NEWSLETTER MAY 2019 – EXCITING NEW DEVELOPMENTS AT MARKRAM INC

NEWSLETTER
May 2019
Issue 01
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EXCITING NEW DEVELOPMENTS AT MARKRAM INC

We are excited to announce that as of March 2019, Johan Loots joined our team at Markram Inc. as director. Johan, a Pretoria born attorney, specializes in Commercial, Civil and General Litigation, especially in Insolvency Law and Rehabilitations. Johan was appointed in 2000 as moderator and specialist examiner of the Attorney’s Admissions Exam for the Legal Practice Council.

We herewith extend our heartfelt congratulations to our two Professional Assistants, Anjo Rheeders and Sumari Benade, on their admissions as both Conveyancer and Notary Public of the High Court of South Africa respectively during March 2019. We are proud to share this remarkable achievement with them.

Sumari Benade   Anjo Rheeders

FEATURE ARTICLES THIS MONTH
THE LEGAL APPROACH TOWARD TIME BARRING CLAUSES IN INSURANCE CONTRACTS

BY CLAIRE ROUX       Claire Wolmarans

The Constitutional Court, in the case of Barkhuizen v Napier 2007 (5) SA 323 (CC), dealt with the issue of “time-barring clauses” in contracts entered into between private persons.

The salient facts of the case are as follows:

The applicant claimed the insured sum from the respondent upon being in an accident with his insured vehicle. The respondent subsequently rejected the claim.

Two years later, the applicant instituted legal proceedings against the respondent claiming payment of the insured sum together with interest thereon. The respondent responded claiming that they were released from liability due to the applicant’s failure to adhere to the time-limitation clause which formed part of the contract. The relevant clause read as follows: “if we reject liability for any claim made under this policy we will be released from liability unless summons is served… within 90 days of repudiation”. In essence the applicant was time barred from instituting proceedings to pursue his claim.

The applicant argued that the time-limitation clause was unconstitutional as it was contrary to public policy and thus invalid. The basis of the Applicant’s contentions in this regard was that the clause sought to prescribe an unreasonably short period of time within which to institute legal proceedings and as a result it infringed on the right to seek redress from the Court and the right to access the Court.

The Court considered whether public policy tolerates time-limitation clauses. The Court held that it did, subject to the considerations of reasonableness and fairness. Furthermore, the Court reiterated that the Constitution recognises that the right to seek legal redress may be limited in certain instances. The Court also formulated a test for fairness viz, firstly, whether the clause itself is unreasonable and secondly, if the clause is reasonable whether it should be enforced in the circumstances. The Court found that clauses of this type are reasonable and thus operational within our law.

The Court ultimately found that the clause should be enforced in this matter because the applicant failed to show why he had did not act in accordance with the provisions of the time-bar clause. The Court explained that had the applicant been unaware of the time limitation clause or the consequences thereof, or failed to act in accordance with same due to factors outside of his control then the clause would operate unfairly and the Court would not enforce same. However, the applicant seemed to be fully aware of the clause and the effect of same.

This decision opened the door for the Courts to refuse enforcement of certain unfair clauses in contracts between private persons and laid the foundation of the grounds on which to do so.

The Policyholder Protection Rules
On 01 January 2018, the amended policyholder protection rules came into force. Various Rules have been in place regarding time barring since 2011, which the new Rules amplify. The rules build on the position laid down by the Court in Barkhuizen v Napier.

The Rules, firstly, provide that insurers must accept, reject or dispute a claim or the quantum thereof within a reasonable period of time. Thereafter, insurers must give written notice of their decision to the claimant within 10 days of making same.

In the event that an insurance claim is rejected or disputed by the insurer, the Rules provide for a rather stringent set of disclosure obligations which the insurer must fulfil. This ensures that claimants are equipped with the necessary information to properly pursue claims which they feel have been wrongly rejected.

It is also clear that mere notification of the clauses and processes is insufficient. Insurers must also ensure that claimants are made aware of the relevant details and implications thereof in order for them to be well equipped to deal with such clauses and/or to pursue such processes successfully.

The Rules confirm the Court’s power to condone non-compliance with time-limitations should they operate unfairly, as well as in circumstances where the policyholder can show their failure to institute legal proceedings timeously was due to a good cause. It is submitted that the test for fair operation of such a clause remains as decided by the Court in Barkhuizen. It must also be noted that the above requirements must be fulfilled in conjunction with one another.

