BUCHANAN’S - STBB · Issue 01 of 2018 | Buchanan’s Brief 3 It is also far quicker to get an arbitration hearing than a court date. ’ well be an architect or building engineer.

AUGUST 2018 | ISSUE 01 OF 2018

BUCHANAN’S

1 | Buchanan’s Brief | Issue 01 of 2018

INSIDEChastising your child

Litigation vs. arbitration

Staff misconduct: What employers need to know

Companies beware! Public officers, their appointment and their liability

Who is liable for repairs in sectional title schemes?

Deemed donationsand interest-free loans

Facilitation and divorce

The business of (business) rescue

Our branches and initiatives

CHASTISING YOUR CHILD: PARENTS TAKE NOTEBy the Divorce & Family Law team

The question of whether parents should be allowed to chastise their children has been a heavily debated topic over the past couple of years. In terms of South African common law, parents were allowed to chastise their children provided that such chastisement was reasonable.

P arents could then raise a special defence of reasonable chastisement against assault charges arising therefrom. This principle was confirmed in

the judgment of R v Janke and Janke 1913 TPD 382 and in numerous judgments thereafter. To date, no legislation has been promulgated to either regulate what constitutes reasonable chastisement or to prohibit it completely.

It has, however, been argued, that chastisement constitutes an infringement of some of the human rights in the Bill of Rights. In line with this reasoning, the Schools Act No. 84 of 1996, prohibiting chastisement at schools, was introduced.

The recent judgment in the Gauteng High Court, YG v S 2018 (1) SACR 64 (GJ), took a stance against the defence of reasonable chastisement when it was tasked with determining whether this defence remained available in our constitutional era.

The father in this matter (the accused) was charged with assault with intention to do grievous bodily harm after he repeatedly smacked his 13-year-old son. The accused’s defence was that he was merely exercising his parental right of reasonable chastisement.


‘...there is still an element of

physical violence involved and

it therefore infringes on the

child’s right to bodily integrity

and dignity. ’

LITIGATION VERSUS ARBITRATIONby BELINDA LEWIS, Director, Property Law & Conveyancing

What is the difference between litigation and arbitration, two processes of dispute resolution in South Africa?

In this article, I review the basic elements of each form of dispute resolution, as well as the benefits and pitfalls one may experience when going through either. This article aims to clarify why you might prefer to use the one means over the other to resolve a civil dispute.

Litigation is a very old process of dispute resolution that takes place in our courts - whether it be the Magistrates’ or High Court and the respective appeal processes available in these forums. A Magistrate or Judge presides over the process, hearing each case put forward and delivering a judgment thereafter. Civil litigation is between two parties and criminal litigation is between one (or more parties) and the State. Civil litigation cases are conducted in a very public forum and the process is formal and highly regulated. The entire matter is of public record with anyone, including the press, having access to the records that are filed as part of each party’s case.

Arbitration, on the other hand, is a far less formal mode of dispute resolution that does not take place in a courtroom, but in a venue that the parties choose.

An arbitration hearing is conducted completely outside the ambit of the courts. Parties in a dispute with one another would proceed to have the matter adjudicated via arbitration in terms of a pre-agreement with one another when they contracted initially (before the dispute arose) or at the time of the dispute, rather than electing to go through the civil litigation process. The parties will agree on the rules and processes of the arbitration, for example, when and where it will be held, who the arbitrator will be and whether an appeal process is available.

An essential difference between litigation and arbitration is that an arbitrator can be appointed by mutual agreement and be one who is skilled and experienced in the subject matter of the dispute, for example, in a building dispute, the arbitrator might

The court found that even if parents’ actions fall within the scope of reasonable chastisement, there is still an element of physical violence involved and it therefore infringes on the child’s right to bodily integrity and dignity. Furthermore, allowing the defence of reasonable chastisement takes away children’s right to equal protection under the law and undermines the state’s obligation to protect children from violence. The infringement on children’s rights could not be reasonably justified and therefore the court held that the defence of reasonable chastisement is unconstitutional.

According to the court, doing away with the defence of reasonable chastisement would not result in harsh criminal sanctions being imposed on all parents found guilty of assault, as these parents should rather be sent for prevention and intervention training with the aim of promoting positive parenting.

Until this matter is dealt with in the Constitutional Court, this judgment does not have a binding effect on any court outside the jurisdiction of the Gauteng High Court. However, it will be considered when any other court is faced with answering the same question.

Issue 01 of 2018 | Buchanan’s Brief | 3

It is also far quicker to get an arbitration hearing than a court date. ’

‘well be an architect or building engineer. This is not the case with civil litigation, where the Magistrate or Judge is appointed by the State and the parties have little or no control over their appointment.

It is also far quicker to get an arbitration hearing than a court date. As soon as all the parties are ready with their documentation and the availability of their expert witnesses has been secured, the arbitration hearing can be set down – on average it can be a matter of months, with the process being completed within approximately six months. Alternatively, it can take 18 months to two years to get to the trial court in a civil litigation matter. In litigation and arbitration, the timing would depend on the nature and complexity of the matter.

