Talking Point January 2014

A succinct discussion of selected topical, legal matters

I take great pleasure in submitting the first 2014 edition of Talking Point to you.

The bohemian American author Anaïs Nin made short shrift of New Year resolutions in a rather solemn manner:

I made no resolutions for the New Year.  The habit of making plans, of criticizing,
sanctioning and molding my life, is too much of a daily event for me
.”

From all of us at Walkers to you:

May your year ahead be full of contentment and joy!

As always, I would greatly appreciate your feedback on Talking Point.  Please email me at charlt@walkers.co.za.

Regards
Charl Theron

In this issue:

 

LEGAL MATTERS

Sangoma training and work ethic

Amien Hoosain
by Amien Hoosain

Kiewits Kroon Country Estate v Johanna Mmoledi, a judgment of the Supreme Court of Appeal on 29 November 2013, concerned a clash of cultures in the workplace.

The employee informed the employer that she had been seeing visions of her ancestors, accordingly had a calling to become a traditional healer; and requested certain indulgences to attend training. The employer was accommodating. Soon thereafter, the employee requested five weeks unpaid leave to attend a traditional healer course. However, the employee had already used up almost all her annual leave, sick leave, and compassionate leave, and her absence would adversely affect the employer’s business. The employer offered one week. The employee rejected the offer, and submitted a note from her traditional healer stating that the employee had been under her care for a long time, had been diagnosed by her as having ‘perminisions of ancestors’, and must attend the five week course. Thereafter, the employee absconded to attend the course without the employer’s permission. In due course, following a fair procedure, the employee was dismissed.

The employee initiated CCMA proceedings. At the CCMA, her traditional healer testified that serious consequences (including death) would befall someone who ignored the calling. The CCMA held that, as the employee’s sincerely held cultural belief compelled her to attend the course, her absence from work was justified, and her dismissal was substantively unfair. The Labour and Labour Appeal Courts upheld the decision.

So did the SCA. It held that:
• a court is not permitted to evaluate the acceptability, logic, consistency, or comprehensibility of a sincerely held cultural belief; and
• the employer ought to have regarded the traditional healer’s note as equivalent to a conventional medical doctor’s sick note.

There are unfortunate aspects to this matter. The word of the SCA is ‘gospel’ going forward. However, the SCA finding is based on insufficient evidence. The only actual oral evidence in the matter was heard in the CCMA, where the parties had no legal representation, and evidence was not properly presented or tested. Also, there was no expert evidence as to the anticipated economic impact of the judgment, or possible unintended consequences.


 

Is your banker as good as his word?

by Jerome Veldsman

Should a property developer sign on the dotted line to purchase property, based on an oral assurance from his banker that funding is not a problem?

In Royal Bank of Scotland PLC v Carlyle, a 12 September 2013 judgment of the Court of Session in Scotland, in a telephone conversation, the bank’s business development manager told the developer: “It’s all approved”; and the developer assumed he had the funding in the bag. However, when the developer received the paperwork, as approved by the credit committee, it was merely ‘indicative terms’. The developer succeeded in holding the bank to its word in the court of first instance, but lost on appeal:

It was commercially absurd to suggest that the [bank] had, in the use of three words in a conversation over the telephone, contracted in a manner obliging them to lend the defender £700,000 (and further monies to his company) no matter what his (or its) financial position might be at the date of draw down. What had been said did not come close to satisfying the requirements for a contract of loan …

In the real world, banks only advance real money once copious documents have been signed.  It is likely that a South African court will make a similar finding on similar facts.

Hiding behind a veil of vagueness

Roxanne Ker

by Belinda van der Vyver

When people talk, they lay lines on each other, do a lot of role playing, sidestep, shilly-shally and engage in all manner of vagueness and innuendo. We do this and expect others to do it, yet at the same time we profess to long for the plain truth, for people to say what they mean, simple as that.

(Steven Pinker, a cognitive scientist and linguist)

In Kingswood Golf Estate (Pty) Ltd v Witts-Hewinson, a judgment of the Supreme Court of Appeal on 29 November 2013, the purchaser of a property in a golf estate discovered that vague, ill-defined
promises do not give rise to enforceable obligations.

