Article courtesy of Law Dot News | Litigation – Litigation Lawyers

Tell All Your Creditors When You Change Address!

“In my view, given the difficulties of a sheriff or his deputy accessing a security complex in the absence of the occupant for the purposes of service in terms of rule 4, service of process by way of it being handed to the security guard at the complex, a responsible employee older than 16 years, is valid and effective service on the debtor.” (Extract from judgment below)

Moving house (or office) will mean a busy time and a long “to do” list.

Here’s an action item to add to the “Priority” section of your list: Give notice, in the required format, to everyone you have contracted with. Otherwise you could well, like the debtor in this case, wake up one morning to find your bank account frozen. Or the Sheriff of the High Court knocking on your door with a Warrant of Execution against your property.

Why is your “domicilium citandi et executandi” so important?

A “domicilium citandi et executandi” (“domicilium” for short), is a bit of Latin wording you will see in many agreements, and in simple terms it’s the address you nominate in a contract where legal notices may be sent to and legal process (such as a summons) served on you.

As we shall see below, it’s vital to take it seriously, both when you initially choose an address in the contract, and if/when you later move.

Debtor’s bank account frozen after summons served on a complex security guard

• An occupant in a security complex with “many” residents bought a motor vehicle on instalment sale agreement, specifying his residential address as his domicilium.
• Eventually after he surrendered the motor vehicle it was sold on auction and he was notified to pay the balance of R108k plus interest.
• When he moved to another security complex, he phoned the creditor to advise his new address. Critically however, he didn’t follow that up with a formal advice of change of domicilum in the required format.
• When the creditor issued Summons, the Sheriff tried first to serve it at the new address but failed when that complex’s security guard said the debtor was not yet living in the unit, although his possessions were there.
• The Sheriff then served the Summons at the old address (the debtor’s chosen domicilium), by handing it to the complex’s security guard.
• Unsurprisingly there was no notice of intention to defend from the debtor, whereupon the creditor took a default judgment and attached and froze the debtor’s bank account (leaving him, so he said, unable to pay his covid-related hospital and medical expenses).
• The debtor asked the High Court to set aside (“rescind”) the judgment, arguing amongst other things that the summons hadn’t been properly served on him.

Why the debtor lost

• As the Court put it: “Service on an address chosen by a debtor as the domicilium citandi et executandi constitutes good service even if the debtor is known not to be residing at the domicilium address, is overseas or has abandoned the premises.” In other words the summons is considered properly served whether you are still at the address or not.
  
• “The manner of service at a domicilium address, however, must be effective. It must be such that the process served at the domicilium citandi et executandi would, in the ordinary course, come to the attention of and be received by the intended recipient.”One way of meeting that requirement is to serve the process on a “responsible employee” – and, held the Court, security complexes not being easy to access in the absence of an occupant, it made no difference that the security guard in question worked not for the debtor but for the complex.
• The obligation is on a debtor changing address “to update or amend the debtor’s chosen domicilium address with the credit provider.” You have only yourself to blame for the consequences if you forget to do that.
• Critically, you must advise a change of domicilium in whatever manner the contract requires (usually in writing at the very least). Make sure you specify it is your domicilium address that you are changing – “A change in residential address does not serve to change a domicilium address.”
• And don’t think that your obligation to notify a change of address falls away once the contract is terminated. On the contrary, “the domicilium address survives cancellation of the agreement.”

End result – the judgment stands and the debtor must cough up.

Keep proof!

First prize of course is to avoid any disputes with the other party in the first place, but bad things happen to even the most careful of us so make sure that you aren’t left blissfully unaware of any notices or summonses that are issued against you at the wrong address. And if you do find yourself applying for a default judgment to be set aside, make sure you have kept proof that you notified the other party of your change of domicilium in the specified format.

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 your professional adviser for specific and detailed advice.