Disputes that are arbitrated are completely private and confidential - both the hearing and all the documentation involved. One can also add a “confidentiality clause” into the arbitration agreement forcing both parties to maintain confidentiality around the entire process.

In litigation, the judgment of the court can be taken on appeal. For example, in the Western Cape High Court, a matter can go on appeal to a full bench of judges, then to the Supreme Court of Appeal and, if still unsuccessful, to the Constitutional Court in certain circumstances. An appeal can add on an additional two years to the final determination and outcome of the dispute. Arbitration awards, on the other hand, possess a quality of finality. In general,

arbitration awards are final. If the parties agree to an appeal procedure, the arbitration award may be appealed to a bench of three arbitrators. Even if the matter is appealed, the appeal can be heard as soon as a date can be set by the arbitrators and the parties to the dispute. Therefore, even the appeal in arbitration can be dealt with far more expeditiously than that of a formal litigation process.

Arbitration is, however, a more expensive route to follow than the litigation process. With arbitration, the cost of the venue and arbitrator is covered by the parties themselves, whereas with litigation, the cost of the courtroom, the Magistrate or Judge and other court officials is covered by the taxpayer. Having said that, time is money, and the lengthy appeal processes involved could mean a turnaround time of approximately four years from inception to final determination of the dispute.

In both litigation and arbitration, having attorneys represent each party is the norm, and each party calling expert witnesses is standard - unless the matter is purely a factual inquiry. With arbitration however, the parties are more in control of the timing of the proceedings and can therefor better manage the time of their expert witnesses.

All in all, litigation and arbitration each have a firm place and function in our legal system. The arbitration process has certain advantages over litigation, however, the cost can be a deterrent.


STAFF MISCONDUCT: WHAT EMPLOYERS NEED TO KNOWBy JAMES FOXCROFT, Senior Associate, Labour Law

Eskom has repeatedly been in the news this year due to the parastatal’s ongoing investigation into 239 cases of staff misconduct. This raises the question of how employers should go about addressing staff misconduct.

Many employers have found themselves at the losing end of CCMA or other disputes due to the incorrect processes being

followed when dismissing an employee.

If an employer suspects an employee of serious misconduct, then an investigation may need to be conducted before starting the disciplinary process. The Code of Good Practice: Dismissal, Schedule 8 of the Labour Relations Act No. 66 of 1995 recommends that an investigation takes place if there are suspected grounds of misconduct that may warrant dismissal.

Some employees may be suspended or may take “special leave” during the investigation period (and pending the outcome of a disciplinary hearing). Conditional suspension is often advisable in order to protect information and the integrity of the investigation, for example, where an employee is prohibited to contact other employees or access the company premises or servers. Suspensions must be based on substantive reason/s and must follow fair procedure. During the suspension period, the employee usually receives full pay. “Special leave” (not part of the employee’s annual leave and taken on full pay) is taken when the alleged misconduct involves an executive member of staff and the employer has to consider the media and public attention repercussions. “Special leave” is also used when a negotiated settlement or mutual separation agreement is an option.

An investigation looks into whether or not there is factual evidence to support disciplinary proceedings. For this reason, investigations act as a caveat against unnecessary disciplinary action where not enough factual evidence exists to show that, on a balance of probabilities, the employee committed the allegations of misconduct.

The evidence obtained during the investigation will be used in any subsequent disciplinary proceedings,

the CCMA and the Labour Court. In order to document the investigation, a report should be put together documenting all of the evidence so that the employer’s disciplinary committee can then decide whether to proceed with hearing/s or not.

Investigations may lead to an employee’s resignation. This does not, however, always mean that the investigation is over. There are duties imposed in various industries where employers may be required to continue an investigation even though the employee has resigned e.g.: banks. This is due to the fact that the alleged misconduct could have far-reaching effects.

IF YOUR COMPANY WANTS TO CHARGE AN EMPLOYEE WITH MISCONDUCT:

�� Ensure that there is a proper investigation;

�� After the investigation, based on the evidence uncovered, decide whether or not a disciplinary enquiry is necessary and appropriate;

�� If you choose to go ahead with a disciplinary enquiry, ensure that an impartial person is appointed to chair the hearing;

�� During the enquiry, ensure that both parties have an opportunity to make opening statements, call witnesses, cross-examine witnesses and make closing statements;

�� If the employee is found to be guilty, ensure that both parties are given the opportunity to lead evidence and make arguments in mitigation or aggravation of sanction; and

�� If the employee is dismissed, the employee should be given the reason for dismissal and reminded of his/her right (if applicable) to refer the matter to a council with jurisdiction or to the Commission or to any dispute resolution procedures established in terms of a collective agreement.

A dismissal will be unfair if it is

not effected for a fair reason and in accordance with fair procedure.