The sale agreement contained a provision in terms of which the seller (the developer) was to construct “a clubhouse, duly furnished in accordance with the upmarket quality and nature of the proposed development“.  The agreement contained no further details as to what the clubhouse should look like (there were no drawings, plans, or specifications) or where it should be situated.  The Court found that the provision was therefore of uncertain content and could not be enforced.  Stated differently, the relevant provisions were found to be void for vagueness.  The Court rejected the purchaser’s argument that a newsletter issued by the developer some eight months after the agreement was signed, and which contained more details about the proposed clubhouse, could be used to give content to the vague provisions in the agreement.

Before entering into any contract, it is critical to ensure that the parties’ respective rights and obligations are set out clearly and with adequate certainty in the contract.  If they are not, one or the other party’s expectations will not be met.  While of general application, this principle frequently comes to the fore when purchasing a house or an apartment ‘off plan’ or in a new development.  The benefit of sound legal advice outweighs the cost.

Selling Your Fixed Property: There’s Many a Slip ‘Twixt The Cup and the Lip’

Amien Hoosain Amien Hoosain

by Charl Theron & Nosipho Madikiza

For many of us, the immovable property registered in our name is our major asset. The sale of such asset is a grave matter, and great care must be taken to avoid loss. A conveyancer is pivotal to the transfer of a property, and ensuring that the seller receives the purchase price (net of agent’s commission, bond settlement, and the like). Therefore, the seller must appoint his or her own conveyancer. Minister of Agriculture and Land Affairs v De Klerk, a judgment of the Supreme Court of Appeal on 30 September 2013, is a case in point.

De Klerk was the registered owner of two farms in Mpumalanga in respect of which claims were lodged in terms of the Restitution of Land Rights Act. Under threat of expropriation, De Klerk entered into a deed of sale with the National Department of Land Affairs. The latter insisted that its appointed conveyancer (who was a stranger to De Klerk) must attend to the transfer. De Klerk acquiesced, and did not appoint her own conveyancer.

The purchase price was R3 700 000. The purchase price was paid into the conveyancer’s trust account, and transfer occurred on 22 May 2009. Regrettably, the conveyancer stole just over R1 000 000 of the purchase price. For an undisclosed reason, De Klerk did not proceed against the conveyancer, and sued the Minister (as the representative of the Department).

De Klerk succeeded in the High Court, Pretoria. The Minister appealed to the SCA, on the basis that the Department had paid the full purchase price to the conveyancer, and was thus off the hook. Two of the five judges who heard the appeal agreed with the Minister. However, the majority held that in this specific instance the conveyancer was the Department’s agent only, and did not receive the purchase price on behalf of De Klerk. The Minister had to pay up, with interest.

Although De Klerk succeeded, the final court order was given more than four years after transfer was registered! Had De Klerk appointed her own and trusted conveyancer, she would have had her money in May 2009, and would have been able to utilise the funds appropriately at that stage. De Klerk would also have been spared years of agony, missed opportunities, and legal expenses.

 

The long and winding road

Jerome Veldsman

by Jerome Veldsman

Hedge funds are much maligned and poorly understood. Some blame hedge funds for the 2008 financial crisis, yet hedge funds shielded others from the fall-out of such financial crisis.

Hedge funds originated in the USA around 1950, and the name “hedge fund” comes from the term hedge, as used in “to hedge a bet”. However, many hedge funds no longer necessarily hedge. Hedge fund investment strategies (including arbitrage, directional, and long/short) generally aim to achieve a positive return on investment, regardless of whether markets are rising or falling (so-called absolute return). Hedge fund typically invest in (usually listed) financial instruments (bonds, collective investment schemes, shares, and the like) and derivative instruments based on financial instruments.

A main reason for the existence of hedge funds is for the managers to earn management fees, usually a percentage of the assets of the fund. Of course, the investors (often financially sophisticated) want value for money, and that includes tax efficiency. So, the legal structure of most hedge funds is such that there is a flow through to the investors, with no ‘tax trap’ in the fund itself.

Regulators world-wide have struggled with how to regulate and to tax hedge funds. There is not even sufficient consensus on how to define a hedge fund. South Africa is stepping up regulation of hedge funds, but in a fragmented manner. The FSB and SARS have recently procured the publication of statutes and draft statutes, including the Taxation Laws Amendment Bill, 2013. Too many questions remain unanswered. What legal framework is appropriate for a hedge fund? CIPC may have an opinion on an unregistered association of persons carrying on business for gain (section 8(3) of the Companies Act). SARB may have an opinion on an unregistered person tasking deposits from the public (section 11(1) of the Banks Act). As hedge funds are here to stay, coordinated and consistent regulation will be welcomed.