B Lubbe & Associates Attorneys B Lubbe - Table View Based Litigation & Divorce Attorneys

“Landlords grow rich in their sleep.” (John Stuart Mill, economist)

If you are thinking of buying (or already own) a house or apartment in a residential complex with the idea of renting it out as an Airbnb (whether permanently or on an “I can make a fortune this Christmas” basis), tread carefully.

A recent High Court decision has signalled confirmation that your body corporate or homeowners’ association (HOA) can, within limits, regulate your right to do so.

Residents vs. Renters

The setting for this dispute is a large residential scheme in the Silver Lakes area of Pretoria, envisioned by its developers as “a family orientated lifestyle estate where families enjoy the various amenities which include the outdoors, beach and water activities in a safe and secure environment.”

However, many of the owners don’t reside in the complex permanently but rather let their units out on a short-term letting (“STL”) basis as holiday accommodation, usually for one to three days at a time.

That, says the Homeowners’ Association (HOA), has become a major problem for residents, because holidaymakers renting the units don’t always adhere to the rules and family ethos which it tries to maintain and preserve. The short-term tenants are, it says, there only to party and have a good time, which predictably has led to endless complaints from residents relating to noise, overcrowding, traffic congestion, raucous behaviour, security risks and so on.

As its original conduct rules proved inadequate in addressing these concerns, the HOA adopted new, stricter short-term letting rules. Among other restrictions, owners were now prohibited from letting out their units for periods shorter than three months without the HOA’s prior consent. Contraventions of this rule attracted a penalty of 90% of the monthly levy.

These rules were originally approved by the Community Schemes Ombud Service (CSOS) but were later challenged by a group of owners who wanted to keep the short-term-letting party going. The CSOS adjudicator set the rules aside as invalid and unreasonable, characterising the estate as “a leisure holiday resort lifestyle estate in which the presence of non-permanent residence is the norm”.

The HOA appealed this order to the High Court, which has issued an interim order suspending the part of the CSOS order setting aside the rules. Effectively, the Court has allowed the stricter rules to remain in force until the appeal is finalised.

What this means in practice for HOAs, bodies corporate, and unit owners

The Court’s order is only an interim one pending the final outcome of the appeal – but the fact that it didn’t set aside the rules at this stage does suggest at least a provisional confirmation of the right of HOAs and bodies corporate to regulate short-term letting in this way.

We’ll have to wait for the final outcome of the appeal for more clarity, and it is likely that every case will be decided on its own facts and merits. But our courts have previously upheld similar conduct rules and it seems logical that they will continue to do so in appropriate cases.

Here are some thoughts on how you should address this thorny issue in the meantime. To be on the safe side:

Short-term landlords: The fact that the Court allowed the HOA’s stricter STL rules to remain in place for now is a clear signal to tread carefully before letting out your unit on a short-term basis. At the very least, check your complex’s conduct and letting rules and remember that even if STL is not specifically restricted or prohibited, you remain responsible for any breach of the rules by your guests – so make sure your letting agreement obliges them to obey all conduct and other rules. Last but not least, check whether your local authority’s zoning or other regulations restrict your rights in this regard.
HOAs and bodies corporate: On the general principle that you have both the power and the duty to consider the rights of all owners, think of addressing the risks created by constant guest turnover by adopting or tightening rules to regulate or prohibit short-term stays. The term “short-term rental” is not formally defined anywhere, but existing case law relates mostly to conduct rules prohibiting letting for less than three or six months at a time. Make sure rules are properly adopted (via special resolution if required) and that they are defensible as valid and reasonable. I.e. they should balance the competing rights of landlords and permanent residents to use and enjoy their properties as they please. If you have to enforce the rules, do so fairly and reasonably.

This ruling isn’t the last word, but it’s a strong signal

The High Court’s ruling is interim, with the final outcome of the HOA’s appeal still to come. But it does signal a strong likelihood that our courts will continue to uphold restrictions on STL that are fair, reasonable, and correctly instituted and enforced. Regardless, transparency and communication will always help to avoid dispute and conflict.

Could this dispute have gone direct to the High Court?