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’


A dismissal will be unfair if it is not effected for a fair reason and in accordance with a fair procedure (requirements of section 188 of the Labour Relations Act). Generally speaking, it is not appropriate to dismiss an employee for a first offence, except if the misconduct is so serious that it makes continued employment intolerable for both parties (destroys, beyond repair, the trust relationship), for example, gross dishonesty, wilful damage to the property of the employer, gross insubordination, wilful endangerment of others and physical assault on the employer / a fellow employee/ a client / a customer.

COMPANIES BEWARE!PUBLIC OFFICERS, THEIR APPOINTMENT AND THEIR LIABILITY By the Corporate & Commercial Law team

The Tax Administration Act No. 28 of 2011 stipulates that all companies are required to appoint a Public Officer. A Public Officer

is an individual residing in South Africa and must be a registered taxpayer with SARS.’

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According to the Codes of Good Practice, when deciding whether or not to impose the penalty of dismissal, the employer should, in addition to the gravity of the misconduct, consider factors including:

�� The employee’s length of service;

�� The employee’s previous disciplinary record;

�� The employee’s personal circumstances;

�� The nature of the job; and

�� The circumstances of the infringement itself.

A Public Officer serves as the representative taxpayer for a company, meaning that this person is, effectively,

the face of the company for tax purposes.

All actions carried out in this person’s capacity as a Public Officer are deemed to have been done by the company. A Public Officer is an individual residing in South Africa and must be a registered taxpayer with SARS. The individual representative who is approved by SARS must be a senior official of the company. Should the company not have a senior official residing in South Africa, then any suitable person can fulfil this role.

WHAT ARE THE DUTIES/ROLE OF A PUBLIC OFFICER?The Public Officer is responsible for all acts, matters or things relating to the company under the various tax acts, including:

�� Attending to all tax registrations, for example, for VAT, Payroll and Customs and Excise;

�� Attending to all tax matters of the entity, including submission of tax returns for VAT, employees’ tax, employee reconciliations, income tax, dividends tax and provisional taxes;

�� Being responsible for the timeous payments of taxes due to SARS; and

�� Notifying SARS of any change to the registered particulars, for example, registered address, year-end change, name change and banking details.


All actions carried out in this person’s capacity as a

Public Officer are deemed

to have been done by the company.

‘

’

WHEN MUST A PUBLIC OFFICER BE APPOINTED?

Companies are required to appoint a Public Officer within one month after they begin to conduct business or acquire business premises in South Africa. Should your company fail to do this, the Commissioner of the South African Revenue Service will designate a director, member (in respect of close corporations) or the company secretary as Public Officer.

Where there is a change of Public Officer, the company must notify SARS within 14 days of the change being implemented. SARS may impose administrative penalties on a company, should the company fail to notify SARS of a change of Public Officer.

HOW IS A PUBLIC OFFICER APPOINTED?

A Public Officer is classified by SARS as a “registered representative.” A registered representative is a person who is appointed with full rights to act on behalf of another legal entity.

If a legal entity has more than one registered representative, then one has to be nominated as the official “representative person” with SARS. Please note that the registered representative must be registered with SARS. If more than one registered representative is recorded/listed at SARS, one person must be nominated as the “official” representative to be updated on the system.

The documentation that SARS will require to register the Public Officer is as follows:

�� The original and a copy of an Identity document (ID)/temporary ID/passport/driver’s licence for the registered representative;

�� Copy of proof of residential address of the registered representative;

�� Letter of appointment authorising the appointed representative to act as a Public Officer on behalf of the company or minutes of the meeting where the resolution was made that the appointed representative should act as the Public Officer of the company; and

�� Certificate of Registration of the Company or Company’s Memorandum of Incorporation (MOI) or CK1/CK2.

WHAT HAPPENS IF A COMPANY FAILS TO APPOINT A PUBLIC OFFICER?

Administrative penalties may be levied by SARS against any company that fails to:

�� Appoint the required Public Officer;

�� Elect the place for service or delivery of notice;

�� Keep the office of Public Officer constantly filled;

�� Maintain the place for service or delivery of notice; or

�� Notify SARS of any change of Public Officer or place for service or delivery of notice.

WHAT LIABILITY ATTACHES TO A PUBLIC OFFICER?

The Public Officer is subject to penalties for “the company’s defaults” and, as a “representative taxpayer”, risks further liability in terms of the Tax Administration Act. For example, Public Officers risk liability for tax due to SARS to the extent that they concluded transactions or had control of income or received income from the company. They are also personally liable if tax is due to SARS and they divert or dispose of monies or assets that could have been used to settle the tax. There are differences of opinion in legal circles as to exactly how far these risks of personal liability go, but they are real risks.


WHO IS LIABLE FOR REPAIRS IN SECTIONAL TITLE SCHEMES?By DAVID THOMPSON, Senior Associate, Litigation

Many sectional title owners are under the impression that their body corporate is automatically responsible to arrange and pay for the repair of damage to their section if it results from some defect or failure in the common property.