Insurers are also precluded from imposing unreasonably short time-limitations, as the Rules state that any time-limitation imposed in a policy entered into after 2011, may not be shorter than six months.

The Rules now require insurers to ensure that the policyholder is well aware of the existence of the time-limitation clause, as well as the implications thereof. This protects policyholders from being prejudiced by clauses which they previously would not have been made aware of, or fully understood. It also provides the policyholder with ample opportunity to dispute repudiated claims and follow the correct processes in order to have their claims reconsidered.

Should an insurer fail to act in accordance with the Rules, a policyholder may lay a formal complaint against the insurer. As a result, the Rules have created a more onerous position for the insurer and this should ensure that they act in accordance therewith.

The Rules provide some welcome redress to the unequal power that insurance companies hold over policyholders. Furthermore, the new amendments to the Rules obligate insurers to inform policyholders of the protection in place which makes it more accessible to the policyholder and easier to follow.

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DEFECTIVE WORKS AND SUCCEEDING CONTRACTOR’S LIABILITY

BY ANJO RHEEDERS     Anjo Rheeders

When a contractor is replaced by a new contractor it is of the utmost importance that the succeeding (new) contractor must understand the provisions of his/her appointment agreement, as well as the liabilities imposed in terms of the agreement. Depending on the intention of the parties to the contract, the contractor’s liability regarding defective works could be exempted.

In the recent unreported case of Trencon Construction (Pty) Ltd v South African Airways (Pty) Ltd 2015 JDR 0090 (GJ) the court had to determine whether the replacement contractor was liable for the defective works caused by the former contractor on the project.

In this case, Trencon Construction (“Trencon”) was appointed as the contractor for the construction of a departure lounge at OR Tambo International Airport, subsequent to the liquidation of the initial contractor. The parties concluded a written agreement and the general conditions applicable were the Joint Building Contract Committee: Principal Building Agreement (“JBCC”). When Trencon issued an invoice to South African Airways (“SAA”) for work done in terms of the appointment, the principal agent contended that there was defective works which had to be remedied before a certificate of final completion could be issued. It should be noted that when the Applicant was appointed as contractor the design, manufacture and installation of the shop fronts, which were alleged to be defective by the principal agent and SAA, was done by the previous contractor.

SAA and the project manager relied on clause 8.2 of the JBCC which provides that: “The contractor shall make good any physical loss and repair damage to the works, including clearing away and removing from site, all debris resulting therefrom, which occurs after the date on which the possession of the site is given and up to date of issue of the deemed certificate of final completion…” [own emphasis]

The court held that clause 8.2 implies that the contractor shall make good the physical loss and repair and damage to works which occurs after the date on which possession of the site is given. It is common cause that the loss or damage occurred after the date on which possession was given to Trencon, and accordingly they were therefore not obliged to make good the loss or repair the damage.

Furthermore, the principal agent never issued a defects list, despite Trencon’s notification that same was outstanding. Accordingly in terms of clause 26.4 of the JBCC, the certificate of final completion is deemed to be issued, and as a result final completion is deemed to have been achieved.

The court also referred to clause 8.5 of the JBCC which provides that: “The contractor shall not be liable for the cost of making good any physical loss or repairing any damage of works where this resulted from the following circumstances: …8.5.9. design of the works where the contractor is not responsible in terms of clause 4.0…”

It was common cause that Trencon was not responsible for the design of the works which the principal agent and SAA contends to be defective. This is therefore another reason why Trencon cannot be held liable for the loss or damages.

To conclude, due to the provisions of the JBCC and due to the fact that the loss or damage did not occur after the date of possession of the site, Trencon was not responsible for the loss or damaged works that occurred. Should an employer therefore require the succeeding contractor to take responsibility for remedying defects or damages caused by the preceding contractor, the employer must expressly state its intention and ensure that it is included in the agreement.

It should be noted that the JBCC applicable in the Trencon case was the JBCC published in 2007, and in the latest edition of the JBCC published in 2014, clause 8.2 is amended. In terms of the 2014 JBCC version, clause 8.2 states that: “The contractor shall make good physical loss and repair damage to the works caused by or arising from:
8.2.1. any cause before the date of practical completion;
8.2.2. any act or omission of the contractor, in the course of any work carried out in pursuance of the contractor’s obligations after the date of practical completion.”