A recent Supreme Court of Appeal (SCA) ruling has confirmed that, despite previous court rulings suggesting that community scheme disputes must always be referred firstly to the CSOS in the absence of “exceptional circumstances”, you do in fact have a choice – either the CSOS or the High Court can hear your matter direct.

Going direct to court would certainly save you from having to fight your way through two sets of proceedings (as the parties in this case have had to do, with no final resolution yet in sight) but be careful. Not only is the CSOS’s dispute resolution service likely to be a lot quicker, more affordable, and less formal than going to court, if a court feels that you weren’t justified in approaching it direct, it could well punish you with some form of punitive costs order. Choose wisely!

Bottom line: there are plenty of grey areas and difficult decisions here, so don’t hesitate to ask us for advice specific to your situation.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact us for specific and detailed advice.

“I have heard that in war, haste can be folly, but have never seen delay that was wise.” (Sun Tzu, The Art of War)

Collecting debt from a recalcitrant debtor can feel very much like going to war, particularly if you have to slog through the trenches of a series of increasingly costly court battles.

Which is where Sun Tzu’s warning against delay comes into play, because not starting collection in time could defeat your claim entirely. The reason of course is that debts – with only a few exceptions – prescribe (become unenforceable) after three years. Although that sounds like a long time, it can race by all too quickly!

Indeed, our law reports are full of cases where creditors have lost large amounts of money through procrastination, so it’s essential to start the process as soon as you think you may have a claim against someone.

It’s important to note however that the “prescription” defence has its limits, as a recent Supreme Court of Appeal (SCA) decision illustrates.

Another bent bookkeeper?

A Trust sued the sole member of a close corporation (CC) on the basis of allegations (hotly denied by her) that she, her CC, and her bookkeeper husband (since deceased, apparently by suicide) had defrauded a company in a sophisticated six-year scheme. Her husband, as the bookkeeper/accountant of both the Trust and the company, had allegedly made fraudulent payments totalling R21.8m to her CC through a series of fictitious transactions.

One forensic investigation and an insolvency inquiry later…

The Trust came into the picture when it took over the company in question. It identified suspicious transactions and commissioned auditors and forensic investigators to investigate. Critically, however, it was only during the inquiry held subsequently in her deceased husband’s insolvent estate that the member admitted receiving monies from the CC, and produced the bank statements which came to underpin the claims.

After some R12m was repaid, the Trust sued the member for the balance of R9.8m on two grounds:

Personal liability under the Close Corporations Act for being party to the reckless or fraudulent conduct of the CC’s business.
Liability for damages as a co-wrongdoer alongside her husband and the CC.

Before defending the claims directly, she raised the prescription defence, saying the claims were more than three years old and thus unenforceable. The High Court agreed with her, but the Trust appealed and the SCA held that the claims had not prescribed and that the trial could continue.

Let’s see why, and what lessons we can extract from that outcome.

Why didn’t the Close Corporations Act claim prescribe?

This statutory claim for recklessness or fraud, held the Court, isn’t a “debt” for the purposes of prescription, which only begins to run when a court actually declares a member personally liable. That hasn’t happened, so prescription hasn’t yet started running.

Why didn’t the damages claim prescribe?

Turning to the damages claim, the Court confirmed that “a debt is not considered due until the creditor knows the identity of the debtor and the relevant facts behind the debt. A creditor is assumed to have such knowledge if he could have exercised reasonable care to obtain it” – only then does the three years start running.

In this case, the Court held that although the forensic report had raised suspicion against the member, the Trust only acquired enough knowledge of the facts to actually sue her after the insolvency inquiry. The Trust then avoided prescription by issuing Summons within three years of that inquiry.

The Trust can now breathe a sigh of relief and return to the main trial in the High Court to prove its claims.

The bottom line: Delay can be fatal!

If you are unfortunate enough to fall victim to a sophisticated fraud, it may not be easy to identify the culprit and establish your claim immediately. But the sooner you call in the forensic investigators and ask us to advise on your best course of action, the less likely you are to have to fight your way through the courts (as this Trust has had to do just to retain its right to continue with its claim).