MAINTENANCE DUTIES OF ROLE-PLAYERS

The basic maintenance and repair responsibilities of role players in a sectional title scheme are set out in the Sectional Titles Schemes Management Act No. 8 of 2011 (STSMA). Section 3, with the heading “Functions of the body corporate”, and section 13, titled “Duties of owners”, provide the essentials. These sections provide that the body corporate must maintain all the common property and keep it in a state of good and serviceable repair whilst, on the other hand, an owner must repair and maintain his or her section in a state of good repair.

WHAT IS THE ‘COMMON PROPERTY’ THAT THE BODY CORPORATE MUST MAINTAIN?

“Common Property”, in terms of the Sectional Titles Act No. 95 of 1986 (STA) includes the land on which the building or buildings is or are situated. Apart from land, the common property also comprises all parts of the building or buildings that are not included in a section, for example, the outer shell, the roof and the foundations of the building that are intended to serve all the sectional owners. The STSMA reflects a similar definition of common property.

The question arises as to where the boundaries between a section and the common property lie. The STA provides a definite answer but it is hidden in

technical language. Without discussing the legal-technical aspects, it is sufficient for purposes of this article to state that the boundaries of a section reach to the middle of the floor, the middle of the walls and the middle of the ceiling board that separates the ceiling cavity from the rooms below.

If you own a freestanding housing unit in a sectional title scheme, the inner half of the walls will be part of the section, while the outer half of the walls are common property. Up to the middle of the ceiling board is part of the section, and the roof is common property. This is important because, as was indicated before, the owner is liable for maintenance of his part of the section, and the body corporate is responsible for maintenance of the part of the section that is common property.

Doors and windows are not always positioned exactly in the middle of a wall. Amendments introduced to the STA in 2011 determine that the median (middle) line is deemed to pass through the centre of any door/window or other structure that divides two sections or a section and the common property. This means that, where, for example, an owner’s leaking shower causes damage to a section below, the owner must have his shower repaired, and where a leaking roof causes damage to sections below, the body corporate must repair the roof.

...boundaries of a section reach to the middle of the floor, the middle of the walls and the middle of the ceiling board that separates the ceiling cavity from the rooms below.

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WHO IS LIABLE FOR ENSUING DAMAGE?

Whilst the STSMA apportions the legal responsibility for maintenance and repair of the common property to the body corporate, and maintenance and repair of sections to their owners, it does not deal with a body corporate’s responsibility for consequential (ensuing) damage. No automatic liability follows. Since the STSMA does not expressly deal with the question of liability to pay for consequential damage to a section that is caused by defects arising from the common property, an owner will have to look to the common law remedies if the body corporate is not willing to pay for the cost of repair. An example of this would be rising damp as a result of a defect in common property walls or floors.

The common law requirements for the recovery of damages (i.e. pure economic loss) will have to be applied in order to hold the body corporate liable for such consequential damage. An owner may therefore request the body corporate to pay for the damages

caused by defects arising out of the common property, but if the body corporate refuses to pay, the owner must then proceed to either enforce their common law rights, or consider filing an application with the Community Schemes Ombud against the body corporate for an order requiring them to have the repairs and maintenance carried out. In this regard, the Community Schemes Ombud Service Act 9 of 2011 (CSOS) finds application. Section 38 of CSOS allows an owner to approach the Ombud with an application if such person is a party to or affected materially by a dispute. A “dispute” is defined as:

“…a dispute in regard to the administration of a community scheme between persons who have a material interest in that scheme, of which one of the parties is the association, occupier or owner, acting individually or jointly”

In terms of Section 39 of CSOS, an application made in terms of section 38 must include one or more of the following orders: “(6) In respect of works pertaining to private areas and common areas - …(a) an order requiring the association to have repairs and maintenance carried out”.

The effect of section 7C is that the interest foregone by the person providing the loan to the trust is deemed to be a donation to the trust and, thus,

the donation attracts donations tax. One of the reasons for introducing this provision is to prevent taxpayers from avoiding estate duty by selling assets to a trust on loan account and then extinguishing the loan account by making use of their annual donations tax exemption.

DEEMED DONATIONSINTEREST-FREE LOANS FOR TRUSTS AND THE PROPOSED OFFICIAL INTEREST RATE INCREASEBy JOHAN GREYLING, Senior Associate, Tax Law

Section 7C of the Income Tax Act No. 58 of 1962 (effective from 1 March 2017) creates a deemed donation where a trust is granted an interest-free loan or a loan at a lower rate of interest than the official rate (7.5% since 29 March 2018) by a connected person to the trust.

This deemed donation is equal to the difference between the official rate of interest and the lower/zero rate multiplied by the amount of the loan owing from time to time. This donation is deemed a continuing annual donation made to the trust on the last day of the tax year, and is thus subject to donations tax at the rate of 20%. In most instances this tax liability will be due at the end of March.

