Who is held responsible for payments lost due to cybercrime?
This is exactly what happened in Fourie v Van der Spuy and De Jongh Inc. and others. The First Respondent was a law firm and the Second and Third Respondents were practising Attorneys. The Applicant claimed payment of R1 744 599.45 from the Respondents. The First Respondent had a mandate to deal with money paid into Trust by the Applicant. The Second Respondent, upon receiving instructions to make payments via email, paid the money into a banking account belonging to an unknown third party who fraudulently hacked the email server of the Applicant and sent emails to the First Respondent containing the wrong instructions and the wrong banking details. The Court held that the nature of a trust account imposes very strict obligations on the Trust Attorney and a very high degree of care and skill is required from Attorneys dealing with a client’s Trust account. The Attorneys could have easily avoided the situation if they acted diligently and verified the banking details before transferring money out of the Trust account. The Court held that they failed to act with the required skill and diligence and were therefore held liable to pay the Applicant. In another matter, a sales agreement was concluded between the Respondent and a car Dealership. The Respondent transferred the funds for a motor vehicle into a fraudulent account and sent proof of payment to the Dealership. He collected the vehicle soon thereafter. Neither the Applicant nor the Dealership checked that the proof of payment reflected the correct bank account number. The mistake was discovered when the funds did not reflect in the Dealership’s bank account. The Respondent raised the defence of estoppel. He held that the Dealership’s normal procedure was to release the motor vehicle after receipt of money and not just receipt of the proof of payment. He further held that the Dealership was negligent in that they failed to check that the proof of payment contained the correct banking details, which resulted in a delay that would otherwise have been flagged by the bank and the transaction blocked. Again, the Court decided in favour of the Dealership and held that a Debtor (The Respondent in this case) always bears the duty and risk when payment is due to the creditor. The new Cybercrimes Act (the Act) might bring some relief to the parties involved. The Act aims to criminalise unlawful access, use and distribution of data and data messages. It will also regulate the power to investigate and adjudicate cybercrimes. Section 8 in particular relates to the above-mentioned cases, where it aims to create statutory offences of Unlawful Access (hacking) and Cyber Fraud. It reads: “Any person who unlawfully and with the intention to defraud makes a misrepresentation by means of a data or computer program or interference with a data or computer program is guilty of an offence.” A fine and/or imprisonment of up to 5 years for a conviction of Unlawful Access is possible, and for “Cyber Fraud” the Courts have the discretion to impose a penalty appropriate for convictions under S 276 of the Criminal Procedure Act 51 of 1977. From the above cases and the many others not mentioned in this article, it is clear that the courts will not be in favour of a party that was deemed to be negligent. It is of paramount importance, when dealing with invoices and payments from an online source, to be vigilant and always have checks in place to reduce the chances of being a victim of cybercrime. References: Fourie v Van der Spuy and De Jongh Inc and Others (2019) JOL458L8 (GP) Galactic Auto (Pty) Ltd v Venter (4052/2017) (2019) ZALMPPHC 27 Cybercrimes Act 19 of 2020 This article is a general information sheet and should not be used or relied on as legal or other 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 legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)
Private prosecution: Is justice attainable even if the state fails us?