“South African drivers, beware! Scammers are issuing fake traffic fines to catch you off guard! Always use AARTO approved collecting agents for your payments.” (Road Traffic Infringement Agency)

The national rollout of AARTO has again been postponed, this time to July 2026. Speculation is that we now won’t see the demerit system implemented before the middle of 2027, but both dates remain provisional until gazetted.

None of this should stop us from sharing with our families, friends, colleagues and staff this warning: Scammers don’t care about the delayed rollout date, they’re too busy stealing from harried motorists.

How to avoid being scammed

Beware of these common scams:

Phishing emails, SMSs and WhatsApp messages. They can look exactly like official communications from genuine organisations – your local traffic department perhaps, or the National Traffic Information System (Natis).
Links to fake payment portals and official websites, cloned to look like the real thing.
Phone calls from helpful “officials”, warning you of “overdue” fines and kindly offering to guide you through a quick and easy payment process to avoid all the horrendous consequences of failing to pay.

These “ghost fine” frauds all take advantage of the confusion swirling around everything AARTO, and use a blend of threats (“If you don’t pay you face arrest and suspension of your driver’s licence”), incentives (“Pay within 5 days to get a 50% discount) and deception to con you into rushing payment.

Use only official, legitimate payment channels. If you aren’t sure, check with your local municipality (or ask us to check for you).

“In the summertime, when the weather is high, you can stretch right up and touch the sky.” (Mungo Jerry)

Summer’s here with its blue skies, happy holidaymakers from around the country and the world, and, as always, an upsurge in demand for houses. If you’re going to capitalise on this seasonal upswing, start planning your sales strategy now with our simple, practical Seller’s Checklist below.

Follow these 10 steps for a successful sale:

1. Ask yourself “What’s my goal and how will I get there?”

The first step is to outline your strategy, starting with your end goal. Of course, all sellers want to get the best price and to get paid out as quickly as possible, but brainstorm the specifics. What price do you actually want to achieve? Define your perfect buyers (a critical and much-overlooked step) and think about how you’ll find them. Which estate agent should you employ? And so on…

It pays to bring us in from the start. Not only can we help you find the right agent for the job, but we’ll also tell you what prices are being achieved in your area and share our thoughts on how to avoid the over-pricing trap – a common mistake which can taint a property for months, or even years.

We’ll also outline the whole sales and transfer process for you from a legal perspective, highlighting both the potential pitfalls to watch out for, and the many ways in which you can help make the whole process as smooth, quick and hassle-free as possible.

2. Give notice to your bondholder

If you have a home loan, remember that some banks will charge an early settlement penalty unless you give them 90 days’ written notice.

3. Prepare a cashflow projection

Get your finances ready to cover all your selling costs, including:

Compliance certificates and any repair work needed to get them issued.
Bond cancellation fees (if you have a home loan).
Final municipal accounts (rates, refuse, sewerage, and water) and, if your property is in a sectional title scheme or Homeowners Association complex, outstanding levies.
CGT: Plan for possible Capital Gains Tax on your profit (subject of course to exemption thresholds).
Estate agent’s commission is normally paid out by the conveyancer on transfer – but don’t lose sight of it when you’re dreaming about how to spend the proceeds!

4. Spruce up your property

Pretend you’re a house hunter seeing your property for the first time:

What’s its “kerb appeal”? How about its “front door appeal”? First impressions can make or break a sale, so ask yourself “what will potential buyers see when they first drive up to my property, park, and walk through the garden into my house?” Imagine being greeted by a neat, tidy, colourful garden with a sparkling pool, bright and airy rooms with homely wafts of fresh air and brewing coffee – get this bit right and you could seal the deal in the first few minutes of a viewing.
Declutter and tidy up, both inside and out, particularly on viewing and show days – the hassle is well worth it.
To give your property that all-important feeling of being well maintained, find and fix small issues like leaky taps, peeling paint, dark musty corners, scruffy gardens, murky swimming pools and the like. Deep clean if there’s any risk of doggy smells or stained carpeting spoiling that positive first impression.
And last but not least, we come to a deal breaker of note. Many a sale has been lost purely because of old, unwelcoming bathrooms or kitchens. Spruce them up now: repaint, retile or renovate completely, if necessary.