This deemed donation is equal to the difference

between the official rate of interest and the lower/zero rate

multiplied by the amount of the loan owing from time to

time.

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Criticism of section 7C includes the fact that it negatively impacts on legitimate estate planning, for example, the protection of personal and family assets from creditors or placing assets in trust for minors. Section 7C also negatively impacts on trust administration as trust financial statements are often only finalised several months after year-end.

Following the implementation of section 7C, a number of schemes became apparent through which taxpayers were avoiding its application. These schemes included loans advanced to companies owned by the trust and the transfer of loan claims to current or future beneficiaries of the trust. Both of these avoidance mechanisms were thwarted through the amendments affected by the Taxation Laws Amendment Act of 2017, which was promulgated in December 2017. Application of the amendments was made effective retrospectively from 19 July 2017 and introduced a connected person test and specifically addressed the transfer of loans in sections 7C(1)(i) and (ii) and 7C(1A) of the Income Tax Act.

Another change to section 7C was the specific exclusion of its application to employee share schemes, provided that certain requirements are met. These mean that no donations tax will arise in respect of loans or advances, provided that:

�� The trust is created solely for the purpose of giving effect to an employee share incentive scheme in terms of which the loan was provided for share acquisition;

�� Shares are only offered by the trust to persons by virtue of them being employed in full-time employment or holding office as a director of the company; and

�� Connected persons may not participate in the scheme.

Apart from the above-mentioned newly included exemption, all the section 7C(5) exceptions still apply (these also provide that no donations tax will arise in respect of loans or advances under certain circumstances) and include the funding of a primary residence, Public Benefit Organisations (PBO) and special trusts.

A PROPOSED INCREASE IN THE “OFFICIAL RATE OF INTEREST”

The 2018 National Budget revealed a proposed increase in the “official rate of interest” as set out in the Income Tax Act. Increasing the official interest rate increases the individual tax burden, including discouraging low interest loans from employers and creating significant extra tax on loans to trusts.

The official rate of interest is currently 7.5% (repurchase rate plus 100 basis points). The proposed increase would bring the official rate of interest up to 10%, reflecting a tax increase of 33.3%.

A higher “official rate of interest” would also result in:

�� Higher employees’ tax payable by employees receiving low or no-interest loans from their employers;

�� Higher dividends tax payable in relation to low or no-interest loans from a company to its individual shareholders; and

�� Higher donations tax payable in relation to low or no-interest loans from individuals.

The 2018 / 2019 Budget Speech stated that:

“Given that interest rates lower than prime are now uncommon, it is proposed that the official rate be increased to a level closer to the prime rate of interest. This would allow the benefit of lower rates to be measured with reference to a rate that approximates the rate offered by commercial banks to low-risk clients.”

This might be true for individual borrowing, but it is not true for loans by individuals, which is the case regarding section 7C loans to trusts. In this case, one has to consider the investment return the individual could otherwise earn, presumably substantially below prime.

The cost of maintaining foreign and local trusts has been rising due to increased focus by tax authorities, compliance complexity and increased reporting obligations. Currently, if the loan to a trust is made in rands, the effective donations tax is 1.5% of the loan (7.5% of 20% donations tax rate). If the loan is in another currency, the official rate of interest might be as low as 1.5%. If the official rate of interest is increased, the effective donations tax will be 2.05% of the loan.

Increasing the official interest rate increases the individual tax burden, including discouraging low interest loans from employers and creating significant extra tax on loans to trusts.

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FACILITATION AND DIVORCEBy SHEREEN VOLKS, Head of Divorce & Family Law

Modern families turn gender stereotypes on their heads. Parents share the care and upbringing of their children in radically different ways to that of even one generation ago.

Relationships between parents also break down more readily. People no longer stay together “for the sake of the children”. Divorce is more accessible and breakups no longer carry the social stigma they used to. Gone are the days when a pregnancy meant marriage or marriage was tradition.

Although the Children’s Act is dated 2005, it was another few years before the Act was implemented. It has now been a decade since the age of majority was lowered by three years, from 21 to 18, and parents became the holder of shared parenting rights and jointly responsible for their children after divorce.

Prior to these changes, conventional wisdom dictated that, on divorce, one parent should have primary responsibility for the children. The term “custody” was understood to refer to the place where a child would live for most of the time, and it included the primary authority over that child’s life. The custodian parent made all sorts of decisions about that child on his/her own. The custodian parent was usually the mother, who took domestic responsibility for the child’s arrangements. Most fathers took the primary financial responsibility for the children, seeing them on alternate weekends. It was unusual for a child to sleep over at the non-custodial parent’s house during the week.

SHARED PARENTAL RIGHTS AND RESPONSIBILITIESWith more mothers becoming breadwinners and more fathers becoming nurturers, parents formed new partnerships in the home. Parenting became trickier to negotiate, particularly when the parents were no longer involved in a relationship with each other or perhaps where they never were in a permanent relationship in the first place. The legal landscape that has emerged around and as a consequence of these changes is sometimes tricky to navigate.

