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Data Science for Social Impact 33

3907

non-electoral

2022

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Reportable Case No: 502/2021 In the matter between: THE MEMBER OF THE EXECUTIVE COUNCIL FOR HEALTH, LIMPOPO PROVINCIAL GOVERNMENT APPELLANT and L W MOKGOTHO obo D MOKGOTHO RESPONDENT THE MEMBER OF THE EXECUTIVE COUNCIL FOR HEALTH, EASTERN CAPE AMICUS CURIAE Neutral Citation: MEC for Health, Limpopo v L W M obo D M (502/2021) [2022] ZASCA 146 (27 October 2022) Coram: VAN DER MERWE, MOLEMELA and GORVEN JJA, and DAFFUE and SALIE-HLOPHE AJJA Heard: 18 August 2022 Delivered: 27 October 2022 Summary: Delict – Medical negligence – failure to monitor the appellant and foetus during labour – whether hospital staff was negligent – whether negligence causally connected to the child’s brain damage – negligence and causation established – appeal dismissed. ______________________________________________________________ ORDER ______________________________________________________________ On appeal from: Gauteng Division of the High Court, Pretoria (Swanepoel AJ, sitting as court of first instance): The appeal is dismissed with costs, including the costs occasioned by the employment of two counsel. ______________________________________________________________ JUDGMENT ______________________________________________________________ Molemela JA (van der Merwe and Gorven JJA and Daffue and Salie- Hlophe AJJA concurring): Introduction [1] This appeal concerns a medical negligence claim in terms of which a mother (the respondent), acting on behalf of her minor child (D M), claimed damages in the Gauteng Division of the High Court, Pretoria (the high court) arising from the brain injury which D M suffered during the birth process at Dilokong Hospital (the hospital) in Limpopo Province. The claim was lodged against the Member of the Executive Council for Health, Limpopo Province (the appellant), who would be vicariously liable for damages caused by the negligent conduct of the hospital staff. Background facts [2] The facts of the case are substantially undisputed and are fully set out in the judgment of the high court. Briefly, they are as follows. The respondent was admitted at the hospital in the early hours of 17 July 2010. She was in the early stages of labour. On examination in the labour ward at 03h50, she was assessed as being nine months pregnant by date and 38 weeks by palpitation. Everything appeared to be normal. There are two phases of labour: the latent phase progressing to the active phase. The active phase has two stages, with the first stage beginning when the cervix of the woman in labour reaches a dilation of 4cm and the second phase starting when the cervical dilation is 10cm. An examination at 14h00 revealed that she was still in the latent phase of labour with no risk factors having been noted. Her vital signs were noted as normal, as were those of the foetus. The examination that was done at 18h00 revealed that the dilation of her cervix was 4cm; thus, she had entered the active first stage of labour. Labour progressed normally. [3] Some concerns relating to the slow progression of labour were noted in the partogram at 00h00. The partogram is a form that must be completed by midwives to record foetal and maternal information and to graphically reflect the progress of labour. The National Guidelines for Maternity Care published in 20071 (maternity guidelines) list ‘poor progress in the active phase of labour (crossing partogram action line)’ and ‘thick meconium staining of the liquor’ among the list of labour-related problems. The entry made in the partogram at 01h20 on 18 July 2010 showed that the respondent’s progress had slowed down. The graphic presentation in the partogram showed that the action line had been crossed. The plan was to notify the doctor about the respondent’s condition. The notes reflect that the doctor was summoned at 01h30 and he undertook to attend to the respondent. I pause here to mention that in terms of the maternity guidelines, if the cervix of the woman in labour has reached 10cm dilation, then the delivery must be expedited by using forceps. However, where the cervical dilation has not yet reached 10cm, then preparations for a caesarean section must be made. [4] The respondent’s examination at 01h50 revealed that the amniotic sac membranes had ruptured, and meconium-stained liquor, grade 2, was observed. She was fully dilated and was thus in the second stage of active labour. At 02h00, the attending midwife again summoned the doctor who was on call. The clinical notes recorded that the doctor promised to attend. It further 1 Department of Health RSA Guidelines for Maternity Care in South Africa 3 ed (2007). recorded that the plan was to monitor the foetal and maternal condition. The note made at 02h00 was the last entry made in the clinical notes. There is no indication of any monitoring whatsoever having taken place between 02h00 and the delivery of the baby at 03h35. Despite it being common cause that D M was born at 03h35, the partogram inexplicably reflects an entry purporting to show the position of the foetal head (in utero) at 04h00. [5] The clinical notes pertaining to D M’s birth recorded that her 1-minute Apgar score was 5/10.2 Her score for the heart rate was 2, while she scored 0 for respiration and muscle tone. Her score for response to stimulation was 1 and she scored 2 for colour. A second Apgar assessment was done 5 minutes after D M’s birth; she scored 7/10, again the score for heart rate was 2. At that stage, her breathing had improved somewhat, and she had a better muscle tone. The neonate assessment form shows that D M had a slow respiration rate, a weak Moro reflex,3 and an absent grasp reflex and ‘cry’. She had to be resuscitated. Her blood glucose was high. [6] Later observations noted that D M had suffered seizures. Her ‘cry’ was still not audible, and at 13h10 on 20 July 2010 a doctor noted the presence of hypertonia4 and the absence of Moro reflex; in addition, D M’s muscle tone was described as ‘floppy’. A diagnosis of hypoxic-ischaemic encephalopathy (HIE) was recorded. Ischaemia is defined as a ‘deficiency of blood in a body part due to functional construction or actual obstruction of a blood vessel’. Hypoxia results from a sustained reduction in the supply of oxygen to the brain. It is 2 APGAR stands for Appearance, Pulse, Grimace, Activity and Respiration. In the Apgar test, five factors are used to check a newborn baby’s health. Each is scored on a scale of 0 to 2, with 2 being the best score. For Appearance the skin colour is checked; for Pulse, heart rate; for Grimace, reflexes; for Activity, muscle tone; and for Respiration, breathing rate and effort. The individual scores for the five factors are added up to obtain a score out of ten. The highest score to be achieved is 10 and scores of 7, 8 or 9 out of 10 are normal or good scores. Source: kidshealth.org. 3 The Moro reflex is an infantile reflex that, inter alia, entails the infant’s spreading of the arms in response to a sudden loss of support. In W B Saunders Co’s Dorland’s Illustrated Medical Dictionary 25 ed (1974), Moro reflex is described as follows: ‘[O]n placing an infant on a table and then forcibly striking the table on either side of the child, the arms are suddenly thrown out in an embrace attitude; called also startle r[eflex]’. 4 W B Saunders Co’s Dorland’s Illustrated Medical Dictionary 25 ed (1974) defines ‘hypertonia’ as ‘increased resistance of muscle to passive stretching’. common cause that D M developed severe asymmetrical mixed-type cerebral palsy,5 predominantly dystonic. [7] It was on that basis that the respondent claimed damages from the appellant. In her particulars of claim, the respondent asserted, inter alia, that the appellant had failed to ensure that a suitably qualified medical practitioner attended to the respondent at all material times of her labour; failed to take required steps to ensure proper, timeous and professional assessment, monitoring and management of patients; and failed to take steps to prevent the occurrence of complications when this could have been done by exercising reasonable care and diligence. Furthermore, it was averred, inter alia, that the hospital staff had failed to perform accurate and proper cardiotocographic6 (CTG) tracings of the foetal heart rate; failed to record an accurate partogram; failed to monitor the foetal heart rate with sufficient frequency; and failed to detect that D M was in foetal distress. [8] The appellant’s plea amounted to a bare denial, as the appellant had denied every aspect of negligence which the respondent had alleged in the particulars of claim, without stating material facts upon which she was relying. The pre-trial minutes identified the issues for determination as negligence and causation and indicated that the parties agreed to separate the issues of liability and quantum. The trial commenced in February 2021. [9] The only evidence adduced before the high court was that of experts. The expert witnesses who testified formulated their opinions based on the respondent’s medical records, her antenatal card, the partogram, the neonatal records, as well as the magnetic resonance imaging (MRI) scan performed on 4 February 2015. The MRI features were considered as diagnostic of an acute profound (central) hypoxic ischaemic injury. The diagnosis was later changed 5 The American College of Obstetrics and Gynaecology (ACOG) defines neonatal encephalopathy as a clinically defined syndrome of disturbed neurological function in the earliest days of life of an infant born after 35 weeks of gestation manifested by a subnormal level of consciousness or seizures and often accompanied by difficulty with initiating and maintaining respiration and depression of tone and reflexes. 6 A cardiotocograph monitors the foetal heartbeat and the contractions of the uterus. to central perirolandic, basal ganglia and thalamic hypoxic ischaemic injury (PBGT). [10] The respondent adduced the evidence of two experts, namely Dr Murray, an obstetrician and gynaecologist, and Prof Smith, a neonatologist. The appellant adduced the evidence of only one expert, namely Prof Cooper, a neonatologist. The appellant’s gynaecologist and obstetrician, Prof Lombaard, signed a joint minute of experts with Dr Murray, but did not testify during the trial. [11] In its judgment, the high court outlined the issues for determination as follows: ‘[8] It is not in dispute that [the appellant] had a duty of care to ensure that [the respondent] received proper medical care and that [the appellant] is vicariously liable for the acts or omissions of the hospital staff. It is also not in dispute that [the respondent] received substandard care. There is no evidence that she was monitored at all from 02h00 onwards, at a time when the protocols require constant monitoring of the mother and foetus. [The appellant] accepts that the nursing staff were negligent. [9] The sole question for determination is whether negligent omission resulted in the hypoxic ischaemic injury and whether, with proper care, the injury could have been prevented.’ [12] Having analysed the evidence of all the witnesses, the high court found that the omission of the hospital staff to properly monitor the respondent’s labour, their failure to recognise foetal distress and the consequent failure to take urgent steps to deliver D M caused the brain injury that led to D M’s cerebral palsy. It was common cause that D M’s brain injury affected the basal ganglia-thalamic (BGT) structures of her brain. This pattern of injury is ordinarily associated with an acute profound insult. However, in determining causation, the high court accepted Prof Smith’s evidence that subacute or subthreshold intermittent hypoxic events that built up over an extended period could cause and had caused an acute-profound type injury to the BGT structures of the brain, that is, in the absence of a sentinel event. The high court therefore concluded that the appellant was liable to the respondent for delictual damages. This appeal is with the leave of the high court. [13] It bears mentioning that some months prior to the appeal hearing, the MEC for Health, Eastern Cape applied to the President of the Supreme Court of Appeal for leave to be admitted as an amicus curiae (amicus) in the appeal proceedings. On 7 March 2022, the Deputy President of the Supreme Court of Appeal granted an order admitting the MEC for Health, Eastern Cape as amicus and simultaneously issued directions pertaining to the filing of the heads of argument and related matters. [14] Following the granting of that order, the amicus brought an application for leave to adduce further evidence on appeal. The respondent opposed the application. The application to adduce new evidence was heard prior to the commencement of the appeal hearing. Having heard the oral submissions of counsel, the application was dismissed with costs, including the costs occasioned by the employment of two counsel. The court indicated that reasons for that order would be furnished in due course. It would be prudent to furnish those reasons at the end of this judgment, as the considerations which informed our decision to dismiss the application were informed by the analysis of expert evidence and the authorities discussed in the succeeding parts of this judgment. Suffice it to mention that the amicus was granted leave to make oral submissions for a maximum of 30 minutes, limited strictly to new submissions not dealt with by the appellant’s counsel. [15] The element of wrongfulness was admitted in the parties’ pre-trial minutes. The only elements of delictual liability that remained as issues to be determined at the commencement of the trial were negligence and causation. It is to these two elements of delict that I now focus my attention. Evaluation of expert evidence [16] Since reliance was placed exclusively on expert evidence, it is necessary to preface my discussion on the delictual elements of negligence and causation with an outline of the legal principles applicable to the evaluation of expert evidence. [17] The functions of an expert witness were explained by this Court as follows in McGregor and another v MEC Health, Western Cape:7 ‘. . . The functions of an expert witness are threefold. First, where they have themselves observed relevant facts that evidence will be evidence of fact and [be] admissible as such. Second, they provide the court with abstract or general knowledge concerning their discipline that is necessary to enable the court to understand the issues arising in the litigation. This includes evidence of the current state of knowledge and generally accepted practice in the field in question. Although such evidence can only be given by an expert qualified in the relevant field, it remains, at the end of the day, essentially evidence of fact on which the court will have to make factual findings. It is necessary to enable the court to assess the validity of opinions that they express. Third, they give evidence concerning their own inferences and opinions on the issues in the case and the grounds for drawing those inferences and expressing those conclusions.’ [18] Endorsing the approach followed by the House of Lords in Bolitho v City and Hackney Health Authority,8 this Court in Michael and Another v Linksfield Park Clinic (Pty) Ltd and Another9 (Linksfield) cautioned that a court is not bound to absolve a defendant from liability for negligent medical treatment or diagnosis simply because expert opinion evidence is that the treatment or diagnosis was in accordance with sound medical practice. It laid down that what is required in that evaluation is to determine whether the opinions advanced by the experts are founded on logical reasoning.10 Negligence [19] As is apparent from para 11 above, the appellant conceded in the high court that the hospital staff had been negligent and concentrated on the issue 7 A M and another v MEC for Health, Western Cape [2020] ZASCA 89; 2021 (3) SA 337 (SCA) para 17. 8 Bolitho v City and Hackney Health Authority [1998] AC 232; [1997] UKHL 46; [1997] 4 All ER 771; [1997] 3 WLR 1151 at 241-242. Also see Daubert et al v Merrell Dow Pharmaceuticals Inc [1993] USSC 99; 509 US 579 (1993). 9 Michael and Another v Linksfield Park Clinic (Pty) Ltd and Another [2001] ZASCA 12; 2001 (3) SA 1188 (SCA); [2002] 1 All SA 384 (SCA) para 36. 10 Linksfield para 37. of factual causation. The appellant took the same stance in this Court. For the reasons briefly set out below, the concession that negligence on the part of the hospital staff had been proved was fully justified. The test for establishing negligence is trite;11 it rests on two bases, namely, reasonable foreseeability and the reasonable preventability of damage and failure to act accordingly. What is or is not reasonably foreseeable in a particular case is a fact-bound enquiry.12 [20] The standards that were applicable in clinics, community health centres and district hospitals in South Africa at the time of D M’s birth were those specified in the maternity guidelines, which emphasise the necessity to monitor a woman in labour. They set out the monitoring that is considered appropriate. It is clear from the maternity guidelines that certain steps need to be taken when labour is prolonged. These steps include frequent monitoring, especially to enable the hospital staff to identify foetal distress. [21] Dr Murray opined that the second stage of labour is the most critical time for a foetus, as it is during this time that contractions occur most frequently and are strongest. Although the maternity guidelines stipulate that progress which has crossed the action line and the presence of thick meconium are indications for CTG monitoring, there is no evidence of CTG monitoring having been done during the respondent’s labour despite the presence of grade 2 meconium- stained liquor and slow progress of labour. Dr Murray testified that the foetal condition was ‘severely inadequately monitored’ during the last 95 minutes of the respondent’s labour. In the joint minute, Prof Lombaard agreed with this statement. [22] Inexplicably, the partogram completed by the nurse bore a mark purporting to show the foetal head position in utero at 04h00 despite D M having been delivered at 03h35. Remarking on that glaring error, the appellant’s own counsel stated that the 04h00 entry made in the partogram places a question 11 Kruger v Coetzee 1966 (2) SA 428 (A); [1966] 2 All SA 490 (A). 12 Pitzer v Eskom [2012] ZASCA 44 (SCA) para 24. mark on the truthfulness of its contents. Surprisingly, the nurse who attended to the appellant was not called to testify despite counsel having undertaken to do so. There remains no explanation for the wrong entry in the partogram and the failure to make clinical notes at a critical time when the only intervention to avoid harm was, in terms of the maternity guidelines, to deliver the baby as soon as possible. [23] All things considered, there can be no doubt that reasonable nurses and doctors in the position of the attending hospital staff would have monitored the respondent and the foetus more closely. Notably, it was not the appellant’s case that the hospital experienced a shortage of staff on the night in question or that it did not have the necessary equipment to expedite D M’s delivery. The concessions regarding negligence, made by counsel during cross- examination,13 in the heads of argument and during oral argument, were therefore rightly made. Causation [24] It is well-established that causation has two elements, namely: (i) factual causation, determined by applying the ‘but for’ test; and (ii) legal causation, which answers the question of whether the wrongful act is linked sufficiently closely to the harm suffered; if the harm is too remote, then there is no liability.14 In Za v Smith and Another,15 Brand JA described the applicable test as follows: ‘The criterion applied by the court a quo for determining factual causation was the well- known but-for test as formulated, eg by Corbett CJ in International Shipping Co (Pty) Ltd v Bentley 1990 (1) SA 680 (A) at 700E-H. What it essentially lays down is the 13 While cross-examining Dr Murray, counsel for the appellant prefaced one of the questions as follows: ‘The infrequent monitoring during this time must also be accepted, especially bearing in mind that there was a meconium staining thicker and slow progress. Meaning more foetal surveillance was required by way of CTG because of the increased risk of foetal distress’. Counsel went on to say the following: ‘Then [Prof Lombaard] said, secondly the foetal heart rate should be monitored every second contraction and that further foetal heart rate was only monitored every 30 minutes. Well, we know according to the guidelines that it is not an appropriate monitoring that deviates from the standard. . . . I do not think that we have difficulty to say, well that . . . in itself is method to conduct, not necessarily [causally] connected to the outcome of the baby but that in itself was negligent’. 14 International Shipping Company (Pty) Ltd v Bentley [1990] 1 All SA 498 (A); 1990 (1) SA 680 (A) at 700E-I. 15 Za v Smith and Another [2015] ZASCA 75; 2015 (4) SA 574 (SCA); [2015] 3 All SA 288 (SCA) para 30. enquiry – in the case of an omission – as to whether, but for the defendant’s wrongful and negligent failure to take reasonable steps, the plaintiff’s loss would not have ensued. In this regard this court has said on more than one occasion that the application of the “but-for test” is not based on mathematics, pure science or philosophy. It is a matter of common sense, based on the practical way in which the minds of ordinary people work, against the background of everyday-life experiences. In applying this common sense, practical test, a plaintiff therefore has to establish that it is more likely than not that, but for the defendant’s wrongful and negligent conduct, his or her harm would not have ensued. The plaintiff is not required to establish this causal link with certainty (see eg Minister of Safety & Security v Van Duivenboden 2002 (6) SA 431 (SCA) para 25; Minister of Finance v Gore NO [2006] ZASCA 98; 2007 (1) SA 111 (SCA) para 33. See also Lee v Minister of Correctional Services [2012] ZASCA 30; 2013 (2) SA 144 (CC) para 41.).’ (Own emphasis.) [25] Applying the test set out above to the facts of this case, the crisp question is: is it more likely than not that, but for the wrongful and negligent conduct of the appellant’s employees, D M would not have suffered a brain injury during the birth process, as a result of hypoxic ischemia?16 The high court found in the affirmative. The high court relied on the evidence of Prof Smith and an article that he co-authored, which was based on a case-study.17 The study was in respect of 10 cerebral palsy survivors who sustained intrapartum hypoxic ischaemic basal ganglia-thalamic (BGT) pattern injury in the absence of an obstetric sentinel event. In respect of all 10 patients there was evidence of foetal distress consisting of pathological or suspicious CTG prior to delivery, and the median time interval between the first pathological CTG and delivery of the infant was 179 minutes. Prof Smith’s article concluded that in the absence of a perinatal sentinel event, subacute or subthreshold prolonged or intermittent intrapartum hypoxic ischaemia may cause a BGT pattern brain injury but that warning signs in the form of non-reassuring foetal status, would be detectable 16 Ischaemia is a restriction in blood supply. Blood supplies oxygen to the brain. A continued restriction in blood supply leads to a lack of oxygen supply. Where this takes place, bradycardia occurs. This is a slowing of the foetal heart rate. Hypoxia results from a sustained reduction in the supply of oxygen to the brain. The resulting injury to the newborn baby is described as hypoxic-ischaemic encephalopathy. This is a form of neurological dysfunction that leads to the development of cerebral palsy. 17 J Smith et al ‘Intrapartum Basal Ganglia-Thalamic Pattern Injury and Radiologically Termed “Acute Profound Hypoxic-Ischemic Brain Injury” Are Not Synonymous’ (2020) American Journal of Perinatology. by means of cardiotocograph or auscultation monitoring up to a few hours before delivery. [26] The primary thrust of the appellant’s attack on the judgment of the high court was its acceptance of Prof Smith’s evidence pertaining to the mechanism of the brain injury suffered by D M. The appellant contended that the high court erroneously accepted the validity of Prof Smith’s theory, published in a 2020 medical journal even though his theory was in its developmental stage and thus unsupported, was not compelling and ran contrary to the ‘traditional view’ that a BGT pattern (grey matter injury) is associated with an acute profound hypoxic ischaemic event. The theory posited in that article had already been rejected by this Court in A N (obo E N) v MEC for Health, Eastern Cape18 (A N v MEC), so it was argued. The appellant laid great emphasis on the fact that the generally accepted view supported by literature was that acute profound insults happen because of sentinel events and occur suddenly and without warning, and therefore could not be averted. [27] The appellant contended that the respondent’s experts had applied reverse reasoning and had ventured beyond the proven facts in order to apply the theory propounded by Prof Smith. Furthermore, it was contended that even if Prof Smith’s article were to be regarded as authoritative, there was no evidence showing that the foetus was in a compromised state for a prolonged time prior to delivery, which is a fact that is necessary for the application of Prof Smith’s theory. [28] The central question in this appeal is whether on the facts set out in the preceding paragraphs, Prof Smith’s opinion was founded on logical reasoning. This includes an assessment of whether the reasoning or methodology underlying his testimony is scientifically valid and whether that reasoning or methodology can be applied to the facts in issue.19 It is about the cogency of the underlying reasoning which lead the experts to their conflicting opinions.20 18 A N (obo E N) v MEC for Health, Eastern Cape [2019] ZASCA 102; [2019] 4 All SA 1 (SCA). 19 Daubert et al v Merrell Dow Pharmaceuticals Inc [1993] USSC 99; 509 US 579 (1993) at 592. 20 S v Rohde [2021] ZASCA 134; 2021 (2) SACR 565 (SCA) para 70. If the expert’s opinion is logical and can reasonably be held on those facts and his chain of reasoning, then the threshold will be satisfied even though his is not the only opinion that can be expressed on those facts.21 [29] The appellant levelled considerable criticism at Prof Smith’s testimony and contended that his evidence and the article that he relied on ought to be rejected. I disagree. There is nothing illogical about Prof Smith’s opinion. It was not and could not be disputed that Prof Smith and his colleagues had identified 10 cases of patients with BGT pattern injuries (with no sentinel events and no fixed terminal bradycardia22), where proper monitoring demonstrated that the babies had commenced displaying foetal distress at a median of about three hours before delivery. Thus, it was uncontroverted that such cases are possible and the only real remaining question on the merits is whether this probably was such a case. I nevertheless deal with the criticisms levelled against the article and Prof Smith’s evidence in respect thereof. [30] The appellant described Prof Smith’s opinion as ‘shaky’ and ‘unreliable’. Notably, the appellant did not call an expert to challenge the reliability of Prof Smith’s opinion during the trial. In his testimony, Prof Smith expressed the same opinion he expressed in the article he co-authored, which was peer-reviewed prior to its publication. Prof Cooper did not challenge the validity of Prof Smith’s hypothesis based on animal studies and merely opined in the joint minute that it had been published online and not in print. According to him, it is only when the article was in print that peer review would take place. In his testimony, Prof Smith denied that his article had not been peer-reviewed and explained that Prof Cooper had confused post-publication with peer review. Thereafter, no further cross-examination was pursued on this aspect. 21 Imperial Marine Company v Motor Vessel Pasquale della Gatta and Another; Imperial Marine Company v Motor Vessel Filippo Lembo and Another [2011] ZASCA 131; 2012 (1) SA 58 (SCA); [2012] 1 All SA 491 (SCA) para 26. 22 The normal foetal heart rate ranges between 120 and 160 beats per minute. In her medico- legal report, Dr Murray said: ‘For infants, bradycardia is defined as a heart rate of less than 110 beats per minute’. [31] It bears noting that it was not disputed that the online journal in which the article was published is reputable. The article was based on information from textbooks and articles, as well as the personal experiences of, and investigations conducted by Prof Smith and of the other experts who co-authored the article. It was also based on experiments on animal models and data obtained from a case-study relating to human foetuses by others, or information from textbooks. As correctly pointed out by the high court, Prof Cooper is one of Prof Smith’s peers. If he had any qualms about the study, its methodology, the data, or its interpretation, he should have raised those concerns. He failed to engage with the validity of Prof Smith’s methodology. In my view, the opinion propounded by Prof Smith is founded on logical reasoning, survives scrutiny and is foursquare in accordance with the Linksfield principle. [32] Although the appellant criticised Prof Smith’s expert opinion regarding the mechanism of the insult and his reliance on the case-study involving 10 cases, the appellant could not point to any contrary literature. None of the articles submitted by the appellant ruled out the theory that intermittent episodes of hypoxia can culminate in an injury of an acute profound type as propounded by Prof Smith. [33] In an attempt to discredit Prof Smith’s case-study and its findings, the respondent relied, inter alia, on a study conducted by Okumura et al,23 which determined that, in some cases, the origin of the foetal bradycardia could not be determined despite the labour being monitored. But this article obviously did not contradict that the research of Prof Smith et al had uncovered the aforesaid 10 cases. And it bears emphasising that the Rennie and Rosenbloom article24 relied upon by the appellant was based on brain injuries consequent on the occurrence of sentinel events; in this matter, the joint minute of experts acknowledged that there was no evidence that a sentinel event had occurred. 23 A Okumura, F Hayakawa, T Kato, K Kuno & K Watanabe ‘Bilateral basal ganglia-thalamic lesions subsequent to prolonged fetal bradycardia’ (2000) 58 Early Human Development 111. 24 J Rennie & L Rosenbloom ‘How long have we got to get the baby out? A review of the effects of acute and profound intrapartum hypoxia and ischaemia’ (2011) The Obstetrician & Gynaecologist 13(03): 169-174. [34] Insofar as the size of Prof Smith’s case-study was criticised as too small on account of having analysed 10 cases, this criticism is unjustifiable. It is worth noting that the Pasternak study25 relied upon by the appellant was based on 11 patients. To my mind, Prof Smith’s explanation for relying on only 10 cases is plausible. He pointed out that the antepartum and maternal and neonatal characteristics of the 10 cases were retrospectively analysed. The 10 cases were not hand-picked, as alleged by the appellant; rather, the study was based on actual cases where the injury sustained was of the acute profound type, where there was no sentinel event and where the foetal heart rate had been properly monitored. [35] The fact of the matter is that the appellant did not submit scientific data or evidence ruling out the reliability of Prof Smith’s expert opinion. Moreover, the trial court was not provided with any article which served to refute the observations made in his case-study. The insurmountable difficulty for the appellant is that it failed to call an expert who could engage with and challenge the reliability of Prof Smith’s theory.26 That being the case, counsel’s submission that Prof Smith’s approach was not the medical norm does not serve to refute Prof Smith’s uncontested evidence, at the level of factual probability.27 [36] Furthermore, a lack of general acceptance of his theory cannot, without more, warrant a rejection of his theory,28 as it is backed up by a case-study. Clearly, there is no basis in law for rejecting Prof Smith’s theory. The 10 cases on their own demonstrate that a series of partial intermittent, subacute/subthreshold hypoxic insults can cause an injury to the BGT deep nuclear structures including the perirolandic area with a pattern like that revealed by D M’s MRI scan. Moreover, Prof Smith’s conclusions were not based exclusively on animal experiments. It was also based on his experience 25 J F Pasternak & M T Gorey ‘The Syndrome of Acute Near-Total Intrauterine Asphyxia in the Term Infant’ (1998) Pediatric Neurology 18(05): 391-398. 26 Oppelt v Head: Health, Department of Health Provincial Administration: Western Cape [2015] ZACC 33; 2016 (1) SA 325 (CC); 2015 (12) BCLR 1471 (CC) paras 39-40. 27 Ibid. 28 Linksfield para 37. and that of his co-authors over many years, involving human cases. His views find material support in Volpe’s textbook,29 where the following is stated in relation to the injuries arising from an insult to the deep nuclear-brain stem, in which the insult is severe and abrupt: ‘In the more prolonged and less severe insults, the diversion of blood to deep nuclear structures occurs at least to a degree, and thus the cerebral regions are more likely to be affected. Studies in the near-term fetal lamb indicate that the severe terminal insult that results in injury to deep nuclear structures especially may be likely to occur after brief, repeated hypoxic-ischaemic insults first cause a cumulative deleterious effect on cardiovascular function that presumably then can result in a severe late insult.’ [37] The appellant must accept her counsel’s choices regarding the expert evidence that was adduced on her behalf and the failure to call an expert that could challenge Prof Smith’s theory. In this regard, I align myself with the following remarks made by the high court in its judgment: ‘[67] There is no substantive evidence from [the appellant] to refute Prof. Smith’s version. I would have expected [the appellant] to put up some evidence as to the cause of the injury. I say so in the full understanding that [the appellant] does not bear an onus of proof. However, when [the respondent] presents a well-reasoned opinion, one would expect [the appellant] to put up some version of its own. [The appellant] did not even put up a version during cross-examination. I therefore accept Prof. Smith’s evidence, that a series of partial intermittent, subacute/subthreshold hypoxic insults may result in this type of injury to the BGT deep nuclear structures including the perirolandic area.’ From my point of view, this finding of the high court is unassailable. [38] Having considered the conspectus of the evidence, I am satisfied that the high court’s acceptance of Prof Smith’s evidence, that a series of partial intermittent, subacute/subthreshold hypoxic insults can result in this type of injury to the BGT deep nuclear structures including the perirolandic area was justified. 29 J J Volpe ‘Hypoxic-Ischemic Injury in the Term Infant: Pathophysiology’ Chapter 9 in J J Volpe Neurology of the Newborn 6 ed (2018) at 502. [39] It follows that in determining the causation element in this matter, the starting point is that the BGT brain injury pattern revealed by the MRI, ie the injury to the central or deep grey matter of the brain, (the basal ganglia and/or thalami and/or sensorimotor cortex), could in principle have been caused by either by an acute profound total or near-total hypoxic ischaemic insult or intermittent or prolonged episodes of subacute and subthreshold interruption of the supply of blood to the brain. As I have said, the crucial question is which of these probably occurred in this case. Of cardinal importance in this regard is that in their joint minute Dr Murray and Prof Lombaard agreed that there was no evidence of a sentinel event, whereas the A N v MEC judgment recorded that the experts were agreed that there had been a sentinel event. This is one crucial aspect that distinguishes the case A N v MEC on the facts. It is somewhat odd that even though the appellant is content with the order granted in A N v MEC and supports the evaluation of the evidence in that matter, the appellant’s counsel argued that this Court’s assertion (in paragraph 17) of that judgment that the experts were agreed that there was a sentinel event is wrong. [40] It bears emphasising that the present appeal is not a debate about whether A N v MEC was correctly decided or not. Besides, it is a trite principle of our law that every case must be decided on its own facts and on the evidence adduced in that specific matter. Factual findings made in one case cannot be transferred to produce the same factual findings in another case with similar facts. A N v MEC was a judgment reached on the basis of expert evidence presented in that case and its conclusion was based on the facts of that case. In the face of this important distinguishing fact, the appellant’s expectation that the outcome of this case ought to be the same as that of A N v MEC is misplaced. The appellant’s apparent anxiety that this Court’s confirmation of the decision of the high court would open the floodgates of medical negligence claims against the government is an irrelevant consideration. After all, nothing bars a party from adducing all the evidence that it considers necessary to persuade a court to reach an outcome favourable to it. Advocacy tools such as cross-examination, presentation of contrary evidence will always be available for counsel to use in similar cases in the future. [41] Reverting to the facts of this case, it is of significance that Dr Murray noted an entry in the respondent’s medical records categorising her pregnancy as ‘low risk’. It was also noted that she had an adequate pelvis. In the joint minutes of Dr Murray and Prof Lombaard, there was consensus that there was no recorded sentinel or catastrophic event (uterine rupture, uterine tear, placenta praevia, abruption placenta, umbilical cord prolapses, foeto-maternal haemorrhage) which occurred during labour which could theoretically explain the outcome of D M developing an encephalopathy which developed into cerebral palsy. The expert evidence demonstrated that these are all rare, traumatic and easily diagnosable events. Importantly, whilst both Dr Murray and Prof Smith conceded that a cord compression (not to be confused with a cord prolapse) would not leave a ‘footprint’, they convincingly explained that it was improbable that a cord compression would cause an abrupt total hypoxic- ischaemic event, ‘usually it comes and goes’. [42] The paediatric experts, Prof Smith and Prof Cooper, agreed that there was no clear evidence suggesting that infection, genetic or anatomical abnormalities of the brain played a causative role. The joint minute of the paediatric neurologists, too, expressed consensus on this aspect. Crucially, Prof Smith asserted that in the event of a cord compression having the same effect as a sentinel event, that would have meant that there was a cord compression which occurred in the 20 minutes before delivery, resulting in a bradycardia (the heart rate falling to 60 to 80 beats per minute). He opined that if that were so, the bradycardia could not have resolved itself so quickly that at 1 minute of life (when D M’s first Apgar test was performed) the heart rate was normal (the Apgar score for the heart rate was 2). It bears noting that this evidence was not disputed. [43] On this aspect, Dr Murray, the only obstetrician and gynaecologist who testified, stated that typically a cord compression that is equal to a sentinel event occurs when a cord prolapses. According to her, such an event would not go unnoticed when there is proper monitoring, as it can be detected by decelerations of the foetal heart rate. Based on these two experts’ uncontested evidence on this aspect, it is improbable that there could have been a cord compression that had the same effect as a sentinel event. In the absence of a sentinel event, the aetiology of D M’s brain injury as one arising from intermittent hypoxia, as described by Prof Smith, is the more probable explanation. [44] Regarding the late placental insufficiency that was observed when the respondent’s placenta was examined following D M’s birth, Prof Smith opined that it, too, would have caused foetal compromise, which would have impacted on the foetus’s ability to tolerate a normal labour. If this aspect had been noted during labour, it would have required intervention to avert the eventuation of harm. However, this was an aspect that was obviously missed due to inadequate monitoring. [45] In an attempt to refute the occurrence of foetal distress, the appellant referred to the relatively high Apgar score allocated to D M at birth, which, it was submitted, was incompatible with foetal distress. However, this stance fails to take into consideration that the paediatricians accepted the accuracy of the following information, which was recorded by a reviewing doctor following D M’s birth: ‘Prolonged 2nd stage; [Meconium-stained liquor] MSL II; baby resuscitated, no meconium plug or laryngoscopy . . . glucose 11.2’. In respect of the Apgar score, the following was recorded: ‘pink . . . regular breathing; floppy; the baby was admitted and supplemental oxygen via head box was administered’. Both paediatricians agreed that the Apgar scores recorded in D M’s medical records were probably assisted by resuscitation. What was more significant in this regard, however, was the evidence of Prof Smith that a sentinel event would necessarily have resulted in a fixed terminal bradycardia, which on the probabilities was incompatible with the baby’s Apgar scores of 2 for heart rate at 1 minute and 5 minutes after delivery. [46] Dr Murray’s uncontested evidence was that the hypoxic ischaemic episode would have manifested itself in decelerations of the foetal heart rate, which would have been noted, had there been adequate monitoring. Her uncontested evidence was that in the face of foetal distress, the desired preventive action indicated in the maternity guidelines would have been to expedite D M’s delivery. Her uncontested opinion was that there would have been sufficient time to expedite D M’s delivery within twenty to twenty-five minutes using forceps, which would have prevented the onset of D M’s brain injury. Prof Lombaard did not dispute the estimated delivery time. [47] Both obstetric experts agreed that the exact time at which foetal distress occurred was impossible to determine due to the absence of clinical notes detailing the last 95 minutes of the respondent’s labour. Despite it having been the hospital staff’s obligation to monitor the foetal heart rate and to make the necessary clinical notes, which it failed to do, the appellant tried to capitalise on the fact that the exact times at which the foetal heart rate was indicative of foetal distress could not be established. In my opinion, it is fallacious to posit that where a woman in labour has not been monitored by hospital personnel at all during the most critical stage of her labour, the MEC responsible for the relevant hospital should escape liability arising from the negligence of its employees purely on the basis that the exact timing of the hypoxic injury of an acute profound nature cannot be ascertained. To do so would be to ignore uncontested evidence that, on probabilities, shows a link between the negligence and the harm that ensued. Amicus application to adduce further evidence on appeal [48] Against the background of the facts of this case and applicable authorities, it is now convenient to give reasons for this Court’s dismissal of the amicus application to adduce further evidence in the appeal. As mentioned before, the application to admit further evidence was premised on the contention that the medical and scientific articles sought to be introduced as further evidence would reveal the unreliability of Prof Smith’s theory. It is well- established that new evidence introduced on appeal is only admitted in exceptional circumstances. The following passages of the seminal judgment of the Constitutional Court in Rail Commuters Action Group and Others v Transnet Ltd t/a Metrorail and Others30 are apposite: 30 Rail Commuters Action Group and Others v Transnet Ltd t/a Metrorail and Others [2004] ZACC 20; 2005 (2) SA 359 (CC); 2005 (4) BCLR 301 (CC) at paras 41-43. ‘The SCA has similarly held that new evidence should be admitted on appeal under this section only in exceptional circumstances. This is because on appeal, a court is ordinarily determining the correctness or otherwise of an order made by another court, and the record from the lower court should determine the answer to that question. It is accepted however that exceptional circumstances may warrant the variation of the rule. Important criteria relevant to determining whether evidence on appeal should be admitted were identified in Colman v Dunbar. Relevant criteria include the need for finality, the undesirability of permitting a litigant who has been remiss in bringing forth evidence to produce it late in the day, and the need to avoid prejudice. One of the most important criteria was the following: “The evidence tendered must be weighty and material and presumably to be believed, and must be such that if adduced it would be practically conclusive, for if not, it would still leave the issue in doubt and the matter would still lack finality.”.’ [49] The argument presented in support of this application strayed far from the criteria mentioned above. The thrust of the amicus’s argument was that allowing the introduction of the articles would ensure that the erroneous findings of the high court regarding the brain injury and how it is caused would have precedential value, as this would expose the Department of Health to billions of rands in damages claims. It was argued that whereas what could be distilled from previous judgments of this Court was that acute profound insults happen as a result of sentinel events which occur suddenly and without warning, the high court had departed from that conventional view because of its erroneous acceptance of a controversial theory propounded by Prof Smith. In fortification of his argument, counsel for the amicus referred us to the discrepancies in factual findings in A N v MEC for Health and MEC for Health and Social Development, Gauteng v M M (obo O M)31 despite the pattern of the infants’ brain injuries being the same. In my view, the different conclusions arrived at by various courts on this aspect perfectly illustrate the long-established principle that every case will be decided on its own merits. 31 MEC for Health and Social Development, Gauteng v M M (obo O M) [2021] ZASCA 128 (SCA). [50] The amicus, being the MEC for Health for the Eastern Cape Province, confirmed having been a litigant in several medical negligence cases of a similar nature to the one under consideration. It is worth mentioning that in A N v MEC, this Court bemoaned the prevalence of medical negligence cases arising from hospitals falling under the amicus.32 Of significance is that the appellant, being part of government, has the means to engage counsel with the requisite proficiency to ensure that evidence is presented on her behalf in the best way possible. As properly observed in MEC for Health, Eastern Cape and Another v Kirland Investments (Pty) Ltd,33 ‘[g]overnment is not an indigent or bewildered litigant, adrift on a sea of litigious uncertainty’. The amicus must accept that the appellant presented the case to the best of her ability. None of these matters were relevant to the question that had to be answered. There was no legal basis for allowing the amicus to attempt to supplement the appellant’s case on appeal. [51] The amicus’s contentions about the erroneous precedential value arising from reliance on Prof Smith’s evidence have no merit. It is trite that each case is decided on its own merits. Each case’s factual findings are based on the evidence adduced in that specific case. The amicus’s contentions also fail to take into account that scientific conclusions are subject to revision.34 The periodic revision of ACOG recommendations attests to this. Trial courts should not fall into the trap of demanding an unduly high measure of proof from a litigant.35 As mentioned in Linksfield, the scientific measure of proof is the ascertainment of scientific certainty, whereas the judicial measure of proof is the assessment of probability.36 The following remarks by Holmes JA in Ocean Accident and Guarantee Corporation Ltd v Koch37 are apposite: ‘The fact that, scientifically speaking, the aetiology of the disease is uncertain, does not hamper the Court in deciding, on the facts and on the expert evidence adduced in a given case, whether a likely cause was proved in such case. Judicial decisions reflect 32 A N v MEC para 28. 33 MEC for Health, Eastern Cape and Another v Kirland Investments (Pty) Ltd [2014] ZACC 6; 2014 (5) BCLR 547 (CC); 2014 (3) SA 481 (CC) para 82. 34 Daubert et al v Merrell Dow Pharmaceuticals Inc [1993] USSC 99; 509 US 579 (1993) at 597. 35 Maqubela v S [2017] ZASCA 137; 2017 (2) SACR 690 (SCA) para 5. 36 Linksfield para 40. 37 Ocean Accident and Guarantee Corporation Ltd v Koch 1963 (4) SA 147 (A). the particular facts and testimony of each case, and are not intended and cannot be regarded as scientific treatises. Accordingly, the possibility of future scientific disproof of the opinion of one or other of the expert medical witnesses is, judicially, a matter of no moment - the Court must do the best it can on the material presently before it in each case.’ Decades later, similar sentiments were expressed as follows by the United States Supreme Court in Daubert et al v Merrell Dow Pharmaceuticals Inc:38 ‘It is true that open debate is an essential part of both legal and scientific analyses. Yet there are important differences between the quest for truth in the courtroom and the quest for truth in the laboratory. Scientific conclusions are subject to perpetual revision. Law, on the other hand, must resolve disputes finally and quickly. The scientific project is advanced by broad and wide-ranging consideration of a multitude of hypotheses, for those that are incorrect will eventually be shown to be so, and that in itself is an advance.’ I express unqualified agreement with these remarks. [52] It is common cause that the new evidence sought to be introduced comprised published articles which were already available at the time of the trial. It was therefore open to the appellant to have used the articles in the trial as part of her evidence, had she deemed it necessary to do so. A party’s election to present its case in a particular manner is one of the factors that a court will consider within its discretion to allow an amicus to adduce evidence. As a general rule, therefore, an amicus should not be permitted to introduce evidence, on appeal, that had been available to the parties at the time of the trial but which they elected not to place before the court. Moreover, it was even open to the appellant to apply to introduce the evidence on appeal. The appellant, being a litigant in the matter, did not consider it necessary to do so. The amicus was unable to proffer a valid explanation as to why the articles in question should nevertheless be received as evidence on appeal. [53] A scientific or medical publication that is merely handed up during the proceedings without comment by a witness has no evidential value; such an 38 Daubert et al v Merrell Dow Pharmaceuticals Inc [1993] USSC 99; 509 US 579 (1993) at 596- 597. article has to be properly made part of the evidence by mutual admission or confirmation in evidence. In my view, it was not open to the amicus to merely hand up the articles it sought to have admitted as new evidence on appeal (with the aim of discrediting Prof Smith’s evidence), when Prof Smith did not express any views on the articles during the trial. Moreover, the contents of the articles were not put to him for comment during cross-examination. The articles in question could therefore not serve to discredit Prof Smith’s evidence.39 [54] As the amicus did not meet the requirements for the admission of new evidence on appeal, the application was doomed to fail. Those are the reasons why the amicus was not allowed to adduce new evidence on appeal. I must also add that the amicus’s written and oral submissions were not helpful, as they did not add anything new to the debate. Conclusion [55] To sum up in respect of the respondent’s delictual claim, it is clear from the conspectus of all the medical evidence that there was a lack of adequate monitoring at the most critical stage of the respondent’s labour. This conduct fell far short of the very guidelines intended for public hospitals and clinics in South Africa. In the face of slow progress in labour and the presence of thick meconium, there was no intervention on the part of the hospital staff to expedite the delivery of D M to avoid the eventuation of harm. However, it must be borne in mind that the doctor was summoned for the first time at 01h30. Based on the evidence, it is more probable than not that had the doctor who had been summoned arrived, he would, upon noting the unfavourable maternal and foetal conditions and the fact that the respondent was fully dilated, have delivered D M by forceps within 20-25 minutes of that doctor’s arrival.40 This means that D M would probably have been delivered by 02h15. It follows that D M’s brain injury would not have eventuated if her delivery had been expedited, which is 39 President of the Republic of South Africa v South African Rugby Football Union and Others [1999] ZACC 11; 2000 (1) SA 1 (CC); 1999 (10) BCLR 1059 (CC) paras 61-65. 40 Life Healthcare Group (Pty) Ltd v Suliman [2018] ZASCA 118; 2019 (2) SA 185 (SCA) para 16. the intervention spelt out in the maternity guidelines and confirmed by Dr Murray. [56] For all the reasons set out above, it is clear that but for the appellant’s failure to monitor and to take appropriate steps, D M would have been delivered much earlier and the harm would probably not have eventuated. The appellant’s argument that there is no evidence that the foetus was compromised for a prolonged time, amounts to refusing to admit the undisputed fact that a period of more than two hours lapsed between the noting of the poor progress of labour at 01h20 and D M’s delivery at 03h35. This contention is plainly misconceived and has no merit. [57] In my view, the findings of Prof Smith’s article find a clear correlation between the poor management of D M’s labour and the brain injury suffered by D M. It is noteworthy that both Dr Murray and Prof Lombaard agreed that insufficient monitoring of labour could have resulted in foetal distress being missed. It is uncontested that no steps were taken to exclude foetal distress despite poor progress of labour having been noted. Prof Smith’s opinion that, in the absence of a sentinel event, it is more probable than not that this substandard intrapartum obstetric management was the cause underlying the sequence of events that culminated in D M being subjected to a hypoxic ischaemic insult that led to her brain injury, is persuasive. Expressed differently, the most probable cause of D M being asphyxiated during labour and consequently suffering cerebral palsy was the failure of the hospital staff to monitor the maternal condition during the most critical time of labour, the failure to monitor the foetal heart rate and the consequent failure to intervene by expediting D M’s delivery. The high court’s reliance on Prof Smith’s evidence cannot be faulted. [58] Further and in any event, the conspectus of the evidence has shown on a balance of probabilities that the harm suffered by D M is closely connected to the omissions of the hospital staff in relation to their inadequate monitoring of the respondent’s critical stage of labour. Consequently, the causal link between the negligence and the harm that ensued is undeniable. It follows that the appeal must fail. Costs [59] As regards costs, I can see no reason why this Court should deviate from the general rule that costs should follow the result. The appellant engaged a senior and junior counsel to represent her in the appeal. Furthermore, during the exchange with the bench, counsel for the appellant indicated that he accepted that in the event of the appeal being dismissed, the costs order would include the payment of costs occasioned by the employment of two counsel. Given all the circumstances of this case, it was prudent for the respondent to employ more than one counsel to represent her in the appeal. Order [60] In the result, the following order is made: The appeal is dismissed with costs, including the costs occasioned by the employment of two counsel. ____________________ M B Molemela Judge of Appeal Appearances For appellant: A B Rossouw SC (with L A Pretorius) Instructed by: State Attorney, Pretoria State Attorney, Bloemfontein For respondent: J F Mullins SC (with M Coetzer) Instructed by: Wim Krynauw Attorneys, Krugersdorp Martins Attorneys, Bloemfontein For amicus curiae: P J de Bruyn SC (with M Rili and T Rossi) State Attorney, East London State Attorney, Bloemfontein

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 27 October 2022 Status: Immediate The following summary is for the benefit of the media in the reporting of this case and does not form part of the judgments of the Supreme Court of Appeal MEC for Health, Limpopo v L W M obo D M (502/2021) ZASCA 146 (27 October 2022) Today, the Supreme Court of Appeal (SCA) dismissed an appeal brought by the Member of the Executive Council for Health, Limpopo Province (the appellant) against the decision of the Gauteng Division of the High Court, Pretoria (the high court). The appeal was dismissed with costs, including the costs occasioned by the employment of two counsel. The appeal concerned a medical negligence claim in terms of which a mother (the respondent), acting on behalf of her minor child (D M), claimed damages in the high court arising from the brain injury which D M suffered during the birth process at Dilokong Hospital (the hospital) in Limpopo Province. The claim was lodged against the appellant, who would have been vicariously liable for damages caused by the negligent conduct of the hospital staff. The facts of the matter were as follows. The respondent was admitted at the hospital in the early hours of 17 July 2010. She was in the early stages of labour. An examination at 14h00 revealed that she was still in the latent phase of labour with no risk factors having been noted. Her vital signs were noted as normal, as were those of the foetus. Labour progressed normally. Some concerns relating to the slow progression of labour were noted in the entry made in the partogram at 01h20 on 18 July 2010. The notes reflected that the doctor was summoned at 01h30 and he undertook to attend to the respondent. The respondent’s examination at 01h50 revealed that the amniotic sac membranes had ruptured, and meconium-stained liquor, grade 2, was observed. She was fully dilated and was thus in the second stage of active labour. At 02h00, the attending midwife again summoned the doctor who was on call. The clinical notes recorded that the doctor promised to make an attendance. It further recorded that the plan was to monitor the foetal and maternal condition. The note made at 02h00 was the last entry made in the clinical notes. There was no indication of any monitoring whatsoever having taken place between 02h00 and the delivery of the baby at 03h35. The clinical notes pertaining to D M’s birth recorded, inter alia, a diagnosis of hypoxic-ischaemic encephalopathy (HIE). It was common cause that D M developed severe asymmetrical mixed-type cerebral palsy, predominantly dystonic. The crisp question that the SCA had to determine was whether it was more likely than not that, but for the wrongful and negligent conduct of the appellant’s employees, D M would not have suffered a brain injury during the birth process, as a result of hypoxic ischemia. The appellant had conceded that the hospital staff had been negligent. The SCA found in respect of the respondent’s delictual claim that it was clear from the conspectus of all the medical evidence that there was a lack of adequate monitoring at the most critical stage of the respondent’s labour. This conduct fell far short of the very guidelines intended for public hospitals and clinics in South Africa. In the face of slow progress in labour and the presence of thick meconium, there was no intervention on the part of the hospital staff to expedite the delivery of D M to avoid the eventuation of harm. Based on the evidence, the SCA found that it was more probable than not that had the doctor who had been summoned for the first time at 01h30 arrived, he would, upon noting the unfavourable maternal and foetal conditions and the fact that the respondent was fully dilated, have delivered D M by forceps within 20-25 minutes of that doctor’s arrival. The SCA found that this meant that D M would probably have been delivered by 02h15. It followed that D M’s brain injury would not have eventuated if her delivery had been expedited, which was the intervention spelt out in the maternity guidelines and confirmed by Dr Murray. The SCA found in respect of the expert evidence that the findings of Prof Smith’s article found a clear correlation between the poor management of D M’s labour and the brain injury suffered by D M. The SCA found further that it was noteworthy that both Dr Murray and Prof Lombaard agreed that insufficient monitoring of labour could have resulted in foetal distress being missed. It was uncontested that no steps were taken to exclude foetal distress despite poor progress of labour having been noted. The SCA found that Prof Smith’s opinion that, in the absence of a sentinel event, it was more probable than not that this substandard intrapartum obstetric management was the cause underlying the sequence of events that culminated in D M being subjected to a hypoxic ischaemic insult that led to her brain injury, was therefore persuasive. Expressed differently, the SCA found that the most probable cause of D M being asphyxiated during labour and consequently suffering cerebral palsy was the failure of the hospital staff to monitor the maternal condition during the most critical time of labour, the failure to monitor the foetal heart rate and the consequent failure to intervene by expediting D M’s delivery. The SCA thus held that the high court’s reliance on Prof Smith’s evidence could not be faulted. The SCA found further that the conspectus of the evidence had shown on a balance of probabilities that the harm suffered by D M was closely connected to the omissions of the hospital staff in relation to their inadequate monitoring of the respondent’s critical stage of labour. Consequently, the causal link between the negligence and the harm that ensued was undeniable. ~~~~ends~~~~

1765

non-electoral

2011

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Case no: 149/10 SAVVAS SOCRATOUS Appellant and GRINDSTONE INVESTMENTS 134 (PTY) LTD Respondent ________________________________________________________________ Neutral citation: Socratous v Grindstone Investments (149/10) [2011] ZASCA 8 (10 March 2011) CORAM: Navsa, Ponnan and Shongwe JJA HEARD: 22 February 2011 DELIVERED: 10 March 2011 SUMMARY: Cancellation of lease agreement ─ proliferation of litigation concerning cancellation on alternative bases ─ defence of lis alibi pendens wrongly rejected by court below ─ courts are a public resource under severe pressure ─ congested court rolls prejudiced by repeated litigation involving the same parties, based on the same cause of action and related to the same subject matter ─ court ought not to have decided the merits. ______________________________________________________________ ________________________________________________________________ ORDER ________________________________________________________________ On appeal from: Eastern Cape High Court (Mthatha) (Dukada AJ sitting as court of first instance). 1. The appeal is upheld with costs on the attorney and client scale. 2. The order of the court below is set aside in its entirety and substituted as follows: ‘a. The applicant’s application to strike out succeeds with costs. b. The proceedings are stayed pending the determination of either case 464/08 in the Magistrates’ Court for the district of Mount Currie or case 522/09 in this court. c. The applicant is to pay the respondent’s costs of these proceedings on the attorney and client scale.’ ________________________________________________________________ JUDGMENT ________________________________________________________________ NAVSA JA (Ponnan and Shongwe JJA concurring) [1] This is an appeal against a judgment of the Mthatha High Court (Dukada AJ), in terms of which it granted an order confirming the cancellation of a lease agreement in respect of commercial property and ordered the appellant’s eviction from the premises. The appellant was ordered to pay the costs of the application on an attorney and client scale. The appeal is before us with the leave of the Mthatha High Court. [2] In November 2006 the respondent company, Grindstone Investments 134 (Pty) Ltd (Grindstone), concluded a lease agreement with the appellant, Mr Savvas Socratous (Mr S), in terms of which it let to him, for a period of twelve years, certain premises situated at 107 York Road, Mthatha. The property was used to conduct a supermarket business under the style of a national supermarket chain. Clause 14 of the agreement provides that in the event of the destruction of or damage to the property to the extent that it was ‘untenantable’, either party was entitled to declare the lease cancelled by giving written notice to the other to that effect by pre-paid registered post within 30 days. [3] Clause 18 of the agreement provides that in the event of the lessor cancelling the agreement and the lessee disputing the cancellation and remaining in occupation, the lessee shall, pending the resolution of the dispute by litigation or otherwise, continue to pay to the lessor an amount equivalent to the monthly rental. Clause 23 of the agreement provides that in the event of the rental or any other amount remaining unpaid the lessor shall be entitled, after giving notice to remedy the breach, to cancel the lease forthwith and retake possession of the property, without prejudice to its right to claim arrear rentals and any damages it might have sustained as a result of the lessee’s breach. The agreement provides that in the event of legal action being taken against the lessee the latter shall be liable for costs on the attorney and client scale. Importantly, clause 18 provides that in the event that the dispute is resolved in favour of the lessor the amounts paid by the lessee shall be deemed to be amounts suffered by the lessor on account of damages suffered by it as a result of cancellation of the lease and/or the unlawful holding over. [4] It is undisputed that during September 2008 a fire broke out at the premises. Whilst the parties agreed that the damage caused by the fire was extensive they disagreed on whether the premises were, as a result, ‘untenantable’. On 28 September 2008 Grindstone purported to cancel the lease agreement on the basis that the property had been destroyed and was ‘untenantable’. The response by Mr S to the cancellation was that the premises could still be partially used and the lease agreement provided that in those circumstances it was not liable to be cancelled. [5] This dispute precipitated much litigation. During March 2009 Grindstone instituted action against Mr S in the Mthatha High Court, in terms of which it sought an order declaring the lease agreement cancelled by virtue of the notice given in terms of clause 14 of the lease, referred to in para 2 above. Grindstone also sought the eviction of Mr S. It did not in that action claim any amount for arrear rental or for holding over. [6] On 3 April 2009 Grindstone wrote to Mr S demanding payment of arrear rental in an amount of R262 020 for the period March 2008 to September 2008, when the fire broke out. It also claimed an amount of R439 692 for the period September 2008 to April 2009 on the basis that Mr S continued in occupation after the cancellation referred to in paragraph 4. Grindstone stated that in the event of these amounts not being paid it would cancel the lease agreement in terms of clause 23. That demand went unheeded. During May 2009 Grindstone brought the application that led to this appeal. In its founding affidavit it relied for its right to cancel on the destruction of the property and for failure to pay arrear rental and the amounts it considered due to it for the continued occupation by Mr S after the fire and subsequent to the cancellation. Significantly, in its founding affidavit, Grindstone referred to the action instituted by it, referred to in para 5 above, and stated the following: ‘There is accordingly pending litigation between the parties to determine the right of the applicant to cancel the lease.’ [7] Mr S opposed the application on several bases. First, that at the time that it had brought the application Grindstone had unlawfully resorted to self-help and had physically retaken possession of the property. Thus, Mr S contended, the application for eviction was misconceived. The spoliation by Grindstone had caused Mr S, in separate proceedings, to apply to the High Court on an urgent basis for the restoration of the property. The accusation by Mr S of spoliation on the part of Grindstone is unchallenged. [8] Furthermore, Mr S brought it to the attention of the court below that during June 2008, before any high court proceedings had been instituted, Grindstone had commenced litigation in the Magistrates’ Court for the district of Mount Currie for an order cancelling the lease agreement and his eviction. Grindstone’s response to this disclosure by Mr S was to submit that those proceedings related to arrear rentals due at that time and it should be considered to be distinct from the application proceedings leading up to the present appeal, which was for cancellation based on non-payment of rental for a different period and on the destruction of the property. If this litigation cocktail has not yet had a dizzying effect, there is more. It appears that as early as March 2008 there had been litigation between Grindstone and Mr S in relation to the lease and that it involved the alleged failure to pay stamp duties and the provision of a bank guarantee. At the time that the application in the court below was heard all these proceedings had not been disposed of and were still pending. It was contended by Mr S that all those proceedings were between the same parties based on the same cause of action and related to the same subject matter. Put simply, Mr S raised the defence of lis alibi pendens. [9] On the merits of the application in relation to the damage or destruction of the property Mr S relied on the provisions of clause 14, which, over and above the provisions referred to above, states that in the event of the lessor failing to give notice to cancel it would be obliged to proceed expeditiously with rebuilding the premises and for the period that the premises are ‘untenantable’ the lessee would not be liable for rental. Clause 14 also provides that in the event that the premises are partially tenantable the rental would be abated pro-rata to the beneficial use. In his opposing affidavit, Mr S states contradictorily, that since the fire the premises are tenantable and that he has been ‘forced to close the doors’. Clause 14 provides that when a dispute arises concerning the extent of the abatement of rental the dispute should be settled by arbitration. Mr S contended that the application by Grindstone was premature. Mr S also relied on a counterclaim he instituted against Grindstone which is the subject of the proceedings in the action instituted by the latter in the high court. In the counterclaim Mr S sought to hold the lessor liable for the national supermarket chain withdrawing its franchise rights from him. [10] In deciding the matter in the court below Dukada AJ was dismissive of the spoliation complaint. He stated that Mr S had retaken possession of the premises and that if the court held the basis for cancellation to be well-founded the eviction order could be executed. The learned judge went on to consider the requirements for a successful plea of lis pendens, namely, that there must be litigation pending between the same parties based on the same cause of action and in respect of the same subject matter. He rightly discounted the action in the magistrates’ court relating to unpaid stamp duties and the failure to provide a bank guarantee. Dukada AJ had regard to the submission on behalf of Grindstone, that cancellation on the basis of clause 23 of the lease agreement for failing to pay the rental, after Mr S remained in occupation subsequent to the fire, was a separate and distinct cause of action. Thus, he considered the proceedings in the magistrates’ court for the district of Mount Currie to be based on a different cause of action. He reached the same conclusion in relation to the high court action. He took the view that even if he had erred in relation to the question of lis pendens he had a residual discretion which he would have exercised in favour of Grindstone. [11] Having dismissed the points in limine the court below went on to decide the merits against Mr S. In respect of the allegations by Mr S concerning his counterclaim the court below decided to grant Grindstone’s application to strike them out on the basis that they were irrelevant. The court below confirmed the cancellation of the lease agreement and ordered the eviction of Mr S. The court appears to have held that the cancellation was justified on the basis of both the destruction of the property as well as for the non-payment of rental. It should be borne in mind that the litigation in the court below did not involve a determination of the amount owing in respect of the arrear rental or continued occupation after the fire or cancellation. [12] It is necessary to record certain events that unfolded subsequent to the judgment of the court below which are matters of concern. By the time the application for leave to appeal was argued in the court below the eviction order had already been executed. It appears that the court below was not informed of this fact. Furthermore, pending the appeal, the buildings on the property had been rebuilt by Grindstone and let to someone else. We were informed by counsel representing Grindstone that this was done against his advice. He rightly accepted that this conduct was deserving of censure. He assured us that since the premises in question were let to a fully owned subsidiary a decision of this court in favour of Mr S could be executed. These are troubling aspects to which I will return. Conclusions [13] It is necessary to consider the underlying principle of the defence of lis alibi pendens. In Nestle (South Africa) (Pty) Ltd v Mars Inc 2001 (4) SA 542 (SCA) para 16 this court said the following: ‘The defence of lis alibi pendens shares features in common with the defence of res judicata because they have a common underlying principle, which is that there should be finality in litigation. Once a suit has been commenced before a tribunal that is competent to adjudicate upon it, the suit must generally be brought to its conclusion before that tribunal and should not be replicated (lis alibi pendens). By the same token the suit will not be permitted to revive once it has been brought to its proper conclusion (res judicata). The same suit between the same parties, should be brought once and finally.’ This principle has been stated and repeated by the authorities over a period of more than a century.1 [14] The proceedings in the Magistrates’ Court at Mount Currie, instituted in June 2008, indisputably concerned cancellation of the lease agreement based on non-payment of rental. The action instituted in the high court which preceded the application which is the subject of the present appeal was based on the 1 Voet 45.2.7 Gane’s translation vol 6 at 560: ‘Exception of lis pendens also requires same persons, thing and cause. The exception that a suit is already pending is quite akin to the exception of res judicata, inasmuch as, when a suit is pending before another judge, this exception is granted just so often as, and in all those cases in which, after a suit has been ended there is room for the exception res judicata, in terms of what has already been said. Thus the suit must already have started to be mooted before another judge between the same persons, about the same matter and on the same cause, since the place where a judicial proceeding has once been taken up is also the place where it ought to be given its ending.’ destruction of the premises. The application that is the subject of this appeal was based on both. It is no answer to the defence of lis pendens in this case to say that part of the claim for arrear rental is for non-payment of rental for the period after the fire and that it is regulated by clause 23, the relevant parts of which are set out in para 3 above. It misconceives clause 23 and the effect of a prior cancellation for non-payment of arrear rental with amounts that may be due because of continued occupation. Clause 23 does not have the effect of reviving a prior cancellation and the court below was wrong to accept the submission that this distinguished the present litigation from the preceding litigation. Importantly, as pointed out in para 6 above, the claim for cancellation in the application that is the subject matter of the present appeal is based on non-payment of rental for a period that overlaps with the period on which the claim for cancellation was based in the Mount Currie proceedings. [15] There can, of course, be no doubt that the high court action sought confirmation of a cancellation based on the destruction of the property, which is one of the bases advanced in the application. One might rightly ask how many times a cancellation must occur to take effect. It is disingenuous to suggest that the litigation is distinguished on the basis that cancellation is sought on the basis of non-payment of arrear rental for a different period. Had the Mount Currie litigation been allowed to run to its conclusion the cancellation of the lease and its termination would have been decided. Likewise, if the high court action had proceeded to a conclusion it would have decided whether the lease had rightly been terminated. These are the same two questions the court below was asked to consider. As stated in para 6 above, Grindstone, in its founding affidavit, itself stated that there is pending litigation in the high court concerning its right to cancel the lease agreement. [16] Courts are public institutions under severe pressure. The last thing that already congested court rolls require is further congestion by an unwarranted proliferation of litigation. The court below erred in not holding that against Grindstone when it dismissed the defence of lis pendens without due regard to the facts and on wrong principle. The court below ought not to have proceeded to consider the merits. Furthermore, in my view, Grindstone’s failure to disclose in its founding papers that it had despoiled Mr S and to fully disclose all of the other litigation referred to above was deserving of censure, at least to the extent of a punitive costs order (see Trakman NO v Livshitz & others).2 It had come to court with unclean hands. The court below ought to have taken a dim view of that fact. [17] The failure by each counsel representing the respective parties to inform the court below at the time that the application for leave to appeal of the execution of the eviction order is baffling. I have little doubt that had the high court been appraised of that fact it would have refused the application. Grindstone’s conduct before and subsequent to judgment in the court below makes it liable to a punitive costs order on appeal. The same applies to its conduct in bringing the application in the court below. One final aspect remains. Strictly speaking the allegations struck out by the court below were irrelevant. [18] The following order is made: 1. The appeal is upheld with costs on the attorney and client scale. 2. The order of the court below is set aside in its entirety and substituted as follows: ‘a. The applicant’s application to strike out succeeds with costs. b. The proceedings are stayed pending the determination of either case 464/08 in the Magistrates’ Court for the district of Mount Currie or case 522/09 in this court. c. The applicant is to pay the respondent’s costs of these proceedings on the attorney and client scale.’ _________________ M S NAVSA JUDGE OF APPEAL 2 1995 (1) SA 282 (A) at 288E-H. APPEARANCES: For Appellant: A R Duminy Instructed by Elliot & Walker Kokstad Naudes Inc Bloemfontein For Respondent: T J M Paterson SC Instructed by Bate Chubb & Dickson Inc East London Honey Inc Bloemfontein

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 10 March 2011 Status: Immediate Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal On 10 March 2011 the Supreme Court of Appeal handed down judgment in Savvas Socratous v Grindstone Investments 134 (Pty) Ltd, upholding an appeal against an order of the Mthatha High Court, in terms of which the appellant was evicted from premises from which he had conducted a supermarket business under the style of a national supermarket chain. During September 2008 a fire had broken out at the premises causing extensive damage. The lease agreement between the parties provided that if the property was destroyed and proved ‘untenantable’ either party was entitled to cancel by giving written notice to that effect. The parties were in dispute about whether or not the building was ‘untenantable’. The respondent gave notice in terms of the agreement. The appellant refused to vacate. This precipitated much litigation in various courts, including litigation in terms of which the respondent sought confirmation of cancellation of the lease and the eviction of the appellant. The Mthatha High Court rejected the submission on behalf of the appellant that there was litigation pending involving the same parties, based on the same cause of action and related to the same subject matter. This court held that the Mthatha High Court had erred in this regard. In upholding the appeal the court said the following: ‘Courts are public institutions under severe pressure. The last thing that already congested court rolls require is further congestion by an unwarranted proliferation of litigation. The court below erred in not holding that against Grindstone when it dismissed the defence of lis pendens without due regard to the facts and on wrong principle. The court below ought not to have proceeded to consider the merits.’ The SCA also took a dim view of the respondent’s failure to disclose material facts to the court below, including the fact that it had resorted to self-help to retake possession of the premises at the time that it had proceeded to seek the appellant’s eviction in the high court. Additionally, the SCA expressed is displeasure at the actions of the appellant pending the appeal. It had retaken possession of the premises and had let it to a subsidiary company. The court, however, was assured that because the premises had been let to a subsidiary company a decision in favour of the appellant could be executed. The appeal was upheld and the eviction order was set aside. The respondent was ordered to pay the appellant’s costs on the attorney and client scale.

2980

non-electoral

2015

SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Not Reportable CASE NO: 20053/2014 In the matter between: NICHOLUS THEMBOKWAKHE BLOSE APPELLANT and ETHEKWINI MUNICIPALITY RESPONDENT Neutral citation: Blose v Ethekwini Municipality (20053/14) [2015] ZASCA 87 (29 May 2015). Coram: Mpati P, Maya, Pillay, Zondi JJA and Van der Merwe AJA Heard: 06 May 2015 Delivered: 29 May 2015 Summary: Magistrate‟s court – civil proceedings – application by plaintiff to reopen case in terms of rule 28(11) of Magistrates‟ courts rules - discretion of presiding officer – such discretion to be exercised judicially. ORDER On appeal from: KwaZulu-Natal High Court, Pietermaritzburg (D Pillay J and Chili AJ sitting as court of appeal) 1 The appeal is upheld with costs. 2 The order of the court below is set aside and substituted with the following: „(a) The appeal is upheld, with costs. (b) The order of the magistrate is set aside. (c) The matter is remitted to the magistrate in order to hear further evidence from the plaintiff relating to proof of compliance with the provisions of s 3(1)(a) of the Institution of Legal Proceedings Against Certain Organs of State Act 40 of 2002 and thereafter to come to a judgment afresh.‟ JUDGMENT Pillay JA (Mpati P, Maya, Zondi JJA and Van der Merwe AJA concurring) [1] This appeal, with the leave of this court, is against the judgment of the KwaZulu- Natal High Court, Pietermaritzburg (D Pillay J and Chili AJ). The appellant instituted action against the respondent for damages in respect of alleged unlawful arrest, search and detention in the magistrate‟s court for the district of Durban. I will, for the sake of convenience, hereinafter refer to the appellant as „the plaintiff‟ and the respondent as „the defendant‟ – as they were in the trial court. [2] On 17 July 2009 at Botanic Gardens Road, Durban, a minor collision between a motor vehicle and a motor cycle occurred causing a traffic jam. While Mr Sandy McCutcheon (McCutcheon), the driver of the motor vehicle, was assisting the injured motor cyclist, the passenger in a BMW motor vehicle which was part of the traffic being held up, approached him, allegedly threatened him and then assaulted him. The passenger thereafter hastily left the scene and got into the BMW motor vehicle which immediately sped off. Moments later members of the Durban Metropolitan Police Service (the police) employed by the defendant arrived on the scene. McCutcheon made a report to them. He was also able to point out the BMW motor vehicle to them as it was still within sight. The plaintiff was the driver of the BMW motor vehicle at the material time. [3] The police then gave chase and caught up with the BMW motor vehicle at the intersection of Moore and Cleaver Roads. The occupants, Mr Ndokweni and the plaintiff, were requested to step out of the vehicle and were both asked to put their hands on the roof of their motor vehicle. When this occurred, the police found a firearm sticking out of the waistband of Ndokweni. Another firearm was also found in the compartment of the driver‟s door. Neither the plaintiff nor the passenger was able to produce a license for either of the firearms. There seems to be a dispute about that but it does not require determination and in view of the order made in this appeal, it would in any event be unwise to comment thereon. The firearms were confiscated and the plaintiff and his passenger were arrested, handcuffed and detained in the police vehicle. They were subsequently dealt with at the Berea Police Station, Durban. The plaintiff was released from there after a few hours. [4] The plaintiff's action, which was commenced by summons issued on 25 January 2010, was defended. The defendant initially pleaded to the claim on or about 31 May 2010. On 6 July 2011, the defendant amended its plea. Whilst there is no indication in the record as to what process was followed in amending the plea, counsel for the plaintiff confirmed that proper notice of intention to amend the plea in terms of Rule 55A of the Magistrates‟ Courts Rules1 was served on the plaintiff, who did not object to the proposed amendment. In fact, the amendment included inter alia, what amounted to a withdrawal of an admission that s 3(1)(a) of the Institution of Legal Proceedings Against Certain Organs of State Act 40 of 2002 (the 1 The relevant parts of Rule 55A read as follows: „(1)(a) any party desiring to amend a pleading or document (other than an affidavit) filed in connection with any proceedings, must notify all other parties of his intention to amend and shall furnish the particulars of the amendment; (b) . . . (2) The notice referred to in sub-rule (1) shall state that unless written objection to the proposed amendment is delivered within 10 days of delivery of the notice of amendment, the amendment will be effected.‟ Act) had been complied with. It is also not clear from the record which procedures were employed to give effect to the said withdrawal. [5] As regards the withdrawal of the admission that s 3(1)(a) of the Act had been complied with, Mr Quinlan, who appeared for the defendant at the trial and in this court was unable to shed light as to whether the magistrate had granted leave to withdraw the admission or not. In relation to whether a party can simply withdraw an admission, especially, as in this case, a material one, he submitted that it was never raised in the trial court, in the court below nor in the plaintiff's heads. He had thus not done any research on the point. [6] It is true that there was no objection to the proposed amendment. However where a withdrawal of a prior admission is sought, the party seeking the withdrawal should make a substantive application in regard thereto, explaining under oath, that the admission was an error, the circumstances under which the error was made and satisfying the court that the withdrawal of the admission will not prejudice the other party (normally the plaintiff).2 It seems no such procedure was followed. It is however unnecessary to delve into this issue in light of the conclusion I have arrived at in this judgment. [7] The trial proceeded on the basis that the amendment had been effected. After both parties had tendered evidence and closed their respective cases, Mr Quinlan argued that the plaintiff had not proved compliance with the provisions of s 3(1)(a) of the Act. He submitted that the defendant should thus be absolved from the instance with costs. S 3(1)(a) of the Act reads as follows: „3 Notice of intended legal proceedings to be given to organ of state. (1) No legal proceeding for the recovery of debt may be instituted against an organ of state unless – (a) the creditor has given the organ of state in question notice in writing of his or her intention to institute the legal proceedings in question;‟ Mr Ndlovu, for the plaintiff, then applied to reopen the plaintiff‟s case in order to merely submit a copy of a letter which constituted proof of compliance with s 3(1)(a) of the Act. 2 L T C Harms Civil Procedure in Magistrates’ Courts Service Issue 34 (1997) at B–540; Bellairs v Hodnett & another 1978(1) SA 1109 (A) at 1150 - 1151. [8] Mr Quinlan strongly objected and opposed the application to reopen the plaintiff's case. The magistrate, in dealing with the application stated: „The considerations that usually fall to be weighed when the Court has to consider an application of this nature are generally five fold. Firstly the reason why the evidence was not led timeously, secondly the degree of materiality of the evidence, thirdly the balance of prejudice, fourthly the general need for finality in judicial proceedings and fifthly the stage that the particular litigation has reached.' [9] The magistrate briefly dealt with each of the factors she had tabulated. It is not necessary to deal with each of them in this judgment. I will deal with two only. It is trite that in considering an application to reopen a party‟s case, the court has a discretion in making such a decision. This is what Mr Quinlan emphasised. He argued that in the circumstances, this court was not entitled to interfere with that decision. [10] In magistrates‟ courts, leave to adduce further evidence – leave to reopen a case – is governed by Rule 28(11) of the Magistrates‟ Courts Rules which reads as follows: „Either party may, with the leave of the court, adduce further evidence at any time before judgment; but such leave shall not be granted if it appears to the court that such evidence was intentionally withheld out of its proper order.‟ As was stated in Mkwanazi v Van der Merwe & another,3 „The discretion under Rule 28(11) must be exercised judicially, upon a consideration of all relevant factors, and in essence it is a matter of fairness to both sides.‟ [11] The magistrate‟s whole approach to the question of reopening the plaintiff‟s case was flawed. Most significantly, in the two paragraphs where she dealt with the issue of prejudice, she clearly misconstrued the notion thereof. [12] I think it is necessary to quote portions of her judgment to illustrate this. In one instance she said the following: „As far as prejudice is concerned, it is prejudice to the applicant if the application is refused and prejudice to the respondent if the application is in fact granted. In Coetzee v Jansen 1954 (3) SA 173 it was stated that: “Generally a party will not be allowed to adduce further evidence if, having the evidence at 3 Mkwanazi v Van der Merwe & another 1970 (1) SA 609 (A) at 616B. his disposal, he deliberately elects not to put it before the Court because he is of the opinion that it is unnecessary.” As far as the first point is concerned, that is the issue as to why the evidence was not before the Court timeously, in the case before me the reason itself is not really clear. As I‟ve indicated supra the plaintiff had argued that the defendant should have raised it as a point in limine. But as will be recalled, this is neither here nor there. After the notice was placed in dispute, the plaintiff bore the onus of proof of that particular notice.‟ In another instance she went further and stated: „As far as prejudice is concerned, clearly there is prejudice. If the application to reopen the plaintiff‟s case is allowed and thereby the [s 3(1)(a)] notice to be handed in to the record, clearly there is prejudice to the defendant in the matter and, likewise, if the Court refuses the application, there is prejudice to be borne by the plaintiff in this matter.‟ [13] As is apparent, she merely mentioned that both parties were at risk of prejudice depending whether the application to lead further evidence was granted or not. She seemed to measure this aspect as against the final outcome of the case rather than what was ultimately procedurally fair to the parties. She therefore failed to balance the issue of prejudice. Had she done so properly and judicially - as she was required to do - she would have found that the defendant was at no risk of prejudice at all. The failure to balance possible prejudice to either of the parties ignored any notion of fairness required to make the decision. In this case, to have refused the introduction of further evidence was extremely prejudicial to the plaintiff. On the other hand, there is not one iota of evidence or suggestion that the defendant would have been prejudiced by allowing the plaintiff‟s case to be reopened as was conceded by Mr Quinlan. In my view this was a misdirection by the magistrate resulting in an improper exercise of her discretion. [14] Secondly, she paid lip service to the need to bring the case to a final conclusion. In this regard she said the following: „As far as the need for finality in judicial proceedings is concerned, in principle there is no bar to align the reopening of a case even after judgment is reserved. In the particular case before me, but for the defendant bringing the issue of a [s 3(1)(a)] notice to the plaintiff, it is certainly arguable that the plaintiff would not have addressed such deficiency at all and the Court in all probability would have granted judgment on the evidence as it stood before the Court in the absence of evidence relating to the [s 3(1)(a)] notice.‟ As was the case with all the rest of the factors, she gave no explanation as to why she thought this factor would militate against granting the plaintiff the opportunity to adduce further evidence. Nobody could doubt that granting the application would not extend the life of the trial by any significant period or at all. It would merely be a matter of handing in the document which proved delivery of the notice as intimated by Mr Ndlovu. This would not entail any amendment of pleadings and the notice itself would be self explanatory. The failure to deal with this aspect properly was also a misdirection and resulted in an improper exercise of the magistrate‟s discretion. [15] It ought to be noted that the purpose of the requirement envisaged in s 3(1)(a) of the Act is clearly not to non-suit a litigant but rather to place the organ of state concerned in a position to assess the claim as described by Didcott J in Mohlomi v Minister of Defence.4 The magistrate ought then to have allowed the further evidence to be adduced instead of committing the aforementioned misdirections. Mr Quinlan was constrained to concede that the magistrate had misdirected herself in this regard and therefore did not exercise her discretion properly. The court of appeal was thus at large to revisit the issue and come to its own decision.5 [16] The court below found that the refusal of the plaintiff‟s request to reopen the proceedings was not appealable. It reasoned that in applying to reopen the plaintiff‟s case, Mr Ndlovu sought an indulgence and that the magistrate had applied her mind in exercising her discretion judiciously when refusing the plaintiff‟s request to do so. [17] As was illustrated in the aforegoing, the magistrate did not exercise her discretion properly and judiciously. This seemed to have escaped the court below. It failed to properly analyse the approach of the magistrate in considering the application to reopen the plaintiff‟s case. If it had, it would have come to a different conclusion since it would have found that the magistrate had clearly not exercised her discretion judicially. This, in my view, is a misdirection on the part of the court below and this court is therefore at large to interfere with its decision. 4 Mohlomi v Minister of Defence 1997 (1) SA 124 (CC) para 9. 5 Director of Public Prosecutions (KwaZulu Natal) v Henry & others (305/07) [2008] ZASCA 63 (29 May 2008); Minister of Safety & Security v Sibiya [2005] JOL 15401 (T). [18] Generally the achievement of justice should not be hampered by excessive adherence to printed form of legislation without regard to its significance and what it seeks to accomplish. The aforegoing, in my view, represents compelling and pragmatic reasons why the appeal should succeed and the plaintiff ought to be afforded an opportunity to lead further evidence. [19] In the result, I would make the following order: 1 The appeal is upheld with costs. 2 The order of the court below is set aside and substituted with the following: „(a) The appeal is upheld, with costs. (b) The order of the magistrate is set aside. (c) The matter is remitted to the magistrate in order to hear further evidence from the plaintiff relating to proof of compliance with the provisions of s 3(1)(a) of the Institution of Legal Proceedings Against Certain Organs of State Act 40 of 2002 and thereafter to come to a judgment afresh.‟ R PILLAY JUDGE OF APPEAL APPEARANCES: FOR APPELLANT: Mr S Tsangarakis Instructed by: Thami Ndlovu & Company, Durban Matsepes, Bloemfontein FOR RESPONDENT: Mr P D Quinlan Instructed by: Linda Mazibuko & Associates, Durban Symington & De Kok, Bloemfontein

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 29 May 2015 Status: Immediate Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal. Blose v Ethikweni Municipality The Supreme Court of Appeal (SCA) today upheld an appeal by Mr Blose. Mr Blose had sued the Ethikweni Municipality for wrongful and unlawful arrest, search and detention in the magistrate’s court. After evidence had been lead on behalf of both parties the legal representative of the defendant argued that the defendant was entitled to be absolved from the instance with costs because the plaintiff had not proved compliance with s 3(1)(a) of the Institution of Legal Proceedings Against Certain Organs of State Act 40 of 2002. S 3(1)(a) of the Act stipulates that any creditor of a state organ such as the Ethikweni Municipality must give written notice to that organ of state of his or her intention to institute legal proceedings. The legal representative of the plaintiff immediately applied to reopen the case in order to prove compliance therewith. The application was refused. The magistrate was found to have exercised her discretion improperly in refusing the application. On appeal to the KwaZulu Natal High Court, Pietermaritzburg it was found that the magistrate had indeed exercised her discretion properly. The appeal court found that the high court’s analysis of the magistrate’s approach to the application to reopen the case was misdirected. This court accordingly set aside its order and remitted the case to the magistrate to hear further evidence from the plaintiff relating to compliance of s 3(1)(a) of that Act and to come to a fresh judgment.

3652

non-electoral

2021

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Not Reportable Case no: 433/2020 In the matter between: LUNGISA GRIFHS APPELLANT and THE STATE RESPONDENT Neutral citation: Lungisa Grifhs v The State (433/2020) [2021] ZASCA 112 (1 September 2021) Coram: VAN DER MERWE, MOLEMELA, MBATHA and CARELSE JJA and POTTERILL AJA Heard: Appeal disposed of without the hearing of oral argument in terms of s19(a) of the Superior Courts Act 10 of 2013. Delivered: This judgment was handed down electronically by circulation to the parties’ representatives by email, publication on the Supreme Court of Appeal website and release to SAFLII. The date and time for hand-down of the judgment is deemed to be 10h00 on 1 September 2021. Summary: Criminal procedure – appeal against refusal of petition by High Court – reasonable prospects of success on appeal against conviction and sentence on account of inconsistencies in the written statement and oral testimony of single witness – leave to appeal to High Court granted. ___________________________________________________________ ORDER ___________________________________________________________ On appeal from: Eastern Cape Division of the High Court, Mthatha (Beneke AJ and Dawood J concurring, sitting as court of appeal): The appeal is upheld. The order of the court a quo is set aside and substituted with the following: ‘The appellants’ petition for leave to appeal in terms of s 309C of the Criminal Procedure Act 51 of 1977 against both conviction and sentence is granted.’ ___________________________________________________________ JUDGMENT ___________________________________________________________ Mbatha JA (Van der Merwe, Molemela and Carelse JJA and Potterill AJA concurring): [1] On 28 November 2018, the appellant, Mr Lungisa Grifhs, was convicted together with two of his erstwhile co-accused in the Regional Court for the Eastern Cape Region, Mthatha, on one count of murder read with the provisions of s 1(1) of the Criminal Law Amendment Act 105 0f 1997. The Regional Court found substantial and compelling circumstances that warranted the imposition of a sentence less than the one prescribed in the Criminal Law Amendment Act. The appellant was accordingly sentenced to 16 years imprisonment. His application for leave to appeal against both conviction and sentence was dismissed. [2] The appellant subsequently petitioned the Judge President of the Eastern Cape Local Division of the High Court, in terms of s 309 of the Criminal Procedure Act 51 of 1977, for leave to appeal. The petition met with the same fate. Consequently, the appellant approached this court for special leave to appeal in terms of s 16(1)(b) of the Superior Courts Act 10 of 2013, against the dismissal of his petition for leave to appeal. He was granted special leave to appeal on 15 May 2020. [3] Pursuant to that order, the parties agreed that this court may dispose of the appeal without hearing oral argument, in terms of s 19(a) of the Superior Court’s Act. There are two preliminary applications that must be disposed of before delving into the appeal. First, the appellant applied in terms of rule 12 of the Rules of the Supreme Court of Appeal (the rules) for the condonation of his failure to comply with rule 7(1)(b) of the rules, by not filing a notice of appeal within the prescribed one-month period from the date of the granting of leave to appeal. Second, the appellant applied for condonation for the late filing of the heads of argument within the prescribed time. The applications were not opposed by the respondent. Accordingly, the appellant’s non-compliance should be condoned and, likewise, the appeal be revived and re-instated. [4] The only issue on this appeal is whether there are reasonable prospects of success in the appellant’s appeal. (Van Wyk v The State and Galela v The State [2014] ZASCA 152; [2014] 4 All SA 708 (SCA); 2015(1) SACR 584 (SCA)). The appellant was convicted on the evidence of a single witness, Mr Bavu. It is trite that the appellant could only have been properly convicted if the evidence of the single witness was clear and satisfactory in all material respects. The appellant contended that it was not reliable, as it was improbable and inconsistent with the admitted statement that the witness had made to the police. It suffices to say that it appears that there are substantial unexplained contradictions between Mr Bavu’s oral testimony and his written statement to the police. [5] Accordingly, without pre-judging the merits, I find that there are reasonable prospects of success on the appeal against both conviction and sentence. [6] In the circumstances, I make the following order: The appeal is upheld. The order of the court a quo is set aside and substituted with the following: ‘The appellants’ petition for leave to appeal in terms of s 309 C of the Criminal Procedure Act 51 of 1977 against both conviction and sentence is granted.’ _____________________________ Y T MBATHA JUDGE OF APPEAL Appearances For appellant: S C Vutula S C Vutula & Co., Mthatha For respondent: M Ntlakaza Director of Public Prosecutions, Mthatha

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 1 September 2021 Status: Immediate The following summary is for the benefit of the media in the reporting of this case and does not form part of the judgments of the Supreme Court of Appeal Lungisa Grifhs v The State (433/2020) [2021] ZASCA 112 (1 September 2021) Today the Supreme Court of Appeal (SCA) handed down judgment upholding the appeal against the Eatern Cape Division of the High Court, Mthatha (the high court). The issue before the SCA was whether there were reasonable prospects of success in the appellants appeal. On the 28 November 2018, the appellant, Mr Lungisa Grifhs, was convicted together with two of his erstwhile co-accused in the Regional Court for the Eastern Cape Region, Mthatha, on one count of murder. The Regional Court found substantial and compelling circumstances that warranted the imposition of a sentence less than the one prescribed in the Criminal Law Amendment Act. The appellant was accordingly sentenced to 16 years’ imprisonment. His application for leave to appeal in the high court, against both conviction and sentence, was dismissed. The appellant was convicted on the evidence of a single witness, Mr Bavu. The appellant contended that the evidence of the single witness was not reliable, as it was improbable and inconsistent with the admitted statement that the witness had made to the police. The SCA found that there were substantial unexplained contradictions between Mr Bavu’s oral testimony and his written statement to the police. As a result, the SCA upheld the appeal on the basis that there were reasonable prospects of success on the appeal against both conviction and sentence. ~~~~ends~~~~

2320

non-electoral

2009

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA JUDGMENT Case No: 484/2009 ABDUL MUTALIED RUDOLPH Appellant and THE STATE Respondent Neutral citation: Rudolph v The State (484/09) [2009] ZASCA 133 (30 September 2009) Coram: STREICHER, SNYDERS and MHLANTLA JJA Heard: 28 SEPTEMBER 2009 Delivered: 30 SEPTEMBER 2009 Summary: Bail – onus in terms of s 60(11)(a) of the Criminal Procedure Act 51 of 1977 not satisfied. ORDER On appeal from: Western Cape High Court (Saldanha J sitting as a court of appeal). The appeal is dismissed. JUDGMENT SNYDERS JA (STREICHER and MHLANTLA JJA concurring): [1] This is an appeal against a judgment of the Western Cape High Court, Saldanha J presiding, in which the judge dismissed an appeal against the refusal by the magistrate at Goodwood to grant bail to the appellant pending his trial on a charge of attempted murder. [2] At the hearing before the magistrate, during June 2009, the appellant chose to present evidence in the form of his own affidavit, the oral evidence of Dr Ameen, a neurologist, and a report by Dr Thakersee, a cardiologist, both of whom were treating him at the time. [3] The appellant is a 30 year old South African citizen. Since the age of four he had been living at one address in the Western Cape. For two years prior to his arrest on 29 April 2009 the appellant was employed by his sister in her pawn shop, earning R2 000 per month. The appellant’s parents and four of his five siblings live in the Western Cape. He was previously married and has one child, aged four, from that marriage. The child lives with her mother. He owns assets to the value of approximately R50 000. He has never been overseas, he does not have a passport, and has no family or assets outside South Africa. [4] The appellant married Ms Firdous Rudolph, the complainant, approximately two years prior to the incident that gives rise to the current charge against him. They are the parents of an 18 month old girl. Two months before the incident the complainant separated from the appellant. After their separation, on 24 March 2009, the complainant obtained an ex parte interim protection order in terms of the Domestic Violence Act 116 of 1998 against the appellant. The order was served on him on 30 March 2009 and was enrolled for confirmation on 13 July 2009. In terms of that interdict the appellant was ordered not to physically, verbally or emotionally abuse the complainant; not to threaten, harass or intimidate her; not to enter her residence at 16 Faust Close, Eastridge; not to enter her place of employment at Morkels N1 City; and not to, directly or indirectly, contact her. [5] According to the investigating officer, Inspector Abrahams, who testified on behalf of the state at the hearing, the case against the appellant has been fully investigated and is ready for trial. Apart from the evidence of the complainant, three more witnesses are to testify about the incident. The evidence is that on 29 April 2009 the appellant went to the complainant’s place of employment, uninvited. He persuaded her to go into the kitchen with him. There he attacked her with a carpet knife. He cut her throat and inflicted various other lacerations, then doused her with petrol from a 500ml Coca Cola bottle that he carried with him and tried to set her alight with his cigarette lighter. When the kitchen door was opened by her colleagues they saw him swinging the knife in her direction, trying to inflict further lacerations, and then trying to set her alight. Once his attack on her was interrupted the appellant proceeded to cut his own throat with the same knife and then left the premises. The bloodied knife and the almost empty Coca Cola bottle were taken from the scene as exhibits. The content of the Coca Cola bottle forensically tested for petrol. [6] The appellant and the complainant were admitted to hospital after the incident. Flowing from this incident the appellant was arrested in hospital on 29 April 2009 and charged with attempted murder. The very next day the charge against him was withdrawn, as he was in the intensive care unit of a hospital. On 2 May 2009 the appellant was discharged from hospital and on 7 May 2009 re-arrested. The appellant had, in the interim, also laid a charge of attempted murder against the complainant, alleging that the injuries he suffered during the incident were inflicted by her. At no stage did he tender any explanation for the injuries that were inflicted on her. According to Abrahams a decision was made not to prosecute the charge by the appellant. [7] On 11 May 2009 the appellant suffered a massive heart attack and a second one later in the same month with the result that he was left with 70 per cent loss of function in the left ventricle of his heart together with coagulated blood in an artery that supplies the wall of his heart with blood. A piece of the coagulated blood dislodged and caused a stroke. Since his first heart attack the appellant has been treated at the Gatesville Medical Centre by Dr O S Ameen, a neurologist, Dr S N Thakersee, a cardiologist, and a psychiatrist. The gist of the evidence of both doctors was that prison is not the ideal environment for the appellant’s recovery. Although, according to Dr Ameen the appellant’s condition has stabilised and would improve, imprisonment would delay his healing and presents some risks. Any form of anxiety, which implies an increased heart rate, could result in further damage to his heart and another stroke. As the appellant is receiving blood-thinning medication, any form of trauma could cause excessive bleeding and, in fact, even spontaneous bleeding is possible. Swift access to the appellant in the event of any of these occurrences is essential to help him and in prison such access is unlikely. According to Dr Ameen’s experience of working at Groote Schuur Hospital, where prisoners are treated, instructions by doctors are not efficiently implemented. [8] Although the appellant has no previous convictions, he was on bail of R2 000 pending his trial on charges of rape and attempted murder allegedly perpetrated on his former wife at the time of the incident on 29 April 2009. The incident has given rise to a second charge of attempted murder. Attempted murder is an offence referred to in Schedule 5 to the Criminal Procedure Act 51 of 1977 (the Act). Schedule 5 includes ‘[a]ttempted murder involving the infliction of grievous bodily harm’ and ‘rape’. A Schedule 5 offence committed whilst ‘released on bail in respect of an offence referred to in Schedule 5’ constitutes an offence under Schedule 6. Section 60(11)(a) of the Criminal Procedure Act 51 of 1977 prescribes that in the case of offences falling within the ambit of Schedule 6 that ‘. . . the court shall order that the accused be detained in custody until he or she is dealt with in accordance with the law, unless the accused, having been given a reasonable opportunity to do so, adduces evidence which satisfies the court that exceptional circumstances exist which in the interests of justice permit his or her release’. [9] The section places an onus on the appellant to produce proof, on a balance of probability, that ‘exceptional circumstances exist which in the interests of justice permit his’ release.1 It ‘contemplates an exercise in which the balance between the liberty interests of the accused and the interests of society in denying the accused bail, will be resolved in favour of the denial of bail, unless “exceptional circumstances” are shown by the accused to exist’.2 Exceptional circumstances do not mean that ‘they must be circumstances above and beyond, and generally different from those enumerated’ in ss 60(4) to (9). In fact, ordinary circumstances present to an exceptional degree, may lead to a finding that release on bail is justified. 3 [10] The case presented on behalf of the appellant is that his attachment to his community and environment and poor health constitute exceptional circumstances that ‘in the interests of justice permit his release’.4 [11] The appellant is rooted in his community and he is physically frail. Dr Ameen conceded during evidence that the appellant’s condition would, however, improve. Despite being in custody he is receiving adequate medical attention as is reflected by the evidence of Dr Ameen. As an arrested person he is entitled ‘to conditions of detention that are consistent with human dignity, including at least exercise and the provision, at state expense, of adequate accommodation, nutrition, reading material and medical treatment;’.5 [12] The appellant’s case is characterised rather by what he does not address than by what he does. The state’s case against him is that he 1 S v Dlamini 1999 (2) SACR 51 (CC) para 78. 2 Dlamini para 64. 3 Dlamini para 76; S v Botha 2002 (1) SACR 222 (SCA) para 19. 4 These are factors listed in s 60(6) of the CPA as relevant considerations in an enquiry whether the ground in s 60(4)(b) has been established. 5 The Constitution of the Republic of South Africa 108 of 1996, s 35(2)(e). attempted to murder his wife by the use of barbarous violence. He has made no attempt to meet that case. The complainant obtained the interim interdict against him on allegations of violence and threats of violence by the appellant against her and their child. None of these allegations are addressed by him. He has also not tendered any explanation for the charges of attempted murder and rape by his former wife. Those charges also involve acts of violence. Thus the unchallenged allegations against him show that he has a propensity to violence.6 In those circumstances subsecs 60(4)(a) and (d) of the Act prohibits his release from detention. It is apposite to quote all of s 60(4): ‘The interests of justice do not permit the release from detention of an accused where one or more of the following grounds are established: (a) Where there is the likelihood that the accused, if he or she were released on bail, will endanger the safety of the public or any particular person or will commit a Schedule 1 offence; or (b) where there is the likelihood that the accused, if he or she were released on bail, will attempt to evade his or her trial; or (c) where there is the likelihood that the accused, if he or she were released on bail, will attempt to influence or intimidate witnesses or to conceal or destroy evidence; or (d) where there is the likelihood that the accused, if he or she were released on bail, will undermine or jeopardise the objectives or the proper functioning of the criminal justice system, including the bail system; (e) where in exceptional circumstances there is the likelihood that the release of the accused will disturb the public order or undermine the public peace or security; or [sic]’. Offences listed in Schedule 1 to the Act include murder, culpable homicide, rape, sexual assault, assault when a dangerous wound is inflicted and arson. [13] The appellant, despite the onus on him, did not introduce any evidence to show that he is not likely to act in terms of the propensity to violence that his past undisputed behaviour illustrates. His physical condition, as evident at the time of the hearing, even in the unlikely event of no improvement, may prohibit him from physically employing some forms of violence, but is not 6 All of these factors are listed in s 60(5) of the CPA as relevant to the consideration whether the ground in s 60(4)(a) has been established. evidence that the propensity no longer exists nor that he would be unable to commit any violence. [14] It was argued on behalf of the appellant that appropriate bail conditions, like house arrest, could adequately safeguard all interests.7 The impracticality of house arrest was conceded during argument. Apart from that the appellant was in breach of an interdict and bail conditions when he committed the offence currently charged with. He did not adduce any evidence to explain the commission of an offence whilst on bail pending charges of attempted murder and rape. He only tendered an explanation for ignoring the interdict against him. He alleged in this affidavit that the complainant invited him to meet with her and that they were likely to reconcile. This explanation misses the point. The interdict was served on him on 30 March 2009, less than a month before the incident. The date for confirmation was set for 13 July 2009. Neither the appellant nor the complainant had taken any steps to change the set course or effect of the interdict. One of the express terms of the interdict aims at keeping the appellant away from the complainant’s place of employment. The unanswered allegations by the state are of violence against the complainant at her place of employment, the very thing she wanted to prevent by obtaining an interdict in the terms that she did. [15] The appellant has not addressed his propensity to ignore court orders illustrated by his past behaviour. He has also not furnished any evidence, despite the onus being on him, that he is unlikely to behave with the same disregard in the future.8 He has, therefore, not addressed the evidence that his release will ‘undermine or jeopardise the objectives or the proper functioning of the criminal justice system, including the bail system’. [16] When all the allegations are weighed up at least two of the grounds listed in s 60(4) have been established. In those circumstances the release on 7 S v Branco 2002 (1) SACR 531 (W) at 537a-b. 8 These factors are relevant to consider whether the ground in s 60(4)(d) has been established. bail of the appellant is not permitted. The court a quo was therefore correct in upholding the refusal of bail by the magistrate. [17] The appeal is dismissed. _________________________ S SNYDERS Judge of Appeal Appearances: For the appellant: F Roets Instructed by: F Rudolph Attorneys, Cape Town Symington & De Kok Attorneys, Bloemfontein For the Respondent: C De Jongh Instructed by: Director of Public Prosecutions, Cape Town Director of Public Prosecutions, Bloemfontein

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: Status: Immediate Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal. * * * The Supreme Court of Appeal, this morning, refused the release on bail of Mr Abdul Mutalied Rudolph, thereby confirming the refusal of bail by the magistrate at Goodwood and the Western Cape High Court. On 30 March 2009 Mr Rudolph, who was on bail of R2000 pending charges of attempted murder and rape of his former wife, was served with an interdict obtained by his current wife, who separated from him a month before, to prevent him from, amongst other things, threatening, contacting or visiting her at her home or place of employment. On 29 April 2009 Mr Rudolph, despite the interdict, went to his wife’s place of employment, where he allegedly attacked her in barbarous fashion. He allegedly slit her throat with a carpet knife, poured petrol over her and tried to set her alight. When his attack on her was interrupted by her colleagues, he proceeded to slit his own throat and left. Both survived the incident. During May 2009 Mr Rudolph, at the age of 30, suffered two major heart attacks and a stroke which left him with permanent damage to his heart. During June 2009 he applied for bail, advancing his fragile physical condition as an exceptional circumstance that warranted his release on bail. The Supreme Court of Appeal found that Mr Rudolph’s medical needs are adequately taken care of despite his imprisonment. His appeal to be released on bail was refused because he at no stage explained any of the allegations against him and as a result the court was unable to find that he would not in future act in accordance with his illustrated propensity to violence and to ignore court orders.

3727

non-electoral

2022

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Reportable Case No: 51/2021 In the matter between: WILLIAM FRANCE MASINGA FIRST APPELLANT RIRHANDZU JOY KHOSA AND 33 OTHERS SECOND TO THIRTY- FIFTH APPELLANTS and CHIEF OF THE SOUTH AFRICAN NATIONAL DEFENCE FORCE FIRST RESPONDENT MINISTER OF DEFENCE AND MILITARY VETERANS SECOND RESPONDENT SURGEON GENERAL OF THE SOUTH AFRICAN NATIONAL DEFENCE FORCE THIRD RESPONDENT SECRETARY OF DEFENCE FOURTH RESPONDENT Neutral citation: Masinga and Others v Chief of the South African National Defence Force and Others (Case no 51/2021) [2022] ZASCA 1 (05 January 2022) Coram: PETSE AP and MAKGOKA, SCHIPPERS, NICHOLLS and MABINDLA-BOQWANA JJA Heard: 23 November 2021 Delivered: This judgment was handed down electronically by circulation to the parties' representatives by email, publication on the Supreme Court of Appeal website and release to SAFLII. The date and time for hand-down is deemed to be 15h00 on 05 January 2022. Summary: Statutory interpretation – s 59(3) of the Defence Act 42 of 2002 – jurisdictional requirements – officers of South African National Defence Force discharged after absenting themselves from official duty – whether they were entitled to hearing – whether discharge lawful. ORDER On appeal from: Gauteng Division of the High Court, Pretoria (Hughes J, Mlambo JP and Francis J concurring, sitting as court of appeal): 1 The appeal against the costs orders in paragraphs 1 and 2 of the order by the court a quo dated 19 June 2020 succeeds, and the costs orders are set aside. 2 Save as aforesaid, the appeal is dismissed. JUDGMENT Schippers JA (Petse AP and Makgoka, Nicholls and Mabindla-Boqwana JJA concurring) [1] The appellants were officers in the South African Military Health Service (SAMHS), the medical branch of the South African National Defence Force (SANDF). They were part of a group of 35 officers selected to study military medicine in Cuba. Of this group 26 were chosen in 2017 (the 2017 group), and nine were selected and commenced studying in Cuba in 2018, pursuant to a memorandum of understanding between the Department of Defence (DoD) and the Cuban military authorities concerning the training of members of various divisions of the SANDF in Cuba (the MOU). [2] On 26 March 2019 the appellants were informed that they had been dismissed from the SANDF in terms of s 59(3) of the Defence Act 42 of 2002 (the Act), for refusing to attend classes from 11 February to 20 March 2019, in defiance of an order by their commanding officer. Section 59(3) of the Act provides that members of the SANDF who absent themselves from official duty for more than 30 days without the permission of their commanding officer, must be regarded as having been dismissed. The appellants were sent back to South Africa. The central issue in this appeal, which is with the special leave of this Court, is whether the appellants’ dismissal was lawful. The facts [3] The main reason for training the appellants in Cuba is that it has a unique system of training doctors in military medicine. The intake of South African students was dependent on available slots at the University of Ciencias Medicas (UCIMED) in Havana, where, in terms of the MOU, students were required to study medicine. UCIMED is an accredited teaching institution with the relevant Cuban authority which is the equivalent of the Health Professions Council of South Africa (HPCSA). Due to an increase of students registered at UCIMED, it established two satellite campuses in Santiago, namely Ciencia Medicas Facultad 2 Santiago de Cuba and the Inter Arms School General José Maceo (the Inter Arms School). [4] The Inter Arms School was established in 1980 to train the Revolutionary Armed Forces of Cuba. The School became a higher education centre in 1983 and offers qualifications in Military Science, which includes specialities such as Infantry, Tanks, Military Intelligence, Military Politics, Engineering, Logistics and Military Medicine. The latter qualification is known as General Military Basic Doctor, comprising six years of study. Professors from UCIMED at Santiago and the Dr Joaquin Castillo Duany Military Hospital provide academic training to students at the Inter Arms School. The School provides training to military officers from Venezuela, Angola, South Africa, Congo and Vietnam. [5] Some of the appellants commenced their studies in Cuba in August 2017 and were enrolled at the Inter Arms School. On 3 April 2018 they raised the following concerns with the third respondent, the Surgeon General of the SANDF (the Surgeon General). The Inter Arms School was not accredited to offer medicine, it had not done so before and the quality of education was unsatisfactory. There was no proof of registration of first year students at the UCIMED campus in Santiago, which was necessary to register those members as medical students with the HPCSA. [6] These concerns were unfounded. The allegation that students at the UCIMED campus in Santiago had not been registered as medical students was pure speculation: the respondents presented evidence that there were 17 South African students studying medicine at the Inter Arms School in Santiago, 13 of whom were in their second year of medical studies with satisfactory results. The evidence placed it beyond question that UCIMED Santiago, as well as the Inter Arms School, were accredited institutions with the relevant Cuban authority. Despite this, the appellants embarked on protest action and refused to attend classes. Furthermore, as stated earlier, nine of the appellants had been selected in 2018 and would have completed their language studies only in 2019, after which they would have commenced with the study of medicine. [7] After completing their Spanish and pre-medical courses, the appellants came home for their annual break in July 2018. Before returning to Cuba in August 2018 to commence their medical studies at the Inter Arms School, each of the appellants concluded an agreement concerning a foreign learning opportunity with the national Government, represented by the DoD (the agreement). The agreement was explained to them and they were informed that they could withdraw from the programme if they did not consent to the essential terms and consequences of the agreement. [8] The salient terms of the agreement were these. The appellants would study military medicine on a full-time basis at a Cuban medical institution and attend classes during official hours of duty for the duration of the prescribed period of the course. They undertook to attend every training session and abide by the rules governing attendance of the course as well as any other rules and regulations of the institution. Two of the appellants raised the following queries on the agreements they had signed: there was no clarity on the difference between military medicine and the MBChB qualification; the Inter Arms School was not accredited to teach medicine; and registration with the HPCSA was not mentioned in the agreement. [9] In terms of the agreement, the DoD undertook to pay the appellants’ fees and all related expenses from State funds. This was no small thing. The SANDF had not only paid the appellants’ salaries, service benefits, stipends and any additional expenses to facilitate the studies, but had also paid for their studies in full, in advance. [10] The following facts were not in dispute. The institution at which a South African student studies medicine must be listed on the database of the HPCSA. Upon graduation from the foreign institution, the HPCSA would examine its curriculum and if there is a shortage in hours of training on any aspect of medicine, students are required to complete those hours in South Africa and thereafter do an internship and render community service, after which they may be registered as independent medical practitioners. If the medical institution is not listed on the database of the HPCSA, that institution is required to inform the HPSCA in writing of the health professional body which has granted it accreditation and the requisite training hours. Prior to commencing their studies in Cuba, the appellants were informed that they would be required to pass the HPCSA examination to register as medical doctors. [11] The 2017 group commenced classes at the UCIMED campus in Santiago in September 2018 because classrooms and logistical arrangements for study at the Inter Arms School were still being prepared. The group was informed that this was temporary and that classes at the Inter Arms School would start in February 2019. [12] From 11 February to 20 March 2019 the appellants refused to attend classes at the Inter Arms School, in defiance of an order by the principal and their commanding officer in Cuba, Colonel Joel Pavon Lopez. Four members of the 2017 group complied with the order and returned to class. They have since been enrolled at UCIMED in Santiago, as it was not feasible for only four SANDF members of the 2017 intake to continue their studies at the Inter Arms School. At the time 13 members of the SANDF who were part of the 2016 group in their second year, were receiving tuition at the Inter Arms School. [13] On 20 March 2019 Colonel José Rodriguez, the Head: External Relations of FAR (Revolutionary Armed Forces of Cuba), wrote to Colonel Mokete Thulo, the Assistant Defence Attaché at the South African Embassy in Cuba, and informed him that the appellants had refused to attend classes from 11 February to 20 March 2019. Colonel Rodriguez cited the following examples of their indiscipline. The appellants had absented themselves from classes with no reference to their whereabouts. They refused to participate in activities and created disorder. They put pressure on second-year cadets (the 2016 group) and four students of the 2017 group not to attend classes. They dirtied bathrooms and left taps running with the result that the dormitory ran out of water and other cadets could not shower. [14] The SANDF made numerous attempts to get the appellants back to class. On 16 February 2019 Brigadier General Majola, the South African Defence Attaché to the Republic of Cuba, addressed two of them individually and thereafter all of them as a group. He referred them to the Code of Conduct of the SANDF (the Code) and the agreement between the Cuban Armed Forces and the SANDF, and showed them proof that UCIMED was a registered institution. [15] On 18 February 2019 the appellants were handed a letter by the Surgeon General (dated 17 February 2019) in which they were informed that he intended to apply to the Chief of the SANDF for their administrative dismissal/discharge and that they had committed an offence of mutiny. They were instructed to make written submissions to the Chief of the SANDF by 21 February 2019 to show cause why they should not be discharged. [16] In response to the Surgeon General, the appellants referred him to their letter of 13 February 2019 and another undated letter in February 2019. In the former they informed the Surgeon General that they were not willing to study medicine at the Inter Arms School because it was not an accredited medical institution, they were not registered with the HPCSA as medical students studying abroad and their living arrangements were not favourable for the study of medicine. In the undated letter the appellants requested urgent intervention because they had already missed days of lectures, and referred to the same concerns raised in their letter of 3 April 2018. [17] On 20 February 2019 Brigadier General Majola returned to the Inter Arms School and informed the appellants that their response was unacceptable. By 22 February 2019 the appellants were told to hand in their Cuban uniforms and instructed not to leave the Inter Arms School, because they would be returning to South Africa. On 28 February 2019 Colonel Thulo again instructed the appellants to return to class and to respond to the Surgeon General’s letter of 17 February 2019. They refused to return to class and did not respond to the letter. [18] On 8 March 2019 a delegation of officers from the SAMHS, headed by Major General Dabula, a medical doctor and the Chief Director: Military Health, Force Preparation of the SANDF, stationed in Pretoria, addressed all the members of the SANDF studying medicine in Cuba. The appellants were once again instructed to attend classes. They refused and informed Major General Dabula that they wished to withdraw from the programme and return to South Africa. [19] On 9 March 2019 the appellants individually addressed letters to the Surgeon General in which they requested to be registered at an institution that met the standards of the HPCSA, preferably in South Africa. Of course, registration as a medical student in South Africa was never an option and was directly at odds with the purpose of the MOU – the training of members of the SANDF in military medicine in Cuba. The appellants contended that the SANDF had breached the agreement when they were withdrawn from UCIMED in Santiago and registered at the Inter Arms School, which was not an accredited institution. They said that they did not make submissions to the military attaché as to why they should not be discharged because they did not understand the letter and the charge, since they had not committed mutiny. [20] On 26 March 2019 the appellants were instructed to clear out their units at the Inter Arms School and sent home to South Africa. On the same day they were handed a letter by the Chief of the SANDF (dated 25 February 2019) in which they were informed that they had been dismissed/discharged from the SANDF with immediate effect (the dismissal). The reasons for the dismissal were these. Since 11 February 2019 the appellants had refused to attend classes as instructed by their superiors. Their conduct was akin to mutiny and regarded as a very serious offence. They were given an opportunity to make written submissions to the Chief of the SANDF to show cause why they should not be dismissed, but had refused to exercise that right. The proceedings below [21] In May 2019 the appellants launched an urgent application in the Gauteng Division of the High Court, Pretoria (the high court) for an order declaring that the ‘decision to terminate’ the appellants’ service with the SANDF, was unlawful and invalid. The application came before Basson J who held that the jurisdictional requirements of s 59(3) of the Act had not been met. The court held that the appellants had been dismissed on 25 February 2019, the date of the letter of discharge, when they had not been absent from their posts for a period of 30 days, and that a board of inquiry should have been convened in terms of s 103(1) of the Act, prior to the dismissal. [22] The high court made an order declaring that the ‘decision to terminate’ the appellants’ service with the SANDF was unlawful and invalid. The decision was ‘reviewed and set aside’ and the court ordered the appellants to be reinstated ‘with full retrospective effect, with retention of all salaries and benefits’. The respondents were granted leave to appeal to a full court. [23] Subsequently the appellants successfully launched an application in terms of s 18(3) of the Superior Courts Act 10 of 2013 for the enforcement of the high court’s order, pending the determination of the appeal by the full court. This was met with an urgent appeal by the respondents under s 18(4)(ii) of the Superior Courts Act, which suspended the high court’s s 18(3) order and prevented the appellants’ reinstatement. The appeal against the main judgment and the appeal against the s 18(3) order were consolidated for hearing before the full court. [24] On 19 June 2020 the full court upheld the consolidated appeals and discharged the s 18(3) order, with costs. It held that the appellants’ dismissal under s 59(3) of the Act arose by the operation of law, and that there was no decision susceptible to review. The court concluded that the appellants’ dismissal was not premature because the operative date of the dismissal was 26 March 2019, when the appellants were informed of it. There was no jurisdictional requirement that a board of enquiry must first be convened under s 103(1) of the Act, prior to a discharge in terms of s 59(3). The appellants, in any event, had been granted a fair hearing prior to their dismissal. The issues [25] Two principal issues are required to be determined in this appeal. The first is whether the Chief of the SANDF had taken a decision to dismiss the appellants prior to, and regardless of, any submissions they might make. The appellants contended that the respondents elected to commence an ad hoc disciplinary process for an alleged offence of mutiny under the Military Discipline Code (the Code) and gave them a ‘semblance of a hearing’ in the Surgeon General’s letter of 17 February 2019 when they were asked to show cause why they should not be discharged. The so-called election was concluded when the appellants received a letter from the Chief of the SANDF ‘confirming’ his decision to administratively discharge them for misconduct. I shall refer to this issue as the alleged decision. [26] The second issue is the proper construction of s 59(3) of the Act, more specifically whether its jurisdictional requirements were satisfied. I shall refer to this as the interpretive question. [27] The alleged decision is simply unsustainable on the evidence, and an afterthought. The Surgeon General’s letter of 17 February 2019 stated that steps would be taken for the appellants’ dismissal/discharge from the SANDF and that they were being given an opportunity to make submissions individually or collectively. That is also how the appellants understood the position. In their response they made it clear that they were not willing to study medicine at the Inter Arms School. There was no hint by the appellants of an ad hoc disciplinary process or the semblance of a hearing in their responses to the letter of 17 February 2019. [28] What is more, the facts show that after the Surgeon General’s letter of 17 February 2019, the respondents made further attempts to get the appellants to go back to class, even after they had been informed on 22 February 2019 that they would be returned to South Africa. On 28 February 2019 Colonel Thulo instructed the appellants to return to class. They were again instructed to do so on 8 March 2019 by the delegation of the SAMHS from Pretoria, led by Major General Dabula. On the appellants’ version, all of this was a pretence kept up by the respondents because they had already decided to dismiss the appellants in terms of an ad hoc disciplinary process: it is fanciful and absurd. [29] Finally, the alleged decision was denied in the answering papers and it was stated that the appellants’ dismissal occurred by the operation of law in terms of s 59(3) of the Act, after they did not report to their official place of duty for 30 days. They were notified of their dismissal in the letter by the Surgeon General dated 9 April 2019. Any factual dispute in this regard had to be determined essentially on the respondent’s version. Motion proceedings, Harms DP stated in NDPP v Zuma,1 ‘are all about the resolution of legal issues based on common cause facts’ and ‘cannot be used to resolve factual issues because they are not designed to determine probabilities’. He went on to say: 1 National Director of Public Prosecutions v Zuma [2009] ZASCA 1; 2009 (2) SA 277 (SCA); 2009 (1) SACR 361 (SCA); 2009 (4) BCLR 393 (SCA); [2009] 2 All SA 243 (SCA) para 26, footnotes omitted. ‘It is well established under the Plascon-Evans rule that where in motion proceedings disputes of fact arise on the affidavits, a final order can be granted only if the facts averred in the applicant's (Mr Zuma’s) affidavits, which have been admitted by the respondent (the NDPP), together with the facts alleged by the latter, justify such order. It may be different if the respondent’s version consists of bald or uncreditworthy denials, raises fictitious disputes of fact, is palpably implausible, far-fetched or so clearly untenable that the court is justified in rejecting them merely on the papers. The court below did not have regard to these propositions and instead decided the case on probabilities without rejecting the NDPP’s version.’ [30] It is clear from the letter of 25 February 2019, which was handed to the appellants only on 26 March 2019 after they had returned to South Africa, that they were being dismissed from the SANDF with immediate effect, because they had refused to attend classes since 11 February 2019. They had plainly been absent from their place of duty for a period in excess of 30 days and the high court’s conclusion to the contrary, was incorrect. Moreover, it is indisputable on the facts that the operative date of the letter was not 25 February 2019 but 26 March 2019, after the attempts by the respondents to persuade the appellants to return to classes. And it is trite that the operative date of an action by a government functionary is the date on which it is communicated to the affected person. [31] I come now to the interpretive question. Section 59(3) of the Act reads: ‘A member of the Regular Force who absents himself or herself from official duty without the permission of his or her commanding officer for a period exceeding 30 days must be regarded as having been dismissed if he or she is an officer, or discharged if he or she is of another rank, on account of misconduct with effect from the day immediately following his or her last day of attendance at his or her place of duty or the last day of his or her official leave, but the Chief of the Defence Force may on good cause shown, authorise the reinstatement of such member on such conditions as he or she may determine.’ [32] The starting point is the language of s 59(3). In this regard, the caution that this Court recently sounded in Capitec Bank,2 bears repetition: ‘[I]nterpretation begins with the text and its structure. They have a gravitational pull that is important. The proposition that context is everything is not a licence to contend for meanings unmoored in the text and its structure. Rather, context and purpose may be used to elucidate the text.’ [33] The jurisdictional requirements of s 59(3) are straightforward. The members must have: (i) absented themselves from official duty; (ii) without permission of their commanding officer; and (iii) for a period of not less than 30 days. Once these requirements are met, the members, if they are officers (as in this case), are regarded as having been dismissed on account of misconduct with effect from the day immediately following their last day of attendance at their place of duty. [34] These jurisdictional requirements are not new. In Louw3 this Court held that a deemed discharge provision comes into effect by the operation of law, and not as a result of an administrative decision, if the person concerned is absent from duty for 30 days. Consequently, the audi alteram partem principle which requires affected persons to be heard before decisions are taken affecting their rights, privileges or liberty, has no application. Whether the jurisdictional requirements for a deeming provision have been satisfied is objectively determinable. [35] That a deemed dismissal comes into effect by the operation of law without a hearing, has been affirmed by the Constitutional Court. In Grootboom,4 a case 2 Capitec Bank Holdings Ltd and Another v Coral Lagoon Investments 194 (Pty) Ltd and Others [2021] ZASCA 99; [2021] 3 All SA 647 (SCA) para 51. 3 Minister van Onderwys en Kultuur en Andere v Louw 1995 (4) SA 383 (A) at 388G-H; Phenithi v Minister of Education and Others [2005] ZASCA 130; 2008 (1) SA 420 (SCA) paras 9-11; Minister of Defence and Military Veterans and Another v Mamasedi [2017] ZASCA 157; 2018 (2) SA 305 (SCA) para 3. 4 Grootboom v National Prosecuting Authority and Another [2013] ZACC 37; 2014 (2) SA 68 (CC) para 37. concerning a deemed dismissal clause under section 17(5)(a)(i) of the Public Service Act 103 of 1994, the Court stated: ‘Section 17(5)(a)(i) effectively countenances the dismissal of the state employee without a hearing. That implicates the right to fair labour practices enshrined in s 23 of the Constitution. The constitutionality of the section is not attacked; hence it must be interpreted in a manner best compatible with the Constitution.’ [36] Likewise, the Constitutional Court in Maswanganyi5 accepted that the service of a member of the SANDF is terminated by the operation of law in terms of s 59(1)(d) of the Act, if he or she is sentenced to a term of imprisonment by a civilian court without the option of a fine.6 It follows, as was held in Maswanganyi, that a deemed dismissal clause must be interpreted in the light of s 39(2) of the Constitution, and that the respondents’ submission to the contrary is wrong.7 [37] Applying the jurisdictional requirements to the present case, s 59(3) does not refer to a member who is absent – a state or situation of not being present. Instead, it envisages a volitional act – the member must absent himself or herself from duty. In other words, the member must leave the appointed place of duty or not go to it, when he or she is required to be there. The appellants were instructed to report for duty at the place assigned by their commanding officer – the Inter Arms School – and to attend classes in furtherance of their medical studies: the very purpose for which they had been enrolled at the School. 5 Maswanganyi v Minister of Defence and Military Veterans and Others [2020] ZACC 4; 2020 (4) SA 1 (CC); 2020 (6) BCLR 657 (CC).. 6 Maswanganyi fn 5 paras 39, 41 and 45 7 Maswanganyi fn 5 para 33. Section 39(2) of the Constitution provides: ‘39 Interpretation of Bill of Rights . . . (2) When interpreting any legislation, and when developing the common law or customary law, every court, tribunal or forum must promote the spirit, purport and objects of the Bill of Rights.’ [38] Counsel for the appellants however submitted that the appellants did not absent themselves from official duty. They had regularly reported for roll call and were physically present at the Inter Arms School, so it was submitted, despite their refusal to attend classes. They had never left their assigned place of duty and their whereabouts were always known to their commanding officer. [39] These submissions do not bear scrutiny and have no basis in the evidence. A member of the SANDF could just as unlawfully absent himself/herself from official duty without permission by, for example, hiding on a military installation, as another who absents himself/herself by walking away from it. Neither of these individuals is performing his/her duty, and neither has authority for his/her action. The appellant’s argument that they had not left their assigned place of duty is plainly untenable. It would mean that members of the SANDF who report for roll call but remain in their living quarters, or sit in a cafeteria, and refuse to attend classes with impunity, or as was put to the appellants’ counsel in argument, decline to engage in combat, are nonetheless on official duty. Such an interpretation produces a manifest absurdity.8 Section 59(3) of the Act lends no support to such a construction. [40] On their own version, the appellants refused to go to their appointed place of duty without the permission of their commanding officer, until their demands were met. It is beyond question that they absented themselves from official duty, and thus the jurisdictional requirement in (i) has been satisfied. [41] The appellants openly defied their commanding officer, Colonel Joel Lopez, by refusing to attend classes. It follows that they had no permission to absent themselves from duty and thus the requirement in (ii) was satisfied. The 8 Venter v R 1907 TS 910 at 915; Smit v Minister of Justice and Correctional Services and others [2020] ZACC 29; 2021 (3) BCLR 219 (CC) para 121. fact that their commanding officer was aware of the appellants’ whereabouts (on the evidence he was not) or that they were physically present within the precincts of the School of Arms, is irrelevant. In the replying affidavit the appellants denied that Colonel Joel Lopez, a member of the Revolutionary Armed Forces of Cuba, was their commanding officer because he had not been appointed to that rank under the Act. They contended that Brigadier General Majola was their commanding officer and that he had not instructed them to attend classes. Before us the appellants rightly did not persist in this argument – it is opportunistic and contrived. [42] The appellants absented themselves from their official place of duty without permission for a consecutive period in excess of 30 days and the requirement in (iii) has also been satisfied. They must accordingly be regarded as having been dismissed from the SANDF by the operation of law, but may be reinstated by the Chief of the SANDF on good cause shown. [43] It was however submitted on behalf of the appellants that they were not absent from duty without permission for 30 consecutive days, because on 22 February 2019 they were ordered to hand over their Cuban uniforms and told not to leave the base because they were returning to South Africa. These instructions, so it was submitted, ‘relieved’ the appellants of any duty to attend classes, and that their position was analogous to employees placed on suspension. [44] Again, these submissions have no basis in the evidence. In fact, they are wholly inconsistent with the appellants’ own case. First, by 11 February 2019 already, they had taken the decision not to attend classes until their concerns had been addressed. The facts show that they stood by that decision until they were sent back to South Africa. So, they could not have been ‘relieved’ of the duty to attend classes which they had no intention of carrying out. The appellants were instructed to hand in their uniforms precisely because they refused to attend classes. Second, the suspension analogy is inapposite: suspension itself precludes employees from performing their duties. And the appellants were never suspended – they elected not to attend classes. [45] The appellants concede, as they must, that s 59(3) of the Act is an exception to the rule that any contravention of the Code is treated as a criminal matter to be tried in the military courts. But it was argued that even if s 59(3) applied to them, no valid dismissal could take place unless and until a board of enquiry was convened under s 103(1) of the Act, in order to determine that the appellants had been absent without leave for more than 30 days. [46] Section 103(1) reads: ‘Board of enquiry in relation to absence without leave (1) When any member of the Defence Force has been absent without leave for more than 30 days and is still absent, a board of inquiry must be convened by the commanding officer of the absent member to inquire into such absence.’ (2) If a routine inspection reveals any deficiency in the kit, arms and equipment for any public property issue to the person contemplated in subsection (1), the board of enquiry may also inquire into such deficiency. (3) If the board of enquiry finds that such has been so absent for more than 30 days and is still so absent, it must record such finding, including the date of the commencement of the absence without leave, and also its finding on any deficiencies of the kit, arms and equipment and any public property issued to him or her and the estimated value thereof.’ [47] The argument is unsound. It ignores the plain wording, context and jurisdictional requirements of s 59(3). The latter is a self-standing provision. It is not rendered subject to s 103(1) or any other provision of the Act. The purpose of s 59(3), as in the case of s 59(1)(d) of the Act (which is to safeguard the SANDF against members convicted of serious crimes) is to ensure that the SANDF ‘is structured and managed as a disciplined military force’,9 as required by s 200(1) of the Constitution.10 Military discipline constitutes the difference between an army and a mob. Obedience and order are the backbone of any military force. The SANDF simply cannot function properly when its members absent themselves from duty without permission, contrary to the job they agreed to do, and the rules with which they undertook to comply. The appellants’ conduct was a flagrant breach of duty. It is precisely for this kind of conduct that s 59(3) was enacted. [48] As stated, once the jurisdictional requirements of s 59(3) are met, the member must be regarded as having been dismissed on account of misconduct, by the operation of law and without a hearing. These consequences, affirmed by the Constitutional Court,11 would be rendered nugatory by any inquiry into the absence of the member under s 103(1). Likewise, the power granted to the Chief of the SANDF to authorise the reinstatement of members deemed to have been dismissed in terms of s 59(3), would similarly be rendered meaningless, a fortiori, when a board of inquiry convened under s 103(1) of the Act ‘has no power to determine the reasons for the absence without leave’.12 [49] The high court thus erred in holding that if a dismissal under s 59(3) were to occur before a board of enquiry was convened and has recorded its findings, this would deprive the s 103(1) inquiry any meaningful purpose. The converse is true: s 59(3), critical to the functioning of the SANDF as a disciplined military force, will be stripped of its efficacy if it is construed as a first step in a s 103(1) 9 Maswanganyi fn 5 para 38. 10 Section 200 (1) of the Constitution states: ‘200 Defence force (1) The defence force must be structured and managed as a disciplined military force.’ 11 Grootboom fn 4 para 37. 12 Mamasedi fn 3 para 11. board of inquiry procedure. The text, structure and purpose of s 59(3) do not allow for such an interpretation. [50] For these reasons the decision of the full court that the appellants’ dismissal in terms of s 59(3) of the Act occurred by the operation of law, cannot be faulted. What remains is the appellants’ alternative argument that they were not given a fair hearing. It can be dealt with briefly. The appellants recognise that in Louw,13 Phenithi14 and Grootboom,15 and the cases that followed, the dismissal occurs by the operation of law and there is no right to a hearing. But they argued that those cases are distinguishable from the present case because the respondents had embarked on an ad hoc disciplinary process for an alleged offence of mutiny under the Code. As indicated above, this argument is unsustainable on the evidence. [51] Finally, there is the question of costs. The appellants sought to enforce fundamental rights under the Constitution and it cannot be said that the main application or the application in terms of s 18(3) of the Superior Courts Act was frivolous, vexatious or in any other way manifestly inappropriate. The full court thus erred in failing to apply the Biowatch principle and directing the appellants to pay costs.16 [52] In the light of the above the following order is issued: 1 The appeal against the costs orders in paragraphs 1 and 2 of the order by the court a quo dated 19 June 2020 succeeds, and the costs orders are set aside. 2 Save as aforesaid, the appeal is dismissed. 13 Louw fn 3. 14 Phenithi fn 3. 15 Grootboom fn 4. 16 Biowatch Trust v Registrar Genetic Resources and Others [2009) ZACC 14; 2009 (6) SA 232 (CC); 2009 (10) BCLR 1014 paras 21-24. _______________________ A SCHIPPERS JUDGE OF APPEAL Appearances For appellants: G Marcus SC and C McConnachie Instructed by: Griesel Breytenbach Attorneys, Pretoria Phatshoane Henney Attorneys, Bloemfontein For respondents: D T Skosana SC and T Lupuwana Instructed by: State Attorney, Pretoria State Attorney, Bloemfontein

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 5 January 2022 Status: Immediate The following summary is for the benefit of the media in the reporting of this case and does not form part of the judgments of the Supreme Court of Appeal Masinga and Others v Chief of the South African National Defence Force and Others (Case no 51/2021) [2022] ZASCA 1 (05 January 2022) Today the Supreme Court of Appeal (SCA) dismissed the appellants’ appeal against their dismissal from the South African National Defence Force (SANDF) in terms of s 59(3) of the Defence Act 42 of 2002 (the Act), but set aside the costs orders granted against them by the court below. Section 59(3) provides that members of the SANDF who absent themselves from official duty for more than 30 days without the permission of their commanding officer, must be regarded as having been dismissed, but the Chief of the SANDF could reinstate a member on good cause shown. The appellants were officers in the South African Military Health Service (SAMHS), the medical branch of the SANDF, selected to study military medicine at the University of Ciencias Medicas (UCIMED) in Cuba, in terms of a memorandum of understanding between the SANDF and the Revolutionary Armed Forces of Cuba. Each of the appellants concluded an agreement concerning a foreign learning opportunity with the national Government. In terms of this agreement they undertook to study military medicine on a full-time basis at a Cuban medical institution and attend classes during official hours of duty for the duration of the prescribed period of the course (six years); and the SANDF paid for the appellants’ studies in full in advance, and paid their salaries, service benefits, stipends and any additional expenses to facilitate their studies. The majority of the appellants (26) commenced their studies in 2017 and nine of them started in 2018. However, from 11 February to 20 March 2019, the appellants absented themselves from official duty by refusing to attend classes, in defiance of an order by their commanding officer. They refused to participate in activities and created disorder. They put pressure on second-year cadets and other students not to attend classes. They dirtied bathrooms and left taps running with the result that the dormitory ran out of water and other cadets could not shower. The appellants’ reasons for breaching their duty were that the Inter Arms School General José Maceo (the Inter Arms School), a satellite campus of UCIMED at which they were enrolled, was not accredited to offer medicine; there was no proof of registration of first year students at the UCIMED campus in Santiago, which was necessary to register them as medical students with the Health Professions Council of South Africa (HPCSA); and the appellants had not been registered with the HPCSA. These claims were unfounded. The Inter Arms School was an accredited institution, the students at the Santiago campus had been registered, and prior to commencing their studies in Cuba, the appellants were informed that they would be required to pass the HPCSA examination to register as medical doctors. The SANDF made numerous attempts to get the appellants back to class. On 16 February 2019 the South African Defence Attaché to the Republic of Cuba, requested them to return to class. On 18 February 2019 they were handed a letter by the Surgeon General informing them that he intended to apply to the Chief of the SANDF for their dismissal and they were instructed to make written submissions to the Chief of the SANDF to show cause why they should not be discharged. On 8 March 2019 a delegation of officers from the SAMHS from Pretoria, once again instructed the appellants to attend classes. They refused and were sent home to South Africa. The appellants were accordingly dismissed from the SANDF for absenting themselves from official duty by refusing to attend classes from 11 February to 20 March 2019. In May 2019 the appellants obtained an order from the Gauteng Division of the High Court, Pretoria (the high court), that the ‘decision to terminate’ their service with the SANDF was unlawful and invalid, and they were reinstated ‘with full retrospective effect, with retention of all salaries and benefits’. This order was reversed on appeal by a full court, which held that the appellants’ dismissal under s 59(3) of the Act arose by the operation of law; that there was no decision susceptible to review; and that the jurisdictional requirements of s 59(3) had been met. The SCA upheld the decision of the full court. It concluded that the jurisdictional requirements of s 59(3), namely that the appellants had (i) absented themselves from official duty; (ii) without permission of their commanding officer; and (iii) for a period of not less than 30 days, had been satisfied; and accordingly that they were regarded as having been dismissed on account of misconduct with effect from the day immediately following their last day of attendance at their place of duty. The appellants however contended that they had not absented themselves from official duty because they regularly reported for roll call and were within the precincts of the Inter Arms School, despite their refusal to attend classes. The SCA rejected this contention as untenable: a member of the SANDF could just as unlawfully absent himself/herself from official duty without permission by, for example, hiding on a military installation, as another who absents himself/herself by walking away from it. Neither of these individuals is performing his/her duty, and neither has authority for his/her action. The appellants’ argument that they could not be dismissed until a board of enquiry was convened under s 103(1) of the Act, to inquire into their absence without leave for more than 30 days, was rejected because it is inconsistent with the plain wording, context and purpose of s 59(3). The latter is a self-standing provision aimed at ensuring the SANDF ‘is structured and managed as a disciplined military force’, as required by s 200(1) of the Constitution. Obedience and order are the backbone of any military force. The SANDF simply cannot function properly when its members absent themselves from duty without permission, contrary to the job they agreed to do, and the rules with which they undertook to comply. The appellants’ conduct was a flagrant breach of duty. --------oOo--------

1507

non-electoral

2008

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA JUDGMENT Case No: 639/07 THE BODY CORPORATE OF THE SECTIONAL TITLE SCHEME SEASCAPES Appellant and CYNTHIA ANNE FORD First Respondent THE BODY CORPORATE OF THE SECTIONAL TITLE SCHEME OCEAN VIEW HEIGHTS Second Respondent CONRAD PETER ERLAND HANSEN Third Respondent RUPERT TAILLEFER DU TOIT Fourth Respondent THE BODY CORPORATE OF THE SECTIONAL TITLE SCHEME OLIVER COURT Fifth Respondent THE BODY CORPORATE OF THE SECTIONAL TITLE SCHEME BEN ROMA Sixth Respondent THE REGISTRAR OF DEEDS Seventh Respondent Neutral citation: Seascapes v Ford (639/07) [2008] ZASCA 109 (23 September 2008) Coram: STREICHER, MTHIYANE, MLAMBO, MAYA and COMBRINCK JJA Heard: 4 SEPTEMBER 2008 Delivered: 23 SEPTEMBER 2008 Summary: Sectional Titles Act 95 of 1986 – special resolution – agreement in writing by non-member, if not revoked upon becoming a member, becomes agreement in writing by member – resolution interpreted so as to give effect to intention of signatories. _________________________________________________________________________ ORDER _________________________________________________________________________ On appeal from: High Court, Cape Town (Uijs AJ sitting as court of first instance) The appeal is dismissed with costs. ____________________________________________________________ JUDGMENT ____________________________________________________________ STREICHER JA (MTHIYANE, MLAMBO, MAYA & COMBRINCK JJA concurring) [1] In terms of a notarial agreement concluded on 5 June 2003 and registered on 4 July 2003 the appellant, being the body corporate in respect of the Sectional Title Scheme Seascapes on Erf 1745 Sea Point East in Cape Town, granted to the first to sixth respondents as owners of neighbouring properties, the right to use parking bays in the sectional title scheme. The appellant, contending that the notarial agreement was entered into without its authority, applied to the Cape High Court (‘the court a quo’) for the agreement to be declared invalid and for its registration to be set aside. The application was dismissed but the court a quo granted leave to the appellant to appeal to this court. [2] As the proceedings were on notice of motion the court a quo correctly held that the matter had to be decided on the basis of the facts averred in the appellant’s affidavits and admitted by the respondents together with the facts alleged by the respondents. [3] The construction of the Seascapes Sectional Title Scheme as it now stands required departures from the provisions of the applicable town planning scheme. Neighbouring property owners objected to these departures but eventually agreed to withdraw their objections in return for an undertaking by the developer, Faircape Property Developers CC (‘the developer’), to register servitudes over six parking bays in the development in favour of neighbouring properties. As a result consent to the required departures was obtained and the project was completed. [4] In terms of s 11(1) of the Sectional Titles Act 95 of 1986 a developer may, after approval of a draft sectional plan by the Surveyor–General, apply to the registrar in charge of the deeds registry in which the land comprised in the scheme is registered, for the opening of a sectional title register in respect of the land and building in question, and for the registration of the sectional plan. When making such an application a developer may impose registrable conditions (s 11(2)). According to Mr Vietri, a member of the developer, he was advised that the developer could implement the agreement with the objectors by imposing registrable conditions in terms of s 11(2) but that it would involve a further delay, since documentation incorporating such conditions had to be amended and resubmitted to the appropriate authorities. For this reason the developer decided that it would be better to proceed with the registration of the sectional plan and the opening of a sectional title register and to procure the body corporate of the sectional title scheme, once established, to attend to the registration of the servitudes. [5] Upon registration of a sectional plan the building or buildings and the land shown thereon are deemed to be divided into sections and common property as shown on the sectional plan (s 13(1)). Separate ownership may be acquired in such sections (s 2(b)). The common property is owned by the owners of sections jointly in undivided shares proportionate to the quotas of their respective sections as specified on the sectional plan (s 16(1)). A section together with its undivided share in the common property is defined as a unit (s 1). With effect from the date on which any person other than the developer becomes an owner of a unit in a scheme there is deemed to be established for that scheme a body corporate of which the developer and such person are members, and every person who thereafter becomes an owner of a unit in that scheme becomes a member of that body corporate (s 36(1)). [6] Section 29 makes provision for the burdening of the land shown on a sectional plan with a servitude by the body corporate if directed to do so by special resolution adopted by the owners. The section reads as follows: ‘29 (1) The owners may by special resolution direct the body corporate- (a) to execute on their behalf a servitude or restrictive agreement burdening the land shown on the relevant sectional plan; (b) to accept on their behalf a servitude or restrictive agreement benefiting the said land. (2) Every such servitude or agreement shall be embodied in a notarial deed and shall be registered by the registrar by noting such deed on the schedule of servitudes and conditions referred to in section 11(3)(b) and on the title deeds of any party to such servitude or restrictive agreement whose title deeds are registered in the land register. (3) . . .’ [7] A special resolution is defined as follows (s 1): ‘“special resolution” means, subject to subsection (2), a resolution passed by a majority of not less than three-fourths of the votes (reckoned in value) and not less than three fourths of the votes (reckoned in number) of members of a body corporate who are present or represented by proxy or by a representative recognized by law at a general meeting of which at least 30 days’ written notice, specifying the proposed resolution, has been given, or a resolution agreed to in writing by at least 75% of all the members of a body corporate (reckoned in number) and at least 75% of all such members (reckoned in value) personally or by proxy or by a representative of any such member recognized by law: Provided . . .’ Only the alternative meaning of special resolution is of relevance in this matter. [8] The Seascapes sectional title register was opened on 24 December 2002. On the same day 18 of the 21 units in the scheme were transferred to their respective purchasers. The other three remained the property of the developer until they were subsequently transferred. [9] Before the opening of the register and the transfer of the units to the purchasers and in order to procure the registration of the servitudes agreed to with the objectors, the developer had obtained, with the exception of one, the signatures of the purchasers of the 18 units which were transferred on 24 December 2002, to a document which purports to be the minutes of a meeting. The document reads as follows: ‘Minutes of a meeting of the members of the Body Corporate of the Sectional Title Scheme Seascapes (still to be established) at which meeting the following special resolution had been passed in terms of section 29 read together with the definition of special resolution in section 1 of the Sectional Titles Act 95 of 1986. Resolved that: 1. The Body Corporate enter into a Notarial Agreement together with Cynthia Ann Ford, Ocean View Heights Body Corporate SS32/1989, Conrad Peter Eland Hansen and Rupert Taillefer du Toit, Oliver Court Body Corporate SS62/1987 and Ben Roma Body Corporate SS206/1989 as per the draft agreement annexed hereto marked “A” and initialled for purposes of identification. 2. Michael Joseph Vietri, be and he is hereby duly authorised to sign all documents and do all things necessary to give effect to the resolution in 1 above.’ (I shall refer to the document as ‘the minutes’ and to the content thereof as ‘the resolution’.) After the opening of the sectional title register and the transfer of the 18 units on the same day, the owners who had signed the minutes constituted more than 75% of all the members of the appellant (reckoned in number) and more than 75% of all such members (reckoned in value). [10] The purchasers who signed the minutes had been kept informed of the nature of the construction delays caused by the objections and the negotiations taking place and were aware that the developer was obliged to grant servitude rights to six parking bays as a quid pro quo for obtaining the necessary consents from the objectors. [11] Subsequent to the opening of the sectional title register Vietri, who had been authorised to give effect to the resolution, procured the registration of a notarial agreement in terms of which the appellant - (i) granted to the first respondent, the second respondent, the third and fourth respondents jointly and the fifth respondent the right to use parking bays 4, 2, 1 and 3 respectively; (ii) granted to the sixth respondent the right to use parking bays 5 and 6; and (iii) granted rights of way to provide access to the parking bays. [12] The appellant contends that the notarial agreement is invalid because a special resolution directing it to execute the agreement as is required by s 29 had not been adopted by the members of the appellant and because even if the ‘minutes’ constituted a special resolution by the members of the appellant, a different agreement to the one authorised had been entered into. [13] The respondents submitted that the resolution qualified as a special resolution as defined in the alternative definition of special resolution ie that part of the definition which requires the resolution to have been agreed to in writing by at least 75% of the members reckoned in number and value. The appellant on the other hand submitted that no resolution by members could have been adopted as the minutes were signed at a time when the signatories were not members of the appellant and could not have been members of the appellant as the appellant was not in existence yet. [14] It is true that the resolution was adopted by non-members but the signatories, by signing the resolution, indicated that they agreed that the appellant (which according to the resolution still had to be established) should once it had been established enter into the draft agreement annexed to the resolution. When the appellant was established and their units were transferred to them, the signatories became members of the appellant. None of them revoked his or her agreement (consent) in writing, it remained his or her agreement in writing and having become a member it then constituted an agreement in writing by a member. Consequently, after transfer of their units to the purchasers, the resolution constituted a resolution agreed to in writing by the requisite majority of members that the appellant should enter into a notarial agreement as per the draft agreement annexed to the minutes and that Vietri should give effect to the agreement. That was still the position when the notarial agreement was concluded on 5 June 2003. [15] The appellant submitted that a special resolution as defined had nevertheless not been adopted as there is no evidence that every member had been given an opportunity to consider the resolution. He could however not point to any indication in the Act that that was required for a special resolution according to the alternative meaning of special resolution. In the result I am satisfied that a special resolution as defined had been adopted. [16] There are differences between the draft agreement and the registered notarial agreement. The appellant relies on the differences summarised as follows in one of the affidavits filed by it: ‘(a) The first respondent was given a servitude right to one parking bay. The third and fourth respondents were jointly given a servitude right to one parking bay. The sixth respondent was given a servitude right to two parking bays. In respect of each such parking bay, the square metreage differs between the draft agreement and the notarial agreement. (b) The notarial agreement records a servitude right of way both in favour of the third and fourth respondents and in favour of the fifth respondent. Neither servitude is contained in the draft agreement. (c) The notarial agreement makes provision for the second respondent to grant reasonable access over its servitude parking bay to the owner of a certain exclusive use store. That provision is not to be found in the draft agreement.’ The appellant submitted that assuming that Vietri was authorised to conclude the draft agreement on behalf of the appellant he had no authority to conclude an agreement which differed in these respects. [17] The draft agreement in so far as it relates to the right to use a parking bay to be given to the first respondent reads as follows: ‘Seascapes as owner of Erf 1745 hereby grants to Ford as owner of Erf 291 a servitude parking bay 13 (Thirteen) square metres in extent, which servitude is depicted by the figure abjk on Diagram No. /2002 attached hereto.’ The corresponding provison in the notarial agreement reads as follows: ‘Seascapes hereby grants to Ford as owner of Erf 291 a servitude parking bay SB4 12 (Twelve) square metres in extent, which servitude is depicted by the figure R16, R19, R20, R21, R22, R17 on Sheet 3 of Sectional Plan SG No. D.209/2003 which servitude extends to a height of 61,35 metres above mean sea level.’ The wording in respect of the other parking bays is similar except (i) that the areas of the parking bays differ; (ii) that no mention is made in the notarial agreement of the extension above sea level in respect of the parking bays granted to the second respondent and the sixth respondent; and (iii) that the right of the second respondent is qualified in the notarial agreement but not in the draft agreement. The qualification reads as follows: ‘Ocean View Heights will grant reasonable access over servitude parking bay SB2 to the owner of exclusive use area Store S3 depicted on Sheet 5 of Sectional Plan SG No. D.209/2003.’ [18] According to the draft agreement one of the parking bays is 12 m² in extent and all the others 13 m² whereas in terms of the notarial agreement one of the parking bays is 15 m², another is 13 m² and the other four are 12 m² in extent. In the result the total area of the parking bays according to the draft agreement is 77 m² and according to the notarial agreement 76 m². The appellant did not place any reliance on the fact that the extension above sea level is mentioned in respect of some of the parking bays in the notarial agreement but not in respect of any of the parking bays in the draft agreement. [19] The respondents submitted that on a proper construction of the resolution Vietri was authorised to enter into the notarial agreement on behalf of the appellant. According to the draft agreement the servitudes are depicted on a diagram annexed to the agreement. According to this diagram all the parking bays are 5m long and 2.5m wide ie 12,5 m² in extent and according to a note on the diagram parking bay 2 is approximately 12 m² in extent and all the others are approximately 13 m² in extent. The question thus arises whether on a proper interpretation of the resolution the purchasers agreed that the area of the parking bays had to be exactly what they are stated to be in the draft agreement or whether that area was only intended to be an approximate area. The appellant submitted that the former was the case and that the diagram could not be used to interpret the draft agreement. [20] What has to be determined is the ambit of the resolution ie what did the signatories intend to agree to. Although the resolution was that the appellant should enter into a notarial agreement as per the draft agreement it is apparent from a reading of the draft agreement that the intention was not that the notarial agreement was required to be in the exact same terms as the draft agreement. According to the draft agreement the parking bays are depicted by figures on ‘Diagram No. /2002 attached hereto.’ The diagram attached is not a final diagram. It is specifically stated that all data on the diagram is approximate. It is therefore clear that the signatories must have had in mind that a final diagram would be prepared in which the data ie the location and area could differ from those indicated on the diagram annexed. But could they have intended that the area according to the final diagram should be exactly the area stated in the draft agreement? In my view that could not have been the intention. It is quite clear from the provisional diagram that the exact areas still had to be determined. It follows that properly construed the areas stated in the draft agreement were intended to be approximate and not exact. [21] The provisional diagram also depicted a right of way in favour of parking bays 1 to 4 and a right of way in favour of parking bays 5 and 6 (as numbered on the provisional diagram). Those rights of way are incorporated in the notarial agreement but in the draft agreement only the rights of way in favour of parking bays 1 and 2 and parking bays 5 and 6 are mentioned. The omission from the draft agreement of the right of way in favour of parking bays 3 and 4, which is exactly the same as the right of way granted in respect of parking bays 1 and 2 and which is required in order to gain access to the parking bays, is a patent error. The signatories could not have intended to grant a right to use the parking bays without at the same time granting a right of way to access these parking bays. Read with the provisional diagram which is an annexure to the draft agreement I am satisfied that the signatories intended to authorise the registration of the right of way not only in respect of parking bays 1 and 2 but also in respect of parking bays 3 and 4. [22] Storeroom S3 is delineated on the sectional plan as an exclusive use area. In order to make use of the storeroom access over parking bay 2 is required. No express provision for such access is made in the draft agreement but there can be no doubt that had the signatories been asked the question they would have answered but naturally the servitude right to parking bay 2 should be made subject to such access being granted to whoever is entitled to the use of that exclusive use area. The signatories therefore by implication directed the appellant to impose the qualification to the servitude granted in respect of parking bay 2. [23] It follows that the court a quo correctly dismissed the application and that the appeal should be dismissed with costs. __________________ P E STREICHER JUDGE OF APPEAL APPEARANCES: For Appellant: E Fagan Instructed by Bernadt Vukic Potash & Getz, Cape Town Lovius-Block, Bloemfontein For Respondent: S P Rosenberg SC Instructed by Smith Tabata Buchanan Boyes, Cape Town E G Cooper & Sons Inc, Bloemfontein

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 23 September 2008 Status: Immediate THE BODY CORPORATE OF THE SECTIONAL TITLE SCHEME SEASCAPES v C A FORD & OTHERS Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal. * * * The Supreme Court of Appeal today dismissed an appeal against a judgment of the Cape High Court concerning an application by the appellant, being the body corporate of the Sectional Title Scheme Seascapes, for a notarial agreement between it and owners of neighbouring properties to be declared invalid. The Sectional Title Scheme Seascapes is situated in Sea Point East, Cape Town. The scheme, as it now stands, required departures from the provisions of the applicable town planning scheme. Neighbouring property owners objected to these departures but eventually agreed to withdraw their objections in return for an undertaking by the developer, Faircape Property Developers CC, to register servitudes over six parking bays in the development in favour of neighbouring properties. As a result consent to the required departures was obtained and the project was completed. In terms of the Sectional Titles Act the owners ie the members of a body corporate may by special resolution direct the body corporate to execute on their behalf a notarial agreement burdening the land shown on the relevant sectional plan with a servitude. A special resolution may be adopted at a general meeting of the body corporate or may be agreed to in writing by 75% in number and value of the members. Before they became members of the body corporate, the requisite majority of the members, who were purchasers at the time, and who were aware of the agreement with the objectors, agreed in writing to the registration of servitudes in respect of six parking bays in favour of the neighbouring property owners and authorised the developer to give effect to the resolution. Subsequent to the opening of the sectional title register and to the purchasers who agreed to the resolution, having become members of the appellant the developer procured the execution and registration of the required notarial agreement. However, the appellant thereupon applied for the notarial agreement to be declared invalid on the ground that the developer did not have authority to enter into the agreement on behalf of the appellant. It contended that non-members and not members had agreed in writing to the registration of the servitudes. The SCA dismissed this submission and held that by not having revoked their agreement in writing the agreement in writing of non- members became the agreement in writing of members when the non-members became members. In terms of the resolution agreed to the developer was authorised to register a notarial agreement as per a draft agreement annexed to the resolution. However, the notarial agreement as registered differed in certain respects from the draft agreement. The appellant submitted that assuming that the developer had been authorised to conclude the draft agreement on behalf of the appellant it had no authority to conclude an agreement which differed from the draft agreement. The SCA held that it is apparent from a reading of the draft agreement that the intention was not that the notarial agreement should be in the exact same terms as the draft agreement. It concluded that on a proper interpretation of the resolution the developer had been authorised to enter into the notarial agreement.

