COMMERCIAL COURT REVIVED TO SPEED UP LITIGATION PROCESS

The Commercial Court has recently been revived in the Gauteng Division of the High Court of South Africa. This Court was originally established in terms of the Supreme Court Act 59 of 1959 (Practice Note No. 1 of 1996: Commercial Court Practice Direction), but was never fully operational. However, the Judge President of the Gauteng Divisions of the High Court of South Africa, Justice Dunstan Mlambo recently published the directives of the Commercial Court, effective from 3 October 2018.

The purpose of the Commercial Court is to promote the efficient conduct of litigation in the High Court and will assist litigants with the faster resolution of commercial matters. The Commercial Court will deal with a variety of matters that have their foundation in a commercial transaction or commercial relationship, and includes disputes arising from the following non-exhaustive list:

  • the export or import of goods;
  • the carriage of goods by land, sea, air or pipeline;
  • the exploitation of oil and gas reserves or other natural resources that do not involve Administrative Law;
  • insurance and reinsurance;
  • banking and financial services;
  • the operation of markets and exchanges;
  • the purchase and sale of commodities;
  • medical scheme matters;
  • commercial matters arising out of business rescue and insolvency cases;
  • all commercial matters affecting companies arising out of the Companies Act 71 of 2008 and its interpretation;
  • arbitration;
  • delictual cases that take place in a commercial context for, e.g. unlawful competition cases;
  • generally, appropriate contractual matters; and
  • intellectual property cases.

Litigants may transfer a trial action or an application in a commercial matter to the Commercial Court by delivering a letter to the Judge President or Deputy Judge President, setting out reasons why the case is a commercial case, or should be considered as such, which would warrant a transfer under the Commercial Court Directive.

The Commercial Court Directive is specifically designed to ensure that matters are trial ready by the inclusion of various case management conferences, the resolution of interlocutory matters and by introducing timetables by which the litigants will be bound.

For more information on the Commercial Court, or should you require assistance with a commercial matter, please contact the Adams & Adams Commercial Litigation Team at mail@adamsadams.com

by

Mia de Jager | Candidate Attorney

GREGOR WOLTER

Partner
Commercial Attorney

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ROAD ACCIDENT FUND TRIVIA: WHAT IS A MOTOR VEHICLE?

It sounds obvious enough, but the first thing that a potential RAF claimant must prove is that he / she was involved in a motor vehicle collision (failing which he / she cannot successfully claim from the RAF). Section 3 of the Act that guides the Fund expressly and unequivocally states that the objective of the Fund is to compensate victims of motor vehicle collisions. So what do the courts regard as fitting the description: “motor vehicle”?

Section 1 of the Act is the point of departure and it defines a motor vehicle as “… any vehicle designed or adapted for propulsion or haulage on a road by means of fuel, gas or electricity, including a trailer, an agricultural or any other implement designed or adapted to be drawn by such motor vehicle.” As broad as this definition is, courts are, from time to time, called upon to adjudicate on whether a vehicle qualifies as a motor vehicle for the purposes of the Act. This can, to a certain degree, be attributed to ever-introduced inventions, developments and technical advancements etc, most of which the legislature could not have foreseen during the implementation of the Act.

The courts have previously been called on to decide whether shuttles; Golf Cars; Caterpillar 769 trucks; mobile Hobart ground power unist; flatbed transporters; folks lifts; and Hamm 18 pneumatic tyre rollers (PTRs) are motor vehicles. In determining whether or not a ‘vehicle’ qualifies as a motor vehicle, courts seem to be more inclined to adopt a broad interpretation of the definition and generally commence by construing a “motor vehicle” definition, then defining the key words of the definition, and thereafter considering and applying tests that have been developed over the years.

In Berry, D C and Another vs SPE Security Patrol Experts and RAF, the court held that a Golf Cart is a motor vehicle. In RAF vs Mbendera and Others, the SCA held that a Caterpillar 769 is also a motor vehicle as defined by the Act.

The issue In Vogel vs RAF, was whether the Hobart ground power unit, which supplies electricity to jumbo jet aircraft, was a motor vehicle. The High Court found that it did qualify. But on appeal by the RAF, the SCA overturned the High Court’s decision.

In Chauke vs Santam, the Plaintiff was injured by a forklift while walking and he instituted action against Santam in the Magistrate Court. The Defendant successfully raised a Special Plea that the forklift is not a motor vehicle in terms of the Motor Vehicles Accidents Act. The Plaintiff subsequently appealed unsuccessfully to the Witwatersrand Local Division of the Supreme Court and later, to the SCA. In RAF vs Van Den Berg, the issue was whether a PTR qualified as a motor vehicle and the SCA held that it did.

The determination of whether something qualifies as a “motor vehicle” in terms of the Act is then largely based on the court’s interpretation of “motor vehicle” definition – key words of the definition, interpreted against the vehicle’s features, what the vehicle is able to do and an expert witness’s description of the vehicle. Courts have developed tests, whereby they look at the features of the motor vehicle in question, its intended use, where it is intended to be used, etc. Further, courts have developed approaches to apply in such cases and an objective approach i.e. a reasonable man approach and “common sense approach” are ostensibly preferred by courts. The court would, therefore, ask whether a reasonable man would see or think that a vehicle in question is a motor vehicle. In addition to this, courts ordinarily call an expert (someone who has a superior knowledge of the motor vehicle concerned) to provide necessary evidence about the vehicle. For example, in Santam, Mr Bhayla, who was a foreman at Santam was called to provide a thorough description of the forklift, how it operated and provided court with several photographs of the concerned forklift.

In Berry, Mr Johnson, who was a director at E-Z-Go (from where the Plaintiffs had hired a Golf Car) was called to give evidence about the Golf Cars. The courts consider the presence or lack thereof, of features, like petrol driven engine, steering wheel, headlights, rear lights, pedals, forward and reverse gears, side and rear mirrors, safety belts, whether a vehicle is inherently unsafe or could be unsafe, speed limit, gearbox, direction indicators, type and make of tyres, hooter, the size of the vehicle, etc. The presence of most of these features would ordinarily suggest that a vehicle concerned is a motor vehicle.

In addition to features, courts consider the purpose of the motor vehicle, where it is intended to be used and whether it would be expected to be seen on public roads. For example, in Berry’s case, the court considered that a Golf Car is ordinarily used at airports, holiday resorts, hospitals, residential estates, and is used for moving people on road surfaces. In Mbendera, the court considered that a truck was intended to be used in the mining and construction industry, to travel on roads and haul loads. In Santam, in concluding that a forklift is not a motor vehicle, the court considered that a forklift is used for lifting, conveying and depositing heavy loads, it is not used on public roads and it lacks various common motor vehicle features. And in Van Den Berg, the court in concluding that a PTR qualifies as a motor vehicle, it considered the presence of various features; it being designed for propulsion by means of fuel; intended to be used in construction of roads, etc.

