Author: zerophoid

“The secret of crisis management is not good vs. bad, it’s preventing the bad from getting worse” (Andy Gilman)

We can only guess at how the COVID-19 coronavirus outbreak will end, but let’s all take whatever concrete steps we can right now to lessen its impact on our personal lives, on our businesses, and on our country.

One of those steps is for businesses to find ways of continuing to operate as normally as possible, given of course the exceptional times we are living through. And as employers, many businesses will find themselves facing some novel challenges, particularly during the National Lockdown…

Small businesses – the new relief programs

A whole raft of support and relief programs has been announced. Some still need to be finalised and the situation is changing daily, so keep an eye on the media and incorporate into your business survival plan all relief channels you think may be open to you. At date of writing, these are the main ones –

• The DSBD (Department of Small Business Development) will provide relief to businesses in several categories. Call the DSBD on its 0860 663 7867 hotline or email info@dsbd.gov.za to see if you quality. Apply at https://smmesa.gov.za/.
• The DTI (Department of Trade and Industry) is set to provide relief for large businesses as well as small. Keep an eye on the DTI’s website for developments.
• The Solidarity Fund has been set up with R150 million from the government to, amongst other things, assist and support those affected (contact details here).
• Employer and employee relief: Access the “Easy Guide for employers on COVID19” here and read up on the “Temporary Employer/Employee Relief Scheme” and UIF benefits from a special R30bn National Disaster Benefit Fund. Confirmation that employees who fall victim to the virus will be paid through the Compensation Fund – details here.
• Other funds and relief measures: The Rupert and Oppenheimer families have pledged R1 billion each to help struggling small businesses and employees – the details are not available at date of writing. Read the President’s speech here for more on planned or implemented measures involving tax relief, changes to the Competition Act, a fund to support the tourism sector, and more.

Employers – comply with the law!

From a legal perspective, employers in particular need to have a solid action plan in place to ensure that they comply with all our many employment laws, which will continue to apply as is, unless and until government announces any new measures to the contrary.

Detailed planning will not be easy. With the situation changing daily, keep informed of developments and keep all your plans flexible.

In any event there is unfortunately no “one size fits all” answer to questions like “Can I dismiss an employee who tests positive for COVID-19?”, “Can my employees insist on working from home?”, “Can I start retrenching?”, “Can I prohibit employees from travelling abroad for personal reasons?”, “What steps must I take to ensure a safe working environment and what rules can I put in place to underpin them?”.

The list is endless and the answers to these questions will depend upon your Lockdown exemption status, your particular employment contracts, business circumstances, operational needs, and so on.

Your employee action plan

We need to get used to constant change and uncertainty, but there are steps you can take now to plan for as many eventualities as possible –

1. As a start, incorporate into your “COVID-19 Business Plan” all the possible scenarios you can think of, both during the National Lockdown and after it ends.
2. Then brainstorm – with your employees where you can – a list of all the employment-related problems you and they might face. Use that in turn to make a list of questions you will need the answers to under each scenario.
3. Then, make sure you are fully prepared to deal with whatever may come your way by taking specific legal advice on each and every one of those questions.

“Will the 20s roar like they did in the last century or will the outcome be different?” (Clem Sunter)

What exactly is in store for us South Africans in the Twenty-Twenties? It’s a vital question not only for business and for investors, but for us all on the most personal level.

Of course it’s also a question that’s a lot easier to ask than to answer. As Nobel Prize winning physicist Niels Bohr put it: “Prediction is very difficult, especially if it’s about the future” – witness the new COVID-19 coronavirus scare which has suddenly popped up with its game-changing impacts on the world and world economies.

Nevertheless as Clem Sunter (well known for his “High Road or Low Road?” speeches in the late Eighties) reminds us, we can and should still use scenario planning to ready ourselves for any one of a whole variety of possible futures. And in his article “The world and South Africa in the 2020s” (read it on Leader.co.za here) he discusses all the major global and local flags and scenarios to watch out for.

