Kwazulu Natal High Court indefinitely postpones default judgment requests

Section 129 of the National Credit Act requires that a notification be sent to consumers that are in debt, advising them of their right to refer a credit agreement to a debt counsellor to resolve disputes prior to proceeding with legal steps to recover the debt. Recently, ABSA had three applications for default judgment postponed indefinitely by the Kwazulu Natal High Court, as the debtors against whom the applications were brought, did not receive the Section 129 notices as required by law. The applications for default judgment brought by ABSA were for home loans. ABSA argued that with reference to the Constitutional Court Judgment, proof of delivery to the correct post office was sufficient. The notices sent by ABSA however returned unclaimed, and as a result, the Kwazulu Natal High Court held that the object of sending the letters by registered post were defeated since they were not received by the debtors, even though ABSA had complied with the requirement of sending them by registered post. The court found, based on the evidence presented to it, that registered post was likely to fail and was far from being a reliable method of getting notices to a consumer in comparison to ordinary post. The Court however gave ABSA the opportunity to make use of the other methods as provided by the Act, namely fax, ordinary post and e-mail, as well as by registered post at the consumer’s chosen domicilium. Acting Judge Peter Olsen said that, “the only advantage of registered post, on the evidence before me, is the facility of proof; and if the experience of ABSA and its attorneys reflects the experience of other lending institutions, what will be facilitated in most cases is proof of failure. In my view it is accordingly worth having another look at ordinary post when registered post has failed, despite the expressed preference of both the Supreme Court of Appeal and the Constitutional Court for registered post.” Furthermore, the Court indicated that there is a “high degree of probability that the consumer has avoided delivery” when registered post fails due to the consumer not collecting the letter. As a result, this “must be put in the scale when balancing the interests sought to be protected.”

Euthanasia

Legalisation on euthanasia is a topic that is controversial on a global scale. The right of a person to choose whether to live or die is not only a legal issue but also covers the realm of religion and morality. Whilst in many societies it is not morally accepted, there are great arguments from a legal perspective in favour of euthanasia. In recent events there has been great uproar pertaining to the debate on euthanasia since Sean Davidson, a Western Cape University professor, returned to South Africa after serving his sentence in New Zealand for assisting his terminally ill mother to die. He assisted his elderly cancer-stricken mother to die by giving her several crushed morphine tablets with water, resulting in him being charged for attempted murder. He did not deny the charges, and pleaded guilty to helping is mother to permanently end the long years of suffering she endeavoured. Euthanasia has been marked illegal in South Africa, but Sean Davidson is adamant to have this changed. This is a clear indication that our country is now ready to have this controversial debate. Currently he is running a petition in favour of legalising euthanasia in South Africa. Euthanasia has been described in Greek as ‘a Good Death’, although the controversy surrounding this question would prove contrary. S v Hartmann 1975 (3) SA 532 (C) is a leading criminal case in connection to the legality of euthanasia in South Africa. In this case, a doctor helped his father who was suffering increasingly and terminally from secondary cancer. The accused was charged with murder because for legal purposes, he possessed dolus directus as he was fully aware that his actions would ultimately end his father’s life. It was established by the court that consent of the deceased to die is no defence to murder and therefore the accused was convicted of such crime. Despite the conviction of murder, the court accentuated the element of mercy in this particular case. It found that this was indeed a situation where full measure must be taken to mercy in so far as it is not unfair to society. As a result, the accused was to serve one year in prison, of which nearly all was suspended. Religious views show broad consensus about the fact that it is wrong to kill another human being. According to modern secular medical ethics, human life is to be preserved and the role of the physician is not to be an instrument in its destruction. However according to the principle of autonomy, if there is in fact an autonomous decision to die, it must ultimately be respected. The situation is diverse and more controversial where there is an autonomous request to be actively killed. The question then arises as to how a patient can actually come to a conscious and intelligible decision to end their own life when such patient in effect cannot function autonomously. Despite the deep controversy that has long since been existent in societies regarding assisting persons to die, the Constitutional era in South Africa has shown that human rights take precedence over moral beliefs. The question of legalising euthanasia has pushed the envelope forward in persuading us to think about whether we are at that point where euthanasia must be dealt with and for people’s genuine beliefs to take precedence within strict and controlled boundaries. Legalisation of euthanasia seems to be a logical step forward to address individual liberty and offer them the choice regarding a dignified death, but ultimately time will be the only real decider in such a controversial topic.