From the case law jurisprudence, it is clear that each vehicle needs to be considered on its own i.e. features, purpose, place/area where the vehicle is intended to be used, etc.

Considering that the features, purpose and intended use play a pivotal role in the determination of whether a vehicle is a motor vehicle or not, it may well be that a certain model of a vehicle is disqualified but another model of that same vehicle (e.g. forklift) is qualified – depending on the presence or lack thereof, of certain features, safety for use on public roads, etc.

It would certainly be interesting to see more cases of this nature, particularly in light of the developments and inventions of vehicles for use in various industries.

MTHO MAPHUMULO

Associate
Litigation Attorney

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THE STATE LIABILITY AMENDMENT BILL | A MISSED OPPORTUNITY FOR CHANGE

The State Liability Amendment Bill, as published in Government Gazette No. 41658 of 25 May 2018, in its preamble, aims to amend the State Liability Act, Act 20 of 1957, seeking to “provide for structured settlements for the satisfaction of claims against the State as a result of wrongful medical treatment of persons by servants of the State”.

The introduction is sought to reduce the impact of lump sum payments and aimed to ease the financial strain on the budget of provincial departments of health, in an ever-increasing climate of medical malpractice litigation in South Africa, to allow for an increase in financial resources available for provincial hospitals to provide health care services. The Bill aims to inter alia, recoup unused portions of a lump sum paid to an injured for future medical expenses and future loss of earnings that were not previously retrievable if they had died prematurely, in contrast to what had been postulated at time of settlement or adjudication, and to combat, although unlikely it would appear, what Minister of Health Aaron Motsoaledi deems to be “rampant fraud” in some provinces. [1]

The Bill specifically seeks to inter alia, introduce Section 2A to the State Liability Act, in terms of which compensation in respect of claims against the State, exceeding R1 million, are to be paid to the injured in terms of a structured settlement and periodic payments, in relation to claims for future care, future medical treatment and future loss of earnings, which further will cease once the injured has passed away. Payments are to be made, at the very least, at yearly intervals. More importantly, and possibly restrictively so, a court may in lieu of payment of the anticipated amount, order the State to provide such treatment to the injured party at a public health establishment which complies with the standards set by the Office of Health Standards Compliance, or conversely order, that a reduced amount may be awarded to be tendered for private care, akin to the compensation that would have been paid for the future medical treatment of the injured party, at a public health establishment. Minister Motsoaledi indicates that the Bill directs claimants for treatment to public healthcare facilities, in preparation of the National Health Insurance legislation to be implemented[2].

The proposed legislation to be introduced, raises certain points of contention:

  1. It derogates from the well established “once and for all” rule, that ensures finality and certainty in the resolution of delictual claims.
  2. Structured payments, as evidenced by the proposed Bill, call for proper administration facilities to be in place, to regulate and process claims and payments so awarded. The administrative burden to enforce payments continues to reside with the injured, who is forced to go through lengthy processes to ensure and enforce due payments not honoured by the state, as is currently already being experienced, which further serves to deprive the injured from immediate compensation which ought to maintain and care for his or her day to day care and well-being.
  3. The legislation is devoid of provisions catering for the furnishing of security to the courts or undertaking to be liable to pay the full capital amount, or remedies available to the injured in the alternative, in the absence of periodic payments being honoured in the long term. [3]
  4. In considering the Law Reform Commission Report, issue paper 33, [4] published for commentary, prior to the publishing of the proposed Bill, it is noted that: A) The countries used as a comparative study, such as Canada, the UK, Ireland and Australia, who employed a system of periodic or structured payments, are first world countries, whose financial resources and socio-economic circumstances differ greatly from that of a developing country like South Africa.[5] and B) Structured settlements or periodic payments, for some of these countries, are further discretionary by the courts and not legislatively made compulsory. As such the basis of their introduction in our jurisdiction carries a different weight of consideration if not equally applied.[6]
  5. Litigation and payments of compensation for medical malpractice should not be paid from operational budgets of state health establishments, further straining resources for adequate and proper medical care but rather should be separately budgeted for.
  6. A reconsideration and proper implementation of introducing compulsory professional indemnity insurance of medical practitioners should be considered, to ease the financial burden of the state, to be viewed in context of the National Health Act to be similarly implemented.
  7. The amendment of the Act serves to circumvent litigation in ensuring greater risks to recoup legal costs, brought on by periodic payments, once the litigation has finalised, in instances where lump sum payments would normally have covered within reason, the attorney and client costs not capable of being recouped on a party and party scale. An indigent injured is accordingly prejudiced, by his or her financial means, to pursue litigation as a result.
  8. In advocating for treatment at a state facility, the injured is forced to seek care from the very person or provider that caused the harm, without a guarantee that health standards are enforced and maintained.
  9. The injured is still liable at private healthcare services, for the portion of accounts that exceed public sector rates,[7] placing the financial burden on the injured and thereby limiting and negating the compensation which is received, which is to be sourced for payments of additional obligations imposed, rather than for the injured’s day to day care.

The Bill is anticipated to be passed on a date still to be determined by the President by proclamation in the Government Gazette. It is doubtful at this stage if the Bill will be able to withstand constitutional scrutiny, which will no doubt require a careful consideration of not only state interest, but also the patient’s rights. It is inherent for the patient, to have a right of recourse, to be placed in a position he or she would have been had it not been for the negligent act, which caused or contributed to his or her damage, without being burdened, restrictively, and to be forced to absorb undue hardships that would not have ensued were it not for the negligent act to start with. Ever increasing social awareness, and the constitutional dispensation, warrant an equitable approach that serves to address and find systemic solutions that aim to improve the health care system as a whole without detracting from the health care providers ability to perform its functions and duties effectively and efficiently whilst most importantly still safeguarding the patient’s interests, rights and well-being.

 by Richard Wiers | Senior Associate

[1] Article, “Staggered medical negligence bill “unfair, Business Day, dated 5 June 2018

[2] Article, “Staggered medical negligence bill “unfair, Business Day, dated 5 June 2018

[3] South African Law Reform Commission, Issue Paper 33, as published 17 July 2017 at page 44;

[4] South African Law Reform Commission, Issue Paper 33, as published 17 July 2017;

[5]  South African Law Reform Commission, Issue Paper 33, as published 17 July 2017 at page 40 – 45;

[6] South African Law Reform Commission, Issue Paper 33, as published 17 July 2017 at page 45;

[7] Article, “Staggered medical negligence bill “unfair, Business Day, dated 5 June 2018

RICHARD WIERS

Senior Associate
Attorney

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WHITE PAPER | HOW WILL THE COMPETITION AMENDMENT BILL AFFECT YOU?

The public hearings on the Competition Amendment Bill (“the Amendment Bill”) have been tabled by Parliament’s Portfolio Committee of Economic Development for 28 & 29 August 2018.