Let’s hope that his concluding “I give a return to the High Road trajectory, with all the flags I talked about turning green, a heads-up with a probability of 80%” holds true!

Will the main provisions of POPIA (the Protection of Personal Information Act) really commence on 1 April 2020 as media reports suggest, or is this just another case of Crying Wolf? This time it seems it may be the real thing, with the Information Regulator having formally requested the President to declare the commencement date.

If that does indeed happen (still unclear at date of writing), any organisation that needs to comply with POPIA will have a one year transitional period expiring on 31 March 2021 to get their house in order.

Watch this space…

“Engage brain before hitting send” (Anon)

WhatsApp comes with a host of business and personal benefits, and its use is growing exponentially here as in the rest of the world. Which brings us to a possible downside – binding yourself to a legally-enforceable agreement without really meaning to.

First principles: Offer + Acceptance = Contract

What makes for a binding contract? In the most simplistic sense, all you need is for one person to make an offer and for another to accept that offer.

There are of course many other requirements – consensus ad idem (‘true agreement’ or ‘meeting of minds’), lawfulness, capacity to contract, compliance with any formalities, certainty of terms, possibility of performance and the like. Lawyers and legal academics love to wax lyrical on the finer ins-and-outs of these and of related concepts like “quasi-mutual assent” (more on that below, it’s actually an important concept), but the core principle applicable in the vast majority of cases remains this: Offer + Acceptance = Contract.

And of course, with only a few exceptions (such as property sales, wills and ante-nuptial contracts), even verbal agreements are fully binding, and the binding effect of electronic messages has been established both by legislation (most importantly the ECTA or Electronic Communications and Transactions Act) and by a series of modern court decisions.

A R20m lottery windfall and a R1m WhatsApp “offer”

• A father was paying R1,000 p.m. child maintenance to the mother of one of his seven children.
• Shortly after becoming the lucky recipient of a National Lottery windfall in the form of a prize of R20.8m, he met with the mother, told her that his health had deteriorated, that he could no longer be employed (by SARS) and that he would get about R600,000 in pension benefits.
• He offered R100,000 out of these pension benefits in full and final settlement of his child maintenance obligations, which the mother accepted and which was paid to her for the child’s benefit.
• At a meeting with the maintenance officer he denied having won R20m but the mother, after getting proof of his win, sent a WhatsApp message to the effect that she knew about it. He replied – also on WhatsApp – “if I get 20m I can give all my children 1m and remain with 13m. I will just stay at home and not driving up and down looking for tenders”.
• The mother sued the father for R900,000 on the basis that he had contracted to pay her R1m and had only paid R100,000. The father denied liability, saying that his WhatsApp message was just to “get rid of” the mother and that he had no intention to make an offer to contract.

When is an “offer” not an offer? The “intention to contract” factor

The mother won in the High Court but lost on appeal to the Supreme Court of Appeal (SCA), which held that the father wasn’t bound because on the facts his message was a denial of having won R20m and it “related what [he] could possibly do in the hypothetical future event of him receiving R20 million. It set out what the [he] might do if he received R20 million … the message clearly did not contain an offer that could on acceptance thereof be converted into an enforceable agreement.”

On the facts of this case, the father “subjectively had no intention to contract and the message did not suggest otherwise.” His “morally reprehensible conduct” lost him his claim for legal costs, but it did not affect his lack of intention to contract. So in this case our WhatsApping father is off the hook and gets to keep his R1m.

But… before you hit send

On slightly different facts his WhatsApp message could easily have been held to have been a valid offer, binding him on acceptance. For example, the concept of “quasi mutual consent” which we mentioned above, means that even if you don’t actually intend to make a binding offer, our law can hold you to it if your actions or conduct lead the other party “as a reasonable person” to believe that you did intend to enter into a contract. So you may not intend your message to be a real offer but if the recipient reasonably thinks it is, you are in trouble.

The lesson for us all is this – all users of electronic communications, whether via WhatsApp, Facebook, email or any of the many other electronic messaging channels open to us, face the very real danger of inadvertently making a promise in haste which down the line a court will hold us to.

