Category: Let’s get Legal

Lets get Legal – Debt Counselling

I’ve heard about debt counselling but am not sure what all it entails?

Our government was concerned about the financial future of its population in the uncertain economic times that the world finds itself in and to regulate this, they promulgated the National Credit Act No. 34 of 2005.

The portions relating to over-indebtedness and restructuring of debt came into effect on 1 June 2007.

Debt Counselling makes provision to assist over-indebted consumers by restructuring their debts so that they can afford to meet their monthly living expenses.

Creditors take legal action when a debtor’s accounts are in arrears, which leads to added costs in the form of attorneys fees and collection commission and penalty interest to any arrear amounts. Debt Counsellors can protect the debtor from collection procedures by negotiating with the creditors to reach a mutually satisfactory agreement with regard to the repayment of the debt.

A debt counsellor is a “specialist” who has completed the necessary exams and been enrolled as a debt counsellor on the NCR website.

If the debt counsellor establishes that the consumer is over-indebted, he will proceed with a debt restructuring programme whereby he renegotiates the repayments, interest rates and terms with the credit providers of each and every contract that the client has committed himself to. Once consent is reached, the consumer is presented with one affordable monthly payment which is distributed to the creditors via an authorized Payment Distribution Agency (PDA).

As long as the client maintains his monthly repayment as negotiated, he is protected from all legal action and the normal consequences of non payment. If he finds that the situations have changed again, he will have to ask the debt counsellor to again renegotiate on his behalf – but rather a renegotiation that that the entire debt counselling is set aside. It is imperative that the client maintain contact with the debt counsellor and advise him of all and any changes.

WHAT DID I SIGN FOR AGAIN?

Everyone gets so excited when they go to sign for something big – how many of us actually listen to the person explaining the small print? How many of us say – don’t worry I don’t understand it anyway!

According to the National Credit Act, the person appointed by the financial institution has an obligation to ensure that you understand each and every term and condition in the agreement that you are signing. The agreement must be in a plain and simple language of your choice.

Terms that are used in the contract have to be explained and if the person representing the financial institution is of the opinion, after explaining the agreement to you, that you are still unaware of your rights, they are under an obligation to not allow you to proceed with the contract until such time as they are satisfied that the terms and conditions that are used, are understandable to you.

Contracts for the loan of money to buy houses and cars are especially lengthy documents and still contain some latin words. If the attorney representing the bank is of the opinion that the contents are unclear to you, they are obliged to send the instructions back to the bank and ask for further information. The bank can then arrange for training and courses for the consumer to attend to enable them to gain clarity over the contents of the agreements.

Bottom line – if you are unsure about anything before you sign, please ask and if you are still unsure have them explain again and again until it is clear. Rather take a little longer at the beginning and know what you are signing for than to sign blindly and only realise later how deep you have gotten yourself into trouble.

Fiona Williamson 082 820 6428
(fiona@holaw.co.za) •

LETS GET LEGAL – Legal steps in placing yourself under debt counselling

STOP – take a good long look at your budget – are YOU over indebted?

If you are in a situation where your expenses exceed your income on any given month, and you are battling to meet all your financial commitments, then you are entering a dangerous world.

Before things reach crisis point, it would be in your best interests to consult a debt counsellor. While you are consulting with the debt counsellor, you will be required to sign a form 16 – this is the start of the debt counselling process and this form, together with all the supporting documents such as your credit card statements, mortgage loan account, car payments etc and captured and your creditors are notified by the debt counsellor within 5 days of the fact that you are intending to follow the debt counselling route.
Once this notice has been sent to creditors, there can be no legal action taken by the creditors.
The debt counsellor now has 60 days to look at the application in depth and determine whether the person is actually over indebted.
If it is found that the person is in actual fact over indebted, then the debt counsellor will prepare a debt restructuring proposal which he will send to all the creditors. This will be based on the income of the applicant and restructuring of the debts that will be forming part of the debt counselling application.