1923

non-electoral

2011

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Case no: 135/11 In the matter between: DANIEL WILLIAM MOKELA Appellant and THE STATE Respondent Neutral citation: Mokela v The State (135/11) [2011] ZASCA 166 (29 September 2011) Coram: Mthiyane, Maya and Bosielo JJA Heard: 05 September 2011 Delivered: 29 September 2011 Summary: Appeal – Sentence – Appellant convicted of robbery with aggravating circumstances and attempted murder – appellant sentenced to imprisonment for 25 years in respect of count 1 and 5 years in respect of count 2 – whether the appeal court erred in interfering with the magistrate’s order that the sentences imposed in respect of the two counts should run concurrently. ORDER On appeal from: South Gauteng High Court, Johannesburg (Hussein J and Luther AJ sitting as court of appeal): 1. The appeal succeeds to the extent that the sentences are varied by the order that the sentence of 5 years in respect of the count of attempted murder shall run concurrently with the sentence of 15 years in respect of the count of robbery with aggravating circumstances. The effective sentence to be served by the appellant is a period of imprisonment of 15 years. __________________________________________________________________ JUDGMENT __________________________________________________________________ BOSIELO JA (Mthiyane and Maya JJA concurring) [1] The appellant was convicted on his pleas of guilty, of robbery with aggravating circumstances (count 1) and attempted murder (count 2) in the Regional Court, Pretoria North. He was sentenced to a term of imprisonment of 25 years in respect of count 1 in terms of s 51(2)(a)(ii) of the Criminal Law Amendment Act 105 of 1997 (as amended) (the Act) and to imprisonment of 5 years in respect of count 2. The regional magistrate ordered that the sentence imposed in respect of count 2 should run concurrently with the sentence imposed in respect of count 1. [2] The appellant appealed against both his conviction and sentence to the South Gauteng High Court, Johannesburg. The appeal against the conviction and sentence in respect of count 2 failed. However the appeal against the sentence of 25 years in respect of count 1 succeeded to the extent that the sentence was set aside and replaced with a sentence of 15 years’ imprisonment. The order that the sentences in respect of both counts should run concurrently was set aside by the court below. The effective sentence for the appellant is a term of imprisonment of 20 years. The appellant is appealing to this Court against his sentence with leave of the court below. [3] As the appeal is against the sentence only those facts which are germane to the determination of an appropriate sentence for the appellant deserve to be briefly recounted. According to his plea-explanation the appellant, accompanied by his friend, went to one Ms Beetge’s house to commit theft where they confronted her. In order to subdue her, the appellant throttled her and caused her to fall to the ground and throttled her whilst sprawled on the ground. She was then stabbed in her stomach with a knife by the appellant’s friend. [4] On appeal to the court below the appeal succeeded partly in that the appeal against conviction in respect of both counts was dismissed. However concerning the sentence, the court below found that the regional magistrate misdirected himself on sentencing by treating count 1 as falling within the ambit of s 51(2)(a)(ii) of the Act by virtue of the fact that the appellant had a previous conviction of robbery, and thereby treating him as a second offender. I agree. [5] The relevant part of s 51(2)(a) of the Act provides: ‘51(2) Notwithstanding any other law, but subject to subsections (3) and (6), a regional court or a High Court shall sentence a person who has been convicted of an offence referred to in – (a) Part II of Schedule 2, in the case of – (i) a first offender, to imprisonment for a period not less than 15 years; (ii) a second offender of any such offence, to imprisonment for a period not less than 20 years.’ [6] It is a clear requirement of s 51(2)(a)(ii) that for the appellant to attract a minimum sentence of imprisonment of not less than 20 years, the State had to prove that he is a second offender of robbery with aggravating circumstances. This is the jurisdictional requirement necessary to trigger s 51(2)(a)(ii). All that the State proved in this case is that the appellant had previous convictions amongst others for rape, robbery, theft, assault and escaping from lawful custody. In terms of s 51(2)(a)(ii) it is not sufficient that the appellant has a previous conviction for robbery. The conviction must be robbery with aggravating circumstances. Robbery and robbery with aggravating circumstances are two different offences calling for different sentences. [7] In its judgment the court below correctly pointed out that there is a distinction between robbery and robbery with aggravating circumstances. As a result, the court below found, correctly, that the regional magistrate ought not to have treated the appellant as a second offender and imposed a sentence of 25 years’ imprisonment but should have treated him as a first offender in terms of s 51(2)(a)(i) of the Act, thus qualifying for a sentence of imprisonment of not less than 15 years. For that reason, the court below set aside the sentence of imprisonment for 25 years and imposed a sentence of 15 years’ imprisonment in terms of s 51(2)(a)(i) of the Act. [8] However, having done this, the court below proceeded to set aside the order of the regional magistrate that the sentences imposed in respect of the two counts should run concurrently. Regrettably the court did not furnish reasons for this order. What is even more disturbing is that it does not appear from the judgment whether either the appellant’s counsel or counsel for the State were afforded an opportunity to address the court on this crucial aspect. [9] It is well-established that sentencing remains pre-eminently within the discretion of the sentencing court. This salutary principle implies that the appeal court does not enjoy carte blanche to interfere with sentences which have been properly imposed by a sentencing court. In my view, this includes the terms and conditions imposed by a sentencing court on how or when the sentence is to be served. The limited circumstances under which an appeal court can interfere with the sentence imposed by a sentencing court have been distilled and set out in many judgments of this Court. See S v Pieters 1987 (3) SA 717 (A) at 727F-H; S v Malgas 2001 (1) SACR 469 (SCA) para 12; Director of Public Prosecutions v Mngoma 2010 (1) SACR 427 (SCA) para 11; and S v Le Roux & others 2010 (2) SACR 11 (SCA) at 26b-d. [10] In ordering the sentences imposed on the two counts to run concurrently, the regional magistrate relied on s 280(2) of the Criminal Procedure Act 51 of 1997 (the Criminal Procedure Act). The section provides a sentencing court with a discretion when sentencing an accused to several sentences to make an order that such sentences run concurrently. There are a number of reasons which a sentencing court can legitimately take into account in this regard. One such ground is the cumulative effect of such sentences. It follows that a court of appeal can only interfere with the exercise of such a discretion by the sentencing court where it is satisfied that the sentencing court misdirected itself, or did not exercise its discretion properly or judicially. Absent such proof, the appeal court has no right to interfere with the exercise of a discretion by a sentencing court. [11] I have already stated that the court below did not give reasons why it interfered with the order made by the regional magistrate in exercising his or her discretion for the sentences to run together. In the absence of such reasons we are unable to conclude that the regional magistrate did not exercise the discretion properly or judicially. In fact the order by the court below has the hallmarks of an arbitrary decision. It follows that the court below erred in setting aside the order by the regional magistrate for the sentence imposed in respect of count 2 to run concurrently with that imposed in respect of count 1. This is so because the evidence shows that the two offences are inextricably linked in terms of the locality, time, protagonists and importantly the fact that they were committed with one common intent. (See, for example, S v Brophy & another 2007 (2) SACR 56 para 14). [12] I find it necessary to emphasise the importance of judicial officers giving reasons for their decisions. This is important and critical in engendering and maintaining the confidence of the public in the judicial system. People need to know that courts do not act arbitrarily but base their decisions on rational grounds. Of even greater significance is that it is only fair to every accused person to know the reasons why a court has taken a particular decision, particularly where such a decision has adverse consequences for such an accused person. The giving of reasons becomes even more critical if not obligatory where one judicial officer interferes with an order or ruling made by another judicial officer. To my mind this underpins the important principle of fairness to the parties. I find it un-judicial for a judicial officer to interfere with an order made by another court, particularly where such an order is based on the exercise of a discretion, without giving any reasons therefore. In Strategic Liquor Services v Mvumbi NO & others 2010 (2) SA 92 (CC) para 15 the Constitutional Court whilst dealing with a failure by a judicial officer to give reasons for a judicial decision stated that: ‘…Failure to supply them will usually be a grave lapse of duty, a breach of litigants’ rights, and an impediment to the appeal process…’. See also Botes & another v Nedbank Ltd 1983 (3) SA 27 (A) at 28. [13] Regarding the duty of judicial officers to give reasons for their decisions it is instructive to have regard to what the RT Hon Sir Harry Gibbs GCMG, AC, KBE, the former Chief Justice of the high court of Australia stated in the Australian Law Journal 1993 (67A) 494 where he said at 494: ‘…The citizens of a modern democracy – at any rate in Australia – are not prepared to accept a decision simply because it has been pronounced, but rather are inclined to question and criticise any exercise of authority, judicial or otherwise. In such a society it is of particular importance that the parties to litigation – and the public – should be convinced that justice has been done, or at least that an honest, careful and conscientious effort has been made to do justice, in any particular case, and that the delivery of reasons is part of the process which has that end in view…’. See also Mphahlele v First National Bank of SA Ltd 1999 (2) SA 667 (CC) para 12; Commissioner, South African Revenue Service v Sprigg Investment 117 CC t/a Global Investment 2011 (4) SA 551 (SCA) paras 28-30. [14] It is generally accepted that both the accused and the State have a right to address the court regarding the appropriate sentence. Although s 274 of the Criminal Procedure Act uses the word ‘may’ which may suggest that a sentencing court has a discretion whether to afford the parties the opportunity to address it on an appropriate sentence, a salutary judicial practice has developed over many years in terms whereof courts have accepted this to be a right which an accused can insist on and must be allowed to exercise. This is in keeping with the hallowed principle that in order to arrive at a fair and balanced sentence, it is essential that all facts relevant to the sentence be put before the sentencing court. The duty extends to a point where a sentencing court may be obliged, in the interests of justice, to enquire into circumstances, whether aggravating or mitigating which may influence the sentence which the court may impose. This is in line with the principle of a fair trial. It is therefore irregular for a sentencing officer to continue to sentence an accused person, without having offered the accused an opportunity to address the court or as in this case to vary conditions attached to the sentence without having invited the accused to address him on the critical question of whether such conditions ought to be varied or not. See Commentary On The Criminal Procedure Act at 28-6D. [15] I interpose to state that I have no problem with the sentence of 5 years’ imprisonment imposed in respect of count 2. The facts of this case justify such a sentence. The complainant, a 46 years old woman was attacked by the appellant and his friend in her own home. The sanctity and privacy of her private home was invaded. The appellant initiated the attack on her. This incident was pre-planned. The complainant was threatened with a knife pressed against her throat. Later she was stabbed with a knife in her stomach by the appellant’s friend. The appellant was present and witnessed this and did not intervene. He proffered no explanation why the complainant who had already been successfully subdued was stabbed. The stabbing was unnecessary and gratuitous. Jewellery valued at approximately R4 000 was stolen and never recovered. I agree with the court below that there is no basis to interfere with the sentence of 5 years in respect of count 2. [16] In the result, the following order is made: 1. The appeal succeeds to the extent that the sentences are varied by the order that the sentence of 5 years in respect of the count of attempted murder shall run concurrently with the sentence of 15 years in respect of the count of robbery with aggravating circumstances. The effective sentence to be served by the appellant is a period of imprisonment of 15 years. ____________ L O Bosielo Judge of Appeal APPEARANCES: For Appellant: Mr JH van Rooyen (Attorney) Instructed by: Legal Aid South Africa, Pretoria Legal Aid South Africa, Bloemfontein For Respondent: A Coetzee SC Instructed by: Director of Public Prosecutions, Pretoria Director of Public Prosecutions, Bloemfontein

SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL FROM The Registrar, Supreme Court of Appeal DATE 29 September 2011 STATUS Immediate Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal. Mokela v The State (135/11) [2011] ZASCA 166 (29 September 2011) The appellant was convicted pursuant to his plea of guilty of robbery with aggravating circumstances and attempted murder. He was sentenced to 25 years’ imprisonment in respect of the robbery with aggravating circumstances and 5 years in respect of attempted murder. The regional magistrate had ordered the sentence in respect of attempted murder to run concurrently with the sentence in respect of robbery with aggravating circumstances. On appeal, the North Gauteng High Court the sentence of 25 years’ imprisonment for robbery with aggravating circumstances was reduced to 15 years’ imprisonment. However the High Court varied the order of the regional court for the sentences to run concurrently and ordered them to run cumulatively without giving any reasons. On appeal the SCA found that, absent any suggestion that the regional magistrate had not exercised his discretion in terms of s 280(2) of the Criminal Procedure Act 51 of 1977 properly when he ordered the sentences to run concurrently, that the high court erred in interfering with such a discretion. The SCA re-affirmed the principle that sentencing falls pre-eminently within the discretion of the sentencing court. The SCA upheld the appeal and ordered the sentence of 5 years’ imprisonment in respect of attempted murder to run concurrently with the sentence of 15 years’ imprisonment in respect of robbery with aggravating circumstances.

3141

non-electoral

2007

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA JUDGMENT Case no: 46/06 REPORTABLE In the matter between: HEATHER JUNE SMITH APPELLANT and THE STATE RESPONDENT Before: Cameron, Mlambo JJA et Theron AJA Heard: 19 March 2007 Delivered: 28 March 2007 Summary: Sentence – motor vehicle theft – first offender – sentence of four years’ imprisonment – on appeal sentence found to be inappropriately severe justifying interference – sentence reduced by suspending two years conditionally. Neutral citation: This judgment may be referred to as Smith v The State [2007] SCA 40 (RSA). MLAMBO JA [1] This is an appeal, with the leave of the Cape High Court (Goso AJ, Waglay J concurring), against that court’s dismissal of an appeal against a sentence of four years’ imprisonment imposed by the Wynberg Regional Court on one count of motor vehicle theft. The appellant had pleaded guilty to that count as well as four others of theft of money totalling some R6 500. She was sentenced to four years’ imprisonment on those latter counts taken together, which was suspended for five years on condition that she was not convicted of theft or fraud or attempt to commit theft or fraud committed during the period of suspension. The four-year term of direct imprisonment on the motor vehicle theft conviction was imposed despite a recommendation in a correctional supervision report that the appellant be sentenced in terms of s 276(1)(h) of the Criminal Procedure Act, Act 51 of 1977. The appeal is against only that sentence. [2] The facts in relation to the relevant offence are that the appellant, a salesperson employed by Pierre Masado, trading as Steward Car Centre, in Diep River in the Western Cape, stole a Mazda 626 motor vehicle the property of her employer and sold it to her daughter who used her own Honda Ballade motor vehicle as a trade in. She pocketed the proceeds. (It seems from the evidence that her daughter was also a victim of the appellant’s misdeed, being innocent of complicity in it.) [3] The appellant resigned when her employer, noting that the business was struggling to make a profit even though it was selling cars, initiated an investigation. The investigation uncovered the appellant’s deceit regarding the Mazda and other thefts of money. [4] All in all the investigation uncovered a loss of R89 000 as a result of the appellant’s chicanery for which she signed an acknowledgement of debt coupled with an undertaking of repayment at R2 000 per month. The Mazda had been valued at R25 000 of which her employer received an insurance payout of R15 000. [5] When imposing sentence the regional court correctly criticized the correctional supervision report as unhelpful and lacking in substance. The regional court confirmed that the appellant was a suitable candidate for correctional supervision because she was gainfully employed and had a fixed residential address. The court further noted that it was significant that the appellant was a first offender and that courts do not lightly sentence a first offender to direct imprisonment. The regional court also noted that, by pleading guilty, the appellant had shown remorse though observing that (given the strength of the state case) she did not have much of a choice. [6] The regional court also took account of evidence led in aggravation of sentence from Mr Masado. He informed the court that despite the appellant’s undertaking to pay off her debt in monthly instalments of R2 000, she had failed to make any payments even though she had obtained a job after her dismissal. This evidence exposed the appellant as having lied to the correctional officer when she stated that she was in fact paying off the amount. [7] Masado told the court that when the appellant was approached for information about the whereabouts of the stolen Mazda she lied, claiming that she had sold it to a Mr van Eck – but offered no cooperation in tracing him or in providing any details about him, until her daughter surfaced, seeking assistance to register the motor vehicle in her name. [8] The regional court also considered the appellant’s personal circumstances as recorded in the correctional supervision report. At the time of her trial she was 45 years old and married with four children aged 28, 26, 23 and 16 years. Her husband, though sickly, was in the employ of Telkom earning a modest income. [9] Against this background the regional court found that motor vehicle theft was a serious offence: the more so because the appellant had stolen from her employer, thus abusing her position of trust. The regional court in those circumstances concluded – though mindful that it would severely affect her – that direct imprisonment was the only appropriate sentence. [10] In this court, counsel for the appellant criticised the regional court for imposing direct imprisonment and submitted that the regional court had misdirected itself in not giving appropriate cognizance to the fact that the appellant was a first offender and that she had shown remorse by pleading guilty. Counsel also submitted that the regional court had misdirected itself by considering the circumstances around the commission of the theft of money (counts 2 to 5) as aggravation for the motor vehicle theft count. It must be said in this regard that Masado’s evidence painted a poor picture of the appellant’s scrupulousness, truthfulness and integrity. [11] It is correct that a plea of guilty is an indication of remorse and the regional magistrate though acknowledging this appeared to downplay its significance. This cannot however be viewed as a misdirection in itself. In fact I can find no misdirection in the regional court’s reasons in arriving at its sentence. Certainly the theft of a motor vehicle by an employee who breaches a position of trust merits in my view a custodial sentence, and not merely correctional supervision. In my view, however, the sentence is excessive if one takes account of two cardinal facts: first, that the appellant was a first offender, and second that the car she stole was of relatively low value. I refer in this regard to the judgment of this court in S v Gerber 2006 (1) SACR 618 (SCA). There this court gave global consideration to sentences imposed in a number of cases on first offenders for motor vehicle theft. This court concluded – in a case that involved, like the present, a ‘white collar’ offender – and the theft of vehicles of considerably higher value than in the present case – that a sentence of ten years’ imprisonment, of which three years were conditionally suspended, was excessive. A sentence of seven years’ imprisonment with two years conditionally suspended was substituted. The reasoning (at 623G) was: ‘Die appellant verdien beslis ‘n straf wat aan die boonste grens van gangbare strawwe lê. Nietemin dink ek dat die opgelegde straf met inagneming van huidige vlakke van strafoplegging en die persoonlike omstandighede van die appellant, treffend onvanpas is.’ [12] Indeed consistency in the sentencing of offenders in desirable and should be strived for. This however does not mean that courts should tailor-make their sentences in keeping with sentences imposed in other cases, in total disregard of the particular circumstances of each particular case. In this case the factors in favour of the appellant which can be regarded as mitigatory are that she is a first offender and demonstrated remorse by pleading guilty. Although some damaging evidence in aggravation was led, my view is that the sentence is inappropriately severe, the more so because the loss she occasioned to her employer was mitigated. The magistrate took no discernible account of the fact that the appellant’s employer received an insurance pay-out for more than half of the on-sale value of the vehicle. The loss eventually suffered thus totalled only R9 000. That is toward the lowest end of losses inflicted by the crime of vehicle theft. [13] In these circumstances in my view an appropriate sentence is one of four years’ imprisonment, two of which are suspended for five years on condition that the appellant is not convicted of theft or attempted theft of a motor vehicle within the period of suspension. [14] The appeal therefore succeeds. The sentence imposed by the regional court is set aside and replaced with a sentence of four years’ imprisonment, two of which are suspended for five years on condition that the appellant is not convicted of theft or attempted theft of a motor vehicle within the period of suspension. ____________ D MLAMBO JUDGE OF APPEAL CONCUR: CAMERON JA THERON AJA

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 28 March 2007 Status: Immediate Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal HEATHER JUNE SMITH v THE STATE 1. The Supreme Court of Appeal today upheld an appeal by the appellant against a sentence of four years’ imprisonment. The sentence was imposed by the Wynberg Regional Court and upheld by the Cape High Court on one count of motor vehicle theft. 2. The Supreme Court of Appeal found that, although motor vehicle theft was a serious offence, more so in this case, that the appellant had stolen from her employer, a four year custodial sentence was excessive. The Supreme Court of Appeal found that the regional court had not given appropriate weight to the fact that the appellant was a first offender and had shown remorse by pleading guilty and that the sentence of four years was out of proportion when considering sentences imposed in other cases for similar offences. 3. The Supreme Court of Appeal set aside the sentence of four years’ imprisonment and replaced it with a sentence of four years’ imprisonment but suspended two years for five years on condition that the appellant was not convicted of theft of a motor vehicle or attempted theft of a motor vehicle committed within the period of suspension.

435

non-electoral

2016

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Reportable Case No: 20640/2014 In the matter between: BERNARD GEOFFREY FISHER APPELLANT and NATAL RUBBER COMPOUNDERS (PTY) LTD RESPONDENT Neutral citation: Fisher v Natal Rubber Compounders (Pty) Ltd (20640/14) [2016] ZASCA 33 (24 March 2016) Coram: Lewis, Wallis, Willis, Saldulker and Mathopo JJA Heard: 4 March 2016 Delivered: 24 March 2016 Summary: Prescription ─ cession of a claim ─ action instituted by cedent against the debtor ─ claim ceded after litis contestatio and substitution of cessionary for cedent not objected to ─ debt not prescribed in terms s 15(2) and (6) of the Prescription Act 68 of 1969. ___________________________________________________________________ ORDER On appeal from: KwaZulu-Natal Local Division of the High Court, Durban (Gyanda J sitting as court of first instance): The appeal is dismissed with costs including the costs of two counsel. JUDGMENT Mathopo JA (Lewis, Wallis, Willis and Saldulker JJA concurring): [1] This is an appeal against the judgment of the KwaZulu-Natal Local Division of the High Court (Gyanda J) dismissing the appellant, Mr Bernard Fisher‟s (Fisher) special plea of prescription against the respondent, Natal Rubber Company‟s (NRC), claim. The appeal is against that finding with the leave of that court. There are no factual disputes. The parties agreed to approach the court a quo on the basis of a stated case and the court ordered a separation of issues in terms of Uniform rule 33(4). [2] The brief background, is as follows. On 10 November 2010 George Beaton, trading as Meranti and Board (Meranti) issued a combined summons against Fisher claiming payment of the sum of R1 077 377 for goods sold and delivered to a company called Strongwood Manufacturing (Pty) Ltd (now in liquidation). Fisher had stood surety for the latter company. The summons was served on him on 18 November 2010. On 7 January 2011 Fisher filed his plea on the merits and pleadings were closed. On 22 October 2013, Meranti ceded to NRC „all of its right, title and interest in and to the claims‟ in relation to its right of action under case number 13172/10 in the court a quo. In terms of clause 2.3 of the deed of cession, it was agreed that NRC would, on fulfilment of the suspensive conditions, apply for its substitution in the stead of Meranti as the plaintiff and that it would thereafter prosecute the case until its final determination. It is not in dispute that the suspensive conditions were fulfilled. [3] On 9 December 2013 Meranti served a notice in terms of Uniform rule 28(1) to amend the summons and particulars of claim by substituting NRC as the plaintiff. Fisher did not oppose the amendment, which was thus effected. On 22 January 2014, Fisher amended his plea in response to the amended particulars of claim by raising a special plea, contending that, upon cession to NRC after its substitution as the plaintiff, Meranti‟s interruption of prescription against Fisher had lapsed and that the claim had been extinguished by prescription in terms of ss 15(2) and (6) of the Prescription Act 68 of 1969 (the Act). [4] Subsections 15(2) and (6) provide as follows: „(2) Unless the debtor acknowledges liability, the interruption of prescription in terms of subsection (1) shall lapse, and the running of prescription shall not be deemed to have been interrupted, if the creditor does not successfully prosecute his claim under the process in question to final judgment or if he does so prosecute his claim but abandons the judgment or the judgment is set aside. . . . (6) For the purposes of this Section, “process” includes a petition, a notice of motion, a rule nisi, a pleading in reconvention, a third party notice referred to in any rule of Court, and any document whereby legal proceedings are commenced.‟ This appeal turns on whether the substitution of NRC for Meranti amounted to the institution of fresh proceedings, so that the interruption of prescription in terms of s 15(2), effected by Meranti‟s service of the summons, ceased to be effective. This involved the submission that NRC‟s action against Fisher only commenced when it was substituted for Meranti as plaintiff. [5] The argument on behalf of Fisher was the following. The effect of the cession was to substitute NRC for Meranti as creditor. When the order for substitution was made Meranti ceased to pursue the claim and NRC pursued it in its own name and in its own right. Effectively this was a fresh action commenced by the notice of amendment.1 As Meranti did not prosecute its claim to final judgment the interruption 1 Mias de Klerk Boerdery (Edms) Bpk v Cole 1986 (2) SA 284 (N). On the facts that case is distinguishable. Summons had been issued in the name of Mr de Klerk instead of the company. A notice of amendment to substitute the company for Mr de Klerk was served within the three-year prescriptive period. The respondent contended that this was not process in terms of s 15(6) and therefore that the claim prescribed. The court rejected the contention on the basis that the company commenced proceedings by way of the notice of amendment and that this constituted a process. of prescription effected by the service of summons fell away. By the time NRC was substituted for Meranti more than three years had elapsed since the claim arose. Accordingly the claim had prescribed. [6] The counter-argument on behalf of NRC was the following. Prescription was properly interrupted in terms of s 15(2) of the Act by service of the original summons by Meranti. The substitution of NRC for Meranti was purely procedural and after substitution NRC continued to pursue the same claim under the same process. Its substitution did not involve the commencement of a fresh action but the continuation of existing proceedings in respect of the same debt. Accordingly prescription was interrupted by service of the summons and the claim had not prescribed. [7] Fisher relied strongly in this regard on Silhouette Investments Ltd v Virgin Hotels Group Ltd.2 Silhouette is clearly inapplicable to the problem in this case. In that case, the action had been instituted by Silhouette. It later gave notice of intention to amend its particulars of claim by the substitution of one Dyer as plaintiff on the ground that he had taken cession of Silhouette‟s claim against the defendant. That amendment was effected. A plea was then filed in which reliance was placed upon a provision in the contract that precluded the cession of Silhouette‟s right. Consequently, Silhouette attempted to re-amend the particulars of claim by substituting itself in the place of Dyer as the plaintiff in the action. As this was done after the expiry of the prescription period, the defendant raised a special plea of prescription, relying on the proposition that the process by which prescription had originally been interrupted had not, within the meaning of s 15(2), been prosecuted to finality, because the original plaintiff, Silhouette, had withdrawn and ceased to pursue the action while still vested with the claim. [8] The rationale of Silhouette is the following. Silhouette ceased to pursue the claim and Dyer stepped in when the summons was amended. But Dyer had not acquired the claim that Silhouette had been pursuing, so there was no continuity in pursuing the claim as there is in this case. Instead the party in whom the claim vested at all times simply withdrew and someone who had no claim continued the 2 Silhouette Investments Ltd v Virgin Hotels Group Ltd 2009 (4) SA 617 (SCA). action. Accordingly the interruption of prescription lapsed because the claim was not prosecuted under the process in question to final judgment. When it was restored to its position as plaintiff that occurred in terms of the notice of amendment, which became a process under which it was pursuing the claim. The correct view of Silhouette is that the party that had the claim ceased to pursue it when Dyer was substituted as plaintiff and, as Dyer had no claim capable of being pursued, the claim was not prosecuted to finality in terms of s 15(2). When Silhouette was substituted for Dyer, it was in effect commencing proceedings afresh. That is wholly different from the present case, where the same claim has been pursued throughout. [9] In Waikiwi Shipping Co Ltd v Thomas Barlow & Sons (Natal) Ltd & another3 where there was a cession of the claim but no application for substitution, this court held that there was nothing to prevent the cedent from continuing with the claim in its own name. Jansen JA said the following at (678G): „In practice any purported transfer after litis contestatio could only become effective if the court allowed the cessionary to be substituted as the plaintiff. This is a matter apparently within the discretion of the court and the court will refuse the substitution if there is any prejudice to the other side. . . . The transfer is, therefore, only perfected when the court gives its seal of approval by granting the substitution.‟ And in Government of the Republic of South Africa v Ngubane,4 an earlier judgment of this court concerned with the question whether an action for pain and suffering could be ceded prior to litis contestatio, Holmes JA observed that (at 608B): „. . . it seems to me that, in regard to a cession after litis contestatio, you are not ceding your interest in the claim but in the result of the litigation.‟ Jansen JA in Waikiwi said the following, when commenting on this dictum (at 677G- 678A): „The “interest in the claim” and the “interest in the result of the litigation” are contrasted. However, there may be three factors involved: (i) the original founding right, (ii) the right arising from litis contestatio to proceed with the action to its conclusion, (iii) the spes in respect of the benefits that will flow from the successful conclusion of the proceedings. (As to this last, it may be pointed out that a spes may also be “ceded”. There is, however, a difference of opinion in respect of the nature and precise effect of such a “cession”: De Wet and Yeats Kontrakreg en Handelsreg 3 ed at 180; Schreuder v Steenkamp 1962 (4) SA 74 3 Waikiwi Shipping Co Ltd v Thomas Barlow & Sons (Natal) Ltd & another 1978 (1) SA 671 (A). 4 Government of the Republic of South Africa v Ngubane 1972 (2) SA 601 (A). (O) at 76A-D. But this dispute does not affect the present issues.) It would seem that in Ngubane’s case this court by “interest in the result of the litigation” meant the spes, and by “interest in the claim”, right (ii) (perhaps including right (i)). No doubt a cession may be framed to relate explicitly to the spes (cf the cession in Hall v Howe [1929 TPD 591], and Schreuder v Steenkamp (supra)), but the dictum seems to imply that even in other cases a cession after litis contestatio must be construed as a cession of the spes.‟ [10] This view was endorsed by Nienaber JA in Brummer v Gorfil Brothers Investments (Pty) Ltd en andere,5 where he expressed himself as follows at (410F): „Die beginsel wat na my mening uit die Waikiwi-beslissing te abstraheer is, is dit: waar ‟n vorderingsreg wat die onderwerp van ‟n geding is na litis contestatio sedeer word, moet die sessionaris, as hy die geding in eie naam wil voortsit, by the Hof aansoek doen om as eiser gesubstitueer te word; alvorens hy dit doen, beskik hy nie oor die nodige locus standi nie; die keersy is dat die sedent, tot tyd en wyl sodanige substitusie plaasvind, nie sy locus standi verbeur nie. Dit is ‟n suiwer prosesregtelike aangeleentheid waarvoor daar gesonde praktiese redes bestaan.‟6 [11] What Nienaber JA said in effect about cession after litis contestatio is that the cessionary stepped into the shoes of the cedent, but that the cedent did not lose his locus standi until the cessionary has been substituted. In other words in the absence of substitution, Meranti would still have been entitled to pursue the action in its own name and obtain judgment. See also Van Rensburg v Condoprops 42 (Pty) Ltd,7 where Leach J held that because there had been no objection to substitution it was no longer open to the defendant to raise prescription. In the same judgment he said the following (para 12): „When litis contestatio was reached, the rights of the defendant . . . in regard to such debt were frozen, and the subsequent cession of Nissen‟s right, title and interest in the debt did not divest her of her right to prosecute that claim until such time as Van Rensburg was substituted as plaintiff.‟ 5 Brummer v Gorfil Brothers Investments (Pty) Ltd en andere 1999 (3) SA 389 (SCA). 6 To my mind the principle to be extracted from Waikiwi is this: where a claim that is the subject of proceedings is ceded after litis contestatio, the cessionary must, if he wants to continue the proceedings in his own name, apply to court to be substituted as plaintiff; before he does that, he lacks the necessary locus standi; the converse is that the cedent, until such substitution takes place, does not lose his locus standi. This is a purely procedural matter for which there are sound practical reasons. (My translation.) 7 Van Rensburg v Condoprops 42 (Pty) Ltd 2009 (6) SA 539 (E). I fully accept the rationale in Waikiwi and Brummer, that subject to the need for the cessionary to be substituted as plaintiff, a right of action may be ceded after litis contestatio. This is what Leach J found in Van Rensburg. Where a cession of a claim takes place after litis contestatio, the cessionary cedes his or her interest not in the claim but in the result of the litigation. [12] The cession alone does not transfer the right to prosecute the action to the cessionary. That right only accrues to the cessionary when it is substituted for the cedent as plaintiff. The subject matter of pending litigation can be ceded freely and fully until litis contestatio. Such a right may be ceded subject to one limitation: the cessionary is not entitled subsequently to pursue concurrent litigation in its own name. The corollary is that the cedent may continue the existing litigation in its own name. The cession would not divest the cedent of its locus standi nor vest the cessionary with it unless the court on application permits the substitution of the parties. Such an application will not succeed if the substitution will prejudice the debtor.8 On substitution, the cessionary can pursue the action in its own name. [13] This review of the law dealing with the implications of a cession after litis contestatio highlights an absurdity in the argument on behalf of Fisher. If Meranti had simply continued to pursue the action in its own name, either because that was so agreed with NRC, or because the court refused to authorise a substitution, the point of prescription would not have arisen. But in those circumstances the claim would still have been pursued for the benefit of NRC, albeit the named plaintiff remained Meranti. It would be absurd to hold that the effect of a substitution was to create a defence of prescription where none previously existed. [14] This approach is reinforced by Tecmed.9 There the original plaintiff, after having issued summons in respect of its claim, merged with another entity and a new entity was formed. The original plaintiff ceased to exist and all its rights and obligations were transferred to the new entity by operation of law. It was then sought 8 Devonia Shipping Ltd v MV Lius (Yeoman Shipping Co Ltd Intervening) 1994 (2) SA 363 (C); Rosner v Lydia Swanepoel Trust 1998 (2) SA 123 (W) para 8. 9 Tecmed (Pty) Ltd & others v Nissho Iwai Corporation & another 2011 (1) SA 35 (SCA). to substitute the new entity in the place of the original plaintiff. A plea of prescription was raised. Brand JA said the following in para 20: „At the heart of Silhouette Investments lies the notion that the legal effect of a cession after litis contestatio is to terminate the proceedings instituted by the cedent, with the corollary that the substitution of the cessionary as the plaintiff must be regarded as the institution of new proceedings. As to whether that underlying notion is correct in respect of cessions, is not necessary to consider in this case. I say that because Sojitz does not rely on a transfer of rights by means of a cession. What it relies upon is a universal succession of all Nissho Iwai‟s rights and obligations by operation of Japanese law.‟ That case was no different from the present one. A claim vested in one legal entity passed by operation of law to another and that party was substituted as plaintiff in the action. Central to the court‟s rejection of the argument that the claim had prescribed was the finding that there was an essential continuity in pursuing the claim. [15] It follows that since the underlying debt was not altered, the cessionary was entitled to proceed with the claim. As the cessionary, NRC stepped into the shoes of the cedent, Meranti, the right of the cedent to pursue the claim fell away. Upon substitution, the cessionary acquired by way of cession, all rights and obligations vested in the cedent at the time of the substitution. What was bestowed on NRC by cession was a claim in respect of which the running of prescription had been interrupted by the service of the summons. In my view the original interruption of prescription by the timeous service of the summons was not affected in any way by the cession or subsequent amendment. The amendment was a mere procedural step followed to effect the substitution. (See Tecmed and Van Rensburg.) [16] To demonstrate the fallacy in Fisher‟s argument one has to look at the „debt‟ and the „process‟ (summons) – in terms of the Act – under which the debt was pursued. To my mind the debt remains the same throughout. It is illogical to contend that when the cessionary sues on a ceded claim the underlying debt changes. All that happens is that the identity of the person entitled to enforce the debt changes, but not the debt itself. [17] It seems to me clear that the process under which the debt was being pursued remained the same throughout. To suggest that the summons operated to interrupt the running of prescription when it was initially served but ceased to fulfil that function when there was a notice of amendment or substitution is clearly not consistent with the Act. Any judgment that is granted in favour of NRC in this case will be granted in terms of the original summons and particulars of claim, not in terms of the application for substitution. In the result the original process that interrupted prescription will be prosecuted successfully. That is what is required by s 15(2) of the Act. There is no doubt that it is only the identity of the party (NRC) now pursuing the debt that changes. The debt remains the same and unaffected by prescription. [18] For these reasons, the special plea must fail. In the result the following order is made: The appeal is dismissed with costs including the costs of two counsel. ______________ R S Mathopo Judge of Appeal Appearances For Appellant: K J Kemp SC (with him L E Combrink) Instructed by: Shepstone & Wylie Attorneys, Durban Matsepes Inc, Bloemfontein For Respondent: C P Hunt SC Instructed by: Evershed Attorneys, La Lucia Ridge E G Cooper & Majiedt Inc, Bloemfontein

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL FROM The Registrar, Supreme Court of Appeal DATE 24 March 2016 STATUS Immediate Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal. Fisher v Natal Rubber Compounders (Pty) Ltd (20640/14) [2016] ZASCA 33 (24 March 2016) The Supreme Court of Appeal (SCA) today handed down judgment relating to whether consequent to the cession of a claim after the close of pleadings, the amendment of pleadings and substitution of parties amounts to the institution of fresh proceedings having the effect of lapsing the interruption of prescription under ss 15(2) and (6) of the Prescription Act 68 of 1969 (the Act) where such interruption was effected through the service of the original summons. On 10 November 2010 George Beaton trading as Meranti and Board (Meranti) sued Mr Bernard Fisher (Fisher) in the court a quo for the sum of R1 077 377 in respect of goods sold and delivered to a company (Strongwood Manufacturing (Pty) Ltd (now in liquidation)) for which Fisher had stood surety. The summons was served on Fisher on 18 November 2010 and he filed his plea on 7 January 2011 and pleadings were subsequently closed. On 22 October 2013, Meranti ceded all of its rights in relation to its claim in the case to the Natal Rubber Company’s (NRC). The cession was subject to the condition, which was fulfilled, that NRC would apply for its substitution in the stead of Meranti as the plaintiff and that it would thereafter prosecute the case until its final determination. On 9 December 2013 Meranti, had in accordance to the cession condition, served a notice to amend the summons and particulars of claim by substituting NRC as the plaintiff. Fisher did not oppose the amendment, which was thus effected. Nonetheless, on 22 January 2014, when he amended his plea in response to the amended particulars of claim, Fisher raised a special plea contending that upon cession to NRC after its substitution as the plaintiff, Meranti’s interruption of prescription against him had lapsed and that the claim had been extinguished by prescription in terms of ss 15(2) and (6) of the Act. On appeal, it was argued on behalf of Fisher that the effect of the cession was to substitute NRC for Meranti as creditor and that when the order for substitution was made Meranti ceased to pursue the claim and NRC pursued it in its own name and in its own right. Effectively this was a fresh action commenced by the notice of amendment. As Meranti did not prosecute its claim to final judgment the interruption of prescription effected by the service of summons fell away. By the time NRC was substituted for Meranti more than three years had elapsed since the claim arose. Accordingly the claim had prescribed. The counter-argument on behalf of NRC was that prescription was properly interrupted in terms of s 15(2) of the Act by service of the original summons by Meranti. The substitution of NRC for Meranti was purely procedural and after substitution NRC continued to pursue the same claim under the same process. Its substitution did not involve the commencement of a fresh action but the continuation of existing in respect of the same debt proceedings, and accordingly that prescription was interrupted by service of the summons and the claim had not prescribed. The SCA held that that subject to the need for the cessionary to be substituted as plaintiff, a right of action may be ceded after the close of pleadings and that where the cession of a claim takes place thereafter, the cessionary cedes his or her interest not in the claim but in the result of the litigation. The SCA held that cession alone does not transfer the right to prosecute the action to the cessionary, instead that right only accrues to the cessionary when it is substituted for the cedent as plaintiff. The subject matter of pending litigation can be ceded freely and fully until the close of pleadings. Such a right may be ceded subject to the single limitation that the cessionary is not entitled subsequently to pursue concurrent litigation in its own name. The court held that the cession would not divest the cedent of its locus standi nor vest the cessionary with it unless the court on application permits the substitution of the parties. And such an application will not succeed if the substitution will prejudice the debtor. On substitution, the cessionary could pursue the action in its own name. The SCA further held that it followed in the case that since the underlying debt had not been altered, that the cessionary was entitled to proceed with the claim. NRC as the cessionary had stepped into the shoes of the cedent (Meranti) and the right of the cedent to pursue the claim had fallen away. What was bestowed on NRC by the cession was a claim in respect of which the running of prescription had been interrupted by the service of the original summons. The SCA found that the original interruption of prescription by the timeous service of the summons had not been affected in any way by the cession or subsequent amendment as the amendment was a mere procedural step followed to effect the substitution of the plaintiff. The SCA accordingly dismissed the appeal with costs including the costs of two counsel. --- ends ---

173

non-electoral

2017

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Reportable Case No: 149/2017 In the matter between: OMEGA RISK SOLUTIONS (PTY) LTD APPELLANT and JOSIAS ALEXANDER DE WITT RESPONDENT Neutral citation: Omega Risk Solutions (Pty) Ltd v De Witt (149/2017) [2017] ZASCA 171 (1 December 2017) Coram: Navsa ADP and Majiedt, Willis and Swain JJA and Lamont AJA Heard: 20 November 2017 Delivered: 1 December 2017 Summary: Prescription Act 68 of 1969 – s 12(3) – identity of debtor and facts from which debt arose – objective standard of reasonable care – statutory attribution of knowledge to creditor – claims prescribed. ORDER On appeal from: Gauteng Division of the High Court, Pretoria (Fabricius J, sitting as court of first instance): ‘The appeal is dismissed with costs, including the costs consequent upon the employment of two counsel.’ JUDGMENT Swain JA (Navsa ADP, Majiedt and Willis JJA and Lamont AJA concurring): [1] The issue in this appeal is whether several claims advanced by the appellant, Omega Risk Solutions (Pty) Ltd, against the respondent, Mr Josias Alexander De Witt, have in terms of ss 12(1) and 12(3) of the Prescription Act 68 of 1969 (the Act) become prescribed. It was accepted by the parties, whether knowledge of these claims held by Mr Philippus Smit, an employee of the appellant, should be attributed to the appellant, determines the outcome of the appeal. [2] The claims were advanced by the appellant against the respondent, in the Gauteng Division of the High Court (Fabricius J), based upon a series of payments made by the appellant during the period March 2007 to August 2010, at a time when the respondent was the Chief Executive Officer of the Omega Group. Certain of the claims alleged that the respondent, in breach of his fiduciary duty to the appellant, authorised payment to named individuals, when to the knowledge of the respondent the appellant was not liable to make payment. Other claims alleged that the respondent authorised payment to named individuals, but then fraudulently and in breach of his fiduciary duty to the appellant, misappropriated these payments for personal purposes. A further claim alleged that the respondent authorised payment of an amount to a company to discharge a personal liability and thereby committed theft from, and a breach of his fiduciary duty to, the appellant. [3] In response to these claims, save and except for three payments, the respondent raised a special plea of prescription which was upheld with costs by the court a quo. By agreement, it was dealt with as a preliminary issue in terms of rule 33(4) of the Uniform Rules of Court. The appeal is with the leave of the court a quo. [4] A resolution of the appeal requires the application of the provisions of ss 12 (1) and (3) of the Act, to the facts. I did not understand counsel for either party to contend otherwise. These sections provide as follows: ‘12. When prescription begins to run. – (1) Subject to the provisions of subsections (2), (3), and (4), prescription shall commence to run as soon as the debt is due. (2) . . . (3) A debt shall not be deemed to be due until the creditor has knowledge of the identity of the debtor and of the facts from which the debt arises: Provided that a creditor shall be deemed to have such knowledge if he could have acquired it by exercising reasonable care.’ [5] It was common cause that the respondent bore the onus of proof in respect of the special plea of prescription. The respondent therefore had to satisfy the requirements of the Act by proving in respect of each claim: (a) The date of inception of the period of prescription; and (b) The date on which the appellant, as the creditor, acquired actual knowledge of the identity of the respondent as the debtor, as well as actual knowledge of the facts from which the debt arose, alternatively, the date on which the appellant could, with the exercise of reasonable care, have acquired knowledge of the material facts. [6] On appeal the appellant accepted: (a) That the payments made by the appellant as alleged in its claims were common cause and the respondent therefore established the date of inception of the period of prescription in each case; (b) That Mr Smit, the Group Finance Manager of the Omega group, had gained knowledge of the minimum facts required to institute action (ie the facts from which the debt, claimed by the appellant in each instance, arose) within a period exceeding three years before summons was issued against the respondent. (c) That the respondent had succeeded in proving the requisite knowledge (of the minimum facts from which the appellant's claims arose) on the part of Mr Smit. [7] The appellant did not, however, accept that the actual knowledge of Mr Smit could, on the facts of this case, be attributed to the appellant. [8] In Northview Shopping Centre (Pty) Ltd v Revelas Properties Johannesburg CC & another 2010 (3) SA 630 (SCA) para 20, the judgment of Lord Hoffmann in Meridian Global Funds Management Asia Limited v Securities Commission [1995] 2 AC 500 (PC) at 506B-D, in which the following statement appears, was quoted with approval: ‘Any proposition about a company necessarily involves a reference to a set of rules. A company exists because there is a rule (usually in a statute) which says that a persona ficta shall be deemed to exist and to have certain of the powers, rights and duties of a natural person. But there would be little sense in deeming such a persona ficta to exist unless there were also rules to tell one what acts were to count as acts of the company. It is therefore a necessary part of corporate personality that there should be rules by which acts are attributed to the company. These may be called "the rules of attribution.”’ [9] Section 12(3) of the Act defines the circumstances in which constructive knowledge of the identity of the debtor and the facts from which the debt arose, may be attributed to the creditor. The creditor is deemed to have acquired this knowledge if the creditor could have acquired it by exercising reasonable care. This involves the statutory attribution of knowledge to a creditor, based on the objective criterion of reasonable care, distinct from an enquiry in terms of the rules of attribution. As stated in PriceWaterhouseCoopers & others v National Potato Co-operative & another [2015] 2 All SA 403 (SCA) para 149: ‘. . . When prescription is raised against a corporate entity the ordinary rule of attribution of knowledge to the company of the knowledge of natural persons of the facts giving rise to the claim, is satisfied if the members of the board of directors have that knowledge, or could acquire it if they took reasonable care. It is unnecessary for the purposes of this case to consider whether the knowledge of other persons within the entity would also be attributed to it for the purposes of prescription.’ (Emphasis added). [10] In Macleod v Kweyiya 2013 (6) SA 1 (SCA) para 9, the circumstances in which knowledge could be attributed to a creditor, in terms of s 12(3) the Act, were described in the following terms: ‘Constructive knowledge is established if the creditor could reasonably have acquired knowledge of the identity of the debtor and the facts on which the debt arises by exercising reasonable care. The test is what a reasonable person in his position would have done, meaning that there is an expectation to act reasonably and with the diligence of a reasonable person.’ [11] In Minister of Finance & another v Gore NO 2007 (1) SA 111 (SCA) para 16, the policy underlying the Act was described in the following terms: ‘The statutory prescription periods are meant to protect defendants from undue delay by litigants who are laggard in enforcing their rights.’ [12] The evidence which was relevant to a determination of whether the board of directors of the appellant, acting reasonably and with the diligence of reasonable persons, could have acquired knowledge of the material facts upon which the claims were based, was as follows: (a) The appellant formed part of a group of corporate entities described as the ‘Omega International Associates’, of which the respondent was the Chief Executive Officer. Mr Smit was the Group Finance Manager, which designation was later changed to Group Executive Finance in 2010, and was responsible for financial strategy, policy and procedures. He was known as the person who managed and had the responsibility of supervising the Group’s finances. The respondent and Mr Smit were members of and reported to the Executive Committee of the Omega Group. (b) Mr Smit supervised the delivery of budgets, had a great deal of input into their formulation and had the important function of ensuring that all audits were done within the group. In addition, he ensured that internal audits were undertaken with regard to each individual entity, as well as cross audits between entities, within the group. (c) Mr Smit had the responsibility of ensuring, on a monthly basis, that all of the financial statements were consolidated and that management statements were made available to the board of directors of the group. Every company had to have its own financial statements on a monthly basis. (d) Mr Smit was responsible for overseeing the effective management of the cash flow situation within the group. This included the compilation of weekly and monthly cash flow statements. He was also in charge of ensuring that the expenditure of the group, which included statutory expenditure, was properly accounted for as well as timeously and correctly done. (e) The appellant was so to speak, the treasury for the entire group and this function was located in the financial division, which Mr Smit controlled. (f) Mr Smit had oversight over, and was aware of, the payments made to the respondent, which formed the subject matter of the claims as they were made by personnel within the Group’s office. [13] Claims 2 and 4 have to be considered in the context that the appellant conducted operations in the form of risk management by providing security solutions primarily for clients located in parts of Africa and the Middle East. In Gabon, for example, the appellant concluded a macro city centre surveillance contract in terms of which they installed and maintained the surveillance equipment. It installed a control centre which it managed and maintained in support of the government of Gabon and the city of Libreville. [14] Claim 2 was in respect of the amount of R430 000.00 paid to Mr MJ Khasu, the South African ambassador to Gabon, for assistance he allegedly rendered in respect of this contract which Mr Smit paid at the request of the respondent. According to the respondent, Mr Smit was aware of the reasons for these payments, the work Mr Khasu had supplied and the role he had played in ensuring that the government of Gabon made the payments to the Industrial Development Corporation (IDC) timeously. The government of Gabon did not have funds immediately available to pay for the project and finance was subsequently arranged through the IDC. Mr Smit was fully aware of what the contract entailed as well as the arrangement with Mr Khasu. [15] As regards claim 4, the respondent admitted these payments were made to Mr Motayo and his consortium as advances in respect of work that he did on various phases of this contract. According to the respondent, everybody was aware of the contract with Mr Motayo and that he was entitled to commission, including Mr Smit. He disputed that Mr Smit was not aware of the reasons for these payments. [16] Counsel for the appellant conceded that this contract was vital to the economic survival of the appellant, as held by the court a quo. Consequently, when regard is had to the importance of this contract, if the board of directors of the appellant had acted reasonably and with the diligence of reasonable persons, they could have acquired knowledge of claims 2 and 4. [17] It must be borne in mind that the payments in respect of the claims extended over several auditing periods. These payments must have been included in the annual financial statements for each successive year and would have required the approval of the board of directors. The payments involved large amounts that could not escape attention. The facts are such that it is compellingly arguable that the board of directors in fact knew and authorised the payments. In addition, when regard is had to the functions Mr Smit performed in the financial management of the appellant, it becomes unnecessary to carry out a detailed examination of these claims. He was the Group Finance Manager, managed the cash flow of the Group, had to ensure that the expenditure of the group was properly accounted for and was a member of and reported to the Executive Committee of the Group. He had to ensure that all financial statements were consolidated on a monthly basis and that management statements were made available to the board of directors of the Group. I agree with the conclusion of the court a quo that Mr Smit was sufficiently close to the Chief Executive Officer of the Group that on the probabilities, the directors possessed knowledge of these claims, or could have acquired it, by the exercise of reasonable care. [18] I do not agree with the criticism directed by the appellant at this conclusion of the court a quo, describing it as a ‘novel proximity test’ with the consequence that it thereby avoided the process of attribution of knowledge, at least partially, which as a matter of law it should have applied in order to adjudicate the question of prescription. Although the court a quo referred to the rules of attribution, it is clear that in concluding that ‘. . . on the probabilities the directors of Plaintiffs had knowledge of the claims relevant in these proceedings, or could have acquired them if they took reasonable care at the time when they ought to have done so’, it applied the provisions of s 12(3) of the Act and not the rules of attribution, which it was entitled to do. [19] In the result the following order is granted: ‘The appeal is dismissed with costs, including the costs consequent upon the employment of two counsel.’ K G B Swain Judge of Appeal Appearances: For the Appellant: G W Alberts SC (with F J Labuschagne) Instructed by: Booysen, Dreyer & Nolte Inc., Pretoria Honey Attorneys, Bloemfontein For the Respondent: M v R Potgieter SC Instructed by: Senekal Simmonds Inc., Bedfordview Phatshoane Henney Attorneys, Bloemfontein

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL FROM The Registrar, Supreme Court of Appeal DATE 1 December 2017 STATUS Immediate Please note that the media summary is for the benefit of the media and does not form part of the judgment. Omega Risk Solutions (Pty) Ltd v Josias Alexander De Witt (149/2017) [2017] ZASCA 171 (1 December 2017) Media Statement The SCA today dismissed an appeal against an order granted by the Gauteng Division of the High Court, Pretoria, upholding a special plea of prescription raised by the respondent, in respect of several claims advanced by the appellant. It was held that the directors of the appellant had knowledge of these claims, or could have acquired them if they took reasonable care, in accordance with the provisions of sections 12(1) and (3) of the Prescription Act 68 of 1969. Section 12(3) defined the circumstances in which constructive knowledge of the identity of the debtor and the facts from which the debt arose, could be attributed to the creditor. The creditor was deemed to have acquired this knowledge if the creditor could have acquired it by exercising reasonable care. This involved the statutory attribution of knowledge to a creditor, based on the objective criterion of reasonable care, distinct from an enquiry in terms of the common law rules of attribution of knowledge to a corporate entity. --- Ends ---

162

non-electoral

2017

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Reportable Case no: 1213/2016 In the matter between: HMI HEALTHCARE CORPORATION (PTY) LIMITED APPELLANT and MEDSHIELD MEDICAL SCHEME FIRST RESPONDENT JOHANNES ZACHARIAS HUMAN MULLER NO SECOND RESPONDENT MICHAEL MMATHOMO MASILO NO THIRD RESPONDENT THE MASTER OF THE GAUTENG HIGH COURT, PRETORIA FOURTH RESPONDENT Neutral citation: HMI Healthcare Corporation (Pty) Limited v Medshield Medical Scheme & others (1213/2016) [2017] ZASCA 160 (24 November 2017) Bench: Ponnan and Petse JJA and Tsoka, Lamont and Mbatha AJJA Heard: 13 November 2017 Delivered: 24 November 2017 Summary: Application for rescission – whether applicant an affected party as contemplated in Rule 42(1)(a) of the Uniform Rules of Court – whether rescission appealable. _____________________________________________________________________ ORDER ______________________________________________________________________ On appeal from: Gauteng Division, Pretoria (Tuchten J (Tolmay J concurring) and Makgoka J dissenting sitting as a court of appeal): The appeal is dismissed with costs including the costs consequent upon the employment of two counsel. ______________________________________________________________________ JUDGMENT ______________________________________________________________________ Ponnan JA (Petse JA and Tsoka, Lamont and Mbatha AJJA concurring): [1] The appellant, HMI Healthcare Corporation (Pty) Ltd (HMI), is the sole shareholder of Calabash Health Solutions (Pty) Ltd (in liquidation) (Calabash). Calabash was incorporated during 1999 and commenced business as a provider of capitation services to medical schemes in 2005. In October 2006 it concluded a written capitation agreement1 with the first respondent, the Medshield Medical Scheme (Medshield). The agreement commenced operating with retrospective effect from 1 January 2006 and was to endure for a period of three years until 31 December 2008. During its subsistence several disputes arose between the parties, consequently the agreement came to be prematurely terminated during the middle of 2008. 1 In terms of the general regulations promulgated under the Medical Schemes Act 131 of 1998, capitation agreement means: ‘an arrangement entered into between a medical scheme and a person whereby the medical scheme pays to such person a pre-negotiated fixed fee in return for the delivery or arrangement for the delivery of specified benefits to some or all of the members of the medical scheme.’ [2] Calabash was liquidated by way of a creditors’ voluntary liquidation pursuant to a special resolution dated 13 July 2009.2 On 18 August 2009 Johannes Zacharias Human Muller NO (the second respondent) and Michael Mmathomo Masilo NO (the third respondent) were appointed by the fourth respondent, the Master of the Gauteng High Court, Pretoria (the Master) as the joint provisional liquidators of Calabash. Their appointment was subsequently made final by the Master, who issued a certificate to that effect on 23 October 2009. At the first meeting of creditors on 22 September 2009 HMI proved a claim in the sum of R3 530 000.00 against Calabash. The second meeting of creditors was held on 27 October 2009 at which, a related company, Agility Global Health Solutions Africa Ltd (Agility) proved a claim in the sum of R9 959 829.96 against Calabash. HMI, Agility and Calabash are related companies, being subsidiaries within the Bathabile Group of Companies. [3] During April 2011, Medshield called for a special meeting of creditors to be convened, at which it proved claims in the total sum of R39 226 814.40 against Calabash. On 29 November 2012 Medshield caused summons to be issued against Calabash, wherein it claimed payment as follows: (i) R2 000 000.00 in respect of claim A; (ii) R3 500 000.00 in respect of claim B; (iii) R26 526 715.00 in respect of claim C; (iv) R2 922 197.00 in respect of claim D; (v) R2 952 831.00 in respect of claim E; (vi) R1 025 375.20 in respect of claim F; (vii) R299 696.18 in respect of claim G; (viii) R935 605.00 in respect of claim H; and (ix) R459 690.00 in respect of claim I. [4] Claims A to G, although initially proved at a meeting of creditors, were subsequently expunged by the Master in terms of the provisions of s 45 of the Insolvency Act 24 of 1936 (the IA). Thereafter, Medshield sought to prove claims H and 2 In terms of s 349 and 351 of the old Companies Act 61 of 1973. I at a further meeting of creditors, but these claims were also rejected by the Master. In expunging the claims, the Master stated: ‘The nature of the factual disputes of these claims is of such technical intensity that the Master as a quasi-judicial officer cannot investigate and adjudicate on these claims. It would in this instance be prudent of the Master to expunge these claims and afford creditors the opportunity to prove their claims by way of action. All interested parties can voice their respective merits of either proving or disallowing the claims in a court of law.’ [5] On 2 October 2012 and, at the instance of the Registrar of Medical Schemes, Medshield was placed under provisional curatorship by the North Gauteng High Court, Pretoria. Mr Themba Benedict Langa was appointed the provisional curator of Medshield. [6] On 18 December 2012 HMI applied ex parte to the North Gauteng High Court, Pretoria for an order in the following terms: ‘1. That, in terms of s 387(4) and s 388 of the Companies Act, 61 of 1973: – 1.1 the applicant be and is hereby empowered to defend the action instituted by Medshield Medical Scheme (“Medshield”) against Calabash Health Solutions (Pty) Ltd (in liquidation) (“Calabash”) out of the above Honourable Court under case number 2012/69139, in the name of Calabash and subject to the applicant furnishing an indemnity as to cost to the duly appointed joint liquidators of Calabash, Johannes Zacharias Human Muller NO and Michael Mmathomo Masilo NO (“the joint liquidators”); 1.2 the applicant be and is hereby empowered to defend any other legal proceedings brought against Calabash by Medshield, in the name of Calabash and subject to the applicant furnishing an indemnity as to costs to the joint liquidators; 1.3 the applicant be and is hereby empowered to institute action against Medshield, or to launch a counterclaim under case number 2012/69139, for recovery of the claim articulated in the draft particulars of claim attached to the letter addressed by the applicant’s attorneys to the joint liquidators on 6 September 2012, as well as for any other claim which Calabash may have against Medshield, in the name of Calabash and subject to the applicant furnishing an indemnity as to costs to the joint liquidators; 2. That the costs of this application be costs in the action under case number 2012/69139, alternatively, costs in the liquidation of Calabash, unless opposed by any third party, in which event such third party be ordered to pay the costs of this application.’ [7] The ex parte application succeeded before Van der Merwe DJP, who issued the following order: ‘1. The applicant is empowered and authorised to defend the action instituted by Medshield Medical Scheme, against Calabash Health Solutions (Pty) Ltd (In Liquidation), in the North- Gauteng High Court under case number 2012/69139, in the name of Calabash Health Solutions (Pty) Ltd (In Liquidation), subject to it furnishing an indemnity as to costs to the joint liquidators, Johannes Zacharias Human Muller NO and Michael Mmathomo Masilo NO; 2. The applicant is empowered and authorised to defend any other legal proceedings brought against Calabash Health Solutions (Pty) Ltd (In Liquidation) by Medshield Medical Scheme, in the name of Calabash Health Solutions (Pty) Ltd (In Liquidation), subject to it furnishing an indemnity as to costs to the joint liquidators, Johannes Zacharias Human Muller NO and Michael Mmathomo Masilo NO; 3. The applicant is empowered and authorised to institute legal proceedings, either in the form of a summons or a counterclaim, substantially in the form of annexure “A”, against Medshield Medical Scheme, in the name of Calabash Health Solutions (Pty) Ltd (In Liquidation), subject to it furnishing an indemnity as to costs to the joint liquidators, Johannes Zacharias Human Muller NO and Michael Mmathomo Masilo NO; 4. The cost of this application will be cost in the action under case number 2012/69139.’ [8] On 4 April 2013 Medshield applied to the high court to rescind the order of Van der Merwe DJP. It sought an order in the following terms: ‘2. Rescinding the ex parte order of his lordship, Mr Justice van der Merwe, dated 18 December 2012 (“the ex parte order”), in terms of rule 42(1)(a) of the Uniform Rules of Court; 3. Setting aside the further steps taken by HMI Healthcare Corporation (Pty) Ltd (“HMI”) pursuant to the ex parte order, namely: 3.1 The notice of intention to defend Medshield’s action in case number 2012/69139, filed on behalf of Calabash Health Solutions (Pty) Ltd (in liquidation) (“Calabash”); 3.2 The notice of substitution in terms of Rule 15(2) filed by HMI on 18 December 2012; and 3.3 The special plea, plea over and counterclaim, filed on behalf of Calabash in case number 2012/69139; 4. Declaring that HMI is not entitled to: 4.1 defend the action instituted by Medshield against Calabash, in the name of Calabash, in case number 2012/69139; 4.2 defend any other legal proceedings brought against Calabash by Medshield, in the name of Calabash; and 4.3 institute any action against Medshield, or launch a counterclaim against Medshield under case number 2012/69139, in the name of Calabash; 5. Directing HMI to pay the costs, on an attorney and own client scale: 5.1 of this application, including the costs of two counsel; and 5.2 associated with the notice of intention to defend, the notice in terms of Rule 15(2) and the special plea, plea over and counterclaim under case number 2012/69139, including the costs of two counsel where applicable.’ [9] The rescission application succeeded before Tlhapi J, who subsequently granted leave to HMI to appeal to the full court of that division. The full court (per Tuchten J (Tolmay J concurring) and Makgoka J dissenting) dismissed the appeal. The further appeal by HMI is with the special leave of this court. [10] I deal later in this judgment with whether an appeal against the order of Tlhapi J is competent. Before turning to that issue it is necessary to first consider whether Medshield had the necessary locus standi to bring the rescission application. HMI contends that Medshield is not an affected party as contemplated in Rule 42(1)(a) of the Uniform Rules of Court. That rule provides: ‘The court may, in addition to any other powers it may have, mero motu or upon the application of any party affected, rescind or vary [a]n order or judgment erroneously sought or erroneously granted in the absence of any party affected thereby.’ An applicant for an order setting aside a judgment or order of court must show, in order to establish locus standi, that ‘he has an interest in the subject-matter of the judgment or order sufficiently direct and substantial to have entitled him to intervene in the original application upon which judgment was given or order granted’.3 A court will accordingly refrain from deciding a dispute unless and until all persons who have a direct and substantial interest in both the subject matter and the outcome of the litigation, have 3 Per Corbett J in United Watch & Diamond Co (Pty) Ltd & others v Disa Hotels Ltd & others 1972 (4) SA 409 (C) at 415A. been joined as parties.4 It has been held that a ‘direct and substantial interest’ is more than a financial interest in the outcome of the litigation.5 [11] It is important to determine what interest it is that Medshield claims to have had in the proceedings leading to the grant of the ex parte order. HMI approached the court for relief in terms of s 387(4) of the Companies Act 61 of 1973, which provides that: ‘[a]ny person aggrieved by any act or decision of the liquidator may apply to the court after notice to the liquidator and thereupon the court may make such order as it thinks just.’ That provision empowers a court in the exercise of its discretion to make any order that it considers that justice requires.6 Medshield contends that HMI failed to properly disclose such interest as it (Medshield) had to the court hearing the ex parte application and that its version should have been placed before the court so as to enable that court to properly exercise the discretion conferred by s 387(4). [12] According to Medshield, that it had locus standi to bring the rescission application is evident from the following: First, Medshield has a direct and substantial interest in the relief sought in the ex parte order. The extensive references in HMI’s founding affidavit to its interactions with Medshield are evidence of this. Second, Medshield is an asserted creditor of Calabash. It is allegedly owed a total amount of approximately R40 million by Calabash and has instituted action against the latter for the recovery of the money. Its claims are set out in its particulars of claim, which were attached to HMI’s founding affidavit in the ex parte application. The Master expunged claims A to G, and rejected claims H and I, in order that Medshield could prove its claims by way of action proceedings. That case is pending. Until a decision is made in that action, Medshield retains a substantial interest in the affairs of Calabash and in particular, whether HMI is entitled to litigate on behalf of Calabash. Third, Medshield’s action against Calabash 4 See eg Amalgamated Engineering Union v Minister of Labour 1949 (3) SA 637 (A) at 657 and 659; Gordon v Department of Health, KwaZulu-Natal 2008 (6) SA 522 (SCA) para 9; City of Johannesburg & others v South African Local Authorities Pension Fund & others (20045/2014) [2015] ZASCA 4 (9 March 2015) para 9. 5 See Judicial Service Commission & another v Cape Bar Council & another 2013 (1) SA 170 (SCA) para 12, where Brand JA stated: ‘It has by now become settled law that the joinder of a party is only required as a matter of necessity – as opposed to a matter of convenience – if that party has a direct and substantial interest which may be affected prejudicially by the judgment of the court in the proceedings concerned . . . .’ 6 Cohen NO & another v Ruskin and Smith NNO & another 1981 (1) SA 421 (W) at 425. appears to be the principal reason for the ex parte application. By contrast, neither HMI nor Agility, whose claims against Calabash were also expunged by the Master, have attempted to prove their claims against Calabash by way of action. Those claims might well have since prescribed, in that event, HMI and Agility would no longer be creditors of Calabash. Fourth, the terms of the ex parte order cite Medshield expressly. [13] It thus seems clear that Medshield was indeed an affected party and that the ex parte order was granted in its absence, despite it having a direct and substantial interest in the relief sought. As it was put by Streicher JA in Lodhi 2 Properties Investments CC v Bondev Developments (Pty) Ltd:7 ‘Where notice of proceedings to a party is required and judgment is granted against such party in his absence without notice of the proceedings having been given to him such judgment is granted erroneously.’ It follows that the ex parte order could not stand and was correctly rescinded by Tlhapi J. [14] I turn to a consideration of whether the rescission order is appealable. It was stated in Zweni v Minister of Law and Order8 that a judgment or order is a decision which, as a general principle, has three attributes: first, the decision must be final in effect and not susceptible to alteration by the court that made it; second, it must be definitive of the rights of the parties; and, third, it must have the effect of disposing of at least a substantial portion of the relief claimed in the main proceedings. Zweni, more particularly the requirement of finality, has been affirmed by this court in a number of subsequent decisions.9 In Guardian National Insurance Co Ltd v Searle NO,10 Howie JA, with reference to the three Zweni attributes, said:11 ‘As previous decisions of this court indicate, there are still sound grounds for a basic approach which avoids the piecemeal appellate disposal of the issues in litigation. It is unnecessarily expensive and generally it is desirable, for obvious reasons, that such issues be resolved by the 7 Lodhi 2 Properties Investments CC v Bondev Developments (Pty) Ltd 2007 (6) SA 87 para 24. 8 Zweni v Minister of Law and Order 1993 (1) SA 523 (A) at 532I-533A. 9 Those judgments are usefully collated in Maize Board v Tiger Oats Ltd & others 2002 (5) SA 365 (SCA) para 6. 10 Guardian National Insurance Co Ltd v Searle NO [1992] 2 All SA 151 (A). 11 Zweni supra fn 8 at 301B-C. same court and at one and the same time. Where this approach has been relaxed it has been because the judicial decisions in question, whether referred to as judgments, orders, rulings or declarations, had three attributes.’ [15] In Pitelli v Everton Gardens Projects CC12 Nugent JA observed: ‘An order is not final for the purposes of an appeal merely because it takes effect, unless it is set aside. It is final when the proceedings of the court of first instance are complete and that court is not capable of revisiting the order. That leads one ineluctably to the conclusion that an order that is taken in the absence of a party is ordinarily not appealable (perhaps there might be cases in which it is appealable, but for the moment I cannot think of one). It is not appealable because such an order is capable of being rescinded by the court that granted it, and it is thus not final in its effect. In some cases an order that is granted in the absence of a party might be rescindable under rule 42(1)(a), and if it is not covered by that rule, as Van der Merwe J correctly found, it is in any event capable of being rescinded under the common law.’ [16] It is so that the Zweni attributes are not cast in stone13 and that even where a decision does not bear all those attributes it may nevertheless be appealable if some other considerations are evident. This includes instances where the order disposes of any issue or any portion of the issue in the main proceedings14 or if the appeal ‘would lead to a just and reasonably prompt resolution of the real issue between the parties’.15 This court has held that no distinction can be drawn between ‘a decision’ in s 16(1)(a) of the Superior Courts Act 10 of 2013 and ‘a judgment or order’ in s 20 of the Supreme Court Act 59 of 1959.16 Therefore, a decision for the purposes of s 16(1)(a)(i) of the Superior Courts Act must still bear the three attributes identified in Zweni. [17] More recently, this court and the Constitutional Court have expanded on this test by adapting the general principles on the appealability of interim orders to accord with the equitable and more context-sensitive standard of the interests of justice.17 A 12 Pitelli v Everton Gardens Projects CC 2010 (5) SA 171 (SCA) para 27. 13 Moch v Nedtravel (Pty) Ltd t/a American Express Travel Service 1996 (3) SA 1 (A) at 10F-11C. 14 Jacobs & another v Baumann NO & others 2009 (5) 432 (SCA) at 436F-G. 15 Zweni supra fn 8 at 531D-E and Jacobs ibid at 436E-G. 16 See Neotel (Pty) Ltd v Telkom SA Soc & others [2017] ZASCA 47 (31 March 2017) and the cases there cited. 17 Philani-Ma-Afrika & others v Mailula & others 2010 (2) SA 573 (SCA) and International Trade consideration of the interests of justice is now of particular importance. But, this does not mean that it is the sole consideration or that one no longer takes into account the factors set out by this court in Zweni. Specifically, this court has held that in deciding what is in the interests of justice, each case has to be considered on its own facts, including whether a judgment is dispositive of the main or real issues between the parties.18 The Constitutional Court has elaborated on this as follows: ‘The test of irreparable harm must take its place alongside other important and relevant considerations that speak to what is in the interests of justice, such as the kind and importance of the constitutional issue raised; whether there are prospects of success; whether the decision, although interlocutory, has a final effect; and whether irreparable harm will result if leave to appeal is not granted. It bears repetition that what is in the interests of justice will depend on a careful evaluation of all the relevant considerations in a particular case.’19 [18] It is plain that a rescission order does not have a final and definitive effect. In De Vos v Cooper & Ferreira this court expressed the view that ‘[s]o ‘n bevel [that is, a rescission order] het immers nie enige finale of beslissende uitwerking op die geskilpunte in die hoofgeding nie’.20 The rescission order simply returns the parties to the positions which they were in prior to the ex parte order being granted. De Vos relied inter alia on Gatebe v Gatebe21 and Ranchod v Lalloo.22 In Gatebe, De Villiers JP held: ‘The order therefore does not dispose of the main case or of any of the issues in the main case, and therefore has not the effect of a definitive sentence in this behalf. It still remains to consider whether it has not the effect of a definitive sentence in that it causes irreparable prejudice. Here again it seems to me to be clear that an order merely rescinding a default judgment does not cause irreparable prejudice, for in the definitive sentence the effect of the decision can obviously be repaired.’23 In Ranchod, Millin J endorsed the reasoning of De Villiers JP. He expatiated: Administration Commission v SCAW South Africa (Pty) Ltd 2012 (4) SA 618 (CC) para 53. 18 Nova Property Group Holdings v Corbett 2016 (4) SA 317 (SCA) at paras 8-10. 19 International Trade Administration Commission supra fn 17 at para 55. 20 De Vos v Cooper & Ferreira 1999 (4) SA 1290 (SCA) at 1297A-D. 21 Gatebe v Gatebe 1928 OPD 145. 22 Ranchod v Lalloo 1942 TPD 211. 23 Gatebe supra fn 21 at 149. ‘The plaintiff's claim remains intact. Nothing has been decided about it. All that has happened is that the defendant has been given an opportunity of answering it; and the setting aside of the default judgment for that purpose is reparable in the final stage.’24 [19] Counsel for HMI sought to escape these authorities with the argument that the reasoning of Tlhapi J finally determined some of the issues between the parties and, as a result, on the facts of this case the order was indeed appealable. That argument is untenable. First, an appeal lies not against the reasoning, but the substantive order of the court below.25 Second, as Ranchod makes plain: ‘[I]f the question of appealability were to depend on the facts of each case, the same order might be appealable by one litigant but not by another; and the court would in every case have to enter into the merits of the appeal in order to determine whether there should be an appeal.’ It may be that the rescission order will cause HMI some inconvenience but as Harms AJA pointed out in Zweni:26 ‘[t]he fact that a decision may cause a party an inconvenience or place him at a disadvantage in the litigation which nothing but an appeal can correct, is not taken into account in determining its appealability’. [20] In my view, the rescission order bears none of the attributes identified by the court in Zweni. This is a central consideration in determining whether the interests of justice favour a finding that the order is appealable. By rescinding the ex parte order, the way is paved for the parties’ respective versions to be fully ventilated and deliberated upon by a court, thereby ensuring a resolution of the real issues between the parties. To find that the rescission order is appealable will therefore effectively unnecessarily delay the resolution of the true issues between the parties. The interests of justice therefore do not favour such an order being appealable. 24 Ranchod supra fn 22 at 217. 25 See inter alia Absa Bank Ltd v Mkhize & another, Absa Bank Ltd v Chetty, Absa Bank Ltd v Mlipha 2014 (5) SA 16 (SCA); Western Johannesburg Rent Board & another v Ursula Mansions (Pty) Ltd 1948 (3) SA 353 (A) at 355; and Atholl Developments (Pty) Ltd v The Valuation Appeal Board for the City of Johannesburg & another [2015] ZASCA 55 (30 March 2015). 26 Zweni supra fn 8 at 533B-C. [21] In the result the appeal must fail and it is accordingly dismissed with costs, including the costs consequent upon the employment of two counsel. _________________ V M Ponnan Judge of Appeal APPEARANCES: For Appellant: E Kromhout Instructed by: Gildenhuys Malatji Inc, Pretoria Honey Attorneys, Bloemfontein For First Respondent: A Subel SC (with him N Rajab-Budlender) Instructed by: Hogan Lovells c/o Friedland Hart Solomon & Nicolson Attorneys, Pretoria McIntyre van der Post, Bloemfontein

SUPREME COURT OF APPEAL SOUTH AFRICA MEDIA SUMMARY - JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL FROM The Registrar, Supreme Court of Appeal DATE 24 November 2017 STATUS Immediate HMI Healthcare Corporation (Pty) Limited v Medshield Medical Scheme & others (1213/2016) [2017] ZASCA Please note that the media summary is for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal. Today, the Supreme Court of Appeal dismissed HMI Healthcare Corporation (Pty) Ltd’s (the appellant) claim against the judgment of the full court of the Gauteng Division, Pretoria (the full court) in favour of the respondents. This appeal concerned whether the first respondent, Medshield Medical Scheme, is an affected party in terms of Rule 42(1)(a) of the Uniform Rules of Court and whether the rescission judgment of the court a quo is appealable. The appellant is the sole shareholder of Calabash Health Solutions (Pty) Ltd (in liquidation) (Calabash). Calabash was incorporated during 1999 and commenced business as a provider of capitation services to medical schemes in 2005. In October 2006 it concluded a written capitation agreement with Medshield. The agreement commenced operating with retrospective effect from 1 January 2006 and was to endure for a period of three years until 31 December 2008. During its subsistence several disputes arose between the parties, consequently the agreement came to be terminated before its expiry during the middle of 2008. Calabash was liquidated by way of a creditors’ voluntary liquidation pursuant to a special resolution dated 13 July 2009. During April 2011, Medshield proved claims against Calabash and it thereafter caused summons to be issued against Calabash for payment of the sum of R40 622 109.00. On 12 December 2012 the appellant applied ex parte to the North Gauteng High Court, Pretoria for an order authorising it, as the sole member of Calabash, to defend an action instituted by Medshield against Calabash. On 18 December 2012, Van Der Merwe DJP granted the ex parte order. Thereafter, Medshield sought to rescind the ex parte order on the grounds that it was erroneously sought and granted in its absence. In addition, Medshield sought an order that steps taken by the appellant pursuant to the ex parte order, be set aside and an order that the appellant is precluded in the future from defending or instituting any claims on behalf of Calabash against Medshield. In the court of first instance, Tlhapi J found that Medshield had a substantial interest in the ex parte application and that the order was erroneously sought in its absence. The learned judge therefore rescinded the ex parte order. Subsequently, the appellant sought and was granted leave to appeal to a full court. The full court (per Tuchten J (Tolmay J concurring) and Makgoka J dissenting) found that notice should have been given to Medshield as it was an affected party as contemplated in Rule 42(1)(a). The appeal was therefore dismissed and the further appeal by the appellant is with the special leave of the SCA. On appeal to the SCA, the court stated that Medshield was indeed an affected party and that the ex parte order was granted in its absence, despite it having a direct and substantial interest in the relief sought. The court therefore found that that the ex parte order could not stand and was correctly rescinded by Tlhapi J. On the issue of whether the rescission order is appealable, the SCA found that by rescinding the ex parte order, the way is paved for the parties’ respective versions to be fully ventilated and deliberated upon by a court, thereby ensuring a resolution of the real issues between the parties. To find that the rescission order is appealable will therefore effectively unnecessarily delay the resolution of the true issues between the parties. The interests of justice therefore do not favour such an order being appealable. As a result, the appeal was accordingly dismissed with costs.

4038

non-electoral

2023

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Reportable Case no: 425/2022 In the matter between: SIQALO FOODS (PTY) LTD APPELLANT and CLOVER SA (PTY) LTD RESPONDENT Neutral citation: Siqalo Foods (Pty) Ltd v Clover SA (Pty) Ltd (425/2022) [2023] ZASCA 82 (31 May 2023) Coram: PONNAN, CARELSE and MATOJANE JJA and DAFFUE and SIWENDU AJJA Heard: 15 May 2023 Delivered: 31 May 2023 Summary: Agricultural Product Standards Act 119 of 1990 - s 3 read with Regulations 2(1)(d) and (e) and 26(7)(a) - word or expression on a product label may not be bigger than the class designation unless it is a registered trade mark or trade name - s 6 read with Regulations 32(3)(a) and 32(4) - use of mark that conveys or creates, or is likely to convey or create, a false or misleading impression as to the quality, nature, class, origin or composition of a product. ___________________________________________________________________ ORDER ___________________________________________________________________ On appeal from: Gauteng Division of the High Court, Pretoria (Vuma AJ, sitting as court of first instance): The appeal is dismissed with costs, including those of two counsel. ___________________________________________________________________ JUDGMENT ___________________________________________________________________ Ponnan JA (Carelse and Motojane JJA and Daffue and Siwendu AJJA concurring): [1] This appeal is concerned with the lawfulness of, inter alia, the names, words, expressions or marks (the marks) depicted on the product container label (the product label) of the appellant’s STORK BUTTER SPREAD (the product). [2] The appellant, Siqalo Foods (Pty) Ltd (or more accurately its predecessor), was incorporated and launched in 2018, when Remgro (Pty) Ltd completed its purchase of Unilever South Africa (Pty) Ltd’s margarine ‘spreads’ business. The appellant’s product line includes the STORK range consisting of, amongst others, the product. [3] The respondent, Clover SA (Pty) Ltd, a wholly-owned subsidiary of the Clover Group, is a manufacturer, marketer and purveyor of branded foods and beverages. It manufactures and sells what is described as a modified butter product under its registered trade mark BUTRO, which has been in use since July 1985. [4] The complaint of the respondent is that the appellant had commenced promoting, marketing, distributing and selling the product as a butter product, when it was in fact not such a product, but a modified butter product. The respondent objected to such trade by the appellant on the basis that the product label misrepresents the particular nature, substance, attributes, character and composition of the product, thereby misrepresenting modified butter as a butter product. [5] The respondent’s case is that the marks on the product label are proscribed in at least two respects by the Agricultural Product Standards Act 119 of 1990 (the Act) and the relevant regulations published thereunder (the regulations).1 The first regulates and prescribes, amongst others, the size of the marks that may be imprinted on a product label or container (s 3 of the Act read with regulations 2(1)(d) and (e) and 26(7)(a)) and, the second prohibition forbids the use of any mark that conveys or creates, or is likely to convey or create, a false or misleading impression as to the nature, class or identity of a product (s 6 of the Act read with regulations 32(3)(a) and 32(4)). [6] The respondent accordingly applied on 5 March 2021 to the Gauteng Division of the High Court, Pretoria (the high court) to interdict and restrain the appellant from competing unlawfully with the respondent and trading in contravention of the Act and the Regulations. The application succeeded before Vuma AJ, who issued the following order on 12 November 2021: ‘1. That the Respondent is interdicted and restrained from:- 1.1 competing unlawfully with the Applicant by using, selling, offering for sale, promoting, advertising, delivering, marketing and/or in any way distributing for the purpose of sale, modified butter products in a container and/or any other packaging and wrapping material having a label imprinted thereon:- 1.1.1 as illustrated in the documents attached hereto as Annexures CF 2.1 – 2.6; 1.1.2 that is similar to the labels illustrated in Annexures CF 2.1 – 2.6; 1.1.3 in which the word “butter” appears as a dominant aspect or feature. 2. That the Respondent is interdicted and restrained from trading in contravention of section 3 and 6 of the Agricultural Product Standards Act, 119 of 1990, as read with Regulations 2, 3, 17, 18, 27 and 32 of the Regulations, GN R1510, published under that Act in Government Gazette 42850, dated 22 November 2019, by using, selling, offering for sale, promoting, advertising, delivering, marketing and/or in any way distributing for the purposes of sale, or offering for sale, modified butter products in a container and/or any other packaging and wrapping material having an offending label imprinted thereon. 3. The Respondent is ordered, within 7 (SEVEN) days of this order, to: - 3.1. remove an offending label from all modified butter packaging and wrapping material, and modified butter marketing and promotional material in their possession or under their 1 ‘Regulations Relating to the Classification, Packing and Marking of Dairy Products and Imitation Dairy Products Intended for Sale in the Republic of South Africa, GN R1510, GG 42850, 22 November 2019.’ control; and 3.2. where an offending label is incapable of being removed from such material, to destroy the material. 4. Costs of this application, including the cost consequent upon the employment of two counsel are awarded to the applicant.’ The appeal is with the leave of the high court. [7] It was common ground that the product is not butter, but something entirely different – namely, a modified butter. Butter is a primary dairy product – a product derived from or manufactured solely from milk. It may not contain any animal, vegetable or marine fat.2 Butter is therefore ‘pure butter’. By contrast, modified butter merely has the general appearance of butter, but it is not pure butter. It is an imitation of butter. The product comprises a blend of 62% plant oils (fats) and other ingredients, but only 38% primary dairy product. [8] The product is as depicted here: [9] Notably: (a) the word BUTTER is, when compared to all other words on the label, dimensionally oversized and, therefore, visually accentuated; (b) the word BUTTER is in bold blue font, capitalised and superimposed on a white letter-shadowed background, further enhancing its visual accentuation; (c) the appellant’s goods mark, 2 See Regulation 17(1), which provides that butter and cultured butter with or without added foodstuff shall be manufactured by churning or crystallisation of cream using the appropriate method; and not contain any animal fat, vegetable fat or marine fat. STORK, which appears above the word BUTTER, is dimensionally of a much smaller size when compared to both the words BUTTER and SPREAD – it is, by contrast, not superimposed on a white letter-shadowed background, thus, also further enhancing the visual accentuation of the word BUTTER on the product label; (d) the words MODIFIED BUTTER, as it appears in the phrase MEDIUM FAT MODIFIED BUTTER SPREAD WITH SUNFLOWER AND PALM OILS, are not in bold and are much smaller dimensionally than the words BUTTER and SPREAD – that phrase appears in a condensed and neutral script and is imposed on a dominant colourful graphic; and, (e) the words WITH SUNFLOWER AND PALM OILS, which define the composition of the product,3 are comparatively so small relative to the rest of the mark as to fade into obscurity. The cumulative consequence of all of these considerations is that they serve to under-accentuate the words MODIFIED BUTTER. [10] The respondent accordingly contends that the product label, viewed as a whole, not only contravenes the statutory labelling prohibitions, but also misrepresents or is likely to create the misleading impression that the appellant’s modified butter product is in fact a butter product. The ineluctable conclusion, so the contention proceeds, is that the appellant’s product label was devised with exactly that misrepresentation and misleading impression in mind. [11] Five questions arise for consideration: First, do the marks on the product label contravene the statutory labelling requirements? Second, does the appellant’s product label misrepresent, or is it likely to misrepresent and create a misleading impression regarding the respondent’s product, as a product of another nature, composition, class or identity? Third, if the appellant is found to trade in contravention of these statutory prohibitions, does that trade constitute unlawful competition? Fourth, did the respondent have an alternative remedy available to it in lieu of this application? Fifth, was the Minister of Agriculture, Land Reform and Rural Development (the Minister) a necessary party and should she have been joined as a party to the suit? As to the first: [12] Sections 3(1)(a)(iii) and (v) of the Act empower the Minister to prohibit the sale 3 In other words, this phrase amounts to the product’s class designation. of a product, unless the labelling of that product complies with the prescribed requirements. In terms of regulation 2(1)(d), ‘[n]o person shall sell a dairy product or an imitation dairy product in the Republic of South Africa . . . unless a container and outer container in which such product is packed, is marked with particulars and in a manner set out in regulations 26 to 31’. And, in terms of regulation 26(7)(a), ‘[n]o word or expression [on a label] may be bigger than the class designation unless it is . . . a registered trade mark or trade name’. [13] The regulations define: (i) ‘class designation’ as ‘the type of dairy product . . . as specified by these regulations’; (ii) ‘dairy product’ as ‘a primary dairy product, a composite dairy product or a modified dairy product’; (iii) ‘imitation dairy product’ as ‘any product other than a dairy product or a fat spread, that is of animal or plant origin and in general appearance, presentation and intended use corresponds to a dairy product’; (iv) ‘primary dairy product’ as ‘milk or a product that has been derived or manufactured solely from milk’; and (v) ‘modified dairy product’ as ‘a product that, in so far as it relates to general appearance, presentation and intended use, corresponds to a primary dairy product, and of which not more than 50 per cent of the fat content, protein content and/or carbohydrate content has respectively been obtained from a source other than a primary dairy product.’ [14] It is not in dispute that the class designation of the appellant’s product is ‘modified butter’, not ‘butter’, and the words STORK BUTTER SPREAD and the words BUTTER SPREAD, individually or compositely, are not registered trade marks. The appellant attempts to suggest that, where regulation 26(7)(a) speaks of ‘a registered trade mark or trade name’, it distinguishes between a registered trade mark, on the one hand, and a trade name, on the other. It accordingly contends that STORK BUTTER SPREAD is a trade name, not a registered trade mark. [15] But, that contention is not supported by the evidence. First, the appellant had applied to register STORK BUTTER SPREAD as a trade mark for use in respect of certain goods, ie as a mark used ‘to indicate the origin of the goods in connection with which it is used’.4 Second, in order to obtain a clearance for its product label, the appellant made a declaration to NejahMogul Technologies and Agric Services (NejahMogul) (the assignee appointed in terms of the regulations as a product label compliance inspector) that STORK BUTTER SPREAD is a trade mark. Third, in response to the respondent’s demand issued before the launch of the application, the appellant’s attorney recorded that the ‘complaint is directed at our client’s STORK BUTTER SPREAD logo, which is a trade mark of our client. The trade mark complies with sub-regulation 26(7)(a) of the Regulations’. [16] Thereafter, the appellant expressed the view in its answering affidavit, ‘[w]hether or not STORK BUTTER SPREAD is a registered trade mark is . . . wholly irrelevant’. Significantly, it did not state that STORK BUTTER SPREAD is its trade name. Then, after the respondent’s replying affidavit had been filed, the appellant proceeded (perhaps impermissibly so) to file a fourth affidavit, described as a ‘supplementary answering affidavit’ in which it said, ‘[f]or the avoidance of all doubt, I submit that “STORK BUTTER SPREAD” is utilised as a trade name’. But that submission, being just that, lacked a proper factual foundation. And, if anything, it was contradicted by what had gone before. [17] It is in this context that the appellant argues (relying solely on the fourth affidavit and completely ignoring what went before) that STORK BUTTER SPREAD is not a trade mark but a trade name and, therefore, that it does not run afoul of regulation 26(7)(a). In that, the appellant should not be allowed to approbate and reprobate. Nor should it be permitted that easily to escape the consequences of the representations made by it. The appellant’s volte-face ought, therefore, to be seen for what it is – a belated attempt to escape the reach of s 3 of the Act, as read with regulations 2(1)(d) and 26(7)(a). As to the second: 4 Cowbell AG v ICS Holdings Ltd [2001] 4 All SA 242 (A); 2001 (3) SA 941 (SCA) para 10. [18] Section 6 of the Act and regulations 32(3)(a)5 and 32(4)6 proscribe the use of any mark that conveys or creates, or is likely to convey or create, a false or misleading impression as to the nature, class or identity of a product.7 [19] Both parties accepted that the test to determine whether the use of the marks would be likely to convey or create a false or misleading impression as to the nature, class or identity of a product is the same as the test applied by the courts to determine the likelihood of deception and/or confusion for the purposes of trade mark infringement as well as passing off. Where a court considers such likelihood, it must take ‘a commonsensical approach to the language on the labels . . . and to the visual impressions created by them in order to resolve . . . the particular issue between the parties’.8 [20] In the course of the determination of a likelihood of deception and/or confusion, the commonsensical approach by a court is guided by the following principles. The first impression is usually determinative of the issue. A court does not have to peer too closely at the offending article to make the determination as to whether it is likely to mislead.9 The court should notionally transport itself from the courtroom to the marketplace and look at the article as it will be seen there by consumers.10 When considering the likelihood of deception and/or confusion, regard must be given to the 5 Regulation 32(3)(a) states that ‘no word, mark, illustration, depiction or other method of expression that constitutes a misrepresentation or directly or by implication creates or may create a misleading impression regarding the quality, nature, class, origin or composition of a diary product or an imitation dairy product shall be marked on a container of such product’. 6 Regulation 32(4) provides that ‘no registered trade mark or brand name which may possibly, directly or by implication, be misleading or create a false impression of the contents of a container or outer container containing a dairy product or an imitation dairy product, shall appear on such a container’. 7 Regulations 3 and 17 state that a product must be classified in accordance with specified classes and that butter may not contain ‘any animal fat, vegetable fat or marine fat’. It must follow that a label that represents ‘modified butter’ as ‘butter’ would also contravene the Regulations. 8 William Grant and Sons Ltd and Another v Cape Wine and Distillers Ltd and Others [1990] 4 All SA 490 (C); 1990 (3) SA 897 (C) at 913A-B (William Grant). 9 In the context of the determination of the likelihood of confusion and/or deception in the trade mark infringement context, which approach equally applies here, see: Puma AG Rudolf Dassler Sport v Global Warming (Pty) Ltd [2009] ZASCA 89; [2010] 1 All SA 25 (SCA); 2010 (2) SA 600 (SCA) para 9: ‘. . .the question of the likelihood of confusion or deception is a matter of first impression and that one should not peer too closely at the registered mark and the alleged infringement to find similarities and differences’. See also John Waddington Ltd v Arthur E Harris (Pty) Ltd [1968] 3 All SA 360 (T); 1968 (3) SA 405 (T) at 409D. 10 Laboratoire Lachartre SA v Armour-Dial Inc [1976] 3 All SA 88 (T); 1976 (2) SA 744 (T) at 746D; Plascon-Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd [1984] 2 All SA 366 (A); 1984 (3) SA 623 (A) at 642D-F (Plascon-Evans). role played by the dominant feature of the offending article,11 because consumers will be focused on that feature and will not necessarily be alerted to the fine points of distinction or definition in order to clear up confusion.12 The confusion experienced by consumers need also not be lasting – even if it lasts only for a ‘fraction of time’, it is sufficient to find a likelihood of confusion, albeit that the confusion might later be cleared up.13 [21] I daresay that this issue can be satisfactorily resolved without having regard to the expert evidence adduced by the appellant, and thus without having to consider the validity of the objection to its admissibility. This, perhaps because the court need really go no further than take a commonsensical approach to the labels and to the visual impressions created by them in order to resolve the issue, without expert assistance.14 However, because of the store sought to be set by the appellants on the evidence, it may be as well to turn to a consideration of that evidence, namely the Melange Concept Development Research Proposal (the Melange Proposal), Visual Attention Service Shelf and Pack Testing Analysis (the VAS analysis) and Catalyst Research and Strategy Survey (the Survey). I do so, because as I shall endeavour to show in what follows, despite the appellant’s argument to the contrary, it seems inescapable from the evidence (such as it is) that the appellant may be ‘acting out a common charade . . . sailing as close to the wind . . . without brewing up a storm of deception’.15 [22] In September 2019, the appellant commissioned qualitative consumer research on the intended label for the product (the Melange Proposal). According to the appellant, it then intended to use the sub-brand ‘Buttery’, instead of BUTTER SPREAD. When consumers were exposed to the initial label: ‘. . . [T]hey felt that the sub-brand name “Buttery” was misleading and confusing – it implied that the product is a “buttery-ish” product not actually a type of butter. Some consumers were 11 International Power Marketing (Pty) Ltd v Searles Industrials (Pty) Ltd 1983 (4) SA 163 (T) at 168H; Plascon-Evans fn 10 above at 641C-D. 12 Blue Lion Manufacturing (Pty) Ltd v National Brands Ltd [2001] 4 All SA 235 (A); 2001 (3) SA 884 (SCA) para 3. 13 Orange Brand Services Ltd v Account Works Software (Pty) Ltd [2013] ZASCA 158 (SCA); 2013 BIP 313 (SCA) para 13; G C Webster, N S Page, C E Webster; G E Morley and I Joubert Webster and Page South African Law of Trade Marks (2022) LexisNexis 4 ed SI 25 para 6.5.1 (Webster and Page). 14 William Grant fn 8 above at 912I-913B. 15 Red Bull GmbH v Rizo Investments (Pty) Ltd 2002 BIP 319 (T) at 323F (Red Bull). even of the view that the sub-brand “Buttery” created the impression that the product could be a margarine that has a butter flavour or texture.’ The initial concept was therefore revised to exclude ‘Buttery’ and insert ‘BUTTER SPREAD’ in its stead’. Further, so it was asserted: ‘Consumers unanimously preferred the revised version. This was because they were of the view that the label clearly communicated the nature of the product – a butter spread. It was also emphasised that the use of the product descriptor “butter spread” needed to be bolder than normal on this new label, so as to clearly communicate the product contents and differentiate this pack from other STORK products.’ [23] The Melange Proposal discloses the following consumer reactions and responses, namely that: (a) ‘butter spread’ is ‘a butter that is spreadable’; ‘a butter with oil/more cream/something added to make it softer’; and ‘definitely a type of butter’; (b) ‘butter spread’ communicated that the product was a spread made from butter as opposed to a margarine spread; (c) the product descriptor ‘butter spread’ needed to be bolder than normal so as to clearly communicate the product contents; and (d) when consumers are asked if the product is butter – they say yes, it is pure butter but with something added/removed to make it more spreadable. [24] What is clear from these responses is that consumers believed that Stork butter spread is ‘butter’ and ‘pure butter’. It is nowhere evident that any consumer had correctly identified the product as ‘modified butter’, despite the fact that the design label carried the phrase ‘medium fat modified butter spread’. But, that can only be because that product class description is, as suggested earlier, essentially invisible. This notwithstanding, the appellant accepted and implemented the Stork butter spread format recommendation and, in the event, the product came to be launched in its current packaging as ‘STORK BUTTER SPREAD’. [25] In July 2020, Barrows Design and Marketing (Pty) Ltd (Barrows) received instructions from the appellant to assess the effectiveness of the label, with particular emphasis on what was described as the ‘stand-out’ of the label. According to the evidence: ‘Barrows made use of Visual Attention Service (VAS), a web-based software tool that analyses designs and photos and predicts 5 visual elements proven to attract human attention in the first 3-5 seconds of viewing. It does this by using an algorithm to predict where people will look.’ [26] The conclusion, amongst others, was that the words ‘STORK BUTTER SPREAD’ would have an 83% overall probability of determining and dictating the visual fixation by a notional customer, over any other element of the label, ie that it would be likely to ‘grab and hold’ the attention of a consumer in the first 3 to 5 seconds of viewing. The further conclusion from the VAS Analysis was that the phrase ‘MEDIUM FAT MODIFIED BUTTER SPREAD’, being the very feature that should have alerted the customer to the fact that the product is not pure butter but modified butter, would have a ‘very low probability of attention’. That very low probability, may well have been due to the significant under-accentuation of the class designation phrase in the product label. [27] Given the methodological shortcomings, the appellant was constrained to accept in its answering affidavit that ‘VAS is not proven research’. The obvious lack of empirical cogency notwithstanding, the appellant then somewhat surprisingly added, ‘it is certainly an indicator to help guide design decisions . . .’. In those circumstances, there is much to be said for the argument that no regard should be had to that evidence. However, when the VAS Analysis, to the extent that reliance can be placed on it, is read together with the Melange Proposal, it is difficult to resist the suggestion that the product label was fashioned to focus consumer attention on the word ‘butter’. [28] That leaves the Survey: As stated by Mr Michael Charnas, the Chief Executive Officer of Catalyst Research and Strategy (Pty) Ltd (Catalyst): ‘4.1. Catalyst has been engaged by the [appellant’s attorney] . . . to conduct market research to assist this honourable Court in determining, I am advised, the main issue in these proceedings regarding whether the [appellant’s] STORK BUTTER SPREAD product will be interpreted by consumers to be “pure” butter. 4.2. In order to test whether consumers will be confused into believing that the [appellant’s] STORK BUTTER SPREAD product will be understood to be “pure” butter, the [appellant] commissioned a market survey. This survey was titled the “Project Lard” survey and was conducted during 12 to 17 March 2021. . . . Research method 4.4. The Project Lard Survey was conducted using an online panel survey and consisted of a panel of 36,000 panelists, who opted to fill in the survey were utilised. The universe 4.5. The universe represented by Project Lard Survey included a spread of demographics across nine regions, all races, ages, genders and income levels. 4.6. However, the minimum earnings to a gross household had been restricted to an income of R15,000 per month (who are amongst the LSM 8 – 10 income category) given that this is calculated as the prime target market for butter and butter spread products. Sample 4.7. In the survey, 914 respondents completed the survey. However, 459 respondents qualified as butter and/or butter spread users in the LSM 8 – 10 income category. Questionnaire 4.8. Qualifying respondents were shown a various range of (pure) butter and modified butter products and asked to categorize each one as either: 4.8.1. Butter; 4.8.2. Butter spread; 4.8.3. Margarine; 4.8.4. None of the above; 4.8.5. Other – with a reason to be specified.’ [29] The Survey, so it would seem, purports to do exactly what the court has to decide, namely whether a notional consumer would, or be likely to, confuse the appellant’s imitation butter product with a pure butter product. That aside, the conclusion reached appears to contradict the conclusion in the Melange Proposal, which found that consumers believed that the product is ‘butter’ or ‘pure butter’. For the purposes of the determination of a likelihood of confusion by a notional consumer in the notional marketplace, the methodology used in the Survey self-evidently fell short. One searches in vain for questions that seek to recreate and emulate the experience of a notional consumer in the notional marketplace. [30] If anything, the Survey was ‘conducted under artificial conditions away from the trade’, which renders the Survey ‘less probative’ and unreliable.16 The participants comprised an ‘online internet panel’, not actual, potential or even notional consumers 16 Webster and Page fn 13 above para 8.25, citing The European Limited v The Economist Newspapers Limited [1996] FSR 431. in a notional marketplace. They were required to complete an undisclosed internet- based questionnaire, the content of which was also undisclosed, all of which makes it impossible to properly assess both the efficacy and validity of the exercise. Labels were provided to the participants to study and consider before filling out the questionnaire. The Survey, therefore, utterly ignored the notional marketplace and the notional consumer, who would encounter the appellant’s product cheek by jowl with other products. [31] Somewhat alarmingly, the Survey, conducted during 12 to 17 March 2021, claimed that a considerable number of participants knew the appellant’s product, despite the fact that the product had only entered the market in limited volumes in certain undisclosed locations on the 1st of that month. How such product recognition could occur in such a short period of time and with such limited market penetration, is not explained. [32] Significantly, the Survey also apparently pointedly avoided the real question that ought to have been asked, namely, whether any survey participant could correctly identify the appellant’s product as a modified or imitation butter. Nevertheless, it is significant that the Survey concluded that a significant number of participants identified and categorised the product as ‘butter’ and ‘butter spread’. Only a mere 5% categorised the product as ‘margarine’ or ‘something else’. We are not told whether that something else is ‘modified butter’. But the fact that 94% of the participants identified the appellant’s product as butter and butter spread ought not to have come as a surprise. It had been predicted in the Melange Proposal that if the butter product descriptor on the label is made bolder so as to ‘grab and hold’ the consumer’s attention within the first few seconds, consumers would perceive the product’s content as ‘butter’ or ‘pure butter’. [33] It is so that although survey evidence is hearsay, it can be admitted as evidence in terms of the Law of Evidence Amendment Act 45 of 1988.17 However, even if survey opinions and conclusions are admitted into evidence, a court is at large to decline to 17 McDonald’s Corporation v Joburgers Drive-Inn Restaurant (Pty) Ltd and Another; McDonald’s Corporation v Dax Prop CC and Another; McDonald’s Corporation v Joburgers Drive-Inn Restaurant (Pty) Ltd and Another [1996] 4 All SA 1 (A); 1997 (1) SA 1 (A) at 26A-B. accord the survey any evidentiary weight because the determination of a likelihood of deception and confusion is within the exclusive province of the court, and no court would surrender that determination to an expert.18 The inherent deficiencies in the Survey compounded, when read together with the articulated objectives, conclusions and recommendations in the Melange Proposal and the VAS Analysis, may well warrant rejection as unreliable. But, it is perhaps not necessary to go that far, because to the extent that reliance can be placed on that evidence, they appear to warrant the inference that the appellant had, in adopting the product label, acted out ‘a common charade’.19 [34] The evidence, such as it is, appears to support the conclusion that the label would, or at the very least would be likely to, convey or create a false or misleading impression as to the nature, class or identity of the appellant’s product. It also tends to support the suggestion that the label was designed so as to mislead the public into thinking that the product is a pure butter product.20 [35] As observed earlier, the word ‘butter’ is undeniably the dominant feature on the appellant’s product label and, the product class designation ‘modified butter’ in the phrase ‘medium fat modified butter spread with sunflower and palm oils’, is virtually invisible in the phrase (which itself is barely perceptible). It follows that the conclusion that the label is likely to convey or create a false or misleading impression as to the nature or class of the appellant’s product is inescapable – the peculiar get-up of the label will self-evidently (or at least be likely to) deceive or confuse the notional consumer into believing that the product is a butter product. As to the third: [36] It does not appear to be in dispute that if the appellant trades in contravention of a statutory prohibition, such trade would also constitute an actionable wrong under 18 South African Human Rights Commission obo South African Jewish Board of Deputies v Masuku and Another [2022] ZACC 5; 2022 (4) SA 1 (CC); 2022 (7) BCLR 850 (CC); 2022 (4) SA 1 (CC) para 144- 145; Gentiruco AG v Firestone SA (Pty) Ltd [1972] 1 All SA 201 (A); 1972 (1) SA 589 (A) at 616H. 19 Red Bull fn 15 above. 20 Ibid at 323F: ‘. . . the irresistible and only reasonable inference from a comparison of the marks . . . is that [the] respondent is acting out a common charade . . . sailing as close to the wind . . . without brewing up a storm of deception’. the common law, namely unlawful competition21 (which is actionable even if the misrepresentation is innocent).22 On appeal, the appellant appears to have accepted that if it is found to trade in contravention of the statutory prohibitions, then the respondent has proven unlawful competition and that the court a quo was correct in so finding. As to the fourth: [37] The appellant contends that the respondent had available to it an alternative remedy under the Act which, so the contention goes, should have been pursued instead of this application. On that score, s 3 of the Act, which states that the Minister may ‘prohibit the sale of a prescribed product’, has been invoked.23 However, why it is thought that s 3, which does no more than empower the Minister to take steps to ensure compliance with the Act, would avail the respondent in the present circumstances is far from clear. NejahMogul’s label clearance issued on 4 March 2020. The argument that the respondent should have approached the Minister to prohibit the sale of the product despite the grant of the clearance may well be untenable. Moreover, the Act and the Regulations appear to make no provision for any such further approach. [38] In any event, s 3 of the Act falls far short of affording the respondent the remedy sought in this application, namely to interdict and restrain the appellant’s continuing unlawful conduct. As observed in Milestone Beverage CC and Others v The Scotch 21 Patz v Greene & Co 1907 TS 427; Pexmart CC and Others v H Mocke Construction (Pty) Ltd and Another [2018] ZASCA 175; [2019] 1 All SA 335 (SCA); 2019 (3) SA 117 (SCA) paras 62 and 63(a); Schultz v Butt [1986] 2 All SA 403 (A); 1986 (3) SA 667 (A) at 678F-H; Long John International Ltd v Stellenbosch Wine Trust (Pty) Ltd 1990 (4) SA 136 (D) at 143G-I; Milestone Beverage CC and Others v The Scotch Whisky Association and Others [2020] ZASCA 105; [2020] 4 All SA 335 (SCA); 2021 (2) SA 413 (SCA) para 16 (Milestone). 22 Elida Gibbs (Pty) Ltd v Colgate-Palmolive (Pty) Ltd (1) [1988] 4 All SA 68 (W); 1988 (2) SA 350 (W) at 358F-359A: ‘[w]here, however, a misstatement of fact relates to a fundamental or intrinsic quality of the wares to be sold, thereby providing the advertiser with a competitive advantage, a plaintiff should not be non-suited merely because the deception was innocent’. 23 Section 3(1) provides that the Minister may prohibit the sale of a prescribed product unless that product is sold according to the prescribed class or grade; unless that product complies with the prescribed standards regarding the quality thereof, or a class or grade thereof; unless the prescribed requirements in connection with the management control system, packaging, marking and labelling of that product are complied with; if that product contains a prescribed prohibited substance or does not contain a prescribed substance; and unless that product is packed, marked and labelled in the prescribed manner or with the prescribed particulars. Whisky Association and Others24 (Milestone) (citing with approval the judgment of Trollip J in Johannesburg City Council v Knoetze and Sons25): ‘. . . [T]he purpose of an interdict is to restrain future or continuing breaches of a statute, whereas the statutory remedy of prosecuting and punishing an offender relates to past breaches. Different considerations must therefore inevitably apply. For, while the statutory remedies might be adequate to deal with past breaches, the civil remedy of an interdict might be the only effective means of coping with future or continuing breaches.’26 [39] The respondent’s case is that the Act and the Regulations make no provision for any form of relief even remotely similar to an interdict to restrain continuing unlawful competition in the form of trade in contravention of a statutory prohibition. But, even if there was a statutory remedy that could be invoked to address the unlawful competition (and there appears to be none), then applying the dictum in Milestone, there is nothing that prevents the respondent from seeking an interdict in the high court. Nothing, therefore, precluded the respondent from seeking the remedy of an interdict for alleged trade in transgression of a statutory provision and, therefore, unlawful competition in the court a quo. As to the fifth: [40] In support of the contention that the Minister has a direct and substantial interest in the application and will be prejudicially affected by the relief sought,27 reliance is sought to be placed on Esquire Electronics Ltd v Executive Video (Esquire).28 However, as I see it, such reliance is facile. The dictum relied upon by the appellant bears repeating: 24 Milestone fn 21 above. 25 Johannesburg City Council v Knoetze and Sons 1969 (2) SA 148 (W) at 150-155. 26 Milestone fn 21 above para 53. 27 As it was put in Judicial Service Commission and Another v Cape Bar Council and Another [2012] ZASCA 115; [2013] 1 All SA 40 (SCA); 2013 (1) SA 170 (SCA) para 12: ‘It has by now become settled law that the joinder of a party is only required as a matter of necessity – as opposed to a matter of convenience – if that party has a direct and substantial interest which may be affected prejudicially by the judgment of the court in the proceedings concerned (see eg Bowring NO v Vrededorp Properties CC and Another 2007 (5) SA 391 (SCA) para 21). The mere fact that a party may have an interest in the outcome of the litigation does not warrant a non-joinder plea. The right of a party to validly raise the objection that other parties should have been joined to the proceedings, has thus been held to be a limited one (see eg Burger v Rand Water Board and Another 2007 (1) SA 30 (SCA) para 7; and Andries Charl Cilliers, Cheryl Loots and Hendrik Christoffel Nel Herbstein & Van Winsen The Civil Practice of the High Courts of South Africa 5 ed vol 1 at 239 and the cases there cited).’ 28 Esquire Electronics Ltd v Executive Video [1986] 2 All SA 210 (A); 1986 (2) SA 576 (A). ‘In my opinion this point cannot properly be considered without the Registrar of Trade marks having been joined. A decision upholding the point might have far-reaching consequences, affecting the validity of numerous other trade marks in the register. More-over, Regulation 4(4) provides that if any doubt arises as to what class any particular description of goods or services belongs to, the doubt shall be resolved by the Registrar. It is plain that the Registrar is directly and substantially interested in the point and that it should not be decided unless he is given an opportunity of being heard.’29 [41] The dictum underscores the fact that Esquire differs toto caelo from this case. The point under discussion in that matter conceivably brought into question the validity of numerous other registered trade marks.30 The judgment in Esquire was one in rem in that it affects a public register.31 Esquire, therefore, stated that the point could not properly be considered without the Registrar of Trade Marks (the Registrar) having been joined, because a decision on that point would bind the Registrar and could have far-reaching consequences for the validity of numerous other trade marks on the Trade Marks Register. In contrast, the relief sought by the respondent in this application affects and binds only the appellant and the respondent. It has no effect on, or consequence for the Minister, the Department or any other party. For the present, the relief sought also has no effect on, or implications for, the product label already approved by NejahMogul. [42] The role and powers of the Registrar also differ fundamentally from that of the Minister. Contrasted with the Minister, the Registrar is a specialist in trade marks and related law who has, in terms of s 45(1) of the Trade Marks Act 194 of 1993 (Trade Marks Act), ‘all such powers and jurisdiction as are possessed by a single judge in a civil action before the Transvaal Provincial Division of the Supreme Court’. The Trade Marks Tribunal is furthermore a specialist tribunal especially created by the Trade Marks Act to hear and decide all statutory issues relating to trade marks. The provisions under consideration here do not create such a specialist tribunal to hear and decide issues relating to matters falling within the scope of the Act. The Minister and other functionaries, unlike the Registrar in Esquire, do not appear to have any 29 Ibid at 590I-591A. 30 Ibid at 590H. 31 The Gap Inc v Salt of the Earth Creations 2012 (5) SA 259 (SCA) para 2. further role to play in this matter in relation to any of the orders sought by the respondent. It follows that, like the other grounds of appeal raised by the appellant, the non-joinder point must also fail. [43] In the result, the appeal falls to be dismissed with costs, such costs to include those of two counsel. ______________________ V M PONNAN JUDGE OF APPEAL Appearances For the appellant: R Michau SC with L Harilal Instructed by: Kisch Africa Inc, Pretoria Phatshoane Henney Attorneys, Bloemfontein For the respondent: AJ Bester SC with P Eilers Instructed by: Hahn & Hahn Attorneys, Pretoria McIntyre Van der Post Inc, Bloemfontein

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 31 May 2023 Status: Immediate The following summary is for the benefit of the media in the reporting of this case and does not form part of the judgments of the Supreme Court of Appeal Siqalo Foods (Pty) Ltd v Clover SA (Pty) Ltd (425/2022) [2023] ZASCA 82 (31 May 2023) Today, the Supreme Court of Appeal (SCA) dismissed an appeal with costs, including those of two counsel, against the decision of the Gauteng Division of the High Court, Pretoria (the high court). The appeal was concerned with the lawfulness of the names, words, expressions, marks, etc (the marks) depicted on the product container label (the product label) of the appellant, Siqalo Foods (Pty) Ltd’s, STORK BUTTER SPREAD (the product). The respondent, Clover SA (Pty) Ltd, manufactured and sold what was described as a modified butter product under its registered trade mark BUTRO, which has been in use since July 1985. The complaint of the respondent was that the appellant had commenced promoting, marketing, distributing and selling the product as a butter product, when it was in fact not such a product, but a modified butter product. The respondent objected to such trade by the appellant on the basis that the label on the product misrepresented the particular nature, substance, attributes, character and composition of the product, thereby misrepresenting modified butter as a butter product. The respondent’s case was that the marks on the product label were proscribed in at least two respects by the Agricultural Product Standards Act 119 of 1990 (the Act) and the relevant regulations published thereunder (the Regulations). The first regulated and prescribed, amongst others, the size of the marks that may be imprinted on a product label or container; and, the second prohibition forbade the use of any mark that conveyed or created, or was likely to convey or create, a false or misleading impression as to the nature, class or identity of a product. The respondent, accordingly, applied to the Gauteng Division of the High Court, Pretoria (the high court) to interdict and restrain the appellant from competing unlawfully with the respondent and trading in contravention of the Act and the Regulations. The SCA found that five questions arose for consideration: First, did the marks on the product label contravene the statutory labelling requirements? Second, did the appellant’s product label misrepresent, or was it likely to misrepresent and create a misleading impression regarding the respondent’s product as a product of another nature, class or identity? Third, if the appellant was found to trade in contravention of these statutory prohibitions, did that trade constitute unlawful competition? Fourth, did the respondent have an alternative remedy available to it in lieu of this application? Fifth, was the Minister of Agriculture, Land Reform and Rural Development (the Minister) a necessary party and should she have been joined as a party to the suit? As to the first, the SCA found that it was not in dispute that the class designation of the appellant’s product was ‘modified butter’, not ‘butter’, and the words STORK BUTTER SPREAD and the words BUTTER SPREAD, individually or compositely, were not registered trade marks. Further, that the contention by the appellant that STORK BUTTER SPREAD was a trade name, not a registered trade mark, was not supported by the evidence. As to the second, the SCA found that the evidence, such as it was, appeared to support the conclusion that the label would, or at the very least would be likely to, convey or create a false or misleading impression as to the nature, class or identity of the appellant’s product. It also tended to support the suggestion that the label was designed so as to mislead the public into thinking that the product was a pure butter product. Further, that the word ‘butter’ was undeniably the dominant feature on the appellant’s product label and the product class designation ‘modified butter’ in the phrase ‘medium fat modified butter spread with sunflower and palm oils’ was virtually invisible in the phrase (which itself was barely perceptible). It followed, the SCA found, that the conclusion that the label was likely to convey or create a false or misleading impression as to the nature or class of the appellant’s product was inescapable – the peculiar get-up of the label would self-evidently (or at least be likely to) deceive or confuse the notional consumer into believing that the product was a butter product. As to the third, the SCA found that the appellant appeared to have accepted that if it was found to trade in contravention of the statutory prohibitions, then the respondent had proven unlawful competition and that the high court was correct in so finding. As to the fourth, the SCA found that the argument that the respondent should have approached the Minister to prohibit the sale of the product despite the grant of the label clearance, was untenable. Moreover, the Act and the Regulations appeared to make no provision for any such further approach. The SCA found further that, in any event, s 3 of the Act fell far short of affording the respondent the remedy sought in the application, namely to interdict and restrain the appellant’s continuing unlawful conduct. Nothing, therefore, precluded the respondent from seeking the remedy of an interdict for alleged trade in transgression of a statutory provision and, therefore, unlawful competition in the high court. As to the fifth, the SCA found that the relief sought by the respondent in the application affected and bound only the appellant and the respondent. It had no effect on, or consequence for the Minister. The Minister did not appear to have any further role to play in the matter in relation to any of the orders sought by the respondent. It followed, the SCA found, that the non-joinder point had to also fail. ~~~~ends~~~~

3060

non-electoral

2015

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Reportable Case No: 409/2015 In the matter between: MATHEWS SIPHO LELAKA APPELLANT and THE STATE RESPONDENT Neutral citation: Lelaka v The State (409/15) [2015] ZASCA 169 (26 November 2015) Coram: Ponnan, Shongwe, Petse and Mathopo JJA and Van der Merwe AJA Heard: 4 November 2015 Delivered: 26 November 2015 Summary: Criminal Procedure ─ sentence ─ whether plea of double jeopardy applicable where accused had been convicted of assault with intent to do grievous bodily harm and where after the conviction, the victim died and the State intends preferring charges of murder against him. ________________________________________________________________ ORDER ________________________________________________________________ On appeal from: The North West Division of the High Court, Mahikeng (Gura J, Matlapeng and Djaje AJJ sitting as a court of review): 1. The appeal succeeds. 2. The order of the full court is set aside and replaced with the following: ‘The matter is remitted to the Magistrate’s Court, Ga-Rankuwa for the appellant’s trial to be finalised before another magistrate.’ ________________________________________________________________ JUDGMENT ________________________________________________________________ Mathopo JA (Ponnan, Shongwe, Petse JJA and Van der Merwe AJA concurring): [1] On 10 February 2013, the appellant, Mr Mathews Lelaka and Mr Kgotatso Moshe (the complainant) were on their way from a tavern. The latter took a bottle of whisky from the appellant. This incensed the appellant, who then took the bottle from the complainant and assaulted him by striking him in his face. The appellant was charged with one count of assault with intent to do grievous bodily harm. On 14 February 2013 the appellant pleaded guilty to the charge. He made a detailed statement in terms of s 112 (2) of the Criminal Procedure Act 51 of 1977 (the Act), in which he set out his version of events. Satisfied that all of the essential elements of the charge were admitted, the magistrate convicted him as charged. The State then applied for a postponement of the matter to obtain a record of the appellant’s previous convictions. The magistrate postponed the case to 28 February 2013 and cancelled the appellant’s bail and remanded him in custody. On 28 February 2013, the magistrate was informed that the complainant had died in the interim on 15 February 2013. In the light of this new fact, the magistrate granted the State a postponement to obtain a post-mortem report (the report) to determine the exact cause of the death. [2] The report only became available after several further postponements on 27 May 2013. The report reflected the cause of death as ‘severe blunt force head trauma’. The magistrate postponed the matter once again to enable the State to seek a directive from the office of the Director of Public Prosecutions (DPP). There were several other postponements whilst the appellant was kept in custody. On 13 June 2013 the appellant appeared in court with a new legal representative, who urged the court to sentence the appellant in terms of his plea of guilty. [3] The State opposed the application and requested another postponement for the DPP’s directive as to whether murder charges should be proffered against the appellant or not. In essence the State contended that it would not be in the interest of justice to proceed with the sentencing procedure in the light of the death of the deceased. On 20 June 2013 and for reasons that are not clear the magistrate recused herself from the matter. She further stated that ‘the case can start de novo, then you can argue a bail and everything afresh when there will be no prejudice to you’. She did not explain why she arrived at that decision. At that stage, the appellant had been in custody for a period of four months. [4] Some seven months after her recusal, the magistrate sent the case to the North West Division of the High Court, Mahikeng (high court) on special review in terms of s 304A(a) of the Act. She requested the high court to set aside the conviction on the basis that the proceedings were not in accordance with justice. Section 304A(a) reads as follows: ‘304A Review of proceedings before sentence (a) If a magistrate or regional magistrate after conviction but before sentence is of the opinion that the proceedings in respect of which he brought in a conviction are not in accordance with justice, or that doubt exists whether the proceedings are in accordance with justice, he shall, without sentencing the accused, record the reasons for his opinion and transmit them, together with the record of the proceedings, to the registrar of the provincial division having jurisdiction, and such registrar shall, as soon as is practicable, lay the same for review in chambers before a judge, who shall have the same powers in respect of such proceedings as if the record thereof had been laid before him in terms of section 303.’ (My emphasis.) [5] Upon receipt of the review, Landman J requested the DPP for an opinion, which was to the effect that a grave injustice would occur if murder charges were not preferred against the accused, and submitted that the high court could invoke its inherent power in terms of s 173 of the Constitution to set the proceedings aside. The two reviewing judges, Landman J and Hendricks J, could not agree on the matter, with the result that the Judge President of that division directed that the review be placed before the full court for argument. After hearing the argument, the full court (per Gura J, Matlapeng and Djaje AJJ) held that it would not be in the interests of justice if the appellant was sentenced on a lesser charge where the victim had died as a result of the appellant’s unlawful actions arising from the same facts. Consequently, acting purportedly in terms of s 173 of the Constitution, it set aside the conviction and ordered that the trial should commence de novo. The appeal by the appellant against that order is with the special leave of this court. [6] It is a general rule of the common law that a person may not be punished twice for the same offence. This common law rule is now entrenched in the provisions of s 35(3)(m) of the Constitution.1 In terms of the rule, an accused may raise the plea of autrefois convict or acquit. This principle is grounded in the maxim that no person is to be brought into jeopardy more than once for the same offence. This principle finds expression in the rule of law that if someone has been either convicted or acquitted of an offence he or she may not later be charged with the same offence or with what was in effect the same offence.2 According to Lord Devlin in Connelly v Director of Public Prosecutions 1964 (2) All ER 401 ‘[t]he word offence embraces both the facts which constitute the crime and the legal characteristics which make it an offence.’3 Lord Morris elaborated: ‘It matters not that incidents and occasions being examined on the trial of the second indictment are precisely the same as those which were examined on the trial of the first. The Court is concerned with charges of offences and crimes. The test is, therefore, whether such proof as is necessary to convict of the second offence would establish guilt of the first offence or of an offence for which on the first charge there could be a conviction. In R v Long4 Schreiner JA said the following: ‘It is not enough to support the plea that the facts are the same in both trials. The offences charged must be the same, but substantial identity is sufficient. If the accused could have been convicted at the former trial of the offence with which he is subsequently charged there is substantial identity, since in such a case acquittal on the former charge necessarily involves acquittal on the subsequent charge. Another way of putting it is that he must legally have been in jeopardy on the first trial of being convicted of the offence with which he was charged on the second trial.’ 1 This subsection provides that an accused has the right not to be tried for an offence in respect of an act or omission for which that person has previously been either acquitted or convicted. 2 S v Ndou & others 1971 (1) SA 668 (A ) at 676C-E. 3 At 433G-H. 4 1958 (1) SA 115 (A) at 117F-H. [7] However, our law has long recognised that a plea of autrefois convict is not available when it was impossible at the previous trial to prefer the more serious charge later presented.5 Voet 48.2.12 puts it thus: ‘One convicted (but not one acquitted) of light crime can be charged again with serious crime arising out of the same act─ Finally nothing prevents one who has been charged with and punished for a somewhat light crime from being afterward charged in turn with a heavier crime which is proved to have sprung from the same act. An instance would be when a person has been first punished as having inflicted a wound and it later becomes clear that the wounded man perished from such wound as being a lethal wound, and therefore he is account afresh as a homicide. It would be otherwise if one who was accused of wounding a person has not been convicted by the judgment, but has been acquitted, since his innocence has already been approved by the Judge in respect of the very act from which the ensuing.’ It follows that a conviction for assault is no bar to a prosecution for murder or culpable homicide where the victim has died since the conviction ‘for the fact of the death has altered the essential nature of the crime’.6 Put somewhat differently, ‘the death is a new fact’.7 See also S v Gabriel 1971(1) SA 646 (RA) and S v Ndou supra. In Ndou (at 676C) the general principle was expressed as follows: ‘it is clear that a plea of autrefois convict or acquit is not available to an accused charged with murdering A on a stated occasion notwithstanding that he has previously been acquitted or convicted of assaulting A on that occasion’. [8] It follows that both courts below misconceived the position in their approach to the matter. Reverting to the facts of this case, the deceased was assaulted on 10 February 2013. The appellant pleaded guilty and was convicted on 14 February 2013. The deceased died on 15 February 2013 from what appears to be assault 5 F Gardiner and C Landsdown South African Criminal Law and Procedure 5ed (1946) p297. 6 See 5 above. 7 WM Russel KNT A Treatise on Crimes and Misdemeanors 8ed (1923) p1817. related injuries. When the appellant was convicted the deceased was still alive. It was thus not possible at that stage to charge him with murder. A case on all fours with the present case is that of R v Stuurman (1863) 1 Roscoe 83. In that case an accused had been convicted of common assault and the man assaulted subsequently died. It was held that this conviction was no bar to his subsequent trial and conviction for culpable homicide. It follows that nothing stops the state from instituting a charge of murder against the appellant, if so inclined. In the result there was no basis for setting aside the conviction and the trial should be finalised. [9] There is one aspect which requires final comment. The high court was rightly critical of the magistrate because she recused herself. The effect of her recusal though is that the matter must be remitted to another magistrate for the trial to be finalised. The appellant was convicted on his plea of guilty and it should not occasion any great difficulty for another magistrate on the strength of the present record and such evidence as may be placed before the court in either aggravation or mitigation to proceed to sentence the appellant. [10] I therefore make the following order: 1. The appeal succeeds. 2. The order of the full court is set aside and replaced with the following: ‘The matter is remitted to the Magistrates’ Court, Ga-Rankuwa for the appellant’s trial to be finalised before another magistrate.’ ________________ R S Mathopo Judge of Appeal Appearances For Appellant: M L Skibi Instructed by: Legal Aid, Mahikeng Justice Centre, Mahikeng Bloemfontein Justice Centre, Bloemfontein For Respondent: L van Niekerk Instructed by: The Director of Public Prosecutions, Mmabatho The Director of Public Prosecutions, Bloemfontein

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL FROM The Registrar, Supreme Court of Appeal DATE 26 November 2015 STATUS Immediate Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal. Mathews Sipho Lelaka v The State (409/2015) [2015] ZASCA 169 (26 November 2015) The Supreme Court of Appeal (SCA) today handed down judgment in a matter relating to whether a plea of double jeopardy is applicable where the appellant, an accused, had been convicted of one count of assault with intent to do grievous bodily harm and after the conviction the victim died and the state intends to prefer charges of murder against him. The appeal to the SCA by the accused was against the judgment of the North West Division of the High Court, Mahikeng sitting as a court of review, which reviewed and set aside his conviction on a charge of assault with intend to do grievous bodily harm, and referred the matter back to the magistrate’s court to be heard de novo. Proceedings began in the Ga-Rankuwa Magistrate’s Court (the magistrate’s court) where the appellant pleaded guilty to a charge of assault with intent to do grievous bodily harm after he struck the victim of the assault in the face with a bottle. The appellant made a detailed statement in terms of s112(2) of the Criminal Procedure Act 51 of 1977 (the Act) and he was convicted as charged. The matter was postponed to obtain a record of the appellant’s previous convictions. During this period, the victim of the assault passed away. This information was brought to the magistrate’s attention at the next hearing, and in light of this, the magistrate postponed the hearing to obtain the post mortem report. Subsequently, the post mortem report became available. It reflected the deceased’ cause of death as ‘severe blunt force head trauma’. The matter was postponed several times to enable the State to obtain a directive from the Director of Public Prosecutions (DPP) to determine whether murder charges should be proffered against the appellant. The appellant was remanded in custody during these postponements. Following several other postponements, the appellant’s newly appointed representative urged the court to sentence the appellant in terms of his guilty plea. The state opposed this application and requested a further postponement for the DPP’s directive. The state contended that it would not be in the interest of justice to proceed to sentence the appellant in light of the death of the deceased. The magistrate postponed the matter, and at the next sitting, recused herself. Some seven months after her recusal, the magistrate referred the matter to the North West Division of the High Court, Mahikeng on special review in terms of s304A(a) of the Act. The matter was argued before the full court which reviewed and set aside the proceedings, and ordered that the trial should commence de novo. The full court determined that the referral by the magistrate in terms of s304A(a) of the Act was incompetent, but invoked its inherent powers in terms of s173 of the Constitution, 1996 to set aside the trial. The court held that it would not be in the interest of justice if the appellant was sentenced on a lesser charge when the victim had died as a result of the appellant’s unlawful actions arising from the same facts. In the SCA, the state persisted that the interest of justice would not be served if the appellant was sentenced on the lesser charge. The SCA held that the defence raised by the appellant that he may not be punished twice for the same offence was recognised in our common law, and has been entrenched in s35(3)(m) of the Constitution, 1996. However, defence is not available when it was impossible at the previous trial to prefer the more serious charge later presented. Consequently, a conviction of assault is not a bar to a prosecution for murder or culpable homicide where the victim has died since the conviction because the fact of death has altered the essential nature of the crime. The SCA accordingly held that there was no basis for the full and magistrate court to set aside the conviction. The SCA also expressed its unhappiness at the recusal of the magistrate as her conduct had the effect that the trial could not be finalised. The SCA accordingly upheld the appeal and made an order remitting the matter back to the magistrate’s court for the appellant’s trial to be finalised before a different magistrate. --- ends ---

3556

non-electoral

2021

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Reportable Case no: 856/2019 In the matter between: IMPACT FINANCIAL CONSULTANTS CC FIRST APPLICANT MICHAL JOHANNES CALITZ SECOND APPLICANT and NOLUNTU NELLISA BAM N O FIRST RESPONDENT YVONNE MOKGORO N O SECOND RESPONDENT LORENDANA HANSEN THIRD RESPONDENT NATALINA NATALI FOURTH RESPONDENT HENDRIK FREDERICK DU PLESSIS FIFTH RESPONDENT ERNA ELIZABETH DU PLESSIS SIXTH RESPONDENT JOHANNES JACOBUS MATTHYS COETZEE SEVENTH RESPONDENT JEANRICH HEIN EHLERS EIGHTH RESPONDENT ROBERT WILLIAM WHITFIELD JONES NINTH RESPONDENT CAROLINA JOHANNA OLIVIER TENTH RESPONDENT ERIKA ELISE KRUGER ELEVENTH RESPONDENT MARTHA HENDRINA CARSTENS TWELFTH RESPONDENT HENDRIK JOHANNES CARTENS THIRTEENTH RESPONDENT ETTIENNE DU PREEZ VAN DER MERWE N.O. FOURTEENTH RESPONDENT CRAIG STEWART INCH FIFTEENTH RESPONDENT HENDRINA AMEDJE RAUTENBACH SIXTEENTH RESPONDENT GARVITTE HERMAN LOMBARD SEVENTEENTH RESPONDENT MARTHA CATHARINA JOOSTE EIGHTEENTH RESPONDENT JOHANNES ENOCH HARTSHORNE NINTEENTH RESPONDENT FIONA AVERY KING TWENTIETH RESPONDENT Neutral citation: Impact Financial Consultants CC and Another v Bam NO and Others (Case no 856/2019) [2021] ZASCA 54 (30 April 2021) Coram: NAVSA ADP and MAKGOKA and DLODLO JJA and GOOSEN and UNTERHALTER AJJA Heard: 4 March 2021 Delivered: This judgment was handed down electronically by circulation to the parties’ legal representatives by email, publication on the Supreme Court of Appeal website and release to SAFLII. The date and time for hand-down is deemed to be 09h45 on 30 April 2021. Summary: Ombud for Financial Services – Financial Advisory and Intermediary Services Act 37 of 2002 – the nature of the financial product to be identified before determination of complaint and possible compensation is directed. ORDER On appeal from: Gauteng Division of the High Court, Pretoria (Tlhapi J, sitting as court of first instance): 1. Leave to appeal is granted with costs. 2. The appeal is upheld to the extent set out in the substituted order below. 3. The order of the high court is set aside and replaced by the following order: ‘(a) The decision of the second respondent to refuse leave to appeal to the Financial Services Appeal Board in case numbers FAB3/2015 to FAB20/2015 is hereby set aside. (b) The determinations of the first respondent under case numbers FAB3/2015 to FAB20/2015 are hereby set aside. (c) Each of the complaints lodged under case numbers FAB3/2015 to FAB20/2015 are referred back to the first respondent for determination in accordance with the provisions of the Financial Advisory and Intermediary Services Act 37 of 2002. (d) The first respondent is ordered to pay the costs of the application.’ 4. The first respondent is ordered to pay the costs of the appeal, including the costs of the application for leave to appeal before the high court. JUDGMENT Goosen AJA (Navsa ADP and Makgoka and Dlodlo JJA and Unterhalter AJA concurring) [1] This is an application for leave to appeal referred for oral argument by this Court in terms of section 17(2)(d) of the Superior Courts Act, 10 of 2013. The parties were directed to be prepared to address the court on the merits, if called upon to do so. We heard argument on the application for leave to appeal and on the merits. The Gauteng Division of the High Court, Pretoria (the high court) dismissed a review application (the review application) in which the applicants sought to set aside the dismissal of their application for leave to appeal by the second respondent. [2] The central issue in this matter is whether the Ombud for Financial Services (the Ombud), established in terms of section 20 of the Financial Advisory and Intermediary Services Act, 37 of 2002 (the FAIS Act) committed a reviewable error in determining complaints lodged by each of the third to twentieth respondents in terms of s 27 of the FAIS Act. The detailed background culminating in the proceedings before us is set out hereafter. The parties [3] The first applicant, Impact Financial Consultants CC (Impact Consultants), is a registered financial services provider in which the second applicant (Mr Calitz) holds a 90% membership interest. Mr Calitz is a duly registered financial services provider who rendered such services as a member of Impact Consultants. [4] The first respondent is the duly appointed Ombud for Financial Services, appointed in terms of s 21 of the FAIS Act.1 The second respondent is the chairperson of the appeal board of the Financial Services Board. The appeal board considers appeals from determinations made by the Ombud.2 The third to twentieth respondents (hereafter the respondents) each lodged a complaint with the Ombud in relation to advice furnished to them by Mr Calitz to them regarding investments which each had made. The complaints were recorded by the Ombud under case numbers FAB3/2015 to FAB20/2015. The investments were made in the MAT Relative Value Arbitrage Fund, later named the Relative Value Arbitrage Fund Trust (the RVAF Trust). The RVAF Trust was controlled or managed by Abante Capital (Pty) Ltd (Abante Capital), an investment company controlled by Mr Herman Pretorius (Mr Pretorius). The complaints arose pursuant to the collapse and eventual liquidation of Abante Capital and the RVAF Trust, following the death of Mr Pretorius, who committed suicide in July 2012, subsequent to adverse press reports about fraud allegedly perpetrated by him, and significant losses incurred by Abante Capital. 1 The first respondent was cited nomine officio. She has since been replaced by the current Ombud. The current Ombud participated in the proceedings before this court. 2 See s 28(5)(b) of the FAIS Act read with s 26(1) of the Financial Services Board Act 97 of 1990. The Financial Services Board Act was repealed by the Financial Sector Regulation Act, 9 of 2017 which, in respect of the provisions relating to the appeal board, came into effect on 1 April 2018. The appeals process is now regulated by the latter Act. The proceedings before the Ombud [5] It is not in dispute that Mr Calitz furnished the respondents with advice regarding an investment in the RVAF Trust, which was described as a ‘hedge fund’ managed by Abante Capital. It is also not in dispute that each of the respondents invested funds as advised. Nor is it in dispute that, in consequence of the collapse and resulting liquidation of Abante Capital and the RVAF Trust, the respondents suffered capital losses on their investments. [6] It was these losses which gave rise to the complaints lodged against Mr Calitz and Impact Consultants with the Ombud. The complaints were premised upon the allegation that Mr Calitz had negligently failed to comply with his obligations as a financial services provider, as set out in the General Code of Conduct for Authorised Financial Service Providers and Representatives (the Code)3, published in terms of s 15 of the FAIS Act. It was alleged, inter alia, that Mr Calitz had failed: to undertake a due diligence assessment of the RVAF Trust and / or Abante Capital; to establish that the ‘hedge fund’ in which investments were made was not duly registered and regulated by the FAIS Act; to establish that the scheme of investment was an illegal scheme; to undertake a proper needs analysis in relation to each of the investors; to advise of the high risks associated with the investment; and had generally negligently failed to comply with his duties as a financial advisor. The respondents alleged that this negligent conduct had caused the respondents to suffer loss. They accordingly sought a compensatory award in terms of the FAIS Act. 3 General Code of Conduct for Authorised Financial Services Providers and Representatives, Board Notice 80 of 2003, GG 25299, 8 August 2003. [7] In answer to the complaints Mr Calitz raised several defences. He denied that he had rendered financial advisory services as a representative of Impact Consultants. He asserted that he had rendered such advice in his personal capacity as a registered financial services provider. He denied that he had failed in his duties in any manner. He stated that he was under no obligation to conduct a due diligence of the particular funds in which investments were to be made. His obligation, he asserted, extended only to a requirement that he undertake a due diligence assessment of the fund manager. In this instance that was Abante Capital. He alleged that: he had undertaken such due diligence assessment; he had satisfied himself that Abante Capital was a registered service provider; it was managed by competent and qualified personnel, including Mr Pretorius who was a highly respected fund manager; and that the returns on investment earned by the Abante Capital hedge fund were sustainable and in line with returns earned by similar funds. He alleged further that he had advised each of the respondents about the nature of the risks associated with such investments and that in many instances his clients had insisted on investing with the RVAF Trust. He stated that Abante Capital had on two occasions been the subject of investigation by the Financial Services Board and that no impropriety had been discovered. The nature and extent of the fraud perpetrated by Mr Pretorius upon investors was only discovered after his demise and upon the liquidation of Abante Capital. [8] Mr Calitz accordingly denied that he was negligent in any respect or that any negligence that was established, had caused the losses suffered by the respondents. The losses, he asserted, were occasioned by the fraud perpetrated by Mr Pretorius and that such fraud could not have been detected by a due diligence assessment which he (Mr Calitz) was required to undertake. [9] Mr Calitz also raised a further defence, namely that the financial product in respect of which he had furnished advice was not a ‘financial product’ as defined by the FAIS Act and accordingly that the ‘advice’ he had furnished was not regulated by the FAIS Act. The Ombud, so he contended, accordingly lacked jurisdiction to determine the complaints against him and Impact Consultants. The determinations by the Ombud [10] The first determination made against Impact Consultants and Mr Calitz was in respect of the complaint lodged by the fifteenth respondent, Dr Inch (the Inch Determination). Thereafter the Ombud determined all the other complaints, essentially upon the basis set out in the Inch Determination. Reference will accordingly only be made to the Inch Determination as reflecting the findings of and reasoning adopted by the Ombud. [11] The Ombud found that Mr Calitz, acting on behalf of Impact Consultants, had failed to conduct a needs analysis in terms of s 8 of the Code4 from which it could be determined whether the selected investment product was likely to satisfy the investor’s needs. The Ombud was critical of Mr Calitz’s advice to place the greater part of the savings into a high risk investment, without any thought as to diversification. The Ombud held that in breach of sections 4 and 5 of the Code, Mr Calitz had failed to make proper disclosure by not providing full details of what they were investing in and with whom they were dealing. It was also found that Mr Calitz had failed to maintain a record of the advice that 4 Ibid. was required to explain what range of financial products had been considered as being appropriate to meet his client’s needs. [12] The Ombud also found that Mr Calitz had failed to comply with Part III, s 4 and Part IV, s 5 of the Code. Regarding the latter provision, it was found that insufficient details were provided to ensure that the client knew and had access to full details of the relevant product supplier. As to the former provision, it was found that, on the documentation supplied by Mr Calitz, all that could be ascertained was that his client was investing capital in a limited partnership, styled the ‘Relative Value Arbitrage Fund En Commandite Partnership’. Neither the nature of this partnership, nor the rationale for this contractual relationship, it was found, were explained to the client. [13] In regard to the conduct of a due diligence assessment, Mr Calitz alleged that he conducted such assessment of Abante Capital. The Ombud dismissed this defence ‘as an afterthought’, noting that there was no reference to Abante Capital in the disclosure documents. The Ombud found that since the RVAF Trust was promoted as a hedge fund, and since the RVAF Trust directly accepted clients’ funds and accounted for them, the RVAF Trust in fact provided intermediary services on a discretionary basis. It therefore fell within the definition of a hedge fund financial services provider, as provided by Board Notice 89 of 2007, issued by the Registrar of Financial Services Providers. Based upon this, the Code of Conduct for Discretionary Financial Services Providers5 applied. Section 8A(4) of this Code requires that a hedge fund financial services provider must obtain a written mandate from a client which 5 Code of Conduct for Administrative and Discretionary FSP’s Amendment Notice, Board Notice 89 of 2007, GG 30228. confirms that the client approves the investment objectives, guidelines and trading philosophy of the hedge fund financial services provider. No evidence was provided that established compliance with this requirement or that Abante Capital had concluded such mandate with the RVAF Trust. [14] The Ombud concluded that the complainant (in this instance Dr Inch) was not adequately apprised of the risks associated with an investment in a hedge fund. In relation to the fact that the RVAF Trust was not registered, the Ombud found that proper due diligence would have disclosed this fact. It did not avail Mr Calitz to rely on the fact that the FSB had not established any impropriety on the part of Abante Capital or Mr Pretorius. [15] The upshot of these findings was that the Ombud concluded that Mr Calitz had negligently breached the statutory duties owed to his clients. This negligent conduct had resulted in the investments being placed in the RVAF Trust and the subsequent losses incurred. Impact Consultants and Mr Calitz were accordingly found to be jointly and severally liable for the losses incurred. The applications for leave to appeal before the Ombud and the second respondent [16] Applications for leave to appeal against each of the determinations were made to the Ombud in terms of s 28(5)(i) of the FAIS Act. The applications were prosecuted on the basis that the Ombud erred in finding that Mr Calitz and by extension Impact Consultants had negligently breached the statutory duties imposed by the FAIS Act and the Code. It was contended that even if such breach was established and that it was found that Impact Consultants and Mr Calitz had been negligent, it had not been established that such negligence had caused the loss suffered. The cause of the loss was the fraudulent conduct of Mr Pretorius. In the circumstances, Mr Calitz could not reasonably have foreseen fraudulent conduct on the part of Mr Pretorius. It was argued that liability was not established. [17] The Ombud dismissed the applications for leave to appeal. She found that there was no reasonable prospect that her factual findings would be overturned. She held that reliance upon common law concepts such as causation and foreseeability of harm did not apply in the context of statutory provisions enacted to protect the clients of financial services providers. In effect, the Ombud found that once it was established that a financial services provider had negligently breached their statutory duties and a client has suffered loss, liability and compensation must follow. [18] Aggrieved with the refusal of leave to appeal, an application for leave to appeal was directed to the chairperson of the appeal board, in terms of s 28 (5)(b)(ii). To facilitate the conduct of those proceedings a request was directed to consolidate the applications of each of the respondents. [19] The second respondent granted the consolidation and dismissed the applications for leave to appeal, holding that, having regard to the record in each matter and the reasoning of the Ombud, there was no prospect of success on appeal. The review application [20] The dismissal of the applications for leave to appeal by the second respondent resulted in a review application launched in the high court, in which the applicants sought an order reviewing and setting aside such dismissal. They sought an order granting such leave, alternatively an order reviewing and setting aside the determinations made by the Ombud in respect of the complaints lodged by the respondents. [21] The applicants contended that the Ombud had committed an error of law inasmuch as she had found that liability followed on the finding of negligence without considering whether the impugned conduct was the cause of such loss. Upon receipt of the record filed in terms of rule 53 of the Uniform Rules of Court, the applicants supplemented their grounds of review to include the following: (a) that the Ombud had no jurisdiction to entertain the complaints since the investors had invested in the Relative Value Arbitrage Fund En Commandite Partnership, which is not a financial product as defined by the FAIS Act; (b) that the provisions of s 27(3)(c) ought to have been invoked by the Ombud to refer the dispute for determination by a court in the light of the disputes; (c) that the Code does not provide for civil liability by reason only of a breach thereof; and (d) that the appeal board has in a similar matter ruled that the product was not a financial product as defined by the FAIS Act and, accordingly, that the Ombud did not enjoy jurisdiction in respect of such complaint. [22] The high court did not address the challenge to the jurisdiction of the Ombud. It set out the contentions of the parties in some detail but did not identify all the issues to be adjudicated in relation to the grounds of review. In relation to the applicants’ reliance upon the failure to consider causation as a separate element of liability, framed as an error of law, the high court was not persuaded that the applicants had established the materiality of such error, even on the assumption that the error was established. The high court appears to have accepted the basis upon which the Ombud determined liability as being the correct basis. [23] The following is recorded in the judgment: ‘In the answering affidavit the first respondent states that it is not correct that she determined that liability followed automatically from a transgression of the Code: “I submit that I made the findings against the Applicant which cumulatively point to his wrong advice and negligence as the cause of the complainant’s loss…..the Applicant’s negligent failure to establish the nature of the entity or product (RVAF) he invested in.”’(Emphasis in original text). [24] The high court went on to find as follows: ‘The first respondent denies that how she dealt with the matter constitutes an error of law. As I see it, the standard of service that the applicants are held to is what is provided for in the Code, and nothing more and it is not only the transgressions that she relied upon as constituting liability but the cumulative effect of all the transgressions, as having given rise to liability.’ (Emphasis added.) [25] In coming to this finding, the high court did not consider whether, properly considered, liability for the negligent breach of the provisions of the FAIS Act and the Code arises strictly upon such breach or, upon the establishment of a causal link – both factual and legal – between the culpable conduct and the loss suffered. The court considered that there was no error of law in relation to the refusal of leave to appeal and consequently did not embark on an analysis of the specific grounds of review raised by Calitz. [26] The review application was dismissed with costs. The high court subsequently refused leave to appeal against its order. The proceedings before this Court [27] Before this Court, the issue was whether leave to appeal ought to be granted to the applicants and, if so, what relief should follow. The appellants framed the question for adjudication as follows: whether upon the facts it could be found that the Ombud enjoyed jurisdiction to determine the complaints lodged by the respondents. As I have detailed, the Ombud made no definitive finding that she had jurisdiction. The Ombud proceeded upon the assumption that she enjoyed such jurisdiction. The high court similarly did not make a finding that the Ombud had jurisdiction, notwithstanding that the issue was squarely raised. For reasons that will become apparent the principal question is whether the Ombud established the foundational facts upon which a determination could be based. And consequentially whether that constituted a reviewable error. The statutory scheme [28] The purpose of the FAIS Act is to provide assurance to consumers of financial services and financial products that those who render such services are subject to effective regulation and control. These broad objects and purposes are achieved by establishing a system of licencing and governance to which providers of financial and intermediary services are subject.6 The FAIS Act (in conjunction with allied and related legislation) does so by establishing standards, in the form of Codes of Conduct which service providers are required to meet.7 Enforcement of these provisions is achieved by various mechanisms8, including the establishment of an Ombud clothed with the power to investigate and adjudicate disputes and to provide remedies for regulatory non-compliance. [29] The office of the Ombud is established in terms of s 20 of the FAIS Act. Section 20(3) outlines the objectives as follows: (3) The objective of the Ombud is to consider and dispose of complaints in a procedurally fair, informal, economical and expeditious manner and by reference to what is equitable in all the circumstances, with due regard to— (a) the contractual arrangement or other legal relationship between the complainant and any other party to the complaint; and (b) the provisions of this Act.9 6 Section 7 of the FAIS Act provides that a financial services provider is not authorized to offer such services unless they have been issued with a license to do so by the Financial Services Board in terms of s 8 of the FAIS Act. In terms of s 8 the Registrar is required to establish ‘fit and proper’ requirements to be met by applicants for authorization. 7 Section 15 of the FAIS Act permits the registrar to publish codes of conduct to regulate the conduct of service providers. Such codes of conduct must comply with a set of principles set out in s 16. 8 Section 9 allows for the withdrawal or suspension of a licence under specified conditions. 9 This is how s 20(3) read at the time that the Ombud was engaged with this matter. The section was subsequently amended by s 290 of the Financial Sector Regulations Act, 9 of 2017 (the FSR Act), which commenced on 1 April 2018, read with Schedule 4 to the FSR Act. There is no substantive difference between the provisions. The new subsection now reads as follows: ‘(3) The objective of the Ombud is to consider and dispose of complaints under this Act, and complaints for which the Adjudicator is designated in terms of section 211 of the Financial Sector Regulation Act, in a procedurally fair, informal, economical and expeditious manner and by reference to what is equitable in all the circumstances, with due regard to— (a) the contractual arrangement or other legal relationship between the complainant and any other party to the complaint; and (b) the provisions of this Act and the Financial Sector Regulation Act.’ [30] Section 27 of the FAIS Act provides for the receipt of complaints, matters dealing with prescription, the jurisdiction of the Ombud and its powers of investigation. The relevant portions of the section read as follows: ‘(1) On submission of a complaint to the Office, the Ombud must— (a) determine whether the requirements of the rules contemplated in section 26 (1) (a) (iv) have been complied with; (b) in the case of any non-compliance, act in accordance with the rules made under that section; and (c) otherwise officially receive the complaint if it qualifies as a complaint. (2) …. (3) The following jurisdictional provisions apply to the Ombud in respect of the investigation of complaints: (a)(i) The Ombud must decline to investigate any complaint which relates to an act or omission which occurred on or after the date of commencement of this Act but on a date more than three years before the date of receipt of such complaint by the Office. (ii) Where the complainant was unaware of the occurrence of the act or omission contemplated in subparagraph (i), the period of three years commences on the date on which the complainant became aware or ought reasonably to have become aware of such occurrence, whichever occurs first. (b)(i) The Ombud must decline to investigate any complaint if, before the date of official receipt of the complaint, proceedings have been instituted by the complainant in any Court in respect of a matter which would constitute the subject of the investigation. (ii) Where any proceedings contemplated in subparagraph (i) are instituted during any investigation by the Ombud, such investigation must not be proceeded with. (c) The Ombud may on reasonable grounds determine that it is more appropriate that the complaint be dealt with by a Court or through any other available dispute resolution process, and decline to entertain the complaint. (4) …. (5) …. (6) For the purposes of any investigation or determination by the Ombud, the provisions of the Commissions Act, 1947 (Act No. 8 of 1947), regarding the summoning and examination of persons and the administering of oaths or affirmations to them, the calling for the production of books, documents and objects, and offences by witnesses, apply with the necessary changes.’ [31] Section 27(1)(c) requires, in addition to consideration of compliance with the procedural requirements for the submission of a complaint, that the Ombud consider the substantive nature of the complaint. A ‘complaint’ is defined in s 1, ‘means, subject to section 26(1)(a)(iii), a specific complaint relating to a financial service rendered by a financial services provider or representative to the complainant on or after the date of commencement of this Act, and in which complaint it is alleged that the provider or representative— (a) has contravened or failed to comply with a provision of this Act and that as a result thereof the complainant has suffered or is likely to suffer financial prejudice or damage; (b) has wilfully or negligently rendered a financial service to the complainant which has caused prejudice or damage to the complainant or which is likely to result in such prejudice or damage; or (c) has treated the complainant unfairly;’. [32] Section 26(1)(a)(iii) provides that the Board may make rules regarding- ‘the type of complaint justiciable by the Ombud, including a complaint relating to a financial service rendered by a person not authorised as a financial services provider or a person acting on behalf of such first-mentioned person’. [33] The following definition which appears in s 1 of the FAIS Act is significant. ‘Advice’ (as it bears upon the present matter) is defined to mean, ‘…any recommendation, guidance or proposal of a financial nature furnished, by any means or medium, to any client or group of clients— (a) in respect of the purchase of any financial product; or (b) in respect of the investment in any financial product’. (Emphasis added) [34] A financial product, in turn, is defined to mean, ‘(a) securities and instruments, including— (i) shares in a company other than a “share block company” as defined in the Share Blocks Control Act, 1980 (Act No. 59 of 1980); (ii) debentures and securitised debt; (iii) any money-market instrument; (iv) any warrant, certificate, and other instrument acknowledging, conferring or creating rights to subscribe to, acquire, dispose of, or convert securities and instruments referred to in subparagraphs (i), (ii) and (iii); (v) any “securities” as defined in section 1 of the Financial Markets Act, 2012 (Act No. 19 of 2012);10 (b) a participatory interest in one or more collective investment schemes; (c) a long-term or a short-term insurance contract or policy, referred to in the Long-term Insurance Act, 1998 (Act No. 52 of 1998), and the Short-term Insurance Act, 1998 (Act No. 53 of 1998), respectively; (d) a benefit provided by— (i) a pension fund organisation as defined in section 1 (1) of the Pension Funds Act, 1956 (Act No. 24 of 1956), to the members of the organisation by virtue of membership; or (ii) a friendly society referred to in the Friendly Societies Act, 1956 (Act No. 25 of 1956), to the members of the society by virtue of membership; (e) a foreign currency denominated investment instrument, including a foreign currency deposit; (f) a deposit as defined in section 1 (1) of the Banks Act, 1990 (Act No. 94 of 1990); (g) a health service benefit provided by a medical scheme as defined in section 1 (1) of the Medical Schemes Act, 1998 (Act No. 131 of 1998); (gA) an investment, subscription, contribution, or commitment in an alternative investment fund;11 10 Sub-para (v) substituted by s 175(d) of Act No. 45 of 2013, i e after the complaints arose but at a time when the complaints were being determined by the Ombud. 11 This is a pending amendment: Paragraph (gA) to be inserted by s 290 read with Sch. 4 of Act No. 9 of 2017 with effect from a date determined by the Minister by notice in the Gazette – date not determined. (h) any other product similar in nature to any financial product referred to in paragraphs (a) to (g), inclusive, declared by the registrar by notice in the Gazette to be a financial product for the purposes of this Act;12 (i) any combined product containing one or more of the financial products referred to in paragraphs (a) to (h), inclusive; (j) any financial product issued by any foreign product supplier and which in nature and character is essentially similar or corresponding to a financial product referred to in paragraph (a) to (i), inclusive;’13 A reviewable error [35] As noted earlier, the Ombud did not deal with the challenge to her jurisdiction, namely that the financial product in which the investment was promoted, was not a financial product as defined by the FAIS Act. The difficulty extends further than this. [36] The respondents identified the financial product in which they were advised to invest as being a ‘hedge fund’. Mr Calitz, in his answer to the complaints, admitted that what was promoted was an investment in the RVAF Trust, apparently being a hedge fund managed by Abante Capital. The documents disclosed during the investigation indicated that the respondents had invested in what was designated as the RVAF En Commandite Partnership. They had accordingly, so Mr Calitz maintained, become partners in a limited partnership and the returns earned by them were profits earned by the limited partnership. 12 Paragraph (h) substituted by s 175(e) of Act No. 45 of 2013, i.e. after the complaint in this matter arose but at a stage when the Ombud was called upon to determine the complaint. 13 Paragraph (j) substituted by s. 290 read with Sch. 4 of Act No. 9 of 2017 with effect from a date determined by the Minister by notice in the Gazette: 1 April, 2018 (Government Notice No. 169 in Government Gazette 41549 of 29 March, 2018). This is after the determination of the complaints by the Ombud. [37] In its determinations the Ombud treated the investment as an investment in a ‘hedge fund’. It also treated the RVAF Trust as a discretionary financial services provider which invested in a hedge fund. The Ombud however, recognised that the true nature of the investment was not explained and was not known or understood by the respondents. Indeed, the Ombud found that Mr Calitz did not understand the nature of the financial product in which the investment was made. [38] What is apparent from a reading of the complaints and the record, is that although the product was described as a ‘hedge fund’ the true nature of the investment product and indeed, if it was an investment product at all, remained unknown. That being so, it was not possible to ascertain whether the investment that was the subject of the compliant was a financial product as defined in the FAIS Act. And if not, what consequences, if any, this would have for the Ombud exercising jurisdiction to entertain the complaint. It is common ground that hedge funds were not included in the definition of a financial product in the FAIS Act at the time that the complaints arose. [39] The failure to determine the nature of the financial product which was the subject of the advice furnished by Mr Calitz, constituted a fundamental error on the part of the Ombud. It is not known, nor were any steps taken to ascertain, whether the funds were in fact placed in any investment product at all or invested in a hedge fund or merely siphoned off by Mr Pretorius. That ought to have been ascertained. It also ought to have been ascertained whether Mr Calitz had taken steps to determine the destination of the invested funds. Absent a proper determination of the nature of the financial product and without establishing what is referred to earlier in this and the preceding paragraphs, the Ombud was not entitled to conclude her adjudication and to finalise the complaints lodged in terms of s 27 of the FAIS Act. The Ombud enjoys extensive powers of investigation in terms of s 27(6), the exercise of which would have permitted the Ombud to ascertain facts relevant to the issues identified above, which relate to jurisdiction and remedy for a complainant, if any. This she failed to do. That was what the high court ought to have concluded was a reviewable error, necessitating a remittal. [40] It is necessary to deal briefly with two aspects which arose in argument before us. The first concerns the judgment of this Court in Atwealth (Pty) Ltd and Others v Kernick and Others (Atwealth).14 The second concerns the approach of the Ombud to the application of principles of the common law. [41] The Atwealth matter concerned a claim for damages against a financial services provider who was alleged to have furnished advice in breach of legal duties owed to a client. The legal duties alleged to have been breached were those set out in the FAIS Act and in the General Code of Conduct for Financial Services Providers promulgated under the FAIS Act. The investment product which was promoted was an investment in the RVAF Trust Fund operated by Abante Capital, ie the same ‘product’ promoted in the present matter. The judgment in Atwealth was relied upon by counsel for the applicants, as authority for the proposition that the advice relating to the RVAF Trust was not advice in relation to a financial product as defined by the FAIS Act. In this regard reference was made to a passage in the judgment where Davis AJA records that: 14 Atwealth and Others v Kernick and Others [2019] ZASCA 27 (SCA); [2019] 2 All SA 629 (SCA); 2019 (4) SA 420 (SCA). ‘Central to appellants’ case was whether Ms Moolman provided advice to the Kernicks and, if so, whether this advice, failed to comply with Ms Moolman’s legal duties and caused the Kernicks to invest in ill-fated products. Before the court a quo and again in this Court, Counsel for both parties focussed their arguments on whether Ms Moolman breached the provisions of the FAIS Act read together with the General Code of Conduct for Authorised Financial Service Providers and Representatives (the “Code”). There was some debate before us in regard to the applicability of these provisions as hedge funds were not regulated by the Financial Services Board until 1 April 2015, when they were declared to be collective investment schemes in terms of section 63 of the Collective Investment Schemes Control Act 45 of 2002.’15 (Emphasis added.) [42] Based on this passage, it was asserted that the RVAF Trust Fund was not, at the time of the Ombud’s determination, a financial product within the meaning of that term as defined and, therefore, the Ombud lacked jurisdiction. [43] The passage, however, is not authority for such proposition. It merely records that hedge funds were only defined to be collective investment schemes in 2015 and thereby came within the ambit of the definition of a financial product in the FAIS Act. The court in Atwealth was not called upon to decide whether the product was indeed a hedge fund and that the provisions of the FAIS Act accordingly did not apply. The claim in Atwealth was premised upon the breach of common law legal duties owed by a financial advisor to their client. The provisions of the FAIS Act were pleaded as reflecting the legal duties of the financial advisor. 15 Ibid para 25. [44] This Court equally did not decide that financial advice provided in respect of any financial product (whether or not it is one as defined by the FAIS Act) renders a financial advisor subject to the enforcement mechanisms provided by the FAIS Act. In the first instance the court made no such finding. Secondly, it was called upon to decide issues of wrongfulness and fault to establish liability in the context of the pleaded case. It is in this context that the following passage in the judgment should be understood. ‘Ms Moolman’s Counsel contended that she had merely given the Kernicks objective information about particular financial products and, at best for them, no more than advice on the procedures for concluding an investment transaction. In Counsel’s submission this did not constitute “advice” as defined in the FAIS Act. Furthermore, he contended that the Kernicks had invested in a hedge fund, which was structured as an en commandite partnership. He submitted that a hedge fund or a partnership of this particular kind did not constitute a “financial product” as defined in terms of the relevant law as it existed in 2009 and therefore, whatever Ms Moolman might have told the Kernicks, it could not have constituted “advice” for the purposes of the FAIS Act read together with the Code. The difficulty with these contentions was that, even if they had merit, on a careful parsing of the language of the FAIS Act, the presentation by Ms Moolman constituted, in ordinary parlance, the giving of financial advice, at least in the form of product information, to the Kernicks. It was advice on which they clearly intended to rely and on which they were entitled to rely, coming as it did from a professional financial advisor from whom they had sought that advice.’16 [45] That brings me to the second issue, namely the Ombud’s approach to the application of common law principles in the determination of a complaint. As indicated earlier in this judgment, in response to the application for leave to appeal to the board of appeal the Ombud suggested that common law principles 16 Ibid para 30 of delictual liability do not apply. She took the view that the statutory scheme establishes liability upon a breach of the FAIS Act and the Code. This view is emphatic, insufficiently reasoned and requires further exploration. We need however express no definitive view on this. Section 28, which deals with determinations, is rather widely worded, and provides that fair compensation may be awarded for financial prejudice or damage suffered.17 Furthermore a ‘complaint’, as indicated above, is widely defined in the FAIS Act as is advice. In addition, the objectives of the Ombud as set out in s 20 must also be taken into account. Why, one might rightly enquire, should a registered financial advisor, be dealt with less punitively for providing advice beyond the products recognised and regulated under the FAIS Act, when such an advisor has breached both common law duties echoed in the statutory provisions. Be that as it may, it is foundationally necessary to establish the true nature of the investments complained about before any final conclusions are reached, including in relation to questions related to compensation. Remedy [46] It follows from what is set out above that the applicants are entitled to relief before this Court, both in relation to the application for leave to appeal 17 The relevant portion of s 28 of the FAIS Act reads as follows: ‘(1) The Ombud must in any case where a matter has not been settled or a recommendation referred to in section 27(5)(c) has not been accepted by all parties concerned, make a final determination, which may include— (a) the dismissal of the complaint; or (b) the upholding of the complaint, wholly or partially, in which case— (i) the complainant may be awarded an amount as fair compensation for any financial prejudice or damage suffered; (ii) a direction may be issued that the authorised financial services provider, representative or other party concerned take such steps in relation to the complaint as the Ombud deems appropriate and just; (iii) the Ombud may make any other order which a Court may make.’ and in relation to the merits of the appeal, on the circumscribed basis presaged above. [47] In the light of the finding that it is necessary for the Ombud to determine her jurisdiction in respect of the complaints on the basis of facts, no purpose would be served by permitting an appeal to the appeal board. Instead, the only appropriate remedy is to set aside the determinations made by the Ombud and to refer each of the complaints back to the Ombud for investigation and determination in accordance with the guidance provided in this judgment. All the issues identified above require full exploration and further evidence and full debate. [48] In respect of costs, the second respondent abided the decision of this Court. There is no compelling reason why, in respect of the Ombud, the costs should not follow the result. [49] In the result the following order is made: 1. Leave to appeal is granted with costs. 2. The appeal is upheld to the extent set out in the substituted order below. 3. The order of the high court is set aside and replaced by the following order: ‘(a) The decision of the second respondent to refuse leave to appeal to the Financial Services Appeal Board in case numbers FAB3/2015 to FAB20/2015 is hereby set aside. (b) The determinations of the first respondent under case numbers FAB3/2015 to FAB20/2015 are hereby set aside. (c) Each of the complaints lodged under case numbers FAB3/2015 to FAB20/2015 are referred back to the first respondent for determination in accordance with the provisions of the Financial Advisory and Intermediary Services Act 37 of 2002. (d) The first respondent is ordered to pay the costs of the application.’ 4. The first respondent is ordered to pay the costs of the appeal, including the costs of the application for leave to appeal before the high court. ________________________ G. GOOSEN ACTING JUDGE OF APPEAL Appearances For applicants: M Daling Instructed by: Laas & Scholtz Inc., Cape Town c/o Webbers, Bloemfontein For first respondent: S L Shangisa and B B Mkhize Instructed by: Kgokong Nameng Tumagole Inc., Johannesburg c/o Lovius Block, Bloemfontein.