Think before you message!

“To support the property market, the threshold for transfer duties is adjusted” (Finance Minister Tito Mboweni)

Transfer Duty Exemption Up

Some good news for property sellers and buyers in particular is the increase in the transfer duty exemption to R1m. See the table below for details and note that with all the brackets being adjusted upwards, buyers at every level will save – for example the buyer of a R2.5m house will save R17,000.

(Source: National Treasury)

Some useful Tax Calculators for you

• How long will you work for the taxman today?

Input your salary into the 2020 Tax Clock calculator and find out how many hours you will spend today working for the taxman, and at what time precisely you will finally start working for yourself (warning – it’s not pretty!).

• How will your income tax change?

Put your monthly taxable income into Fin24’s Budget 2020 Income Tax Calculator to find out.

• How much extra will your sin taxes cost you this year?

Work out how much more you will be shelling out for spirits, wine, beer and cigarettes (or how much you will be saving if you don’t indulge!) with Fin24’s Budget 2020 Sin Tax Calculator.

“It is unquestionable that an owner of land is not permitted to perform activities which contravene the restrictive title conditions or the zoning restrictions” (extract from judgment below)

You decide to open a home business, or perhaps you are about to buy a house in order to run a business from it. You apply for rezoning but the council is taking forever to decide (although it has happily started charging you rates and taxes on the business tariff), your immediate neighbours are supportive, you won’t cause any nuisance, you know of many other businesses operating undisturbed “under the radar”, and anyway the suburb’s residential character has been eroding for years. Surely you are safe to just go ahead and open your business?

On the other side of the coin, perhaps you bought your dream house in a leafy suburb, secure in the knowledge that its residential character is protected by strong and effective zoning laws. Then businesses start moving in – what can you do about it?

A recent High Court decision addresses both questions directly…

A suburban office and the interdict application

• A construction company opened an administrative office in a suburban area, manned from 8 am to 4.30 pm on weekdays by a staff of four (with the occasional visitor).
• Three complainants in the suburb, objecting strongly to this move, applied to the High Court for an interdict against the running of any business on the property. They had, they said “acquired their properties with a keen expectation of residing in a residential suburb with amenities that are consistent with a residential suburb and with a residential character” – sentiments which will no doubt resonate with many other home-buyers.
• Critically, one of the restrictive conditions in the offending property’s title deeds read “this erf shall be used for residential purposes only and no trade or business or industry whatsoever shall be conducted thereon”. That, said the Court, rendered the property’s usage illegal. Full stop.

All the defeated defences

The property owner and the business (let’s refer to them together as “the business” for simplicity) raised a series of defences to the interdict application, all of them rejected by the Court on essentially the same ground that “the use or continuation to use the property for any business or trade other than for residential purposes constitutes an illegal act” –

• The suburb’s character had been changing over the years with businesses moving in, including a large shopping mall. Not relevant.
• The business had applied to the local council for re-zoning and removal of the title deed restriction over a year before, no objections had been received and it had in fact been supported by at least one neighbour. Not relevant.
• Although the rezoning application had yet to be granted or declined, council was already collecting rates and taxes payable by business and commercial properties. Not relevant.
• The office caused no nuisance to anyone in the area. Not relevant.
• Other property owners in the area were also in contravention of the law. Not relevant.

Who can object and who can’t?

The business also argued that only property owners living “in close proximity” to the office had any right to object. That, it said, excluded not only the complainant who was not an owner (she lived with her parents) but all three of the complainants because they all lived about a kilometer away from the office.

No problem, said the Court, “the essence of town planning schemes is conceived in the interest of the community to which it applies” and the complainants lived “in an area affected by an applicable zoning scheme”. All the complainants had “protectable interests” and therefore locus standi (in plain English, the ‘right to bring a legal action’) and were entitled to enforce their rights under the planning scheme.

The interdict and the request to suspend it

“Once it is accepted”, quoted the Court from an earlier judgment “that the nature of the right in question is a public right, then it must follow … that for continuing infringements of that right the only effective remedy is an interdict, all the more so where such infringements amount to an offence.” Final interdict granted with costs.

