The Importance of complete information at the consultation phase

One often overlooks the importance of complete and up-to-date information when clients and attorneys come together.

Clients focus directly on the problem at hand, while the attorney’s mind is immediately working to sift and sort the information received in such a way as to quickly give the client an idea of his or her chances of success, or of finding a solution to the said problem.

As a plaintiff client, it is imperative that correct and complete information is provided to the attorney at the consultation phase.  It has happened all too often that a client (usually with multiple companies) arrives at a consultation seeking to claim on behalf of their company, summons is issued, the court process runs its course and a few months (or years) down the line, a defendant raises a plea of non-joinder and/or prescription because the summons was erroneously issued in the name of one of the clients companies when it did not enter into the contract upon which the course of action is based.

This was specifically the case in the matter of Solenta Aviation (Pty) Ltd v Aviation @ Work (Pty) Ltd (754/2012) [2013] ZASCA 103; 2014 (2) SA 106 (SCA) (12 September 2013) where Solenta Aviation Workshops (Pty) Ltd issued summons against the defendant for damages resulting from breach of contract.

The contract, however, was concluded in the name of another company of the same client, namely Solenta Aviation (Pty) Ltd.  The client then sought an amendment of the name of plaintiff to the correct company.  The amendment was opposed and the court eventually found that the misdescription of the plaintiff was merely a misnomer and granted the amendment.

Good for the plaintiff? Not really.

Solenta may have dodged the proverbial bullet with the granting of the amendment, but Aviation @ Work was then free to make consequential amendments to its plea.  It did just that and raised a special plea of prescription against the claim, as the time taken with the amendments had now run past the prescription period of the claim.

The court, at the hearing of the matter, had to decide whether the original summons had communicated the intention of the plaintiff to the defendant.  Upon applying an objective test to the situation, the court found that the summons had not done so, the special plea was upheld and Solenta’s claim dismissed.   On appeal, the court found the same.

Another case is that of Imperial Bank Ltd v Hendrik Barnard N.O. and Others (349/12) [2013] ZASCA 42; 2013 (5) SA 612 (SCA) (28 March 2013)

In this matter, Pro Med Construction CC was under liquidation and the liquidators claimed payment from Imperial Bank in terms of a purchase and sale agreement on behalf of the close corporation.

The summons in this case was brought under the names of the liquidators in their representative capacities (nomine officio), where it should have been brought by the liquidators, and specifically on behalf of Pro Med.

Imperial Bank raised this misdescription in their plea and the liquidators, realising their error, sought an amendment to the claim, which amendment was opposed on the basis that it would amount to the introduction of a new party to the proceedings.

Imperial Bank also contended that the prescription period for the claim had also run its course, and an introduction of a new party would, in any event, render the claim prescribed.

Good for the defendant?  Not really.

The court, at the hearing of the matter, found that the amendment was merely to correct a misnomer and that the true plaintiff (the close corporation) had stayed the same throughout the proceedings, no new cause of action had been introduced and the claim did not, in turn, prescribe.

In these two examples the same question was decided by the same court in the same year with differing outcomes.

In the Pro Med case, the correct plaintiff had been incorrectly described, whilst in the Solenta case the incorrect plaintiff had been correctly described.

As one can see, there is a great risk in launching a claim without all the necessary facts.

An incomplete understanding of the business structure of a client can be detrimental to that client’s case, whilst the same can further be detrimental to the attorney who draws up and issues a claim on behalf of a client without all the necessary information.

Both situations open a client up to the possibility of losing their claim together with a substantial cost order against them.  The attorney is exposed to a multitude of professional negligence issues by that same situation.

What does this mean to you?

As clients, please make sure that all the necessary information is provided to your attorney.  If you have a complex business structure make sure that it is understood by your legal representative.  If you enter into agreements in the course of your business, make sure that the registration number of the entity entering into that agreement appears thereon.  Doing so will remove any possible doubt as to who the parties are and ensure that you do not end up with a situation down the line where a technical point has the real potential to ruin your chances at success?

by Dylan Lowe
dylanl@dyason.co.za 

Who is really entitled to the deposit when the sale to purchase immovable property does not proceed?

One of the most contentious issues in purchasing an immovable property today is if the sale does not proceed, does the seller or purchaser have the right to the deposit? The answer to this question is not that easy or as simple as many sellers, buyers and estate agents wish to believe.