This proposal must be sent to the creditors within 25 days of the date of the application – creditors have 10 days to responds to the suggestions contained in the restructuring. If a creditor does not respond, the suggestion is sent to the central PDA (Payment Distribution Agency) and the payments are started and made to creditors.

This is however not the end of the process and the arrangement must be formalised by court and a consent order obtained. Creditors still have the opportunity to oppose the arrangement and file their objections to the application at court.

A magistrate will hear evidence and make a determination based on the facts that are placed before court.

Fiona Williamson 082 820 6428
(fiona@holaw.co.za) •

Lets get Legal with Fiona – The importance of spending the “right” money

In the “good old days” our parents were always advocates of the fact that we should rather not operate accounts and pay everything cash.
It seems, in light of the current economic turmoil that they were right!
However, in modern times, it is vital to have some kind of credit record.
Your credit record is your credit score and it is this score that decides whether or not you are worthy of being advanced credit.
Credit can in some instances be regarded as a good thing or a bad thing – a “good” example of credit is a mortgage loan whereby you use your credit rating to obtain a asset. “bad” credit will be your credit card and “dreadful” credit would be where you use your credit card to buy perishable items like food.

In our technical world, there is no way of escaping your reality when it comes to credit. Every transaction is noted and listed on various websites. Late payments and non payments immediately reflect under your name and have an instantaneous impact on your credit record. Even something as silly as paying your rent late has an impact on your score.

It is advisable to check your credit record at least every 6 months – you are entitled to one free check each year. This will also make it easier for you to see what you qualify for or what you have to strive towards if you have in mind of applying for a big loan for special purposes like a home loan.

Should any of the information on your report be incorrect, you have the right to contact the bureau and have them change it to the correct state of affairs. Be warned – this is a very time consuming process and you will have to follow up with the bureau regularly to make sure that they have complied with your request.

This also protects you from identity theft whereby someone else uses your name and details to fraudulently obtain credit.

Fiona Williamson 082 820 6428
(fiona@holaw.co.za) •

Lets get Legal – Jurisdiction of the CCMA to adjudicate benefit disputes expanded

The confusion that has existed for years between employers and employees over the scope of what the term “benefits” in section 186(2)(a) of the Labour Relations Act entails has finally been resolved by the Labour Appeal Court in Apollo Tyres SA (Pty) Ltd v Commission for Conciliation, Mediation and Arbitration (2013) 34 ILJ 1120 (LAC).

This case also dispelled the fallacy that in order to have an unfair labour practice claim against an employer there has to be an employment relationship in existence at the time that the employee declared and referred an unfair labour practice dispute to the CCMA.

Until very recently, the position in South African labour law was that the Labour Relations Act only allowed an employee to refer an unfair labour practice dispute relating to employment benefits to the CCMA if such benefits were provided for in the employee’s contract of employment, the employer’s conditions of employment, collective agreement or any applicable legislation. If the benefits in dispute could not be traced back to any one of these categories, such a dispute would be classified as a dispute of mutual interest which could only be pursued by way of industrial action, and the CCMA would not have the necessary jurisdiction to arbitrate such a dispute except to conciliate it. A dispute of mutual interest is a dispute where an employee wishes to assert a right which he does not have in terms of any legislation, policy or employment contract, for example, an increment or bonus when there is no provision for such in the contract of employment. The reason for this distinction is based on the view that a wider definition of the term “benefits” could undermine the employees’ right to strike which is constitutionally entrenched.

