BONDHOLDERS AND LANDLORDS TAKE HEED - RATES ETC RANK AHEAD OF BONDS

Bondholders and landlords of immovable property need to bear in mind the very strong preferences enjoyed by local authorities for rates and other charges (including electricity and water, whether consumed by the owner of the property or by a tenant). Although you can get a transfer clearance certificate by paying only amounts due for two years prior to transfer, that is by no means the limit of the municipal claim.

The Supreme Court has now held that even in a liquidation situation, where claims for rates and similar "taxes" are limited to a two-year period prior to liquidation, only the normal laws of prescription limit all other claims. As municipal claims can be substantial, their superior ranking is a risk factor that needs to be constantly managed both by landlords, and by lenders relying on the (normally excellent) security afforded by mortgage bonds.


CONTRACTING WITH A TRUST? CHECK FOR AUTHORISATION!

When contracting with a Trust, make sure that whoever signs for the Trust is fully authorised to do so by the Trust Deed. And, according to a recent case, an agent purporting to sign for the Trust where a sale of land is involved must be authorised to do so in writing - verbal authority is not enough, even where the "agent" is one of the Trustees. At the same time, check the Trust Deed to ensure that the Trustees are empowered to enter into the contract in question in the first place


CREDIT PROVIDERS AND CONSUMERS TAKE NOTE: NATIONAL CREDIT ACT IN FORCE

The new National Credit Act has been signed into law, and National Credit Regulations will follow shortly. Various provisions of the Act will be phased in, in a process that extends to June 2007. The Usury Act and the Credit Agreements Act are repealed, but remain partially applicable for transitional purposes.

The Act will significantly affect all consumers, credit providers and credit bureaux. Credit providers in particular should keep a close eye on the Draft Regulations, which cap interest rates, regulate loan periods and control fees.


A STITCH IN TIME WOULD HAVE SAVED THE CLAIM

In a recent judgment, a claimant sought damages for alleged medical negligence after a series of eye operations had left him blind. He did not institute his action within the three-year prescription period, because it was only after the three years had expired that he obtained expert opinion to the effect that his doctor's actions amounted to negligence. The Supreme Court found that the claim had nevertheless prescribed- prescription starts to run as soon as you have actual or deemed knowledge of the facts from which the debt arises. If it then takes further time to establish that those facts give rise to a claim in law, that does not delay prescription.

The distinction is subtle but the message is clear - as soon as you think you have a claim, for anything, seek appropriate advice without delay.


TO RELY OR NOT TO RELY - THAT IS THE QUESTION

As a secured creditor in a liquidation matter, you need to decide whether or not to rely upon your security in satisfaction of your claim - normally, you would elect to do so if there was a danger of being called upon to contribute towards the costs of liquidation. In a recent Supreme Court case, a secured creditor chose to rely upon its security when proving its claim against a company in liquidation. It then sued a surety, who argued that the creditor's election had the effect of releasing him, as surety, from liability for the creditor's shortfall.

In relying on your security, you lose your right to share in any concurrent dividend that may accrue in the liquidation; but, said the Court, you do not thereby waive or abandon the balance of your claim. Thus the shortfall is still recoverable from the surety.


THE PERILS OF PARTNERSHIP: BE CAREFUL HOW YOU STRUCTURE THE JV

One of the dangers of trading as a partnership has always been that all partners are jointly and severally liable for the partnership's debts - hence a provision in the Insolvency Act that sequestration of a partnership must be accompanied by sequestration of the individual estates of the partners. The Supreme Court has re-iterated recently that even if one of the partners cannot be sequestrated (in this case because as a company it could only be liquidated by separate action) this is no bar to sequestration of the partnership.

So even if you trade through a corporate entity, be aware that involving it in any form of partnership arrangement will expose it to an increased degree of risk. There is a hidden trap here - the creation of a partnership can be implied from conduct. Be careful therefore how you structure any form of joint venture arrangement - just calling it a "joint venture" does not mean it is something other than a partnership. Take advice on protecting yourself or your trading entity by using a separate, limited liability, entity for the actual JV.


SPOUSES' NEW RIGHTS TO SUE

Until recently, although anyone married in community of property could recover damages from the other spouse, only "non-patrimonial" damages (i.e. damages for non-financial loss, such as pain and suffering) could be claimed. Now the Constitutional Court has held that all damages are claimable, including financial losses - such as medical expenses, loss of earnings etc, which often form the bulk of any claim and are thus of great consequence to the claimant.


THE "CLEAN HANDS" PRINCIPLE; AND A LIQUOR LICENCE REMINDER

The law will usually not assist a party to an illegal or immoral contract. There are so many laws around these days (many of them complex, some of them obscure in the extreme), and they change with such regularity, that it quite possible for anyone to conclude an "unlawful" contract without even knowing it. Are we left defenceless by the law if that happens? Fortunately not - the party to such a contract has legal protection under two scenarios: -

1. Where that party has "clean hands" (i.e. is innocent of wrongdoing in relation to the contract), or
   
2. Where the Court considers it necessary to assist one of the parties in order to avoid injustice, or for reasons of public policy. In a recently reported case, the purchaser of a liquor business was assisted to recover monies paid to the seller, to avoid unjust enrichment to the seller.

• The Global Futurist at www.futureguru.com (see in particular the articles under "Future Trends")
  
• The World Future Society website at www.wfs.org (the Futurist Update newsletter is a good source of topical information)
  
• Trend Hunter Magazine at www.trendhunter.com
  
• PSFK at www.psfk.com (follow the links from there to sites relevant to your particular field of business or interest).

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