Members of the public, and specifically victims or those close to them, are often disheartened by the National Prosecuting Authority (“NPA”) and its decisions not to prosecute persons who have allegedly committed a criminal offence. The Criminal Procedure Act (“the CPA”), however, contains two sections that can be relied on to bypass the NPA, by privately prosecuting persons who have allegedly committed criminal acts. These sections have recently been shoved in the spotlight thanks to the successful private prosecution of Faizel Hendricks, who was found guilty in January 2022 of murdering his partner Rochelle Naidoo in 2005. This is the first time that an accused has been convicted after being privately prosecuted. The first section that details the terms in which a person can be privately prosecuted is found in section 7 of the CPA, where it states that an individual may institute proceedings if a certificate has been issued by the Director of Public Prosecutions (“DPP”) confirming that the NPA does not intend to prosecute the alleged criminal. This certificate is also known as a certificate nolle prosequi. Section 7(1) of the CPA states the following: “(1) In any case in which a Director of Public Prosecutions declines to prosecute for an alleged offence: (a) any private person who proves some substantial and peculiar interest in the issue of the trial arising out of some injury which he individually suffered in consequence of the commission of the said offence; (b) a husband, if the said offence was committed in respect of his wife; (c) the wife or child or, if there is no wife or child, any of the next of kin of any deceased person, if the death of such person is alleged to have been caused by the said offence; or (d) the legal guardian or curator of a minor or lunatic, if the said offence was committed against his ward, May… either in person or by a legal representative, institute and conduct a prosecution in respect of such offence in any court competent to try that offence.” The second is section 8 of the CPA, which makes provision for a private prosecution to be instated under a statutory right. Section 8(1) reads as follows: “(1) Anybody upon which or person upon whom the right to prosecute in respect of any offence is expressly conferred by law, may institute and conduct a prosecution in respect of such offence in any court competent to try that offence.” Section 8(2) further states that private prosecution under this section may only be instituted after consultation with the Attorney General, and only if the Attorney General has withdrawn his/her right to prosecute in respect of any specified offence or specified category of offences. Private prosecutions under section 8 can be done by natural or juristic persons and do not require a certificate as referred to in section 7 of the CPA. Hendricks was prosecuted in terms of section 7 of the CPA, when Rochelle Naidoo’s parents instituted action after the Cape Town District Court, during its inquest in 2008, found that it could not determine who held the firearm at the fatal moment when Rochelle Naidoo was shot (Hendricks averred that she committed suicide). The DPP declined to prosecute and Rochelle’s parents subsequently instituted proceedings in the Malmesbury Regional Court, where Hendricks was found guilty of murder in July 2014 and sentenced to 15 years imprisonment. Hendricks appealed the verdict but was unsuccessful in his appeal as the Western Cape High Court confirmed the conviction and sentence in January 2022. It is clear from sections 7 and 8 of the CPA, as well as Mr Hendricks’ conviction, that justice can be obtained by victims and/or their families in circumstances where the NPA decides not to prosecute a person who has allegedly committed criminal acts. However, this justice is neither swift nor affordable when one considers the formalities that must be complied with and the accused’s right to appeal, which can cause significant delays for the persons instituting the private prosecution as well as significant legal costs (which include expert witnesses’ fees, such as pathologists and ballistic experts, which would normally be paid for by the State). The private prosecution of Faizel Hendricks confirms this as it took the Naidoo family 10 years to finalise this matter to attain justice. Yusuf Asmall, Rochelle’s father, confirmed the high financial and personal costs involved in this matter when he stated that “[i]t’s been a painful journey. It was a costly affair”. In conclusion, the CPA does provide possible avenues for victims and their families to attain justice in circumstances where the NPA decides not to prosecute. However, these avenues are only available to those who have significant resources and time, and are thus only available to a select group of South Africans. Reference List: https://www.iol.co.za/capeargus/news/family-finds-closure-after-17-year-battle-to-get-justice-for-their-slain-daughter-32cc2d3b-0b92-4e3d-b108-ab6ae2c32c79 Criminal Procedure Act This article is a general information sheet and should not be used or relied on as legal or other 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 legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)
Is it time to say goodbye to your business?
