EY Suart Attorneys

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Our article in May 2018 explained two categories of trusts and we undertook to answer the question of when a benefit is deemed to be vested to beneficiaries. However, before we can delve into this answer, we must explain the tax implications associated with trusts.

In terms of South African tax law there are two ways trusts can operate:

• A vesting trust is a trust where a beneficiary has a vested right to the income and/or capital thereof; and

• A discretionary trust that does that not provide a beneficiary with a vested right to trust distributions.  Trustees have a discretion to make distributions to beneficiaries as they deem fit.

(Alternatively, a combination of the two.)

The Income Tax Act 58 of 1962 provides for taxation of trusts. Section 25B of the Act is founded on the common law principle known as the “conduit principle”. This principle simply states that in a vesting trust, trust income or capital that vests or has been vested in beneficiaries is taxed in the hands of the beneficiaries and not the trust.  Income received by a discretionary trust will be taxed in the hands of the trust, unless it is distributed to beneficiaries before the new tax year.

However, Section 7 of the Act provides for certain circumstances where the income of the trust is taxed in the hands of the donor of the trust assets. This is referred to as a deeming provision and can be explained as follows in the 2018/2019 Pocket Tax Guide:

“Where the income or capital gain of the trust is derived from any donation, settlement or similar dispositions the income or a portion thereof may be deemed to accrue to the donor, rather than the beneficiaries or the trust. For example, sale of an asset to a trust by way of an interest free loan or a capital gain distributed to an exempt person as defined by the Act and Trust deed is taxed in the trust.”

Trust losses cannot be carried by the beneficiaries in any sense and this will fall in the hands of the trust. According to tax law this loss will usually be retained and carried forward to the next tax year assessment.

In Potgieter v Potgieter NO and Others 2012 specifically referred to beneficiaries having received a right and/or accepted a benefit from the Trust. The Act also makes reference to accrued rights and benefits. In instances where minors are beneficiaries, natural parents and legal guardians can accept benefits or exercise rights on their behalf. This is deemed to be legitimate acceptance or receipt of benefits.

The trust deed should state how the trust will operate (vested or discretionary trust) as well as stipulate what constitutes acceptance of benefits and when would rights transfer to beneficiaries. This will provide a clear indication of who is liable for tax.

Taxation in respect of capital and income beneficiaries in relation to the types of trusts as well as residential and non-residential beneficiaries differ and can become complex. These principles will need to be explained in a simple and easy-to-follow manner to avoid confusion.

Bianca van Wyk - Director


I recently dealt with a case where a child was classified by the CMR (Christian Social Council) as an abandoned baby in need of care and protection. This case, although very upsetting, is more common than most would think.

Children’s rights are entrenched in our Constitution and they include inter alia the right to safety and security and the right to family/parental care or to alternative care when removed from the family environment (Section 28(1)(b) of the Constitution). Parliament has given effect to these rights by enacting the Children’s Act 38 of 2005 (herein after “the Act”) later amended by Children’s Amendment Act 41 of 2007.

The Act makes provision for the regulation of children’s rights and also provides a legal framework for the situation where children are in need of care and protection.

Section 150 lists the grounds to determine if a child is in need of care and protection and this includes circumstances where a child:

• has been exploited or lives in circumstances that expose the child to exploitation;

• has been abandoned/orphaned and is without visible means of support;

• lives or works on the streets or begs for a living;

• is addicted to dependence – producing substance and is without any support to obtain treatment for such dependency;

• is in a state of physical or mental neglect;

• may be at risk if returned to the custody of the parent, guardian or care-giver of the child, where there is reason to believe that he or she will live in or be exposed to circumstances  which may seriously harm the physical, mental or social wellbeing of the child;

• where the child is in a state of physical or mental neglect;

• lives in, or is exposed to circumstances which may seriously harm the child’s physical, mental or social wellbeing;

• is being neglected or abused by the caregiver or other person who has control over the child.

Where a child fits into one of these categories the matter must be referred to the Children’s Court (Section 155 of the Act) who will then conduct an investigation into the circumstances of the child. Before a child can be formally found to be in need of care and protection, a formal enquiry and hearing will have to be conducted by the children’s court. This includes the appointment of a social worker to investigate the circumstances of the child.

Unfortunately, our Children’s court structure is not built around a sense of urgency and it does take time to have the court to conclude a formal enquiry.

Should there be a situation where the immediate removal of a child from his/her environment prior to obtaining the necessary authority is required, it can only be justified in a case of emergency where the child needs immediate emergency protection. 

The applicable legislative provision for immediate removal is Section 152 of the Act and this allows any police official or social worker to remove a child from his/her current environment without first obtaining a court order.