The issue for determination in the Apollo case at the CCMA was whether an employee’s entitlement to claim benefits under an early retirement scheme fell within the ambit of the unfair labour practice provisions. Due to a decline in trade Apollo Tyres was forced to start with an early retirement scheme for monthly paid staff between the ages of 46 and 59 years. After being told that she did not qualify for the scheme, Ms Hoosen resigned and referred a dispute to the CCMA, claiming that the company’s refusal to pay her the amount specified in the voluntary retrenchment scheme amounted to an unfair labour practice relating to the provision of benefits. Apollo Tyres argued that the CCMA lacked jurisdiction to arbitrate the matter as the voluntary retrenchment scheme was not a “benefit” as contemplated by the Labour Relations Act. The commissioner however ruled that the company had committed an unfair labour practice by not admitting Ms. Hoosen to the scheme, and ordered Apollo Tyres to pay her the specified severance package.

The Labour Appeal Court considered the matter and held that the retirement benefit in Apollo Tyres had been offered to all monthly paid employees between the ages of 46 and 59. The employee was 49 and was paid a monthly wage. Apollo Tyres also had a discretion as to whether or not to grant the benefit. The issue was whether that discretion had been exercised unfairly, for example, whether the employer had acted arbitrarily, capriciously or for no justifiable reason. The Labour Appeal Court concluded that Appollo Tyres had shifted the goal posts and had provided no credible reason for not granting the employee an early retirement package. The court accordingly held that Apollo Tyres had perpetrated an unfair labour practice by excluding the employee from the early retirement scheme and dismissed the appeal with costs.

In arriving at its decision the Labour Appeal Court enunciated the following important legal principles:

A proper approach is to interpret the term “benefit” to include a benefit to which an employee is entitled (from contract or from legislation, including rights judicially created) as well as an advantage or privilege which the employee has been offered or granted in terms of a practice subject to the employer’s discretion. Those judgments in which a contrary approach was adopted are accordingly wrong.
Employees who wish to use unfair labour practice jurisdiction to claim a right to be promoted, receive training or be granted employment benefits, do not have to prove a right to be promoted or trained if the fairness of the employer’s conduct is challenged.
The concern that a wide definition of “benefit” will undermine the right to strike is no longer justified.
Disputes over the provision of benefits fall into two categories. Where the dispute is not based on an allegation that the grant or removal of a benefit is unfair, strike action is the remedy. Where the dispute concerns the fairness or otherwise of the employer’s conduct, it can be adjudicated through arbitration.

The Labour Appeal Court went further and held that there are at least two instances of conduct by an employer relating to the provision of benefits that may be subjected to scrutiny by the CCMA under its unfair labour practice jurisdiction:

The first instance is where an employer fails to comply with a contractual obligation that it has towards an employee. In this instance, an employee would still only be able to refer a dispute to the CCMA for adjudication if such a dispute is based on a right or benefit contained in the contract of employment, or alternatively in law.
The second situation is where the employer exercises a discretion that it enjoys under the contractual terms of a scheme conferring a benefit. In this instance, even where the employer enjoys a discretion in terms of a policy or practice relating to the provision of benefits, such conduct can be scrutinized by the CCMA.

As a result, the term “benefit” in the Labour Relations Act has now been expanded to include not only existing advantages or privileges to which an employee is entitled to as a right, but also those advantages and privileges granted in terms of a policy or practice over which the employer has a discretion. Employers should thus exercise extra care when exercising their discretion and implementing policies relating to benefits.

This judgment may also be seen to have potentially opened the floodgates for referrals by unsatisfied employees to the CCMA regarding privileges and advantages awarded by an employer at its discretion. Importantly thougth, the unfair labour practice jurisdiction cannot be used by employees to assert an entitlement to new contractual terms such as new benefits, new forms of remuneration or new policies not previously provided for by the employer.

It is clear that employers faced with having to exercise a discretion as to whether to grant certain benefits or not must exercise such discretion in a fair, transparent and justifiable manner to avoid falling foul of the unfair labour practice provisions of the Labour Relations Act.

Lets get Legal – Road Accidents and Personal Insurance

The frequency and severity of road accidents are becoming an increasingly worrying statistic and the provisions made by the Road Accident Fund (RAF) for injury or death suffered on our roads are decreasing with each amendment of the Act. This increases the burden on each person to financially prepare themself for the possibility of a serious motor vehicle accident and the potential repercussions of such an event. But how does one do this?

