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Don’t let your lawyer rip you off

13 November 2013

Hiring a law firm to wind up an estate and establishing the cost for services rendered is not as simple as it sounds, finds Angelique Ruzicka.

There are a few professionals out there that will dodge the question: “So how much will it all cost?”. Usually it’s the professionals in the service industry that are hesitant about giving you an overall picture of how much their services will cost and these include mechanics, builders and lately as a friend of mine came to discover lawyers do it too.

Sometimes I get the feeling that they try to avoid the question so they can charge as much as they humanly can. Of course I am not trying to tar all mechanics, builders and lawyers with the same brush here but experience and observations have led me to conclude that some of these so-called ‘professionals’ really do try to dodge the question for this very reason.

Counting the cost
A friend of mine recently tried to hire a law firm after her father passed away to manage his estate which consisted of some assets that were based locally (in South Africa) and abroad in Europe. The South African law firm she hired put her in touch with a law firm that specialised in dealing with estates that were based overseas.

However, this specialist law firm gave her the run around in terms of how much the overall cost of recovering and distributing the estate would be. Common phrases like ‘it’s difficult to calculate how much it would be’ and ‘it depends on what happens’ were used to steer her off course, but when she eventually pried them for an example of a case they were currently working on. She found out that the bill for another client currently sat at R500,000 and the estate had not been wound up. Needless to say she walked away and found another law firm who were willing to give her a quote.

So if you are looking to hire a law firm to wind up an estate, what should you be looking out for and what should they be charging you? According to Meyer de Waal, director of Oosthuizen & Co Meyer de Waal Attorneys, the fee prescribed by the Master of the High Court is 3,5 % of the value of the estate. The remuneration excludes disbursements such as advertising costs, Master’s fees and also excludes transfer costs where immovable property forms part of the estate.

De Waal does concede that it can be difficult for an attorney to provide an estimate.  “The value of the estate is also not always easily determinable or readily available and the attorney will have to obtain further information first before being able to confirm the value of the estate for purposes of calculating the allowable fee.  However, the fee to wind up the estate can be negotiated and we suggest that the attorney, as agent,  be allowed the opportunity to study the nature, structure and complexity of the estate before such fee quotation is provided,” he explains.

If the estate involves property and/or cash that is based overseas then  a certified copy of the will must be obtained and it should comply with the laws of the country in which those foreign assets are based. “The estate must then be wound up according to the laws of that particular country and the executor appointed. This can lead to substantial and unnecessary delays – in particular, if a South African executor has to perform his/her functions overseas,” says de Waal.

Establishing the facts
What else should you ask a law firm before you hire them? Hussan Goga, a Durban attorney and the chairperson of Trusts and Deceased Estates Committee of the Law Society of South Africa, offers this advice:

1. Obtain an overview of the administration process to wind up the estate.
2. Check on the expertise and skills of the attorney to wind up the estate.
3. Ascertain the estimated period that it would take to wind up the estate.
4. Establish the estimated costs to wind up the estate and the basis on which such costs are computed.

And if you are not happy with the quote they are giving you or if the law firm refuses to give you an overall picture of the costs it is best to walk away says Goga: “It is [asking for the overall cost] a very important question and transparency is of the utmost.”

Finally, if you are dissatisfied with the services you are getting from the law firm you have already appointed you can take the matter further with the Law Society of South Africa. “If there is a dispute between a client and the law firm, which he/she has hired then the client may approach the Provincial Law Society where the attorney practices to assess the fee payable to the attorney. This usually occurs when the mandate of the attorney is terminated during the winding up process,” says Goga.

For further information, feel free to contact Meyer de Waal of Oosthuizen and Co on (021) 461 0065 or email meyer@oostco.co.za.

 
 

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TIME FOR ESTATE DUTY TO GO?

