You own a business and you put a sign up saying, “Park at your own risk” – which effectively amounts to a ‘contract’ – simply put, you are saying that anyone can enter your premises on that basis - if they don’t want to then they shouldn’t enter - and that you are not liable for any damages howsoever arising, whether due to your negligence or anything else.  The sign actually means nothing and offers a business no protection against public liability claims. 

This can be contested in terms of Section 48 of the Consumer Protection Act (CPA) on the basis that ‘a supplier must not offer to supply, supply, or enter into an agreement to supply any goods or services on terms that are unfair, unreasonable or unjust (and here’s the kicker), they cannot require a consumer or any other person to waive any rights or assume any obligation on terms which are unfair, unreasonable or unjust.’ 

PJ Veldhuizen, Managing Director of Gillan & Veldhuizen, says that when dealing with consumers what businesses need to do is to ensure a contractually sound relationship between them and the consumer which promotes the objectives of the Consumer Protection Act.  This includes fair and reasonable treatment of consumers by suppliers when supplying goods and services.   

There is a clear injunction in the legislation which requires a court or tribunal to interpret the provisions of the CPA purposively – by that, it means that a presiding officer when attributing meaning to any part of the legislation must do so in the light of the purpose which it seeks to achieve.  “For example,” says Veldhuizen, “any ambiguous provision in the act must be interpreted in favour of the consumer and although it may seem like an oversimplification of matters, the interests of consumers will generally win the day.”

When suppliers are wishing to consider the fairness of any provisions on which they seek to rely, they should consider who their consumers are, especially in relation to those consumers who could be considered vulnerable as result of poverty, illiteracy, age or any other vulnerability.    

At store level, suppliers need to ensure that their staff are adequately briefed on how to deal with the public, are aware of the CPA, and know to whom they should refer any complaints. 

If you work with clients or customers in public spaces, have visitors to your premises, or manufacture products, suppliers are encouraged not to simply rely on so called exclusionary clauses or signs which may have assisted them prior to the CPA and should now adequately insure themselves against claims.   

While claims made against you may be opportunistic and ultimately unsuccessful, the costs of defending even spurious claims can be debilitating and these defence costs should also be insured against all public liability claims.   

Veldhuizen adds that whilst it is often a David and Goliath game, there are many lawyers who are prepared to take on matters on contingency basis, i.e. a no-win-no-fee in circumstances where consumers have been injured and significant damages incurred. Veldhuizen, therefore, advises that when confronted by a public liability claim, one should always consider appointing a mediator to assess whether there is scope for alternative dispute resolution.    

Without necessarily admitting liability, the purpose of mediation is to explore whether it is not simply an apology that somebody wants – furthermore, mediation will see you as being a responsible and worthy supplier, and will ultimately save the business money and preserve its reputation.

A family business trust is one where the trustees are beneficiaries of the trust and the beneficiaries are related to each other. It has become common practice to use inter vivos family trusts as asset protection, particularly in the context of estate planning, in order to secure the financial interests and protect the property of a group of family members.  In this context, trusts are designed to protect and safeguard the interests of beneficiaries, for example when they are unable to look after themselves or manage their inheritance effectively.

 However, problems can arise as a result of the fact that the trustees of a family business trust are related to one another and are all beneficiaries of the trust.  Katherine Timoney, Candidate Attorney at Gillan & Veldhuizen, says, “It can be difficult for trustees to separate the enjoyment of the benefits of the trust from the oversight role they have in controlling and looking after its assets.”

In such circumstances it often appears that there is no real separation between ownership and enjoyment of the trust’s assets. The same is true for inter vivos business trusts created to conduct operations for gain, such as those holding and leasing immovable properties for rental and capital return.  Timoney adds that the Trust Property Control Act 57 pf 1988 requires in section 9 that all trustees must “act with the care, diligence and skill which can reasonably be expected of a person who manages the affairs of another”. It is in this context that the role of the independent trustee is crucial.

Following the case of Land and Agricultural Development Bank of SA v Parker and Others [2004] 4 All SA 261 (SCA), the Chief Master issued a Directive in 2017. This Directive provided that the Master must consider appointing an independent trustee when a trust is initially registered and it appears from the trust deed that it is a “family business trust”.

This kind of trust is defined in the Directive as a trust where -

(a) trustees can contract with other people and create trust creditors;

(b) trustees are all beneficiaries; and

(c) beneficiaries are all related to one another.

The Master must then consider appointing an independent trustee who meets several criteria set out in the Directive. Timoney adds, “This person must be an independent outsider capable of taking on the responsibilities of a trustee, must be independent of the trustees, beneficiary and founder, and must be competent to observe the requirements set out in the trust deed.”