The Competition Amendment Bill, if approved, will amend the Competition Act 89 of 1998 (“the Act). The main objective of the amendments is to address two persistent structural constraints on the South African economy, namely, the high levels of economic concentration in the economy and the skewed ownership profile of the economy. The Amendment Bill aims to address these structural constrains through seven key focus areas.

To read comments on the Amendment Bill, download our latest White Paper below.

JAC MARAIS

Partner
Commercial Attorney

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MISHA VAN NIEKERK

Senior Associate
Commerical Attorney

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WITH THIS AGREEMENT I THEE WED. AND PROTECT

Planning your ‘happily-ever-after’ is no easy feat. Between finding a venue, coming up with a world war-thwarting seating plan and orchestrating photography and flowers, couples find themselves managing a lot during the engagement period. Understandably then, the conclusion of the marriage agreement between two persons hardly receives the due consideration and attention it requires. For most brides and grooms, discussions and negotiations regarding the finances, assets and adverse future scenarios is a serious mood killer. In the sort of environment we encounter today, an antenuptial agreement is no longer a nice-to-have. It’s an absolute necessity.

Generally referred to as a ‘prenup’, the marriage arrangement is correctly called an antenuptial agreement (or ‘ANC’) in South African Law. Let’s face it, ‘antenuptials’ generally have a bad rap in society. The most common argument put forward against having an ANC is that it means that the parties must consider the possibility of the marriage breaking down. And that creates suspicion and doubt. We find that when the couple ignores the ambient noise and negativity from friends and family and approach the negotiations with an objective and business-minded attitude, they quickly realise that the agreement also addresses economic risk and other factors.

An antenuptial agreement can be especially important if either of the parties are involved in high risk business endeavours, have inherited or accrued large amounts of monies, have children from a previous relationship, or property registered in their names, and they wish to avoid the consequences of being married ‘in community of property’.

Contrary to popular belief, an antenuptial agreement is not just for the rich and famous. It can, if properly formulated, serve to protect spouses from their partners’ existing debts, future debts or insolvency; stipulate how property should be distributed; preserve family inheritances; or ensure that a spouse does not structure his or her finances by means of a trust to the detriment of the other party. An antenuptial agreement is also not only relevant upon divorce but can also benefit a surviving spouse in the unfortunate event of his or her partner passing away.

It is important for individuals to be aware of the different marital regimes and to understand the implications thereof, well before getting married. Parties who don’t sign an ante-nuptial agreement are automatically married ‘in community of property’. This means that there is only one pot of gold, or perhaps one pot of coal. This marital regime does not offer a husband or wife any protection against monetary claims by third parties. And in the unfortunate event of one spouse being sequestrated, the couple will lose everything. Parties who intend to explore risky business ventures should be wary of getting married in community of property.

In certain circumstances, it is possible to change your marital regime by means of an application to court.

A marriage ‘out of community of property’ can either include or exclude the accrual system. The accrual system entitles a spouse to share in the accrual of the spouse whose estate has accrued more than his or her estate as at the date of divorce or death. The result, on a proper application of an accrual claim under normal circumstances (but not always), is that the parties share equally in the combined value of the assets and liabilities that they each acquired after the date of their marriage up to the date of divorce or death.

Regardless of whether the accrual system is included or excluded the parties are protected against third parties and retain financial independence. Couples can get quite creative with what they wish to be included as part of the terms of their union. A balance however, always needs to be achieved to ensure that the marriage does not kick off with bitterness. Fairness is a key ingredient in any agreement. Tailor-made provisions should be capable of being given effect from a practical perspective and it should be ensured that they don’t go against the moral convictions of society, in which event such a provision will not be enforceable.

An antenuptial agreement needn’t be a mood killer, but rather viewed as an asset that protects you and your loved ones in future. Seek guidance and assistance from an experienced family law attorney at least three months before the wedding bells start ringing.

by Shani van Niekerk | Associate

SHANI VAN NIEKERK

Associate
Attorney

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FRANCHISING IN SOUTH AFRICA | 2018 OVERVIEW

Prominent international food and beverage franchises as well as fashion and apparel franchises maintain significance in the local market. However, due to economic challenges and a weak exchange rate, some foreign franchisors encounter difficulties with their local franchisees.

The health and education sectors have shown notable growth. Despite a tough economy, the franchising sector has maintained its steady growth and adaptability, managing to attract global franchise brands. This is the opinion of Danie Strachan and André Visser, Partners at Adams & Adams, in their latest assessment of the developments in the franchising market in South Africa, as part of the Thomson Reuters Practical Law Series.

Most foreign franchisors prefer to enter the South African market by way of master franchise agreements or, in some cases, area development franchises. Some franchisors also enter into joint ventures with local parties due to the imperatives of complying with black economic empowerment legislation. This is particularly relevant in the case of organisations that wish to do business with the South African Government. To download the South Africa Chapter on Franchising, CLICK HERE.

For additional information regarding the Franchising services offered by Adams & Adams CLICK HERE.

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Reproduced with permission from Thomson Reuters Practical Law 2018 and the Associations of Corporate Counsel.

DANIE STRACHAN

Partner
Attorney

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ANDRE VISSER

Partner
Commercial Attorney

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HIGH COURT ORDERS POLICE TO STOP COUNTER-INVESTIGATIONS AGAINST IPID

In an important ruling on 28 June 2018, the High Court in Pretoria ruled on a case that centred on the question of whether members of the South African Police Service (SAPS) that are the subject of investigations by the Independent Police Investigative Directorate (IPID) should be allowed to investigate members of IPID. In handing down the court’s decision, Judge Neil Tuchten confirmed that such ‘revenge investigations’ by the SAPS are unlawful.

IPID brought the matter to Court when, after IPID initiated two criminal cases against the former National Police Commissioner, Lt Gen Khomotso Phahlane, a police squad from the North West Province was appointed to investigate the same IPID officers involved in the criminal investigations of Lt Gen Phahlane.

All the members of the North West squad are currently subject to IPID investigations. In terms of the Court Order, the North West squad, led by General Ntebo Mabula must be immediately removed from any investigation by the SAPS of any of the members of the IPID investigative team and the Executive Director of IPID, Mr Robert McBride.

Investigations into the North West SAPS members are ongoing and, in light of the judgment, IPID can continue with its investigations without interference by SAPS members who are subject to IPID’s investigations.

The case highlighted the fact that there is legal provision that regulates, in the context of conflicts of interest, the conduct of IPID members toward SAPS members but there is no equivalent provision regulating the conduct of SAPS members toward IPID members. In light of this, the Court laid down a general principle that no member of the SAPS may be involved in any investigation in which the member has a personal, financial or any other interest. The order will remain in effect until such time as a standing order or a regulation is implemented to deal with conflicts of interest between SAPS and IPID.