Even when parents have a similar approach to raising their children, conflict can arise and parents can struggle to overcome their differences. The concept of shared parental rights and responsibilities (introduced by the Children’s Act No. 38 of 2005) focuses on the benefit to the children of having both parents participate in their everyday lives. Shared parental rights and responsibilities also impose an obligation on the parents to consult with each other when making major decisions about their children.

PARENTING PLANUsually parents agree to a Parenting Plan in terms of the Children’s Act. The Parenting Plan determines how their respective responsibilities and rights over the child will be exercised. While Parenting Plans usually set out living arrangements, contact times and sometimes matters such as religious upbringing, they cannot cast in stone or necessarily predict what the changing needs of the children and the parents will involve in the future. New relationships, geographical proximity, changes to parental working circumstances and the changing needs and preferences that the children develop over time all require some parenting flexibility.

Shared parental rights and

responsibilities also impose an

obligation on parents to consult

with each other when making major

decisions about their children.

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MEDIATIONSometimes a child wants to spend more time in one parent’s home or wants to change schools. All is well when parents agree with these changes. If the parents do not agree on a decision, mediation is often helpful. Mediation involves sitting down with a skilled professional – usually a lawyer, psychologist or social worker – and working through the possibilities and ventilating each parent’s perspective. The beauty of mediation is having a skilled third party assist the parents in gaining a more objective perspective and seeing things from the child’s point of view. Parents often convince themselves that something is good for the child when, in fact, they are expressing an individual preference. Mediation is not adversarial and its success depends on the ability of both parents to come to an agreement. The mediator cannot and does not impose a decision on the parents. Instead, the mediator works with the parents to assist them in coming to a joint agreement on the issue.

WHAT HAPPENS WHEN MEDIATION FAILS AND THE PARENTS CANNOT AGREE? Litigation is often expensive and is time-consuming. Our Courts will not take decisions without allowing both sides an equal opportunity to explain their position. In practice, fairness requires an equal opportunity for each side to state their case, which in turn can mean long delays waiting for Court dates. Disputes become more intractable once the litigation practice commences. Parents feel that they have so much invested in the process that they often lose perspective altogether. Children then live in circumstances of continuous acrimony between their parents, for months or even years at a time. Parents can also become financially and emotionally drained to the point of drastically reducing their parental capacity.

FACILITATIONIn an endeavour to address this problem, a practice was developed a number of years ago in an attempt to try to keep parenting disputes out of Court by enhancing the powers of a mediator and elevating the procedure to what was called (in the Western Cape) “facilitation”. A facilitator was appointed by agreement between the parties in their Parenting

Plan. A facilitator’s job involved first trying to mediate the dispute between parents but, if after making every effort to assist the parents in reaching agreement failed, a facilitator was authorised in the Parenting Plan to make a binding directive or ruling. The parties undertook to be bound by this ruling. Thus, a facilitator’s directive was thought to determine many things which the parents could not agree on, from changes to contact arrangements to other big and small parenting decisions.

Over time, the term “parenting co-ordinator” replaced the term “facilitator”, but the powers and the role of the professional concerned was the same, therefore, the terms are used interchangeably in this article.

Over the last decade, a large number of divorces and Parenting Plans have been ordered by Courts in the Western Cape containing facilitation or parenting co-ordination clauses. Frequently, the name of a particular professional is not included and these Parenting Plans state that if the parents in a dispute cannot agree upon which facilitator to appoint, the Chairperson/s (for the time being) of the Family Mediators Association of the Western Cape (FAMAC) would appoint the facilitator. FAMAC developed facilitation training and a system of accreditation over time but there was, and still is, no legal obligation to appoint a facilitator with any particular training or accreditation.

Over the last decade, a large number of divorces and Parenting Plans have been ordered by Courts in the Western Cape containing facilitation or parenting co-ordination clauses.’

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Without regulation or standardisation of facilitation training or qualifications, appointing a facilitator could become a somewhat random process without any assurance that your facilitator or parenting co-ordinator would necessarily be qualified or competent to attend to such an important role.

In the past, in practice, a good facilitator could make a positive difference in constructively resolving post-breakup parenting disputes, but this depended upon acceptance and co-operation of the parties, and the good judgement of the facilitator. The professional concerned needed to know when to call in other professionals where an assessment was necessary, and to stop short of usurping the Court’s authority in certain decisions where only a Court has the right to make decisions.

Facilitators were sometimes making drastic decisions without fair processes. There are rules that bind Judges when determining disputes that affect the lives of children, but these did not apply to facilitators, and this impacted negatively on the integrity of parenting dispute resolutions. The question of the extent to which a facilitator could or should make decisions about a child’s life has been crying out for formal and clear guidance.