It is clear that the words “which occurs after the date on which the possession of the site is given” has been omitted and accordingly this could have an influence on the liability of the contractor. Clause 8.5 of the 2014 JBCC, however, still excludes the contractor’s liability for the loss or repair of damages caused by the design works for which the contractor is not responsible, and this could ultimately still be a defence for the contractor, should the preceding contractor’s works include design.

In light of the aforementioned it is therefore evident that depending on the type of JBCC edition applicable, the contractor will have a valid defence in these circumstances. However, every situation will have to be determined on its own merits and facts.

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WHO IS REGARDED A NON-RESIDENT FOR PURPOSE OF SECTION 35A OF THE INCOME TAX ACT 58 OF 1962?
BY ALLEN WEST    

Under South African Law there are different types of residents, for example a resident defined by the Income Tax Act, 1962 in terms of the so-called physical presence test and an ordinary resident defined in terms of South African common law.

Any individual, who is ordinary resident (common law concept) in South Africa during the year of assessment or, failing which, meets all three requirements of the physical presence test, will be regarded as a resident for tax purposes.

An individual will be considered to be ordinary resident in South Africa, if South Africa is the country to which that individual will naturally and as matter of course return after his or her wanderings. It could be described as that individual’s usual or principal residence, or his or her real home. If an individual is not ordinarily resident in South Africa, he or she may still meet the requirements of the physical presence test and will be deemed to be a resident for tax purposes.

To meet the requirements of the physical presence test that individual must be physically present in South Africa for periods exceeding-
• 91 days in total during the year of assessment under consideration;
• 91 days in total during each of the five years of assessment preceding the year of assessment under consideration; and
• 915 days in total during those five preceding years of assessment.

An individual who fails to meet any one of these three requirements will not satisfy the physical presence test.

If the individual is neither ordinary resident, nor meets the requirements of the physical presence test, that individual will be regarded as a non-resident for tax purposes. This means that individual will be subject to tax only on income that has its source in South Africa. A non-resident will, however, be subject to the withholding of tax on the sale of immovable property, as provided for in Section 35A of the Income Tax Act 1962.

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LATEST DEVELOPMENTS IN CASE LAW

National Home Builders Registration Council v Michiel Wessel Adendorff & others (406/2018) [2019] ZASCA 20

In this matter, the Supreme Court of Appeal had to determine whether a trust is a “home builder” in terms of sections 1 and 10(1) of the Housing Consumer Protection Measures Act 95 of 1998 (“the Act”).
The salient facts of the matter are as follow: During 2013 an NHBRC inspector, whilst

conducting a routine inspection, discovered that the trustees of the Mike’s Trust were constructing a sectional title housing development on the property for the benefit of the Trust. It is common cause that initially the Trust registered as a ‘home builder’ in terms of section 10 of the Act, for a period of one year, but failed to renew its registration. The Trust continued with the construction of new homes on the property, whilst not registered as a home builder. It was served with notices of non-compliance by the NHBRC, but refused to comply. Consequently, the NHBRC launched the application against the trustees.

The Trust submitted that it is not regarded as a person and therefore it is not required to register as a home builder in terms of the Act. The Court considered the relevant provisions of the Act and confirmed that “the Act is consumer-protection legislation, having as its object the protection of consumers against home builders who construct homes with structural defects, to provide consumers with information about competent builders, and to give effect to the rights of consumers.” The Act therefore requires registration of home builders and the enrolment of houses being built to ensure that the aims and objects of the Act are optimally achieved.

It was evidently confirmed by the Court that there can be no cogent reason for the legislature to exclude a trust that owns property, and is building a home, from the provisions of the Act, where the manifest purpose of the Act is the protection of the housing consumer, and maintaining the minimum standards required of home builders. Trusts are therefore deemed to be home builders as envisaged in the Housing Consumers Protection Measures Act 95 of 1998 and should register as such.

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PUZZLES AND PUNS

What’s wrong with lawyer jokes?
Lawyers don’t think they’re funny and
other people don’t think they’re jokes.