Jac Marais, Partner at Adams & Adams, and attorney for IPID, confirmed that the judgement further strengthens IPID’s independence in the wake of the Constitutional Court judgment in 2016, that that struck down the Minister of Police’s power to suspend the Executive Director of IPID. “The judgement goes some way to restore the confidence which the public should have that IPID will be able, without undue interference, to investigate complaints against the police fearlessly and without favour or bias. Without enjoying the confidence of the public, IPID will not be able to function efficiently as the public might be disinclined or reluctant to report their cases to it.”

The Court also ordered the SAPS to pay the costs of the litigation and held that the SAPS adopted positions in relation to the application that were unreasonable and unjustified.

JAC MARAIS

Partner
Commercial Attorney

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BEING BEAUTIFUL AND WIDOWED

In South African law, a claim for loss of support may be lodged against the Road Accident Fund when a breadwinner of a family, an innocent victim of a motor vehicle accident, passes away. 

The following is an historical overview of remarriage contingencies in South Africa.

When determining the amount to be paid to the spouse of the deceased breadwinner, the probable remarriage of the surviving spouse plays an influential role in the ultimate calculation.

In the past, apart from the number of children and attitude of the spouse to the idea of remarriage, the courts would consider appearance and personality as essential factors when determining possibility of remarriage.

In Legal Insurance Company Ltd v Botes 1963 (1) SA 608 AD , the court a quo took the following into consideration:

“… adjustments must be made according to the appearance, personality, nature and attitude to remarriage of the person concerned, and indeed other factors such as the number and ages of the widow’s children.”

This attitude was re-iterated in the matter of Snyders v Groenewald 1966 (3) SA ED 785, where the court found the following:

“In determining the percentage deduction to be made, the Court has regard to such matters as the age, health, appearance and nature of the widow, as well as such other factors as the age and number and financial dependence of her children.”

Given that this attitude was held prior to our Constitutional dispensation, this view was challenged in the matter of Members of the Executive Counsel Responsible for the Department of Road and Public Works, North West Province v Oosthuizen (A671/07) [2009] ZAGPPHC 16 (2 April 2009) where it was stated that reliance on appearance is offensive and should not be part of our law.  It was further argued that remarriage contingencies should be struck down as unconstitutional as it offends the equality provisions of the Constitution.

After considering the facts of that particular case, the Court ultimately pointed out that no reference had been made to the respondent’s appearance and found that remarriage contingencies are not unconstitutional.

This archaic view of determining re-marriage contingencies was again challenged / re-visited in the case of Esterhuizen v Road Accident Fund (Unreported judgment of Tolmay J, North Gauteng Division, case no 26180/2014 on 6 December 2014) where Judge Tolmay found past judgments to be outdated and extremely offensive to women.  The court stated:

“…To take appearance and nature in consideration is not in accordance with the constitutional values of dignity and equality enshrined in our Constitution…”

In light of this approach, the court found that the following observations should be considered when determining the appropriate remarriage contingency, if any, to be applied:

  1. Widows are entitled to compensation for loss of maintenance as a result of the death of a husband, but such claim should not place the widow in a financially better position had it not been for the accident;
  2. Second marriages do not always last and may not result in financial support;
  3. Dependants (that is, children) and the age of the widow should be relied on when determining the appropriate remarriage contingency.

The most recent case law to address the issue of remarriage contingencies directly is the case of De Bruyn v Road Accident Fund L Brink de Bruyn // Road Accident Fund (Gauteng Division, Pretoria, Case no 14606/2016) where the history of such contingencies (citing various case law) was outlined, and Koch’s Quantum Yearbook was discussed.  The court found Koch’s statistics relating to “remarriage deductions” to be outdated and inaccurate.

The court referred to an article titled “Re-partnering as a Contingency Deduction in Claims for Loss of Support Comparing South Africa and Australian Law” (PER/PELJ 2007 10 (3)), where the conclusion was:

“Re-partnering is merely another of the many vicissitudes of life, namely that the claimant may enter an economically beneficial or detrimental relationship after the trial.  It is therefore to be given no more weight than any of the other vicissitudes that go to make up the general discount.  The ‘standard’ adjustment should not be increased to reintroduce the ‘remarriage’ discount by the back door.

The court agreed with this approach and held that unless special circumstances ensue, no higher than normal contingency ought to be deducted.

It is clear that while the principle of a re-marriage contingency continues to have relevance and applicability, one must be cautious in how it is applied.  If there is evidence to justify its application, then the courts should apply same with due regard to the facts of each matter.  Where there is no evidence, simply to include such a contingency on the broad assertion that the possibility of re-partnering must always exist, would offend the principles of fairness and justice.

Kerry Lynne Wiers | Senior Associate

This article also appeared in Without Prejudice | May 2018

KERRY LYNNE WIERS

Senior Associate
Attorney

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SUPREME COURT OF APPEAL UPHOLDS HIGH COURT RULING SETTING ASIDE UNLAWFUL RATES REGIME

Recently, the Supreme Court of Appeal (“SCA”) upheld a ruling handed down by the High Court in Pretoria 2 years ago, setting aside an exorbitant rates regime implemented by the City of Tshwane Metropolitan Municipality.

The unlawful property rates regime arose following the amalgamation of the former Kungwini Municipality into the City of Tshwane.  When compiling its supplementary valuation roll in 2012, the City of Tshwane incorporated properties which previously fell within the Kungwini Municipality into its jurisdiction, but re-categorised as “vacant” properties which had previously been categorised and rated as “residential”.  This was done without the prescribed notice, depriving the affected property owners of the right to object to the re-categorisation. The impact of this is that the thousands of property owners in question were no longer invoiced at the considerably lower residential tariff, and were instead rated at the vacant land tariff (some 4.5 times higher than the residential rate).  To make matters worse, the increase date was applied retrospectively to July 2011, being the date upon which the properties in question were incorporated into the City of Tshwane.

The net impact was that owners who received monthly invoices in the amount of R843.43 in August 2012, received rates invoices in the amount of R75 939.64 the very next month.  Other owners went from paying a monthly amount of R491.16 to R4 009.33, representing an alarming increase of 716%, even without factoring in the backdating.

Lombardy Development (Pty) Ltd, the developer of Lombardy Estate & Health Spa in Pretoria East, together with other property owners in the area launched a review application to set aside the City of Tshwane’s decision to re-categorise the affected properties.

The review was based primarily upon the City’s failure to have complied with its mandatory notice obligations in terms of the Municipal Property Rates Act, which required the owners of the affected properties to be given individual notification of the fact that their properties were to be re-categorised in terms of the supplementary valuation roll.  In consequence of this failure, the Pretoria High Court set aside the 2012 supplementary valuation roll insofar as it re-categorised the properties in question from “residential” to “vacant”.  The Court also set aside the City of Tshwane’s 2013 general valuation roll and all subsequent valuation rolls to the extent that they adopted and perpetuated the unlawful re-categorisation originally introduced by the 2012 supplementary valuation roll.

