The Master Law

Why an Oral Estate Agency Mandate Isn’t Worth the Paper It’s Written On

“A verbal contract isn’t worth the paper it’s written on” (Samuel Goldwyn)

Perhaps you are a seller marketing your property through an estate agency, or a buyer asking an agent to find you one, or a landlord employing an agent to let out your property. Whatever the transaction involved, make sure that the agency mandate is in writing.

The problem is that, because we have a human tendency to hear only what we want to hear, the parties to any verbal agreement can, quite genuinely, each remember the terms of their agreement quite differently. Even worse, if one party is determined to cheat the other, it’s a lot easier to challenge a verbal agreement than a written one.

Bottom line – oral contracts invite misunderstanding, conflict and protracted litigation, and for that very reason few agents will accept a mandate without requiring your signature on a written agreement.

But not always – let’s consider a recent High Court fight over a R450,000 commission claim.

Buyer must pay R450k for a cancelled sale
  • A property developer had previously employed an estate agent to source development property for it. No written mandate was ever signed.
  • The agent, relying on what she said was a verbal mandate to find a further development property, introduced the developer to a property which it decided to buy. An agreement of sale, including a clause confirming that the agent was entitled to R450,000 in commission, was signed by both buyer and seller. The agent had thus fulfilled her mandate and was the effective cause of the sale, the developer being willing and able to buy the property. In the ordinary course the agent would then have been entitled to her commission on fulfillment of all suspensive conditions (“conditions precedent”).
  • However, when the developer cancelled the sale, it refused to pay the agent her commission, denying firstly that any mandate had been given, and secondly arguing that in any event commission was only payable against actual transfer of the property from the seller to the buyer.
  • Long story short, the Court dismissed the developer’s attempts to convince it that there was no mandate at all, or that the suspensive conditions had not been fulfilled, or that the mandate included either an implied or a “tacit” term to the effect that commission would only be payable against transfer.
  • The developer was ordered to pay the agent’s commission and is left R450k (and legal costs) down, with absolutely nothing to show for it.
The lessons…

That is of course not only an expensive lesson for the developer, it’s also a clear wake-up call to anyone and everyone entering into a property deal of any sort with the involvement of an estate agent to ensure that you –

  1. Sign a written, clear mandate

    Both parties could have saved themselves all the aggravation, delay and cost of litigation had they only entered into a written mandate agreement with clear, simple terms accurately recording the terms and conditions they had agreed upon.

    As we said above, most agencies insist on written mandates anyway, but make sure you aren’t the exception!

  2. Specify that commission is payable against transfer

    Most sale agreements will provide that commission is earned on performance of the agent’s mandate and fulfilment of any suspensive or resolutive conditions (bond clauses and the like).

    But when is the commission actually payable to the agency? As it is normally deducted from the buyer’s deposit held in trust, both seller and buyer should check that it will not be paid out before transfer (or, in the event of a breach or cancellation of the sale, on that date). And whilst most standard mandates and sale agreements will provide exactly that, you must check because every agreement will be different. If there is a clause allowing payment of commission before transfer, don’t accept it without specific legal advice.

    From an agent’s perspective, further clauses are of course essential to protect your commission payment in the event that the sale is frustrated or doesn’t proceed – normally the agreement is that a defaulting party (buyer or seller) is liable to pay the full commission on default.

Most importantly of all, sign nothing property-related without asking us to check it over for you first!

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Cannabis Policies in the Workplace: A Delicate Balancing Act

“It is declared that the [employer]’s Alcohol and Substance Abuse Policy is irrational and violates the right to privacy in section 14 of the Constitution, to the extent that it prohibits office-based employees that do not work with or within an environment that has, heavy, dangerous and similar equipment, from consuming cannabis in the privacy of their homes.” (Court order, below)

A recent Labour Appeal Court (LAC) decision highlights the complexities of workplace policies regarding cannabis use and provides guidelines to employers and their employees on the intersection of individual rights and workplace policies.