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL FROM: The Registrar, Supreme Court of Appeal DATE: 30 April 2021 STATUS: Immediate Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal. Impact Financial Consultants CC and Another v Bam NO and Others (Case no 856/2019) [2021] ZASCA 54 (30 April 2021) The Supreme Court of Appeal (the SCA) today upheld an appeal against an order of the Gauteng Division of the High Court, Pretoria (Thlapi J) (the high court) dismissing a review of determinations made by the Ombud for Financial Services (the Ombud). In 2015, several complaints were lodged with the Ombud (established in terms of the Financial Advisory and Intermediary Services Act 37 of 2002 (the FAIS Act)) against Impact Financial Consultants CC (Impact Consultants) and its principal member, Mr Calitz (the applicants). The applicants were authorised financial services providers as provided by the FAIS Act. The complaints arose in consequence of the collapse of an investment scheme involving Abante Capital (Pty) Ltd (Abante Capital) and the Relative Value Arbitrage Fund Trust (the RVAF Trust). In 2012 allegations of fraud perpetrated by Mr Pretorius, a key figure in Abante Capital, were reported in the financial press. Following the death of Mr Pretorius and the liquidation of Abante Capital and the RVAF Trust, fraudulent conduct was established in relation to the investment scheme. The complainants alleged that Mr Calitz, and by extension Impact Consultants, had negligently breached the duties imposed upon financial advisors by the FAIS Act and the General Code of Conduct for Financial Advisors and Representatives (the Code) enacted in terms of the FAIS Act. It was alleged that Mr Calitz had, inter alia, failed to undertake a due diligence assessment of the RVAF Trust and had negligently advised his clients to invest in a high risk and illegal scheme. This had resulted in the complainants suffering substantial losses. The Ombud upheld the complaints and ordered Impact Consultants and Mr Calitz to pay compensation to each of the complainants. The Ombud refused leave to appeal against these orders, as did the chairperson of the appeal board of the Financial Services Board. The applicants then brought a review application in the high court alleging, inter alia, that the Ombud did not enjoy jurisdiction and had failed to consider that the losses suffered by the complainants were as a consequence of fraud on the part of Mr Pretorius and not negligence on the part of Impact Consultants or Mr Calitz. They alleged that the Ombud had committed an error of law in respect of the bias upon which liability is determined in terms of the FAIS Act. The high court dismissed the review application and refused leave to appeal. The applicants filed an application for leave to appeal with the SCA. The SCA ordered that the application be referred for oral argument and that the parties also address the merits of the appeal. The SCA found that the Ombud is required to establish the nature of the investment made upon the advice of the advisory in order to determine whether it falls within the ambit of a financial product as defined by the FAIS Act. This is a foundational factual enquiry which enables the Ombud to decide upon the exercise of its jurisdiction to determine the complaint and to order any remedial compensation which may flow from such determination. In this instance the Ombud had failed to do so, notwithstanding the investigative powers conferred by the FAIS Act. The SCA therefore found that the high ought to have found that the Ombud had committed a reviewable error and set aside the determinations. In the light of the absence of a factual basis upon which to determine the nature of the investment and therefore the Ombud’s jurisdiction, no purpose would be served by allowing an appeal to the Financial Services Board. The SCA therefore granted the applicants leave to appeal and upheld the appeal. It set aside the determinations made by the Ombud and referred the complaints back to the Ombud for investigation and determination in accordance with the FAIS Act. The court ordered the Ombud to pay the costs of the application before the high court and the cost of appeal.

2650

non-electoral

2014

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT REPORTABLE Case No: 100/2014 In the matter between: SOCIÉTÉ DES PRODUITS NESTLÉ SA FIRST APPELLANT NESTLÉ SOUTH AFRICA (PTY) LTD SECOND APPELLANT and INTERNATIONAL FOODSTUFFS CO FIRST RESPONDENT IFFCO SOUTH AFRICA (PTY) LTD SECOND RESPONDENT THE REGISTRAR OF TRADE MARKS THIRD RESPONDENT Neutral citation: Société des Produits Nestlé SA v International Foodstuffs 100/14) [2014] ZASCA 187 (27 November 2014). Coram: Navsa ADP, Theron JA, Swain, JA, Zondi JA et Dambuza AJA Heard: 3 November 2014 Delivered: 27 November 2014 Summary: Trade Marks Act 194 of 1993 – s 34(1)(a) and (c) – shape of respondents’ ‘Break’ finger wafer chocolate bar confusingly and/or deceptively similar to appellants’ 4 finger wafer and 2 finger wafer shape trade marks – blurring of appellants’ shape mark established – ‘Break’ word trade mark of respondent not confusingly similar to appellants’ word trade mark ‘Have a Break, Have a Kit Kat’ – blurring of appellants’ word mark not established – s 10(5) – appellants’ registered shape not attributable only to the technical shape – s 16(5) – Registrar entitled to make substantial amendments to pending applications – must exercise caution in doing so and where amendment will cause injury or prejudice should not be allowed – two- dimensional depiction of three-dimensional shape in application for registration. ___________________________________________________________________ ORDER ___________________________________________________________________ On appeal from: The North Gauteng High Court, Pretoria (Louw J sitting as court of first instance): The following order is made: 1 The appeal by the first and second appellants against the order of the court a quo dismissing the appellants‟ application with costs, succeeds with costs, to the extent reflected in the following order: „The first respondent and the second respondent are interdicted from infringing the rights of the first applicant in trade mark registration numbers 1999/23579 4 finger wafer shape and 1999/23580 2 finger wafer shape by making unauthorised use, in the course of trade, in relation to chocolate and/or confectionary products of any finger wafer shape mark of any of the types referred to in paragraph 11 of the founding affidavit of Kevin Corlett and illustrated in annexures “N17A” to “N17E” thereto, and of any depictions of any such finger wafer shapes on the packaging or labelling of such products, or of any finger wafer shapes which are confusingly and/or deceptively similar to the aforesaid registered trade marks of the first applicant. The first and second respondents are ordered to pay the first and second applicants‟ costs.‟ 2 The cross-appeal by the first and second respondents against the dismissal of the respondents‟ counter-application and second review application with costs, is dismissed with costs. 3 The costs orders are to include the costs of two counsel. ___________________________________________________________________ JUDGMENT ___________________________________________________________________ Swain JA (Navsa ADP, Theron, Zondi JJA et Dambuza AJA concurring): [1] The first appellant (Société des Produits Nestlé SA) and the second appellant (Nestlé South Africa (Pty) Ltd) who I will collectively refer to as Nestlé, and the first respondent (International Foodstuffs Co) and the second respondent (Iffco South Africa (Pty) Ltd) who I will refer to as Iffco, are international competitors in the sale of chocolates. [2] The physical shape as well as the name of a chocolate bar marketed and sold by Iffco has given rise to the present dispute. Nestlé alleged that these attributes of Iffco‟s „Break‟ chocolate bar, infringe trade marks held by Nestlé in the „Kit Kat‟ chocolate bar, marketed and sold by it. It is also alleged that these attributes result in the passing off of Iffco‟s chocolate bar for that of Nestlé. [3] Nestlé unsuccessfully applied in the North Gauteng High Court (Louw J) for interdictory relief based upon trade mark infringement and passing off. Nestlé was also unsuccessful in its attempt to expunge certain word trade marks from the trade marks register held by Iffco in its chocolate bar. [4] Iffco was in turn equally unsuccessful in its attempt, brought by way of a counter-application before the court a quo, to expunge certain shape trade marks held by Nestlé in its Kit Kat chocolate bar, as well as an application to review the registration of these shape trade marks. [5] Leave was granted by the court a quo to Nestlé and Iffco respectively to appeal against the dismissal of Nestlé‟s application and the dismissal of Iffco‟s counter-application, as well as the review application. [6] Because the validity of the shape trade mark held by Nestlé, which it seeks to enforce against Iffco, forms the principal basis for the relief sought by Iffco in its counter and review applications, it is necessary to deal firstly with Iffco‟s appeal against the dismissal of these applications. This is so because if successful Nestlé‟s shape marks will be rendered invalid and unenforceable. Iffco’s review application [7] At the heart of Iffco‟s application to review certain administrative decisions taken by the Registrar in the registration process of Nestlé‟s 4 wafer finger and 2 wafer finger shape trade mark registrations, lies the contention that what was initially sought to be registered as trade marks, were pictorial devices to be placed on packaging consisting of depictions of products, and not the three-dimensional shapes of the chocolate bars themselves. In addition, it was submitted that there was no endorsement which would indicate that the trade marks were for the three- dimensional shape of these goods. [8] The pictorial representations as submitted by Nestlé for registration were as follows in respect of the 4 finger wafer shape: and in respect of the 2 finger wafer shape: [9] In terms of s 2(1) of the Trade Marks Act 194 of 1993 (the Act) a „mark‟ is defined as: „. . . any sign capable of being represented graphically, including a device, name, signature, word, letter, numeral, shape, configuration, pattern, ornamentation, colour or container for goods or any combination of the aforementioned.‟ A shape may accordingly fall within the definition of a trade mark as defined in s 2(1) of the Act, to be used „for the purpose of distinguishing the goods or services in relation to which the mark is used or proposed to be used from the same kind of goods or services connected in the course of trade with any other person‟1. 1 This court has recognised that the shapes of goods may perform a trade mark function. Beecham Group plc & another v Triomed (Pty) Ltd 2003 (3) SA 639 (SCA); Die Bergkelder Bpk v Vredendal Koöp Wynmakery & others 2006 (4) SA 275 (SCA). [10] In terms of Regulation 13(1) of the Trade Marks Regulations (GNR 578, GG 16373 21 April 1995) every application for the registration of a trade mark shall contain a representation, suitable for reproduction, affixed to it „in the space provided‟ in the form TM1 for this purpose. In terms of Regulation 13(3) three- dimensional marks must be represented in such a way that all the dimensions are clearly visible. In addition the pictorial representation of the mark must have the required degree of certainty for the public to know the extent of the monopoly claimed.2 [11] Nestlé contended that the relevant trade marks were applied for as shape marks and that this is visually apparent from the representations of the marks that were filed with the application forms TM1 on 21 December 1999. Nestlé submitted that Iffco is wrong in its assertion that it applied for two-dimensional device marks. On 18 January 2000 Nestlé applied for an endorsement to be entered against both the 2 finger and the 4 finger wafer shape trade mark applications reading as follows: „The mark consists of the distinctive shape or appearance of the goods.‟ Nestlé argued that the endorsement simply clarified and confirmed the monopoly in which it was seeking rights, whereas Iffco contended that by entering the endorsement the relevant trade marks were transformed from device marks, into marks consisting of the shape of goods. [12] Counsel were in agreement that the interpretation of a trade mark application must be made objectively and through the eyes of an ordinary consumer in the same way as the infringement of a trade mark is determined. That test requires a court to compare the registered trade mark and the allegedly infringing mark through the eyes of the ordinary consumer, both side-by-side and apart and determine, whether as a matter of global first impression there exists a likelihood of deception or confusion.3 This must be so because if the comparison is to be made objectively and through the eyes of the ordinary consumer, the interpretation of the trade mark allegedly infringed must be conducted in the same manner. Consequently, the subjective intention of the applicant for the mark sought to be registered is irrelevant. 2 Triomed (Pty) Ltd v Beecham Group and others 2001 (2) SA 522 (T) at 539D-F. 3 Plascon Evans Paints (Pty) Ltd v Van Riebeeck Paints (Pty) Ltd 1984 (3) SA 623 (A) at 640-641; Bata v Face Fashions CC and another 2001 (1) SA 844 (SCA) para 9; Puma v Global Warming 2010 (2) SA 600 (SCA) paras 8-9. The interpretation of the mark is to be decided by the court and the views of expert witnesses as to how the mark would be perceived by the ordinary consumer is accordingly irrelevant. In this regard the views of Dr Dean, Mr Stewart and Mr Bouwer whose evidence was relied upon by the parties is therefore irrelevant. [13] In my view on the facts of this case the representations of the marks as contained in the application by Nestlé for registration as trade marks, viewed objectively through the eyes of the notional ordinary consumer, would be perceived as two-dimensional depictions of three-dimensional shapes and not two-dimensional devices for the following reasons. It is clear that the chocolate bars in question have been marketed and sold in South Africa under the name Kit Kat, in the shape depicted in the applications for registration, for the last 50 years. In addition it is clear that Nestlé has also for a considerable period of time made extensive use of this shape of the chocolate bar in advertisements to promote its sale. [14] That ordinary consumers are able to recognise the shape of Nestlé‟s Kit Kat finger wafer chocolate bar is borne out by the results of two market surveys conducted by Nestlé during 2005 and 2011 in which consumers were shown a photograph of each of the Kit Kat chocolate bars in black and white in the form applied for (and subsequently registered) and asked whether any foodstuffs came to mind. In both surveys a significant number of consumers associated the shape depicted with chocolate or confectionary as well as with Nestlé and the Kit Kat brand. I agree with the submission made by counsel for Nestlé that Iffco has not challenged the survey evidence in any meaningful way save to submit that the fact that the public recognised the mark is irrelevant for its interpretation. However, the fact that the consumers surveyed, when shown the identical two-dimensional pictures which were the subject of the application for the registration of the 2 finger and 4 finger wafer shape trade marks, recognised them as the three-dimensional Kit Kat chocolate bar, without any endorsement to clarify that what was depicted was the shape or appearance of the chocolate bar, is relevant to an objective assessment of what the perception of the notional ordinary consumer would be. [15] A further argument advanced by Iffco was that because a certain portion of the specifications of goods claimed by Nestlé, in respect of the marks could not take the shape of the goods contended for it meant that the applications as filed, when objectively viewed, were not marks for the shape of goods, but rather for materials intended as ornamentation for packaging and the like. In addition, because the consumers surveyed were not shown the specifications of the goods claimed their views were accordingly unreliable. As the distinctive shape of the chocolate bars in question were readily identifiable by a significant number of consumers, in my view the inclusion of the list of specifications would not have drastically altered these results. For the same reason the objective perception by the notional ordinary consumer of the shape claimed, in my view, would not be affected by the addition of other goods in addition to „cocoa and preparations having a base of cocoa, chocolate, chocolate confectionary, sweets, candies, sugar . . .‟ in the specifications. In any event, even if some of the goods listed in the specifications could not take the shapes as depicted in the applications, this does not lead to the conclusion that what were depicted were not shapes. It could equally be concluded that Nestlé included some goods that it did not intend to use as part of the marks claimed. If this is so the appropriate remedy would be to apply for their removal in terms of sections 10(4), 24(1) and/or 27(1)(a) of the Act. In addition, after five years of non-use of any of the goods specified with the mark, application could be made by any interested person for their removal from the register in terms of s 27(1)(b) of the Act. [16] Because the 2 finger and 4 finger wafer shape trade marks filed without any endorsements, would objectively have been interpreted by the notional ordinary consumer as two-dimensional depictions of three-dimensional shapes, the endorsements which Nestlé applied for did not affect the identity of the finger wafer shape trade marks and were included simply to clarify the rights it claimed. In this regard I agree with the view of the court a quo, that even if the notional consumer was confused as to whether the marks were two-dimensional or three-dimensional, the endorsements constituted a limitation in that the marks were limited to a three- dimensional shape. It is not without significance that Mr Catic, the director of international business development of Iffco, and the deponent to the affidavits filed on behalf of Iffco, stated the following in this regard: „Without the endorsement that the mark is a “shape mark”, the mark is simply a logo mark and would not prohibit a person from using the shape in a three-dimensional form. At worst for the respondents (Iffco) it could be interpreted as either one or the other (although the respondents contend there is only the interpretation). For that reason, too, it is non- distinctive.‟ (My emphasis.) [17] The effect of the endorsements lies at the heart of the additional ground advanced by Iffco for the review of the Registrar‟s decision. The submission was that the Registrar is not entitled in terms of s 16(5) of the Act, to permit amendments to an application that would substantially affect the identity of the trade mark. Iffco conceded, however, that s 16(5) of the Act on the face of it, provides for an unlimited discretion on the part of the Registrar to make amendments to pending applications. Iffco submitted that the Registrar‟s discretion must be exercised in a judicious and responsible manner, bearing in mind the purpose and spirit of the Act and its provisions as a whole, including the provisions of s 29(1) which deal with the withdrawal by the Registrar of an application for registration accepted in error. The practice of the Registrar and practitioners, according to Iffco, has been to regard s 25, which deals with the alteration of registered trade marks, as the standard for making or allowing amendments to trade mark applications. The present enquiry is concerned with the power of the Registrar in terms of s 16(5) of the Act to permit an applicant for registration of a trade mark, whether before or after acceptance by the Registrar, to amend the application. This is to be contrasted with the power of the Registrar in terms of s 25 of the Act to amend a registered trade mark. [18] The relevant parts of s 16 of the Act provide: „(1) An application for registration of a trade mark shall be made to the registrar in the prescribed manner. . . . (5) The registrar or the court, as the case may be, may at any time, whether before or after acceptance of the application, correct any error in or in connection with the application, or may permit the applicant to amend his application upon such conditions as the registrar or the court, as the case may be, may think fit.‟ [19] Webster et al4 state that an amendment of an application in terms of s 16(5) would appear to relate to matters of substance concerning an application contained 4 G C Webster, N S Page, C E Webster, G E Morley South African Law of Trade Marks (2013) at 8.25. in the form TM1 such as the identity of the applicant, the form of the mark or the specification of goods or services. [20] Section 25(1) of the Act, dealing with the alteration of registered trade marks provides that: „(1) The registered proprietor of a trade mark may apply in the prescribed manner to the registrar for leave to add to or alter the trade mark in any manner not substantially affecting the identity thereof, and the registrar may refuse leave or may grant it on such terms and subject to such limitations as he may think fit.‟ Whether the alteration sought substantially affects the identity of the mark is determined by the application of the so-called „arresting features test‟.5 The registered mark and the mark containing the alteration or addition, are physically inspected side-by-side and the question to be asked and answered is whether the mark retains its arresting features. If they are then the identity of the mark is not substantially altered. [21] Iffco, citing the Registrar‟s practice directives6 dealing with „amendment of marks‟, submitted that they indicate that the provisions of s 25 should be applicable in the exercise of the Registrar‟s discretion when allowing the amendments of the mark, which is the subject of the pending application. Substantial changes affecting the identity of the mark in the application accordingly cannot be made and the applicant is bound by the identity and nature of the mark as contained in the initial application. The principles contained in s 25 of the Act according to the original submissions by Iffco when applied to pending applications meant, in reality that only minor errors, such as clerical errors and the like should be permitted to be amended in pending applications. Counsel for Iffco, however, in argument, disavowed reliance upon such a limited interpretation being placed upon the Registrar‟s discretion. [22] The Registrar‟s practice directive as well as the views of certain practitioners of the relevance of the provisions of s 25 to applications brought in terms of s 16 of 5 Bernstein Manufacturing Co (1961) (Pvt) Ltd v Shepherdson 1968 (4) SA 386 (T) at 389H; Adcock Ingram Consumer Products Ltd v Dhansooklal Jeenabhai Mody t/a Black Magic [1997] 3 All SA 125 (T) at 129. 6 Companies and Intellectual Property Registration Office: Guidelines in the examination of trade mark applications. the Act are irrelevant to an interpretation of its provisions. As pointed out, s 25 deals with the entirely different scenario of amendments to be made to registered marks. The Registrar‟s discretion is quite clearly not limited to correcting minor errors such as clerical errors and the provisions of s 46(1) of the Act provide for this eventuality. This section empowers the Registrar: „. . . [A]t any time before the registration of a trade mark permit the amendment of any document relating to any application or proceedings before him on such terms as to costs or otherwise as he may think just.‟ Webster et al7 state that this section deals with non-essential elements of an application, such as the amendment of the form TM1 or any other document forming part of the application, as opposed to amendments of substance which are dealt with in terms of s 16(5). [23] Iffco also submitted that s 29(1) of the Act, which provides that amendments to pending applications have retrospective effect to the date of the trade mark application should be understood as a „deeming provision‟ in the interpretation of s 16(5). The argument is that the date of the application is important because it in due course becomes the effective date of the registered trade mark and the date and period when priority can be claimed for filing of „convention applications‟ in foreign countries in terms of the Paris Convention. Consequently, if a mark which on the date of filing of the domestic application was a device mark, and was disseminated internationally on that basis, was later transformed in the domestic country to a shape or other form of mark, an anomaly would arise. The international derivations of the mark would be for device marks but the domestic application would be for a shape mark. I agree, however, with the submission by Nestlé that insofar as the South African application may be used as a priority application in foreign countries, it will be for those foreign countries to determine whether that priority is legitimately claimed. In the face of the clear and unambiguous wording of s 16(5) of the Act, the discretion of the Registrar and the court is unfettered and includes the power to allow amendments to applications which substantially affect the identity of the mark. I agree, however, with Webster et al8 that caution should be exercised in allowing a substantial amendment to a mark and that if injury or prejudice will result to another 7 Supra paragraph 8.25. 8 Supra paragraph 8.25. party, or the public, it should not be allowed. For the reasons set out above no substantial amendment was made to the shape mark of Nestlé and no prejudice or injury resulted. [24] Iffco‟s appeal against the refusal by the court a quo to review the Registrar‟s decision on these grounds must accordingly fail. Iffco’s counter-application for the expungement of Nestlé’s finger wafer shape trade mark registrations [25] The application by Iffco for the expungement of Nestlé‟s finger wafer shape trade marks is limited to s 10(5) of the Act. Section 10 of the Act deals with unregistrable trade marks and section 10(5) provides as follows: ‟10. The following marks shall not be registered as trade marks or, if registered, shall, subject to the provisions of sections 3 and 70, be liable to be removed from the register: . . . (5) a mark which consists exclusively of the shape, configuration, colour or pattern of goods where such shape, configuration, colour or pattern is necessary to obtain a specific technical result, or results from the nature of the goods themselves.‟ [26] The cornerstone of Iffco‟s challenge is that the trapezoidal shape of Nestlé finger wafer shape trade mark registrations is entirely a technical requirement. It is not in dispute that chocolate bars have to be trapezoidal in shape when viewed in cross-section in order to facilitate their release (the so-called „release angle‟) from the moulds in which they are formed. In short its shape was merely functional. What is, however, in issue is whether the additional elements which contribute to the shape of Nestlé‟s finger wafer shape trade marks (other than the cross-sectional trapezoidal shape) are not distinctive but simply „banal‟ arbitrary additions to the shape of the product. If they are then Nestlé‟s finger wafer shape marks consist exclusively of a shape which is necessary to obtain a specific technical result (ie release of the chocolate bar from the mould) were not registrable and are to be expunged from the register. [27] Section 10(5) is concerned with the question of „whether the registered shape is necessary to obtain a specific technical result‟9 or whether „the essential functional features of that shape are attributable only to the technical result‟.10 [28] Both parties relied upon certain decisions of overseas tribunals, in which Nestlé‟s finger wafer shape marks were in issue, as support for their competing contentions. [29] Nestlé relied upon the findings made by the Second Board of Appeal of the Office for Harmonization (OHIM) in the United Kingdom in the case of Société des Produits Nestlé SA v Cadbury Holdings Ltd (11 December 2012). One of the issues for determination there was whether the shape of Nestlé‟s 4 finger wafer bar was precluded from registration because its shape consisted exclusively, in its essential characteristics, of the shape of the goods which was technically causal of, and sufficient to obtain the intended technical result. It was held that the shape in question possessed three attributes which were not necessary to achieve the technical function. Firstly, the rectangular base upon which the four identical trapezoidal bars were aligned was not a feature which responded to a technical need or performed a technical function of the goods at issue. Secondly, even if it were considered that the bars served the purpose of facilitating the partition of the product into four portions at the moment of consumption, this solution was neither technical nor essential in the shape of the chocolate bar. Thirdly, the technical solution could be incorporated without difficulty by competitors in shapes which did not have the same non-functional elements as contained in Nestlé‟s chocolate bar such as the trapezoidal shape of each bar, the alignment of the bars, the alignment into four bars, the common joining base and its rectangular shape.11 [30] Although the Second Board of Appeal remarked that these non-technical features were rather banal, the fact remained that these characteristics, not dictated by any technical reason, were sufficient to make that shape recognised by the 9 Beecham supra para 30. 10 Koninklijke Philips Electronics NV v Remington Consumer Products Ltd (para 84) quoted with approval in Beecham supra para 28. 11 Paras 104-107. relevant public as a badge of origin, as an indication of the commercial origin of the products bearing them.12 [31] Iffco, in turn, relied upon the decision of the United Kingdom‟s Intellectual Property Officer (IPO) dated 20 June 2013 in the case of Société des Produits Nestlé SA v Cadbury Holdings Ltd in opposition proceedings. The main findings were as follows. Firstly, it was held that the basic rectangular „slab‟ shape represented by the mark was a shape which results from the nature of moulded chocolate bars. Secondly, the presence of breaking grooves was a feature which was necessary to achieve a technical result. Thirdly, the angle of more than 8-10 degrees for the sides of the product and the breaking grooves resulted from the nature of moulded chocolate products, and the depths of the grooves was necessary to achieve a technical result. Fourthly, the number of breaking grooves and fingers was determined by the desired portion size.13 In the result it was held that Nestlé‟s finger wafer shape was contrary to s 3(2)(b) of the United Kingdom Act, which prohibits the registration of „the shape of goods which is necessary to achieve a technical result‟. [32] Nestlé submitted that achieving a portion size is not a technical result, but simply a marketing choice. In addition the finding that the number of fingers reflects a technical result (portion size) is wrong because it is not necessary to have breakable fingers at all to achieve a portion size. The choice of fingers rather than square or squat – rectangular pieces of chocolate is an aesthetic choice, not dictated by technical considerations. Portion size can just as easily be adjusted by increasing the size or weight of the fingers and the number of fingers is therefore not necessary to achieve a portion size. As regards the presence of breaking grooves, whilst necessary to achieve breakability, the shape of the fingers joined by that groove, and thus the length and breadth of the groove itself, was not necessary to achieve a technical result. I agree with these submissions. In addition the finding that the basic rectangular „slab‟ shape of the finger wafer shape trade marks resulted from the nature of moulded chocolate bars, was the result of this generally rectangular shape being attacked on the basis that it „results from the nature of the goods themselves‟. This challenge, however, is not raised in these proceedings. 12 Para 108. 13 Para 81. [33] This decision of the UK IPO was appealed by Nestlé to the Chancery Division Société des Produits Nestlé SA v Cadbury UK Ltd [2014] EWHC 16 (Ch). On 17 January 2014, Justice Arnold referred certain questions to the Court of Justice of the European Union and expressed his views on the questions raised. His views do not constitute findings of the court and with respect do not require further consideration. [34] In my view there are a number of features of Nestlé‟s finger wafer shape trade marks, which are distinctive and not attributable only to a technical result. Most significant is the „plinth‟ or „apron‟ which forms the basis for the composite finger wafer shapes, whether in the form of the four or two finger varieties. This imports a distinctive appearance and aesthetic appeal to either product. I disagree with Iffco‟s contention that the „plinth‟ is merely an arbitrary addition to the product. In addition the „finger‟ shape of each of the chocolate wafer bars when viewed from above is distinctive. I agree with Nestlé‟s contention that the high length to width ratio of each of the chocolate wafer fingers is distinctive and a major non-functional element of the chocolate bars as a whole. [35] I am fortified in these views by the rationale underlying the provisions of s 10(5) of the Act which „is to prevent trade mark protection from granting its proprietor a monopoly on technical solutions, or functional characteristics of a product which a user is likely to seek in the product of competitors‟.14 It is quite clear that the finger wafer shape trade marks in issue do not grant Nestlé a monopoly over trapezoidal shaped chocolate bars. Iffco does not identify what „technical solution‟ or „functional characteristics‟ Nestlé has obtained a monopoly over in terms of the finger wafer shape trade marks. [36] I accordingly agree with the conclusion of the court a quo that Nestlé‟s finger wafer shape trade marks are not solely shapes of goods which incorporate a technical solution. Iffco‟s appeal against the court a quo‟s refusal to expunge Nestlé‟s finger wafer shape trade marks from the register accordingly fails. 14 Beecham supra para 28 quoting Philips para 78. Nestlé’s application for interdictory relief based upon Iffco’s alleged use as trade marks of the 4 finger wafer shape and 2 finger wafer shape trade marks [37] Nestlé alleges infringing use by Iffco of its 4 finger and 2 finger wafer shape trade marks in the following manner. In the shape of Iffco‟s Break 4 finger wafer product: and its representation on the packaging of its Break 4 finger wafer product: As well as the shape of Iffco‟s Break Mini 2 finger wafer product: And its representation on the packaging of its Break Mini 2 finger wafer product: [38] What is immediately apparent is that the shape of Iffco‟s „Break‟ chocolate bars are almost identical to Nestlé‟s 4 finger and 2 finger wafer shape trade marks. The only insignificant difference is the superficial decorative pattern which is embossed on the top of Iffco‟s chocolate finger wafer bars. [39] In terms of s 34(1)(a) of the Act Nestlé has to establish that Iffco has used the mark in respect of the same goods for which the trade marks are registered which is either identical to, or so nearly resembles the registered trade mark, so as to be likely to deceive or cause confusion. The mark is used in respect of the same goods, namely chocolate bars. The issue accordingly is whether there is a likelihood of confusion or deception between the chocolate bars. In addition Nestlé has to establish that Iffco is using the finger wafer shapes themselves, or on the packaging of their chocolate bar „Break‟, as a badge of origin and not simply in a descriptive manner. [40] The use of the trade mark must be „such that it creates the impression that there is a “material link in trade between the third party‟s goods and the undertaking from which those goods originate”. There can only be primary trade mark infringement if it is established that consumers are likely to interpret the mark, as it is used by the third party, as designating or tending to designate the undertaking from which the third party‟s goods originate‟.15 [41] As regards the likelihood of deception or confusion „what is required is an interpretation of the mark through the eyes of the consumer as used by the alleged infringer. If the use creates an impression of a material link between the product and the owner of the mark there is infringement; otherwise there is not. The use of a mark for purely descriptive purposes will not create that impression but it is also clear that this is not necessarily the definitive test‟.16 The issue is whether the public would perceive the finger wafer shape to perform the function of a source identifier and for that purpose the finger wafer shape must be considered in context and not in isolation.17 15 Verimark (Pty) Ltd v BMW AG; BMW AG v Verimark (Pty) Ltd 2007 (6) SA 263 (SCA) para 5. 16 Verimark para 7. 17 Verimark para 9. [42] Iffco submitted that there is no evidence to show any actual instances of confusion over the nine years that the chocolate bar of Nestlé and that of Iffco have been sold side-by-side in Shoprite stores. Evidence of actual confusion may be of special value in a particular case,18 but as pointed out by this court, however, the likelihood of deception or confusion is „a matter for the court to decide and, taking into account the difficulties associated with the admissibility and the weight to be given to such evidence, no significance can be attached to the absence of this evidence‟.19 In my view, by virtue of the fact that the shape of Iffco‟s chocolate Break bars is identical to that of Nestlé‟s Kit Kat chocolate bar, whether in the 4 finger or 2 finger wafer varieties, when viewed through the eyes of the ordinary consumer, side- by-side and apart, as a matter of global first impression there exists a likelihood of deception or confusion. [43] The issue of whether the ordinary customer would perceive the finger wafer shape depicted in two-dimensions on the packaging of Iffco‟s „Break‟ chocolate bars, as well as the three-dimensional shape of the chocolate bar itself, as a source identifier, ie as a badge of origin of the chocolate bar, must be considered in context. The court a quo concluded that customers would not see the depictions of the chocolate fingers on the respondent‟s packaging as an indication of their origin, but simply as an indication of what was inside the package. In other words, purely descriptive use of the mark. The court also recorded that when seeing the product after opening the package, the consumer would also not believe that the product emanates from Nestlé, or that there was any connection between the product and Nestlé‟s product. It appears that the main factor which led the court a quo to this conclusion was the fact that the most prominent feature of the packaging was the word „Break‟ which was in capital letters, with the word „Tiffany‟ above the word „Break‟ in an elliptical circle. In effect the court a quo minimized the depiction of the shape of the chocolate bar on the packaging. [44] The evidence of surveys conducted by Nestlé, referred to above, is of importance in this regard. It is clear that the unique shape of Nestlé‟s Kit Kat chocolate bar has been advertised and sold for 50 years in South Africa. The market 18 Reckitt & Colman SA (Pty) Ltd v S C Johnson & Son SA (Pty) Ltd 1993 (2) SA 307 (A) at 316I. 19 Adidas AG & another v Pepkor Retail Ltd [2013] ZASCA 3 (28 February 2013) para [27]. survey has established that a significant number of consumers associated the shape of the chocolate bar with Nestlé‟s Kit Kat product. In this regard Iffco contended that the surveys were of no assistance because they were conducted in 2005 and 2011 respectively, whereas Iffco had commenced their conduct in June 2002 and the lawfulness of their conduct is to be assessed at that date. It was further submitted that Nestlé has to show that as at June 2002 the public would have perceived the use by Iffco as trade mark use, for the reason that the rights of one party cannot be overtaken by another.20 What has to be determined is the perception of the consumer as to the existence of a material link between the two products. The evidence of the surveys is not conclusive but simply of relevance in determining this issue. The results of these surveys must be considered in the context of the clear evidence that Nestlé has marketed and sold its Kit Kat chocolate bar in its present shape in South Africa for more than 50 years. This is not a case where the evidence is that Nestlé only sold and acquired a reputation in the shape of its Kit Kat chocolate bar after Iffco entered the market with its Break bar in June 2002, and that Nestlé now seeks to rely upon that subsequently acquired reputation to disentitle use by Iffco of the almost identical shape of its Break chocolate bar. The evidence to the contrary is that Nestlé enjoyed a reputation in the shape of its Kit Kat chocolate bar before Iffco even entered the South African market. I agree with the submission of Nestlé that once it is accepted, as the court a quo did, that Nestlé enjoys a reputation in its finger wafer shapes, whether in the 4 finger or 2 finger varieties, it follows that these shapes are distinctive and designate the origin of the proprietor. [45] The fact that according to Iffco it is common in the confectionary industry to depict the actual product in the packaging, so that the consumer knows what is inside the packaging does not per se mean that such use constitutes descriptive use. What is of importance is whether the shape of the product depicted on the packaging, is a shape that is capable of distinguishing the product of the owner of the shape trade mark in question from the products of competitors.21 If the public perceives that shape of the product depicted on the packaging as a badge of origin this would not constitute descriptive use. 20 A M Moolla Group Ltd and others v The Gap Inc and others 2005 (6) SA 568 (SCA) at 582E-G. 21 Bergkelder supra para 9. [46] In addition, this court has held that one cannot use a trade mark and then argue that it was used as ornamentation.22 This is not a case where the finger wafer shape trade marks of Nestlé have been altered in some way by Iffco to distinguish their „Break‟ chocolate bars from that of Nestlé‟s „Kit Kat‟ chocolate bars. As pointed out above, the shape of the chocolate bars are almost identical, save for the insignificant decorative pattern which is embossed on the tops of Iffco‟s chocolate bars. [47] I accordingly conclude that the court a quo erred in finding that consumers would not be deceived or confused by the depiction on the packaging of Iffco‟s chocolate bars nor by the shape of their chocolate bars as to the origin of the chocolate bars. The use by Iffco of the shape as depicted on its packaging and its three-dimensional form would be perceived by the consumer as a source identifier, that is, as a badge of origin, of the goods as emanating from Nestlé.23 [48] The use by Iffco of the 4 finger and 2 finger wafer shape trade mark of Nestlé accordingly contravenes s 34(1)(a) of the Act. The court a quo accordingly erred in concluding that Nestlé had failed to prove an infringement of the registered finger wafer trade marks in terms of s 34(1)(a) of the Act. Whether Nestlé is entitled to an order interdicting Iffco from using this trade mark, requires the consideration of a number of special defences raised by Iffco, namely waiver, acquiescence and estoppel, in due course. [49] Nestlé also relied upon the provisions of s 34(1)(c) of the Act to restrain the use by Iffco of the finger wafer shape trade marks. Having already established that its trade mark is well-known in South Africa and that Iffco is using a trade mark which is identical or similar to this registered trade mark, Nestlé, for the purposes of this section, had to establish that Iffco‟s shape of its Break chocolate bars, is likely to 22 Puma AG Rudolf Dassler Sport v Rampar Trading (Pty) Ltd & others [2011] 2 All SA 290 (SCA) para 27. 23 In the matter of Nestlé Deutschland AG and Société des Produits Nestlé SA v Inter Cookies Gebäck – und Kuchenspezialitäten GmbH – the District Court of Cologne held that the defendant was prohibited from marketing a chocolate bar, which was confusingly similar to Nestlé‟s three- dimensional trade mark in its Kit Kat chocolate bar. The court held (at para 3) that the form of the defendant‟s product and as depicted on the wrapping was identical to Nestlé‟s product and had become known to the consumer as an indication of origin of Nestlé‟s product. take unfair advantage of, or be detrimental to, the distinctive character or the repute of the registered 4 finger wafer shape and 2 finger wafer shape trade marks.24 [50] The section „aims to protect the commercial value that attaches to the reputation of a trade mark, rather than its capacity to distinguish the goods or services of the proprietor from those of others . . . That being so, the nature of the goods or services in relation to which the offending mark is used, is immaterial, and it is also immaterial that the offending mark does not confuse or deceive‟.25 [51] The protection of s 34(i)(c) extends beyond the primary function of a trade mark which is to signify the origin of goods or services. It strives to protect the unique identity and reputation of a registered trade mark which sells the goods. Its object it to avoid „blurring‟ and „tarnishment‟ of the trade mark.26 [52] The advantage or detriment complained of must be of a sufficiently significant degree to restrain the use of the trade mark.27 The court must be satisfied by evidence of actual detriment, or of unfair advantage, but depending on the primary facts, these may be self-evident.28 I agree with the submission by Nestlé that as the sales of Iffco‟s Break chocolate bars increase consumers will associate Nestlé‟s registered finger wafer shape with the product of Iffco, or as the shape of a chocolate bar sold by a number of proprietors in South Africa. The loss of the unique shape of Nestlé‟s Kit Kat bar as a distinctive attribute will inevitably result in a loss of advertising or selling power to Nestlé. This will clearly result in „blurring‟ of Nestlé‟s finger wafer shape trade mark. In addition, because Nestlé and Iffco are direct competitors, increased sales of Iffco‟s Break chocolate bars will be at the expense of Nestlé‟s Kit Kat chocolate bar. Economic harm to Nestlé is consequently self-evident from the primary facts. 24 Bata v Face Fashions CC and another supra at para 13. 25 National Brands Ltd v Blue Lion Manufacturing (Pty) Ltd 2001 (3) SA 563 (SCA) para 11. 26 Laugh it Off Promotions CC v SAB International (Finance) BV t/a SABMARK International (Freedom of Expression Institute as Amicus Curiae) 2006 (1) SA 144 (CC) paras 40 and 41. 27 Laugh it Off para 39. 28 Verimark para 14 n 21. [53] The court a quo accordingly erred in concluding that Nestlé had failed to prove an infringement of the registered finger wafer trade marks in terms of s 34(1)(c) of the Act. Whether Nestlé is entitled to interdictory relief in this regard again must await a consideration of the special defences raised by Iffco as referred to above. Nestlé’s application for interdictory relief based upon Iffco’s use of the ‘Break’ trade mark in contravention of Nestlé’s word trade marks [54] Counsel for Nestlé conceded at the hearing that if Nestlé was successful in interdicting the use by Iffco of Nestlé‟s 4 finger and 2 finger wafer shape marks, there would be no practical need to interdict the use by Iffco of the „Break‟ word mark. However, Counsel for Iffco submitted that the resolution of the dispute concerning the shape marks would not be dispositive of the dispute concerning the use by Iffco of the „Break‟ word mark. The issue required determination in the appeal. [55] A determination of whether Iffco‟s „Quanta Break‟ and „Tiffany Break‟ word trade marks, contravene Nestlé‟s word trade marks must be carried out without regard to the finding that the shape of Iffco‟s chocolate finger wafer bars to which the name „Break‟ is attached, is confusingly or deceptively similar to Nestlé‟s 4 finger and 2 finger wafer shape marks. This is because the comparison is between the respective word marks of Nestlé and Iffco and not between the respective word marks viewed in conjunction with the shape of the products which they name. [56] The registered word trade marks of Nestlé are the following: Have a Break, Have a Kit Kat Have a Break . . . Have a Kit Kat Have a Break Take a Break All of these marks, except for „Have a Break, Have a Kit Kat‟ are endorsed with disclaimers on the word „Break‟. Counsel for Nestlé in their heads of argument accordingly rely solely on the mark not subject to the disclaimer, namely „Have a Break, Have a Kit Kat.‟ [57] The registered word trade marks of Iffco are „Quanta Break‟ and „Tiffany Break‟, but it is clear that Iffco uses the word „Break‟ on its packaging as a trade mark. By virtue of the fact that Nestlé relies upon the provisions of s 34(1)(a) of the Act, it has to be determined by comparing the mark of Nestlé relied upon, namely „Have a Break, Have a Kit Kat‟, with the mark of Iffco namely, „Break‟ whether there is a likelihood that consumers would be deceived or confused into believing that Iffco‟s product is a Nestlé product, or that there was a material connection between them. [58] Of significance in this enquiry is the fact that Nestlé has disclaimed use of the word „Break‟ in three out of the four registered word marks. Why it has not been disclaimed in the remaining word mark relied upon by Nestlé is not explained. There is certainly nothing in the word mark relied upon to distinguish it in this regard from the other word marks. It is clear that a disclaimer allows others to use disclaimed features in a trade mark sense and is not simply intended to protect third parties who use the word „Break‟ descriptively in association with chocolate confectionary as contended for by Nestlé. If this was so, the provisions of s 34(2)(b) of the Act would be rendered superfluous. This section permits the descriptive use of features which have not been disclaimed. In this regard I agree with the view expressed by the court a quo, relying upon the authors Webster and Page,29 that the effect of a disclaimer is that the trade mark owner recognises that that which is disclaimed, is not in itself distinctive of the origin of the goods or services in question and that there will be no infringement of the trade mark, where the only similarity between the trade mark and the mark complained of consists of a similarity to those features which have been disclaimed. [59] Nestlé does not claim exclusivity in the word „Break‟ in a trade mark sense. What is relied upon is the contention that the use of the word „Break‟ as a trade mark is confusingly or deceptively similar to Nestlé‟s trade mark „Have a Break, Have a Kit Kat‟. Nestlé contends that Iffco has appropriated a dominant and essential element of their trade mark, namely the word „Break‟. I disagree. In order to find that a consumer would be confused or deceived into thinking that the word „Break‟ 29 Paragraph 9.8. indicated that the origin of Iffco‟s product was that of Nestlé, the highly distinctive name of Nestlé‟s product „Kit Kat‟ would have to be ignored. It is clear that the likelihood of confusion must be a real probability, not a remote possibility.30 In my view, the requisite likelihood of confusion amongst consumers confronted by the respective trade marks has not been established by Nestlé. Nestlé‟s appeal against this finding by the court a quo accordingly fails. [60] Nestlé also relies upon the provisions of s 34(1)(c) of the Act to restrain the use by Iffco of the Break trade mark. As pointed out the object of this section is to avoid „blurring‟ and „tarnishment‟ of the trade mark. It is clear that the mark of Nestlé relied upon, namely „Have a Break, Have a Kit Kat‟ is well-known and has been used for a considerable period of time in South Africa. As pointed out it is not necessary for Nestlé to prove the likelihood of confusion among customers when viewing the respective trade marks. Nestlé contends that the harm to the selling power in the Break trade mark is self-evident, because it will now be precluded from relying upon the „Have a Break‟ concept in its advertising. It argues that the value of the Break trade marks, which were devised and used as advertising slogans, resides in their advertising value. It is alleged that Nestlé‟s promotion of its Kit Kat product using the Break trade marks, will have the undesirable effect of promoting Iffco‟s Break products. [61] As pointed out the court must be satisfied by evidence of actual detriment, or of unfair advantage. However, this may be self-evident from the primary facts. In my view the mere fact that the concept of „Have a Break, Have a Kit Kat‟ has become well-known in connection with the Nestlé‟s Kit Kat chocolate bar, does not mean that the detriment or unfair advantage alleged by Nestlé in the use by Iffco of the trade mark Break is self-evident. This is a case which required evidence to prove the „blurring‟ of Nestlé‟s word mark in the respects alleged. Nestlé‟s appeal against the finding of the court a quo must accordingly fail. Nestlé’s application to expunge Iffco’s Quanta Break and Tiffany Break trade marks 30 Cowbell AG v ICS Holdings Ltd 2001 (3) SA 941 (SCA) para 15. [62] In the light of the conclusion that Iffco‟s Quanta Break and Tiffany Break trade marks are not confusingly similar to Nestlé‟s trade marks and their use does not lead to the dilution of Nestlé‟s Break trade marks by blurring, there is no basis for ordering that Iffco‟s trade marks be expunged from the register. Nestlé‟s appeal against the court a quo‟s refusal to grant such an order accordingly fails. Nestlé’s claim in terms of s 35(3) of the Act and for passing off [63] Counsel for Iffco conceded that if Nestlé was successful in obtaining interdictory relief either in terms of s 34(1)(a) or (c) of the Act, there would be no need to deal with these claims. Iffco’s special defences based upon acquiescence, waiver and estoppel [64] A great deal of evidence was filed by Nestlé and Iffco dealing with the defences raised by Iffco of tacit waiver (through silence or a failure to act in the face of a legal duty to do so) and acquiescence, on the part of Nestlé. Iffco also raised the defence of estoppel based upon an implied representation made by Nestlé as a result of a failure to act in preventing Iffco from continuing to use the contested trade marks. [65] The basis for these defences is the allegation by Iffco that Nestlé was aware of Iffco‟s use of the Quanta Break and Tiffany Break word marks, as well as the 4 finger wafer shape trade mark from 2002, but only took action in June 2011. [66] At the hearing counsel for Iffco quite correctly abandoned reliance upon the defence of acquiescence, which does not form part of our law.31 In addition, counsel stated he would not address further argument on these defences and relied solely upon the submissions made in his heads of argument. [67] I find it unnecessary to deal with the evidence in detail because it is clear that Iffco received demands from Nestlé on several occasions to cease the sale of its Break chocolate bar in South Africa and elsewhere in the world. Although it is clear that no demands were made during the period 2004 to 2008 for Iffco to cease selling 31 Turbek Trading CC v A & D Spitz (Pty) Ltd & another [2010] 2 All SA 284 para 15. their Break chocolate bar in South Africa, the delay is explained by Nestlé on the basis that it was awaiting registration of the finger wafer shape trade marks in South Africa before taking action. [68] In addition during this period in 2008 the parties litigated over the identical trade mark issues, with Nestlé instituting legal proceedings against Iffco in Iffco‟s country of domicile being the United Arab Emirates. From 2008 a number of meetings were held between the parties to settle their dispute on a global scale. [69] On a conspectus of all of the evidence I am satisfied that Iffco was never led to believe that Nestlé would not enforce the contested trade marks in South Africa against Iffco. The conduct of Nestlé never unequivocally indicated a waiver of the rights it held in the contested trade marks, nor did it amount to a representation that action would not be taken against Iffco to enforce these rights. [70] These defences were not dealt with by the court a quo, finding it unnecessary to do so because of the dismissal of Nestlé‟s application on the basis that it had failed to prove infringement of its trade marks. For the reasons set out above these defences must fail and Nestlé is accordingly entitled to the interdictory relief referred to above. [71] The following order is made: 1 The appeal by the first and second appellants against the order of the court a quo dismissing the appellants‟ application with costs, succeeds with costs, to the extent reflected in the following order: „The first respondent and the second respondent are interdicted from infringing the rights of the first applicant in trade mark registration numbers 1999/23579 4 finger wafer shape and 1999/23580 2 finger wafer shape by making unauthorised use, in the course of trade, in relation to chocolate and/or confectionary products of any finger wafer shape mark of any of the types referred to in paragraph 11 of the founding affidavit of Kevin Corlett and illustrated in annexures “N17A” to “N17E” thereto, and of any depictions of any such finger wafer shapes on the packaging or labelling of such products, or of any finger wafer shapes which are confusingly and/or deceptively similar to the aforesaid registered trade marks of the first applicant. The first and second respondents are ordered to pay the first and second applicants‟ costs.‟ 2 The cross-appeal by the first and second respondents against the dismissal of the respondents‟ counter-application and second review application with costs, is dismissed with costs. 3 The costs orders are to include the costs of two counsel. ________________ K G B SWAIN JUDGE OF APPEAL APPEARANCES: For the Appellant: C Puckrin SC, G D Marriot Instructed by: Adams & Adams Inc, Pretoria c/o Honey Attorneys Inc, Bloemfontein For the Respondents: R Michau SC, L G Kilmartin Instructed by: Goldman Judin Inc, Illovo c/o Rossouws and Conradie Inc, Bloemfontein

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 27 November Status: Immediate Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal. SOCIÉTÉ DES PRODUITS NESTLÉ SA FIRST APPELLANT NESTLÉ SOUTH AFRICA (PTY) LTD SECOND APPELLANT and INTERNATIONAL FOODSTUFFS CO FIRST RESPONDENT IFFCO SOUTH AFRICA (PTY) LTD SECOND RESPONDENT THE REGISTRAR OF TRADE MARKS THIRD RESPONDENT The SCA upheld an appeal by Nestlé on the ground that the shape of the finger wafer chocolate bars marketed and sold by International Foodstuffs, under the registered word mark ‘Tiffany Break’, were confusingly and/or deceptively similar to Nestlé’s 4 finger wafer and 2 finger wafer shape trade marks, being the shape of its Kit Kat finger wafer chocolate bars. International Foodstuffs was interdicted from making use of Nestlé’s registered shape marks in the course of trade. Nestlé’s appeal to restrain use by International Foodstuffs of its registered word marks ‘Quanta Break’ and ‘Tiffany Break’ on the ground that it was confusingly and/or deceptively similar to Nestlé’s registered word mark ‘Have a Break, Have a Kit Kat’ was dismissed.

2954

non-electoral

2015

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT CASE NO: 181/2014 Reportable In the matter between: SYLLA MOUSSA APPELLANT and THE STATE FIRST RESPONDENT THE MINISTER OF JUSTICE AND CONSTITUTIONAL DEVELOPMENT SECOND RESPONDENT Neutral Citation: Moussa v S (181/2014) [2015] ZASCA 61 (14 April 2015). Coram: Navsa ADP, Ponnan, Mhlantla, Mbha & Zondi JJA Heard: 5 March 2015 Delivered: 14 April 2015 Summary: Private counsel engaged by National Prosecuting Authority in terms of s 38 of the National Prosecuting Authority Act 32 of 1998 to conduct prosecution on fraud charges – prosecution requiring commercial expertise – challenge to prosecutor‟s authority – constitutionality of s 38 – challenge on basis that it impinged on constitutional imperative of prosecutions without fear, favour or prejudice – ultimately restricted to a challenge based on the fact that s 38 does not provide for an oath as required for permanent members of the National Prosecuting Authority – held that private counsel are required to conduct themselves within the structure of the Act – and that they conduct prosecutions under the control and supervision of the most senior members of the NPA – s 38 held not to be unconstitutional. ______________________________________________________________________ ORDER ______________________________________________________________________ On appeal from: Gauteng Local Division of the High Court, Johannesburg (Campbell AJ sitting as court of first instance): The following order is made: The appeal is dismissed with costs. ______________________________________________________________________ JUDGMENT ______________________________________________________________________ Navsa ADP (Ponnan, Mhlantla, Mbha & Zondi JJA concurring): [1] This appeal, with the leave of the court below, concerns the constitutionality of s 38 of the National Prosecuting Authority Act 32 of 1998 (the NPA Act). The appellant, Mr Sylla Moussa, is a Guinean national who, during June 2006, was charged with 16 counts of fraud, alternatively, three counts of theft and three counts of money laundering in terms of the provisions of the Prevention of Organised Crime Act 121 of 1998 (the POCA). The preamble to the indictment reflects the following: The appellant was in control of two accounts held by corporate entities with Absa Bank. The accounts labelled „credit accounts‟ bore a no-risk status which meant that the appellant could immediately make withdrawals against cheque deposits into the account. Electronic transfers can only be made from such an account if sufficient funds exist in that account, even if only by way of cheque deposits. The appellant, so it is alleged conducted „cross-fire fraud‟ which is described in the preamble to the indictment as follows: „1.10.1. No value cheques or cheques of insufficient value (“facilitation cheques”) would be deposited into the beneficiary bank account at ABSA and drawn against the drawer‟s account at ABSA. 1.10.2. The lack of funds in the drawer‟s account to support the amounts depicted as per face value of the facilitation cheques, resulted in an artificial credit being created in the beneficiary bank account. 1.10.3. The drawing and depositing of the facilitation cheques would be recorded on the bank statements of the drawer‟s and beneficiary bank accounts as debit and credit entries respectively. 1.10.4. From the beneficiary bank account, the accused would then, on or about the day that the cheques were deposited or shortly thereafter, remit via electronic banking transfer a similar amount (“contra amount”) back to the drawer‟s bank account. 1.10.5. When remitting the contra amount back to the drawer‟s account, the initial beneficiary account would be debited and the drawer‟s account credited. 1.10.6. The recording of the facilitation cheques on the drawer‟s bank account would however only happen after depositing the cheques into the beneficiary bank account, which would be on the same day or shortly after the contra amount is remitted, creating the impression of availability of funds in the drawer‟s account when the facilitation cheques were recorded and/or debited. 1.10.7. The balances and credits recorded on the respective bank statements of the beneficiary and drawer bank account would therefore not be represented by genuine and/or sufficient underlying funds created in bona fide manner in the ordinary course of business, but such balances and credits would record mere artificial or illusory balances of a temporary nature. 1.10.8. Such credits and balances were designed to mislead ABSA into accepting and/or believing that accused and/or the corporate entities were conducting bona fide transactions and/or are involved in genuine and bona fide arms length business transactions and/or doing well financially and that sufficient underlying funds existed to honour the facilitation cheques and subsequent contra payments.‟ [2] For present purposes it is not necessary to deal with the particulars relating to the alternative charges of fraud, theft or the charges related to the contraventions of the POCA which are all founded on the same allegations. The amount ABSA Bank is said to have lost as a result of the appellant‟s alleged conduct appears in the indictment, namely, R41 329 188.37. [3] Because of the nature of the commercial transactions in relation to which the appellant was charged, the National Prosecuting Authority (the NPA) took the view that it required the skills of a specialised prosecutor and thus engaged the services of Mr Zirk Pansegrouw (Pansegrouw), an advocate in private practice and member of the Pretoria Bar and a former prosecutor. In doing so, the NPA purported to act in terms of s 38 of the NPA Act, which reads as follows: „(1) The National Director may in consultation with the Minister, and a Deputy National Director or a Director may, in consultation with the Minister and the National Director, on behalf of the State, engage, under agreements in writing, persons having suitable qualifications and experience to perform services in specific cases. (2) The terms and conditions of service of a person engaged by the National Director, a Deputy National Director or a Director under subsection (1) shall be as determined from time to time by the Minister in concurrence with the Ministers of Finance. (3) Where the engagement of a person contemplated in subsection (1) will not result in financial implications for the State – (a) the National Director; or (b) a Deputy National Director or a Director, in consultation with the National Director, may, on behalf of the State, engage, under an agreement in writing, such person to perform the services contemplated in subsection (1) without consulting the Minister as contemplated in that subsection. (4) For purposes of this section, “services” include the conducting of a prosecution under the control and direction of the National Director, a Deputy National Director or a Director, as the case may be.‟ [4] After his arrest in June 2006, the appellant appeared in the Regional Court, Johannesburg and was released on R100 000 bail. During March 2008, his trial was transferred to the Gauteng Local Division, Johannesburg. Faced with Pansegrouw as the prosecutor appellant‟s legal representative requested documentation to allay the appellant‟s concerns about Pansegrouw‟s authority to conduct the prosecution. After the documentation was supplied and scrutinised, the appellant correctly concluded that the oath in terms of s 32(2) of the NPA Act had not been taken by Pansegrouw. I interpose to set out the relevant part of that subsection: „(a) A National Director and any person referred to in section 4 must, before commencing to exercise, carry out or perform his or her powers, duties or functions in terms of this Act, take an oath or make an affirmation, which shall be subscribed by him or her, in the form set out below . . . . . . (b) Such an oath or affirmation shall – (i) . . . (ii) in the case of a prosecutor, be taken or made before the Director in whose office the prosecutor concerned has been appointed or before the most senior judge or magistrate at the court where the prosecutor is stationed, who shall at the bottom thereof endorse a statement of the fact that it was taken or made before him or her and of the date on which it was so taken or made and append his or her signature thereto.‟ [5] Section 4 sets out the composition and hierarchical structure of the National Prosecuting Authority as follows: „The prosecuting authority comprises the – (a) National Director; (b) Deputy National Directors; (c) Directors; (d) Deputy Directors; and (e) Prosecutors.‟ Prosecutor is defined as follows: „“prosecutor” means a prosecutor referred to in section 16(1)‟. Section 16(1) in turn provides: „(1) Prosecutors shall be appointed on the recommendation of the National Director or a member of the prosecuting authority designated for that purpose by the National Director, and subject to the laws governing the public service.‟ [6] Having regard to the fact that at that stage Pansegrouw had not taken the oath provided for in s 32(2) of the NPA Act, the appellant gave notice in terms of s 106(3), read with s 106(1)(h) of the Criminal Procedure Act 51 of 1977 (the CPA), challenging Pansegrouw‟s authority to prosecute,1 because he had not taken the oath provided for in s 32(2) of the NPA Act. The appellant launched an application in the Gauteng Local Division in which he sought an order: (a) that Pansegrouw had no authority to prosecute him; (b) that his trial was unfair and (c) for a permanent stay of his prosecution. 1 Section 106(3) reads as follows: „An accused shall give reasonable notice to the prosecution of his intention to plead a plea other than the plea of guilty or not guilty, and shall in such notice state the ground on which he bases his plea: Provided that the requirement of such notice may be waived by the attorney-general or the prosecutor, as the case may be, and the court may, on good cause shown, dispense with such notice or adjourn the trial to enable such notice to be given.‟ Section 106(1)(h) provides: „(h) that the prosecutor has no title to prosecute.‟ [7] That application came before Mailula J in the Gauteng Local Division. An exchange ensued between Mailula J and appellant‟s counsel, during which the judge expressed reservations about whether a prosecutor appointed in terms of s 38 of the NPA Act was required to take an oath. That view appeared to be shared by appellant‟s counsel, who consequently sought a postponement in order to challenge the constitutionality of s 32(2) of the NPA Act, ostensibly because it did not provide for counsel appointed from outside of the NPA to take the oath provided for in that section. The original notice of motion was amended and the second respondent, the Minister of Justice and Constitutional Development (the Minister) was joined, as a party, as required by Uniform rule 10A.2 Before the merits of the case were addressed, the appellant‟s legal representative was asked by Mailula J whether the appellant would abide Pansegrouw taking the prescribed oath before the trial commenced. Since the appellant‟s attitude was that it was the taking of the prescribed oath that was foundational to prosecutorial independence, one would have thought that the suggestion that Pansegrouw would take the oath would put paid to the appellant‟s objections to him being the prosecutor. Alas, the appellant changed tack and chose, instead, to challenge the constitutionality of s 38 of the NPA Act, which as reflected in paragraph 3 above, enables the engagement of persons outside of the NPA to perform prosecutorial services in specific cases. [8] Thus, the appellant launched an application seeking an order declaring s 38 to be unconstitutional on the basis that it permitted the appointment of a prosecutor outside the National Prosecuting Authority‟s normal staff complement and therefore did not give effect to the constitutional principle enshrined in s 179(4) of the Constitution of the Republic of South Africa (the Constitution), that requires the prosecuting authority to 2 Uniform rule 10A provides: „If any proceedings before the court, the validity of a law is challenged, whether in whole or in part and whether on constitutional grounds or otherwise, the party challenging the validity of the law shall join the provincial or national executive authorities responsible for the administration of the law in the proceedings and shall in the case of a challenge to a rule made in terms of the Rules Board for Courts of Law Act, 1985 (Act No. 107 of 1985), cause a notice to be served on the Rules Board for Courts of Law, informing the Rules Board for Court of Law thereof.‟ Rules regulating the Conduct of Proceedings of the Several Provincial and Local Divisions of the Supreme Court of South Africa GN 48 of 1965. exercise its functions without fear, favour or prejudice. The State as prosecuting authority and the Minister opposed the application. [9] The application, in amended form, was heard by Campbell AJ. Three years before that application was heard and subsequent to the appearance before Mailula J, Pansegrouw had in fact taken an oath to act „without fear, favour or prejudice‟. The dispute before Campbell AJ was narrowed to the constitutionality of s 38 on the basis set out in the preceding paragraph. [10] Campbell AJ took into account that s 38 of the NPA Act, in contradistinction to s 32(2)(a), did not provide for the taking of an oath. The learned judge reasoned that the starting point of the enquiry was s 179(4) of the Constitution, which dictated that national legislation should provide for the prosecuting authority to act without fear, favour or prejudice. This led Campbell AJ to consider the composition of the „prosecuting authority‟ and in turn to s 179(1) of the Constitution, which provides as follows: „(1) There is a single national prosecuting authority in the Republic, structured in terms of an Act of Parliament, and consisting of – (a) a National Director of Public Prosecutions, who is the head of the prosecuting authority, and is appointed by the President, as head of the national executive; and (b) Directors of Public Prosecutions and prosecutors as determined by an Act of Parliament.‟ This, of course, must be read with the provisions of s 4 of the NPA Act as set out in paragraph 5 above, which sets out the hierarchical structure of the NPA. [11] Campbell AJ considered that when persons are engaged as prosecutors in terms of s 38 of the NPA Act, they can hardly be regarded as free agents. In his view, they were subject to the control and direction of senior officers of the NPA, within the structure of the NPA Act. The court below held that persons appointed in terms of s 38 were „prosecutors‟ in the normal sense of the word, but not necessarily as contemplated in certain other sections of the NPA Act. The court reasoned that Pansegrouw was obliged to carry out his functions as a prosecutor in the manner contemplated by s 179(4) of the Constitution. Section 32 requires permanently appointed prosecutors to take an oath of office that they will carry out their duties in the prescribed manner. The absence of an oath in s 38 does not detract from the manner in which private counsel appointed in terms of the NPA Act are required to perform their duties. The following paragraphs of the judgment set out in succinct form the reasoning and conclusions of the court below: „19. To conclude: section 38 of the Act, on this construction, simply authorises the employment of, inter alia, ad hoc prosecutors to carry out specific and limited tasks on behalf of the NPA, but does not specify their constitutional duties because such ad hoc prosecutors are part of the prosecuting authority and their constitutional duties are set out in section 32 of the Act. 20. It therefore follows that in my view section 38 of the Act is not unconstitutional and that the application, as currently framed, must fail.‟ The court below dismissed the application with costs. It is against that order and the findings referred to above that the present appeal is directed. [12] In written heads of argument it was contended on behalf of the appellant that s 38 of the NPA Act is inconsistent with the Constitution in that it does not specifically provide that such persons should conduct themselves without fear, favour or prejudice when prosecuting – the latter qualities being the hallmark of prosecuting integrity in this country. Before us counsel on behalf of the appellant, when pressed about the precise ambit of the appellant‟s case, stated that he was contending that s 38 of the NPA Act was unconstitutional because it did not compel „outside counsel‟ to take the oath as prescribed for permanent members of the prosecution services by s 32 of the NPA Act. As I understood the submission, it was contended that it is the taking of the oath that is foundational to the independence of a prosecutor. [13] The engagement of persons who have specialised skills, to assist in prosecutions, is not statutorily novel. This emerges from a brief review of legislation over the last few decades.3 3 See Harksen v DPP, Cape 1999 (4) SA 1201 (C) and The Investigating Directorate: Serious Economic Offences v Hyundai Motor Distributors (Pty) Ltd; in re Hyundai Motor Distributors (Pty) Ltd v Smit NO 2000 (10) BCLR 1079 (CC), where transition from former dispensation is discussed. [14] Prior to the now repealed Attorney-General Act 92 of 1992 (the AGA), which commenced on 31 December 1992, the CPA provided for prosecutions (ss 2-5) and the Attorney-General was the prosecuting authority on behalf of the State. Section 4 of the CPA used to provide that an Attorney-General may, in writing: „(a) delegate to any person, subject to the control and directions of the attorney-general, authority to conduct on behalf of the State any prosecution in criminal proceedings in any court within the area of jurisdiction of such attorney-general, or to prosecute in any court on behalf of the State any appeal arising from criminal proceedings within the area of jurisdiction of such attorney-general.‟ [15] Section 2 of the AGA provided for the appointment of an Attorney-General by the State President in respect of each provincial division and of the Witwatersrand Local Division of the Supreme Court of South Africa. Section 6(a) of the AGA read as follows: „6. An attorney-general may, in respect of the area for which he has been appointed, in writing – (a) delegate to any person who has the right to appear in any court in terms of the Right of Appearance in Courts Act, 1995 (Act No. 62 of 1995), subject to the control and directions of the attorney-general, authority to conduct on behalf of the State any prosecution in criminal proceedings in any court within the area of jurisdiction of such attorney-general, or to prosecute in any court on behalf of the State any appeal arising from criminal proceedings within the area of jurisdiction of such attorney-general.‟ The NPA Act repealed the AGA and ss 2-5 of the CPA which previously dealt with the prosecuting authority. [16] In S v Tshotshoza 2010 (2) SACR 274 (GNP), where the propriety of private funding for a prosecution was discussed and decided, the court, considering s 38 of the NPA Act, said the following: „[18] It has not been argued that s 38 of the Act or any portion thereof is unconstitutional. It is difficult to conjure up possible arguments for such a contention. After all, the Constitution acknowledges that there is crime and that criminals are to be prosecuted and punished, and that for this purpose there has to be a prosecuting authority which has to take the necessary initiative in respect of the institution of prosecutions and the fulfilment of all necessary steps incidental thereto. The detail is to be enacted in specific legislation and has been enacted in terms of the Act. It is a prerequisite that prosecutions must be fair and must not violate an accused‟s right to a fair trial in terms of s 35(3) of the Constitution. [19] All over the world, outside prosecutors are engaged to prosecute on behalf of the State. There cannot be objection in this country to the engagement of outside prosecutors in specific cases. There are many reasons why it may become necessary for the NPA to engage outsiders. One thinks of a shortage of staff or of staff with the necessary expertise and experience to prosecute in particular cases.‟4 [17] In Tshotshoza the court there was, of course, not dealing with the constitutional challenge posed in the present litigation. I interpose to state that in the present case it is factually un-contentious that the State has routinely and extensively engaged the specialised services of outside counsel,5 particularly in prosecutions requiring commercial expertise and that those prosecutions were conducted without the oath of office, or affirmation, prescribed by s 32 of the NPA Act being taken. [18] I turn to deal with the appellant‟s challenge to the constitutionality of s 38 of the NPA Act. I agree with the court below that the starting point is s 179(4) of the Constitution which provides: „National legislation must ensure that the prosecuting authority exercises its functions without fear, favour or prejudice.‟ The NPA Act is that legislation. Section 2 provides for a single prosecuting authority. Section 3 reiterates that there is a single prosecuting authority consisting of „the Office of the National Director and the offices of the prosecuting authority at the High Courts, established by section 6(1)‟. Section 4 referred to above sets out the composition of the prosecuting authority. Section 5 established the office of the National Director of Public Prosecutions and places the National Director at its head. Section 6 established offices for the prosecuting authority at the seat of each High Court division. A number of 4 Cf Bonugli & another v DNDPP & others 2010 (2) SACR 134 (T) at 142F-145F, where it was held that a private practitioner can be appointed as prosecutor subject to the perception of the reasonable, objective and informed person of acting without fear, favour or prejudice, thus setting out the test for private prosecutions. That case was decided on its own facts and was primarily concerned with the funding of a prosecution. 5 This appears from para 48 of the respondent‟s heads of argument and I did not understand it to be contested. sections of the NPA Act deal with hierarchical appointments. Section 16, alluded to above, provides for the appointment of prosecutors. Section 20(1) states that the power to institute criminal proceedings contemplated in s 179(2) of the Constitution „vests in the prosecuting authority and shall, for all purposes, be exercised on behalf of the Republic.‟ [19] Significantly, s 20 subsecs (2)-(5) provide as follows: „(2) Any Deputy National Director shall exercise the powers referred to in subsection (1) subject to the control and directions of the National Director. (3) Subject to the provisions of the Constitution and this Act, any Director shall, subject to the control and directions of the National Director, exercise the powers referred to in subsection (1) in respect of – (a) the area of jurisdiction for which he or she has been appointed; and (b) any offences which have not been expressly excluded from his or her jurisdiction, either generally or in a specific case, by the National Director. (4) Subject to the provisions of this Act, any Deputy Director shall, subject to the control and directions of the Director concerned, exercise the powers referred to in subsection (1) in respect of – (a) the area of jurisdiction for which he or she has been appointed; and (b) such offences and in such courts, as he or she has been authorised in writing by the National Director or a person designated by the National Director. (5) Any prosecutor shall be competent to exercise any of the powers referred to in subsection (1) to the extent that he or she has been authorised thereto in writing by the National Director, or by a person designated by the National Director.‟ [20] Section 21, consistent with s 179(5) of the Constitution,6 provides for the National Director, with the concurrence of the Minister and after consultation with other Directors, 6 Section 179(5) reads as follows: „(5) The National Director of Public Prosecutions – (a) must determine, with the concurrence of the Cabinet member responsible for the administration of justice, and after consulting the Director of Public Prosecutions, prosecution policy, which must be observed in the prosecution process; (b) must issue policy directives which must be observed in the prosecution process; (c) may intervene in the prosecution process when policy directives are not complied with; and to determine prosecution policy and issue policy directives which must be observed in the prosecution process. Section 22(1) of the NPA Act provides: „(1) The National Director, as the head of the prosecuting authority, shall have authority over the exercising of all the powers, and the performance of all the duties and functions conferred or imposed on or assigned to any member of the prosecuting authority by the Constitution, this Act or any other law.‟7 [21] Section 23 deals with the powers, duties and functions of Deputy National Directors and reads as follows: „(1) Any Deputy National Director may exercise or perform any of the powers, duties and functions of the National Director which he or she has been authorised by the National Director to exercise or perform.‟ [22] Section 24 of the NPA Act sets out the powers, duties and functions of Directors and Deputy Directors. Section 24(1) provides as follows: „(1) Subject to the provisions of section 179 and any other relevant section of the Constitution, this Act or any other law, a Director referred to in section 13(1)(a) has, in respect of the area for which he or she has been appointed, the power to – (a) institute and conduct criminal proceedings and to carry out functions, incidental thereto as contemplated in section 20(3); (b) supervise, direct and co-ordinate the work and activities of all Deputy Directors and prosecutors in the Office of which he or she is the head; (c) supervise, direct and co-ordinate specific investigations; and (d) carry out all duties and perform all functions, and exercise all powers conferred or imposed on or assigned to him or her under any law which is in accordance with the provisions of this Act.‟ (d) may review a decision to prosecute or not to prosecute, after consulting the relevant Director of Public Prosecutions and after taking representations within a period specified by the National Director of Public Prosecutions, from the following: (i) The accused person. (ii) The complainant. (iii) Any other person or party whom the National Director considers to be relevant.‟ 7 A Code of Conduct was issued by the National Director on 1 October 1999 together with the Policy Manual, the former was published under GN R1257 in GG 33907 dated 29 December 2010 with effect from 18 October 2010. [23] Section 25 deals with prosecutors at the lower end of the prosecutorial hierarchy. Section 25(1) reads as follows: „(1) A prosecutor shall exercise the powers, carry out the duties and perform the functions conferred or imposed on or assigned to him or her – (a) under this Act and any other law of the Republic; and (b) by the head of the Office or Investigating Directorate where he or she is employed or a person designated by such head; or (c) if he or she is employed as a prosecutor in a lower court, by the Director in whose area of jurisdiction such court is situated or a person designated by such Director.‟ [24] That brings us to s 32(1)(a) of the NPA Act which provides: „(1)(a) A member of the prosecuting authority shall serve impartially and exercise, carry out or perform his or her powers, duties and functions in good faith and without fear, favour or prejudice and subject only to the Constitution and the law.‟ [25] The picture that emerges from the statutory scheme, in line with the constitutional imperative of ensuring independence, impartiality and prosecutions without fear, favour or prejudice, is the establishment of a single national prosecuting authority with strict controls, directions and hierarchical supervision from the top downwards. It was not suggested that the policy and policy directives presently in place are not consonant with that model. Section 38 of the NPA Act, which is at the heart of the present litigation, ensures that the appointment of persons with suitable qualifications and experience to perform „services‟ in specific cases occurs only after consultation at the highest level involving the Minister, the National Director and/or Directors or Deputy National Directors. Importantly, s 38(4) provides: „(4) For purposes of this section, “services” include the conducting of a prosecution under the control and direction of the National Director, a Deputy National Director or a Director, as the case may be.‟(My emphasis.) This must mean that when persons from „outside‟ are engaged as prosecutors, they do so after consideration at the highest level and that the prosecutions that they are involved in are subject to the control and direction of the highest ranking officials within the NPA, who themselves have taken the oath of office prescribed by s 32. This translates into ensuring that the decision and basis of the prosecution are within the control of those officials. All of this is to ensure that constitutional imperatives are met. [26] Given the structure of the NPA Act and the controls and supervision referred to above, I struggle to understand how prosecutorial independence and impartiality are, without more, undermined by s 38. This is something that counsel on behalf of the appellant himself had difficulty with. In my view, it is that difficulty that drove him to reliance, on the failure by the legislature, in section 38 to provide for an oath, to be taken by outside counsel in the same manner as is required of permanent members of the NPA. As stated above, my understanding of the submission was that it was the oath of office that guaranteed the independence and impartiality that the Constitution demands. That meant, as counsel was constrained to concede, that the reading-in of an oath would have the effect of saving s 38 from constitutional invalidity. Having regard to the fact that Pansegrouw had by then taken an oath the attitude of the appellant in continuing to challenge his prosecution is strange, to say the least. I consider it necessary to record that, initially, the appellant attacked Pansegrouw‟s conduct in the prosecutorial process up until the time that he noted his objection. That was abandoned. It will be recalled that, initially, the appellant‟s challenge was based on the constitutionality of s 32 of the NPA Act. After the exchange with Mailula J, that stance altered and the attack was directed at the constitutionality of s 38. When pressed about why s 38 was lacking, the argument reverted to the failure to provide for the oath in terms similar to that contained in s 32. It leads one to the compelling conclusion that the latest argument on behalf of the appellant is contrived. [27] It must also be borne in mind that Pansegrouw is a member of the Bar who upon admission took an oath of fidelity to the Republic and the Constitution and is required to subscribe to and practice in the best traditions of his profession.8 Members of the Bar 8 See the comparable case of Prince v President, Law Society of Good Hope & others 2000 (3) SA 845; 2000 (7) BCLR 823 (SCA) paras 3-6 of the separate concurring judgment of Mthiyane AJA, where the learned judge pointed out the interrelation between the professional oath of office and loyalty to the Republic and to the Constitution. are ultimately officers of the court and required to conduct themselves as such. Pansegrouw is a former prosecutor and thus not a stranger to the workings of the NPA. [28] I agree with the reasoning of the court below that prosecutors appointed in terms of s 38 of the NPA Act are statutorily required to perform their functions as part of the NPA, in the manner dictated by s 32(1)(a). The structure of the NPA Act is such that control and supervision are in place to ensure compliance with s 32(1)(a) and constitutional norms. [29] It is not the taking of the oath that guarantees prosecutorial independence and impartiality. Nor can the taking of the oath by itself ensure an accused‟s fair trial rights. It is the manner in which prosecutions are initiated and conducted that is the test of prosecutorial independence. Whether a trial is fair usually falls to be determined on a case by case basis. Our courts will be astute to ensure that the constitutional guarantees of prosecutions without fear, favour or prejudice and fair trial rights are met. The appellant‟s contentions have the effect of placing form above substance. In Porritt v The NDPP [2015] 1 All SA 169 (SCA), this court in dealing with a challenge of impartiality to a prosecution said the following in para 14: „The protection of an accused person, therefore, lies not in a general standard of independence and impartiality required of all prosecutors, but in the right to a fair trial entrenched in s 35(3) of the Constitution. That right was described in S v Shaik [2008 (2) SA 208 (CC) para 43] in these terms: “The right to a fair trial requires a substantive, rather than a formal or textual approach. It is clear also that fairness is not a one-way street conferring an unlimited right on an accused to demand the most favourable possible treatment. A fair trial also requires „fairness to the public as represented by the State. It has to instil confidence in the criminal justice system with the public, including those close to the accused, as well as those distressed by the audacity and horror of crime.‟”‟ [30] I can find no flaw in the essential reasoning of the court below in dismissing the appellant‟s application. I turn now to consider whether there is anything in comparable jurisdictions that might detract from that conclusion. [31] At our invitation, counsel filed a joint written note on the position in comparative jurisdictions in relation to the question of whether „outside prosecutors‟ are required to take an oath when appointed to prosecute on behalf of the state in a particular matter. We are grateful for their assistance in this regard. The note had regard to legislation and case law in England, Canada, the United States of America, India and Australia. It is clear that the appointment of outside prosecutors is not unique to South Africa. We were informed that counsel could find only one local jurisdiction (the Canadian province of Quebec) that requires an outside prosecutor to take the same oath as that required of a permanent state prosecutor. [32] In those countries the scope of authority and powers delegated differ significantly. It does appear, though, that in all instances the mandate given to a person recruited from „outside‟ is subject to the control of the prosecuting authority. [33] In England and Wales, the Prosecution of Offences Act 1985 makes provision for the appointment of external counsel to conduct prosecutions on behalf of the Crown Prosecution Service. Part 1, section 5 of Chapter 23 of the Prosecution of Offences Act provides in relevant part: „(1) The Director may at any time appoint a person who is not a Crown Prosecutor but who has a general qualification (within the meaning of section 71 of the Courts and Legal Services Act 1990) to institute or take over the conduct of such criminal proceedings or extradition proceedings as the Director may assign to him. (1A) . . . (1B) . . . (2) Any person conducting proceedings assigned to him under subsection (1) or exercising functions by virtue of an appointment made under subsection (1A) shall have all the powers of a Crown Prosecutor but shall exercise those powers subject to any instructions given to him by a Crown Prosecutor.‟ [34] There is no legislative indication that members of the Bar in England and Wales are required to take the prosecutors‟ oath in addition to the oath taken by barristers on their admission to the Bar. [35] In Canada, in terms s 7(2) of the Director of Public Prosecutions Act S.C. 2006 c. 9, s 121, the Public Prosecution Service has the power to appoint outside counsel to act as prosecutors. That section reads as follows: „(2) The Director may also for that purpose retain on behalf of Her Majesty, the services of barristers and, in the Province of Quebec, advocates to act as federal prosecutors and, with the approval of the Treasury Board, may fix and pay their fees, expenses and other remuneration.‟ In terms of section 7(3) of the Director of Public Prosecutions Act, the person whose services are retained under subsection (2) must be a member of the bar of one of the ten Canadian provinces. [36] It is clear from s 9 of that Act that the person authorised, acts under the control and direction of the Director and acts as his/her agent. There does not appear to be any legislative requirement for a barrister to take the prosecutors‟ oath. As stated earlier, Quebec requires an oath in the prescribed form to be taken by outside counsel. [37] In India the position appears to be regulated by ss 24 and 25A of the Criminal Procedure Code. The Central Government and State Government are empowered to appoint a Special Public Prosecutor for purposes of any case or class of case, if the so appointed person has been in practice as an advocate for not less than ten years. The circumstances in which a special private prosecutor may be appointed is limited to cases where, having regard to the nature of the case, the gravity of the matter and the public interest involved in the matter, such appointment is necessary. [38] In K.V. Shiva Reddy v State of Karnataka 2005 CriLJ 3000 in paras 16 and 25 the following appears: „There is a clear distinction between a private Counsel engaged to assist a Public Prosecutor and private Counsel, who has been appointed as a Special Public Prosecutor by the State. In the latter case, he is a Public Prosecutor because he has been appointed as such while in the former case, he is a Public Prosecutor because he has been acting under the direction of a Public Prosecutor. . . . . . . Section 2(u) of the Code states that “Public Prosecutor” means any person appointed under Section 24 and includes any person acting under the directions of Public Prosecutor. Therefore, the words “Public Prosecutor” includes Public Prosecutor, Additional Public Prosecutor, Special Public Prosecutor and a Pleader instructed by a private person under Section 301(2) of the Code. . . .‟ [39] We were referred to Rule 22 of the Rules for the Conduct of Legal Affairs of Government, 1984 which sets out the manner in which a special private prosecutor in India may be appointed. As far as could be ascertained, no provision is contained in the Criminal Procedure Code or the Rules for the special private prosecutor to take the prosecutor‟s oath on their appointment in terms of section 24 of the Code. Section 22 provides: „22. Engagement of Special Public Prosecutor – (1) The Government in the Law and Judiciary Department, either suo motu, or on the request of any aggrieved party or the concerned Department in the Government, may, engage an Advocate for not less than ten years, and having regard to his general repute, legal acumen and suitability, by appointing him, as a Special Public Prosecutor in any criminal case or class of cases, as the case may be: Provided that, no order under this sub-rule regarding appointment of a Special Public Prosecutor shall be made unless, for the reasons to be recorded in writing, the Remembrance of Legal Affairs is satisfied, having regard to the nature of the case, gravity of the matter and public interest involved in the matter that such appointment is necessary. (2) On the request of a private complainant not being the aggrieved party, the Government in the Law and Judiciary Department may, [appoint] any of the Public Prosecutor or Additional Public Prosecutor as a Special Public Prosecutor in accordance with the provisions of sub-rule (1), for conducting any such case. (3) Fees for such Special Public Prosecutor, appointed under sub-rule (1) or (2) may be borne by the Government or the aggrieved party or the private complainant, as may be directed by the Remembrance of Legal Affairs; Provided that, in cases where the aggrieved party is, a Bank or an Institution or Trust or the like, the fees shall be borne by such aggrieved party; Provided further that, the amount of the fees to be paid to such Special Public Prosecutor, shall be deposited with the Government in the Law and Judiciary Department first, and the same shall be paid by it to such Special Public Prosecutor on completion of the trial, unless directed otherwise by the Remembrance of Legal Affairs.‟ [40] The U.S. Attorney‟s Office is the chief prosecutor for the United States in criminal cases. Title 28 Code of Federal Regulations (“CFR”) § 600.1 empowers the attorney general to appoint special counsel in limited circumstances, often related to sensitive matters, matters in the public interest or matters which may raise a conflict of interest for Department of Justice Personnel. Special counsel appointed under these provisions are supervised by the Attorney General who must be notified of all significant actions that the special counsel is to take and may countermand any proposed action by the special counsel. Moreover, appeals by the special counsel have to be approved of by the Attorney General. [41] Australia has the Commonwealth Office of the Director of Public Prosecutions (CDPP), which is headed by a Director of Public Prosecutions and each state or territory has a uniquely structured state prosecution service. At a federal level, the Attorney General is responsible for the Commonwealth criminal justice system and is accountable to Parliament for decisions made in the prosecution process. The Office of the CDPP runs independently of the Attorney General. In addition, there are areas where Commonwealth agencies conduct straightforward regulatory prosecutions by arrangement with the CDPP (for example, the Australian tax office and the Australian securities and investment commission). In the office of the CDPP, both the Director and Assistant Director of Public Prosecutions are required to take the oath of office contained in the schedule to the Director of Public Prosecutions Act 113 of 1983. At federal level the Governor-General is empowered to appoint special prosecutors for a renewable period of five years in terms of the Special Prosecutors Act 79 of 1982. Special prosecutors are not appointed for a particular criminal prosecution but for a fixed period. There does not seem to be a requirement for Special Prosecutors to take an oath of office. [42] There is nothing in the comparable survey that detracts from the conclusion set out above. If anything, the survey supports the conclusion. In any event, the challenge by the appellant has to be decided by reference to our Constitution and provisions of the NPA Act. It is that exercise that leads to the conclusion that the appeal falls to be dismissed. [43] The following order is made: The appeal is dismissed with costs. ________________________ MS NAVSA ACTING DEPUTY PRESIDENT APPEARANCES: FOR APPELLANT: Adv. L J Lowies Instructed by: Du Toit Attorney, Johannesburg Lovius Block, Bloemfontein FOR RESPONDENT: Adv. N Rajab-Budlender (with her S Kazee) Instructed by The State Attorney, Johannesburg The State Attorney, Bloemfontein

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL FROM The Registrar, Supreme Court of Appeal DATE 14 April 2015 STATUS Immediate Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal. Moussa v S (181/2014) [2015] ZASCA 61 (14 April 2015) The Supreme Court of Appeal (SCA) today handed down judgment in a matter relating to the constitutionality of s 38 of the National Prosecuting Authority Act 32 of 1998 (NPA Act) which allows for the appointment of private counsel to assist in specialised prosecutions on the basis that it impinged on the constitutional imperative of prosecutions without fear, favour or prejudice. The appellant, Mr Sylla Moussa, a Guinean national, was charged, during June 2006, with 16 counts of fraud, and in the alternative, with three counts of theft and three counts of money laundering in terms of the provisions of the Prevention of Organised Crime Act 121 of 1998. The preamble to the indictment stated that he was in control of two accounts held by corporate entities with Absa Bank. The accounts labelled ‘credit accounts’ bore a no-risk status which meant that the appellant could immediately make withdrawals against cheque deposits into the account. The appellant allegedly conducted ‘cross-fire fraud’ which had been described in the indictment as depositing no value cheques or ‘facilitation cheques’ into a beneficiary bank account at Absa and drawing against the drawer’s account of the same bank resulting in artificial credit being created in the beneficiary account. The balances and credits recorded on the respective bank statements of the beneficiary and drawer bank account would therefore not be representative of the genuine or underlying funds created by such transactions, but would be artificial and designed to mislead Absa into accepting that the accused or the corporate entities were conducting bona fide transactions or were involved in genuine and bona fide arm’s length business transactions while they were not. After his arrest in June 2006, the appellant appeared in the Johannesburg Regional Court and was released on R100 000 bail. During March 2008, his trial was transferred to the Gauteng Local Division of the High Court, Johannesburg. Due to the nature of the commercial transactions in relation to which the appellant was charged, the National Prosecuting Authority (the NPA) took the view that it required the skills of a specialised prosecutor and thus engaged the services of Mr Zirk Pansegrouw (Pansegrouw), an advocate in private practice and member of the Pretoria Bar who also happened to be a former prosecutor. The NPA thus appointed Pansegrouw in terms of s 38 of the NPA Act. Faced with Pansegrouw as the prosecutor appellant’s legal representative contested Pansegrouw’s authority to conduct the prosecution. After documentation was produced relating to Pansegrouw’s appointment, the appellant challenged the fact the Pansegrouw had not taken an oath that had to be taken by prosecutors in terms of s 32(2) of the NPA Act, the appellant accordingly launched an application in the Gauteng Local Division in which he sought an order that Pansegrouw had no authority to prosecute him; that his trial was unfair and for a permanent stay of his prosecution. When the application came before Mailula J in the Gauteng Local Division, she enquired whether the appellant would accept Pansegrouw taking the prescribed oath before the trial commenced. However, the appellant instead, choose to challenge the constitutionality of s 38 of the NPA Act, which enables the NPA to engage persons outside of it to perform prosecutorial services in specific cases. The appellant then launched an application seeking an order declaring s 38 to be unconstitutional on the basis that it permitted the appointment of a prosecutor outside the NPA’s normal staff complement and therefore did not give effect to enshrined constitutional principles requiring the prosecuting authority to exercise its functions without fear, favour or prejudice. The application was heard by Campbell AJ, three years after Pansegrouw had taken the oath. Campbell AJ considered that when persons are engaged as prosecutors in terms of s 38 of the NPA Act, they can hardly be regarded as free agents. In his view, they were subject to the control and direction of senior officers of the NPA, within the structure of the NPA Act. The court reasoned that Pansegrouw was obliged to carry out his functions as a prosecutor in the manner contemplated by s 179(4) of the Constitution, and that the absence of an oath in s 38 did not detract from the manner in which private counsel appointed in terms of the NPA Act are required to perform their duties. The court resultantly dismissed the application with costs, and it was against that order and the findings referred to above that the appeal to the SCA was directed. The SCA found that the engagement of person with specialised skills to assist in prosecutions was not statutorily novel. The Court, after considering relevant provisions of the NPA Act, held that the statutory scheme was directed at establishing a single national prosecuting authority with strict controls to ensure independence and impartiality. The SCA found that in terms of the statutory scheme, private counsel were only engaged after due consideration at the highest level of the NPA. It held that given the hierarchical structure of the NPA and the established controls and supervision, prosecutorial independence and impartiality were not undermined by s 38 of the NPA Act. The SCA accordingly agreed with the court below that the structure of the NPA Act is such that controls and supervision are in place to ensure compliance with constitutional norms that dictated prosecutions without fear, favour or prejudice. The SCA held that it is not the mere taking of the oath that guaranteed prosecutorial independence and impartiality and ensured an accused’s fair trial rights. The Court held that the manner in which prosecutions are initiated and conducted is the true test of prosecutorial independence. The Court found that whether a trial is fair usually falls to be determined on a case by case basis and that our courts would be astute to ensure that the constitutional guarantees of prosecutions without fear, favour or prejudice and fair trial rights are met. The SCA further found, after a survey of the law in comparable foreign jurisdictions, that there was nothing there that detracted from the Court’s aforesaid conclusions. The SCA accordingly dismissed the appeal with costs. --- ends ---

2384

non-electoral

2013

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Case No: 781//2011 Reportable In the matter between: RAYMOND BANDA FIRST APPELLANT PATRICIA FYNN SECOND APPELLANT and FRANK JOHANNES VAN DER SPUY FIRST RESPONDENT ALICIA ANASTASIA VAN DER SPUY SECOND RESPONDENT Neutral citation: Banda v Van der Spuy (781/2011) [2013] ZASCA 23 (22 March 2013) Coram: Lewis, Maya, Cachalia JJA and Erasmus and Swain AJJA Heard: 7 March 2013 Delivered: 22 March 2013 Summary: Knowledge by the sellers of a house that its roof was latently defective and that repairs to it had not properly rectified the latent defect, which they fraudulently concealed, vitiated the effect of a voetstoots clause – an alternative cause of action based upon a fraudulent misrepresentation by the sellers as to the existence of a guarantee in respect of the repairs, which induced the buyers to purchase the house – alternatively, agree upon the price, was causally related to the damage suffered, being the cost of repairing the roof – this was so despite the fact that the guarantee did not cover all of the defects which caused the roof to leak and sellers were unaware of an additional cause of the leak. ORDER On appeal from: South Gauteng High Court, Johannesburg (Boruchowitz J sitting as court of first instance): 1 The appeal is upheld with costs. 2 The order of the high court is set aside and is substituted with the following order: ‘The defendants are ordered jointly and severally to pay to the plaintiffs the sum of R449 499 together with interest thereon at the rate of 15.5 per cent per annum from the date of judgment, being 23 September 2011, and costs of suit including the qualifying fees of Mr Visagie.’ JUDGMENT _______________________________________________________________ SWAIN AJA (LEWIS, MAYA AND CACHALIA JJA AND ERASMUS AJA concurring): [1] A thatch roof that leaked prior to the sale of a house by the respondents to the appellants, and which continued to leak after the sale, gave rise to the present dispute between the parties. [2] The main claim advanced before the South Gauteng High Court (Boruchowitz J) by the appellants, was based upon the actio quanti minoris, in which a reduction in the purchase price was sought, being the cost of repairing the roof, to cure the leaks. The agreement of sale contained a voetstoots clause. This placed the added burden upon the appellants of not only proving the existence of the latent defects in the roof, but also that the respondents were aware of these defects which caused the roof to leak, and thereby fraudulently neglected to inform the appellants of their existence. [3] Two further alternative causes of action were advanced by the appellants. One was based upon a fraudulent misrepresentation by the respondents as to the existence of a guarantee in respect of repairs done to the roof and the other was founded on the actio ex empto. None of these claims found favour with the trial court, with the result that they were dismissed. The appellants were granted leave to appeal to this court. [4] The trial court found that the defects in the roof were latent in nature, but upheld the defence of the respondents that they were excused from liability by virtue of the provisions of the voetstoots clause. The trial court found that the appellants had failed to establish on a balance of probabilities that, when the sale agreement was concluded, the respondents had knowledge of the latent defects ‘and designedly, craftily or fraudulently, concealed their existence from the plaintiffs’. [5] There is no challenge by the respondents by way of a cross-appeal against the finding of the trial court, that there were latent defects in the roof at the time of the sale. Indeed, from the evidence it is abundantly clear that this was the case. [6] Accordingly the issue for determination is whether the appellants proved the requisite knowledge on the part of the respondents of the latent defects in the roof, which they then fraudulently concealed from the appellants. By virtue of the fact that it was common cause that the respondents had effected repairs to the roof before the sale, this would also embrace a determination of the issue of whether, to the knowledge of the respondents, these repairs did not properly or adequately rectify the defects in the roof to prevent the roof leaking. [7] In order, however, properly to address the issue of whether the respondents possessed knowledge of the latent defects in the roof, it is necessary to briefly deal with the evidence concerning the nature of the defects in the roof, which caused the roof to leak. The evidence led by the appellants was that of Mr Jan de Wet Bornmann, an independent assessor of insurance claims, employed by the bond holder over the house, namely Absa Bank and Mr Abraham Visagie, a professional engineer who was called as an expert witness. No evidence was led by the respondents to contradict the testimony of these witnesses. [8] The evidence of these two witnesses clearly established that the cause of the leaks in the roof was twofold. Bornmann’s evidence was that the wooden roof poles were inadequate properly to support the weight of the thatch roof and would have to be reinforced. As a result, the roof was gradually collapsing, moving downwards, as well as laterally. As a consequence of the movement in the roof, openings had appeared between the flashing and the thatch, through which rainwater had gained ingress and flowed down the internal walls of the house. [9] Visagie testified that the cause of the leaks was the inadequate pitch of the roof. The recommended pitch for a thatch roof was 45 degrees. The roof of the house was less than 30 degrees in places and could not be regarded as functional, because the thatch fibres would have a negative gradient and water would not run off the roof, but into the thatch. As a consequence, the thatch would stay wet and would rot much more quickly than it was supposed to. Much of the top layer of thatch had rotted away when he inspected the roof and leaks had occurred in various locations. In addition, severe deflection was visible in the ridge line which he regarded as a failure. At the time the repairs to the roof were carried out, it had already deflected beyond the point of repair. In Visagie’s opinion, the only way to repair the roof was to demolish it and reconstruct it in accordance with a properly engineered design with the correct pitch. [10] The trial court correctly found in the light of this evidence that the design of the roof structure was inadequate, the thatch roof was not functional, leaks would occur and the remedial work performed would not make the structure safe and pass engineering guidelines. As pointed out, the trial court then concluded that these defects were clearly latent. [11] An assessment of whether the appellants proved that the respondents knew of the latent defects in the roof which caused it to leak, and whether they also knew that the repairs effected would not permanently solve the problem of it leaking, in the face of the first respondent’s denial that he possessed such knowledge, requires an assessment of the objective facts. Any inference must be drawn from the facts revealed by the evidence. [12] As pointed out in R v Myers 1948 (1) SA 375 (A) at 383: ‘. . .absence of reasonable grounds for belief in the truth of what is stated may provide cogent evidence that there was in fact no such belief.’ Similarly in Hamman v Moolman 1968 (4) SA 340 (A) at 347A the following was added: ‘The fact that a belief is held to be not well-founded may, of course, point to the absence of an honest belief, but this fact must be weighed with all the relevant evidence in order to determine the existence or absence of an honest belief.’ [13] Central to this enquiry is the evidence concerning the undertaking given by the first respondent to the appellants, contained in an addendum to the contract of sale, executed on 25 July 2007 providing as follows: ‘Seller to transfer guarantee on thatch roof to purchaser from the contractor.’ The first respondent was forced to concede that when he signed the addendum, to his knowledge, there was no guarantee in existence, because the time period for which it was furnished had expired. The trial court correctly concluded that: ‘To have undertaken in these circumstances to provide a guarantee was thoroughly misleading and in my view fraudulent’. In addition, a consideration of the first respondent’s evidence in relation to what he alleged was the duration of the guarantee, reveals a similar distressing lack of veracity. [14] The first respondent’s legal representative presented the respondents’ case on the basis that Braaff, the contractor, had given an oral guarantee of one year to first respondent’s brother. However, when giving evidence the first respondent said that he asked Braaff for a guarantee until after the rains, to which Braaff agreed. When the first respondent was asked where his legal representative had obtained the idea that the guarantee was for one year, he gave a clearly fallacious reply in which he attempted to reconcile a guarantee for one year with the date in the following year when the first rains fell. [15] On the other hand Braaff maintained that the first respondent had asked for a guarantee for six months, to which he agreed. It is significant that when Braaff was asked to furnish a guarantee, which he did on 27 July 2007, to enable the respondents to comply with their obligations in terms of the addendum, it was for a period of six months only. This elicited no protest from the first respondent, who maintained that he did not see the document when it was furnished. In my view it is highly improbable that the first respondent, knowing that the furnishing of a valid guarantee had been elevated to the status of an obligation in terms of the addendum, would have had no interest in the duration of the guarantee furnished by Braaff. [16] The evidence clearly establishes that the first respondent was untruthful concerning the duration of the guarantee. That he was dishonest in regard to the guarantee’s duration clearly shows he appreciated the danger to the sale of the house, inherent in a guarantee which was worthless, because it had expired. The trial court found that ‘[o]n the probabilities the defendants gave the undertaking to deliver, what at that stage was a non-existent guarantee, because they did not wish to sabotage or derail the contract and hoped that in the fullness of time there would be no need on the part of the plaintiffs to rely upon same’. The trial court did not, however, interrogate the further issue, namely, why the respondents would fear disclosure of the non-existence of the guarantee? If the first respondent believed in the adequacy of the repairs, why did the first respondent not simply disclose that the guarantee had expired and invite an inspection of the roof? That the first respondent did not do so speaks volumes for his lack of belief in the adequacy of the repairs. [17] It is necessary, however, to examine the relevant evidence to determine whether there were reasonable grounds for the professed belief of the first respondent in the adequacy of the repairs effected by Braaff. Bornmann said his great fear, which he pointed out to the first respondent, was that if nothing was done to stop the movement of the roof, it would become worse and could eventually collapse, causing damage to the structure of the walls. He told the first respondent that the reinforcement of the roof was not as he would have wished, but what had been done was better than doing nothing. In other words, it would delay further movement of the roof. The first respondent conceded that Bornmann had said that the work was not done as Bornmann would have done it, but that it was acceptable (‘aanvaarbaar’) if he could use that word. [18] According to the first respondent, Bornmann stated that the roof was much better than it was and that the problems with the roof had been permanently cured (‘dit sal stopgesit word nou’). This was in direct contradiction to what Bornmann had said, namely that the repairs would only delay further movement of the roof, which statement was never challenged. If the first respondent truly believed that this was Bornmann’s view of the adequacy of the repairs, why did he not disclose the non-existence of the guarantee and refer the first appellant to Bornmann for confirmation, that the problems in the roof had been permanently rectified? That the first respondent did not do so again speaks volumes for his lack of belief in the adequacy of the repairs. [19] A further issue which must be addressed, in the context of determining the bona fides of the first respondent’s professed belief in the adequacy of the repairs, is his contention that he believed that the repairs were acceptable because he continued to enjoy insurance cover over the roof by Absa Insurance, after the repairs had been effected. It was originally put to Bornmann that the first respondent would say that he had phoned Bornmann to inspect the repairs, because the first respondent was worried about his insurance cover and had wanted to be satisfied that the repairs would not place his insurance at risk. Bornmann emphatically disputed that there was any basis upon which he would inspect a property to certify that the property was free of any defects, latent or otherwise, or that he would inspect the property purporting to represent Absa and certify that the property was insurable. The first respondent maintained that although Bornmann had said the repairs were not executed as he would have liked, Bornmann did not explain what he meant, or elaborate upon his reservations. When asked why he did not ask Bornmann what he meant, he replied that it was not important to him because Absa had satisfied him that the repairs were acceptable and he again had insurance cover on his roof. He added that this was not conveyed to him but was what he concluded. When the first respondent was asked why he did not directly address this issue with Bornmann, he replied that Bornman worked with the bank and he believed that Bornmann would correspond with the bank. [20] In R v Myers (at 382) Greenberg JA, quoting Halsbury 2 ed vol 23 sec 59, stated that a belief is not honest which ‘though in fact entertained by the representor may have been itself the outcome of a fraudulent diligence in ignorance – that is, of a wilful abstention from all sources of information which might lead to suspicion, and a sedulous avoidance of all possible avenues to the truth, for the express purpose of not having any doubt thrown on what he desires, and is determined to, and afterwards does (in a sense) believe.’ [21] The first respondent quite clearly avoided asking Bornmann what his reservations were in regard to the adequacy of the repairs to the roof and whether this would affect his insurance cover. He also avoided directing the same enquiry to Absa Insurance. His conduct cannot be construed as anything other than a ‘wilful abstention’ from both sources of information, which would, according to his professed understanding of what the purpose was of Bornmann’s visit, have led to an answer to his fears. That he did not do so indicates an avoidance by him of all possible avenues to the truth, for the express purpose of not having any doubt thrown upon what he desired and was determined to believe. [22] When all of the above is considered, it is clear that the first respondent did not possess an honest belief in the adequacy of the repairs that were effected to the roof, such that the problem of leaks in the roof had been permanently addressed. Considered together with the fraudulent conduct of the respondents in not disclosing the absence of a valid guarantee and their dishonesty in relation to the duration of the guarantee, it is clear that they possessed knowledge of the structural defects in the roof, identified by Bornmann, which were a cause of the roof leaking, and which had not been permanently repaired by Braaff. At the very least, they were conscious of the inadequate nature of the repairs to the defects in the roof, which gave them reasonable grounds to suspect that the leaks in the roof had not been fixed, and they were therefore obliged to disclose this knowledge to the appellants. See A J Kerr The Law of Sale and Lease 3 ed (2004) at 148. [23] It is, however, clear that the respondents were not aware that an additional cause of the leaks in the roof was the inadequate pitch of the roof as identified by Visagie. Braaff maintained that he had identified this problem and told the first respondent, which the first respondent denied. Braaff also said that before he had delivered a quotation to repair the roof, he had inspected the roof with Bornmann and they had discussed the roof and Bornmann had pointed out to him what the problem was. If Braaff was aware of the serious problem in the roof, namely the inadequate pitch, and had inspected the roof with Bornmann, it is highly improbable that he would not have mentioned it to Bornmann. It is, however, clear that Bornmann was not aware of this problem in the roof when he compiled his report. In addition if Braaff was aware of this problem in the roof, it is unlikely that he would have suggested repairs which would not have addressed the problem. His explanation that he had not quoted to remove the roof, because if he had, he would not have obtained the job, rings hollow. Considering all of the above, it is clear that Braaff did not possess knowledge of the inadequate slope of the roof and accordingly could not have told the first respondent of this defect. In this context I agree with the trial court’s view that Braaff was neither a reliable nor satisfactory witness. [24] It is trite that a seller is liable for all latent defects which render unfit or partially unfit, the res vendita for the purpose for which it was intended to be used. See G R J Hackwill and H G Mackeurtan Sale of Goods in South Africa 5 ed (1984) at 135. A leaking roof is a latent defect which renders the house unfit for habitation. The respondents were aware of one of the causes for the leaking roof, namely inadequate roof design, which resulted in the sagging of the roof, which had not been permanently repaired and which they had concealed. The respondents were unaware, however, of the other cause of the leaking roof namely, the inadequate pitch of the roof. The fact that they were unaware of an additional cause of the leaking matters not. Their fraudulent conduct in concealing the existence of the defective leaking roof forfeits the protection of the voetstoots clause in respect of this latent defect. [25] The appellants are accordingly entitled to the difference between the purchase price of the house and its value with the defective roof. (See Hackwill supra at 156 para 10.6.1.) No evidence was led of the market price of the house with the defective roof at the time of the sale. It seems self-evident, however, that there would not be a market for a house where the whole roof has to be replaced. Where there is no market the court is entitled to fix the sum for which the house could have been restored. (See Hackwill supra at 157 para 10.6.2.) The cost of repairs may be used as a measure of the award to be made where the actual value could not be determined, or is difficult to determine. See Labuschagne Broers v Spring Farm (Pty) Ltd 1976 (2) SA 824 (T). [26] An alternative cause of action was based upon the fraudulent, alternatively, negligent misrepresentation by the respondents that a valid written guarantee, regarding the soundness of the thatch roof, was in place and that the defect had been rectified. As pointed out, the trial court found that the respondents were aware that the guarantee had lapsed when the addendum was signed and the undertaking to provide one was misleading and fraudulent. The trial court found that a fraudulent misrepresentation was made by the respondents to the appellants in regard to the guarantee. I agree with this view. [27] The trial court, however, found that the damages claimed, being the cost of replacing the thatch roof, did not arise as a direct consequence of the respondents’ fraudulent conduct in relation to the guarantee. The reasoning of the trial court was that the guarantee, even if provided by the respondents to the appellants (presumably as a valid guarantee) would not have prevented the appellants from suffering loss as a result of the presence of the latent defects, because the guarantee, given by Braaff, only related to the remedial work performed and did not operate as a guarantee in respect of all latent defects. [28] The first appellant’s evidence was that if the first respondent had not informed him of the guarantee he would not have signed the agreement, and if this was conveyed to him when the addendum had been signed, he would not have proceeded with the transaction. The first appellant also stated that if he had been aware of the problem with the roof, he would have had an expert assess the roof and furnish him with a quotation of what it would cost to restore it. He would then have negotiated with the respondents regarding the quotation because they really liked the house. If agreement could not be reached, then they would not have gone ahead with the purchase. On the evidence, the existence of a guarantee in respect of the repairs to the roof had played a vital role in the conclusion of the agreement, right from the outset. It was for this reason that it was elevated to a term of the agreement, by the first appellant, in terms of the addendum. It is quite clear that the appellants were induced by the fraudulent misrepresentation to conclude the sale agreement or, at least, to pay the purchase price agreed upon. [29] It is trite that the claim of the appellants, based as it is in delict, is one in which the appellants seek to recover the amount by which their patrimony has been diminished. See Trotman & another v Edwick 1951 (1) SA 443 (A) at 449B-C. The fraud of the respondents may be considered either as having causally effected, not the transaction as a whole, but only the roof of the house, as a distinctive part having special significance to the appellants. The fraud therefore affected only the amount of the purchase price that the appellants agreed to pay. On this basis the so-called ‘swings and roundabouts’ principle of computing the damages would be inapplicable and the cost of repairing the defect would be the appropriate measure. See Ranger v Wykerd & another 1977 (2) SA 976 (A) at 992A-B. Alternatively, the fraud of the respondents may be regarded as causally related to and affecting the transaction as a whole. In the present case, as in Ranger, it may be inferred as a fact that the agreed purchase price for the house, was prima facie its actual market value in its represented condition (with a properly repaired roof) at the time of the sale. The first appellant stated that they had initially offered an amount less than the asking price, which was rejected by the respondents. The respondents then offered an amount in return as the sale price, which the appellants accepted. The amount agreed upon constituted a small reduction in the listing price of the agents. There was no evidence led by the respondents to disturb such a prima facie inference on the facts of this case. (Ranger at 993C-E.) [30] Whether the fraud of the respondents induced the appellants to conclude the sale agreement, or simply to agree upon the purchase price, it is clear that the fraud did occasion as cause and effect the patrimonial loss sustained by the appellants. On either basis, the correct manner of computing the appellants’ loss is the cost of repairing the roof. That the cost of repairing the roof included the costs of rectifying a defect of which the respondents were unaware ie the pitch of the roof, which was an additional cause of the roof leaking, is irrelevant to this inquiry. That the terms of the guarantee only covered the repairs to the roof effected by Braaff, and not all latent defects in the roof, is likewise irrelevant. [31] In addition, the respondents knew when making the fraudulent misrepresentation, that because the roof had not been properly or adequately repaired, it would leak in the future and it would have to be repaired to render the house habitable. The evidence establishes that the reasonable cost of repairing the roof to prevent it leaking necessitates that the roof be replaced. That the respondents did not foresee that the reasonable cost of repairing the roof would entail its replacement, matters not. The reasonable costs of repairing the roof are directly and causally connected with the fraud and are not remote. (Ranger at 994F-G.) The trial court accordingly erred in restricting the causative effect of the fraudulent misrepresentation to those defects which would have been covered by the invalid guarantee. It is therefore unnecessary to deal with the remaining alternative cause of action based upon the actio ex empto. [32] The appellants are accordingly entitled to the reasonable cost of repairing the roof. Visagie tendered evidence that the cost of repairing the roof in 2007 as at the date of the sale was R309 698. In the appellants’ amended particulars of claim this was the amount advanced. Visagie stated that the cost of rebuilding the internal walls and gables to accommodate the increased pitch of the roof, calculated in 2010, was R110 000. This price would have to be discounted by 30 per cent to arrive at the cost in 2007, which discount produced an amount of R84 600. The total claim accordingly advanced by the appellants in their amended particulars of claim was R449 499. I do not agree with the view of the trial court that there was no justification in the evidence for the amount claimed. Visagie explained how the calculation was done and there was no evidence lead by the respondents to contradict his views. [33] As regards the interest payable on this amount, in the particulars of claim interest was claimed at the rate of 15.5 per cent per annum a temporae mora. In the appellants’ heads of argument interest was claimed as from the date of inception of the trial, being 8 October 2010. However, during the hearing counsel for the appellants agreed that interest should run only from the date upon which judgment was delivered by the trial court being 23 September 2011. Interest will accordingly run from this date. [34] In the result the following order is made: 1 The appeal is upheld with costs. 2 The order of the high court is set aside and is substituted with the following order: ‘The defendants are ordered jointly and severally to pay to the plaintiffs the sum of R449 499 together with interest thereon at the rate of 15.5 per cent per annum from the date of judgment, being 23 September 2011, and costs of suit including the qualifying fees of Mr Visagie.’ K G B SWAIN ACTING JUDGE OF APPEAL APPEARANCES: FOR FIRST AND M WAGENER SECOND APPELLANTS: BOWMAN GILFILLAN ATTORNEYS MATSEPES INC, Bloemfontein FOR FIRST AND B M HEYSTEK SECOND RESPONDENTS: Instructed by: MARITZ BOSHOFF & DU PREEZ INC BEN VAN DER MERWE INC, Bloemfontein

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL FROM The Registrar, Supreme Court of Appeal DATE 22 March 2013 STATUS Immediate Please note that the media summary is for the benefit of the media and does not form part of the judgment. Banda & another v Van der Spuy & another (781/2011) [2013] ZASCA 23 (22 March 2013) Media Statement A thatch roof which leaked prior to the sale of a house and which continued to leak after the sale, was held to be a latent defect which had not been properly repaired by the sellers. The sellers had fraudulently concealed the existence of this defect which vitiated the effect of a voetstoots clause in the agreement of sale. In addition, it was held that the sellers had made a fraudulent misrepresentation as to the existence of a guarantee in respect of the repairs to the roof, which induced the purchasers to buy the house, or agree upon the price. The fraud of the sellers was held to be causally related to the damage suffered by the purchasers, despite the fact that the guarantee did not cover all of the defects which caused the roof to leak and the sellers were unaware of an additional cause of the leak. The purchasers were entitled to recover the cost of replacing the roof, either on the basis of a reduction of the purchase price in this amount, or on the basis of this being the damages suffered by the purchasers as a consequence of the seller’s fraud. The decision of the South Gauteng High Court that the sellers were not liable for the damages suffered was accordingly reversed. --- Ends ---

4140

non-electoral

2023

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Not Reportable Case no. 1004/2022 In the matter between: LEGAL PRACTICE COUNCIL Appellant and BULELANI RUBUSHE Respondent Neutral Citation: Legal Practice Council v Bulelani Rubushe (Case no 1004/2022) [2023] ZASCA 167 (1 December 2023) Coram: PETSE DP and MBATHA JA and MUSI, BINNS-WARD and KATHREE-SETILOANE AJJA Heard: 22 November 2023 Delivered: 1 December 2023 Summary: Legal Practitioner – misconduct involving dishonesty – striking from the roll appropriate remedy – court a quo making material misdirection in suspending the respondent from practising for two years – suspension order set aside on appeal and replaced with striking order. ________________________________________________________________ ORDER On appeal from: Eastern Cape Division of the High Court of South Africa, Makhanda (Jolwana J, Govindjee J concurring) sitting as a court of first instance: 1. The appeal is upheld with costs on the scale as between attorney and client. 2. Paragraphs 1 and 11 of the revised order of the High Court issued on 4 August 2022 are set aside. 3. Paragraph 1 of the said order is substituted with an order directing that the respondent’s name be struck off the roll of legal practitioners kept by the applicant in terms of s 30(3) of the Legal Practice Act 28 of 2014, and paragraph 12 of the said order is consequentially renumbered as paragraph 11. 4. Save as provided in paragraphs 2 and 3 above, the revised order made by the High Court is otherwise confirmed. ________________________________________________________________ JUDGMENT ________________________________________________________________ BINNS-WARD AJA (PETSE DP and MBATHA JA and MUSI and KATHREE-SETILOANE AJJA concurring): [1] The respondent, Mr Bulelani Rubushe, was an attorney practising for his own account under the name and style B.R. Rubushe Attorneys at Vincent, East London. Consequent upon proceedings instituted by the Legal Practice Council (the appellant) arising from the respondent’s dishonest misconduct, the Eastern Cape Division of the High Court (Jolwana J, Govindjee J concurring) made an order that provided, in paragraph 1 thereof, that the respondent be suspended from practising as an attorney for a period of two years, and, in paragraph 11, that ‘[a]fter the expiry of the suspension period, and in the event that the Respondent is desirous of practising as an attorney, he shall make a substantive application to the High Court having jurisdiction to be permitted to practise as an attorney and shall serve such application upon the Legal Practice Council’.1 This appeal, which is brought with leave granted by the High Court, concerns only those paragraphs of the order. [2] Mr Rubushe’s misconduct was uncovered when a settlement agreement in a motor vehicle accident claim, in which he represented a certain Mr Zama Mfengwana, was put before Plasket J in the High Court to be made an order of court. The learned judge’s misgivings, and the outcome of the enquiry he made arising from them, are related in detail in the judgment he handed down on 15 December 2016. The judgment has been reported sub nom Mfengwana v Road Accident Fund.2 A brief summary of the pertinent facts will therefore suffice for present purposes. [3] The judge was informed that the matter was the subject of a contingency fee agreement. The affidavits required by s 4(1) and s 4(2) of the Contingency Fees Act3 were not in the court file put before him, and he therefore directed that 1 The order, as originally framed, omitted to make provision for the detailed directions ordinarily included in such orders concerning the handing over of the delinquent practitioner’s practice to the executive officer of the Legal Practice Council for winding up. The omission was rectified by way of a revised and amplified order issued on 4 August 2022. The judgment, incorporating the originally made order, is listed on SAFLII sub nom, Legal Practice Council v Rubushe [2022] ZAECMKHC 37. The orders in issue on appeal were in paragraphs 1 and 4 of the originally made order. 2 Mfengwana v Road Accident Fund [2016] ZAECGHC 159; 2017 (5) SA 445 (ECG). 3 Contingency Fees Act 66 of 1997. they be produced before he could make the requested order. Only an affidavit by Mr Rubushe was forthcoming. There was no affidavit from the client. [4] The judge found Mr Rubushe’s affidavit to be ‘wholly inadequate’. There was no response by the respondent to the judge’s directions for the shortcomings to be rectified. [5] Plasket J summarised the pertinent provisions of the Act in his judgment. It permits legal practitioners to conclude contingency fee agreements with their clients on a no-win no-fee basis. Practitioners are entitled to stipulate for a success fee in such agreements. The statute limits the extent of any success fee so stipulated to a maximum of double the normal fee that the practitioner would charge for the work concerned, provided that ‘in the case of claims sounding in money, the total of any such success fee payable by the client to the legal practitioner, shall not exceed 25 per cent of the total amount awarded or any amount obtained by the client in consequence of the proceedings concerned, which amount shall not, for purposes of calculating such excess, include any costs’.4 [6] In the course of his discourse on the import of the Contingency Fees Act, the learned judge also referred to the judgment of Morrison AJ in Thulo v Road Accident Fund,5 which, he said, sets out the position ‘in very clear terms’.6 The reason for mentioning the judge’s reference to Thulo will become apparent shortly. [7] The settlement agreement provided for an award of damages in favour of Mr Mfengwana in the sum of R904 889.17. The contingency fee agreement 4 Section 2(2) of the Contingency Fees Act. 5 Thulo v Road Accident Fund 2011 (5) SA 446 (GSJ) para 51-52 6 Mfengwana para 20. purported to allow Mr Rubushe a fee of 25 percent of the settlement amount. The salient provisions of the agreement provided as follows (warts and all): ‘5. The Attorneys hereby warrants (sic) that the normal fees on an attorney and own client basis perform work (sic) in connection with the aforementioned proceedings are calculated on the following basis: 25% of the total of damages awarded, (Set out hourly, daily, and or applicable rates) (sic) 6. The Parties agrees (sic) that if the Clients is (sic) successful in the aforementioned proceedings; An amount shall be payable to the Attorney, calculated according to the following method; see paragraph 5 For purpose of calculating the higher fee, costs are not included,’ [8] Plasket J found Mr Rubushe’s subsequent attempt to get around the inconsistency between the agreement he had made with his client and the provisions of the Act to be disingenuous. He said: ‘[22] Mr Rubushe has, in the affidavit he filed on 6 December 2016 (which I found to be inadequate), attempted to remedy the predicament he has found himself in. He stated that he wished to confirm that ‘I had complied with Contingency Fee Act 66 of 1977 (sic) in that I will charge fee of 25% from the client or (double my fees and take whichever is lesser which would not be more than 25% agreed fees)’. In the following paragraph he stated: “Any fees referred to in paragraph 5 of the Contingency fee Agreement shall be calculated as follows; the client shall owe the Attorneys fee calculated in terms of Rule 70 of the Rules of the High Court plus 100% thereof. (hereafter referred to as the success fees) provided that in the case of claims sending (sic) in money, the total of any such success awarded, or any amount obtained by client in consequence of the proceedings concerned, which amount shall not, for purposes of calculating fee, include any costs. This was explained to client on 26th November 2014.” [23] 26 November 2014 is the date of signature of the contingency fee agreement. Two problems arise from the passages of the affidavit that I have quoted. First, what Mr Rubushe said about his fee and its computation is contrary to what is contained in the contingency fee agreement. He appears to accept that the contingency fee agreement is contrary to the Act and now seeks to tender to amend it unilaterally and retrospectively. That cannot avail him in his attempt to sidestep the difficulty posed by clauses 5 and 6 of the contingency fee agreement. Secondly, he could not have given the information he claims to have given to Mr Mfengwana when the contingency fee agreement was signed for the simple reason that it did not contain that information. The affidavit is transparently disingenuous.’ [9] Plasket J identified that not only did the agreement not comply with the Contingency Fees Act, it also purported to permit Mr Rubushe to claim in fees (excluding disbursements) a sum that was grossly disproportionate, having regard to the modest amount of work involved in attaining the early settlement of the claim and the demonstrably poor quality of the professional services that he had rendered. [10] The judge concluded that Mr Rubushe was ‘guilty of an attempt to grossly overreach his client, of rapacious and unconscionable conduct’.7 He set the agreement aside and directed that ‘BR Rubushe Attorneys may only recover from [Mr Mfengwana] their attorney and client costs on the High Court scale, such costs to be taxed by the Taxing Master prior to the presentation of the bill of costs to [Mr Mfengwana]’. Plasket J requested the registrar of the court to forward a copy of his judgment to the Cape Law Society (the appellant’s legal predecessor as the regulatory body for the attorneys’ profession) and ‘to contact [Mr Mfengwana] and to explain to him the import of th[e] judgment and the rights that it accord[ed] him’.8 [11] In two letters written to the Law Society in response to Plasket J’s complaint about his conduct, Mr Rubushe showed that he refused to accept the 7 Mfengwana para 27. 8 Ibid para 32B. court’s analysis of the Contingency Fees Act and its determination that he had not complied with it. He accused the learned judge of having ‘acted ultra vires in posing (sic) his nose of client contingency (sic), as the matter was in Court for settlement to be made. In fact contract was signed by client’. He proceeded ‘I am wondering why the judge close (sic) one eye when he was reading Thulo judgment, and I fail to understand why Thulo at 451’ (sic). He concluded, ‘I find that this actions (sic) [ie those of the judge] were malicious, contradictory and acted (sic) contrary to the Act’. In a further letter to the Law Society, Mr Rubushe claimed that Mr Mfengwana had called him to ask ‘who gave instructions to the Judge to challenge his agreement’. [12] It goes without saying that the grossly disrespectful and contemptuous tone and content of Mr Rubushe’s letters to the Law Society evinced further examples of conduct unbefitting a member of the legal profession. The High Court was correctly conscious of this, and professed to have taken it into account as an aggravating factor. [13] Mr Rubushe informed the Law Society that he intended to lodge an appeal from the judgment of Plasket J. Unsurprisingly, he did not do so. [14] Over the course of the following months, under pressure from the Law Society, Mr Rubushe had four different and mutually irreconcilable bills of costs in respect of his attendances in Mr Mfengwana’s matter drafted for taxation. The Law Society engaged a costs consultant to review the bills prepared by the respondent. The review exposed that Mr Rubushe had sought to charge exorbitant amounts for attendances for which he was not entitled to charge a fee. An example was charging for drafting the summons and particulars of claim and then also for perusing those documents after the summons had been issued. There were also a number of charges for work that had not been done, including consultations, inspections in loco and telephone calls that did not take place. It hardly needs stating that this afforded yet further evidence of dishonest conduct by the respondent. He blamed others for the problems discovered with his bills of costs. His explanation did not bear scrutiny. It is inconceivable that anyone else would have dreamt up attendances by Mr Rubushe which had not happened. The overwhelming probability is that such attendances were included in the bills at the instance of the respondent. [15] If that were not enough, in defiance of the judgment of Plasket J delivered four months earlier, Mr Rubushe paid Mr Mfengwana only R700 000 of the settlement award that he received from the Road Accident Fund on his client’s behalf. The payment to client was made on 10 March 2017. In the face of a judgment holding that he was not entitled to do so, Mr Rubushe sought to withhold from his client an amount approximating 25 percent of the award. He was seeking thereby to implement a contract that the court had found to be unlawful and overreaching. His conduct in this regard, if not downright dishonest, was outrageously dishonourable for an officer of the court. [16] The position was aggravated by the fact that Mr Rubushe exacted the payment of the settlement award to his offices at a time after he had given notice of his withdrawal as Mr Mfengwana’s attorney. He therefore had no authority to receive payment of the award on Mr Mfengwana’s behalf. It is obvious that he did so only so as to facilitate his ability to withhold from his erstwhile client a substantial portion of the award payment. [17] In July 2017, Mr Mfengwana instituted proceedings against Mr Rubushe for payment of the monies that had been withheld. He did not oppose the claim, and judgment was granted in favour of Mr Mfengwana on 5 September 2017 by Robeson J. He was ordered to pay the costs of those proceedings on a punitive scale. Mr Rubushe made payment of the part of the settlement award that he had wrongfully withheld only after he was ordered to do so. [18] The appellant thereafter resolved to bring proceedings to have the respondent’s name struck from the roll of attorneys. In its judgment in those proceedings, the court a quo reviewed the evidence against Mr Rubushe that I have summarised in this judgment and rejected his attempts at answering it. It aptly described his answering affidavit as an ‘attempt at explaining the inexplicable’. It rightly pointed out that he failed to ‘take responsibility for what he did’ and attempted ‘to blame everything on something else or someone else other than himself instead of taking responsibility for his actions’. [19] After referring to the three-stage analysis described in Jasat v Natal Law Society9 that is applied in applications for the striking of a legal practitioner from the roll and the elaboration thereon in Malan and Another v Law Society of the Northern Provinces, 10 the High Court determined that it would be inappropriate to strike Mr Rubushe’s name from the roll. It reasoned its conclusion as follows in para 30 of the judgment: ‘The facts of this matter make it clear that the respondent is not a fit and proper person to continue to practice (sic). While the conduct of the respondent is indisputably of a seriously egregious nature it is somehow ameliorated by the fact that when all is said and done the respondent did not succeed in overreaching his client, Mr Mfengwana. I must, however, point out that his lack of success cannot be accounted for by his lack of trying. It was foiled by Mr Mfengwana and his new attorneys who acted swiftly in recovering the amount of R204 889.17 before it was decimated which would most likely have happened had they tarried in moving the application under case no. 3469/2017. There must be a clear distinction between an attempt to commit an offence and actually committing the offending conduct. That distinction leads me to the conclusion that, while he is clearly not a fit and proper person to continue to practice, imposing what is essentially the most extreme punishment a court can give to a legal practitioner would not be appropriate.’ 9 Jasat v Natal Law Society [2000] ZASCA 14; 2000 (3) SA 44 (SCA); [2000] 2 All SA 310 (A) para 10. 10 Malan and Another v Law Society of the Northern Provinces [2008] ZASCA 90; 2009 (1) SA 216 (SCA) ; [2009] 1 All SA 133 (SCA) (Malan). [20] For the reasons that follow, the High Court’s reasoning was materially misdirected, and this Court is consequently entitled to interfere with the order that was made, notwithstanding its discretionary character. The court was not at large in the exercise of its discretion. It was obliged to exercise it judicially, which included the obligation to have due regard to the principles and judicial policies in point identified in the judgments of this Court. [21] The primary issue to be determined was whether Mr Rubushe was a fit and proper person to remain on the roll of legal practitioners. Having correctly found that, by reason of his dishonesty, he was not, there would have to be exceptional circumstances before a court will order a suspension instead of a removal. That much was stated in the clearest of terms in Malan,11 where Harms ADP, writing for a unanimous court, said ‘Obviously, if a court finds dishonesty, the circumstances must be exceptional before a court will order a suspension instead of a removal. Where dishonesty has not been established the position is . . . that a court has to exercise a discretion within the parameters of the facts of the case without any preordained limitations.’ (Emphasis supplied.) [22] The principle was articulated in similar terms by Brand JA in Summerley v Law Society, Northern Provinces: ‘The attorney's profession is an honourable profession, which demands complete honesty and integrity from its members. In consequence dishonesty is generally regarded as excluding the lesser stricture of suspension from practice, … .’12 [23] This Court, also held in Malan that ‘[i]t is seldom, if ever, that a mere suspension from practice for a given period in itself will transform a person who is unfit to practise into one who is fit to practise. Accordingly, as was noted in A v Law Society of the Cape of Good Hope 1989 (1) SA 849 (A) at 852E - G, it is 11 Malan para 10. 12 Summerley v Law Society of the Northern Provinces [2006] ZASCA 59; 2006 (5) SA 613 (SCA) para 21. implicit … that any order of suspension must be conditional upon the cause of unfitness being removed. For example, if an attorney is found to be unfit of continuing to practise because of an inability to keep proper books, the conditions of suspension must be such as to deal with the inability. Otherwise the unfit person will return to practice after the period of suspension with the same inability or disability. In other words, the fact that a period of suspension of, say, five years would be a sufficient penalty for the misconduct does not mean that the order of suspension should be five years. It could be more to cater for rehabilitation or, if the court is not satisfied that the suspension will rehabilitate the attorney, the court ought to strike him from the roll. An attorney, who is the subject of a striking-off application and who wishes a court to consider this lesser option, ought to place the court in the position of formulating appropriate conditions of suspension.’ (Emphasis supplied.) [24] In the current case, the respondent did not do anything to place the court in the position of formulating appropriate conditions of suspension and the order made by the court did not provide for any such conditions. On the contrary, the requirement to which the sanction imposed was made subject, namely an application by the respondent at the end of the period to be permitted to resume practice as an attorney, clearly signals that the court was not satisfied that Mr Rubushe would be a fit and proper person to practise as an attorney at that time. For all the reasons cited with reference to this Court’s judgment in Malan, the only appropriate order in the circumstances of this case was an order striking his name from the roll. [25] The High Court was clearly misdirected in failing to adhere to the principles articulated in Malan and other judgments of this Court to the same effect. The fact that the respondent did not succeed in his dishonest endeavour to deprive his client of a substantial amount of his damages award only because of the intervention of a conscientious judge did not serve in any measure to mitigate his dishonesty. The dishonest character of the respondent’s dishonesty was not affected by his failure to succeed in his attempt to recover the extortionate fee for which he had stipulated. It was the character of his conduct, not its degree of success, that was germane to the court’s determination of whether he was a fit and proper person to remain on the roll of legal practitioners. [26] As Nugent JA (Harms ADP concurring) explained in Law Society of the Cape of Good Hope v Peter: ‘The enquiry before a court that is called upon to exercise that power [ie to strike a practitioner’s name from the roll or suspend him or her from practising] is not what constitutes an appropriate punishment for a past transgression but rather what is required for the protection of the public in the future. Some cases will require nothing less than the removal of the attorney from the roll forthwith. In other cases, where a court is satisfied that a period of suspension will be sufficiently corrective to avoid a recurrence of the offensive conduct, an order of suspension might suffice. But the proper approach in each case is not to weigh the various factors for the purpose of finding an appropriate punishment - as a criminal court would do when sentencing an offender - but to determine whether, or if appropriate when, an attorney should be permitted to continue in practice’.13 It is evident from the passage in the court a quo’s judgment quoted above14 that it adopted the wrong approach in the exercise of its powers. [27] It was in any event clear from the evidence summarised in the High Court’s judgment that the respondent’s dishonesty was not confined to attempting to overreach his client. It also manifested in his further conduct after his initial misconduct was exposed. Far from showing any insight into his wrongdoings, the respondent sought to make little of them, blame others for them, and, by his failure to pay Mr Mfengwana the full amount of his award and reliance on 13 Law Society of the Cape of Good Hope v Peter [2006] ZASCA 37; 2009 (2) SA 18 (SCA) para 28 (referred to with approval by a unanimous bench in Law Society of the Northern Provinces v Sonntag [2011] ZASCA 204; 2012 (1) SA 372 (SCA) para 16, note 7). 14 Para 18. fraudulent bills of costs, he perpetuated and exacerbated them. He showed no amenability to rehabilitation; quite the opposite. [28] In the circumstances, the High Court erred in not taking these considerations properly into account. Making an order of suspension was misconceived. It was predicated on misdirections in fact and principle. [29] In the result, an order is made as follows: 1. The appeal is upheld. 2. Paragraphs 1 and 11 of the revised order of the High Court issued on 4 August 2022 are set aside. 3. Paragraph 1 of the said order is substituted with an order directing that the respondent’s name be struck off the roll of legal practitioners kept by the applicant in terms of s 30(3) of the Legal Practice Act 28 of 2014, and paragraph 12 of the said order is consequentially renumbered as paragraph 11. 4. Save as provided in paragraphs 2 and 3 above, the revised order made by the High Court is otherwise confirmed. _________________________ A G BINNS-WARD ACTING JUDGE OF APPEAL Appearances For the appellant: KL Watt Instructed by: Wheeldon Rushmere & Cole, Makhanda Symington De Kok Attorneys, Bloemfontein For the respondent: No appearance

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 1 December 2023 Status: Immediate Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal Legal Practice Council v Bulelani Rubushe (Case no 1004/2022) [2023] ZASCA 167 (1 December 2023) ___________________________________________________________________________ The Legal Practice Council came on appeal to the Supreme Court of Appeal (SCA) from two paragraphs in an order made by the Eastern Cape Division of the High Court (Makhanda), in terms of which Mr Bulelani Rubushe was suspended from practice for two years and directed, if he wished to resume his practise at the end of that period, to apply to court for permission to do so. The Legal Practice Council contended that the High Court was misdirected in not acceding to its application that Mr Rubushe’s name be struck off the roll of legal practitioners. The evidence established that Mr Rubushe was guilty of a number of instances of misconduct involving dishonesty. The High Court found that Mr Rubushe was not a fit and proper person to continue to practise as an attorney but considered that it was inappropriate to impose the ‘extreme sanction’ of striking off because he had not succeeded in his scheme to overreach his client in a motor vehicle accident claim matter by appropriating 25 percent of the settlement award as his fee. The SCA reiterated that it is axiomatic that, save in exceptional cases, a legal practitioner whose misconduct involves dishonesty is not a fit and proper person to continue in practice. The appropriate order in such matters is to strike off the practitioner’s name from the roll. As the High Court was misdirected in the exercise of its discretion, the SCA intervened. The SCA upheld the appeal. It set aside para 1 and 11 of the High Court order and replaced them with an order directing that Mr Rubushe’s name be struck off the roll of legal practitioners (attorneys). --Ends--

4029

non-electoral

2023

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Not Reportable Case no: 1176/2021 In the matter between: MAXWELE ROYAL FAMILY FIRST APPELLANT ASIPHE SOLANGA MAXWELE SECOND APPELLANT and THE PREMIER OF THE EASTERN CAPE PROVINCE FIRST RESPONDENT MEC FOR THE DEPARTMENT OF CO-OPERATIVE AND TRADITIONAL AFFAIRS SECOND RESPONDENT BAXOLELE MAXWELE THIRD RESPONDENT SANGONI ROYAL FAMILY FOURTH RESPONDENT Neutral citation: Maxwele Royal Family & Another v The Premier of the Eastern Cape Province and Others (Case no 1176/2021) [2023] ZASCA 73 (24 May 2023) Coram: DAMBUZA AP, NICHOLLS and GOOSEN JJA and NHLANGULELA and MALI AJJA Heard: 9 March 2023 Delivered: 24 May 2023 Summary: Administrative law – review of appointment of a headman/headwoman – validity of the appointment in dispute – decision to appoint the third respondent set aside. ________________________________________________________________ ORDER ________________________________________________________________ On appeal from: Eastern Cape Division of the High Court, Mthatha (Notyesi AJ, sitting as court of first instance): 1 The appeal is upheld with costs, including the costs of two counsel where so employed; such costs to be paid by the respondents jointly and severally, the one paying the others to be absolved. 2 The order of the high court is set aside and replaced with the following order: ‘(a) The second respondent’s decision to appoint the third respondent as acting headman of Zimbane Administrative Area, Mthatha is hereby declared unlawful and accordingly reviewed and set aside. (b) The respondents are ordered to pay the costs of the application jointly and severally, the one paying, the others to be absolved.’ ________________________________________________________________ JUDGMENT ________________________________________________________________ Nhlangulela AJA (Dambuza AP, Nicholls and Goosen JJA and Mali AJA concurring): The parties [1] The first appellant is the Maxwele Royal Family (the MRF), which is described as ‘a core customary institution or structure comprising immediate relatives of the ruling family and other family members who are close relatives of the ruling family’. It exercises authority within Khwenxurha Location, Zimbane in Mthatha (Zimbane). The second appellant is Asiphe Solanga Maxwele (Asiphe), an adult male and a member of the first appellant.1 He resides 1 First names are used because some of the persons referred to in this judgment share the same surname. No disrespect is intended. at Zimbane. The first respondent is the Premier of the Eastern Cape Province (the Premier) who is responsible for recognising chiefs and headmen/headwomen who have been identified to serve in traditional communities of the province of the Eastern Cape. The second respondent is the Member of the Executive Council for the Department of Co-operative and Traditional Affairs (the MEC). The third respondent is Baxolele Maxwele (Baxolele), an adult male of Khwenxurha. The fourth respondent is the Sangoni Royal Family (the SRF). It is composed of members of Sangoni Royal House. It exercises authority in the Qokolweni Administrative Area, Mthatha. Its senior member (Chief Sangoni) presides over the Qokolweni-Zimbane Traditional Council, a structure that was established in terms of s 6 of the Traditional Leadership and Governance Act 4 of 2005 (the EC Act of 2005). Introduction [2] This appeal arises from the judgment of the Eastern Cape Division of the High Court, Mthatha (the high court) which dismissed with costs an application to review the decisions made by the MEC. In terms of the impugned decisions, Baxolele was appointed as the acting headman of Zimbane. The matter comes to this Court on appeal with the leave of the high court. The appeal turns on the crisp question of whether the identification, recognition and appointment of Baxolele as acting headman of Zimbane was lawful. Background [3] Until 2008, the late Mr Mzimtsha Maxwele (Mzimtsha) was the headman of Zimbane. At the time of his death, Mzimtsha had one wife, Mrs Nomthandazo Maxwele (Mrs Maxwele). The two of them had one minor child, namely, the second appellant, Asiphe. Subsequent to the death of Mzimtsha, the MRF identified Asiphe as the successor to the headmanship, in terms of s 18 of the EC Act of 20052. Mrs Maxwele was identified and duly assumed the position of regent in accordance with the provisions of s 21 of the EC Act of 20053 as Asiphe was 19 years old at the time. This state of affairs endured until 20 August 2020 when the MEC appointed the third respondent as acting headman of Zimbane under Qokolweni Traditional Council, effectively the same position in which Mrs Maxwele was a regent at the time. On 26 January 2017, whilst the regent was still in office, the MEC instructed the SRF to identify an acting headman to replace the regent. Accordingly, Baxolele was recognised and appointed by the Premier.4 At the same time, the SRF advised Mrs Maxwele that she was removed from headwomanship with immediate effect for the reason that her term as acting headwoman had expired. [4] The appellants brought an application to review and set aside the decisions of the MEC. The application was opposed. Ms Ntombekhaya D. Maxwele (Ms Maxwele), the chairperson of the MRF, deposed to the founding affidavit. She 2 The provisions of s 18 of the EC Act of 2005 read as follows: ‘(1) Whenever the position of an iNkosi or iNkosana is to be filled - (a) the royal family concerned must subject to such conditions and procedure as prescribed, within sixty days after the position becomes vacant, and with due regard to applicable customary law: - (i) identify a person who qualifies in terms of customary law to assume the position in question, after taking into account whether any of the grounds referred to in section 6(3) apply to that person; and (ii) through the relevant customary structure, inform the Premier of the particulars of the person so identified to fill the position and of the reasons for the identification of that person; and (b) the Premier must, subject to subsection (5), by the notice in the Gazette, recognise the person so identified by the royal family as an iNkosi or iNkosana, as the case may be. (2) Before a notice recognising an iNkosi or iNkosana is published in the Gazette, the Premier must inform the Provincial House of Traditional Leaders of such recognition. (3) The Premier must, within a period of thirty days after the date of publication of the notice recognising an iNkosi or iNkosana issue to the person who is identified in terms of paragraph (a)(i), a certificate of recognition.’ 3 The provisions of s 21 of the EC Act of 2005 read as follows: ‘Recognition of regents - (1) Where a royal family has identified the successor to the position of iKumkani, iNkosi or iNkosana who is a minor in terms of applicable customary law or customs and advised the Premier, the Premier must: - (a) within a reasonable time, by notice in the Gazette, recognize the person so identified by the royal family as a regent; … (3) The Premier must review the recognition of a regent - (a) at least once every three years, and (b) immediately after the successor has attained the age of majority.’ 4 The provisions of s 18 of the EC Act of 2005 were replaced by s 23 of the EC Act of 2017 in identical terms. traced the history of Maxwele Royal House. It was common cause that until his death, Mzimtsha was the hereditary headman of Zimbane and that Mrs Mawele was appointed as Regent because of Asiphe’s minority status. [5] On 26 January 2017, whilst the regent was still in office, the MEC addressed a letter to the SRF instructing it to identify an acting headman to replace the Regent. On the same day the MEC advised Mrs Maxwele that the term of her regency had expired and gave her 30 days to vacate the office. The MEC explained that the reason for the termination of her regency was the expiry of the three-year term of Regency as prescribed under ss 22(1)(a) and (b) of the EC Act of 20055. There were also allegations made that she had caused instability within the Zimbane community. That conduct, it was contended, disqualified her from continuing to act as a headwoman. On 8 January 2019, the MEC addressed a letter to Mrs Maxwele confirming that she was removed from office. Baxolele was identified as Acting Headman and his appointment as such with effect from 12 June 2020 was confirmed by the MEC on 20 August 2020. Mrs Maxwele retorted that the termination of her appointment and the recognition of Baxolele as a new acting headman violated the provisions of ss 26(1)(a) and (b) of the EC Act of 2017. [6] Aggrieved by the decisions of the respondents, the appellants launched the review proceedings seeking an order that the decision of the Premier and MEC to appoint Baxolele be reviewed and set aside (Case no 2990/2020). It also appears from the record that further application proceedings had been launched by the 5 Subsections 22 (1)(a) and (b) of the EC Act of 2005, reading in identical terms as ss 26(1)(a) and (b) of the EC Act of 2017, which read as follows: ‘Persons acting as iKumkani, iNkosi or iNkosana – (1) A royal family may identify a suitable person to act as iKumkani, iNkosi or iNkosana as the case may be, where: — (a) a successor to the position of a traditional leader has not been identified by the royal family concerned; (b) the identification of a successor to the position of iKumkani, iNkosi or iNkosana is being considered and not yet resolved;…’. appellants under case no 1234/2020. In that application the appellants sought an order to compel the Premier and MEC to recognise Asiphe as the headman so that he would commence his official duties as he had since attained the age of majority. Apart from the order that was granted in case no 1234/2020, there are no further details of that application in the record. [7] In the review application to which this appeal relates, the respondents challenged Ms Maxwele’s authority to depose to the founding affidavit on the basis that the MRF was not a valid legal entity. Baxolele and the SRF contended that the Qokolweni-Zimbane Traditional Council should have been joined in the review application. They also asserted that the review application was premature to the extent that the appellants had failed to refer the dispute(s) to mediation as envisaged in the provisions of Rule 41A of the uniform rules of the high court. In addition, they took issue with the appellants’ failure to file the record of the impugned decisions. They also maintained that there was an irresolvable dispute of facts that must have been foreseen by the appellants. [8] In justifying his appointment as acting headman, Baxolele asserted that in Zimbane, the electoral system, as opposed to the hereditary system, had always been applied in appointing headmen. He refuted the allegation made by Ms Maxwele that Asiphe’s position as an eldest male issue in Maxwele Royal House was the qualifying factor for his appointment as the headman. In the high court [9] The high court dismissed the review application on four principal bases, namely that: (a) Ms Maxwele had neither the locus standi to bring the application, nor the authority to depose to an affidavit on behalf of the MRF; (b) the establishment of the MRF was invalid to the extent that its members constituting were not of royal blood; (c) there was no resolution in terms of which Asiphe was identified as the headman; and (d) in Zimbane, the procedure for appointment of a headman is the public ballot system, rather than the hereditary system. [10] The court found that the MRF is not a royal family because Zimbane is an administrative area and not a traditional community recognised in terms of s 2 of the Traditional Leadership and Governance Framework Act 41 of 2003 (the Framework Act)6. For that reason, it was not qualified to identify a headman. It held that the SRF, as the royal family with authority over the entire Qokolweni- Zimbane traditional community, held the authority to identify headmen for all the communities within its jurisdiction, including Zimbane. The court upheld the respondents’ contention that the first appellant was not a legal entity. In this Court [11] For the reasons that follow, the judgment of the high court cannot stand. First, it was not in dispute that the demise of Mzimtsha in 2008 led to the identification of Asiphe as the successor in terms of s18 of the EC Act of 2005 and the processes provided for therein. Mrs Maxwele’s regency was founded on this identification. Further, the MEC was involved in the 2008 process, which, in essence, meant that he accepted the underlying reason for the regency. Had it not been for the fact of the minority status of Asiphe, the Premier would have been compelled in terms of the provisions of s 18(2) of the EC Act of 2005 to inform the Provincial House of Traditional Leaders of such identification and then 6 Section 2(1) of the Framework Act reads: ‘(1) A community may be recognised as a traditional community if it – (a) is subject to a system of traditional leadership in terms of that community’s customs; and (b) observes a system of customary law.’ publish, in the Gazette, a notice recognising such identification. Thereafter, in terms of s 18(3) of the EC Act of 2005, the Premier would have been compelled to issue a certificate of recognition in favour of Asiphe. [12] In the record, Asiphe’s date of birth appears as 13 July 1989. He had, therefore, long attained majority when the MEC instructed the SRF to identify an acting headman and when Baxolele was recognised as such. If the term for Mrs Maxwele’s regency had expired, the Premier and MEC could not simply ignore the identification of Asiphe which remained extant. Both the identification of an acting headman and the recognition of Baxolele as such had no lawful basis. [13] Counsel for the Premier and MEC conceded that the appointment of Mrs Maxwele as regent proceeded on the basis of an acceptance of the recognition of Asiphe as the successor to headmanship. The consequence of such acceptance is that there existed an administrative decision or act which preceded the appointment of the regent. Counsel conceded that in the absence of such administrative conduct being set aside both the MEC and Premier could not lawfully recognise another identified headman nor purport to appoint such person to the position of headman or acting headman. Counsel accordingly conceded, correctly so, that the decision to appoint Baxolele must be set aside. [14] At the hearing of this appeal, our attention was drawn to the fact that the review in this case served before same judge who, on the same day, granted the order in case no 1234/2020 in terms of which the Premier and MEC were compelled to consider and decide Asiphe’s recognition as the headman of Zimbane. It was not in dispute before us that the order in case no 1234/2020 compelled the Premier and MEC to consider and decide Asiphe’s recognition as the headman of Zimbane. The context in which the order in case no 1234/2020 was granted is not apparent from the record. However, the fact that a full-scale hearing of the review application proceeded before the same judge who had just granted the order compelling a decision on Asiphe’s nomination is surprising. The reasons for rejecting Asiphe’s nomination by the same court in the review application are perplexing, given that the order in case no 1234/2020 entailed a positive finding on issues regarding the status of the MRF and Ms Maxwele’s locus standi and authority to participate in the review proceedings. [15] A further issue that requires comment by this Court is the reference in the record, especially in the correspondence by the MEC to the ‘appointment’ of the third respondent. It is important to highlight that there is no provision in the EC Acts 2005 and 2017, for appointment of a headman by government functionaries. The relevant legislation provides for recognition of the headman by the Premier, rather than the MEC.7 Conclusion [16] To conclude, the MEC’s (and the Premier’s) decisions to recognise the identification, and appoint Baxolele in the face of the identification of the second appellant in 2008, which resulted in Mrs Maxwele’s regency, is unlawful. In addition, the order of the high court in case no 1234/2020, in effect, disposed of the preliminary issues raised in the review application. The order of the high court must be set aside. There is no reason why costs should not follow the result. Order [17] In the result, the following order is made: 7 Sections 9, 11, 13, and 14 of the Framework Act; see also s 3 of the Traditional and Khoi-San Leadership Act 3 of 2019 and relevant provincial legislation, in this instance, ss 18 & 21 of EC Act of 2005 and s 23 of the EC Act of 2017. 1 The appeal is upheld with costs, including the costs of two counsel where so employed; such costs to be paid by the respondents jointly and severally, the one paying the others to be absolved. 2 The order of the high court is set aside and replaced with the following order: ‘(a) The second respondent’s decision to appoint the third respondent as acting headman of Zimbane Administrative Area, Mthatha is hereby declared unlawful and accordingly reviewed and set aside. (b) The respondents are ordered to pay the costs of the application jointly and severally, the one paying, the others to be absolved.’ _______________________ ZM NHLANGULELA ACTING JUDGE OF APPEAL Appearances For appellants: ZZ Matebese SC with Z Badli Instructed by: A S Zono & Associates, Mthatha Honey Attorneys, Bloemfontein For first and second respondent: M Gwala SC with LX Mpiti Instructed by: State Attorney, Mthatha State Attorney, Bloemfontein For third respondent: S Sintwa Instructed by: Chris Bodlani Attorneys, Mthatha Webbers Attorneys, Bloemfontein For fourth respondent: M Sishuba with N Mdunyelwa Instructed by: Potelwa & Co, Mthatha Ponoane Attorneys, Bloemfontein.