5. Start getting your paperwork together

To speed up the transfer process when you do sell, and in case potential buyers ask to see them before offering, make a start now on putting these basics together:

Your original title deed (or a copy from your bank if the original is held as security for a bond). If the original has been lost, we’ll be able to get an early start on obtaining a replacement for you.
Your ID (and your spouse’s, if you own the property jointly or are married in community of property).
Approved building plans and any compliance certificates you already have.
A recent municipal rates account showing you’re up to date.

6. Make sure your property is compliant

Find out what compliance certificates you will need early so you have time to fix any issues:

Electrical compliance certificate.
Plumbing/water installation compliance certificate (required in Cape Town – check whether your local authority has any similar provision).
Gas compliance certificate if you have a gas installation.
Electric fence certificate (if applicable).
Beetle clearance certificate where needed.

7. Complete the disclosure form

You’ll need to sign a mandatory disclosure form in which you must list all defects or issues you know about, such as damp, leaks, structural issues, boundary disputes, unapproved alterations and the like.

8. Don’t sign blind

Most importantly, when you do get an acceptable offer, don’t sign anything until we’ve checked it all out for you. The terms and conditions in the sale agreement (often titled “offer to purchase”) become binding as soon as you sign. There’s no going back and many a seller has regretted “signing blind”. Even “standard” clauses may come back to bite you because every sale’s different, and every seller has their own areas of risk.

9. Nominate the conveyancer

It’s your right as seller to choose the conveyancer, so don’t let anyone convince you otherwise.

10. Communication is key!

Remain in constant touch with your agent, with us, and with the buyer. Quick responses to requests for documents or signatures can save days or even weeks in the transfer timeline.

In closing…

Selling a property doesn’t have to be stressful. Work through this checklist step by step and keep us constantly in the loop to avoid delays, disputes, and unwelcome surprises.

“Raising kids is part joy and part guerilla warfare.” (Ed Asner, actor with a great sense of humour!)

A game-changing judgment from our Constitutional Court sets out new rules for parental leave.

The joy of becoming parents, and a father’s leave dilemma

The birth of a couple’s first child presented them with both a bundle of joy and a practical dilemma. Dad wanted to be the baby’s primary caregiver while his wife carried on running her two businesses, so he asked his employer for four months’ parental leave. “Sorry,” said his boss, “the law only allows you ten days”. In the end he had to take six months’ unpaid leave – which came with some unhappy financial and career consequences.

Off to the High Court he went. That Court’s declaration of invalidity of the relevant provisions in the Basic Conditions of Employment Act (BCEA) and Unemployment Insurance Fund (UIF) Act has now been confirmed by the Constitutional Court – with some important modifications.

Let’s start with a quick look at how the current wording of the two Acts creates an inherent inequality between parents.

Out with the old: Different rules for mums and dads

In the far off “bad old days”, many expectant mothers had no job security or entitlement to maternity leave. That gradually changed for the better over many years, but even after a general entitlement to maternity leave was introduced it was, as the name suggests, available to women only. Then in 2020 came the brand-new and widely welcomed concept of “parental leave”, which brought fathers (and other non-birth parents) into the fold.

It was ground-breaking at the time but still not perfect, in that while biological birth mothers were entitled to “maternity leave” of at least four consecutive months, fathers (and other non-birth parents) got “parental leave” of only ten consecutive days. Adoptive leave and commissioning (surrogacy) leave was ten weeks for one parent but only ten days for the other. The UIF Act inevitably mirrored these inequalities.