Finally, the Court rejected a request by the business to suspend the application of the interdict. The business had been continuing to act in an unlawful manner for at least fifteen months, it was “hell-bent to do so without the necessary relaxation of the restrictive conditions” and to suspend the interdict would be to support or give approval “to an ongoing illegality which is also a criminal offence … tantamount to the subversion of the doctrine of legality and undermining of the rule of law”. The business “must be brought into line immediately when such matters are brought to the attention of the court.” Interdict effective immediately.

Owners – must you always rezone?

Have your attorney check what title deed restrictions your property is subject to, what your current zoning is and what it allows and doesn’t allow. Your local town planning scheme may perhaps let you run a small scale “home enterprise” or “micro business” either without any municipal consent (there will be conditions attached) or with a municipal permit. Or you may need to formally apply for rezoning and removal of title deed restrictions. Every local authority will have its own rules on this and the important thing is to comply with them or risk unhappy neighbours applying to close you down.

“It takes seven times more money, effort and time to get a new client than it does to keep an existing one”

We’ve all heard of “dog whisperers”, “cat whisperers”, “horse whisperers”, even “elephant whisperers” – but “client whisperers”? Is that even a thing?

It is, and with your clients being the lifeblood of your business, retaining them is fundamental to its profitability and success. For a take on how to do that – to your mutual benefit – read “The Client Whisperer” on the CleanFax website.

The article specifically addresses carpet cleaning businesses but the principles it espouses, and the advice it gives, are universal. They apply to every type of business you can think of.

So protect your client base – become a client whisperer!

raffic accidents, your fault or not, are traumatic affairs. Even minor dings come with their hassles – panel beaters, tow trucks, shock and recriminations, reams of paperwork, having to get a Crash Report Number for the insurers…

That last bit has always been a major added stress factor, requiring a trip to the local police station (unlikely to be a happy experience) and yet more paperwork.

No longer – life just got a little bit easier with the new online reporting service from NaTIS (the National Traffic Information System) on its website here. The submission of the report is legally binding and only applies to “minor damage crashes”, not in cases of injury or death. Note the time limit – “All crashes must be reported within 24 hours or the next working day. (Non-Working days Saturday, Sunday and Public Holidays).”

Get your lawyer’s help urgently if it’s anything but a minor accident!

“I always advise people never to give advice” (P. G. Wodehouse)

If you want to send shivers down the spine of any investor, mention “Steinhoff”, or “Sharemax”, or any one of the many other spectacular corporate collapses that have plagued both local and overseas investors in recent times.

Quite apart from the high-profile failures it’s been a hard few years for investors generally, and if your nest egg has taken a painful tumble recently you may well wonder whether you can sue your financial advisor for giving you bad advice.

The short answer, as several recent cases have highlighted, is “It depends…”.

Case 1: A R2.5m claim succeeds

• A widow, still reeling from her husband’s death and unversed in financial products, invested R2m in Sharemax on the advice of her trusted financial advisor, an authorised Financial Services Provider (FSP).
• She made it clear that she needed a safe, low risk investment and “that she could not risk losing even two cents as the money was earmarked for her son’s upbringing”.
• The advisor did not explain any other investment products and emphasized that “it was so good that he did not even want to introduce other financial instruments and/or investments to her.”
• Sharemax of course collapsed, and the investor duly sued the advisor for her R2m plus interest – a total of almost R2.5m by the time this case found its way through the High Court and an appeal to the Supreme Court of Appeal (SCA).
• The advisor was found liable on the basis of having been negligent “and even dishonest” and to have “failed to exercise the degree of skill, care and diligence which one is entitled to expect from a FSP”.