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 24 May 2023 Status: Immediate The following summary is for the benefit of the media in the reporting of this case and does not form part of the judgments of the Supreme Court of Appeal Maxwele Royal Family & Another v The Premier of the Eastern Cape Province and Others (1176/2021) [2023] ZASCA 73 (24 May 2023) Today the Supreme Court of Appeal (the SCA) handed down judgment upholding the appeal against the decision of the Eastern Cape Division of the High Court, Mthatha (the high court). The SCA furthermore set aside the high court’s order, substituting it with an order declaring the decision of the MEC Department of Traditional and Co-Operative Affairs (the MEC) as delegated by the Premier of the Eastern Cape Province (the Premier) to appoint the third respondent, Mr Baxolele Maxwele (Baxolele), as the Acting Headman of Zimbane Administrative Area, Mthatha (Zimbane) as unlawful. The factual background is briefly that upon the demise of Mr Mzimtsha Maxwele, the reigning Headman of Zimbane on 28 April 2008, the first appellant (the Maxwele Royal Family) identified the second appellant, Mr Asiphe Maxwele (Asiphe), who is the surviving son of the late Headman, as the successor. On account of the minority status of Asiphe, his mother Mrs Maxwele, was appointed as the Regent to serve as the Acting Headwoman until Asiphe attained the age of majority. The Premier, together with the MEC, were involved in the recognition of the Regent. On 26 January 2017, whilst the Regent was still in office, the MEC, exercising power delegated to her by the Premier, instructed the fourth respondent (the Sangoni Royal Family), exercising authority in Qokolweni-Zimbane Traditional Council, to identify the Acting Headman for Zimbane as the term of office for the Acting Regent had expired. Accordingly, the Sangoni Royal Family identified Baxolele as the Acting Headman. On 20 August 2020, the Premier recognised Baxolele as the Acting Headman, and proceeded to issue a certificate of recognition in his favour. In challenging the decision of the Premier and MEC, the Maxwele Royal Family and Asiphe brought a review application before the high court. That application for review was dismissed. Leave to appeal the review application was granted by the high court. The SCA, in coming to a conclusion, found that the decision of the high court was wrong for the reasons that, inter alia: (a) In terms of s 18 of the Eastern Cape Traditional Leadership and Governance Act 4 of 2005, the appointment of the Regent was an administrative act that was inextricably linked to the identification of Asiphe as the successor to headmanship; (b) when the Premier recognised Baxolele as the Acting Headman, both the regency of Mrs Maxwele and identification of Asiphe had not been set aside by a court of law; (c) the Premier was still obliged in terms of s 23 of the Eastern Cape Traditional Leadership and Governance Act 1 of 2017 to recognise Asiphe by issuing a certificate of recognition in his favour so that he could commence duties as the Headman; and (d) the Premier and MEC could not lawfully recognise the identification of Baxolele by the Sangoni Royal Family. In the result, the SCA upheld the appeal and accordingly set aside the order of the high court, substituting it with an order declaring the decision of the MEC to appoint Baxolele as the Acting Headman as unlawful. ~~~~ends~~~~

3934

non-electoral

2022

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Not Reportable Case no: 1232/2021 In the matter between: ZWELITHINI MAXWELL ZONDI APPELLANT and THE STATE RESPONDENT Neutral citation: Zwelithini Maxwell Zondi v The State (1232/2021) [2022] ZASCA 173 (7 November 2022) Coram: ZONDI, NICHOLLS, MOTHLE JJA and MJALI and MASIPA AJJA Heard: 7 November 2022 Delivered: 1 December 2022 Summary: Criminal law and procedure – appeal against conviction – credibility and reliability of the witnesses’ identification of the appellant – appellant’s conviction based on unexplained, untested and uninvestigated bald statements of the witnesses – whether the State succeeded in discharging the burden of proof – appellant entitled to benefit of doubt – conviction and sentence set aside. ORDER On appeal from: Gauteng Division of the High Court, Johannesburg (Ismail, Mahalelo JJ and Van Veenendaal AJ, sitting as a full court): The appeal is upheld. The order of the full court is set aside and replaced by the following order: ‘The appeal is upheld and the conviction and sentence of the appellant are set aside.’ JUDGMENT Mjali AJA (Zondi, Nicholls, Mothle JJA and Masipa AJA concurring): [1] Prosecutors play a critical role in the criminal justice system in response to crime. They generally represent the authority of the State in ensuring that perpetrators of crime are held accountable for their actions and in that way communicate a strong message to the community that crime will not be tolerated. In line with the burden of proof that rests on their shoulders, it is essential that they meticulously ensure that the matters that they bring before courts have been properly investigated and when that has been done, ensure that the evidence is properly presented in court. Sadly, what follows is a model of the very opposite and depicts a picture of a matter that was badly investigated and badly prosecuted. [2] The appellant, Mr Zwelithini Maxwell Zondi (Zondi), was prosecuted in the Gauteng Division of the High Court, Johannesburg on two charges of murder, three counts of attempted murder as well as unlawful possession of firearm and ammunition respectively. He pleaded not guilty to all the charges and proffered a plea explanation of an alibi, contending that he was nowhere near the scene of crime on the day as alleged, but was at his home with his girlfriend. He was convicted on all counts as charged and sentenced to life imprisonment in respect of each count of murder, 10 years’ imprisonment in respect of each count of attempted murder, 5 years’ imprisonment in respect of the charge of unlawful possession of firearm and 3 years’ imprisonment in respect of the charge of unlawful possession of ammunition. The court ordered that the sentences in respect of counts 2 to 7 run concurrently with the sentence in respect of count 1. Effectively, the appellant was to serve a term of life imprisonment. The court also declared him unfit to possess a firearm. [3] He unsuccessfully applied for leave to appeal against his conviction and sentence in the court of first instance. On petition to this Court, the appellant was granted leave to appeal to the full court of the Gauteng Division of the High Court, Johannesburg. The full court dismissed his appeal. Aggrieved by the dismissal of his appeal by the full court, the appellant again petitioned this Court and was granted special leave to appeal to this Court against his conviction. [4] The main grounds of appeal were as follows. Firstly, that the full court erred in accepting the evidence of the state witnesses identifying the appellant as their attacker, as true beyond reasonable doubt, whereas it was palpably untruthful and should have been rejected as false. Secondly, that the full court must have entertained reasonable doubt in the light of the fact that the state witnesses must have colluded to falsely implicate the appellant. Further, that the full court erred in placing too much reliance on the failure of the appellant to disclose earlier in the trial and to put to the witnesses that his vehicle was fitted with a tracking device. Accordingly, the full court erred in evaluating the appellant’s alibi defence, but rather drew an adverse inference against him for not disclosing early during the trial that his vehicle was fitted with a tracker device. [5] The issues to be decided in this appeal are whether the witnesses’ identification of the appellant was credible and reliable; whether the appellant’s alibi and his denial of complicity in the commission of the offences are reasonably possibly true. Before doing so, it is apposite to first set out briefly the background facts in this matter. [6] On 3 July 2016, in the early evening at approximately 18h00, a group of men arrived at the Mall of Africa taxi rank in Midrand in a white VW Polo motor vehicle and fired gunshots at the taxi drivers/owners who were waiting to load passengers. There is no further description of the VW Polo motor vehicle beyond it being a white sedan. Notably, however, Morris Kazamule Machekecheke, a state witness, described it as a white VW Polo hatchback. The significance of this will become apparent later in this judgment. The appellant is alleged to be amongst the four occupants of that VW Polo and is the one who purportedly fired gunshots at the witnesses and the deceased. [7] Lungisani Hlongwane and Mkhacani Terris Yingwani were the two taxi drivers that were fatally wounded by the gunshots and were certified dead at the scene. Penny Shirinda (Shirinda), Phati Shadrack Mlangeni (Mlangeni) and Morris Kazamule Machekecheke (Machekecheke) successfully ran for cover and were the only witnesses that were led by the State during the trial to prove its case against the appellant. There is no dispute as to how the events evolved. The identity of the deceased, the cause of their deaths, the correctness of the procedure of the pointing out, the post-mortem reports as well as the correctness of the doctor’s findings were all admitted in terms of s 220 of the Criminal Procedure Act 51 of 1977 (the CPA). [8] What is in dispute is the identity of the perpetrator, as the appellant’s defence is that of an alibi. The three state witnesses are all members of the Alexandra, Randburg, Midrand and Sandton Taxi Association (ARMSTA). They operate from the Mall of Africa taxi rank to Olievenhoutbosch, Midrand, Alexandra as well as to Johannesburg CBD. The appellant is a member of the Alexandra Taxi Association (ATA). It is common cause that at the time of the incident there was a conflict between these associations regarding their operating routes. [9] The state witnesses testified that the appellant was the one who fired gunshots at them and that they were certain about his identity, as they were not seeing him for the first time on the day of the shooting. They stated that they had seen him on 27 June 2016, approximately six days prior to the shooting of 3 July 2016. They alleged that he was one of four men that arrived on 27 June 2016 at their taxi rank in a Toyota Corolla which bore ATA stickers on the sides. On their arrival, the appellant informed them and the other taxi operators that they, as members of ATA, were sent to work with them. At that moment, a certain Toyota Quantum minibus taxi arrived and the appellant, pointing at the Quantum, informed them that it would operate at their rank. Further, that it had to be loaded with passengers immediately after the minibus taxi that was loading at the time was full. The witnesses and their group objected and a verbal altercation ensued. It is then that the appellant is alleged to have uttered some threatening words. [10] The state witnesses were certain that the person who threatened them on 27 June 2016, was the one that fired gunshots at them on 3 July 2016 and that person was the appellant. Shirinda testified that he saw the appellant for the first time on 27 June 2016 and when the appellant made the threats, he requested his driver to take pictures of the appellant using his (Shirinda’s) cellphone. He then kept the pictures. On the day of the shooting he had already enquired about the appellant’s name from other taxi operators, using the pictures he had on his cellphone1 and already knew the appellant’s name as Zondi. Yet, he never mentioned this when he made a statement to the police immediately after the incident of 3 July 2016. All that he stated was that he could identify the perpetrator. He gave four different reasons for his failure to provide the police with the name of the appellant as the perpetrator. Firstly, that he was paralysed with fear when the statement was obtained from him immediately after the incident. Secondly, that he feared for his life, as he did 1 The cellphone was lost on the day of the shooting. not know who else was present when he made the statement. Thirdly, that it did not occur to him that he should inform the police about the name of the perpetrator. The fourth reason was that he did not trust the police, as some of them are members of taxi associations. Shirinda pointed out the appellant at the second identification parade. He did not point out anyone at the first identification parade since the appellant was not part of it. [11] Machekecheke, on the other hand, pointed out a certain Sibusiso Cornelius Mkhize (Mkhize) in the first identification parade as the shooter. In a statement made to the police immediately after pointing him out, Machekecheke stated that he remembered his face very well, as he was in close proximity to him and that he had taken a good look at him. Further, that Mkhize was the one that approached Machekecheke and started shooting at them. Machekecheke also stated that, that person was later known to him as Sibusiso Cornelius Mkhize. He subsequently made a second statement stating that he erroneously pointed out Mkhize and that the charges against Mkhize should be withdrawn. When cross-examined on this aspect, Machekecheke explained that he was confused when he gave the statement at the first identification parade. Significantly, he went further to state that when he looked at the person during the trial he got confused. His subsequent statement is undated, but was clearly made after the first identification parade, as it sought to correct the alleged error made there. It is worth noting that the change of mind as to the identity of the perpetrator was prompted by Machekecheke learning from his other colleagues in Midrand that the person who threatened them on 27 June 2016 was Zondi. [12] Mlangeni testified that he had known the appellant for a period of five years at the time of the incident, as they both drove on the same route. When he made a statement to the police, Mlangeni stated that he did not know the perpetrators and could not identify them. Despite him having indicated in his statement that he did not know and could not point the perpetrators out, Mlangeni was invited to the second identification parade where he pointed out the appellant. There was no explanation provided as to why he was invited to the identity parade in view of his expressed inability to identify the perpetrators in his statement to the police. The appellant took issue that all the state witnesses knew him at the time of the incident, yet in their statements to the police, they never mentioned his name. Also, that except for Shirinda, the two other state witnesses told the police that they did not know who fired gunshots at them and could not identify him. [13] Their belated ability to identify the appellant appears to be based solely on the fact that they had seen him for the first time on 27 June 2016, when he arrived at their taxi rank and threatened them with violence. When they again saw the perpetrator on 3 July 2016, they realised that he was the man who threatened them on 27 June 2016, approximately six days before the shooting incident. It is this evidence that deserves some close scrutiny, particularly in the light of the pliability of their versions from not being able to identify and not knowing the perpetrator to later knowing his name and being able to identify him at an identification parade. In S v Mthetwa,2 Holmes JA set out the proper approach when dealing with the evidence of identification as follows: 2 S v Mthetwa [1972] 3 All SA 568 (A); 1972 (3) SA 766 (A) at 768A-C. ‘Because of the fallibility of human observation, evidence of identification is approached by the Courts with some caution. It is not enough for the identifying witness to be honest: the reliability of his observation must also be tested. This depends on various factors, such as lighting, visibility, and eyesight; the proximity of the witness; his opportunity for observation, both as to time and situation; the extent of his prior knowledge of the accused; the mobility of the scene; corroboration; suggestibility; the accused’s face, voice, build, gait, and dress; the result of identification parades, if any; and, of course, the evidence by or on behalf of the accused. The list is not exhaustive. These factors, or such of them as are applicable in a particular case, are not individually decisive, but must be weighed one against the other, in the light of the totality of the evidence, and the probabilities; see cases such as R v Masemang, 1950 (2) SA 488 (AD); R v Dladla and Others, 1962 (1) SA 307 (AD) at p 310C; S v Mehlape, 1963 (2) SA 29 (AD).’ [14] Identification must not only be credible, but must also be reliable. Bearing in mind the version of the state witnesses that they saw the appellant for the first time on 27 June 2016 as well as the circumstances pertaining to the day of the shooting, of a moving scene akin to a war zone, the reliability of their identification of the perpetrator is doubtful. The circumstances were unconducive to reliable cognisance, particularly when one considers that it was in the early evening and that when the shooting started the witnesses ran for their lives. As such, the court below ought to have entertained serious reservations as to the reliability of the identification of the appellant as the perpetrator especially where the identifying witnesses had initially indicated their inability to identify the perpetrator. Their bald statements that the appellant was the person who committed the crime is not enough. It has been held that such statements unexplained, untested and uninvestigated, leave the door wide open for possibilities of mistake.3 In this matter, the prosecutor 3 R v Shekelele and Another 1953 (1) SA 636 (T) at 638. seems to have been satisfied with their evidence that the person they saw firing at them was the one that they had seen on 27 June 2016. The prosecutor failed to elicit sufficient evidence to establish the credibility and reliability of the state witnesses’ identification of the appellant. [15] The state witnesses’ credibility was destroyed when they admitted to knowing the appellant as well as his name prior to the incident on 3 July 2016 and yet failed to disclose his identity at the earliest opportunity to the police. That, in my view, was fatal to the State’s case, particularly in the light of the fact that the reasons given by the state witnesses under cross-examination for such failure kept changing as if tailored to meet the circumstances. A situation that is akin to the suggestive benefit that our case law cautions the courts to be vigilant of.4 That, in my view, casts serious doubt on the reliability of the state witnesses’ identification of the appellant as the perpetrator. On the contrary, it lends credence to the argument advanced by the appellant that there must have been collusion between the state witnesses to falsely implicate him. The history of differences between their associations, makes this possibility real and, considered with all the other factors, renders their evidence as not reliable beyond reasonable doubt. [16] During his testimony, the appellant maintained that he was not involved in the commission of the offences. His alibi defence was disclosed very early during the trial and his version put to the state witnesses. It is trite that there is no onus on the accused person to establish his alibi. In evaluating the 4 See S v Mthethwa [1972] 3 All SA 568 (A); 1972 (3) SA 766 (A) at 768A-C. defence of an alibi, the dictum in R v Hlongwane,5 where the accused denied complicity, is instructive: ‘At the conclusion of the whole case the issues were: (a) whether the alibi might reasonably be true and (b) whether the denial of complicity might reasonably be true. An affirmative answer to either (a) or (b) would mean that the Crown failed to prove beyond reasonable doubt that the accused was one of the robbers.’ [17] Despite there being no duty to prove his alibi, it is apparent from the appellant’s testimony that he informed the police that his VW Polo motor vehicle was fitted with a tracking device. By implication, he must have informed them about his alibi defence. It was, therefore, incumbent upon the police to conduct investigations fully, and upon the State to prove its case beyond reasonable doubt. The State should have led evidence linking the appellant to the crime, which evidence must be sufficient and credible to discharge the onus that rests on it. Yet, the State failed in that regard. Instead, it led evidence of the identification of the appellant, which should have been found by the trial court as well as the court below to be unreliable in the light of the numerous problems highlighted earlier in this judgment. There is no detailed description of the VW Polo that was involved in the shooting other than it being white. The witnesses differed as to whether it was a sedan or a hatchback. Consequently, there is absolutely no connection of that white VW Polo to the appellant. Under the circumstances, there is no justification for associating the appellant with that white VW Polo, bearing in mind his evidence that his white VW Polo vehicle was parked at his home on the day of the incident and that the State’s evidence does not prove any evidence to the contrary. 5 [1959] 3 All SA 308 (A); 1959 (3) SA 337 (A) at 339C-D [18] Similarly, the rejection of the appellant’s alibi purely on the basis of his failure to disclose early during the trial that his vehicle was fitted with a tracking device finds no justification on the facts and in law. On the contrary, it seeks to reverse the onus onto the appellant to prove his innocence; a situation which would be contrary to the right that is enshrined in the Constitution of being presumed innocent until proven guilty.6 It was never part of the appellant’s alibi defence that his vehicle was fitted with a tracker. The trial court as well as the full court failed to properly evaluate the evidence holistically. As stated by this Court in Combrinck v S:7 ‘It is trite that the State must prove its case beyond reasonable doubt and that no onus rests on an accused person to prove his innocence. The standard of proof on the State and the approach of a trier of fact to the explanation proffered by an accused person has been discussed in various decisions of this Court and of the High Court (see R v Difford 1937 AD 370 at 373; S v Van der Meyden 1999 (1) SACR 447 (W) at 448F-I). It suffices for present purposes to state that it is well settled that the evidence must be looked at holistically.’ [19] The explanation proffered by the appellant that he was home with his girlfriend at the time of the shooting is corroborated by his girlfriend. In rejecting the appellant’s evidence, the trial court placed heavy reliance on the fact that the appellant was identified in the identification parade by witnesses who knew him. I have already in this judgment alluded to the numerous problems with such identification and found same to be unreliable. 6 Constitution, s 35(3)(h). 7 [2011] ZASCA 116; 2012 (1) SACR 93 (SCA) para 15 [20] The trial court also relied on the fact that the appellant only mentioned during re-examination that his VW Polo was fitted with a tracking device. That reliance is misplaced for the following reasons. The appellant disclosed his defence timeously. There was no duty on him to prove his alibi. In the light of the uncontroverted evidence that the police had knowledge of the fact that a white VW Polo was involved and that the appellant owned a white VW Polo, it was then incumbent upon them to properly investigate this aspect so as to exclude the appellant’s alibi defence. Moreover, they were informed about this tracking device as well as the company that would assist with the tracking records of the vehicle, yet they did nothing to investigate this aspect. Neither did the State lead any evidence linking the white VW Polo that was at the scene to the appellant. There was no justification for the rejection by the trial and the full court of the appellant’s alibi, purely from the alleged failure to disclose the presence of the tracking device in the appellant’s vehicle. [21] Similarly, the reliance by the State on the dictum in Thebus and Another v S,8 for the proposition that the appellant was shifting the goalposts by his late disclosure of the presence of the tracking device in his VW Polo vehicle is misplaced. That argument loses sight of the fact that the appellant disclosed his alibi in his plea. Further, that it was never part of the appellant’s alibi defence that his vehicle was fitted with a tracking device. Even if it were, it was still incumbent upon the police to investigate as well as the prosecution to ensure that proper and sufficient evidence is placed before court to refute the alibi. The evidence led in this matter, at best for the State, simply creates a suspicion that the appellant could have been one of the perpetrators, but 8 2003 (2) SACR 319 (CC) certainly does not refute the appellant’s alibi. As such, it also cannot be said that the appellant’s alibi is not reasonably possibly true. It is a trite principle of our law that suspicion, however strong, cannot replace proof beyond a reasonable doubt. [22] In Thebus, the Constitutional Court makes it plain that the late disclosure of an alibi is one of the factors to be taken into account in evaluating the evidence of the alibi. Thus, it is not the only factor to be considered, as, standing alone, it does not justify an inference of guilt. Further, that it is a factor which is only taken into consideration in determining the weight to be placed on the evidence of the alibi. By the same token, the alleged failure of the appellant to disclose that his VW Polo was fitted with a tracking device, standing alone, could not justify the rejection of the appellant’s alibi defence. This Court in Musiker v S,9 held that once an alibi has been raised, the alibi has to be accepted, unless it can be proven that it is false beyond a reasonable doubt. On a conspectus of all the evidence in this matter, the State failed to discharge the burden of proof beyond reasonable doubt that the appellant was the one who fired gunshots at the deceased and the witnesses. There is, thus, no justification for rejecting the appellant’s alibi. It is a well-established principle in our law that in search for the truth it is better for a guilty person to go free than for an innocent one to be convicted. On this basis, the accused is given the benefit of doubt and must the appeal must succeed. [23] In the result, the following order is made: The appeal is upheld. 9 Musiker v S [2012] ZASCA 198; 2013 (1) SACR 517 (SCA) paras 15-16. The order of the full court is set aside and replaced with the following: ‘The appeal is upheld and the conviction and sentence of the appellant are set aside.’ _________________________ G N Z MJALI ACTING JUDGE OF APPEAL Appearances For appellant: J C Kruger SC Instructed by: BDK Attorneys, Johannesburg Symington De Kok Attorneys, Bloemfontein For respondent: J M K Joubert Instructed by: Director of Public Prosecutions, Johannesburg Director of Public Prosecutions, Bloemfontein

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 1 December 2022 Status: Immediate The following summary is for the benefit of the media in the reporting of this case and does not form part of the judgments of the Supreme Court of Appeal Zwelithini Maxwell Zondi v The State (1232/2021) [2022] ZASCA 173 (1 December 2022) The Supreme Court of Appeal (SCA) upheld an appeal against the judgment of the Gauteng Division of the High Court, Johannesburg, sitting as a full court, which dismissed an appeal against the conviction and sentence of the appellant, Mr Zwelithini Maxwell Zondi, on two charges of murder, three counts of attempted murder as well as unlawful possession of firearm and ammunition, respectively. No order was made as to costs. The background facts of the matter were as follows. On 3 July 2016, in the early evening at approximately 18h00, a group of men arrived at the Mall of Africa taxi rank in Midrand in a white VW Polo motor vehicle and fired gunshots at the taxi drivers/owners who were waiting to load passengers. The appellant was alleged to be amongst the four occupants of that VW Polo and was the one who purportedly fired gunshots at the witnesses and the deceased. The state witnesses testified that the appellant was the one who fired gunshots at them and that they were certain about his identity, as they were not seeing him for the first time on the day of the shooting. They stated that they had seen him on 27 June 2016, approximately six days prior to the shooting of 3 July 2016, during which a verbal altercation ensued between them and the appellant was alleged to have uttered some threatening words. The appellant pleaded not guilty to all the charges and proffered a plea explanation of an alibi, contending that he was nowhere near the scene of crime on the day as alleged, but was at his home with his girlfriend. He was convicted on all counts as charged and, effectively, the appellant was to serve a term of life imprisonment. The issues to be decided in the appeal were whether the witnesses’ identification of the appellant was credible and reliable; whether the appellant’s alibi and his denial of complicity in the commission of the offences were reasonably possibly true. The SCA found that bearing in mind the version of the state witnesses that they saw the appellant for the first time on 27 June 2016 as well as the circumstances pertaining to the day of the shooting, of a moving scene akin to a war zone, the reliability of their identification of the perpetrator was doubtful. As such, the SCA found that the court below ought to have entertained serious reservations as to the reliability of the identification of the appellant as the perpetrator, especially where the identifying witnesses had initially indicated their inability to identify the perpetrator. Their bald statements that the appellant was the person who committed the crime was not enough. In this regard, the SCA found that the state witnesses’ credibility was destroyed when they admitted to knowing the appellant as well as his name prior to the incident on 3 July 2016 and yet failed to disclose his identity at the earliest opportunity to the police. That, in the SCA’s view, was fatal to the State’s case. The SCA found further that there was no justification for the rejection by the trial and the full court of the appellant’s alibi, purely from the alleged failure to disclose the presence of the tracking device in the appellant’s vehicle. The appellant had disclosed his defence timeously. There was no duty on him to prove his alibi. The SCA found that in the light of the uncontroverted evidence that the police had knowledge of the fact that a white VW Polo was involved and that the appellant owned a white VW Polo, it was then incumbent upon them to properly investigate this aspect so as to exclude the appellant’s alibi defence. Moreover, they were informed about this tracking device, yet they did nothing to investigate this aspect. Neither did the State lead any evidence linking the white VW Polo that was at the scene to the appellant. Accordingly, the SCA held that on a conspectus of all the evidence in the matter, the State failed to discharge the burden of proof beyond reasonable doubt that the appellant was the one who fired gunshots at the deceased and the witnesses. There was, thus, no justification for rejecting the appellant’s alibi. As such, the SCA found that it also could not be said that the appellant’s alibi was not reasonably possibly true. On this basis, the SCA held that the accused had to be given the benefit of doubt and the appeal succeeded. ~~~~ends~~~~

2434

non-electoral

2013

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Case No: 505/2012 Reportable In the matter between: ROAD ACCIDENT FUND Appellant and ADVOCATE ELE MYHILL, NO (SWALIBE MINORS) Respondent Neutral citation: Road Accident Fund v Myhill NO (505/2012) [2013] ZASCA 73 (29 May 2013) Coram: Brand, Shongwe and Leach JJA and Willis and Van der Merwe AJJA Heard: 3 May 2013 Delivered: 29 May 2013 Summary: Contract ─ rescission of a contract concluded on behalf of a minor to settle minor’s claims ─ defendant sued not entitled to set-off against claims brought on behalf of minor by a custodian parent any amount personally owed to it by the parent ─ settlement concluded on basis of such set-off and without making any allowance for real prospect of minor requiring future medical treatment ─ settlement substantially prejudicing minor ─ settlement set aside. ___________________________________________________________________ O R D E R ___________________________________________________________________ On appeal from: South Gauteng High Court, Johannesburg (Strydom AJ sitting as a court of first instance): The appeal is dismissed with costs, including the costs of two counsel. ___________________________________________________________________ J U D G M E N T __________________________________________________________________ LEACH JA (BRAND and SHONGWE JJA, WILLIS and VAN DER MERWE AJJA concurring) [1] The appellant is the Road Accident Fund, an organ of state established under s 2(1) of the Road Accident Fund Act 56 of 1996, having as its primary function the provision of compensation to persons injured through the negligent driving of motor vehicles. The crisp issue arising in this appeal is whether agreements settling the claims for damages brought against the appellant on behalf of two minors should be recognised as binding or set aside. The high court held that they should be set aside, but granted the appellant leave to appeal to this court. [2] On 20 March 1997, Ms Seani Swalibe (‘the plaintiff’) and her two children, Philippine and Lufuno Swalibe,1 respectively aged two years and four months at the time, sustained bodily injuries when they were run down by a motor vehicle. According to the plaintiff, the incident occurred on or alongside an unpaved road in Katlehong as she was walking facing oncoming traffic. She alleges that she was carrying Lufuno on her back and holding Philippine by the hand when a motor vehicle, which approached from the rear, moved onto its incorrect side of the road and collided with them. 1 For convenience I intend to refer to the two minors simply by their first names. No disrespect is intended. [3] Both Philippine and Lufuno were hospitalised as a result of head injuries they sustained in this collision. Not surprisingly, the plaintiff also appears to have been injured, although the nature and severity of her injuries were not canvassed in the court a quo. Be that as it may, in due course the plaintiff consulted an attorney, Ms Cynthia Chabana of Germiston, whom she instructed to claim compensation from the appellant. Ms Chabana proceeded to complete the prescribed claim forms in respect of a personal claim of the plaintiff and separate claims by her in her capacity as mother and natural guardian of Philippine and Lufuno. The claim forms, together with various supporting documents, including copies of the police accident report form, plan and key as well as the plaintiff’s police statement and an affidavit by her explaining the circumstances under which the collision had occurred, were posted to the appellant on 19 August 1998. [4] The claims made on behalf of the minors were not unduly substantial, totalling R57 260 for Philippine and R60 260 for Lufuno. The major item of each claim related to so-called ‘general damages’, in respect of which R55 000 was claimed on behalf of Philippine and R60 000 for Lufuno. The balance claimed in respect of each child was made up of R260 for past hospital expenses, R1 000 for past medical expenses and a further R1 000 for estimated future medical expenses. [5] The claims were dealt with at the appellant’s Randburg branch. On receipt, a so-called ‘sub-0’ file relating to the plaintiff’s personal claim was opened. Into this were placed two sub-files, respectively numbered as the ‘01’ and ’02’ files, each of which related to the claim of one of her children. The claims were then forwarded for assessment and were allocated for that purpose to Mr Ambrose Dickenson, a senior claims handler. [6] Following the appellant’s standard procedure, Mr Dickenson passed the claims onto a so-called ‘office’ operating under him for initial assessment. The office he selected was staffed by a claims handler, Siphiwe Khumalo, and a claims assistant, Adri Oosthuizen, who proceeded to seek further information from Ms Chabana. This led to the office preparing assessments in respect of both Philippine and Lufuno’s claims. Due to a lack of supporting documentation, no allowance was made for hospital or medical expenses and the assessments related solely for general damages. In respect thereof, an amount of R10 000 per child was suggested. [7] The assessments and all available documents were then returned to Mr Dickenson for him to deal further with the claims. Agreeing with the assessments, he authorised Ms Oosthuizen to commence settlement negotiations and to start the bidding, so to speak, by offering R8 000 in respect of Philippine’s general damages and R7 000 for those of Lufuno. However, as the merits of the claim had been assessed on the basis that the plaintiff had been partially to blame for the collision (an issue to which I shall return in due course) he further instructed that the amounts offered should be reduced by 30% to cater for the plaintiff’s contributory negligence. Even though he accepted that the claims of the two minor children could not be subject to an apportionment, Mr Dickenson testified that it was the appellant’s standard practice to do so in these circumstances as it eliminated having to subsequently sue custodian parents for a contribution in respect of amounts paid to their children. [8] Accordingly, on 21 April 1999, Ms Oosthuizen wrote to attorney Chabana offering to settle the children’s claims by paying R5 600 in respect of Philippine (R 8000 less a 30% deduction of R2 400 in respect of an apportionment) and R4 900 in respect of Lufuno (R7 000 less a 30% apportionment of R2 100). An additional sum of R1 350 per claim was offered as a contribution towards the plaintiff’s costs. [9] For some inexplicable reason the plaintiff was not called to testify in the court below to explain what had happened when these offers were received, and one is left to infer that attorney Chabana probably recommended that they should be accepted. In any event, on 10 May 1999 the plaintiff, in her capacity as Philippine and Lufuno’s mother and natural guardian, signed discharge forms accepting the offers. Pursuant thereto, on 18 May 1999 the amounts concerned were paid to attorney Chabana. Unfortunately Philippine and Lufuno derived no benefit from this as we were informed that attorney Chabana had subsequently disappeared together with the amounts she had received on behalf of the plaintiff. Sad though that this may be, it can bear no reflection upon the issues to be decided. [10] Time passed, and some 10 years later a practising advocate, the respondent, was appointed as curator ad litem to represent Philippine and Lufuno in civil proceedings against the appellant. In due course the respondent issued summons, seeking an order setting aside the settlements and claiming substantial damages for the two children arising out of their injuries. Inter alia, it was alleged in the summons that at the time the offers of settlement were made, a sum of R850 000 would have been fair and reasonable compensation for each child. Before the matter came to trial the parties agreed that the issue of liability should be determined at the outset as a separate issue, with the issue of damages standing over for later decision if needs be. An order to that effect was made, and the trial in the court a quo proceeded solely in regard to the so-called ‘merits’ of the claim. [11] In seeking to set aside the settlement agreements, the respondent relied on three alternative causes of action: first, that the agreements were void or voidable due to mistake; second, that they were prejudicial to the interests of the two children; and third, that in making the offers, the appellant had breached a statutory duty to investigate the nature and extent of the injuries suffered by the children and their consequences, and to offer them reasonable compensation. The court a quo appears to have been somewhat sceptical about the sustainability of the first and third of these, but found in favour of the respondent on the second. The correctness or otherwise of its decision in that regard was the sole issue debated in the appeal. It is to this issue that I now turn. [12] The principles relating to the rescission of a contract concluded on behalf of a minor are well established and do not need to be dealt with in any detail. Suffice it to say that the parties were correctly agreed that a contract may be set aside under the restitutio in integrum if it is shown that it was prejudicial to the minor at the time it was concluded.2 In that regard, it is necessary to show that the prejudice suffered was serious or substantial. As Boberg states ‘to succeed in a claim for restitution, 2 See in this regard Van Heerden et al Boberg’s Law of Persons And The Family (2nd ed) pg 724 and the authorities there collected at footnote 278, and Boezzart Child Law in South Africa pg 30. the minor must show that the transaction against which he or she objects was inimical from its inception’.3 [13] Of course in considering the issue of prejudice in a case such as this, a court must guard against being wise after the event and taking into account factors unknown at the time the claims were settled. In the present case, at the time the claims were compromised the only medical information available in regard to the nature and severity of the children’s injuries and the sequelae thereof was that contained in the medical report section of the prescribed claim forms and the children’s hospital records. [14] The prescribed medical reports in both cases were compiled by a Dr Snide of the Natalspruit Hospital. He recorded that both children had suffered head injuries that were ‘serious’. Dr Snide’s competence to assess the severity of head injuries was questioned on appeal, counsel for the appellant pointing out that he was an orthopaedic surgeon not a neurosurgeon, and that he had recorded that Philippine had been unconscious whereas her hospital records reflect that she had been conscious an hour or so after the injury had been sustained. Dr Snide did not testify, and there is thus no explanation for this possible contradiction. But more importantly, there is no reason to think that an orthopaedic surgeon, who is after all a trained medical specialist, was not able to recognise and evaluate whether a head injury should be regarded as ‘minor’, ‘fairly severe’ or ‘severe’ ─ those being the three standard categories set out in the medical report. Moreover Philippine was hospitalised for ten days after the collision and Lufuno for six days. These periods at first blush indicate that their head injuries were by no means insubstantial. [15] Importantly the hospital records show that after Philippine and Lufuna had been released from hospital, the plaintiff alleged that both had undergone seizures on various occasions. This complaint had led to a Dr Levuno examining Philippine in October 1998, but although he recorded his opinion that whatever fits she might have had were not related to the accident, subsequent entry in Philippine’s hospital records of a complaint by the plaintiff that Philippine had twice had seizures throws some doubt on this. The plaintiff described two incidents, the most recent in August 3 At 724-725. 1998, where a seizure was accompanied by ‘uprolling of the eyeballs.’ According to the evidence of Ms Adan, a neurophysiologist who testified in the court below, this was a classic description of a general tonic chronic epileptic seizure. The plaintiff’s complaint in this regard led to arrangements being made for Philippine to go to an epilepsy clinic on 14 October 1998 and for her to be booked for an electro- encephalogram, an examination used to diagnose abnormal activity in the brain typical of epileptic seizures. Unfortunately her hospital records are incomplete. There is no report from the epilepsy clinic and it is not known whether Philippine received the encephalogram or, if she did, what it showed. [16] Turning to Lufuno, Dr Snide’s report reflected that she was suffering from concussion on admission to hospital and that she was referred for neuro- observation. An impact wound to the occipital area was noted. This is consistent with the plaintiff’s statement submitted to the appellant that a portion of Lufuno’s scalp was removed. Whatever Lufuno’s symptoms may have been, it was decided to perform a CT scan later that day. It showed an infarct in the parietal area of the brain just behind the frontal lobe where a blood clot obstructing the blood flow in that area caused the tissue around it to die. It was accepted that a child with a focal injury such as this would be at a higher risk of developing post-traumatic epilepsy. Indeed in Lufuno’s case as well, the plaintiff subsequently took her back to the hospital and complained that she had twice had seizures. Lufuno, too, was booked for an electro- encephalogram and was to attend the epileptic clinic at the hospital on 14 October 1998. However, as was the case with her sister, the results of these investigations were not available. [17] In assessing the general damages of each child at R10 000, Mr Dickenson and his office were guided by a list of recommended awards for general damages used by the appellant at the time. In respect of a fracture of the base of the skull, a sum of R8 640 was suggested in cases with minor after-effects and R10 800 in cases involving moderately severe after-effects. For a fracture of the parietal area of the skull, it recommended R9 720 in cases of minor after-effects and R14 040 in the event of there being moderate after-effects. How these guideline figures had been arrived at was unexplained. It is of some relevance that Mr Dickenson did not know what an infarct was and clearly he did not appreciate the severity of Lufuno’s injury. He also incorrectly thought that the occiput, the site of Lufuno’s external injury, was at the front part of her head. [18] Be that as it may, although the evidence of Mr Dickenson was somewhat ambivalent about the issue, it appears that possible epilepsy was not taken into account by the appellant’s staff in the assessment of the children’s general damages. This is borne out by the appellant’s assessment forms and the failure to make any allowance in respect of future medical expenses. Indeed appellant’s counsel was driven to argue that epilepsy had been disregarded as, on the medical records available to the appellant at the time, it had not been positively diagnosed. That may be so, but the medical information available indicated, as I have said, that they had each sustained a head injury that was by no means insubstantial and had required hospitalisation of some duration. Moreover, not only had Lufuno suffered an infarct in the brain but the plaintiff had complained that both children had suffered epileptic seizures. This complaint could not just be ignored for purposes of a compromise. Post-traumatic epilepsy is a complication wholly consistent with head injuries such as those the children had suffered. Any reasonable assessment of the children’s damages should therefore have taken into account that there was a real possibility that they had developed post-traumatic epilepsy. [19] Taking that possibility into account, the amounts of R8 000 and R7 000 offered as an assessment of the general damages of the two children were not only substantially less than the appellant’s own assessment of the claims but were, in my view, wholly inadequate. In reaching that conclusion I am aware that substantial increases in awards have occurred since 1999 and that it is necessary to consider what would have been reasonable then and not now. But the amounts offered, even then, would have been appropriate only for substantially less severe cases, and certainly not in cases where there were indications of post-traumatic epilepsy. [20] It is neither necessary nor desirable to deal with the issue of the general damages any further. Suffice it to say that I am satisfied that the offer to settle Philippine’s general damages at R8 000 and those of Lufuno at R7 000 was wholly inadequate and that, had the real possibility of them having suffered epilepsy as a result of their injuries been taken into account as it should have been, a reasonable assessment of their damages would probably have substantially exceeded the appellant’s assessment of R10 000. [21] The failure to take epilepsy into account is also crucial in a further respect. The compromise made no allowance in respect of future medical expenses. There was direct evidence before the court a quo that the cost of treating epilepsy could amount to R1 000 per month and, that being so, in the event of epilepsy manifesting itself, the amounts at which the claims were settled would be wholly inadequate. Even if on the medical information available epilepsy was no more than a real possibility and not a probability, that does not mean future medical treatment could be discounted in settling the claims. It is well established that in actions arising out of bodily injuries involving prospective loss, a plaintiff is not required to prove on a preponderance of probability that such loss will in fact occur and a court in assessing future loss may make a contingency allowance for the possibility of it occurring.4 Moreover, the real possibility of future medical expenses could easily have been catered for by the appellant providing a certificate in respect of future medical expenses under s 17(4)(a) of the Act. Indeed, such certificates are tailor made to deal with any uncertainties that might arise in cases such as this. In the absence of a certificate or any other provision for the real contingency that future medical expenses might be incurred to treat both children for epilepsy in the future, the settlements were obviously to Philippine and Lufuno’s prejudice. [22] Then there is the fact that the already parsimonious amounts offered were reduced by a further 30% to cater for an apportionment against the plaintiff herself. One does not know on what basis the appellant concluded the plaintiff had been 30% to blame for the collision. On the plaintiff’s version (that the vehicle swerved across the road and ran her and the children down from the rear while they were either close to the edge or indeed off the road) it is hard to see how it could have been concluded that she had been negligent to any degree. Unfortunately the appellant’s assessment of the merits of the collision was in the plaintiff’s sub-0 file and no copy was available in the sub-files of the two injured children that were 4 See Jowell v Bramwell-Jones [2000] 2 ALL SA 161 (A) para 23, Blyth v Van den Heever 1980 (1) SA 191 (A) at 225E-226B and Burger v Union National South British Insurance Co 1975 (4) SA 72 (W) at 75D-F. handed in as exhibits in the court below. In addition, for some inexplicable reason the merits assessment was neither called for nor debated in any detail in the court below. When asked about it, Mr Dickenson had a vague recall that it had been based on an allegation that the plaintiff had moved into the road with the children. But even if such an allegation had been made, its source is a mystery. It is certainly wholly inconsistent with all the police documentation. Be that as it may, for present purposes I am prepared to accept that the 30% apportionment which the appellant sought to apply was based on a bona fide assessment of the plaintiff’s negligence and was not merely a groundless attempt on the part of the appellant to reduce the extent of its liability. Even so, it is another matter whether it was entitled to apply an apportionment against Philippine and Lufuno’s damages. [23] The general principle is trite that in order for set-off to operate between two parties there should be reciprocal indebtedness which, if both debts are equal, leads to their mutual discharge or, if they are not equal, to the larger being reduced by the amount of the smaller.5 It is also trite that individuals in their personal capacities are treated as different persons from when they act in representative capacities. Consequently ‘a debt owed by or to a person in his individual capacity cannot be set- off against a debt owed to or by the same person in a representative capacity whether as executor, trustee, custodial parent, stakeholder or however’.6 [24] Despite this, the appellant argued that it had been permissible as an exception to the general rule for it to set-off any amount it could recover from the plaintiff in her personal capacity from what it owed her in her capacity as mother and natural guardian of her two minor children. In advancing this contention the appellant relied on Voet 16:2:8 the opening passage of which reads as follows: 7 ‘Set-off in cases of ─ (i) Guardian’s claim against own debtor and debt of ward. ─ Furthermore a guardian who sues against his own debtor in his own name is not held liable to suffer set-off of what his own ward owes to the opponent sued. 5 Blakes Maphanga Incorporated v Outsurance Insurance Company Ltd [2010] 3 All SA 383 (SCA) para 14. 6 Christie The Law of Contract in South Africa 6th ed at 498. 7 Voet Commentary On The Pandects (Gane’s translation) 16:2:8. (ii) Guardian’s claim for debt to ward and his own debt. ─ Nor does what a guardian claims in the name of his wards from a debtor to the wards undergo set-off of what the guardian owes in his own personal name to such debtor of the wards. (iii) Guardian’s debt to creditor who is also in debt to ward. ─ But if a guardian is sued in his own name by his own creditor who is likewise a debtor of the ward, the position is rather that set-off is allowed of that which the guardian owes against that which is owed to his own ward.’ [25] The appellant relied solely upon Voet’s opinion in (iii) above as authority for its argument. However, not only does that passage appear to be inconsistent with the principle set out in (ii), but it flies in the face of the well-established general principles of set-off just mentioned ─ which are consistent with what is set out in (i) and (ii). It is therefore not surprising that the principle espoused in (iii) has been the subject of trenchant criticism. Christie refers to it as being an authority ‘of doubtful validity’8 while Wessels, in his seminal work on the law of contract, states ‘the debts are in (such a) case not mutual, and it seems difficult to reconcile the opinion of Voet with . . . the general principle’.9 Wessels further points out that Voet’s opinion in this regard follows that of Faber and that ‘[t]here is no evidence that the Roman-Dutch Law recognised Faber’s principle.’10 [26] Wessels suggests that Voet favoured the principle suggested by Faber as both were of the opinion that its operation would not prejudice a minor.11 It seems to me, however, that the prejudice to a minor in a case such as the present is obvious; the amount of an innocent minor’s claim against a defendant would be diminished by reason of the fault of another. In my view even if the underlying premise on which Voet and Farber based their opinions reflected the views of their time, it cannot be regarded as valid today. [27] Indeed more than a century ago the author of a case note published in the South African Law Journal, in referring to Voet 16:2:8, commented that ‘when the tutor on behalf of the ward sues A, A cannot demand that what the tutor personally 8 Christie at 498. 9 Wessels Law of Contract in South Africa (2nd ed) vol 2 § 2517. 10 Referring to Van Leeuwen Censura Forensis 1.4.36.20; Pothier Obligation s 594; Demolombe Contrats vol 5 n 561. 11 See Gane at 157. owes him shall be set-off against the claim now made’.12 Similarly Wessels states:13 ‘Hence, if a guardian demands a debt due to his ward, the minor’s debtor cannot claim to set-off what is due to him by the guardian in his own right and not in his capacity as guardian.’ [28] Not only has this been accepted as a correct reflection of the law for many years14 but there seems to me to be no reason in principle why the general rules of set-off, which exclude a debt owed by or to an individual in his personal capacity being set-off against a debt owed by or that person in a representative capacity, should not operate in respect of claims brought by custodian parents on behalf of their minor children. Not to apply the general rule can only be to the disadvantage of any such minor. While there do not appear to be any reported decisions advancing the contrary conclusion, I think the time has now come for this court to put the matter beyond doubt and to rule that a debtor liable to a minor child, when sued by the child’s custodian parent, may not set off against its liability to the child any amount that it may personally be owed by the custodian parent. [29] That being so, it was impermissible to reduce the appellant’s liability to Philippine and Lufuno by way of setting off against their claims the alleged personal liability of the plaintiff to it it arising from contributory negligence on her part, and the two children were clearly prejudiced by it having done so. [30] Of course the mere fact that the claims were settled in amounts less than what they were worth does not in itself lead to the inexorable conclusion that the settlement agreements should be rescinded. Weighed in the scale must also be the inherent advantages of compromising a claim. The old adage that a bird in the hand is worth two in the bush is all too frequently true in respect of litigation which is, by its very nature, fraught with unforeseen difficulties. All too often the anticipated strength of a case wilts during the progression of a trial. Not only do witnesses both err and make unmerited concessions, but the assessment of general damages and future losses are matters of discretion upon which opinions may validly differ. All in all, the prediction of the outcome of a claim for damages for bodily injuries is not a matter for 12 South African Law Journal (Vol 20) 1903, 55 at 56. 13 §2515. 14 Cf Exley v Exley 1952 (1) SA 644 (O) at 647A-C. the fainthearted and is incapable of accurate determination. A value judgment has to be made and, bearing in mind that a settlement not only does away with the inherent uncertainties of litigation but also limits the escalation of costs and brings about an immediate payment rather than one forthcoming at some future, uncertain stage, it is often best to settle even if the amount offered is less than what is hoped would be finally awarded. [31] Nevertheless, despite the advantages attendant upon settling Philippine and Lufuno’s claims even before the issue of summons, in my view the agreements fall to be rescinded. The relatively trifling amounts at which the children’s claims were settled bear no realistic relationship to the measure of their damages, regard being had to the nature and severity of their injuries and the very real prospect that they could experience epilepsy in the future. Although a court should always be cautious in interfering with compromises seriously concluded, there was in my view such substantial prejudice suffered by Philippine and Lufuno that the agreements cannot be allowed to stand. Accordingly the court below correctly concluded that they should be set aside. [32] The appeal is dismissed with costs, including the costs of two counsel. ______________________ L E Leach Judge of Appeal APPEARANCES: For Appellant: M Patel (with him J Schwartz) Instructed by: Lindsay Keller Attorneys, Rosebank Matsepes Inc, Bloemfontein For Respondent: B Ancer SC (with him A Berkowitz) Instructed by: Norman Berger & Partners Inc, Highlands North, Johannesburg Lovius, Block Attorneys, Bloemfontein

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 29 May 2013 Status: Immediate Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal Neutral citation: Road Accident Fund v Myhill NO (505/2012) [2013] ZASCA 73 (29 May 2013) In March 1997 two minor children of Ms S Swalibe were injured when they were run down by a motor vehicle which had swerved onto its incorrect side of the road. In due course Ms Swalibe sued the appellant for damages on behalf of her children, both of whom had sustained severe head injuries. The appellant offered to settle by paying R5 600 in respect of one child and R4 900 in respect of the other. Probably on the recommendation of her attorney, in May 1999 Ms Swalibe signed discharge forms accepting the two offers. Ten years later, the respondent, a practising advocate, was appointed as curator ad litem to represent the two minors in civil proceedings against the appellant and, in due course, he sued for an order setting aside the settlement agreements and claiming substantial damages for the two children. The high court was called upon merely to decide whether the settlements should be recognised as binding or set aside. It set them aside. With leave of the high court, the appellant appealed to the Supreme Court of Appeal. The Supreme Court of Appeal found that the two children had been substantially prejudiced by the settlements. Not only had the amounts offered taken no account of the real possibility that both children had developed post-traumatic epilepsy, and were for that reason inadequate, but it also made no provision for future medical expenses which was a likely contingency. Moreover the amounts offered had been reduced by the appellant’s assessment that Ms Swalibe herself had been contributorily negligent in regard to the collision and had set-off an amount against her children’s claims its assessment of her liability to it. It was contended that this was permissible by reason of the third paragraph of Voet 16:2:8. The Supreme Court of Appeal however ruled that the passage relied upon had been based on an acceptance that no prejudice would be caused to the minors if set-off was to operate, and that the time has now come to rule that a debtor liable to a minor child, when sued by the child’s custodian parent, may not set-off against its liability to the child any amount that it may personally be owed by the custodian. As a result of the offers that the appellant made failing to take account of the possibility of the children suffering from epilepsy or any amount in respect of future medical expenses, and due to the impermissible reduction of the claims by reason of the apportionment, both children had been substantially prejudiced by their acceptance. The Supreme Court of Appeal therefore ruled that the high court had correctly found that the agreement should be set aside and dismissed the appeal. ---ends---

2238

non-electoral

2009

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA JUDGMENT Case no: 369/08 MANONG AND ASSOCIATES (PTY) LTD Appellant and EASTERN CAPE DEPARTMENT OF ROADS AND TRANSPORT 1st Respondent THE NATIONAL TREASURY 2nd Respondent HAWKINS HAWKINS OSBORNE 3rd Respondent KWEZI V3 ENGINEERS 4th Respondent ILISO NINHAM SHAND JOINT VENTURE 5th Respondent ________________________________________________________________ Neutral citation: Manong v Eastern Cape Department of Roads and Transport & others (369/08) [2009] ZASCA 50 (25 May 2009) CORAM: Navsa, Brand, Jafta, Ponnan JJA and Bosielo AJA HEARD: 5 May 2009 DELIVERED: 25 May 2009 CORRECTED: SUMMARY: Principle of legality ─ powers of Equality Court ─ consideration of provisions of the Promotion of Equality and Prevention of Unfair Discrimination Act 4 of 2000 ─ Equality Court not a High Court ─ powers exercised in terms of the Act ─ restricted to dealing with specified complaints ─ procedures in terms of Equality Act not followed ─ matter remitted. ________________________________________________________________ ________________________________________________________________ ORDER ________________________________________________________________ On appeal from: High Court, Bhisho (Froneman J sitting as court of first instance). 1. The appeal is upheld. 2. The order of the court below is set aside in its entirety and the matter is remitted to the Equality Court for it to be dealt with in terms of the provisions of the Promotion of Equality and Prevention of Unfair Discrimination Act 4 of 2000. 3. No order is made as to costs of appeal at this stage. The parties are invited, if so advised, to apply to this court upon the final resolution of their dispute for an order in this regard. ________________________________________________________________ JUDGMENT ________________________________________________________________ NAVSA JA (Brand, Jafta, Ponnan JJA and Bosielo AJA concurring): Introduction [1] At the heart of this appeal is the principle of legality, an incident of the rule of law.1 This appeal concerns the jurisdiction and powers of the Equality Court established in terms of s 16 of the Promotion of Equality and Prevention of Unfair Discrimination Act 4 of 2000 (the Equality Act). Background [2] During July 2007 the first respondent, the Eastern Cape Department of Roads and Transport (the ECDRT), invited tenders for the design and 1 In Fedsure Life Assurance Ltd v Greater Johannesburg TMC 1999 (1) SA 374 (CC) at para 56 the following appears: ‘[I]t is a fundamental principle of the rule of law, recognised widely, that the exercise of public power is only legitimate where lawful. The rule of law ─ to the extent at least that it expresses this principle of legality ─ is generally understood to be a fundamental principle of constitutional law.’ construction of three provincial roads in an area under its jurisdiction. In August 2007, the appellant, Manong and Associates (Pty) Ltd (Manong), a company that conducts business nationally as consulting civil, structural and developmental engineers responded to the invitation. In December 2007 Manong was disqualified during the first part of a two-phase tender evaluation process due to not scoring the minimum required points for functionality. [3] Manong considered that it was unlawfully disqualified and in February 2008, as a matter of urgency, instituted proceedings, purportedly in the Equality Court in Bhisho, seeking relief in two parts.2 In the first part, Manong sought a temporary interdict preventing the ECDRT from: (a) taking further steps to evaluate any of the other tenders and; (b) awarding the tenders to any one of the other tenderers. Manong also sought an order compelling the ECDRT to furnish certain documentation. [4] At the time that the proceedings were instituted, Manong was unaware that the tenders had already been awarded to three of the tenderers. [5] Manong sought the orders set out in para 3 pending determination of an application for final relief in the following terms: (i) to set aside a decision of the ECDRT to disqualify from further consideration Manong’s tender for the relevant works; (ii) to review, correct and set aside the award of the tenders to successful bidders; (iii) declaring the contracts resulting from the allocation of tenders to be null and void; (iv) declaring the procedure followed in awarding the tenders to be inconsistent with s 217 of the Constitution and unfairly discriminatory under the Equality Act; 2 Proceedings were instituted by way of notice of motion, accompanied by supporting affidavits in the form usually employed in high court applications. (v) A direction that the first and second respondent’s procurement procedures and practices should undergo an audit in a manner to be prescribed. [6] The matter came before Froneman J, who, in a judgment in relation to the interim relief sought, said the following: ‘Because of the expedited time limits contained in the order below the application should be determined finally at the next hearing. I therefore do not consider that any temporary interdict is called for, because if the application is successful it will still be possible to undo the effects of any wrongful award of the tenders. The respondents are in any event now aware that the award of the tenders are under attack and they will not be able to rely on any steps taken with that knowledge to prevent the final relief if such relief is in the end merited.’ [7] Froneman J made the following interim orders: ‘1. The application is postponed to 20 March 2008. 2. [Manong] must ensure that the full application papers, including this judgment, be served by the sheriff on (1) Hawkins Hawkins Osborne Africa; (2) Kwezi V3 Engineers; and (3) Iliso Ninham Shand Joint Venture3 (“the other respondents”) in terms of rule 4 of the High Court rules by 6 March 2008, and proof of such service must be delivered to the Registrar of the High Court, Bhisho, by 12 noon on 7 March 2008. 3. The first respondent is ordered to deliver the full records of the proceedings in respect of the tenders for the Dimbaza Road Project, the Maluti to Qachas Nek Road project; and the St. Barnabas Hospital to Hluleka Nature Reserve Road project,4 including the documentation referred to in paragraph 6.1 and 6.2 of the Notice of Motion, to the Registrar of the High Court, Bhisho, by 12 noon on 7 March 2008. 4. [Manong] may, if it chooses to do so, deliver further supplementary affidavits, but only in response to new material arising from the delivery of the said records, by 12 noon on 12 March 2008. 5. The first and second respondents may, if they choose to do so, deliver their opposing affidavits on the main application by 12 noon on 17 March 2008. 6. The other respondents referred to in paragraph 2 above, must file an intention to oppose by 12 noon on 11 March 2008 and may, if they choose to do so, deliver their opposing affidavits on the main application by 12 noon on 17 March 2008. 7. [Manong] may file final replying affidavits by 12 noon on 19 March 2008. 3 These three entities were the successful tenderers. 4 These three projects were the subject of the tender process. 8. The costs of the application thus far are reserved for decision on final determination of the application.’ [8] The matter proceeded to a hearing on the main relief sought, referred to in para 5 above. [9] The second respondent, the National Treasury, was cited as a second respondent by Manong because, in terms of the Public Management Finance Act 1 of 1999, it is empowered to prescribe tender regulations and practices. It is, however, common cause that the ECDRT conducted the tender process in question in terms of regulations prescribed by the Provincial rather than the National Treasury. [10] The three successful tenderers did not participate in the proceedings and chose to abide the court’s decision. The Managing Director of Manong, Mr Mongezi Stanley Manong, appeared in person on behalf of his company both before the court below as also at the hearing of this appeal. [11] Manong’s principal complaint is that the ECDRT tender process is unfair under the Equality Act because it amounted to indirect discrimination against previously disadvantaged individuals. The discrimination is said to arise from the requirement that a bidder must have a history of at least seven years’ involvement in similar projects and that the technical members of its staff must have a minimum prescribed level of specialist engineering experience. Manong contended that these requirements effectively excluded previously disadvantaged persons or groups, who historically did not have an opportunity to develop that experience. In the present circumstances it meant that black engineers, either individually, or as a group, were excluded from commercial participation in public works initiated by the ECDRT.5 Manong is wholly Black- owned. It appears that many of its key personnel are also Black persons. 5 The complaint is premised on s 7(c) which prohibits unfair racial discrimination including: [12] In addition, Manong contended that the procurement process was flawed because it lacked transparency, was not cost-effective,6 was contrary to legislation and the Constitution, and that its early disqualification was actuated by improper motives on the part of officials flowing from its refusal to provide ‘kick- backs’. [13] The ECDRT and the treasury opposed the main relief sought on the basis first, that the Equality Court did not have the power to grant relief in the form of administrative review. Second, that the correct procedures under the Equality Act had not been followed and third, that there was no substance in the complaints of unfair discrimination and the unlawfulness of the procurement process. [14] Froneman J, presumably because of the basis of opposition of the first and second respondents, because the notice of motion was couched in terms conventionally used in review applications in the High Court and because the relief sought was based on grounds that included some of the grounds for judicial review of administrative action set out in the Promotion of Administrative Justice Act 3 of 2000 (PAJA), immediately proceeded to consider whether the Equality Court had ‘review jurisdiction’.7 The learned judge had regard to ss 16 and 31 of ‘The exclusion of persons of a particular race group under any rule or practice that appears to be legitimate but which is actually aimed at maintaining exclusive control by a particular race group.’ It may also be covered by s 7(e) which prohibits unfair racial discrimination including: ‘The denial of access to opportunities, including access to services or contractual opportunities for rendering services for consideration, or failing to take steps to reasonably accommodate the needs of such persons.’ In its founding affidavit, Manong refers to s 29 of the Equality Act which incorporates a schedule which contains an Illustrative list of unfair practices in certain sectors which are unfair and are widespread and which need to be addressed. That list encompasses the sector in which Manong operates and its complaint. 6 The factual underpinning in respect of Manong’s complaint concerning cost-effectiveness is that the two-phase tender process, in terms of which a technical envelope is first opened and its contents scrutinised and evaluated, before a financial envelope is proceeded to, lacks transparency and increases costs. In terms of the process one has to qualify by attaining a minimum of 75 points for functionality in terms of the technical aspect of the bid before the financial aspects are considered. 7 The judgment of the court below is reported as Manong & Associates (Pty) Ltd v Department of Roads & Transport, Eastern Cape, and others (No 2) 2008 (6) SA 434 EqC. the Equality Act8 and concluded that equality courts are not ‘separate courts of “a status similar to either the High Courts or the Magistrates’ Courts” in terms of s 166(e) of the Constitution.’9 He went on to state: ‘Unlike the explicit provisions establishing the Labour Court, Competition Appeal Court and Land Claims Court, there is no explicit attempt in the Equality Act to establish a separate court in terms of the provisions of s 166(e) of the Constitution, nor is there provision for the separate appointment of judges and judicial officers in accordance with the Constitution, as there are in those Acts.’10 [15] The court below reasoned that the judicial function exercised by judges and magistrates under the Equality Act cannot be equated to some ‘specialised legal skill such as that required of someone determining, for example, a tax, patent, competition or labour dispute.’11 It held that the achievement of equality, together with the other values mentioned in s 1 of the Constitution, including dignity and freedom, was a fundamental value and that the interpretation and application of the right to equality in terms of the Constitution are integral features of any adjudication on any given day in the courts established under the Constitution.12 [16] Froneman J considered that although s 21 of the Equality Act did not provide for review powers, an equality court located at the High Court, dealing with an adjudication dispute under the Equality Act, could exercise its High Court powers of review. This review power of the High Court, he reasoned, was in 8 The relevant provisions of s 16 are set out in para 30 below. Section 31 is dealt with in paras 48 to 50 below. 9 Section 166(e) of the Constitution under the heading ‘Judicial system’, provides: ‘The courts are – (a) … (b) … (c) … (d) … (e) any other court established or recognised in terms of an Act of Parliament, including any court of a status similar to either the High Court or the Magistrates’ Courts.’ 10 Para 10 at 439E-G. 11 Para 13 at 441A-B. 12 Para 13 at 441B-D. terms of the common law and by virtue of it being a superior court with judicial authority under the Constitution. He held as follows: ‘[T]he equality jurisdiction in terms of the Act would be exercised under High Court judicial authority, which includes judicial review.’13 [17] For this conclusion the learned judge relied on the decision of this court in Minister of Environmental Affairs and Tourism v George & others.14 In the passage relied upon, this court considered whether a High Court was one of the fora to which a matter could be referred by a presiding officer of the Equality Court in terms of s 20(3) of the Equality Act. The following was said: ‘It is true that s 20(3)(a) refers to “another . . . court”. But “court” clearly cannot include a High Court when the equality court is itself a High Court sitting as an equality court. It may include a small claims court or a magistrates’ court but is not necessary for us to decide that now. What is clear is that, in these circumstances, the High Court is not intended.’ [18] After considering the aforesaid passage, the learned judge said the following: ‘The outcome of the George case in the Supreme Court of Appeal lends support to the approach that when the High Court sits as an “equality court for the area of its jurisdiction” in terms of s 16(1)(a) of the Equality Act, it does so as a High Court with judicial authority under the Constitution. The jurisdiction it exercises when doing so is its own, as a High Court. There is, in my respectful view, no separate “equality court” (either in the form of a court established under s 166(e) of the Constitution or as a tribunal without judicial authority under the Constitution) with any separate jurisdiction of its own. The High Court sitting as an “equality court” sits as a High Court, retaining its original jurisdiction as such, together with any expanded jurisdiction that may be conferred upon it in terms of the provisions of the Equality Act.’15 [19] Re-emphasising that viewpoint Froneman J stated: ‘Perhaps it would be conducive to clarity to talk of the High Court exercising “equality court jurisdiction” under the Equality Act rather than the “equality court” having that jurisdiction. Use of 13 Para 14 at 442A-B. 14 2007 (3) SA 62 (SCA) para 10 at 69B. 15 Para 16 at 442D-F. the term “jurisdiction” in that sense would denote that the High Court has jurisdiction to determine the cause of action brought before it which is based on the provisions of the Equality Act.’16 [20] The learned judge went further: ‘If used in that sense it would mean that there should be no obstacle to single proceedings being brought in the High Court, based on a cause of action under the provisions of the Equality Act, as well as on any other cause of action over which the High Court would normally have jurisdiction.’17 He did not consider that the less formal procedures of the Equality Court militated against a combination of issues being brought in the Equality Court.18 [21] Dealing with the view of the first and second respondents that the proper procedures envisaged by the Equality Act had not been followed, Froneman J held that there was no substance to it. In his view, an enquiry in terms of s 21(1) of the Equality Act could take many forms, some formal, others less so.19 His attitude was that the directions he had given for the further conduct of the matter, namely, those set out in the interim order referred to earlier in this judgment, were sufficient. He recorded that the hearing before him on the main application had proceeded in a formal manner employed in ordinary High Court applications. [22] Froneman J then turned to consider the merits of the main application and took into account the first respondent’s defences. At para 32 of the judgment, he records that Manong did not ask for the matter to be referred to oral evidence on any specific aspect. He considered the ECDRT’s answering affidavits to be the complete response to Manong’s complaints. He held that the two-phase tender process was practical, cost-effective and transparent. The learned judge held that corruption and an improper motive to exclude Manong had not been proved. 16 Para 18 at 443B-C. 17 Para 18 at 443C-D. 18 Para 19 at 443E-444D. 19 Section 21(1) is dealt with later. See paras 41-44 and 63. As will become apparent the problem arises not only in relation to the enquiry itself but to the process leading up to it. [23] In respect of the complaint of indirect discrimination flowing from the requirements of experience and functional expertise, the learned judge took the view that a prior roster system of preferential allocation to previously disadvantaged persons provided for the possibility of obtaining practical experience. He held that the requirements of practical experience and functional experience in the present procurement policy are rationally connected to the unobjectionable goals of providing safe and durable roads to the public without wasting public money.20 [24] The following part of the judgment is important:21 ‘There is no indication before me that there are no previously disadvantaged groups or persons sufficiently experienced and qualified to satisfy the functional requirements in the procurement policy. Indeed, the complainant itself appears to fit this profile in general terms. I cannot hold that a reasonable decision-maker could not have reached the conclusion that the policy is fair and reasonable.’ [25] In the result, Froneman J dismissed the application with costs, such costs to include the costs of two counsel. The present appeal against that order and Froneman J’s judgment is with the leave of the court below. The National Treasury was not a party to the appeal. The law [26] The first issue to be dealt with is whether the court below was correct in its characterisation of the Equality Court. Allied to this is the question of its jurisdiction and powers vis à vis the High Court. In order to answer this question it is necessary to understand the purpose and scheme of the Equality Act. [27] Section 9(2) of the Constitution, after recording that equality includes the full and equal enjoyment of all rights and freedoms, provides that to promote the 20 Para 34 at 449F-H. 21 Para 34 at 449G-I. achievement of equality, legislative and other measures designed to protect or advance persons, or categories of persons, disadvantaged by unfair discrimination may be adopted. The Equality Act is legislation to that effect. [28] Section 2 sets out the objects of the Equality Act as follows: ‘(a) to enact legislation required by section 9 of the Constitution; (b) to give effect to the letter and spirit of the Constitution, in particular─ (i) the equal enjoyment of all rights and freedoms by every person (ii) the promotion of equality; (iii) the values of non-racialism and non-sexism contained in section 1 of the Constitution; (iv) the prevention of unfair discrimination and protection of human dignity as contemplated in sections 9 and 10 of the Constitution; (v) the prohibition of advocacy of hatred, based on race, ethnicity, gender or religion, that constitutes incitement to cause harm as contemplated in section 16(2)(c) of the Constitution and section 12 of this Act; (c) to provide for measures to facilitate the eradication of unfair discrimination, hate speech and harassment, particularly on the grounds of race, gender and disability; (d) to provide for procedures for the determination of circumstances under which discrimination is unfair; (e) to provide for measures to educate the public and raise public awareness on the importance of promoting equality and overcoming unfair discrimination, hate speech and harassment; (f) to provide remedies for victims of unfair discrimination, hate speech and harassment and persons whose right to equality has been infringed; (g) to set out measures to advance persons disadvantaged by unfair discrimination; (h) to facilitate further compliance with international law obligations…’ [29] As will become apparent, in due course, the Equality Court is important in meeting these objectives and in particular to determine whether discrimination has occurred and if so, whether it is unfair. [30] Section 16, under the heading ‘Equality courts and presiding officers’, establishes equality courts. The relevant parts22 of s 16 read as follows: ‘(1) For the purposes of this Act, but subject to section 31 ─ (a) every High Court is an equality court for the area of its jurisdiction; (b) any judge may, subject to subsection (2), be designated in writing by the Judge President as a presiding officer of the equality court of the area in respect of which he or she is a judge; (c) … (d) … (2) Only a judge … who has completed a training course as a presiding officer of an equality court─ (a) before the date of commencement of section 31; or (b) as contemplated in section 31(4), and whose name has been included on the list contemplated in subsection (4)(a), may be designated as such in terms of subsection (1). (3) The Judges President … must─ (a) take all reasonable steps within available resources to designate at least one presiding officer for each equality court within his or her area of jurisdiction; and (b) without delay, inform the Director-General of the Department of any judge … who has completed a training course as contemplated in section 31(4) and (5) or who has been designated in terms of subsection (1). (4) The Director-General of the Department must compile and keep a list of every judge … who has─ (a) completed a training course as contemplated in section 31(4) and (5); or (b) been designated as a presiding officer of an equality court in terms of subsection (1). (5) A presiding officer must perform the functions and duties and exercise the powers assigned to or conferred on him or her under this Act or any other law.’ (My emphasis). [31] In s 4(1) of the Equality Act, under the heading ‘Guiding principles’, the following is stated: ‘In the adjudication of any proceedings which are instituted in terms of or under this Act, the following principles should apply: (a) The expeditious and informal processing of cases, which facilitate participation by the parties to the proceedings; (b) access to justice to all persons in relevant judicial and other dispute resolution forums; 22 References to Magistrates’ Courts have been omitted. (c) the use of rules of procedure in terms of section 19 and criteria to facilitate participation; (d) the use of corrective or restorative measures in conjunction with measures of a deterrent nature; (e) the development of special skills and capacity for persons applying this Act in order to ensure effective implementation and administration thereof.’ (My emphasis). [32] Section 17 provides for the appointment of clerks of equality courts to assist the court to which they are attached to perform prescribed functions. Section 20 provides for the institution of proceedings in terms of or under the Equality Act. Section 20(1) provides that any person may act in his/her own interest or on behalf of persons who are unable to do so themselves or as a member of or in the interest of a group or class of persons. Furthermore, a person may act in the public interest. Section 20(1) also entitles associations to act in the interest of their members and provides that the Human Rights Commission or the Commission for Gender Equality may institute proceedings in the Equality Court. [33] It is important to have regard to s 19(1) of the Equality Act, which provides that Magistrates’ and High Court rules apply, with the necessary changes required by the context, to equality courts in so far as these provisions relate to ─ ‘(a) the appointment and functions of officers; (b) the issue and service of process; (c) the execution of judgments or orders; (d) the imposition of penalties for non-compliance with orders of court, for obstruction of execution of judgments or orders, and for contempt of court; (e) jurisdiction, subject to subsection (3),23 and in so far as no other provision has been made in the regulations under section 30 of this Act.’24 23 Section 19(3) provides that a magistrates’ court sitting as an equality court is not precluded from making orders contemplated in the Act which exceed its monetary jurisdiction. When it does so, its order will be subject to confirmation by a judge of the High Court having jurisdiction. That in itself serves to distinguish a magistrates’ court sitting in its capacity as such from an equality court sitting at the seat of a magistrates’ court ─ in this regard see the discussion later in this judgment from para 52 to 71. 24 Section 30(1) allows for the Minister to make regulations relating to, amongst other things, the procedures to be followed at or in connection with an enquiry in terms of the Act, including the [34] In terms of s 20(2), a person wishing to institute proceedings in the Equality Court is obliged to notify the clerk of the court, in the prescribed manner, of its intention to do so. The clerk, in turn, is obliged to refer the matter to a presiding officer of the Equality Court in question who must decide whether the matter should be dealt with by the Equality Court or whether it should be referred to ‘another appropriate institution, body, court, tribunal or other forum’, which, in the view of the presiding officer can deal more appropriately with the matter in terms of that alternative forum’s powers and functions.25 [35] If the decision is that the Equality Court should hear the matter,26 the clerk of the Equality Court must assign a date for the hearing of the matter. In making a decision as to the appropriate forum the presiding officer ‘must’ take all relevant factors into account, including those listed in s 20(4), which includes the needs and wishes of the parties, particularly of the complainant. [36] I interpose to record that regulations have been promulgated regulating the procedures to be followed in connection with an enquiry in terms of the Equality Act. The relevant regulations will be dealt with in the next four paragraphs. [37] Insofar as the regulations deal with the institution of proceedings they largely echo the provisions of the Equality Act. Importantly, the regulations provide that if the matter needs to be heard in the Equality Court the presiding officer ‘must refer the matter to the clerk who must, within three days after such referral assign a date for the directions hearing’ and inform the complainant of manner in which proceedings must be instituted, the referral of matters contemplated in s 20 and the hearing of urgent matters. The Minister is also empowered to make regulations concerning the right of appearance in court and the attendance of witnesses. The regulations are dealt with later in this judgment. 25 Section 20(3)(a). 26 Section 20(3)(b). that date.27 Regulation 8 provides for witnesses to be subpoenaed and for compelling documentary evidence. Regulation 10 (1) states that the enquiry must be conducted in an expeditious and informal manner, which facilitates and promotes participation by the parties. Regulation 10 (3) provides that the proceedings should, where possible and appropriate, be conducted in an environment conducive to participation by the parties. [38] At a directions hearing the presiding officer ‘must give directions in respect of the conduct of the proceedings as he or she deems fit.’28 After hearing the parties the presiding officer may make an order in respect of a range of issues, including discovery, interrogatories, admissions, the limiting of disputes, the joinder of parties, amicus curiae interventions, the filing of affidavits, the giving of further particulars, the time and place of future hearings, procedures to be followed in respect of urgent matters and the giving of evidence at the hearing, including whether evidence of witnesses is to be given orally or by affidavit or both.29 [39] Regulation 10 (5)(d) is noteworthy. It provides that in order to give effect to the guiding principles contemplated in s 4 of the Equality Act, and in dealing with how the enquiry is to be conducted, the presiding officer ‘must, as far as possible, follow the legislation governing the procedures in the court in which the proceedings were instituted, with appropriate changes for the purpose of supplementing this regulation where necessary, but may in the interest of justice and if no-one is prejudiced deviate from these procedures after hearing the views of the parties to the proceedings.’ (My emphasis). [40] Regulation 10 (7) states that, ‘save as is otherwise provided for in these regulations, the law of evidence, including the law relating to competency and compellability, as applicable in civil proceedings, applies in respect of an enquiry: 27 Regulation 6 (5). 28 Regulation 10 (5)(b). 29 Regulation 10 (5)(c). Provided that in the application of the law of evidence, fairness, the right to equality and the interest of justice should, as far as possible, prevail over mere technicalities.’ [41] I return to deal with further provisions of the Equality Act. Section 21 sets out the powers and functions of the equality court. Section 21(1) reads as follows: ‘The equality court before which proceedings are instituted in terms of or under this Act must hold an enquiry in the prescribed manner and determine whether unfair discrimination, hate speech or harassment, as the case may be, has taken place, as alleged.’ [42] After holding an enquiry the court may make any of the orders set out in s 21(2). For present purposes the following are important: ‘(a) an interim order; (b) a declaratory order; (c) … (d) an order for the payment of any damages … (e) … (f) an order restraining unfair discriminatory practices or directing that specific steps be taken to stop the unfair discrimination, …; (g) an order to make specific opportunities and privileges unfairly denied in the circumstances, available to the complainant …; (h) an order for the implementation of special measures to address the unfair discrimination …; (i) an order directing the reasonable accommodation of a group or class of persons…; (j) … (k) an order requiring … an audit of specific policies or practices …; (l) … (m) a directive requiring … regular progress reports …; (n) … (o) an appropriate order of costs …; (p) an order to comply with any provisions of the Act.’ [43] Interestingly, the Equality Court may, in terms of s 21(4), during or after an enquiry refer any proceedings before it to any relevant constitutional institution or appropriate body for mediation, conciliation or negotiation. [44] In terms of s 21(5), the court ‘has all ancillary powers necessary or reasonably incidental to the performance of its functions and the exercise of its powers, including the power to grant interlocutory orders or interdicts.’ [45] Section 13 deals with the burden of proof when the Equality Court determines a complaint. It provides that if a complainant has made out a prima facie case of discrimination, the respondent must prove that it did not take place, or that it was not based on one or more of the prohibited grounds, which includes race.30 Furthermore, if discrimination has taken place on a prohibited ground, then it is deemed unfair, unless the respondent proves that it is fair.31 [46] A complaint may, of course, be premised on any of the grounds set out in ss 6 to 12. These sections prohibit unfair discrimination in general and then specifically on grounds of race, gender and disability. Section 10 prohibits hate speech. Section 11 prohibits harassment and s 12 prohibits the dissemination and publication of information that unfairly discriminates. [47] Section 14 sets out the many factors that must be taken into account in determining whether the discrimination is fair. These include the context, whether the discrimination reasonably and justifiably differentiates between persons according to objectively determinable criteria, intrinsic to the activity concerned. Some of the other factors are; whether the discrimination is systematic, has a legitimate purpose and to what extent it achieves its purpose. 30 Sections 13(1)(a) and (b). 31 Section 13(2)(b). [48] Section 31 of the Equality Act, on which the court below relied for its conclusion that the Equality Court was not a separate court, deserves attention. Section 31(2) makes further provision for the designation and appointment of presiding officers and clerks of the Equality Court. Section 31(4) obliges the Chief Justice, in consultation with the Judicial Service Commission and the Magistrates Commission, to develop the content of training courses with the view to building ‘a dedicated and experienced pool of trained and specialised presiding officers, for purposes of presiding in court proceedings as contemplated in this Act, …’. (My emphasis). [49] Section 31(6) obliges the Director-General of the Department of Justice and Constitutional Development to develop and implement a training course for clerks of equality courts with the view to building ‘a dedicated and experienced pool of trained and specialised clerks, for purposes of performing their functions and duties as contemplated in this Act, …’. (My emphasis). [50] If anything, these provisions point in the opposite direction to the conclusions reached by the court below ─ the establishment of a dedicated and specialised court. [51] Before concluding this examination of the provisions of the Equality Act, it is necessary to note the provisions of s 5(2) of the Act, which provides as follows: ‘If any conflict relating to a matter dealt with in this Act arises between this Act and the provisions of any other law, other than the Constitution or an Act of Parliament expressly amending this Act, the provisions of this Act must prevail.’ [52] If one reads the preamble to the Equality Act and considers the provisions set out above, it is clear that the legislature intended to promote the restructuring and transformation of our society and institutions, away from the deeply imbedded systematic inequalities and unfair discrimination that still prevail, and to affect practices and attitudes that undermine the best aspirations of our constitutional democracy. [53] It is abundantly clear that the Equality Court was established in order to provide easy access to justice and to enable even the most disadvantaged individuals or communities to walk off the street, as it were, into the portals of the Equality Court to seek speedy redress against unfair discrimination, through less formal procedures. [54] In my view, Froneman J erred in stating that when the High Court sits as an Equality Court it does so as a High Court with all the powers and trappings of that court, including having jurisdiction in respect of causes beyond those stipulated in the Equality Act.32 [55] As stated above, the reasoning of the court below is as follows: Equality is a fundamental constitutional value that underlies all adjudication under the Constitution. Equality is an integral feature of any adjudication in the High Court on any given day. When judges adjudicate disputes under the Equality Act, it is the High Court itself with all its attendant powers that is exercising equality jurisdiction. [56] This view loses sight of the fact that when they are fulfilling their obligations and exercising the powers of their office as judges in their everyday adjudication, they do so within the powers that they have as set out in the Constitution, the common law and the statutes that specifically apply to them. They also do so in terms of the requirements of the substantive law which they apply under the umbrella of the Constitution. It is clear that any person who is the victim of racial or other discrimination is not precluded from asserting his or her right to equality as provided for in s 9 of the Constitution by the institution of proceedings in the ordinary course in a High Court. The matter will then be dealt with by the High Court, following the terms of its empowering statute and its processes and rules. 32 Sections 6 to 12. [57] The Equality Court is a special animal. In modern language one could describe it as ‘a special purpose vehicle.’ As stated above, it was clearly designed and structured to ensure speedy access to judicial redress by persons complaining of unfair discrimination. The infrastructure of magistrates’ and high courts are to be utilised. Selected and ‘specially trained’ magistrates and judges are appointed33 to preside at the seats of their existing respective courts and in relation to a geographical area encompassing the territorial areas of jurisdiction of those courts. In my view, the difference sought to be drawn by Froneman J, between the legislative structure of the equality court and other specialist courts is fallacious. [58] The legislation establishing some of those courts is instructive. It is dealt with in the paragraphs that follow. [59] In terms of s 8 of the Patents Act 57 of 1978, the Judge President of the North Gauteng High Court designates one or more judges of that division as commissioner of patents to exercise the powers and perform the duties conferred or imposed by the Act. The general powers of the commissioner are set out in s 17 which states that the commissioner shall have ‘such powers and jurisdiction as a single judge has in a civil action before a provincial division of the High Court having jurisdiction at the place where the proceedings before the commissioner are held, including the appellate power referred to in s 75.’ ‘Jurisdiction’ under the Patents Act is clearly limited to hearing matters properly brought in terms of the Patents Act. The seat of the court is in Pretoria but hearings may be held at another place. There can hardly be talk of other causes of action or alternative relief in proceedings before the commissioner. 33 This is an aspect which Froneman J considered constitutionally questionable and criticised. It is an aspect which is dealt with later in this judgment. [60] Section 36 of the Competition Act 89 of 1998 established the Competition Appeal Court (CAC). It is a court contemplated in s 166(e) of the Constitution, with a status similar to that of a high court. In terms of s 36(1)(b) it has jurisdiction throughout the Republic. It consists of at least three judges appointed by the President on the advice of the Judicial Services Commission, each of whom must be a judge of the High Court. The jurisdiction of the CAC is limited to reviewing decisions of the Competition Tribunal or considering appeals from it. The CAC can only deal with such matters as are provided for by that Act. The Competition Act provides, amongst others, for the control and evaluation of restrictive practises and to prevent the abuse of dominant positions. It thus implicates to a degree, the notion of equality within the commercial world. [61] Section 83 of the Income Tax Act 58 of 1962 established the Tax Court, which consists of a judge of the High Court, an accountant and a representative of the commercial community. The Judge President of the provincial division of the High Court having jurisdiction in the area in which the Tax Court is to hear an appeal is situated, may, where the subject of the dispute exceeds a particular amount or where the parties have agreed thereto, direct that the appeal shall consist of three judges of the High Court. The powers of the Tax Court are set out in s 83(13) of the Income Tax Act. In the Income Tax Act the fact that judges preside does not give them jurisdiction beyond that conferred by the Act. There is no prospect of other causes of action. Tax courts are located within High Court precincts and this is because of infrastructure and geography. [62] Outside of the provisions of the Equality Act, high courts and magistrates’ courts continue, on a daily basis, to uphold the fundamental values of our Constitution within the parameters of their powers. The Equality Court is an added tool to promote the transformation of our society in realisation of our best aspirations. It is a separate and distinct court with powers specified in its empowering statute. [63] As can be seen from the scheme of the Equality Act, dealt with extensively above, the Equality Court has its own rules and procedures, both in terms of the Equality Act and the regulations framed thereunder. The provisions of the Magistrates’ Courts Act 32 of 1944 and the Supreme Court Act 59 of 1959 and the rules of the Magistrates’ Court and the High Court play a limited part as provided for in s 19(1) of the Equality Act and regulation 10 (5)(d), the provisions of which are set out in paras 33 and 39 above. The statutory provisions and regulations apply in respect of the aspects set out in s 19(1)(a) to (e) and only insofar as no other provision has been made in the regulations under the Equality Act and for the purpose of supplementing them. [64] Section 19(1)(e), in stating that those provisions and rules apply in respect of jurisdiction must, in the scheme of things, mean territorial jurisdiction. Earlier in this judgment the provisions of s 19(3) of the Equality Act were referred to. That subsection, it will be recalled, states that a magistrates’ court sitting as an equality court is not precluded from making orders contemplated in the Act which exceed its monetary jurisdiction subject to confirmation by a judge of the High Court having jurisdiction. This provision is understandable. The legislature, it appears, was intent on ensuring that when an equality court matter was being heard at the seat of a magistrates’ court a party against whom a complaint was lodged was precluded from raising the monetary limit as a jurisdictional point. As pointed out earlier in the judgment, this in itself distinguishes magistrates’ courts from equality courts. The substantive jurisdictional bases for the institution of proceedings are set out in ss 6 to 12 of the Act. These sections prohibit specified unfair discrimination and other conduct. Section 21 provides extensive remedies and sets out the powers of the Equality Court. [65] High courts have inherent power to protect and regulate their own process.34 Equality courts do not. The provisions of the Supreme Court Act and the Uniform rules do not provide for this inherent power and can therefore not be 34 See s 173 of the Constitution. sourced through the Equality Act. The Equality Court has only those powers and functions set out in the Equality Act. [66] Froneman J criticised the exclusive use in the Equality Court of select judges who had completed a training course. He questioned the constitutionality of that exclusivity without deciding it. He did not, however, see that as a bar to the conclusions reached by him. [67] As can be seen from what appears above, judges in the equality court are appointed to preside in that court by the Judge President, and only after such judge has completed a training course. If the Equality Court is truly the High Court under a different name, as concluded by the learned judge, then there can be no justification for limiting the judicial officers entitled to hear equality court matters. It is to be noted that judges who preside in the High Court and who hear matters in that court implicating s 9 of the Constitution are not required to have completed a specific training course. It is, of course, ironic that Equality Court matters cannot be heard by all High Court judges. [68] Legislation could have been constructed or amended to provide for indigent communities or persons or associations or institutions representing the public interest to bring unfair discrimination complaints in the High Court under a simplified procedure that would have been informal, cheap and speedy. If it was felt that High Court judges required sensitivity or diversity training to enable a better understanding of the variety of complaints that would be presented, that could have been done. That, however, was not the structure resorted to by the legislature. We are constrained to interpret and apply the Equality Act. [69] The passage in George, a decision of this court, on which the court below relied was obiter. In that case, this court was dealing with facts clearly distinguishable from those in the present case and was not required to confront the issue resolved in this appeal. In any event, for the reasons set out above, the conclusions on which Froneman J relied cannot be supported. [70] For all these reasons I conclude that Froneman J erred in his characterisation of the Equality Court. In my view, the error in his reasoning was prompted because he was asked to consider, at the outset, whether the Equality Court had ‘review’ jurisdiction. It was the wrong question, which inevitably led to the wrong conclusion. [71] The correct question was to ask whether Manong’s complaint fell within the purview of the Equality Act. Clearly it did. The next step was to look at the powers and functions of the Equality Court referred to above. In the event of the complaint being sustained, any one of the orders set out in s 21(f) to (i) was competent. That an order by the Equality Court might have the same effect as an order made by a high court on review, is merely coincidental. [72] The attempts to typify or categorise the proceedings brought by Manong is what led to the confusion. Labels are less important than substance. In respect of Manong’s principal complaint, the Equality Court clearly had jurisdiction. In the event of the success of that complaint there would have been nothing further to adjudicate. However, in the light of the conclusions reached as set out above, it needs to be stated that only complaints or ‘causes of action’ provided for by the Equality Act are susceptible to adjudication by the Equality Court. That court was set up for a particular purpose. Other causes of action are accommodated in other appropriate fora. The Equality Court was especially set up to deal with unfair discrimination and the other issues provided for by ss 10 to 12 of the Equality Act, as described above. [73] It is now necessary to consider whether the court below, in determining that the ECDRT’s policy was not unfair, acted appropriately in terms of the Equality Act. [74] It is common cause that the prescribed procedure for the institution of proceedings in the Equality Court was not followed. Mr Manong submitted that given the urgency of the matter, he was entitled to resort to an urgent application in conventional form. Counsel for the ECDRT did not contend that there was any prejudice. It is an aspect that we need not address any further. [75] It is apparent from Froneman J’s judgment that he completed a training course as required by the Equality Act. It also appears that he came to preside in the matter coincidentally. [76] It is common cause that, prior to the hearing on the merits of the complaint, no consideration was given to whether the matter could be best dealt with elsewhere. Furthermore, there was no directions hearing as required by regulation 10 and therefore none of the issues set out in regulation 10 (5)(c) (referred to in para 38 above) were considered. [77] The guiding principles set out in s 4 of the Equality Act, particularly that concerning the facilitation of participation by the parties to the proceedings, were ignored. In terms of regulation 10 (5)(c), a presiding officer may make an order in respect of further conduct of proceedings ‘after hearing the views of the parties’. This was not done in the present case. Froneman J, as referred to in para 21 above, thought that his mero motu direction concerning the filing of further affidavits was sufficient. It was not. [78] This approach meant that the burden of proof provision set out in s 13 of the Equality Act (referred to in para 45 above) was not considered, nor, in consequence, were the provisions of s 14 of the Equality Act.35 The complaint was finally adjudicated on the basis of the Plascon-Evans rule.36 35 See para 47 above. 36 Plascon-Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd 1984 (3) SA 623 (A). [79] As will be demonstrated below, by reference to the available information, there were issues related to the complaint concerning systematic discrimination by the ECDRT that required further exploration. [80] Ironically, in the court below, it was the ECDRT which complained that the proper procedures of the Equality Act were not complied with. Before us, Mr Manong raised this complaint and submitted that he had not had a proper enquiry. It is this turn of events that underlies the order in relation to costs that will follow. [81] Mr Manong, although an engineer, is a lay person as far as the law is concerned. It was for the court below to ensure compliance with and adherence to the provisions of the Equality Act and the related regulations. As stated above, Froneman J stated that Mr Manong had not applied for a referral to oral evidence. This approach is at odds with the scheme and purpose of the Equality Act. [82] In order to demonstrate some of the issues that were unexplored because of the ordinary motion court procedure that was followed, and also to show that Froneman J’s conclusions, without all the facts, were premature, it is regrettably, necessary to deal, in some detail, with what emerged from the affidavits, including the bid requirements. I proceed to do so. [83] Bidders had to provide details of similar projects carried out in South Africa in the past seven years. Similar projects relate to the design or rehabilitation of bitumen roads with a minimum project length of ten kilometers. A maximum of ten points is awarded under this category. Furthermore, it is essential that the bidder provides suitably qualified personnel to carry out the work. [84] A maximum of 31 points is awarded for key personnel, dependent on the experience and professional qualifications of key staff members. Four points are available for what appears to be a professional registration (NQF registration). A maximum of five points is also awarded to firms who hold specified management certificates. [85] Thus, for prior work and professional experience a maximum of 50 points can be scored. [86] The following are regarded as key personnel: (a) Project Manager; (b) Road Design Engineer; (c) Pavement/Materials Engineer; (d) Bridge Design Engineer. [87] According to the ECDRT, Manong was allocated two points for each of three similar projects currently in progress or carried out in the past seven years. Although Manong’s project manager Mr Raath has extensive experience it relates to projects outside of South Africa and Manong therefore received no points for his experience. In this regard it received zero out of ten points. In respect of the remaining key personnel it received maximum points. It did not receive any points for quality management certificates as they did not exist. It received full points for NQF certificates that had been applied for but not obtained. [88] Under functionality a total of 100 points can be scored, comprising the 50 points referred to above and 50 points for Methodology, an aspect we need not be concerned with. [89] Manong received 66 points under functionality, thus failing to score the minimum of 75 points out of 100. What is clear is that Manong’s limited number of prior similar projects and Mr Raath’s non-qualification made a substantial difference in the allocation of points. It materially affected the decision to disqualify Manong. So too did the lack of the specified management certificates. [90] Froneman J, with respect, concluded rather too easily, that the prior roster system provided sufficient opportunity for developing the minimum required experience. This was an aspect that was not fully explored. Furthermore, his conclusion that there are no indications that Manong and other similar players in the field are not sufficiently experienced and qualified to satisfy the functional requirements of the bid, is problematical. First, he did not consider whether other previously disadvantaged individuals or engineering firms should be joined. There is no evidence about how many previously disadvantaged individuals or firms are interested or actively involved in bidding for ECDRT contracts. No evidence was presented concerning the profile of previously disadvantaged engineers or firms that operate in South Africa or who are actively interested in public contracts. No evidence was presented about why seven years was chosen as the appropriate minimum requirement as opposed, to say, any other number of years. Manong asserts without challenge, that it had successfully completed other engineering projects for the ECDRT. [91] In dealing with the issues referred to above the evidential onus provision may be implicated. As stated above, it was not even considered. In the light of the aforesaid background, it is clear that Froneman J’s conclusions in relation to the complaint ought to have been more guarded. [92] Every reasonable person would share the court below’s concerns that our roads should be safe and durable and constructed by persons who are technically proficient. This, however, does not obviate the need to properly establish whether the systematic exclusion alleged is unfair. A proper enquiry should reach a decision that will ensure that these concerns are addressed. [93] Counsel for the ECDRT and Mr Manong agreed that, in the light of Froneman J’s non-consideration of imperative provisions of the Equality Act and regulations, the order made by the court below is liable to be set aside and that we should remit the matter for it to be dealt with in accordance with the provisions of the Equality Act. [94] There is one further aspect that requires attention. In its heads of argument, the ECDRT submitted that the court below did not have territorial jurisdiction, because neither it nor the National Treasury were within the area of jurisdiction of that court and furthermore, that ‘the cause of action’ did not arise within the court’s area of jurisdiction. Although counsel for the ECDRT did not have instructions to abandon the jurisdiction point he quite correctly did not address us on this aspect. The impugned policy applies throughout the province and the jurisdiction point raised by the ECDRT is entirely without merit. [95] In light of the above, the following order is made: 1. The appeal is upheld. 2. The order of the court below is set aside in its entirety and the matter is remitted to the Equality Court for it to be dealt with in terms of the provisions of the Promotion of Equality and Prevention of Unfair Discrimination Act 4 of 2000. 3. No order is made as to costs of appeal at this stage. The parties are invited, if so advised, to apply to this court upon the final resolution of their dispute for an order in this regard. ______________________ M S NAVSA JUDGE OF APPEAL APPEARANCES: For Appellant: M S Manong Instructed by Messrs Potelwa & Co King William’s Town E G Cooper & Majiedt Inc Bloemfontein For Respondent: R G Buchanan SC T M Ntsaluba Instructed by The State Attorney King William’s Town The State Attorney Bloemfontein

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 25 May 2009 Status: Immediate Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal On 25 May 2009 the Supreme Court of Appeal handed down judgment in Manong and Associates (Pty) Ltd v Eastern Cape Department of Roads and Transport and others. The SCA overturned a decision of the Equality Court sitting at the seat of the High Court in Bhisho, in terms of which it was held that the Eastern Cape of Roads and Transport had not unlawfully discriminated against a Black-owned national civil engineering company, Manong and Associates (Pty) Ltd, by excluding it from the second phase of a two-phase tender process. The SCA held that the Equality Court is not a high court with all the trappings and power of the latter. Instead, it is a special court with its powers to be found in the provisions of the Promotion of Equality and Prevention of Unfair Discrimination Act 4 of 2000. The SCA held that the Equality Court had ignored provisions of the Equality Act and in particular those that promoted participation by the parties in relation to the proceedings. The Equality Court erred further by not having regard to important provisions of the Equality Act and therefore the enquiry conducted by it was flawed. The SCA held that certain aspects of Manong’s complaint required further exploration. It found that the Equality Court’s conclusion, that a prior roster system of allocation of tenders provided sufficient opportunity to gain experience, was reached without proper scrutiny and important factors that impacted on previously disadvantaged engineers should have been examined. The SCA shared the Equality Court’s concern that our roads should be safe and durable and constructed by persons who are technically proficient but held that this did not obviate the need to properly establish whether the alleged systematic discrimination was unfair. In order to determine this question a proper enquiry in terms of the Equality Act was required. The appeal was upheld and the matter referred back to the Equality Court for a proper enquiry to be conducted in terms of the Equality Act. The question of costs was reserved to be decided upon a final resolution of the dispute.

3224

non-electoral

2007

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA JUDGMENT REPORTABLE Case number: 503/06 In the matter between: VARI-DEALS 101 (PTY) LTD t/a VARI-DEALS First Appellant JILL BELINDA DRAKE Second Appellant ZIMSTONE (PTY) LTD t/a ZIMSTONE Third Appellant KEITH ARNOLD MUNRO Fourth Appellant UWE FRITZ Fifth Appellant and SUNSMART PRODUCTS (PTY) LTD Respondent CORAM: HARMS ADP, NUGENT, PONNAN, COMBRINCK JJA and HURT AJA HEARD: 3 SEPTEMBER 2007 DELIVERED: 27 SEPTEMBER 2007 Summary: Patent – Interpretation of specification and claims – 'Purposive approach' – Patent and Registered Design – Anticipation – Infringement. Neutral citation: This judgment may be referred to as Vari-Deals 101 (Pty) Ltd v Sunsmart Products (Pty) Ltd [2007] SCA 123 (RSA) HURT AJA: Introduction. [1] The respondent, Sunsmart Products (Pty) Ltd (‘Sunsmart’), is the proprietor of a registered patent and a registered design. Since 2004, various courts have dealt with applications for interdicts and related relief, claimed by Sunsmart on the basis that the patent and design have been infringed. It is convenient, at the outset, to recount the history of this litigation for the purpose of clarifying certain of the issues which require to be dealt with in this appeal. [2] During November 1997, applications for registration of the patent and the design were lodged under numbers 97/10535 and 97/1155, respectively, with the Registrar of Patents and the Registrar of Designs. Both applications related to what was described as a ‘flag construction’. During 2002, the original proprietors of the patent and the registered design executed assignments of their rights in both to Sunsmart. In 2004 Sunsmart brought two applications for interdicts restraining the infringement of the patent and the registered design against various alleged infringers. The respondent in the first of these was a company called Flag and Flagpole Industries (Pty) Ltd. In that case simultaneous applications were lodged in the Court of the Commissioner of Patents (under case no 97/10535) and in the High Court, Pretoria (under case no 7385/04). In a second (later) application, the five appellants in this appeal were amongst seven cited respondents who were alleged to have infringed the patent and the registered design. The second application was likewise launched in the Commissioner's Court (also under case no 97/10535) and in the High Court (under case no 21061/04). In each of these applications, a judge sat in the dual capacity of the Commissioner and of a judge of the High Court. In what has become known (and will be referred to in this judgment) as ‘the Flag and Flagpole case’, the presiding judge was Southwood J and in the court from which this appeal emanates, R D Claassen J presided. [3] In the Flag and Flagpole case, the respondent denied infringement and, in the alternative, contended that both the patent and the design were invalid for want of novelty. Southwood J held that Sunsmart had failed to prove infringement of the patent because one of the essential elements of the invention claimed in the patent was not incorporated in the Flag and Flagpole product. He therefore found it unnecessary to deal with the issue of validity of the patent. In regard to the design, Southwood J held that a ‘sail flag’ described and illustrated in a 1992 United States Patent (‘the Rehbein Patent’) constituted an anticipation of the registered design and he accordingly dismissed the application for an interdict on that score. Southwood J granted leave to appeal against his judgment. [4] The applications which were dealt with in the court a quo by Claassen J, came before him after they had been referred for the hearing of oral evidence in regard to a factual dispute relating to the issue of whether certain of the cited respondents had been guilty of ‘contributory infringement’. The matter proceeded before Claassen J while the appeals against the decisions by Southwood J were still pending. I should mention that, on the papers before Claassen J, there was a counter-application for revocation of the patent on the basis that it was invalid. [5] After hearing evidence, Claassen J held that Sunsmart had established infringement of the patent and of the design. In the course of reaching his conclusions as to infringement, Claassen J found himself constrained to disagree with the construction placed on the claims in the patent by Southwood J and with Southwood J's finding that the design was not novel. He found that there had been infringement (both ‘direct’ and ‘contributory’) of the design and the patent and granted the customary relief. In addition, he granted an unusual order, directing the respondents to disclose to Sunsmart the names of other possible infringers to whom the respondents had sold their products. Insofar as his finding was to the effect that there had been contributory infringement (the issue which had been referred for the hearing of viva voce evidence), his conclusion was that the first, third, fourth and fifth respondents had colluded to procure the infringement. As there had apparently been no mention, in the course of argument before him, of the counter-application for revocation, Claassen J made an order dismissing it. His judgment was delivered on 30 January 2006. He, too, granted leave to appeal to this court. [6] On 16 March 2007, the appeal to this court in the Flag and Flagpole matter was heard. Judgment on the appeal (per Streicher JA) was handed down on 3 April 2007.1 The unanimous decision of this court was that Southwood J had erred in finding that there was no infringement of the patent. On this basis it became necessary for the court to consider the issue as to the validity of the patent. In this regard, the contention was that US Patent 5 572 945, applied for in August 1994 (‘the Eastaugh Patent’) described the invention in SA Patent 97/10535 and rendered it invalid for want of novelty. This contention was rejected. Insofar as the design was concerned, this court dismissed various contentions to the effect that the design had been described or depicted in various earlier documents and drawings (including the Rehbein patent). The court decided that the appeals in both the patent and design cases should be upheld and granted relief by way of interdicts, orders for delivery of infringing articles and an enquiry into damages. [7] For some reason, the second respondent in the court a quo, against whom Sunsmart had withdrawn its claims, was cited as the second appellant in this appeal. In fact, there are only four appellants before us and, as was done in the High Court, it will be convenient to refer to them by name, viz, the first appellant, Vari-Deals 101 (Pty) Ltd, as ‘Vari-Deals’, the third appellant, Zimstone (Pty) Ltd, as ‘Zimstone’, the fourth appellant, Mr Keith Arnold Munro and the fifth appellant, Mr Uwe Fritz, by their surnames, ‘Munro’ and ‘Fritz’ respectively. The Effect of the Flag and Flagpole Judgment. [8] The appellants' heads of argument were submitted to this court on 5 April 2007, only two days after the judgment in the Flag and and Flagpole appeal was 1 Sunsmart v Flag and Flagpole Industries [2007] SCA 50 (RSA). handed down. The appellants, having based their original argument on the judgments of Southwood J, submitted a set of supplementary heads in order to deal with the situation which had developed as a result of the reversal by this court of those judgments. In the introduction to the supplementary heads, the appellants stated: ‘These supplementary heads have been prepared in an attempt to address the judgment of this honourable court in the Flag and Flagpole matter insofar as it relates to both the patent and the design cases. The submission will be, for the reasons which follow, that this honourable court is not bound to follow its earlier decision, and that this decision notwithstanding, the present appeal should succeed on both the patent and design cases.’ There followed a number of submissions by counsel for the appellants to the effect that this court erred in coming to its conclusions in the Flag and Flagpole matter – (a) by failing to apply the proper principles of construction of patent claims when considering the meaning and scope which should be attributed to them; (b) by incorrectly rejecting the contention that the invention in the patent was not new, inasmuch as it had been ‘described’ (within the meaning of that expression in s 25(6) of the Patents Act 57 of 1978) in the Eastaugh patent; (c) by finding that all of the essential integers in claim 1 of the patent are present in the allegedly infringing flag; (d) by finding that the registered design had not been anticipated by one of the drawings in the Rehbein patent. (Section 35(5), read with s 31(c) and s 14 of the Designs Act 195 of 1993.) [9] In view of these submissions, it is perhaps not inapposite to bear in mind (trite though the proposition may be) that this court is not sitting as some sort of ‘Second Court of Appeal’ in judgment on the Flag and Flagpole case. The judgment in that case, insofar as it concerns the interpretation of the specification and/or claims of SA Patent 97/10535 and insofar as it incorporates findings that the patent and the registered design had not been anticipated by the Eastaugh and Rehbein patents respectively defines rights of a statutory nature which apply as between Sunsmart and the public at large, and not merely between the parties to the litigation. Especially in this situation, this court would accordingly only be justified in declining to follow the interpretations and the rulings on anticipation (or rather the absence thereof) in the Flag and Flagpole judgment in very restricted circumstances. These are concisely stated in Bloemfontein Town Council v Richter 1938 AD 195 at 232 viz : 'The ordinary rule is that this court is bound by its own decisions and unless a decision has been arrived at on some manifest oversight or misunderstanding that is there has been something in the nature of a palpable mistake, a subsequently constituted court has no right to prefer its own reasoning to that of its predecessor - such a preference, if allowed, would produce endless uncertainty and confusion. The maxim 'stare decisis' should, therefore, be more rigidly applied in this, the highest court of the land, than in all the others.' This approach has been regularly applied in our law.2 Counsel for the appellants, though invited to do so, refrained from contending that the judgment in the Flag and Flagpole case was tainted by the type of oversight or error contemplated in the above passage. [10] Counsel did, however, persist in a submission to the effect that the approach of this court in the Flag and Flagpole case had not been consistent with South African law and that, in considering the issue of infringement in this case, we should have regard to the caution expressed by Plewman JA in Nampak Products Ltd and Another v Man-Dirk (Pty) Ltd 1993 (3) SA 708 (SCA) at 712-714. Counsel's submission, as I understood it, was that the tendency to ‘purposive construction’ of patent specifications and claims in English law3 had been affected by the introduction of s 125 of the English Patents Act of 1977 and Article 69 of the European Patent Convention. These statutory provisions had, and have, no force in this country, with the result that the developments pursuant to them were not applicable to the interpretation of patents by our courts. The result would be that the 2 Catholic Bishops Publishing Co v State President and Ano 1990 (1) SA 849(A) at 866; Brisley v Drotsky 2002 (4) SA 1 (SCA) at paras 55-60. 3 As to which see Catnic Components Ltd and Ano v Hill and Smith Ltd [1982] RPC (HL); Improver Corporation and Others v Remington Consumer Products Ltd and Others [1970] FSR 181. ‘time-honoured approach’ to interpretation in our law4 needed to be, but was not, applied in the Flag and Flagpole case. Without going so far as to ask this court to disapprove of the interpretation given to the claims in the Flag and Flagpole case, counsel suggested that, for the purpose of deciding the infringement issue before us, we should revert to the more ‘literal’ approach and minimize the role which the apparent intention of the patentee might play in deciding what the claims mean and which particular aspects of them should be regarded as ‘essential elements or integers’. [11] There are two crisp answers to this suggestion. (a) The primary object of Plewman JA's comments in regard to the changes in approach to interpretation was to stress that the advent of ‘purposive construction’ should not be treated as giving litigants carte blanche to tender the evidence of expert witnesses as an aid to the construction of claims (p 714B). Nowhere, in the relevant passage, did the learned Judge disapprove of the Catnic approach – he simply cautioned that it should be applied with care (p 714 D-E). (b) In Aktiebolaget Hässle and Another v Triomed (Pty) Ltd 2003 (1) SA 155 (SCA), Nugent JA, after a brief review of the cases, said (at p160 para [9]): ‘While the claim must be construed to ascertain the intention of the inventor as conveyed by the language he has used (Gentiruco AG v Firestone (Pty) Ltd 1972 (1) 589 (A) at 614 B-C) what is sought by a purposive construction is to establish what were intended to be the essential elements, or the essence, of the invention, which is not to be found by viewing each word in isolation but rather by viewing them in the context of the invention as a whole. To the extent that it might have been suggested in an obiter dictum in Nampak Products Ltd and Another v Man-Dirk (Pty) Ltd 1999 (3) SA 708 (SCA) at p 714A that it might be called in aid only to construe an ambiguous claim, I do not think that is supported by the decisions of this court and, in my view, it is not correct.’ That the ‘purposive approach’ has received the authoritative endorsement of the courts in this country was made clear by Nugent JA in his review of the South African decisions (and and their adoption of the Catnic approach) at pages 159 to 160 of 4 As crystallized in Gentiruco AG v Firestone (Pty) Ltd 1972 (1) SA 589 (A) at 613-618, and modified in such cases as Multotec Manufacturing (Pty) Ltd v Screenex Wire Weaving Mnfrs (Pty) Ltd 1983 (1) SA 709 (A) and Sappi Fine Papers (Pty) Ltd v ICI Canada Inc 1992 (3) SA 306 (A). Triomed. It is, of course, true that Catnic did not change the law relating to construction5, but it certainly restricted the scope for contesting litigants to indulge in ‘meticulous verbal analysis’ of specifications and claims - usually to an extent which would have been inconceivable to the ordinary skilled addressee reading the patent to ascertain the invention and the ambit of protection claimed. It also relieved the courts of the metaphorical ‘straitjacket’ of having to arrive at any interpretation of claims without having free recourse (subject to the well-established limits) to the specification in order to decide what the skilled addressee would have understood those claims to mean.6 [12] In reaching his conclusions as to the meaning of the claims in the patent, Streicher JA expressly applied a purposive interpretation. In doing so he relied upon the Triomed judgment and there is no basis for the criticism leveled at him in this respect by counsel for the appellants. The Patent-in-Suit. [13] The first exercise must be to consider the specification of the patent and to decide on the meaning and scope of the monopoly defined by the claims. [14] Fundamentally, the patentee seeks protection for a new type of flag which will remain extended, whatever the weather conditions, and which is of particular use as an advertising medium. The specification records that the flags of the prior art had 5 L T C Harms, The Enforcement of Intellectual Property Rights: A Case Book, p 188-198. 6 In Kirin-Amgen Inc and Ors v Hoechst Marion Rousel and Ors [2005] 1 All ER 667, Lord Hoffman sketched the history of the reception of the concept of ‘purposive interpretation’ in English Law. In para [33] (at p 680) he said : 'Construction, whether of a patent or any other document, is of course not directly concerned with what the author meant to say. There is no window into the mind of the patentee or the author . . . Construction is objective in the sense that it is concerned with what a reasonable person to whom the utterance was addressed would have understood the author to be using the words to mean. . . . . . The meaning of words is a matter of convention, governed by rules, which can be found in dictionaries and grammars. What the author would have been understood to mean by using those words is not simply a matter of rules. It is highly sensitive to the context of and background to the particular utterance.’ two specific drawbacks in this context. The first was that they remained limp in windless conditions, making it impossible to decipher any advertising copy which might be printed on them. The second was that in high wind conditions, or in blustery weather, the continual flapping of the flag would also result in difficulty in reading the advertiser's message and would also often result in damage to the flag material. The patentee's claim is to a method (and to its resultant product) of keeping the material of the flag extended in any type of weather conditions by using a flexible pole to apply tension to the material. The consistory clause reads as follows: ‘According to the invention, a flag construction comprises a pole which includes, at least at the top end thereof, a flexible section which is adapted to be bent into a substantially U-shaped section and being adapted to engage at least a portion of the upper periphery of a piece of material and to maintain it under tension at least in the area defined by the pole, the U-shaped section and a line between a point towards the tip of the flexible section and a point along the length of the pole.’ The specification then proceeds to describe various preferred embodiments and/or modifications which are all to be discerned in the claims and it will be convenient to deal with those that are relevant in this case when the meaning and scope of the claims are considered. [15] The claims read as follow: ‘1. A flag construction comprising a pole which includes, at least at the top end thereof, a flexible section which is adapted to be bent into a substantially U-shaped section and being adapted to engage at least a portion of the periphery of a piece of material and to maintain it under tension at least in the area defined by the pole, the U-shaped section and a line between a point towards the tip of the flexible section and a point along the length of the pole. 2. The flag construction according to claim 1 in which the top end of the pole includes a flexible section of fibreglass or the like which tapers to a narrow diameter. 3. A flag construction according to claim 2 in which the tapered section is integral with the pole. 4. The flag construction according to claim 3 in which the material includes a seam or sleeve along one edge, into which the tapered end of the pole is slided (sic). 5. A flag construction according to any of the above claims including the combination of an inverted U-shaped section with an inverted teardrop-shaped piece of material. 6. A flag construction according to any of the above claims in which the pole is adapted to rotate about its own axis. 7. A flag construction substantially as described with reference to the accompanying drawing.’ The issues relating to the meaning and scope of the claims in this case are restricted and it is not necessary for the purpose of this judgment to embark on an exhaustive analysis and interpretation. It will be convenient, instead, to consider the proper interpretation in relation to each of the issues as they are dealt with. Alleged Invalidity of the Patent. [16] Before us the appellants persisted with the contention that the patent was anticipated by the Eastaugh patent. Certain submissions were made concerning the analysis of the Eastaugh patent by this court in the Flag and Flagpole case. The submissions fall to be rejected on the simple basis of stare decisis: the interpretation of the Eastaugh patent is a question of law and the appellants have not been able to pass the hurdle set in the Bloemfontein Town Council judgment.7 [17] I have already indicated that the counterclaim for revocation of the patent was dismissed by Claassen J. Counsel for the appellants contended that, inasmuch as the revocation proceedings had not reached a stage where they were ripe for adjudication at the time when Claassen J delivered his judgment, they should not have been dismissed but left in abeyance. As stated by Claassen J, however, no submissions were made to him in relation to the prayer for revocation and in the circumstances, given that he was called upon to adjudicate upon the application (including the counterclaim for revocation) it was proper for him to make the order dismissing the latter. Such an order, of course, does not stand as res judicata on the issue of revocation, but given the findings of the courts in relation to the issue of validity of the patent when raised as a defence to the claim for infringement, it is 7 In addition, counsel was unable to identify the presence of integer (b)(iv), referred to in para 19 below, in the Eastaugh patent. highly doubtful whether the revocation application, if proceeded with separately, would have any prospect of success. Infringement of the Patent. [18] The issue of infringement in this case has been complicated by Sunsmart's contention that the appellants collaborated and induced others to assist them in producing infringing articles. Obviously, if the articles thus produced do not infringe the patent, then any question of contributory infringement falls away. In the court a quo the appellants, individually, denied ‘making, . . . disposing of or offering to dispose of . . . the invention’.8 Their case was that the final product on which Sunsmart relied for its case on infringement, was a combination of various items independently supplied by various dealers. What was common cause, however, was that the flag which is depicted in the photograph, Annexure 'A' to this judgment , and which bears the caption ‘New Heights 1408 CC’ is an example of what can be produced by this combination. For the purpose of discussing the issue of infringement, I shall refer to this article as ‘the New Heights flag’. [19] In the court a quo Claassen J expressly recorded that it was common cause that the integers of claim 1 of the patent were: (a) a flag construction comprising (b) a pole (i) which includes at least at the top end thereof a flexible section; (ii) which is adapted to be bent into a substantially U-shaped section; and (iii) being adapted to engage at least a portion of the upper periphery of a piece of material; and 8 Section 45 of the Patents Act. (iv) to maintain it (i.e. the material) under tension at least in the area defined by the pole, the U-shaped section and a line between a point towards the tip of the flexible section and a point along the length of the pole. [20] The debate in the court a quo was confined to the question of whether the New Heights flag incorporated integers (b)(iii) and (b)(iv). On appeal before us, however, counsel for the appellants submitted that a drastically different approach to the analysis of the integers in claim 1 should be adopted. His contention was that claim 1 sought protection for a pole with certain characteristics and not for a pole in conjunction with anything else (to quote counsel's heads of argument) ‘more especially any material’.9 There is no substance in this contention. The patent has already been considered by seven judges, none of whom were asked to find that claim 1 related to a pole without the material. Nor, at this late stage of the proceedings, is it necessary for me to say any more than that the experienced flag maker, reading the specification and claims, could not possibly be under the impression that the main claim described a pole stripped of the material with which it must be coupled to comprise a ‘flag construction’.10 [21] Counsel for the appellants repeated the contention that integer (b)(iii) was missing in the New Heights flag. The basis for it was the earlier finding by Southwood J in the Flag and Flagpole case that integer (b)(iii) defined a pole which was adapted (in the sense of ‘being made suitable’ or ‘altered so as to fit’) to engage (in the sense of ‘to fasten or attach’) the material. He decided that no part of the pole in the allegedly infringing article had been made suitable for fastening or attaching the material to it. ‘On the contrary,’ he stated, ‘it is the material which has been adapted to engage the pole. The addition of the sleeve makes this possible.’ 9 This contention was adumbrated in para 31 of the answering affidavit of Fritz [pp 151-152], but apparently not persisted in before Claassen J. 10 The definition of a ‘flag’ in the Shorter Oxford English Dictionary, 3 ed, p 708 (assuming that the addressee of the patent, bemused by the appellant's contention, might have been driven to look this word up) is given as ‘A piece of stuff . . . . usually oblong or square, attached by one edge to a staff, used . . . for display.’ [22] Claassen J declined to follow the reasoning of Southwood J in regard to this issue. He took the view that the word ‘engage’ had been used in the sense of requiring the pole to be able to conform to the shape of the upper periphery of the material. There is much to be said for this construction, more especially when one has regard to the circumstance that the word ‘engage’ has a special technical meaning of ‘to interlock with or to fit into a corresponding part’.11 This issue was, however, conclusively resolved by the judgment of this court in para [13] of the Flag and Flagpole case where it was held that, on a proper interpretation of claim 1, the essential requirement is that the pole and the material must be attached to each other, the precise manner in which the attachment is achieved not being material. Streicher JA went on to point out (at para [14]) that claim 4, which is an embodiment of claim 1, defines a specific method by which the material is adapted to house the flexible pole. To construe claim 1 as essentially requiring some mechanism of attachment to be incorporated in the pole, as opposed to the material or to both, would be inconsistent with claim 4. This would be contrary to the ‘normal rule’ of interpretation of claims referred to in the judgment of Trollip JA in Netlon Ltd and Another v Pacnet (Pty) Ltd 1977 (3) SA 840 (A) at 857 G–H, and applied by the learned judge at 857H-858B. [23] Claassen J, in the court a quo, confined his consideration of whether the New Heights flag incorporated integer (b)(iv) to the simple statement that: ‘As far as (b)(iv) is concerned, it is present in the infringing flag. For all intents and purposes that is exactly what both flags and poles consist of.’12 On appeal before us, counsel for the appellants did not seriously challenge this finding. Instead, counsel sought to place emphasis on the reference in the patent claims to the ‘U-shaped section’ of the flag for which protection was claimed. In the 11 Oxford English Dictionary (2 ed) Volume V, p 247. 12 Southwood J had also held that integer (b)(iv) was incorporated in the allegedly infringing article in the Flag and Flagpole case, the construction of which, in this particular aspect, was, for all practical purposes, identical to that of the New Heights flag. His finding on this aspect was expressly approved by Streicher JA in para [19]. affidavits in the application, the appellants had contended that the New Heights flag could not be described as having a ‘U-shaped’ upper periphery. In this regard the appellants contended that there was a material difference between the (truncated) ‘spiral’ shape of the upper section of the New Heights flag and the ‘semi-circular’ contour of the flag depicted in the patent as an embodiment of the invention. Perhaps conscious that this contention, standing on its own, could not be justified, counsel expanded it into an argument which ran as follows: (a) In rejecting the contention (in the Flag and Flagpole case) that the Eastaugh patent was an anticipation of the patent-in-suit, this court had emphasised that the ‘question mark shape’ referred to in the Eastaugh patent could not be equated to the ‘inverted U’ claimed in the patent-in-suit.13 (b) By a sort of 'reverse application' of the time-honoured adage 'that which would infringe if later anticipates if earlier’, the corollary to the finding referred to in (a) would be that the article described in the Eastaugh patent would not infringe the patent-in-suit because the shape of its upper periphery would be different to that claimed in the patent-in-suit. (c) Since there is, likewise, a material difference in the shape of the New Heights flag compared to the article claimed in claim 1 (which, I need hardly stress, is not confined to the embodiment depicted in the drawing), there cannot be an infringement. [24] The submission is flawed on two fronts. In the first place, it ignores the fact that claim 1 refers to the pole being bent into a ‘substantially U-shaped section’. The skilled addressee would, in my view, appreciate that the ultimate shape of the taut upper periphery of the flag, given that the pole and material are required to engage each other, would ultimately be dictated by the arc taken up by the flexed pole and the shape of the periphery of the material.14 He would surely not construe the claim as being confined to an article in which the combination of the flexed pole and its 13 Flag and Flagpole judgment, paras [26] and [27]. 14 This much was expressly stated by Fritz in para 24 of his answering affidavit. [p149] attachment to the flag material produced an inverted U.15 In the second place the rejection, in the Flag and Flagpole judgment, of the contention that the Eastaugh patent anticipated the patent-in-suit should not be taken to have been confined only to the consideration that the ‘question mark shape’ described in Eastaugh could not be equated to the ‘substantially U-shaped section’ of the patent-in-suit. It is apparent, both from a reading of the description in the body of the Eastaugh patent and from a consideration of the drawings embodying what had been described in words in that specification, that a wide range of resultant shapes was contemplated. It is trite that, in considering whether an earlier document ‘describes’ a later claim, ‘the wider or more general the language (of the earlier document), the less likely it is to render the specific invented process (claimed in the later patent) identifiable and perceptible and therefore to "describe" it.’16 The article contemplated as a part of the invention in the Eastaugh patent is generally described as having a ‘curvilinear edge’ which term plainly embraces a wide range of curved shapes. Accordingly, the finding that the Eastaugh patent did not anticipate the patent-in-suit does not, as a matter of logic, have the necessary result that a spiral-shaped upper section cannot fall within the ambit of the expression ‘substantially U-shaped’. [25] The appellants' final contention as to why the New Heights flag does not incorporate all of the essential integers of the flag described in the claims, relates to the nature of the pole used in the New Heights flag. As can be seen from the photograph, annexure A, the pole effectively comprises three sections. The lowest of these (which, according to the evidence, is attached to the base support) is a hollow tube which has a diameter larger than the middle section. This middle section is inserted into the lower section, allowing the upper portion of the flag to rotate independently of the lower section. At the top of the middle section there is a gooseneck joint. A solid, flexible baton is inserted into the offset section of the gooseneck and this baton is threaded into the edge pocket sewn into the upper periphery of the flag material. The appellants contended, first, that the pole 15 Cf the finding of the court in Catnic, where the word ‘vertical’ was was interpreted to mean ‘approximately vertical’. 16 Gentiruco at 649G. contemplated by the claims in the patent was a single unit. Accordingly, so the contention ran, the base support and the three-component, rotatably-mounted flag pole used in the New Heights flag were materially different to the pole claimed in the invention. Secondly, they contended that the gooseneck and the baton were materially different to the corresponding integers of the patent claims. [26] It is plain from a consideration of claim 3, read with the claims preceding it, that claim 1 is not confined to what counsel referred to as a ‘unitary pole’. Claim 2 can only be construed as referring to a pole with at least two constituents - a non- flexible base and a tapered, flexible, fibreglass top. Moreover, claim 3 contemplates a pole in which the tapered section is ‘integral with the pole’. The necessary implication is that claim 1 includes, within its scope, a multi-component pole. Nor (insofar as the appellants' second contention is concerned) are there any stipulations in the patent as to how the components of the pole are to be joined to each other. The situation in this regard is much the same as that relating to the means of attachment of the pole to the flag material. It is apparent that the method of joining the sections of a multi-component pole to one another would not be regarded by the skilled addressee as an essential element of making the flag according to the invention. Such addressee would understand that any form of joint could be used provided that the resultant pole has the attributes required by the claims. In the result, the appellants' contentions that the New Heights flag is not an infringement of the patent all fall to be rejected. I shall deal with the issues relating to contributory infringement after considering the issues of the validity and infringement of the registered design. Validity of the Design. [27] In the Flag and Flagpole case, various prior art documents were relied upon in support of the assertion that the design was not new. Southwood J had held that the design was anticipated by one of the drawings in the Rehbein patent and had found it unnecessary to deal with the other alleged anticipations. As already indicated, this court reversed the finding that the Rehbein patent constituted an anticipation.17 The appellants have restricted their attack on the validity of the design to the drawing in the Rehbein patent. The issue has thus already been disposed of by the judgment in the Flag and Flagpole case, and I have nothing to add. Infringement of the Design. [28] The design was registered as an aesthetic design in part A of the register. The definitive statement reads: ‘The novelty of the design as applied to a flag, banner or the like lies in the shape and/or configuration thereof, substantially as shown in the accompanying drawing.’ The drawing to which reference is made is reproduced in annexure B to this judgment. The explanatory statement reads: ‘A flag or banner is shaped substantially like an inverted teardrop (10) and is adapted to be engaged by a flexible pole (12).’ The appellants contended (unsuccessfully) in the court a quo, and have repeated their contention in argument before us, that there are significant differences between the shape of the New Heights flag and the shape depicted in annexure B. They emphasise (a) the difference in the shape of the curved upper periphery of the design compared with that of the New Heights flag; and (b) the ‘multi-components with their peculiar inter-action’ (I quote from the appellants' heads of argument) of the New Heights flag. The difference alleged in (b) can be disposed of without more ado. Functional features such as the multi-component flagpole and the gooseneck joint in the New Heights flag are not relevant in assessing differences between the New Heights flag and the aesthetic design for which protection is claimed.18 The significance of the difference between the two contours alleged in (a), must be 17 Streicher JA's judgment, para 37. 18 Section 1(1)(i) of the Designs Act defines an aesthetic design as ‘any design applied to any article, whether for the pattern or the shape or the configuration or the ornamentation thereof, or for any two or more of those purposes, and by whatever means it is applied, having features which appeal to and are judged solely by the eye, irrespective of the aesthetic quality thereof’. gauged through the eye of the ‘likely customer’.19 Although there is no specific evidence in this regard, I think that it is fair to assume that a very large proportion of the customers in this instance will be attracted to the teardrop shape of the flag, which is plainly a striking feature of the registered design. Comparing the shape of the design with that of the New Heights flag, through the eyes of a hypothetical customer, I do not consider that the subtle differences in curvature of the upper periphery of the two flags would be regarded as significant. It follows that the New Heights flag is an infringement of the registered design. Contributory Infringement [29] As indicated earlier the issue of whether the appellants had collaborated to assist each other in conduct which constituted infringement of the patent was referred, in the court a quo, for the hearing of oral evidence. The evidence related to the proceedings in both the patent and the design applications. The particular issues were defined as follow: '1.1 Whether the first and third respondents were either themselves engaged in the infringing activities as alleged in the papers in the application or were inducing, procuring, aiding or abetting others to infringe; 1.2 Whether the second, fourth and fifth respondents (were) inciting or procuring the first and third respondents to infringe the rights of the applicant as alleged in the papers in the application . . . . '20 [30] Sunsmart called three witnesses, a person (‘Harrison’) who had dealt with Munro in connection with the purchase of the New Heights flag, a person (‘Van der Walt’) who had negotiated with Munro for the supply of teardrop-shaped flags, and the managing director of Sunsmart, Mr Bailey. Only Munro was called as a witness for Vari-Deals and Zimstone. Fritz was not called to give evidence. Claassen J analysed the evidence comprehensively in his judgment. He made explicit findings 19 Homecraft Steel Industries (Pty) Ltd v S M Hare and Son (Pty) Ltd 1984 (3) SA 681 (A) at 692 B-D. 20 It will be recalled that in the application proceedings in the court a quo the first respondent was Vari-Deals, the third respondent was Zimstone, the fourth respondent was Munro and the fifth respondent was Fritz. The proceedings against the second respondent were later withdrawn. as to credibility, accepting the evidence of the three witnesses called by Sunsmart, but describing Munro as a 'very poor' witness.21 The appellants' counsel did not suggest that these credibility findings should be interfered with on appeal, and, accordingly, the facts on which the question of contributory infringement falls to be decided can be briefly stated as follow. [31] At the material times, the sole shareholder and director of Vari-Deals was the erstwhile second appellant, Dr Drake. However, she did not play an active, executive role in the conduct of Vari-Deals' business. That role was filled by Munro who was a 50 percent shareholder, a director and an employee of Zimstone. Zimstone had been appointed as the manager of Vari-Deals' business, so that Munro was de facto in charge of the conduct of business by Vari-Deals. Munro's co- shareholder and co-director in Zimstone was Fritz. In terms of a trade agreement between Vari-Deals and Zimstone, the latter supplied Vari-Deals with various types of poles (including flexible fibreglass poles), gooseneck connectors and pegs. Insofar as the actual management and conduct of Vari-Deals' business was concerned, Munro was actively assisted by Fritz. A copy of the sales brochure emanating from Vari-Deals was annexed to the founding affidavits of Bailey. In it, 'kits' for a teardrop-shaped flag were offered for sale. The kit comprised a set of pole sections, a base and a gooseneck joint. The last two paragraphs of this brochure read as follow: 'CLOTH Different fabrics perform different functions, and Vari-Deals has sourced a variety of fabrics to ensure the client receives the correct material for a particular requirement. Vari-Deals will point customers in the direction of the appropriate fabric supplier, so that fabric is purchased at the manufacturers' factory prices. Vari-Deals has pre-organised these arrangements.22 21 The learned judge elaborated on this finding by stating that '(Munro) was evasive, off the point, constantly referring back to the gooseneck patent when it had nothing to do with the real issue. He contradicted himself several times, e.g. at one stage he admitted he acted as a facilitator for Harrison but later denied it and tried to escape from the obvious inference thereof by saying he only made recommendations to Harrison. Although his brochure says that the cloth for the banners is pre- arranged by him, he denied in evidence that that is done at all’. 22 My emphasis. CLOTH TAUTNESS Many competitive products suffer from having cloth tensioned incorrectly, which creates the difference between a spectacular and a shoddy-looking unit. The Vari-Deals Teardrop looks spectacular as it has just the right degree of tension which is created by the combination of a flexible baton and fabric with the correct stretch characteristics.’ [32] The New Heights flag came into existence as a result of an enquiry by Harrison. It was not in dispute that this enquiry was a ‘trap’, Harrison being an employee of Sunsmart. He telephoned Vari-Deals and was put through to Munro. He told Munro he was looking for a flag to advertise CC of which he and his sister were members. Munro stated that Vari-Deals could supply him with a flag and sent at template to him by e-mail with a request that he indicate what 'art-work' he required on the flag. Harrison duly complied with this request. He was told that he should pay the company that did the printing on the flag separately, but that he should pay Vari-Deals the balance of the price which was for the ‘hardware’ and the sewing services. Two complete flag kits (including the printed fabric) were delivered to him under waybills from Zimstone. He received an invoice from Vari-Deals but he made his cheque for the invoiced amount payable to Zimstone. It is important to note that nothing Munro did in relation to this transaction substantiated his later contention that: (a) Vari-Deals acted separately from Zimstone; and (b) Zimstone and Vari-Deals sold only 'pole kits', and not actual flags. There can be no doubt that the transaction with Harrison constituted 'direct infringement' of Sunsmart's patent and registered design. [33] The evidence of Van der Walt was to the effect that he was in business, selling advertising equipment including flags. He had previously purchased flags from Sunsmart. He had also purchased hardware and banners from Zimstone. In March 2004, he had a conversation with Munro, who informed him that he was producing a new product. (Van der Walt was under the impression that Zimstone would be the actual marketer.) When he heard that the new product was a teardrop- shaped flag (and because the Sunsmart flag was generally known in the trade as a 'teardrop'), Van der Walt informed Munro that the Sunsmart product was the object of patent protection. According to Van der Walt, Munro's response was to the effect that he (or his companies) could 'get round'23 the patent protection. It must be noted that, as cross-examination proceeded, Van der Walt became somewhat equivocal as to the precise words which Munro may have used in response to his warning. In the end he conceded that Munro might have said that the Zimstone/Vari-Deals product 'did not infringe the patent' or 'was different to the patented article'. Claassen J did not deal in his judgment with this equivocal aspect of Van der Walt's evidence. He accepted that Munro told Van der Walt that 'they have ways of getting by it'. Whether this finding is in accordance with the evidence or not is immaterial to the outcome of the appeal. Claassen J correctly treated, as more important than the statement allegedly made by Munro to Van der Walt, the fact (which was not in dispute) that Munro declined to show Van der Walt a sample of his product, saying that he could not do so because of unspecified 'complications'. When pressed to explain what the complications were, Munro gave an answer which Claassen J treated with the appropriate amount of scorn and skepticism. I can do no better than quote the relevant passage from his judgment: 'When asked in court what the complications were, Munro said "the complications were that he (sc Van der Walt) was not very forthcoming during his conversation . . . . He was telling me how wonderful the applicant's product was and I said we did not want to go in and have him as a customer if he saw how wonderful the other product was." This was a very strange answer for a man who wants to sell his product in competition with another product.' [34] On appeal before us, counsel for the appellants suggested that the affidavit evidence read with the oral evidence established that the appellants had bona fide believed that because they had registered their own patent and design, they did not have the requisite unlawful intent to constitute contributory infringement on their part. In his judgment, Claassen J specifically mentioned that awareness of unlawfulness was one of the essential elements of contributory infringement. This was no doubt based on the dictum in Viskasie Corp v Columbit (Pty) Ltd and Another 1986 BP 432 (CP) at 452E. There has been considerable development of the law relating to contributory infringement in foreign jurisdictions since 1986, generated particularly by 23 ‘omseil’. the computer age.24 It may well be that the principles of liability for this type of infringement may have to be reconsidered in the light of these developments. However, on the basis of the findings of fact by Claassen J and the inferences which he drew from those findings, it is not necessary to decide the issue of contributory infringement in this case. The contention that the appellants had acted bona fide plainly fell to be rejected, and Claassen J's decision to do so was founded on sound reasons. First, there was the palpable lack of candour in Munro's evidence. Second, the most reasonable and probable inference25 from the evidence concerning his dealings with Van der Walt must be that he knew (or suspected) that if the assembled product was shown to Van der Walt, it might generate an action by Sunsmart for infringement. Thirdly, for some reason, when asked what was different about the appellants' product, Munro kept harping on the 'gooseneck patent' and avoided coming to grips with the question of why he suggested that the appellants' product was not an infringement of Sunsmart's patent and design. The court a quo, having rejected his evidence, clearly drew the correct inference that his conduct was tainted by dolus. Given all the circumstances, I am satisfied that this inference was correctly drawn. Moreover, the failure by Fritz to take the witness stand when it was common cause that he was intimately involved with the conduct of the businesses of Vari-Deals and Zimstone, and closely associated with the Munro in them, also justified the inference that he could not have furthered the appellants' contention that they acted bona fide. He made no effort to contend that he did not know what Munro was about in relation to the 'new product' and it is inconceivable that he (especially with his professed expert knowledge in the field) could not have known that the new product would be an infringement of Sunsmart's patent and design. The evidence and the inferences which can fairly be drawn from it plainly establish that both Vari- Deals and Zimstone, together with their managers/directors, embarked upon a concerted course of action to infringe the patent and the design. In these circumstances the issue of whether there was 'contributory infringement' by Vari- Deals, Zimstone, Fritz or Munro does not arise for decision. Sunsmart discharged the onus of establishing 'direct infringement' by all of them. 24 See, eg, Sony Corp of America v Universal Studios, Inc 464 US 417; Metro-Goldwyn-Mayo Studios Inc v Grokster Ltd (04-480) 380 F 3d 1154, at pp12-19. 25 Govan v Skidmore 1952 (1) SA 732 (N) at p 34 C–D. [35] In the result, the appeal must be dismissed. I have indicated, at various places in this judgment, that there were errors in the order granted by Claassen J and the following order incorporates the necessary modifications to the order in the court a quo. The amendments thus incorporated do not have any effect on the question of the costs of the appeal. This order is made in respect of both cases in the court a quo, ie High Court case no 21061/2004 and Patent case no 97/10535: 1. The appeal is dismissed. 2. The order of the court a quo is amended to read as follows and an order in the amended form is granted: '(a) The First, Third, Fourth and Fifth Respondents ('the Respondents') are interdicted and restrained from infringing SA Patent no 97/10535 and SA Design Registration A97/1155; (b). The Respondents are interdicted and restrained from procuring, inducing, aiding, abetting, advising, inciting, instigating and/or assisting any act of infringement by end users of infringing flags covered by the said patent and/or the said design; (c) The Respondents are ordered to deliver up to the Applicant for destruction all infringing flags in their possession or under their control. (d) The Respondents are ordered to pay the costs of the application under case no 21061/2004 and Patent case no 97/10535. (e) The Applicant is ordered to pay the costs of the Sixth and Seventh Respondents up to and including the date of filing of their opposing papers in each of the applications referred to in para (d) hereof.' 3. The first, third, fourth and fifth appellants are ordered to pay the respondent's costs of appeal, such costs to include the costs consequent upon the employment of two counsel. ……………………… N V HURT AJA CONCUR: HARMS ADP NUGENT JA PONNAN JA COMBRINCK JA ANNEXURE A ANNEXURE B

