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eupdate MARCH 2010//ISSUE 02 DON'T LOSE YOUR HOUSE SALE ON A TECHNICALITY! Another warning to have your property sale agreement checked by your lawyer before you sign anything comes from a recent Supreme Court of Appeal case. The sale in question was held to be invalid for want of certainty as to when the purchase price had to be paid. The formal legal requirements of a property sale contract were examined by the Court, and in summary are as follows:-
Where grey areas normally come into play is in deciding what is - and what isn't - a "material" term in each particular set of circumstances. Clearly, the parties and the property must be clearly identified. And the Courts have held that the "manner of payment" of the purchase price "is ordinarily a material term", whilst our common law provides that - unless the parties agree otherwise - payment must be made in cash against transfer of the property. In this case, held the Court, the 'payment against transfer' rule could not be applied, because the parties had specifically agreed otherwise, namely (a) that transfer could only take place after full payment, and (b) that the purchase price payment details "were to be agreed upon in writing between the two relevant parties by not later than the 30/04/2005." As the parties fell out before they had reached that subsequent agreement, the whole sale was void. This despite the fact that the buyer in this case had already paid the agreed purchase price and costs in full to the seller's attorneys - in other words, this is a classic case of a party to a sale being able to escape it through a technicality. Don't expose yourself to the same fate! NOTE FOR ATTORNEYS: The judgment in Chretien and Another v Bell (52/09) [2009] ZASCA 147 is on the Saflii website www.saflii.org/za/cases/ZASCA/2009/147.html |
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| FOR FURTHER INFORMATION CONTACT: |
Property Department: Tony Tatham, Karen Taylor & Guy Roberts T: +27 33 341 9139 F: +27 33 392 4622 E: tmj@tmj.co.za |
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LEGAL COSTS AND TAX DEDUCTIBILITY - GOOD NEWS! Trading expenses and losses are generally only allowed as tax deductions if they are incurred "in the production of income". So what happens when you are sued - for damages perhaps - and incur substantial legal costs in defending yourself? Are you denied tax relief on those costs purely because they don't relate to the bringing in of income? Good news in this regard comes from last year's Tax Court ruling in favour of a provincial Premier, who was sued for defamation arising from statements he made about an ex-colleague during an official press conference. The Premier lost the case, and attempted to soften the financial blow by deducting from his earnings both the legal costs and the damages award. There was a lot at stake (as there tends to be when protracted litigation is involved) - legal costs of R452,000 in addition to the damages award of R35,000. SARS disallowed these deductions, but was overruled by the Court. This is good news for taxpayers generally, and it stems from the fact that the "production of income" rule does not apply to legal expenses. All you need prove is that the "claim, dispute or action at law" relates to "ordinary operations undertaken........in the carrying on of [your] trade". Note however that "expenditure of a capital nature" is excluded, and that there are complex issues involved here, with plenty of grey areas - so specialist advice based on the facts of each case is essential. The second bit of good news is that even if you are - like the Premier - a salaried employee, you can still take advantage of this break. Strangely enough, you are for this purpose considered to be "carrying on a trade", because "trade" is defined as "every profession, trade, business, employment, calling, occupation or venture....."! NOTE FOR ATTORNEYS: The judgment of the Cape Tax Court in Income Tax Case no. 1837 71 SATC 177 is only available electronically to SATC subscribers, but Chris Smith of BDO Spencer Steward, who assisted me with the preparation of this article, is available to assist with any queries that may arise from a tax perspective. He may be reached on 021-417 8732. |
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| FOR FURTHER INFORMATION CONTACT: |
Commercial Litigation: Dirk Stofberg, Michael Browning & Bev Nicholson T: +27 33 341 9135 F: +27 33 392 4600 E: tmj@tmj.co.za |