FACILITATORS DO NOT HAVE UNLIMITED DISCRETIONFacilitators are not appointed in terms of any particular provision of the Children’s Act and are not currently regulated by law, and in the absence of statutory law, it was inevitable that appropriate cases would come before the Court for clarification. The recent Western Cape High Court case of TC vs SC (case no. 20286/2017- judgment delivered on 18 April 2018) has shone much light on this issue through the detailed judgement of acting Judge Diane Davis. Judge Davis’ decision makes it clear that parenting co-ordinators do not have an unlimited discretion to make decisions about parental conflict. The Judge emphasises that there are some decisions which only a Court can determine and which cannot be delegated to other professionals. The judgment distinguishes between decisions which are ancillary to the original Court Order and those which operated as an amendment of the Court Order. For example: a Court Order may

stipulate that a child will spend alternate weekends with her parents but that Mother’s Day will be spent with the mother and Father’s Day with the father. Should Mother’s Day fall on the father’s weekend and he will not agree to a change of schedule, the parenting co-ordinator, in those circumstances, can direct that the child spends the day with the mother, but the rest of the weekend with the father. In the words of the Judge, “such a decision would not amount to a permanent variation of the terms of the Consent Order since the default position of alternating weekends remains the same”.

The judgment makes it clear that facilitators can make minor changes aimed at implementing, rather than changing, the rights set out in the Parenting Plan. A parenting co-ordinator cannot change the primary residence of a child, permanently alter the contact arrangements regarding time allocation, or impose material conditions on the contact, such as requiring supervision. In order for a parenting co-ordinator to be appointed, there must be a Parenting Plan in which the parenting rights have been agreed to by the parties or the parenting rights must be contained in an Order of Court. A parenting co-ordinator cannot make a valid directive which changes a court-ordered Parenting Plan. Judge Davis’ judgment stresses that parenting decisions are still subject to judicial oversight and their decisions are subject to appeal by a competent court.

The effect of Judge Davis’ judgment is to put the responsibility for making decisions about children squarely back into the hands of their parents who are enjoined to make greater effort to focus independently on the interests of their children. Disputes regarding major decisions about the child will need to be determined by a competent court and parents will need to carefully weigh up the financial and the human cost of embarking on litigation of this nature.

Facilitators were sometimes making

drastic decisions without fair

processes.

‘

’


The SCA’s verdict came as good news for banks and other secured lenders as the BRP’s fees may only be paid from the free residue, if any, and not from the net proceeds of the sale of any secured asset by a liquidator.’

‘

THE BUSINESS OF(BUSINESS) RESCUEBy the Insolvency & Business Rescue team

Since the enactment of the Companies Act 71 of 2008 (“the Act”), the statutory procedure for the restructuring of companies in financial distress, as provided for in the Act, has gained in popularity.

T he good news, according to the Companies and Intellectual Property Commission (CIPC), is that since 2011, more than 50% of the

financially distressed companies that went into business rescue, have been saved.

This statistic flies in the face of the popular perception that business rescue has a low success rate. Although this perception is unfounded, scepticism abounds due to business rescue statistics being read out of context. To illustrate this point, as a Moneyweb article pointed out, a 10% success rate could mean that 9 out of 10 business rescue attempts failed, however, if the 9 that failed collectively employed 200 people and the 1 that succeeded employed 1 500 people, the success rate of business rescue proceedings would increase to 88% (based purely on job retention).

Chapter 6 of the Act defines business rescue as proceedings initiated to facilitate the rehabilitation of a company that is financially distressed by providing for:

�� The temporary supervision of the company and the management of its affairs, business and property;

�� A temporary moratorium on the rights of claimants against the company or in respect of property in its possession; and

�� The development and implementation, if approved, of a plan to rescue the company by restructuring its affairs, business, property, debt and other liabilities, and equity, in a manner that maximizes the likelihood of the company continuing in existence on a solvent basis or, if it is not possible for the company to so continue in existence, results in a better return for the company‘s creditors or shareholders than would result from the immediate liquidation of the company.

Since its inclusion in the Act, business rescue has been the focal point of a fair amount of jurisprudence, often concerning the interpretation of the provisions of the Act and the finer procedural details that the legislature did not provide for.

Most recently, the Supreme Court of Appeal (“SCA”) had to consider whether any preferences existed in respect of the remuneration of the business rescue practitioner (“BRP”), where the business rescue proceedings had failed. A business rescue practitioner is the person appointed, or two or more persons jointly appointed, to oversee a company during business rescue.

In the case of Diener N.O. v Minister of Justice and Others (926/2016) [2017] ZASCA 180, the court had to decide whether a BRP’s claim for remuneration enjoyed a special preference on the liquidation of a corporation when business rescue failed. The court held that the BRP’s claim ranked after the costs of liquidation but before those of post-commencement claims for wages by employees and secured and unsecured post-commencement finance, and was payable from the free residue of the insolvent estate. The court also had to decide what the effective date of liquidation is. In this regard, the SCA held that business rescue ends when the application to convert business rescue proceedings into liquidation proceedings is filed. In addition, the SCA held that a BRP is not exempted from proving claims.