The appointed person must be qualified to act in terms of the requirements for a trustee in the Trust Property Control Act, but does not have to be a professional person such as an accountant or an attorney. However, the Master currently requires that the independent trustee must depose to an affidavit certifying that he/she is competent to scrutinise the actions of other trustees and is knowledgeable in the law of trusts.

The Master can dispense with the appointment of an independent trustee if the founder demonstrates good cause, if the trustees provide security or if the financial statements are audited annually and all irregularities reported to the Master so that any potential harm to creditors is avoided. If the trust does not contain a provision for the process of appointing an independent trustee, the Master will in most cases accept a person nominated through consultation with the founder, existing trustees and the beneficiaries. The founder of the trust would be well advised to consider this appointment before being called upon to do so.

These new provisions relating to independent trustees in certain family trusts arose in part from the observations of Cameron JA in Land and Agricultural Development Bank that family trusts were open to abuse in the sense that “the control of the trust resides entirely with beneficiaries who, in their capacity as trustees, have little or no independent interest in ensuring that transactions are validly concluded” and that “their conduct is unlikely to be scrutinised by the beneficiaries.” The court therefore suggested that the Master should ensure separation of control over and enjoyment of the assets of a trust by insisting on the appointment of an independent outsider to ensure that the trust functions properly, that the trust deed is followed and that there is oversight over the trustees’ conduct.

Katherine concludes that given these provisions, if you are planning on setting up a family business trust or an inter vivos asset holding trust, it would be advisable to include a provision for nominating and electing an independent trustee in the trust deed itself, so that the founder has input in deciding on the person who will be exercising this oversight or how the choice by the other trustees will be made.

The benefits of selling or buying on auction 

The misconceptions that auctions are reserved for distressed properties or that it is a hunting ground for bargains, is steadily being corrected as more and more people opt for the auction floor as opposed to traditional real estate channels. The auction process has seen much success in the property market for many years and selling on auction can realise more for your asset due to its competitive mechanism.   It provides the seller with fair market related prices and creates opportunities for buyers to acquire property at a price they are comfortable with. 

Then and now 

Given the financial climate 10 years back, many property auctions occurred as a result of company closures or liquidations where the creditors, appointed liquidators or trustees preferred to use the auction method to dispose of assets. Banking institutions have for some time been using the auction process to sell property successfully, based on its transparent and arms-length process and have achieved excellent results.  These results are achieved through a larger pool of buyers and investors, with a low cost to creditors.   

Qualified buyers 

Normally, the lack of financing is a common hurdle to selling property out of hand or through a broker where a high percentage of deals may not be approved by finance companies or banks and therefore fail, leaving the seller without a result.   Auctions open up the market for a seller on a cash and voetstoots basis with qualified buyers coming fully prepared to make property investments.  While buyers may still obtain finance to pay for the property, making the purchase is not subject to them obtaining finance.    

Voetstoots applies  

Managing Director of Gillan & Veldhuizen PJ Veldhuizen says that Section 55 of the Consumer Protection Act – Consumer’s Right to Safe, Good Quality Goods - does not apply to goods bought on auction.   “The basic purpose of the voetstoots clause is to protect the seller from any action by the buyer (on discovering any defects neither were not aware of when transacting) to jeopardize the actual sale contract. But it is important to note when the consumer’s rights, provided by Section 55, do not apply to a transaction.” 

The price is right  

The savvy seller or investor knows that the auction route is instrumental in achieving a better price where good demand exists, or producing a result for a seller where no demand exists. In particular, auctions are able to produce a sale where a seller requires urgent disposal while traditional marketing and sale methods have not been able to produce any significant result.  Auctions show a higher confirmed sale rate than that shown by the traditional disposal methods.     

Jonathan Smiedt, CEO of Claremart Auction Group, says that he has seen an ongoing increase in both in the number of properties on auction as well as in the demand for such investment opportunities.   “It is a testament to the strength of the auction mechanism that it can out-perform the traditional market under both good and bad economic circumstances, and most notably has been responsible for the sale of many a property that has been listed too long on the market by estate agents incorrectly pricing sellers’ property at the outset.” 

In short, you have a process that is strictly regulated, transparent, and offers instantaneous results, as well as value for money for the buyer and the seller who retain control, can make informed decisions and have the right to set their price at an auction. 

Lights, camera, auction!

A look at some Interesting amendments to King IV, 2016 In July 1993, retired Supreme Court of South Africa Judge Mervyn E. King was asked by the Institute of Directors in South Africa to chair a committee on corporate governance. The committee’s report, aptly named, was to be the first of its kind in South Africa - an opportunity to educate the newly-democratic South African public on the workings of a free economy. 