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: Thursday, 27 September 2007 Status: Immediate The Supreme Court of Appeal today delivered judgment in the matter of Vari-Deals and Others v Sunsmart Products (Pty) Ltd concerning claims by Sunsmart that its registered patent and registered design had been infringed by the appellants. The patent and the design both relate to what are generally referred to as 'teardrop banners', used principally as a form of portable medium for advertising. The Supreme Court upheld the decision of the Witwatersrand High Court and the Commissioner of Patents to the effect that the appellants' conduct amounted to infringement of Sunsmart's patent and design. This notification is purely informative and forms no part of the judgment of the Court. -- end --

3369

non-electoral

2020

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Reportable Case No: 1055/2018 In the matter between: MARINA PETROPULOS FIRST APPELLANT NIK MOROFF & ASSOCIATES CC SECOND APPELLANT and ARTUR FERNANDO PERREIRA DIAS RESPONDENT Neutral citation: Petropulos & Another v Dias (Case no 1055/2018) [2020] ZASCA 53 (21 May 2020) Coram: PONNAN, SALDULKER, VAN DER MERWE, MAKGOKA AND MOKGOHLOA JJA Heard: 3 March 2020 Delivered: This judgment was handed down electronically by circulation to the parties’ representatives by email, and by publication on the Supreme Court of Appeal website and release to SAFLII. The time and date for hand down is deemed to be 10h00 on the 21st day of May 2020. Summary: Neighbour law – duty of lateral support – owed to land and buildings on it – English principle of lateral support, although influential, not part of our law – strict liability – available in principle for breach of lateral support. ___________________________________________________________________ ORDER ___________________________________________________________________ On appeal from: Western Cape Division of the High Court, Cape Town (Bozalek J sitting as court of first instance): judgment reported sub nom Dias v Petropulos and Another [2018] ZAWCHC 93; 2018 (6) SA 149 (WCC); [2018] 4 All SA 153 (WCC). The appeal is dismissed with costs, such costs to be paid by the appellants jointly and severally, the one paying the other to be absolved. ___________________________________________________________________ JUDGMENT ___________________________________________________________________ Makgoka JA (Ponnan, Saldulker, Van Der Merwe, and Mokgohloa JJA concurring) [1] This appeal concerns the nature, scope and ambit of the duty of lateral support owed in respect of contiguous properties. The court a quo, the Western Cape Division of the High Court, Cape Town (Bozalek J), concluded that the duty of lateral support is owed not only in respect of land but also buildings constructed on the land, save where such land has been ‘unreasonably loaded so as to place a disproportionate or unreasonable burden on the neighbouring land.’ The appeal is with leave of the court a quo. [2] The facts are comprehensively set out in the judgment of the court a quo, which has been reported sub nom Dias v Petropulos and Another [2018] ZAWCHC 93; 2018 (6) SA 149 WCC; [2018] 4 All SA 153 (WCC). Briefly stated, the facts are: The first appellant, Ms Petropulos, the respondent, Mr Dias, and Mr Dawid Venter (Mr Venter), Mr Kenneth Wentzel (Mr Wentzel) and Mr Peter Babrow (Mr Babrow), owned adjoining properties in Camps Bay, Cape Town, on a steeply sloping mountainside. The land on which the properties are situated, is bound by Theresa Avenue, on the upper end of the mountain, and Barbara Road, on the lower end. The respondent’s property is situated in Theresa Avenue. It shares a boundary with the properties of the first appellant and Mr Venter, both of which are situated downhill in Barbara Road. At the relevant time, being March to August 2008, all of the properties, except for the first appellant’s, which was still an undeveloped erf, had houses built on them. The respondent’s house had been completed in 1994. [3] During March 2008 the first appellant and Mr Venter each undertook excavations on their respective properties, near the respective boundaries with the respondent’s property. The excavation on the first appellant’s property was in preparation for the building of a house, while Mr Venter was preparing to build an additional garage. The building works on Mr Venter’s property were uneventful, and were completed in April 2008. The excavation on the first appellant’s property, on the other hand, involved fairly substantial excavations to produce three tiers, and for a lift shaft. To provide lateral support, the three levels were each secured by a retaining wall. Mr Naumann, the first appellant’s husband, an experienced builder, undertook the building works on the property. [4] From May 2008, problems became evident on the respondent’s property. A dip appeared in the garden; furrows appeared in the garden between the respondent’s property and the first appellant’s; the respondent’s terra-force wall, and the ground under it, collapsed during the course of the construction of the top retaining wall. Between 23 July and 1 August 2008, there was a major movement in the underlying ground. The entire slope on which respondent’s property is situated, subsided. The respondent’s property moved laterally and downwards towards the excavation on the first appellant’s property, resulting in extensive structural damage to the property. Cracks appeared in the walls, tiles, floor slabs, the boundary wall as well as the driveway adjacent to Theresa Road. The pool rail detached from the house and a hairline crack appeared in it. There were problems on Mr Venter’s property, too. The property subsided and cracks appeared thereon. On 23 July 2008 Mr Venter, because of safety concerns, was forced to abandon the property. [5] The respondent attributed the damage to his property to the excavations undertaken by the first appellant and Mr Venter on their respective properties. He instituted a claim for damages against both, based on strict liability, for breach of the duty to provide lateral support. It was alleged, among others, that the slope mobilised through the mechanism of ‘a shallow slip circle with uplift at the toe, resulting in vertical upward bulging of the ground surface between Barbara Road and the structures facing onto it; and lateral movement towards Barbara Road.’ This allegation became the focal point of the first appellant’s case during the trial, as will be clear later. The first appellant and Mr Venter each defended the action and denied liability. The first appellant also joined the second appellant, Nik Moroff & Associates, the project engineer for the works on her property, as a third party to the proceedings. [6] Before the trial commenced, an order was made, by a different judge, to adjudicate the following issues separately in terms of Rule 33(4) of the Uniform Rules of Court: (a) Whether a common law duty to provide lateral support to the respondent’s property was owed by each of the first appellant and Mr Venter properties; (b) Whether the excavations carried out on each of the above properties in May or June 2008 breached this duty to provide lateral support; (c) If so, whether as a result of the respondent’s property being so deprived of such lateral support by such excavations the scree slope on which respondent’s property was situated mobilised and subsided in June 2008. [7] The trial commenced before the court a quo on 21 November 2016. During the course of the trial, Mr Venter reached an agreement with the respondent and ceased participation in the action, hence he takes no part in this appeal. On 30 July 2018 the court a quo delivered its judgment. It declared that: the first appellant and Mr Venter owed the respondent a duty to provide lateral support to his property; the excavations undertaken on their respective properties breached that duty, as a result of which the slope on which the respondent’s property is situated, mobilised and subsided. No substantive order was made against the second appellant, except that it was ordered to pay the respondent’s costs, jointly and severally with the first appellant. [8] In this court, it was contended on behalf of the appellants that: First, the first appellant did not owe a duty to provide lateral support to the respondent’s property, inasmuch as the latter’s property was no longer in its natural state. Second, that the excavations on the first appellant’s property did not breach the duty to provide lateral support. Third, that the excavation on the first appellant’s property was not linked sufficiently closely to the harm suffered by the respondent for legal liability to ensue (causation). And, fourth, that on the facts of this case, it is inconceivable that the first appellant should be held liable to the respond in the absence of a finding of fault. Each of these contentions will be considered in turn. Is the duty of support owed only in respect of land in its natural state? [9] In answering this question, the learned judge undertook an extensive analysis of the various authorities. This included East London Municipality v South African Railways and Harbours 1951 (4) SA 466 (E). There, it was held that our law of lateral support was the same as English law, in terms of which the right is confined to land in its natural state and does not extend to constructions such as buildings on it. [10] The court a quo also considered the decision of this court in Anglo Operations Ltd v Sandhurst Estates (Pty) Ltd [2006] ZASCA 118; 2007 (2) SA 363 (SCA); [2007] 2 All SA 567 (SCA). The court a quo declined to follow East London Municipality, and concluded (at para 59)1 that in our law, the duty of lateral support is owed to neighbouring or contiguous pieces of land as well as the buildings on it. However, at para 60,2 the court expressed the following caveat to that general principle: ‘However, too broad a formulation of the right or duty of lateral support could lead to conceptual and equitable difficulties, particularly where the contiguous parcels of land are situated on a slope. Where a property has been unduly or unreasonably loaded through the erection of disproportionately large or heavy structures, it would seem unfair in my view that a neighbouring piece of land should attract an equivalently onerous duty of lateral support’. Later, at (para 63)3 the learned judge summarised the position as follows: ‘In the result, I consider that the appropriate approach is to hold that a duty of lateral support extends not only to land but also to buildings, save where such land has been unreasonably loaded so as to place a disproportionate or unreasonable burden on the neighbouring land’. 1 Para 152 in the original text. 2 Para 153 in the original text. 3 Para 156 in the original text. [11] The appellants submitted that the court a quo was wrong by not concluding that the duty of lateral support in our law is similar to English law, in terms of which the duty is owed to land only in its natural state, and does not extend to artificial structures such as the buildings on it. Further, in English law, support for buildings can only be obtained by means of a servitude, which is obtainable by a user of a building after at least 20 years or by agreement. This principle of English law was enunciated more than a century ago in Dalton v Henry Angus & Co (1881) 6 App Cas 740 and is best expressed in the oft-quoted passage of Lord Penzance’s speech at 804: ‘[I]t is the law, I believe I may say without question, that at any time within twenty years after the house is built the owner of the adjacent soil may with perfect legality dig that soil away and allow his neighbour’s house, if supported by it, to fall in ruins to the ground.’ [12] It is necessary to examine the development of our own law in this regard. The duty of lateral support owed to an adjacent landowner corresponds with the neighbour’s entitlement to such support. This means that the right to lateral support is reciprocal between neighbouring landowners. That principle was first accepted into South African law as a principle of neighbour law in London and SA Exploration Co v Rouliot (1890-1891) 8 SC 74. There it was held (at 93) that the right of lateral support is a ‘well established natural right’, incidental to the ownership of the property and not servitudal in nature. Rouliot was followed, albeit on different grounds, in Johannesburg Board of Executors and Trust Company Limited v Victoria Building Company Limited (1894) 1 OR 43. [13] However, the application of the principle to situations where land has been improved with buildings or structures on it, and where excavation causes subsidence and damage to buildings, has given rise to two contrasting views. Van der Walt4 explains the divergent underlying philosophies thus: ‘Milton argues that the right of lateral support is explained in terms of two theories. According to the one theory, the right of lateral support is a servitude arising from the natural situation of land (as opposed to servitudes created by grant or prescription). According to this theory, the right would be restricted to the land in its natural state and would not apply to buildings on the land. Furthermore, any infringement of the right would arise from the mere withdrawal of lateral 4 AJ van der Walt The Law of Neighbours (2010) at 96 para 3 2 1. support and not only from damage caused by such withdrawal, with the implication that prospective damages could be awarded. The second theory explains the right of lateral support as a natural right of property that is based on the principle sic utere tuo alienum non laedas and protected by nuisance law. Seen in this way, the right pertains to mutual respect for normal use of land and there is no reason why it should not apply to buildings as well. Furthermore, liability for infringements of the right would arise from actual damage and not simply from withdrawal of the support, and consequently prospective damages could not be claimed. Liability would be strict.’ As I have shown, Rouliot grounded the introduction of these principles in our law on the second basis. [14] In Victoria and in Phillips v South African Independent Order of Mechanics and Fidelity Benefit Lodge and Brice 1916 CPD 61 it was held that Roman and Roman- Dutch law recognised a right of lateral support for land and buildings. Consequently the defendants were held liable for the collapsing of buildings caused by the excavation of land on the boundary between two tenements. See also Demont v Akals’ Investments (Pty) Ltd and Another 1955 (2) SA 312 (N), where Selke J (at 316B-E) said: ‘An owner of land is normally entitled to expect and to require from land contiguous to his own such lateral support as would suffice to maintain his land in a condition of stability if it were in its natural state. A landowner can, of course, alter the condition of his land, for example by excavating or building on it, but he cannot normally, by the mere fact of doing that, acquire greater or different rights to lateral support. His basic rights … remain the same whatever he may choose to do with his land. They are rights ancillary to his ownership, and they are enjoyed reciprocally by him and by all owners of contiguous land; and, while they exist unimpaired, any infringement of them by the withdrawal or disturbance of lateral support furnishes him with a cause of action’. [15] However, a different path was followed in Douglas Colliery Ltd v Bothma and Another 1947 (3) SA 602 (T) and in East London Municipality.5 Those cases relied heavily on English law and consequently concluded that lateral support is owed only 5 East London Municipality was uncritically followed in Gordon v Durban City Council 1955 (1) SA 634 (N) and in John Newmark & Co (Pty) Ltd v Durban City Council 1959 (1) SA 169 (N). to land in its natural state, and not to artificial structures on it. Douglas concerned mining law. Neser J held (at 612) that there is no natural right of support for that which is artificially constructed on land. The learned judge relied on a passage in Halsbury Laws of England (Hailsham ed, vol 22 under the title Mines) in which the following is stated at para 1341: ‘There is no natural right of support for that which is artificially constructed on land: such a right cannot exist ex jure naturae for the thing itself did not so exist. Therefore any right to the support of such an artificial burden must in each case be acquired by grant, or by some means equivalent in law to a grant. Thus it may be acquired by express grant, or implied grant, or by prescription, or it may be created by statute.’ [16] In East London Municipality, a landowner had granted to the municipality and the public in general a public road over his property. The municipality laid high tension electric cables along the road. The defendant, in carrying out his quarrying operations, removed the lateral support and caused a subsidence. Reynolds J held that in regard to artificial constructions on land our law was the same as English law. Accordingly he concluded, in line with English authorities, that the right of lateral support extends only to land in its natural state and not to constructions such as buildings on it. [17] Reynolds J (at 482H-484E) expressly declined to follow Victoria on the basis that the Roman law authorities relied on by Morice J in Victoria were no authority for the conclusion that lateral support was owed not only to neighbouring land but also to buildings on it. The learned judge then referred to Halsbury Laws of England (Hailsham ed (vol 11, para 640) in which the following is said: ‘The mere fact, however, that there are buildings on his land does not preclude an owner from his right against a neighbour or subjacent owner who acts in such a manner as to deprive the land of support, so long as the presence of the buildings does not materially affect the question, or their additional weight did not cause the subsidence which followed the withdrawal of the support.’ [18] Over 50 years after the decision in East London Municipality, this court in Anglo Operations had to consider whether the principle of neighbour law should be extended to govern the relationship between mineral rights holders and owners of the same land. It was held that the principle should be restricted to the right of lateral support as between neighbouring landowners, and that the relationship between the landowner and the holder of mineral rights in the same land is regulated by the principle of servitude. In the course of its judgment, the court considered the effect of Rouliot, in respect of which it was pointed out (in para 8) that the gravamen of the decision was that ‘a rule, similar in content to the English rule of lateral support, which provides landowners, as an intrinsic element of their ownership, with the right of adjacent support of their land, should be incorporated into our law’. The court took the view that the origin of the principle was unimportant. [19] After dealing with the conceptual differences between English law and our law, Brand JA cautioned (at para 17) with reference to Rouliot: ‘Equally erroneous, in my view, is the statement that De Villiers CJ decided to incorporate the English doctrine of lateral and subjacent support, with all its ramifications, into our law. On the contrary, I agree with the statement by the Court a quo (at 366B) that what had happened in Rouliot was that: “De Villiers CJ and Smith J simply introduced, as Judge-made law, a rule which they regarded as common to all civilised systems of law because, as they perceived it, a lacuna existed. The Judges did not concern themselves with the exact pedigree of the rule. . . . The rule was introduced because it was regarded as just and equitable.”’ [20] It would thus seem that one of the ‘ramifications’ of the English doctrine of lateral support, which Brand JA cautioned against, is the slavish adoption of the restriction of lateral support being owed to neighbouring land only, and not extending the duty to buildings constructed thereon. This is surely understandable. English law on this aspect is rigid, and results in anomalies, as demonstrated in the passage from Dalton. Therefore, the significance of Anglo Operations is two-fold. First, it affirmed Rouliot as the correct statement of our law on lateral support. Second, it qualified Rouliot, and brought the principle of lateral support within the sphere of our neighbour law. [21] In our neighbour law, fairness and equity are important considerations. As Hoexter JA explained in Regal v African Superslate (Pty) Ltd 1963 (1) SA 102 (A) at 114G those considerations are the basis of the law between neighbours. Furthermore, in our constitutional context, the principle of lateral support must find expression in the constitutional value of Ubuntu, which ‘carries in it the ideas of humaneness, social justice and fairness’.6 The English law principle of lateral support in all its rigidity may well be inimical to all these. [22] It is significant that in at least one common law jurisdiction, Singapore, this principle has been jettisoned. In Xpress Print Pte Ltd v Monocrafts Pte Ltd and Another [2000] SGCA 37; [2000] 3 SLR 545, the appellant and the first respondent were neighbouring landowners. As a result of excavation work done by the first respondent on his land for the purposes of construction, the building on the appellant’s land suffered massive damage. The appellant sued for, among others, wrongful interference of support, which was dismissed by the trial judge on the basis of English law as set out in para 11 above. [23] On appeal to it, the Court of Appeal of Singapore held that the right of support enjoyed by a neighbouring landowner extended beyond the land in its natural state to the buildings erected thereon. In arriving at this conclusion, the court took the view that the right of support must have its roots in ‘the principles of reciprocity and mutual respect for each other’s property (at para 43). With regard to English law, the court observed (at paras 33 and 37): ‘English law on the subject of the right of support … contains a number of curious propositions. If my neighbour’s land is in its natural state, I may not remove the soil on my land without providing alternative support for his land; but if my neighbour expends money and effort in building a bungalow on his land, then I may excavate with impunity, even though his bungalow may crumble to the ground. Yet, my liberty to ignore the support required by his house is not perpetual, but lasts only for 20 years, at which time any indolence in pursuing my right to remove my soil is transformed into a positive right of support in respect of his dwelling. . . . Perhaps only lawyers can understand and appreciate how a simple issue such as this, through the process of law, comes to be governed by a mass of convoluted and irreconcilable rules; surely only the bravest among them would attempt to explain it to the average citizen. For our part, we fail to see any legal principle capable of supporting the distinctions drawn by the cases. Further, we are of the view that the proposition that a landowner may excavate his land with impunity, sending his neighbour`s building and everything in it crashing to the ground, is 6 Per Madala J in S v Makwanyane 1995 (3) SA 391 (CC); 1995 (2) SACR 1 (CC) para 236. a proposition inimical to a society which respects each citizen`s property rights, and we cannot assent to it’. [24] These remarks are apposite, and accord with the principles of our own neighbour law. So viewed, and in the light of this court’s exposition in Anglo Operations, it is clear that the courts in Douglas and East London Municipality erred. It follows that those decisions are not to be taken as correctly reflecting the position of our law. The court a quo was accordingly correct in holding that the duty of lateral support was not limited to land in its natural state, but extends to buildings on the land. [25] However, as stated earlier, the court a quo articulated an exception to that general principle. The court said that a duty of lateral support extends not only to land but also to buildings, save where such land has been ‘unreasonably loaded so as to place a disproportionate or unreasonable burden on the neighbouring land’. What exactly the court a quo intended to convey by the quoted expression is unclear. The exception is not without practical difficulties. A typical example is that of a landowner who builds his or her home in full compliance with town planning and building regulations and in accordance with architectural plans. In terms of the exception, such an owner bears the onus to prove that the building had not ‘unduly or unreasonably loaded’ the land, or that it is not ‘disproportionately large’ or ‘a heavy structure’. That is untenable. [26] Furthermore, the philosophical foundation of the exception seems, with respect, doubtful. The learned judge relied heavily on the views of Professor Milton for the conclusion that the English principle of lateral support is not part of our law. The learned judge, said: ‘Professor Milton argues that the exception whereby the English law does not apply to all artificial erections on land “so long as the presence of the buildings does not materially affect the question, or the additional weight did not cause the subsidence which followed the withdrawal of support” was doubtfully of any real value.’ However, in the same article, the learned author stated: ‘It is an inevitable tendency of modern life for more and more people to gravitate to cities. As a result larger buildings must be erected to accommodate them and provide employment. The larger the buildings, the greater the pressure on the soil and the less the duty of lateral support owed by neighbouring land. This, it is submitted, is an illogical and unrealistic approach and, on principle, it should not be preserved’.7 [27] The approach of the court a quo therefore appears incongruous. Furthermore, it unwittingly introduces a feature of the English principle of lateral support, referred to in East London Municipality, as set out in para 17 above. This is the very principle which the court a quo had correctly declined to follow. It follows that the exception the court a quo sought to introduce cannot be supported. As I demonstrate later in the judgment, there are sufficient safeguards in our law to meet the concerns sought to be addressed by this exception. Did the excavations on the first appellant’s property breach the duty of lateral support owed to the respondent? [28] Seven witnesses testified on behalf of the respondent, two for the first appellant. The second appellant did not call any witnesses. For purposes of this appeal, only the evidence of the two geo-technical experts, Dr McStay and Dr Day is relevant. The reason for this is that it is no longer in dispute that the respondent’s property was damaged by the slope failure in July and August 2008. Both appellants have, in their respective heads of argument in this court, conceded that aspect. Implicit in this, is the acceptance that there was no prior damage or structural defects on the respondent’s property before the slope failure. That issue is one in respect of which the respondent, his wife, Mr Wentzel, Mr Babrow and Mr Naumann all testified. The other witness was Ms Valentia Papanicolaou, whose evidence related to the measurements of the ground movement from the end of July. Nothing turns on her evidence in the appeal. [29] About the geo-technical experts, Dr McStay, for the respondent, is an engineering and environmental geologist, and a director in charge of a geo-sciences unit of an international engineering consultancy firm. Dr Day is a practising specialist geo-technical engineering consultant and an adjunct professor of geo-technical engineering at the University of Stellenbosch. 7 Quoted in para 144 of the judgment of the court a quo (Footnote omitted.) [30] The court a quo gave a commendably detailed exposition of their evidence. I would therefore focus on what I consider the salient features of their respective opinions. It was common cause between them that there was a slope failure which caused ground movement on the affected properties. However, they differed on the cause and mechanism of the slope failure. I find it convenient to commence with Dr Day’s evidence. [31] The defining theme of Dr Day’s evidence was his distinction between mechanisms of slope failure – one as a result of the removal of lateral support, and the other, slope instability. He went on to explain how each of them manifested. In respect of lateral support failure, the primary cause of both ground movement and failure is a reduction in the lateral (horizontal) pressure exerted on the face of the excavation. Here, the ground movement is confined to the area of excavation. Regarding the failure due to slope instability, Dr Day explained that it is normally characterised by a rotational or translational movement on the ground above the failure surface. In the event of a rotational failure, a scarp may develop at the top of the failing mass and bulging may occur at the toe. Unlike in the failure caused by lateral support, here the area of slope instability is generally not confined to a particular property, but may pervade a general area. [32] Applying these suppositions to this case, Dr Day testified that the failure was caused by the removal of the weight of material from the toe of an already compromised slope, the mechanism of which is a deep seated circular slip failure. On this mechanism, according to Dr Day, the failure would not be through the removal of lateral support, but attributable to the general instability of the hillslope, which, in turn, was caused by a multiplicity of historical factors, including the earlier excavations and loading of the affected properties when houses were built thereon, starting from the early 1980s. [33] According to Dr Day, the movement of the slope was triggered by a combination of the excavation at the toe of the slope on the properties of the first appellant and Mr Venter, and the added weight at the top of the slope on the properties of the respondent and Mr Babrow. He explained further that the excavation at the toe of the slope had two effects. Firstly, it reduced the weight of the soil at the toe. Secondly, it reduced the shearing resistance of the soil over the part of the failure plane, below the excavated area. When that happened, given the already compromised slope, according to him, the excavation resulted in slope failure. [34] In line with his mechanism distinction theory, Dr Day went on to explain that if the ground movement was only as a result of the removal of lateral support, it would have been confined to the area immediately above the retaining wall, ie it would have a localised effect. As there was no sign of ground failure in the area immediately above the retaining walls, Dr Day postulated that the ground movement was caused by general instability of the slope rather than the removal of lateral support. This, as stated earlier, was one of the ways in which failure due to slope instability manifested itself, ie it generally pervades a general area, rather than confinement to a particular property. Dr Day also thought it significant that when the slope mobilised, neither the excavation itself nor the retaining walls built by Mr Naumann failed, but continued to support the face of the excavation. This included the portion of the respondent’s land that fell inside the failure zone. According to Dr Day, this further supported his view that the lateral support afforded to the respondent’s property had not been compromised. [35] I turn now to the evidence of Dr McStay. The essence of his evidence was that the deep-seated movement, which occurred under the properties of the first appellant and the respondent, was a slope failure triggered by the removal of lateral support due to the excavation on the first appellant’s property. According to him, the mechanism of the failure was a progressive one, ie a series of smaller slip planes immediately above the face of the excavation. In Dr McStay’s opinion, both his ‘progressive’ failure and Dr Day’s deep- seated circular slip failure theories resulted from the removal of lateral support because the mechanism in each case was the same, namely the excavation on the first appellant’s property, which was the main triggering mechanism for the slope instability. Thus, explained Dr McStay, it was largely irrelevant whether there was a series of small progressive failures or the existence of a deep slip circle. [36] Dr McStay further testified that the respondent’s house itself did not appear to have undergone extreme lateral movement but rather relatively small scale vertical settlement. This suggested that the original foundation of the house was largely below the active slip circle causing the lateral movement. According to him, there was a vertical down movement rather than just uplift, as suggested by Dr Day. To support this view, he had regard to the crack in the paving between the respondent’s garage and Theresa Avenue, which movement straddled two properties. Dr McStay also explained why the excavations on the first appellant’s property stood for some time before they affected the respondent’s property. According to him, this was not unusual, as a slope failure normally occurred over a period of time, and not immediately, especially on a deep-seated circle such as the one in the present case. [37] That summarises the evidence of the two experts. To consider their competing contentions, one has to bear in mind, the objective facts. Key among those is that the respondent’s property was damaged when it moved laterally and downwards towards the excavation on the first appellant’s property. This happened because lateral support, previously provided by the first appellant’s property to the respondent’s property, had been removed. Given these considerations, the exact mechanism which caused the removal of lateral support is unimportant. The distinction by Dr Day in this regard is artificial, has neither a factual nor legal basis, and is not borne out by the objective facts. It was rightly rejected by the court a quo. [38] A further string to the first appellant’s bow was this: as the respondent’s property was contiguously situated on a slope with other properties, the weight of the first appellant and Mr Venter’s properties was meant to support the entire slope, and not only the respondent’s property. Accordingly, so went the argument, following the slope mobilisation and damage to his property, the respondent does not, as a matter of law, have a cause of action for breach of lateral support. The court a quo rejected this submission as follows (at para 111):8 ‘[O]ne reason is the inherent illogicality of the proposition that if an excavation is of such large proportions that it causes not simply a localised subsidence or failure but also one which undermines an entire slope comprising multiple properties, then the owner of a contiguous 8 Para 207 in the original text. property cannot sustain an action based on a breach of the duty of lateral support. To accept this reasoning would mean that a landowner whose excavation or breach causes far-reaching damage affecting a number of properties escapes liability whilst land owners, the consequences of whose breach are much more modest, are saddled with strict liability’. I cannot fault this reasoning. [39] What is more, it became necessary for Mr Naumann to implement remedial measures to arrest further slope failure, including having experts install anchors and to reinstate the lateral support previously provided by the ground excavated from the first appellant’s property. It is common cause that the bulk of these measures were implemented on the first appellant’s property, where the major excavation took place. The significance of this, as correctly pointed out by counsel for the respondent, is that if the lateral movement of the respondent’s property was caused by the excavations on the first appellant’s property, it is on that property that the remedial measures had to be implemented. And it was common cause that these remedial measures in fact arrested the movement of the slope. [40] Counsel for the appellants made much of the averment in the respondent’s particulars of claim that the slope mobilised through the mechanism of ‘a shallow slip circle with uplift at the toe’ which had resulted in vertical upward bulging of the ground surface at the bottom of the first appellant and Mr Venter’s properties. It was suggested that there was evidence of such uplift and bulging. This, according to the first appellant, was fatal to the respondent’s case because the pleaded mechanism fitted in with the opinion of Dr Day that the slope mobilisation occurred when an uplift took place at the toe of the excavation and the slip circle, thus excluding the removal of lateral support. [41] There is no merit in this contention. In Gijzen v Verrinder 1965 (1) SA 806 (D) at 810D-F, it was pointed out that, in most instances, the complaint of a plaintiff suing for deprivation of lateral support arises from a subsidence that was caused by the removal of such support. Nevertheless, such a subsidence (ie one caused by the removal of lateral support) is not required for a successful plaintiff action. By way of analogy, I conclude that is not required for a plaintiff in an action based on the removal of lateral support to plead a particular mechanism through which such removal of lateral support manifests. [42] The respondent’s averment as to the mechanism of the slope failure was thus totally superfluous. Even in its absence, the thrust of his claim was clear: as a result of the excavation on the first appellant’s property, lateral support owed to his property was removed; the slope mobilised in the process of which extensive damage was caused to his property. It is therefore patently opportunistic for the appellants to seek to tie the respondent to a superfluous averment in his particulars of claim. [43] In any event, the two mechanisms were fully explored during the trial and it became clear that they overlapped; and that, in essence, as the court a quo correctly observed, they were variations of the same mechanism. The position is analogous to the converse situation, where an issue not pleaded is fully traversed during the trial. As explained in Van Mentz v Provident Assurance Corporation of Africa Ltd 1961 (1) SA 115 (A) at 122: ‘In a case where it is clear that the appellate tribunal has all the material before it on which to form an opinion upon the real issue emerging during the course of the trial it will be proper to treat the issues as enlarged (Collen v Rietfontein Engineering Works 1948 (1) SA 413 (AD) at 433), where this can be done without prejudice to the party against whom the enlargement is to be used (Robinson v Randfontein Estates, GM Co Ltd, 1925 AD 173 at 198).’ See also Marine & Trade Insurance Co Ltd v Van der Schyff 1972 (1) SA 26 (A) at 44H-45C). [44] In the final analysis, the court a quo was faced with conflicting evidence of a very technical nature. Where this is the case, the resolution of the dispute ‘must depend on an analysis of the cogency of the underlying reasoning which led the experts to their conflicting opinions’ (Buthelezi v Ndaba [2013] ZASCA 72; 2013 (5) SA 437 (SCA) para 14). The court a quo preferred Dr McStay’s evidence to that of Dr Day, and observed as follows (paras 127-128):9 9 Paras 222-223 in the original text. ‘The opinions which he [Dr McStay] expressed were rational and backed by consistent reasons. What came through in his reports and evidence was a practical and common sense approach which demonstrated his wide experience in the field… As far as Dr Day is concerned there is no doubting his expertise as a geo-technical civil engineer and his evidence was very helpful in understanding the geological aspects of what took place on the site from March 2008 until the remedial measures were completed. Although I do not doubt Dr Day’s sincerity or his professional integrity, I gained the distinct impression that he became overly wedded to his client’s case, including the notion that the geological event was not a failure of lateral support. Dr Day’s unwillingness to accept that the Dias dwelling was in excellent condition prior to 2008, based on speculative or weak evidence indicating the contrary, suggested that he fell into the trap of approaching some of the issues in the matter in a less than balanced manner’. [45] Having carefully considered the totality of the evidence of the two experts, the court a quo cannot be faulted for preferring that of Dr McStay. Of the two experts, it is Dr McStay’s evidence which provided the most reasoned and cogent explanation for what had happened. His evidence closely matches the objective facts. It follows that the respondent succeeded in establishing that the slope mobilisation had resulted from a breach of the duty to provide lateral support due to the excavation on the first appellant’s property. Given the objective facts in this case, it would indeed defy all logic for a court to hold that the excavations by the first appellant did not destabilise the respondent’s property and thus breached the duty to provide lateral support to it. Causation [46] I turn now to causation. As explained in Minister of Police v Skosana 1977 (1) SA 31 (A) at 34E-35D, there are two distinct questions in the causation enquiry. The first is a factual one and relates to the question whether the relevant conduct caused or materially contributed to the harm giving rise to the claim. If it did not, then no legal liability can arise. If it did, then the second question becomes relevant, namely whether the conduct is linked to the harm sufficiently closely or directly for legal liability to ensue, or stated differently, whether the harm is too remote from the conduct. [47] The causa sine qua non (the ‘but for’ test) is ordinarily applied to determine factual causation. The central theme of the first appellant’s case was that the slope mobilisation was a result of a multiplicity of factors, of which the excavation on her property was but one. In Minister of Safety and Security v Van Duivenboden 2002 (6) SA 431; [2002] 3 All SA 741 (SCA) (para 25) it was explained: ‘A plaintiff is not required to establish the causal link with certainty, but only to establish that the wrongful conduct was probably a cause of the loss, which calls for a sensible retrospective analysis of what would probably have occurred, based upon the evidence and what can be expected to occur in the ordinary course of human affairs rather than metaphysics.’ And in Minister of Finance and Others v Gore NO [2006] ZASCA 98; 2007 (1) SA 111 (SCA); [2007] 1 All SA 309 (SCA): ‘The legal mind enquires: What is more likely? The issue is one of persuasion, which is ill- reflected in formulaic quantification … Application of the ‘but for’ test is not based on mathematics, pure science or philosophy. It is a matter of common sense, based on the practical way in which the ordinary person’s mind works against the background of everyday- life experiences.10 The test set out in Van Duivenboden and Gore received the imprimatur of the Constitutional Court in Lee v Minister for Correctional Services [2012] ZACC 30; 2013 (2) SA 144 (CC) para 47. [48] Applying the above test to the facts of this case, it must be asked whether, but for the excavation, the slope would have mobilised. In this regard, the excavation was extensive, involving the removal of 5413m³ of earth, 57 blasting shots as well as the removal of many large boulders. The lift shaft excavation was 13m in length, 5.5m in width and 9.5m deep. It was excavated up to about 6m from the respondent’s property and done without any bracing or support. It involved blasting at least one large boulder and many others which needed to be broken and removed. In these circumstances, it is hard not to accept Dr McStay’s opinion that there was a clear nexus between the excavation and the slope failure. [49] There must be a logical explanation as to why, after standing unaffected for 16 years, the respondent’s property mobilised shortly after the major excavation on the first appellant’s property in 2008 and why the movement ceased when the remedial measures were effected. During his testimony, Dr Day utilised a model to demonstrate 10 Minister of Finance and Others v Gore NO [2006] ZASCA 98; 2007 (1) SA 111 (SCA); [2007] 1 All SA 309 (SCA) para 33 (Citations omitted.) the slip circle failure. After a demonstration with reference to four blocks, the court a quo pointed out that in terms of the model he used, a necessary condition of the slip circle was the removal of an excavation block, to which proposition Dr Day agreed. He explained the role of excavation as follows: ‘It was a contributing element. There is no doubt about it. It’s no coincidence that this failure occurred when excavation was formed. So the formation of the excavation contributed to the instability of the slope, that is correct. But it contributed to the instability of the slope as opposed to a lateral support failure’. [50] It is also common cause that the excavation on Mr Venter’s property stopped in April 2008. In answer to a direct question during cross-examination as to what event, thereafter, could have caused the distress on the entire hill slope, Dr Day was constrained to concede that ‘the major event was the removal of ground which then set the process of slope instability in motion ….’ After suggesting that the rainfall was a contributing factor, he conceded that the excavation was ‘a necessary condition’ for the failure. The following excerpt from the evidence of Dr Day’s cross-examination is illustrative of the centrality of the excavation to the slope failure and eventually the damage to the respondent’s property: ‘MR BEY: So Dr, it is not clear that but for the Naumann [first appellant] excavation the land on the Dias [respondent] property behind the [Mr] Venter property would not have failed? --- M’Lord, if the excavations had not been formed we wouldn’t be here today’. I take that as a yes--- Yes’ [51] The appellants emphasised that the role of the other factors such as the innate instability of the slope, the excavation on Mr Venter’s property, and the winter rainfalls, should not be discounted. Of course they should not. But, as shown above, given the nature and extent thereof, the excavation was central to the slope mobilisation. As pointed out in Van Duivenboden para 25 the respondent was not required to establish the causal link between the excavation and the damage to his property with certainty. All that was expected from him was to establish that the excavation was probably the cause of the damage to his property. [52] In Regal, Ogilvie Thompson JA (at 116A-C) referred with approval to the American Restatement of the Law of Torts, vol IV at 277, where, dealing with factual causation, the learned authors say: ‘In some cases the physical condition is not, of itself, harmful, but becomes so upon the intervention of some other force – the act of another person, or force of nature. In such cases the liability of the person whose activity created the physical condition depends upon the determination that his activity was a substantial factor in causing the harm, and that the intervening force was not a superseding cause.’ [53] Applying these tests to the facts of the present case, the excavation on the first appellant’s property must be regarded as a ‘substantial factor’ or a proximate cause of the slope mobilisation. In the circumstances, it is safe to conclude that but for the excavation on the first appellant’s property, the slip circle failure would most probably not have occurred. I thus find a direct and probable chain of causation between the excavation and the slope mobilisation which caused damage to the respondent’s property. Factual causation was accordingly established. [54] With regard to legal causation, the court a quo expressed doubt whether it was necessary to enquire into legal causation, since liability was strict in the present case and ‘the question of reasonable foreseeability does not arise’. With respect, the court a quo overlooked the fact that there has to be a measure by which it is determined whether the conduct that factually caused the harm suffered, is too remote from the harm. The test provided by the law for this part of the enquiry is a flexible one, in which reasonable foreseeability is but only one factor, among several. Other factors include directness, the absence or presence of a novus actus interveniens, legal policy, reasonableness, fairness and justice, as explained in S v Mokgethi and Others 1990 (1) SA 32 (A); [1990] 1 All SA 320 (A) at 40I-41D . It could well be that in a particular case, such as the present, one or more or all of reasonable foreseeability, directness, or the absence or presence of a novus actus interveniens, play a subsidiary role, or no role at all. But it is difficult to imagine a case where legal policy, reasonableness, fairness and justice would play no role at all. [55] Viewed in this light, legal causation is necessary, irrespective of whether liability is strict or not. As explained by the Constitutional Court in Mashongwa:11 ‘No legal system permits liability without bounds. It is universally accepted that a way must be found to impose limitations on the wrongdoer’s liability. The imputation of liability to the wrongdoer depends on whether the harmful conduct is too remotely connected to the harm caused or closely connected to it. When proximity has been established, then liability ought to be imputed to the wrongdoer provided policy considerations based on the norms and values of our Constitution and justice also point to the reasonableness of imputing liability to the defendant.’ [56] In International Shipping Co (Pty) v Bentley (Pty) Ltd 1990 (1) SA 680 (A) at 700H-J Corbett CJ neatly summed up the position with regard to legal causation as follows: ‘[D]emonstration that the wrongful act was a causa sine qua non of the loss does not necessarily result in legal liability. The second enquiry then arises, viz whether the wrongful act is linked sufficiently closely or directly to the loss for legal liability to ensue or whether, as it said, the loss is too remote. This is basically a juridical problem in the solution of which considerations of policy may play a part. This is sometimes called “legal causation”.’ [57] In determining the presence of legal causation, the question is whether, having regard to the considerations alluded to, the harm is too remote from the conduct or whether, it is fair, reasonable and just that the first appellant be burdened with liability. In my view, the question should be answered against the first appellant. No fault liability [58] As stated already, none of the affected properties were in their natural state. They had all been developed for the building of houses. It was submitted on behalf of the appellants that for that reason, our law does not permit a claim under strict liability for breach of the duty of lateral support. The respondent’s claim, it was submitted, should have been brought as an Aquilian action, so that negligence and wrongfulness 11 Mashongwa v Passenger Rail Agency of South Africa [2015] ZACC 36; 2016 (3) SA 528 (CC); 2016 (2) BCLR 204 (CC) para 68. (Citations omitted.) on the part of the first appellant could be established. In their heads of argument, counsel submitted: ‘The imposition of strict liability can only be justified in principle where prospect of direct harm is so obvious that there can be no question of a lack of foreseeability and where there is clear and obvious single cause. By contrast, where potential for harm, as in this instance where mechanism of failure is more complicated, or obscure, and hence not readily foreseeable, or involves more than one cause, including a contribution by the claimant, and the conduct may be neither negligent nor unlawful, the entire blame for the earth movement should not be visited on one neighbour by virtue of a rule of strict liability.’ [59] Broadly stated, every landowner has a right to the lateral support and where subsidence or other destabilisation occurs, as a result of excavations on an adjacent property, the owner of the adjacent property will be liable in an action for damages irrespective of whether she was negligent or not. That is not to suggest that an adjacent property owner is not entitled to excavate. His or her entitlement to do so, is limited by the duty not to withdraw the lateral support which is afforded to the adjacent property. The right is reciprocal. Neither culpa nor dolus is a requirement for liability for damage caused by the withdrawal of lateral support. Of course, if an aggrieved property owner can prove that he or she suffered pecuniary loss through dolus or culpa, she can likewise sue in delict by virtue of the lex Aquilia. [60] It is now settled that liability in subsidence cases is strict. In D&D Deliveries (Pty) Ltd v Pinetown Borough 1991 (3) SA 250 (D) it was explained (at 253H-I) that: ‘In subsidence cases it is unnecessary to prove an unlawful act or negligence; the cause of action is simply damage following upon deprivation of lateral support. The action lies only against the owner of the adjoining property, and each successive subsidence gives rise to a fresh cause of action’. See also Gijzen at 811E. [61] Prof JC van Der Walt12 offers the following justification for strict liability: 12 JC van Der Walt ‘Strict liability in the South African law of delict’ (1968) 1 CILSA at 63. ‘Liability based on risk is usually created - either by legislation or by the courts - in cases where a particular activity normally entails an extra· ordinary increase in the risk of harm to the community. Fleming states it thus: “Certain types of activity which involve extraordinary risks to others, either in the seriousness of the harm threatened or, more often, in its high degree of probability, are charged with responsibility for ensuing harm, even if the most diligent care has been exercised to obviate its occurrence. In these situations, it is widely felt that he for whose benefit the risk is created should bear the loss unavoidably entailed rather than the random victim.” …The most common defences at the disposal of a defendant in cases of strict liability are “act of God” (vis maior) and fault on the part of the injured party.’ [62] There is sufficient safeguard in our law to meet the appellants’ concerns, in the form of legal causation, which, inter alia, rests on policy considerations. The elastic approach to legal causation adopted by this court in Mokgethi is ‘sensitive to public policy considerations and aims to keep liability within the bounds of reasonableness, fairness, and justice’. (See De Klerk v Minister of Police [2019] ZACC 32; 2020 (1) SACR 1 (CC) para 19, referring to Mokgethi at 40I-41D). [63] Also, a cause of action based on strict liability in cases such as this, serves to ensure that those who suffer damage are not non-suited because of the absence of fault or because of their inability to prove the presence of fault. As is evident in this case, the respondent simply did not know exactly what was happening on the first appellant’s property, other than that his property was damaged. Importantly, there is no attack on the strict liability action as being contra bonos mores, or unconstitutional. There are therefore no policy considerations for our law to, a priori, set itself against an action based on strict liability for breach of lateral support, as cases always turn on their own facts. [64] In sum, the answer to counsel’s submission is, first, that culpa or dolus is not required for liability because the right of support is a natural right of ownership. Second, there are sufficient safeguards and flexibility in our law so as to ensure that one is not unjustifiably punished at the expense of others. Third, liability without fault here is usually restricted to damage to life, limb and property. On the facts the court a quo correctly held that the first appellant is liable to the respondent. Although there is no unanimity among scholars on a theoretical justification for strict liability, the authors of Neethling-Potgieter-Visser Law of Delict13 observe: ‘[w]here a person’s activities create a considerable increase in the risk or danger of causing damage, that is, an increased potential for harm, there is sufficient justification for holding him liable for damage even in the absence of fault . . . Van der Walt, however, points out that the question whether or not the potential of risk has been increased enough, will depend largely on the legal convictions of the community, as reflected in legislation or case law. This theory [the risk or danger theory] provides a satisfactory explanation for most of the instances of strict liability which are recognised in our law. Nonetheless, a satisfactory and universally accepted scientific basis for every instance of liability without fault has not yet been found, and will probably never be found. A flexible approach is therefore necessary so that each specific case may be valued on its own merits and judged accordingly.’ [65] It remains to sum up the position of our law on the right of lateral support owed between contiguous properties. First, it is a natural right incidental to the ownership of the property and not servitudal in nature, as enunciated in Rouliot. Second, it is a principle of neighbour law as explained in Anglo Operations, which rests on justice and fairness, as articulated in Regal. Lastly, it is owed to land not only in its natural state, but extends to buildings upon it. Although influential in the acceptance of the right of lateral support into our law, English law was not slavishly implanted into our law. [66] Before I conclude, something needs to be said about the manner in which this litigation has been conducted. The order of separation followed on an application by the appellants, which was opposed by the respondent. The costs of that application were reserved. The trial of the separated issues was lengthy, taking place over a total of 27 days. In this court, the record spans 4248 pages, which includes the court a quo’s judgment 129 pages. It is thus disquieting that despite this circuitous journey, in terms of the separation order, the judgment of this court would not result in a final determination of the dispute between the parties. It was with this in mind that it was enquired of counsel during the hearing of the appeal whether the parties would be prepared to accept the order of this court as a final word on the liability dispute between 13 J Neethling & JM Potgieter Neethling-Potgieter-Visser Law of Delict 7ed (2014) 379-80. the parties. Counsel for the parties accepted that this judgment will finally dispose of all the disputes between the parties, as far as liability is concerned. [67] It is regrettable that this court has, once again, to express disquiet on how rule 33(4) is often not properly considered.14 As it was stated in Denel (Edms) Bpk v Vorster 2004 (4) SA 481 (SCA) para 3: ‘Rule 33(4) of the Uniform Rules ─ which entitles a Court to try issues separately in appropriate circumstances ─ is aimed at facilitating the convenient and expeditious disposal of litigation. It should not be assumed that that result is always achieved by separating the issues. In many cases, once properly considered, the issues will be found to be inextricably linked, even though, at first sight, they might appear to be discrete. And even where the issues are discrete, the expeditious disposal of the litigation is often best served by ventilating all the issues at one hearing, particularly where there is more than one issue that might be readily dispositive of the matter. It is only after careful thought has been given to the anticipated course of the litigation as a whole that it will be possible properly to determine whether it is convenient to try an issue separately. But, where the trial Court is satisfied that it is proper to make such an order ─ and, in all cases, it must be so satisfied before it does so ─ it is the duty of that Court to ensure that the issues to be tried are clearly circumscribed in its order so as to avoid confusion.’ See also ABSA Bank Ltd v Bernert [2010] ZASCA 36; 2011 (3) SA 74 (SCA) para 21. [68] In Consolidated News Agencies (Pty) Ltd (in liquidation) v Mobile Telephone Networks and Another [2009] ZASCA 130; 2010 (3) SA 382 (SCA), this court cautioned against piece-meal litigation: ‘Piece-meal litigation is not to be encouraged. Sometimes it is desirable to have a single issue decided separately either by way of a stated case or otherwise. If a decision on a discrete issue disposes of a major part of a case, or will in some way lead to expedition it might well be desirable to have that issue decided first. This court has warned that in many cases, once properly considered, issues initially thought to be discrete are found to be inextricably linked. And even where the issues are discrete, the expeditious disposal of the litigation is often best served by ventilating all the issues at one 14 See, for example, Firstrand Bank Ltd v Clear Creek Trading 12 (Pty) Ltd and Another [2015] ZASCA 6; 2018 (5) SA 300 (SCA) paras 9-10; Feedpro Animal Nutrition (Pty) Ltd v Nienaber NO and Another [2016] ZASCA 32 para 15; Cilliers NO and Others v Ellis and Another [2017] ZASCA 13 paras 12-14; and Transalloys (Pty) Ltd v Mineral-Loy (Pty) Ltd [2017] ZASCA 95 para 6. hearing. A trial court must be satisfied that it is convenient and proper to try an issue separately.’15 [69] It is by no means clear that these principles informed the decision to separate issues in this matter. In my view, the issues raised in the separated order are inextricably linked to the rest of the issues in the pleadings. They could conveniently have been ventilated in one hearing. This should have been clear to the parties and the judge who granted the separation order. [70] In all the circumstances the appeal has to fail. The following order is made: The appeal is dismissed with costs, such costs to be paid by the appellants jointly and severally, the one paying the other to be absolved. ____________________ T M Makgoka Judge of Appeal 15 Consolidated News Agencies (Pty) Ltd (in liquidation) v Mobile Telephone Networks and Another [2009] ZASCA 130; 2010 (3) SA 382 (SCA) paras 89-90. (Citations omitted.) APPEARANCES: For Appellants: M Seale SC (with him M Steenkamp) Instructed by: Mellows & De Swardt Attorneys, Cape Town Symington & De Kok Attorneys, Bloemfontein For Respondent: RWF MacWilliamson SC Instructed by: Smith Tabata Buchanan Boyes, Cape Town Honey Attorneys, Bloemfontein

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 21 May 2020 Status: Immediate The following summary is for the benefit of the media in the reporting of this case and does not form part of the judgment of, nor is it binding on, the Supreme Court of Appeal Petropulos and Another v Dias (1055/2018) [2020] ZASCA 53 (21 May 2020) Today the Supreme Court of Appeal (SCA) handed down judgment in an appeal against an order of the Western Cape Division of the High Court, Cape Town (Bozalek J, sitting as court of first instance). The appeal was dismissed with costs. The matter concerned the nature and ambit of the duty of lateral support, an aspect of neighbour law. In about July 2008, a scree slope at one of the highest terraces on Table Mountain, in the Cape Town suburb of Camps Bay, mobilised and subsided. This resulted in extensive damage to a group of adjoining properties which formed a parcel of land bound between Theresa Avenue, on the upper side of the slope, and Barbara Road down below. One of the properties damaged by the subsidence was that of the respondent, Mr Artur Dias, whose property is situated in Theresa Avenue. The respondent consequently instituted an action for damages in the court below, alleging that the mobilisation and subsidence was caused by excavations undertaken at the properties of the first appellant, Ms Marina Petropulos, in preparation for the construction of a house, and Mr Dawid Venter, in preparation for the construction of a garage, both properties being situated at the lower end of the parcel on Barbara Road, and both excavations being effected near the respective boundaries with the respondent’s property. The first appellant and Mr Venter were the first and second defendants in the court a quo. The respondent alleged that these excavations jointly, or each partially, caused the mobilisation and subsidence of the scree slope, alternatively that it was caused by one of these excavations independently. The respondent alleged further that these excavations deprived his property of the lateral support it had hitherto enjoyed, and to which he is entitled as a neighbouring landowner. Stated otherwise, Mr Dias’s case was that the respective excavations undertaken on the properties of the first appellant and Mr Venter were in breach of their duties to provide lateral support to contiguous properties. The second appellant, Nic Moroff & Associates, is a structural engineering firm that was appointed as the project engineer for the works on the first appellant’s property. The first appellant alleged that the second appellant, who was one of six third parties joined in the proceedings below, was negligent in carrying out its mandate. The first appellant and Mr Venter both denied any liability for damages to the respondent. The first appellant particularly denied owing the respondent a duty of lateral support because, firstly, the respondent’s property had previously been excavated, developed and built up and was thus no longer in its natural state; and, secondly, because the land on which the respondent’s property was situated was compromised by its (own) development or that of neighbouring properties. In the excavation or the development of its property, so the argument went, the first appellant did not deprive the respondent’s property of any lateral support to which it was entitled. In any event, the first appellant alternatively denied incurring liability by virtue of the respondent having consented to the first appellant’s excavation, thereby accepting the risk of harm resulting from the first appellant’s excavation and waiving any right of lateral support he might otherwise have enjoyed. On the other hand, Mr Venter denied liability and pleaded that the slope mobilisation was caused exclusively by the excavation effected by the first appellant on her property. In terms of rule 33(4) of the Uniform Rules of Court, the high court ordered a separation of issues so that the only issues to be decided in the first instance were, firstly, whether Ms Petropulos and Mr Venter indeed owed Mr Dias a duty of lateral support; secondly, if so, whether the respective excavations effected on the properties of Ms Petropulos and Mr Venter breached this duty; and lastly, whether, in addition to breaching the duty of lateral support, these excavations were also the cause of the scree slope mobilising and subsiding, and accordingly causing extensive damage to Mr Dias’s property. The high court answered all three questions in the affirmative. The high court thus held that the duty of lateral support is owed not only to neighbouring land, but also to buildings constructed thereon, save where such land has been unreasonably loaded so as to place a disproportionate or unreasonable burden on the neighbouring land. On appeal to the SCA, the appellants contended that the first appellant did not owe a duty of lateral support to the respondent’s property because of that property no longer being in its natural state; that, in any event, the excavation undertaken on the first appellant’s property did not breach such duty; that the excavation on the first appellant’s property was not linked sufficiently closely to the respondent’s harm for legal liability to ensue; and, lastly, that it would be inconceivable in these circumstances to hold the first appellant strictly liable, that is, without positively establishing fault. The SCA considered the development of South African neighbour law in relation to the duty of lateral support. It confirmed the trite principles of the right to lateral support being a natural right, incidental to the ownership of property and not servitudal in nature, and that the right was reciprocal between two neighbours, so that the duty of a landowner to provide lateral support corresponds with the adjacent landowner’s entitlement to receive such support. The SCA then considered the divergent views of two schools of thought on whether lateral support is owed only to contiguous land in its natural state, or whether the duty extends also to artificial structures on the land. While English law favours the former approach, the SCA held that, on the basis of fairness and equity being important considerations in South African neighbour law, as well as the constitutional value of Ubuntu, lateral support is owed not only to contiguous land but must necessarily extend to buildings on the land. It therefore agreed with the court a quo on this score. However, in respect of the exception sought to be introduced by the court a quo, namely that the duty of lateral support extends to buildings constructed on contiguous land except where such land has been unreasonably loaded so as to place a disproportionate or unreasonable burden on the neighbouring land, the SCA disagreed. It alluded to the practical difficulties that such an exception might introduce, such as a landowner who constructs in compliance with the relevant building and town planning regulations but is nevertheless saddled with the duty to prove that the construction is not unreasonable or disproportionate. The SCA held that there are sufficient safeguards in our law to meet the concerns sought to be addressed by the exception. After considering the conflicting views of the two expert witnesses, the SCA agreed with the court a quo that the evidence of Dr McStay was to be preferred. The SCA held that Dr McStay’s evidence provided the most reasoned and cogent explanation for the geological event and that it closely matched the objective facts. It concluded that the respondent was successful in establishing that the slope mobilisation had resulted from the breach of lateral support due to the excavation effected on the first appellant’s property. The SCA then considered the element of causation. It found that the excavation effected on the first appellant’s property was both the factual and the legal cause of the respondent’s harm. But for the excavation on the first appellant’s property, the slope mobilisation, which caused extensive damage to the first respondent’s property, would not have occurred. Furthermore, the respondent’s harm was sufficiently closely connected to the first appellant’s conduct so that it would be fair, reasonable and just for the first appellant to be held liable. The SCA concluded that the right to lateral support is a natural right incidental to the ownership of the property and not servitudal in nature, confirming earlier case law; that it is a principle of neighbour law that rests on justice and fairness, again confirming earlier case law; that the duty to provide lateral support is owed to contiguous land as well as the buildings constructed thereon, thereby rejecting the English approach on this aspect; and that liability for breach of the duty of lateral support is strict. Finally, the SCA was critical of the improper consideration of rule 33(4) of the Uniform Rules of Court in ordering a separation of issues. It was of the view that the issues in the separated order were inextricably linked to the remainder of the issues in the pleadings. In the result, the Court (per Makgoka JA) with Ponnan, Saldulker, Van der Merwe and Mokgohloa JJA concurring), dismissed the appeal with costs, such costs to be paid by the appellants jointly and severally, the one paying the other to be absolved. --END--

1535

non-electoral

2008

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA JUDGMENT Case No: 400/07 JOHAN BLOEM KRUGER Appellant and JOLES EIENDOM (PTY) LTD 1st Respondent REGISTRAR OF DEEDS (CAPE TOWN) 2nd Respondent Neutral citation: Kruger v Joles Eiendom (Pty) Ltd (400/07) [2008] ZASCA 138 (27 November 2008). Coram: MPATI P, MTHIYANE, CLOETE, HEHER JJA et KGOMO AJ Heard: 10 NOVEMBER 2008 Delivered: 27 NOVEMBER 2008 Summary: Servitude-interpretation where ambiguous. ______________________________________________________________ ORDER ______________________________________________________________ On appeal from: High Court, Cape Town (Traverso DJP, Griesel J and Ndita J sitting as Full Court) The following order is made: 1(a) The appeal succeeds, with costs. (b) The order of the full court is set aside and the following order substituted: 'The appeal is dismissed, with costs.' 2. The cross-appeal is dismissed, with costs. ______________________________________________________________ JUDGMENT ______________________________________________________________ CLOETE JA (MPATI P, MTHIYANE, HEHER JJA and KGOMO AJA concurring): [1] There is an appeal and a cross-appeal before the court. It would be convenient to refer to the parties as they were at first instance. The plaintiff and the defendant own adjoining properties in Dorp Street, Stellenbosch. The plaintiff made three claims, two of which remain relevant. First, the plaintiff claimed that a servitude registered over part of his property in favour of the defendant's property had become extinguished by prescription. Second, the plaintiff claimed that he had acquired part of the defendant's property by prescription. The trial court (Woodland AJ) upheld both claims and the defendant appealed. The full court in Cape Town (Griesel J, Traverso DJP and Ndita J concurring) upheld the appeal in respect of the first claim (extinction of the servitude) but dismissed the appeal in respect of the second claim (acquisition of part of the defendant's property). The parties have respectively appealed and cross-appealed against these findings with the special leave of this court. [2] The judgment of the full court has been reported as Joles Eiendom (Pty) Ltd v Kruger and Another.1 At the end of the judgment2 there is a diagram to which it is convenient to refer. The plaintiff's property is Erf 3765, on the left of the diagram. The first defendant's property is Erf 548, to the east. Dorp Street lies to the south of both erven where points E and N appear. Between the two erven there is a passage ,95 metres wide and 10,39 metres long the middle of which extends along the common boundary from point E to point F. (Points G and M are directly opposite point F and point N is directly opposite point E.) There is a servitude registered in favour of the plaintiff's property over that area of the defendant's property between points EFMNE, 1 2007 (5) SA 222 (C). 2 Page 235. and a servitude registered in favour of the defendant's property over the corresponding area of the plaintiff's property to the west of the common boundary. It is this latter servitude that the plaintiff in the present appeal contends became extinguished by prescription. The area of the defendant's property relevant to the defendant's cross-appeal, demarcated by points GHJMFG, is contiguous with, and situated to the north of, the passage burdened with the servitudes. (The line GH represents part of the eastern boundary of the plaintiff's property.) It would be convenient to refer to this area as 'the extended passage'. In 1966 the owner of the defendant's property, a Mr Scheiffer, constructed a wall 2,7 metres high which extended from a point about one metre to the south of point M, to point J (and thereafter to point K, to point L and further north). Subsequently, between 1966 and 1968, the plaintiff put in a door where the passage opens on to Dorp Street. [3] Of cardinal importance to the appeal is the proper construction of the servitude in favour of the defendant's property. It is contained in a special condition in the defendant's title deed which reads: 'The passage . . . shall be for the common use of' the two properties in question. The relevant part of the special condition in the plaintiff's title deed is in identical terms. The servitudes originally provided access to the backyards of the two properties. The trial court interpreted each servitude to be one of footpath.3 The full court disagreed, holding that because the expression 'common use' was not further described or defined in any way: '[T]his means that the passage may be used by both owners for any lawful purpose ─ having regard to the nature and situation thereof, namely a narrow passageway between two adjoining commercial buildings in an urban setting ─ and provided, of course, that the servitude is exercised civiliter modo. In addition to the right of footpath (iter), other permissible uses of the passage would include urban servitudes, such as ius stillicidii avertendi (the right to pass off one's rainwater onto the ground of another); ius stillicidii recipiendi (the right to receive the rainwater coming from another's land); ius cloacae (the right to have a drain lying on or coming out on the ground of another); and so on.'4 3 See para 12 of the judgment of the full court, n 1 above. 4 Para 15. In the appeal before this court, the plaintiff championed the interpretation given by the trial court, and the defendant, that given by the full court. [4] Both parties sought to rely in argument before this court on the use to which the passage had in fact been put as it emerged from the evidence of the witnesses who testified at the trial. Where a servitude has been granted by agreement,5 and where the agreement is ambiguous and evidence as to surrounding circumstances which obtained at the date the contract was concluded does not resolve the ambiguity,6 evidence as to the interpretation the parties had by their conduct put upon the grant will be admissible as an indication of their common understanding of its meaning.7 But here there was no evidence as to how the servitude in the present matter came to be constituted ─ it may not have had its origin in contract, but have been imposed by the local authority; and furthermore, none of the witnesses who testified as to how the servitude had in fact been used, could possibly have been the parties to any agreement constituting it, nor could their evidence have related to the conduct of such parties. [5] To my mind, the servitude means that the 'passage' is 'for the common use of' the two properties in question as a passage, ie as a passageway, to pass from Dorp Street to the properties. I am fortified in this view by the fact that the passage is so narrow that any other use does not readily suggest itself. It is not necessary, however, to elaborate further as the servitude is, at best for the defendant, ambiguous, as its counsel readily conceded. Evidence as to the conditions prevailing at the time the servitude was constituted would have been admissible to resolve the ambiguity. The decision of this court in Cliffside Flats (Pty) Ltd v Bantry Rocks (Pty) Ltd8 provides a good illustration of how this may be done. In 1941 the appellant in that matter received transfer of land (Lots 6 and 7) each subject to a condition that 'no more than two 5 As eg in Van Rensburg v Taute 1975 (1) SA 279 (A). 6 Haviland Estates (Pty) Ltd v McMaster 1969 (2) SA 312 (A) at 322B-C. 7 See eg Breed v Van den Berg 1932 AD 283 at 291-3; Shacklock v Shacklock 1949 (1) SA 91 (A) at 101 in fine; MTK Saagmeule (Pty) Ltd v Killyman Estates (Pty) Ltd 1980 (3) SA 1 (A) at 12F-13C. 8 1944 AD 106. dwelling-houses shall be erected on the above-described property'. It was common cause that the condition was a servitude in favour of Lot 3 (owned by the respondent). Feetham JA found the condition ambiguous in that it could mean that only two dwelling-houses could be erected and nothing more, or it could mean that as many structures could be erected as the property would permit save that of those structures, only two could be dwelling-houses. The learned judge said:9 'It thus appears that the condition which we have to consider originated in a deed of transfer dated August, 1919, that it was imposed in favour of a residential property occupied by the transferor, and that the two properties concerned were situate within a short distance of, and within view of, each other, in a residential area lying above the sea coast in a neighbourhood which at the date of the transfer was still only very partially developed. These facts appear to me to be quite sufficient to justify the inference that the object of this condition was to protect and preserve the amenities of Lot 3 as a residential property by barring any developments on Lots 6 and 7 which would be inconsistent with the existing residential character of the adjacent area, and might have the effect of diminishing such amenities; and they thus afford strong confirmation of the view that the condition is to be read as having the meaning which examination of its actual terms led me to regard as the preferable choice between the two alternative meanings of which I find it to be capable ─ that is, that the condition is to be read as meaning ─ "Nothing more than two dwelling-houses shall be erected on the property". . . . I do not think it is open to any doubt that the facts which I have taken into account, as established by admissions and evidence, are facts which can properly be taken into account for the purpose of throwing light on the object and interpretation of the condition. I have held that the condition is susceptible of two meanings, and these facts which relate to the subject matter of the condition, namely the two properties affected by it (which may be called respectively the dominant and the servient tenement), are relevant for the purpose of determining which of the two meanings should be given to it.' 9 At 115-116 and 117. [6] As support for the approach followed by him, Feetham JA referred inter alia to the judgment of Gregorowski CJ (Esser and Kock JJ concurring) in Kempenaars v Jonker, Van der Berg and Havenga10 where the learned Chief Justice, in dealing with the servitude of grazing, said the following: 'It is clear that incidents [sic: sc the incidence] and the extent of the servitude must depend on the circumstances under which it was created . . . I think . . . that much must depend on the circumstances under which the servitude was created, and on the causa et origo servitutis.' Feetham JA also referred to the decision in Priestman v Simonstown Licensing Board & Others11 where Watermeyer J (Sutton J concurring) considered the state of the liquor laws in the Cape Colony, starting with a Plakaat of 1804, in order to interpret a prohibition on the sale of liquor inserted in 1818 in title deeds of hotels at Fish Hoek. [7] In the present appeal the fact that the passage extended up towards two outside lavatories, one on each property with a common wall separating them, suggests that the servitudes may have been imposed by the local authority to give access to the backyards of the properties from Dorp Street for the primary purpose of removing what was politely called 'night soil'. But there was no evidence in this regard or any other evidence as to the conditions prevailing at the time the servitudes were created. The fact mentioned by the full court, in the passage from the judgment quoted above, that there are now commercial buildings on the properties, is irrelevant. [8] In the circumstances I believe that such ambiguity as there is should be resolved by applying the well established rule of construction that because a servitude is a limitation on ownership, it must be accorded an interpretation which least encumbers the servient tenement. Voet,12 in discussing the urban servitude of tigni immittendi (ie the right to let a beam into a neighbour's party wall), contrasts the position under a limited agreement as opposed to a general agreement and says that where the number of beams and mode of 10 1898 5 OR 223 at 227-8. 11 1929 CPD 263. 12 Commentarius ad Pandectas 8.2.2. letting in has been defined, the owner of the dominant tenement is not allowed either to let in more or to alter the shape of the letting in. The reason he gives is: 'That is especially so because the granting of a servitude receives a strict interpretation as being an odious thing (because it is opposed to natural freedom); and in case of doubt there must be a declaration in favour of freedom.'13 As authority for this proposition Voet refers to, amongst others, Carpzovius14 and the author of the opinion in the Hollandsche Consultatien15 where the passage from Carpzovius which follows is quoted: '. . . servitus ceu res odiosa restringi, ac in dubio pro libertate pronunciari debet. Et semper servitus indefinita ita est interpretanda, quo fundus serviens minori afficiatur detrimento.' The passage may be translated as follows: '. . . a servitude being something odious should be interpreted restrictively and so, in case of doubt, should be declared free of restraint. And an imprecise servitude must always be interpreted so that the servient tenement is the less adversely burdened.' [9] The restrictive approach to interpreting servitudes has been endorsed by this court in Pieterse v Du Plessis16 although in Van Rensburg v Taute17 the caveat was added that: 'By die toepassing van hierdie beginsel moet egter steeds in gedagte gehou word dat die aard en omvang van die beswaring bepaal word na aanleiding van die betekenis wat gegee moet word aan die ooreenkoms wat die serwituut daarstel. Indien die betekenis daarvan ondubbelsinnig blyk te wees, is 'n hof nie geregtig om daarvan af te wyk ten einde 'n mindere beswaring te bewerkstellig nie.'18 13 Gane's translation vol 2 p 440.To the same effect, as regards the general principle, is Schorer in his supplementary notes to Grotius 2.32, Austen's translation p 303. 14 Jurisprudentia Forensis Romano-Saxonica 2.41.4. 15 Opinion 146. 16 1972 (2) SA 597 (A) at 599G-in fine; see also Willoughby's Consolidated Co Ltd v Copthall Stores Ltd 1918 AD 1 at 16 and Union Government (Minister of Railways and Harbours) v Marais 1920 AD 240 at 271 per Maasdorp JA; and see the decisions of Corbett J in Stuttaford v Kruger 1965 (4) SA 505 (C) (appendix) and Jonordon Investment (Pty) Ltd v De Aar Drankwinkel (Edms) Bpk 1969 (2) SA 117 (C) at 125H-126B. 17 Above n 5, at 301G-in fine. 18 In applying this principle it must, however, be borne in mind that the nature and extent of the encumbrance is determined with reference to the meaning that must be given to the agreement that constitutes the servitude. If the meaning is unambiguous, a court is not entitled to depart therefrom in order to achieve a lesser encumbrance. (My translation.) [10] In my respectful view, the meaning given by the full court to the servitude burdening the plaintiff's property loses sight of this principle of interpretation, and the conclusion reached by that court accordingly cannot be supported. Indeed, counsel was unable to refer to any authority where a servitude was construed as being in such wide and imprecise terms and I have found none either. I therefore conclude that the servitude in question must be limited to the use of the passage as a passageway to gain access to the defendant's property. [11] The conclusion reached in the previous paragraph renders it unnecessary, with one exception, to consider the evidence of the witnesses called on behalf of the defendant as to the alleged exercise of the servitude. The exception relates to the evidence of Mr Gideon Jacobs who was employed by a tenant of the defendant's predecessor in title. Counsel representing the defendant submitted that a proper reading of Jacobs' evidence showed that on occasion he used the passage as a passageway to obtain access to the extended passage to clear a drain on Erf 548 and also to clean away debris which had fallen into the extended passage when he cleaned gutters of a building on Erf 548 which adjoined the extended passage. Therefore, so went the argument, the passage was used as a passageway to gain access to the extended passage, which was part of Erf 548 (now the defendant's property), and extinctive prescription was accordingly interrupted on each occasion this took place. I find the argument contrived but it is possible to dispose of it relatively briefly on the facts. Jacobs never said expressly that he went into the extended passage, but we were asked to infer that he did. I am not prepared, however, to accept that he was there at all because his evidence was confusing and contradictory, and deviated in significant respects from what was put to the plaintiff's witnesses on this very point. In addition he confessed to two confrontations with the plaintiff in the past which cast doubt on his reliability. [12] The trial court found it to be clear on the evidence that the defendant and its predecessors in title had not exercised the right of way through the passage since at least 1966, when the wall was built by Scheiffer; that after the wall was built, it was no longer possible to obtain access to Erf 548 by means of the passage; and that the position did not change until 2001, when the defendant built a door which opened on to the passage. I agree with these conclusions. It follows that the requirements of s 7(1) of the Prescription Act,19 which provide that: 'A servitude shall be extinguished by prescription if it has not been exercised for an uninterrupted period of thirty years', have been satisfied. The argument set out in paragraphs 35 and 36 of the judgment of the full court was ─ in my view, correctly ─ abandoned on appeal and it is therefore not necessary to consider it. In my view the appeal should be upheld. [13] I turn to consider the cross-appeal. The plaintiff occupied Erf 3765 as owner after he acquired it in 1967 (although he only obtained transfer in 1976, the delay being due to litigation with his father from whom he acquired it). After the wall was built by Scheiffer in 1966 the extended passage effectively became part of the plaintiff's backyard. A year or two thereafter, as I have said, the plaintiff erected the door, at the Dorp Street entrance to the passage, to which he and his tenants had a key. The door was kept locked most of the time thereafter. He accordingly controlled access to the passage and the extended passage. In addition in 1968 the plaintiff effected improvements to his property: he built a wall which encroached slightly on the extended passage between points G and H; he constructed a drain which ran from and under the extended passage to Dorp Street; and he paved the passage and the extended passage. On these facts there is no doubt in my mind that the trial court and the full court were correct in finding that the plaintiff had both the intention to possess the extended passage as owner, and that he exercised physical control over it. The requirements of that part of s 1 of the Prescription Act, which provide that 'a person shall by prescription become the owner of a thing which he has possessed openly and as if he were the owner thereof for an uninterrupted period of thirty years', were accordingly satisfied. It follows that the cross-appeal falls to be dismissed. 19 68 of 1969. [14] The following order is made: 1(a) The appeal succeeds, with costs. (b) The order of the full court is set aside and the following order substituted: 'The appeal is dismissed, with costs.' 2. The cross-appeal is dismissed, with costs. _______________ T D CLOETE JUDGE OF APPEAL Appearances: Counsel for Appellant: J H Roux SC Instructed by Morkel & De Villiers, Somerset West Matsepes, Bloemfontein Counsel for Respondent: Ms M Ipser Instructed by Schliemann Incorporated, Somerset West Naudes, Bloemfontein

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 27 November 2008 Status: Immediate Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal J B KRUGER v JOLES EIENDOM (PTY) LTD 1. The appellant and the respondent owned adjourning properties in Dorp Street, Stellenbosch. Between the properties there is a passage over which each property has a servitude. The SCA held that the servitude had to be narrowly interpreted as conferring only a right of way from Dorp Street to the backyards of the properties. As the passage had not been used by the respondent for that purpose for more than thirty years, it was held that the servitude in his favour had become extinguished by prescription. 2. The SCA also held that the appellant had become the owner of a piece of land belonging to the defendant at the end of the passage by acquisitive prescription as he had occupied it and treated it as his own for more than thirty years. --ends--

2486

non-electoral

2014

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT REPORTABLE Case No: 40/13 In the matter between: ESORFRANKI PIPELINES (PTY) LTD FIRST APPELLANT CYCAD PIPELINES (PTY) LTD SECOND APPELLANT and MOPANI DISTRICT MUNICIPALITY FIRST RESPONDENT TANGO CONSULTANTS CC SECOND RESPONDENT TLONG RE TRADING SMN JV THIRD RESPONDENT TLONG RE YENG TRADING CC FOURTH RESPONDENT BASE MAJOR CONSTRUCTION (PTY) LTD FIFTH RESPONDENT MAITE IRENE MOAKAMELA SIXTH RESPONDENT MOTLATSO CONSTANCE MALEBATE SEVENTH RESPONDENT LU JINPU EIGHTH RESPONDENT MAILULA CHRISPOLAND MAHOWA NINTH RESPONDENT Neutral citation: Esorfranki Pipelines v Mopani District Municipality (40/13) [2014] ZASCA 21 (28 March 2014) Coram: Mthiyane DP, Lewis and Bosielo JJA, Van Zyl and Legodi AJJA Heard: 4 March 2014 Delivered: 28 March 2014 Summary: Judicial review of administrative action – tender process – contract concluded pursuant to unlawful tender award declared void and set aside – determination of a just and equitable remedy in terms of s 8 of the Promotion of Administrative Justice Act 3 of 2000 – relevant considerations – municipality found to have been biased in its decision to award the tender – successful tenderers guilty of fraud and fronting – orders for costs to reflect the reprehensible and serious nature of the conduct of the municipality and the successful tenderers. ___________________________________________________________________ ORDER ___________________________________________________________________ On appeal from: North Gauteng High Court, Pretoria (Matojane J sitting as court of first instance): The first and second appellants‟ appeal against the orders in paras 2 and 3 of the order of the high court is upheld with costs including the costs of two counsel, such costs to be paid jointly and severally by the first and the third to fifth respondents on the scale as between attorney and client. The aforesaid orders are set aside and are substituted with the following orders: „(a) Any contract entered into between the first respondent and the third to fifth respondents pursuant to the award of the tender to the respondents for the construction of a pipeline between the Nandoni dam and the Nsami water treatment works (Nandoni to Giyani Pipe Project; project number LPR018), is declared void ab initio and is set aside. (b) The first respondent is ordered to formally approach the Department of Water Affairs within seven days of the granting of this order to request that Department to do the following: (i) To take such steps as may be necessary to determine the extent of the works necessary to perform remedial work and to complete the construction of the pipeline and the other works as contemplated in the aforesaid tender, for purposes of publishing a tender for the said remedial work and the completion of the works; (ii) To prepare and publish an invitation to tender for the performance of the remedial work and completion of the works as aforesaid; (iii) To evaluate and adjudicate all bids received, and to make an award in respect of such invitation to bid. The first and the third to fifth respondents jointly and severally are ordered to pay the costs of the review application by Esorfranki Pipelines (Pty) Ltd under case no 13480/2011, and of the third Rule 49(11) application dated 27 August 2011 under case no 13480/2011, such costs to be on an attorney and client scale, and to be inclusive of all the reserved costs and the costs of two counsel where applicable. The first and the third to fifth respondents jointly and severally are ordered to pay the costs of the review application by Cycad Pipelines (Pty) Ltd under case no 17852/2011, such costs to be on an attorney and client scale, and to be inclusive of all the reserved costs and the costs of two counsel where applicable. The first appellant‟s appeal against the order in para 4 of the order of the high court is dismissed with costs.‟ ___________________________________________________________________ JUDGMENT ___________________________________________________________________ Van Zyl AJA (Mthiyane DP, Lewis and Bosielo JJA and Legodi AJA concurring) [1] In August 2010 the first respondent, the Mopani District Municipality (the municipality) invited tenders for the construction of concrete reservoirs and a welded steel bulk pipeline between the Nandoni dam in Thohoyandou and the Nsami water treatment works in Giyani in the Limpopo Province. The purpose of the pipeline was to provide water to the greater Giyani area. A drought in 2009 caused the water levels in the Nsami dam to drop to the extent that there was insufficient water to ensure a supply of water to the inhabitants of Giyani. The water shortage was so severe that a local state of disaster was declared in terms of the provisions of the Disaster Management Act 57 of 2002 and emergency measures had to be implemented. [2] A decision was then made at a national government level to source water from the Nandoni dam and an amount of more than R284 million was made available for that purpose. The construction of the pipeline is a project of the Department of Water Affairs. The municipality was appointed by the Department as an „implementation agent‟. In terms of their agreement it was made responsible for the implementation and management of the project. To that extent it was tasked with the appointment of contractors and other service providers „in accordance with procurement procedures approved by the department and in consultation with the Department when inviting bids, considering bids and administering the contracts of appointed Professional Service Providers (PSP‟s) and Contractors‟. [3] The tender was awarded to the third respondent, a joint venture (the joint venture) consisting of two entities, namely the fourth respondent, Tlong Re Yeng Trading CC (Tlong Re Yeng) and the fifth respondent, Base Major Construction (Pty) Ltd (Base Major Construction). Two unsuccessful bidders, namely the first appellant, Esorfranki Pipelines (Pty) Ltd (Esorfranki) and the second appellant, Cycad Pipelines (Pty) Ltd (Cycad), then proceeded to bring review proceedings in the North Gauteng High Court. This culminated in an agreement in terms of which the award was set aside and the municipality was ordered to re-adjudicate the tenders received by it. According to the municipality the reason for this agreement, which was made an order of court, was the realisation that in the tender process it had applied regulations made in terms of the Preferential Procurement Policy Framework Act,1 which unbeknown to it had been declared ultra vires by the KwaZulu-Natal High Court.2 [4] The municipality thereafter in February 2011 re-adjudicated the tenders and once more decided to award the tender to the joint venture. Esorfranki and Cycad were once again dissatisfied with this decision and as before individually proceeded 1 Act 5 of 2000. 2 Regulations 8(2) to 8(7) of the Preferential Procurement Regulations, GN R725, GG 22549, 10 August 2001 were declared as invalid in the judgment of Sizabonke Civils CC t/a Pilcon Projects v Zululand District Municipality & others 2011 (4) SA 406 (KZP). to institute review proceedings. The main relief sought by each appellant was the setting aside of the municipality‟s decision to award the tender to the joint venture and the substitution thereof of a decision to award the tender to them. Each application was further accompanied by a claim for interim relief in the form of an interdict pending the outcome and final adjudication of the review application, and in terms of which the municipality was to be restrained from taking any steps in implementing the decision to award the tender to the joint venture. The joint venture was in turn to be interdicted from taking any steps towards the execution of any contract which may have been concluded pursuant to the decision. [5] Cycad chose not to pursue its application for interim relief, because an interim order (the interim order) was granted by the high court at the instance of Esorfranki in March 2011. This order became the subject matter of a plethora of further proceedings aimed at either setting it aside, or its continued operation and implementation. I intend to refer to some of these proceedings in such detail as may be relevant to the issues raised in this appeal. The first step was taken by the municipality which applied for leave to appeal the granting of the interim order. In terms of Rule 49(11) of the Uniform Rules of Court, the effect of an application for leave to appeal against an order of the court is that the order is suspended pending the decision of such application, „unless the court which gave such order, on the application of a party, otherwise directs‟. When the municipality and the joint venture failed to give an undertaking that the award of the tender would not be acted upon, Esorfranki then proceeded in terms of sub-rule (11) to apply for an order that, pending the determination of the application for leave to appeal, the interim order should continue to operate. This resulted in the granting of an interim order suspending any further work on the project. [6] That order was extended from time to time until the dismissal of the municipality‟s application for leave to appeal. In dismissing the application the high court held that its order was interim in nature and effect, that it was not appealable and that on the merits there were no reasonable prospects that another court would come to a different conclusion. The municipality proceeded to file a petition to this court for leave to appeal against the grant of the interim order. This was followed by a second application brought by Esorfranki in terms of Rule 49(11). It once again sought to prevent the implementation and execution of the tender. Following upon this application, the municipality and the joint venture gave certain undertakings with regard to the continued execution of work on the tender. Some of these undertakings were incorporated into a court order, only to be discharged at a later date. This prompted Esorfranki to launch a further application for an interim interdict which was to operate pending the hearing of the second Rule 49(11) application. This in turn culminated in an order interdicting the municipality and the joint venture from taking any steps to implement the award of the tender pending the adjudication of the second Rule 49(11) application. Subsequent to this order this court dismissed the municipality‟s application for leave to appeal. The result was that there no longer existed any necessity, as in the case of the first application, to determine the merits of the second application in terms of Rule 49(11). [7] Dissatisfied with the decision of this court to dismiss its application for leave to appeal, the municipality then filed an application with the Constitutional Court for leave to appeal to that court. This caused Esorfranki to institute a third application in terms of Rule 49(11) (the third Rule 49(11) application). It once again sought an order that pending the outcome and adjudication of the municipality‟s application for leave to appeal to the Constitutional Court, the interim order remain in operation. In this application Esorfranki also sought additional relief against certain of the office bearers of the municipality and the joint venture (the sixth to eighth respondents), namely that they be ordered to give effect to the interim order sought and that they be held to be in contempt of the interim order for their earlier failure to do so. Esorfranki further cited the municipality‟s attorney of record Mr M C Mahowa (Mahowa) as the ninth respondent, asking the court not only to order him to give effect to the interim order, but also to pay the costs of the third Rule 49(11) application de bonis propris, on an attorney and client scale. [8] In response to the third Rule 49(11) application the municipality filed a counter application seeking to set aside the interim order, and an order declaring Esorfranki‟s review application to have lapsed. On the date of the hearing both these applications were by agreement postponed to enable the parties to file further affidavits. In addition, it was ordered by agreement that the interim order would remain in force pending the determination of these applications. Cycad subsequently entered the fray when it became aware of the existence of the municipality‟s counter application, and it, with a view to protect its own interests, sought leave to intervene and be afforded an opportunity to file an answering affidavit therein. At the adjourned hearing of the third Rule 49(11) application and the counter application, it was agreed that both the counter application and Cycad‟s application to intervene would be postponed sine die. Agreement was further reached with regard to the hearing and further conduct relating to Esorfranki and Cycad‟s applications for review. It was inter alia agreed that the two matters would be heard simultaneously. [9] It would appear from the judgment of the high court (per Matojane J) that at the joint hearing of the two review applications the issues for decision were limited to the lawfulness of the municipality‟s decision to award the tender to the joint venture and the costs of Esorfranki‟s third Rule 49(11) application. Esorfranki abandoned the remainder of the relief claimed in the latter application, whilst the municipality abandoned its counter application with a tender of costs, such costs to include the costs of two counsel. Cycad in turn informed the court that it was no longer persisting in its claim in its review application that the tender be awarded to it. [10] The high court upheld the challenge of Esorfranki and Cycad to the decision of the municipality to award the tender to the joint venture. There is no appeal against the order that the award was unlawful and that it was set aside. Nonetheless it is necessary briefly to describe the reasons for that order. The high court found that the tender submitted by the joint venture did not comply with the bid specifications, that it was guilty of fronting and that the municipality‟s decision was motivated by bias and bad faith. These findings were based inter alia on the following factors. The joint venture failed to comply with the required contractor grading. This is a standard determined and issued in terms of the Construction Industry Development Board Act 30 of 2000 and its regulations.3 To qualify for evaluation a bidder must have the required contractor grading designation which is based on the estimated tender value. The required grading in this matter was 8CE PE or higher. In the case of a tender by a joint venture the bid documentation 3 Regulation 25(3) of the Construction Industry Development Regulations, GN R692, GG 26427, 9 June 2004, discussed in Moseme Road Construction CC & others v King Civil Engineering Contractors (Pty) Ltd & another 2010 (4) SA 359 (SCA) para 14. required every member of the joint venture to be registered with the Construction Industry Development Board; the lead partner to have a contractor grading designation of 8CE PE or higher; and the combined grading to be higher or equal to 8CE PE. Tlong Re Yeng was found to have possessed a grading of 1CE PE, and Base Major Construction a grading of 8CE. In the circumstances the court concluded that the joint venture failed to comply with the tender specifications and ought to have been disqualified from the tender process. Cycad and other similarly placed bidders were eliminated during the re-adjudication of the tenders on the basis that they possessed only a grading of 8CE. [11] The high court further found that the joint venture failed to submit some of the information required by the tender specifications necessary to assess the tender requirements relating to competence and functionality. Members of the joint venture were also found to have made false representations in their tender submission. Tlong Re Yeng falsely stated that it was conducting its business at a given address when it was not, resulting in it being awarded a point in the adjudication of the tender in respect of locality. It falsely claimed to have been in business for three years prior to the submission of the tender. Base Major Construction in turn falsely represented that its sole shareholder, a foreign-born national, obtained South African citizenship at his/her date of birth, thereby improving its score for equity promotion goals. In the joint venture agreement entered into between Tlong Re Yeng and Base Major Construction it was recorded that both entities individually had experience in the construction industry when it was obvious that Tlong Re Yeng had no such experience and was as a consequence unable to manage and execute its half of the work. Lastly, by declaring that Tlong Re Yeng and Base Major Construction were, contrary to the terms of the joint venture agreement, to manage and execute the contract for the construction of the pipeline in equal shares, they managed to acquire additional points in relation to equity promotion goals. [12] The high court found support for its finding that Tlong Re Yeng was used as a front in the following facts: it was established as an entity only after publication of the invitation to tender and a week before the tender was submitted; it had no assets, employees or income; it did not conduct business at the time the tender was submitted; it had no business address and did not exist at the address given in the tender documentation, which was a residential house with only a few pieces of furniture; and lastly, Tlong Re Yeng‟s sole member was an employee at an unrelated business. [13] Having found that the award of a tender was reviewable on grounds contained in s 6 of the Promotion of Administrative Justice Act (PAJA),4 the high court then proceeded to determine what would constitute a just and equitable remedy as envisaged in s 8 of PAJA. The orders made by the court relevant to this appeal read as follows: „1. The tender process is declared illegal and invalid and is set aside. 2. The Municipality is ordered to independently and at the joint venture‟s costs, verify that all the work has been done according to specifications and that the joint venture does all the necessary remedial work and work is completed as soon as possible in terms of the agreement. 3. Each party is ordered to pay its own costs. 4. Esorfranki Pipelines (Pty) Ltd is ordered to pay ninth respondents‟ costs on the attorney and own client scale, including the costs reserved on 3 and 4 October 2011.‟ [14] The appellants‟ appeal is with the leave of the high court. Esorfranki‟s appeal is directed at the orders made in paras 2, 3 and 4 of the order. It seeks the setting aside of those orders and the substitution of an order to the effect that it be declared to have been the sole successful bidder in respect of the tender; that the municipality enter into a contract with it for the completion of the outstanding work on the pipeline; that the municipality and the members of the joint venture pay the costs of the application for review and of the third Rule 49(11) application on a punitive scale; and that Mahowa pay the costs of the third Rule 49(11) application. Cycad‟s appeal is in turn directed only at paras 2 and 3 of the order of the high court. It seeks an order setting aside those orders and substituting them with an order that the contract concluded between the municipality and the joint venture be set aside and that they pay the costs of its application in the review proceedings on an attorney and client scale. None of the respondents affected by the order of the high court chose to challenge either the correctness of the finding of the court that the award of the 4 Act 3 of 2000. tender to the joint venture was reviewable and liable to be set aside in terms of PAJA, or the relief granted. [15] Before dealing with the main issue raised by the appeal (that is, the appropriate relief to be afforded to Esorfranki and Cycad), there are two preliminary matters that must first be disposed of. The first relates to the issue raised by the municipality and the joint venture in their heads of argument and in documentation filed subsequently that any order dealing with the validity of the contract concluded between the municipality and the joint venture for the construction of the pipeline would not have any practical effect. The submission was that the work would in all probability have been concluded by the time of the hearing of this appeal. This contention, however, stood in stark contrast to a recent progress report of the Department of Water Affairs and other evidence placed before this court by Esorfranki showing that the work on the project is anything but complete. Counsel for the relevant respondents consequently elected to abandon any argument that the issues raised in the appeal may have become moot. [16] The second aspect is the objection raised by the municipality and the joint venture to the standing of Cycad. The contention is based on the fact that the bid specifications required a tenderer to have a contractor grading designation of 8CE PE. Because Cycad had a lower grading it was argued that it could not submit a tender capable of acceptance and could not proceed to contest the award in the litigation. I am, however, satisfied that Cycad does have standing in the circumstances of this case. It sought to vindicate the constitutional right of just administrative action given expression in PAJA.5 Its standing is therefore to be determined in terms of s 38 of the Constitution6 read into PAJA:7 In Giant Concerts 5 Bengwenyama Minerals (Pty) Ltd & others v Genorah Resources (Pty) Ltd & others 2011 (4) SA 113 (CC) para 82. See also Bato Star Fishing (Pty) Ltd v Minister of Environmental Affairs & others 2004 (4) SA 490 (CC) para 25; Zondi v MEC for Traditional and Local Government Affairs 2005 (3) SA 589 (CC) para 99. 6 Relevant to these proceedings is subpara (a). It reads as follows: „Anyone listed in this section has the right to approach a competent court, alleging that a right in the Bill of Rights has been infringed or threatened, and the court may grant appropriate relief, including a declaration of rights. The persons who may approach a court are– (a) anyone acting in their own interest; . . . .‟ 7 Giant Concerts CC v Rinaldo Investments (Pty) Ltd & others 2013 (3) BCLR 251 (CC) para 29. CC v Rinaldo Investments (Pty) Ltd & others8 the principles applicable to standing in this context were summarised as follows: „(a) To establish own-interest standing under the Constitution a litigant need not show the same “sufficient, personal and direct interest” that the common law requires, but must still show that a contested law or decision directly affects his or her rights or interests, or potential rights or interests. (b) This requirement must be generously and broadly interpreted to accord with constitutional goals. (c) The interest must, however, be real and not hypothetical or academic. (d) Even under the requirements for common law standing, the interest need not be capable of monetary valuation, but in a challenge to legislation purely financial self- interest may not be enough – the interests of justice must also favour affording standing. (e) Standing is not a technical or strictly-defined concept. And there is no magical formula for conferring it. It is a tool a court employs to determine whether a litigant is entitled to claim its time, and to put the opposing litigant to trouble. (f) Each case depends on its own facts. There can be no general rule covering all cases. In each case, an applicant must show that he or she has the necessary interest in an infringement or a threatened infringement. And here a measure of pragmatism is needed.‟ [17] Cycad was a co-tenderer. A tenderer has the right to a fair and competitive tender process irrespective of whether the tender is awarded to him.9 This includes the right to compete on an equal footing with his competitors who are similarly placed such as the joint venture which was also not registered in the category of contractors required by the bid specifications. Any decision of the municipality in the award of the tender would not only have affected or potentially affected Cycad‟s financial interests in the award of the tender, but also its interest in a fair process arising from the submission of its bid. A further consideration in this regard is that the issues raised on the facts of this matter give rise to serious concerns about good governance and accountability: „To this observation one must add that the interests of justice under the Constitution may require courts to be hesitant to dispose of cases on standing alone where broader concerns 8 Above para 41. 9 Allpay Consolidated Investment Holdings (Pty) Ltd & others v Chief Executive Officer, South African Social Security Agency & others 2014 (1) SA 604 (CC) para 60. of accountability and responsiveness may require investigation and determination of the merits. By corollary, there may be cases where the interests of justice or the public interest might compel a court to scrutinise action even if the applicant‟s standing is questionable. When the public interest cries out for relief, an applicant should not fail merely for acting in his or her own interest.‟10 [18] I turn to deal with the appeal against the relief granted by the high court in para 2 of its order. On the findings made by the court the tender process was clearly flawed in material respects rendering it reviewable and liable to be set aside. Consistent with s 172(1) of the Constitution,11 s 8 of PAJA empowers a court in judicial review to grant „any order that is just and equitable‟. Section 8 confers on a court undertaking judicial review a „generous‟ discretion.12 The discretion in s 8 must be exercised judiciously.13 The remedies in s 8 are not intended to be exhaustive: they are examples of public remedies suited to vindicate breaches of administrative justice.14 The ultimate purpose of a public law remedy is said to „. . . afford the prejudiced party administrative justice, to advance efficient and effective public administration compelled by constitutional precepts and at a broader level, to entrench the rule of law‟.15 Ultimately the remedy must be fair and just in the circumstances of the particular case.16 [19] In Bengwenyama Minerals (Pty) Ltd v Genorah Resources (Pty) Ltd17 Froneman J explained it as follows: „This “generous jurisdiction” in terms of s 8 of PAJA provides for a wide range of just and equitable remedies, including declaratory orders, orders setting aside the administrative 10 Giant Concerts para 34. 11 Section 172(1) of the Constitution reads: „(1) When deciding a constitutional matter within its power, a court– (a) must declare that any law or conduct that is inconsistent with the Constitution is invalid to the extent of its inconsistency; and (b) may make any order that is just and equitable, including– (i) an order limiting the retrospective effect of the declaration of invalidity; and (ii) an order suspending the declaration of invalidity for any period and on any conditions, to allow the competent authority to correct the defect.‟ 12 Steenkamp NO v Provincial Tender Board, Eastern Cape 2007 (3) SA 121 (CC) para 30. 13 Mvumvu & others v Minister for Transport 2011 (2) SA 473 (CC) para 46. 14 Steenkamp above para 30. 15 Steenkamp above para 29. 16 Hoffmann v South African Airways 2001 (1) SA 1 (CC) para 42. 17 Bengwenyama paras 83 and 84. action, orders directing the administrator to act in an appropriate manner, and orders prohibiting him or her from acting in a particular manner.‟ And „It would be conducive to clarity, when making the choice of a just and equitable remedy in terms of PAJA, to emphasise the fundamental constitutional importance of the principle of legality, which requires invalid administrative action to be declared unlawful. This would make it clear that the discretionary choice of a further just and equitable remedy follows upon that fundamental finding. The discretionary choice may not precede the finding of invalidity. The discipline of this approach will enable courts to consider whether relief which does not give full effect to the finding of invalidity, is justified in the particular circumstances of the case before it.‟ This latter passage shows clearly that only once administrative action is found to be unlawful, may a court then determine what equitable relief should be granted.18 [20] The need for such relief usually arises where adverse consequences flow from an order declaring administrative action unlawful. Third parties may have altered their position on the basis that the administrative action was valid and may suffer prejudice if it is declared invalid. In the context of the procurement of goods and services an order declaring the tender process unlawful means that the decision to award the tender and the contract which was entered into pursuant thereto are both void ab initio.19 It has consequently been held that the factual consideration that it may not be practicable to set the award aside must be given due weight in the exercise of the court‟s discretion in deciding to declare the administrative action unlawful and set it aside.20 That discretion takes into account considerations of „pragmatism and practicality‟.21 Its underlying reason is the desirability of certainty.22 18 See also Allpay above para 28 and 29. 19 Seale v Van Rooyen NO; Provincial Government, North West Province v Van Rooyen NO 2008 (4) SA 43 (SCA) para 13 and TEB Properties CC v MEC, Department of Health and Social Development, North West [2012] 1 All SA 479 (SCA) para 26. 20 Chairperson, Standing Tender Committee & others v JFE Sapela Electronics (Pty) Ltd & others 2008 (2) SA 638 (SCA) para 27; Millennium Waste Management (Pty) Ltd v Chairperson, Tender Board: Limpopo Province & others 2008 (2) SA 481 (SCA) para 23; Eskom Holdings Ltd & another v New Reclamation Group (Pty) Ltd 2009 (4) SA 628 (SCA) para 9 and Moseme Road Construction CC & others v King Civil Engineering Contractors (Pty) Ltd & another 2010 (4) SA 359 (SCA) para 20. 21 Chairperson, Standing Tender Committee & others v JFE Sapela Electronics (Pty) Ltd & others above para 28. 22 Eskom Holdings above para 9. [21] In this case, however, the high court, although correctly finding that the flaws in the tender process and award tainted it and the contract, nonetheless in effect ordered that the joint venture continue to execute the invalid contract under the municipality‟s supervision. No doubt it was the consideration of pragmatism and practicality that weighed heavily with the high court in ordering the continued execution of an invalid contract. It apparently made that decision in response to the claim by Esorfranki that an appropriate order would be one in terms of which it was to be declared the only successful bidder, and the municipality be ordered to award it a contract to complete the work. The court found that the order proposed by Esorfranki raised a number of „issues and practical difficulties‟, and that the granting of the order sought by Esorfranki would not serve to protect the interests of those who were to benefit from the construction of the pipeline. These issues, which it found not to have been properly addressed, included inter alia „the logistical, legal and financial viability of such a relief‟ and „the extent to which the contract has been completed, the ownership of materials, whether if the balance of the contract is legally and factually separable, it should be put out to tender etc‟. [22] The decision of the high court to give effect to a contract concluded pursuant to an unlawful tender award is flawed for several reasons. First, the parties to that contract had acted dishonestly and unscrupulously and the joint venture was not qualified to execute the contract. The first order that the high court made – that the award was unlawful – was undermined by the order that the joint venture continue the work. The second reason is that it was premised on the possible existence of a number of unknown consequences which might follow upon an order declaring the award of the tender unlawful. A decision made in the exercise of the discretion in s 8 of PAJA must be based on fact and not on mere speculation. The delay in the finalisation of the review proceedings brought about a change in the factual position and it was the function of the court to ensure that it be placed in a position to arrive at an informed decision with regard to what an appropriate remedy would be. This could and should have been addressed by an appropriately worded order.23 23 See by way of example the order made in Allpay above para 98. [23] Thirdly, the decision whether to declare conduct in conflict with the Constitution unlawful but to order equitable relief, in the circumstances of any particular case, involves the weighing up of a number of competing interests. Certainty is but one. Other factors include the interests of affected parties and that of the public.24 In Bengwenyama Minerals (Pty) Ltd & others v Genorah Resources (Pty) Ltd & others25 the court also emphasised the importance of the principle of legality: „The rule of law must never be relinquished, but the circumstances of each case must be examined in order to determine whether factual certainty requires some amelioration of legality and, if so, to what extent.‟ And „[T]hen the “desirability of certainty” needs to be justified against the fundamental importance of the principle of legality.‟26 [24] In the context of an unlawful tender process for the acquisition of goods and services for the benefit of the public, the finding as to an appropriate remedy must strike a balance between the need for certainty, the public interest, the interests of the successful and unsuccessful tenderers, other prospective tenderers, the interests of innocent parties and the interests of the organ of state at whose behest the tender was invited. On the facts of the present matter, having declared the tender process to be unlawful, in deciding to grant equitable relief the following considerations were relevant to the exercise of the court‟s discretion. The fact that the joint venture acted upon the award immediately was not due to inaction on the part of the appellants. On two occasions they immediately instituted legal proceedings to set aside the municipality‟s irregular decision to award the tender to the joint venture. During the course of the proceedings Esorfranki consistently sought to prevent the contract from being implemented.27 It was rather the persistence of the municipality and the joint venture, in the face of a valid challenge to the award, pursuing a hopeless appeal against the interim order, and by their opposition to the first appellant‟s Rule 49(11) applications, that any delay resulted. That delay and the execution of the contract were therefore of the municipality and the joint venture‟s own making. The result was 24 Millennium Waste Management above para 23. 25 Bengwenyama above paras 84 and 85. 26 Bengwenyama above paras 84 and 85. 27 See paras 4 to 6 of this judgment. that the joint venture had the benefit of a contract it should never have had in the first place. [25] Further, the invalidity of the tender process was not the result of negligence or incompetence on the part of anyone. That the setting aside of the contract might have been disruptive to the finalisation of the construction of the pipeline must be assessed against the fact that the tender process, and consequently the contract itself, was tainted by dishonesty and fraud. Accordingly, problems which might potentially arise, as foreseen by the high court, in the contractual relationship between the municipality and the joint venture by reason of an order setting the contract aside „may not be of any consequence in the case of corruption or fraud, or where the successful tenderer was complicit in the irregularity‟.28 The joint venture dishonestly obtained the award and the contract. It is therefore hardly open to it to complain that it may suffer prejudice by an order setting the award aside and declaring the contract void. Fraud is conduct which vitiates every transaction known to the law. „No court in this land will allow a person to keep an advantage which he has obtained by fraud. No judgment of a court, no order of a Minister, can be allowed to stand if it has been obtained by fraud. Fraud unravels everything. The court is careful not to find fraud unless it is distinctly pleaded and proved; but once it is proved it vitiates judgments, contracts and all transactions whatsoever; . . . .‟ 29 [26] The award of public tenders is governed by s 217 of the Constitution. It requires awards to be made in accordance with a system that is „fair, equitable, transparent, competitive and cost-effective‟. The interests of the members of the community who are to benefit from the supply of water via the pipeline must be assessed against their interest, and that of the public at large, that this constitutional imperative be given effect to; that the tender process is free from corruption and fraud; and that public moneys do not land up in the pockets of corrupt officials and business people. It is also in this context that the high court‟s finding of fronting must be considered. The difficulty with fronting is that the person or entity who stands to 28 Per Harms DP in Moseme Road Construction above para 21. 29 Per Lord Denning in Lazarus Estates Ltd v Beasley [1956] 1 QB (CA) at 712. See further Firstrand Bank Ltd t/a Rand Merchant Bank & another v Master of the High Court, Cape Town & others [2013] ZAWCHC 173 (11 November 2013) paras 20-27. benefit financially from the award of the tender is not the one to whom it was in fact awarded. The person or entity used as a front, as in the present matter, more often than not does not have the capacity or competence to execute the tender. It amounts to the exploitation of such persons for financial benefit and constitutes a fraud on those who are meant to be the beneficiaries of legislative measures put in place to enhance the objective of economic empowerment of historically disadvantaged people. [27] I therefore conclude that the high court erred in the exercise of its discretion and that its decision in effect to allow the continuation of the contract should be set aside. I am satisfied that in the circumstances of this case, and weighing up the relevant interests, the only appropriate order would be one expressly declaring the contract void and granting equitable relief. As the work on the project is partially complete it would require the Department of Water Affairs to assess the extent of the work already performed, and to determine not only the value of the completed and uncompleted work but also what steps, if any, would be necessary to complete the work on the project. In the interests of the communities who are to benefit from the pipeline it is imperative that this be done as expeditiously as possible. I accept the submission of Esorfranki and Cycad that because of the bias displayed by the municipality in the adjudication of the tender and its conduct in the review and interlocutory proceedings, it should play no part in any further tender process in relation to this project. [28] That leaves the appeal against the costs orders made by the high court. As stated earlier, it ordered the parties to pay their own costs in the review application and in the third Rule 49(11) application. Esorfranki was, however, ordered to pay the costs of the municipality‟s attorney Mahowa, whom it cited as the ninth respondent in the third Rule 49(11) application, on the attorney and own client scale. The determination of the issue of liability for costs is in the discretion of the court that is called upon to adjudicate the merits of the issues raised in the litigation between the parties. It is a discretion which is to be exercised judicially upon a consideration of the facts and circumstances of each individual case and is in essence a matter of fairness to both sides. Being a judicial discretion a court of appeal will interfere with the exercise of such a discretion only where it is shown that: „[T]he lower court had not exercised its discretion judicially, or that it had been influenced by wrong principles or a misdirection on the facts, or that it had reached a decision which in the result could not reasonably have been made by a court properly directing itself to all the relevant facts and principles.‟30 [29] The finding of the high court that the parties were to pay their own costs in respect of the relevant applications was essentially made on the basis of what the court described in its judgment as the „unreasonable and unconscionable manner in which Esorfranki and its attorney including Cycad conducted this litigation‟. It found that the appellants made themselves guilty of collusion. That finding is not supported by the facts. Esorfranki and Cycad are separate legal entities, they separately submitted tenders, instituted legal proceedings and instructed separate firms of attorneys to act on their behalf. The mere fact that they were the joint beneficiaries of a tender awarded to them in another province, and that there may have been similarities in the papers filed by them in the present proceedings, does not support a finding of collusion, the import of which after all is the presence of dishonesty. There is nothing untoward in one litigant aligning itself with another and co-operating in the quest to achieve a particular result in legal proceedings. [30] Another factor taken into account in penalising Esorfranki and Cycad with an unfavourable costs order was that Esorfranki‟s attorney had suggested in a letter to the municipality that if the matter were settled, they would not support any future criminal investigations against the municipality. The letter was written without prejudice, and in an attempt to settle the matter. It could not have been construed as blackmail, as the municipality attempted to argue. Whatever its faults, the attorney‟s letter was in itself insufficient to deprive the appellants of their costs, particularly in the case of Cycad which the attorney purported to represent in sending the letter. Cycad immediately took steps to distance itself from the letter. To the extent that the attorney may have wrongly held himself out to also act on behalf of Cycad, and may have made himself guilty of unprofessional conduct, that was effectively addressed by the high court in directing that his conduct be referred to the relevant Law Society 30 National Coalition for Gay and Lesbian Equality & others v Minister of Home Affairs & others 2000 (2) SA 1 (CC) para 11; Naylor & another v Jansen 2007 (1) SA 16 (SCA) para 24. for investigation. The court‟s reliance on the fact that Cycad may have abandoned certain of the relief claimed in its notice of motion was also misplaced. That did not mean that the second appellant was not entitled to seek an order declaring the contract invalid. [31] From a reading of the court‟s judgment on costs it is evident that it failed to consider that Esorfranki and Cycad were substantially successful in their application to review and set aside the tender process. To that extent they have achieved vindication of an important constitutional right. This failure in my view constitutes a material misdirection. A further aspect of utmost importance which was overlooked is the reprehensible nature of the conduct of the municipality and the joint venture in the tender process.31 As stated earlier, the court issued an order of invalidity on the basis of having found the municipality to have been biased in its adjudication of the tenders and to have failed to insist on compliance with its own tender requirements. The joint venture was in turn found to have made itself guilty of dishonest conduct by misrepresenting the facts in their tender bid in an effort no doubt to achieve an advantage and to secure the award of the tender. The costs order made by the court does not reflect the seriousness of this conduct and the disapproval which it deserves.32 [32] The manner in which the municipality conducted itself in the litigation also calls for censure. Instead of complying with its duty to act in the public interest and to allow the serious allegations of fraud and dishonesty in the tender process to be ventilated and decided in legal proceedings, it chose to identify itself with the interests of the tenderers who stood accused of improper conduct. To this extent it failed to provide undertakings not to implement its decision to award the tender to the joint venture when reasonably requested to do so. It instead delayed the finalisation of the review proceedings by launching hopeless appeals against the 31 Nel v Waterberg Landbouwers Ko-Operatieve Vereeniging 1946 AD 597 at 609. 32 In Tshopo v State (29/12) [2012] ZASCA 193 para 37 this court (per Heher JA) said the following about dishonesty in the procurement of state tenders: „Fraud in the procurement of state tenders is a particularly pervasive form of dishonest practice. It undermines public confidence in the government that awards tenders, apparently without regard for nepotism, and it creates perceptions unfavourable to the services provided pursuant to such tenders. It is proving notably difficult for the authorities to identify and root out such malpractices. The courts are obliged to render effective assistance lest the game be thought to be worth the candle.‟ order interdicting it from implementing its own unlawful decision. This court in Municipal Manager: Qaukeni Local Municipality & another v FV General Trading CC said the following on the function of public bodies: „. . . depending on the legislation involved and the nature and the functions of the body concerned, a public body may not only be entitled but also duty-bound to approach a court to set aside its own irregular administrative act‟.33 In Premier, Free State & others v Firechem Free State (Pty) Ltd it was concluded that „[t]he province was under a duty not to submit itself to an unlawful contract and [was] entitled, indeed obliged, to ignore the delivery contract and to resist . . . attempts at enforcement‟.34 In all the circumstances I am satisfied that an appropriate court order would have been one which reflected the disapproval of the court with the conduct of the municipality and the joint venture. [33] Insofar as the costs of Esorfranki‟s third Rule 49(11) application are concerned, as was the position with the other two Rule 49(11) applications, the launching of this application was clearly motivated by the unreasonable refusal of the municipality and the joint venture to undertake to desist from continuing with any work on the project pending the determination of the municipality‟s application for leave to appeal to the Constitutional Court. The reasonableness of providing the undertaking requested must be assessed in the context of it having been found more than once that Esorfranki had met the requirements for an interim interdict aimed at protecting its rights in the review application. In fact, on occasion the municipality agreed to the granting of such an order. [34] In addition, the attempt to obtain leave to appeal against the granting of the interim order was ill advised and destined to fail. The interim order was clearly not appealable. It was not final in its effect. That the practical effect of the order may have been to delay the execution of the contract for the construction of the pipeline did not make it a final order. This in any event does not appear to have been the complaint of the municipality with regard to the granting of the order. Its complaint was rather that it was not given a proper hearing before the order was granted. The municipality‟s remedy was to apply to the court which first granted the interim order 33 Municipal Manager: Qaukeni Local Municipality & another v FV General Trading CC 2010 (1) SA 356 (SCA) para 23. 34 Premier, Free State & others v Firechem Free State (Pty) Ltd 2000 (4) SA 413 (SCA) para 36. for the rescission or amendment thereof. „And in the case of a common-law interim interdict or attachment pendente lite there is no reason why, for sufficient cause, they would not, generally, be open to variation, if not rescission‟.35 I am accordingly of the view that in the circumstances Esorfranki acted reasonably and was justified in launching the third Rule 49(11) application, and that there exists no reason for it to be deprived of the costs thereof. For the reasons mentioned earlier an appropriate order would similarly have been one on an attorney and client scale. [35] The next question relates to the order for costs in relation to the relief claimed against the attorney, Mahowa, in the third Rule 49(11) application. Although I do not agree with every finding of the high court in this regard, I am not convinced that it misdirected itself in ordering Esorfranki to pay Mahowa‟s costs on a punitive scale. Mahowa was, as stated earlier, the attorney acting for the municipality. He was not a party to any of the proceedings. There existed no basis in fact or in law to compel him in either his personal or professional capacity to comply with any of the orders sought in the Rule 49(11) application. The relief claimed in this regard, on a reading of Esorfranki‟s founding affidavit, was premised on the unsubstantiated allegation that „the representatives of the respondents must be held responsible for their actions and inaction‟ in regard to the failure of the respondents to comply with court orders. Its speculative basis is that Mahowa had „significant‟ influence over the municipality and that its actions must have been on his advice. [36] Further, the punitive costs order sought against Mahowa was based on an allegation in Esorfranki‟s founding affidavit that Mahowa „appears not to have advised his client not to act contemptuously, has repeatedly failed to properly answer letters, and has caused substantial sums of taxpayers‟ monies to be wasted‟. These allegations, which impugned the professional integrity of Mahowa, were similarly made without any factual support and were dealt with and denied by him in his answering affidavit. The attempt by Esorfranki to rectify this by seeking to provide 35 Phillips & others v National Director of Public Prosecutions 2003 (6) SA 447 (SCA) para 21. See also Atkin v Botes 2011 (6) SA 231 (SCA) para 12. factual support for its case for costs in its replying affidavit, cannot on the rules applicable to motion proceedings, assist it in any way.36 [37] I may add that complaints were also raised in argument about the conduct of Mahowa on various occasions during the course of the different proceedings in the high court. This was not pertinently raised in the third Rule 49(11) application and the high court was better placed to investigate and determine the merit thereof. In the circumstances I cannot find that there were no reasonable grounds for the costs order made by the high court in para 4 of its order. [38] That leaves the costs of the appeal. Esorfranki and Cycad were substantially successful in their appeal against the orders in paras 2 and 3 of the high court‟s order and they are entitled to their costs. I agree with counsel for Esorfranki and Cycad that, given the serious and reprehensible nature of the conduct of the municipality and the joint venture in the award of the tender and in the subsequent proceedings in the high court, and that the remedy granted by the said court was clearly inappropriate and indefensible, there are on the facts of this matter, circumstances present37 which justify an order that the costs of the appeal should also be paid on an attorney and client scale. [39] In the result: The first and second appellants‟ appeal against the orders in paras 2 and 3 of the order of the high court is upheld with costs including the costs of two counsel, such costs to be paid jointly and severally by the first and the third to fifth respondents on the scale as between attorney and client. The aforesaid orders are set aside and are substituted with the following orders: „(a) Any contract entered into between the first respondent and the third to fifth respondents pursuant to the award of the tender to the respondents for the construction of a pipeline between the Nandoni dam and the Nsami water 36 Director of Hospital Services v Mistry 1979 (1) SA 626 (A) at 635G-636B; Bowman NO v De Souza Roldao 1988 (4) SA 326 (T) at 327D-H; Port Nolloth Municipality v Xhalisa & others; Luwalala & others v Port Nolloth Municipality 1991 (3) SA 98 (C) at 111E-F and Aeroquip SA v Gross & others [2009] 3 All SA 264 (GNP) para 6. 37 See Herold v Sinclair & others 1954 (2) SA 531 (A) at 537D-E and Ward v Sulzer 1973 (3) SA 701 (A) at 707B-D with regard to awards of costs of appeal on an attorney and client scale. treatment works (Nandoni to Giyani Pipe Project; project number LPR018), is declared void ab initio and is set aside. (b) The first respondent is ordered to formally approach the Department of Water Affairs within seven days of the granting of this order to request that Department to do the following: (i) To take such steps as may be necessary to determine the extent of the works necessary to perform remedial work and to complete the construction of the pipeline and the other works as contemplated in the aforesaid tender, for purposes of publishing a tender for the said remedial work and the completion of the works; (ii) To prepare and publish an invitation to tender for the performance of the remedial work and completion of the works as aforesaid; (iii) To evaluate and adjudicate all bids received, and to make an award in respect of such invitation to bid. The first and the third to fifth respondents jointly and severally are ordered to pay the costs of the review application by Esorfranki Pipelines (Pty) Ltd under case no 13480/2011, and of the third Rule 49(11) application dated 27 August 2011 under case no 13480/2011, such costs to be on an attorney and client scale, and to be inclusive of all the reserved costs and the costs of two counsel where applicable. The first and the third to fifth respondents jointly and severally are ordered to pay the costs of the review application by Cycad Pipelines (Pty) Ltd under case no 17852/2011, such costs to be on an attorney and client scale, and to be inclusive of all the reserved costs and the costs of two counsel where applicable. The first appellant‟s appeal against the order in para 4 of the order of the high court is dismissed with costs.‟ ___________________ D van Zyl Acting Judge of Appeal APPEARANCES For First Appellant: K W Lüderitz SC (with him C Woodrow) Instructed by: Thomson Wilks, Johannesburg Webbers, Bloemfontein For Second Appellant: J P Daniels SC (with him T D Prinsloo) Instructed by: Du Toit McDonald Inc, Johannesburg Webbers, Bloemfontein For First, Second and Sixth Respondents: K Tsatsawane Instructed by: Mahowa Inc, Tzaneen Honey Attorneys Inc, Bloemfontein For Third, Fourth, Fifth, Seventh and Eighth Respondents: P F Louw SC Instructed by: Routledge Modise Inc, Johannesburg Symington & De Kok, Bloemfontein For Ninth Respondent: H van Eeden SC Instructed by: Cliffe Dekker Hofmeyr Inc, Cape Town Honey Attorneys, Bloemfontein

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 28 March 2014 Status: Immediate Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal. ESORFRANKI PIPELINES (PTY) LTD V MOPANI DISTRICT MUNICIPALITY The Supreme Court of Appeal upheld an appeal against a decision in the North Gauteng High Court in which it set aside a tender but kept alive the contract awarded to a joint venture, following the award of the tender. The SCA held that the high court should have set the contract aside. The tender process, and as a result the contract, was tainted by dishonesty and fraud. It was in breach of the constitutional imperative that tender awards should be made in accordance with a system that is fair, equitable, transparent and cost effective. The decision of the high court did not give effect to the public interest which demands that the tender process must be free from corruption and fraud, and that public moneys do not end up in the pockets of corrupt officials and business people. Fronting in turn amounts to an exploitation of persons for financial gain, and constitutes a fraud on those who are meant to be the beneficiaries of legislative measures put in place to enhance the objective of economic improvement of historically disadvantaged people. The Mopani District Municipality awarded a tender to a joint venture known as Tlong Re Trading SMN to construct a pipeline between Nandoni Dam in Thohoyandou and the Nsami water treatment works in Giyani in the Limpopo Province. The purpose of the pipeline was to provide water to the residents of the greater Giyani. A severe draught in 2009 caused the water levels in the Nsami dam to drop to the extent that there was insufficient water available for domestic use. Two unsuccessful bidders, namely the two appellants, brought review proceedings in the North Gauteng High Court. That court found that the tender process was flawed. The decision of the municipality was found to have been motivated by bias and bad faith. The joint venture in turn made itself guilty of fronting and making false representations in its tender submission in an attempt to secure the tender. The high court made an order that the award was unlawful. It however refused to also set aside the contract entered into between the joint venture and the municipality for the construction of the pipeline. The appellants appealed to the SCA against that order and the costs orders made by the high court. Due to the serious and reprehensible nature of the conduct of the municipality and the joint venture, they were ordered to pay the costs of the appellants on a punitive scale.