© LawDotNews

Article courtesy of Law Dot News | Litigation

Heigh Ho, Heigh Ho, It’s Off to Court We Go – But What are the Costs of Suing?

“Agree, for the law is costly” (Marcus Tullius Cicero)

As Roman lawyer and statesman Cicero pointed out two millennia ago, litigation comes at a cost. So first prize will always be to settle out of court. If you can’t settle and decide to sue, arm yourself with “deep pockets and nerves of steel”, particularly if you end up in the higher courts.

The upside is that if you win your case, you are likely to benefit from a costs order in your favour, our law generally following the rule that “costs follow the result”. There are however a few things to bear in mind with that –

 

• No matter how “watertight” you may think your case is, litigation always carries an element of chance, and the hard fact is that you could lose for any number of unforeseeable reasons – evidence going badly, grey areas of law being interpreted against you, misdirections by whichever court you are in – those are just some of the risk factors you face. And if you do lose, you will be paying two sets of legal costs!
• There are also exceptions to the “costs follow the result rule” – for example in labour matters, employees will normally not be ordered to pay any costs at all. Our courts have also been known to exercise their discretion to depart from the general rule in order to spare unsuccessful litigants from an adverse cost order where principles of fairness or special circumstances are involved, such as an attempt to protect the interests of minors or other vulnerable groups.
• Remember also the “Pyrrhic Victory” factor – it’s all very well getting a costs order in your favour, but enforcing payment is another thing entirely, particularly if you are suing a debtor pleading poverty or an adversary skilled at dodging your attempts at recovery.
• You are in any event unlikely to recover more than a portion of your costs. That sounds unfair but it’s how it works. To understand why, read on…

 

Three categories of legal costs

You will in practice come across three main types of costs –

 

1. “Party and Party costs”: These are the costs you are most likely to be awarded if you win. They will be “taxed” by a court official at whatever tariff applies to the court you find yourself in, and the tariffs vary widely – ask your lawyer for details.These tariffs are applied strictly and will only include your lawyer’s necessary costs for the actual litigation, not for pre-litigation consultations and the like. Nor will they include additional work carried out by your lawyer which the taxing official regards as not strictly necessary to the conduct of the case.
2. “Attorney and Client costs”: These costs are also subject to the same tariffs but their scope is broader, and the taxing official may allow for example additional attendances and correspondence, travel costs and the like. An example commonly given is correspondence to you from your lawyer keeping you advised of progress in the case – not strictly necessary for the litigation itself, but likely to be allowed as a recoverable “attorney and client” charge.You will only be awarded attorney and client costs where either they are specified in a contract with the other party (it’s a particularly common clause in property-related and commercial agreements), or where a court decides for whatever reason to punish your opponent with a “punitive” costs order.
3. “Attorney and Own Client costs”: These are additional costs you must pay your lawyer at whatever rates you have agreed to. The rates are normally incorporated in a mandate which you agree to when you first seek legal help, and they are not capped by the tariffs mentioned above. You cannot in practice recover them from the other party.

 

Alternative sources of funding

If you can’t afford to sue, or if you don’t want to risk your own money to fund a court case, ask about alternative sources of funding such as –

 

• Contingency (“No Win, No Fee”) arrangements, which are offered by some attorneys, most commonly in personal injury cases.
• Legal Aid is available to “poor” people who pass a Means Test and whose case meets all the other criteria set by Legal Aid South Africa.
• Litigation Funding is normally only available for larger matters, and the funders apply strict criteria.

Although these alternatives should protect you from costs if you win the case, check what risk you run if you lose and an adverse costs order is made against you.

 

Litigate with your eyes open!

Go into litigation with your eyes open. Make sure you understand your prospects of success, what resources of time (and stress!) you will have to commit to the cause, what costs you might recover from your opponent and what you won’t, what you might have to pay the other side if you lose and so on.

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 your professional adviser for specific and detailed advice.