Unfairly dismissed for off-duty cannabis use and awarded R1m
  • Under medical guidance, an office worker had turned to cannabis to manage severe anxiety. She smoked a nightly “joint” and daily used cannabis oil and the like, but only after hours and over weekends.
  • She was dismissed after pleading guilty at a disciplinary hearing to having tested positive during a routine medical check at work, in contravention of her employer’s zero tolerance policy on alcohol and substance abuse.
  • On appeal from the Labour Court, the LAC considered the legality and fairness of the employer’s zero-tolerance policy towards cannabis use, and whether it infringed upon the employee’s rights to privacy and dignity.
  • Importantly, the employee was an office worker, not required to drive, to operate heavy machinery, or to perform any duty where impairment from cannabis could have caused risk. Nor was there any evidence of intoxication or that her ability to perform her duties had been impaired, nor that she had caused an unsafe working environment.
  • The Court declared the employer’s policy irrational, overbroad and an infringement of the employee’s right to privacy. Her treatment as someone who was intoxicated when in fact she was not, amounted to “unfair discrimination because it singles out cannabis users compared to alcohol users, for what they do at home, even in situations where their conduct carries no risk for the employer.”
  • The dismissal was accordingly automatically unfair and amounted to unfair discrimination. The LAC ordered the employer to pay the employee 24 months’ compensation (a total of some R1.037m).
Employers: The balancing act with your workplace policies

The outcome here serves as a strong reminder to carefully consider the implications of all your workplace policies, particularly regarding sensitive issues such as cannabis use.

You must balance legitimate safety concerns at work with respect for your employees’ rights to privacy and autonomy. Adopt nuanced approaches that take into account your workplace environment, employee duties, individual circumstances and evolving societal norms.

Note that the new “Cannabis for Private Purposes Act”, which has just been signed into law, is unlikely to have any bearing on the effect and import of this judgment.

In conclusion, you need to stay informed and adapt to the evolving legal landscape surrounding cannabis use, so ask us to review and update your workplace policies accordingly.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Siblings Feuding Over a Business: Can You Get a Domestic Violence Protection Order?

“It is the purpose of this Act to afford the victims of domestic violence the maximum protection from domestic abuse that the law can provide” (Domestic Violence Act)

When sibling rivalry escalates into physical or psychological abuse, victims should take advantage of the very strong protections offered to them by the Domestic Violence Act (“DVA”). As the Supreme Court of Appeal (SCA) has put it: “…the primary objective of the Act is to provide victims of domestic violence with an effective, uncomplicated, and swift legal remedy … and placing upon the courts and law enforcement functionaries’ extensive obligations to assist and protect victims of domestic violence.” (Emphasis supplied)

The DVA, as its name suggests, is there to protect victims where the parties are in a “domestic relationship”. Victims of abuse in business or commercial relationships have other legal remedies, but they aren’t nearly as effective, quick or accessible as a DVA protection order.

So, are the DVA’s protections available to siblings who are not just closely related but are also in some form of commercial or business relationship? A recent High Court decision addressed just that question…

An abusive brother, threats of murder, and a family-owned deli business
  • A 59-year-old brother and his 56-year-old sister were not just siblings, but also had a commercial/business relationship in that the brother and his sister’s husband had been 50/50 partners in a deli business managed by the brother.
  • When her husband died, the sister tried to discuss with her brother payment of monies due to her late husband’s estate from the deli business. The resultant abuse at the hands of her brother led her to obtain a final protection order from the magistrate’s court based on (disputed) allegations of –
    • Sexual molestation by her brother when he was 15 and she was 12;
    • A continuing pattern and history of abuse into adulthood, including an assault in the presence of her two children, minors at the time;
    • Thereafter numerous threats towards her and her adult daughter, including serious threats of murder (with repeated statements that he had actually ordered a “hit” on her for trying to take his business away from him), stories of stalking her and the children with a drone, and intimidating phone calls to her daughter by third parties.
  • The brother appealed the protection order, asking the High Court to set it aside. He denied any wrongdoing and also argued that the DVA did not apply anyway, because he and his sister were not in a “domestic relationship” as defined in the DVA. Their dispute, he said, was really of a commercial nature.
  • The High Court, noting a SCA decision to the effect that “a mere blood relationship” was not enough to establish that the DVA applies, found that in this case the siblings not only had a business relationship as regards the deli, but were also in a “domestic relationship” because of their ongoing meetings about their parents’ wellbeing and care. That brought their relationship and dispute within the realm of the DVA’s protections.
  • As regards the facts, the brother had baldly denied any wrongdoing but had not addressed the various detailed allegations made against him, leading the Court to find him guilty of verbal, emotional, or psychological abuse, harassment and stalking.
  • The main objective of a protection order being “not to punish past misdeeds, but to prevent future misconduct”, the Court confirmed the final protection order accordingly.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Contracting with Trusts – Is a Majority Resolution Valid?