That road accidents have reached pandemic proportions in South Africa is well known and is dramaticallly highlighted by the death toll statistics surrounding our national holiday seasons. In the past Easter holiday season more than 1200 people died on our roads. The frequency of these road accidents make it clear that we should be prepared for the repercussions of motor vehicle accidents which range from injury and disability, to death.

In South Africa all road-users have a security safety net in the form of the Road Accident Fund (RAF). In short, the RAF indemnifies the person(s) who caused the accident and compensates the injured and/or the family of fatal victims for special and general damages.

The procedure to institute a claim is relatively straightforward although it can be time consuming. Accordingly, it is wise to approach an attorney specialising in personal injury cases to assist you in providing advice regarding the merits of your claim as well as to assist you with the process of claiming and what you can claim for.

One of the main concerns with the RAF is that continuous amendments have influenced the ‘pay-out-amount’ to claimants, and not in a beneficial way. For example, a claim for non-pecuniary loss is only possible if a serious injury can be proved. This is further complicated by the regulations published in May 2013 describing what constitutes a serious injury and what not, with the list of what is serious, becoming smaller and smaller with each amendment. Another example is compensation that can be claimed for the loss of income. Section 17(4)(c) of the Road Accident Fund Act determines that annual loss of income cannot exceed the amount published in the Government Gazette. This amount is currently capped at R207 528-00, which is less than R17 300-00 per month. Persons earning in the higher income ranges will accordingly still only receive this amount, irrespective of the fact that a previously earned salary could have been much higher. So have funeral expenses been stripped to the bare minimum to cover only the necessary and actual costs regarding a cremation or burial.

Understanding the role and scope of the RAF is therefore of importance to all road users. The reality is that unfortunately the RAF can no longer extensively provide financially for victims and their families. Therefore, even if the RAF does pay out, the amount could in all probability be insufficient to cover the full extent of the damage or losses suffered and this gap between the pay-out and your true expenses could be vast.

Minding this gap is paramount. The obvious way to protect oneself against such loss is to consider broadening one’s personal insurance to make provision for this potential gap. Not only should you make provision for life insurance, but also for funeral costs, unemployment due to incapacity or temporary loss of income due to injury. Personal credit insurance is also something to consider, but of lesser importance if you have already taken out a second life insurance policy to cover your debts. You may also wish to consider consulting a financial planner to assist you in planning your estate and determining the levels of insurance required to avoid being over-or underinsured should an unfortunate accident occur.
Mosdel Parma & Cox
ppam@mpc.law.za
044 533 1101•

Lets get Legal – The new Control of Marketing of Alcohol Beverages Bill

The draft Control of Marketing of Alcohol Beverages Bill is yet to be gazetted for comment although most have already expressed their opinion on the proposed Bill despite very little information being available regarding its scope and impact.

The motivation behind the proposed Bill, according to a statement made by the Inter-Ministerial Committee on Combating Alcohol and Substance (IMC) is because ‘alcohol is reported to rank third on the list of risk factors leading to death and disability while other statistics point to a strong link between alcohol consumption and violent deaths, including those resulting from domestic conflict and suicide. In addition, significant numbers of people arrested for robbery, assault, rape and weapons-related offences are under the influence of alcohol’.

According to the Department of Transport more than half of the country’s road deaths occur as a result of alcohol abuse. Social Development Minister, Bathabile Dlamini, has said that South Africa has some of the highest foetal alcohol syndrome figures in the world.

The South African Chamber of Commerce and Industry (SACCI) on the other hand is of the opinion that a ban on the marketing of alcohol will not only have a negative effect on the liquor industry and the economy but will also affect other areas of business such as the advertising, retail and hospitality industries.