The days of estate duty may be numbered according to Nicolene Schoeman of Schoeman Attorneys and an article by Barry Ger, Cape Town-based tax consultant, in the May issue of De Rebus, the SA attorneys’ journal published by the Law Society of South Africa (LSSA). His opinion is echoed by several other media reports. In fact, many people’s hopes that this tax was finally on its way out rose significantly during this year’s budget speech.

Estate duty: brief background

Imposed in terms of the Estate Duty Act 45 of 1955 as amended, estate duty is a tax levied at 20%. It is payable in respect of all property (and property deemed to be property) held by a deceased person at the date of his or her death.

In respect of property deemed to be property, the law denotes that even property not actually held by the deceased at death – in other words: some insurance policies – are also deemed to be included in his or her estate as part of the dutiable amount on which the tax is raised.

The tax is subject to a R3 500 000.00 exemption or abatement, which can be increased to R7 000 000.00 if the deceased person was predeceased by a spouse who did not use their abatement.

Ironically, writes Ger, wealthy people are reluctant to pay this tax even with their substantial means. They often engage in expensive and elaborate ownership structures to avoid it. As a result, estate duty contributes a relatively small amount of revenue to the fiscus through SARS and the costs involved in collecting estate duty are high.

Ger also states that he thinks this is the reason behind proposals to abolish the tax. Estate duty presents a number of other problems. For example:

  • Assets owned by a deceased person in an offshore jurisdiction could be subject to local estate duty as well as any other duty imposed in the foreign country
  • Assets that form part of the dutiable estate compromise income or assets already subjected to income tax during the deceased person’s lifetime
  • Worst of all, estate duty overlaps in many ways with capital gains tax (CGT).

For these reasons, the fiscus is considering a new inheritance tax that is common to some other jurisdictions. Alternatively, it will make certain amendments to the CGT provisions. These are still rather unclear and, at this point, amount to little more than speculation.

Therefore, clients are urged to consult suitably qualified attorneys for advice on appropriate estate planning strategies and updates on any relevant developments.

Please take note that it is of the utmost importance that any estate planning strategy is implemented with a legally valid and updated will.

 
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Posted by on 07/09/2012 in Content

 

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THE ESSENTIALIA OF PARTNERSHIPS

The essentialia of a partnership were set out in the case Joubert v Tally and Company 1915 some time ago.  The four essential elements are:

1)     Each partner contributes something to the partnership, whether it be money, skills or labour.

2)     The business should be carried on for the joint benefit of the partners

3)     The objective of the partnership should be to make a profit

4)     The contract between the parties should be a legitimate contract.

The contribution made by each partner does not necessarily have to be of a monetary nature.  As long as such contribution has commercial value, it is acceptable.

With reference to the second element, “business” is defined as “anything which occupies the time, attention and labour of a person for the purpose of profit”.  Whether the business activity is of an indefinite nature or aimed at completing a single, particular project, a partnership can exist.  The concept of “joint benefit” illustrates that a partnership can only exist if all the members thereof benefit from the business activities of such a partnership.  Therefore it is deduced that each partner must share in the profits as well as in the losses of the partnership.  One partner cannot benefit from the profits while another is responsible for all the losses.  The latter concept is, after all, not recognised in South African law.

In the case Ally v Dinath 1984 (2) SA 451 (T) it was reported that the following would suffice as “carrying on business to make a profit”:

1)     a pure economic/financial profit motive

2)     a joint effort in order to save costs

3)     to provide for the livelihood and comfort of the parties and their children

4)     the purpose to accumulate an appreciating joint estate

The above clearly excludes charitable and welfare institutions as well as sports clubs from the partnership list.

The agreement concluded by the parties to a partnership must be valid.  The agreement must contain the essentialia of a partnership.  Furthermore, the parties involved must have the intention to establish a partnership.  Should the agreement not be indicative of the nature of the relationship between the parties, the subsequent conduct of the parties can be referred to. This may very well paint the true picture of the parties’ intention.

Although the parties may agree, whether it be by verbal agreement or in writing, on certain formalities concerning the parties and the relationship between them, should the essential formalities not be complied with, no partnership would have been established.