In with the new: Parity for parents

The High Court found these discrepancies to be unconstitutional, and the Constitutional Court has now agreed. It’s given Parliament thirty six months to sort out the invalid provisions (new legislation is reportedly already in the pipeline), and in the interim the following changes apply:

One parent employed: Where only one parent is employed, or in the case of a single parent, that parent gets the full four consecutive months’ leave. If the parent is an expectant mother, she can start her leave up to 4 weeks pre-birth (or earlier if medically certified). Otherwise, it starts on the day of birth.
Both parents employed: Where both parents are employed, they get a total of four months and ten days of parental leave: the sum of what used to be the mother’s four months and what used to be the father’s ten days. This total can be shared between them as they agree, taking it consecutively (one after the other) or concurrently (together), or a mix of consecutive and concurrent. But however they split it, each must take their portion of leave in one single sequence of days. If they can’t agree on the leave split, it must be as close as possible to 50/50. Shared leave must be completed within the four-month period.
Compulsory periods: There are no changes to the compulsory no-work period for the birth mother – a six-week recovery period after birth during which she may not work unless medically cleared. In the event of either a miscarriage during the third trimester, or a stillbirth, the birth mother must get the same six-week recovery period.
Adoptive leave and commissioning (surrogacy) leave: The same equal splits now apply to all parents – natural, adoptive and commissioning. A provision limiting adoptive leave to children under two years old was declared invalid and unconstitutional, but remains in place for now, with the Court leaving Parliament to decide on an appropriate age limit.
Other “parties to a parental relationship”: Leave in the shared pool applies only to “parties to a parental relationship”, defined as people who have assumed parental rights and responsibilities under the Children’s Act.
Notice to employer: Employed parents must still give their employers at least four weeks’ notice (some sections refer to “one month” just to confuse the issue!) of their intention to take leave. If that’s not practical, notice must be given “as soon as reasonably practicable”.

Are you entitled to paid leave, and what about UIF?

Although you now have extended job security protection, you are still not entitled to paid parental leave unless your employment contract provides for it (common in larger corporates), or if a company policy or a collective agreement provides for it.

Better news is that the UIF allows you to claim for maternity and parental leave benefits, but currently still with restrictions mirroring the BCEA’s. The Court declared the relevant sections of the UIF Act invalid but again left it to Parliament to sort out, so it seems that nothing changes there for now.

An important note for employers

Review all your employment contracts, company policies and procedures to ensure compliance with these new rules. Communicate them to your employees to ensure there are no misunderstandings and no unrealistic expectations – not all the media reports and online articles on this new development are accurate!

“A family name holds the music of generations – it’s the first inheritance we receive.” (Attributed to Irish poet-philosopher John O’Donohue)

The Constitutional Court has just confirmed (with some significant adjustments) last year’s High Court ruling that both partners in a marriage have equal rights to choose their surname.

Previously, a woman – and only a woman – could choose when marrying to take her spouse’s surname, or to retain her own surname, or to assume a double-barrelled surname (her own surname with her husband’s surname).

However, if a man wanted to do the same (to adopt his wife’s surname or a double-barrelled surname) he had to apply formally to the Department of Home Affairs (DHA) and provide “good and sufficient reason” for wanting to change. The problem with that is that the reason had to be related to “a change in the marital status of a woman” – an impossible ask for men.

A tale of two couples

The Constitutional Court, and the High Court before it, grappled with this issue via applications from two couples whose attempts to depart from the “only women can choose” rule had been thwarted by the existing wording of the Births and Deaths Registration Act.

The couples’ reasons for wanting to depart from the norm will ring a bell with many. One couple wanted their new family to bear the wife’s maiden name as it symbolized her connection to her parents, who had died when she was young. The other wanted both spouses to use a combined (double-barrelled) name so that the wife’s maiden name, which is important to her, was not lost.

Our apex court has now confirmed that this unequal treatment was unconstitutional because it discriminated on the basis of gender, infringing on their rights to equality and dignity.

So, what are your choices now?

In a nutshell, the Court’s order employs gender-neutral language to ensure that everyone, regardless of gender or type of marriage, now has the same automatic rights when it comes to assuming a new surname.

Although the declaration of invalidity is suspended for 24 months to enable Parliament to either amend existing legislation or to pass new legislation, the Court’s ruling includes the provision that in the interim everyone can, as of right and without needing DHA authority:

After marriage, take their spouse’s surname or, having taken it, resume a previous surname.
After marriage, divorce or the death of a spouse, resume a previous surname or create a double-barrelled surname.

Any other surname changes (including changes to your children’s surnames) still require application to DHA.