Sport and the sponsorship of teams and/or individual players by known alcoholic brands will also be prejudiced by the ban on advertising. The South African Breweries (SAB), official sponsor of the Springboks and SAB Soccer League for example, has been involved in supporting South African sport from as far back as the late 1950s and has through sponsorship contributed to the socio-economic development within local communities by providing opportunities for individuals to improve their lives. Unfortunately, future support by well-known brands like the SAB will depend on the extent of the proposed ban.

Naturally, many questions come to mind, such as for example, will the draft Bill on controlling the marketing of alcohol effectively address the mentioned issues brought on by the misuse of alcohol as suggested by the IMC? Will responsible drinking be promoted by the control of the marketing of alcohol? One may be of the opinion that only controlling the marketing of alcohol in itself is not sufficient to combat alcohol abuse and other related issues but should rather simultaneously promote the responsible use of alcohol and educate consumers on the healthy enjoyment of alcohol. Another possibility could be to consider increasing the minimum age for legally consuming alcohol from 18 to 21 years of age as has been done in the United States of America, India and the United Kingdom as a means to controle the misuse of alcohol by uneducated minors.

Account should also be taken of international research which shows that a ban on alcohol advertising has not by itself had the desired effect of consumers’ consumption declining. In India, for example, the advertising of alcoholic and tobacco products has been banned since 1995. However, India has been identified as the fastest growing alcohol market in the world.

Another possibility is to balance out the ‘positive’ marketing of alcohol with ‘negative/preventative marketing’, emphasizing the possible harm caused by the misuse of alcohol as is currently being done with the advertising and promotion of tobacco with every packet holding a health warning to the consumer. However, the ban placed on tobacco companies to advertise their products in general media and television have necessitated them to utilise other platforms such as social media, mailing databases and the Internet to engage new customers and maintain existing clients.

Clearly there is much to be taken into account before the proposed Control of Marketing of Alcohol Beverages Bill can be implemented in our law. The implications thereof remains to be seen once greater clarity regarding the intentions of the Legislature become known.

Mosdel Parma & Cox
ppam@mpc.law.za
044 533 1101•

Lets get Legal – Jurisdiction of the CCMA to adjudicate benefit disputes expanded

The confusion that has existed for years between employers and employees over the scope of what the term “benefits” in section 186(2)(a) of the Labour Relations Act entails has finally been resolved by the Labour Appeal Court in Apollo Tyres SA (Pty) Ltd v Commission for Conciliation, Mediation and Arbitration (2013) 34 ILJ 1120 (LAC).

This case also dispelled the fallacy that in order to have an unfair labour practice claim against an employer there has to be an employment relationship in existence at the time that the employee declared and referred an unfair labour practice dispute to the CCMA.

Until very recently, the position in South African labour law was that the Labour Relations Act only allowed an employee to refer an unfair labour practice dispute relating to employment benefits to the CCMA if such benefits were provided for in the employee’s contract of employment, the employer’s conditions of employment, collective agreement or any applicable legislation. If the benefits in dispute could not be traced back to any one of these categories, such a dispute would be classified as a dispute of mutual interest which could only be pursued by way of industrial action, and the CCMA would not have the necessary jurisdiction to arbitrate such a dispute except to conciliate it. A dispute of mutual interest is a dispute where an employee wishes to assert a right which he does not have in terms of any legislation, policy or employment contract, for example, an increment or bonus when there is no provision for such in the contract of employment. The reason for this distinction is based on the view that a wider definition of the term “benefits” could undermine the employees’ right to strike which is constitutionally entrenched.