Counterfeit and the “Notional” Good

The Counterfeit Goods Act defines counterfeiting in terms of s1(a) and (b) concisely, making provision for the fact that there will be counterfeiting where manufacturing, producing, making or applying to the goods includes the subject matter of the protected good, or is a colourful imitation which is calculated to be confused with or be taken as the protected goods. Furthermore, the Act must be without the authority of the owner of any intellectual property right in respect of protected goods which are imitated so that those other goods are to a large extent, identical copies of the protected goods. In addition to the above requirements, the act of counterfeiting must also have infringed the intellectual property right in question. This inevitably means that the starting point is to therefore first establish if there is infringement of an already existing intellectual property right. What this indirectly assumes is that the counterfeit good must be a ‘clone’ of an already existing good. By briefly perusing this section of the Act, vast debates may be generated, opening the gates to a storm of questions that require distinct and precise answers. One’s first reaction is to immediately knock down any idea of another good looking or seeming to be a fake of a protected good. Whilst this is the situation most of the time, little attention is paid to the fact that not all producers of goods calculate and premeditate ways in which they can pass off their goods as that of another. Certain designs are uniquely created by others, but due to the high fortification of the rights of the owner of protected goods, such designs can still be seen as counterfeits under certain circumstances. This was apparent in the Puma v Rampar Trading (Pty) Ltd case. It was found that counterfeiting is described in a “somewhat opaque manner” and that due to the fact that the Act remains “contentious” and no visible steps have been taken to solve this problem, it must be interpreted as best as possible by the courts. The main issue surrounding this case was whether another good can actually be a clone of a protected good despite that the owner has not already produced it. In this regard, the court interpreted paragraph a) of the definition of counterfeiting as being intended for piracy, and paragraph b) being intended to be applied to trademark counterfeiting. The rationale for such interpretation was the terminology used in the respective paragraphs which was an indication of a tradition in either trademark or in piracy respectively. An extremely interesting fact from the judgment was the court’s interpretation of what a ‘protected good’ actually meant. Two meanings were given; the first being that ‘protected goods’ are actual genuine goods that feature the registered trade mark. The Act in this regard protects against cloning of goods that already exist. The second meaning refers to goods that bear a registered trade mark but which have not yet been produced. These are so called “notional goods”; goods which the owner could have placed a trade mark on. Therefore, in so far as a good is calculated to confuse persons into thinking that it is actually that of the owner, goods which have not yet been produced by the owner but which in some time in the future could be, will be protected by the Counterfeit Goods Act. Any clone of such notional good is deemed to be a counterfeit of such good. Whilst the intentions of such a decision could be directed in a positive way, it seems that it may have prejudicial effects on those that are producing good quality goods honestly. Even if they create a unique design of a good, it could still be seen as being a counterfeit of a protected good as described in the Act, provided that it resembles something that could or may be produced by the owner in the future. This appears very indeterminable, as there are no guarantees that the owner will in fact produce such a good. Others’ goods are marked as counterfeits despite whether the owner of the protected good has an existing one. Perhaps the Counterfeit Goods Act should be more precise and indicative of the extent to which such a notional good is protected, inclusive with time frames and detailed requirements. The concise manner in which the definitions in the Act are described creates vagueness and obscurity, allowing the courts to interpret the provisions broadly, thereby placing extreme protection on already protected goods. This appears to leave little room for those that are still trying to enter the market. Clearly, upcoming producers of new goods may find it difficult to become a small spec in a sea of goods protected by intellectual property rights, whether they already exist presently or not. Resources: Puma AG Rudolf Dassler Sport v Rampar Trading (Pty) Ltd and Others 2011(2) SA 463 (SCA) The Counterfeit Goods Act 37 of 1997

The Liability of Non- Executive Directors in light of the New Companies Act

It has become an established principle of good corporate governance, that a substantial portion of a company’s board should be composed of non-executive directors. Indeed, the King III Report on Corporate Governance went as far as to recommend that the majority of the board should be independent non-executive directors, and that the only executive directors should be the CEO and the finance director.

The establishment of this principle has made many would be non-executive directors excited at the prospect of obtaining lucrative, well paying, and undemanding positions on the boards of companies. However, many of these would be directors will would be wise to pay attention to the new governance provisions of the new Companies Act, no 71 of 2008. The new act does not distinguish between executive and non-executive directors when attributing responsibility and liability for the losses of a company.