Where the child is not in imminent danger (however the child’s situation is of concern) and it is not necessary to immediately remove the child, the correct procedure is for a children’s court magistrate to order an investigation into the circumstances of the child. The court will then appoint a social worker to do a thorough investigation and the court will consider the abovementioned criteria together with the social worker’s report and any other evidence the court may deem necessary (such as witness testimony)  to determine if the child is in need of care and protection, and need to be removed from his/her environment.

After the social worker conducts an investigation and it is found that a child in not in need of care and protection, the court can still determine that the child and his/her family need to go for mediation, therapy or the matter can be postponed to monitor the situation (Section 46 and Section 156 of the Act).

All children have the right to feel safe, secure and to be protected against abuse and neglect. The abovementioned legislative instruments strive to protect children and safeguard their fundamental rights. Various professionals from different disciplines such as social workers, police officer, court clerks and children court magistrates need to work together effectively and interact constructively with each other to serve the children in need of care and protection.

            Juanné Bester - Associate


The Prevention of Illegal Eviction from and Unlawful Occupation of Land Act 19 of 1998 (PIE Act) governs the eviction process in the event of a land invasion. The aim of the PIE Act is to protect both the occupiers and the landowners. In terms of PIE, the applicant is only required to prove ownership and illegal occupation. However, in addition to the basic requirements for eviction, various principles and requirements have been established by the South African courts in their interpretation of the PIE Act.

As a point of interest, if one is contemplating purchasing a property, whether for investment purposes, or as a primary residence, it is important to ascertain certainty regarding the occupiers of the property, as according to the most recent High Court decision of Pure Capital Property Trading CC v Hanslo and Others 15217/2018 ZAWCHC 137, if you are unaware of the occupiers or have not been successful in arranging proper agreements with them, you could find yourself unable to evict them even if you purchase the property “free of lease”

The facts of Pure Capital Property Trading CC v Hanslo and Others involved an application for eviction by a property investor (the Applicant) in terms of the PIE Act, against the occupiers of the property in question.

The Applicant purchased the property on a sale in execution, wherein the Sheriff of the High Court sold the property in question where the conditions of sale stipulated that it is sold “free of lease” but further provided no warranty that the Applicant would be able to take vacant occupation of the property, or that the property is unoccupied.

The occupiers of the property refused to vacate the property and failed to legalize their rights to the property with the Applicant (i.e. concluding a lease agreement), consequently leaving the Applicant with no option but to apply to the High Court for the aforesaid eviction order.

The High Court refused to grant the eviction order, based on the following findings:

-       The Applicant failed to provide the court with sufficient information pertaining to the age or circumstances of the occupiers, which are crucial in determining the rights and needs of the elderly, children, disabled persons and household headed by women;

-       The Applicant failed to establish what legal right the occupiers had when they originally took occupation of the property, when or if that right was terminated and under what circumstances;

-       The Applicant did not provide sufficient confirmations regarding whether the occupants had any form of verbal or written lease. This is important because of our law’s “huur gaat voor koop” principle which means that the rights under the lease agreement supersedes the provisions of the sale agreement; and

-       Therefore, the Applicant failed to convince the court that it was “just and equitable” to grant the eviction order.

From the above judgement, we can deduce the Court’s warning to do a thorough and in-depth investigation of the rights and circumstances of the occupiers of the property before the signing of your Offer to Purchase. Bear in mind that not all leases are in writing and you could find yourself in difficulty if you do not obtain all relevant details pertaining to verbal leases.

We recently assisted the Executor of a deceased estate to successfully evict members of the Black Land First Movement from a house in Brooklyn, Pretoria.  This again indicated that these applications, if opposed, takes a long time to be finalised and are very costly.  Often, as were the case, your eviction order is not the final straw and you have to incur substantial costs to execute the eviction order where you receive resistance from the unlawful occupiers.

  Quraisha Dawood - Associate


  1. Legal assistance insurance for Community Schemes with increasing responsibilities, liability risk and high costs of litigation:  This new product is something to be considered by the Executive Committee of a Community Scheme.  The link is as follows:  www.communitylegal.co.za.

2. Training courses:  Whether you are merely a member (owner) of a Community Scheme or serve on the Executive Committee (Trustee / Director) of a Community Scheme,  you need to know the basics of your property ownership rights and if serving on an Executive Committee, you need to have sufficient knowledge of applicable legislation or else you should not serve on such committee.  Various training courses (from the basics to advanced) are available.  The National Association of Managing Agents frequently presents such courses.  The University of Pretoria presents an Introductory   course in Sectional Title Management. Enclosed herewith the programme structure and a link to more information:




To view our previous newsletters, please visit our website on http://www.eyslaw.co.za.

Kind regards,



Disclaimer: The information disclosed herein is not intended to constitute legal advice and is not guaranteed to be correct, complete, or up-to-date. You should not act or rely on any information emanating from this Newsletter without seeking the advice of an Attorney, as the facts relating to your circumstances may influence any advice or information conveyed herein. Should you require legal representation, then please do not hesitate to communicate with us for further information and our standard mandate terms.