3591

non-electoral

2021

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Reportable Case no: 916/2018 In the matter between: ESORFRANKI (PTY) LTD APPELLANT and MOPANI DISTRICT MUNICIPALITY RESPONDENT Neutral citation: Esorfranki Pipelines (Pty) Ltd v Mopani District Municipality (Case no 916/2018) [2021] ZASCA 89 (24 June 2021) Coram: PETSE AP and NICHOLLS and MBATHA JJA and GOOSEN and POYO-DLWATI AJJA Heard: 19 February 2021 Delivered: This judgment was handed down electronically by circulation to the parties’ legal representatives by email, publication on the Supreme Court of Appeal website and release to SAFLII. The date and time for hand-down is deemed to be 09h45 on 24 June 2021. Summary: Constitutional law – procurement of goods and services by organ of state – delictual action for damages for loss of profits by an unsuccessful tenderer – claim founded on alleged breach of constitutional duty by organ of state subverting dictates of s 217 of the Constitution – organ of state deliberately manipulating selection process in order to advantage a tenderer that did not meet the tender requirements – held that appellant had failed to establish legal causation of loss – appeal dismissed with costs. ORDER On appeal from: Gauteng Division of the High Court, Pretoria (Makgoka J, sitting as court of first instance): The appeal is dismissed with costs, such costs to include the costs consequent upon the employment of two counsel. JUDGMENT Goosen AJA (Petse AP concurring): [1] This appeal concerns the liability, in delictual damages, of a municipality to an unsuccessful tenderer where the award of the tender is vitiated by fraudulent or dishonest conduct. [2] The appellant, Esorfranki Pipelines (Pty) Limited (Esorfranki), instituted a claim for damages, based on a loss of profit, against the Mopani District Municipality (Mopani); Tlong Re Yeng CC (Tlong); and Base Major Construction (Pty) Ltd (Base Major) as first, second and third defendants respectively. It is common cause that Tlong and Base Major had formed a joint venture (the Joint Venture) for the purposes of securing and executing a contract offered by way of tender. As the successful tenderer, the Joint Venture was awarded a contract with Mopani. [3] Esorfranki’s claim for damages against Mopani and the Joint Venture was founded upon the allegation that the award of the tender was as a result of wrongful and intentional conduct, amounting to dishonesty and fraud. It was alleged that the decision of Mopani to award the contract to the Joint Venture was vitiated by bias, bad faith, ulterior purpose and dishonesty. In consequence, Esorfranki was alleged to have suffered damages based on the profit it would have earned had the contract been awarded to it as the successful tenderer as it should have been. [4] On 29 April 2015 judgment was granted by default against the Joint Venture members for payment of damages, interest and costs. The relief claimed against Mopani was postponed sine die. The high court trial against Mopani commenced on 15 May 2017 in respect only of the issue of liability. Makgoka J dismissed the claim on 17 January 2018. The high court subsequently refused leave to appeal. The appeal therefore comes before this Court with leave having been granted on petition. Background and litigation history [5] In August 2010 Mopani invited tenders for the construction of a water pipeline between the Nandoni Dam, Thohoyandou and the Nsami water treatment works in Giyani (the first award). In October 2010 the contract was awarded to the Joint Venture. Esorfranki and another unsuccessful tenderer, Cycad Pipelines (Pty) Ltd (Cycad) brought an urgent application in the Gauteng Division of the High Court, Pretoria to interdict the implementation of the award pending further review relief. On 27 January 2011, Preller J granted an order by consent between the parties, setting aside the award of the tender and directing that the tender be re-adjudicated. [6] In February 2011, the tender bids were re-adjudicated and Mopani again awarded the contract to the Joint Venture (the second award). On 1 March 2011, Esorfranki commenced an urgent application to interdict implementation of the award pending the outcome of review proceedings. On 22 March 2011, Fabricius J granted an interim order interdicting and restraining Mopani from implementing the contract. [7] What followed the grant of the interim order was a series of applications. In response to a failure to comply with the order of Fabricius J, Esorfranki commenced contempt proceedings. Mopani brought an application for leave to appeal the interim order. When the hearing of the latter application was delayed, Esorfranki brought an interlocutory application in terms of rule 49(11) of the uniform rules. Esorfranki sought an order suspending all operations and actions by the Joint Venture pending the finalisation of the application for leave to appeal. All the while the Joint Venture proceeded with the works. Webster J granted an order in terms of rule 49(11) on 1 April 2011. That order was extended, on various occasions, to 10 May 2011, when the application for leave to appeal was heard. Leave to appeal the order of Fabricius J was refused on 11 May 2011. Mopani thereupon, on 19 May 2011, filed a petition for leave to appeal the interim order with this court. When no undertaking was provided in respect of the continuation of the contract works, Esorfranki commenced a second rule 49(11) application to stay the implementation of the contract. An interim order was granted on 24 May 2011, pending the hearing of the rule 49(11) application. [8] On 31 May 2011, when the second rule 49(11) application came before De Vos J certain undertakings given by Mopani and the Joint Venture, effective until 10 June 2011, were made orders of court. The hearing of the application was postponed to that date. It was then further postponed. On 24 June 2011 De Vos J discharged the order incorporating the undertakings and postponed the rule 49(11) application sine die. [9] Since the implementation of the tender contract was proceeding, Esorfranki launched a third interim interdict application. This was heard by Kollapen J on 6 July 2011. On 8 July, Kollapen J granted the order. Despite this order the implementation of the contract proceeded. A further contempt application was heard by Jordaan J on 19 July 2011 when an order was granted by consent. [10] On 2 August 2011, this court dismissed the application for leave to appeal against the interim order granted by Fabricius J. The respondents then filed an application for leave to appeal with the Constitutional Court on 24 August 2011. They continued, in the light thereof, to implement the contract. On 6 September 2011, Tuchten J granted a further interdict restraining implementation of the contract. The Constitutional Court thereafter dismissed the application for leave to appeal. [11] The judgment in the review application which Esorfranki had commenced in March 2011 was delivered by Matojane J on 29 August 2012.1 The learned Judge issued an order, inter alia, in the following terms: ‘1. The tender process is declared illegal and invalid and is set aside. 2. The municipality is ordered to independently and at the Joint Ventures costs verify that all 1 Both Esorfranki and Cycad had commenced review applications claiming substantially similar relief. The two applications were consolidated for hearing purposes. the work has been done according to specifications and that the Joint Venture does all the necessary remedial work and work is completed as soon as possible in terms of the agreement. 3. Each party is ordered to pay its own costs.’ [12] The learned Judge also made an order that Esorfranki should pay the costs of Mopani’s attorney, a Mr Mahowa, who had been joined, on a punitive scale. Esorfranki and Cycad obtained leave to appeal against the remedy (principally paragraphs 2 and 3 of the high court order set out in the preceding paragraph) to this Court. Matojane J denied Esorfranki and Cycad their costs on the basis that there was evidence of collusion between them in the manner in which they had conducted the litigation. He also found that they had sought to induce the award of the tender to Esorfranki, in an improper manner. [13] The appeal against the order of Matojane J was heard on 4 March 2014 and judgment was delivered on 28 March 2014.2 This court upheld the appeal against paragraphs 2 and 3 of Matojane J’s order. It set those orders aside and substituted them. The relevant portion of the substituted order reads as follows: ‘(a) Any contract entered into between [Mopani] and the [Joint Venture] pursuant to the award of the tender to the respondents for the construction of a pipeline between the Nandoni dam and the Nsami water treatment works (Nandoni to Giyani Pipe Project; project number LPR018), is declared void ab initio and is set aside. (b) [Mopani] is ordered to formally approach the Department of Water Affairs within seven days of the granting of this order to request that Department to do the following: (i) To take such steps as may be necessary to determine the extent of the works necessary to perform remedial work and to complete the construction of the 2 Esorfranki Pipelines (Pty) Ltd v Mopani District Municipality [2014] ZASCA 21; [2014] 2 All SA 493 (SCA). pipeline and the other works as contemplated in the aforesaid tender, for purposes of publishing a tender for the said remedial work and the completion of the works; (ii) To prepare and publish an invitation to tender for the performance of the remedial work and completion of the works as aforesaid; (iii) To evaluate and adjudicate all bids received, and to make an award in respect of such invitation to bid.’ [14] It is necessary to touch briefly on Matojane J’s finding regarding the conduct of Esorfranki and Cycad. This is so because my colleague Nicholls JA accords some weight to Matojane J’s finding in the context of relevant public policy considerations at play in relation to the element of wrongfulness.3 The reliance is, with respect, misplaced. [15] This court rejected Matojane J’s finding on the basis that there were no facts to support the finding. The judgment records the following:4 ‘The finding of the High Court that the parties were to pay their own costs in respect of the relevant applications was essentially made on the basis of what the court described as the “unreasonable and unconscionable manner in which Esorfranki and its attorney including Cycad conducted this litigation”. It found that the appellants made themselves guilty of collusion. That finding is not supported by the facts. Esorfranki and Cycad are separate legal entities, they separately submitted tenders, instituted legal proceedings and instructed separate firms of attorneys to act on their behalf. The mere fact that they were the joint beneficiaries of a tender awarded to them in another province,5 and that there may have been similarities in the papers filed by them in the present proceedings, does not support a finding of collusion, the import of which after all is the presence of dishonesty. There is 3 See para 95 below. 4 Ibid at paras 29–30. 5 This is a reference to a tender which formed the subject matter of litigation in the Kwa-Zulu Natal Division of the High Court which is to be found in paragraph 47 of Matojane J’s judgment and is cited by Nicholls JA at para 94 hereunder. nothing untoward in one litigant aligning itself with another and co-operating in the quest to achieve a particular result in legal proceedings.’ The trial action in the high court [16] As stated earlier, the trial commenced before Makgoka J on 15 May 2017. It proceeded only in respect of the liability of Mopani. At the commencement of the proceedings counsel for Esorfranki commenced with an opening address, as is customary. I shall return to this later in this judgment since it featured prominently in argument before this Court. For present purposes it suffices to record that counsel, with the consent of Mopani’s counsel, submitted a bundle of documents which comprised the affidavits deposed to on behalf of Esorfranki in the review application heard by Matojane J. The bundle also included affidavits which had been filed in the rule 49(11) applications. [17] It was pointed out that each of the deponents to the affidavits would be called as witnesses for the purposes of confirming their respective affidavits so that the content of the affidavits would serve as evidence in the trial. The witnesses would be available to be cross-examined should counsel for Mopani wish to do so. In consequence of this, counsel who appeared for Mopani at the trial indicated that it would not be necessary for each of the witnesses to be called. The affidavits could be received as evidence before the trial court. I shall return to this aspect since, before this court, there was some debate about the status of the affidavits as served before Makgoka J. [18] The upshot of the agreement was that Esorfranki submitted the affidavits and thereupon closed its case. Mopani in turn closed its case without tendering any evidence before the trial court. The findings of the high court [19] Makgoka J dismissed Esorfranki’s action against Mopani with costs. The learned Judge held that a declaration that Mopani is liable to Esorfranki in damages must, necessarily, be preceded by a finding that Esorfranki would have been the successful bidder. This issue, it was held, was res judicata as between the parties inasmuch as the review court and this Court on appeal were not persuaded to declare Esorfranki the successful bidder. Consequently, the learned Judge held that he was bound by this court’s findings and that this was decisive of the matter. [20] Notwithstanding his conclusion, the learned Judge still considered the question of legal causation. In this regard the court said: ‘…it is instructive that neither this court nor the Supreme Court of Appeal made findings of fraud against the municipality. Those findings were made against the joint venture. The municipality was criticized, warrantably so, for its bias towards the joint venture and bad faith in adjudicating the tender. Indeed the municipality’s conduct is reprehensible. But the finding of bad faith, dishonesty, or ulterior purpose does not without more, give rise to delictual liability, especially in light of the Supreme Court of Appeal declining to make an order of substitution.’ [21] The high court went on to find that the relief granted by this Court, namely the order requiring the advertisement of a tender in respect of remedial work (under the auspices of the Department of Water Affairs), effectively afforded Esorfranki another opportunity to submit a bid. Since Esorfranki did submit a bid, albeit unsuccessful, this constituted a novus actus interveniens. Accordingly its claim was dismissed. The issues on appeal [22] In the light of the judgment of the high court, several issues in this case require consideration. The first of these concerns the nature and effect of the evidence which served before the trial court. The second relates to the findings of this Court in the review appeal. These are to be considered against the backdrop of the doctrine of res judicata. The third issue concerns the question of legal causation. This will require consideration of the finding in relation to novus actus interveniens made by the trial court. The fourth issue concerns the question of the relevant policy considerations which bear upon imposition of delictual liability in the context of tender impropriety. The status of the affidavits before the high court [23] There was some debate before this Court as to the effect of the admission of the affidavits filed on behalf of Esorfranki in the review application. As I understood the position of counsel for Mopani, it was that the agreement meant no more than that the affidavits could be received as being the affidavits properly deposed to by each deponent. The record of the opening address, however, does not support such a construction. To the contrary, it is clearly recorded that the affidavits were received as evidence before the trial court. It was accepted by Mopani that the deponents need not be called since there was to be no cross-examination of them. It was on this basis that Esorfranki closed its case. It was accordingly simply wrong to suggest that Esorfranki did not present evidence to support its pleaded case. The evidence it presented in the trial was, by reason of the failure to cross- examine witnesses or to lead evidence in rebuttal, uncontested. As will be seen hereunder this is of considerable significance in the outcome of the appeal. [24] The trial court was alive to the fact that the contents of the affidavits were properly before it as evidence. The court however took the view that the affidavits added ‘nothing in terms of evidentiary value’ to the determination of what it considered the crisp issue before it. The crisp issue was described as whether ‘in the circumstances of the case, the municipality should be held delictually liable to Esorfranki’. That issue, as has been indicated above, concerns several interrelated questions. In the light of this approach to the affidavits the trial court determined that ‘no particular regard will be had to the contents of those affidavits outside the parameters considered by the court in the review proceedings’. [25] For reasons which will become apparent hereunder, the trial court erred in its approach to the evidence which was properly before it. The trial court took this view of the evidence given its approach to the question of res judicata. In consequence the trial court did not determine whether the evidence before it established the pleaded cause of action upon which Esorfranki relied. I shall return to this question later in this judgment. [26] Before turning to the first issue, namely that of res judicata, it is appropriate to make one further observation about the evidence before the trial court. Both Nicholls JA and Mbatha JA express some reservation about the evidence before the trial court because of the manner in which it was presented. I am, however, respectfully, unable to discern where the difficulty arises. The fact that the same evidence, consisting of allegations of fact, was presented by Esorfranki in the review (and related applications) as it presented at the trial is of no moment. The same facts may support different causes of action. Whether the proven facts, ie those accepted by a court, allow for the conclusion by that court that a party has discharged its onus, is a matter of adjudication according to the principles of the law of evidence. [27] There is no procedural impediment to the reception of evidence, by a trial court, by way of affidavit. If the parties agree that facts may be placed before a court by way of affidavit and agree that the deponent will not be cross-examined, then the factual allegations contained in the affidavit stand unchallenged. Where that occurs, no dispute of fact arises. [28] It must be emphasised that Mopani was not obliged to accept the manner in which the evidence was placed before the trial court. It was entitled to challenge the evidence by subjecting the witnesses to cross-examination. Not only did it not do so, it also elected not to present any evidence at all, despite being possessed of affidavits which had been presented in the review application and in the numerous interlocutory applications. The upshot of this was that the only evidence before the trial court was the extensive allegations of fact presented by Esorfranki’s witnesses. [29] The trial court was not required to resolve factual disputes as would a court dealing with opposing sets of affidavits. It was required to evaluate and assess the facts as presented, weigh probabilities as it ordinarily would do with evidence presented orally, and consider what inferences could be drawn from the proven facts. This, I shall demonstrate hereunder, the trial court failed to do. Res judicata [30] A plea of res judicata requires the party who relies thereupon to establish each of the three elements upon which the exception is based, namely that the same cause of action between the same parties has been litigated to finality i.e. the same relief has been sought or granted. [31] In this instance, although the parties are undoubtedly the same, the cause of action and the relief sought in the trial action is plainly not the same as that pursued before the review court. The latter litigation concerned the exercise of a court’s review jurisdiction under the Promotion of Administrative Justice Act 3 of 2000 (PAJA) and the relief which may properly be granted in relation thereto. The trial action, on the other hand, was based upon a delictual cause of action to establish liability for damages for loss of profit arising from Mopani’s wrongful and culpable conduct causing loss to Esorfranki. [32] It appears, from a reading of the high court’s judgment, that it considered the doctrine to apply in relation to the determination of an issue which was before him. In Royal Sechaba Holdings (Pty) Limited v Coote and Another 2014 (5) SA 562 (SCA)6 this Court held: ‘The expression “issue estoppel” is a convenient description of instances where a party may succeed despite the fact that the classic requirements for res judicata have not been complied with because the same relief is not claimed, or the cause of action differs, in the two cases in question. The common-law requirements of same thing and same cause (eadem res and eadem petendi causa) have been relaxed by our courts in appropriate circumstances. As was pointed out by Lewis JA in Hyprop Investments Ltd v NSC Carriers 6 Paragraphs 12 and 13. and Forwarding CC and others, the relaxation and the application of issue estoppel effectively started in Boshoff v Union Government, where it was held that the strict requirements for a plea of res judicata (eadem res and eadem petendi causa) should not be understood literally in all circumstances and applied as inflexible or immutable rules. Despite some debate as to the approach of Greenberg J in Boshoff, Botha JA in Kommissaris van Binnelandse Inkomste v Absa Bank Bpk confirmed the correctness of the approach and added that in particular circumstances these requirements may be adapted and extended in order to avoid the unacceptable alternative that the courts would be obliged: “. . . om met letterknegtige formalisme vas te klou aan stellings in die ou bronne, wat onversoenbaar sou wees met die lewenskragtige ontwikkeling van die reg om te voorsien in die behoeftes van nuwe feitelike situasies.”Following the decisions in Boshoff and Kommissaris, Scott JA in Smith v Porritt summarised the development of the law in this regard: “. . . the ambit of the exceptio rei judicata has over the years been extended by the relaxation in appropriate cases of the common-law requirements that the relief claimed and the cause of action be the same (eadem res and eadem petendi causa) in both the case in question and the earlier judgment. Where the circumstances justify the relaxation of these requirements those that remain are that the parties must be the same (idem actor) and that the same issue (eadem quaestio) must arise. Broadly stated, the latter involves an inquiry whether an issue of fact or law was an essential element of the judgment on which reliance is placed. Where the plea of res judicata is raised in the absence of a commonality of cause of action and relief claimed it has become commonplace to adopt the terminology of English law and to speak of “issue estoppel”. But, as was stressed by Botha JA in Kommissaris van Binnelandse Inkomste v Absa Bank Bpk 1995 (1) SA 653 (A) at 669D, 670J–671B, this is not to be construed as implying an abandonment of the principles of the common law in favour of those of English law; the defence remains one of res judicata. The recognition of the defence in such cases will however require careful scrutiny. Each case will depend on its own facts and any extension of the defence will be on a case-by- case basis. (Kommissaris van Binnelandse Inkomste v Absa Bank (supra) at 670E–F.) Relevant considerations will include questions of equity and fairness not only to the parties themselves but also to others. As pointed out by De Villiers CJ as long ago as 1893 in Bertram v Wood (1893) 10 SC 177 at 180, “unless carefully circumscribed, [the defence of res judicata] is capable of producing great hardship and even positive injustice to individuals”.’ (Emphasis added.) [33] What requires consideration therefore is whether the high court was correct in concluding that the issue, namely whether Esorfranki was the successful bidder, was an essential element of either or both of the high court and Supreme Court of Appeal judgments. In order to answer this question it is necessary to consider (a) the issues (both factual and legal) that the high court was required to decide and what its findings were; (b) the remedial jurisdiction of the high court in review proceedings; and (c) the reasons given for the remedy. Once this analysis is conducted regard must be had to the issue(s) which the high court was called upon to decide. [34] In regard to the proceedings before Matojane J, it is common cause that this involved a judicial review of administrative action which Esorfranki alleged was unlawful. It based its case upon several factual and legal grounds. It alleged that: (a) the Joint Venture did not, as a matter of fact, meet the qualifying criteria for consideration of its bid; (b) the Joint Venture had failed to furnish proof of its capacity to conduct the works; (c) the Joint Venture had misrepresented facts upon which Mopani based its adjudication of the bid; and (d) the facts disclosed bias, bad faith and ulterior purpose on the part of Mopani in awarding the contract to the Joint Venture. As was recorded by Van Zyl AJA in the review appeal before this Court:7 7 Esorfranki (supra) at para 10. ‘The high court found that the tenders submitted by the joint venture did not comply with the bid specifications, that it was guilty of fronting and that the municipality’s decision was motivated by bias and bad faith.’ [35] A court of review is, as a general rule, called upon to determine whether the impugned administrative conduct or decision is liable to be set aside on one or more cognizable grounds of review. These are enumerated in s 6 of PAJA. Once it has been determined that the decision is liable to be set aside, the review court must declare the decision unlawful and then set it aside. Thereafter, the review court will be required to consider an appropriate or just and equitable remedy in accordance with the dictates of s 172(1)(b) of the Constitution.8 [36] It stands to reason that in deciding whether a ground of review is established under section 6 of PAJA, a review court may make factual findings or draw conclusions of law which could be susceptible to a plea of issue estoppel. In this instance it was contended that since neither the high court nor this Court had found that the tender was fraudulently awarded to the Joint Venture, it was not open to Esorfranki to rely upon fraud on the part of Mopani. That being so, no liability on the part of Mopani could arise in delict for reasons of public policy. [37] The argument was contorted. The absence of a positive finding of fraud on the part of Mopani does not constitute a finding that its conduct was not fraudulent. I shall address this aspect in greater detail later in the judgment when evaluating the evidence before the trial court and its effect. 8 Constitution of the Republic of South Africa Act 108 of 1996. [38] In dealing with the central issue which was before it on appeal, namely whether the remedy granted by Matojane J on review was appropriate or just and equitable, this Court said the following:9‘ ‘On the findings made by the court the tender process was clearly flawed in material respects rendering it reviewable and liable to be set aside. Consistent with s 172 (1) of the Constitution s 8 of PAJA empowers a court in judicial review to grant “any order that is just and equitable”. Section 8 confers on the court undertaking judicial review a “generous discretion”. The discretion in s 8 must be exercised judiciously. The remedies in s 8 are not intended to be exhaustive: they are examples of public remedies suitable to vindicate breaches of administrative justice. The ultimate purpose of the public law remedy is said to “… afford the prejudiced party administrative justice, to advance efficient and effective public administration compelled by constitutional precepts and at a broader level, to entrench the rule of law.” Ultimately the remedy must be fair and just in the circumstances of the particular case.’ [39] This Court then considered the basis upon which Matojane J had formulated the remedy granted. It found as follows: ‘No doubt it was the consideration of pragmatism and practicality that weighed heavily with the high court in ordering the continued execution of an invalid contract. It apparently made that decision in response to a claim by Esorfranki that an appropriate order would be one in terms of which it was to be declared the only successful bidder, and the municipality be ordered to award it a contract to complete the work. The court found that the order proposed by Esorfranki raised a number of “issues and practical difficulties” and that the granting of the order sought by Esorfranki would not serve to protect those who were to benefit from the construction of the pipeline. These issues, which it found not to have been properly addressed included inter alia “the logistical, legal and financial viability of such a relief and the extent to which the contract had been completed, the ownership of materials, whether if the balance of the contract is legally and factually separable, it should be put out to tender etc”.’ 9 Esorfranki (supra) paragraph 18. [40] Matojane J did not make a finding that Esorfranki was not or would not have been the successful bidder. Nor, as the above passage bears out, was the relief premised on such a finding of fact. The same is true of this Court’s finding in relation to the relief granted on appeal. This Court found that the high court’s decision to give effect to an unlawful contract was flawed for several reasons. Chief among these was that the parties to the contract10 had acted dishonestly and unscrupulously. It also found that the invalidity of the tender process was not the result of negligence or incompetence. Rather, that the tender process and the consequent contract was tainted by dishonesty and fraud. [41] Having come to this conclusion, the court held that the only appropriate remedy would be one declaring the contract void and granting equitable relief. In framing the relief, two considerations were decisive; namely the fact that the work was partially complete and that it would be necessary to determine what remedial work would be required and what further steps would be required to complete the project. The second issue was its acceptance that Mopani, by virtue of the bias displayed by it in the adjudication of the tender and its conduct in the litigation, was disqualified from participating in any further tender process that may arise in relation to the project. [42] The court was therefore equally motivated by considerations of pragmatism and practicality in determining the appropriate relief. In formulating that relief, it made no finding in relation to whether or not Esorfranki was ‘the successful bidder’. 10 My emphasis. [43] What the trial court was required to determine was whether the conduct of Mopani (found to be in breach of s 217 of the Constitution and in violation of the right to just administrative action by the review court) was wrongful and culpable in the context of a delictual claim. It was also required to consider whether as a fact, but for that conduct, Esorfranki would have been awarded the contract and what consequences flowed from Mopani’s failure to do so. This issue was not one that was an essential basis for the judgment in the review proceedings. The trial court was accordingly not precluded from consideration of this issue by reason of res judicata. [44] My colleague Mbatha JA comes to the conclusion that the court a quo was correct to find that the matter was res judicata, on the basis of a broad interpretation of the meaning of the cause of action. I respectfully disagree for the reasons already outlined. In addition, it must be emphasized that the review relief was premised upon several grounds of review and not solely upon a finding that there was fraud on the part of Mopani. In any event, the fact that a finding of fraud or what is tantamount to fraud in review proceedings is made, cannot preclude Esorfranki from pursuing other relief based on that finding. A plea of res judicata is not available to Mopani in such circumstances. It would, however, be available to Esorfranki if Mopani sought to challenge such a finding. Novus actus interveniens [45] The trial court accepted that the evidence established factual causation. In dealing with legal causation, that is whether the harm suffered was sufficiently closely connected to the act or omission causing harm, the high court approached the issue from the perspective that this Court, by ordering the tender process to be re-advertised, had afforded Esorfranki another opportunity to submit a bid for the self-same tender. The court held that this constituted an alternative remedy and was a case of novus actus interveniens. [46] The trial court rejected an argument that the tender which flowed from the appeal court order was not the same as the original tender. I am unable to discern on what basis the court came to this conclusion. This Court made it plain that by the time an appropriate remedy was to be formulated, although the project as a whole was incomplete, some work had been completed. This is also apparent from the high court judgment, delivered at a much earlier stage in the litigation process. Indeed in the latter judgment it was recognized that ownership of delivered materials and remedial work would need to be considered. [47] It is necessary to say something about the ‘new’ tender which followed the order made by this Court. It was common cause, as indicated in Mbatha JA’s judgment, that Esorfranki submitted a bid in an amount considerably higher than its bid in the tender at issue and that it was unsuccessful. It was also common cause that the successful bidder had submitted a bid which was in excess of Esorfranki’s bid. The successful bidder was Vharanani Properties (Pty) Ltd and a contract in an amount of almost R600 million was awarded to it. [48] The evidence before the review court included affidavits, which were filed by Esorfranki in the various interlocutory applications by which it sought to stop the implementation of the contract. These included affidavits filed in opposing the attempts by Mopani to obtain leave to appeal against the interim orders. Esorfranki sought to demonstrate that Mopani and the Joint Venture were proceeding with the contract as rapidly as possible, ostensibly to render any review process academic. What is relevant for present purposes, is the evidence regarding the state of the contract works. [49] Gibbons, Esorfranki’s managing director, alleged that the Joint Venture had dumped sections of the pipes in large stockpiles, that these were unprotected and damaged. Sections of the pipeline trenches had been filled; but not in accordance with specifications; and that there was evidence of poor workmanship. The significance of this evidence, which was before this Court in the review appeal, is that it established a need for remedial work, not only to correct defective work on the project but to redo work already done. It is against this background that the order requiring the Department of Water Affairs to assess the extent of the work required and to prepare a tender for such remedial work and for the completion of the project, must be seen. [50] The further tender advertised might have been a sequel to the original tender but it was manifestly not the original tender. The fact that Esorfranki was able to bid for that contract does not constitute ‘an alternative remedy’. Nor does the availability of a further and different contract opportunity constitute a novus actus for purposes of breaking the causal chain. [51] Esorfranki’s claim was one for loss of profit. Its cause of action, as pleaded, was premised upon the failure of Mopani to award it a specific contract for which it had bid. And in relation to which it was the only party that had actually met the bid requirements. The availability to it of another contract requiring the delivery of a set of services different from those required in the original contract and at a different price does not interrupt causation of loss in relation to the first or original contract. At best, assuming it was awarded the second contract, whatever profit it earned from the second contract would have to be brought to account in determining its loss on the first contract. That is so for the simple reason that the second contract only arises on account of the setting aside of the first contract which was unlawfully not awarded to Esorfranki. Nor does Esorfranki’s failure to secure the second contract alter the fact that it may, as asserted, have suffered a loss of profit on the first contract. [52] It follows from this that the trial court’s reasoning in relation to the existence of a novus actus interveniens cannot be sustained. The inquiry, however, does not end there. It is still necessary to consider, having regard to the evidence before the trial court, whether Esorfranki succeeded in establishing each of the elements of its delictual cause of action. It is also necessary to consider whether, as the trial court found, the circumstances of the case are such as to preclude delictual liability on the basis of public policy. This latter aspect requires consideration of the nature of the wrongful and unlawful conduct of the part of Mopani. Wrongfulness and fault [53] These two elements will be dealt with together in what follows. It is appropriate at this juncture to return to the debate concerning the ambit of the case as presented at trial. Counsel for Mopani, submitted that the ‘parameters’ of what was before the trial court was set out in the opening address. He argued that counsel for Esorfranki had disavowed any reliance upon fraud as vitiating the award of the tender. Such disavowal accorded with the fact that the reviewing court and this court had made no finding of fraud on the part of Mopani. This finding was, he submitted both to the trial court and this Court, binding upon the parties by reason of res judicata. It could accordingly not be revisited. [54] However, a careful reading of counsel for Esorfranki's opening address does not reveal any statement disavowing Esorfranki’s reliance on fraud on the part of Mopani. In an exchange with Makgoka J, Mr. Luderitz submitted that in so far as the element of wrongfulness was concerned the findings by the high court and this court were sufficient. Nevertheless, counsel accepted, quite correctly, that no finding of fraud was made against the municipality in either of the two judgments. That is a far cry from disavowing reliance upon the pleaded case on behalf of Esorfranki. [55] The particulars of claim make it abundantly clear that Esorfranki relied upon deliberate and intentional dishonesty on the part of Mopani and its employees or officials. It was also specifically averred that its claim was founded upon fraudulent conduct. In the light of the pleadings there can be no question that fraud, by way of deliberately dishonest conduct, to favour the Joint Venture at the expense of Esorfranki, remained an integral part of the case to be adjudicated at trial. [56] This brings me to the contention that the trial court could not go beyond the findings of the review court in relation to the wrongfulness of Mopani’s conduct. The contention was one advanced in the context of the application of the exceptio rei judicata. [57] I have already dealt with the principles applicable to res judicata above. As indicated, the trial court’s finding that res judicata precluded consideration of the nature of the wrongful conduct and its impact upon the pleaded cause of action cannot be sustained. What remains to consider is the evidence tendered in relation to that pleaded case. [58] Esorfranki’s particulars of claim contained several allegations relating to the wrongful and culpable conduct of Mopani and its employees in awarding the tender to the Joint Venture. It was alleged, inter alia, that Mopani or its employees: with knowledge of the irregularities alleged in respect of the first award to the Joint Venture: ‘…intentionally and deliberately dishonestly, and by virtue of its alternatively, their dishonest conduct, awarded the tender to the Joint Venture in terms of the second award.’ [59] In substantiation of the allegation of bias in favour of the Joint Venture, it was alleged that: ‘… employees, officials and/or representatives of [Mopani], manipulated the scoring of the [Joint Venture] and increased certain of [the Joint Venture’s] scores in respect of the second award to [the Joint Venture] to ensure that the [Joint Venture] was awarded the second award.’ (My emphasis.) [60] In regard to fraudulent misrepresentations made by the Joint Venture, regarding amongst others its qualifications and experience and its contractor’s rating, (averments which were common cause between the parties), the particulars of claim alleged that: ‘Despite knowledge on the part of [Mopani] and/or on the part of the employees, officials and/or representatives of [Mopani], of the aforesaid frauds committed by the [Joint Venture] on [Mopani] and despite knowledge of the true facts [Mopani]… intentionally and deliberately dishonestly, and by virtue of its alternatively, their dishonest conduct, nonetheless awarded the tender to the [Joint Venture] in terms of the second award.’ [61] In regard to the evidence before the court it should be emphasized that it was uncontested. The facts alleged in the affidavits of, inter alia, Mr Arne Rheeder (Rheeder), the contracts director of Esorfranki and Mr David Gibbons (Gibbons) the managing director of Esorfranki, who deposed to the main founding affidavits in the review application and several affidavits in the rule 49(11) applications, must be accepted. [62] Rheeder explained that in the first application which came before Preller J it was alleged by Esorfranki that, inter alia, the Joint Venture was not compliant with the required contractor’s rating (its CIDB rating) which had been stipulated as a tender qualification. The Joint Venture ought on this basis to have been disqualified. It was further alleged that the contract had been awarded to the Joint Venture despite its bid price being higher than in eleven other bids. The significance of this evidence lies in the fact that the award was set aside by Preller J, by agreement between the parties, and the tenders were required to be re-adjudicated. The reason for Mopani’s agreement to the order matters not. What matters is that the re-adjudication of the tenders which followed occurred in circumstances where Mopani was aware of a significant deficiency in the Joint Venture’s bid, namely its CIDB rating. It is in the light of this knowledge that the conduct of Mopani and its officials is to be evaluated in making the second award to the Joint Venture. [63] The evidence of Rheeder, Gibbons and Thompson, in particular, shows that the adjudication of the bids for the second award occurred not only on the basis of a failure to disqualify the Joint Venture by reason of non-compliance, but upon a deliberate manipulation of the points allocated in the scoring system which applied. (My emphasis). This manipulation, by allocating points to which the Joint Venture was not entitled, had the effect that the Joint Venture notionally scored a higher total of points than Esorfranki. It was upon this basis that the award was made to the Joint Venture. [64] The high court found that the second award of the contract to the Joint Venture was unlawful by reason of, inter alia, bias in favour of the Joint Venture, bad faith and ulterior purpose. This finding was based on the fact that the bid documents submitted by the Joint Venture established that: (a) it did not meet the required CIDB grading and that Mopani had relied on its subsequent justification of the award in the litigation, upon a document which was dated a year later after the award of the contract; (b) the Joint Venture had not submitted documents required to establish its qualifications and experience in the conduct of such works; and (c) upon proper investigation in the light of what was submitted it would have been established that the Joint Venture was using the device of ‘fronting’. [65] This Court, on appeal, considered the basis of those findings, as was necessary to determine the appeal in respect of the remedy. None of the findings were challenged. It then concluded that: ‘…the parties to that contract had acted dishonestly and unscrupulously and the Joint Venture was not qualified to execute the contract.' [66] The trial court had before it a pleaded cause of action which encompassed an allegation of fraud and deliberate dishonesty. It had before it uncontested evidence which unequivocally established deliberate and intentional conduct to subvert the prescripts of s 217 of the Constitution. It was open to the high court to consider the evidence and to find that the unlawful conduct attributable to Mopani was indeed in fraudem legis, i.e. fraudulent. Had it properly evaluated the evidence it would have found that Mopani had acted dishonestly, intentionally and wrongfully in awarding the tender to the Joint Venture. On the facts, it would and should have found that the conduct of Mopani was vitiated by bad faith, ulterior purpose and fraud. [67] There remains the question of whether Mopani’s deliberate dishonesty in the tender adjudication and in its award of the contract to the Joint Venture was wrongful in the context of a delictual claim brought by Esorfranki. Consideration of this involves questions of legal or public policy. The trial court found that in the circumstances of this case legal policy does not favour delictual liability to arise against Mopani. The trial court advanced no reasons for coming to this conclusion. [68] Before this Court it was argued that in the absence of fraudulent conduct on the part of Mopani, delictual liability in relation to public procurement ought not to be imposed. Reliance for this proposition was placed on Steenkamp NO v Provincial Tender Board of the Eastern Cape 2007 (3) SA 121 (CC) and Olitzky Property Holdings v State Tender Board and Another 2001 (3) SA 1241 (SCA).11 [69] Neither of these judgments, however, is authority for an absolute bar to delictual liability for wrongful and unlawful conduct in the context of public 11At 1261. procurement. In Steenkamp the wrongful conduct resulting in the administrative conduct being impugned involved a negligent breach of a statutory duty. The Constitutional Court, dealing with policy considerations which are relevant to the imposition of delictual liability in the context of public procurement, said the following: ‘(a) Compelling public considerations require that adjudicators of disputes, as of competing tenders, are immune from damages claims in respect of their incorrect or negligent but honest decisions. However, if an administrative or statutory decision is made in bad faith or under corrupt circumstances or completely outside the legitimate scope of the empowering provision, different public policy considerations may well apply. (b) Legislation governing the tender board in this case is primarily directed at ensuring a fair tendering process in the public interest. Where legislation has a manifest purpose to extend protection to individual members of the public or groups, different considerations may very well apply. Again whether or not delictual liability ought to attach even in that case will be dependent on the factual context and relevant policy considerations. (c) Imposing delictual liability on the negligent performance of functions of tender boards would open the prospect of potential claims of tenderers who had won initially. This will be to the detriment of the invaluable public role of tender boards. A potential delictual claim by every successful tenderer whose award is upset by a court order would cast a long shadow over the decisions of tender boards. Tender boards would have to face review proceedings brought by aggrieved unsuccessful tenders. And should the tender be set aside it would then have to contend with the prospect of another bout of claims for damages by the initially successful tenderer. In my view this spiral of litigation is likely to delay, if not to weaken the effectiveness of or grind to a stop the tender process. That would be to the considerable detriment of the public at large. The resources of our state treasury, seen against the backdrop of vast public needs, are indeed meagre. The fiscus will ill-afford to recompense by way of damages, disappointed or initially successful tenderers and still remain with the need to procure the same goods or service.’ 12 12 Paragraph 55. [70] Steenkamp accordingly recognizes that different policy considerations apply where it is found that a decision-maker has acted dishonestly, mala fide or fraudulently. In Odifin (Pty) Ltd v Reynecke 2018 (1) SA 153 (SCA)13 this court held that there is no difficulty in imposing liability where the decision- maker acts dishonestly or corruptly.14 In Telematrix (Pty) Ltd t/a Matrix Vehicle Tracking v Advertising Standards Authority of SA [2005] ZASCA 73 (SCA), [2006] 1 All SA 6 (SCA) it was stated: ‘In different situations courts have found that public policy considerations require that adjudicators of disputes are immune to damages claims in respect of their incorrect and negligent decisions. The overriding consideration has always been that, by the very nature of the adjudication process, rights will be affected and that the process will bog down unless decisions can be made without fear of damages claims, something that must impact on the independence of the adjudicator. Decisions made in bad faith are, however, unlawful and can give rise to damages claims.’15 [71] It bears emphasis that in this instance the decision-maker acted deliberately and dishonesty, with bias in favour of the Joint Venture. It acted in bad faith, with an ulterior purpose and, fraudulently. And what aggravates matters is that Mopani acted in the manner it did not once but twice in the face of serious allegations of wrongdoing levelled against it by Esorfranki. One would have thought that Mopani would instead pause for reflection and correct its unseemly conduct. On the contrary, Mopani became even more resolute to frustrate Esorfranki at every turn. The series of interlocutory applications brought by Esorfranki against Mopani all confirm one thing, i.e. that Mopani had clearly evinced a determination not only to award the tender 13 Paragraph 23. 14 See also The Trustees of the Simcha Trust v De Jong and others [2015] ZASCA 45; 2015 (4) SA 229 (SCA) at para 30; South African Post Office v De Lacy and another 2009 (5) SA 255 (SCA) para 14. 15 Paragraph 26. to the Joint Venture come what may, but also to ensure that its implementation proceeded notwithstanding court orders restraining it from executing the contract. Quite clearly therefore, its conduct was the antithesis of what is to be expected from an organ of the state. [72] In Minister of Finance and Others v Gore NO 2007 (1) SA 111 (SCA) (Gore), this Court considered an argument similar to that advanced before us in relation to public policy limitations. It said the following: ‘In the language of the more recent formulations of the criterion for wrongfulness: in cases of pure economic loss the question will always be whether considerations of public or legal policy dictate that delictual liability should be extended to loss resulting from the conduct at issue. Thus understood, it is hard to think of any reason why the fact that the loss was caused by dishonest (as opposed to bona fide negligent) conduct, should be ignored in deciding the question. We do not say that dishonest conduct will always be wrongful for the purposes of imposing liability, but it is difficult to think of an example where it will not be so. In our view, speaking generally, the fact that a defendant’s conduct was deliberate and dishonest strongly suggests that liability for it should follow in damages, even where a public tender is being awarded. In Olitzki and Steenkamp, the cost to the public purse of imposing liability for lost profit and for out-of-pocket expenses when officials innocently bungled the process was among the considerations that limited liability. We think the opposite applies where deliberately dishonest conduct is at issue: the cost to the public of exempting a fraudulent perpetrator from liability for fraud would be too high.’16 [73] In Gore the claim against the organ of state concerned was premised upon vicarious liability arising from the conduct of its employees. The court nevertheless went on to state that: 16 Paragraphs 87-88. ‘These considerations would indicate that liability should follow even if the plaintiff’s case were based on dishonesty on the part of the State Tender Board itself.’ 17 [74] In this instance the claim against Mopani asserts direct liability of the organ of state by reason of deliberate dishonest conduct on its part in the award of the tender to the Joint Venture. Based on the findings of deliberate dishonesty made by the high court in the review proceedings and this Court on appeal to it, there is, in my view, no reason of public or legal policy to exclude liability of Mopani for such economic loss as Esorfranki may have suffered. [75] As I understand Nicholls JA’s judgment she does not hold that considerations of public policy preclude a claim in damages even in circumstances where a tenderer was unsuccessful as a result of dishonest or fraudulent conduct by an organ of state. She considers instead, that since no direct finding of fraud was made against Mopani and since Esorfranki’s integrity was also questioned18, on a conspectus of all the facts, liability should not be imposed. [76] Nicholls JA finds that the effect of this Court’s order in the review appeal was to ‘set aside the original tender’. This public law remedy resulted in there not being an extant tender in which Esorfranki lost the opportunity to bid and thus make a profit. Nicholls JA accordingly finds that wrongfulness is not established by reason of the non-existence of a duty owed to Esorfranki which could be breached. 17 Paragraph 89. 18 I have set out in par 15 above why this finding is misplaced. [77] I am respectfully unable to agree with this reasoning. This Court set aside the contract concluded between the Joint Venture and Mopani. It did so having found that the adjudication of the tender i.e. the process which resulted in the administrative decision to award the contract to the Joint Venture, was tainted by bias and deliberate dishonesty. The effect of the remedy is not to expunge the unlawful conduct, it is to correct it prospectively. This is achieved by determining appropriate relief by which to vindicate the right to administrative conduct that is lawful and fair. The fact of the unlawful conduct remains and there is no reason why that established breach of a duty owed to Esorfranki cannot found a claim in damages. Causation [78] I turn now to the element of causation. Esorfranki pleaded that but-for the unlawful conduct on the part of Mopani, it would have been awarded the contract. In support of this assertion, the evidence presented by it established that it presented an eligible or valid bid, i.e. one that complied with all of the qualifying criteria. Its price was the lowest presented. The differential between the price of the Joint Venture and that of Esorfranki was approximately R10 million. The bid adjudication report made available by Mopani after the second award indicated that Esorfranki scored the second highest number of points after the Joint Venture. The difference was a mere half a point. As already indicated, the points allocated to the Joint Venture were manipulated in order to ensure that it scored the highest number of points. Accordingly, had the points allocation not been manipulated Esorfranki would, without doubt, have secured the highest points tally. The evidence asserting this proposition was unchallenged, and no evidence to suggest that Esorfranki would not, for some or other objective reason, have been awarded the contract, was presented. [79] The further question is whether the harm suffered by Esorfranki is sufficiently closely linked to the wrongful and unlawful conduct to establish liability. Esorfranki’s claim is one for loss of profit being the economic loss it suffered in consequence of it not being awarded the contract and therefore not being able to conduct the works in accordance with the contract. [80] In International Shipping Company (Pty) Ltd v Bentley 1990 (1) SA 680 (A), [1990] 1 All SA 498 (A)19 it was held: 'On the other hand, demonstration that the wrongful act was a causa sine qua non of the loss does not necessarily result in legal liability. The second inquiry then arises. That is whether the wrongful act is linked sufficiently closely or directly to the loss for legal liability to ensue or whether, as it is said, the loss is too remote. This is basically a juridical problem in the solution of which considerations of policy may play a part.’ [81] The test for legal causation is a flexible one in which factors such as reasonable foreseeability, directness, the absence or presence of a novus actus interveniens, legal policy, reasonability, fairness and justice all play a part.20 [82] In Minister of Safety and Security v Van Duivenboden 2002 (6) SA 431 (SCA)21 it was held that: ‘A plaintiff is not required to establish the causal link with certainty, but only to establish that the wrongful conduct was probably a cause of the loss, which calls for a sensible 19 At 517. 20 Standard Charted Bank of Canada v Nedperm Bank Limited 1994 (4) SA at 765A-B, OK Bazaars (1929) Proprietary Limited v Standard Bank of SA Limited 2002 (3) SA 688 (SCA) para 23. 21 Paragraph 25. retrospective analysis of what would probably have occurred, based upon all the evidence and what can be expected to occur in the ordinary course of human affairs rather than an exercise in metaphysics.’ [83] In this instance it must be accepted that it was reasonably foreseeable that Esorfranki would have generated a profit in the ordinary course of carrying out the works in terms of the contract had it secured that contract. Such loss of profit was proximate to and not too remote from the unlawful conduct of Mopani. Upon a sensible retrospective analysis of the probabilities therefore, legal causation is clearly established. [84] That brings me to the question of the existence or otherwise of a novus actus interveniens. I have dealt above with the factual considerations earlier in this judgment. What remains to be said is that the order directing that a tender be re-advertised or that a further process be initiated to correct the unlawful administrative conduct is not an unusual nor generally unexpected result in the context of public law remedies. On the contrary such remedies are specifically provided for in s 8 of PAJA. As was held in OK Bazaars22 the test for legal causation, ‘When directed specifically to whether a new intervening cause should be regarded as having interrupted the chain of causation (at least as a matter of law if not as a matter of fact) the forseeability of the new act occurring will clearly play a prominent role (Joffe & Co Ltd v Hoskins and another 1941 AD 431 at 455–6; Fischbach v Pretoria City Council 1969 (2) SA 693 (T); Ebrahim v Minister of Law and Order and others 1993 (2) SA 559 (T) at 566B–C; Neethling et al, supra, 2015; Boberg The Law of Delict 441). If the new intervening cause is neither unusual nor unexpected, and it was reasonably foreseeable that 22 OK Bazaars (supra) at para 33. it might occur, the original actor can have no reason to complain if it does not relieve him of liability.’ [85] That is precisely the case in the present matter. By the time the high court heard the review application the contract had already been implemented to a considerable extent. That was all the more so by the time the appeal was heard. The factual circumstances that prevailed at that stage were quite different to those that prevailed when the award was originally made. Indeed, Mopani had advanced the contention in the intervening litigation that no practical effect or purpose could be served by an appeal precisely because the contract had largely run its course. It could therefore hardly not be foreseeable that a court on review might order that such outstanding work as was still required to be done, be subject to another tender process. Accordingly, the order of this court to fashion a just and equitable order to address the prevailing circumstances cannot, by any stretch of the imagination, be construed as having interrupted the chain of causation in relation to the loss suffered by Esorfranki by reason of being unlawfully deprived of the original contract. [86] It follows in my view, that the appeal must succeed. I would accordingly make the following order: 1. The appeal is upheld with costs, such costs to include the costs consequent upon the employment of two counsel. 2. The order of the high court is set aside and replaced with the following: 2.1 It is declared that the first defendant, Mopani District Municipality, is liable to the plaintiff, Esorfranki (Pty) Ltd, for such loss of profits as may be agreed between the parties or as the plaintiff may prove in relation to tender bid number MDN2011-005 for the construction of a raw bulk water line from Nandoni Dam to Nsami Water Treatment Works plus interest thereon. 2.2 The first defendant is ordered to pay the plaintiff's costs, such costs to include the costs of two counsel.' ________________________ G GOOSEN ACTING JUDGE OF APPEAL Nicholls JA (Poyo-Dlwati AJA concurring): [87] I have read the judgment of my colleague Goosen AJA and agree with his rendition of the facts and litigation history. I am also in agreement with his findings on res judicata. Regrettably, I cannot agree with his conclusion that the Mopani Municipality should be held liable for Esorfranki’s loss of profits. [88] The requirements for a delictual claim are trite - a wrongful act or omission, fault in the form of negligence or intention, causation, and finally damages in the form of patrimonial or non-patrimonial loss. Delictual claims for pure economic loss have had a more gradual recognition in the development of our common law.23 It is now acknowledged that early Roman Dutch law did not only recognise claims for loss caused by physical harm to one’s person or property but extended claims for all patrimonial loss, including financial. Aquilian liability for pure economic loss was conclusively recognised in Administrateur, Natal v Trust Bank24 in 1979. [89] The issue today is not so much whether such liability is recognised in principle but the circumstances in which such liability should be imposed. The general principle, frequently stated, is that every person has to bear the loss he or she suffers.25 It is universally accepted that there must be some limitation on wrongdoer’s liability. The brake on limitless legal liability takes the form of wrongfulness and causation, both of which are ‘measures of control’.26 [90] Although these are independent and distinct enquiries, both are impacted upon by policy considerations taking into account constitutional norms and values. Conduct causing pure economic loss is not prima facie wrongful and whether a defendant is to be liable for compensation must be viewed through the prism of public policy and the legal convictions of society 23 In The Cape of Good Hope Bank v Fischer (1885-1886) 4 SC 368 it was found that Roman Dutch Law had extended Aquilian liability to ‘every kind of loss’ sustained as a result of a person’s wrongful actions even if the loss had not been caused by damage done to corporeal property. In Dickson and Co. v Levy (1894) 11 SC 33 it was held that a false representation causing damage was only actionable if it was fraudulent. Perlman v Zoutendyk 1934 CPD 151 endorsed the Dickenson approach that liability for pure economic loss would only result if the wrongful conduct was intentional rather than negligent. 24 Administrateur, Natal v Trust Bank van Afrika BPK 1979 (3) SA 824 (A); [1979] 2 All SA 270 (A) where it was accepted that a person who negligently causes pure economic loss to another could incur delictual liability if a duty of care is owed to the wronged person. This requires an assessment of whether public policy required that the offender ought to be placed under a legal duty to compensate that person. 25 Telematrix (Pty) Ltd t/a Matrix Vehicle Tracking v Advertising Standards Authority of SA [2006] 1 All SA 6 (SCA); 2006 (1) SA 461 (SCA) para 12; Home Talk Developments (Pty) Ltd and Others v Ekurhuleni Metropolitan Municipality [2017] ZASCA 77; [2017] 3 All SA 382 (SCA); 2018 (1) SA 391 (SCA) para 1. 26 Fourway Haulage SA (Pty) Ltd v SA National Roads Agency Ltd [2008] ZASCA 134; 2009 (2) SA 150 (SCA); [2009] 1 All SA 525 (SCA) para 31. at large.27 The fact that an act constitutes an administrative illegality does not mean that delictual damages should be awarded against a public authority if other administrative remedies were available.28 There are various decisions from both this Court and the Constitutional Court where liability for financial loss suffered by unsuccessful bidders in public tenders has not resulted in an award of damages against government institutions.29 It is settled law that negligence and incompetence is insufficient to ground liability in the context of public procurement. Only where there is ‘something more’ can a plaintiff recover her lost bargain.30 In the same vein s 8(1)(c)(ii)(bb) of PAJA provides that only in exceptional circumstances could payment of compensation be a just and equitable remedy. It appears that ‘something more’ or an ‘exceptional circumstance’ occurs where the tender is vitiated by fraud or where there was bad faith and malice on the part of the tender board. There are two cases of this Court of significance in this regard. [91] The legal position that loss of profit suffered by an unsuccessful tenderer as a result of dishonesty and fraud is claimable in delict, should all the other requirements of delict be met, was confirmed by this Court in Transnet v Sechaba Photoscan.31 Prior to this, courts had inclined towards the 27 Telematrix para 13; Trustees Two Oceans Aquarium Trust v Kantey and Templer (Pty) Ltd 2006 (3) SA 138 (SCA) para 12; MV MSC Spain; Mediterranean Shipping Company v Tebe Trading (Pty) Ltd [2007] ZASCA 12; [2007] SCA 12 (RSA); 2008( 6) SA 595 (SCA); [2007] 2 All SA 489 (SCA) para 14. 28 Fose v Minister of Safety and Security 1997 (3) SA 786 (CC); Steenkamp v Provincial Tender Board of the Eastern Cape [2006] All SA 478 (SCA) held that delictual damages would be inappropriate against a public authority if there were public law remedies available; Steenkamp NO v Provincial Tender Board, Eastern Cape 2007 (3) SA 121 (CC) para 46. 29 Olitzki Property Holdings v State Tender Board 2001 (3) SA 1247 (SCA); Steenkamp v Provincial Tender Board, Eastern Cape 2007 (3) SA 121 (CC); South African Post Office v De Lacy and Another [2009] ZASCA 45; 2009 (5) SA 255 (SCA); [2009] 3 All SA 437 (SCA). 30 Steenkamp v Provincial Tender Board, Eastern Cape 2007 (3) SA 121 (CC) para 27; see also C Okpaluba ‘Bureaucratic bungling, deliberate misconduct and claims for pure economic loss in the tender process’ (2014) 26 SA Merc LJ 387. 31 Transnet Ltd v Sechaba Photoscan (Pty) Ltd 2005 (1) SA 299 (SCA). principle set out in Trotman and Another v Edwick,32 namely that a litigant who sues on a contract sues to have his or her bargain or its equivalent in money. Whereas a litigant who sues in delict sues to recover the loss which was sustained because of the wrongful conduct, that is to recover the extent by which his or her patrimony was reduced by the conduct. Damages in delict seek to restore the plaintiff to the position she would have occupied had the delict not been committed. In Transnet an argument that the tenderer sought to have the benefit of its bargain (as in a contractual claim) and that accordingly loss of prospective profits was not recoverable in delict, was rejected. It was held that the principles set out in Trotman were wide enough to include a delictual claim for loss of profits in certain circumstances, as the court was careful to guard against a formula applicable to all fraud which induced a contract. However, in general, contractual damages concern the recovery of profits, whereas the measure of damages in delictual claims is different, namely to place the plaintiff in the position it would have been had the harm not occurred.33 [92] The next crucial decision of this Court is Minister of Finance and Others v Gore.34 It dealt with a tender for the automated fingerprint identification for the payments of social grants which was designed to address the massive fraud taking place in the payments of grants. The two public officials concerned corruptly negotiated contracts of employment with the successful bidder and caused the company to pay substantial amounts of money as bribes into the bank accounts of their wives. This Court held that 32 Trotman and Another v Edwick 1951 (1) SA 443 (A) at 449B-C. 33 In German law the ‘loss of a chance’ to conclude a favourable contract is primarily a policy issue: 68 RGZ 163; 2 BGHZ 310. 34 Minister of Finance and Others v Gore NO 2007 (1) SA 111 (SCA); [2007] 1 All SA 309 (SCA). where there is deliberate dishonesty on the part of government officials, this is strongly suggestive that delictual liability should follow. This Court did not say that dishonest conduct would always be wrongful for the purposes of imposing delictual liability, but that it was difficult to think of a situation where it would not be.35 Further, it found that public officials should not be shielded with immunity and the government institution was therefore held vicariously liable for the corrupt conduct of its employees. Whilst acknowledging the impact this may have on scarce resources urgently needed for economic and social reform, the cost of the fraud was found to outweigh the effect such a finding may have on the public purse. [93] In the present matter there is no direct finding of fraud against Mopani in either the high court or this Court’s review judgments. Nor do the facts approximate the fraud and corruption that was described in Gore. Nonetheless, bound as we are by the factual findings in the judgments in the review proceedings, I cannot fault Goosen AJA’s finding that the municipality displayed mala fides, an element of dishonesty and an ulterior purpose in awarding the tender to the Joint Venture. [94] It should not be overlooked that the honesty of Esorfranki was also impugned in Matojane J’s judgment. At paragraph 47 he stated: ‘This case cannot be properly decided without first having regard to the manner in which Esorfranki, a civil engineering group with a turnover of 1.9 billion conducts this litigation. Esorfranki and Cycad, despite their protestations to the contrary are not independent. The Esorfranki-Cycad joint venture was awarded a tender by the Ethekwini Municipality for the construction of the Western Aqueduct Phase Two. The Kwazulu Natal High Court in 35 Ibid para 87. the matter of Sanyathi Civil Engineering and Consultants v Ethekwini Municipality reviewed and set aside the award of the tender to the Esorfranki-Cycad joint venture as the court found that corruption could not be ruled out in the tender process.’ [95] Notwithstanding the bias alluded to, I have some difficulty attributing wrongfulness to the municipality under these circumstances. Public law acts for the public good rather than the furtherance of private interests. Delictual claims in the context of public procurement bring into sharp focus the intersection and uneasy relationship between public and private law. The ultimate question in every case is whether on a conspectus of all the facts and considerations, public policy, infused by the values of the Constitution, requires that the conduct be compensable. The first point to be made is that the Constitution does not create a right to claim damages for loss of profits in the arena of procurement administrative law. This much was stated by this Court in Olitzki Property Holdings v State Tender Board36 and SA Post Office v De Lacy37 and confirmed by the Constitutional Court in Steenkamp NO v Provincial Tender Board.38 Thus, the constitutional guarantee of a fair tender does not provide the basis for imposing a legal duty to compensate for loss arising from the breach of the guarantee.39 [96] In this particular case, public policy considerations undoubtedly require that the relevant public officials face the full might of the law, including possible criminal charges. But the question is whether public policy considerations require that a municipality (and hence ultimately the rate 36 Olitzki Property Holdings v State Tender Board 2001 (3) SA 1247 (SCA) para 31. 37 South African Post Office v De Lacy and Another [2009] ZASCA 45; 2009 (5) SA 255 (SCA); [2009] 3 All SA 437 (SCA) paras 2 and 3. 38 Steenkamp v Provincial Tender Board, Eastern Cape 2007 (3) SA 121 (CC) para 56. 39 See also Gore above note 12 para 83. payers), more than ten years later, should be held liable to pay a private company such as Esorfranki for loss of profits for work that it did not do. On the one hand the law cannot countenance corrupt local government officials who do not act for the public good. After all, it is the municipalities that are the direct interface between the community and government. They are the organs of state constitutionally mandated to deliver basic services to our communities. A municipality, cash-strapped as a result of the dishonest conduct of its officials, cannot deliver the necessary municipal services. Inevitably, it is the poorest who will suffer most. On the other hand do the legal convictions of the community permit a private company, with a turnover of billions, to claim for its loss of profits? It is to this issue that I now turn. [97] Esorfranki challenged the tender awarded to the Joint Venture by way of review before the courts. It was successful. The tender awarded to the Joint Venture was set side, and a new tender process was ordered by this Court. Esorfranki used a public law remedy to right the wrong that it had suffered. Esorfranki was entitled to bid again in the new tender process that followed the order of this Court. It did tender and was unsuccessful. Esorfranki does not complain of that failure. The question is whether it can still claim in delict for the wrongful conduct that vitiated the tender awarded to the Joint Venture, even though it secured the opportunity to bid afresh in a fair and competitive new tender process? I think not for following reasons. [98] Esorfranki obtained a public law remedy that set aside the original tender, which became void ab initio. That public law remedy has private law consequences. If, as a matter of public law, the tender was set aside by an order of court, there was no extant tender in which Esorfranki lost the opportunity to bid and thus make a profit. As a result the wrongful conduct perpetrated by the municipality does not attach to any existing tender. This means that there was no legal duty owing to Esorfranki by the municipality to permit it to profit from a fair and competitive tender process because it was expunged as an incident of the order made to set aside the tender. In other words, if there was no tender, there was no legal duty that was owing. Once that is so, there is no wrongfulness that Esorfranki can rely upon to establish its cause of action. [99] I am fortified in this view by the following consideration. The point of the review was to restore the position so that a fair, equitable, transparent, competitive and cost effective tender process could be followed as required by s 217 of the Constitution. Esorfranki’s opportunity to make a private profit from public procurement was anchored in the new tender process that followed this Court’s order. Esorfranki could never claim that it stood to make two profits for the same work that was the subject of the tender. It was unsuccessful in the only lawful opportunity it had to profit. It cannot use the law of delict to resurrect another opportunity to make a profit that had been expunged by operation of law. Nor can the state be saddled with the liability to compensate private companies for profits lost in a tender process that has been set aside, while also burdening the state with the cost of paying the company that wins the tender in a fair process. The Constitution requires procurement that is cost-effective. Public policy should not tolerate a situation where a company retains a claim in an unlawful tender process that is set aside, in circumstances where that same company fails in the lawful process that follows. That entails a double charge upon the state, and a double entitlement on the part of Esorfranki to profit. Neither is justifiable. In my view no wrongfulness arises in these circumstances. [100] There is a further basis upon which I hold that Esorfranki cannot succeed in its appeal. That is causation. [101] A fundamental difficulty with the present matter is the manner in which the evidence was placed before court. No witnesses were called. The parties saw fit to accept the affidavits in the various applications and the factual findings in judgments of the high court and this Court, in the review proceedings, as constituting evidence in the trial court. A claim for damages inevitably involves a dispute of fact and requires evidence to be led. What is required to bring a successful review of a tender on motion proceedings is not the same as that for a delictual action. This immediately puts this matter on a different footing to Gore where extensive oral evidence was led in the trial and, on the evidence before it, the court found that causation had been proven. [102] Esorfranki must show causation, both factual and legal. Factual causation, as its name suggests, is a factual enquiry as to whether the impugned conduct or omission is factually linked to the harm caused. In other words, does the one fact follow from the other? The ‘but-for’ test has received universal acceptance in common-law jurisdictions as being the appropriate test for determining factual causation.40 If the harm would not have occurred 40 See UK cases: McGhee v National Coal Board [1972] 3 All ER 1008 (HL); Barker v Corus (UK) Plc [2006] UKHL 20; Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10. Canadian cases which re-affirmed the but- for test for factual causation are Resurfice Corp v Hanke (2007) SCC 7, [2007] 1 SCR 333 para 21; Clements (Litigation Guardian Of) v Clements (2010) BCCA 581 para 40-41. The Australian case March v E and MH Stramere Pty Ltd (1991) 171 CLR 506 concluded that the but-for test is not conclusive, rather causation should be determined by common sense. ‘but for’ the happening of a certain event, then that event is the cause. If the harm would have occurred in any event, it is not the cause. The test is set out in International Shipping Co (Pty) Ltd v Bentley41 as follows: ‘The enquiry as to factual causation is generally conducted by applying the so-called “but- for” test, which is designed to determine whether a postulated cause can be identified as the causa sine qua non of the loss in question. In order to apply this test one must make a hypothetical enquiry as to what probably would have happened but for the wrongful conduct of the defendant.’ [103] The question is whether the conduct in fact amounted to a causa sine qua non, rather than whether it ought to have been the cause. This is a factual test. Where there has been positive conduct one eliminates the conduct to establish whether the same result would ensue. In the case of an omission, the inquiry involves ‘the mental elimination of the wrongful conduct and the substitution of a hypothetical course of lawful conduct and the posing of the question as to whether upon such hypothesis plaintiff’s loss would have ensued or not’.42 This requires a retrospective analysis of what would have occurred and is to a large measure dependant on common sense and experience as well as reliable evidence on the probable outcome. [104] The Constitutional Court decision of Lee v Correctional Services led to a debate whether policy considerations play any part in this leg of the enquiry.43 In that matter the Constitutional Court said that what was required was ‘postulating hypothetical non-negligent conduct, not actual proof of that 41 International Shipping Company (Pty) Ltd v Bentley [1990] 1 All SA 498 (A) at 516. 42 Ibid at 516. 43 Lee v Minister of Correctional Services [2012] ZACC 30; 2013 (2) BCLR 129 (CC); 2013 (2) SA 144 (CC); 2013 (1) SACR 213 (CC) para 39. conduct’. The debate whether Lee changed the test for factual causation has been resolved by the Constitutional Court in Mashongwa v PRASA44 which categorically stated that Lee had not replaced the traditional approach to factual causation but rather emphasised the long-standing flexibility of the test where the harm is closely connected to an omission of a defendant who has the duty to prevent harm. [105] The judgment of Goosen AJA accepted Esorfranki’s evidence that it submitted a tender which was valid, and more cost effective than that of the Joint Venture. Esorfranki vigorously disputed that it should have been placed 12th in the tender process and pointed out that its tender was R10 million lower than that of the Joint Venture. In regard to the second award, the bid adjudication report indicated that there was only half a point dividing the Joint Venture and the appellant, and therefore, argued Esorfranki, there is no doubt that it would have had the highest point allocation had Mopani not acted dishonestly, intentionally and wrongfully. Because these went unchallenged and there was no ‘other objective reason’ to suggest that Esorfranki would not have been awarded the tender, the judgment finds that the threshold for factual causation has been met. [106] My respectful view is that this starts from the wrong premise. Instead of finding there was no evidence led to suggest that Esorfranki would not have been awarded the tender, it was incumbent on Esorfranki to show on a balance of probabilities that it would have been awarded the tender. Much was made, in the affidavits of Esorfranki, of how it deserved to have been awarded the 44 Mashongwa v Passenger Rail Agency South Africa [2015] ZACC 36; 2016 (2) BCLR 204 (CC); 2016 (3) SA 528 (CC) para 65. tender on the basis of the point system and because the Joint Venture did not comply with the standards of the Construction Industry Development Board (the CIDB). However, understandably, because the application was for a review and setting aside of the irregular tender, evidence on what would have occurred had the tender not been awarded to the Joint Venture is absent. Merely because Esorfranki had the highest point allocation after the Joint Venture, or that its bid was for a lessor amount, does not axiomatically mean that the tender would have been awarded to it. In fact the tender itself, in the invitation to bid makes this manifestly clear. It provides: ‘Mopani District Municipality does not bind itself to accepting the lowest or any other bid’. [107] There is nothing in the papers before the court to suggest that Esorfranki would have been awarded the tender had it not been awarded to the Joint Venture. As indicated in the judgment of Matojane J, Esorfranki itself was under a cloud and suspected of fraudulent conduct with Cycad, another unsuccessful bidder. Cycad had brought a parallel application to review and set aside the award to the Joint Venture and sought an order that the tender be awarded to it. It later changed its prayer to one that the tender be awarded to Esorfranki. Whether these allegations played a role in the evaluation of the tender we cannot know in the absence of evidence, but they have an impact on causation. [108] Neither reviewing court saw fit to substitute Esorfranki as the successful bidder despite a prayer to this effect. Mindful that there was a discretion to be exercised by the public body, the court required that the matter be remitted for the exercise of that discretion. There was nothing in the judgments to indicate how that discretion should be exercised. [109] One cannot discount the possibility that no tender would have been awarded at all. The invitation to bid pertinently stated that there was no obligation to award the tender. No evidence was led that there was any compunction for the tender to be awarded. This situation differs from that of Gore where evidence was led on this aspect, and rejected. Gore dealt with racialised social pensions. The State Tender Board and the Cape Provincial Administration were both under great political pressure to award the tender and were very eager to do so. As the Court held: ‘Ultimately it is clear that both the CPA and the State Tender Board were desperately keen to award the tender. Enormous pressures were brought to bear upon them to find a solution for the fraud that was rampant with welfare payments, not least because the extent of the fraud had received considerable coverage in the press. Apart from the enormous financial consequences, it therefore also became a political embarrassment. . . ’45 [110] This matter dealt with an entirely different scenario. Relying on the affidavits in the review applications as amounting to the totality of evidence in the trial court was ill-conceived. The considerations in an application to set aside a decision to award a tender are different to those that are required to prove all the elements of delict. For this reason, I agree that the high court was incorrect in finding that the matter was res judicata. However, absent any cogent evidence to show otherwise, I am of the view that Esorfranki has not shown that it would have been awarded the contract absent fraudulent conduct on the part of the municipality. For the reasons stated above Esorfranki has not shown factual causation on a balance of probabilities. 45 Gore above note 12 para 79. [111] Once a plaintiff fails to establish factual causation that should be the end of the matter and it is not necessary to deal with legal causation. In this matter Esorfranki fails on both legs of the enquiry. [112] The purpose of legal causation, which has been described as the remoteness of damage, is to fix the outer limit of liability by determining whether or not a factual link between the conduct and the consequence should be recognised in law. Various tests for legal causation have been used over the years. They include reasonable foreseeability,46 adequate cause,47 direct consequence48 as well as notions of reasonableness, fairness, legal policy and justice. No test for legal causation should be applied dogmatically and all the theories are but factors making up the elastic criteria of legal causation.49 [113] Legal causation has been differentiated from factual causation in the following manner in LAWSA: ‘Although a factual link exists between the conduct and the harmful consequences, courts must strike a proper and equitable balance between the interests of the wrongdoer and of the innocent victim, even if it does on occasion result in anomalies. In essence, therefore, the question of legal causation is not a logical concept concerned with causation but a policy-based reaction, involving a value judgment and applying common sense, aimed at assessing whether the result can fairly be said to be imputable to the defendant. In reaching that conclusion, constitutional imperatives also play a part.’50 46 According to the reasonable foreseeability test a defendant is held liable only for those factual consequences of his or her conduct which were reasonably foreseeable. 47 According to this test if the harm is the likely result of a normal course of events, then the cause is said to be ‘adequate’ for the purposes of liability. 48 According to the theory of direct causation, the defendant is liable for the direct factual consequences of his or her wrongful conduct. 49 Fourway Haulage SA (Pty) Ltd v SA National Roads Agency Ltd [2008] ZASCA 134; 2009 (2) SA 150 (SCA); [2009] 1 All SA 525 (SCA) paras 33-35; Standard Chartered Bank of Canada v Nedperm Bank Ltd 1994 (4) SA 747 (AD); [1994] (2) ALL SA 524 (A); S v Mokgethi 1990 (1) SA 32 (A). 50 15 Lawsa 3 ed para 181. [114] The high court accepted that factual causation had been shown. In this respect it erred. The difficulty it had was with legal causation, firstly because Esorfranki had not been substituted as the successful bidder in either the high court or this Court in the review proceedings. Secondly because it had an opportunity to bid for the re-advertised tender by the National Department of Water Affairs (the Department). The high court held that because this Court in the review appeal found that the works commenced by the Joint Venture were far from completion, the re-advertised tender was merely a sequel to the original tender. As it had failed again to win the tender, this was a ‘classic case’ of novus actus interveniens. [115] A novus actus interveniens is an independent event which, after the wrongdoer’s act has been concluded, either caused or contributed to the relevant consequences. It usually refers to the intervening act of a third party which breaks the chain of causality or, in some instances, the actions of the wronged party itself. A novus actus interveniens is one of the myriad of factors to be considered when determining causation. It can go to legal causation or factual causation. Where it extinguishes the causal connection between the act of wrongdoer and harmful result of the act, it is a determining factor in factual causation. [116] Legal causation is implicated where the novus actus interveniens influences the result to such an extent that the result can no longer be solely imputed to the actor, although its conduct remains the factual cause of the result. This occurs when the impugned conduct is the initial cause of the harm but there is an intervening act which materially reduces the extent of the harm suffered. It goes to limitation of liability and thus whether policy considerations of reasonableness, justice and equity dictate the consequence of the conduct be imputed to the wrongdoer. Foreseeability and direct consequence are not discarded as determinants of legal causation but rather play a subsidiary role in this flexible approach.51 [117] Cycad’s and Esorfranki’s review appeal was partially upheld by this Court. It declared that the contract between the Joint Venture and Mopani was void ab initio and set aside. Instead of substitution, it was ordered that the Department determine the extent of the required remedial works and the total work required to complete the works. Once this was completed the tender was to be re-advertised. The bids would be evaluated, adjudicated upon and an award made. This was carried out by the Department and, in accordance with the order of this Court, Mopani played no role. [118] Esorfranki again put in a bid in the sum of approximately R421 million. It should be noted that Esorfranki’s original tender was for approximately R207 million, some R10 million less than the Joint Venture’s bid, and a substantially lesser amount than the bid submitted for the Department’s tender. Again Esorfranki was unsuccessful. The tender was awarded to Vharanani Properties (Pty) Ltd who put in a substantially higher bid, for almost R594 million. This was more than R170 million higher than Esorfranki’s bid, as compared to the R10 million difference between Esorfranki and the Joint Venture’s initial tender bids. Again Esorfranki sought to urgently interdict the award of the tender, this time to Vharanani. The 51 S v Mokgethi 1990 (1) SA 32 (A) 40-41; Fourway Haulage (Pty) Ltd v National Roads Agency [2008] ZASCA 134; 2009 (2) 150 (SCA); [2009] 1 All SA 525 (SCA) para 34; Premier of Western Cape and Another v Loots NO [2011] ZASCA 32; See also J Neethling and J M Potgieter Law of Delict 7th ed (2014) at 200- 203. matter was struck from the roll due to lack of urgency and, it seems, has not been taken further. [119] The judgment of Goosen AJA accepted Esorfranki’s argument that this tender was for remedial works and the completion of the works and therefore was not the same contractual opportunity. While it may have been ‘a sequel’ to the original tender, the judgment finds that it is a manifestly different tender. It thus does not constitute a novus actus interveniens for purposes of breaking the causal link. I cannot agree. While the re-advertised tender might not directly impact on factual causation, if one applies the flexible criteria of legal causation, it certainly mitigates against a finding of imputability. The view favoured by academics is that theories of legal causation are at the service of imputability and not vice versa. In other words, courts should do the best they can to be fair to both parties and be not strait jacketed by any particular theory of legal causation. A court is not bound by a single theory but should strive for an outcome that serves the reasonableness and justice as embodied by the legal convictions of the community.52 This may be an imperfect solution but is nonetheless the best that can be expected of a court. [120] In light of the above considerations, neither the threshold for factual causation nor legal causation in the context of public procurement has been met. I am also of the view that wrongfulness has not been shown. 52 J C Van der Walt and J R Midgley Principles of Delict 4th ed (2016) at 295; J Neethling and J M Potgieter Law of Delict 7th ed (2014) at 202; Minister of Safety and Security and Another v Rudman and Another 2005 (2) SA 16; [2004] 3 All SA 667 (SCA) para 81. [121] In the result I would make the following order: The appeal is dismissed with costs, including the costs consequent upon the employment of two counsel. ___________________ C NICHOLLS JUDGE OF APPEAL Mbatha JA [122] I have had the benefit of reading the judgment of my colleague Goosen AJA. He found in favour of the appellant in respect of all the issues on appeal. I respectfully hold a different view. I endorse the conclusion of the court a quo in terms of which the appellant was non-suited on the bases that the issue of fraud on the part of the respondent was res judicata; and the failure of the appellant to prove legal causation. The basis upon which my view diverges from the judgment of Goosen AJA are elucidated below. [123] The elements of the defence of res judicata are set out in para 30 of Goosen AJA’s judgment. The most contentious of these elements is whether it can be said that the appellant relied on the same cause of action as before. The concept of 'cause of action', which is well-established in our law, entails ‘an inquiry into whether an issue of fact or law was an essential element of the judgment on which reliance is placed’ (Royal Sechaba Holdings (Pty) Limited v Coote and Another [2014] ZASCA 85; 2014 (5) SA 562 (SCA); [2014] 3 All SA 431 (SCA) paras 12-13). [124] In the context the meaning of cause of action, it is important to bear in mind that the defence of res judicata is based first, on public policy, in that there should be an end to litigation; and second, on the hardship to the litigant, in that they should not be sued twice for the same cause. (See Carl-Zeiss- Stiftung v Rayner and Keeler Ltd and Others [1966] 2 All ER 536 at 549). [125] The genesis of the defence of res judicata in this matter arises from the judicial review of administrative action proceedings that were initially instituted in the high court (before Matojane J) and subsequently appealed to this Court. The findings of both courts are final and binding on all the parties. The appellant’s present claim for delictual damages against the respondent is based on the same affidavits that served before the courts in the review application. The appellant further relies on the findings of the courts insofar as they found that there was dishonest conduct on the part of the respondent, which the respondent disputed. [126] My view is that the matter is res judicata on the basis that certain issues of fact and law, which are presently before this Court in the delictual proceedings, were disposed of in the review proceedings. In the review proceedings the appellant not only sought that the award be set aside, but it also sought an order substituting it as the successful bidder. Both the high court and this Court dismissed this prayer. Nonetheless, in order to conclude that the award of the tender was unlawful, the high court and this Court made factual findings that there had been acts of fraud on the part of the respondent. [127] In the circumstances, the review proceedings relied on the factual assertion that there was fraud on the part of the respondent to establish the relief claimed. In the present proceedings, although the appellant sues in delict, it relies on the factual finding that there was fraud on the part of the respondent. In the circumstances, on the broad interpretation of the meaning of cause of action, it can be said that the cause of action in the present proceedings was the same as that of the review proceedings. [128] As will be demonstrated below, the appellant could have invoked, even in the alternative, the claim to monetary compensation in its prayers for an administrative law remedy in the review proceedings. The question then arises as to why the appellant should be allowed to make submissions necessary for a finding of fraud but refrain from pursuing a claim for monetary compensation in the review proceedings and opt instead to subsequently pursue a claim for delictual damages for loss of profit. This would essentially mean that the respondent would be called to defend the same assertions that arose from the same facts that had been made and conclusively determined in previous court proceedings, which is the precise basis for the existence of the defence of res judicata. [129] In sum, the review proceedings that culminated in the tender process being set aside and the subsequent tender process that followed made findings with respect to the fraudulent acts of the respondent. Thus, it extinguished any claim, if any, against the respondent. I find that the judgment of Matojane J and that of this Court, on appeal to it, are binding and final and all the elements of res judicata are, as a result, satisfied. [130] In spite of my finding that the defence of res judicata was established, I shall nonetheless proceed to consider the merits of the appellant’s claim, specifically whether it established legal causation. This is in the light of the review proceedings that set aside the award and ordered a fresh tender process for the evaluation of bids for the performance of the remaining work under the contract. [131] The court a quo held that the appellant failed to prove legal causation. It reasoned that had the appellant been successful in obtaining an order for substitution, the delictual claim against the respondent would not have arisen. The tender was re-advertised, the appellant responded to it, but lost. It found that this was a classic case of the presence of the novus actus interveniens. This broke the link to establish legal causation. I agree with the conclusion that legal causation was not established. [132] The test for legal causation is trite. The enquiry is whether the wrongful act was sufficiently closely or directly related to the loss for legal liability to arise or whether the loss is too remote. In determining whether legal causation was established considerations of public policy apply. Case law is replete with dicta regarding the extent to which public policy militates against delictual liability being extended to cases that involve administrative law breaches. [133] In Steeenkamp NO v Provincial Tender Board, Eastern Cape 2007 (3) BCLR 300 (CC); 2007 (3) SA 121 paras 28 and 29 the Constitutional Court acknowledged that everyone is entitled to lawful administrative action that must be reasonable and procedurally fair and that every improper performance of an administrative function entitles the aggrieved party to appropriate relief. It further held that ordinarily a breach of administrative justice attracts public law remedies. [134] The appellant sought administrative law remedies including those available in s 8 of the PAJA, where a court could grant a just and equitable remedy that includes monetary compensation where appropriate (see President of the Republic of South Africa and Another v Modderklip Boerdery (Pty) Ltd 2005 (8) BCLR 786 (CC); 2005 (5) SA (CC) para 57). It is common cause that the appellant never sought monetary compensation. Instead, the appellant sought substitution which may be granted by a court only in exceptional circumstances where the outcome is inevitable or a foregone conclusion (see Gauteng Gambling Board v Silverstar Development Ltd and Other 2005 (4) SA 67 SCA; Trencon Construction (Pty) Ltd v Industrial Development Corporation of South Africa and Another [2015] ZACC 22 (CC); 2015 (5) SA 245 (CC) para 47). Of all the available remedies in the review proceedings, exceptional or otherwise, of its own volition the appellant elected to seek a review and setting aside of the award and, flowing therefrom, substitution and not monetary compensation even in the alternative. [135] In its order, this Court set aside the award and ordered a fresh evaluation of the remaining work of the same contract in a new tender process. In spite of the assertion by the appellant that, on the strength of its bid, it should have been the successful bidder in the initial tender it did not appeal this decision of the SCA nor did it thereafter institute proceedings for delictual damages arising out of its loss of profit. The tender was then re-advertised by the Department of Water Affairs in compliance with the order of this Court. The appellant submitted a new bid. The tender was awarded to Vharanani Properties (Pty) Ltd (Vharanani). The appellant did not succeed although its tender was considerably lower than Vharanani and although the process was conducted in a fair and transparent manner, by an independent body. [136] In participating in the new tender process, the appellant thereby exercised an administrative law remedy granted to it by this Court. The appellant can therefore not rely on the old cause of action, which was interrupted by the review proceedings and its submission of a new bid to the new tender process. Accordingly, the court a quo was correct in holding that the tender process by the Department of Water Affairs, specifically the submission of a bid by the appellant, constituted a novus actus interveniens. It interrupted the chain of events that had arisen from the initial unlawful tender process which had been conducted by the respondent. Had the appellant strongly felt entitled to the tender, on any basis, it could have approached the court to review the decision of the Department of Water Affairs. It has not taken this Court into its confidence as to why it abandoned such process and opted to pursue a claim for delictual damages against the respondent. [137] This Court in Olitzki Property Holdings v State Tender Board and Another 2001 (8) BCLR 779 (SCA); 2001 (3) SA 1247 (SCA) para 42 held that the loss of profit claimed by the plaintiff would not be an appropriate constitutional remedy in those circumstances but at the same time this Court was of the view that ‘[i]t is, however, not necessary to decide that a lost profit can never be claimed as constitutional damages’. It nonetheless held that considerations of public policy did not allow for such a claim. [138] Odifin (Pty) Ltd v Reyneke [2017] ZASCA 115; 2018 (1) SA 153 (SCA) paras 16-17 clarified the position pertaining to the delictual liability for pure economic loss arising from a breach of administrative law. There, it was stated that where there was a breach of a statute pursuant to which the administrative action was taken, and if such statute on a proper interpretation confers a delictual remedy, then delictual liability is possible. The court held that in instances where the tender was negligently awarded contrary to the principles of administrative justice, policy considerations precluded the unsuccessful tenderer from recovering delictual damages that were purely economic in nature. [139] In Trustees, Simcha Trust v De Jong and Others [2015] ZASCA 45; 2015 (4) SA 229 (SCA); [2015] 3 All SA 161 (SCA) (para 27) this Court held that compensation is not available where the unlawful administrative decision is remitted back to the administrator. Simcha Trust further stated (para 28) that the determination of whether the case is ‘exceptional’ to make an order requiring payment of compensation, turns not so much on whether the administrative decision was ‘conspicuously bad’, but rather on whether there are unusual circumstances which make it appropriate to order compensation and not the usual remedy of setting aside and remittal. Nothing exceptional has been shown by the appellant. Simcha Trust (paras 18 and 28) also held that there is nothing exceptional when a litigant has an alternative remedy such as the setting aside and remittal or even substitution which will effectively rectify that violation of the right to just administrative action. It went on to state that whether a potential damages claim in delict or contract would constitute an effective alternative remedy, which could prevent a case from being ‘exceptional’ is an open question. [140] I am mindful that there are judgments that recognise that delictual liability should follow where there is dishonest or wrongful conduct by the employees of a municipality.53 However, judgments like Minister of Safety and Security v Van Duivenboden 2002 (6) SA 431 (SCA); [2002] 3 All SA 741 (SCA) recognise that redress can be sought in different ways. There, this Court said the following (para 21): ‘When determining whether the law should recognize the existence of a legal duty in any particular circumstances what is called for is not an intuitive reaction to a collection of arbitrary factors but rather a balancing against one another of identifiable norms. Where the conduct of the state, as represented by the persons who perform functions on its behalf, is in conflict with its constitutional duty to protect rights in the Bill of Rights in my view the norm of accountability must necessarily assume an important role in determining whether a legal duty ought to be recognised in any particular case. The norm of accountability, however, need not always translate constitutional duties into private law duties enforceable by an action for damages, for there will be cases in which other appropriate remedies are available for holding the state to account. Where the conduct in issue relates to questions of state policy, or where it affects a broad and indeterminate segment of society, constitutional accountability might at times be appropriately secured through the political process, or through one of the variety of other remedies that the courts are capable of granting. No doubt it is for considerations of this nature that the Canadian jurisprudence in this field differentiates between matters of policy and matters that fall within what is called the “operational” sphere of government though the distinction is not always clear. There are also cases in which non-judicial remedies, or remedies by way of review and mandamus or interdict, allow for accountability in an appropriate form and that might also provide proper grounds upon which to deny an action for damages. However where the state’s failure occurs in circumstances that offer no effective remedy other than an action for damages the norm of accountability will, in my view, ordinarily demand the recognition of a legal duty unless there are other considerations affecting the public interest that outweigh that norm. For as pointed out by Ackermann J in Fose v Minister of Safety 53 Telematrix (Pty) Ltd t/a Matrix Vehicle Tracking v Advertising Standards Authority of SA [2005] ZASCA 73; [2006] 1 All SA 6 (SCA) paras 13-14; Black v Joffe 2007 (3) SA 171 (C); [2007] 2 All SA 161 (C) at 23- 25. and Security in relation to the Interim Constitution (but it applies equally to the 1996 Constitution): “. . . without effective remedies for breach [of rights entrenched in the Constitution], the values underlying and the right entrenched in the Constitution cannot properly be upheld or enhanced. Particularly in a country where so few have the means to enforce their rights through the courts, it is essential that on those occasions when the legal process does establish that an infringement of an entrenched right has occurred, it be effectively vindicated. The courts have a particular responsibility in this regard and are obliged to “forge new tools” and shape innovative remedies, if needs be, to achieve that goal.”’ [141] I reiterate that in this case the appellant received redress in the form of an administrative law remedy. Even then, the criminal justice system should play its part where dishonest conduct is proved against state organs, functionaries or officials, rather than imposing a financial burden on the public purse and the tax payer for the type of infractions perpetrated by respondent's officials in this case. [142] In the circumstances, the appellant has failed to establish legal causation, because of the presence of the novus actus interveniens and particularly in light of the interests of public policy which militate against the extension of delictual liability in these circumstances. Accordingly, I would dismiss the appeal with costs including the costs of two counsel. __________________ Y T MBATHA JUDGE OF APPEAL Appearances For appellant: K W Luderitz SC (with him C Woodrow) Instructed by: Thomson Wilks Inc., Sandton Webbers., Bloemfontein For respondent: W R Mokhare SC (with him SC Motsepe) Instructed by: Mogaswa Inc., Johannesburg Morobane Inc., Bloemfontein

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL FROM: The Registrar, Supreme Court of Appeal DATE: 24 June 2021 STATUS: Immediate Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal. Esorfranki Pipelines (Pty) Ltd v Mopani District Municipality (Case no 916/2018) [2021] ZASCA 89 (24 June 2021) The Supreme Court of Appeal (the SCA) today dismissed an appeal against an order of the Gauteng Division of the High Court, Pretoria (Makgoka J) (the high court) dismissing a delictual action instituted against the Mopani District Municipality (Mopani). The action arose from circumstances in which Mopani awarded a contract for the construction of a water pipeline between Thohoyandou and Giyani in Limpopo Province. In 2010, Mopani published a call for tenders for the construction of the pipeline. A number of entities submitted bids, including Esorfranki Pipelines (Pty) Ltd (Esorfranki) and a Joint Venture (the Joint Venture) comprising TeLong Re Yeng CC and Base Major Construction (Pty) Ltd. Mopani awarded the contract to the Joint Venture in October 2010. Esorfranki launched urgent proceedings in the Pretoria High Court to set aside the award of the contract to the Joint Venture, alleging that the Joint Venture was disqualified since it did not meet the specified bid requirements. On 27 January 2011 Preller J granted an order, by agreement between the parties, setting aside the award of the contract and ordering that the tenders be re-adjudicated. On 1 March 2011, Mopani again awarded the contract to the Joint Venture. Esorfranki thereupon again commenced review proceedings and, on 21 March 2011, obtained an interim interdict preventing the implementation of the contract works. Despite the existence of the interim order the implementation of the contract proceeded. Mopani sought leave to appeal against the interim order. Since the works were continuing Esorfranki brought an application in terms of rule 49 (11) of the Rules of Court, seeking to enforce compliance with the interim orders it had obtained. The review application was finalised on 29 August 2012 when Matojane J found that the award of the contract to the Joint Venture was tainted by bias in favour of the Joint Venture. Matojane J also found that Mopani had acted with deliberate dishonesty and mala fides in awarding the contract to the Joint Venture. The review court did not, however, set aside the contract. Esorfranki appealed against the failure to set aside the contract. In a judgment, reported as Esorfranki Pipelines (Pty) Ltd v Mopani District Municipality [2014] ZASCA 21; [2014] 2 All SA 493 (SCA), the SCA confirmed the findings of deliberate dishonesty, bias and mala fides on the part of Mopani. It set aside the contract and ordered the Department of water Affairs to assess the work needed to complete the pipeline and to proceed with another public tender for such works. This was done and upon adjudication of the bids received, which included a further bid by Esorfranki, the contract was awarded to a third party. Esorfranki instituted a delictual claim against Mopani claiming damages for loss of profits arising from the wrongful and unlawful failure by Mopani to award the original contract to it. The trial was heard by Makgoka J on 15 May 2017. Makgoka J dismissed the action on 17 January 2018. The high court found that the issues before it were res judicata. It further held that the award of a further tender published by the Department of Water Affairs following the SCA order on review, constituted a novus actus interveniens i.e. a new event that interrupted the causal chain giving rise to the loss allegedly suffered by Esorfranki. Esorfranki had therefore failed to establish legal causation in its claim. On appeal the SCA found, by a majority of three to two, that the high court’s finding regarding the interruption of causation was correct. It therefore dismissed the appeal with costs. __________________

455

non-electoral

2016

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Reportable Case No: 54/2015 In the matter between: THE COMMISSIONER FOR THE SOUTH AFRICAN REVENUE SERVICE APPELLANT and COLTRADE INTERNATIONAL CC RESPONDENT Neutral Citation: CSARS v Coltrade International (54/2015) [2016] ZASCA 53 (1 April 2016) Coram: Navsa ADP, Leach, Tshiqi and Zondi JJA and Kathree-Setiloane AJA Heard: 04 March 2016 Delivered: 01 April 2016 Summary: Customs duty levied under Customs and Excise Act 91 of 1964 – principles to be applied in interpreting the Schedule to the Act ─ correct tariff to be applied in respect of coconut milk, coconut cream and coconut powder. ________________________________________________________________ ORDER ________________________________________________________________ On appeal from: Gauteng Division of the High Court, Pretoria (Prinsloo J sitting as court of first instance): The appeal is dismissed with costs. ________________________________________________________________ JUDGMENT ________________________________________________________________ Leach JA (Navsa ADP, Tshiqi and Zondi JJA and Kathree-Setiloane AJA concurring) [1] Section 47(1) of the Customs and Excise Act 91 of 1964 provides for duties, in accordance with the provisions of Schedule 1 to the Act (the Schedule), to be paid for the benefit of the National Revenue Fund on goods imported into this country. Goods generally dealt with in international trade are systematically grouped into sections, chapters and headings in the Schedule. Different rates of duty are imposed in accordance with tariffs contained therein. The goods in respect of which duties are levied are categorised under different tariff headings or sub-headings (for convenience, when referring to a particular tariff heading or subheading I intend to adopt the abbreviation ‘TH’ as was used by the parties). [2] In the appeal the question is under which tariff subheading do the coconut milk, coconut cream and coconut powder (the products) imported by Coltrade International CC, the respondent, properly fall? In an appeal to it under s 47(9)(e) of the Act against a determination made by the appellant, the Commissioner of the South African Revenue Service (SARS), the Gauteng Division of the High Court, Pretoria upheld the respondent’s contention that TH2008.19 was the applicable tariff heading. The appeal to this court against that decision is with the leave of the court a quo. [3] Historically, SARS has indeed treated the products imported by the respondent as falling within TH2008.19. As far back as March 2005, it issued the respondent with a so-called ‘half-slip determination’ to the effect that TH2008.19 was applicable to canned coconut milk with a 10-11% fat content. On the strength of this, for some seven years the respondent had its imports of coconut milk (of varying fat contents and not solely that of 10-11%), coconut cream and coconut powder, duly cleared by SARS officials under TH2008.19. Then, in 2012, SARS officials in East London decided that canned coconut milk (with a 10-11% fat content) fell within tariff item TH 2106.90.90 rather than TH2008.19. [4] Pursuant to this, the respondent made representations to SARS contending that the appropriate subheading had been determined as TH2008.19 by the 2005 half-slip determination. Before us it accepted, however, that a determination may be varied or amended and that the half-slip determination is not binding upon SARS. In any event, on 8 May 2012, the Commissioner accepted that the East London officials were correct and made a tariff determination that canned coconut milk with a fat content of 10-11% fell within TH 2106.90.90. This was followed by a letter of demand from SARS dated 19 October 2012 in which reference was also made to bills of entry relating to canned coconut milk (14- 15% fat and 19-20% fat), canned coconut cream and coconut powder. The parties accept that this letter should be construed as a further tariff determination in regard to those products. As mentioned earlier, the respondent proceeded to appeal under s 47(9)(e) of the Act to the court a quo, which held that TH2008.19 was in fact the correct item of the Schedule to apply. The correctness of this decision is the subject of this appeal. [5] Two matters should immediately be recorded. First, the parties are agreed that if this court finds that the products do not fall within TH 2008.19, the residual item is TH2106.90.90 and its provisions will then apply. In that event, the appeal must succeed. Second, in SARS’s answering affidavit the Commissioner stated that due to the half-slip determination of 2005 and the history thereafter, it had been decided to treat the products as if a determination in respect of all of them under item TH2008.19 had been issued in 2005 and that the tariff determination would be considered to have been correct for the interim period. Consequently, even if this appeal succeeds, SARS will regard the tariff determination that the products fall within TH2106.90.90 as only being effective from 9 February 2012 in respect of canned coconut milk with 10-11% fat content, and from 19 October 2012 (the date of the letter of demand) in respect of the remaining items. [6] The crisp issue for decision is thus whether all the products fall within item TH2008.19 of the Schedule. In considering this issue it must be remembered, as was set out by Nicholas AJA in International Business Machines1 (a passage since regularly applied by this court in cases such as The Heritage Collection2 and The Baking Tin3), that: ‘Classification as between headings is a three-stage process: first, interpretation ─ the ascertainment of the meaning of the words used in the headings (and relative section and chapter notes) which may be relevant to the classification of the goods concerned; second, 1International Business Machines SA (Pty) Ltd v Commissioner for Customs & Excise [1985] ZASCA 87; 1985 (4) SA 852 (A) at 863G-H. 2The Heritage Collection (Pty) Ltd v Commissioner, South African Revenue Service 2002 (6) SA 15 (SCA) para 13. 3Commissioner, South African Revenue Service v The Baking Tin (Pty) Ltd [2007] ZASCA 100; 2007 (6) SA 545 (SCA) para 5. consideration of the nature and characteristics of those goods; and third, the selection of the heading which is most appropriate to such goods.’ Also to be taken into account are the ‘general rules’ for the Schedule’s interpretation set out in Part A thereof, the first of which provides: ‘Classification of goods in this Schedule shall be governed by the following principles: 1. The titles of Sections, Chapters and sub-Chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes . . . .’ [7] Furthermore, s 47(8)(a) of the Act prescribes that the interpretation of any tariff heading or tariff sub-heading in Part 1 of Schedule 1,4 the general rules for the interpretation of Schedule 1,5 and every section note and chapter note in Part 1 of Schedule 1,6 ‘shall be subject to the International Convention on the Harmonised Commodity Description and Coding System done in Brussels on 14 June 1983 and to the Explanatory Notes to the Harmonised System issued by the Customs Co-operation Council, Brussels (now known as the World Customs Organisation) from time to time . . . .’. These explanatory notes do not, however, constitute ‘peremptory injunctions’7 as they ‘are not worded with the linguistic precision usually characteristic of statutory precepts; on the contrary they consist mainly of discursive comment and illustrations’.8 Accordingly, they are designed for guidance to explain or supplement headings ‘and not to override or contradict them’.9 [8] Finally, it must also be regarded as well-established that the decisive criterion regarding the classification of goods for customs purposes is the objective characteristics and properties of the goods concerned. Bearing that in 4 Section 47(8)(a)(i). 5 Section 47(8)(a)(iii). 6 Section 47(8)(a)(iv). 7 Per Lewis JA in The Baking Tin para 6. 8 Per Trollip JA in Secretary for Customs and Excise v Thomas Barlow & Sons Ltd 1970 (2) SA 660 (A) at 676B-D; a passage since regularly adopted by this court. 9 Cf Ibid. mind, I turn to consider the characteristics and properties of the products at the centre of the debate and their method of production. [9] The evidence establishes that coconut milk is produced in the following manner. The matured coconut is de-husked, and the coconut juice drained off, leaving the white meat of the coconut. Known as ‘endosperm,’ this is then comminuted, a process in which the endosperm is shredded into minute particles. A machinated crushing of the comminuted endosperm, with the inedible fibres being separated and strained out, leaves the endosperm in liquid form but retaining all the nutritive and organoleptic characteristics of the original coconut meat. In other words, it retains the essential characteristics of coconut meat; it has the same aroma, flavour and taste. [10] From that stage a number of different products may be produced by the application of different procedures. First, the water naturally present in the liquid endosperm may be driven off to obtain an edible endosperm solid, known in the trade as ‘coconut cream concentrate’, which has approximately the same amount of fat, protein, carbohydrates and minerals present in the original endosperm. A second possibility is to add water and minute amounts of emulsifiers and stabilisers, so as to obtain a stable liquid endosperm emulsion known as ‘coconut cream’ which must contain a minimum of 20% soluble fat solids and at least 4,5% of insoluble non-fat solids. A third possible procedure is to add more than 10% water, and less than 0,5% of emulsifiers and stabilisers, to obtain a somewhat diluted stable liquid endosperm emulsion known as ‘coconut milk’. Both the milk and cream are homogenised and canned. [11] It is clear from this that the nature of the product obtained either by driving off or adding water to the liquid emulsion obtained after the crushing stage, does not materially affect the nature and characteristics of the original endosperm. As was stated by the quality manager of the Thai Coconut Company Limited, which manufactures the imported products, Ms Lawan Poomphruk, the addition of the stabilisers, emulsifiers and preservatives to the liquid endosperm ‘does not serve to alter the character of a product, but rather to enhance it’. This was not disputed. [12] In the light of this, I turn to the tariff classification of the products. The competing tariff headings that are at the core of the present dispute are both to be found in Part 1, Section IV, of the Schedule. Section IV is headed ‘Prepared Foodstuffs; Beverages, Spirits and Vinegar; Tobacco and Manufactured Tobacco Substitutes’, a heading so wide ranging as to be of little help in resolving the present dispute. [13] Chapter 20 of Section IV, which is headed ‘Preparations of Vegetables, Fruit, Nuts or Other Parts of Plants’, is more useful. Having regard thereto, it should be recorded that the Harmonized System regards a coconut as being a nut although, botanically, it is a fruit. But be that as it may, the method by which coconut cream and coconut milk are produced, as already described, is clearly a ‘preparation’ of nuts which would fall within the ordinary meaning of the words used in the chapter heading. [14] Importantly, TH20.08, which falls within Chapter 20, reads as follows: ‘Fruit, nuts and other edible parts of plants, otherwise prepared or preserved, whether or not containing added sugar or other sweetening matter or spirit, not elsewhere specified or included: A variety of fruits and nuts are then specified in various subheadings under TH20.08. These include ‘Nuts, groundnuts and other seeds, whether or not mixed together’ (TH 2008.1), ‘Ground nuts’ (TH2008.11) in which there are three further subheadings relating to ‘peanut butter’, ‘ground-nuts roasted’ and ‘other’. The following item is TH2008.19 (which the respondent alleges applies to its products). It refers to ‘Other including mixtures’, while pineapples, citrus fruit, pears, apricots, cherries, peaches (including nectarines) and strawberries are thereafter categorised under various other subheadings of TH20.08. [15] The explanatory note to TH20.08 is of considerable importance. First, it provides: ‘This heading covers fruit, nuts and other edible parts of plants, whether whole, in pieces or crushed, including mixtures thereof, prepared or preserved otherwise and by any of the processes specified in other Chapters or in the preceding headings of this Chapter.’ Second, it goes on to state that other substances ‘may be added to the products of this heading provided that they do not alter the essential character of fruit, nuts or other edible parts of plants’. (My emphasis.) [16] The contention of SARS is that, in order for the products to fall within TH20.08 the fruit or nuts used have, first to be ‘whole, in pieces or crushed’ (as set out in both the general explanatory note to Chapter 20 and the explanatory note to item 20.08) and, second, to have the organoleptic characteristics of the base product ie in this case, coconut. In its answering affidavit, SARS stated that the ‘Commissioner is satisfied that the products in issue comply with the second requirement’ but that the coconuts used had been ‘processed to the extent that they are (stabilised and preserved) emulsions’ and could no longer be regarded as being coconuts ‘whole, in pieces or crushed’ as specified in the explanatory notes. [17] Of course, by reason of the processes that I have described, by the time coconuts are reduced to coconut milk or coconut cream they cannot be regarded as still being whole. The issue then becomes whether it can be said that they are ‘in pieces’ or ‘crushed’. As Lord Wright pointed out in Forster v Llanelly Steel,10 there is a distinction to be drawn between ‘breaking’ (into pieces) and ‘crushing’ and that: ‘Both words describe the disintegration of the particular object. The difference is in the degree to which the disintegration is carried. Wherever there are differences of degree, there must be cases where the one word becomes more applicable than the other, just as in the old problem of how many things constitute a heap.’ [18] I am prepared to accept for purposes of this judgment that, after being processed into liquid endosperm, it can no longer be said that the coconuts are still ‘in pieces.’ The issue then becomes whether it can be said that they have been processed beyond having been ‘crushed’. In considering this question, it must be remembered that the Act is of general application, and it and the explanatory rules are accordingly to be interpreted by applying the grammatical and ordinary sense of the words used unless the context or the subject clearly shows otherwise. In applying itself to this task, a court is entitled to have recourse to dictionaries in order to take judicial notice of the meaning of a word.11 [19] As set out above, the liquid endosperm is prepared largely by crushing the coconut meat or endosperm. Counsel for the appellant, however, fell back on arguing that as it was obtained not only by crushing the coconut endosperm but by then straining out the non-edible the fibres, the liquid endosperm could not be regarded as being a ‘crushed’ form of coconut as it was in the form of an emulsion. 10 Forster v Llanelly Steel Co (1907) Ltd [1941] 1 All ER 1 (HL) at 6-7. 11 National Screenprint (Pty) Ltd v Minister of Finance 1978 (3) SA 501 (C) at 507A-H and the cases there cited. [20] I disagree. The Shorter Oxford English Dictionary (6 ed) (2007) gives various meanings of the verb ‘crush’ including: to ‘break down into small pieces; reduce to powder, pulp, etc, by pressure’ and to ‘press or squeeze forcibly (against, into, out of, through, etc); force out or by pressing or squeezing’. As a graphic illustration it gives the following quotation from R Bradbury: ‘Wine was being crushed from under the grape-blooded feet of dancing vintners’ daughters.’ [21] Furthermore, the Collins Dictionary of the English Language (2010) gives one of the meanings of the verb ‘crush’ to be ‘to extract (liquid) by pressing’ and the meaning of the noun to be ‘a drink made by crushed fruit.’12 Just as wine is crushed out of grapes, it seems to me that to press liquid out of the meat of a coconut is consistent with the commonly understood concept of crushing. [22] Consequently, the process by which the liquid endosperm is produced clearly falls within the generally accepted meaning of the white coconut meat being crushed. This is so even if the inedible fibres are removed in the process ─ just as grape skins are removed after grapes are crushed in the process of the manufacture of wine. However, as already pointed out, their removal does not alter the essential character ‘of fruit, nuts or other edible plants’ as specified in the explanatory note to TH20.08. Nor does the addition of water and minute amounts of emulsifiers and stabiliser to the liquid endosperm so as to obtain either coconut cream or coconut milk, depending upon how much water is added (which is also permissible under the explanatory note to TH20.0813), alter the essential characteristics of the coconut. 12 Essentially the same definition is to be found in the Shorter Oxford English Dictionary. 13 As already mentioned in para 15. [23] To summarise then: a coconut is regarded as a nut under the Harmonised System; coconut milk and coconut cream are preparations of a nut consistent with the heading of Chapter 20; equally they have a meaning consistent with ‘nuts . . . prepared or preserved’ as required by TH20.08 itself and by what is envisaged in the explanatory note to that tariff item; they have also not lost their essential character of coconut as further specified in that explanatory note; coconuts – or more correctly coconut preparations of coconut milk and coconut cream – do not fall within any of the specific products particularised under the various sub-headings of TH20.08 and, therefore, conveniently fall under TH2008.19 ie ‘Other, including mixtures’. [24] Faced with this, it was suggested on behalf of SARS in argument, albeit somewhat tentatively, that TH20.08 does not cover liquid preparations or emulsions ─ and as coconut milk and cream are correctly described as being emulsions, they are excluded from its ambit. Such reticence is understandable. The original meaning of the word ‘emulsion’ was ‘a milky liquid obtained by crushing almonds in water’, albeit that definition has now been widened.14 A milky liquid obtained by crushing another type of nut is therefore consistent with the ordinary grammatical meaning of a product envisaged by TH20.08. Furthermore, not only are emulsions not specifically excluded but the explanatory notes to TH20.08 contain examples of what may be typified as liquid preparations: they include fruits which have been crushed containing added water, fruit, including fruit-peel and seeds, preserved in water, syrup or alcohol; and fruit peel put up in syrup. As emulsions are not specifically excluded, and are indeed consistent with TH20.08, SARS’s argument in this regard has no merit. 14 Shorter Oxford English Dictionary. [25] In my view, then, the respondent’s products fall squarely within the compass of TH20.08 and the court a quo was correct in concluding that to be the case. Counsel for the appellant, however, argued that even if coconut milk and coconut cream are items envisaged by TH20.08, the same could not be said for coconut powder, the third of the products which form part of the dispute. [26] Coconut powder consists of the solids which remain after water is removed from liquid coconut endosperm. It, too, retains the essential character of the coconut and there is no reason to distinguish between it, on one hand, and coconut milk and coconut cream, on the other. But of equal importance is the fact that SARS, in its answering affidavit, placed on record that the Commissioner ‘accepts that for classification purposes the milk, cream and powder are essentially the same and can therefore be treated the same’. That being so, the issue was common cause and it does not redound to SARS’s credit to now attempt to allege that coconut powder should not be treated the same as coconut milk and coconut cream for purposes of these proceedings. [27] For these reasons there is no merit in the appeal, which must be dismissed. There is no reason for costs not to follow the event. [28] The appeal is dismissed, with costs. ____________________ L E Leach Judge of Appeal Appearances: For the Appellant J A Meyer SC (with him MPD Chabedi) Instructed by: The State Attorney, Pretoria The State Attorney, Bloemfontein For the Respondent: J P Vorster SC Instructed by: Shepstone & Wylie c/o Clarinda Kügel Attorneys, Pretoria Webbers Attorneys, Bloemfontein

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 1 April 2016 Status: Immediate Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal Neutral Citation: CSARS v Coltrade International (54/2015) [2016] ZASCA 53 (1 April 2016) Section 47 of the Customs and Excise Act 91 of 1964 provides for duties to be paid on goods imported into this country. In terms of the Schedule to that Act, different rates of duty are imposed in respect of various tariff headings. The issue in the above appeal was into which tariff sub-heading the coconut cream, coconut milk and coconut powder imported by the respondent, Coltrade International CC, properly fall? Although these products had been imported since March 2005 under the tariff heading TH2008.19, in 2012 SARS officials in East London sought to impose a different tariff. This led to the appropriate tariff being determined by the Commissioner, South African Revenue Service as TH2106.90.90. Coltrade appealed to the Gauteng Division of the High Court, Pretoria against this determination. That court upheld Coltrade’s contention that the appropriate tariff was indeed TH2008.19. SARS proceeded to appeal to the Supreme Court of Appeal against this latter decision. However, the court today dismissed its appeal, holding that the Pretoria High Court had correctly concluded that the correct tariff was TH2008.19. The appeal was therefore dismissed, with costs. ---ends---

2773

non-electoral

2012

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT SCA CASE NO: 526/2011 Reportable In the matter between: DISTELL LIMITED APPELLANT and THE COMMISSIONER FOR THE SOUTH AFRICAN REVENUE SERVICE RESPONDENT Neutral Citation: Distell Limited v The Commissioner for the South African Revenue Service (526/2011) [2012] ZASCA 88 (31 May 2012) Coram: Navsa, Heher and Van Heerden JJA Heard: 22 May 2012 Delivered: 31 May 2012 Summary: Excise and customs duty – Custom and Excise Act 91 of 1964 - classification of beverages under tariff headings – fermented or distilled (spirituous) beverages - International Convention on the Harmonised Commodity Description and Coding System. ______________________________________________________________ ORDER ______________________________________________________________ On appeal from: North Gauteng High Court, Pretoria (Pretorius J sitting as court of first instance): The appeal is dismissed with costs, including the costs of two counsel. ______________________________________________________________ JUDGMENT ______________________________________________________________ Navsa and Van Heerden JJA (HEHER JA concurring) [1] This appeal involves a dispute about a tariff classification in relation to excisable goods under the Customs and Excise Act 91 of 1964 (the Act)1. The appeal turns on whether the products in question are fermented or distilled (spirituous) beverages. The appellants contended that they are fermented, and accordingly classifiable under a specific tariff heading, namely 22.05, alternatively 22.06, of part 1 of Schedule 1 to the Act. The respondent contended that they are spirituous, and therefore classifiable under tariff heading 22.08. Once that issue is determined the proper tariff item in part 2A of Schedule 1 under which the products should be classified will follow as a matter of course. Each tariff heading has a corresponding tariff item number. For ease of reference we shall refer only to the relevant tariff heading. [2] The appellant company is Distell Limited (Distell), which owns and operates a number of wineries and conducts business as a manufacturer and distributor of liquor products. It markets and sells a number of well-known alcoholic beverages to commercial outlets. The respondent is the Commissioner for the South African Revenue Service (the Commissioner). [3] The facts giving rise to the appeal are set out hereafter. During 2007 ______________________ 1 The products in question are goods manufactured in a customs and excise warehouse which renders them liable for the payment of excise duty: see s 37(1) of the Act. and 2008 the Commissioner determined all of the products forming the subject matter of this appeal as falling within tariff heading 22.08 in Part 1 of Schedule 1 to the Act.2 The tariff headings themselves and an explanation of how they operate and are applied will be dealt with in due course. The products in question are the following: (i) Angels' Share Cream; (ii) Delgado Supremo; (iii) GoldCup Creamy Vanilla; (iv) Barbosa; (v) GoldCup Banana Toffee; (vi) Zorba; (vii) Nachtmusik; (viii) Mokador; (ix) Alaska Peppermint; (x) Copperband; (xi) VinCoco; (xii) Clubman Mint Punch; (xiii) Viking; (xiv) Castle Brand; and (xv) Brandyale. [4] As stated above, the tariff determinations were arrived at on the basis that the products in question are spirituous beverages. The Commissioner‟s perspective, put simply, is that the base wines used in the beverages in question are subjected to processes in terms of which they are stripped of flavour and colour and have cane spirits added to them in order to bolster the alcohol content significantly, as well as sweeteners, flavourants and _____________________ 2 Section 47(9)(a)(i) provides, inter alia, that the Commissioner may in writing determine the tariff headings, tariff subheadings or tariff items of any Schedule under which goods manufactured in the Republic shall be classified. Section 37(1) of the Act provides, inter alia, that excise duties are payable in respect of goods manufactured in a customs and excise warehouse, on entry for home consumption thereof at rates determined in terms of the Act. colourants, and that they no longer qualify as a wine of any kind, but are ultimately spirituous and therefore liable to a tariff classification attracting higher duties. [5] At the time of the determination, Distell assumed the position that the products in issue have a „basis of wine of fresh grapes‟, are fermented, not distilled, and should resort under one or more of the following tariff headings, namely, 22.04, 22.05 or 22.06, all of which pertain to fermented beverages and consequently attract lower excise duties. Distell‟s primary contention was that the products in question fell to be classified under tariff heading 22.04 in that they were „wine of fresh grapes, including fortified wines‟. Alternatively, it contended that the products in issue are wine of fresh grapes (fortified wine), flavoured with plant and aromatic substances and accordingly, fell under tariff heading 22.05. It contended, in the further alternative, that the products are mixtures of fermented beverages and non-alcoholic beverages, as contemplated in tariff heading 22.06, which covers all fermented beverages other than those in tariff headings 22.03 to 22.05. Distell challenged the Commissioner‟s determination that tariff heading 22.08 applies, as this heading does not, so it was contended, include aperitives „with a basis of wine of fresh grapes‟. [6] Subsequent to the Commissioner‟s determination, set out in paragraph 3 above, Distell lodged an appeal in terms of section 47(9)(e) of the Act to the North Gauteng High Court3 on the basis set out in the preceding paragraph. That court (Pretorius J) found the products to be spirituous beverages and held that they thus fell under tariff heading 22.08. The present appeal is before us with the leave of the court below. We shall hereafter use „TH‟ as an abbreviation for tariff heading. ____________________ 3 Section 47(9)(e) provides that an appeal against any such determination shall lie to the division of the High Court of South Africa having jurisdiction to hear appeals in the area wherein the determination was made, or the goods in question were entered for home consumption. [7] The Republic of South Africa is a party to the General Agreement on Tariffs and Trade and is a member of the World Customs Organisation, which employs an internationally Harmonised System, referred to in the Act. Part 1 of Schedule 1 to the Act comprising the Section and Chapter Notes, the General Rules for the Interpretation of the Harmonised System and the tariff headings, is a direct transposition of the nomenclature of the Harmonised System. [8] Section 47(8)(a) provides that: „The interpretation of– (i) any tariff heading or tariff subheading in Part 1 of Schedule 1; (ii) (aa) any tariff item or fuel levy item or item specified in Part 2, 5 or 6 of the said Schedule, and (bb) any item specified in Schedule 2, 3, 4, 5 or 6; (iii) the general rules for the interpretation of Schedule 1; and (iv) every section note and chapter note in Part 1 of Schedule 1, shall be subject to the International Convention on the Harmonized Commodity Description and Coding System done in Brussels on 14 June 1983 and to the Explanatory Notes4 to the Harmonised System issued by the Customs Co- operation Council, Brussels (now known as the World Customs Organisation) from time to time: Provided that where the application of any part of such Notes or any addendum thereto or any explanation thereof is optional the application of such part, addendum or explanation shall be in the discretion of the Commissioner.‟ [9] In the court below, Pretorius J started her reasoning leading to the conclusion referred to above by referring to the purpose of the correct tariff headings, namely, to determine the excise duty payable in terms of the Act. She considered TH 22.04, the relevant parts of which, together with their Explanatory Notes, read as follows: _____________________ 4 Also referred to as the Brussels Notes. ‘Wine of fresh grapes, including fortified wines; grape must other than that of heading 20.09. . . . (I) Wine of fresh grapes The wine classified in this heading is the final product of the alcoholic fermentation of the must of fresh grapes. The heading includes: (1) Ordinary wines (red, white or rosé). (2) Wines fortified with alcohol. (3) Sparkling wines. These wines are charged with carbon dioxide, either by conducting the final fermentation in a closed vessel (sparkling wines proper), or by adding the gas artificially after bottling (aerated wines). (4) Dessert wines (sometimes called liqueur wines). These are rich in alcohol and are generally obtained from must with a high sugar content, only part of which is converted to alcohol by fermentation. In some cases they are fortified by the addition of alcohol, or of concentrated must with added alcohol. Dessert (or liqueur) wines include, inter alia, Canary, Cyprus, Lacryma Christi, Madeira, Malaga, Malmsey, Marsala, Port, Samos and Sherry.‟ [10] In regard to this TH, Distell contended that, since it included wines fortified with alcohol, the beverages in question should continue to be regarded as fermented beverages, rightly resorting under this classification. [11] As indicated, Distell relied in the alternative on TH 22.05, the relevant part of which, accompanied by the Explanatory Notes, reads as follows: ‘Vermouth and other wine of fresh grapes flavoured with plants or aromatic substances . . . This heading includes a variety of beverages (generally used as aperitives or tonics) made with wine of fresh grapes of heading 22.04, and flavoured with infusions of plant substances (leaves, roots, fruits, etc.) or aromatic substances.‟ [12] The third alternative TH relied on by Distell was TH 22.06, the salient provisions and Explanatory Notes of which, are: „Other fermented beverages (for example, cider, perry, mead); mixtures of fermented beverages and mixtures of fermented beverages and non-alcoholic beverages, not elsewhere specified or included. This heading covers all fermented beverages other than those in headings 22.03 to 22.05.‟ [13] In contradistinction, the court below referred to the TH regarded by the Commissioner to be the appropriate one, namely 22.08, the applicable parts and Explanatory Notes of which, provide: ‘22.08 – Undenatured ethyl alcohol of an alcoholic strength by volume of less than 80 % vol; spirits, liqueurs and other spirituous beverages. 2208.20 – Spirits obtained by distilling grape wine or grape marc 2208.30 – Whiskies 2208.40 – Rum and other spirits obtained by distilling fermented sugar-cane products 2208.50 – Gin and Geneva 2208.60 – Vodka 2208.70 – Liqueurs and cordials 2208.90 – Other The heading covers, whatever their alcoholic strength: (A) Spirits produced by distilling wine, cider or other fermented beverages or fermented grain or other vegetable products, without adding flavouring; they retain, wholly or partly, the secondary constituents (esters, aldehydes, acids, higher alcohols, etc.) which give the spirits their peculiar individual flavours and aromas. (B) Liqueurs and cordials, being spirituous beverages to which sugar, honey or other natural sweeteners and extracts or essences have been added (e.g., spirituous beverages produced by distilling, or by mixing, ethyl alcohol or distilled spirits, with one or more of the following : fruits, flowers or other parts of plants, extracts, essences, essential oils or juices, whether or not concentrated). These products also include liqueurs and cordials containing sugar crystals, fruit juice liqueurs, egg liqueurs, herb liqueurs, berry liqueurs, spice liqueurs, tea liqueurs, chocolate liqueurs, milk liqueurs and honey liqueurs. (C) All other spirituous beverages not falling in any preceding heading of this Chapter . . . .„ [14] The court below rightly held that it had to decide the meaning of the words in the various tariff headings, determine the nature and characteristics of the products in question, and thereafter select the most appropriate TH. In this regard Pretorius J referred to the following dictum in International Business Machines SA (Pty) Ltd v Commissioner for Customs and Excise 1985 (4) SA 852 (A) at 863G-H: „Classification as between headings is a three-stage process: first, interpretation – the ascertainment of the meaning of the words used in the headings (and relative section and chapter notes) which may be relevant to the classification of the goods concerned; second, consideration of the nature and characteristics of those goods; and third, the selection of the heading which is most appropriate to such goods.‟ [15] At this stage it is necessary to record, as did the court below, the proper approach to the consideration of tariff headings, Section Notes, Chapter Notes and Explanatory Notes. In Secretary for Customs and Excise v Thomas Barlow and Sons Limited 1970 (2) SA 660 (A) at 675D–676D, the following appears: „„The duty which is payable is set out in Schedule 1 to the Act. This Schedule is a massive part of the statute in which all goods generally handled in international trade are systematically grouped in sections, chapters, and sub-chapters, which are given titles indicating as concisely as possible the broad class of goods each covers. Within each chapter and sub-chapter the specific type of goods within the particular class is __________________ 5 In terms of s 47(9)(e) an appeal against a determination by the Commissioner of a tariff heading is heard as a de novo application. itemised by a description of the goods printed in bold type. That description is defined in the Schedule as a “heading”. Under the heading appear sub-headings of the species of the goods in respect of which the duty payable is expressed. The Schedule itself and each section and chapter are headed by “notes”, that is, rules for interpreting their provisions. „It is clear that the above grouping and even the wording of the notes and the headings in Schedule 1 are very largely taken from the Nomenclature compiled and issued by the Customs Co-operation Council of Brussels. That is why the Legislature in sec. 47(8)(a) has given statutory recognition to the Council‟s Explanatory Notes to that Nomenclature. These Notes are issued from time to time by the Council obviously, as their name indicates, to explain the meaning and effect of the wording of the Nomenclature. By virtue of sec. 47(8)(a) they can be used for the same purpose in respect of the wording in Schedule 1. It is of importance, however, to determine at the outset the correct approach to adopt in interpreting the provisions of the Schedule and in applying the explanations in the Brussels Notes. „Note VIII to Schedule 1 sets out the “Rules for the Interpretation of this Schedule”. Para. 1 says: “The titles of sections, chapters and sub-chapters are provided for ease of reference only; for legal purposes, classification (as between headings) shall be determined according to the terms of the headings and any relative section or chapter notes and, provided such headings or notes do not otherwise indicate, according to paras. (2) to (5) below.” That, I think, renders the relevant headings and section and chapter notes not only the first but the paramount consideration in determining which classification, as between headings, should apply in any particular case. Indeed, right at the beginning of the Brussels Notes, with reference to a similarly worded paragraph in the Nomenclature, that is made abundantly clear. It is there said: “In the second provision, the expression „provided such headings or Notes do not otherwise require‟ (that is the corresponding wording of the Nomenclature) is necessary to make it quite clear that the terms of the headings and any relative section or chapter notes are paramount, i.e., they are the first consideration in determining classification.” It can be gathered from all the aforegoing that the primary task in classifying particular goods is to ascertain the meaning of the relevant headings and section and chapter notes, but, in performing that task, one should also use the Brussels Notes for guidance especially in difficult and doubtful cases. But in using them one must bear in mind that they are merely intended to explain or perhaps supplement those headings and notes and not to override or contradict them. They are manifestly not designed for the latter purpose, for they are not worded with the linguistic precision usually characteristic of statutory precepts; on the contrary they consist mainly of discursive comment and illustrations. And, in any event, it is hardly likely that the Brussels Council intended that its Explanatory Notes should override or contradict its own Nomenclature. Consequently, I think that in using the Brussels Notes one must construe them so as to conform with and not to override or contradict the plain meaning of the headings and notes.‟ [16] The court below went on to have regard to Rule 1 of the General Rules for the Interpretation of the Harmonised System, which states: ‘The titles of Sections, Chapters and sub-Chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and relative Section or Chapter Notes . . . .’ [17] Pretorius J considered the Explanatory Notes to the Chapter Notes in relation to Chapter 22, under which the tariff headings in question reside. Those Explanatory Notes divide the products in Chapter 22 into four main groups, the relevant two of which are: „(B) Fermented alcoholic beverages (beer, wine, cider, etc.). (C) Distilled alcoholic liquids and beverages (liqueurs, spirits, etc.) and ethyl alcohol.‟ It will be recalled that Distell contended that the products in question fall under category B, whereas the Commissioner determined that they fell under category C. [18] The court below dealt with Distell‟s contention that the products should be classified under TH 22.04, set out in paragraph 9 above, which refers to wine of fresh grapes, including fortified wines. Distell‟s reliance on this TH was driven, inter alia, by the increased alcohol content of the products in question about which more will be said later. It will be recalled that the Explanatory Note to TH 22.04 states that the heading includes „wines fortified with alcohol‟ and „dessert wines‟. [19] In this regard, the learned judge had regard to additional note 2 to Chapter 22: „The expressions “unfortified wines” . . . shall be taken to mean wine . . . with an alcoholic strength not exceeding 16 per cent of alcohol by volume and the expressions “fortified wine” . . . shall be taken to mean wine . . . with an alcoholic strength exceeding 16 per cent of alcohol by volume‟, He also referred to Explanatory Note (I)(4) to TH 22.04, the full wording of which is set out in paragraph 9 above. According to that note dessert wines are rich in alcohol and in some cases are fortified by the addition of alcohol. [20] In deciding whether the contentions by Distell were justified, Pretorius J took into account the expert evidence of Dr Loubser (Loubser), a chemist and the Director: Quality Management and Research of Distell. In relation to dessert wines, Loubser testified to the effect that such wines are fermented and only alcohol or concentrated must, with additional alcohol are introduced to increase the overall alcohol content. Using the example of Madeira, which is a dessert wine, Loubser pointed out that no colourants, flavourants or sweeteners are added to create dessert wines. [21] The court below considered the Commissioner‟s submission that the products could no longer be classified as wine or fortified wine due to the fact that the wine had been stripped of the taste and flavour of wine and fortified by the addition of cane spirits to increase the alcohol content. The colourants, flavourants and sweeteners are then added and can thus be distinguished from dessert wines to which, as indicated above, no colourants, flavourants and sweeteners are added. Pretorius J sought assistance from a dictionary definition of wine which essentially describes a wine as an alcoholic liquor product from fermented grape juice. „Vinous‟ is defined as being of the nature of/or resembling wine; made of or prepared with wine‟.6 _______________________ 6 Taken from the New Shorter Oxford English Dictionary 6 ed (2007) [22] Pretorius J then went on to cite a decision of the European Court of Justice, namely Siebrand BV v Staatssecretaris van Financiën [2009] EUECJ C-150/08. The court there was considering a case concerning a fermented alcohol-based beverage corresponding originally to TH 22.06, to which a certain proportion of distilled alcohol, water, sugar syrup, aromas, colouring and, in some cases, a cream base had been added, resulting in the loss of the taste, smell and/or appearance of a beverage produced from a particular fruit or natural product. The court held that this beverage did not fall under heading 22.06, but rather 22.08, as contended for in this case by the Commissioner. Although referring to the Siebrand case, Pretorius J considered this decision not to be binding on South Africa. For that, she relied on the decision of this court in the International Business Machines case, where the following appears (873J–874B): „Whatever may be the status of such a decision so far as customs administration and international organisations are concerned, it is not, until it is reflected in an Explanatory Note, authoritative in a South African Court. Before that, it is no more than an expression of opinion which involves the interpretation of the relative tariff headings and the Notes relating thereto. Under our system, question of interpretation of the documents are matter of law, and belong exclusively to the Court.‟ [23] Distell had submitted before the court below that the Explanatory Notes to 22.07, although not directly applicable, provided guidance in reaching a conclusion on the dispute in issue. The Explanatory Notes to 22.07 provides: „Ethyl alcohol is the alcohol which occurs in beer, wine, cider and other alcoholic beverages. It is obtained either by fermentation of certain kinds of sugar by means of yeast or other ferments and subsequent distillation, or synthetically.‟ In juxtaposition are Explanatory Notes (A) and (B) to TH 22.08, which appear in paragraph 13 above. That deals with spirits produced by distillation and includes liqueurs and cordials. [24] The court below had regard to a dictionary definition of „spirituous‟, being „of or pertaining to spirit or alcohol; containing (much) spirit or alcohol‟.7 Pretorius J went on to consider Distell‟s submission that TH 22.08 only has application to spirits produced by distillation and not by fermentation. According to Distell, the products in question are not liqueurs or cordials as set out in Explanatory Note (B) of TH 22.08, as they are not spirituous beverages. It is further provided that TH 22.08 does not include „(a) Vermouths, and other aperitives with a basis of wine of fresh grapes (heading 22.05)‟. Thus, Distell contended TH 22.08 only applies to spirituous beverages and that, should the court find the products in question to be fermented beverages (as is their submission), TH 22.08 will not be applicable. [25] Returning to the evidence by Loubser, Pretorius J considered his explanation that fermentation and distillation were two distinct processes and that distillation could lead to an alcohol content of 96 per cent per volume, while fermentation cannot be utilised to attain an alcohol content of more than 16 per cent. In both instances the alcohol contained in the products is ethyl alcohol. Furthermore, Loubser testified that a cane spirit is only added to the products in question to increase the alcohol content and the addition thereof does not deprive the wine of its character. Even when wine is fortified with spirits, the essential base character remains wine. Furthermore, by volume all the products in issue contain more wine than spirits and the wine component exceeds the spirit component (excepting Zorba). The absolute alcohol content of spirits in the products, excepting Brandy Ale, is higher than that of wine. Loubser, however, admitted that the wine is stripped of its taste and flavour, but did not explain the reason for so doing. [26] The court below also took into account evidence on behalf of the Commissioner by Mr Michael Fridjhon (Fridjhon), an internationally recognised wine authority and wine judge and one of the country‟s most respected wine tasters and widely published wine writers. Fridjhon testified about the organoleptic8 characteristic of the stripped wine. Fridjhon‟s ___________________ 7 Taken from the New Shorter English Oxford Dictionary 6 ed (2007). 8 Defined in the Concise Oxford English Dictionary 12 ed (2011) as „involving the use of, the sense organs‟. conclusions were: ‟19.8.1 the residual aromas and tastes left in the wine after subjecting it to the stripping process are insignificant and would definitely not be discernible in the final product; 19.8.2 the perceptible difference between the stripped fortified wine and cane spirit diluted with water to approximately the same alcoholic strength is minimal . . . ‟ [27] The court noted, on the basis of the evidence of Mr van Niekerk, the General Manager of Distell, that the wines used in the production of the products in question, were selected because they were low in flavour intensity, colour intensity, acid, phenolics and sulphur dioxide, and high in alcohol. [28] The court below considered the Commissioner‟s contention that the products in question should be classified under TH 22.08, the particulars of which appear in paragraph 13 above and more specifically that they resorted under subheading 2208.90, namely „other‟. In this regard the court below had regard to the evidence on behalf of the Commissioner by Mr G Taylor (Taylor), who is a biochemist from the United Kingdom. According to him, the presence of spirits in the products in question was essential to obtain the required alcohol level and preserve it, as well as to add to the stability of added flavourants. Taylor, with reference to the evidence of Fridjhon, was of the view that it was not necessary to use the stripped wine as the same products could be produced by using neutral spirits as the alcohol base. The opposite was not true as the required alcohol strength could thus not be obtained. The unique characteristics of wine were not required in the end product. [29] Pretorius J stated that it was clear from the processes employed by Distell, which were demonstrated to and observed by Fridjhon, that the beverages in question were not only a mixture of a fermented beverage and cane spirits, but that they were individually designed, each with a unique taste and characteristic. She held that the beverages in question consisted of several components, but that in each instance it was spirits that gave these products their essential character. [30] The court below found that the Commissioner‟s argument, that the alcohol component that gave the products in question their essential character was the spirits and not the wine, was well founded. Whilst concluding that all the products in issue were fermented alcohol-based beverages, Pretorius J nevertheless held that they can „by no stretch of the imagination‟ be wines. The following appears in the judgement: “The addition of cane spirit, water, sweeteners, flavourants, colourants and cream in some instances, have caused new products to be created, which have lost all the aroma and taste of wine. Tariff Heading 22.04 can thus not be applicable.‟ [31] Turning to the alternative classification, namely TH 22.05, the court below could not agree that it was an appropriate TH for the beverages in question. This conclusion was based on what she regarded as being common cause, namely that the products were not ‘Vermouth and other wine of fresh grapes flavoured with plants or aromatic substances’. In this regard the court had regard to the Explanatory Note under this TH, which made it quite clear that the heading dealt with „a variety of beverages (generally used as aperitives or tonics) made with wine of fresh grapes of heading 22.04 and flavoured with infusions of plant substances (leaves, roots, fruits, etc.) or aromatic substances‟. The addition of spirits, colourants, flavourants, sweetener and cream is not mentioned and thus, according to Pretorius J, this TH could never be the appropriate one. [32] Referring to Distell Ltd v The Commissioner, SARS [2011] 1 All SA 225 (SCA), Pretorius J held that the beverages are produced in a multiple stage process – two beverages are not mixed to get the relevant product. The colourant, flavourant and sweetener mixture cannot be described as „lemonade like‟ or „cooldrink like‟ (as Distell contended), does not constitute a non-alcoholic beverage and thus could not fall under one of the „mixtures‟ referred to in TH 22.06 which is set out in paragraph 12 above. [33] Finally, the learned judge concluded that the wine in the products in issue does not contribute to the organoleptic characteristics of the final products as it is neutral and cannot give it its essential character. Accordingly, the court found that all of the products in issue are spirituous and resort under TH 22.08 and, more particularly, under TH 2208.90.20. [34] Thus it is the correctness of the reasoning and the conclusions set out above that are at issue in this appeal. [35] Before us, reliance on TH 22.04 was abandoned by Distell. Its case in the present appeal is that two of the beverages in question, namely Zorba and Brandyale, fell under TH 22.05 and the remaining 13 under TH 22.06. The reason for this distinction, so they contended, was because, in the case of the former two products, water was not added, and they could thus not be considered to be mixtures as contemplated in TH 22.06. [36] It is now necessary to follow the approach set out in the International Business Machines case, described in paragraph 14 above. First, we have to interpret the tariff headings concerned. Starting with TH 22.05, it is clear that this TH refers to wine which is the fermented product derived from fresh grapes. The Explanatory Note states that the beverages under this heading include a wide variety of beverages (generally used as aperitives or tonics) made with wine of fresh grapes of TH 22.04 and flavoured with infusions of plant substances or other aromatic substances. It is clear that what is dealt with in this paragraph is a product derived through the fermentation process to which fresh grapes are subjected, with plants or aromatic substances being added to the fermented liquid. [37] It was Distell‟s case that the addition of spirits does no more than „fortify‟ the stripped wine used in the making of the beverages. TH 22.04, so it was contended, provides for the fortification of wines of fresh grapes by way of the addition of alcohol in whatever form. According to Distell this fortification process does not in any way change the essential vinous character of the base of stripped wine. Following that logic, Distell submitted that the two products in question, therefore, resided more logically and appropriately under TH 22.05. [38] On behalf of the Commissioner it was contended that the base of stripped wine was no longer wine and that this liquid could, even if alcohol be added to it, not qualify as fortified „wine‟, as none of the base liquid‟s essential vinous qualities were retained. Moreover, they submitted that the ingredients added at the end of the process can hardly be described as being „flavoured with aromatic substances‟. [39] We now turn to consider TH 22.06. This TH covers all fermented beverages other than those provided for in TH 22.03, TH 22.04 and TH 22.05. TH 22.06 refers to ‘[o]ther fermented beverages (for example, cider, perry, mead); mixtures of fermented beverages and mixtures of fermented beverages and non-alcoholic beverages, not elsewhere specified or excluded’. It was common cause that the beverages in question do not fall within the genus under which cider, perry and mead reside. We were required to consider whether the beverages were mixtures of the kind contemplated in this TH. The mixtures that are contemplated are clearly of a combination of fermented beverages or of fermented beverages with non-alcoholic beverages added, which do not properly reside under any other TH. [40] In respect of the remaining 13 products, Distell contended in relation to TH 22.06 that these products were mixtures of fermented beverages and non- alcoholic beverages. The non-alcoholic beverage on which Distell relied, is the mixture of water and flavourants, sweeteners and colourants. Distell argued that TH 22.06 does not require that a mixture of a fermented beverage (eg fortified wine) and a non-alcoholic beverage should retain the character of a particular type of fermented beverage, for instance wine. Furthermore, they argued, that whatever the processes the wine was subjected to, in order to reduce it to an almost wholly neutral alcoholic liquid, it still retains its essential character, namely, of wine. Lastly, Distell contended that, in any event, the mixture resulting in the products is not spirituous in character, in that the volume of the stripped wine is greater than that of the cane spirits, except for one of the products, and they submitted that the mixture in itself does not have the essential characteristics of spirits. [41] In making the argument referred to in the preceding paragraph, Distell submitted that one could not argue, as the Commissioner does, that what we were dealing with in relation to the products in question was a mixture or combination of a once fermented beverage with a distilled beverage. In order to counteract the Commissioner‟s contention in this regard, Distell was driven to submitting that the addition of the cane spirits was merely a fortification of the existing stripped wine. In this sense, so it was submitted, one was dealing with a fortified wine which on its own was undoubtedly a fermented beverage to which the non-alcoholic components, which flavoured, coloured and sweetened the beverage, together with the water were added. [42] It is now necessary to have regard to the evidence about the nature of the beverages in question. The parts of Fridjhon‟s evidence, referred to in paragraph 26 above, were dealt with by Loubser, as stated hereafter. Loubser‟s response was not to contest that the flavour and aroma of the stripped wine is negligible. Loubser adopted the position that a fermented product such as wine can only change its „essential character‟ when distilled and not when subjected to the processes in question. However, in Loubser‟s founding affidavit the following is stated: „Wine is selected for its sensory and analytical characteristics.‟ This is in line with Fridjhon‟s primary assertions. In Fridjhon‟s answering affidavit he refers to the Oxford Companion of Wine, in which flavour is said to be „arguably a wine‟s most important distinguishing mark‟. Fridjhon went on to state that vinosity is the defining element of wine. [43] The evidence of Taylor, referred to in paragraph 28 above, is important. Loubser‟s evidence concerning a fortified wine such as Madeira, in support of Distell‟s case, is unhelpful. It is true that Madeira, a fermented product, has brandy, which is a distilled product, added to it to increase its alcohol content. Fridjhon‟s responding affidavit makes it clear that like all recognised fortified wines, the addition of spirits does not cause Madeira to lose its essential vinosity. On the contrary, its vinosity is bolstered by the addition of spirits. [44] It was common cause that the stripped wine‟s maximum alcohol content was between 12.5 per cent and 16 per cent, the latter of which is recognised as a general maximum for an unfortified wine. The addition of the cane spirits increased the alcohol content to between 18 per cent and 23 per cent. [45] Another important part of the evidence on behalf of Distell is that the production sequence in relation to the beverages ultimately produced was unimportant. More particularly the stripped wine could have been added at the end of the production process. [46] It is clear from the evidence that the wine was subjected to the stripping process to neutralise its taste and aroma. Final fermented products, even in the case of fortified wines, do not lose their essential vinous characteristics. Much as distillation changes the essential characteristic of a fermented product, so too do the processes which result in the stripped wine. The following question posed by Taylor illustrates the point: „If, as is argued, these are wine based products and the wine is an integral component, why then is the base wine neutralised? If the wine character is that important, then surely it should be retained and the fortification be utilised to enhance that character and help carry it into the final product? The fact that the wine character is removed prior to fortification strongly suggests not only that the wine character is not required, but that it is actually undesirable.‟ [47] In our view, Distell‟s reliance on the overall volume of the stripped wine in relation to the cane spirits is misplaced. Clearly, one could have a greater volume of water overwhelmed by a lesser volume of an intense different liquid. It is a question of which essential ingredient is dominant. In this regard General Rules of Interpretation 3(b) provides that in the case of mixtures, the goods are to be classified as if they consisted of the material or component which gives them their essential character, in so far as this criterion is applicable. [48] It is now necessary to revisit TH 22.05, set out in paragraph 11 above. As stated earlier, the essential characteristic of a beverage resorting under this TH is that of a „wine of fresh grapes‟. For the reasons set out in the preceding paragraph it cannot be, in our view, said that the stripped wine forming the basis of the two beverages in question qualifies as wine under this TH, for the reasons provided by Fridjhon and Taylor and due to the common cause facts mentioned above. As Fridjhon, supported by Taylor and Dr Croser, the wine maker who also testified on behalf of the Commissioner, pointed out: „What such processes would have removed would have been precisely what fermentation contributed in the first place: the essential vinosity of the product. The restoration of the alcohol to the fluid left after the flavour and alcohol had been removed would not thereby produce wine . . . ‟ [49] Distell‟s contention that, even though the stripped wine has lost much of its flavour and aroma, it is nevertheless a fermented product and a wine is, in our view, for the reasons stated above, fallacious. Consequently, the two products in question do not fit under TH 22.05. [50] Turning to the remaining 13 beverages, we now reconsider TH 22.06. In our view, Distell‟s reliance on this TH is also unjustified. An essential requirement of this TH, for the purposes of Distell‟s argument, was that the fermented beverage used in the production of the products was fortified wine („wine‟ in the sense of TH 22.04). As we have already demonstrated, the „stripped wine‟ cannot be regarded as wine for the purposes of TH 22.04, and therefore cannot be made „fortified wine‟ in the sense used in TH 22.06. Furthermore, a fortified wine does not itself lose any of its vinous qualities and it appears that, if anything, the vinosity is thereby enhanced. That is not the case with the beverages in question. The fact that the sequence of production is irrelevant demonstrates further that the submission by Distell is unsustainable. [51] Following on the conclusions reached in the preceding paragraphs it follows that the next enquiry is whether the beverages in question rightly resort under TH 22.08, which is set out on paragraph 13 above. It is clear, when one has regard to the TH, that the beverages do not resort under tariff sub-heading 2208.20, in that they are not spirits obtained from distilling grape wine or grape marc. It is common cause that they do not fall under any of the other tariff sub-headings between 2208.30 and 2208.70. It is equally clear that they cannot be classified under tariff notes (A) or (B). As set out above, the cane spirits was added to the stripped wine to boost alcohol content significantly. According to Taylor, he had tested all 15 beverages organoleptically and concluded that they all have a distinct spirituous character. Considering our line of reasoning set out above, in relation to the beverages in question, and in particular paragraph 47, the compelling conclusion is that the ultimate distinctive nature of the beverages is spirituous, that they rightly resort under TH 22.08, and are covered by tariff note (C). [52] Distell‟s reliance on the decision of this court in Distell Ltd and Another v Commissioner for SARS [2011] All SA 225 (SCA) is misplaced. In that case it was common cause that TH 22.06 applied. The dispute was whether the beverages fell under the first or second part of the item. It was submitted on behalf of Distell that there was no difference to the facts of this case in that the „wine coolers‟ in issue in that case constituted wine, to which flavourants and water had been added. It was submitted that the vinous nature of the „wine coolers‟ were not challenged in that case and that in the present case, neither should the vinous character of the beverages in question. It was submitted on behalf of the Commissioner that, contrary to this case, there had been no attempt in the first Distell case to mask the flavour of the wine by a stripping process. We agree that the facts of that case are poles apart from those in the present appeal. [53] We were referred by the Commissioner to another decision by the European Court of Justice (ECJ), namely Paderborner Brauerei Haus Cramer KG v Hauptzollamt Bielefeld [2011] EUECJ C-196/10. In that case, the ECJ was called upon by the Finanzgericht Düsseldorf to make a preliminary ruling on whether „a liquid described as a “malt beer base”, such as that in issue in the main proceedings, with an alcoholic strength by volume of 14% and obtained from brewed beer which has been clarified and then subjected to ultra-filtration, by which the concentration of ingredients such as bitter substances and proteins has been reduced, must be classified under tariff heading 2208 of the CN‟. [54] The ECJ found that the „malt beer base‟ was not a beverage for the following reasons. Although suitable for human consumption in the sense that it was drinkable, it was not an end product primarily intended for consumption, but rather an intermediate product for use in the production of another product; the malt beer base was not sold to consumers as an end product; it was not obtained purely and simply by fermentation, but was after fermentation subjected to ultra-filtration which caused it to lose its „objective properties and characteristics particular to beer‟. The Explanatory Note to TH 22.08 expressly states that the heading also covers ethyl alcohol, whether intended for human consumption or for industrial purposes and, although this Explanatory Note excludes from that heading alcoholic beverages obtained from fermentation, the malt beer base, not being a beverage, was not affected by the exclusion. Finally, the fact that the malt beer base was not completely devoid of any aroma did not exclude it from being classified under TH 22.08. The malt beer base, after being treated, was ethyl alcohol and as a consequence must be classified under TH 22.08. [55] Counsel for the Commissioner submitted that, like the malt beer base, the stripped wine is not produced purely and simply by fermentation; is devoid of the vinous character of wine of fresh grapes; is not sold to customers as an end product; is an „intermediate product‟ specifically „prepared‟ to be used, and used, in the production of the products in issue, and that it satisfies the requirements of the Explanatory Note proviso to TH 22.08. Thus, following the analysis and interpretation of the ECJ in this case, the stripped wine is not „wine‟ as contemplated by TH 22.04 and would be classifiable under TH 22.08. [56] We were warned on behalf of Distell to be cautious about the dangers of relying on decisions by the ECJ. According to counsel, the ECJ had simply made a „preliminary ruling‟ concerning the interpretation of the combined nomenclature of the common customs tariff. The main proceedings were before the Düsseldorff Court. This „preliminary opinion‟ is a non-binding opinion, the admissibility and status of which should not be over-emphasised. Moreover, counsel contended the Parderborner case does not support the Commissioner‟s contentions. The treatment of wine does not change the essential character of wine, and the Commissioner did not lay any factual foundation why the process used in the Parderborner case (ie to treat the malt beer base by ultra-filtration) is comparable to the processes used by Distell in respect of the wine it used in the manufacturing of the beverages in issue. [57] None of these submissions is convincing. Clearly the decisions of the ECJ are not binding on South African courts. They may have persuasive force, but it is up to the South African court to decide the relevance of the foreign decision in question. It was also not necessary for the Commissioner to demonstrate that the processes followed in the Parderborner case were identical to those followed by Distell in relation to the beverages in question. [58] Whilst the conclusions in Parderborner and Siebrand accord with our own, we have arrived at our decision by applying the Harmonised System as catered for by the Act and following the line of logic and reasoning set out in the preceding paragraphs. [59] In the result, the appeal is dismissed with costs, including the costs of two counsel. _______________________ MS NAVSA JUDGE OF APPEAL _______________________ BJ VAN HEERDEN JUDGE OF APPEAL APPEARANCES: FOR APPELLANT: A.P. Joubert SC (with him C Louw) Instructed by Shepstone & Wylie Attorneys Pretoria Webbers Attorneys Bloemfontein FOR RESPONDENT: C.E. Puckrin SC (with him J.A. Meyer SC and I A Enslin) Instructed by The State Attorney Pretoria The State Attorney Bloemfontein

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL FROM The Registrar, Supreme Court of Appeal DATE 31 May 2012 STATUS Immediate Please note that the media summary is for the benefit of the media and does not form part of the judgment. Distell Limited v The Commissioner for the South African Revenue Service (526/2011) [2012] ZASCA 88 ( 31 May 2012) The Supreme Court of Appeal (SCA) today dismissed an appeal against an order of the North Gauteng High Court, Pretoria involving a dispute regarding a tariff classification in relation to excisable goods under the Customs and Excise Act 91 of 1964. The appeal turns on whether the 15 beverages in question1 are fermented or distilled (spirituous) beverages. The appellants contended that they are fermented and therefore classified under tariff heading (TH) 22.05, alternatively 22.06. The respondent contended that they are spirituous, and therefore classifiable under TH 22.08. The products in question consist of base wines which are stripped of flavour and colour and have cane spirits added to them in order to bolster the alcohol content significantly. Sweeteners, flavourants, colourants and water are also added. The SCA held that the stripped wine, forming the basis of the beverages in question, does not qualify as ‘wine of fresh grapes’ under TH 22.05. This could thus not be the applicable TH as the essential characteristic of a beverage resorting under this TH is that of a ‘wine of fresh grapes of heading 22.04’. The beverages could also not be ‘wines fortified with alcohol’. As the Court had already found that the stripped wine cannot be regarded as wine for 1 Angels’ Share Cream, Delgado Supremo, GoldCup Creamy Vanilla, Barbosa, GoldCup Banana Toffee, Zorba, Nachtmusik, Mokador, Alaska Peppermint, Copperbamd, VonCoco, Clubman Mint Punch, Viking, Castle Brand and Brandyale. the purposes of TH 22.04, it therefore cannot be made fortified wine in the sense used in TH 22.05. As regards TH 22.06, the court held that the beverages could not be regarded as a mixture of fermented beverages and non-alcoholic beverages as all the attributes of the fermentation process had been removed from the stripped wine. They therefore did not resort under TH 22.06. Thus, the SCA held that these beverages fall under TH 22.08 and more particularly, ‘[a]ll other spirituous beverages not falling in any preceding heading of this Chapter’. As a result the appeal was dismissed with costs, including the costs of two counsel.

1505

non-electoral

2008

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA JUDGMENT Case No: 466/07 In the matter between MUTUAL CONSTRUCTION COMPANY (TVL) (PTY) LTD APPELLANT and KOMATI DAM JOINT VENTURE RESPONDENT Neutral citation: Mutual Construction v Komati Dam (466/2007) [2008] ZASCA 107 (23 September 2008). Coram: SCOTT, CAMERON, LEWIS JJA, LEACH AJA and MHLANTLA AJA Heard: 4 September 2008 Delivered: 23 September 2008 Summary: Contract for the hire of a truck and its operator for use on a building site – operator remaining the employee of the truck’s owner but operating on site under the supervision and control of the hirer – operator’s negligence on site causing damage to truck– hirer liable to owner for damages. _________________________________________________________________ ORDER _________________________________________________________________ On appeal from: High Court, Johannesburg (Van Oosten J sitting as court of first instance). (1) The appeal succeeds with costs. (2) The order of the court a quo is set aside and is replaced with the following: ‘(a) The defendant is directed to make payment to the plaintiff of an amount equal to the damages which the parties may agree or which the plaintiff may prove. (b) The defendant is to pay the costs of the proceedings determining liability.’ _______________________________________________________ JUDGMENT ________________________________________________________________ LEACH AJA (SCOTT, CAMERON, LEWIS JJA and MHLANTLA AJA concurring): [1] During June 2000 the parties entered into an agreement in terms of which the appellant let to the respondent a CAT 769 articulated dump truck (‘the truck’), together with the services of an operator. The respondent, a partnership between a number of major civil engineering companies, was engaged in the construction of the Maguga Dam in Swaziland and used the truck and its operator in the course of its operations at that site. In the early hours of 5 October 2000, the operator fell asleep while driving the truck along a haul road at the site, allowing the truck to leave the road and collide with an embankment. For convenience, I shall refer to this as ‘the accident’. [2] The truck was extensively damaged in the accident and, in due course, the appellant instituted an action for damages in the Johannesburg High Court, claiming payment by the respondent of both the cost of repairing the truck as well as an amount in respect of loss of income because it was out of operation for several weeks until it was repaired. The respondent denied liability and the matter proceeded to trial. [3] Although the precise terms of the agreement under which the truck had been let to the respondent were an issue on the pleadings, this aspect of the case was initially dealt with as a separate issue under rule 33(4), with Goldblatt J concluding that a written agreement, a copy of which had been attached to the particulars of claim as annexure ‘A’, contained the terms of the contract between the parties. His finding was accepted by both sides and the terms of the contract can be regarded as finally determined. [4] The dispute as to the terms of the agreement having been resolved, the matter was set down for trial before Van Oosten J for adjudication of the remaining issues. By the date of the hearing the parties had reached agreement on the cost of repairing the damage to the truck. Although it was agreed that very little evidence would be required to determine the quantum of the claim for loss of income, the learned judge ordered the question of liability to be determined as a separate issue at the outset with the outstanding issues relevant to damages to stand over yet again. After hearing evidence, he concluded that the operator of the truck had negligently fallen asleep as he had failed to rest, despite the respondent offering him the opportunity to do so, a failure which he considered fell beyond the respondent’s power of control, and that in these circumstances policy and fairness dictated that the respondent not be held liable for the operator’s negligence. [5] The high court therefore dismissed the appellant’s claim. An application for leave to appeal was similarly unsuccessful but, with leave obtained from this court, the appellant now appeals against the dismissal of its claim. [6] It is a trite principle of our law that the hirer of an article is obliged to return it in the same condition in which it had been at the outset of the period of hire, fair wear and tear excluded. Accordingly, in the absence of agreement to the contrary, all the owner of a hired article has to allege and prove is that it was in a damaged state when returned and it will then be up to the hirer to show that this is due to no negligence on the part of himself or others under his control for whose acts he would be liable.1 In the present case, the parties are agreed that the damage was due to the operator's negligence in driving when he was so tired that he fell asleep. The hirer’s liability is thus entirely dependent on the parties’ contract. [7] The material provisions of the contract are: ‘10. Owner 's operator. If the plant is supplied with the owner's operator, then while on site the operator shall be under the sole and absolute control of the hirer who/which warrants and undertakes that he/it will give to the operator clear and specific instructions and directions regarding the nature and the manner of all work to be performed by the operator and the plant on site, the hirer shall be obliged and warrants that he/it will during the hours that the hirer requires the plant to operate provide responsible supervision for the operator while the plant is on the site during the period of hire. Notwithstanding anything to the contrary hereinbefore contained, the owner shall remain the general employer of the operator and no obligation shall be placed upon the hirer to observe the provisions of any statutory laws regulating the relationship between the owner and the operator …. 12. Indemnity. 1 See eg Eensaam Syndicate v Moore 1920 AD 457 at 458 and Manley van Niekerk v Assegaai Safari and Film Productions (Pty) Ltd 1977 (2) SA 416 (A) at 422G-423B. Anything to the contrary herein contained notwithstanding while the plant is on site, the owner shall not be responsible or liable to the hirer or any other person for any damages of any nature whatsoever (consequential or otherwise) arising out of the plant being faulty or in a defective state of repair or for any acts or omissions on the part of the owner's operator while such operator is carrying out the instructions of the hirer or any acts or omissions on the part of the hirer's operator or for any loss or damage (consequential or otherwise) whatsoever occasioned to the hirer or any other person, property or thing and the hirer indemnifies and holds harmless the owner against all claims of any nature whatsoever for any loss or damage aforesaid including all costs relating to such claims. 21. Care of plant. Subject to clause 10 & 12 above the hirer shall be responsible for all expenses arising from the breakdown, loss or damage to the plant occurring through the hirer's negligence, misdirection or misuse, or for any theft of the plant or parts thereof, and shall include the travelling time and costs of the owner and his/its nominee and time lost and expenses incurred through the plant being immobilised or bogged in wet ground, rockfall, subsistence, inundation or the like. The hirer undertakes at all times to exercise adequate security and care in respect of the plant. 22. Self propelled plant. Where the plant is self propelled and is required to travel under its own power then save as is provided below, the hire period shall be deemed to commence from the time it commences to move on despatch from the owner's depot or site nominated by the owner, whichever is the nearer to the site where it is required by the hirer. In such event, the risk shall be with the hirer for the entire period. When the plant, being self propelled, is required to travel under its own power with an operator supplied by the owner, the risk of loss of or damage to the plant shall pass to the hirer when the plant is delivered or presented for delivery to the hirer's site specified overleaf and shall revert to the owner when the plant commences to move on its return to the owner's depot or site nominated by the owner.’ [8] It will be observed that under clause 21 the respondent (as hirer) became responsible for all expenses arising from the truck breaking down or being damaged through ‘the hirer's negligence, misdirection or misuse’ until such time as it was restored to the appellant. The issue that arose for determination in this appeal was therefore whether the negligence of the operator who, under clause 10, was to work on site under the respondent's ‘sole and absolute control’, was to be construed as negligence for which the respondent bound itself to be liable under clause 21. This question is to be answered with reference to the contract and not to the principles of vicarious liability in delict, which appears to have been the approach of the high court. [9] In dealing with this issue, there are certain basic principles which arise. Firstly, any ‘negligence, misdirection or misuse’ envisaged by the agreement had to be conduct on the part of a natural person as a partnership between several juristic persons can only act through natural persons doing so on its behalf. Secondly, a term in a contract is to be read not in isolation but in its context. [10] Accordingly, in construing clause 21 it is important to bear in mind that although clause 10 provides for the operator to remain in the employ of the appellant, he was at all times to be under the respondent’s ‘sole and absolute control’ while on site and that the respondent undertook to ‘provide responsible supervision’ and to give ‘clear and specific instructions and directions regarding the nature and the manner of all work to be performed by the operator and the (truck) on site’. [11] Importantly, clause 12 also provides for the appellant not to be ‘. . . responsible or liable to the (respondent) or any other person for damages of any nature whatsoever . . . arising out of . . . acts or omissions on the part of the . . . operator while such operator is carrying out the instructions of the (respondent) or . . . for any loss or damage . . . occasioned to the (respondent) or any other person, property or thing . . . .’ The indemnity given in this clause, which excuses the appellant from liability for damage caused by negligence on the part of the operator while working under the respondent’s instructions on site, amounts to an acceptance by the respondent of liability in those circumstances. [12] It is clear from this that despite the operator remaining within the employ of the appellant, he at all times acted for and on behalf of the respondent and under its control while working on site. The respondent, in turn, accepted both the risk of damage to the truck as well as liability for the operator’s negligence while under its supervision on site. To all intents and purposes, the operator while on site was therefore envisaged in the agreement as being a functionary of the respondent, akin to an employee. [13] In my view, these considerations all point towards negligence on the part of the operator while on site and under the respondent’s supervision and control, being construed as ‘the hirer's negligence‘ as envisaged by clause 21. [14] This court reached a similar conclusion in RH Johnson Crane Hire (Pty) Ltd v SA Iron & Steel Industrial Corporation Ltd.2 In that matter, the defendant had hired a crane and its operator from the plaintiff under a written agreement which contained clauses identical to clauses 10, 12 and 21 of the present contract. The crane collapsed and was damaged when the operator, acting at the time under the supervision of the defendant’s rigger, attempted to lift a heavy load that was beyond its capabilities. The plaintiff sued the defendant for the cost of repairing the crane and for loss of income while the repairs were carried out. Two judgments were delivered, each holding the defendant liable to the plaintiff. In the minority judgment3 it was held that the crane had been damaged because the defendant's rigger had been negligent, rendering the defendant liable under the provisions of the contract. On the other hand, in the majority judgment4 it was held that the evidence had been insufficient to determine negligence on the part of the rigger. But as it was common cause that the damage to the crane must 2 Unreported; case no 207/85 delivered on 31 March 1987. 3 Viljoen JA, Smalberger J concurring. 4 Botha JA ,with whom Vivier JA and Kumleben AJA concurred. have been due to negligence on the part of either the rigger or the operator, the majority reasoned that the failure to prove that the rigger had not been negligent placed the defendant on the horns of a dilemma. On the one hand, its failure in that regard did not allow it to escape liability under the common law which placed a burden on it to prove that there had been no negligence on the part of its servants or those for whose acts it would be liable while, on the other hand, it was unable to escape liability by seeking to contend that the operator had been negligent as ‘. . . in terms of the conditions of contract the defendant was liable for his acts.’ The defendant was therefore found to be liable without the majority having to decide whether the operator had been negligent. [15] In the light of the above, I conclude that negligence on the part of the operator while driving the truck on site and under the respondent's supervision and control is to be construed as negligence on the part of the respondent as envisaged in clause 21 of the agreement, rendering the respondent liable to the appellant for damages suffered as a result. [16] Counsel for the respondent sought to avoid the result of that construction by arguing that as the operator had commenced his shift at a time when he was exhausted on returning to site after a long weekend during which he had not properly rested, his negligence which caused him to fall asleep had been at a time when he was off site and not under the respondent's supervision and control. [17] This argument cannot be upheld. The cardinal point is that the operator was negligent in driving the truck at a time when he was over-tired, which led to his falling asleep and the truck leaving the road. This occurred on site and at a time when he was driving under the respondent's supervision and control. The respondent is accordingly liable under the contract for the damage the appellant suffered as a result. [18] The appeal must accordingly succeed, with costs. In regard to the order which should be made in substitution of that of the court a quo, I intend to use the terms suggested by appellant's counsel in his heads of argument to which the respondent offered no objection. [19] The following order is made: (1) The appeal succeeds, with costs. (2) The order of the court a quo is set aside and is replaced with the following: ‘(a) The defendant is directed to make payment to the plaintiff of an amount equal to the damages which the parties may agree or which the plaintiff may prove. (b) The defendant is to pay the costs of the proceedings determining liability.’ __________________________ L E LEACH ACTING JUDGE OF APPEAL Appearances: For Appellant: R Stockwell SC Instructed by Knowles Husain Lindsay Inc, Sandton McIntyre & Van Der Post, Bloemfontein. For Respondent: DA Smith SC M T Shepherd Instructed by Roodt Incorporated, Sandhurst Naudes Attorneys, Bloemfontein

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 23 September 2008 Status: Immediate Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal MUTUTAL CONSTRUCTION COMPANY (PTY) LTD v KOMATI DAM JOINT VENTURE The Supreme Court of Appeal today reversed a decision of the Johannesburg High Court which had dismissed the appellant’s claim for damages against the respondent. The appellant had let a dump-truck to the respondent for use on a construction site. The truck had been let together with the services of an operator employed by the appellant. While working on site and under the respondent’s control, the operator negligently fell asleep, allowing the truck to leave the road and collide with an embankment. The appellant sued the respondent for the cost of repairing the truck as well as for loss of income derived from the truck until it was repaired. The claim failed in the high court which found that policy and fairness dictated that the respondent not be held liable for the negligence of the appellant’s operator. On appeal, the Supreme Court of Appeal held that on a proper construction of the parties’ written agreement the operator’s negligence on site was to be construed as negligence on the part of the respondent for which the respondent had bound itself to be liable under the contract. The respondent should therefore have been held liable to the appellant for its damages. The appeal succeeded and the order of the trial court altered to hold the respondent liable for whatever loss the appellant may have suffered.