To avoid any confusion, it’s a good idea to tell the marriage officer before you marry what names you’ve chosen so the correct choices appear in the marriage register and on your marriage certificate.

Give us a call if we can help with anything.

“Forewarned is forearmed.” (Wise old proverb)

Government keeps assuring us that the long-delayed AARTO (Administrative Adjudication of Road Traffic Offences) system will finally begin its full national rollout on 1 December 2025.

Is this another false start or the real thing this time?

There have been so many false starts to AARTO over the last fifteen years that many of us will no doubt take the attitude “I’ll believe it when I see it” … Particularly with all the speculation that the implementation could be delayed, varied or even blocked again by legal and other challenges.

But let’s not be caught unawares here – this time, the first phase really could be shooting out of the starting blocks on time, so it seems a good idea to start prepping for the changes. Particularly now that the annual holiday season, with its surge in year-end travel, speed trapping and roadblocks, is almost upon us.

In a nutshell, the way traffic fines work is about to change for millions of drivers, including private motorists, fleet operators, delivery drivers, taxi operators, owners etc.

Here’s what you need to know on a practical level.

Firstly, driver demerits are still nine months away

Sensational, click bait headlines and fake news reports notwithstanding, the “driver demerit points” system, with its licence suspensions and cancellations for repeat offenders, is only scheduled to kick in on 1 September 2026.

So what will actually change on 1 December?

If your vehicle is registered in, or if you drive in, any of the 69 major municipalities and metros countrywide scheduled for commencement on 1 December 2025, you’ll be subject to these new rules from day one, with the other 144 areas set to commence on 1 April 2026:

Fines will become administrative, not criminal: Traffic infringements such as speeding, traffic light, licence, parking offences and so on will no longer be handled in criminal courts. Instead, the RTIA (Road Traffic Infringement Agency) will run everything as an administrative process.
Electronic notices: Infringement notices, courtesy letters and enforcement orders can now be sent by email or SMS (even by fax if you still list a fax number) as well as by post or personal service. Not receiving notices won’t be a defence – legal service will be deemed to have been made whether you receive/open them or not. The onus is on you to make sure you get them by updating all your contact details with your licensing authority now – and by configuring your spam and junk filters to let them through.
Discounts and deadlines: A 50% discount will be your reward for paying within 32 days of receiving an Infringement Notice. Miss that window and you lose the discount. You may then get a Courtesy Letter allowing you another 32 days to pay the full fine plus a fee. If you still don’t pay, an Enforcement Order is issued.
Enforcement orders will block licence and permit renewals: Unpaid fines that reach the “enforcement order” stage are recorded on the National Contraventions Register. If your name appears on the register, you are automatically blocked from registering a vehicle and from renewing your vehicle licence disc or driver’s licence/professional driving permit.
If you aren’t the driver: You must nominate the actual driver within 32 days to prevent the fine being attached to you. Keep a copy of all drivers’ driving licences so you have a record of the infringer’s full names and I.D. number.
Businesses in particular should be able to identify the drivers of their vehicles at all times so that fines can be allocated correctly. Also, review all your staff training processes, vehicle policies and disciplinary procedures accordingly.
Scammers are reportedly already issuing fake notices so be sure to pay on authorised payment portals only.
Know your rights but act quickly: You can still make representations or appeal against fines you disagree with, but strict deadlines apply.

Johannesburg and Tshwane motorists

Note that although Johannesburg and Tshwane motorists have already lived with AARTO’s pilot fine system for years, from 1 December 2025 they will move onto the amended national AARTO framework and can expect stricter electronic service, updated fine tariffs, stronger enforcement order blocks on licence renewals, and new proxy nomination duties.

Bottom line: if you need our help with anything, please get in touch immediately!

“Don’t wait to buy real estate. Buy real estate and wait.” (Will Rogers)

Spring is in the air and, as the annual uptick in property sales kicks in, let’s address two questions commonly asked by both sellers and buyers who are unsure about exactly what happens after they sign their sale agreement:

How does the transfer process work?
How long does it take before the seller gets paid and the buyer becomes the new registered owner?