The SCA’s verdict came as good news for banks and other secured lenders as the BRP’s fees may only be paid from the free residue, if any, and not from the net proceeds of the sale of any secured asset by a liquidator.


STBB’S SOMERSET WEST AND STELLENBOSCH BRANCHES MOVE

Our Somerset West retail property division and our Stellenbosch property development division will soon be under one roof.

T he two offices are merging on 1 September 2018, when approximately 700sqm of brand new office space on the first floor of Titanium House in the Paardevlei Development will be occupied. Paardevlei is a mixed-use development located on Broadway Boulevard, just off the N2, and consists

of retirement lifestyle units, residential property and office blocks. We look forward to welcoming our clients to our new office space!

STBB OPENS EAST LONDON BRANCH

The East London branch is STBB’s

eleventh office nationally

HELDERBERG OFFICE

1st Floor, Titanium House,

19 Gardner Williams Avenue,

Paardevlei, Somerset West

Tel: 021 850 6400Fax: 021 852 1770

In November 2017, in response to the new jurisdictional changes regarding registration of deeds in the Eastern Cape, we opened our East London branch in Vincent, East London, with a smaller office in King William’s Town.

The practice is run by newly appointed director, Nikhail Munsamy who, with the assistance of his experienced paralegals, has already entrenched the STBB brand in the area.

Currently, the main focus of the branch is to act as the correspondent conveyancing attorney for all firms in the greater Eastern Cape region. The new branch also aims to expand STBB’s national footprint by increasing retail property work from the area.

The East London branch marks number 11 of STBB’s offices nationally, and we are confident that Nikhail and his team will continue to provide clients with the outstanding professional service that is synonymous with the STBB name.

HOSTED BY:

For more information visit www.stbb.co.za

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We welcome your feedback and invite you to contact us at

[email protected]

CONTRIBUTORS: Belinda Lewis; David Thompson; James Foxcroft; Johan Greyling; Shereen Volks; Andreas Tsangarakis; Stoffel Ackermann; Annetjie Van Rooyen; Mondeka Mabibini

DESIGN: Infestation 021 461 8601

www.infestation.co.za

www.stbb.co.za

Cape Town 021 406 9100

Blouberg 021 521 4000

Claremont 021 673 4700

Fish Hoek 021 784 1580

Helderberg 021 850 6400

Tyger Valley 021 943 3800

Bedfordview 011 453 0577

Centurion 012 001 1546

Fourways 010 001 2632

Illovo 011 219 6200

East London 043 721 1234

Disclaimer: This communication is subject to the disclaimer of STBB | Smith Tabata Buchanan Boyes which can be found at

www.stbb.co.za/info/disclaimer

UPhawu COMMUNITY DEVELOPMENT

UPhawu Community Development, an education, art and life-skills afterschool programme based in the informal settlement of Philippi in the Western Cape, was founded by STBB employee, Mondeka Mabibini. UPhawu is supported by STBB and has been a registered Non-Profit Organisation since 2016.

UPhawu was established in September 2015 after Mondeka discovered that there were various challenges in her community. She took it upon herself to conduct research about these challenges, as well as investigate possible solutions. She discovered that there was a need to instil a reading culture in the children of the community from an early age, and a need to grow the children’s self-esteem, skills and talents.

UPhawu was therefore established to provide a safe place for children to grow and learn, and to prevent them from loitering around the streets and engaging in gang activity and substance abuse in the afternoons after school. UPhawu provides children with knowledge and skills to assist them in living a better, happier life.

WITH THE SUPPORT OF STBB, UPHAWU HAS MANAGED TO:

�� Collect in excess of 1500 pairs of school shoes over the past 3 years for children in the Eastern Cape (see also below);

�� Successfully coordinate Boys and Girls Camps annually;

�� Transport beneficiaries for dance and theatre classes and literacy workshops at the Baxter;

�� Secure donations; and

�� Host a successful Gala Dinner for Senior members of the Book Club.

You can help Mondeka by donating paper, stationery, art supplies, books, dictionaries, dance costumes, unwanted musical instruments and building materials (ideally a prefab shed or dwelling), or by making a cash donation that will be used to fund meals and outings.

Email Mondeka at [email protected]

NO MORE BARE FEETIn January 2018, with the help of STBB, our clients, schools, friends and family, we broke our 2017 record and successfully supplied 760 children with proper shoes. This is the 4th year that UPhawu has undertaken this drive. If you want to get involved in this great initiative, you can drop black school shoes, new or pre-owned (as long as they are still in wearable condition), at any STBB branch, or you can email Mondeka at [email protected]

BUCHANAN’S - STBB · Issue 01 of 2018 | Buchanan’s Brief 3 It is also far quicker to get an arbitration hearing than a court date. ’ well be an architect or building engineer.

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