3598

non-electoral

2021

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Not Reportable Case no: 280/2020 In the matter between: ETHEKWINI MUNICIPALITY APPELLANT and CRIMSON CLOVER TRADING 17 (PTY) LTD t/a ISLAND HOTEL RESPONDENT Neutral citation: Ethekwini Municipality v Crimson Clover Trading 17 (Pty) Ltd t/a Island Hotel (Case no 280/2020) [2021] ZASCA 96 (1 July 2021) Coram: DAMBUZA, MAKGOKA and MBATHA JJA, GOOSEN and UNTERHALTER AJJA Heard: 7 May 2021 Delivered: This judgment was handed down electronically by circulation to the parties’ legal representatives by email, publication on the Supreme Court of Appeal website and release to SAFLII. The date and time for hand-down is deemed to be 09h45 on 1 July 2021 Summary: Civil procedure – appeal against an order granting condonation for failure to serve notice in terms of s 3(2) of the Institution of Legal Proceedings Against Certain Organs of State Act 40 of 2002 – failure to show good cause for delay – order set aside ORDER On appeal from: KwaZulu-Natal Division of the High Court, Durban (D Pillay J, sitting as court of first instance): The appeal is upheld with costs including costs of two counsel. The order of the high court is set aside and replaced with the following: ‘The application for condonation is dismissed with costs, including costs of two counsel, where so employed.’ JUDGMENT Mbatha JA (Dambuza and Makgoka JJA and Goosen and Unterhalter AJJA concurring) [1] The pertinent issue in this appeal is whether condonation ought to have been granted to the respondent, Crimson Clover Trading 17 (Pty) Ltd t/a Island Hotel, for its failure to serve on the appellant, Ethekwini Municipality, a notice in terms of s 3(2) of the Institution of Legal Proceedings Against Certain Organs of State Act 40 of 2002 (the Act). The notice serves to notify the appellant, within six months of the debt becoming due, of the facts giving rise to the debt and such further particulars of the debt as are in the respondent’s knowledge. [2] On 8 May 2016, the Island Hotel, owned by the respondent and situated on a spur of land bordered by the Isipingo Estuary and the Isipingo Riverfront, was flooded and extensively damaged. Santam Limited (Santam), the insurer of the respondent, instructed loss adjustors to determine the cause of the incident. On 24 May 2016, the loss adjustors advised Santam that there was a possible recovery action, but they were not certain against whom the action lay. During September 2016, the respondent instructed its attorneys to pursue a claim for damages, who in turn, instructed consulting engineers to investigate the cause of the flooding. By 4 October 2016, the respondent had formed a prima facie view that the flooding was caused by the height of the sand berm at the mouth of the Isipingo River, which prevented the storm water from entering the sea. As will appear below, the respondent formed the view that a claim was to be instituted against the appellant. [3] On 14 December 2016, the respondent submitted to the appellant a request in terms of the Promotion of Access to Information Act 2 of 2000 (the PAIA), seeking documentation relating to the management and/or maintenance of the Isipingo River and the Isipingo River Mouth and estuary. The appellant furnished the requested information by 24 April 2017. [4] On 19 July 2017, the respondent served on the appellant a notice in terms of s 3(2). By then it had ascertained that the cause of the flooding was attributable to the Isipingo River mouth being blocked by the said sand bar. The respondent held a view that the appellant was responsible for excavation of the sand bar. The appellant advised the respondent that estuarine management, including the breaching of berms or sand bars in estuaries for the protection of the riparian property owners against flooding, were functions falling exclusively within the purview of the provincial government in terms of part A of Schedule 4 of the Constitution. In support of this stance, the appellant furnished the respondent with a copy of the judgment of this Court in Abbott v Overstrand Municipality and Others [2016] ZASCA 68. [5] On 12 September 2018, the respondent launched its application for condonation for failure to serve the appellant with the s 3(2) notice within the prescribed period of six months. The appellant opposed the application on the basis that the respondent had failed to give an explanation for the delay, and to show good cause. The appellant also complained that the respondent’s cause of action had changed over time. In support of that complaint, the appellant pointed out that in the s 3(2) notice the respondent had relied on the failure by the appellant to excavate the sand bar at the Isipingo Estuary mouth, whereas in the condonation application, the respondent relied on the failure by the appellant to ensure that the storm water management system was functioning as it was designed to. [6] The application served before D Pillay J. The learned judge noted that there was a considerable and unexplained delay by the respondent. Despite this, the court granted the respondent condonation for the late service of its s 3(2) notice. It found that the appellant, as a public authority, had to ensure that there was a functioning storm water drainage system and that the judgment in Macsteel Service Centre SA (Pty) Ltd v eThekwini Municipality,1 which was relied upon by the respondent, made it clear that there was a storm water drainage problem in Isipingo. The high court also found that an order in favour of the respondent was in the public interest as the appellant had to fix the storm water problem. The high court found that the respondent had shown good cause and that prima facie, there were good prospects of success on the merits. It accepted that there would be prejudice to the appellant due to non-availability of witnesses, but this, the court reasoned, would be ameliorated by the availability of records. Aggrieved by this outcome, the appellant appeals, with the leave of the high court, against the judgment, on the basis that the respondent failed to satisfy the statutory requirements for the court to exercise its discretion to grant condonation in terms of s 3(2). [7] Condonation for the late service of the notice in terms of s 3(2) is governed by s 3(4), which provides: (3) For purposes of subsection (2)(a) — (a) a debt may not be regarded as being due until the creditor has knowledge of the identity of the organ of state and of the facts giving rise to the debt, but a creditor must be regarded as having acquired such knowledge as soon as he or she or it could have acquired it by exercising reasonable care, unless 1 Macsteel Service Centre SA (Pty) Ltd v eThekwini Municipality Case no 10974/2012 (unreported). the organ of state wilfully prevented him or her or it from acquiring such knowledge. (4) (a) If an organ of state relies on a creditor’s failure to serve a notice in terms of subsection (2)(a), the creditor may apply to a court having jurisdiction for condonation of such failure. (b) The court may grant an application referred to in paragraph (a) if it is satisfied that — (i) the debt has not been extinguished by prescription; (ii) good cause exists for the failure by the creditor; and (iii) the organ of state was not unreasonably prejudiced by the failure. (c) If an application is granted in terms of paragraph (b), the court may grant leave to institute the legal proceedings in question, on such conditions regarding notice to the organ of state as the court may deem appropriate.’ [8] Section 3(4)(b) sets out the factors of which the court must be satisfied to decide whether to grant condonation for the failure to serve a notice in accordance with the requirements set out in s 3(2). Numerous judgments have dealt with the interpretation of these provisions, and found that these factors need to be read conjunctively.2 [9] In line with s 3(2)(a) and the principles propounded in the various judgments, the time limit for filing the notice in terms of s 3(2) against an organ of state is six months. Therefore, if the creditor is out of time, condonation must be sought within the prescripts of s 3(4). In Madinda v Minister of Safety and Security,3 this Court affirmed that: 2 See Minister of Agriculture and Land Affairs v C J Rance (Pty) Ltd [2010] ZASCA 27; 2010 (4) SA 109 (SCA); [2010] 3 All SA 537 (SCA) para 11; and Minister of Safety and Security v De Witt [2008] ZASCA 103; 2009 (1) SA 457 (SCA) para 13. 3 Madinda v Minister of Safety and Security [2008] ZASCA 34; 2008 (4) SA 312 (SCA); [2008] 3 All SA 143 (SCA) para 8. ‘The phrase “if [the court] is satisfied” in section 3(4)(b) has long been recognised as setting a standard which is not proof on a balance of probability. Rather it is the overall impression made on a court which brings a fair mind to the facts set up by the parties.’ [10] Furthermore, the factors set out in s 3(4), must be considered in light of the well-settled principles on condonation. In Mulaudzi v Old Mutual Life Assurance Company South Africa Ltd4 this Court restated the factors which need to be taken into account when considering an application for condonation as follows: ‘A full, detailed and accurate account of the causes of the delay and their effects must be furnished so as to enable the Court to understand clearly the reasons and to assess the responsibility. Factors which usually weigh with this court in considering an application for condonation include the degree of non-compliance, the explanation therefor, the importance of the case, a respondent’s interest in the finality of the judgment of the court below, the convenience of this court and the avoidance of unnecessary delay in the administration of justice.’ [11] It is not enough for an applicant to merely allege that there is good cause for the granting of the condonation, the applicant must show that there is good cause.5 To decide whether an applicant has given a reasonable explanation for its failure to timeously serve the notice in terms of s 3(2), it is necessary to consider when the applicant had all the necessary information in terms of s 3(4) to enable it to formulate the notice. [12] In this case the incident occurred on 8 May 2016. The notice was only served on 19 July 2017. On the facts, it is clear that as of 4 October 2016, the respondent had formed a view as to the cause of the flooding, as instructions were given to the engineers to investigate further and identify the debtor. On 4 Mulaudzi v Old Mutual Life Assurance Company South Africa Ltd [2017] ZASCA 88; [2017] 3 All SA 520 (SCA); 2017 (6) SA 90 (SCA) para 26. 5 Silber v Ozen Wholesalers (Pty) Ltd 1954 (2) SA (A) 345 at 352 G-H. 14 December 2016, the respondent launched a PAIA application against appellant, an indication that the appellant had likely been able to identify the debtor. By 24 April 2017, in terms of the PAIA application, the appellant had provided the respondent with all the documents relating to the management and maintenance of the Isipingo River mouth and estuary. The respondent relied on the four months taken to furnish the requested documents as the main cause of delay, however, it was already in possession of the information relating to the cause of action and the identified debtor before lodging the PAIA application. Once the respondent had this information, the period within which the notice had to be served began to run. The respondent failed to appreciate that legal consequences flowed from these known facts, namely that the period of prescription runs. [13] The respondent erroneously asserted that it required full knowledge of all the facts giving rise to the cause of action before serving the legal notice. It did not proffer any explanation as to why, whilst awaiting the response from the appellant, it could not, as a cautionary measure, serve the notice on the respondent and other potentially responsible State organs. Though all the documents requested were received by 24 April 2017, the respondent waited yet further for an engineer’s final report, which it received on 30 June 2017. All these documents were unnecessary for serving the notice on the appellant, because the facts giving rise to the debt and such particulars of the debtor were already within the respondent’s knowledge. [14] As stated already, the notice was only served on the appellant on 19 July 2017. On 27 October 2017, almost three months after the service of the notice, the respondent sent out letters to various State organs, including the appellant, trying to identify the debtor. The appellant’s response, dated 6 November 2017, suggested that the respondent’s identified cause of action concerned the competency of the provincial government, and not that of the respondent. The undisputed facts reveal that the respondent did nothing about that information. [15] The respondent did nothing until 16 February 2018, when it sought a response to the request for condonation embodied in the notice served on 19 July 2017. This was an unwarranted request as the appellant had denied any liability. The respondent persisted with this request until 10 April 2018, when the appellant advised that it would not grant condonation. It took the respondent another five months to bring an application for condonation. No reasons were given for this undue delay. When one takes into account the period from the date of serving the legal notice, 19 July 2017, it took the respondent over a year to bring the application for condonation. In Madinda6 this Court emphasised that good cause is not a simple matter of cause and effect, but involves a court deciding whether the applicant has produced acceptable reasons for justifying in whole or at least substantially, any culpability on his or her part which attaches to the delay in serving the notice timeously. On these facts, there is no acceptable explanation for the inordinate delay. In fact, no reasons had been proffered for the delays by the respondent. [16] Since the inception of the proceedings, the respondent had failed to take steps to pursue its claim. The laissez-faire attitude of the respondent carries consequences. The sparsely drawn and self-accommodative founding affidavit leaves a lot to be desired. The respondent tried to shift the blame to the appellant, whilst failing to explain the long periods of inactivity on its part. The high court erred in finding that the respondent showed good cause for the failure to comply with the requirements of s 3(2). 6 See fn 3 above, para 12. [17] A further feature of this application is that the respondent’s legal notice referred to a different cause of action than that relied upon in the application for condonation. No explanation was proffered for this change. This meant that the appellant did not know the case to which it had to respond. Regarding the first cause of action, it was pointed out by the appellant that it was excluded as a possible debtor. Instead of engaging with the appellant the respondent kept quiet. It is trite that a court must be placed in a position to make an assessment on the merits in order to balance that factor with the cause of delay as explained by the appellant. The respondent in casu also failed to explain the discrepancy in the two causes of action. [18] In the circumstances, the high court misdirected itself when it granted the condonation on the basis of the legal principles advanced by it, which fell outside the pleadings that were before the court. The learned judge expressed the view that there was a responsibility on public authorities, whoever they may be, to ensure that there was a proper storm water drainage system. In addition, I am unable to agree with the high court’s reliance on the public interest, which was not before it, when there were other more compelling factors, like the unexplained delay, which militated against the exercise of the high court’s discretion in favour of granting the condonation. The high court expressed itself as follows: ‘You are not here only on your behalf. I want to make that absolutely clear. The reason you are being granted this condonation is because you must put up the case in the public interest. I cannot emphasise enough that Ethekwini [Municipality] needs to defend it. If it has a real problem with storm water, then it must fix it. Do not defend the indefensible because we will continue to have more and more storm water claims. If there are parties who are co-responsible for anything, then join them because that is what dialogical constitutionalism is all about. Read Froneman J’s article on dialogical constitutionalism please.’ This was stated against the backdrop of a respondent that had failed to address the court on the prospects of success and whose case had nothing to do with the public interest. Before the court was a private company pursuing a subrogated claim. [19] The concept of ‘dialogical constitutionalism’, on which the high court relied for its public interest approach, has only ever been referred to in four cases – all authored by the same judge as in this case.7 It is not clear what the concept entails. It could well be that the learned Judge relies on the constitutionally- entrenched principle of cooperative governance dictated by s 41 of the Constitution.8 Whatever its merits, it is clear that the principle can only be applicable in the sphere of public law involving one or more of the three spheres of government. It certainly has no application to a case such as the present, which concerns a purely private delictual claim against a municipality. A court may not ordinarily formulate its own dispute resolution procedure outside of the rules of court or practice directives. In this case it was engaged by the parties on a pleaded case to adjudicate a defined dispute. [20] The high court failed to deal with the prospects of success, save to accept that the court in Macsteel9 made it clear that there was a storm water drainage problem in the area of Isipingo, where the hotel is located. The high court therefore found that ‘the prospects of success are prima facie fair’. This was an untenable conclusion, given that the cause of action lacked supporting evidence. This stands in contradiction to the dicta of this Court in Mulaudzi,10 where it held that: 7 Motata v Minister of Justice and Correctional Services and Another [2016] ZAGPPHC 1063; [2017] 1 All SA 924 (GP); Westwood Insurance Brokers (Pty) Ltd v Ethekwini Municipality and Others [2017] ZAKZDHC 29; and Hanekom v Zuma [2019] ZAKZDHC 16. 8 Section 41 of the Constitution encourages the three spheres of government to cooperate with one another in mutual trust and good faith, and to promote effective intergovernmental relations, ensure effective communication and coordination, respect the constitutional status, institutions, powers and functions of government, and avoid taking their disputes to court. 9 See fn 1 above. 10 See fn 5 above. ‘[T]he court is bound to make an assessment of an applicant’s prospects of success as one of the factors relevant to the exercise of its discretion, unless the cumulative effect of the other relevant factors in the case is such as to render the application for condonation obviously unworthy of consideration.’11 [21] Section 3(3) provides that the debt does not arise until the creditor has knowledge of the identity of the organ of state and the facts giving rise to the debt. It reads further that ‘a creditor must be regarded as having acquired such knowledge as soon as he or she or it could have acquired it by exercising reasonable care’. I should highlight the provisions of s 3(3)(a) that refer to the deemed knowledge of the debtor and the cause of action. The section determines when the creditor must lodge the notice with the State organ. It gives the creditor reasonable latitude to determine when they have deemed knowledge of the cause of action and the debtor. Nothing precludes the creditor from explaining that during the prescribed six-month period, they were not yet in a position to identify the facts with reasonable certainty or to identify the debtor. I highlight this as it appears in this matter that the respondent was confused as to when they could be deemed to have knowledge of the debtor and the cause of action. Although this line of argument could have been of assistance to the respondent, it was not pleaded. [22] The unexplained delay in the delivery of the notice and the change in the cause of action deprived the appellant of the opportunity to investigate the matter timeously, thereby prejudicing the appellant. The administration of justice requires that such matters be dealt with expeditiously and efficiently. [23] On an assessment of all the facts, I am not satisfied that the respondent should have been granted condonation by the high court. The high court having 11 See fn 5 above. found that condonation should have been granted, correctly determined that there should be no order as to costs. However, as we have found that it should not have granted the order, costs should follow the result. [24] Accordingly, the following order is made: The appeal is upheld with costs including costs of two counsel. The order of the high court is set aside and replaced with the following: ‘The application for condonation is dismissed with costs, including costs of two counsel, where so employed.’ ________________________ Y T MBATHA JUDGE OF APPEAL Appearances: For appellant: A M Annandale SC (with her S Pudifin-Jones) Instructed by: Livingston Leandy, La Lucia Ridge McIntyre van der Post, Bloemfontein For respondent: A J Troskie SC (with him J Thobela-Mkhulisi) Instructed by: Norton Rose Fulbright SA Inc, La Lucia Ridge Webbers, Bloemfontein.

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 1 JULY 2021 Status: Immediate The following summary is for the benefit of the media in the reporting of this case and does not form part of the judgments of the Supreme Court of Appeal Ethekwini Municipality v Crimson Clover Trading 17 (Pty) Ltd t/a Island Hotel (Case no 280/2020) [2021] ZASCA 96 (1 July 2021) Today the Supreme Court of Appeal (SCA) handed down judgment upholding the appeal against the KwaZulu-Natal Division of the High Court, Durban (high court). The issue before the SCA was whether condonation ought to have been granted to the respondent, Crimson Clover Trading 17 (Pty) Ltd t/a Island Hotel, for its failure to serve on the appellant, Ethekwini Municipality, a notice in terms of s 3(2) of the Institution of Legal Proceedings Against Certain Organs of State Act 40 0f 2002 (the Act). On 8 May 2016, the Island Hotel, owned by the respondent and situated on a spur of land bordered by the Isipingo Estuary and the Isipingo Riverfront, was flooded and suffered extensive damage. Santam Limited (Santam), the insurer of the respondent, instructed loss adjustors to determine the cause of the incident. On 19 July 2017, the respondent served on the appellant a notice in terms of s 3(2) of the Act. By then it had ascertained that the cause of the flooding was attributed to the Isipingo River mouth being blocked by a sand bar. The respondent held a view that the appellant was responsible to excavate the sand bar. On 12 September 2018, the respondent launched its application for condonation for failure to serve the appellant with the s 3(2) notice within the prescribed period of six months. The high court noted that there was a considerable and unexplained delay by the respondent. Despite this, the court granted the respondent condonation for the late service of its s 3(2) notice. The SCA held that that the delays occasioned by the respondent could not be explained. Furthermore, the SCA held that there were no compelling reasons to persuade the Court that there were good prospects of success on the merits. ~~~~ends~~~~

2880

non-electoral

2012

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Case no: 199/2012 Reportable In the matter between: GLENRAND MIB FINANCIAL SERVICES (PTY) LTD First Appellant DAVID JAMES HARPUR Second Appellant ALLAN WALTER MANSFIELD Third Appellant AON SOUTH AFRICA (PTY) LTD Fourth Appellant and THEODOR WILHELM VAN DEN HEEVER NO First Respondent CHRISTIAAN FREDERIK DE WET NO Second Respondent DEIDRE BASSON NO Third Respondent PROTECTOR GROUP HOLDINGS (Pty) Ltd Fourth Respondent Neutral citation: Glenrand MIB Financial Services (Pty) Ltd & others v Theodor Wilhelm van den Heever NO & others (199/2012) [2012] ZASCA 195 (30 November 2012) Coram: MTHIYANE DP, MHLANTLA and THERON JJA and SWAIN and SALDULKER AJJA Heard: 12 November 2012 Delivered 30 November 2012 Summary: Company Directors – misappropriation of company funds – dishonesty and subjective intention to steal not proved Breach of fiduciary duty – insufficient evidence to prove dishonesty and collusive dealings Company - Insolvency - Disposition without value in terms of s 26 of the Insolvency Act 24 of 1936 – after disposition the assets of the company exceeded its liabilities Contract – written sale of shares agreement – purchaser signed as agent for non-existent principal – agreement not valid Enrichment – General enrichment action – claimant’s funds transferred without legal ground to B – B transferred the funds to C without legal ground – claimant has a claim against C – chain of causation linking C’s enrichment with claimant’s impoverishment not broken. ___________________________________________________________________ ORDER ___________________________________________________________________ On appeal from: South Gauteng High Court, Johannesburg, (Monama J sitting as court of first instance): 1 The appeal of the first appellant is dismissed. 2 The appeal of the second and third appellants is upheld. 3 As against the first, second and third appellant, the judgment of the high court is set aside and replaced with the following: ‘(a) The claim against the fourth and fifth defendants is dismissed with costs. (b) The first defendant is ordered to make payment of the sum of R50 million together with interest at the rate of 15, per cent per annum from 15 March 2004, to date of payment to the plaintiffs. (c) The first defendant is ordered to pay the plaintiffs’ costs.’ 4 The respondents are ordered to pay the costs of appeal of the second and third appellants. 5 The first appellant is ordered to pay the costs of appeal of the respondents. 6 The respondents are ordered to pay the costs of appeal of the fourth appellant. ___________________________________________________________________ JUDGMENT ___________________________________________________________________ THERON JA and SWAIN AJA (MTHIYANE DP, MHLANTLA JJA and SALDULKER AJA concurring): [1] This is an appeal from the South Gauteng High Court (Monama J) dealing with misappropriation of money, unjust enrichment, setting aside of a disposition under s 26 of the Insolvency Act 24 of 1936 (the Insolvency Act) and a breach by directors of their fiduciary duties. The appellants appeal to this court with the leave of the high court. [2] The fourth respondent, Protector Group Holdings (Pty) Ltd (In Liquidation), (Protector), was wound up by the high court on 1 December 2004. The application for its winding-up was presented to the high court on 9 July 2004 and this is the date when the winding-up is deemed to have commenced, in terms of s 348 of the Companies Act 61 of 1973 (the Companies Act). Protector was placed in liquidation because it was unable to pay its debts, as contemplated in s 345 of the Companies Act. The Master of the High Court appointed the first, second and third respondents as joint liquidators of Protector, and they act in their official capacity as liquidators in these proceedings. [3] The first appellant, Glenrand MIB Financial Services (Pty) Ltd, (Financial Services), was a wholly owned subsidiary of Glenrand MIB Ltd (Glenrand MIB). At all relevant times, Financial Services, held 65 per cent of the issued share capital in Protector, while the remaining 35 per cent was held by Protector Group Management Company (Pty) Ltd (PGMC). David Harpur, the second appellant, was a director of Protector, Financial Services and a director, shareholder and chief executive officer of Glenrand MIB Ltd. Allan Mansfield, the third appellant, was a director of Protector and the chairperson of its board of directors, a director of Financial Services and a director, shareholder and chairperson of the board of Glenrand MIB. [4] During 2003, the board of Glenrand MIB decided to dispose of its interests in Protector. Marc Seelenbinder and Leon Janse van Rensburg, sixth and seventh defendants in the court a quo respectively, both directors of Protector and PGMC, made offers to purchase Financial Services’ 65 per cent shareholding in Protector. On 10 November 2003, the board of directors of Financial Services adopted a resolution to dispose of its 65 per cent shareholding in Protector by entering into an agreement with ‘Newco or its nominee’. Pursuant to this resolution, an agreement with ‘Newco or its nominee’ was signed on 15 December 2003. Financial Services was represented by Harpur and Mansfield while Van Rensburg represented the purchaser. It was later suggested that Freefall Trading 65 (Pty) Ltd (Freefall) was the purchaser. Van Rensburg and Seelenbinder, were, through their family trusts, the sole shareholders of Freefall. PGMC disposed of its 35 per cent shareholding in Protector to Freefall. Protector sold its entire business as a going concern to a new established company New Protector Group Holdings (Pty) Limited, (New Protector), comprising an empowerment partner, Tradeworx, holding 51 per cent of New Protector and Freefall holding 49 per cent. The funding for the transaction was provided by the Industrial Development Corporation (the IDC). [5] New Protector and the IDC concluded a loan agreement on 4 March 2004 to enable New Protector to acquire the business of Protector as a going concern. The sale of the business by Protector to New Protector was considered and approved at a board meeting of Protector on 2 March 2004. The Financial Services representatives on the board of Protector, including Harpur and Mansfield, resigned as directors after the approval of the sale of the business. The sale of business agreement was implemented and the business and assets of Protector were transferred to New Protector. [6] The IDC released the funds to New Protector on 5 March 2004, pursuant to a written request from Seelenbinder dated 3 March 2004. An amount of R69 188 647 was transferred from the IDC into New Protector’s bank account held with Nedbank. On 8 March 2004, an amount of R63 382 254 was transferred out of the Nedbank account to an account in the name of Protector held with Standard Bank. The latter account was opened by Seelenbinder and Van Rensburg, who were the only directors of Protector at that stage. On 10 March 2004, and on the instructions of these two directors, an amount of R63 382 254 was transferred out of the Standard Bank account to an account in the name of Fehrsen, Harms & Associates (FHA) in Namibia. On 15 March 2004, from the funds held in the Namibian account, an amount of R50 million was paid into the trust account of Edward Nathan & Friedland (ENF). On 22 June 2004, the amount of R50 997 468.57 was transferred from the said attorneys’ trust account to Glenrand MIB’s bank account. It was common cause that the R50 million paid by ENF to Glenrand MIB was to settle Freefall’s debts to Financial Services in respect of the sale of the latter’s shareholding in Protector to Freefall. [7] The respondents instituted action in the court a quo against Financial Services (first defendant), Glenrand MIB Ltd (second defendant), Freefall (third defendant), Harpur (fourth defendant), Mansfield (fifth defendant), Seelenbinder (sixth defendant) and Janse Van Rensburg (seventh defendant). In the action the respondents claimed, inter alia, payment of various sums of money from the respondents. There were six causes of action pleaded by the respondents, namely: (1) collusive dealings contemplated by s 31 of the Insolvency Act (claim A); (2) unlawful and intentional misappropriation of funds (claim B); (3) unjust enrichment (claim C); (4) an alleged disposition without value liable to be set aside under s 26 of the Insolvency Act (claim D); (5) a fraud perpetrated on the body of creditors of Protector (claim E); (6) breach by certain directors of Protector, namely Harpur, Mansfield, Seelenbinder and Van Rensburg, of their fiduciary duties owed to the company (claim F). [8] By the time of the commencement of the trial on 16 February 2011, Freefall had been deregistered, the estate of Seelenbinder sequestrated, resulting in the trial proceeding only against Financial Services, Glenrand MIB, Harpur, Mansfield and Van Rensburg. By arrangement between the respondents and Van Rensburg, the latter did not oppose the matter and testified for the respondents. Judgement was however sought and granted against Van Rensburg. At the conclusion of the trial, claims A and E were abandoned by the respondents and the court was also advised that no relief was sought against Glenrand MIB. [9] The court a quo upheld claims B (misappropriation of money), C (unjust enrichment), D (setting aside of a disposition without value in terms of s 26 of the Insolvency Act) and F (breach of fiduciary duty). It also found against the appellants on the basis of a contravention of s 38 of the Companies Act. The judge granted judgment against Glenrand MIB, Financial Services, Harpur, Mansfield and Van Rensburg. The appellants appeal against the judgment of the court a quo, with the leave of that court. [10] Subsequent to the trial and prior to judgment being handed down, Glenrand MIB merged with the fourth appellant, AON South Africa (Pty) Ltd (AON). In terms of this merger AON assumed all property and obligations of Glenrand MIB. Following the merger, Glenrand MIB was deregistered. AON applied for and was granted leave to intervene in the application for leave to appeal and in the appeal itself, by the high court. Thereafter the respondents abandoned the judgment against Glenrand MIB, leaving only the question of the wasted costs of the application for determination. At the hearing of this appeal, counsel for the respondent could advance no reason why the respondent should not be ordered to pay these costs. Contravention of s 38 [11] As mentioned above, the high court found against the appellants on the basis of a contravention of s 38 of the Companies Act.1 This was not a cause of action pleaded or relied upon by the respondents in the action in the high court. It was not an issue that was specifically traversed by the parties during the trial. This was in fact conceded by the respondents on appeal. The finding by the high court, that ‘the assistance given to the fourth plaintiff [payment of R50 million] violates the provisions of section 38(1) of Act 61 of 1973’ was ill-conceived and cannot stand. Claim B – misappropriation of money (theft) [12] The IDC knew that Glenrand MIB was selling its 65 per cent shareholding in Protector and the IDC intended, when its board approved the financing on 25 November 2003, that the proceeds of that loan would be applied towards settling the purchase price of the sale of shares of Glenrand MIB and PGMC. The IDC’s recognition that the proceeds of the loan would immediately be applied towards paying for Glenrand MIB’s shares in Protector, was in full knowledge of the IDC’s decision that ultimately the business of Protector would be located within a new vehicle, which would represent a consortium led by a BEE shareholder. 1 Section 38 reads: A winding-up of a company by the Court shall be deemed to commence at the time of the presentation to the Court of the application for the winding-up. [13] There is no evidence to suggest that the IDC, and all the other relevant parties, in agreeing or arranging that the proceeds of the loan should be paid to the shareholders of Protector, intended to defraud the creditors of Protector. The common intention of Glenrand MIB, the IDC, and of Seelenbinder and Van Rensburg, was that the money should be applied to discharge Freefall’s indebtedness arising from the sale of shares by Glenrand MIB and PGMC. In the circumstances, the respondents have not made out a case for dishonesty on the part of Harpur and Mansfield. It was not established that, in arranging that part of the proceeds of the IDC loan be paid to Financial Services, they had the subjective intention to steal the money. It follows that the claim of theft cannot be sustained. Claim F - Breach of Fiduciary Duty [15] Counsel for the respondents was constrained to concede, and rightfully so, that in the event of the respondents failing to prove the theft claim, then the claim for breach of fiduciary duty must also fail. Claim C – Unjust Enrichment [16] The respondents also claim payment of the sum of R50 million from Financial Services on the basis of unjust enrichment. Although there is no general action based on enrichment in our law, it is generally accepted that for enrichment liability to arise there are a minimum of four requirements, namely: (1) the defendant must be enriched; (2) the plaintiff must be impoverished; (3) the defendant’s enrichment must be at the expense of the plaintiff and (4) the enrichment of the defendant must be unjustified or sine causa.2 This was the basis on which the case was argued by both counsel. 2 9 Lawsa 2 ed para 209. [16] The third and fourth requirements for enrichment liability can give rise to difficulties where three or more parties are involved. The difficulties arise from the fact that the general requirement for liability is that the defendant’s enrichment must be at the expense of the plaintiff; and it must be unjustified. Where there is the intercession of a third party between the plaintiff and the defendant, and the value is transferred not directly from the plaintiff to the defendant, but from the plaintiff to the third party, and then in turn from the third party to the defendant, the question arises of whether the defendant’s enrichment has occurred at the expense of the plaintiff. [17] In Buzzard Electrical (Pty) Ltd v 158 Jan Smuts Avenue Investments (Pty) Ltd & another 1996 (4) SA 19 (A) at 25H-26A the court discussed two types of multi-party enrichment claims. The first type of claim arose where A, in terms of an agreement with B, improves the property of a third party, C, and A then seeks to hold the owner C liable on the grounds of unjust enrichment because B has not paid A. The second type of claim applied in a situation where the owner C contracted with B to improve his property and B in turn subcontracted A to do the work. A did the work and later relied on the liability of the owner C on the grounds of unjust enrichment. The second type of enrichment claim was considered by the court in Buzzard. The court held that the main difference between the two types of claims was that in the second type of claim, the performance of the work by A could be traced to an agreement between the owner C and B in terms of whereof that specific work had to be performed by B. The court further held that neither a direct nor an indirect enrichment liability could arise in the second type of case. In all cases of the second type of liability the owner C contracted with B on a specific basis, and it would be unfair that his counter-performance, if any, were to increase in effect or that he should incur an obligation which did not arise out of the contract with B, simply because B had engaged A to comply with his contractual obligations. The reasoning of the court was that there was no contractual relationship between A and the owner C and, when A performed the work, he complied with his obligations towards B. At the same time, however, A also gave effect to B's obligation to the owner C and thus also performed indirectly with respect to the owner. The agreement between the owner C and B was the primary source of the performance of the work and any possible enrichment of the owner; the owner C received no more as a result of A's performance than that which he had contracted for with B. For that reason, the court concluded, the enrichment was not sine causa. On the contrary, his agreement with B was the cause of his enrichment. In McCarthy Retail Ltd v Shortdistance Carriers CC 2001 (3) SA 482 (SCA) Schutz JA, with reference to the reasoning adopted by the court in Buzzard, said it may be a question of semantics whether the owner’s enrichment had been at the expense of A or B. The learned judge put the matter thus: ‘For myself, I think there is much to be said for the justice of the lien cases, an unsophisticated justice though it may be, but with which we have lived for a long time. A improves a car at the instance of B, wrongly believing him to be owner. C claims the car by virtue of his ownership. Is he to get it scot-free? Or is he to first pay A his necessary and reasonable expenses; A's claim being moderated by the increase in market value cap, by the limitation to expenses to the exclusion of the market price and by the operation in the last resort of the jus tollendi (the right to compel removal of materials)? The question whether C is enriched at the expense of A or of B in the example given is in any event a matter of semantics (I do not dispute that the manner in which the question is answered can have practical consequences). When A improves C's vehicle the ownership in the improvements passes at once to C's estate by accession and it seems to me to pass there directly from A's estate. Is it not a fiction that it passes through the estate of B, even though A owes a contractual obligation to him to effect the repairs?’3 [18] It was argued, on behalf of Financial Services that in this matter there had been no transfer of property from the impoverished party, Protector, to the enriched party (Financial Services). The enrichment, if there was any, was not 3 Para 23. at the expense of the claimant (Protector) and for this reason the claim must fail. It has been suggested by the author Jacques Du Plessis The South African Law of Unjustified Enrichment (2012) at 300 that the purpose of the ‘at the expense of’ requirement is to indicate that a sufficiently strong causal link exists between the plaintiff and the defendant’s enrichment. The ultimate issue for a court to determine when considering the question of causation or the ‘at the expense of ‘requirement in a multi-party situation is whether the defendant has been unjustifiably enriched vis-a-vis the claimant.4 [19] On the facts of this case, it is clear that not only has Financial Services been unjustifiably enriched, but that such enrichment has been at the expense of the impoverishment of Protector. The funds in the Standard Bank account that had been opened by Van Rensburg and Seelenbinder, was the property of Protector, representing the purchase price paid by New Protector for the sale of Protector’s business. The funds remained the property of Protector. There was no legal relationship between Protector and FHA justifying the transfer of the funds to the latter. [20] It was further contended by the appellants that the fourth requirement had also not been met in that the enrichment of Financial Services was not unjustified (sine causa). The argument advanced was that the proceeds of the IDC loan received by New Protector were applied by Seelenbinder and Van Rensburg for the benefit of Freefall to discharge the liabilities of Freefall. There was a deliberate intention on the part of Freefall to pay a debt that it owed to Financial Services and an acceptance by ENF, on behalf of Financial Services. In these circumstances it cannot be said that Financial Services’ enrichment would have been sine causa. 4 Daniel Visser Unjustified Enrichment (2008) at 215. [21] In support of this argument, reliance was placed on Commissioner for Inland Revenue v Visser 1959 (1) SA 452 (A) and John Bell & Co Ltd v Esselen 1954 (1) SA 147 (A) where it was held by this court that where a third party (even unlawfully) used money which initially belonged to the plaintiff in order to discharge a true liability owed to the defendant (no matter by whom), and the defendant received that money, bona fide, intending for it to be applied to discharge the liability concerned (whether the liability was that of the third party or another party), then the plaintiff could not recover the funds from the defendant; the defendant’s enrichment would not have been sine causa; and it would have not been at the expense of the plaintiff. [22] Essential to the question of whether the payment by Freefall to Financial Services had been unjustified (sine causa) is a determination of whether the sale of shares agreement between Financial Services and Freefall, in terms of which Financial Services sold its shareholding in Protector to the former with effect from 1 December 2003, for the purchase price of R50 million is valid. If the agreement is valid then the payment made by Freefall was one in discharge of a true liability, it would not be sine causa, and would serve to interrupt the enrichment claim. [23] We turn now to consider the validity of the sale of shares agreement. Seelenbinder signed the document on behalf of the purchaser and qualified his signature as being ‘duly authorised thereto’. He clearly purported to act as an agent. The purchaser was described as ‘Newco or its nominee’. According to Van Rensburg, Seelenbinder did not, at the time, act on behalf of Freefall or any company in particular. Van Rensburg was pointedly asked, during his evidence in chief, as to who Seelenbinder had represented when he signed the document and his response was: ‘As a minimum he would have represented himself and me at that stage.’ He was later asked to explain the reference to Newco in the document and this is what he said: ‘Your Lordship, at that stage we thought that a good name for Newco would have been L&M (Pty) Limited. We tried our best to register a company with that name but we were unsuccessful, but that was part of the process. When we were not successful with that we went to a shelf company which was called Freefall 65 or something in that line. Eventually it became the nominee.’ Harpur agreed that Freefall was not nominated and nothing was done to make Freefall the purchaser. [24] In Heathfield v Maqelepo 2004 (2) SA 636 (SCA) the court recognised that an agreement signed on behalf of a non-existent principal is invalid.5 It was also noted, with reference to Burroughs Machines Ltd v Chenille Corporation of SA (Pty) Ltd 1964 (1) SA 669 (W) that a court should not lightly hold that an agreement is invalid.6 Southwood AJA, writing for the court, quoted the following passage from Burroughs with approval: ‘In so doing I must, I think, have regard to the fact that exh ''A'' is a commercial document executed by the parties with a clear intention that it should have commercial operation. I must therefore not lightly hold the document to be ineffective. I need not require of it such precision of language as one might expect in a more formal instrument, such as a pleading drafted by counsel. Inelegance, clumsy draftmanship or the loose use of language in a commercial document purporting to be a contract, will not impair its validity as long as one can find therein, with reasonable certainty, the terms necessary to constitute a valid contract.’7 [25] In McCullogh v Fernwood Estate Ltd 1920 AD 204 this court held that a company can by adoption or ratification obtain the benefit of a contract made on its behalf before it came into existence where such contract has been made by a person acting individually and not as agent of the company. Innes CJ stated that 5 Para 13. 6 See also Legator McKenna Inc v Shea 2010 (1) SA 35 (SCA). 7 Heathfield v Maqelepo 2004 (2) SA 636 (SCA) para 14. ‘the rule that there can be no ratification by a principal not in existence at the date of the transaction is recognised by our law as well as by the law of England’.8 However the situation would be different where the contract is for the benefit of a third party and such benefit is obtained by a party who is acting individually and not as agent for the beneficiary.9 The court further held that the distinction between a promise made to an agent for his principal and a promise made to a principal for the benefit of a third party, was a real one and ought to be maintained. In Natal Land & Colonisation Co Ltd v Pauline Colliery and Development Syndicate Ltd [1904] AC 120 the promisee purported to act as agent for a company to be formed (and was therefore at the time of the contract non-existent) whereas in McCullogh although the company was non-existent, the promisee acted as trustee for it and therefore acted as dominus of the relative subject matter. Thus a promisee who purports to contract as principal not as agent, may validly contract for the benefit of a non-existent third party such as a company to be formed.10 [26] This distinction was done away with by s 35 of the Companies Act. Section 35 removed the anomaly that a contract made by a trustee for an undisclosed principal was valid (McCullogh) while one made by an agent was not (Natal Land).11 In any event, the factual situation in the matter under consideration does not fall within s 35 of the Companies Act in regard to pre- incorporation contracts and the formalities required by that section have not been satisfied. 8 At 207. 9 At 209 10 See generally R H Christie and G B Bradfield The Law of Contract 6 ed (2011) at 272; 1 Lawsa 2 ed paras 185 and 189. 11 Christie and Bradfield, supra, at 272. [27] The appellants’ argument is that the company which was renamed Freefall was in existence at the time because it was registered on 6 May 2002 and consequently the agreement was one where the principal existed but was simply unnamed at the time. The submission is made that the agreement is enforceable on the authority of Springfield Omnibus Service Durban CC v Peter Maskell Auction CC 2006 (4) SA 186 (N) at 193A-E which deals with the principal of the undisclosed principal which applies where the one party believes that the other is acting personally, whereas he is acting on behalf of a principal. It also provides that once the party is aware that the other party is acting on behalf of a principal, his intention can only be that he wishes to contract with the principal through the agent. [28] In this matter, Seelenbinder had qualified his signature and indicated that he had signed the agreement as agent. Seelenbinder acted as agent and not as principal and therefore the doctrine of a contract for the benefit of a third party does not apply. At the time of signature, both Seelenbinder and Van Rensburg were unsure as to the identity of the principal. Seelenbinder purported to act as agent for Newco, which was in existence at the time. Van Rensburg said that Seelenbinder, at a minimum would have been representing the two of them, namely Van Rensburg and Seelenbinder. It is therefore clear that Seelenbinder had no authority to act on behalf of Newco and the principle of the undisclosed principal cannot apply. [29] It was argued, on behalf of the appellants, that Freefall had, by its conduct adopted or ratified the authority of Seelenbinder. There is no evidence that Seelenbinder and Van Rensburg acting as the sole directors of Freefall ratified Seelenbinder’s conduct and retrospectively conferred authority upon Seelenbinder to conclude the agreement. On 4 March 2004, the directors of Freefall adopted a resolution nominating Freefall as purchaser in respect of the 15 December 2003 agreement. In this regard the crucial issue is that the resolution says that Freefall is nominated as the purchaser and contracting party which is the appropriate resolution for the nomination of Freefall by Newco as the purchaser. The terms of the resolution refute any suggestion that up to that stage Freefall had ratified the authority of Seelenbinder. It had nothing to do with the lack of authority of Seelenbinder or the ratification of his conduct, as the first paragraph of the resolution is simply a recital of the provisions of the agreement. In the view we take of the matter, the document signed on 15 December 2003, relating to the sale of Financial Services’ shares in Protector, does not constitute a valid agreement and is therefore unenforceable. [30] We return to the question of unjust enrichment. As has been mentioned in paragraph 19 above, it is clear from the evidence that the funds in the Standard Bank account belonged to Protector. These funds were paid by New Protector to Protector for the sale of the latter’s business. The account was opened in the name of Protector by Van Rensburg and Seelenbinder, the only two directors of Protector at that stage. When the funds were moved to FHA it was still the funds of Protector and they were paid over without true liability. Counsel for the appellants conceded, that at that stage, the money still belonged to Protector and that it could, successfully have applied for a rei vindicatio for a return of the money. [31] It was argued by the respondents that this was not a case of ‘indirect enrichment’ with Freefall interceding between Protector and Financial Services because there was no valid sale of shares to Freefall and the funds in question did not belong to Freefall, it throughout remained Protector’s money. In light of the finding that the sale of shares agreement was invalid, Visser and Esselen are distinguishable and not applicable to this matter as there was no true liability which Freefall, by paying Financial Services, intended to settle. [32] It is useful to refer to the writings of the author, Niall R Whitty Indirect Enrichment in Scots Law 1 (1994) 200 Juridical Review at 250 where he deals with a scenario where no legal relationship exists between I and T (Protector and Freefall) and T and E (Protector and Financial Services). He writes: ‘One would expect that, a fortiori, where I pays T in error and E takes the money from T wrongfully or without T’s authority, I has an enrichment claim against E. On one view, since the transactions between I and T and between T and E are vitiated by error and wrongfulness respectively, there is no reason to construe them as juridical acts transferring wealth from I to E.’ There was no legal ground for the money to have been transferred from Protector to Freefall and neither was there a legal ground for it to have been transferred from Freefall to Financial Services. Put differently, in these circumstances the enrichment did not leave Protector’s estate in terms of a valid legal ground, nor did it enter Financial Services’ estate in terms of a valid legal ground, as the payment to Financial Services was without causa.12 In the view we take of the matter, the chain of causation linking Financial Services’ enrichment with Protector’s impoverishment, is not broken. [33] It was further argued by Financial Services, in the alternative, and in the event of the court finding that all the requirements for enrichment liability are satisfied, that Financial Services had, bona fide, disgorged any enrichment before the action was instituted on 1 March 2007. It was the testimony of Sanet Uys, the group financial director of Glenrand MIB, that Financial Services had expended the proceeds it received, first, by discharging its debt to Glenrand MIB on 22 June 2004 when the money went into Glenrand MIB’s bank account, in the amount of R38,1 million; and second, by declaring a dividend on 13 June 2005 in favour of Glenrand MIB for the balance of R11,7 million. For these reasons, it was contended by Financial Services, that this claim should fail. 12 J du Plessis The South African Law of Unjustified Enrichment (2012) at 305. [34] Financial Services’ liability is confined to the amount of its actual enrichment at the time of the commencement of the action. Enrichment may be constituted by a decrease of liabilities which would otherwise not have taken place.13 As regards the payment of the loan, the enrichment of Financial Services was still in existence at the time of the action, because of the decrease in its liabilities which would otherwise not have taken place. In respect of the payment of the dividend, on the face of it, it would appear that Financial Services was not enriched at the time of the action, because the payment of the dividend was purely a distribution of profits to shareholders. However, from the moment that Financial Services became aware, or ought to have been aware, that it had been enriched sine causa at the expense of Protector, its liability is reduced or extinguished, only if Financial Services is able to prove that the diminution or loss of its enrichment, was not due to its fault.14 [35] Harpur testified that Dr Clarence Mini, a director of Tradeworx, met with him on 23 August 2004 and accused him of stealing the R50 million. As a result Harpur met with Seelenbinder and the latter drew a chart, explaining to Harpur how the money had been transferred. It was then that Harpur questioned Seelenbinder about why the money was transferred via Namibia and ‘his response was there was some concern that in some of the structure there might have been something that touched on s 38 of the Companies Act, and by structuring this deal through an offshore company outside of South Africa that would have avoided any problems with that particular section.’ [36] Harpur said he did not think there was anything untoward about the flow of the funds that he could remember. He conceded that Protector was entitled to and would own the money it received for the sale of its business. He agreed that Protector was not obliged to pay the R50 million to Financial Services. 13 9 Lawsa 2 ed para 209 14 ibid. Harpur disputed the assertion that after he had met with Seelenbinder he should have been alerted that something was amiss and from that point must have realised that Financial Services was not entitled to retain the money. His answer was that he would have acted if he thought action was required and by the fact that he had not taken action, he did not think it was necessary. Harpur agreed, in the context of the admission made on the pleadings, that in terms of s 38 of the Companies Act, Protector could not directly or indirectly, give financial assistance for the purpose of, or in connection with the purchase of the shares and that Protector could not in any way give assistance to Freefall to pay the R50 million. [37] Harpur had been the CEO of Glenrand MIB since 1997, which became a listed company on the JSE in June 1998. It is quite clear that Harpur, as an experienced CEO, should have been alerted to a possible contravention of s 38 of the Companies Act. When Seelenbinder pertinently drew Harper’s attention to the possibility of a breach of s 38, Harpur should have investigated the validity of Seelenbinder’s claim that this had been averted by directing the funds through Namibia. At that stage, Financial Services and Harpur should have been aware that Financial Services had been enriched sine causa at the expense of Protector. Financial Services was accordingly obliged to prove that the loss of the enrichment by payment of the dividend to Glenrand MIB was not due to its fault. It is quite clear however, that Financial Services failed to do this and consequently it is obliged to repay the dividend. [38] It seems that the appellants’ alternative argument is that Financial Services was not enriched, because the assets it owned before the sale of shares agreement was concluded, namely the shares in Protector and indirectly the business of Protector, were without value by the time of the action and the shares were the equivalent in value of the payment made. In other words, Financial Services was not enriched, because it was not better off financially, after the invalid sale of the shares. This argument is without merit because it seeks to consider whether Financial Services was enriched, in isolation from a consideration of whether Protector was impoverished by the transaction. A plaintiff’s claim is the amount by which it has been impoverished, or by which the defendant has been enriched, whichever is the lesser.15 Every enrichment action must therefore embrace an enquiry not only into the defendant’s enrichment, but also into the plaintiff’s impoverishment.16 It is quite clear that Protector was impoverished by the payment of the amount of R50 million and that Financial Services was enriched by this amount. The fact that the assets which Financial Services parted with, in terms of the void agreement for the sale of shares, were valueless at the time of the action is irrelevant. In the circumstances, Protector should be successful in its enrichment claim against Financial Services. Claim D – Disposition without value in terms of s 26 of the Insolvency Act [39] It was alleged by the respondents that the payment of R50 million to Financial Services, which payment can be traced back to the banking account of Protector, constitutes a disposition without value within the context of s 26 of the Insolvency Act.17 The disposition took place within two years before the commencement of Protector’s winding-up, which was wound up due to its inability to pay its debts. In the circumstances, Financial Services bore the onus 15 9 Lawsa 2 ed para 209. 16 9 Lawsa 2 ed para 209. 17 Section 26(1) reads: (1) Every disposition of property not made for value may be set aside by the court if such disposition was made by an insolvent- (a) more than two years before the sequestration of his estate, and it is proved that, immediately after the disposition was made, the liabilities of the insolvent exceeded his assets; (b) within two years of the sequestration of his estate, and the person claiming under or benefited by the disposition is unable to prove that, immediately after the disposition was made, the assets of the insolvent exceeded his liabilities: Provided that if it is proved that the liabilities of the insolvent at any time after the making of the disposition exceeded his assets by less than the value of the property disposed of, it may be set aside only to the extent of such excess. to show that, immediately after the disposition was made, the assets of Protector exceeded its liabilities. [40] The uncontested evidence of the appellants’ expert witnesses, Neeraj Shah and Riana Fourie, both chartered accountants, was that at the time of payment of the sum of R50 million into the trust account of ENF on 15 March 2004, the assets of Protector exceeded its liabilities. The guarantees or indemnities furnished by New Protector to Protector against all claims and liabilities did constitute assets of Protector.18 The court a quo misconstrued Shah’s evidence and took into account factors prevailing at a time not material to the enquiry. For these reasons, the finding of the high court in this regard cannot be supported. Counsel conceded, and rightly so, that this claim had not been proved. [41] The following order is made: 1 The appeal of the first appellant is dismissed. 2. The appeal of the second and third appellants is upheld. 3 As against the first, second and third appellant, the judgment of the high court is set aside and replaced with the following: ‘(a) The claim against the fourth and fifth defendants is dismissed with costs. (b) The first defendant is ordered to make payment of the sum of R50 million together with interest at the rate of 15, 5 per cent per annum from 15 March 2004, to date of payment to the plaintiffs. (c) The first defendant is ordered to pay the plaintiffs’ costs.’ 18 Millman & another NNO v Masterbond Participation Bond Trust Managers (Pty) Ltd (Under Curatorship) & others 1997 (1) SA 113 (C) at 123C-D. 4 The respondents are ordered to pay the costs of appeal of the second and third appellants. 5 The first appellant is ordered to pay the costs of appeal of the respondents. 6 The respondents are ordered to pay the costs of appeal of the fourth appellant. __________________ L V THERON JUDGE OF APPEAL ___________________ K SWAIN ACTING JUDGE OF APPEAL Appearances Appellants: WG Van Der Linde (with AO Cook) Instructed by: Norton Rose South Africa, Johannesburg Webbers: Bloemfontein Respondents: PF Rossouw SC Instructed by: De Vries Incorporated, Johannesburg Matsepes Incorporated: Bloemfontein

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 30 November 2012 Status: Immediate Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal. Glenrand MIB Financial Services (Pty) Ltd & others v Theodor Wilhelm van den Heever NO Today the Supreme Court of Appeal (SCA) dismissed an appeal by Glenrand MIB and upheld the appeal of the second and third appellants. This is an appeal from the South Gauteng High Court (Monama J) dealing with misappropriation of money, unjust enrichment, setting aside of a disposition under s 26 of the Insolvency Act 24 of 1936 (the Insolvency Act) and a breach by directors of their fiduciary duties. The appellants appeal to this court with the leave of the high court. The fourth respondent, Protector Group Holdings (Pty) Ltd (In Liquidation), (Protector), was wound up by the high court on 1 December 2004. The first appellant, Glenrand MIB Financial Services (Pty) Ltd, (Financial Services), was a wholly owned subsidiary of Glenrand MIB Ltd (Glenrand MIB). At all relevant times, Financial Services, held 65 per cent of the issued share capital in Protector, while the remaining 35 per cent was held by Protector Group Management Company (Pty) Ltd (PGMC). David Harpur, the second appellant, was a director of Protector, Financial Services and a director, shareholder and chief executive officer of Glenrand MIB Ltd. Allan Mansfield, the third appellant, was a director of Protector and the chairperson of its board of directors, a director of Financial Services and a director, shareholder and chairperson of the board of Glenrand MIB. During 2003, the board of Glenrand MIB decided to dispose of its interests in Protector. Marc Seelenbinder and Leon Janse van Rensburg, sixth and seventh defendants in the court a quo respectively, both directors of Protector and PGMC, made offers to purchase Financial Services’ 65 per cent shareholding in Protector. New Protector and the IDC concluded a loan agreement on 4 March 2004 to enable New Protector to acquire the business of Protector as a going concern. The sale of business agreement was implemented and the business and assets of Protector were transferred to New Protector. The IDC released the funds to New Protector on 5 March 2004. R50m from these funds was paid to Protetcor, but the funds were deviated and ended by being paid by Freefall to Financial Services in respect of the sale of the latter’s shareholding in Protector to Freefall. [The respondents instituted action in the court a quo against Financial Services (first defendant), Glenrand MIB Ltd (second defendant), Freefall (third defendant), Harpur (fourth defendant), Mansfield (fifth defendant), Seelenbinder (sixth defendant) and Janse Van Rensburg (seventh defendant). In the action the respondents claimed, inter alia, payment of various sums of money from the respondents. There were six causes of action pleaded by the respondents, namely: (1) collusive dealings contemplated by s 31 of the Insolvency Act (claim A); (2) unlawful and intentional misappropriation of funds (claim B); (3) unjust enrichment (claim C); (4) an alleged disposition without value liable to be set aside under s 26 of the Insolvency Act (claim D); (5) a fraud perpetrated on the body of creditors of Protector (claim E); (6) breach by certain directors of Protector, namely Harpur, Mansfield, Seelenbinder and Van Rensburg, of their fiduciary duties owed to the company (claim F). The court a quo upheld claims B (misappropriation of money), C (unjust enrichment), D (setting aside of a disposition without value in terms of s 26 of the Insolvency Act) and F (breach of fiduciary duty). It also found against the appellants on the basis of a contravention of s 38 of the Companies Act. The judge granted judgment against Glenrand MIB, Financial Services, Harpur, Mansfield and Van Rensburg. The appellants appeal against the judgment of the court a quo, with the leave of that court. On appeal it was found that claim B (misappropriation of money), claim C (unjust enrichment), claim D (setting aside of a disposition without value in terms of s 26 of the Insolvency Act) and claim F (breach of fiduciary duty) had not been proved. For this reason the appeals by the second and third appellants were upheld. The court further found that Protector was impoverished by the payment of the amount of R50 million and that Financial Services was enriched by this amount. The court also found that the sale of shares agreement between Financial Services and Freefall was not valid therefore the money was transferred from Freefall to Financial Services without a true liability and thus did not interrupt the chain of causation linking Financial Services’ enrichment with Protector’s impoverishment.

3715

non-electoral

2021

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Not Reportable Case no: 1140/2020 In the matter between: FORMER WAY TRADE AND INVEST (PTY) LTD t/a PREMIER SERVICE STATION FIRST APPELLANT LEE BENTZ SECOND APPELLANT and BRIGHT IDEA PROJECTS 66 (PTY) LTD t/a ALL FUELS RESPONDENT Neutral citation: Former Way Trade and Invest (Pty) Ltd t/a Premier Service Station and Another v Bright Idea Projects 66 (Pty) Ltd t/a All Fuels (1140/2020) [2021] ZASCA 175 (14 December 2021) Coram: VAN DER MERWE, MAKGOKA, PLASKET, MBATHA and MABINDLA-BOQWANA JJA Heard: 16 November 2021 Delivered: This judgment was handed down electronically by circulation to the parties’ representatives by email, publication on the Supreme Court of Appeal website and released to SAFLII. The date and time for hand-down of the judgment is deemed to be 10h00 on 14 December 2021. Summary: Contempt of court – requisites for contempt satisfied – wilful disregard of the order and mala fides proved on the part of the appellants – duty to comply with court orders – appeal dismissed. ___________________________________________________________ ORDER ___________________________________________________________ On appeal from: KwaZulu-Natal Division of the High Court, Pietermaritzburg (Govender AJ sitting as court of first instance): The appeal is dismissed with costs. ___________________________________________________________ JUDGMENT ___________________________________________________________ Mbatha JA (Van der Merwe, Makgoka, Plasket and Mabindla- Boqwana JJA concurring): [1] On 22 April 2020, the KwaZulu-Natal Division of the High Court, Pietermaritzburg (the high court) declared the first appellant, Former Way Trade and Invest (Pty) Ltd t/a Premier Service Station, to be in contempt of court. The second appellant, Mr Lee Bentz, as the controlling mind of the first appellant, was committed to prison for that contempt for a period of 30 days wholly suspended on certain conditions. Aggrieved by these orders, the appellants appealed to this Court with the leave of the high court. [2] The background of the matter is as follows. The respondent, Bright Idea Projects 66 (Pty) Ltd t/a All Fuels and the first appellant, became parties to a franchise agreement. In terms thereof, the first appellant operated a Caltex filling station at premises owned by the respondent and with fuel products supplied to it by the respondent. At all times relevant hereto, the second appellant was the sole shareholder and director of the first appellant. During 2017, however, a dispute arose between the parties to the franchise agreement. The respondent took the stance that the franchise agreement would come to an end on 31 December 2017. The first appellant, on the other hand, alleged that a new franchise agreement had been entered into, which conferred on it the right to continue to conduct business on the premises for a period of five years from 1 March 2015, with a right of renewal. [3] The respondent consequently launched an application in the high court for the eviction of the first appellant from the premises. The first appellant, in turn, filed a counter-application in which it sought an order enforcing the alleged new franchise agreement, alternatively a stay of the application pending an arbitration that the first appellant had initiated. The main application and counter-application came before Poyo-Dlwati J on 22 January 2018. Both the litigants were represented by senior counsel. The parties managed to reach an agreement. By consent Poyo-Dlwati J made that agreement an order of court (the consent order). It provided for the postponement of the main application and counter-application and for the filing of further affidavits. [4] Paragraphs 6 and 7 of the consent order provided as follows: ‘6. Pending final determination of the main application and the counter-application: (a) the parties shall conduct themselves as if the franchise agreement remains of full force and effect and comply with their respective obligations as defined in the franchise agreement; (b) the Respondent shall source all of its petroleum products from the Applicant, who shall, in turn, supply same to the Respondent. (It is recorded that the Respondent had placed a further order with Fueltech, on 19 January 2018, and agreed that the aforegoing shall not apply to the execution of that order). 7. It is recorded that the Respondent’s consent to this order is granted without prejudice to the Respondent’s defences raised in its answering affidavits, including its claim to a stay of these proceedings pending determination by arbitration either in terms of Section 12B of the Petroleum Products Act, 1977, and/or the franchise agreement.’ [5] For the period commencing on 22 January 2018 to 27 July 2019, the appellants complied with the terms of the consent order. On 24 July 2019, the attorneys for the appellants addressed a letter to the respondent’s attorneys stating that whilst being aware of the pending litigation and arbitration proceedings between the parties, the first appellant was aggrieved by the alleged gross overcharging for supplies and failure by the respondent to follow the industry guidelines in respect of pricing. The appellants’ attorneys intimated that the first appellant would source supplies at better prices elsewhere and that they had advised their client to go ahead and do so. They further stated that the respondent must by no later than the close of business on Friday, 26 July 2019 table to them and for their client’s consideration a decent proposal. [6] On 24 July 2019, in reply to their letter the respondent’s attorneys reminded the appellants’ attorneys that the consent order obliged the first appellant to procure all petroleum products from the respondent and attached a copy of the order for their attention. The respondent’s attorneys further pointed out that the first appellant’s intended course of action would amount to contempt of court. [7] The first appellant attorneys’ response, dated 25 July 2019, was as follows: ‘Unfortunately, we: 1. Firstly, do not agree that the order is good and/or valid or capable of implementation since no binding “contract” can exist without a price. 2. Secondly, we do not see that our directive to your client to comply with ‘lawful’ pricing as opposed to unilaterally imposed prices violates the order as it must be implied that the prices underlying paragraph 6 of the order have to be in accordance with industry standards if there are any.’ In response thereto, the first appellant’s attorneys were reminded by the respondent’s attorneys that the order which obliged the first appellant to purchase petroleum products from the respondent was taken by consent. The correspondence ended with a sound warning to this effect: ‘I trust that you have advised your client of the consequences of the breach of a High Court order.’ [8] Despite the tense exchange of letters the first appellant placed an order for petroleum products on 25 July 2019, which were delivered and paid for by the first appellant on 29 July 2019. Unexpectedly, on 30 July 2019, the first appellant’s attorneys emailed a letter to the respondent stating that no further orders will be placed with the respondent until it responded fully to its letter of 24 July 2019. It is common cause that the first appellant proceeded to source various petroleum products from other distributors and sold those products from the premises of the respondent, using the respondent’s equipment and brand name, Caltex. [9] By that time, the main application and counter-application had not been finally determined. Therefore, the respondent approached the high court on an urgent basis for a rule nisi operating as an interim interdict. It cited the first and second appellants as the first and second respondents respectively. On 21 August 2019 Bezuidenhout J issued a rule nisi calling upon the appellants to show cause why the following order should not be made final: ‘2.1 THAT the first respondent is declared to be in contempt of court in failing to comply with paragraph 6 of the order (“the order”) granted by the Honourable Madam Justice Poyo Dlwati on 22 January 2018 under case number 283/2018 P; 2.2 THE second respondent be committed to prison for such period as this Honourable Court may determine for the first respondent’s contempt of paragraph 6 of the order granted by the Honourable Madam Justice Poyo Dlwati on 22 January 2018 under case number 283/2018 P; 2.3 THAT the first respondent is interdicted and restrained from conducting the business of a fuel retail service station as Caltex Premier Service Station (alternatively any other fuel retail service station, from the premises described as Sub 27 of Lot 2725, Pietermaritzburg Administrative District of Natal, Province of KwaZulu-Natal and situated at 238 Albert Luthuli Street, Pietermaritzburg, KwaZulu-Natal) on any basis other than sourcing all its fuel from the applicant in compliance with paragraph 6 of the order of this court granted on 22 January 2018 under the present case number; 2.4 IN the event of the first and second respondents failing to comply with the provisions of paragraph 2.3 above, then . . . the first respondent is interdicted and restrained from conducting the business of a fuel retail service station as Caltex Premier Service Station alternatively any other fuel retail service station, from the premises described as Sub 27 of Lot 2725, Pietermaritzburg Administrative District of Natal, Province of KwaZulu-Natal and situated at 238 Albert Luthuli Street, Pietermaritzburg, KwaZulu-Natal; 2.5 IN the event of the first and second respondents failing to comply with either of the provisions of paragraph 2.3 or 2.4 above, . . . the Sheriff or his duly authorised representative/s is authorised to do all things necessary to give effect to paragraphs 2.3 or 2.4 above; 2.6 THAT the first and second respondents are ordered to pay the costs of this application, jointly and severally the one paying the other to be absolved, on an attorney and own client scale . . .’ He also ordered that paras 2.3 and 2.4 of the rule nisi operate as an interim interdict with immediate effect, pending the finalisation of the application. [10] On the extended return date, K Govender AJ confirmed the rule nisi. As I have said, the order committed the second appellant to prison for a period of 30 days, wholly suspended on condition that the first appellant complies fully with the consent order. [11] Before I deal with the issues raised on appeal, it is appropriate that I briefly set out the law on contempt of court proceedings. This Court in Fakie N O v CCII Systems (Pty) Ltd [2006] ZASCA 52; 2006 (4) SA 326 (SCA), among others, found that the contempt of court proceedings has survived constitutional scrutiny and is a necessary tool to enforce compliance of court orders. To be successful in contempt of court proceedings the applicant needs to prove the existence of an order; service or notice thereof; non-compliance; wilfulness and mala fides beyond any reasonable doubt. Once the first three requisites are established, the respondent bears the evidential burden in relation to wilfulness and mala fides. If he or she fails to advance evidence that establishes a reasonable doubt as to whether non-compliance was wilful or mala fide, contempt would have been established beyond a reasonable doubt. [12] In Pheko and Others v Ekurhuleni City (II) [2015] ZACC 10; 2015 (5) SA 600 (CC) para 1, the Constitutional Court stated as follows: ‘The rule of law, a foundational value of the Constitution, requires that the dignity and authority of the courts be upheld. This is crucial, as the capacity of the courts to carry out their functions depends upon it. As the Constitution commands, orders and decisions issued by a court bind all persons to whom and organs of state to which they apply, and no person or organ of state may interfere, in any manner, with the functioning of the courts. It follows from this that disobedience towards court orders or decisions risks rendering our courts impotent and judicial authority a mere mockery. The effectiveness of court orders or decisions is substantially determined by the assurance that they will be enforced.’ The court emphasised that when a court order is disobeyed, not only the person named or party to the suit but all those, with knowledge of the order, aided and abetted the disobedience or wilfully are party to the disobedience are liable.1 [13] It was common cause or undisputed that the appellants had knowledge of the consent order. As I have demonstrated, it was also common cause that the second appellant caused the first appellant to disobey the consent order by sourcing petroleum products from other 1 Pheko and Others v Ekurhuleni City (II) [2015] ZACC 10; 2015 (5) SA 600 (CC) para 47; Twentieth Century Fox Fil Corporation and Others v Playboy Films (Pty) Ltd and Another 1978 (3) SA 202 (W) at 203. suppliers than the respondent. The appellants raised only two points on appeal, namely, first, that the consent order was ‘inchoate and incapable of implementation’ and second, in the alternative, that the non-compliance with the consent order had not been wilful. [14] The first point was based on the contention that the franchise agreement was unenforceable or invalid because it did not state prices for the fuel products nor provided for a method of determination thereof. Clause 6.3 of the franchise agreement provided: ‘The FRANCHISEE will pay CALTEX the CALTEX invoice price for all CALTEX products sold by Caltex to it under the contract’. With reference to Shell SA (Pty) Ltd v Corbitt and Another 1986 (4) SA 523 (C) at 526, the high court held that the franchise agreement had allowed the respondent to charge its usual, normal or current prices and that therefore the prices were determinable. Save for pointing out that it was not appropriate to interpret the clause of the franchise agreement without having regard to its context, it is not necessary to determine whether this approach was correct. [15] This is so because the consent order created self-standing obligations. In its contextual setting the consent order clearly provided that pending the final determination of the main application and counter- application and without prejudice to the first appellant’s rights, the appellants would continue to operate a Caltex filling station as before, that is, as if the franchise agreement remained of full force and effect. Thus, as an interim measure, the first appellant was bound not only to source all the petroleum products from the respondent, but also to pay the invoiced prices for these products, as it had done since 2015. [16] To the extent that the appellants might have intended to say that the first appellant’s conduct had not been mala fide, they carried the burden to adduce evidence that created a reasonable doubt as to whether the first appellant had in good faith believed that it was entitled to source petroleum products from other suppliers than the respondent. In the light of the circumstances under which the consent order was made, the compliance with it from January 2018 to July 2019 and the contents of the correspondence referred to above, their evidence did not raise a reasonable doubt as to the first appellant’s mala fides. The second point can be briefly disposed of. The non-compliance with the consent order was clearly deliberate, that is wilful. The appeal must therefore fail. [17] Before I conclude, I am constrained to comment on the decision of the high court to grant leave to appeal to this Court. Section 17(6)(a) of the Superior Courts Act 10 of 2013 reads as follows: ‘(6)(a) If leave is granted under subsection (2)(a) or (b) to appeal against a decision of a Division as a court of first instance consisting of a single judge, the judge or judges granting leave must direct that the appeal be heard by a full court of that Division, unless they consider – (i) that the decision to be appealed involves a question of law of importance, whether because of its general application or otherwise, or in respect of which a decision of the Supreme Court of Appeal is required to resolve differences of opinion; or (ii) that the administration of justice, either generally or in the particular case, requires consideration by the Supreme Court of Appeal of the decision, in which case they must direct that the appeal be heard by the Supreme Court of Appeal.’ [18] Thus, ordinarily, leave to appeal against a decision of a single Judge of a division of the high court should be granted to the full court of the relevant division. Leave to this Court should only be given after the Judge is satisfied that the requirements of (i) and (ii) of s 17(6)(a) are satisfied. In the present case, it is not clear whether these provisions were considered when granting leave to this Court. The appeal involves no question of law of importance. There are no differences of opinion to be resolved by this Court. There is no suggestion that the administration of justice, either generally or in this case, requires consideration by this Court. On these considerations, if the high court was minded to grant leave, it should have granted it to the full court, and not to this Court. [19] In the result, the following order is made: The appeal is dismissed with costs. ________________________ Y T MBATHA JUDGE OF APPEAL Appearances: For appellants: B G Savvas Instructed by: K Swart & Company c/o Stowell & Company, Pietermaritzburg Honey Attorneys, Bloemfontein. For respondent: D Ramdhani SC Instructed by: Norton Rose Fulbright South Africa Inc., c/o Venns Attorneys, Pietermaritzburg Webbers Attorneys, Bloemfontein.

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 14 DECEMBER 2021 Status: Immediate The following summary is for the benefit of the media in the reporting of this case and does not form part of the judgments of the Supreme Court of Appeal Former Way Trade and Invest (Pty) Ltd t/a Premier Service Station and Another v Bright Idea Projects 66 (Pty) Ltd t/a All Fuels (1140/2020) [2021] ZASCA 175 (14 December 2021) Today the Supreme Court of Appeal (SCA) handed down judgment dismissing the appeal against and order of the KwaZulu-Natal Division of the High Court, Pietermaritzburg (the high court), which held the first appellant, Former Way Trade and Invest (Pty) Ltd t/a Premier Service Station, in contempt of court and committed the second appellant, Mr Lee Bentz, to a suspended term of imprisonment. Bright Idea Projects 66 (Pty) Ltd t/a All Fuels (the respondent), and the first appellant became parties to a franchise agreement. In terms thereof, the first appellant operated a Caltex filling station at premises owned by the respondent and with fuel products supplied to it by the respondent. At all times relevant hereto, the second appellant, was the sole shareholder and director of the first appellant. During 2017, however, a dispute arose between the parties to the franchise agreement. The respondent took the stance that the franchise agreement would come to an end on 31 December 2017. The first appellant, on the other hand, alleged that a new franchise agreement had been entered into which conferred on it the right to continue to conduct business on the premises for a period of five years from 1 March 2015, with a right of renewal. The respondent consequently launched an application in the high court for the eviction of the first appellant from the premises. The first appellant, in turn, filed a counter-application in which it sought an order enforcing the alleged new franchise agreement, alternatively a stay of the application pending an arbitration that the first appellant had initiated. The main application and counter-application came before Poyo-Dlwati J on 22 January 2018. The parties managed to reach an agreement. By consent, Poyo-Dlwati J made that agreement an order of court (the consent order). It provided that the parties shall conduct themselves as if the franchise agreement remains of full force and effect and comply with their respective obligations. Furthermore, the consent order provided that the first appellant shall source all its petroleum product from the respondent. However, after July 2019, the first appellant proceeded to source various petroleum products from foreign distributors and dispensed them from the premises of the respondent, using the respondent’s equipment and brand name, Caltex. As a result, the respondent approached the high court on an urgent basis for a rule nisi operating as an interim interdict. The rule nisi inter alia called upon the first appellant to show cause why it should not be held in contempt of the consent order. The high court subsequently confirmed the rule nisi and committed the second appellant to prison for a period of 30 days, wholly suspended on condition that the first appellant complies with the consent order. The SCA held that the consent order clearly provided that pending the final determination of the main application and counter-application and without prejudice to the first appellant’s rights, it would continue to operate a Caltex filling station as before, that is as if the franchise agreement remained of full force and effect. Thus, as an interim measure, the first appellant was bound not only to source all the requirements in respect of petroleum products from the respondent, but also to pay the invoiced prices for these products, as it had done since 2015. Furthermore, the SCA held that it is not in the interest of the litigants and the courts to bring an appeal to the SCA which does not involve an important question of law or requires consideration by this Court. This was such a matter and it should have been referred to the full court. ~~~~ends~~~~

2678

non-electoral

2014

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Reportable Case No: 437/13 In the matter between: THE MINISTER OF SAFETY AND SECURITY N.O. FIRST APPELLANT THE DIRECTOR OF PUBLIC PROSECUTIONS N.O. SECOND APPELLANT and LEONARD CHARLES SCHUBACH RESPONDENT Neutral citation: Minister of Safety and Security NO v Schubach (437/13) [2014] ZASCA 216 (1 December 2014) Coram: Navsa ADP, Shongwe, Zondi JJA and Schoeman and Meyer AJJA Heard: 14 November 2014 Delivered: 1 December 2014 Summary: Malicious prosecution – what plaintiff must prove – plaintiff prosecuted on a number of charges including those for which there was no basis – assessment of damages – Prosecuting Authority – Powers and duties – s 42 of National Prosecuting Authority Act 32 of 1998 not applicable where powers unlawfully exercised. ___________________________________________________________________ ORDER ___________________________________________________________________ On appeal from: North Gauteng High Court, Pretoria (Kruger AJ sitting as court of first instance): 1. The appeal is upheld to the extent reflected in the orders that follow. 2. The respondent is ordered to pay the appellants‟ costs of the appeal, including the costs of two counsel. 3. The order of the court below is set aside and replaced with the following order: „(a) The first and second defendants are ordered jointly and severally, the one paying the other to be absolved, to pay the plaintiff a sum of R10 000. (b) The first and second defendants are ordered to pay interest at the rate of 15.5 per cent a tempore morae from date of summons to date of payment. (c) The first and second defendants are ordered jointly and severally, the one paying the other to be absolved, to pay the plaintiff‟s costs of suit.‟ JUDGMENT Zondi JA (Navsa ADP, Shongwe JA and Schoeman and Meyer AJJA concurring): [1] This is an appeal against the judgment and order of the North Gauteng High Court, Pretoria (Kruger AJ) upholding the respondent‟s claim arising from an alleged malicious prosecution and awarding him damages. The appeal is with the leave of that court. [2] The respondent, Mr Leonard Charles Schubach, held the rank of Colonel in the South African Police Service. He was the commanding officer of the Escort Unit of the SAPS, which unit was responsible for escorting money for the South African Reserve Bank to various destinations in the country. As a result of information received from an informer various firearms and ammunition including weapons owned by the respondent, his wife and third parties as well as flares or explosives used by members of the SAPS for operational purposes were found in a walk-in safe at the offices of the Escort Unit on 14 March 2005 over which the respondent exercised control. The weapons, ammunition and explosives were seized and the respondent was arrested for the unlawful possession of firearms and ammunition despite his explanation that the firearms and ammunition found were all licensed and owned by either him, his wife or third parties for whom they were kept in safe custody and that the rest of the weapons and explosives were either found or owned by the SAPS. [3] Notwithstanding his explanation, the respondent was arrested for the unlawful possession of all the firearms and ammunition and was detained at Pretoria Central Police Station until 15 March 2005. On that date the respondent appeared in court where he was released on R3000 bail. In due course the second appellant, the Director of Public Prosecutions (DPP), charged the respondent with possession of unlicensed firearms and ammunition, prohibited firearms and explosives in contravention of the Firearms Control Act.1 The respondent made representations to the DPP in an attempt to persuade the DPP not to prosecute him. [4] In the representations the respondent contended that his possession of the following set of firearms was not unlawful: 4.1 A firearm which had been issued to him by his employers, the South African Police Service (SAPS), as a service firearm; 4.2 Firearms which were licensed to him and to his wife; 4.3 Firearms which were recovered by members of the police diving unit in Roodeplaat Dam and kept in a police safe pending investigation; 4.4 Firearms which he had kept in the police safe on behalf of his friend, Mr van der Merwe, who had bought them from Mr Storm; and 4.5 Weapons which he held in safe custody for his friend, Mr Kruger, who owned a security company. These weapons were to be collected from him in due course by Mr Kruger‟s business associate. [5] The DPP considered the respondent‟s representations and on the basis of his explanation decided not to prosecute him on charges relating to his own and wife‟s firearms. The DPP added a charge against the respondent relating to the explosives that were also found in the safe. At the same time the DPP instructed the Senior Public Prosecutor not to charge the respondent for firearms in respect of which he and his wife held licences and to forward the explosives to the forensic laboratory for analysis before the commencement of the trial. But the DPP‟s instruction was ignored and the respondent was nevertheless prosecuted also in respect of the firearms owned by him or his wife that were licensed. In due course the respondent was arraigned at the Pretoria Regional Court, but was acquitted of all the charges. [6] The respondent instituted action in the North Gauteng High Court against the appellants for damages sustained as a result of what was alleged to be an unlawful arrest and malicious prosecution. The basis for his claim against the first appellant, the Minister of Safety and Security (the Minister), was that the arresting police officers wrongfully and maliciously laid false charges against him, first by providing false information that he was in unlawful possession of prohibited firearms, ammunition and explosives; secondly, by falsely representing that he was not authorised to be in possession of the firearms, ammunition and explosives; and thirdly, by falsely representing that he was unlawfully in possession of his own and service firearms. [7] The allegations underpinning the damages claim against the DPP are that „[d]ie lede in diens van die Tweede Verweerder het geen gronde gehad om te glo dat die 1 Firearms Control Act 60 of 2000. besonderhede verskaf deur die Eerste Verweerder die waarheid is nie‟. When the trial commenced in the court below the respondent abandoned his claim for damages for unlawful arrest and detention against the Minister, but persisted with his claim against the DPP and the Minister in respect of the malicious prosecution. [8] Kruger AJ who heard the matter found that the prosecution of the respondent on the charges relating to the possession of explosives, his service pistol and the firearms and ammunition owned by him or his wife was not based on reasonable and probable cause and was malicious. [9] In relation to the balance of the charges, namely those relating to the firearms which the respondent kept for safe keeping on behalf of Mr van der Merwe and Mr Kruger, and those which were recovered from a nearby dam, Kruger AJ found that there was a reasonable and probable cause to prosecute him on those charges and that the prosecution was not malicious. [10] With regard to the amount of damages, Kruger AJ awarded the respondent R120 000 for general damages and R93 000 for the legal costs he had incurred in defending the legal proceedings terminated in his favour. He ordered the appellants jointly and severally, the one paying the other to be absolved, to pay the respondent for the damages and costs of suit. The appellants appeal against the findings and the order of Kruger AJ as set out above. [11] The requirements for a successful claim for malicious prosecution as set out by this Court in Minister for Justice and Constitutional Development v Moleko [2008] 3 All SA 47 (SCA) para 8 were restated in Rudolph & others v Minister of Safety and Security & another 2009 (5) SA 94 (SCA) para 16: „(a) that the defendants set the law in motion (instigated or instituted the proceedings); (b) that the defendants acted without reasonable and probable cause; (c) that the defendants acted with malice (or animo injuriandi); and (d) that the prosecution has failed.‟ See also Moaki v Reckitt & Colman (Africa) Ltd 1968 (3) SA 98 (A); Relyant Trading (Pty) Ltd v Shongwe [2007] 1 All SA 375 (SCA). [12] It is not in dispute in this matter that the DPP instituted the criminal proceedings against the respondent and that those proceedings were terminated in his favour (Thompson v Minister of Police 1971 (1) SA 371 (E)). What the DPP challenged is the court below‟s finding that its decision to prosecute the respondent on some of the charges was without reasonable cause and malicious. Counsel for the DPP submitted that the court below erred in its finding that the DPP‟s decision to prosecute the respondent on those charges was malicious, but not malicious on others. He argued that, as the decision to prosecute constitutes a single intent and a single act, its reasonableness had to be evaluated in its entirety, and it was thus wrong to conduct such an evaluation separately since it is inconceivable that the prosecutor would have a malicious intent for one set of charges and not for the other; he either has malicious intent (animo injuriandi) or not. [13] I disagree with the DPP‟s contention. The set of charges are discrete and have to be considered separately in determining the absence of reasonable and probable cause. Considerations pertaining to the one set of charges cannot be transposed onto the other. In other words, the fact that there was a reasonable and probable cause to prosecute on one set of charges has no effect on the outcome of the enquiry in relation to the other set of charges. This is so, because the question whether reasonable grounds for the prosecution exist is answered only by reference to the facts of each case. [14] This Court in Beckenstrater v Rottcher and Theunissen 1955 (1) SA 129 (A) at 136A-B set out the test for „absence of reasonable and probable cause‟ as follows: „When it is alleged that a defendant had no reasonable cause for prosecuting, I understand this to mean that he did not have such information as would lead a reasonable man to conclude that the plaintiff had probably been guilty of the offence charged; if, despite his having such information, the defendant is shown not to have believed in the plaintiff‟s guilt, a subjective element comes into play and disproves the existence, for the defendant, of reasonable and probable cause.‟ [15] The test contains both a subjective and objective element which means that there must be both actual belief on the part of the prosecutor and that that belief must be reasonable in the circumstances (J Neethling, JM Potgieter & PJ Visser Neethling’s Law of Personality (2 ed, 2005) at 176). [16] It is common cause that there was no probable cause to prosecute the respondent on the charges relating to the firearms and ammunition for which he and his wife had licences because the DPP had given instructions that those charges had to be withdrawn. The prosecution on these charges was malicious. [17] With regard to the charges relating to explosives and a service pistol, Ms Meintjies, who testified for the DPP, explained in relation to the former that „daardie klagte was aanvanklik nie gestel nie, maar by heroorweging het Mnre Mashile and Ngobeni besluit maar daar moet so „n klagte wees en ek kon nie daarmee fout vind nie‟, and secondly she reasoned that the fact that the respondent had these items in the same safe as other items was sufficient for her to conclude that there was unlawful possession. It is difficult to understand her first explanation having regard to the fact that she had, on 2 October 2006, instructed the Senior Public Prosecutor to send the explosives „to forensic science laboratory for forensic report before the commencement of the trial‟ and her evidence was that she had no knowledge of what happened thereafter because she did not follow it up. Moreover Mr Hartell‟s statement (the arresting officer), which I assume formed part of the material placed before the DPP on the basis of which a decision to prosecute was taken, makes no reference to the explosives. There is a reference to explosives in a statement in the docket, but it is not clear if it had anything to do with his decision to arrest the respondent. All that he said in his statement is that he arrested the respondent „for being unlawfully in possession of firearms and ammunition‟. Neither of them testified in the court below. [18] Ms Meintjies‟ latter explanation goes to show that there was no reasonable and probable cause to prosecute the respondent, bearing in mind that the explosives and the service pistol were found in a police safe and are used by the police. In these circumstances there can be no basis for the contention that the DPP‟s decision to prosecute the respondent on those charges was based on reasonable and probable cause. Also the court below‟s conclusion that the respondent‟s prosecution on those charges was malicious cannot be faulted. The ineluctable inference to be drawn is that those responsible for initiating the prosecution against the respondent on the charges under consideration were aware of what they were doing in initiating the prosecution and foresaw the possibility that they were acting wrongfully, but they nevertheless acted, reckless as to the consequences of their conduct (dolus eventualis). See: Rudolph & others v Minister of Safety and Security & another 2009 (5) SA 94 (SCA) para 18. [19] In its heads of argument the DPP raised, and relied on, s 42 of the National Prosecuting Authority Act 32 of 1998 (the Act) as the basis for its denial that its prosecution of the respondent was malicious. This section provides that „[n]o person shall be liable in respect of anything done in good faith‟ under the Act. The DPP‟s argument therefore was that, since the Senior Public Prosecutor acted in good faith in prosecuting the respondent, he cannot be liable for the damages suffered by the respondent. It was contended that this section creates a legal immunity in favour of a person who in good faith exercises a power conferred under the Act even in cases where that person is negligent. This argument was not raised in the appellant‟s pleadings, but was only raised when the application for leave to appeal was made. It was not persisted with in oral argument before us. [20] In my view, s 42 does not protect the officials of the National Prosecuting Authority who in the performance of their duties under the Act exercise act maliciously from civil liability. The s 42 defence relates to a bona fide mistake. In the instant matter the DPP‟s decision to prosecute the respondent on some of the charges was malicious, which conduct by its very nature negates bona fide. The DPP‟s s 42 defence must therefore fail. Furthermore, it has not been established that the prosecutors involved in this matter have taken all reasonable precautions to avoid or minimize injury to the appellant and the DPP‟s s 42 defence must therefore fail. In The Minister of Justice and Constitutional Development v X (196/13) [2014] SASCA 129 (23 September 2014) para 52, Fourie AJA said the following: „Returning to s 42 of the NPA Act and in view of the principles outlined above, it has to be borne in mind that, in terms of s 20 of the NPA Act, the prosecuting authority and accordingly also the prosecutor involved in this matter are clothed with the statutory power to institute and conduct criminal proceedings and matters incidental thereto on behalf of the State. Where s 42 refers to “anything done . . . under this Act”, it by necessary implication refers to the powers conferred in terms of s 20 of the NPA Act. A prosecutor exercising this power and wishing to avail him or herself of the immunity afforded by s 42 is required to show that he or she acted within the authority conferred by the power in question, which, in turn, requires him or her to have taken all reasonable precautions to avoid or minimize injury to others. A failure to do so would render his or her conduct unlawful and the reliance on s 42 of the NPA Act would therefore fail.‟ [21] With regard to damages, there is no doubt that the respondent was entitled to damages for both injury to personality and pecuniary loss suffered (Law v Kin [1966] 3 All SA 84 (W); 1966 (3) SA 480 (W) at 483), but the question is whether the amount of damages awarded to him was justified. The former are awarded as a solatium under the action injuriarum, while the latter constitute compensation under the actio legis aquilia. [22] As regards the quantum of damages the court below awarded damages in the amount of R120 000 for injury to the respondent‟s personality rights and R93 000 for the legal costs he incurred in defending the criminal proceedings in the regional court and seeking the setting aside in the high court of the first appellant‟s decision to suspend him without pay. Counsel for the DPP contended that the damages awarded were excessive having regard to the fact that the respondent abandoned his claim for damages arising out of unlawful arrest and detention, that his criminal trial in any event proceeded in respect of the charges for which there was reasonable and probable cause to prosecute and furthermore that there was no evidence to support his claim for R93 000. I agree with the DPP‟s counsel. An amount of R93 000 for legal costs should not have been awarded in the absence of proof that those costs were in fact incurred. The evidence adduced by the respondent in support of that claim is very vague, flimsy and devoid of substance. Although the respondent claimed to have spent R93 000 on legal costs he admitted that „ek het geen bewyse daarvoor nie‟. In any event it is unknown how much of the legal costs he allegedly expended related to that part of the case in respect of which there was probable cause to prosecute and in relation to representation connected to his challenge in the high court against his suspension from his duties as a police officer. [23] As regards the award of R120 000 the court below, in my view, erred in failing in its assessment of damages to take into account the fact that the respondent‟s prosecution on charges relating to the other weapons was based on reasonable and probable cause and not malicious. In other words, the infringement of the respondent‟s rights was not wrongful as his prosecution on those charges was based on reasonable grounds. The appellant would in any event have been arrested in respect of the charges for which there was probable cause, spent time in custody and faced the prosecution. These facts were ignored by the court below. The damages were thus assessed at an amount too generous. A reasonable amount in my view would be an amount of R10 000. [24] In the result I make the following order: 1. The appeal is upheld to the extent reflected in the orders that follow. 2. The respondent is ordered to pay the appellants‟ costs of the appeal, including the costs of two counsel. 3. The order of the court below is set aside and replaced with the following order: „(a) The first and second defendants are ordered jointly and severally, the one paying the other to be absolved, to pay the plaintiff a sum of R10 000. (b) The first and second defendants are ordered to pay interest at the rate of 15.5 per cent a tempore morae from date of summons to date of payment. (c) The first and second defendants are ordered jointly and severally, the one paying the other to be absolved, to pay the plaintiff‟s costs of suit.‟ ______________ D H Zondi Judge of Appeal Appearances For the Appellants: E M Coetzee SC (with him Marisa Barnard) Instructed by: State Attorney, Pretoria State Attorney, Bloemfontein For the Respondent: G C Muller SC Instructed by: Du Toit Attorneys, c/o Opperman Attorneys, Pretoria Honey & Partners, Bloemfontein

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 1 December 2014 Status: Immediate Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal. The Minister of Safety and Security v Schubach (437/13) [2014] ZASCA 216 (1 December 2014) The Supreme Court of Appeal (SCA) today delivered a judgment partially upholding the appeal by the appellants, the Minister of Safety and Security and the Director of Public Prosecutions against the judgment of the North Gauteng High Court, Pretoria. The issues before the SCA were whether the respondent’s prosecution by the second appellant was malicious and if so, whether the amount of damages awarded to the respondent was correctly assessed. The respondent’s claim arose in the following circumstances: The respondent, a former colonel in the South African Police, was on 14 March 2005 arrested for being in possession of unlicensed firearms, ammunition and explosives. Some of those firearms belonged to him and his wife, some were kept by him for investigation and others he kept for safekeeping on behalf of his friends. He was charged and in due course appeared in the Regional Court, Pretoria, but he was acquitted of all of the charges. Thereafter the respondent sued the Minister of Safety and Security and the Director of Public Prosecutions contending that his arrest and detention by the police officers was unlawful and that his prosecution was malicious. The high court found that the Director of Public Prosecutions should not have prosecuted the respondent on charges relating to the firearms and ammunition for which he and his wife had licences and accordingly found that the Director of Public Prosecutions had failed to show that its prosecution of the respondent on those charges was based on reasonable and probable cause. It found, however, that there was a reasonable and probable cause to prosecute the respondent on the other charges and that his prosecution on those charges were thus not malicious. The SCA was in agreement that the Director of Public Prosecutions’ decision to prosecute the respondent on charges relating to the firearms and ammunition for which he and his wife had licences was malicious. The SCA held, however, that the high court had erred in awarding him damages for the legal costs he alleged he had incurred in defending the criminal proceedings which were terminated in his favour as there was no proof that he had in fact incurred those costs. With regard to the amount awarded to the respondent for general damages the SCA held that the high court had incorrectly assessed the damages suffered by the respondent by ignoring the fact that his prosecution on the other charges was reasonable and therefore not malicious. The SCA accordingly reduced the amount of damages.

1865

non-electoral

2011

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Case No: 422/10 Of precedential significance only in parts In the matter between: THE PUBLIC PROTECTOR Appellant and MAIL & GUARDIAN LIMITED First Respondent FERIAL HAFFAJEE Second Respondent STEFAANS BRÜMMER Third Respondent SAM SOLE Fourth Respondent Neutral citation: The Public Protector v Mail & Guardian Ltd (422/10) [2011] ZASCA 108 (1 JUNE 2011) Coram: NUGENT, PONNAN, SNYDERS and TSHIQI JJA and PLASKET AJA Heard: 12 MAY 2011 Delivered: 1 JUNE 2011 Summary: Public Protector – investigation and report – whether properly conducted – set aside on review _______________________________________________________________ ORDER _______________________________________________________________ On appeal from: North Gauteng High Court, Pretoria (Poswa J sitting as court of first instance): Paragraphs 2 and 3 of the order of the court below are set aside. Save for that, the appeal is dismissed with costs. ________________________________________________________________ JUDGMENT ________________________________________________________________ NUGENT JA (PONNAN, SNYDERS and TSHIQI JJA and PLASKET AJA concurring) [1] About six years ago a series of articles was published, over some weeks, in a national weekly newspaper known as the Mail & Guardian (M&G). The series revealed various transactions and events that the newspaper called ‘Oilgate’. The articles were written in collaboration between two journalists employed by the newspaper, Mr S Brümmer (the third respondent) and Mr S Sole (the fourth respondent), in some cases also with the collaboration of Mr Wisani wa ka Ngobeni (who is not a party to these proceedings). There can be no gainsaying that the revelations that were made in the articles raised matters of profound public importance if they were true. When the first article appeared the matter was raised in the National Assembly and a member of that body asked the Public Protector to conduct an investigation. As the story unfolded over the following weeks the leader of the official opposition in parliament asked the Public Protector on two occasions to expand his investigation to include the further revelations. The Public Protector acceded to the requests and produced a report within a short time. He called a press conference when he released the report, which he said had been necessitated by the importance and enormity of the matter. A spokesman in his office expressed the opinion that it had been the second most important investigation that had been conducted by the Public Protector. The report was tabled in the National Assembly, where it evoked some debate, and it was adopted by a majority of its members. [2] At the time that is relevant to this appeal the incumbent of the office of the Public Protector was Adv M Mushwana. He was assisted in his investigation by the head of special investigations in his office, Adv C Fourie. Although Adv Fourie undertook much of the work, both say that he did so in close consultation with Adv Mushwana, who properly accepts responsibility for the report. [3] Promptitude by public functionaries is ordinarily meritorious, but not where that is at the cost of neglecting the task. The promptitude in this case is explained by the paucity of the investigation. A large part of the report was taken up with explaining why much of what had been placed before the Public Protector fell outside his investigatory mandate, and what remained after that had been excised was decidedly narrow. The approach to the investigation narrowed it even more, and the investigation of the remnants was undertaken as little more than a formality. The Public Protector nonetheless concluded that there had been no impropriety on the part of any of the various functionaries and entities concerned and that is what he reported. [4] The proprietor of the M&G (Mail & Guardian Limited, the first respondent), its then editor (Ms F Haffajee, the second respondent), and the two journalists, brought review proceedings against the Public Protector in the North Gauteng High Court. They asked for orders setting aside the report and ordering the Public Protector to investigate and report afresh. The orders were granted by Poswa J and the Public Protector now appeals against them with the leave of the learned judge. [5] The Constitution1 upon which the nation is founded is a grave and solemn promise to all its citizens. It includes a promise of representative and accountable government functioning within the framework of pockets of independence that are provided by various independent institutions. One of those independent institutions is the office of the Public Protector. [6] The office of the Public Protector is an important institution. It provides what will often be a last defence against bureaucratic oppression, and against corruption and malfeasance in public office that is capable of insidiously destroying the nation. If that institution falters, or finds itself undermined, the nation loses an indispensable constitutional guarantee. [7] The constitutional mandate and duty of the Public Protector is stated by implication in the powers that are recited in s 182 of the Constitution: ‘(1) The Public Protector has the power, as regulated by national legislation – (a) to investigate any conduct in state affairs, or in the public administration in any sphere of government, that is alleged or suspected to be improper or to result in any impropriety or prejudice; (b) to report on that conduct; and (c) to take appropriate remedial action. 1 The Constitution of the Republic of South Africa, 1996. (2) The Public Protector has the additional powers and functions prescribed by national legislation.’ [8] The office of the Public Protector is declared by the Constitution to be one that is independent and impartial, and the Constitution demands that its powers must be exercised ‘without fear, favour or prejudice’.2 Those words are not mere material for rhetoric, as words of that kind are often used. The words mean what they say. Fulfilling their demands will call for courage at times, but it will always call for vigilance and conviction of purpose. [9] The national legislation that is referred to in s 182 is the Public Protector Act 23 of 1994. The Act makes it clear that while the functions of the Public Protector include those that are ordinarily associated with an ombudsman3 they also go much beyond that. The Public Protector is not a passive adjudicator between citizens and the state, relying upon evidence that is placed before him or her before acting. His or her mandate is an investigatory one, requiring pro- action in appropriate circumstances. Although the Public Protector may act upon complaints that are made, he or she may also take the initiative to commence an enquiry, and on no more than ‘information that has come to his or her knowledge’ of maladministration, malfeasance or impropriety in public life.4 [10] The Act repeats in greater detail the constitutional jurisdiction of the Public Protector over public bodies and functionaries and it also extends that jurisdiction to include other persons and entities in certain circumstances. In broad terms, the Public Protector may investigate, amongst other things, any 2 Section 181(2). 3 Concise Oxford Dictionary: ‘An official appointed to investigate individuals’ complaints against maladministration, especially that of public authorities’. 4 Section 7 (1)(a) of the Act. alleged improper or dishonest conduct with respect to public money,5 any alleged offence created by specified sections of the Prevention and Combating of Corrupt Activities Act 12 of 2004 with respect to public money,6 and any alleged improper or unlawful receipt of improper advantage by a person as a result of conduct by various public entities or functionaries.7 [11] But although the conduct that may be investigated is circumscribed I think it is important to bear in mind that there is no circumscription of the persons from whom and the bodies from which information may be sought in the course of an investigation. The Act confers upon the Public Protector sweeping powers to discover information from any person at all. He or she may call for explanations, on oath or otherwise, from any person, he or she may require any person to appear for examination, he or she may call for the production of documents by any person,8 and premises may be searched and material seized upon a warrant issued by a judicial officer.9 Those powers emphasise once again that the Public Protector has a pro-active function. He or she is expected not to sit back and wait for proof where there are allegations of malfeasance but is enjoined to actively discover the truth. [12] There are a number of important observations that I need to make at the outset concerning matters upon which there must be no misunderstanding. [13] The first is that we are not called upon to make findings on the matters that were placed before the Public Protector for investigation, or on the veracity or authenticity of material that might have been relevant to his enquiry, and I do 5 Section 6(4)(a)(iii). 6 Section 6(4)(a)(iii). The offences are those referred to in ‘Part 1 to 4, or section 17, 20 or 21 (in so far as it relates to the aforementioned offences) of Chapter 2’ of the Act. 7 Sections 6(4)(a)(iv) and 6(5)(c). 8 Section 7(4). 9 Section 7A(1). not purport in this judgment to do so. We are concerned only with the extent to which that material casts light upon the adequacy or otherwise of the investigation. It needs to be borne in mind that organisations and persons to which the material might relate are not parties to these proceedings and we have not heard what they might have to say. There might be ready answers to or explanations for what the material reveals at first sight, there might be other facts not before us that would impact upon inferences that might otherwise be drawn, and it might be that documents are not authentic or that statements in documents or otherwise are untrue. Those are all matters upon which we are not called upon to pronounce, and I do not purport to do so. So far as I relate what that material shows as if it is fact, I have done so only for convenience of narration. [14] Following upon that is the approach that is to be taken to the evidence. Courts will generally not rely upon reported statements by persons who do not give evidence (hearsay) for the truth of their contents. Because that is not acceptable evidence upon which the court will rely for factual findings such statements are not admissible in trial proceedings and are liable to be struck out from affidavits in application proceedings. But there are cases in which the relevance of the statement lies in the fact that it was made, irrespective of the truth of the statement. In those cases the statement is not hearsay and is admissible to prove the fact that it was made. In this case many such reported statements, mainly in documents, have been placed before us. What is relevant to this case is that the document exists or that the statement was made and for that purpose those documents and statements are admissible evidence. [15] I need to deal specifically with one form of such evidence. In his founding affidavit Mr Brümmer has at times conveyed information that he says was imparted to him by an undisclosed source. The appellant applied to strike out those portions of his evidence but for the reasons I have given that application is misconceived. What is relevant for present purposes is that the reported statements were made, and not that the reported statements are true, and the allegations in the affidavit are admissible proof of that fact. [16] There is another context in which statements by undisclosed sources play a role in this case. In the various newspaper articles that I refer to later in this judgment the authors have at times again attributed information to undisclosed sources. A theme that runs throughout the answering affidavits is disdain for that information and at times taunting challenges to the respondents to reveal those sources. The disdain that the Public Protector displays is unfortunate because it is misconceived. [17] The fact that the source of information is not disclosed does not mean that the information is untrue. And the question whether or not it is true will usually be capable of being verified even without resort to the undisclosed source. If it is reported by an undisclosed source that a document is in the possession of A, the Public Protector is quite capable of establishing whether it exists by asking A for the document, and if necessary by searching for it under a warrant. If it is reported that an undisclosed source said that something was done by B, then the Public Protector is quite capable of asking B and others who may have knowledge of the matter, whether that is true, if necessary under compulsion to answer. It is often in cases of the most important kind that there will be people who fear reprisals if their identities become known. It is precisely in cases of that kind that the arsenal of investigatory tools at the disposal of the Public Protector becomes particularly important. The Public Protector has no place summarily dismissing any information. His or her function is to weigh the importance or otherwise of the information and if appropriate to take steps that are necessary to determine its truth. I repeat that the Public Protector is an investigator and not a mere adjudicator of verified information that must be sought out and placed before him or her by others. [18] The affidavits filed on his behalf are also replete with challenges to the respondents to demonstrate that what has been said is untrue, and with protestations against the need for corroboration, but I think, once again, that those challenges and protestations are misconceived. [19] The Public Protector must not only discover the truth but must also inspire confidence that the truth has been discovered. It is no less important for the public to be assured that there has been no malfeasance or impropriety in public life, if there has not been, as it is for malfeasance and impropriety to be exposed where it exists. There is no justification for saying to the public that it must simply accept that there has not been conduct of that kind only because evidence has not been advanced that proves the contrary. Before the Public Protector assures the public that there has not been such conduct he or she must be sure that it has not occurred. And if corroboration is required before he or she can be sure then corroboration must necessarily be found. The function of the Public Protector is as much about public confidence that the truth has been discovered as it is about discovering the truth. [20] The second important observation I need to make is that we are not called upon to direct the Public Protector as to the manner in which an investigation is to be conducted and I do not purport to do so in this judgment. A proper investigation might take as many forms as there are proper investigators. It is for the Public Protector to decide what is appropriate to each case and not for this court to supplant that function. To the extent that I have suggested what might have been done in this case it is only to assess what might be expected in the proper performance of the functions of the Public Protector so as to determine the adequacy or otherwise of his investigation. [21] There is no dispute in this case that an investigation and report of the Public Protector is subject to review by a court. I do not find it necessary to pronounce upon the threshold that will need to be overcome before the work of the Public Protector will be set aside on review. It would be invidious for a court to mark the work of the Public Protector as if it was marking an academic essay. But I think there is nonetheless at least one feature of an investigation that must always exist – because it is one that is universal and indispensable to an investigation of any kind – which is that the investigation must have been conducted with an open and enquiring mind. An investigation that is not conducted with an open and enquiring mind is no investigation at all. That is the benchmark against which I have assessed the investigation in this case. [22] I think that it is necessary to say something about what I mean by an open and enquiring mind. That state of mind is one that is open to all possibilities and reflects upon whether the truth has been told. It is not one that is unduly suspicious but it is also not one that is unduly believing. It asks whether the pieces that have been presented fit into place. If at first they do not then it asks questions and seeks out information until they do. It is also not a state of mind that remains static. If the pieces remain out of place after further enquiry then it might progress to being a suspicious mind. And if the pieces still do not fit then it might progress to conviction that there is deceit. How it progresses will vary with the exigencies of the particular case. One question might lead to another, and that question to yet another, and so it might go on. But whatever the state of mind that is finally reached, it must always start out as one that is open and enquiring. The Standing of the Parties [23] The Public Protector is there to inspire confidence that all is well in public life. In those circumstances I think it is unfortunate that he should have chosen to challenge the right of the respondents to submit his report to scrutiny. But he has done so and I must perforce deal with that objection at once. [24] In the founding affidavit, which was deposed to by Mr Brümmer and confirmed by the other respondents, it was said that they had brought the application ‘in the public interest as well as in their own interests’. Their own interest in the matter stems from a curious feature of the report. [25] Apart from exonerating the public entities and functionaries that were investigated Adv Mushwana discredited the newspaper, saying that ‘much’ that had been published ‘was factually incorrect, based on incomplete information and documentation, and comprised unsubstantiated suggestions and unjustified speculation’. That finding is curious because it is inconsistent with his careful exposition of why much of what had been published could not be and was not investigated. The finding features prominently in the report. It was repeated by Adv Mushwana in a press statement that he issued when he released the report. Hansard’s report of proceedings in the National Assembly when the report was tabled records one member asking of an opposing political party, on the basis of that finding, and to applause, what kind of party it was that relied upon newspaper reports of the M&G for its political interventions. Another described the M&G as ‘the choirmaster in the chorus of unsubstantiated allegations’. Yet another said that the report should ‘caution us to be ready for what we read in the papers and the credibility of relying on such material as [being] accurate and dependable’. [26] The newspaper and the journalists say that they have an established reputation for the credibility of their journalism and that the finding of the Public Protector undermines that reputation to their detriment. I think that the remarks made in the National Assembly are ample testimony to that, but in any event it must be correct. A newspaper that publishes a series of articles on matters of great public concern can only be seriously damaged by a finding that much of what was published is not correct or cannot be substantiated. [27] On the other ground that the respondents relied upon for their right to bring the application their counsel pointed out that the Constitution guarantees the protection of the office of the Public Protector to all inhabitants of the country. Once again that must be correct. He submitted that in those circumstances, when it comes to matters that concern its inhabitants at large, every one of them must be entitled to vindicate that promised protection. [28] The traditional approach to standing that was taken at common law has seen some expansion in cases that have been founded on the vindication of constitutional rights. I have said that it is not in dispute that the work of the Public Protector is subject to review. The source of that power was not addressed in argument before us, and I express no view on the matter. But for present purposes I will assume, in favour of the Public Protector, that a person who applies for such review must meet the more conservative test of the common law. [29] The common law has no fixed rule that determines whether a party has standing to bring litigation and the courts have always taken a flexible and practical approach. The right to bring litigation before the courts is restricted for various reasons: the courts are not there to pronounce upon academic issues; they are not there to pronounce upon matters that have no significant consequences for the initiating party; they are not there for the benefit of busybodies who wish to harass others; and so on. Thus the courts have always required that an initiating litigant should have an interest in the matter. The interest that is required has been expressed in various forms that are collected in Cabinet of the Transitional Government for the territory of South West Africa v Eins.10 It has been expressed as ‘an interest in the subject matter of the dispute [that] must be a direct interest’, and as ‘an interest that is not too remote’, and as ‘some direct interest in the subject-matter of the litigation or some grievance special to himself’, and as ‘a direct interest in the matter and not merely the interest which all citizens have’. The finding by the Public Protector discrediting the respondents is manifestly damaging. I am in no doubt that the interest that the respondents have in protecting their reputation is sufficient to have entitled them to commence these proceedings for review and I need not deal with whether they were also entitled to do so in the public interest. [30] With that disposed of I turn to the merits of this appeal. The Requests to Investigate [31] The requests for an investigation to be made have been referred to often in these papers as ‘complaints’ but that is a misnomer. In each case it was in truth no more than a request for an investigation into alleged conduct that was 10 Cabinet of the Transitional Government for the territory of South West Africa v Eins 1988 (3) SA 369 (A) at 388B-I. rightly considered to be of public concern. Nonetheless, I have used those terms interchangeably in this judgment. [32] The politicians who made the requests had no independent knowledge of the matters to which the requests related. They were prompted to do so by concern at information that had been published by the M&G. The form in which the requests were made merely highlighted what was of particular concern. In the court below Poswa J rightly pointed out that a complaint or request must not be scrutinised as if it is a pleading, which serves to define and circumscribe the issues. What is needed is to extract the substance of the complaint or request. It needs to be kept in mind that the Public Protector is not restricted to investigating what has been placed before him or her. The Act expressly empowers the Public Protector to investigate on his or her own initiative, and on no more than information that comes to his or her knowledge, however that may occur. [33] For ease of narration it is as well at the outset to describe the principal protagonists. The first is Imvume Management (Pty) Ltd (Imvume). That was a dormant company that was acquired and renamed by Mr Majali in about April or May 2001. The shares in the company were allotted in September 2001. The only shareholders were three newly formed trusts. Each of the trusts had three trustees and in each case Mr Majali was one of the trustees. The objects of the trust in each case were expressed in broad and imprecise terms but they were essentially to engage in social and development programmes of various kinds. From the events that occurred I think it is clear that Mr Majali exercised full control over the company. [34] The second is The Petroleum Oil and Gas Corporation of South Africa (Pty) Ltd (PetroSA). The report of the Public Protector records that ‘PetroSA was formed in July 2000 out of a merger of the business of Mossgas and Soekor as well as parts of the business undertaken by the Strategic Oil Fund, in order to effectively explore, develop, manufacture and trade the crude oil and gaseous hydrocarbon resources of South Africa’. It was wholly owned by CEF (Pty) Ltd,11 which was a ‘Major Public Entity’ listed in schedule 2 of the Public Finance Management Act 1 of 1999. [35] The third protagonist is the SFF12 Association, an incorporated association that is described in one of the documents as a subsidiary of CEF (Pty) Ltd. [36] The information that was disclosed in the articles is inter-related and should properly be seen in the context of the articles as a whole. Nonetheless, the report deals with the various requests in isolation of one another and for convenience I will also do so. The First Request [37] In the issue of the M&G published on 20 May 2005 an article appeared that had been written jointly by Mr Brümmer, Mr Sole and Mr Wisani wa ka Ngobeni under the heading ‘The ANC’s Oilgate’. The tenor of the article appears from its opening paragraphs, which are expanded on in the remainder of the article: ‘A Mail and Guardian investigation into covert party funding has revealed how R11-million of public money was diverted to African National Congress coffers ahead of the 2004 election. 11 Formerly known as Central Energy Fund (Pty) Ltd. 12 An acronym for the Strategic Fuel Fund. In what may be the biggest political funding scandal since 1994 the M&G has established that South Africa’s state oil company, PetroSA, irregularly paid R15-million to Imvume Management – a company closely tied to the ANC – at a time when the party was desperate for funds to fight elections. The M&G possesses bank statements and has seen other forensic evidence proving that Imvume transferred the lion’s share of this to the ANC within days. PetroSA this week said it was unaware of this. The ANC denied impropriety and said it was not obliged to discuss its funders’ [38] A further article was prepared for publication the following week. Imvume obtained an interdict against its publication but the interdict was lifted the week after and the article was published in the edition that appeared on 10 June 2005. Written under the heading ‘The Scandal Spreads’ the tenor of the article appears once again from the opening paragraph: ‘When Sandi Majali wrote cheques after getting a multimillion-rand advance from the state oil company, two of the first recipients were relatives of Cabinet members. The ministers – Phumzile Mlambo-Ngcuka of Minerals and Energy and Zola Skweyiya of Social Development – regulate fields in which Majali’s companies operated.’ [39] The articles reveal and expand upon facts that are to be found in various documents that are disclosed in the affidavits, more particularly a report of the Auditor General, documents submitted to the Public Protector by PetroSA, and various original documents. I will relate those facts with reference to the documents rather than with reference to the article itself. [40] That material discloses that in about October 2002 a written contract was concluded between Imvume and PetroSA under which Imvume undertook to deliver to PetroSA cargoes of oil condensate from time to time. The condensate was to be sourced by Imvume from Glencore International AG (Glencore), a Swiss based commodity trader. The contract provided that PetroSA would pay the price of each cargo direct to the bank account of Glencore within 30 days of the date of the bill of lading. The inference from the evidence is that Imvume would receive a fee from Glencore for each cargo. [41] Cargoes were duly acquired by Imvume from Glencore and delivered to PetroSA from time to time. On 6 December 2003 the ninth cargo of 314 598 barrels of condensate was loaded for delivery. The cost of the cargo was approximately US$10.2 million. The ordinary terms of payment required the full price to be paid to Glencore by no later than 5 January 2004. [42] On 18 December 2003 Imvume asked PetroSA to make an ‘advance’ payment to it of R15 million (approximately US$2.3 million) and it gave PetroSA an invoice to that effect. The invoice recorded that the payment was to constitute ‘advance payment invoice of North West Shelf condensate (light crude) loaded per vessel Selendang Sari at Dampier, Australia, Bill of Lading dated 06 December 2003’. According to PetroSA the advance was paid to Imvume on the same day. [43] I pause for a moment to say that it seems odd on the face of it that Imvume asked for an ‘advance’ on the price of the cargo, bearing in mind that its supply contract provided that PetroSA would pay Glencore direct. I have found no explanation for that in the documents but it is a question that the Public Protector might have asked. Nonetheless, I think I must infer that the parties had come to a new arrangement that PetroSA would pay Imvume and Imvume would pay Glencore. If that was so then I must also infer from what happened that the due date for payment to Imvume and the due date for payment to Glencore coincided. [44] The cargo was received by PetroSA on 22 December 2003. On 5 January 2004 – the date that the price of the cargo became payable to Glencore – PetroSA paid to Imvume the balance of the price, which amounted to US$7.9 million. For reasons that are not explained Imvume returned the sum of US$7.4 million to PetroSA on 15 January 2004, retaining the sum of $500 000. On 2 February 2004 PetroSA again paid to Imvume the sum of US$7.4 million, which Imvume paid to Glencore. That left a shortfall that was owing to Glencore of $2.8 million. The shortfall had by then already been paid by PetroSA to Imvume (the advance of $2.3 million plus $500 000 that had been incorporated in the first payment to Imvume of $7.9 million and had not been returned). [45] The cargo was discharged on 22 December 2003. On 28 January 2004 Glencore invoiced PetroSA for the full amount of the cargo. Glencore told PetroSA that the shortfall had not been paid to it by Imvume, which Imvume admitted to PetroSA. At that stage the next cargo was in transit and Glencore threatened to withhold delivery unless it was paid the shortfall. PetroSA then paid to Glencore the outstanding amount of $2.8 million. The explanation that was given by PetroSA to the Public Protector for paying the debt was that production at its refinery would have been interrupted at substantial cost had the subsequent cargo been withheld. [46] The net result of those transactions was that PetroSA paid $13 million for the cargo when its purchase price was only $10.2 million. The excess represented the ‘advance’ of $2.3 million (R15 million) that had been paid to Imvume but not paid over to Glencore, plus the sum of $500 000 that had been withheld by Imvume when it repaid to PetroSA the moneys that it first received. [47] The ‘scandal’ that was referred to in the article concerned the fate of part of the advance of R15 million that had been paid to Imvume. It was alleged in the article that within days of the R15 million advance having been made to Imvume, Imvume paid R11 million to the governing political party, the African National Congress (ANC). The documents do not disclose the fate of the balance of R4 million that remained in the hands of Imvume, nor the fate of the $500 000 that was retained, but that is not directly relevant to the present case. [48] The payments that were the subject of the second article were two payments that were alleged to have been made by Imvume on 19 December 2003 (the day after the advance had been received from PetroSA). One was a payment of R50 000 to a company called Uluntu Investments, which was owned by Mr B Mlambo, the brother of the then Minister of Minerals and Energy, Ms P Mlambo-Ngcuka. The other was a payment of R65 000 to Hartkon Construction as part of its price for renovating the private residence of Mr Z Skweyiya, then the Minister of Social Development, and his wife. [49] For completeness it is convenient to set out briefly what PetroSA did to recover the R15 million ‘advance’ that it had made to Imvume. PetroSA told the Public Protector that the decision to pay Glencore was taken on the basis that PetroSA would immediately take steps to recover the money from Imvume. On 19 February 2004 an acknowledgement of debt was signed by Mr Majali on behalf of Imvume, in which Imvume acknowledged itself to be indebted to PetroSA for the amount of $2.8 million plus interest, which it undertook to pay within 90 days. Imvume failed to pay and, after demand for payment had been made, PetroSA issued summons for recovery of the debt. Imvume defended the action and PetroSA applied for summary judgment for approximately R18 million on 20 Augst 2004. Imvume opposed the application on spurious grounds. Meanwhile, the parties had entered into settlement negotiations. In August 2004 Imvume paid R1 million and proposed terms for payment of the balance. By August 2005 an amount of approximately R18 million was still outstanding and the parties concluded a written agreement for payment of that amount plus interest in instalments of R500 000 per month. Whether and to what extent that balance had been repaid at the time the Public Protector investigated the matter is not disclosed. [50] On 3 June 2005 a member of the National Assembly for the Freedom Front Plus, Mr W Spies, asked the Public Protector to investigate the information that had been disclosed in the two articles. It seems that he must have had wind of the second article because at that time it had not yet been published. I set out the letter in full: ‘COMPLAINT AGAINST PETROSA AND TWO CABINET MINISTERS With reference to the above, we hereby give notice of – 1. our formal complaint against the state-controlled petrochemical corporation, PetroSA, for improper conduct and maladministration, in that it used the company Imvume Investments13 as a conduit to transfer public money to the ANC, as well as 2. a request for an investigation into the exact nature of certain business relationships between close relatives of the Minister of Minerals and Energy and the Minister of Social Development and the company known as Imvume Investments. Backround to the complaint We request you to investigate whether the alleged unindebted and unsecured payment of R15 million made by PetroSA to Imvume Investments on 18 December 2003, constituted improper conduct and maladministration by the management of PetroSA. In particular, given the fact that a further R15 million had to be paid by PetroSA to Glencore International (a Swiss-based resource trader) on 19 February 2004, as a result of Imvume Investments’ non-performance in terms of its obligations towards Glencore International, we submit that prima facie, Imvume Investments was merely used by PetroSA as a conduit to transfer money to the ANC during December 2003. 13 An erroneous reference to Imvume Management. Kindly also investigate the exact nature of the following alleged payments by Imvume Investments or its CEO, Mr Sandi Majali to the persons and/or entities referred to below:  R50 000 paid to the company Uluntu Investments o[r] Mr Bonga Mlambo on 19 December 2003;  R65 000 paid with regard to improvements by the construction company Hartkon to the private residence of the Minister of Social Development on 19 December 2003; and  R11 million paid to the ANC in tranches of R2 million (twice), R3 million and R4 million respectively, on 23 December 2003.’ It is our respectful submission that, if found to be true and causally related, one or more of the transactions set out above, not only constitute an improper prejudice caused to the fiscus, but also amounts to dishonesty and/or improper dealings with respect to public money.’ The Second Request [51] In its edition published on 25 June 2005 the M&G published two articles as part of what it called ‘Oilgate: A special report’. Both were written by Mr Brümmer and Mr Sole. One article was headed ‘An ANC front’ and once again I quote the opening paragraph as being descriptive of its tenor: ‘The African National Congress has misled the nation on the Oilgate scandal. Documents in the possession of the Mail & Guardian make it clear that Imvume Management – the company that channeled R11-million in state oil money to the ANC before the 2004 election – was effectively a front for the ruling party.’ Another longer article appeared under the heading ‘Trading principle for profit. How the ANC hawked foreign policy for oil’. Here are the opening paragraphs: ‘This is the story of how South Africa’s ruling party offered solidarity to Saddam Hussein in exchange for crude oil – and how state resources were used to help the party in this ambitious fundraising project. Two years of effort resulted in little, if any, financial gain for the African National Congress. But the story is important for it reveals not only how the party subordinated principle to profit, but also how it engaged in business through what was effectively a front company’. [52] The bare facts that were revealed, and expanded upon, in those articles appear from various documents that were in the possession of the M&G. The documents that I refer to were freely available from the M&G’s website and readers were invited to download them. Once again I relate what the story was about with reference to those documents. [53] The events that led to the disclosure of ‘Oilgate’ can be traced to the imposition of sanctions upon Iraq by the United Nations Security Council in 1990 following upon Iraq’s invasion of Kuwait. In 1995 the sanctions were partially lifted so as to allow oil to be purchased from Iraq for the purpose of generating funds to meet the humanitarian needs of the people of that country under a scheme that was to be monitored by the United Nations (the ‘Food-for- Oil’ programme). Allocations of oil were to be made by the Iraqi authorities but payment was to be made to an account monitored by the United Nations. [54] In October 2005 an Independent Inquiry Committee (IIC) established by the United Nations released a report titled ‘Manipulation of the Oil-for-Food Programme by the Iraqi Regime’ that disclosed abuses of the scheme. That report was naturally not available to the Public Protector at the time he wrote his report but I nonetheless refer to it to provide the background against which subsequent events occurred. [55] The committee reported that numerous individuals and organisations around the world received allocations of oil in return for political influence that they promised to Iraq to have sanctions lifted, and in return for ‘surcharges’ (a euphemism for ‘kickbacks’) that were paid to members of the Iraq regime. Two South African companies were listed in the report as having participated in those abuses – Montego Trading (Pty) Ltd and Imvume. [56] The IIC report recorded that in December 2000 Montego concluded a contract with the State Oil Marketing Organisation of Iraq (SOMO) for the supply to it of 2 million barrels of crude oil for delivery during the period December 2000 to March 2001. The contract was concluded on behalf of Montego by Mr Majali, who described himself as a director. The IIC report contains a copy of a letter from the ‘Oil Minister’ of Iraq recording approval of the contract by SOMO, which refers to Mr Majali as ‘[a]dvisor to the President of South Africa’. It records that the ‘[a]mount of surcharge’ was to be paid during the month after delivery. A due diligence review of Imvume that was conducted by Deloitte & Touche, which I return to later in this judgment, confirmed the transaction in general but not its details. The writer of the due diligence report recorded having been told that Montego was used to secure a crude oil allocation while Imvume was still being ‘conceptualised’. He said that Montego had secured one allocation of oil and had then become dormant, and that thereafter Mr Majali pursued his oil interests through Imvume. [57] I need not deal with the fate of the transaction. It is sufficient to say that matters apparently did not turn out as planned by Montego with the result that it was left with a debt for the ‘surcharge’. I turn now to the documents that were in the possession of the M&G when it published its articles [58] On 30 July 2001 Mr Majali wrote a letter on behalf of ‘Imvume SAOE’ to SFF offering to supply about 6 million barrels of Basrah Light (a category of crude oil that emanates from Iraq) for delivery between August and September 2001. The letter recorded that if required by SFF, Imvume was ‘in a position to facilitate a direct crude oil Purchase Agreement between SFF and SOMO’. What happened to that offer is not disclosed in the documentation. [59] By September 2001 an organisation called the South African Business Council for Economic Transformation (SABCET) had been established with Mr Majali as its chairman. The nature of the organisation was described under the hand of Mr Majali in the executive summary of a proposal that was to be submitted under the name of the organisation to the government of Iraq. The document was marked ‘TOP SECRET’. It recorded that SABCET had been established ‘to facilitate strategic partnership for economic advancement at a political level’ and had made an ‘unequivocal commitment to open relevant channels and advance the socio-economic support programmes geared towards establishing long lasting relations between South African leadership, the Baath Party and the Iraq Government’. It went on to record that ‘South Africa has made an unequivocal commitment to advancing the cause of the people of Iraq at various levels. Such commitment has been demonstrated by a number of actions taken by South Africa as a country, to express its support for that cause’. It said that SABCET ‘has the blessing of the South African leadership with its brief being to facilitate and advance economic programmes that are geared towards supporting the ANC’s political programmes sourcing finance to fund such programmes’. [60] A letter that was subsequently written by Mr Majali under the name of SABCET14 to the director of the Foreign Relations Bureau of the Arab Ba’ath Socialist Party in Baghdad, expressing appreciation for its hospitality on a visit that Mr Majali and others had made to Iraq (of which more later), recorded the following: ‘Allow me to, once again, re-affirm our commitment to support the people of Iraq in their struggle against the economic sanctions, embargo and the proposed smart sanctions by the West. 14 The letter was headed ‘SABCETT’ but I think that it must be taken to have meant SABCET. Please be advised that I have already briefed the leadership of the ANC, through the Secretary-General and the Treasurer-General regarding our visit to Baghdad and discussions with yourselves. They, in turn have undertaken to provide a full briefing to the President of the ANC. Be assured that the ANC remains committed to the co-operation agreement with the Arab Ba’ath Socialist Party. We therefore propose a signing of a Protocol to formalise the relations between our respective parties during your visit to South Africa between the 10th and 20th of October 2001.’ It went on to say: ‘I am further pleased to inform you that I have conveyed the invitation by yourselves to the ANC to join the International Conference that will take place in Baghdad on 12 November 2001 and they have welcomed the invitation. The Secretary-General of the ANC will respond as soon as he receives a formal invitation in this regard.’ [61] Another document, said to have been a speech prepared for delivery by the Secretary General of the ANC, described SABCET as ‘an agent of change duly mandated by the ANC to implement its programmes’ and said that it reported to the Secretary General of the ANC. [62] Mr Majali was also instrumental in establishing an organisation called the South Africa-Iraq Friendship Association. The nature of that organisation is to be pieced together from various documents. A letter purporting to have been written by Mr Majali, under the name of that organisation, to the chairperson of the Iraq Friendship Association, headed ‘TOP SECRET’, records that ‘[i]t is our desire to finalise discussions on the Iraq-South Africa Friendship Association as a vehicle towards the promotion of socio-economic and political relations between the two countries.’ A protocol that purports to have been concluded between the Iraqi-South African Friendship Associations of South Africa15 and Iraq, establishing an organisation bearing that name, records that 15 In its context I think that the organisation referred to was one and the same as the South Africa-Iraq Friendship Association. ‘the Protocol between the Arab Ba’ath Socialist Party and the African National Congress which entered into force constitutes the basis for this protocol’. A letter written by the Secretary General of the ANC to the Chairperson of the Iraq Friendship Association commended Mr Majali to them in the following terms: ‘His position, therefore, as the Chairperson of the South Africa-Iraq Friendship Association has our full approval and full blessing’. [63] I think that it can fairly be inferred from those documents, absent facts or explanations to the contrary that might come to light, that SABCET and the South African Iraq Association were organisations that were established to further the interests of the ANC. [64] I return to the proposal that I referred to earlier. The proposal was prepared in September 2001 under the name of SABCET and was marked ‘TOP SECRET’. The proposal recorded that it was being made by ‘Mr Sandi Majali (“the Proposer”), a director of Imvume Management (Proprietary) Ltd’ to ‘His Excellency the Deputy Prime Minister of Iraq, Mr Tariq Aziz’. It proposed an agreement between Imvume and SOMO for the sale and delivery to Imvume of crude oil. It described its shareholder-trusts and recorded that: ‘[t]he proceeds from the sale of the crude oil by the Company will be channeled, in addition to the abovementioned trusts, to the South African Business Council for Economic Transformation (“SABCET”) and the South Africa Iraq Friendship Association (“SAIFA”) in … amounts to be agreed between the parties’. [65] In the same month Mr Majali travelled to Iraq in the company of the Director-General of the Department of Minerals and Energy (Adv S Nogxina), the International Liaison Officer of that department (Mr T Mafoko), the Assistant to the Minister of Minerals and Energy (Mr A Nkuhlu), and a member of the board of directors of SFF (Mr R Jawooden). The visit was approved by the Minister and the expenses of the government officials were paid by the department. I think it is clear that the proposal I have referred to was prepared for presentation in the course of that visit. [66] In preparation for the visit Mr Majali, writing as chairperson of the South Africa-Iraq Friendship Association, wrote to his counterpart in Baghdad on 10 September 2004, requesting his assistance to host the visit. He described himself as ‘Head of Implementation of ANC Economic Transformation programmes and leader of the delegation’. After providing the ‘credentials of our delegation’ (naming the four officials I have mentioned) he proposed the following programme: ‘THURSDAY, 13 SEPTEMBER 2001  Presentation of a message from the leadership of the ANC by Sandi Majali to His Excellency, Mr T Aziz.16  Sandi Majali meets with the Chairperson of the Iraq Friendship Association to discuss possible friendship with the African National Congress (ANC).  Discussions between the Director-General of Minerals and Energy (South Africa) and his delegation with his counterpart from the Ministry of Oil (Iraq) regarding government to government relations in relation to oil trade.’ FRIDAY, 14 SEPTEMBER 2001  Site visits by the South African delegation to areas affected by the sanctions and ravaged by the war, including hospitals. SATURDAY, 15 SEPTEMBER 2001.  Meeting with the leadership of the Baath Party to discuss political relations and practical programmes to tighten these.’ 16 Deputy Prime Minister of Iraq. [67] I referred earlier to a letter written by the Secretary General of the ANC to the Chairperson of the Iraq Friendship Association on 10 September 2001, which commended Mr Majali to them in the following terms: ‘As a gesture of our desire to take the programmes agreed to between our respective parties forward, I wish to confirm the ANC’s approval of Sandi Majali as a designated person to lead the implementation processes arising out of our economic development programmes. As a leader of this process he is expected to develop and implement a comprehensive Programme of Action aimed at achieving the socio-economic objectives agreed to between our parties and to report to my office on the progress and developments at regular intervals. His position, therefore, as the Chairperson of the South Africa-Iraq Friendship Association has our approval and full blessing.’ [68] Subsequent to the visit, on 20 September 2001, Mr Majali wrote a series of letters that were all marked ‘TOP SECRET’. One was written in the name of Imvume to the Deputy Minister of Oil for Iraq. Mr Majali thanked the Deputy Minister for his hospitality to the delegation and recorded what was said to have been discussed at a meeting between them. He said that ‘[o]n the basis of our discussions we request you to approve an allocation to us of 12 million barrels of Basrah Light in your Phase 11 allocation by the United Nations 661 Committee’. He recorded that ‘[t]he management and execution of this transaction will be undertaken by Imvume Management (Pty) Ltd on behalf of the South African Department of Minerals and Energy’ and it concluded as follows: ‘We further wish to confirm our visit to finalise our discussions regarding the details of the lifting as suggested by yourself. Be advised therefor that, if it meets your approval, we would like to return to Baghdad on 10 November 2001 and we are also looking forward to participate in the International Conference in support of the lifting of sanctions, the embargo and resisting the proposed smart sanctions in Baghdad on 12 November 2001. The ANC will be sending a high level delegation to represent the voice of the people of South Africa in support of the freedom of the Iraq people.’ [69] Another was addressed under the name of Imvume to SOMO. It recorded, amongst other things, that Imvume had been ‘officially appointed by the South African Department of Minerals and Energy to source crude oil for the government’s strategic stock’. Mr Majali said that the required quantity was 12 million barrels of Basrah Light immediately, and that another 21 million barrels might be required by the end of June 2002. He said that discussions had been held with the Iraq Department of Oil in that regard and he sought approval of the request by SOMO. [70] Another was a letter that I referred to earlier, written by Mr Majali as chairperson of SABCET to the director of the Foreign Relations Bureau of the Arab Ba’ath Socialist Party in Baghdad, expressing appreciation for its hospitality. I have already recited the contents of that letter. [71] Yet another was addressed, for SABCET, to the President of the Iraq Friendship Association. It recorded: ‘We believe the discussions we held were very constructive and progressive and added tremendous value to our relations. We believe there is a need to move speedily towards the implementation of the suggested programmes especially the implementation of an effective political program that will result in an effective strategy geared towards campaigning for the lifting of sanctions and the embargo that have inflicted pain and suffering on the people of Iraq. We fully believe that the people of Iraq do not deserve to be subjected to this kind of oppression by the West. We further believe that a joint effort between the ANC and the Arab Ba’ath Party will add a lot value towards achieving the common political objectives. The programme of action in this regard should be discussed and finalised at a top level by the leadership of both parties. Your visit to South Africa between the 10th and 20th of October 2001 presents a valuable opportunity to deal with these issues.’ The letter went on to express appreciation to the organisation if it would facilitate the transaction referred to in its letter to SOMO which was said to be to ‘build financial resources to support political programmes’. Mr Majali went on to say: ‘I am convinced that you do appreciate that such financial resources are crucial for the long- term sustainability of the political programmes the parties will be implementing and to run seminars, workshops in order to develop effective political development strategies. On the basis of the aforegoing, we would like to discuss various plans with yourself during your visit to South Africa.’ [72] The documents reflect that a delegation of the Arab Ba’ath Socialist Party visited South Africa in October 2001. Included amongst the papers is a copy of what is said to be a speech that had been prepared for presentation to the delegation by the Secretary General of the ANC. Much of it is taken up with pledging the support of the ANC for the lifting of sanctions against Iraq. It describes the Iraq-South Africa Friendship Association as an association ‘brought into being through the Protocol entered into by the two parties’ which will be ‘empowered to conduct business in the open market through appropriate vehicles and/or companies it sets up or through strategic partners in the private sector’. As for SABCET it says the following: ‘South Africa has established a body known as the South African Business Council for Economic Transformation (SABCET) as a vehicle to facilitate and manage all bilateral and multilateral economic transformation programmes. This relationship, on the South African side is therefore driven and managed by SABCET which reports to the Secretary-General of the ANC … SABCET is therefore an agent of change duly mandated by the ANC to implement its programmes geared towards the economic and socio-political renewal of the African continent and the world.’ The speech concludes as follows: ‘It is therefore on the basis of the aforegoing that the ANC, through [SABCET] has presented a proposal to secure a contract for the lifting of 25 million barrels of Basrah Light oil per annum over a 10-year period as an initial measure to foster such political relations.’ [73] A letter written by Mr Majali, for Imvume, on 17 October 2001, to the Deputy Minister of Oil of Iraq, confirms discussions with the delegation as follows: ‘Please be advised that we have received confirmation of your positive response to our correspondence dated 20 September 2001 regarding a crude oil allocation through Dr Monther Abdul Hameed and his delegation during their visit to South Africa. We are indeed very pleased with the turn of events in this regard.’ The letter proceeds to deal with details of the proposed lifting of oil at various times. It proposed lifting 6 million barrels in three tranches during December 2001 and the remainder in tranches during January 2002. [74] There are some contradictions in the various documents, and there are gaps in the narrative, but I think that, when viewed as a whole, they tell a tale of Mr Majali, with the support and assistance of the ANC, attempting to secure allocations of Basrah Light crude oil that would be sold to the state. The proposed programme for the visit to Iraq records that the officials who accompanied Mr Majali were there to discuss ‘government to government relations in relation to oil trade’ but the documents make it clear that any oil that was allocated would be supplied to South Africa through the medium of Imvume, so as to produce income for the ANC. What was offered in return for allocations was political support from the ANC for the lifting of sanctions. Although it was expressed as being support from the party, counsel for the respondents submitted, I think correctly, that political influence in the United Nations can be expected to be exerted only by member states, and thus it can be inferred that the ANC was to exercise its promised influence through the medium of the state. [75] That was the essence of the story that was told in the series of articles published in the M&G, considerably supplemented by other allegations and inferences. I think it will be obvious that the documents alone, without resort to information from undisclosed sources, provided a considerable basis for the story that was told. Whether or not the documents are authentic is another matter, and is not material to this case. [76] The publication of the articles prompted the leader of the official opposition in parliament, Mr T Leon, to ask the Public Protector to expand his enquiry. In a letter that was written on 18 July 2005 the request was made as follows: ‘Request for broadening of investigation into “Oilgate” to include the state’s involvement with Imvume. I am approaching your office with the specific request that… your office broadens its existing inquiry into the so-called “Oilgate affair” (public funds are alleged to have been deliberately channeled to the ruling party through a BEE company, Imvume) by determining the extent to which the state was involved in funding and supporting Imvume’s Iraqi oil ventures and travel related thereto.’ It then summarised allegations that had been made in the newspaper articles, motivated the request, and concluded as follows: ‘In light of the above, the extent of the state's involvement in funding and assisting Imvume’s oil ventures in Iraq are relevant to a full exploration of the Oilgate affair.’ The Third Request [77] A further article by Mr Brümmer and Mr Sole appeared in the issue of the M&G that was published on 22 July 2005. The article related to a tender that had been awarded to Imvume by SFF. The headings were ‘Oilgate: The next instalment’ and ‘R1bn tender was “fixed”’. I quote again the opening paragraphs: ‘A R1-billion crude oil tender – one of South Africa’s largest ever – went to African National Congress-linked company Imvume Management after an extraordinary series of interventions that suggest the tender was rigged. This emerges from a Mail & Guardian investigation of the 2001/02 tender process, which resulted in Imvume supplying the Strategic Fuel Fund Association (SFF) with four billion [sic] barrels of Iraqi oil. The SFF was the state agency that managed the country’s strategic stocks.’ [78] Once again I relate what that article was about with reference to documents that are disclosed in the affidavits. The story that they tell is that on 5 December 2001 the SFF invited tenders for the supply of 4 million barrels of Basrah Light, in two cargoes of 2 million barrels each to be delivered to Saldanha Bay from January 2002. The invitation to tender required the FOB price to be reflected as ‘either a discount or a premium of Dated Brent price’ Dated Brent price was described as the ‘mean of dated Brent quotations as published in Platts crude oil marketwire’. [79] Tenders were opened at a meeting held on 3 January 2002. There was an evaluation team of six and Mr Jawooden (who had accompanied Mr Majali to Iraq) was one of the members. The minute of the meeting reflects that there were 14 tenders, one of which was from Imvume. Of nine bidders who quoted prices in accordance with the tender,17 Imvume’s was the second highest, and a ‘first short list’ placed it eighth in line. The minute records that the bidders were invited to re-submit their prices, on this occasion relative to SOMO prices. A document emanating from SFF reflects that bidders were then invited to submit a ‘Revised or a Reconfirmation’ of prices relative to Dated Brent. At the end of the process a company referred to as Leokoane Oil topped the list and it was resolved that it be awarded the contract, subject to it furnishing a performance bond, and the satisfactory outcome of a due diligence review. 17 Four bidders submitted prices relative to SOMO prices. [80] The minute of a board meeting of SFF held on 18 January 2002 reflects that Leokoane Oil had not been able to furnish the guarantee, and that the diligence review disclosed that it was a company of no substance, and it was accordingly disqualified. The contract was then awarded to Imvume on the same conditions. [81] On the same day the Chief Executive Officer of SFF, Dr R. Mokate, addressed a letter to Mr M Mandela of ‘Imvume Resources’, in which she advised that it had been selected as the preferred bidder, subject to it furnishing a performance bond for US$1 million, and to the outcome of a due diligence review. On 28 January 2002 she wrote to him advising that the failure to submit a performance bond complying with the terms of the tender by 25 January 2002 had ‘led to an automatic disqualification to the crude oil procurement process’. Mr Majali must have contested the disqualification because the following day Dr Mokate wrote to him and dealt extensively with various issues that had been raised, particularly in relation to the performance bond. Whether the required performance bond was ultimately furnished by Imvume is not clear. [82] Dr Mokate was subsequently suspended, and then dismissed, from SFF on unrelated grounds. She wrote an article that was published in Business Day on 30 October 2002 in defence of the conduct that led to her dismissal, in which she also said that ‘when I would not sign an agreement between the SFF and Imvume Management Resources until all the conditions stipulated in the contract had been met, [Mr Damane, the chairman of SFF] accused me of being obstructionist and threatened to fire me’. [83] Included in the record of the investigation is a report of a limited due diligence review of Imvume that was conducted by Deloitte & Touche in January 2002. I think it can be inferred that the review was conducted for purposes of evaluating whether the contract should be awarded to Imvume. The report records that the information that it contained was obtained from attorneys Bell Dewar and Hall, and at a meeting attended by two attorneys from that firm, and by Mr Majali (who was described as the Chairman of Imvume) and a representative of an entity referred to as SOPAK. SOPAK was described as a wholly owned subsidiary of Glencore. [84] The review revealed that the sole shareholders of Imvume were the trusts that I referred to earlier, and that the trusts had no assets or financial ability, and ‘no ability to assist Imvume in its contractual obligations’. Imvume had no employees or existing infrastructure, it had no management structure (Deloitte & Touche was told that it had ‘a full management team in waiting’ but no details were furnished), and it was being financed by SOPAK on an undefined ‘grant basis’. It had four directors, of whom Mr Majali was one,18 and was said to have a ‘strategic relationship’ with SOPAK but the details were not disclosed. [85] Imvume was awarded the contract. It seems that it fulfilled its obligations to supply, at least partly, because a document addressed to Imvume by Glencore records a contract between them under which Glencore sold to Imvume 2 million barrels of Basrah Light for delivery to SFF on 6 March 2002. [86] Those facts form the basis of the disclosures that were made by the M&G, which were filled out in the article. The publication of the article prompted yet another request by Mr Leon for the investigation to be broadened 18 The others were Nomdakazana Tibelo Marion Mbina, Elliot Madela Mahile, and Mphumzi Mhatu. further. He made the request in a letter that he wrote to the Public Protector on 22 July 2005, which commenced as follows: ‘Further to my correspondence with you on 18 July 2005 regarding the “Oilgate affair”, I am approaching the Office of the Public Protector requesting that the Office further broadens its existing inquiry to include the role played by the Strategic Fuel Fund (SFF) in a tender process for Iraqi crude oil in 2001-2002 in which the bid of Imvume Investment Holdings (Pty) Ltd19 was selected in apparent violation of the law.’ The letter went on to explain the background to the request, and to set out at some length the irregularities that were alleged to have occurred and the legal issues that were said to be relevant, and it concluded: ‘In light of the above, the irregularities in the SFF tender process are relevant to a full exploration of the Oilgate affair’. The investigation and report [87] I will deal with the investigation and the report in the order in which the requests were made. Payment by PetroSA to Imvume [88] The core of the article that prompted the first request was the allegation that a portion of the money that had been paid to Imvume by PetroSA had been ‘diverted’ or ‘channeled’ by Imvume to the ANC. Although the article was directed at the ‘diversion’ of the money by Imvume, the request by Mr Spies was directed instead at the conduct of PetroSA in paying the money. [89] Mr Spies wanted to know whether PetroSA had intended the ANC to receive the money and had used Imvume as the conduit for that purpose. That is apparent from his notice of ‘our formal complaint against … PetroSA, for improper conduct and maladministration, in that it used the company [Imvume] 19 An erroneous reference to Imvume Management (Pty) Ltd. as a conduit to transfer public money to the ANC’. Expanding on that complaint, he submitted that ‘prima facie, [Imvume] was merely used by PetroSA as a conduit to transfer money to the ANC …’. [90] That request is perfectly plain and the Public Protector was under no misapprehension as to what was required. In his report he recorded the complaint that had been made by Mr Spies as follows: ‘According to the allegations and the complaint of [Mr Spies] the advance payment was intended for the ANC and PetroSA used Imvume as a conduit to transfer the money… It is alleged that PetroSA’s conduct was irregular and constituted maladministration and misappropriation of public finds.’ He also acknowledged, correctly, that the investigation of that ‘complaint’ fell within his investigatory powers: ‘As the affairs and conduct of PetroSA fall under the jurisdiction of the Public Protector and the conduct complained of is contemplated by the provisions of section 6(5) of the Public Protector Act, 1994, the Public Protector has the power to investigate these allegations.’ [91] There was a subsidiary part to the request that was made by Mr Spies. He asked the Public Protector to also investigate ‘the exact nature of the following alleged payments by Imvume Investments or its CEO, Mr Sandi Majali’, and he referred to one such payment as ‘R11 million paid to the ANC in tranches of R2 million (twice), R3 million and R4 million respectively, on 23 December 2003’. [92] A considerable part of the report is taken up with an analysis by the Public Protector of what conduct fell within and what conduct fell outside his investigatory mandate. I have pointed out that the mandate of the Public Protector is, in general, confined to investigating the conduct of public bodies and functionaries. Adv Mushwana concluded that Imvume and the ANC were not public bodies, and had not been performing a public function, and there can be no quarrel with that. But the Public Protector may also investigate the conduct of other bodies and persons in specified circumstances. Amongst other things, he or she may investigate any alleged: ‘improper or dishonest act, or omission … with respect to public money’ 20 and also any alleged ‘offences referred to in Part 1 to 4, or section 17, 20 or 21 (in so far as it relates to the aforementioned offences) of Chapter 2 of the Prevention of Corrupt Activities Act, 2004, with respect to public money’21 and also any alleged ‘improper or unlawful enrichment … by a person as a result of an act or omission in connection with the affairs of an institution or entity contemplated in paragraph (a).’22 [93] Two of those provisions confine the conduct that is subject to investigation to conduct ‘with respect to public money’. In his report the Public Protector posed the question ‘When does public money lose its character and become private money?’ Relying upon what was said in South African Association of Personal Injury Lawyers v Heath,23 he concluded that once the money came into the hands of Imvume it ceased to be ‘public money’. As I understand his analysis that led him to the view that all conduct by Imvume and the ANC in relation to the money fell outside his investigatory mandate, and he made no investigation of that conduct. [94] It needs to be borne in mind that South African Association of Personal Injury Lawyers, which was decided in another context, was not concerned with public money that had been improperly obtained. It was concerned only with the propriety of its distribution thereafter. This is an entirely different case. The 20 Section 6(4)(a)(iii). 21 Section 6(4)(a)(iii). 22 Section 6(5)(c). The institutions and entities referred to in that paragraph are ‘any institution in which the State is the majority or controlling shareholder or of any public entity as defined n section 1 of the Public Finance Management Act, 1999’. It is not disputed that PetroSA is one such institution. 23 South African Association of Personal Injury Lawyers v Heath 2001 (1) SA 883 (CC). primary complaint in this case was not concerned with the propriety of the payment of private money by Imvume to the ANC. It was concerned with the propriety of its conversion from public money into private money in the first place. That step in the transaction was overlooked altogether in the analysis. [95] The conversion of public money into private money occurs through a bilateral transaction of payment and receipt. I would be most surprised if the legislation envisaged that one side of that bilateral transaction of conversion may be investigated but not the other. To improperly pay public money, and to improperly receive public money, each seems to me to be quintessentially an ‘improper … act … with respect to public money’. I also see no immediate reason why the improper receipt of public money is not ‘improper … enrichment’ by a person resulting from an act in connection with the affairs of the public body. And if the act constitutes one of the specified offences under the Prevention of Corrupt Activities Act it is also not immediately apparent to me why that is not an offence ‘with respect to public money’. It needs to be borne in mind that that is a broad term that does not require a direct relationship with the money. [96] The omission from the analysis of that step in the transaction, which was the step that was material to the complaint, meant that no consideration was given to whether the receipt of the money by Imvume, and, indeed, by the ANC, fell within the terms of those provisions. Whether or not they do was not addressed in argument before us and I make no findings in that regard. But the omission of that step in the analysis, with the resultant failure to consider those questions, seems to me to have been a material misdirection. [97] But that apart, it is not clear to me why the analysis was required at all, at least as far as the primary complaint was concerned. That enquiry was directed to the propriety of the conversion of the money from public to private money. I cannot see how the circumstances of that conversion could be properly investigated with consideration to only one side of the transaction, if only to ensure that the pieces fell into place. If the conduct of the receiver of the money was indeed beyond the mandate of the Public Protector, that did not make the receiver immune from furnishing information relevant to an investigation of the conduct of the payer. To erect a wall between payment and receipt, and investigate only part of the transaction, which is what the Public Protector did, was wholly artificial. Indeed, the artificiality of the wall is demonstrated by the manner in which the investigation was conducted. [98] The investigation of only one side of the transaction led the Public Protector to conduct the investigation as if the money had been paid to a supplier in the ordinary course of business. But that begged the primary question whether it was indeed paid in that way, which was not investigated at all. It is then not surprising that the report does not purport to answer the question whether PetroSA intended the money to reach the ANC, though we are told by Adv Fourie, opportunistically in my view, that the question was answered by inference from a passage that is buried in the body of the report. Indeed, the question was not even asked of PetroSA. [99] So the Public Protector examined whether PetroSA was authorised to advance money to a supplier, whether the payment of such an advance fell within the authority of the person who had authorised it, whether it had adhered to principles of good corporate governance, and whether it had exercised sound commercial judgment. In relation to those questions he considered the Public Finance Management Act 1999, the ‘King’ principles of corporate governance, the terms in which the authority of the board to incur expenditure had been delegated, and the procurement policy of PetroSA particularly so far as it related to black economic empowerment. [100] Having approached the matter in that way all the findings in the report are directed towards the propriety of the payment as if it had been an ordinary commercial transaction. These were what the Public Protector called his ‘key findings’: ‘1. The approval and authorization on 18 December 2003 by the Acting CEO of PetroSA of an advance payment of R15-million to Imvume was lawful, well-founded and properly considered in terms of the legal vehicle and policy prescripts that applied to PetroSA; 2. The decision to approve Imvume’s request, as it was presented to PetroSA, for an advance was not unreasonable under the prevailing circumstances and did not amount to maladministration, abuse of power or the receipt of any unlawful or improper advantage; 3. Imvume’s failure to pay Glencore the full amount due to it in respect of the cargo concerned could not reasonably have been foreseen or expected by PetroSA; 4. PetroSA’s payment of an amount of USD2,8 million (plus interest) to Glencore on 23 February 2004 was in the public interest and complied with its legal obligations in terms of the Public Finance Management Act, 1999; 5. The subsequent actions taken by PetroSA to recover from Imvume the amount paid to Glencore was taken without delay and in compliance with its legal obligations in terms of the Public Finance Management Act, 1999; 6. The allegations and suggestions of improper influence made against Deputy President Mlambo-Ngcuka in relation to the advance payment were not substantiated and are without merit ....’ [101] Although that all begged the question whether PetroSA had indeed paid the money in the belief that it was doing so in the ordinary course of business, even on its terms the investigation was so sparse as to be no investigation at all. [102] The investigation amounted to no more than a written request to PetroSA for its response to aspects of the article, and formal follow up of that response, and a similar written request to the Minister. The responses that were received were accepted without question and formed the basis for the findings. [103] The request to PetroSA was made in a letter addressed by Adv Fourie to Mr Mkhize, the CEO of PetroSA, on 10 June 2005. I set it out in full: ‘COMPLAINT: IRREGULAR PAYMENTS TO IMVUME INVESTMENTS We have received a complaint from the Freedom Front Plus in connection with an alleged irregular payment of R15-million that was made by PetroSA to Imvume Investments on 18 December 2003. It is alleged that the payment was made as an advance and that it related to a shipment of condensate required by PetroSA that was to be delivered by Glencore International. Instead of complying with its commitment to Glencore, Imvume apparently paid most of the R15 million to the ANC and relatives of Members of the Cabinet. PetroSA subsequently made a further payment of R15 million to Glencore to ensure delivery of the condensate. As you are aware, this matter has received extensive media attention in the past weeks. We are of the view that it would be in the public interest that we conclude our investigation of the complaint and report thereon as quickly as possible. It would be appreciated if you could urgently provide us with: 1. Your detailed comments on the allegations to enable us to determine the merits of the matter; 2. A copy of the report(s) on the internal investigations that PetroSA conducted into the matter; 3. Details of PetroSA’s civil claim against Imvume Investments and the current status thereof. A copy of the pleadings filed would be of assistance to us in regard to the reasons for the action taken against Imvume and their response thereto; and 4. Details of any steps that had been taken by PetroSA to prevent a recurrence of such advance payments, if it was in fact irregular. Kindly also advise whether the Minister of Minerals and Energy was in any way involved in the matter, and if so, to what extent.’ [104] Mr Mkhize replied to the letter on 23 June 2005, enclosing various documents. The only relevant enclosures for present purposes are what were titled ‘comments on the allegations in the media’ and a ‘[r]eport sent to PetroSA Board of directors’. Mr Mkhize commented in his letter that ‘Support Initiatives’ (for BEE companies) were allowed by the procurement policy. [105] The former document recorded that ‘[a]fter developing a solid track record through delivery of over 70% of the contractual supplies, Imvume requested PetroSA for an advance payment when the ninth cargo was due. PetroSA considered the request and elected to grant the advance payment in view of the fact that:  cargo in question was en route to the Mossel Bay refinery and that there was no risk that the cargo will not be delivered.  The advance payment was allowed in terms of the procurement policy.’ It proceeded to detail what had occurred thereafter and explained why PetroSA had paid the outstanding balance to Glencore: ‘PetroSA evaluated the prospect of standing its ground with Glencore and take legal action against them, with the minimum delay being 20 days if disturbed production at the refinery. The cost of disturbing production at the refinery would be $ 1 million per day over 20 days, total $ 20 million. This did not include any start up cost in the event that PetroSA were to shutdown the refinery in view of the shortage of the feedstock/raw material (condensate) required for the operation.’ The report to the board took the matter no further. [106] What I find to be startling is that PetroSA was not asked whether it knew the purpose for which the ‘advance’ was required by Imvume, nor whether PetroSA asked Imvume that question. Instead Adv Fourie wrote again to Mr Mkhize on 28 June 2005 asking only for a copy of the request for advance payment, and asking who had authorised the payment, and raising queries relating to how the payment fitted into the support initiatives allowed by PetroSA’s procurement policy, with no apparent interest in the purpose for which the advance had been requested. He went about the investigation as if it was self-evident that the advance had been requested for a legitimate business purpose without ever having asked whether that was so. [107] It was only when Mr Mkhize replied that the purpose for which Mr Majali allegedly said he wanted the advance first emerged, and then only by happenstance. Mr Mkhize replied on 6 July 2005. As to the first query he said: ‘The request from Imvume for an advance payment on the basis for part of the money that would be due to them on delivery of the cargo was in the form of an invoice, attached hereto as Annexure A. However, Mr Majali did explain that Imvume had [temporary] cash flow problems and wanted to pay their monthly payment commitments. He also claimed that Imvume could not delay these payments because it was December, a holiday month.’(1137) He also attached a copy of the delegation that had conferred authority on the acting CEO, Mr Mehlomakulu (who had authorised the payment), repeated that the advance payment was allowed by the procurement policy, and provided a short explanation in that regard. [108] On 11 July Adv Fourie asked Mr Mkhize for a copy of the delegated authority of the board to the CEO, and for the outstanding amount of the debt and the prognosis for its recovery, and that information was provided. That ended the enquiry that was made of PetroSA. [109] On 28 June 2005 Adv Mushwana wrote to the Minister and once more I find it necessary to set out the letter in full: ‘COMPLAINT: PetroSA As you are aware, we are currently investigating a complaint in connection with an advance payment that was made by PetroSA to Imvume Management in December 2003. The payment related to a contract between the two companies for the procurement of oil condensate. It has been alleged that the said advance payment was intended for the ANC, your brother and the Minister of Social Development and that Imvume Management was merely used as a conduit to transfer the public money concerned. Imvume subsequently failed to comply with its commitment relating to the said contract and PetroSA had to make a further payment to the supplier to ensure uninterrupted production at its Mossel Bay plant. Media reports suggested that you had been involved. These suggestions appear to be based on the following: 1. The fact that you were the Minister of Minerals and Energy at the time when the payment in question was made and were allegedly consulted by PetroSA in regard to the said advance; 2. An amount of R50 000 that was allegedly paid by Imvume to your brother, Mr B Mlambo, shortly after the advance payment was made; 3. Your alleged interference in regard to the appointment of Mr Mkhize as the CEO of PetroSA, which was made shortly before the advance payment to Imvume was effected. We have noted your reported responses in the media to these allegations and suggestions. It would however, be appreciated if you could provide us with your official response and comments for the purposes of our investigation and to enable us to conclude this matter on direct and reliable evidence.’ [110] Ms Mlambo-Ngcuka replied on 29 June 2005. It is not necessary to recite everything that was said. So far as the issue now before us is concerned she said that ‘PetroSA never consulted me in regard to the advance payment to Imvume when it was requested and approved as alleged, as this was an operational matter’. She continued to say that when it came to whether to pay Glencore she was indeed consulted and agreed with the recommendation to pay on the basis outlined above. That was the end of the enquiry made of the Minister. [111] In various parts of his affidavits Adv Fourie made clear his disdain for acting upon anything but original evidence from disclosed sources. On this occasion he seems to have made an exception. Mr Mkhize was on leave when the advance was authorised (thus its authorisation by the acting CEO) and, on the face of it, had no direct knowledge of the circumstances in which the advance was made. The source of the information that he conveyed was not disclosed in the documents. Adv Fourie made no enquiry as to who had provided the information and, naturally, he made no enquiry of those who had direct knowledge of what had occurred. [112] The explanation that was advanced in the documents that were furnished by Mr Mkhize raises questions for even a mildly enquiring mind, but one in particular jumps out like a jack-in-the-box. The money was said to have been asked for as an ‘advance’, meaning, presumably, an advance of money that would become payable to Imvume three weeks hence. But PetroSA was well aware that Imvume would simultaneously become liable to pay Glencore the full amount of the cargo. The question that might be expected to have been asked of PetroSA is whether it asked Mr Majali how he would pay Glencore the price of the cargo if part had already been spent to meet Imvume’s ‘commitments’? And the next question that would arise is whether it had given thought to what would happen if Glencore was indeed not paid? And if Glencore was not paid, and the money had been spent, how and when would Imvume repay PetroSA? [113] PetroSA might also have been asked whether it had queried the nature of Imvume’s ‘monthly payment commitments’? Mr Mkhize later told a parliamentary committee that PetroSA had been ‘under the impression that [Imvume] needed to pay its employees their end of year remuneration including cash bonuses’. But the question that then springs to mind is how PetroSA could have thought that the monthly payroll of Imvume (even including bonuses) amounted to R15 million, bearing in mind particularly that barely a year earlier Imvume had no employees at all? [114] And so the questions might go on if an open and enquiring mind is brought to bear on the matter, because the explanation that was given certainly did not bring all the pieces into place. Yet not one question of that kind was asked in the course of the investigation. The explanation found its way into the report and was the sole basis upon which findings were made. As for the Minister, she had said no more than that she had not been consulted on the matter, but it does not follow that she was unaware of the purpose to which the ‘advance’ was to be put. She was never pertinently asked that question, nor any other questions in that regard. [115] The explanations that were given, without more, provide no proper basis for finding that the payment of the advance was ‘well founded and properly considered’, nor for finding that it was ‘not unreasonable under the prevailing circumstances’ for the payment to have been made. They also provide no proper basis for finding that Imvume’s failure to pay Glencore ‘could not reasonably have been foreseen or expected’. The only reasonable findings that could have been made on that scant information were no less than that the payment was reckless, and that default by Imvume was virtually guaranteed. [116] On this part of the case I think it is clear that there was no investigation of the primary complaint. So far as the Public Protector purported to investigate and report on associated matters the investigation was so scant as not to have been an investigation, and there was no proper basis for any of the findings that were made. The Payments to Uluntu and Hartkon Construction [117] The investigation of these payments can be disposed of briefly. It was alleged that Imvume had paid R50 000 to Uluntu Investments, a company owned by Mr B Mlambo, a brother of the Minister of Minerals and Energy, and had paid R65 000 to Hartkon Construction towards the cost of renovating the private residence of Dr Skweyiya and his wife. Mr Spies asked the Public Protector to investigate ‘the nature of those transactions’. [118] I find the conclusions of the Public Protector in that regard to be rather confusing. He concluded that because Imvume, Uluntu and Hartkon were all private bodies, and that the payments did not relate to state affairs or public money, he could not investigate their conduct. He nonetheless purported to investigate what he called ‘suspicions raised of an improper relationship between Imvume and Dr Sweyiya’, and whether there had been any impropriety on the part of the Minister of Minerals and Energy. He absolved both ministers of impropriety. [119] With regard to the alleged payment to Hartkon Construction the report records that: ‘Dr Sweyiya referred questions with regard to the allegations of payment to Hartkon Construction to his wife. He also denied any conflict of interest in respect of the payment concerned. Ms Mazibuko-Sweyiya confirmed the payment, but explained that it represented a loan that had already been repaid. This explanation was also confirmed by the said attorneys of Mr Majali and Imvume.’ [120] That is all that the investigation entailed. The ‘key findings’ do not include a finding on the issue but in the body of the report the Public Protector said the following: ‘There was no substantive allegation or indication that the Minister performed any official action or omission that could have favoured Imvume in any way. The suggested corrupt intent clearly speculates in relation to future events that might or might not occur, which obviously cannot be investigated’. He went on to say that ‘the information at the disposal of the Office of the Public Protector and that could be considered and verified in terms of its jurisdiction does not disclose the commission of any offence, but merely comprise suspicions and speculations that have not been substantiated’. [121] The question that called for an answer was not whether the money was paid as a gift or a loan. The question was why Imvume was paying money for the benefit a minister of state, whether as a loan or otherwise. There was no investigation of that at all. It is apparent from the report that not Imvume, nor the Minister, nor his wife, nor anyone else for that matter, was even asked what had motivated the payment. If it was the understanding of the Public Protector that he was not entitled to make enquiries of the persons concerned, if necessary under compulsion to answer, which is what he seems to suggest, then he was clearly wrong. There was no investigation of the matter at all. [122] With regard to the payment to Uluntu the Minister of Minerals and Energy told the Public Protector, in reply to his letter that I referred to earlier, that: ‘[I] am not aware of all business deals my family members are involved in. I have however, upon enquiry established that Bonga Mlambo my brother and Sandi Majali were at some stage involved in a toursm related business which tried to bid for a hotel at St Lucia, KwaZulu Natal. It is in this context I have been informed, that a sum of R50 000,00 was paid by Imvume towards the defrayment of costs incurred in the bidding process. Such payment had nothing to do with the relationship between my brother and I on the one hand, and PetroSA and Imvume on the other hand. More importantly the payment between Bonga Mlambo and Sandi Majali related to a tourism venture, which is evidently outside the Mineral and Energy sector, and thus I fail to see any real or potential conflict of interest.’ [123] The report contains no more on that issue than a summary of that response. A refrain throughout the affidavit deposed to by Adv Fourie is that he was not required to be suspicious of everything he was told and to look for corroboration, but I have already said why that misses the point. The Public Protector is not there to determine whether an onus has been discharged. He or she must be satisfied that the truth has or has not been told. In this case no information was sought from Imvume or from Mr Mlambo or from anyone else to clear up what had motivated Imvume to make the payment. Once again, that was no investigation at all. The Second Request [124] The Public Protector drew attention in his report to the separation of party and state, which he correctly called a ‘fundamental principle of constitutional law and democracy’. That is precisely what this complaint was about. The story that was told in the articles that prompted this request was a story of the governing party and the state coming together in pursuit of the financial interests of the party. It was in that context that the Public Protector was asked to ‘determine the extent to which the state was involved in funding and supporting Imvume’s Iraq oil ventures and travel related thereto.’ [125] The tale that was told in the articles emerges as much from the documentation I have referred to, all of which was available on the website of the M&G. Yet the only enquiry of any substance was in a letter written by Adv Fourie to the Director-General of the Department of Minerals and Energy on 18 July 2005. He referred the Director-General to the article that had been published on 15 July 2005 and said that it ‘appears to allege that you, in your capacity as the Director General of the Department of Minerals and Energy, were improperly involved in dealings between Mr Majali and the Government of Iraq.’ He went on to say: ‘According to the said article, you and Mr Nkhulu of your department, “accompanied” Mr Majali in September 2001 to Iraq : “for talks with Hussein’s government”. The Minister of Minerals and Energy allegedly approved your trip. Mr Jawoodeen of the SFF apparently joined the “delegation”. An extract of the Minster’s approval, dated 7 August 2001, was also published. We have noted your response to these allegations that was published as part of the said article. It would be appreciated if you could provide us with your detailed official response to the allegations referred to above as well as any other comments on the contents of the said article that could be of assistance to us in our investigation. If you in fact travelled to Iraq, as alleged, kindly also provide us with a copy of the memorandum submitted to the Minister for her approval in this regard.’ [126] The Director-General, Adv Nogxina, replied on 19 July 2005. He described various contacts that had been made between the Department of Foreign Affairs and the government of Iraq and said: ‘It is against this background that in September of the same year, we undertook an official trip to Iraq on a mission to further strengthen bilateral relations between the two countries. In particular, we were supposed to explore the possibility of a government to government oil supply deal for our Strategic Stocks…. During our preparations for the visit, a person in the name of Mr Sandi Majali who is a representative of a black owned company called my office requesting to join us, having learned from the Iraqi Embassy that we would be embarking on the visit. Mr Majali thought it would be helpful for the delegation to explain the BEE policy to the Iraqi’s, and thus facilitate his negotiations for an oil deal. Mr Majali had had previous dealings with the Iraqi’s and was at his final stages of negotiations…. I wish to emphasize that it is normal practise for visits undertaken by Government Departments, to take business delegations with them and to assist, in the course of such visits, in the facilitation of business relationships between the entrepreneurs of both countries.’ [127] An internal memo, addressed to the Chief Financial Officer by the executive assistant to the Director-General, requesting an advance of R15 000 for the trip, together with related documents, was sent to Adv Fourie. [128] Apart from making some observations upon this country’s foreign policy towards Iraq, the report does little more than to recite in full the response from the Director-General, and then to paraphrase parts of the letter as findings, in the following terms: ‘The visit by the Director General of Minerals and energy and officials of the department and the SFF to Iraq, in September 2001, related directly to the Government’s expressed commitment to improve trade relations with Iraq. The then Minister of Minerals and Energy was properly informed of the intention of the visit and she approved it accordingly. The South African delegation was accompanied by Mr Majali, at his request. The involvement of representatives of the South African business sector in discussions with the Iraqi Government in connection with the improvement of trade was necessary and justified in terms of South Africa’s Foreign Policy.’ [129] The ‘key finding’ on this aspect of the matter was: ‘The allegations of improper involvement of senior officials of the Department of Minerals and Energy and the SFF in the advancement of business relations between Imvume and the Iraqi Government … are without merit.’ [130] The letter that was written by Adv Fourie to the Director-General gives a parsimonious account of what was conveyed in the articles. I have pointed out that they told a tale of the state and its resources being used to secure contracts for Imvume that would benefit the ANC. The visit to Iraq was an element of the tale but was not the tale itself. Nor was the tale confined to the incurring of expenses by the officials on the visit to Iraq. The gravamen of the tale was that the nation’s stature in the forums of international affairs was ‘hawked’ in pursuit of party financial gain. The tenor is apparent from the various headings under which the ‘special report’ was made: ‘Trading principle for profit’; ‘How the ANC hawked foreign policy for oil’; ‘Hawking foreign policy for oil’. [131] If he had read the articles, and I must assume that he did, I cannot see how the Public Protector could have thought that what concerned Mr Leon was whether the officials had the permission of the Minister to visit Iraq, and whether they had completed the appropriate forms for subsistence and travel, which is really all that he queried. Once again, the gravamen of the request was not investigated at all. [132] The reason that an enquiring mind is called for in an investigation is demonstrable from what occurred in this case. I have already recited the considerable documentation that supports the substance of the articles, all of which was freely available on the M&G website. Adv Fourie was challenged in the affidavits on why he had not downloaded them from the M&G website. His reply was that ‘the said documents effectively form part of the article and were considered as such when the allegation referred to was investigated’. I think that unusual reply must be taken to mean that he did not read the documents. Indeed, had he read the documents, his report so far as it relates to this issue, would be astonishing. [133] He would have seen immediately from the documents that they painted a picture of the visit to Iraq that was altogether different to the picture that was painted by the Director-General. They do not paint a picture of Mr Majali discovering coincidentally from the embassy that government officials were planning to visit Iraq. They do not present a picture of a businessman tagging on to a government delegation. They do not present a picture of government- to-government contracts being negotiated. They present a picture of Mr Majali taking charge of a venture to access oil that was to be channeled to the state through the medium of Imvume. That contrast would have presented many questions to an enquiring mind. [134] I think I need say no more about this aspect of the investigation. I think it is manifest that the substance of the request was not investigated at all. The Third Request [135] The third request concerned the contract that was awarded to Imvume by SFF after tenders had been invited. Mr Leon asked for the enquiry to be broadened ‘to include the role played by the Strategic Fuel Fund (SFF) in a tender process for Iraqi crude oil in 2001-2002 in which the bid of Imvume Investment Holdings (Pty) Ltd24 was selected in apparent violation of the law’. [136] In his letter Mr Leon provided the context in which the request was made. Amongst other things, he said that the award of the contract ‘was allegedly done as part of an elaborate ANC fundraising scheme … in which Imvume was established as a front company for the ANC and would help it raise money through sales of Iraqi oil obtained in violation of the UN Oil-For-Food Programme’. I think that makes it clear that what was being called for was an investigation of the tender, not in isolation, but in the context that I have already described. Needless to say, it cannot be said that the Public Protector investigated the tender in that context, when he failed to investigate the context at all. 24 An erroneous reference to Imvume Management (Pty) Ltd. [137] But even when viewed in isolation, certain features of the tender were highlighted in particular. Those were, in summary, first, that Mr Jawoodeen, who had accompanied Mr Majali to Iraq, was on the evaluation panel; secondly, that on two occasions after the tenders had been opened the bidders were invited again to submit prices, which resulted in Imvume moving up the list; thirdly, that Leokoane Oil had been disqualified for not furnishing a performance bond, and for want of an acceptable due diligence review, but Imvume had not been disqualified when it was in the same position; fourthly, that Dr Mokate had said that pressure had been brought to bear on her by the chairperson of SFF and the Minister to award the contract to Imvume; and fifthly, that the type of oil that was called for was the type of oil that Mr Majali had been seeking in Iraq. [138] The report records that the Public Protector asked SFF to respond to the contents of the article, and the report reproduced the response of the CEO in full. The response did not deal with all the concerns that the request had raised, and so far as they were dealt with, that was done only cursorily. No further enquiry was made, not even whether Imvume had met the conditions for award of the contract that had disqualified Leokokane Oil, yet on that sparse information alone the ‘key finding’ was that: ‘[t]he allegations … that a crude oil supply contract was improperly awarded to Imvume by the SFF in March 2002, are without merit.’ [139] I think that it is manifest that this was no investigation at all and that there was no proper basis for that finding. Conclusions [140] The story that unfolded over the weeks that the articles were published was a story of alleged impropriety on various related fronts. The view that the Public Protector took of his investigatory powers had the effect of disemboweling the complaints right from the start. The manner in which he then went about investigating the remainder narrowed it even further. By the end there was in truth no investigation of the substance of the various complaints. [141] But even so far as the Public Protector purported to investigate the remnants with which he was left, the investigation was so scant as not to be an investigation at all. Much of that can be attributed to the state of mind in which the purported investigation was conducted, which is revealed both in the manner in which the Public Protector went about the task, and in the tone of the affidavits deposed to by Adv Fourie. That state of mind is exemplified by a passage to which we were referred by counsel for the respondents. [142] In his supplementary affidavit that was filed after the record of the investigation was produced Mr Brümmer said that the response that Adv Fourie received from the Director-General ‘was effectively accepted without question by the respondent and was conveyed in the Report as the factually correct version’. This is how Adv Fourie replied: ‘The deponent does not say why the Director-General’s explanation had to be corroborated by others on the trip or by further documentation. He does not produce evidence that contradicts [the Director General’s] explanation and does not indicate why his response should have been regarded with suspicion. A Director General of a government department is a person of high integrity with expert knowledge and experience of the matters of his/her department engages in. His views and opinions on matter cannot be questioned simply because a certain journalist, for reasons of their own, might not believe him’. [143] Truth and deceit know no status or occupation. One expects integrity from high office but experience shows that at times it is not there. And while experience shows that journalists can be cavalier there are times when they are not. It is the material that determines the veracity of the speaker and not the other way round, and that applies universally across status and occupation. It is the hallmark of this investigation that responses were sought from people in high office and recited without question as if they were fact. An investigation that is conducted in that state of mind might just as well not be conducted at all. The investigator is then no more than a spokesman, who adds his or her imprimatur to what has been said, which is all that really occurred in this case. I have said before that an investigation calls for an open and enquiring mind. There is no evidence of that state of mind in this investigation. [144] I have pointed out that the Public Protector made prominent findings discrediting the respondents and I think I must deal briefly with them as well, bearing in mind that I have found that the respondents were entitled to bring these proceedings to controvert those findings at least. In this judgment I have related the essential facts that were revealed in each of the articles with reference to outside material and not with reference to the articles themselves. By doing so I think I have already demonstrated that the substance of each of the articles was constructed upon an ample base. There might well be some errors in the various articles, there might be some unsupportable inferences, and there might be some unjustified speculation. But I think it is abundantly clear from the material that I have used for relating the substance of each of the articles, that the Public Protector had no basis for discrediting the newspaper as he did. Whether that material is authentic, and whether it is true, is another matter. That was not the ground upon which the newspaper was discredited. Nor could it be discredited on those grounds, because there was no investigation in that regard. [145] I have no doubt that the court below was correct in finding that there was no proper investigation and in setting aside the report. But I have some difficulty with the further order that was made. Before the court below, and before us, it was accepted on behalf of the Public Protector that if the report is set aside then an order directing a fresh investigation should follow, and the court below cannot be faulted for having made that order (and an ancillary order). But I do not think that a court should make an order, thereby exposing the litigant to the penalties for contempt if it is not obeyed, unless the order is clear and unambiguous as to what is required. There was no suggestion on behalf of the Public Protector that the investigation will not be opened afresh and the views expressed by Adv Mushwana himself of the enormity and importance of the matter give every reason to think that that will indeed occur. It is not open to us to supplant the Public Protector by directing with precision what is required for a proper investigation. That will inevitably be dictated by the exigencies that might arise. In those circumstances I do not think those orders should stand and the Public Protector must be left to determine what is required in order to fulfil his or her duty. [146] Paragraphs 2 and 3 of the order of the court below are accordingly set aside. Save for that, the appeal is dismissed with costs. ___________________ R W NUGENT JUDGE OF APPEAL APPEARANCES: For appellant: IV Maleka SC B Makola Instructed by: Edward Nathan Sonnenberg Inc, Sandton Matsepes Inc, Bloemfontein For respondent: G M Budlender SC Instructed by: Webber Wentzel Attorneys, Johannesburg Symington & De Kok, Bloemfontein