“Externally, trustees cannot disagree. In the external sphere the Trust functions by virtue of its resolutions, which have to be supported by the full complement of the Trust body.” (Extract from judgment below)

A recent Supreme Court of Appeal (SCA) judgment provides yet another reminder to tread carefully when contracting with trusts. Your agreements with a trust will be invalid and unenforceable if the trustees acting for the trust weren’t properly authorised to bind the trust.

But must trustee resolutions always be taken unanimously by all of the appointed trustees to be valid, or will a majority decision ever suffice? The SCA addressed that question in the context of a trust seeking to escape from a suretyship which had not been unanimously agreed to and signed by all three trustees acting jointly –

When a majority trustee decision isn’t enough
  • A creditor sued a property trust for payment under a suretyship given to it by the trust. The trust countered that the suretyship was invalid because the resolution authorising trustees to sign the suretyship was not authorised and signed by all three trustees, but only by two of them.
  • Indeed, only two of the trustees had attended the trustee meeting at which the suretyship was discussed. The third trustee had not been at the meeting and did not sign either the resolution authorising the suretyship to be signed or the actual suretyship.
  • The meeting itself was in order, in that the trust deed provided for two trustees to constitute a quorum for meetings. But the deed also provided that a unanimous decision was required for the trust “to conduct business on behalf of and for the benefit of the Trust, and to employ trust property in such business”.
  • In any event, as the Court put it: “…trustees must act jointly in taking decisions and resolutions for the benefit of the Trust and beneficiaries thereof, unless a specific majority clause provides otherwise” and “Even when the trust deed provides for a majority decision, the resolutions must be signed by all the trustees. (Emphasis added)
  • As it was neatly put in an earlier High Court decision: “A majority of trustees in office may form a quorum internally at a trust meeting, but can still not externally bind a trust by acting together … It is not the majority vote, but rather the resolution by the entire complement which binds a trust estate. A trust operates on resolutions and not votes.” (Emphasis added)
  • As only two of the three trustees had acted for the trust in this case, the Court held both the resolution and the suretyship to be invalid and unenforceable.
So, what does that mean for you in practice when contracting with a trust?

Internal trust matters: Internal matters (such as using trust income for the benefit of beneficiaries or administering trust assets) “may be debated and put to a vote, thereafter the voice of the majority will prevail.”

External trust matters: As an outsider however your dealings with the trust will relate to external trust matters (transactions relating to trust property with the outside world such as buying and selling property, signing suretyships and the like) and here unanimity is essential for the trust to be bound. Even when the trust deed allows majority decisions, all the trustees must still participate in the decision-making and all of them must sign a resolution to make it valid externally. Make sure therefore that all trustees signing for the trust have the power to do so per the trust deed and by a valid, unanimous resolution.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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In the Land of the Will, Clarity is King

“The golden rule for the interpretation of testaments is to ascertain the wishes of the testator from the language used. And when these wishes are ascertained, the court is bound to give effect to them, unless we are prevented by some rule or law from doing so.” (Quoted in the judgment below)

When drawing up your will (“Last Will and Testament”), remember that “clarity is king”. Ambiguity is one of the cardinal sins of will-drawing because it exposes your loved ones to the risk of uncertainty, dispute, rancour, and quite possibly expensive litigation.

Worse, if in the end a court has to try and decipher what you actually intended, there is no guarantee that it will be able to correctly ascertain your true wishes.