The following acts, amongst others, will lead to any director(including non – executive directors) being held liable losses incurred due to:

1.A breach of that director’s fiduciary duty.
(At least in this respect a non-executive director has a lesser duty than an executive director. The content and scope of fiduciary duty is relevant to the circumstances of the fiduciary relationship)
2.Failure to exercise the degree of care skill and experience expected of someone in their position and with their knowledge.
(Non-executive directors are often chosen because they have specialized knowledges such as experience in a industry and legal or accounting knowledge. A failure to communicate any potential future problems that fall within your skill set could lead to liability)
3.Signing or consenting to false or misleading financial statements
(Non-executive directors must be prepared to spend time ensuring that financial statements are valid. A failure to properly investigate any irregularities could lead to liability)
4.Failing to resist reckless trading
(This is an onerous duty. The point of a non-executive director is to prevent abuse by that company’s management. A non-executive director is expected to be an active supporter of prudent management, who takes action to prevent mismanagement.)
5.Approving a resolution for an unlawful dividend or allotment of shares.
(It is not enough to have technical knowledge or experience in the industry in which the company trades. A non-executive director must have basic accounting knowledge and be familiar with the company capitalisation laws.)

The Benefits and Pitfalls of an Arbitration Clause in Contracts

Most, if not all legal jurisdictions make provision for parties to choose to use private arbitration to settle matters instead of the Courts. It decreases the workloads on over burdened courts, as well as the state’s contribution to the cost of justice. It also allows the justice system to wipe it’s hands of a case, as the parties become responsible for the quality of the justice they receive in the case. The benefits are not just for the State, and as I will set out below there are very real and useful benefits for a contractant to choose to insert an arbitration clauses into an agreement.

The most valuable benefit that can be provided by an arbitration clause is that of privacy. Defamatory allegations made about a party in court papers are “privileged” and cannot be the basis for a defamation claim unless the defamed party is able to prove that there was malice behind the allegations. Court Process is open to the public and the allegations made therein must be made available the public on request. However, if a party were to include a privacy or non-disclosure clause in an agreement in addition to the arbitration clause, the only the parties themselves and the arbitrator would have knowledge of the matter. No member of the public would be entitled to information about the matter, and none of the parties are entitled to disclose information about the matter. The Arbitration Act no 42 of 1965 (“the Act”) even allows for parties to limit the extent of that parties have to discover evidence in their possession.

The Act allows for parties to customize every facet of the litigation process, from the time frames to deliver pleadings and notice to the inspection and delivery of evidence. Ordinarily, it can take approximately 3 months before a magistrate’s court will grant judgment in an undefended matter. Parties seeking quick and enforceable solutions to their disputes may benefit by agreeing to refer the matter to an arbitrator. However, there is on caveat in respect of the efficiency of arbitration clauses, and it is that the parties must truly intend to utilize arbitration. The mere existence of a clause which requires parties to refer matters to arbitration is not an automatic bar to the institution of legal action in a civil court. Should a party elect to institute action in the courts, that court will have jurisdiction to hear the matter unless the other party brings an application in terms of S6(1) of the Act. The court will only grant the application to stay proceedings if the respondent has been unable to show good reason as to why the matter should not be referred to arbitration.

Parties who continually find themselves repeating the same commercial transaction, such as a landlord leasing the same property to different tenants, usually elect to use a one size fits all contract for those transactions. It sometimes happens that those agreements contain arbitration clauses specifying that disputes arising from the agreement must be referred to an arbitrator. This type of agreement is often a double edged sword. It will allow a party to utilize a private forum, but a careless party could find themselves involved in unnecessarily costly litigation if they proceed to institute legal action without first seeking to refer the matter to arbitration.

RECKLESS CREDIT AND DEBT REVIEW

One of the purposes of the National Credit Act is to prevent predatory lending practices and reckless credit. A credit agreement is reckless if : i) The credit provider failed to conduct an assessment of the consumer’s credit worthiness ii) a credit assessment reveals that the consumer did not understand the agreement iii) a credit assessment revealed that the consumer is over-indebted or would become over indebted if further credit is granted. In determining whether credit is reckless a court can only consider the circumstances at the time that the credit was granted. Furthermore, where a consumer has failed to fully and truthfully supply any information requested by the credit provider when applying for credit, the credit agreement cannot be reckless for any reason.

According to Section 83 of the National Credit Act (“NCA”), if a credit agreement is reckless , A court is entitled to either i) suspend or freeze that credit agreement, ii) set the credit agreement aside, iii) declare the consumer over-indebted and restructure that consumer’s debt. A court will only set aside a credit agreement if the reason for recklessness is that the credit provider failed to conduct an assessment or the consumer did not understand the credit agreement.

However, one does not simply bring an application to Court to have a credit agreement declared reckless. The granting of reckless credit does not by itself entitle a consumer to approach a court to obtain a declaration that the credit agreement is reckless. Reckless credit is an ancillary consideration. A court is only entitled to consider whether a credit agreement is reckless when that credit agreement is already before court for some other reason, such as a credit provider attempting to enforce that credit agreement or a consumer attempting to obtain a Debt Restructuring Order.

