Diminution’ in share value and third-party claims for pure economic loss: the question of director liability to shareholders

by | Jul 22, 2020 | SAMLJ, SAMLJ V31 I1

Diminution’ in share value and third-party claims for pure economic loss: the question of director liability to shareholders

Author Brightonmmupangavanhu

ISSN: 1996-2185
Affiliations: Senior Lecturer in Law, University of the Western Cape, PhD Commercial Law (UCT), LLM Environmental Law (UKZN), LLB (Fort Hare)
Source: South African Mercantile Law Journal, Volume 31 Issue 1, 2019, p. 107 – 128

Abstract

When a shareholder suffers pure economic loss as a consequence of a reduction in shareholding value, the natural temptation for a shareholder is to seek a remedy that includes a personal claim against a director. This is because directors, as agents of a company, are decision-makers in a company. However, the common law in South Africa and elsewhere holds that a shareholder does not have a cause of action to recover personal damages against a director simply because a company in which he or she holds shares, suffered damages. This article argues that the Supreme Court of Appeal (SCA) in Itzikowitz v Absa Bank Limited confirmed that this principle still applies in South African common law. Yet, despite the SCA clarifying the contours between delicts committed against a company and those committed against a shareholder, there are still cases in which shareholders seek damages against directors for pure economic losses suffered by him or her. This article identifies the ambiguity in section 218(2) of the Companies Act 71 of 2008 as part of the problem. Suggestions are made to adopt a judicial approach to the interpretation of section 218(2) in order to distinguish between instances where the general remedy under section 218(2) is applicable and instances when it is not. The focus first falls on the correct position at common law regarding a remedy for pure economic losses. Thereafter, the focus moves to the proper interpretation of section 218(2) in order to ensure that courts do not arrive at an absurd outcome—that is, to avoid an absurdity so glaring that it could never have been contemplated by the legislature.

Do business rescue proceedings affect the liability of sureties of the company?

by | Jul 22, 2020 | SAMLJ, SAMLJ V31 I1

Do business rescue proceedings affect the liability of sureties of the company?

Author Simphiwe P Phungula

ISSN: 1996-2185
Affiliations: Lecturer, School of Law, University of KwaZulu-Natal, LLB LLM (UKZN)
Source: South African Mercantile Law Journal, Volume 31 Issue 1, 2019, p. 129 – 144

Abstract

This article deals with the legal position of sureties of a company that has commenced business rescue. It analyses how sections 133 and 154 of the Companies Act apply to debts incurred by the company and whether these sections extend to sureties by examining how the courts interpret sections 133 and 154 in relation to the liability of sureties for the debts of the company. It starts by explaining the general legal principles governing suretyship, and then addresses sections 133 and 154 and their impact on the sureties of a company undergoing business rescue.

To foreclose or not to foreclose: revealing the ‘cracks’ within the residential foreclosure process in South Africa

by | Jul 22, 2020 | SAMLJ, SAMLJ V31 I1

To foreclose or not to foreclose: revealing the ‘cracks’ within the residential foreclosure process in South Africa

Authors Ciresh Singh

ISSN: 1996-2185
Affiliations: LLB, LLM, PhD Candidate at the University of KwaZulu-Natal.
Source: South African Mercantile Law Journal, Volume 31 Issue 1, 2019, p. 145 – 162

Abstract

The execution against hypothecated immovable property, also known as foreclosure, involves a delicate balancing of mortgagor and mortgagee rights. Section 26(1) of the Constitution of the Republic of South Africa, 1996 (‘Constitution’) provides that ‘everyone has the right to have access to adequate housing’. Foreclosure can be seen as an infringement of a mortgagor’s right to have access to adequate housing. Thus, during foreclosure a balance needs to be struck between the mortgagor’s right to have access to adequate housing and the mortgagee’s foreclosure rights. Unfortunately, South African law has not provided clarity on the balancing of mortgagor and mortgagee rights during the foreclosure process and this has resulted in considerable inconsistency. With the exception of rule 46A of the Uniform Rules of Court, there is no specific legislation that governs foreclosure process. This ‘crack’ in the law is concerning given the economic and social impact of mortgage and foreclosure. The argument in this article is that current rules governing foreclosure are inadequate and lack a structured framework. In particular, the current laws do not provide any clarity as to when foreclosure against a home is justifiable or when it is not, nor do they provide any guidelines for courts to consider during foreclosure proceedings. This lack of clarity has resulted in much confusion, and it is submitted that there is a need for establishing clarity for purposes of certainty in law regarding foreclosure. Accordingly, it will be suggested that the adoption of a ‘Foreclosure Act’ is required to establish clarity in foreclosure process and fairly balance the interests of all parties concerned during foreclosure against a home.