A case of different interpretations and a bitter dispute

A recent SCA (Supreme Court of Appeal) case confirms once again the need to express your wishes clearly and unambiguously in your will –

  • A bitter dispute between a widow on the one hand and her three step-children on the other had its roots in a deceased father’s ownership of two plots. On the one plot the father had built houses for his two daughters, with his son building flatlets for renting out on the same plot. He and his wife lived in their house on the other plot.
  • The dispute centered on two different interpretations of a clause in the father’s will in which he had left both plots to his daughters, but subject to a right of habitatio in favour of his wife. That, said the executor of the deceased estate, gave the widow the right to live in, and to rent out, the buildings on both plots.
  • The widow’s step-children on the other hand argued that it could not have been their father’s intention to give his wife such rights to the plot in question in light of all the “surrounding circumstances”. They made much of the fact that their parents’ ante-nuptial contract referred only to the other plot (the one with the marital home) in that context. They also pointed out that they had all agreed informally to each of the siblings being allocated a “portion” of the disputed plot.
  • The siblings accordingly refused to pay out any rentals to the executor, and the dispute eventually found its way into the courts – first the High Court and then the SCA.
  • In confirming the widow’s right to live in the buildings and to let/sub-let them out and receive rentals from both plots, the SCA confirmed that a court will establish the intention of the deceased from the language used “in its contextual setting”. In other words, “the will must be read in the light of the circumstances prevailing at the time of its execution.” Thus, in this case it was relevant that the father had not changed his will to reflect the informal allocation of “portions” of the disputed plot between his children, and that he had probably intended his wife to benefit from the receipt of rentals for her financial well-being and maintenance.
  • But beyond that, there is no place for the introduction of “extrinsic evidence” or “surrounding circumstances” if the wording of the will is clear and unambiguous – as it was in this case.

Bottom line – it is critical that the wording of your will be drawn professionally to correctly, clearly, and concisely set out exactly what your wishes are.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

© LawDotNews

Rising Damp and Failed Waterproofing: How to Sue the Sellers

“[w]here a seller recklessly tells a half-truth or knows the facts but does not reveal them because he or she has not bothered to consider their significance, this may also amount to fraud” … “a willful abstention from establishing the true facts does not constitute a lack of knowledge” (Extracts from the judgment below)

Consider this all-too-common scenario: You buy your dream house and happily move in. Only then do you discover that the house has major defects, which were never disclosed to you by the seller. You demand the seller pays the repair costs but the seller refuses. So off to court you go, claiming either damages or a reduction in the purchase price.

What must you prove to win your case? Let’s consider a recent High Court decision addressing just that question.

Concealing the damp with paint and Polyfilla
  • The buyer of a house only became aware of substantial damp problems in the ceilings and walls after taking transfer and when planning renovations. The damp was caused both by rising damp, and by water flowing down into the walls due to failed waterproofing.
  • The sellers (a divorced couple) refused to pay for the repairs (costing just under R245k) and the buyer sued them for either damages or a reduction in the purchase price.
  • Highly relevant – as we shall see below – was the fact that twice in the year of sale the ex-wife (living alone in the house and tasked with selling it after the divorce) had called in contractors to repaint and carry out “cosmetic repairs” – extensive repairs judging by the drum of paint and 24kg of Polyfilla involved.
What the buyer must prove

The matter ended up in the High Court, which considered what the buyer must prove to succeed in a claim of this nature.  –

  • Defects: That there were defects in the property at the time of the sale which “affected the use and value of the property”. The buyer had no difficulty in proving that the damp problems qualified as defects for this purpose.
  • Latent, not patent: That the damp was a latent defect, not “obvious or patent” to the buyer. That’s important because latent defects are defects that “would not have been visible or discoverable upon inspection by the ordinary purchaser” – so if the damp was a “patent” defect, the buyer should have picked it up. The buyer in this case was able to convince the Court that the damp was not discoverable by her at the time of sale because all traces of it had been concealed by the remedial work referred to above.
  • Fraud: That the damp as a latent defect was not covered by the voetstoots clause, a standard clause in deeds of sale which specifies that the property is sold “as is” and without any warranty. The effect of such a clause is that the buyer agrees to carry the risk of latent defects, but only if there was no fraud on the part of the seller. So the buyer had to establish fraud, by proving two things –
    • That the sellers were aware of the damp and its consequences.
    • That they deliberately concealed it with the intention to defraud.
Proving fraud – how relevant is the “property condition report”?