In the recent case of Royal Anthem Investments 129 (Pty)Ltd v Yuen Fan Lau (941/2012) (2014) ZASCA 19 (26 March 2014), this point was decided on in the Supreme Court of Appeal. In this case, as is most common with offers to purchase immovable properties, the sale was dependent on the purchasers being approved for the purchase amount or part thereof. The purchaser was not approved for such finance, and both the seller and purchaser declared that they were entitled to the deposit. The Judge’s ruling in respect to the deposit turned on the wording and interpretation of the breach/penalty clause of the agreement, and emphasized the importance of using the correct wording in such clause to ensure that it embodies the interpretation the parties have of such clause, and that the clause complies with the applicable laws. The Judge ruled that, due to the manner in which the agreement was drafted and in particular the breach clause, the deposit had to be returned to the purchaser with interest.

According to South African Law of Contracts, it is an accepted principle that the non-compliance with a clause contained in an agreement places an obligation on both parties, in this situation the seller and purchaser, to restore each other to the position they were in immediately prior to the conclusion of the agreement. Based on this principle, many purchasers believe, if the sale does not proceed, due to their inability to obtain finance, then the deposit will automatically be returned to them. Unfortunately for the purchaser it is not as simple as that. Our law also allows for parties to an agreement, to exclude the duty to restore on the parties, but then such exclusion mostly gives rise to a penalty or liquidated damages clause, which is subject to the Conventional Penalties Act 15 of 1962 (“the Act”).

In terms of Section 3 of the Act:

“If upon the hearing of a claim for a penalty, it appears to the Court that such penalty is out of proportion to the prejudice suffered by the creditor (purchaser) by reason of the act or omission in respect of which penalty was stipulated, the Court may reduce the penalty to such extent as it may consider equitable under the circumstances. Provided that in determining the extent of such prejudice the Court shall take into consideration not only the creditor’s proprietary interest, but any other rightful interest that may be effected by the act or omission in question.

From the seller’s point of view, the Court can take into account not only any financial loss but any pain and suffering which the seller may have suffered, due to stress and anxiety, caused by the cancellation. Due to the subjective wording of the Act this means that a penalty enforced by the Judge could be higher than the actual loss suffered. From the Purchaser’s perspective it means that any deposit cannot simply be retained by the seller, without such seller having to quantify his damages as result of such cancellation.

The Act, by balancing the rights to some extent of the seller and purchaser to the deposit, now places the Conveyancer in the position, if there is a conflict in respect to retaining or paying over the deposit, then such disputed amount should be placed, in an interest bearing account, until either the seller and purchaser have reached agreement thereon or alternatively there is a Court Order in respect to such deposit. This definitely changes the previous view of many sellers, that the Conveyancer is ‘’their Attorney”’, and accordingly “takes instruction from them”.

Some Attorneys are of the view, that in order to get around the issue of the seller being able to retain the entire deposit paid by the purchaser and not having to quantify their loss, that an agreement should be drafted, in which the purchaser has an option to purchase the property, and the purchaser pays an amount for such option. The option Agreement would then provide that if the option is exercised, the amount paid for the option will be deducted from the purchase price. Whilst if the transfer does not proceed, then the option amount will be retained by the seller, as such agreement, is not considered to contain a penalty clause in terms of the Act. Realistically the option Agreement does not place either the seller or purchaser in the perfect position. The seller does not know if the purchaser intends to exercise such option, until the option expires, and the purchaser will forfeit the option amount, no matter the reason for his inability to exercise the option.

The question of who the deposit belongs to is fraught with complexity and considerately depends on the wording of each offer to purchase.

by Natalie Bailey
natalie@dyason.co.za

Circumventing Rule 57 of the Uniform Rules of Court with reference to Ruca v RAF

While most of us are familiar with the concept of appointing a curator for people who are unable to conduct their own litigation or to handle their own affairs all in all, we may not be aware that there is an extensive procedure to be followed before one can be appointed as a curator or we are just oblivious to the procedure like the practitioners in matter of Sibusisiwe Ruca v Road Accident Fund (GP) (unreported case no 73012/13, 27-1-2014). There is a spectrum of curators, however this article will only focus on people who require the assistance of a curator as a result of having sustained severe head and brain injuries in a motor vehicle collision.

This article focuses the circumvention of the provisions of Rule 57 of the Uniform Rules of Court by practitioners while dealing with the appointment of curators. This was extensively dealt with in the Ruca-matter. A summary of the facts of this case are as follows:

The patient, Ruca, had been involved in a collision on the 28th of November 2009. He had suffered a severe head injury with brain damage, facial bruises, a right ear injury and whiplash injury to the neck. The patient had been transferred to Groote Schuur Hospital on the, upon examination dr. Peter Mitchell recorded that the patients Glasco Coma Scale was 3/15, a reading that is in itself indicative of severe traumatic effects on the brain.