The issue for determination in the Apollo case at the CCMA was whether an employee’s entitlement to claim benefits under an early retirement scheme fell within the ambit of the unfair labour practice provisions. Due to a decline in trade Apollo Tyres was forced to start with an early retirement scheme for monthly paid staff between the ages of 46 and 59 years. After being told that she did not qualify for the scheme, Ms Hoosen resigned and referred a dispute to the CCMA, claiming that the company’s refusal to pay her the amount specified in the voluntary retrenchment scheme amounted to an unfair labour practice relating to the provision of benefits. Apollo Tyres argued that the CCMA lacked jurisdiction to arbitrate the matter as the voluntary retrenchment scheme was not a “benefit” as contemplated by the Labour Relations Act. The commissioner however ruled that the company had committed an unfair labour practice by not admitting Ms. Hoosen to the scheme, and ordered Apollo Tyres to pay her the specified severance package.

The Labour Appeal Court considered the matter and held that the retirement benefit in Apollo Tyres had been offered to all monthly paid employees between the ages of 46 and 59. The employee was 49 and was paid a monthly wage. Apollo Tyres also had a discretion as to whether or not to grant the benefit. The issue was whether that discretion had been exercised unfairly, for example, whether the employer had acted arbitrarily, capriciously or for no justifiable reason. The Labour Appeal Court concluded that Appollo Tyres had shifted the goal posts and had provided no credible reason for not granting the employee an early retirement package. The court accordingly held that Apollo Tyres had perpetrated an unfair labour practice by excluding the employee from the early retirement scheme and dismissed the appeal with costs.

In arriving at its decision the Labour Appeal Court enunciated the following important legal principles:

A proper approach is to interpret the term “benefit” to include a benefit to which an employee is entitled (from contract or from legislation, including rights judicially created) as well as an advantage or privilege which the employee has been offered or granted in terms of a practice subject to the employer’s discretion. Those judgments in which a contrary approach was adopted are accordingly wrong.
Employees who wish to use unfair labour practice jurisdiction to claim a right to be promoted, receive training or be granted employment benefits, do not have to prove a right to be promoted or trained if the fairness of the employer’s conduct is challenged.
The concern that a wide definition of “benefit” will undermine the right to strike is no longer justified.
Disputes over the provision of benefits fall into two categories. Where the dispute is not based on an allegation that the grant or removal of a benefit is unfair, strike action is the remedy. Where the dispute concerns the fairness or otherwise of the employer’s conduct, it can be adjudicated through arbitration.

The Labour Appeal Court went further and held that there are at least two instances of conduct by an employer relating to the provision of benefits that may be subjected to scrutiny by the CCMA under its unfair labour practice jurisdiction:
The first instance is where an employer fails to comply with a contractual obligation that it has towards an employee. In this instance, an employee would still only be able to refer a dispute to the CCMA for adjudication if such a dispute is based on a right or benefit contained in the contract of employment, or alternatively in law.
The second situation is where the employer exercises a discretion that it enjoys under the contractual terms of a scheme conferring a benefit. In this instance, even where the employer enjoys a discretion in terms of a policy or practice relating to the provision of benefits, such conduct can be scrutinized by the CCMA.

As a result, the term “benefit” in the Labour Relations Act has now been expanded to include not only existing advantages or privileges to which an employee is entitled to as a right, but also those advantages and privileges granted in terms of a policy or practice over which the employer has a discretion. Employers should thus exercise extra care when exercising their discretion and implementing policies relating to benefits.

This judgment may also be seen to have potentially opened the floodgates for referrals by unsatisfied employees to the CCMA regarding privileges and advantages awarded by an employer at its discretion. Importantly thougth, the unfair labour practice jurisdiction cannot be used by employees to assert an entitlement to new contractual terms such as new benefits, new forms of remuneration or new policies not previously provided for by the employer.

It is clear that employers faced with having to exercise a discretion as to whether to grant certain benefits or not must exercise such discretion in a fair, transparent and justifiable manner to avoid falling foul of the unfair labour practice provisions of the Labour Relations Act.

Mosdel Parma & Cox

Lets get Legal – Electrical fencing certificates: Do I need one?