The City appealed the High Court’s decision to the SCA, despite conceding that it had failed to give proper notification of the re-categorization of the affected properties.  In its judgment last week, the SCA confirmed the High Court’s declaration of invalidity of both the 2012 and 2013 rolls insofar as the re-categorisation of the affected properties is concerned, and specifically recorded that its judgment applies to all affected property owners and is ‘conclusive against all persons whether parties or strangers to the litigation’. The City will accordingly be required to make significant adjustments to the rates accounts of all affected property owners.

Andrew Molver of Adams & Adams, who represented Lombardy and the other respondents in the appeal, regards the outcome as “a significant victory not only for Lombardy, who led the fight against the City, but for the thousands of individual property owners who stand to benefit from the broad application of the order handed down by the SCA”.

ANDREW MOLVER

Partner
Litigation Attorney

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THE ‘CALDERBANK OFFER’ FINDS ITS WAY INTO SOUTH AFRICAN LAW

In many instances, the litigation process of bringing a matter to its finality has become a tedious and lengthy one, lasting for anything from three to four years, if not longer.

And the cost implications of such a prolonged process has become exorbitant not only for the unsuccessful party who will ultimately pay the party and party costs (in personal injury claims usually being the Defendant) but also for the successful party, in respect of the attorney and client costs, which are deducted from the settlement amount (usually to the Plaintiff).

Rule 34 of the High Court Rules which deals with offers of settlement states the following:

(1) In any action in which a sum of money is claimed, either alone or with any other relief, the defendant may at any time unconditionally or without prejudice make a written offer to settle the plaintiff’s claim. Such offer shall be signed either by the defendant himself or by his attorney if the latter has been authorised thereto in writing.

(10) No offer or tender in terms of this rule made without prejudice shall be disclosed to the court at any time before judgment has been given. No reference to such offer or tender shall appear on any file in the office of the registrar containing the papers in the said case.

(11) The fact that an offer or tender referred to in this rule has been made may be brought to the notice of the court after judgment has been given as being relevant to the question of costs.

Rule 34 of the High Rules of Court as it currently stands is specifically designed as a tool that the Defendant may use to place the Plaintiff at risk for paying costs. If the Defendant makes an offer and a lower amount is awarded at trial, the Defendant may then seek a cost order against the Plaintiff.

Although no express mention is made of the Plaintiff being able to make a without prejudice offer, it also does not expressly or by necessary implication mention that if a Plaintiff makes a tender, that same cannot be relied upon when considering the issue of costs.

In the United Kingdom and Australia, it has become common practice for a Plaintiff to make an offer to the Defendant, thereby putting the Defendant at risk of paying “indemnity costs”. In personal injury litigation in South Africa it has become more common that, once the Plaintiff is in possession of all its medico-legal reports and once the claim has been completely quantified, the Plaintiff then addresses a “without prejudice” settlement proposal to the Defendant, in an attempt to reach an early settlement of the matter which results in costs being minimised.

A Calderbank offer is an offer to settle a dispute, putting the other side on notice that, if the dispute goes before any court and the outcome is less favourable to the other side compared to the Calderbank Offer being made, then the side making the offer is entitled to more of their costs being recovered.
This is because, if the other side had accepted the offer, then they would have been better off and neither side would have had to spend money taking the matter to court.

Most of these offers made by the Plaintiff often either go unnoticed or a significant period of time passes before any response is received from the Defendant, if at all. The case of Calderbank v Calderbank [1975] 3 ALL ER 333 (CA) being cited in the judgement of D and Another v MEC for Health and Social Development, Western Cape Provincial Government (2747/10) [2017] ZAWCHC 17; 2017(5) SA 134 (WCC) could bring about new developments in South African law where the Plaintiff’s offer of settlement amount was less than the amount granted by a judge once judgment is handed down.

The Calderbank case was an important English Court of Appeal decision – a divorce case where the husband (Defendant) was said to have caused an unreasonable delay in the legal proceedings and he was then ordered to pay his wife’s (Plaintiff) legal costs as a result thereof.

The Calderbank case was then challenged in the United Kingdom, but eventually became practice that “Calderbank Offers” can be made. The practice was subsequently written into the United Kingdom and Australia’s Rules of Court.

The highlighted principle of the Calderbank case is that the Plaintiff can place the Defendant on risk by making an offer of settlement.  If such an offer is ignored by the Defendant and the Plaintiff is awarded more when the matter proceeds to trial and judgment is handed down, the Plaintiff could disclose to the Judge that a “Calderbank offer” was made. If the offer met the requirements of a “Calderbank offer”, and if ordered by the Judge, the Defendant may be held liable to pay the Plaintiff’s attorney and own client costs over and above the party and party costs for which the Defendant will already be liable for.

In the Case of D and Another V MEC for Health and Social Development, Western Cape Provincial Government, Judge Trollip stated the following “I have thus come to the conclusion that in principle “Calderbank offers” are admissible in relation to costs and can be disclosed to the court for that purpose after judgment has been given.”

Judge Trollip went on further to mention that in considering whether a punitive cost order must be made against the Defendant the court must consider among other factors, whether the Defendant behaved unreasonably, and thus put the Plaintiff to unnecessary expense by not accepting the offer or making a reasonable counter-offer.

Although the Plaintiff in the case of D and Another V MEC for Health and Social Development, Western Cape Provincial Government was not successful in being granted a punitive cost order against the Defendant, it was a breakthrough of the “Calderbank offers “being fused into South African Law.  A defendant should therefore be more cautious when considering offers made by a Plaintiff, so as to ensure that the Defendant is not at risk of paying indemnity or attorney and own client costs (over and above the party and party costs), where the Defendant forces the Plaintiff into protracted or unnecessary litigation, and a judge ultimately awards the Plaintiff the same or more in compensation than what the Plaintiff previously offered to accept as a settlement.

Calderbank offers” will therefore be a useful tool that Plaintiffs can utilise in litigation to ensure that Defendants seriously consider offers made by Plaintiffs and will result in earlier settlements and costs limitations.

by Shaina Kim Steyn | Associate

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DISPUTE RESOLUTION IN SOUTH AFRICA

The much-anticipated International Arbitration Bill, which was initially approved by Cabinet in April 2016, was again approved in March 2017 after errors in the bill were discovered and corrected. The Act came into operation as the International Arbitration Act 15 of 2017 on 20 December 2017 and incorporates the Model Law of the United Nations Commission on International Trade Law (UNCITRAL) as the cornerstone of the international arbitration regime in South Africa, providing much-needed reform in South Africa’s arbitration regulatory framework. Previously, the Arbitration Act, a 51-year-old statute, regulated both domestic and international arbitrations. For additional information on dispute resolution in South Africa, click here.

The Law Reviews has published the 10th edition of the Dispute Resolution Review, which is available in print, as an e-book and online here. The South Africa Chapter is authored by Adams & Adams Partners, Grégor Wolter, Jac Marais, Andrew Molver; and Senior Associate, Renée Nienaber.