The patient had been examined by various experts opined as follows:

Dr Mokgokong, the Plaintiff’s neurosurgeon, stated that the head and brain injuries suffered by the plaintiff were severe and that there would be severe long term mental and behavioural changes resulting from the accident. He further stated that the patient’s head and brain injury was so serious that it took a full year to recover sufficiently to recognise his family members and to communicate intelligently with them. He also suffered severe post-traumatic amnesia.

The defendant’s neurosurgeon, Dr Segwapa, examined the patient and concluded that he had suffered severe brain injury, commenting that he would not be able to handle his own affairs.

A consulting clinical psychologist, Dr Gladys Maluleke recorded that “he is independent in self-care and can look after himself. He can distinguish coins from banknotes, but he is confused when he has to count a lump sum of money. He relates well with his family. He needs assistance to manage, plan, think and run his life and he relies on his mother for that.”

The matter was brought before court and settled. Upon settlement, the issue was raised as to whether the patient would be able to handle his own affairs.

It was then decide that a curator ad litem should be appointed on behalf of the patient, since both the medical experts and his mother are of the view that he will not be able to handle his own affairs.

Bypassing the rules and the independence of a curator

The court raised the question of whether the patient was in a position to appreciate the nature and extent of the proposed settlement and whether he would be able to manage the funds to be awarded to him and further queried the procedure followed when deciding that counsel who was representing the patient on first appearance be appointed as his curator.

When pressed for answers not one of the three advocates was able to supply the court with a satisfactory answer. Nor were the three able to deal with the court’s question whether the proposed curator’s independence had not been irrevocably compromised by his prior association with the patient’s legal representative, not one of the three considered the applicability of Rule 57 to the appointment of the proposed curator, and did not seem to be aware of its provisions. Application for appointment of advocate R as curator was dismissed.

Upon return to court on the 2nd of December 2013 the patient’s attorney of record applied to be appointed as the patient’s curator ad litem. He motivated his application with the help of his neurosurgeon’s report, quoting the doctor’s statement that the patient would require the assistance of a curator as he is unable to handle his own affairs.

The court raised the same question, stating that the attorney had failed to deal with patient’s incapacity to deal with his own affairs and whether or not this extended to his ability to understand the proceedings or not. The court stressed in this regard that “when an application is made to appoint a legal representative as a patient’s curator ad litem, that representative should know if there is a need to address the issue of whether the patient requires a curator to assist in dealing with his personal or financial affairs.

In the matter of Ex Parte Futter 2012, the court dealt with the issue mentioned supra and stated that “…a court will not appoint a curator until it is satisfied that the patient needs to be protected against loos that would be caused if the patient is unable to manage his affairs.” This emphasises the idea that the curator must address the issue of whether the patient needs a curator to manage all or part of his affairs.

Circumventing the Master’s supervision

With regard to avoiding the master’s supervision the court stressed that “the Master’s jurisdiction is not determined by the jurisdiction of the court, but by the provisions of the Administration of Estates Act 66 of 1965. That the

referral of the report to the Master is obligatory as decreed by sub-rule 57(6). In this regard the court, in the matter of Molatudi v Road Accident Fund [2010] ZANWHC 6 (20 May 2010), said that:

“Rule 57(6) prescribes that, the report of the curator ad litem as well as the documents filed in terms of 57 (2) and (3), shall be submitted to the Master of the High Court for consideration and report to the court. Rule 57(7) provides that the Master, in his report, shall as far as he is able, comment upon the patient’s means and general circumstances, and the suitability or otherwise of the person suggested for appointment as curator to the person or property of patient.”

The Master exercises control over curators, executors and trustees, the powers to do so having been conferred by the Administration of Estates Act and Trust Property Act.

One can conclude from the discussion supra that to an extent the court was not challenging the patient’s capability of managing his own affairs or having an unsound mind all in all, but the circumvention of Rule 57. Whether it was correct for the attorney and counsels involved in the matter to deal with such a sensitive matter in the way they did, whether it was proper for the practitioners to avoid a thorough inquiry into the appointment of a curator.

It is absurd for the practitioners involved in the Ruca-matter to even mention that the practice of avoiding the provisions of Rule 57 is trite in both the North Gauteng and South Gauteng High Court divisions. It cannot be acceptable that this extensive and thorough procedure be avoided as the patient loses his independence and someone must now make decisions for him (who oversees this process if the rule is circumvented?). It goes without saying that there has been gross negligence in both divisions in the past years and we as practitioners need to jettison it.

by Sada Raulinga
sada@dyason.co.za