Case 2: An R11m claim fails

• A UK couple temporarily in South African sought a local financial advisor’s advice on how best to invest some “spare cash”.
• They ended up putting GBP 565,000 and R700,000 (about R11m in all) into investment products offered by UK based investment companies. The companies failed and the investments were rendered worthless.
• The investors successfully sued the advisor in the High Court for R11m in damages, but on appeal to the SCA their claim was dismissed.
• The investors, said the Court, had failed on the evidence to “identify what a reasonably skilled financial service provider would know about products in the market place; what due diligence they would have done before making a presentation to a prospective client and what sources of information they would have consulted.”They had failed to prove that any negligence on the advisor’s part in “making a presentation without adequate knowledge of the proposed investments, resulted in advice materially different from that which a reasonably competent advisor would have given.” (Emphasis supplied).
• End result – the investors lose their R11m and face a (doubtless substantial) legal bill.

Case 3: A R5m claim fails

To the High Court now for some insight into the range of factors that a court is likely to take into account in deciding liability –

• This was another Sharemax investment, this time for R5m.
• The difference was that this investor was found to have been an astute and wealthy businessman who managed his own share portfolio and went into the investment understanding the risks and “with his eyes open” after taking independent advice.
• Claim dismissed.

The bottom line, and some advice for investors

Let’s start off with this thought –unless you are fully qualified to make your own investment decisions, seeking help from a financial advisor is a no-brainer. A trained and certified professional advisor brings elements of insight, knowledge and objectivity that you can never match on your own.

Just be sure that your chosen advisor is the right advisor for you and is both competent and trustworthy. As a first step check for FSCA (Financial Sector Conduct Authority) authorisation (and a list of products the advisor is approved to provide) here.

If worst comes to worst and you feel that your advisor has let you down and should refund you, the bottom line (in a nutshell) is that to successfully sue you will have to prove that you suffered loss in consequence of following your advisor’s negligent advice.

The million dollar question (literally perhaps) is of course – how do you establish that necessary element of negligence? Whilst it will never be easy, and whilst each case will be treated on its own merits, the SCA (in the R11m case above) usefully held that an advisor’s legal duties are mirrored in the FAIS (Financial Advisory and Intermediary Services) Act and its Codes of Conduct. So perhaps start off by proving a breach of the General Code of Conduct’s provision that “an authorised financial service provider ‘must at all times render financial services honestly, fairly, with due skill, care diligence and in the interests of clients and the integrity of the financial services industry’.”

There’s also the FAIS Ombud option

You may not need to go to court to recover your losses, in that the “FAIS Ombud” (Ombudsman for Financial Services Providers) has the power to resolve complaints against FSPs. It can award “fair compensation for the financial prejudice or damage suffered” up to its jurisdictional limit of R800,000. In at least two Sharemax complaints, compensation orders have been issued, but many more have been dismissed.

Ask your lawyer which route is best for you.

And last but not least, some advice for financial advisors

Make sure that all your documentation protects you from liability as much as possible, that you have insurance cover in place in case you are sued (in the R2.5m case mentioned above, the insurers were ordered to indemnify the advisor against the claim), and that you comply strictly with FAIS and its Codes.

“People who say they sleep like a baby usually don’t have one” (Psychologist Leo J Burke)

It has taken over a year of confusion and delay around when new changes will be implemented, but finally your extended rights to parental leave and to an Unemployment Insurance Fund (UIF) claim have fully commenced.

Here’s an update/refresher –

• New mothers are still entitled to 4 consecutive months’ maternity leave.
• New “parents” (which would include fathers and same-sex partners) are entitled to 10 consecutive days’ “parental leave”.
• An adoptive parent of a child under 2 years old is entitled to 10 consecutive weeks’ adoption leave. Where there are two adoptive parents, the other is entitled to only the 10 consecutive days’ “parental leave” (the two adoptive parents should decide between them who gets 10 weeks and who gets 10 days).
• Commissioning parents in a surrogacy agreement have the same entitlements as adoptive parents.
• The law does not force your employer to give you paid leave – the above entitlements are for unpaid leave only. So unless your employment contract entitles you to paid leave you are limited to claiming from the UIF (assuming you are a qualifying contributor). That will give you 66% of your salary subject to a standard earnings cap.

And a note for employers: if you haven’t already done so, take advice now on reviewing your maternity and parental leave policies.