The Dispute Resolution Review provides an indispensable overview of the civil court systems of 37 jurisdictions. It offers a guide to those who are faced with disputes that frequently cross international boundaries. As is often the way in law, difficult and complex problems can be solved in a number of ways, and this edition demonstrates that there are many different ways to organise and operate a legal system successfully. At the same time, common problems often submit to common solutions, and the curious practitioner is likely to discover that many of the solutions adopted abroad are not so different to those closer to home.

To read the full South Africa chapter, CLICK HERE.

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Reproduced with permission from Law Business Research Ltd. Published March 2018.

GREGOR WOLTER

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THE PRINCIPLE OF REMOTENESS OF DAMAGES

The personal injury team of Adams & Adams has found itself assessing the principle of remoteness of damages on a consistent basis in the last few months with its increasing personal injury and insurance-based actions.

The principle of remoteness of damages is often assessed at the pleadings stage as it is essential that the Plaintiff only includes damages that are casually linked to its action against a delictual wrongdoer. In this regard the test in our law has been held to be a flexible one based on the principles of fairness, reasonableness and justice as is evident from the cases of International Shipping Co (Pty) Ltd v Bentley 1990 (1) SA 680 (A) at 701A-F; Smit v Abrahams 1994 (4) SA 1 (A) at 15E-G and OK Bazaars (1929) Ltd v Standard Bank of South Africa Ltd 2002 (3) SA 688 (SCA) at para 23.

In the case of S v Mokgethi 1990 (1) SA 32 (A) at 40I-41D (and supported in the case of Fourway Haulage v SA National Roads Agency (653/07) [2008] ZASCA 134) it was held that the flexible test should not be viewed as one that supersedes the principles of foreseeability, proximity or direct consequence, as has been used in the past, but rather that the aforesaid principles are not to be applied dogmatically and should be applied in a flexible manner so as to avoid a result which is so unfair or unjust that it is regarded as untenable.

If the direct consequence principle leads to a result which would be acceptable to most right-minded people, then that is accepted as not being too remote. In a matter involving a ten year old boy (“the minor”) we had to determine whether or not a claim for caregiving on behalf of his mother could be included in his claim for damages or whether it would be regarded as too remote. In this matter, the minor sustained severe injuries, inter alia, multiple broken bones in his left foot and ankle and crushed right foot resulting in 22 surgeries as a result of a non-compliant wall collapsing on his lower legs. As a result of the incident, his mother is no longer able to work and is required to avail herself to assist her minor son. If we apply the direct consequence principle, the cost of caregiving is a direct cause of the incident and the injuries sustained by the minor and are therefore not too remote to be included in the minor’s claim for damages against the delictual wrongdoer.  The same outcome would be established if we applied the proximity principle or the principles of reasonable, fairness and justice.

It is imperative to note that as a attractive as the concepts of fairness and justice may be in courts, law reform commissions and amongst legislators, it is of very little use (if at all) to legal practitioners and trial judges who are required to apply the law to concrete facts arising from real life activities (Perre v Apand (Pty) Ltd 1999 198 CLR 180 (HC of A) para 80) and it is therefore the reason that the flexible test to the principle of remoteness of damages is applied in our law.

by Jessica-Jade Faint | Candidate Attorney

ANDREW PHILLIPS

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COMPETITION TRIBUNAL ENDS MASSMART EXCLUSIVE LEASE SAGA

The Massmart exclusive lease saga, which commenced with Massmart’s complaint to the Competition Commission (“the Commission”) in October 2014, has finally come to an end.

The Competition Tribunal (“the Tribunal”) yesterday upheld exceptions brought by Pick ‘n Pay, Shoprite Checkers and Spar (“the Excipients”) and dismissed Massmart’s complaint that the Excipients’ exclusive lease agreements with various shopping malls were anti-competitive and falls foul of the prohibition on restrictive vertical practices contained in Section 5(1) of the Competition Act 89 of 1998 (“the Act”).

Massmart initially self-referred the complaint to the Tribunal in 2015, following the Commission’s non-referral of Massmart’s 2014 complaint – the Commission put forth its decision to institute an enquiry into the grocery retail sector as the reason for the non-referral. A number of exceptions were raised to this first referral and Massmart was granted an opportunity to amend. Massmart’s amended referral was again the subject of a number of exceptions which were heard by the Tribunal on the 19th of September 2017 and resulted in the complaint finally being dismissed yesterday.

The common thread running through all the exceptions raised was the fact that Massmart’s complaint failed to make out a cause of action in respect of Section 5(1) of the Act – not only did Massmart fail to define the markets with sufficient particularity, it also failed to sufficiently demonstrate an anti-competitive effect. In this regard, the Tribunal stated that the “fact that Game is excluded from malls does not equate to an exclusion of competition if another rival is present…Mere proof of exclusion of a particular competitor does not suffice.

The Tribunal’s approach to exclusive lease agreements as demonstrated in this case, can be summed up by its statement that a “complainant needs to allege more than the existence of a contractual restraint.

by Misha van Niekerk | Associate

JAC MARAIS

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SANDTON & CAPE TOWN LAW SEMINAR SERIES HIGHLIGHTS LATEST INTELLECTUAL PROPERTY AND COMMERCIAL LAW DEVELOPMENTS

The annual legal Crammer events presented by leading intellectual property and commercial law firm, Adams & Adams, took place recently in Johannesburg and Cape Town, respectively – bringing together in-house legal representatives, entrepreneurs and executive decision-makers for a morning of intensive panel discussions and presentations. In focusing on trade mark, copyright, patent, commercial and property law developments, legal professionals and industry guest speakers reviewed interesting updates and legislative developments on subjects ranging from innovation funding, copyright and brand development, to data protection and a number of significant IP and commercial case law studies.

In various discussions – mainly centred on trade marks, patents and commercial law – speakers brought attention to topical matters affecting organisations in a South African context. An enthralling keynote address was delivered by historian and storyteller, Michael Charton, who, in the spirit of the event, was able to cram hundreds of years of South African history into a thought-provoking and insightful story presentation, “My Father’s Coat.”

The firm’s biggest and boldest Crammer® event to date, subjects ranging from tech innovation funding; to due diligence in IP; data protection and policy in light of happenings such as the “GuptaLeaks”; rules around community schemes; trade mark judgments by the SCA; and a number of significant IP cases drew a great deal of interest. There was even time to squeeze in a fascinating chat about the now-infamous ‘monkey selfie’ by Cape Town Partners, Charné Le Roux and Phil Pla.

“These kinds of innovative events and seminars are an important part of our firm’s efforts in actively engaging with both clients and lawmakers so that we are able to pro-actively promote our customers’ interests,” commented firm Chairman, Gérard du Plessis. “In another innovative move, and as part of our annual Africa IP Network Week in September, Adams & Adams co-hosted the inaugural Africa Patent Examination Summit with the European Patent Office (EPO), where registrars, officials and examiners from twenty African jurisdictions, as well as regional bodies such as WIPO, ARIPO and OAPI met to discuss the various approaches to patent examination available and to gain insights into developments in this regard around the world.”