If a Debt Counsellor is of the opinion that a credit agreement constitutes reckless credit and wishes to have that credit agreement suspended or set aside, the Debt Counsellor must make a second application to the magistrate’s court under the same case number as the actual debt review application. In that second Application, the Debt Counsellor must set out the basis on which he or she is of the opinion that the credit agreement is reckless and ask for the desired relief. If the Court makes an order of suspension or sets aside the credit agreement the Debt Counsellor must then issue a new proposal reflecting the court’s ruling.

The Reciprocal Nature of Contracts and the Consumer Protection Act

Reciprocity is an established principle of South Africa’s law of contract. Essentially, the principle states that when a party to a contract has failed to perform all his obligations in terms of an agreement, then the non-performing party is not entitled to demand that the other party provide any performance in terms of the agreement. The principle of reciprocity applies to agreements which have reciprocal obligations. An obligation is reciprocal when the performance of one party is conditional upon the performance by the other party. Most bilateral agreements such as agreements of sale, lease or services rendered are automatically considered to be reciprocal unless proven otherwise.

It is lawful and very common for parties to exclude the principle of reciprocity by making obligations non-reciprocal. The most common manner of doing so is to simply set a date by which performance is due, e.g. that rental is paid on the first of every month. The usage of such clauses has become so common that many parties do not consider the effect of reciprocity when negotiating and concluding agreements. This approach is recommended for parties who wish to retain the commercial efficiency of agreements, as the transactions between parties may otherwise come to a standstill whilst they wait for each other to perform.

The coming into force of the Consumer Protection Act no 68 of 2008 (the Act) will have a significant impact on the application of the principle of reciprocity. Section 48(1)(a)(ii) makes it unlawful to supply goods or services on terms that are unjust, unfair or unreasonable. Section 120(d) of the Act entitles the minister to make regulations in respect of unfair terms. Regulation 44(3)(m) of the Consumer Protection Act regulations state that a term obliging the consumer to fulfill all his or her obligations where the supplier has failed to fulfill all his or her obligations is automatically unfair. What this means is that any supplier of goods such as a lessee or retailer, cannot first demand that the consumer pay (normally the consumer’s only obligation) before receiving the goods or be entitled to take possession. Regulation 44(3)(m) also does not state that the consumer is entitled to the goods or services before payment. Quite simply if a contact entitles the supplier to performance by the consumer (e.g. payment of rent on the first of the month)without specifying that the supplier must already have performed (e.g. given occupation of the premises), that term is unlawful. Whether or not the supplier has in fact supplied the good or service first is irrelevant, the term itself is unlawful and will be struck out the agreement. In the absence of set dates for performance, the contract reverts to the default position whereby the principle of reciprocity applies. There will be no date set for performance, thus a party to a contract which seeks performance from the other contractor will have to first i) prove performance of all their obligations and ii) thereafter set a reasonable date for timeous performance. Unless these two requirements are the other party will not be in breach of contract. It may be possible to a party There will in fact be an extra burden on the suppliers of services, in terms of Section 54(1)(a) of the Act which provides that services must be supplied timeously.

The problem with the principle of reciprocity is that it can leave itself open to abuse. Reciprocity is given form in the way of the exceptio non-adempleti contractus (the exception of the non-performed contract), which is a defence to claim based on contract. To rely on this defence a defendant would have to prove that: i) the obligation not performed by the plaintiff is reciprocal; ii) the plaintiff has not fully performed all of his reciprocal obligations. The burden of proof in this respect is not always clear and will be affected by the type of contract. In order for a party to be denied use of the exceptio when defending legal action, the party claiming performance must prove that it has complied fully with its obligations in terms of the agreement. The application of the principle in this manner, would result in businesses suffering severe penalties for incomplete performance, even though most of the cost had already been incurred and the defect in performance may be not be significant. If this situation were to be allowed, the defendant would be in a position to retain almost all the performance, but not have to perform at all in return.

The courts have developed two responses to the above situation. The first is that a party who is denied by the exceptio must be given the opportunity to rectify the performance if possible. The second, is that in the interests of equity, courts have relaxed the exceptio and reduced the plaintiff’s claim by the amount necessary to repair the defective performance. In order to relax the exceptio the plaintiff must prove: i) that the defendant is utilizing the defective performance; ii) a quantifiable cost of remedying the defect ; iii) that the circumstances are such that it would be equitable for the court to relax the exceptio. It is expected that the majority of cases will be concerned with the supply of defective goods and services, in which case the provisions of Section 54 of the Act will apply, which gives consumers a further remedy.