Fraud, said the Court, “is not lightly imputed [but] it may nevertheless be inferred when such inference is supported by the objective facts revealed by the evidence.” The following factors were central to the Court’s conclusion that both sellers had acted with fraudulent intent –

  • The sellers’ protestations that either they were unaware of the damp problems or had not intended to fraudulently conceal them found no favour with the Court on the facts – which included the extent and nature of the re-painting carried out.
  • The ex-wife’s claim to have been ignorant of the damp issues, despite the extent and nature of the “cosmetic repairs” she carried out, was rejected. As the Court put it: “At best for her, she remained willfully ignorant of the underlying cause of the issues in the paintwork; she could not honestly have believed that the core issue had been remediated.”
  • The ex-husband for his part admitted that he had known of damp issues in two rooms because of bubbling paint and a smell of damp, with the Court concluding that: “He appears to have taken no steps to ascertain how extensive or serious those problems were – but a willful abstention from establishing the true facts does not constitute a lack of knowledge.”
  • Perhaps most damningly of all, both the ex-husband and the ex-wife had signed the mandatory Property Condition Report (“defects disclosure form”), in which they specifically stated that there were no latent defects in the property, including “dampness in walls/ floors”.

The Court held that the buyer had proved fraud by both sellers and confirmed her award of R244,855 in damages for the repairs.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

© LawDotNews

The Pothole Plague – Claiming Damages

“If cars are required to be roadworthy, shouldn’t roads be required to be car-worthy?” (Online meme)

If you fall victim to a pothole-infested road, don’t hesitate to sue for your losses. A recent High Court victory for a motorist claiming R8.6m in damages confirms yet again that those charged with maintaining our roads can be made to pay for failing to do so.

R8.6m claimed for a pothole crash
  • A motorist hit a pothole on a gravel road, lost control, and hit a tree. Severe injuries landed him in the ICU with no memory of the crash, and he claimed R8.6m from a provincial department of Public Works and Roads for past and future medical expenses, past and future loss of earnings and general damages.
  • His case was that the department’s negligence was the sole cause of his accident. He was, he said, a careful driver unfamiliar with the road in question. As he had no recollection of the accident, the Court relied on expert testimony that the vehicle and tyres were in good condition and his speed was probably about 80kph, whilst the road had numerous potholes and no signs warning of hazards or speed limits despite it being a road notorious for accidents.
  • The department flatly denied any liability and said there were no potholes in the road. Alternatively, it claimed that the accident was caused solely by the driver’s negligence, alternatively that he was contributorily negligent for failing to keep a proper lookout, driving at an excessive speed, and failing to avoid the accident when he could have done so.
  • On the facts the Court held the department 100% liable for whatever damages are proved or agreed. The driver, said the Court, had proved that the department had a duty of care to him, his injuries resulted from its breach of that duty, and it had a legal duty to take reasonable steps to prevent harm. It was negligent in not maintaining the road and in not keeping it in a constant state of repair.
  • On the other side of the coin, the department had not proved any contributory negligence on the part of the motorist – it alone was to blame.
Drivers – your duty to keep a proper lookout

None of that of course means that you will automatically be able to recover for vehicle damage or injury caused by a pothole. As our courts have put it: “A driver of a motor vehicle is obliged to maintain a proper look-out. He (or she) must pay attention to what is happening around him; but most important of all, he must as far as possible keep his eyes on the road …”.

That boils down to simply taking common-sense safety precautions – being aware of the general condition of the road, keeping a proper lookout at all times (a particularly sharp lookout when visibility is poor), travelling carefully and at a reasonable speed, paying attention to road hazard signs and speed limits, keeping your vehicle safe and roadworthy.

All are factors that a court will take into account if you end up in a legal fight, and if you are shown not to have complied with any one of them you risk either losing your claim in total, or having your claim apportioned for contributory negligence.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

© LawDotNews

Lending to a Friend or Relative – When Must You Register as a Credit Provider?

“In life, we never lose friends, we only learn who the true ones are” (Unknown)

Lending money to a friend or family member in need sounds like a natural and informal sort of thing to do. But beware – if relations sour and your friend/relative can’t or won’t repay you, you may not be able to reclaim your money.

The danger is that, if you should have registered as a credit provider in terms of the NCA (National Credit Act) but didn’t, the loan would be an unlawful credit agreement and would therefore be void and unenforceable. You could even face penalties for non-compliance with the requirement to register.

Only “arm’s length” loans fall under the NCA

A recent Supreme Court of Appeal (SCA) case turned on the question of whether or not such a loan was conducted “at arm’s length”.

That’s critical, because only a loan given “at arm’s length” falls under the NCA. The question of what is and isn’t at arm’s length is a complex one, but the factors taken into account by the SCA in reaching its decision provide a good example of what will weigh with a court.