GERARD DU PLESSIS

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DARREN OLIVIER

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PHILIP PLA

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DISPUTE RESOLUTION REVIEW | SOUTH AFRICA

The Dispute Resolution Review provides an indispensable overview of the civil court systems of 40 jurisdictions. It offers a guide to those who are faced with disputes that frequently cross international boundaries. This ninth edition follows the pattern of previous editions where leading practitioners in each jurisdiction set out an easily accessible guide to the key aspects of each jurisdiction’s dispute resolution rules and practice, and developments over the past 12 months. The South African Chapter has been authored by Jac Marais, Andrew Molver and Renée Nienaber from Adams & Adams.

Key developments in South Africa over the past year followed global trends and included:

  • Clarification of the effect of a pending application for a restraining order and the scope of issues capable of referral to court in terms of Section 20(1) of the Arbitration Act;
  • Further progress towards more active judicial management of the dispute resolution process;
  • Approval of the International Arbitration Bill; and
  • The Community Schemes Ombud Services Act coming into effect.

To read the full South African submission, CLICK HERE, or for the full Dispute Resolution Review publication, CLICK HERE.

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JAC MARAIS

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ANDREW MOLVER

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RENEE NIENABER

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THE COHABITATION INTERPRETATION

The amount of time that a couple lives together does not translate into a default marriage. So, in a long-term relationship where marriage is not considered or possible, a cohabitation agreement is the smart way to live together without the fear of the future.

When asked at a recent Comic Con about the future living arrangements of their characters, Amy and Sheldon on the hit TV series The Big Bang Theory, Jim Parsons (Sheldon) quipped “Right now, there is such a new world of living together and what that means, and working that out.” 21st Century relationships come in all shapes, forms and sizes, but what are the risks of being in a long-term relationship that is not formally recognised as a lawful marriage?

“At the outset it is important to stress that there is no such thing as a common law marriage or spouse”, says Shani van Niekerk, an Associate at Adams & Adams. “The amount of time that a couple lives together does not translate into a default marriage. We’ve had clients ask us about a “six-month rule”. It’s a total myth unfortunately.”

The consequence is that at the dissolution of the relationship, or in the event that a cohabitant dies without leaving a Will, partners are left very vulnerable and without the legislative protection which married individuals enjoy. For example, when a cohabitant dies without leaving a valid will, the partner has no right to inherit under the Intestate Succession Act. A cohabitant also cannot rely on the Maintenance of Surviving Spouses Act to secure maintenance should a partner pass away. There’s no legal obligation on either person to maintain the other – meaning no enforceable right to claim maintenance from each other.

So what can you do to protect your interests in a cohabitation relationship? Shani suggests taking a leaf out of Sheldon’s script. “The only way to be protected in our law is to enter into a cohabitation agreement. Such an agreement is in the best interests of both parties in a relationship and clarifies the expectations of the partners.”

A cohabitation agreement regulates the rights and duties between partners, and could almost be compared to an ante-nuptial contract in a civil marriage. The agreement can provide for the division and distribution of assets if the relationship ends, the rights and obligations towards each other with regards to maintenance, and parties’ obligations and respective financial contributions towards the joint home. A cohabitation agreement will be legally binding as long as it contains no provisions that are immoral or illegal, however it is important to note that a cohabitation agreement will not be enforceable insofar as third parties are concerned.

In a long-term relationship where marriage is not considered or possible, a cohabitation agreement is the smart way to live together without the fear of the future. Chatting to an experienced family law attorney and getting a cohabitation agreements drawn up may help you avoid the financial risks and potential trauma of a possible break-up.

by Shani van Niekerk | Associate

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DAVID SCHEEPERS

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POWER TO THE PUBLIC | AN INTERVIEW WITH ANDREW MOLVER

On 31 March 2016, the Constitutional Court of South Africa ruled unanimously in favour of the applicants in the matter regarding Nkandla, President Jacob Zuma’s homestead, as well as the powers of the Public Protector. Andrew Molver, Partner at Adams & Adams, offers his insights into this pivotal ruling.

Q: As attorneys of record for the Public Protector, what role does Adams & Adams play in the functions of her office?
A: The Office of the Public Protector is equipped with a highly skilled staff complement that manages any legal matters it’s faced with. Generally, we’re only instructed upon the anticipation or institution of formal proceedings. In that regard, our primary role has become one of defending the reports issued, findings made and remedial action taken by the Public Protector.

Q: From a personal point of view, what has it been like to work with the former Public Protector, Adv Thuli Madonsela?
A:
Working with the Public Protector has been by far the greatest highlight of my career. One of the greatest lessons I’ve learnt from her is how she remained determined to ascertain a proper definition of the Public Protector’s powers throughout the Nkandla debacle. She remained focused on helping the “Gogo Dlaminis” of the world, as she calls them, when she could quite easily have become consumed and distracted by the highly politicised and sensationalised nature of the ordeal. Even in those trying circumstances, she was steadfast in her commitment to the helpless and to leaving a legacy of empowerment to her successors by upholding the powers of her office.

Q: The powers of the Public Protector were challenged well before the Nkandla saga. How did this start?
A: The question of whether or not remedial action taken by the Public Protector is binding first arose in relation to the remedial action taken by the Public Protector in 2014 regarding the SABC and then acting-COO, Hlaudi Motsoeneng. The SABC and related parties argued that they were not bound to give effect to the Public Protector’s remedial action taken and, as they had procured an opinion from an independent law firm which cleared Motsoeneng of any wrongdoing, concluded that the findings of the Public Protector were incorrect.
In proceedings initiated by the DA as a result of the SABC’s conduct, we argued that remedial action taken by the Public Protector is legally binding and places an obligation on the subject of the remedial action to give effect to it unless and until it is reviewed and set aside by a court of law. Regrettably, the High Court did not find favour with this argument and took the view that remedial action by the Public Protector is not binding.
Fortunately, in its judgment of October 2015 in the SABC case, the Supreme Court of Appeal (SCA) set the record straight and found that remedial action taken by the Public Protector is indeed valid and binding until reviewed and set aside by a court of law and that, absent any such review, a subject of such remedial action is obliged to implement it, and cannot disregard it.

Q: Why was the Public Protector never a main applicant in either the Nkandla case or in matters beforehand? How did this help the Public Protector’s standing?
A: The SABC matter was launched by the DA, which cited the Public Protector as a respondent in the matter. The so-called Nkandla applications were launched by the EFF and the DA respectively. While the DA cited the Public Protector as a respondent, the EFF omitted to do so, which required us to apply to the Constitutional Court to intervene as a respondent in the EFF’s application.
We found it preferable for the Public Protector to be in the position of a respondent as this enabled her to abide the relief sought, as opposed to having to seek it directly, as an applicant would. This was more in keeping with the politically neutral position occupied by the Office of the Public Protector and allowed the Public Protector to avoid being drawn into the political war being waged through the litigation. In addition, by not being preoccupied with seeking the enforcement of her remedial action, the Public Protector was able to focus her submissions on obtaining a proper interpretation of her powers, which would significantly outlast any particular remedial action that formed the focus of either the SABC or Nkandla matters.