South Africa has been experiencing very slow economic growth and international rating agencies have subsequently downgraded South Africa’s investment outlook to “junk status”. This, and a myriad of other factors, have negatively impacted South African businesses, especially small and medium business enterprises. Many of these struggling enterprises are now at a crossroads: do they continue trading and hope that things will improve, whilst risking incurring further debts, or do they cut their losses and give up? This article will briefly explain what the difference is between business rescue and liquidation, two legal avenues which are available to financially distressed companies. Business rescue: Failing companies traditionally only had the option to liquidate. The Companies Act 71 of 2008 (hereinafter referred to as “the Act”) has created another option in the form of business rescue proceedings.[1] Companies which are in financial distress can be placed under business rescue where after a business rescue practitioner will be appointed. The main objective of business rescue proceedings is to reorganise and restructure the business in order to make it a more profitable and stable entity. This is achieved by placing the company and the management of its affairs, business and property under temporary supervision. Furthermore, it provides for the development and implementation of a business rescue plan.[2] Business rescue proceedings can, similarly to liquidation proceedings, be launched on a voluntary basis or by way of a court application brought by creditors or other affected persons. A company must be in financial distress before it can file for business rescue. A company will be deemed to be financially distressed for purposes of this Act if: “(i) it appears to be reasonably unlikely that the company will be able to pay all of its debts as they fall due and payable within the immediately ensuing six months; or (ii) it appears to be reasonably likely that the company will become insolvent within the immediately ensuing six months”.[3] Companies meeting either of the requirements as set out above will thus be eligible to commence with business rescue proceedings in order to rehabilitate the financially distressed company. Some of the most prominent effects of a company being placed under business rescue are the following: A general moratorium on legal proceedings against the company is imposed. Creditors will accordingly not be able to institute civil claims against the company or execute on any court orders already granted.[4] A guarantee or surety previously given by the company in favour of any other person may not be enforced by any person against the company.[5] The company may only dispose of its property in the ordinary course of its business in a bona fide transaction which is at arm’s length.[6] The business rescue practitioner can “cancel or suspend entirely, partially or conditionally any provision of an agreement to which the company is a party at the commencement of the business rescue period, other than an agreement of employment.”[7] This places the business rescue practitioner in a powerful position to alleviate some of the financial commitments of the struggling company by renegotiating payment schemes with the company’s creditors. The ultimate objective of business rescue proceedings is to save companies. This should, if possible, be the preferred course of action for a financially distressed company since it has the potential to preserve jobs and to reinstitute a stable and solvent company which can contribute to the South African economy. Liquidation: The objective of liquidation proceedings is fundamentally different from that of business rescue proceedings. Liquidation proceedings are not aimed at rescuing a financially struggling company, but rather to permanently end the company. It is important to note that liquidations of insolvent companies are still done in terms of the Companies Act 61 of 1973 (hereinafter referred to as “the Old Act”). A company is regarded as being insolvent if its liabilities exceed its assets, or if it is unable to pay its debts as and when it becomes due.[8] Liquidation of a company results in the establishment of a concourses creditorium and the company will cease to trade and its assets will be frozen. All civil proceedings against the company will stop as well as any execution processes against the company. The Master of the High Court will appoint a liquidator who will be responsible for collecting all of the company’s assets and to distribute same between the creditors after the costs of the liquidation have been paid. Liquidation and business rescue proceedings, although applicable in similar circumstances have very different objectives and one should thus consider these objectives when choosing one or the other. Business rescue proceedings should be strongly considered where there is a reasonable prospect that the company may be able to trade on a solvent basis again. However, it does sometimes happen that a company is completely “down and out” and that there are absolutely no prospects of the company ever being able to service its debts and/or to trade on a financially viable manner again. In such cases, one should liquidate the company in order to protect the remaining assets in favour of the creditors. You should consult a knowledgable attorney if your company is financially distressed in order to determine the best way forward. Reference List: Companies Act 71 of 2008. Companies Act 61 of 1973. [1] Chapter 6 of the Companies Act 71 of 2008. [2] The purpose of the business rescue plan is to “rescue the company by restructuring its affairs, business, property, debt and other liabilities, and equity in a manner that maximises the likelihood of the company continuing in existence on a solvent basis or, if it is not possible for the company to so continue in existence, results in a better return for the company’s creditors or shareholders than would result from the immediate liquidation of the company.” See section 128(1)(b)(iii) and section 150 in this regard. [3] Section 128(1)(f) of the Companies Act 71 of 2008. [4] Section 133. [5] Section 133(2). [6] Section 134(1)(a). [7] Section 136(2). It is important to note that employees remain employed by a company under
Do annuities form part of the estate during a divorce?