 

© LawDotNews

Article courtesy of Law Dot News | Business Law | Corporate Compliance

“Creditors have better memories than debtors” (Benjamin Franklin)

In these hard times of pandemic and economically destructive unrest, an unfortunate number of businesses face collapse, and many will opt for the “first aid for companies” option of business rescue.

Creditors coming out of that process with a shortfall (only the luckiest creditors are likely to emerge with full settlement) will naturally look to any personal suretyships they hold to cover that shortfall.

A recent SCA (Supreme Court of Appeal) decision has brought welcome clarity to the question of whether – and in what circumstances – such personal suretyships will survive the business rescue process.

Both directors and creditors need to understand the outcome, and to act accordingly.

Sued for R6m, a CEO’s defence crumbles

• A company CEO (Chief Executive Officer) signed a personal suretyship in favour of a creditor supplying the company with petroleum products.
• When the company fell upon hard times it was placed into business rescue. Eventually a business rescue plan was adopted, the rescue process was terminated, and the creditor sued the CEO for the shortfall on its claim of just over R6m.
• The CEO’s main defence was that his liability as surety was an “accessory obligation” – in other words, if the creditor’s claim against the principal debtor (the company) fell away, he should be released from his liability as surety.
• But, held the Court, although a principal debtor’s discharge from liability does indeed ordinarily release the surety, our law allows the creditor and the surety to agree otherwise.
• And the suretyship agreement in this case did just that. It contained “unobjectionable” and “standard” terms which included a specific agreement by the surety that he would remain liable even if the creditor “compounded with” the company by accepting a reduced amount in settlement of its claim. Nor was there any mention in the business rescue plan of its effect on creditor claims against sureties (it could, for example, have provided specifically for sureties to remain on the hook, or to be released). But the deciding factor remained that the wording of the suretyship was such that the creditor did not abandon its claim against the surety by supporting the business rescue plan.
• Bottom line – the CEO goes down over R6m, and the creditor has another shot at emerging unscathed from the mess.

Heed these lessons from the judgment!

The SCA in its judgment undertook a comprehensive interpretation of the terms of the deed of suretyship, of the business rescue plan, and of the relevant legislation. Although the detail will be of more interest to lawyers and academics than it will be to the average director or creditor, it did bring welcome clarity to an issue of great practical importance, and the valuable lessons therein should be heeded –

Directors: As always, think twice before signing any personal suretyship, and if you absolutely have no alternative, at least understand fully what you are letting yourself in for both legally and practically. Equally, ensure that the business rescue plan lets you fully off the hook as regards any possible personal liability; you may be advised to go further and have a separate release agreement with any creditor/s holding your surety. Although not directly relevant to this article, think also of managing any risk of personal liability beyond suretyship, such as allegations of reckless trading and the like.

Creditors: You on the other hand should always try for watertight and upfront suretyships from directors and others with attachable assets (again not directly relevant to this article, but also take whatever security you can over company assets such as debtors, fixed property etc). And when it comes to the business rescue plan, make sure that it leaves your claim against sureties unaffected.

Upfront professional advice and assistance is a real no-brainer here!

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 your professional adviser for specific and detailed advice.

© LawDotNews

By: Sean Bosse

The Cost of Litigation

The very nature of business and our commercial interactions with each other means that the ground is always fertile for disputes to arise. In cases of dispute that cannot be resolved between the parties on an amicable basis, either one or both parties may proceed to have the dispute referred to court for a final determination.

The fact that everyone in South Africa has the right to access to justice, does not always mean that it comes without cost. In this article, I explain in broad terms the nature and application of costs in litigation proceedings.

In general, our legal system is premised on the so-called adversarial system meaning that parties to a dispute will present and argue their respective sides of a matter in a dispute before an impartial judge, magistrate, arbitrator, or the like. More often than not, the disputing parties will employ the services of professional legal representatives to assist with the preparation and presentation of their cases.

The dispute resolution procedure.