A Loophole in the Joint Administration of Estates by Spouses Married in Community of Property in the Context of the Purchase of Land

by | Jul 21, 2020 | SLR, SLR V30 I2

A Loophole in the Joint Administration of Estates by Spouses Married in Community of Property in the Context of the Purchase of Land

Authors Alina Starosta

ISSN: 1996-2193
Affiliations: LLB LLM (Wits), Lecturer, School of Law, University of the Witwatersrand, Attorney, Wits Law Clinic
Source: Stellenbosch Law Review, Volume 30 Issue 2, 2019, p. 155 – 165

Abstract

The Matrimonial Property Act 88 of 1984 ensures equal spousal powers in relation to the administration of the joint estate. Section 15 of the Matrimonial Property Act entrenches the right to joint administration by requiring written consent of the other spouse in transactions that would have a substantial impact on their share of the joint estate. Most notably, section 15(2)(g) requires the consent of a spouse “to enter into a contract as defined in the Alienation of Land Act” which is generally understood as requiring the consent of both spouses when purchasing immovable property. The Alienation of Land Act 81 of 1988 defines “contract” as a “deed of alienation under which land is sold against payment by the purchaser to, or to any person on behalf of, the seller of an amount of money in more than two installments over a period exceeding one year”. This wording effectively limits the requirement for spousal consent to installment sales which reveals a fatal flaw or loophole in the protection afforded by the system of joint administration of the joint estate for spouses married in community of property. Most modern property transactions are cash sales secured by mortgage and not installment sale transactions. With reference to reported and unreported cases, this article investigates the loophole and proposes a way in which the devastating effects of the flaw might be mitigated in future cases.

May an Employer Dismiss an Employee if the Disciplinary Chair Imposed a Lesser Sanction? South African Revenue Service V Commission for Conciliation Mediation and Arbitration 2017 38 ILJ 97 (CC)

by | Jul 21, 2020 | SLR, SLR V30 I2

May an Employer Dismiss an Employee if the Disciplinary Chair Imposed a Lesser Sanction? South African Revenue Service V Commission for Conciliation Mediation and Arbitration 2017 38 ILJ 97 (CC)

Author Karin Calitz

ISSN: 1996-2193
Affiliations: BA LLB LLM LLD, Emeritus Professor, Stellenbosch University
Source: Stellenbosch Law Review, Volume 30 Issue 2, 2019, p. 166 – 185

Abstract

In South African Revenue Services v Commission for Conciliation, Mediation & Arbitration, Kruger, the employee, called his superior a “kaffir” on more than one occasion. The employer unilaterally dismissed the employee after the chairperson of the disciplinary hearing had imposed a lesser sanction. In doing so, the employer disregarded the collective agreement which did not make provision for the sanction of the disciplinary chair to be substituted. The employee claimed that his dismissal was invalid and therefore unfair. The Commission for Conciliation Mediation and Arbitration (“CCMA”), Labour Court and Labour Appeal Court (“LAC”) agreed. However, in the Constitutional Court (“CC”) the employer no longer argued that it was entitled to substitute the sanction in the light of the breach in the trust relationship, but only alleged that reinstatement was a remedy that no reasonable decision-maker would order. The CC agreed and held that the dismissal was substantively fair but procedurally unfair. The CC did not answer questions of lawfulness, fairness and invalidity, but in Steenkamp v Edcon the CC held that employees claiming remedies for unfair dismissal in terms of the Labour Relations Act 66 of 1995 (“LRA”) should not rely on invalidity. However, employees still have the right to common-law remedies based on their employment contract. Considering the importance of collective agreements, negotiated disciplinary codes, certainty and consistency, and to avoid employers exercising unfettered power over employees, state organs should apply for a review of an unsatisfactory sanction by the disciplinary chairperson in terms of section 158(1)(h) of the LRA. Private employers could negotiate a disciplinary code which allows both the employer and employee to appeal against the decision of the disciplinary chair which should make provision that a more severe sanction can be imposed on appeal.