The use of electrical fencing as a means to secure fixed property, and in particular also residential property, has escalated dramatically over the last few years. To address this increasing demand the market has been flooded by suppliers offering electrical fence installation services. Understandably the necessity to regulate safety issues in respect of these installations has led to the promulgation of the Electrical Machinery Regulations in terms of the Occupational Health and Safety Act which regulate electrical fencing and its certification.

What implications do the Regulations have for electrical fences?

The Regulations stipulate that all electric fences installed after 1 October 2012 must be certified and have an electric fence system certificate of compliance. It also applies to electric fences that have been altered, added to or where ownership of the premises changed after 1 October 2012

What effect does the Regulations have on the transfer of property?

The Regulations stipulate that where there is a change of ownership of the premises on which the electric fence exists after 1 October 2012, the user must obtain an electric fence certificate.

This means that a homeowner whose installation was done prior to 1 October 2012 is not required to obtain such a certificate, but that such a certificate will be required by the user if the property is transferred after 1 October 2012 and the user wishes to utilise the system.

It is not stipulated which party (buyer or seller) is responsible for the certificate and it is up to the parties to negotiate the matter of certification as well as the cost thereof. In practice it often occurs that this obligation falls to the seller in the same way as with electrical and gas certification. However, the Occupational Health and Safety Act does allow this undertaking to be transferred and a clause can be included in the sale agreement which relieves the seller of his responsibility to obtain certification and places an obligation on the purchaser to ensure that the system is certified as compliant at the cost of the purchaser. This may particularly be relevant where the seller is exempted from obtaining a certificate and that responsibility falls to the purchaser who wishes to use the electric fence.

Additionally, if a certificate has been obtained, a new certificate may be required if there has been subsequent alterations or additions to the system. Accordingly, when property is sold it would be wise to add a clause in the sale agreement that states that there have been no additions or alterations to the system (if this is in fact the case), allowing the existing certification to remain valid.

Is your electric fence certificate transferrable and for how long is it valid?

The certificate is transferable from one owner to the next. Once it has been issued there is no need for another one. Unlike the electrical compliance certificate which is only valid for two years, the electric fence certificate does not expire, unless additions or alterations have been done to the electric fence after the certificate has been issued, in which case a new certificate is required.

From the above it is clear that electrical fencing certification, particularly when dealing with the transfer of property, is vitally important. Additionally it is also clear that the responsibility for obtaining the certification and cost thereof is a negotiable item which can be addressed in the sale agreement. Discuss the certification of the electrical fence with your estate agent or legal advisor and ensure that this responsibility is addressed beforehand where possible. •

Is the biological father liable for the costs of a child born out of wedlock?

We have become accustomed to the fairy tale endings we so often see in the movies – boy meets girl, they fall in love, get married, have kids and live happily ever after. Unfortunately, the reality of modern society is not always as romantic with a dramatic increase in the number of single and unmarried parents and children born out of wedlock every year. This raises questions as to whether the biological father of a child born out of wedlock is obliged to contribute to the mother’s pregnancy and birth related costs and pay maintenance for his child even if not married to the mother.

In legal terms, a child born to a mother and father who are not married to each other is referred to as a child born out of wedlock, or, more correctly, as an extra-marital child.

Our law recognises that all children irrespective of the marriage status of the parents are entitled to financial support from both of their biological parents, with the degree of contribution by each parent dependant on their respective means.

Child maintenance is a periodic payment made to the caregiver of a child for basic amenities such as food, shelter, clothing, education and medical care. According to the Maintenance Act 99 of 1998 a maintenance order can be obtained to enforce the common law duty of parents to support their children. An unmarried mother who claims maintenance for her child must however prove paternity. If she can prove that she and the man from whom she claims maintenance had sexual intercourse at any time during which the child could have been conceived, that man is, in the absence of evidence to the contrary, presumed to be the father.