At stake – R15m, loaned informally to a friend on a handshake
  • A R15m loan made by one businessman to another was “informal in nature which was sealed with a handshake, with no interest charged.” Later on, the debtor signed an AOD (Acknowledgment of Debt) for the R15m, granting a grace period of six months before interest would accrue on default. The lender had never registered as a credit provider.
  • The High Court found both the loan agreement and the AOD were subject to the NCA and therefore unlawful.
  • Fortunately for the lender, the SCA overturned this decision on appeal. On the facts, it held that the loan was not “at arm’s length” and therefore not subject to the NCA. Key factors it considered in reaching this decision were –
    • The loan agreement was oral and informal,
    • The parties had become friends and had “… formed a close bond in personal matters outside the realms of business. The loan was offered as a gesture of friendship”,
    • The lender did not normally lend money, and this was a one-time occurrence,
    • No interest was levied on the loan except on default and the lender had not “sought to obtain the utmost advantage from the transaction”.
  • Bottom line – the lender can breathe a sigh of relief, the loan agreement and AOD are not void in terms of the NCA, and it can pursue the debtor for its R15m.
But – don’t take unnecessary chances!

Concluding an informal loan agreement with a handshake is all very well, but this could well have turned out badly for the lender, and R15m is a lot of money to lose for want of checking for lawfulness upfront.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

© LawDotNews

Property: Why Do You Need an Occupancy Certificate Before You Buy?

“…there is no obligation on the [seller] to obtain an occupancy certificate and to furnish it to the [buyers]” (Extract from judgment below)

Imagine this – you buy your dream home, pay for it, take transfer into your name, and move in. But then disaster strikes. The Municipality tells you no occupancy certificate was ever issued for the property and that you must vacate. Now.

Both buyers and sellers should take note of a recent High Court decision highlighting the importance to buyers of getting an occupation certificate from the seller before putting in any offer or insisting on a clause in the sale agreement requiring the seller to produce one before transfer.

What is an occupancy certificate and why is it vital to have one?

It’s confirmation by your local authority that the building complies with the approved building plans and that all other requirements have been met.

Without it, it is unlawful for anyone to occupy the building. You can be ordered to vacate, but that’s not all – other risks include your insurers declining any claims you make, municipal penalties for non-compliance, perhaps threats of a demolition order. You and your family could even be in physical danger if the non-compliance results in electrical hazards, fire risks, structural failure, or the like.

Although the municipality can “grant permission in writing to use the building before the issue of the certificate of occupancy”, that will be a temporary permission only, probably only for a short period and with stringent conditions.

The demolition threat and the court application
  • Having bought a property from the owner/builder’s deceased estate, the buyers took transfer and happily moved in.
  • To their horror, when a municipal building inspector was called in to inspect the building for defects, it came to light that although building plans had been approved 30 years ago, no occupancy certificate had ever been issued.
  • The municipality “suggested” that the buyers vacate immediately and threatened to demolish the building, citing a number of outstanding certificates – completion certificates for the structural and storm water, an electrical compliance certificate, a plumbers’ compliance certificate, a glazing certificate, a gas installation certificate, and a soil poisoning certificate.
  • The buyers demanded that the executor of the deceased estate obtain an occupancy certificate for them, and when she refused, they asked the High Court to order her to do so.
  • The buyers pointed out that, per a standard clause in their sale agreement, the seller was obliged to give them “vacant possession”. That, they argued, meant “lawful possession” requiring the seller to provide them with an occupancy certificate before transfer.
  • The seller (executor) replied that she was not bound by the sale or any other agreement to provide a certificate, that there is no general obligation on a seller to furnish a purchaser of an immovable property with an occupation certificate, that the buyers had been given vacant (“free and undisturbed”) possession, and that anyway the buyers as the new owners should now be the ones to apply for the certificate.
The seller wins, and a warning for buyers

The Court refused to order the seller to provide an occupancy certificate, finding that despite the fact that occupancy of the house was unlawful without the certificate, the buyers had “…clearly received vacant possession. [They] received what they purchased. They had no concerns about what they were purchasing and there is no indication in the papers that they enquired about the occupancy certificate at the time of the sale or prior to taking transfer. They have alternatives available to them … and failed to explain why, as the owner of the property, they have not taken any of the steps available to them.”