Q: Your team referred to the “Oudekraal” matter in written submissions. What is this and why was it relevant?
A: “Oudekraal” refers to the well-established principle (deriving from the matter of Oudekraal Estates (Pty) Ltd v City of Cape Town) that until a decision of an administrative nature is set aside by a court in proceedings for judicial review, it exists in fact and has legal consequences that cannot be overlooked. In its judgment in the SABC matter, the SCA found this principle to apply to reports issued and remedial action taken by the Public Protector, even if the Public Protector isn’t a typical public functionary or body, as the underlying principles arguably find greater application in her context.

Q: The Nkandla matter found that the Public Protector was correct in her assessments that the President was required to pay for a portion of the upgrades that took place at his homestead. More importantly, it confirmed the powers of the Public Protector as a Chapter 9 institution. What are those powers?
A: In essence, the Public Protector’s direct constitutional powers enable her to investigate irregular conduct in state affairs or public administration, to report on that conduct and to take appropriate action.

Q: What ideologies or approaches differentiate Adams & Adams from other commercial law firms?
A:
We try to approach our admin and constitutional matters by retaining a strong focus on why the matter is important to the client. This isn’t always obvious and often various considerations are involved. For example, in the SABC and Nkandla matters, it would have been tempting to enter the fray by siding with one of the political parties involved and attempting to enforce the remedial action in question. But what made the matters important to the Public Protector went beyond that. As mentioned, a proper definition of the powers of her office held far greater value. Apart from the objective to define the Public Protector’s powers, it was also important that she did not compromise the independence of her office thereafter. We also have a firm commitment to litigating in a manner which we believe upholds the Constitution and ensures that good law is made in its interpretation and application.


ABOUT ADAMS ON AFRICA | ISSUE 1

This article is part of a new quarterly digital publication, Adams on Africa. The publication aims to provide you with the necessary information and updates on developments in business and the law in Africa. We welcome your feedback. Articles in this issue:

A NEW CONVERSATION ON AFRICA

AFRICA REGIONAL REPORT

CHAPTER 9: THE POWERS OF THE PUBLIC PROTECTOR

DISSECTING THE NEW IP CONSULTATIVE FRAMEWORK

HOW OIL PRICES IMPACT AFRICA

ADDLED BY THE INTERWEBS

AFRICA’S LEADING LADIES

BANKING ON THE MAPUTO CORRIDOR

TOURISM – A MARKET OF OPPORTUNITIES

PHILANTHROPY’S PURPLE RAIN

PURE WATER ON TAP

Andrew molver

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CAN AN EMPLOYER RECOVER DAMAGES FROM EMPLOYEES?

In an employer-employee relationship it often happens that an employee violates his employment agreement in a manner that results in the employer suffering damages. For example, an employee performs his duties in a grossly negligent manner and the employer suffers a financial loss or an employee decides to quit without giving the agreed upon notice. If such a situation occurs, the employer is always left wondering whether it can proceed against the employee, and if so, how to proceed and whether, it can recover damages from the employee in question.

In South Africa, it is generally believed that South African labour legislation is overprotective of employees and offers little to no protection to employers. This is evident from the myriad labour statutes that protect the rights of employees in South Africa and the high rate of success of cases brought against employers. The misconception as to the protection offered to employers is well demonstrated in the case of Rand Water v Johan Stoop (JA 78/11) where counsel for the defendant argued that the Basic Conditions of Employment Act (BCEA), 1997 was designed to only permit claims by employees against their employers and not vice versa.

However, the court in the above matter held as follow:

“there is simply no warrant for interpreting the BCEA in a partisan manner. The BCEA benefits both employers and employees….The BCEA was designed to promote the right to fair labour practice which is available to everyone employees and employers alike. If the employee can claim damages for breach, so too can the employer, to suggest otherwise is to argue that this section is unconstitutional.”

Section 77(3) of the BCEA stipulates that ‘the Labour Court has concurrent jurisdiction with the Civil Courts to hear and determine any matter concerning a contract of employment, irrespective of whether any basic condition of employment constitutes a term of that contract.’

This provision of the BCEA clearly applies both ways and permits the employer to sue and recover from an employee damages caused by the employee, if the wrongful conduct constitute a breach of the contract of employment. Obviously, the normal principles of common law applicable to claims for damages will apply to such a claim.

For example, an employer will have to prove that it actually suffered damages or loss as a result of the breach of contract. The courts have wide powers in terms of the BCEA and may make any order considered reasonable on any matter concerning a contract of employment, including an award of damages. For example, the courts have upheld claims for payment of damages resulting from the repudiation of an employment contract by an employee, and a failure by an employee to work his full notice.

However, a claim for damages may not always be the simplest and most effective route for an employer to take and there are less acrimonious courses of action to pursue. For example, an employer may make salary deductions from an employee’s remuneration, to recover loss or damages only if such damages occurred in the course of employment and was due to the fault of the employee. For such a deduction to be in compliance with the BCEA, the employer must comply with a number of requirements, such as, the employer must follow a fair procedure and give the employee a reasonable opportunity to show why the deductions should not be made, the total amount of the debt must not exceed the actual amount of the loss or damage, and the total deductions from the employee’s remuneration must not exceed one-quarter of the employee’s remuneration in monetary terms.

Unfortunately, these formalities cannot be seen as mere guidelines and have to be complied with strictly. This was confirmed by the court in Shenaaz Padayachee v Interpark Books (D243-12) where the court stated that the BCEA confers a right on the employer to make deductions from an employee’s remuneration in respect of damages or loss caused by the employee but stipulates that this cannot be done unless the prescribed formalities are complied with. These prescribed formalities include an internal hearing to determine the liability of the employee and a written agreement by the employee to reimburse the employer in respect of the damages.

If the employee does not admit liability, and consequently, does not agree to the salary deductions the employer can proceed with court action and claim contractual damages. In this instance, the employer will rely on section 77 (3) of the BCEA as set out above and establish a case of breach of the relevant employment contract. The normal principles of common law applicable to claims for damages will apply to such a claim.

In conclusion, employers should not labour under the misconception that its employees are immune to civil action. In fact, the above principles clearly demonstrate that an employer can recover damages from an employee under Section 77(3) of the BCEA if the breach by the employee of his contract of employment resulted in damages or financial loss to the employer. It has also been established that an employer can recover damages by making deductions from an employee’s salary, subject, the formalities prescribed by the BCEA.

by Thami Khoza | Candidate Attorney

Andre Visser

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