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“SOME POTENTIAL CORONAVIRUS-19- RELATED LEGAL ISSUES”

 

Children

 

1. There has been a great deal of confusion about the movement of children during this time. Various Ministers have commented on the matter including the Ministries of Justice, Police, COGTA and Social Development. The mood swung from directing that divorce orders and parenting plans must be complied with to an absolute prohibition.

2. A definitive stance was taken by the Minister of Social Development last week and the movement of children is now PROHIBITED. The final position is that children are compelled to remain in the care of the parent they were with on the date of lockdown.

3. A number of parents appear to be flouting this regulation and arrange handover at supermarkets or chemists. This is simply unlawful. The regulation is clearly designed to protect children from exposure to the virus and as hard as it is, parents who have no direct contact must accept the legal position.

4. They are of course encouraged by the Minister to make use of social media and engage their children as frequently as is required. If the lockdown is extended without any break this position will prevail.

 

Leases and Rental

 

1. Social media is replete with articles about tenants (in both retail and residential accommodation) who will simply stop paying rent because of this supervening impossibility, or act of God, or force majeure, where performance in terms of the contract becomes impossible.

2. Whilst the law recognises the unusual occurrence of a calamitous event, (and the fact that it is beyond the control of the parties) and the effect this has on commercial contracts, each case must be viewed on its own facts. It may be that the ordinary consequences of a breach of contract may be suspended.

3. It is necessary in each case to look to the nature of the contract, the relationship of the parties, the facts of the case, and the nature of the impossibility. A lease agreement, for example, may give the tenant beneficial occupation of the premises, whilst the national lockdown prevents the tenant from conducting business. The elements referred to in this para must then be investigated fully.

4. In the event that force majeure does as a matter of fact exist, it will extinguish in whole or in part the effects of a commercial contract (including a lease).

5. There is NO AUTOMATIC right to non-performance.

6. Examples would be earthquakes, floods, or in this case plagues.

7. The established requirements are:

   1. Performance objectively (not subjectively) must be impossible;

   2. Impossibility must be absolute and not probable and/or relative;

   3. It must be unavoidable by any reasonable person;

   4. It must not arise due to any fault by either party;

   5. Whether the event was foreseeable and if so, was it avoidable.

8. Difficulty and expense in performing do not constitute impossibility.

9. Impossibility is NOT implicit in a change of financial strength.

10. In the retail sphere this problem should only be experienced by those exempted from trading during the lockdown. Those entitled to trade will be hard pressed to make out a case for remission. However, should they do so, the provisions of the lease must first be examined.

11. An example is where a lease provides that rent must be paid, without deduction or demand (or where the force majeure is rules out in the agreement). Here it is unlikely a claim for remission will succeed.

 

In a nutshell, check the terms of the lease dealing with force majeure - is the loss of the tenant total or not, is the obligation to pay other outgoings affected, did the tenant take steps (if possible) to mitigate its loss? A tenant generally (depending on the terms of the lease) is entitled to remission if through no fault of his own (force majeure) he suffers a total or partial deprivation of beneficial occupation.

 

Clearly any negotiations around this topic must be conducted in good faith and must be reduced to writing.

 

Retail Property Exemptions

 

1. On 24 March Minister Patel Gazetted exemptions that allow landlords and tenants to reach agreements that would enable both to escape the provisions of the Competition Act. Usually agreements that are anti-competitive, and/or collusive are unlawful.

2. In the main, large landlords (property trusts or funds and developers) are engaging retail tenants in an effort to persuade them to pay rentals.

3. The agreements are clearly designed, mostly, to protect the viability of the retail business.

4. The Gazette is relatively simple to understand but anyone affected by these regulations must seek legal advice.

5. There appears to be a difference of opinion between retail tenants and their landlords on what relief the tenant is entitled to.

6. There are currently intense negotiations underway and some progress is expected by the end of the week.

    

Prescription

 

1. It is a principle of our law that a debt becomes unenforceable after a specified period of time has elapsed from the time it became due (in the main 3 years).

2. There is legislation that deals with this (Prescription Act – “the Act”).

3. This means a creditor loses his right to claim after prescription.

4. Prescription can be interrupted by the service of legal process or by admission by the debtor.

5. The lockdown has put paid to the service of legal process temporarily.

6. Our Courts in KZN have by direction of the Judge President or Chief Magistrate suspended the issuing of processes on certain terms.

7. Quo vadis for a creditor?

8. The Act does deal with delaying prescription in the event of an intervening “superior force”

9. In the current circumstances it appears probable that the Covid 19 pandemic presents such an impediment and matters or claims that may prescribe during this period will have their prescription period extended.

 

In all matters above please take notice that these are simply the views of the author, are not comprehensive, and should not be relied upon as legal advice. You are advised to seek professional help from a Legal Practitioner before acting on any of these comments.

 

 

Contributor:  David Randles (Senior Executive Consultant) (Commercial / Matrimonial / Litigation Departments) (Umhlanga Office)

Tel:  031 566 2207

E-mail:  randles@tmj.co.za