In South African law, a partnership is viewed according to the aggregate theory of partnership, which means that a partnership is regarded as a collection of individuals and not an entity.  Therefore, a partnership does not enjoy legal personality, as it is the individual partners in their personal capacities who are co-owners of assets and jointly and severally liable for losses.

One of the exceptions to the lack of legal personality of a partnership is in the case of insolvency of the partnership estate.  According to Section 13(1) of the Insolvency Act 24 of 1936, if the partnership estate is sequestrated by a court, the personal estate of every partner will simultaneously be sequestrated.

With regards to the personal liability of the individual partners the following applies:  each of the partners is jointly and severally liable for all partnership debts.  The case of Geldenhuys v East and West Investments (Pty) Ltd 2005 (2) SA 74 (SCA) is relevant in this instance.  The facts of the case in short are that the appellant, an attorney, was ordered by the court to pay his previous landlord a sum of R36 761.10 in respect of arrear rental.  The attorney’s partner had settled a larger amount with the landlord.  The question which then arose was to what extent the appellant was liable?  The court ruled that the partners could be held jointly and severally liable for the full amount of the disputed debt and therefore the landlord could, and should, sue both the partners.  Subsequently, judgement was given against both partners.

During the existence of the partnership, the partners are co-debtors and jointly and severally liable for all partnership debts.  Creditors must sue all of the partners and cannot institute action against only some of the partners.  However, as soon as the partnership is dissolved, this rule falls away and the creditors may seek satisfaction for their claims from the individual assets of any of the partners.

 
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Posted by on 30/03/2012 in Content

 

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A SPANNER IN THE WORKS – Ensure that your company secretarial matters are up to date

An event worth popping the champagne for is one where you finally conclude a property sale transaction by signing your name on the dotted line.

How annoying would it not be if you should find out that there is a major spanner in the works (that you were blissfully unaware of) which will delay the conclusion of the transfer of a property with almost 2-4 months?

This, unfortunately, can happen to both the seller and the purchaser.  The obstacle referred to here is the silent deregistration of a company by the Companies and Intellectual Property Commission (“the CIPC”) due to outstanding annual returns.  That such an insignificant misstep can have such serious repercussions, is hard to imagine.  It is definitely not a pleasant experience to find out that your company does in fact not exist, even if the situation is just temporary.  The result is that your company can not be party to any agreement while it has a “deregistered status”.

Should you be in a position where your company, as the seller or the purchaser, intends to enter into an agreement for the sale or purchase of a property, ensure that all your company’s secretarial matters are in line to avoid unnecessary delays.

If, after further investigation, you come to learn that your company has actually been deregistered, here is what you need to do:

If your company does not have a designated person attending to the company secretarial work, you can appoint an independent expert or company to manage this process on your behalf.

Firstly, you need to inspect and ensure that the names of all (and only) the current directors of the company are displayed on the CIPC’s records.  If this is not the case, the CIPC will request the signatures of all the directors on their records before making any changes to your company profile that you may request.  This becomes problematic if one or more of the directors might have died or has resigned from the board of the company.  If it is established that the list of directors on the CIPC’s records does not accord with the list of current directors of your company then one has to submit a C.o.R 39 form in order to notify the CIPC that the composition of the board of directors have changed.  This process takes approximately 6 – 8 weeks.

Only once you receive confirmation that the above changes have been effected (if applicable), you may launch an application to have your company re-instated.  This process also takes approximately 6 – 8 weeks to conclude.

Upon receipt of confirmation that your company has been re-instated and is again active, the value of the outstanding annual return can be determined, after which same can be submitted to the CIPC.

As soon as the above procedures have been completed and your company secretarial matters are up to date, you are entitled to enter into an agreement with another party for the sale or purchase of a property, or any other agreement for that matter.

We appreciate that the periods mentioned above (6-8 weeks) are fairly lengthy.  The processing time is solely dependant on the workload, processing time and backlog of the CIPC and is unfortunately not in our hands.