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THE BANK, THE BUSINESSMAN, AND THE "GOOD" CHEQUES THAT BOUNCED You receive an order for goods or services and accept payment by cheque - and then the customer pressures you to make immediate delivery. Don't give in. Don't rely on the credit entry that shows up on your account as soon as the cheque is deposited. The funds only become available once the cheque is actually cleared (typically after 7 working days unless you ask - and pay for - special clearance within 2 working days). An important warning in this regard emerges from a recent Supreme Court of Appeal case - you are not safe to deliver or pay out before clearance even if your bank specifically tells you, when you deposit the cheque, that it is "good". In the case in question, a businessman delivered product to a purchaser on the strength of cheques which later turned out to carry forged signatures. As a result, he found himself out of pocket to the tune of R137,000. Although a bank official had confirmed to him, when the cheques were deposited, that they appeared to be "good", the Court held that that was not in any way a guarantee by the bank that the cheques were "good for the money" - just that they weren't post-dated, and hadn't been stopped. The 7 days' clearance still applied, and the bank was accordingly entitled to reverse the credits made to the hapless customer's account, and to recover from him the R48,000 which he had withdrawn from the account before the forgeries were discovered. NOTE FOR ATTORNEYS: The judgment in Leeuw v First National Bank (516/2008) [2009] ZASCA 161 is on the Saflii website www.saflii.org/za/cases/ZASCA/2009/161.html. Note the Court's comment that the condictio indebiti is available to a bank in this situation, despite some confusion over this point in earlier cases. |
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| FOR FURTHER INFORMATION CONTACT: |
Commercial Department: Oliver James and Arno Goebel T: +27 33 341 9126 F: +27 33 392 4616 E: gobel@tmj.co.za |
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BUILDERS: JUST WHAT DO INTERIM PAYMENT CERTIFICATES PROVE? Construction contracts commonly provide for "progress payments", based on "interim payment certificates" issued by an agent of the employer (often an architect, engineer or other professional) as the work proceeds. Subject always to the terms of each individual contract, a certificate contains a valuation of work done (and materials supplied) to date, and a certification of the amount accordingly payable by "the employer" (the client in a building contract) to the contractor. Note however that an interim certificate does not conclusively entitle the builder to payment. As illustrated in a recent High Court case, although the certificate itself gives rise to a claim and effectively proves the valuation of the work, it isn't "proof of the sufficiency of the work". In other words, it certifies the value of the work done; it doesn't prove that the contractor has complied with all the terms of the contract. Consequently, as happened in this case, the employer is still free to raise issues of "defective work or any other breach of contract". In practice that can be a subtle distinction, so seek advice before taking any action on any disputed certificate (or, if you are the client, paying out on one). NOTE FOR ATTORNEYS: The judgment in Whiteleys Construction v Carlos Nunes CC (2924/09) [2009] ZAFSHC is on the Saflii website www.saflii.org.za/za/cases/ZAFSHC/2009/128.html. |
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| FOR FURTHER INFORMATION CONTACT: |
Commercial Department: Oliver James and Arno Goebel T: +27 33 341 9126 F: +27 33 392 4616 E: gobel@tmj.co.za |
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SHOPPER TRIPS, SUPERMARKET SLIPS In awarding damages recently to a shopper who was injured when she tripped over something on a supermarket floor (possibly a protruding floor tile, although the supermarket claimed that she had rather slipped on something unidentified lying on the floor), the High Court made the following observations, which supermarkets would do well to take note of: -
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| FOR FURTHER INFORMATION CONTACT: |
Commercial Litigation: Dirk Stofberg, Michael Browning & Bev Nicholson T: +27 33 341 9135 F: +27 33 392 4600 E: tmj@tmj.co.za |
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THE MARCH WEBSITE: CONSUMER COMPLAINT? FLEX YOUR INTERNET MUSCLE! Before you buy anything - goods or services - check out the supplier on the Internet first. First Google the business, as well as its principal, directors or members - it's amazing how much information you can glean in cyberspace on even the smallest of businesses (if there's no trace of your supplier on the Net, find out why). Then search again on the "Hellopeter.com" site at www.hellopeter.com. Consumers file both positive and negative reports on service providers, and the response of suppliers to complaints is tracked. If you do experience problems with a supplier, who then refuses to resolve them both fairly and quickly - use Hellopeter to flex some muscle. Of course you need to be fair and reasonable here, and don't expose yourself to a defamation claim (take advice if in doubt!). But if your complaint has merit, the adverse publicity of a negative report will persuade most suppliers to act on it immediately. If not, you at least have the satisfaction of warning off the public from falling into the same trap that you did! |
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| CONTACT: | TOMLINSON MNGUNI JAMES Attorneys, Notaries & Conveyancers 165 Pietermartiz Street Pietermaritzburg, 3201, South Africa P O Box 271, Pietermaritzburg 3200 T: +27 33 341 9100, F: +27 33 394 3005 E: tmj@tmj.co.za, W: www.tmj.co.za |