Three reports were issued: in 1994 (King I), 2002 (King II), 2009 (King III), and the fourth revision, the King IV Report on Corporate Governance for South Africa 2016, prepared by the Institute of Directors in Southern Africa NPC, the custodians of the King Reports, came into effect on 1 April 2017. 

There are varying opinions on the amendments that were made in King IV at the end of 2016 and their impact on business.  PJ Veldhuizen, CEO of local law firm Gillan & Veldhuizen says, “Arguably, the most important shift in King IV relates to the discretion afforded to companies.” Under King III, companies were able to get around a certain principle if they could explain why they should not be required to adhere thereto. However, King IV assumes that the principles set out have been applied and companies are required to state how this was done, rather than using the ‘explain’ mechanism to avoid adherence.

Companies would have been able to use defences for not complying with King III by, for example, stating that the company was in the process of establishing compliance, or by using justifications based on company maturity or size. However, under King IV, a company would have to conform and explain how compliance is ensured. 

The Deloitte Global Trends in Corporate Governance (2015) identified the governance of Information Technology as an emerging issue in Corporate Governance. Although the Financial Intelligence Centre Act (FICA) has opened the door for better management of information, providing further guidelines to Directors would amplify companies’ understanding.   

Seven years have passed since King III became effective so the old practices are no longer in line with the way that technology is now used.  Gretha Carr, Candidate Attorney at Gillan & Vehldhuizen, adds, “Understandably, the new Corporate Governance guidelines had to consider the development and importance of technology in the modern corporate landscape.”  Principle 12 sets out guidelines, emphasising the need for responsibility and policies to ensure information security and management. 

Another amendment worth noting is that although there is a new emphasis on the roles and responsibilities of stakeholders, it is submitted that other legislation, such as the Companies Act 71 of 2008 and Labour Laws, have already moved South Africa to a stakeholder-inclusive approach. 

As such, it is suggested that the new emphasis on outcomes will result in a shift in how companies approach Corporate Governance. The Code sets out the ultimate desired results, these being Ethical Culture, Good Performance, Effective Control and Legitimacy, and thereafter outlines principles that could assist in their achievement.

By way of example, the desired outcome of Effective Control is supported by, inter alia, the following Principles:

Principle 6: The governing body should serve as the focal point and custodian of corporate governance in the organisation.Principle

7: The governing body should comprise the appropriate balance of knowledge, skills, experience, diversity and independence for it to discharge its governance role and responsibilities objectively effectively.Principle

8: The governing body should ensure that its arrangements for delegation within its own structures promote independent judgement, and assist with balance of power and effective discharge of its duties.

Principle 10: The governing body should ensure that the appointment of, and delegation to, management contribute to role clarity and effective exercise of authority and responsibilities. 

These principles are then, in turn, supported by practices that would ensure compliance with the Code. King IV’s emphasis on consequences and principles seems to conform to the overall effort to make Directors more accountable. 

Whilst mostly voluntary, it does benefit companies to apply King IV as far as possible so as to ensure adherence to international standards and best practices.  Regardless, when it comes to matters of the King (IV), the philosophy of the code remains the same, that of leadership, sustainability and good corporate citizenship.

On 22 June 2017, commercial and corporate law firm Gillan & Veldhuizen (G&V Inc.) announced their affiliation with IR Global, an international professional service network.  This partnership makes G&V Inc. an exclusive IR Global member In South Africa, supplying commercial litigation services to all other members and outside users.  

CEO PJ Veldhuizen says that this is a great achievement and acknowledgement of their good reputation and service offering.  “It also gives us the opportunity to assist our existing clients with quality representation in many more jurisdictions, and improve our service by giving them access to additional advisory services outside our own immediate offering.”    

IR Global is a service firm network that provides legal, accounting and financial advice to companies and individuals across 155 jurisdictions.  Clients are able to build and grow their businesses through the many benefits IR Global affords its members and affiliates, with international exposure of their brand, access to niche skills across many practice areas and sectors, excellent service and support, and ongoing collaboration. 

Gillan & Veldhuizen underwent a vigorous vetting process which included analysis of the firm’s reputation and rankings, and measuring feedback from local IR members and connections to their jurisdictions.  The final step was a one-on-one meeting to discuss the protocols, ethos and expectations required.  

Veldhuizen remarks that he sees the value in being part of a network of like-minded individuals and businesses that together are all powerful, supporting and complementing each other’s expertise through collaboration, co-operation and sharing of skills. “Here’s to going global!”