In the case of CM v EM it was held in the Supreme Court of Appeal of South Africa (“SCA”), case number 10861/2018, that: “The value of the Respondent’s right to future annuity payments in respect of Personal Portfolio Living Annuities (“the living annuities”) from Glacier Financial Solutions (Pty) Ltd, a member of the Sanlam Group, is an asset in his estate for purposes of calculating the accrual of his estate”. Prior to the judgement, a party to a divorce held no claim in regard to the other party’s living annuities. The court, in reaching its decision, referred to the case of De Kock v Jackson and another 1999 (4) SA 346, where it was concluded that there was no logical or legal reason why both the cash component and the accrued right to the pension should not form part of the community of property existing between the parties prior to the divorce. The court’s reasoning behind the decision was that the Respondent in this matter had a clear right to the investment returns yielded by his capital reinvestment with Sanlam, in the form of future annuity income which he draws from the agreement. The court, therefore, found that such annuity income is an asset which can be calculated for purposes of determining the accrual. The brief background to the matter was the following: The parties married in December 1999, out of community of property and subject to the accrual system as defined in the Matrimonial Property Act 88 of 1984. In July 2008, the Respondent used a portion of his pension benefit, which arose from his employment, to purchase a Personal Living Portfolio Living Annuity from Glacier Financial Solutions. In March 2017, he used the remainder of the proceeds of his pension benefit to make another purchase with Glacier. In all future divorce proceedings, in the absence of an agreement between the parties, an expert will have to be appointed to determine the value of a party’s right to receive future payments in respect of the living annuities. The SCA has not provided a guideline as to how the calculation should be done and this could lead to further litigation, as currently, an annuitant may elect to drawdown at any rate between 2.5 or 17.5 per cent per annum. Should there not be a history of contested percentages drawdown over a period of time, I am of the opinion that an average percentage of plus-minus 8 per cent will be used to determine the value of future payments. Reference List: CM v EM (1086/2018) [2020] ZASCA 48. This article is a general information sheet and should not be used or relied on as legal or other 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 legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)
My tenant failed to pay rent: Can I kick him out?
If your tenant has failed to pay his or her rent, it can be tempting to simply kick them out yourself and change the locks. However, do so would be considered illegal, even if the tenant has become an illegal occupant. The reason is because of the PIE Act. In sum, the Prevention of Illegal Eviction from and Unlawful Occupation of Land Act (PIE) (1998) provides procedures for eviction of unlawful occupants and prohibits unlawful evictions. The main aim of the Act is to protect both occupiers and landowners. The owner or landlord must follow the provisions of the Prevention of Illegal Eviction from and Unlawful Occupation of Land Act (PIE) (except in areas where ESTA operates) if they want to evict a tenant. Who is covered? Anyone who is an unlawful occupier, which includes tenants who fail to pay their rentals and bonds, is covered by PIE. It excludes anyone who qualifies as an ‘occupier’ in terms of the Extension of Security of Tenure Act When is an eviction lawful? For an eviction to happen lawfully, certain procedures must be followed. If any one of them is left out, the eviction is unlawful. So, if an owner wants to have an unlawful occupier evicted, they must do the following: give the occupier notice of his/her intention of going to court to get an eviction order. apply to the court to have a written notice served on the occupier stating the owner’s intention to evict the occupier. The court must serve the notice at least 14 days before the court hearing. The notice must also be served on the municipality that has jurisdiction in the area. After a landlord intrusts their attorney to commence eviction proceedings, the following happens: Typically, (except in a case of urgency, e.g. if the tenant is maliciously damaging the leased premises because he got notice to vacate) the attorney will call on the tenant to remedy the breach (usually failure to pay rent on time); If the tenant fails to deal with the demand, the tenant will be considered to be in illegal occupation of the property; The attorney then applies to court for permission to begin the eviction process. The court gives a directive as to how and on whom notice of eviction should be served; The attorney doesn’t give the tenant notice at this time; The application to court sets out the reasons for the application and the personal circumstances of the occupants; If the courts are satisfied that it is fair to evict the tenant and all persons occupying the property with him, it gives a directive as to how the application for eviction must be served; The sheriff then serves the notice of intention to evict on the tenant and the Local Municipality; The occupants have an opportunity to oppose the application, and explain why they should not be evicted; If there is opposition, the matter gets argued before a magistrate or judge, who decides whether an eviction order can be granted, and if so, by when the occupants should vacate the property within a stipulated time; If the tenant does not oppose, the court will grant the eviction order; If the tenant fails to move, the attorney will apply to Court for a warrant of ejectment to be issued by the Court. This process can take a further three to four weeks. Reference: http://www.passop.co.za/your-rights/housing-rights-pie http://www.bregmans.co.za/can-evict-tenant-without-court-order/ This article is a general information sheet and should not be used or relied on as legal or other 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 legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)