Let’s begin with this simplified “in a nutshell” flowchart of the transfer process:

How long does it all take?

How long is a piece of string? If everything goes swimmingly and the bureaucratic stars truly align in your favour, the total timeframe from signing the sale agreement to popping the champagne could be as little as eight weeks. On average, however, it’s safer to work on no less than ten to 12 weeks, and possibly a lot more.

What could delay things? This is a complicated process involving a disparate array of role-players and a host of opportunities for unforeseen delay. Some of the more common sources of delay (and frustration!) centre on bond approval, bank processes, SARS and municipal delays, clearance certificates and repairs, lost title deeds, intervening public holidays, and Deeds Office backlogs. But the list really is endless.

Bottom line: you need professionals in your corner to protect your interests and to move the process along as quickly as possible. We’re here to help!

“If you’re flogging a dead horse, make sure you’re not riding it.” (Josh Stern)

Creditors and company directors alike need to know how best to deal with a company in financial distress. Both should learn to recognise the difference between an enterprise that has failed beyond resuscitation, and one that, given a chance, can be returned to solvency and success.

With that in mind, the law provides you with two main options:

Liquidation: Liquidation is the winding up of a company that cannot pay its debts. A liquidator is appointed to sell all the assets and to distribute the proceeds to creditors in their order of legal preference. When the business is hopelessly insolvent and has no reasonable chance of recovery, it ensures an orderly closure and fair distribution to creditors. There’s seldom a good outcome for creditors, especially “concurrent creditors” (holding no security or preference) who can generally consider themselves lucky to recover anything more than a few cents in the rand on their claims. Moreover, at the end of the winding-up, the company ceases to exist and is lost to all role-players — employees, creditors, suppliers, the taxman and indeed the economy as a whole.
Business rescue: This process is designed to rehabilitate distressed companies by protecting them from attack by creditors while a business rescue practitioner (BRP) develops and implements a plan to restructure debts and operations. The idea is to allow the company to continue trading, save as many jobs as possible, and provide a better return to creditors than liquidation would. Critically, however, there must be a realistic prospect of turning the business around and saving the company. If there isn’t, as we shall see below, applying for business rescue can land the applicants in some very hot water.

The dodging debtor and the creditor’s lament

There’s nothing worse for a creditor: after chasing a recalcitrant debtor from pillar to post and finally cornering them, you’re stymied at the last hurdle by the director’s last-ditch application for business rescue.

“Tough”, the director tells you. “That’s the end of your hunt for payment.” When your blood pressure has dropped a bit, you take legal advice — can this really be correct?

In most cases, yes, you are stuck with waiting while a BRP is appointed and a rescue plan formulated and put to you and other role players for consideration. If the application is genuine, you might even recover something worthwhile. At best you could also retain a long-term customer.

But if this is just another debt-dodging or delaying exercise, our courts will come to your rescue. A recent High Court decision not only set aside business rescue proceedings launched in bad faith but also penalised those responsible by hitting them in their own pockets — hard.

A bad faith application backfires, badly

A property-owning company, in a settlement agreement made an order of court, agreed to a creditor selling its property and keeping the proceeds in full and final settlement of its claim. An auction sale was arranged by the creditor, but on the eve of the sale the director of the property company commenced business rescue proceedings and a BRP was appointed.

The BRP sold the property for R3.4m (to the same buyer who’d offered R3.25m at the auction) and prepared a business rescue plan which was duly adopted. The real fly in the ointment was presumably the fact that the plan included remuneration of over R2.2m for the BRP — a sum grossly disproportionate, said the creditor, to the limited scope of her duties.

Having none of that, the creditor applied to the High Court to set aside the business rescue proceedings. The Court was quick to agree to this request, commenting that the company had no operations, income, or employees. There was no viable business to rescue.

More specifically (emphasis supplied): “The business rescue proceedings were accordingly initiated in bad faith, amounting to an abuse of process … the BRP was remunerated extensively without a proper accounting … no reasonable prospect of rescue existed, procedural requirements were ignored, and it is just and equitable to set the resolution aside.”