In regard to the voetstoots (“sold as is” clause) the Court quoted from a Supreme Court of Appeal decision: “…the absence of the statutory approvals for building alterations, or the other authorisations that render the property compliant with prescribed building standards … does not render the property unfit for the purpose for which it was purchased.”

Perhaps the outcome would be different if a buyer is able to prove that the seller knew of the lack of an occupancy certificate and concealed that, or if a buyer sues for cancellation of the sale agreement or for damages. But that is speculation.

What is clear is this: The occupancy certificate is a vital document and as a buyer you should insist that the seller gives it to you before you make an offer, or that at least a term in the sale agreement obliges the seller to give it to you before transfer.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

© LawDotNews

Who Owns Your Employee’s Invention? Lessons from the “Please Call Me” Saga

24 April 2024 is ‘World Intellectual Property Day’. It’s “an opportunity to explore how intellectual property (IP) encourages and can amplify the innovative and creative solutions that are so crucial to building our common future.” (The UN’s World Intellectual Property Organization)

It’s a case that has been making headlines for years, the “Please Call Me” saga in which Vodacom has been sued by an ex-employee and is now at risk of having to pay over billions of rand to him.

With April being “World Intellectual Property Month”, now’s a perfect time to see what lessons this bitter fight holds for all employers and their employees.

The trainee accountant, his long-distance girlfriend, and his bright idea
  • Employed by Vodacom as a trainee accountant, Mr. Kenneth Nkosana Makate was looking for a way to stay in touch with his girlfriend (now wife) with whom he was in a long-distance relationship. As a student she couldn’t afford airtime, a problem faced by many cellphone users at one time or another.
  • Long story short, in 2000 Mr. Makate came up with what is now known as the “Please Call Me” (“PCM”) concept – “a brilliant idea: a cellphone user with no airtime could send a request to another user with airtime, to call the former.” He took the idea to his employer, for whom it turned out to be a “resounding success”.
  • He asked to be paid for his idea, but Vodacom said it wasn’t obliged to pay him anything. Eventually he sued them on the basis of an agreement, verbally reached between him and Vodacom’s Director of Product Development, to pay him compensation for his idea in the form of a share of revenue.
  • Many court battles later the Constitutional Court issued an order declaring that Vodacom was bound by the verbal agreement and ordering the parties to negotiate in good faith to determine an amount of reasonable compensation to be paid.
  • More litigation followed, leading most recently to the Supreme Court of Appeal (SCA). Its order setting out how that compensation is to be calculated leaves Vodacom facing a liability reported to total billions of Rand.
  • Vodacom is, at date of writing, asking for leave to appeal that order in the Constitutional Court, so the show may not be over quite yet. But regardless of the final outcome, there are valuable lessons to be learned here by all employers (and their employees).
So do your employees own their inventions, or do you?

Generally speaking, our common law rule is that the right to all IP or “intellectual property” (covering patents, designs, copyright, and trademarks – loosely “inventions”), belongs to the employer if the employee created it “in the course and scope of employment”.

But that rule has over the decades led to much uncertainty in cases where employees claim to have come up with their inventions other than in the course of their employment – such as out of working hours, whilst working on their own initiative and on personal matters rather than under the employer’s control and direction, and so on.

For example, one of the many areas of dispute in the Vodacom case was the question of whether or not Mr. Makate, as a junior employee on the accounting side, was acting in the course and scope of his employment when he had his lightbulb moment.

Although, as many commentators have pointed out, that case actually has more to do with being bound by one’s verbal agreements than with questions of intellectual property law, the fact remains that, for employers and employees alike, there is a way to avoid all these potential disputes.

How to avoid uncertainty and dispute

The answer of course is to set out clearly in all contracts of employment and related policy documents who will own such inventions. A standard clause to protect employers in this regard might provide that any IP created by the employee during the period of employment are presumed to belong to the employer, no matter the circumstances in which it is created.

Such a clause should ideally be customized to reflect the nature of the employer’s business and the employee’s job description, it should ensure fairness and practicability, it should comply with legislative limitations applying to various types of IP, and it should lay out incentives and procedures for employees to come up with bright ideas and share them.

Every situation will be unique, so specific professional advice tailored to meet your business and its particular needs is essential.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

© LawDotNews

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