The Maintenance Act regulates all maintenance related claims. This Act provides that if there is no maintenance order in place, a Maintenance Court should make an inquiry into the situation and can, after considering the relevant evidence, order the father of the child to pay the mother a sum of money as well as interest thereon. The amount will reflect what the court believes the mother is entitled to in respect of the relevant expenses incurred by the mother in connection with the birth and maintenance of the child, from the date of birth to the date of the inquiry.

An application for maintenance can be brought at a Maintenance Court located in the area where the person to be maintained resides or where the person in whose care that person is, resides. All Magistrate’s Courts in South Africa serve as Maintenance Courts.
Our courts have also recognised a woman’s right to claim maintenance for herself immediately before, during, and after birth and this right to maintenance is regarded as a part of the “lying-in expenses” which are expenses closely connected with the actual birth. These expenses include –

Doctor’s care before and after the birth,
Hospitalization, and
Certain necessities for the baby.

A maintenance order can thus be made with regards to the birth and the maintenance of the child, but the order will only be granted once the child has been born. Both parents must contribute to the lying-in expenses according to their respective means.

Should you find yourself in an uncertain situation regarding the maintenance of your child born out of wedlock, seek legal advice from an attorney specialising in maintenance matters to assist you.

Mosdel Parma & Cox
ppam@mpc.law.za
044 533 1101•

Lets get Legal – Why do I need a trust?

Most people think a trust is only for the rich and famous but this is not the case. Everyone who has an asset such as a fixed property or shares that needs to be protected against the woes and risks of life should have a trust. These woes and risks of life come in different forms and usually when it is the least expected to all of us. Two of these risks that are most neglected in many estate plans are protection against financial risks and the risk of family relations that may go wrong. For the first one of these risks namely financial ruin, prevention is always better than cure. This is where the protective nature of the trust comes in as an ideal solution. Therefore the main reason one should have a trust is for financial risk protection. For these purposes there should be a proper separation between a person’s high risk, medium risk and low risk assets and activities to ensure that no creditor or third party can lay their hands on your hard-earned assets.

A second important reason for setting up a family trust is for reasons that we call the “family relationship plan”. This entails that there should be adequate separation of possible interest groups in families with more than one child and also the more complex reconstructed families in second and further marriages/relationships after divorce or death, especially to prevent family feuds when ‘in-laws’ may start turning into ‘outlaws’.

Another popular reason for the use of a trust is for the pegging of the value of one’s estate for future growth in order to minimise the value of the personal assets which is good for protection purposes but simultaneously also a saving on Estate Duty. Despite the higher Income Tax Rate a trust might have compared to natural persons and other entities, there are some tax advantages available to the trustees. However, as the legislature can amend tax legislation at any given time, a trust should not be used primarily to save possible Estate Duty and other taxes. On the other hand one should bear in mind that what might be favourable for tax purposes may not necessarily be favourable for risk protection. The residential home in the personal estate is a good example of this. It may have tax benefits but it can be a disaster when a financial crisis looms.

In addition, the trust can also be used instead of a usufruct or in cases where the subdivision of agricultural land is not possible due to the relevant legislation. It is also recommended that a trust be used for testamentary planning where there are minors involved and their inheritance needs to be protected or where an heir needs some financial protection to safeguard his or her inheritance from the “wheeling and dealings” of a spouse. Where there are persons with special needs (for example a child with a physical or mental disability), the trust is a very useful vehicle to provide for such a person, as this type of trust (the so-called “special trust”) qualifies for certain tax advantages. It is also important to remember that there is no limitation on the duration or continuity of a trust and one can thus make provision for further descendants or generations to come.

Trusts can also be used in the business environment, for example business (share) trusts, workers trusts and BEE trusts. It is also a very popular entity for public benefit organisations (PBO trusts or the so-called charity trust).

It is important to remember that your trust should always form part of your holistic estate plan (which also includes your testamentary planning; financial planning; tax planning; insurance planning, etc.) and should be used primarily as a protecting vehicle before indulging in tax concessions.

Mosdel Parma & Cox
ppam@mpc.law.za
044 533 1101•

 

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