All the abovementioned procedures can be done and managed through our correspondent.  Please contact us at 021 461 0065 or alternatively at legalassist@oostco.co.za for more information in this regard.

 
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Posted by on 15/03/2012 in Content

 

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BOUNDARY (PARTY) WALLS: THE NEIGHBOURLY THING TO DO

The rights & obligations of both owners

The easiest way to determine the boundaries between properties is to consult the official town planning diagrams kept by the local authority in control of the area (Rondebosch). In the event of a dispute over the dividing line between two properties, the first point of reference would be the official property plans (diagrams). One can refer to the title deeds of the properties concerned to ascertain plan numbers and with which deeds the plans are filed.

In the absence of proof that a boundary wall or fence is entirely on one of two adjoining properties, it is presumed to half on one property and half on the other. Some legal authorities state that each part is separately owned by the owner of the property on which it stands, but that there are reciprocal servitudes of support. Other authorities state that the wall is jointly owned by the owners of the adjoining properties.

It is important to take note that the law relating to such encroaching boundary walls reflects the influence of both trains of thought and does not concretely swing in either direction. An owner who transfers his property automatically transfers his joint ownership.

Neither owner may without the consent of the other remove, raise or lower the boundary wall or tamper with it in any way except in an emergency, although in terms of common law a neighbour is allowed to break down a wooden fence and replace it at own cost with a more expensive partition.

Either owner my re-erect a boundary wall destroyed by an act of God, such as fire or flood; the other owner would have to contribute half the cost – if he or she will derive any benefit from it. Each owner is obliged to contribute to the maintenance and repair of the wall, although an owner can refuse to contribute to the cost of an unreasonably expensive new wall. Also, an owner is under no obligation to replace with a similar structure a boundary wall that was unreasonably expensive when it was originally erected.

Although both parties are entitled to reasonable use of the boundary wall, this right does not include reducing its strength or making it unstable but does however include improving and altering the appearance of the side that fronts your property. Subject to local authority regulations, either owner my use his side of the boundary wall as support or a beam or for water pipes and may even build on it if it is strong enough.

Title deeds might determine who is responsible for repairing shared walls or fences. A servitude could also make a single owner entirely liable for the costs of upkeep. If one neighbour refuses to make essential repairs, anyone who is entitled to enforce the servitude may obtain an estimate of the costs of repairs, though it is unlikely that a contractor will undertake to handle the repairs if the person responsible for payment refuses to do so.

The owner of a wall who is not bound by a servitude is usually under no obligation to carry out repairs. However, in the case of deterioration that is likely to prove dangerous to the public, a local authority might order the owner(s) of the property to carry out repairs. Should no servitude exist, repairs must be carried out by agreement between the two owners.

PRACTICAL APPLICATION

In both the High Court judgments of Van Bergen v Van Niekerk & Another and Passano v Leissler, the court reiterated the same stance in accordance with the principles laid down in Voet’s Commentarius ad Pandectas.

The respective courts held that in case of doubt, a wall intermediate between two adjoining properties is presumed to have been built on the common boundary. Such a party wall belongs to both the owners of the adjoining properties, irrespective of who built it. Although this is not co-ownership in the accepted sense of the term, the owners of neighbouring properties do have rights against each other.
One view which was taken was that the owners have the rights of co-owners in the sense that each is entitled to the maintenance of the wall encroaching on his neighbours property, as well as the part standing on his own property. Another view is that while each owner has no right of ownership in the portion of the wall standing on his neighbour’s ground, each owner is entitled to demand that the other co-owner should keep his half of the wall in a proper state of repair.

The courts seemed to favour the view that each owner owns half of the wall on his side of the median line with reciprocal servitudes of lateral support. Accordingly both neighbours are liable for the cost of the maintenance of the wall and both must refrain from doing anything which my detrimentally affect the stability of the wall.

 
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Posted by on 15/02/2012 in Content

 

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