A legal representative renders his/her services to his/her client on the basis of a contract of engagement, colloquially referred to as a mandate. The mandate spells out, among other things, what services will be rendered by the legal representative and what he/she will charge the client for such services.

The legal charges are usually made up of two parts: out of pocket expenses, also known as “disbursements” such as: costs of travel, sheriff services, advocates charges, courier charges and the like. The legal representative will also charge his/her client a time-based amount for the services he renders when employing his skills and expertise to the matter. These costs are known as the “attorney and own client costs” and are derived from the mandate concluded between the legal representative and his/her client.

In the process of the legal representative executing his/her client’s instruction and performing his/her services under the terms of the mandate, the client will be invoiced on a regular basis by the attorney his legal charges for work done. The client will be required to pay these legal charges to the attorney as and when they become due.

As a general rule, the party who is successful in the litigation matter will be awarded an order by the court for the loser to pay his/her costs. The rationale hereof is, in general, that the loser will be required to recompense the winner a portion of all the legal charges that he has paid in successfully bringing or defending the legal action. The amount of such legal costs that the loser must pay depends on the nature of the award of costs.

If the court orders the loser to pay the winner’s costs on the scale as between “attorney and own client”, this means that the loser will be required to pay almost all of the winner’s legal costs that he/she can show was incurred.

If the court orders the loser to pay the winner’s costs on the scale as between “attorney and client”, such costs will be payable at a rate usually lower than that of the first-mentioned scale as determined by the charges emanating from the mandate.

Lastly, the court may order the loser to pay the winner’s costs on the scale as between “party and party” and which scale of costs is the lowest level of charges that can be recovered and that is regulated by legislation.

Irrespective of the costs order, the winner of the litigation will be required to prove and quantify his/her costs incurred by way of the preparation of a Bill of Costs. This bill tabulates each and every cost item incurred and provides a reference to the date of such cost item incurred and brief explanation thereof.

The Bill of Costs is referred to both the loser and to an independent adjudicator known as the Taxing Master. The Taxing Master will, on a prescribed date made known to both parties, invite them or their legal representatives to persuade him (Taxing Master) why certain cost items should be refused. The idea behind this process is to ensure that on a final determination, the costs recoverable from the loser is fair and reasonable.

Once the Bill of Costs has been carefully considered, the Taxing Master will approve it, and which approved Bill of Costs is now referred as the taxed allocator. This taxed allocator represents the amount that the loser must pay to the winner.

Are there any alternative courses of action?

Litigation is not for the feint-hearted in terms of the time and process but also in respect of the potential legal costs that may be incurred and that will be payable by the loser. It is therefore advisable that all business owners review their contracts and ensure that they include therein the basis on which costs will be recoverable from the other contracting party in the event of a dispute.

It is equally advisable that before parties’ rush into protracted litigation, consideration be given to alternative means to resolve disputes that will both be a time and money saving alternative. This includes consideration of self-imposed mediation or assisted mediation. The use of arbitration is another alternative to consider that, while costs will be incurred, is sometimes a faster process and eliminates time-spend. Also, the access to tribunals established under law giving access to the public to various ombudsman must also be carefully considered.

When all else fails and litigation is the best alternative, we recommend that you discuss the potential legal costs with your legal representative to agree on costs management arrangement other than one that is only time-based. This can be achieved in numerous and, sometimes, innovative ways such as a fixed-charge arrangement, contingency arrangement (in limited circumstances), a pre-payment arrangement and such similar fee structured arrangements.

Good luck!

Disclaimer to this article: This article is published for you to read and, if you so wish, share with others on the understanding that at all times the copyright herein will and is the sole and exclusive ownership of the author. The article is made available for informational purposes only and does not in any way constitute legal advice. No representations as to the accuracy, completeness, suitability or validity of this article is made. No liability will attract to the author for any losses, injury or damage you may suffer arising out of your use of this article. It is recommended to always seek professional assistance of a qualified lawyer at all material times.