The actio pro socio revisited

The actio pro socio revisited

Author Elizabeth Snyman-Van Deventer

ISSN: 1996-2185
Affiliations: Professor, Mercantile Law, Faculty of Law, University of the Free State, BIuris LLB LLM LLM LLD (UFS).
Source: South African Mercantile Law Journal, Volume 31 Issue 1, 2019, p. 76 – 89

Abstract

The common-law actio pro socio has become part of the South African law of partnership as the action by which partners’ mutual rights and duties can be enforced. Although it is generally accepted that the actio pro socio can be instituted on the dissolution of the partnership, whether it can also be brought while the partnership still exists is less clear. In an attempt to bring greater clarity on the issue, this contribution defines the position of actio pro socio in South African law, and then takes the reader on a brief chronological journey through the South African case law which has crafted the country’s approach to this remedy. It emerges that the courts’ distinguish between bringing the actio pro socio while the partnership still exists and after its dissolution, and that it is indeed possible to institute the action during the existence of the partnership without automatically signalling its dissolution. This is also confirmed by Roman and Roman-Dutch law. Those instrumental in shaping the country’s law of partnership are therefore urged not to lose sight of the Roman and Roman-Dutch origins of this arm of the law in developing a generally empowering partnership law for South Africa.

Opening pandora’s box: the ‘confidentiality’ clause in the international trade administration commission’s amended tariff investigations regulations

Opening pandora’s box: the ‘confidentiality’ clause in the international trade administration commission’s amended tariff investigations regulations

Author Clive Vinti

ISSN: 1996-2185
Affiliations: Lecturer, Department of Public Law, University of the Free State, LLB (cum laude) (UFH) LLM (UCT).
Source: South African Mercantile Law Journal, Volume 31 Issue 1, 2019, p. 90 – 106

Abstract

The Amended Tariff Investigations Regulations (‘ATR’) allow an applicant to apply for a tariff increase on a product so as to protect the local industry from the pressure exerted by imported products. This amendment of a tariff or customs duty is preceded by an investigation by the International Trade Administration Commission (‘ITAC’), which assesses the merits of this application. During this investigation, ITAC requires the party applying for the tariff increase (or amendment) to provide certain information that could either justify or controvert the merits for the amendment of the tariff. However, this information may contain ‘confidential’ information that coincidently justifies the tariff increase but at the same time, also divulges the competitive advantage of the applicant. The ATR permits the non-disclosure of this information if it finds it to be ‘confidential’. This paper then explores the ATR’s attempt at finding the balance between divulging enough information for interested parties to defend their interests and at the same time, to protect the ‘confidentiality’ of the competitive advantage of the applicant for a tariff increase. It is my view that the ATR fails to achieve this balance and thus, compels interested parties to defend their interests in the dark.

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

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?

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

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

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)

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.

In Chronic Exile: Rethinking the Legal Regime for Refugees in Protracted Refugee Situations

In Chronic Exile: Rethinking the Legal Regime for Refugees in Protracted Refugee Situations

Author Fatima Khan

ISSN: 1996-2193
Affiliations: BA HDE LLB LLM PhD (UCT), Associate Professor of Law and Director of the Refugee Rights Unit, University of Cape Town
Source: Stellenbosch Law Review, Volume 30 Issue 2, 2019, p. 186 – 211

Abstract

Millions of refugees worldwide are living in protracted situations with no end in sight. This is the situation even though refugeehood was never envisaged to be a long-lasting or permanent status. On the contrary, it was always meant to be of a temporary nature. In reality however, this status may be indefinite, and the perpetual refugee status of most of the world’s refugees today provides clear evidence thereof.

This article seeks to rethink the legal regime for refugees in protracted situations. In part one it reviews the supposed temporary nature of refugeehood and considers whether the drafters of international and refugee law anticipated protracted refugee situations. Part two provides a historical and global overview of protracted situations, explores key issues that lead to chronic exile and examines why current approaches have been insufficient. Part three then offers possible solutions by calling for a focus on responsibility-sharing, as outlined in the Global Compact on Refugees.

These proposed solutions seek to address the issues caused by a lack of political will, as demonstrated through case studies. Temporary refugee status deprives refugees of certain civil and political rights necessary for meaningful integration into their host state.

Protracted refugee situations further put people at risk of statelessness. In order to avoid continuous human rights violations, it is vital to explore durable solutions. This article postulates that the Global Compact on Refugees provides a viable solution to protracted refugee situations on the African continent. Responsibility-sharing between states and other global actors can support under-resourced host states and tackle the lack of political will that seems to prevent successful refugee integration.

An Analysis of Directors’ Fiduciary Duties in the Removal of a Director From Office

An Analysis of Directors’ Fiduciary Duties in the Removal of a Director From Office

Author Rehana Cassim

ISSN: 1996-2193
Affiliations: BA LLB LLM (WITS) LLD (Unisa), Senior Lecturer in Law, Department of Mercantile Law, University of South Africa, Attorney and Notary Public of the High Court of South Africa
Source: Stellenbosch Law Review, Volume 30 Issue 2, 2019, p. 212 – 233

Abstract

The Companies Act 71 of 2008 (“the Companies Act”) introduced a provision into South African law that for the first time permits the board of directors to remove another director from office. This provision is contained in section 71(3). This article argues that when the board of directors exercises its power under the Companies Act to remove a director from office it may not breach its fiduciary duties to the company. The directors’ specific fiduciary duties which may apply when the board removes a director from office are explored. This article further examines the consequences of a director breaching his fiduciary duties in removing a board member from office. The question whether such a director runs the risk of incurring personal liability for removing a director in breach of his fiduciary duties is discussed. In addition, the controversial question whether an improperly removed director may be reinstated to office, is also canvassed. The pivotal and contentious English case of Lee v Chou Wen Hsien (“Lee”), in which the court did not reinstate a director who had been wrongly removed by the board – with ulterior motives and in breach of their fiduciary duties – is critically analysed. In light of section 5(2) of the Companies Act, which provides that a court interpreting or applying the Companies Act may consider foreign law to the extent that it is appropriate, this article analyses whether the decision in Lee would be of persuasive authority in South African law. In addition, the article investigates whether any distinctions may be drawn between the applicable company law principles in the United Kingdom (“UK”) on the removal of company directors, and the Companies Act. Finally, this article makes some recommendations relating to the fiduciary duties of directors in removing fellow board members from office.

(Re)Defining the Contours of Ownership: Moving Beyond White Picket Fences

(Re)Defining the Contours of Ownership: Moving Beyond White Picket Fences

Author Zsa-Zsa Temmers Boggenpoel

ISSN: 1996-2193
Affiliations: Bcom LLB LLD, Professor in Public law, Stellenbosch University
Source: Stellenbosch Law Review, Volume 30 Issue 2, 2019, p. 234 – 249

Abstract

Ownership is often viewed as superior in the sense that all other rights or interests are seen as subordinate to ownership. It is often viewed in this light because it is a substantial ingredient of the patrimonial rights that make up a legal subject’s entire state of assets. Ownership is also sometimes seen as the mother right because all other rights purportedly derive from ownership. This article attempts to challenge this view by relying on a number of examples that point towards a redefining of the contours of ownership. The owner’s inability to use the rei vindicatio in some instances, his failure to be able to demand removal of an encroaching structure and the ability of other (sometimes constitutional) rights to prevent the enforcement of ownership, arguably calls for a different, changed perspective of ownership in the new constitutional dispensation. It is on this basis that this article questions whether what has always been deemed exceptions, qualifications and caveats to our general understanding of ownership, should in fact point towards a redefining of the contours of ownership.