Punitive costs and a R2.2m fee down the tubes

No wonder, then, that the Court expressed its displeasure at the actions of both the director and the BRP by ordering them to personally pay all costs (jointly with the company itself, for what that’s worth) on the punitive attorney and client scale (much higher and more severe than the normal costs scale). The BRP, in particular, must be mourning the additional loss of her R2.2m fee.

The bottom line

As a creditor, don’t take it lying down if a company tries to dodge or delay paying you through a misuse of the business rescue procedure.

As a director or BRP, be careful never to be seen to abuse the process. It’s not a “get out of jail free” card to delay liquidation or to relieve creditor pressure. As the Supreme Court of Appeal has put it: “Business rescue proceedings are aimed at restoring a company to solvency, and are not to be abused by a company with no prospects of being rescued but mainly to avoid a winding-up or to obtain some respite from creditors.”

The rules and process relating to business rescue and liquidation can be complex, but we’re here to help you navigate them if needed.

“This [the Stalingrad Strategy] is a strategy of wearing down the plaintiff by tenaciously fighting anything the plaintiff presents by whatever means possible and appealing every ruling favourable to the plaintiff. Here, the defendant does not present a meritorious case. This tactic or strategy is named for the Russian city besieged by the Germans in World War II.” (Judges Matter website)

Divorce disputes are of course intensely personal and emotionally charged affairs — and when feelings run high the resultant fallout can mean protracted, bitter, and costly litigation.

If you are being subjected to a barrage of such litigation, take heart. In balancing our constitutional right to access the courts against the need to prevent people from abusing court processes with endless and meritless litigation, our law provides for “vexatious litigants” to be stopped dead in their tracks.

A recent pair of High Court decisions (featuring the same parties and the same divorce dispute, but in two different battles) provides a textbook example.

A saga of litigation, complaints, threats, and blackmail

This 11-year saga dates from the start of divorce proceedings in 2014, with the financial aspects of the divorce being finalised only in 2020. The ex-wife was awarded a total of R16.8m in accrual, maintenance, and costs. The ex-husband’s property-owning trust was held to be his alter ego, and that opened the door for the house held by the trust (a valuable property in an upmarket Cape Town golf estate) to be sold as his asset.

He responded with a concerted campaign of unrelenting litigation, complaints, and threats — all aimed, the Courts have now determined, at overturning the divorce order.

The list of his serial litigation and intimidation tactics is both long and extraordinary, but suffice it to say that a flood of applications of all sorts to a wide variety of courts (all the way up to the Constitutional Court) is just the tip of the iceberg. He has also lodged professional complaints against all the attorneys and advocates involved in this matter (including his own legal team) and against the Divorce Court Judge. Not even his own financial expert escaped a formal complaint. Allegations of perjury, fraud and collusion abound. He has threatened massive lawsuits (for R210m and R190m to date) against various legal representatives. He was even found to have resorted to blackmail.

Neither his singular failure to reap anything but defeat from any of these endeavours (barring a few minor skirmish successes, and noting that some of the more recent matters remain pending), nor the slew of costs orders made against him (at least one of them on the punitive attorney and client scale), seem to have deterred him in the slightest.

His latest rearguard action, a failed attempt to postpone the auction sale of his house, has earned him yet another defeat and another costs order, with the cherry on top being his being declared a “vexatious litigant”. He can now no longer launch legal proceedings without specific High Court authority to do so.

All’s fair in love and lawfare? Not so fast

As the Court put it: “A fundamental doctrine in our law is, there must be an end to litigation … nobody should be permitted to harass another with second litigation on the same subject as such litigation can be viewed as an abuse of process.” Our courts accordingly have the power to declare such a person a “vexatious litigant”, thus restricting them from launching any new legal proceedings without specific court authority.

To have your opponent declared vexatious, you will need to prove that the person “has persistently and without any reasonable ground instituted legal proceedings in any court or in any inferior court, whether against the same person or against different persons.” There are two legs to that, and note that you can’t stop anyone from pursuing normal appeal and review processes — there must be some abuse of judicial process.

You may also be able to get an order that your opponent provide security for your costs. Although, in this particular matter, the ex-wife was unable to convince the Court to grant her such an order.