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 1 June 2011 Status: Immediate Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal. * * * THE PUBLIC PROTECTOR v MAIL & GUARDIAN LIMITED & OTHERS The Supreme Court of Appeal (SCA) today dismissed an appeal against an order of the North Gauteng High Court, which had set aside a report produced by the Public Protector. The report arose from an investigation that the Public Protector purported to conduct, at the request of two members of the National Assembly, concerning allegations made in a series of articles that had been published by the Mail & Guardian newspaper. The articles made revelations that were dubbed “Oilgate’ by the newspaper. The SCA held that the substance of the matters that were referred to the Public Protector for investigation was not investigated at all. As for the matters that he purported to investigate, it held that the investigation was so scant as to amount to no investigation at all. The SCA said that the minimum that is required for an investigation of any kind is that it must be approached with an open and enquiring mind. It said that there was no evidence of that state of mind in the investigation in this case. The hallmark of the investigation was that responses were sought from people in high office and recited without question as if they were fact. It held that the purported investigation provided no basis for any of the findings of the Public Protector, and that the court below had correctly set aside the report. Ancillary orders directing the Public Protector to investigate afresh, and in doing so to take certain matters into account, were, however, set aside. The SCA said that a court should not make an order unless the order is clear as to what is required. The court could not direct the Public Protector as to the manner in which any further investigation should be made and for that reason it set aside those orders.

3573

non-electoral

2021

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Reportable Case no: 342/2020 In the matter between: MXOLISI MANANGA FIRST APPELLANT THANDO NGQOYI SECOND APPELLANT MAVA MANANGA THIRD APPELLANT and MINISTER OF POLICE RESPONDENT Neutral citation: Mxolisi Mananga and Others v Minister of Police (Case no 342/2020) [2021] ZASCA 71 (04 June 2021) Coram: ZONDI and MAKGOKA JJA, and EKSTEEN AJA Heard: 7 May 2021 Delivered: This judgment was handed down electronically by circulation to the parties’ legal representatives by email, publication on the Supreme Court of Appeal website and release to SAFLII. The date and time for hand-down is deemed to have been 10h00 on 04 June 2021. Summary: Criminal law and procedure – delict – unlawful arrest and detention – arrest, without a warrant, on a charge of assault GBH - s 40(1)(b) of the Criminal Procedure Act 51 of 1977 – whether arresting officer held a reasonable suspicion that appellants had committed an offence listed in Schedule 1 to the Act - assault, when a dangerous wound is inflicted – what constitutes a dangerous wound. ORDER On appeal from: Eastern Cape Division of the High Court, Mthatha (Ndamase AJ sitting as court of first instance): The appeal is dismissed with costs, including the costs of two counsel. JUDGMENT Eksteen AJA (Zondi and Makgoka JJA concurring) [1] The appellants were arrested on 20 March 2015 by Warrant Officer Siphiwo Qunta (Warrant Officer Qunta) of the South African Police Service (SAPS) without a warrant, on charges of assault with intent to do grievous bodily harm (assault GBH) and they were detained until 23 March 2015. They contended that their arrest and subsequent detention was wrongful and unlawful and they issued summons against the respondent (the Minister) in the Eastern Cape Division of the High Court, Mthatha (the high court), for damages. The Minister admitted that the appellants were arrested without a warrant, but denied that it was wrongful or unlawful. He contended that the arrests had been effected ‘in terms of s 40(1)(b) of the Criminal Procedure Act 51 of 1977 as they were [reasonably] suspected of having committed an offence referred to in Schedule 1 (assault, where a dangerous wound is inflicted)’. The high court upheld the Minister’s defence and dismissed the appellants’ claim. The appeal is with leave of this Court and it was considered without oral argument, in terms of s 19(a) of the Superior Courts Act, 10 of 2013. [2] The events which gave rise to the arrests were as follows. On 15 March 2015, in the Ncora administrative area, in the district of Cofimvaba, in the Eastern Cape, Ncedile Duel Sambunjana (the complainant) was allegedly assaulted by a number of assailants, including the appellants. He was severely beaten and sustained, inter alia, five lacerations on his head and a fractured wrist. As a result of his injuries he proceeded first to the nearby clinic to seek medical assistance, from where he was transported by ambulance to the Cofimvaba Hospital. There his head wounds were sutured and he was transferred to a hospital in East London for the assessment of his wrist. At the East London hospital his wrist was immobilised in a plaster of Paris cast before he was again returned to Cofimvaba. In Cofimvaba he was admitted and kept in hospital until 19 March 2015. Upon his discharge, he proceeded first to a doctor to obtain a J88 medical report,1 and then to the SAPS to lay a charge of assault GBH. A docket was opened in which the complainant recorded these events and identified his assailants. [3] Warrant Officer Qunta, who was stationed at the Cofimvaba Police Station, reported for duty on 20 March 2015 when the docket was allocated to him for investigation. He perused the contents of the docket and, as a result thereof, proceeded to Ncora to interview the complainant. He found the complainant ‘severely injured’2 and he observed the wounds to his head and the broken arm. During the interview the complainant identified further 1 The standard medical form commonly utilised in police investigations. 2 The terminology used by Qunta in evidence. witnesses to the assault and, accordingly, Warrant Officer Qunta proceeded to interview them and to take statements from them. Thereafter, he arrested the appellants and charged them, accordingly. On Monday 23 March 2015 the prosecutor at Cofimvaba Magistrate’s Court (the magistrate’s court) decided to release the appellants until the other identified assailants had been arrested. They were subsequently traced and also charged. At the time of the hearing of the appellants’ civil claim in this matter in the high court, the criminal proceedings in the magistrate’s court were partly heard. [4] The basis of the appellants’ case, as pleaded, was that their arrest and subsequent detention was unlawful because the arrest was effected without a warrant and without ‘justifiable cause in law’. Thus, the parties agreed at the pre-trial meeting that the only issues for determination were: ‘1. Whether the members of [the SAPS] had [reasonably] suspected that the plaintiffs had committed an assault, where a dangerous wound was inflicted. . . . 2. Whether the plaintiffs were wrongfully and unlawfully arrested by members of [the SAPS]. 3. Whether the detention of the plaintiffs which flows from the arrest by members of the [SAPS] was wrongful and unlawful and therefore had no justification.’ [5] As I have explained, the Minister admitted the arrests, and subsequent detention, and contended that the arrests were justified and therefore lawful, in terms of s 40(1)(b) of the Criminal Procedure Act (the CPA). Section 40(1)(b) provides: ‘(1) A peace officer may without warrant arrest any person- . . . (b) whom he reasonably suspects of having committed an offence referred to in Schedule 1, other than the offence of escaping from lawful custody.’ An assault (or an assault GBH) is not listed, as such, in Schedule 1. Schedule 1 provides for an arrest without a warrant in respect of an assault only when a dangerous wound has been inflicted. [6] The Minister’s plea is a confession and avoidance, which attracts the onus to prove the justification pleaded, that is, the lawfulness of the arrests in terms s 40(1)(b), on a balance of probabilities.3 In order to discharge this onus the Minister was required to establish: (i) that Warrant Officer Qunta is a peace officer; (ii) that he in fact entertained a suspicion; (iii) that the suspicion which he held was that the suspects (the appellants) had committed an offence which is referred to in Schedule 1 (in this case, an assault in which a dangerous wound had been inflicted); and (iv) that the suspicion rested upon reasonable grounds.4 Once these jurisdictional facts have been established the arrestor has a discretion whether or not to carry out an arrest.5 In the present matter the exercise of the discretion to affect the arrest was not in dispute. [7] Warrant Officer Qunta was a peace officer by virtue of his office. As I have said, a charge of assault GBH had been made against the appellants and a docket had been opened. He had before him the content of the docket which included a statement by the complainant, in which he recounted his ordeal, and a medical report of a doctor reflecting the injuries which he had sustained. Having perused the docket, and acquainted himself with the contents thereof, 3 Mabaso v Felix [1981] 2 All SA 306 (A); 1981 (3) SA 865 (A); Minister of Law and Order v Hurley 1986 (3) SA 568 (A) at 589E-F; Lombo v African National Congress [2002] 3 All SA 517 (A); 2002 (5) SA 668 (SCA) para 32. 4 Duncan v The Minister of Law and Order 1986 (2) SA 805 (A) at 818G-H (Duncan); Minister of Safety and Security v Swart [2012] ZASCA 16; 2012 (2) SACR 226 (SCA) para 20. 5 Duncan at 818H-J; Minister of Safety and Security v Sekhoto and Another [2010] ZASCA 141; [2011] 2 All 157 (SCA) paras 6 and 28. he proceeded to interview the complainant and he observed his injuries. The complainant, as I have said, referred him to further witnesses and he proceeded to interview them. He manifestly held a suspicion that the appellants had perpetrated the assault upon the complainant.6 However, s 40(1)(b) of the CPA requires more. On behalf of the appellants, it was submitted that the Minister had failed to establish that Warrant Officer Qunta had reasonable grounds to suspect that a dangerous wound had been inflicted in the assault. [8] As adumbrated earlier, an assault GBH, which is the offence of which the appellants had been charged, is not listed in Schedule 1 of the CPA as an offence for which an arrest without a warrant may be justified by s 40(1)(b). Such an assault may be brought within the ambit of Schedule 1 of the CPA when a ‘dangerous wound’ has been inflicted. In respect of an assault, the section requires the Minister to establish, on a balance of probabilities, that the arresting officer held the suspicion, on reasonable grounds, that such a wound had been inflicted. It is not necessary to establish as a fact that the inflicted wound was dangerous.7 ‘Suspicion’ implies an absence of certainty or adequate proof. Thus, a suspicion might be reasonable even if there is insufficient evidence for a prima facie case against the arrestee.8 6 This court has endorsed and adopted Lord Devlin’s formulation of the meaning of ‘suspicion’: ‘Suspicion in its ordinary meaning is a state of conjecture or surmise where proof is lacking; “I suspect, but I cannot prove”. Suspicion arises at or near the starting point of an investigation of which the obtaining of prima facie proof is the end.’ Duncan at 819I; Minister of Law and Order v Kader 1991 (1) SA 41 (A) at 50H-I; Powell NO and Others v van der Merwe N.O and Others [2005] 1 All SA 149 (SCA); 2005 (5) SA 62 (SCA) para 36. 7 Rex v Jones 1952 (1) SA 327 (E) at 332 (Jones). 8 Duncan at 819I – 820B. [9] On behalf of the appellants, it was contended that the fracture to the wrist was not a wound as envisaged in the schedule. In the interpretation of a statutory provision language must be considered in the context in which it appears, in the light of the ordinary rules of grammar and syntax. Where a provision is open to more than one interpretation, a sensible meaning is to be preferred to one that leads to insensible or unbusinesslike results.9 Whilst a ‘wound’ refers more often to a cut or laceration penetrating the skin, it is not necessarily so. It is described in The New Shorter Oxford Dictionary (1993) as ‘an injury to body tissue caused by a cut, a blow, hard or sharp impact . . .; an external injury’. [10] Applying the established approach to interpretation, no logical reason commends itself for excluding an arrest without a warrant where a dangerous injury (in the sense of endangering life or limb) has been inflicted to the body of the victim with a blunt instrument, while permitting it when the injury is inflicted with a sharp object causing a laceration. It is the potential consequence of the injury which justifies an arrest without a warrant. Therefore, both the fracture of the wrist and the lacerations to the head of the complainant were wounds as envisaged in the schedule. [11] I turn to consider whether the wounds were dangerous, as contemplated in the schedule. In Jones, Jennett J remarked: 9 Natal Joint Municipal Pension Fund v Endumeni Municipality [2012] ZASCA 13; 2012 (4) SA 593 (SCA) para 18. ‘It seems to me that by a dangerous wound is meant one which itself is likely to endanger life or the use of a limb or organ. The officer effecting the arrest has only to have reasonable grounds for suspecting that such a wound has been inflicted.’10 Whether he had reasonable grounds for his belief must be approached objectively.11 [12] The high court held that the Minister had discharged the onus resting on him. Regrettably, the presentation of the case on behalf of the Minister left much to be desired. As adumbrated earlier, Warrant Officer Qunta had in his possession a docket including a statement, presumably taken on oath, from the complainant, and a J88 form. These documents, on their own, could have gone some way to discharging the onus resting on the Minister, yet, astonishingly, neither was introduced in evidence. [13] Nevertheless, Warrant Officer Qunta testified that he first acquainted himself with the contents of the docket. It related to a charge of assault GBH and it identified the appellants, amongst others, as the perpetrators. He then proceeded to Ncora to interview the complainant because he appreciated that he could not arrest the appellants without an investigation to verify the information contained in the docket. Upon seeing the complainant, he perceived that he had been ‘severely injured’ and noted the fractured arm and the injuries to his head. Warrant Officer Qunta did not describe the injuries which he observed in any finer detail, but, as I have said, the complainant testified that he had sustained five lacerations to his scalp, which had been 10 Jones at 236; Bobbert v Minister of Law and Order 1990 (1) SACR 404 (C) at 409E-H; De Klerk v The Minister of Police [2018] ZASCA 45; [2018] 2 All SA 597 (SCA) (de Klerk) para 10. 11 R v Van Heerden 1958 (3) SA 150 (T) at 152D-E; Wiesner v Molomo 1983 (3) SA 151 (A) at 159B. sutured, and that his wrist had been fractured and immobilised in a plaster cast. These are the injuries which Warrant Officer Qunta observed. [14] The complainant testified that, following the assault, he bled profusely and was ‘dehydrated’, to the extent that he was unable to speak, and that he was admitted to hospital for approximately four days. It is not apparent from the evidence of Warrant Officer Qunta that the content of the docket revealed the extent of the blood loss sustained. However, in explaining the reason for the arrest, Warrant Officer Qunta testified that he decided to arrest the appellants as a case of assault had been opened and that the complainant had been detained in hospital for a period of four days. He considered it imperative to look for the assailants by virtue of the ‘nature of his injuries’. [15] As I have explained, it was the appellants’ contention, that the evidence did not establish that Warrant Officer Qunta had reasonable grounds to suspect that the wounds were dangerous. Warrant Officer Qunta, so the argument went, did not refer in his evidence to Schedule 1 of the CPA nor to s 40(1)(b) thereof and did not state that ‘[he] arrested the appellants because [he] had a suspicion that the wounds were dangerous’. He could not have determined, so the argument proceeded, from merely looking at the complainant that he had sustained dangerous wounds, and he could not have satisfied himself, as a medical officer could, that the wounds were dangerous. [16] The appellants misconstrue the nature of the inquiry. It is not required of a police officer to examine the wounds of a victim, as a doctor would, nor would that be appropriate. He is merely required to have regard to the facts and circumstances at his disposal, and, where reasonably possible, to satisfy himself of the merit thereof. If, on a consideration thereof, there are reasonable grounds to suspect that a dangerous wound has been inflicted, he is entitled to arrest the suspect without first obtaining a warrant. [17] The argument advanced on behalf of the appellants stemmed from Jones and de Klerk. In Jones a member of the public had witnessed a fracas in which Jones had assaulted a young girl by striking her with a sjambok. She sustained five abrasions or bruises on the arms, a linear abrasion, 3 inches long, on each breast and a linear abrasion-bruise, 3 inches long, on the upper lip. The witness noted that she was bleeding from the mouth and summoned the police. A constable hastened to the scene where Jones was pointed out to him and was arrested. The complainant had not yet reported the matter; no charge had been made; and a docket had not been opened. The constable had no evidence on oath; had not seen the complainant; and had merely the say so of the witness that Jones had assaulted the girl with a sjambok. Jennett J concluded that: ‘He had the right to arrest [Jones] only if he suspected that the appellant had committed one of the offences mentioned in the first schedule to Act 31 of 191712 and it is clear that that question was not tested in evidence’.13 The State had accordingly failed to establish the jurisdictional facts required to justify an arrest without a warrant. [18] In de Klerk, the Minister did not rely on an assault, where a dangerous wound had been inflicted, as justification for the arrest. De Klerk had contended that the complainant in that matter had owed him money. He proceeded to confront the complainant in his office and a scuffle ensued. In 12 A predecessor to the CPA, in which s 31 read in terms identical to s 40(1)(b) of the CPA. 13 Jones at 237. the course of the scuffle, de Klerk grabbed the complainant and pushed him against the wall causing him to bump into the frame of a wall picture. The glass broke and cut the complainant’s back. The cut to the complainant’s back was sutured and a medical report was issued. The complainant laid a charge of assault and de Klerk was arrested. De Klerk sued for damages for wrongful arrest. No medical evidence was tendered, the report was entirely illegible, and, because no reliance had been placed on a ‘dangerous wound’ in the justification pleaded, the nature of the injury was not canvassed in evidence. No reason was demonstrated for the arresting officer to have suspected that the wound may have been dangerous, as that terms have been interpreted in case law (ie a wound endangering life or limb). [19] The present matter is markedly different. As I have said, Warrant Officer Qunta appreciated that he was not entitled to arrest the appellants until he had satisfied himself that there were reasonable grounds to suspect that the injuries inflicted were dangerous. He had every reason to suspect that the injuries which he observed had been inflicted by the appellants in the alleged assault. The lacerations which he observed were to the scalp. Whether they were inflicted by sharp objects or by blunt force, Warrant Officer Qunta perceived these injuries to be severe. The application of such force to the head, per definition, suggests that the injuries were not trivial and the information at the disposal of Warrant Officer Qunta was that the complainant had been hospitalised for a period of four days in consequence of his injuries. Warrant Officer Qunta observed, too, the injury to the complainant’s arm, which had been immobilised in a plaster of Paris cast, and which the complainant advised him, had been fractured. It was an injury which patently endangered the use of a limb. [20] The question, whether the suspicion of the person affecting the arrest is reasonable, must, as I have said, be approached objectively. Accordingly, the circumstances giving rise to the suspicion must be such as would ordinarily move a reasonable person to form the suspicion that the arrestee had committed a first schedule offence.14 I agree with Ndamase AJ, that the information before Warrant Officer Qunta in the docket, coupled with his own observations of the injuries, which were objectively proved, demonstrated an actual suspicion, founded upon reasonable grounds, that an assault, in which dangerous wounds had been inflicted, had been committed. The Minister had established that there were reasonable grounds to suspect that both the injuries to the head and the fracture of the wrist, which endangered the use of the limb, constituted dangerous wounds. The complainant’s evidence in respect of the nature of his injuries was not challenged and Warrant Officer Qunta was not cross-examined at all. The arrests and subsequent detention were therefore lawful. [21] In the result, I make the following order: The appeal is dismissed with costs, including the costs of two counsel. _________________________ J EKSTEEN ACTING JUDGE OF APPEAL 14 Du Toit et al Commentary on the Criminal Procedure Act (2020) Chapter 4 at 3 (Juta electronic version); R v Van Heerden 1958 (3) SA 150 (T) at 152D-E. Appearances: For Appellants: M Jozana Instructed by: B Makade, Mthatha Webbers, Bloemfontein. For Respondent: T M Ntsaluba SC (with N Nhantsi) Instructed by: The State Attorney, Mthatha The State Attorney, Bloemfontein.

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 04 June 2021 Status: Immediate The following summary is for the benefit of the media in the reporting of this case and does not form part of the judgments of the Supreme Court of Appeal Mxolisi Mananga & Others v Minister of Police (342/2020) [2021] ZASCA 71 (04 June 2021). The Supreme Court of Appeal (SCA) today dismissed an appeal against the Minister of Police with costs. The appeal arose from the dismissal of the appellants’ claim for wrongful and unlawful arrest in the Eastern Cape Division of the High Court, Mthatha. The issue before the SCA concerned the entitlement of a police officer to arrest a suspect, without a warrant, in terms of section 40(1)(b) of the Criminal Procedure Act, 51 of 1977, on a suspicion that an assault had been committed and a dangerous wound had been inflicted. The appellants had been involved in an altercation relating to the use of dipping facilities for cattle in the Ncora administrative area near Confimvaba, in the Eastern Cape. They had allegedly assaulted the complainant, Mr Sambunjana, causing him to sustain lacerations to his head and a fractured wrist. Mr Sambunjana was admitted to the Cofimvaba Hospital where he was treated, and detained for a period of four days. When a charge with intent to do grievous bodily harm was laid with the South African Police Service at Cofimvaba, Warrant Officer Qunta proceeded to Ncora to interview Mr Sambunjana. He witnessed the injuries sustained and formed the impression that Mr Sambunjana had been severely injured to the head and arm. He accordingly arrested the appellants, without a warrant, and charged them with assault with intent to do grievous bodily harm. They were detained for three days, before appearing in court. The SCA held that an arrest, without a warrant, in terms of section 40(1)(b) of the Criminal Procedure Act was permitted under Schedule 1 to the Act where an arresting officer held a reasonable suspicion that a dangerous wound had been inflicted. It considered that by ‘dangerous wound’ is meant an injury endangering life or limb and that Warrant Officer Qunta reasonably suspected that the appellants had inflicted such injuries to Mr Sambunjana. It accordingly held that the High Court, Mthatha, had correctly concluded that the arrest was lawful. ~~~~ends~~~~

4151

non-electoral

2023

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Reportable Case no: 160/23 In the matter between: NEDBANK LIMITED FIRST APPELLANT NEDGROUP PRIVATE WEALTH STOCKBROKERS (PTY) LTD SECOND APPELLANT and MOHAMMED IQBAL SURVÉ FIRST RESPONDENT SEKUNJALO INVESTMENT HOLDINGS (PTY) LTD SECOND RESPONDENT AFRICAN EQUITY EMPOWERMENT INVESTMENT LIMITED THIRD RESPONDENT PREMIER FISHING AND BRANDS LIMITED FOURTH RESPONDENT PREMIER FISHING SA (PTY) LTD FIFTH RESPONDENT PREMFRESH SEAFOODS (PTY) LTD SIXTH RESPONDENT MARINE GROWERS (PTY) LTD SEVENTH RESPONDENT TALHADO FISHING ENTERPRISES (PTY) LTD EIGHTH RESPONDENT RUPESTRIS INVESTMENTS (PTY) LTD NINTH RESPONDENT DAZZALLE TRADERS (PTY) LTD TENTH RESPONDENT MANICWA FISHING (PTY) LTD ELEVENTH RESPONDENT MB FISHING VENTURES (PTY) LTD TWELFTH RESPONDENT ROBBERG SEA FREEZE (PTY) LTD THIRTEENTH RESPONDENT 3 LAWS CAPITAL SOUTH AFRICA (PTY) LTD FOURTEENTH RESPONDENT AFRICAN NEWS AGENCY (PTY) LTD FIFTEENTH RESPONDENT BUSINESS VENTURE INVESTMENTS NO. 1126 (RF) (PTY) LTD SIXTEENTH RESPONDENT CAPE SUNSET VILLAS (PTY) LTD SEVENTEENTH RESPONDENT GLOBAL COMMAND & CONTROL TECHNOLOGIES (PTY) LTD EIGHTEENTH RESPONDENT HAIFAMS INVESTMENTS (PTY) LTD NINETEENTH RESPONDENT JABSTER TECHNOLOGIES (PTY) LTD TWENTIETH RESPONDENT KATHEA COMMUNICATIONS (PTY) LTD TWENTY FIRST RESPONDENT LINACRE INVESTMENTS (PTY) LTD TWENTY SECOND RESPONDENT AFRICA ONLINE RETAIL (PTY) LTD TWENTY THIRD RESPONDENT MADJADJI AFRICAN EMPOWERMENT CONSORTIUM (PTY) LTD TWENTY FOURTH RESPONDENT SAGARMATHA GROUP HOLDINGS (PTY) LTD TWENTY FIFTH RESPONDENT SAGARMARTHA TECHNOLOGIES LIMITED TWENTY SIXTH RESPONDENT INDEPENDENT MEDIA CONSORTIUM (PTY) LTD TWENTY SEVENTH RESPONDENT SEKUNJALO CAPITAL (PTY) LTD TWENTY EIGHTH RESPONDENT SEKUNJALO PROPERTIES (PTY) LTD TWENTY NINTH RESPONDENT SILO CAPE WATERFRONT PROPERY INVESTMENTS (PTY) LTD THIRTIETH RESPONDENT SIYOLO ENERGY AND AFRICAN RESOURCES (PTY) LTD THIRTY FIRST RESPONDENT THE TRUSTEES OF THE SOUTH AFRICAN INSTITUTE FOR THE ADVANCEMENT OF SOCIAL ENTREPRENEURS TRUST THIRTY SECOND RESPONDENT SOUTH AFRICAN PRESS ASSOCIATION (PTY) LTD THIRTY THIRD RESPONDENT SURVÉ PHILANTHROPIES NPC THIRTY FOURTH RESPONDENT THE TRUSTEES OF THE HARAAS TRUST THIRTY FIFTH RESPONDENT THE TRUSTEES OF THE IQBAL SURVÉ BURSARY TRUST THIRTY SIXTH RESPONDENT THE TRUSTEES OF THE SAVNASI VILLAGE TRUST THIRTY SEVENTH RESPONDENT THE TRUSTEES OF THE IQBAL SURVÉ FAMILY TRUST THIRTY EIGHTH RESPONDENT THE TRUSTEES OF THE SEKUNJALO DEVELOPMENT FOUNDATION TRUST THIRTY NINTH RESPONDENT THE TRUSTEES OF THE SOCIAL ENTREPRENEURSHIP FOUNDATION TRUST FORTIETH RESPONDENT THE TRUSTEES OF THE SURVÉ FAMILY FOUNDATION TRUST FORTY FIRST RESPONDENT KALULA COMMUNICATIONS (PTY) LTD FORTY SECOND RESPONDENT THE TRUSTEES OF THE SOUTH ATLANTIC ARTS AND CULTURE TRUST FORTY THIRD RESPONDENT INDEPENDENT NEWSPAPERS FORTY FOURTH RESPONDENT Neutral citation: Nedbank Limited and Another v Survé and Others (Case no 160/2023) [2023] ZASCA 178 (18 December 2023) Coram: GORVEN, MEYER and WEINER JJA and BINNS-WARD and KEIGHTLEY AJJA Heard: 14 November 2023 Delivered: This judgment was handed down electronically by circulation to the parties’ legal representatives by email publication on the Supreme Court of Appeal website and by release to SAFLII. The date and time for hand-down is deemed to be 11h00 on 18 December 2023. Summary: Promotion of Equality and Prevention of Unfair Discrimination Act 4 of 2000 – application for interim interdict in Equality Court – failure to establish prima facie case – appealability of interim interdict. __________________________________________________________________ ORDER ______________________________________________________________________________ On appeal from: Western Cape Division of the High Court, Cape Town (Dolamo J, sitting as the Equality Court): 1 The appeal is upheld with costs, including the costs of two counsel where so employed. 2 The order of the Equality Court is set aside and replaced with the following order: ‘The application is dismissed with costs, including the costs of two counsel where so employed.’ __________________________________________________________________ JUDGMENT __________________________________________________________________ Keightley AJA (Gorven, Meyer and Weiner JJA and Binns-Ward AJA concurring) [1] This appeal has its origins in proceedings instituted in the Western Cape Division of the High Court, Cape Town sitting as the Equality Court (the equality court), by the first respondent, Dr Survé, and the remaining respondents (the equality court proceedings). The latter are entities within what may broadly be termed the Sekunjalo Group of Companies (the Sekunjalo Group). Dr Survé describes himself as the founder of the Sekunjalo Group. The appellants, Nedbank Limited and Nedgroup Private Wealth Stockbrokers (Pty) Ltd (Nedbank), are two of several banks cited as respondents in the equality court proceedings. The nature of the equality court complaint against the banks is that the decision to close the accounts of Dr Survé and the other entities in the Sekunjalo Group constitutes conduct amounting to unfair discrimination on the ground of race. [2] The equality court complaint was lodged against the backdrop of several banks, including Nedbank, placing the accounts of the respondents on review. On 15 November 2021, Nedbank dispatched termination letters notifying the respondents that their accounts would be closed (the termination letters). In February 2022, the equality court complaint was filed against Nedbank. On 21 February 2022, the respondents instituted an urgent application (the application) in the equality court for an interim interdict in terms of s 21(5) of the Promotion of Equality and Prevention of Unfair Discrimination Act 4 of 2000 (the Equality Act). It is this application that is the subject matter of the appeal. [3] In brief, the respondents sought to prohibit Nedbank from closing the bank accounts of those respondents that had received termination letters, but whose accounts had not yet been closed. In respect of those respondents whose accounts had already been closed, an order was sought directing Nedbank to re-open them with immediate effect, coupled with a prohibition against subsequent closure. Both categories of relief were to be effective pending the final determination of the equality court proceedings. [4] The equality court (per Dolamo J) granted an interdict in the terms sought and ordered Nedbank to pay the costs of the application. Leave to appeal was dismissed with costs. The appeal is with leave of this Court. [5] The event that triggered Nedbank’s decision to review its banker-customer relationship with the respondents, was the Mpati Commission of Inquiry (the Commission). The Commission was appointed in October 2018 to investigate, report and make findings and recommendations on allegations of impropriety concerning the Public Investment Corporation (the PIC). One aspect of the Commission’s scope of inquiry was the relationship between the PIC and certain companies within the Sekunjalo Group, notably, but not solely, Ayo Technology Solutions (Pty) Ltd (Ayo), and certain transactions that had been concluded between them. [6] The Commission’s report was released to the public in March 2020. It contained several findings which raised concern for Nedbank. The Commission found that Ayo’s shares were grossly over-valued at its listing date, when the PIC subscribed for shares at a price previously agreed between the PIC and Ayo. Soon thereafter, the value of the shares plummeted by 87%. This, concluded the Commission, demonstrated ‘the malfeasance of the Sekunjalo Group’. It observed that the PIC’s interactions with, and investments in, the Sekunjalo Group were questionable from the outset and that investment proposals had emanated from direct discussions between Dr Survé and Dr Matjila, the then Chief Executive Officer of the PIC. This close relationship created top-down pressure on the PIC teams involved to recommend approval for the investments. [7] The inquiry and the Commission’s report also generated significant adverse media attention for Dr Survé and the Sekunjalo Group. Concerned about the possible reputational risk its continued relationship with the respondents would generate, Nedbank embarked on a process of reviewing that relationship. There were extensive engagements between the parties over several months in 2021 and in January 2022. Nedbank received representations from Dr Survé, as well as receiving responses to queries directed at other representatives of the Sekunjalo Group. These included queries about the flow of funds between different accounts held by the respondents with Nedbank. Ultimately, Nedbank decided to terminate its banking relationship with the respondents. [8] It is common cause that all the contracts governing the banking relationship permitted Nedbank to terminate the contracts on reasonable notice. In the termination letters, Nedbank gave the various respondents 120 days’ notice of the closure of their accounts. Notwithstanding that Nedbank was under no obligation to provide reasons for its decision,1 the letters recorded that the reason for the closures was that, in Nedbank’s view, taking into account a number of factors, a continued relationship with the respondents was likely to pose significant reputational and association risks for Nedbank. [9] The termination letters listed the factors. Common to most of the respondents, these were identified as: the respondents’ direct or indirect association with Dr Survé and the Sekunjalo Group; the serious nature of the allegations levelled against Dr Survé and the Sekunjalo Group; the litigation in which some companies in the Sekunjalo Group had been involved; the adverse inferences and statements made in the Commission’s report; and the Sekunjalo Group’s failure to appreciate that the report implicated certain entities in the group in wrongdoing. In respect of some respondents, the termination letters also cited, as factors, Nedbank’s detailed transactional analysis of certain bank accounts and the unsatisfactory responses Nedbank had received to its associated queries. 1 Bredenkamp v Standard Bank of SA Ltd [2010] ZASCA 75; 2010 (4) SA 468 (SCA) para 23; [2010] 4 All SA 113 (SCA). [10] Following the dispatch of the termination letters, there was further engagement between the parties. The Sekunjalo Group appointed Mr Heath SC to conduct an independent review of the Commission’s report. He wrote to Nedbank on 30 November 2021 advising them of this fact. He also quoted from his letter of appointment from Dr Survé, in which the latter had indicated that the Sekunjalo Group intended to make the report available to, among others, their bankers. However, on 5 January 2022, he wrote again indicating that he had prepared a preliminary report but that the Sekunjalo Group had claimed privilege over it. According to Nedbank, the respondents were prepared to share the report with the bank if it withdrew its termination notices. This was not acceptable to Nedbank and the notices remained in effect. [11] With the imminent closure of some affected bank accounts, the respondents turned to the courts. They first approached the high court for an urgent interdict against Nedbank to prohibit the closure on the basis of unfair discrimination on the ground of race. On 14 February 2022 the high court ruled that it did not have jurisdiction to consider the application as the matter fell within the exclusive jurisdiction of the equality court. A week later the respondents instituted the application now on appeal. [12] Two main issues arose for consideration in the appeal. First, the issue of whether the order of the equality court is appealable. Second, the question of whether the respondents established a prima facie case of racial discrimination. Nedbank contended that they did not, that the equality court erred in concluding otherwise, and that the order was appealable. The respondents’ submission was that, even if the order was appealable (which they dispute), it was correctly granted. [13] The question of appealability arose because the equality court’s order was expressly stated to be an interim interdict under s 21(5) of the Equality Act.2 Nedbank submitted that despite the apparent interim nature of the order, its reach rendered the order final in effect. This was so because the order prohibits Nedbank from closing the bank accounts of the respondents for any reason, even if that reason has nothing to do with unfair discrimination. If a respondent, for example, breached the terms of the banker-customer contract, the equality court order prohibits Nedbank from exercising its contractual right to terminate the relationship. Due to the equality court’s limited jurisdiction, which is restricted to unfair discrimination related matters, it would never reconsider its order insofar as it dealt with the prohibition against non-discrimination related terminations. Nedbank submitted that to this extent the equality court order was final and appealable. [14] The respondents disputed Nedbank’s interpretation of the equality court order. They contended that, properly interpreted, the order is not as broad as Nedbank suggested, and that it simply does not prohibit non-discrimination based terminations. They based this contention on the order requiring Nedbank to re-open any accounts of the respondents which it had closed. The balance of that order was that the re-opening was directed to ‘retain the terms and conditions on which these accounts were operating prior to their closure’. While that is true of that paragraph of the order, it clearly does not apply to the prohibitory interdicts of the first two paragraphs of the order. Those are not made subject to the accounts being governed by the prior terms and conditions. The respondents relied on Dolamo J’s statement, in his judgment in the application for leave to appeal, that the order was not intended 2 Section 21(5) states that: ‘The court has all ancillary powers necessary or reasonably incidental to the performance of its functions and the exercise of its powers, including the power to grant interlocutory orders or interdicts.’ to enforce a total prohibition on account closures. However, this is not how the order reads. Nonetheless, I do not consider that it is necessary to make a finding on this interpretational dispute. In my view, the question of appealability in this case does not turn on whether the order is interim or final in effect. For the reasons set out below, my view is that even if the order is interim in effect, it is appealable. [15] As a matter of general principle, an appealable decision is one which is final in effect and not susceptible to reconsideration by the court that granted it, is definitive of the rights of the parties, and has the effect of disposing of at least a substantial portion of the relief claimed in the main proceedings.3 It follows that, ordinarily, an interlocutory interdict that operates pending the outcome of further proceedings is not appealable.4 Orders of this nature do not usually satisfy the triad of requirements for appealability mentioned above. [16] However, these requirements do not constitute a closed list.5 Where a decision does not dispose of all the issues in the case, s 17(1)(c) of the Superior Courts Act 10 of 2013 provides that leave to appeal may be granted if this would lead to a just and prompt resolution of the real issues between the parties.6 In recent years, the role of the interests of justice in determining whether an order is appealable has received attention. This has resulted in judgments of this Court which could be said to differ 3 Zweni v Minister of Law and Order of the Republic of South Africa [1992] ZASCA 197; [1993] 1 All SA 365 (A); 1993 (1) SA 523 (A) (Zweni) at 536B. 4 Cipla Agrimed (Pty) Ltd v Merck Sharp Dohme Corporation and Others [2017] ZASCA 134; [2017] 4 All SA 605 (SCA); 2018 (6) SA 440 (SCA) (Cipla) para 36. 5 Cipla para 37. 6 See also DRDGold Limited and Another v Nkala and Others [2023] ZASCA 9; 2023 (3) SA 461 (SCA) (DRDGold) paras 22-26. in approach to this issue.7 Since, however, none of them deals with interim interdicts, and the Constitutional Court has done so expressly, it will not benefit this judgment to rehearse them. [17] In United Democratic Movement and Another v Lebashe Investment Group (Pty) Ltd and Others8 the Constitutional Court dealt with the application of the interests of justice in an appeal relating to interim interdicts. This Court had struck a matter from its roll on the basis that the order, which was an interim interdict, was not appealable under the Zweni test. The Constitutional Court upheld an appeal against that judgment. It found that ‘[o]ver and above the common law test, it is well established that an interim order may be appealed against if the interests of justice so dictate’.9 It found further that, in deciding whether an order is appealable, this Court does not exercise a discretion but rather makes a finding of law.10 The Constitutional Court concluded that the interim interdict in question was appealable because it had resulted in the infringement of the right to freedom of expression.11 This Court is bound by that finding. [18] In a matter where no case was made out for an interim interdict and the order accordingly ought never to have been granted in the first place, along with other 7 See S v Western Areas [2005] ZASCA 31; 2005 (5) SA 215 (SCA) paras 215-216; [2005] 3 All SA 541 (SCA); Philani-Ma-Afrika and Others v Mailula and Others [2009] ZASCA 115; 2010 (2) SA 573 (SCA); [2010] 1 All SA 459 (SCA); 2010 (2) SA 573 (SCA) para 20; Cipla para 37; DRDGold n 5 paras 22-26; Road Accident Fund v Taylor [2023] ZASCA 64; 2023 (5) SA 147 (SCA) para 26; TWK Agriculture Holdings (Pty) Ltd v Hoogveld Boerderybeleggings (Pty) Ltd and Others [2023] ZASCA 63; 2023 (5) SA 163 (SCA paras 30; Knoop NO and Others v National Director of Public Prosecutions [2023] ZASCA 141. 8 United Democratic Movement and Another v Lebashe Investment Group (Pty) Ltd and Others [2022] ZACC 34; 2022 (12) BCLR 1521 (CC); 2023 (1) SA 353 (CC). 9 Ibid para 45. 10 Ibid para 40. 11 Ibid para 45. relevant considerations, interests of justice might well render an interim interdict appealable despite the Zweni requirements not having been met.12 An analysis of the second issue in this appeal, namely, whether the respondents made out a prima facie case for the interim interdict granted, demonstrates that this appeal is one of those exceptional cases. [19] The established requirements for an interim interdict in common law apply to an application for interim relief in the equality court.13 The well-established approach to interim relief requires the court to consider the facts set out by the applicant, together with any facts set out by the respondent which the applicant cannot dispute, and to assess whether the applicant should, on those facts, obtain final relief in due course.14 The inquiry is fact-based. In the context of equality court proceedings, this Court has emphasised that mere allegation or speculation as to an infringement of the Equality Act will not suffice, and that an application may not be based on ‘conjecture, perception and supposition’.15 This means that it is not sufficient for an applicant to baldly aver that there has been unfair discrimination. It must adduce evidence of facts that objectively support the conclusion contended for. In order to succeed the respondents had to make factual allegations to support a prima facie case that Nedbank had discriminated unfairly against the respondents on the basis of race when it closed the respondents’ accounts. 12 Old Mutual Limited and Others v Moyo and Another [2020] ZAGPJHC 1; [2020] 4 BLLR 401 (GJ); [2020] 2 All SA 261 (GJ); (2020) 41 ILJ 1085 (GJ) para 103, endorsed in Eskom Holdings SOC Limited v Lekwas Ratepayers Association NPC and Others; Eskom Holdings SOC Ltd v Vaal River Development Association (Pty) Ltd and Others [2022] ZASCA 10; [2022] 1 All SA 642 (SCA); 2022 (4) SA 78 (SCA) para 7. 13 Manong and Associates (Pty) Ltd v Minister of Public Works and Another [2009] ZASCA 110; 2010 (2) SA 167 (SCA); [2010] 1 All SA 267 (SCA) (Manong) para 22. 14 Gool v Minister of Justice 1955 (2) SA 682 (C) 688D-E. 15 Manong para 30. [20] The thrust of the respondents’ case was that there appeared to be a collective effort among the banks to ‘unbank’ (the term used in the affidavits) the Sekunjalo Group. Nedbank was one of several banks that had either closed bank accounts held by entities within the Sekunjalo Group or had placed the accounts under review. Although, like the other banks, Nedbank had cited reputational risks as the underlying reason, the respondents cast suspicion on this explanation. The key element of the respondents’ case for unfair discrimination was that Nedbank had been selective in its assessment of which customers posed a reputational risk, and that this selective assessment was based on the race of the entities in question. [21] In support of this thesis, the respondents identified the Steinhoff Group (Steinhoff), EOH Limited (EOH) and Tongaat Hulett Limited (Tongaat) as entities that had not had their bank accounts closed despite them having been found guilty of fraud and other offences. By way of contrast, no actual findings of financial misconduct had been made against the Sekunjalo Group, and yet entities within that group had either had their relationship with Nedbank terminated or threatened with termination. The respondents asserted that these examples of what the respondents labelled as ‘white dominated businesses’ not being punished by Nedbank in the same manner as the respondents was absurd and that it was ‘difficult not to infer that there is racial discrimination at play here’. Consequently, Dr Survé stated in the founding affidavit that ‘the [respondents] have taken the view that they are being targeted inter alia, on the basis of race’. [22] Of course, the respondents’ view or perception that it was being discriminated against on the basis of race is not sufficient to establish a prima facie case. Their case was expressly inferential. Consequently, they were required to adduce facts sufficient to satisfy the equality court that the inference of unfair racial discrimination they sought to draw from the facts was more plausible than the alternative inference drawn from the facts averred by Nedbank in its defence to the charge.16 [23] This means that the respondents had to show that: (a) the other impugned companies, which had not had their accounts closed, were ‘white companies’, whereas the respondents, which had faced closure, were ‘black companies’; (b) these two groups were similarly situated in all other respects apart from race; and (c) the reason for this differential treatment was the race of the companies. Without this, a plausible inference could not be drawn that it was the victim of unfair racial discrimination by Nedbank. [24] There were fundamental inadequacies in the respondents’ case on each of these aspects of the application. On the first, being the asserted race of the two contrasted groups of customers, the respondents applied the racial designation of ‘white’ or ‘white dominated’ to Steinhoff, EOH and Tongaat without any underlying factual basis to support that designation. In their submissions, the respondents contended that the race profile of a company must be determined by considering factors such as the racial composition of its senior management, its board of directors and its beneficial shareholders. However, the affidavits filed in support of the application were devoid of any reference to these factors, let alone an evaluation, based on them, of the alleged ‘white companies’ identified. 16 Cooper v Merchant Trade Finance Limited [1999] ZASCA 97; 2000 (3) SA 1009 (SCA) para 7. [25] Effectively, the respondents’ case rested on no more than an assumption of racial designation. That assumption was insufficient to establish even a prima facie case that Nedbank had treated the respondents, as black customers, differently from white customers. The equality court compounded the problem by itself expressly assuming, without deciding, that Steinhoff, EOH and Tongaat were white companies. Having done so, it went on to decide the case on precisely this basis. It misdirected itself in this regard by making this assumption in the absence of any evidence to support it, and then proceeding to the next leg of the inquiry without being satisfied that the respondents had discharged their onus on this, the foundational element of their case. This, in itself, is decisive of the matter. The necessary foundational element of racial identity had not been established. [26] As to establishing a prima facie case that they were treated differently to other, similarly situated, customers of Nedbank for racial reasons, the respondents similarly fell short. Nedbank met the respondents’ case with an express denial that its decision to terminate its relationship with the respondents was motivated by racial factors. It went further and explained why it had not decided to terminate its relationships with Steinhoff, EOH and Tongaat. These companies did not pose the same reputational risk as the respondents. This was because, unlike the respondents, they had all been restructured following the adverse findings against them; they had acknowledged their past wrongdoing; those implicated had been dismissed or resigned; new management was in place and other remedial actions had been undertaken. In contrast, its interaction with the respondents demonstrated that they had sought to downplay the seriousness of the Commission’s adverse findings and comments directed at the Sekunjalo Group and Dr Survé. Further, a number of Nedbank’s queries regarding account transactions had not been adequately explained. [27] It was inherent in Nedbank’s defence that the respondents and the other entities were not similarly situated. There were material differences between them, bearing no relation to race, that informed Nedbank’s decision to terminate its relationship with the respondents and not with the other entities. The respondents did not substantially dispute Nedbank’s explanation. Their case essentially remained one based on their expressed perception that Nedbank’s conduct was racially motivated. This is insufficient to sustain a prima facie averment of unfair racial discrimination. Consequently, the equality court could not properly have found that the respondents had discharged their onus of establishing a prima facie case of unfair racial discrimination. It ought to have dismissed the application for this reason. [28] Inexplicably, the equality court reversed the onus of proof. Relying on s 13 of the Equality Act,17 the equality court found that Nedbank had not proved that its conduct was not based on the prohibited ground of race. The application being for an interim interdict, the court clearly misdirected itself in this respect. As this Court confirmed in, Manong18 it was the respondents that bore the onus of establishing a prima facie case of discrimination before Nedbank attracted an onus. They could not do so based on mere perception of unfair racial discrimination and an inferential case unsupported by facts. For the reasons already stated, it failed to clear that bar. 17 Section 13 deals with burden of proof. It provides, in relevant parts: ‘(1) If the complainant makes out a prima facie case of discrimination- (a) The respondent must prove, on the facts before the court, that the discrimination did not take place as alleged; or (b) The respondent must prove that the conduct is not based on one or more of the prohibited grounds. (2) If the discrimination did take place- (a) on a ground in paragraph (a) of the definition of “prohibited grounds” then it is unfair, unless the respondent proves that the discrimination is fair. . . ’. 18 Manong paras 22 & 27. [29] In sum, the respondents did not allege the facts necessary to make out a prima facie case. The order of the equality court should not have been granted in the first place.19 For this reason, it is one of those exceptional cases where, despite the interim nature of the order, it falls within the appeal jurisdiction of this Court. [30] There is an additional reason for this interim interdict being appealable. The equality court found, albeit on a prima facie basis, that Nedbank’s decision to close the respondents’ accounts was based on unfair racial discrimination. This is a serious charge. Racism is a scourge which has infected the fabric of our national life for well over three hundred years. The Equality Act was specifically devised, in part, to address and eliminate this scourge. Any order under this section of the Equality Act requires a finding that the entity against which the order is granted has unfairly discriminated on the ground of race. A finding of that nature has obvious serious reputational repercussions, particularly considering Nedbank’s standing as one of the major banks in South Africa. Where a case is properly made out for an order having this effect, a party cannot be heard to complain. However, where, as in this case, the order ought never to have been made, justice requires that the impugned decision is rendered appealable and rectified. [31] It follows for this reason that the appeal must succeed. In the result, the following order is granted: 1 The appeal is upheld with costs, including the costs of two counsel where so employed. 2 The order of the Equality Court is set aside and replaced with the following order: 19 Ibid para 22. ‘The application is dismissed with costs, including the costs of two counsel where so employed.’ ____________________ R M KEIGHTLEY ACTING JUDGE OF APPEAL Appearances For the appellants: A Cockrell SC with M Mbikiwa Instructed by: Edward Nathan Sonnenbergs Inc, Sandton Mayet & Associates Inc, Bloemfontein For the respondents: V Ngalwana SC with J Moodley Instructed by: Adriaans Attorneys, Cape Town Honey Attorneys, Bloemfontein.

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 18 December 2023 Status: Immediate The following summary is for the benefit of the media in the reporting of this case and does not form part of the judgments of the Supreme Court of Appeal Nedbank Limited and Another v Mohammed Iqbal Survé and Others (Case no 160/2023) [2023] ZASCA 178 (18 December 2023). Today the Supreme Court of Appeal (SCA) handed down a judgment upholding, with costs, an appeal against the decision of the Western Cape Division of the High Court, Cape Town, sitting as the Equality Court (equality court). The equality court had granted an interim interdict against the appellants, Nedbank Limited and Nedbank Private Wealth Stockbrokers (Pty) Ltd (Nedbank), prohibiting them from closing the bank accounts held by the respondents, being Dr Survé, Sekunjalo Investment Holdings (Pty) Ltd and forty two entities associated with them. Nedbank was further directed to re-open those bank accounts of the respondent that it had already closed. The order had effect pending the finalisation of proceedings in the equality court arising from a complaint of unfair racial discrimination lodged by the respondents. Nedbank’s decision to review its banker-customer relationship with the respondents was triggered by the Mpati Commission of Inquiry (the Commission) which was appointed in October 2018 to investigate, report and make findings and recommendations on allegations of impropriety concerning the Public Investment Corporation (the PIC). Its scope of inquiry included the relationship between the PIC and certain companies within the Sekunjalo Group. The Commission concluded, among other things, that there was ‘malfeasance’ on the part of the Sekunjalo Group, particularly in relation to the subscription by the PIC for shares in Ayo Technology Solutions Ltd. Nedbank proceeded to review its banker- customer relationship with the respondents. After interactions with them over several months, it gave notice that it intended to close the respondents’ accounts. It cited, among other things, the reputational risks to Nedbank of a continued banker-customer relationship with the respondent. The respondents’ case was that Nedbank’s conduct constituted unfair discrimination based on race. They pointed to the Steinhoff Group (Steinhoff), EOH Limited (EOH) and Tongaat Hulett Limited (Tongaat), which had all been found to have been involved in fraudulent conduct, but whose accounts Nedbank had not closed. Describing these companies as ‘white’ or ‘white dominated’, the respondents averred that it was difficult to avoid the inference that the different treatment meted out to the Sekunjalo Group, which was constituted of ‘black’ entities, was racially motivated. The SCA found that although the interdict granted by the equality court was interim, and ordinarily not appealable, this was one of those exceptional cases in which considerations of justice rendered it appealable. The respondents had failed to make out the prima facie case necessary for the grant of an interim interdict. Their case rested on no more than an assumption that Steinhoff, EOH and Tongaat were ‘white’, with no factual averments to support it. That assumption was insufficient to establish a prima facie case that Nedbank had treated the respondents, as black customers, differently from its white customers. Therefore the necessary foundational element of racial identity had not been established. The respondents had also failed to make out a prima facie case that they had been treated differently to similarly situated customers of Nedbank for racial reasons. Nedbank had explained the reasons why its relationship with Steinhoff, EOH and Tongaat did not pose the same reputational risk as the respondents. The explanation pointed to material differences between them bearing no relation to race. The respondents had not substantively disputed this explanation. Their case was based on a perception and inference of racial discrimination unsupported by the necessary evidence. This was insufficient to sustain a prima facie case for relief. The SCA concluded that the order ought never to have been granted in the first place. The SCA held that there was a further reason that rendered the order of the equality court appealable. The prima facie finding by the equality court that Nedbank’s decision to close the respondents’ accounts was based on unfair racial discrimination was a serious charge with reputational repercussions for Nedbank. The SCA found that where a case is properly made out for an order having this effect, a party cannot be heard to complain. However, where, as in this case, the order ought never to have been made, justice required that the impugned decision must be appealable and rectified. ~~~~ends~~~~

214

non-electoral

2018

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Reportable Case No: 286/17 In the matter between: ANTON LOGGENBERG N O FIRST APPELLANT CHARLOTTA AUGUSTA LOGGENBERG N O SECOND APPELLANT LEON LOGGENBERG N O THIRD APPELLANT CHARLOTTA AUGUSTA LOGGENBERG N O FOURTH APPELLANT ANTON GEORG VORSTER N O FIFTH APPELLANT and NICOLAAS PETRUS MAREE RESPONDENT Neutral citation: Loggenberg N O & others v Maree (286/2017) [2018] ZASCA 24 (23 March 2018) Coram: Seriti, Wallis and Swain JJA and Pillay and Schippers AJJA Heard: 20 February 2018 Delivered: 23 March 2018 Summary: Practice – pleadings – exception – non-compliance with s 2(1) of the Alienation of Land Act 68 of 1981 – alleged sale of land not reduced to writing – appellants orally agreed with respondent that he purchase a farm for the benefit of a trust to be formed and that trust would be entitled to transfer of the farm upon reimbursement of respondent’s costs – trustees seeking to enforce oral agreement – vagueness – agreement not a contract of sale – not invalid in terms of s 2(1) of Act 68 of 1981 – appellants’ pleadings disclosing a cause of action and not vague – case remitted for trial. ORDER On appeal from: Free State Division of the High Court, Bloemfontein (Daffue J sitting as court of first instance): 1 The appeal succeeds with costs. 2 The order of the high court is set aside and substituted with the following: ‘(a) The exception to the claim contained in prayers 1 and 2 of the plaintiffs’ particulars of claim is upheld and those prayers are struck out. (b) The exception to the claim contained in prayer 3 of the plaintiffs’ particulars of claim is dismissed. (c) The exception contained in paragraph 5 of the first defendant’s notice of exception that the oral agreement pleaded in paragraph 26 of the plaintiff’s particulars of claim is void for vagueness, is dismissed. (d) Each party shall pay his/her own costs.’ 3 The case is remitted to the high court for trial. JUDGMENT Schippers AJA (Seriti, Wallis and Swain JJA and Pillay AJA concurring): [1] The Loggenberg family live on a farm called Weltevreden comprising two pieces of land in Parys in the Free State. The farm was previously owned by the Anton Loggenberg Familie Trust (the Family Trust). It is now in the registered ownership of the respondent, Mr Nicolaas Maree, an attorney and formerly a close friend of Mr Anton Loggenberg. The action from which this appeal arises is an attempt by Mr Loggenberg, his wife and son (the plaintiffs), in their capacities as trustees of the Chacoranja Trust (the Trust), to compel Mr Maree to transfer Weltevreden to the Trust. [2] Summons was issued in June 2016, accompanied by detailed particulars of claim setting out the background to the case. Prior to the action being instituted Mr Loggenberg and the Trust obtained an interdict against Mr Maree preventing him from transferring Weltevreden to the fifth defendant, Mr Louis Claassen, who had purchased it for R5.2 million. Mr Claassen played no role in the present proceedings and it may well be that he is leaving the defence to Mr Maree. The response to the particulars of claim was a notice of exception delivered on behalf of Mr Maree. He did not plead over. The exception was argued before Daffue J in the Free State Division of the High Court, Bloemfontein, and upheld with costs. The present appeal is with his leave. [3] The pleaded claim in summary was the following. Mr Loggenberg was insolvent when the Family Trust was created in 1997 to protect the family’s interests. He continued farming operations on the farm through two close corporations. In 2007 the debts of the Family Trust and one of the close corporations were consolidated and re-financed by a loan to the Family Trust of some R2.3 million by clients of Maree & Bernard Attorneys. In 2010 when the close corporation was liquidated it was discovered that the Family Trust was indebted to it in an amount of R442 480. The liquidators obtained judgment for this amount, a writ of execution was issued and Mr Maree bought the farm at a sale in execution on 12 October 2011 in the circumstances described below. [4] After taking advice from a Pretoria attorney, Mr Maree and Mr Loggenberg entered into a contract for the benefit of a third party with the following oral, alternatively implied, terms (the oral agreement). Mr Maree would purchase Weltevreden at the sale in execution for the benefit of a new trust to be created to protect the interests of Mr Loggenberg and his family. Although Mr Maree would become the registered owner of the farm, Mr Loggenberg and his family would continue to reside on Weltevreden and Mr Loggenberg would continue his farming activities. Once the new trust was established, Weltevreden would be transferred to it against payment to Mr Maree of the costs he had incurred in acquiring and obtaining registration of the farm in his name, and repayment of the loan to the clients of Maree & Bernard Attorneys. Mr Maree would arrange the finance for this through Maree & Bernard Beleggers. It was alleged that he would engage in reasonable and bona fide negotiations with the Trust for the transfer of the farm, and with the investors for the necessary finance. The newly established trust would in any event be entitled to transfer of Weltevreden from Mr Maree against payment of the amounts mentioned. Finally it was said to be an implied or tacit term that he would not encumber or sell Weltevreden without entering into negotiations with the Trust concerning implementation of the oral agreement. [5] In accordance with the oral agreement, Mr Maree bought Weltevreden for R500 000 on behalf of the trust to be created. The Chacoranja Trust was established on 15 May 2012. Mr Loggenberg, his wife and Mr Maree were the appointed trustees, authorised by the Master on 6 June 2012 to act in that capacity in terms of s 6(1) of the Trust Property Control Act 57 of 1988. Mr Maree resigned as trustee on 26 May 2016. It is alleged that the Trust accepted the benefit conferred by the oral agreement and that at the beginning of 2013, Mr Maree was informed that the Trust anticipated shortly thereafter being in a position to pay the amounts that it was obliged to pay in order to procure transfer of Weltevreden in its favour. However, it was alleged that Mr Maree breached his obligations under the oral agreement by selling Weltevreden to Mr Claassen for R5.2 million. [6] The plaintiffs sought the following relief in the particulars of claim: ‘1. An order directing the first defendant to negotiate bona fide and reasonably with the first to third plaintiffs, with the aim of concluding an agreement for the acquisition and transfer of the Weltevreden farms with the trustees of the Trust. 2. An order in terms of which the first defendant is directed, on behalf of the investors of Maree & Bernard Attorneys, to negotiate bona fide and reasonably with the trustees of the Trust, in order to conclude an agreement for the financing of the Trust for the acquisition and transfer of the Weltevreden farms. 3. In the alternative to prayers 1 and 2, an order in terms of which the first defendant is ordered to: 3.1 transfer ownership of the Weltevreden farms to the trustees of the Trust at some time, upon fulfilment of the tender and payment of the monies referred to in paragraph 42.2 of the plaintiffs’ particulars of claim; and 3.2 take all necessary steps, sign documents and give instructions in order to transfer the Weltevreden farms at some time to the trustees of the Trust.’1 (My translation.) [7] Mr Maree took exception to the particulars of claim on the basis that they did not disclose a cause of action. He raised three arguments in support of the exception. First, he contended that the agreement alleged was an alienation of land in the form of a sale, and invalid because it was not incorporated in a deed of alienation as required by s 2 of the Alienation of Land Act 68 of 1981 (the Act). Second, he alleged that the agreement was void for vagueness, both because it embodied an agreement to agree on matters such as the terms of the transfer and financing arrangements, and because in the absence of agreement 1 The order sought reads: ‘1. ‘n Bevel in terme waarvan die eerste verweerder gelas word om bona fide en redelikerwys met die eerste tot derde eisers te onderhandel met die oogmerk om ‘n ooreenkoms ter verkryging van oordrag en transport van die Weltevreden plase met die trustees van die Trust te sluit. 2. ‘n Bevel in terme waarvan die eerste verweerder gelas word om namens die beleggers van Maree & Bernard Prokureurs bona fide en redelikerwys met die trustees van die Trust te onderhandel ten einde ‘n ooreenkoms ter finansiering van die Trust ter verkryging van oordrag en transport van die Weltevreden plase te sluit. 3. In die alternatief tot smeekbedes 1 en 2, ‘n bevel in terme waarvan die eerste verweerder gelas word om: 3.1 die Weltevreden plase in eiendom aan die trustees indertyd van die Trust oor te dra teen nakoming van die tender en die betaling van die gelde waarna in paragraaf 42.2 van die eisers se besonderhede van vordering verwys is; en 3.2 alle nodige stappe te doen, dokumente te teken en opdragte te verleen ten einde die Weltevreden plase aan die trustees indertyd van die Trust oor te dra.’ on such matters the agreement was incurably vague. Third, and in anticipation of an argument being raised that the common law should be developed to render agreements to agree enforceable in law, he argued that this was not an appropriate development of the common law. [8] The relief sought in the exception was an order upholding it and either dismissing the plaintiffs’ claims with costs, or striking out the particulars of claim with costs. Alternatively, it asked that prayers 1 and 2 be dismissed or struck out. [9] The court a quo held that the particulars of claim did not sustain a cause of action. On any reasonable construction thereof the Trust was required to pay Mr Maree the costs incurred in purchasing the farm and related costs, together with the outstanding loan of the Family Trust. This, the court said, was nothing other than the ultimate sale of Weltevreden to the trustees of the Trust. It concluded that the oral agreement was void for want of compliance with s 2(1) of the Act. The court also upheld the exception on the ground of vagueness. It found that the oral agreement as pleaded was so vague that the particulars of claim would not be saved by evidence and was excipiable upon every interpretation that the pleading could reasonably bear. Finally, the court a quo held that the so-called agreement to negotiate so as to conclude a further agreement, was void. In this regard the court found that there could not be any suggestion of bona fide negotiations for the conclusion of an oral agreement aimed at the alienation of immovable property. This was in direct conflict with the relevant statutory requirements. [10] The exception was upheld with costs, followed by the following confusing and vague order: ‘2. All paragraphs in the plaintiffs’ particulars of claim that relate to the relief sought in prayers 1 & 2, including the relevant prayers, are struck out with costs, including the costs of two counsel.’2 (My translation.) The doctrine of vagueness, based on the rule of law, is a foundational value of our constitutional democracy. It requires laws to be written in a clear manner with reasonable certainty but not perfect lucidity.3 Court orders must comply with this standard: vague provisions in a court order violate the rule of law.4 [11] Neither counsel was able to say what paragraph 2 of the order meant or which portions of the particulars of claim survived. In addition, the plaintiffs were granted leave to amend the particulars of claim and the question arises: which paragraphs required amendment? Nor was it clear that the order correctly reflected the intention of the learned judge. Although prayer 3 of the order was not expressly struck out, the judgment itself made it clear that the prayer could not be sustained both on the ground that it embodied an agreement that did not comply with s 2 of the Act and because the agreement was in any event too vague to be enforceable. Finally the argument in this court was rendered more confusing by a concession by counsel for the plaintiffs that he would no longer pursue the claim in terms of prayers 1 and 2. This led his opponent to submit that the appeal had effectively been abandoned. [12] It is clear from the judgment that the court found that the agreement to transfer Weltevreden to the Trust constituted a contract of sale which was invalid because it did not comply with s 2 of the Act and was in any event unenforceable. Those findings, as a matter of law, applied equally to the relief 2 Paragraph 2 of the order of the court a quo reads: ‘Alle paragrawe in eisers se besonderhede van vordering wat verband hou met die regshulp aangevra in bedes 1 & 2, insluitende die betrokke bedes, word deurgehaal met koste, insluitend die koste van twee advokate.’ 3 Affordable Medicines Trust & others v Minister of Health & others 2006 (3) SA 247 (CC) para 108; National Credit Regulator v Opperman & others [2012] ZACC 29; 2013 (2) SA 1 (CC) para 46 4 Minister of Water & Environmental Affairs v Kloof Conservancy [2015] ZASCA 177; [2016] 1 All SA 676 (SCA) para 14. sought in paragraph 3 of the particulars of claim and were the findings against which leave to appeal was sought and granted. Indeed, counsel for the respondent submitted that prayer 3, which was based on the validity of the oral agreement to transfer Weltevreden (without further negotiation), was perhaps erroneously not struck out. So, irrespective of whether the prayer remains, the terms of the judgment are inconsistent with it being legally sustainable. The submission that there is no longer an appeal before this Court save for the question of costs, since the plaintiffs have abandoned the relief sought in terms of prayers 1 and 2 of the particulars of claim, is incorrect. [13] This brings me to the question whether the oral agreement fell foul of s 2(1) of the Act, which reads: ‘Formalities in respect of alienation of land No alienation of land after the commencement of this section shall, subject to the provisions of section 28, be of any force or effect unless it is contained in a deed of alienation signed by the parties thereto or by their agents acting on their written authority.’ [14] The Act defines ‘alienate’ as meaning ‘sale, exchange or donation’. It was not suggested that this transaction was either an exchange or a donation, which left only a sale. This being an exception, the excipient had to persuade the court a quo that upon every construction which the particulars of claim could reasonably bear, no cause of action was disclosed.5 Put differently, Mr Maree had to show that upon every reasonable interpretation of the oral agreement, it contemplated the sale of Weltevreden to the Trust. [15] A contract of sale is a consensual agreement by which one of the contracting parties (the seller) binds itself to the other (the buyer) to exchange a thing for a definite sum of money (the price) which the buyer promises to pay to 5 Lewis v Oneanate (Pty) Ltd & another 1992 (4) SA 811 (A) at 817F; Ocean Echo Properties 327 CC v Old Mutual Life Assurance Company (South Africa) Ltd [2018] ZASCA 9 para 9. the seller.6 The essentials of the contract are agreement upon the merx, the price and the obligation of the seller to deliver the merx to the buyer.7 [16] The relationship between Mr Loggenberg and Mr Maree cannot be described as being one of buyer and seller. Neither can the relationship between the Trust and Mr Maree be so described. Instead, the oral agreement as pleaded is based solely on the relationship between Mr Loggenberg and Mr Maree. This is buttressed by the following allegations in the particulars of claim. The Loggenberg family was in financial difficulty. Mr Maree agreed to purchase Weltevreden on behalf of a trust to be formed and register the farm in his name until the trust could acquire ownership of it. The Loggenberg family would continue to live and farm on Weltevreden. After its establishment, the trust would be entitled to transfer of Weltevreden upon reimbursement of Mr Maree’s costs incurred in acquiring the farm (there is no hint of profit or payment for his services) and payment of the amount owed to the clients of Maree & Bernard Attorneys. Mr Maree would not be entitled to encumber or sell the farm without negotiations concerning implementation of the oral agreement. [17] Further, it was alleged that at the sale in execution Mr Maree and Mr Loggenberg informed members of the public that Mr Maree was buying Weltevreden on behalf of the Loggenberg family and they were asked not to push up the bids. In accordance with the oral agreement, Mr Maree bought Weltevreden for R500 000 whereas its market value was R1 million. The Trust was established in 2012 and Mr Maree (unlike a seller) and Mr Loggenberg became trustees. Pursuant to a meeting in 2013 at which Mr Loggenberg informed Mr Maree that the Trust would be in a position to repay the purchase 6 A A Roberts Wessels Law of Contract in SA 2 ed (1951) para 4419; Commissioner of Customs and Excise v Randles Brothers & Hudson Ltd 1941 AD 369 at 400. 7 Commissioner for Inland Revenue v Wandrag Asbestos (Pty) Ltd 1995 (2) SA 197 (A) at 214J. price and costs which Mr Maree had incurred in acquiring Weltevreden, on 27 March 2013 and 8 April 2013 amounts, each of R1 million, were paid into the trust account of Bernard & Maree Attorneys for inter alia the acquisition of Weltevreden by the Trust. [18] These allegations in the particulars of claim must for present purposes be assumed to be correct, unless they are clearly false or cannot possibly be proved.8 Reasonably interpreted, the allegations are capable of sustaining a cause of action that Mr Maree bought Weltevreden on behalf of the Trust and took transfer thereof into his own name, with an undertaking to transfer the farm to the Trust when called upon to do so, upon reimbursement of his costs and payment of the loan by the Family Trust to Maree & Bernard Attorneys. So interpreted, the oral agreement does not constitute a sale of Weltevreden to the Trust. This is not new. More than a century ago in White v Collins,9 Ward J explained the nature of such a claim as follows: ‘If A buys a property on behalf of B from C and takes transfer into his own name with a promise to B to transfer it to him when called upon, B has an actio in personam to compel A to transfer the property to him.’ [19] This statement by Ward J was approved in a minority judgment by Greenberg JA in Du Plessis v Nel,10 that a promise by A to hold freehold property registered in her name in trust for B is a contract to deliver such property on demand, and is not a contract of sale of fixed property as contemplated in the Transvaal Transfer Duty Proclamation 8 of 1902.11 8 Natal Fresh Produce Growers’ Association & others v Agroserve (Pty) Ltd & others 1990 (4) SA 749 (N) at 754J-755B. 9 White v Collins 1914 WLD 35 at 37. 10 Du Plessis v Nel 1952 (1) SA 513 (A) at 526H-527B. 11 Section 30 of the former Transfer Duty Proclamation read: ‘No contract of sale of fixed property shall be of any force or effect unless it be in writing and signed by the parties thereto or the agent's duly authorised in writing.’ [20] This Court endorsed Greenberg JA’s view in Dadabhay v Dadabhay & another.12 The appellant and the respondent entered into an oral agreement in terms of which the respondent agreed to buy an erf from the Community Development Board on behalf of and as nominee for the appellant, but refused to transfer it when called upon to do so. A defence based on s 1(1) of the General Law Amendment Act 68 of 1957 was dismissed.13 This Court held that the oral agreement was neither a contract of sale nor a cession in respect of an interest in land; and that the word ‘nominee’ may well have been used in the relevant oral agreement to denote that the respondent would act as a trustee in buying the property and thus would thereafter sign all documents, when called upon by the appellant to do so, in order that it could be registered in her name.14 [21] Counsel for the respondent submitted that unlike Dadabhay, the acquisition of Weltevreden by the Trust against payment of the price to be determined and financed, was nothing other than a sale; that the Trust did not even exist at the time of the stipulation in its favour; and that all it allegedly acquired on acceptance of the stipulation was the right to purchase the farm at a price to be determined and financed. [22] The submission is unsound. A typical stipulatio alteri or contract for the benefit of a third party, is a contract concluded between A and B for the benefit of a third party C, who by accepting the benefit becomes a party to that contract so that it is A and C who are bound to each other.15 Such a contract has been 12 Dadabhay v Dadabhay & another 1981 (3) SA 1039 (A) at 1048H-1049A; 1049G-1050A. 13 Section 1(1) of the General Law Amendment Act 68 of 1957 reads: ‘No contract of sale or cession in respect of land or any interest in land (other than a lease, mynpacht or mining claim or stand) shall be of any force or effect if concluded after the commencement of this section unless it is reduced to writing and signed by the parties thereto or by their agents, acting on their written authority.’ 14 This judgment was followed in Du Plooy & another v Du Plooy & others [2012] 4 All SA 239 (SCA); [2012] ZASCA 135 paras 32 and 33. 15 Crookes N O & another v Watson & others 1956 (1) SA 277 (A) at 291E-F; Joel Melamed and Hurwitz v Cleveland Estates (Pty) Ltd; Joel Melamed and Hurwitz v Vorner Investments (Pty) Ltd 1984 (3) SA 155 (A) at 172A-E. recognised as enforceable in relation to a company not yet formed.16 So, nothing turns on the fact that the Trust was not in existence when the oral agreement was concluded. It appears that the agreement was a fairly typical stipulatio alteri. Once the Trust was established, by accepting the benefit of the oral agreement, it could obtain the right Mr Loggenberg contracted for, ie the transfer of Weltevreden. And since the oral agreement was capable of being construed other than as a sale, it would not be prohibited by s 2(1) of the Act. Of course, it is an entirely different matter whether the oral agreement can be proved and whether the Trust indeed accepted the benefit of that agreement. But these are matters for trial, not exception. [23] What remains is the exception that the contract is void for vagueness. It is a settled principle that the question whether a purported contract is void for vagueness should not lightly be decided on exception.17 In this regard the dictum of Harms JA in Namibian Minerals Corporation v Benguela Concessions18 is particularly apposite: ‘Once a court is called upon to determine whether an agreement is fatally vague or not, it must have regard to a number of factual and policy considerations. These include the parties’ initial desire to have entered into a binding legal relationship; that many contracts (such as sale, lease or partnership) are governed by legally implied terms and do not require much by way of agreement to be binding (cf Pezzuto v Dreyer and Others 1992 (3) SA 379 (A); that many agreements contain tacit terms (such as those relating to reasonableness); that language is inherently flexible and should be approached sensibly and fairly; that contracts are not concluded on the supposition that there will be litigation; and that the court should strive to uphold – and not destroy – bargains.' [24] Given the nature of the oral agreement and that language used in a contract should be approached sensibly and fairly, I do not think that the court a 16 McCullogh v Fernwood Estate Limited 1920 AD 204 at 205-206. 17 Murray & Roberts Construction Ltd v Finat Properties (Pty) Ltd 1991 (1) SA 508 (A) at 514F. 18 Namibian Minerals Corporation Ltd v Benguela Concessions Ltd 1997 (2) SA 548 (A) at 561G-I. quo at the exception stage was able to say with certainty or the requisite degree of confidence, that the agreement was not an enforceable contract on account of vagueness and that the plaintiffs had no case. Instead, there remained the possibility that evidence might resolve uncertainties in the oral agreement, such as the amount that Mr Maree was authorised to bid for the farm; the identity of the investors and the terms of the proposed finance for the acquisition of the farm by the Trust; the effect on the oral agreement if the Trust did not obtain the necessary finance; and Mr Maree’s reimbursement costs.19 [25] The remaining question regarding vagueness – the alleged mutually destructive allegations in the particulars of claim, namely that there would be negotiations for the transfer of Weltevreden, but that the Trust would in any event be entitled to transfer of the farm – is no longer in issue since the plaintiffs have abandoned paragraphs 1 and 2 of the relief sought. It follows that the court a quo’s finding that the oral agreement as pleaded was so vague that no evidence could resolve the uncertainties, cannot stand. [26] In their written submissions and in oral argument the plaintiffs indicated that they no longer intend to proceed with paragraphs 1 and 2 of the relief sought and their claim that the common law should be developed so as to permit enforceability of an agreement to enter into bona fide negotiations. In my view, the plaintiffs’ approach was sensible: whether the common law should be developed is not a matter that should be decided by way of exception.20 In any event this Court has recently held that a development of the common law such as was suggested by the plaintiffs is not justified on constitutional grounds and the Constitutional Court refused leave to appeal against that judgment.21 19 Burroughs Machines Ltd v Chenille Corporation of SA (Pty) Ltd 1964 (1) SA 669 (W) at 676F-H, approved in Murray & Roberts fn 17 at 514F. 20 H v Fetal Assessment Centre [2014] ZACC 34; 2015 (2) SA 193 (CC) para 26. 21 Roazar CC v The Falls Supermarket [2017] ZASCA 166 paras 16-24. Therefore the exception to paragraphs 1 and 2 of the relief sought was properly upheld and fairness dictates that each party should pay its own costs in respect of the proceedings in the high court. The plaintiffs have been substantially successful on appeal and there is no reason why costs should not follow the result. [27] The following order is made: 1 The appeal succeeds with costs. 2 The order of the high court is set aside and substituted with the following: ‘(a) The exception to the claim contained in prayers 1 and 2 of the plaintiffs’ particulars of claim is upheld and those prayers are struck out. (b) The exception to the claim contained in prayer 3 of the plaintiffs’ particulars of claim is dismissed. (c) The exception contained in paragraph 5 of the first defendant’s notice of exception that the oral agreement pleaded in paragraph 26 of the plaintiff’s particulars of claim is void for vagueness, is dismissed. (d) Each party shall pay his/her own costs.’ 3 The case is remitted to the high court for trial. _______________________ A Schippers Acting Judge of Appeal APPEARANCES For Appellant: B Knoetze SC Instructed by: Symington & De Kok, Bloemfontein For Respondent: FH Terblanche SC (with him AJ Wessels and H Struwig) Instructed by: Strydom & Bredenkamp Inc, Pretoria EG Cooper Majiedt Inc, Bloemfontein

SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL FROM The Registrar, Supreme Court of Appeal DATE 23 March 2018 STATUS Immediate LOGGENBERG N O & OTHERS v MAREE (286/2017) [2018] ZASCA 24 (23 March 2018) Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal. The SCA today set aside a decision by the Free State High Court which upheld an exception to particulars of claim on the ground that they did not disclose a cause of action. In 2011, Mr Loggenberg, a farmer in financial difficulty, and Mr Maree, a local attorney, entered into an oral agreement that Mr Maree would purchase the Loggenberg’s family farm, Weltevreden, at a sale in execution for the benefit of a trust that would be created to protect the Loggenberg family interests. The farm would be registered in Mr Maree’s name until the trust could acquire ownership of it, against reimbursement of Mr Maree’s costs in purchasing and holding the farm. Mr Maree bought the farm for R500 000. It was alleged that he reneged on the oral agreement and sold the farm to a third party for R5, 2 million. Mr Loggenberg obtained an interdict to prevent the transfer of the farm to the third party. He then sought to enforce the agreement but the high court held that the agreement to transfer the farm to the trust was a sale which fell foul of s 2 of the Alienation of Land Act 68 of 1981 because the agreement was not in writing. Mr Loggenberg appealed. The SCA upheld the appeal and found that the particulars of claim disclosed a cause of action. Properly interpreted, the oral agreement did not constitute a sale of the farm. The case was remitted to the high court for trial.

3987

non-electoral

2023

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Not reportable Case no: 056/2021 In the matter between: THE MEMBER OF THE EXECUTIVE COUNCIL FOR HEALTH, EASTERN CAPE PROVINCE APPLICANT and Y N obo E N RESPONDENT Neutral citation: The Member of the Executive Council for Health, Eastern Cape Province v Y N obo E N (056/2021) [2023] ZASCA 32 (30 March 2023) Coram: SCHIPPERS, GORVEN and GOOSEN JJA and KATHREE- SETILOANE and UNTERHALTER AJJA Heard: 14 March 2023 Delivered: 30 March 2023 Summary: Application for condonation for late filing of record of appeal and reinstatement of appeal – gross non-compliance with rules and failure to provide reasonable explanation – no basis to consider prospects of success – record incomplete – application dismissed. ________________________________________________________________ ORDER ________________________________________________________________ On appeal from: Eastern Cape Division of the High Court, Mthatha (Tokota J, Dukada and Dunywa AJJ), sitting as court of appeal: The application for condonation of the late filing of the record of appeal is dismissed. The applicant is ordered to pay the respondent’s costs of the application and of the appeal. ________________________________________________________________ JUDGMENT ________________________________________________________________ Goosen JA (Schippers and Gorven JJA and Kathree-Setiloane and Unterhalter AJJA concurring): [1] The applicant is the Member of the Executive Council for Health, Eastern Cape Province (the MEC) who seeks to prosecute an appeal against an order of the Eastern Cape Division of the High Court, Mthatha (the full court), which was delivered on 23 July 2020. The first hurdle which the MEC must overcome, is that the appeal has lapsed in terms of rule 8(3) of the Rules of this Court (the SCA rules). This Court is accordingly required to decide whether to reinstate the appeal. [2] The respondent instituted an action for damages against the MEC in the Eastern Cape Division of the High Court, Mthatha (the high court). The claim was founded upon the alleged failure of medical staff employed by the MEC at Sipetu Hospital (the hospital) in the Eastern Cape, to provide adequate care and treatment to the respondent during the delivery of her daughter. The child was born at the hospital on 1 January 2010. It is common cause that the child was diagnosed as suffering from spastic non-ambulatory cerebral palsy after sustaining a hypoxic ischaemic insult intrapartum, ie, during labour and the birth. [3] The high court (Mjali J) in a judgment delivered on 30 October 2018, found the MEC liable. Leave to appeal was refused. However, on 19 August 2019, this Court granted leave to appeal to a full court. On 23 July 2020, the full court dismissed the appeal. This Court granted special leave to appeal to it on 16 October 2020. [4] A party who wishes to pursue an appeal to this Court is required to file a notice of appeal within one month of the date on which leave to appeal is granted.1 The notice was filed on13 January 2021.2 In accordance with SCA rule 8(1), the MEC was required to lodge with the registrar the record of the proceedings before the court a quo (in this case, the full court), within three months of filing the notice of appeal. The MEC was therefore required to file the record on or before 21 April 2021.3 [5] No extension of the period for lodging of the record was agreed between the parties, nor was any extension granted by the registrar.4 The record was not lodged within the prescribed period. Therefore, in terms of SCA rule 8(3), the appeal lapsed.5 1 SCA Rule 7. 2 The notice of appeal refers to special leave granted on 9 December 2020. This is incorrect. That is the date on which the registrar of this Court dispatched a copy of the order granting leave to appeal to the parties. The delay in doing so, arose because of an administrative problem in the registrar’s office, for which the registrar apologised. 3 It is not apparent from the record why this date was set. 4 On 7 May 2021, the State Attorney made application to the registrar for an extension of the time for filing of the record. The registrar refused the request on the basis that such application should have been made before 21 April 2021 when the record was due. 5 The registrar formally advised the State Attorney on 14 June 2021 that the appeal had lapsed on 21 April 2021. [6] On 29 June 2022, one year and two months after the expiry of the period within which it had to be lodged, the record was lodged with the registrar. An application for condonation and reinstatement of the appeal was filed on the same date. [7] In order to reinstate a lapsed appeal, a party must obtain condonation for its failure to comply with the SCA rules. The principles governing an application for condonation, in the context of reinstatement of an appeal, have been stated on many occasions. It suffices to refer to Mulaudzi v Old Mutual Life Assurance Co (South Africa) Ltd and Others, where Ponnan JA stated: ‘What calls for an explanation is not only the delay in the timeous prosecution of the appeal, but also the delay in seeking condonation. An appellant should, whenever he realises that he has not complied with a rule of this court, apply for condonation without delay. A full, detailed and accurate account of the causes of the delay and their effects must be furnished to enable the Court to understand clearly the reasons and to assess the responsibility. Factors which usually weigh with this court in considering an application for condonation include the degree of non-compliance, the explanation therefor, the importance of the case, a respondent’s interest in the finality of the judgment of the court below, the convenience of this court and the avoidance of unnecessary delay in the administration of justice.’6 [8] The touchstone for such an application is the interests of justice, which depends on the facts and circumstances of each case. The factors relevant to this enquiry include the nature of the relief sought, the extent and cause of the delay, the reasonableness of the explanation of the delay, the effect of the delay on the administration of justice and other litigants, and the prospects of success.7 The 6 Mulaudzi v Old Mutual Life Assurance Company (South Africa) Ltd and Others [2017] ZASCA 88; [2017] 3 All SA 520 (SCA); 2017 (6) SA 90 (SCA) para 26. 7 Brummer v Gorfil Brothers Investments (Pty) Ltd and Others [2000] ZACC 3; 2000 (2) SA 837 (CC) para 3; Van Wyk v Unitas Hospital and Another (Open Democratic Advice Centre as Amicus Curiae) [2007] ZACC 24; 2008 (2) SA 472 (CC) para 20. applicant must give a full explanation for the delay, which must be reasonable and cover the entire period of the delay.8 [9] Before dealing with the MEC’s explanation for the failure to comply with the SCA rules, an aspect relating to the record itself must be highlighted. The record that was eventually filed does not include a transcript of the evidence of two witnesses, who presented evidence on behalf of the MEC at the trial. They are the midwife and senior nurse who attended to the respondent during the delivery of her baby. Although it was submitted that the attorneys had agreed to its exclusion, no such agreement is recorded in the practice note filed by the MEC. The respondent’s practice note merely states that the record is incomplete. The exclusion of this vital evidence from the record is inexplicable, given that one of the grounds of appeal is that the full court had erred in holding that the nursing staff were negligent in failing to monitor the foetal heart rate; and that they could have taken steps to avoid the harm suffered by the child. Counsel for the MEC rightly conceded that this Court would not be able to consider the appeal without this evidence. [10] To remedy this situation, the respondent’s attorney, of his own accord, filed a supplementary bundle to the appeal record. This document, however, is not certified by the registrar of the court a quo in accordance with SCA rule 8(5). It is therefore not properly before this Court. The upshot is that the record of appeal is still not a complete record. [11] The State Attorney’s explanation for the failure to lodge the record within the three-month period is that ‘the delay was occasioned by the hold up in having 8 Van Wyk fn 7 above para 22. the record transcribed, by Inlexso, the company responsible for the transcription’. He asserts that the person responsible for preparing the record encountered unforeseen and personal difficulties. As will become apparent, this is no explanation. [12] An appeal was prosecuted before the full court, which had before it a transcribed record prepared for that appeal. It should therefore not have been difficult to prepare a record for this Court within the prescribed time. The delay is explained by way of a litany of dates of telephone calls and emails between the attorney, counsel and Inlexso, the company engaged to ‘convert’ the record. It is not necessary to recount this chronology. It divides the period of delay into three periods. The first is the period from January 2021 up to September 2021, when there was an attempt to file the record. However, the State Attorney in Bloemfontein advised the applicant’s attorney that the record did not comply with the SCA rules. The second is the period from the end of September 2021 to February 2022, when a corrected record was submitted to the registrar but rejected for non-compliance with the SCA rules. The third is the period from February 2022 until the record was lodged on 29 June 2022. [13] In each of these periods there are months of delay which are unexplained. For example, the affidavit states that ‘counsel started working on the record from 1 March 2021’ – six weeks after the notice of appeal had been filed. The affidavit states that the record was dispatched to Inlexco for cross referencing on 1 April 2021, before the expiry of the period for the filing of the record. Yet there is no explanation for why this could not be done in the available time or within a reasonable time thereafter. There is no explanation for a delay of one month between 14 June and 14 July 2021. In September 2021 the State Attorney in Bloemfontein pointed out the deficiencies in the appeal record. These included the absence of colour photographs, illegible pages, the use of the incorrect appeal case number and the absence of proper cross-referencing of exhibits. There is no explanation for why these deficiencies were not corrected forthwith. Instead, it took a further four months before the corrected record was submitted to the registrar but rejected for non-compliance with the SCA rules. In that period, a delay of one month from 28 October to 26 November 2021 was not explained at all. After the registrar rejected the record on 4 February 2022, it took another four months before the record was finally filed. This encompassed a six-week delay between 24 April and 7 June 2022, apparently because counsel had not been paid and hence could not continue to work on the preparation of the record. [14] Although the prospects of success on appeal is generally an important consideration in relation to the reinstatement of an appeal, it is not decisive.9 Where the degree of non-compliance is flagrant and substantial, condonation may be refused irrespective of the prospects of success.10 If the explanation for such flagrant and substantial non-compliance is manifestly inadequate or there is no explanation at all, the prospects of success need not be considered.11 This is such a case. [15] The effect of the delay in the filing of the record upon the administration of justice and upon the interests of the respondent, is self-evident. At issue in this case is liability for harm caused to a child, who is permanently disabled, and whose interests are paramount.12 She was born on 1 January 2010. Liability was determined by the trial court on 30 October 2018 and confirmed on appeal on 23 July 2020. The interests of the respondent and the minor child cannot be ignored. 9 Melane v Santam Insurance Co Ltd 1962 (4) SA 531 (A) at 532; Commissioner: South African Revenue Service, Gauteng West v Levue Investments (Pty) Ltd [2007] 3 All SA 109 (SCA) para 11. 10 PE Bosman Transport Works Committee and Others v Piet Bosman Transport (Pty) Ltd 1980 (4) SA 794 (A) at 799 D-E; Ferreira v Ntshingila 1990 (4) SA 271 (A) at 281J-282A. 11 Darries v Sheriff, Magistrate’s Court, Wynberg, and Another 1998 (3) SA 34 (SCA) at 44H-I; See also Kekana v Society of Advocates of South Africa 1998 (4) SA 649 (SCA) at 652 B-F; Minister of Finance and Others v Gore NO [2007] 1 All SA 309 (SCA); 2007 (1) SA 111 (SCA) para 2; Mulaudzi fn 6 above para 35. 12 Section 28(2) of the Constitution provides that ‘(a) child’s best interests are of paramount importance in every matter concerning a child’. The quantum of the loss suffered by them is yet to be determined and they are yet to receive compensation in accordance with the loss. [16] Counsel for the applicant conceded that a proper case for condonation was not made out. Finally, it must be said that the way in which the State Attorney, Mthatha dealt with this matter is to be strongly deprecated. There was a flagrant disregard of the SCA rules. This Court, on more than one occasion, has stated that in such cases punitive personal costs orders may be appropriate.13 [17] In the result: The application for condonation of the late filing of the record of appeal is dismissed. The applicant is ordered to pay the respondent’s costs of the application and of the appeal. _________________ G G GOOSEN JUDGE OF APPEAL 13 Reck v Mills en ‘n Ander 1990 (1) SA 751 (A) at 753J-754F, 760C-D; Napier v Tsaperas 1995 (2) SA 665 (A) at 671E-J; Darries fn 11 above at 44J-45A. Appearances For the appellant: B J Pienaar SC and T M Jikwana Instructed by: State Attorney, Mthatha State Attorney, Bloemfontein For the respondent: P Uys Instructed by: Enzo Meyers Attorneys, East London McIntyre Van der Post Inc, Bloemfontein.

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 30 March 2023 Status: Immediate The following summary is for the benefit of the media in the reporting of this case and does not form part of the judgments of the Supreme Court of Appeal The Member of the Executive Council for Health, Eastern Cape Province v Y N obo E N (Case no 056/2021) [2023] ZASCA 32 (30 March 2023) The Supreme Court of Appeal (SCA) today dismissed an application for condonation for the late filing of a record of appeal, with costs. The plaintiff (Y N) had instituted an action for damages against the MEC for Health, Eastern Cape (the MEC) arising from injuries suffered by her minor child during birth at Sipetu Hospital in the Eastern Cape. The child was born on 1 January 2010. She was diagnosed as suffering from spastic non- ambulatory cerebral palsy. On 30 October 2018, the Eastern Cape Division of the High Court, Mthatha (the trial court) held the MEC liable for the negligent conduct of medical personal at the Sipetu Hospital. Leave to appeal against the judgment of the trial court was granted by the SCA. Thereafter an appeal was prosecuted before a full court of the Eastern Cape Division of the High Court, Mthatha (the full court). The full court dismissed the appeal on 23 July 2020. Special leave to appeal to the SCA was granted on 16 October 2020. The MEC failed to file the record of appeal which was due on 21 April 2021. The record was filed on 29 June 2022, fourteen months after the expiry of the initial period of three months allowed for the filing of the record. The appeal had therefore lapsed. The SCA found that the explanation provided for the failure to comply with the rules and to file the record within the prescribed period, amounted to no explanation. It found that the non-compliance was gross and that there had been a flagrant disregard of the rules of the Court. The SCA reaffirmed the principle that in circumstances where the non-compliance with the rules was flagrant and no reasonable explanation was provided, condonation might be refused irrespective of the prospects of success. It held that this was such a case. It noted that the record that had been filed, omitted the evidence of two vital witnesses. No agreement had been reached to exclude this evidence and no explanation was provided for its omission. The record was therefore incomplete. It dismissed the application for condonation with costs and ordered the MEC to pay the plaintiff’s costs of appeal. --------ends--------

3179

non-electoral

2007

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA JUDGMENT Reportable Case no: 096/06 In the matter between: ROAD ACCIDENT FUND Appellant and JASON KING GROBLER Respondent _____________________________________________________ Coram: Farlam JA, Hancke et Musi AJJA Date of hearing: 23 March 2007 Date of delivery: 31 May 2007 Summary: Collision between a motor vehicle and motor cyclist ─ to avoid a collision, the cyclist swerved to his incorrect lane of travel ─ if the motor cyclist committed an error of judgment, the question is whether a reasonable man in the circumstances could have done the same ─ it is wrong to examine meticulously the options taken by the cyclist in the light of after-acquired knowledge ─ no contributory negligence proved on the part of the motor cyclist ─ order in para [15]. Neutral citation: This judgment may be referred to as RAF v Grobler [2007] SCA 78 (RSA). _____________________________________________________ HANCKE AJA HANCKE AJA: [1] I have had the advantage of reading the judgment of my colleague Musi AJA. I have come to the conclusion that the appeal must fail for the reasons which follow. [2] The facts I consider relevant for the determination of the appeal are either set out in my colleague’s judgment, or are referred to hereinafter. [3] It is common cause between the parties that immediately prior to the collision, the insured driver had executed an overtaking manoeuvre, overtaking a Isuzu bakkie which was stationary in his lane and thereby entering his incorrect lane of travel, being the lane of travel upon which the respondent was travelling. The appellant having conceded the negligence of the insured driver, it bore the onus to prove contributory negligence on the part of the respondent. Of importance was the distance between the two vehicles at the point when the insured vehicle failed to return to its correct side of the road, presenting the respondent with a sudden emergency. On the evidence, the distance between the two vehicles at that point was between 50 metres, as estimated by the eyewitness Basson, and a maximum of 100 metres, being the reconstruction of the expert Professor Lemmer. [4] It is apparent from the evidence that the respondent must have had an unrestricted view down the road ahead of him of more than 1,5 kilometres as he crested the rise, and that in this vista he would have been able to see both the stationary Isuzu in the oncoming lane, and the insured vehicle. There was however no evidence as to the distance between the crest and the stationary Isuzu, and, more importantly, as to where the insured vehicle would have been at that point. It is important to note that nowhere in the evidence was a distance between the Isuzu and the crest or the dip canvassed. [5] As already mentioned the distance between the insured vehicle and the respondent’s motorcycle at the point where the former failed to return to his correct lane was, at best for the appellant, somewhere between 50 metres and a maximum of 100 metres. That was accordingly the distance between the vehicles when the respondent could first reasonably have realised that the oncoming vehicle was not returning to its correct lane. [6] In this regard, the Court a quo stated the following: ‘Only when the insured driver failed to take the expected action, did the emergency arise. There is no evidence indicating at what distance this motorcyclist should have realised that the insured driver was acting oddly. Likewise, there is no evidence indicating how much earlier than its abortive swerve to the left, the insured driver could have returned to its correct side of the road.’ [7] The respondent was obliged to take evasive action. One possibility was to swerve away from the oncoming vehicle to the left. According to the evidence the terrain to the left was hazardous. There was loose gravel, a culvert, trees and a fence. According to Professor Lemmer’s evidence, even if the vehicles were 100 metres apart at that point, going off onto the gravel to the respondent’s left would have been ‘quite a dangerous exercise’. It is also important to note that approximately 80 metres in front of the respondent, there was a stationary Golf with five people (including Basson) standing next to it on the gravel to his left. On the other side of the road there was the stationary Isuzu and, further to the right, Basson’s vehicle parked on the opposite gravel verge to the Golf. According to Professor Lemmer’s calculations, on the assumption that the distance between the two vehicles was 100 metres at that stage, then they probably had two seconds to impact. If the distance between the two vehicles at the time was closer to the 50 metres as estimated by Basson, the time to impact could have been closer to one second.1 The evidence of Basson in this regard is not contradicted and his impression was that it happened ‘in the wink of an eye’. [8] A driver of a motor vehicle who is faced with an oncoming vehicle which has swerved and entered its incorrect lane of travel, and an impending 1 Allowance must be made for reaction time. Cf Pretorius v African Gate and Fence Works Ltd 1939 AD 567 at 575; R v Goodall 1969 (3) SA 541 (RAD) at 543A-B. In his evidence Professor Lemmer allowed for reaction time of about one second. collision must, as a general rule, avoid swerving to its incorrect lane as his primary course of action. Kleinhans v African Guarantee and Indemnity Company Ltd 1959 (2) SA 619 (E) at 624F; President Insurance Company Ltd v Tshabalala and Another 1981 (1) SA 1016 (A) at 1018F-H and 1020C; Burger v Santam Versekeringsmaatskappy Bpk 1981 (2) SA 703 (A) at 708A. It is important that each case be judged on its own merits. The cases referred to must be seen in the context of their own facts. In all the cases mentioned the motorists who veered onto the incorrect side of the road had more opportunity and/or options than the respondent had. [9] It is clear from the evidence that the respondent was plunged by the insured driver’s negligence into a situation of sudden emergency, that he had no more than a second within which to escape that emergency, and that he effectively was given a choice between facing the danger, or veering away from it and hoping that it would not follow him. He did the latter. In Rodrigues v SA Mutual & General Insurance Company Ltd 1981 (2) SA 274 (A) Van Heerden AJA stated the following on 280H-281A: ‘He was confronted by a sudden emergency as a result of the unexpected presence of a kneeling person in the street. He judged that by swerving as he did he would be allowing a sufficient berth to avoid colliding with the appellant. He also had to consider his own safety as well as that of the passengers in the back of the van, which could have been endangered by a violent swerve. In my view the circumstances were such that his failure – if indeed it was one – to swerve more to his left did not amount to negligence but at the most to an error of judgment.’2 [10] If he committed an error of judgment, the question is whether a reasonable man in the circumstances could have done the same. In Ntsala and Others v Mutual & Federal Insurance Company Ltd 1996 (2) SA 184 (T) Els J stated the following on 192F-H: ‘Where a driver of a vehicle suddenly finds himself in a situation of imminent danger, not of his own doing, and reacts thereto and possibly takes the wrong option, it cannot be said that he is negligent unless it can be shown that no reasonable man would so have acted. It must be remembered that with a sudden confrontation of danger a driver only has a split second or 2 See also Von Wielligh v Protea Versekeringsmaatskappy Bpk 1985 (4) SA 293 (C) at 301D- F. a second to consider the pros and cons before he acts and surely cannot be blamed for exercising the option which resulted in a collision.’3 [11] The question is whether the respondent acted reasonably in the circumstances. In SAR and H v Symington 1935 AD 37 Wessels CJ stated (at 45): ‘Where men have to make up their minds how to act in a second or in a fraction of a second, one may think this cause better whilst another may prefer that. It is undoubtedly the duty of every person to avoid an accident, but if he acts reasonably, even if by a justifiable error of judgment he does not choose the very best course to avoid the accident as events afterwards show, then he is not on that account to be held liable for culpa.’4 [12] When a person is confronted with a sudden emergency not of his own doing, it is, in my view, wrong to examine meticulously the options taken by him to avoid the accident, in the light of after-acquired knowledge, and to hold that because he took the wrong option, he was negligent.5 The test is whether the conduct of the respondent fell short of what a reasonable person would have done in the same circumstances. [13] In finding no contributory negligence on the part of the plaintiff, the Court a quo stated the following: ‘There is no basis upon which it cannot be found, that until a very late stage the second plaintiff had no reason to anticipate that the insured driver would not return to his lane. After all, the insured driver was executing the more dangerous manoeuvre of passing the LDV on its right, and on the wrong side of the road, and one would have expected him to be very alert as to when he was to return to the correct lane. It is so, that if the motorcyclist carried straight on, then the collision would not have occurred. On the other hand, if the insured driver did not also swerve to the east and tried to travel in its correct lane, the motorcyclist would have avoided the collision with its right hand swerve. It is my view, that a sufficient basis has not been established by the defendant on which the court can find that the conduct of the second plaintiff fell short of what a reasonable motorcyclist would have done.’ 3 See also Rabe v Multilaterale Motorvoertuigongelukkefonds [1997] 4 All SA 407 (T). 4 See also Sierborger v South African Railways and Harbours 1961 (1) SA 498 (A) at 506D-G. 5 Van den Heever J in Cooper v Armstrong 1939 OPD 140 at 148. [14] I agree and am accordingly of the view that the Court a quo was correct in finding that no contributory negligence was proved on the part of the plaintiff. [15] I would therefore make the following order: The appeal is dismissed with costs, including the costs consequent upon the employment of two counsel. ________________ SPB HANCKE AJA CONCUR: FARLAM JA MUSI AJA: [16] This is an appeal from a judgment of the Transvaal Provincial Division of the High Court delivered on 28 October 2005. The dispute arises out of a road accident that occurred on 4 September 1999 on the road between Pretoria/Tshwane and Hammanskraal (the old Warmbaths road) some 8 kilometres from Hammanskraal, in Gauteng. The collision involved a Nissan Skyline motor vehicle driven by one Mr SR Matseke (hereinafter referred to as the insured driver) and a Yamaha motorcycle there and then driven by the respondent. As a result of the collision, the respondent was severely injured. The injuries are described in the following terms in the judgment of the Court a quo: ‘The second plaintiff sustained severe injuries as a result of the collision the most traumatic of which, is the fact that he is completely paralysed below T8, with concomitant incontinence complications and that the use of his arms and his hands, have become impaired.’ [17] The respondent, who was a minor at the time and was duly assisted by his mother, instituted action against the appellant as the body that carries responsibility for compensation of the victims of road accidents in terms of s 2(1) of the Road Accident Fund Act No 56 of 1996 (the Act) claiming compensation for the damages he sustained as a result of the accident. Hartzenberg J found that the collision was due to the sole negligence of the insured driver and awarded the respondent damages in the total amount of R3 931 461 with costs, including the costs of two counsel and the qualifying fees of the experts who testified in the trial. He made a further order that the appellant furnish an undertaking in terms of s 17(4)(a) of the Act relating to the respondent’s future medical treatment. I should mention that the respondent’s mother, who featured as the first plaintiff in the court a quo, also claimed and was awarded an amount of R438 031.51 for the expenses that she had personally incurred in respect of the respondent’s injuries. This award is not the subject of this appeal and hence the erstwhile first plaintiff no longer features. [18] The appellant now appeals, with leave of the court a quo, against the whole of the judgment and the orders made in respect of the respondent. [19] The factual background to this matter is largely undisputed. By the time that the case was tried, the insured driver had died of causes unrelated to the accident and could therefore not testify. On the other hand, due to the fact that he had become unconscious upon impact, the respondent could not remember the events of the day, save for a hazy recollection of what transpired immediately before the collision. The case was decided largely on the testimony of the sole eye-witness, Mr Ronald Basson, who was called by the respondent. In addition, two experts testified on behalf of the respondent on the merits and the appellant relied solely on the testimony of an expert. Photographs of the scene of the accident were also handed in and they give a very clear picture of it. [20] In summary, the evidence is as follows. The accident occurred on a clear sunny day at about 12h30 and traffic was not busy. The section of the road where the accident happened is made up of two lanes, one in each opposite direction. It is a tarred road with broad gravel shoulders on either side. It is a straight road that moves in the direction of north to south as one goes towards Pretoria and south to north as one travels towards Hammanskraal. Just before the scene of the accident, as one comes from the south, there is a rise followed by a gentle curve to the left and then the road straightens, declining toward a dip and then inclining again. The same would be the case with a person travelling in the opposite direction. He would be declining towards the dip and then going up the rise. The accident happened in the area between the dip and the rise as one travels southward. As the respondent emerged from the rise coming from the south he would have had a clear, undisturbed view ahead of him extending to about 1.5 kilometres to 2 kilometres. The same would be the case with the insured driver as he approached the dip from the north. [21] Basson testified that he had come from Hammanskraal on his way to Pretoria at about 12h00 and when he got to this spot where the accident happened he found an Isuzu bakkie stationary in his lane. The Isuzu had apparently been involved in an accident earlier. He overtook it, pulled off to his left and parked his vehicle a short distance from the Isuzu. Opposite the stationary Isuzu on the gravel on the other side of the road was a red Golf sedan, next to which stood four men who turned out to be police officers. He walked across the road and talked to these men. The contents of the discussions are not necessary for the purposes of this judgment, save that Basson alerted the policemen to the danger posed by the stationary Isuzu to other road users. At that point he observed the Skyline approaching from the direction of Hammanskraal. The insured driver overtook the stationary bakkie but then did not immediately return to his correct lane. Basson says that he then observed the respondent approaching. The insured driver had still not returned to his correct lane. At that point the Skyline and the motorcycle were 50 metres apart facing each other in the same lane and an emergency ensued. In an attempt to avoid the accident, the respondent swerved to his right but then the insured driver also swerved to his correct lane. Both drivers then swerved back to the western lane and collided with each other in the process. [22] According to Basson, this was a head-on collision. The motorcycle hit the Skyline on its right front side, on the driver side, and as he did so the respondent and his vehicle split. The respondent hit the top of the Skyline twice, flew over and went to land on the eastern lane. The photographs of the scene confirm this insofar so as the location of the damage on the Skyline and the positions of the respondent and the motorcycle are concerned. [23] I should say in passing that there are aspects of Basson’s evidence that are inherently illogical and unconvincing. Take the evidence that he saw the respondent’s eyes turning when the motorcycle went on top of the Skyline. How could this be when he was 30 metres away and the respondent wore a head shield that partly obscured his face? Then there is this piece of evidence, that having first swerved to the eastern lane, both the Skyline and the motorcycle swerved back to the western lane and collided in the course of that manoeuvre. In that event, one would have expected the motorcycle to have hit the Skyline either on its left front or on the middle front. But strangely they collided head on with the motorcycle hitting the Skyline right in front of the driver. It appears that the proposition that was put to Basson under cross- examination to explain why the respondent would have landed where he did would best explain how the collision occurred. It is to the effect that the collision occurred at the point where the respondent was in the process of veering to his right and the Skyline simultaneously swerving back to its correct lane. The force of the impact would then have carried the respondent in the direction in which he had been moving. The proposition could not be sustained though because its exponent, Professor Lemmer, readily conceded the counter propositions put to him under cross-examination, as he did with numerous other propositions that he had made. Basson’s impartiality and objectivity in this matter is also suspect and this begs the question whether he was perhaps not biassed in favour of the respondent. He would have been a vital witness in any possible prosecution of the insured driver but never made any attempt to contact the investigating officer in the matter. Instead he contacted another policeman in Pretoria who apparently gave him information about the earlier accident involving the Isuzu bakkie. Under cross-examination he would not disclose at whose instance he made the typed statement that was handed in in the trial. And he was evasive as to why did he not contact the police. He seems to have avoided disclosing to the investigating officer that there were other eye witnesses to the accident and this may explain why none were called. Be that as it may, Basson’s credibility appears not to have been challenged in the court a quo and the issue was not even raised in this court. There is therefore no basis on which one can question the acceptance by the court a quo of his evidence. In any event, in the view that I take of the matter the discrepancies in his evidence are immaterial. [24] In the court a quo, as in this court, the appellant correctly conceded that the insured driver was negligent. The crux of its case is that there was contributory negligence on the part of the respondent. The issue for determination therefore is whether there was such contributory negligence and, if so, the extent thereof. [25] The thrust of the submissions made on behalf of the appellant was that the respondent was negligent in swerving to his incorrect lane in an attempt to avoid the accident. It was submitted that there were two clear options that he should have exercised before taking the dangerous step of swerving to his right. The one was that he could have reduced his speed and moved as close as possible to the edge of his lane to his left. Counsel for the appellant pointed out that it is possible for a motorcycle and a motor vehicle to go past each other on the same lane. The second option was to reduce speed considerably and then swerve to his left out of the tarred road and onto the gravel shoulder. Regarding the evidence of the respondent’s expert witnesses that it would be dangerous to stray on to the gravel side at the speed of 70 kilometres per hour, counsel for the appellant countered that it would have been a lesser risk than swerving into the path of an oncoming vehicle and thereby risking a head on collision. He argued that swerving into the incorrect lane in circumstances such as the present was inherently dangerous and should have been done as a last resort. In support of his submissions counsel cited inter alia Burger v Santam Versekeringsmaatskappy 1981 (2) SA 703 (A) at 708A; President Insurance Company Ltd v Tshabalala 1981 (1) SA 1016(A) at 1020C; Kleinhans v African Guarantee and Indemnity Company Ltd 1959 (2) SA 619(E) at 624F. [26] The gist of the argument advanced on behalf of the respondent was that the respondent’s conduct should be judged against the reality that he found himself in an emergency due to no fault of his own and that he only had a matter of seconds to respond. Counsel for the respondent referred to Basson’s evidence to the effect that the incident happened in a split second or “the wink of an eye” and submitted that it was unreasonable to expect the respondent to have first pondered the other options mentioned by the appellant’s counsel. He submitted that a reasonable driver finding himself in a similar situation would have reacted similarly. In hindsight it could be said that the respondent committed an error of judgment but that does not constitute negligence, so it was argued. Counsel cited reported cases dealing with the position of a driver who finds himself in a situation of emergency due to the fault of the other driver. See inter alia South African Railways and Harbours v Symington 1935 AD 37 at 45; Sierborger v South African Railways and Harbours 1961 (1) SA 498 (A); Rodriques v SA Mutual & General Insurance Company Limited 1981 (2) SA 274(A); Von Wielligh v Protea 1985 (4) SA 293 (C); Diskin v Lester Braun 1992 (3) SA 978 (T) 981 C-F. [27] The difficulty I have with the approach and oral submissions made on behalf of the parties is that they focus exclusively on the conduct of the drivers from the moment that the emergency arose. During the course of the hearing I broached the subject of what precautionary measures the respondent took to avoid the impending emergency. In this regard three of the cases that were cited in argument are apposite. The first is Burger v Santam Versekeringsmaatskapp, supra. In this case a Cortina motor vehicle and a panel van (bakkie) were involved in a head on collision on the bakkie’s incorrect lane. The driver of the Cortina (appellant) was unable to testify because she was suffering from amnesia. The driver of the bakkie (Kotze) was the only eyewitness. Kotze had for some distance seen the appellant steadily moving towards her incorrect side of the road but had assumed that she would go back to her lane. He had observed that if the appellant continued to veer onto the incorrect side of the road a collision would be inevitable and was aware that the appellant was not seeing him. When the vehicles were about 30–35 metres from each other, Kotze swerved to his right in order to avoid the accident but the appellant then also swerved to the same lane and the vehicles collided on Kotze’s incorrect lane. [28] Although Kotze had been put in an emergency due to the substantial negligence of the appellant it was held that he nonetheless had the opportunity to take pre-emptive measures to avoid the accident but failed to do so. The following passage is instructive: ‘Die kernvraag is wat ‘n redelike bestuurder in die plek van Kotze sou gedoen het. Dit is nodig om in gedagte te hou dat die appellante nie skielik oor die pad geswaai het nie, maar oor ‘n aansienlike afstand na regs beweeg het. Kotze het derhalwe voldoende geleentheid gehad om aanvanklike voorsorgmaatreëls te tref. Na my mening sou ‘n redelike bestuurder in sy plek minstens drie stappe gedoen het. Hy sou naamlik, desnoods deur rem te trap, die spoed van die paneelwa tot ‘n baie stadige pas laat daal het; hy sou so ver moontlik na links gedraai het, en hy sou aanhoudend getoet het. Die rede vir die draai na links spreek vir sigself. Hy sou spoed verminder het omdat dit dan langer sou neem voordat die voertuie mekaar sou bereik en derhalwe ‘n langer tydperk aan die ander bestuurder sou bied om tot verhaal to kom, en ook omdat hy dan moontlik in ‘n posisie sou wees om desnoods oor die skouer te ry. Hy sou soos voornoemd getoet het omdat hy sou besef het dat die ander bestuurder waarskynlik vanweë onagsaamheid oor die pad beweeg het en by bewuswording van die posisie van sy of haar voertuig na links sou draai.’ [29] The other case that was cited is Fourie v Road Accident Fund 1999 (3) All SA 661 (O). The facts of this case are almost similar to those in Burger. The difference is that in Fourie the plaintiff had taken precautionary measures to try to alert the driver of the other motor vehicle to the fact that he was on the wrong side of the road. The plaintiff had slowed down considerably, hooted and flicked his headlights to no avail, and only moved to the incorrect lane as a last resort. He was exonerated. The unreported judgment of LC le Grange v Guardian Verskeringsmaatskappy Bpk No 12711/91 delivered in the Cape Provincial Division on 7 July 1993, which is annexed to the Respondent’s Heads of Argument, falls in the category of Fourie and does not assist the respondent. [30] In my view, the above cases illustrate one crucial point. In a situation like the present the proper approach is not to confine the inquiry into negligence to the conduct of the drivers from the moment they became embroiled in an emergency. The inquiry must be extended to cover what steps a driver took to avoid the impending emergency. If he/she had the opportunity to take measures ahead of the emergency to avoid the accident, and he/she failed to do what a reasonable person in similar circumstances would have done, then she/he would be negligent. [31] Reverting to the facts of the instant case, in his Heads of Argument, counsel for the appellant contended that because the respondent had a clear view of the whole vista as he descended from the rise, he should have seen that the insured driver was approaching on the incorrect lane and should have taken evasive action timeously. Counsel submitted that the fact that the respondent failed to do so shows that he had not kept a proper lookout. [32] This is the same subject that I canvassed with counsel during oral argument. Counsel for the appellant indicated that the point of impact is far away from the crest of the rise and that the respondent would have travelled for a considerable distance of more than 150 metres in the straight before the emergency arose and I did not understand counsel for the respondent to dispute this estimation of distances. Surely the respondent should have seen the stationary Isuzu on the road surface, Basson’s vehicle in front of it and the red Golf with the group of people standing next to it. And then there was the Skyline coming towards him on his lane. All this should surely have rung a bell that there was something amiss and it called for alertness and extreme caution. In such circumstances the respondent should at the very least have reduced his speed considerably so that should the unexpected happen he would be in a position to pull safely off onto the gravel to his left. [33] Basson further testified that both the respondent and the insured driver had been travelling at about 70 kilometres per hour at the point when the respondent swerved to his right. And the evidence of the two experts who testified on behalf of the respondent was that at such speed it would be dangerous to veer onto the gravel shoulder. However, had the respondent kept a proper lookout and, given the long clear view and the distance he would have travelled before the emergency arose, he should have been able to reduce speed to at least between 30 and 40 kilometres per hour. On the evidence of Professor Lemmer he would have been able to brake and/or pull out at that speed. Furthermore it can be accepted that if he had hooted, Basson would have heard it, judging by the fact that Basson testified that he could hear the sound of the engine and was able to deduce that the respondent had decelerated because of the hammering of the engine. At any rate, there is nothing on record to show that the respondent had hooted or done anything else for that matter to draw the attention of the insured driver to his approach. [34] I conclude therefore that there was negligence on the part of the respondent which causally contributed to the accident. I think that the estimation of the degree of such negligence made by the appellant (30%) is reasonable. Failure to keep a proper lookout is a serious infraction which can have catastrophic consequences as the facts of this case demonstrate. I would therefore allow the appeal with appropriate orders as to costs and the substitution of the orders of the court a quo. __________________________ HM MUSI ACTING JUDGE OF APPEAL

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 31 May 2007 Status: Immediate Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal The dispute in this matter arises out of a road accident that occurred on September 1999 on the road between Pretoria/Tswane and Hammanskraal. The collision involved a Nissan Skyline motor vehicle and a Yamaha motorcycle driven by Mr Grobler the respondent. As a result of the collision he was severely injured. He was completely paralysed below T8 with concomitant incontinence complications. The use of his arms and his hands have also become impaired. In the court a quo he was awarded damages in the total amount of R3 931 461 with costs. The only issue in the present appeal was whether the respondent was contributory negligent. It was common cause that the driver of the insured vehicle had executed an overtaking manoeuvre and thereby entering his incorrect lane of travel. The respondent was obliged to take evasive action. On appeal the court stated that when a person is confronted with a sudden emergency not of his own doing it is wrong to examine meticulously the options taken by him to avoid the accident, in the light of after-acquired knowledge and to hold that because he took the wrong option, he was negligent. Accordingly the majority of the court found no contributory negligence on the part of the respondent and dismissed the appeal with costs. --ends--

2952

non-electoral

2015

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Not Reportable Case No: 611/2013 In the matter between: MUVHUSO CALVIN NDWAMBI APPELLANT and THE STATE RESPONDENT Neutral Citation: Ndwambi v The State 611/2013 [2015] ZASCA 59 (31 March 2015) Coram: Navsa ADP, Leach and Willis JJA and Schoeman and Meyer AJJA Heard: 11 March 2015 Delivered: 31 March 2015 Summary: Criminal Law – fraud – whether intent to deceive and prejudice proved – appellant correctly convicted of fraud. ___________________________________________________________________ ORDER On appeal from: Free State High Court, Bloemfontein (Van Zyl and Moloi JJ sitting as court of appeal): „The appeal is dismissed.‟ __________________________________________________________________ JUDGMENT Meyer AJA (Navsa ADP and Leach JA and Schoeman AJA concurring) [1] Arising from an incident that occurred on 29 October 2003 at the Shell Ultra City, Kroonstad where a fake rhinoceroses (rhino) horn was sold in a police trap for R350 000, the appellant, Mr Muvhuso Calvin Ndwambi, and a co-accused were convicted in the Regional Court, Kroonstad of the crime of fraud committed in the course of the police trap. The appellant was found to have been complicit in the transaction. He was sentenced to six years‟ imprisonment. The appellant appealed unsuccessfully to the Free State High Court against his conviction and sentence. The court a quo, however, granted him leave to appeal to this Court against both. [2] The appellant contends in this court that the proven facts as found by the trial court did not establish all the elements of the crime of fraud. The evidence did not, he contends, prove either the required intent to deceive, which is an aspect of the element of intent to defraud, or the element of prejudice. [3] Inspector Oberholzer, who was attached to the Bloemfontein Diamond and Gold branch of the South African Police Service (SAPS), received information from an informer that the appellant‟s co-accused wished to sell a rhino horn. This prompted the police to set a trap at 11h00 on 29 October 2003 at the Shell Ultra City, Kroonstad (the filling station). Captain Oertel, who was attached to the same branch of the SAPS, was in command of the police action. He and Inspector de Klerk, also a member of the same branch, went to the petrol station ahead of Oberholzer and the informer to observe and assist Oberholzer in the action. Upon their arrival they observed the appellant sitting in the driver‟s seat of a red Volkswagen Golf motor vehicle (the car) parked in the parking area of the petrol station and his co-accused sitting next to him. [4] When Oberholzer and the informer arrived, Oberholzer too observed the car in the parking area but the appellant and his co-accused were at that stage standing behind it. They parked next to the car. The appellant‟s co-accused walked to the driver‟s side of Oberholzer‟s vehicle and he was introduced to her as the prospective buyer of the rhino horn. She fetched a wrapped article from between the seats in the front of the car and then climbed into the rear of Oberholzer‟s vehicle and informed him that it was the rhino horn. He unwrapped the article and it appeared to him to be real rhino horn. She told him that the rhino horn originated from Mozambique, that it belonged to the appellant and that the asking price was the sum of R350 000. Oberholzer requested her to call the appellant so that he could discuss the transaction with him, but she refused, saying that the appellant was observing the surroundings to ensure that everything was in order. Her statement that the appellant was observing accorded with what appeared to Oertel and De Klerk. Oberholzer and the appellant‟s co-accused agreed to the asking price of R350 000. [5] Oberholzer gave a pre-arranged signal to his colleagues who then approached the appellant and his co-accused. Oertel introduced himself and the police officers to the appellant‟s co-accused and he arrested her. Oberholzer and De Klerk approached the appellant. They introduced themselves to him and Oberholzer arrested him. He immediately denied that he knew his co-accused and said that he had only given her a lift from a nearby bridge to the petrol station. De Klerk‟s search of the car revealed that the appellant was a police officer: his police identification card, service pistol and police dockets were found. A few works of art belonging to the appellant‟s co-accused were also found in the boot of the car. [6] The appellant‟s co-accused conducted an arts and craft‟s business at Hartbeespoortdam. The appellant testified that he had been introduced to her during June/July 2003 because she had required transport for the conveyance of her works of art from Johannesburg to Brits. Since then at her instance he had transported her on 3 occasions to Brits. His co-accused, however, denied that he had ever transported her anywhere before 29 October 2003. She, according to the appellant, had telephoned him early during the morning of 29 October 2003, while he was at home in Kagiso, and requested him to transport her to Kroonstad where she was scheduled to meet a client. According to the appellant he was on official duty that day but had decided not to go to work because he was tired. He contradicted himself by also testifying that he stayed off duty because he was ill. The appellant acceded to the request to transport his co-accused to Kroonstad. He had driven from Kagiso to the Hillbrow Police station where he was stationed. That was where they had agreed to meet. His co-accused had a few works of art and a plastic bag with her but he could not see what it contained and did not ask about it. She had directed him to Kroonstad and to where he should park at the filling station. They had got out of the car but he merely stood around viewing the surroundings. He denied any complicity in the transaction and testified that he had been very surprised when the police officers arrived, arrested him and searched the car. He had seen the rhino horn for the first time at the police station, after his arrest. [7] It is not necessary to refer in any detail to the evidence of the appellant‟s co- accused. She, in turn, attempted to shift the blame to the appellant. She had travelled to the garage, she testified, to meet a client who was interested in buying her works of art. The appellant had taken her there in order to sell his rhino horn to the same client, who was also interested in buying a rhino horn for display in his bar. The client had asked her to find him someone who would sell a rhino horn to him and the appellant was introduced to her as a person wishing to sell one. Hence their journey together to Kroonstad. She saw the rhino horn for the first time when it was shown to her at court. [8] The appellant‟s counsel conceded that the trial court correctly rejected the evidence of the appellant and that of his co-accused. That concession was correctly made. The appellant‟s exculpatory version was so wholly improbable as to be plainly untruthful and palpably false. I do not propose to go into all the unsatisfactory features to his evidence referred to by the trial court in its well-reasoned judgment. I need only highlight a few matters which go to show the untruthfulness of his account. [9] The appellant‟s version that his co-accused, on the occasions mentioned by him, would have travelled with her works of art from Hartbeespoortdam to Johannesburg in order for him to then transport her from Johannesburg to Brits is wholly improbable. Hartbeespoortdam is much closer to Brits than Johannesburg is to Brits. Furthermore, the unavoidable inference is that the appellant and his co- accused had not gone to the filling station in order for the appellant to sell works of art to a prospective buyer. The appellant‟s co-accused did not have any works of art with her when she got into Oberholzer‟s vehicle in order to negotiate the sale. She only took along with her what appeared to have been a rhino horn. The works of art were found in the boot of the car immediately after their arrest. The fake rhino horn was the only object found in Oberholzer‟s vehicle. [10] But the matter goes further. The evidence relating to contact between their respective cell phones revealed 32 calls from the appellant‟s cell phone to that of his co-accused and 38 calls from her cell phone to his during the period 22-29 October 2003. The appellant was unable to proffer any plausible explanation for the constant contact between their respective cell phones in the days running up to their attendance at the petrol station. Also, the appellant‟s denial to the police officers at the time of his arrest that he did not know his co-accused is palpably false. That is what prompted the police to obtain the records relating to their cell phones. Clearly, that evidence was obtained in order to refute the appellant‟s version at the time of his arrest that he did not know the appellant and that he had merely given her a lift from a nearby bridge to the petrol station. [11] The trial court‟s assessment of all the evidence, its adverse credibility findings relating to the appellant and his co-accused and its rejection of their evidence cannot be assailed nor can its favourable credibility findings concerning the three State witnesses – Oertel, Oberholzer and De Klerk. The accounts of the State witnesses were satisfactory and accord with the probabilities. They corroborated each other in material respects. A reading of the record leaves not the slightest doubt that all of the State evidence was honest and accurate. [12] It is common cause that the article sold was a mere imitation of a rhino horn. The trial court did not convict the appellant and his co-accused of the statutory offence of contravening s 14(2), read with ss 1, 11, 12, 40-42 and Schedule 3 of the Nature Conservation Ordinance 8 of 1969 (FS), with which they were charged in the alternative. Criminal liability, in terms of the provisions of the Ordinance, is imposed inter alia for the unauthorised possession, conveyance, buying and selling of „any product from any part of the body of a wild or exotic animal of a species specified in Schedule 3‟. A rhino is so specified. [13] This brings me to the appellant‟s first contention that the proven facts as found by the trial court did not establish the element of intent to defraud, and in particular the aspect of intent to deceive. Intent to defraud has two principal aspects: intention to deceive and intention to induce a person to alter or abstain from altering his or her legal position. The intention to defraud can be with direct intent or by dolus eventualis. (See JRL Milton South African Criminal Law and Procedure Vol II 3rd Ed at 730.) [14] The locus classicus, as was pointed out by Prof Milton, at 731, in regard to intent to deceive is Derry v Peek (1889) 14 App Cas 337, at 374, in which Lord Herschell said that- „. . . fraud is proved when it is shown that a false representation has been made (1) knowingly or (2) without belief in the truth, or (3) recklessly, careless whether it be true or false. Although I have treated the second and third as distinct cases, I think the third is but an instance of the second, for one who makes a statement under such circumstances can have no real belief in its truth.‟ [15] Ex parte Lebowa Development Corporation Ltd 1989 (3) SA 71 (T), at 101E-I, is also apposite. There Stegmann J said the following regarding fraud by dolus eventualis: „The essence of fraud involving dolus eventualis appears to be the deceit practised by the representor in suggesting that to be true which he knows may not be true. He knowingly exposes the representee to a risk (that the representation may be false) and deceitfully leaves the representee ignorant of his exposure to that risk. Any such case of fraud by dolus eventualis may, I think, be analysed further to disclose another fraud underlying and accompanying the first. When anyone makes a representation of fact whilst not knowing whether his representation is true or false, he thereby actually makes two distinct representations of fact. The first represents as fact that which he does not know to be either true or false. The second is a misrepresentation of fact relating to his own state of mind: it is a representation (usually implied) that he has an honest belief in the truth of the first representation. Such second representation is one that he knows to be false, and it therefore establishes a case of fraud by dolus directus simultaneously with the fraud by dolus eventualis relating to the first representation.‟ [16] The appellant found himself on the horns of a dilemma at his criminal trial: saying that he honestly believed the imitation was real could potentially have exposed him to conviction of attempt on the alternative statutory charge (compare eg JM Burchell South African Criminal Law and Procedure Vol I 3rd Ed at 351 et seq); whilst saying that he did not hold such belief, would have exposed him to a conviction of fraud. Instead, he falsely distanced himself from the transaction. He denied knowledge of what was contained in the bag or wrapping that his co-accused carried to Oberholzer‟s vehicle and he testified that to his knowledge his co-accused was going to meet a client in connection with her works of art. His evidence and that of his co-accused having been rejected left the trial court without the benefit of credible evidence from either of them and, with only the State evidence to determine their respective guilt or innocence of the charges they faced. It is trite law that a court is entitled to find that the State has proved a fact beyond reasonable doubt if a prima facie case has been established and the accused fails to gainsay it. (See S v Boesak 2000 (1) SACR 633; [2000] ZASCA 24(SCA), paras 46-47.) [17] The appellant‟s co-accused represented to Oberholzer that the item she was offering for sale was a rhino horn and that it originated from Mozambique. The asking price for what had been expressly represented to be a rhino horn was R350 000. The representation, it is common cause, was false. The prima facie inference, unless gainsaid by credible and reliable evidence, is that the false representation had been made knowingly, or without belief in its truth in the sense described in Derry, or without knowledge whether it was true or false but knowingly exposing Oberholzer or the State to a risk that it may be false and deceitfully leaving him ignorant of the exposure. Any suggestion that they did not know that the representation was false lacks a factual foundation and would therefore amount to impermissible speculation or conjecture. It lay exclusively within the power of the appellant and his co-accused to show what the true facts were but they failed to give an acceptable explanation. The prima facie inference became conclusive in the absence of rebuttal. [18] The other requisite, which it is contended had not been proved by the State was prejudice, actual or potential. The appellant contends that because the State‟s evidence was to the effect that the police had no intention to pay for the rhino horn there could be no prejudice. This contention, however, ignores the longstanding principle that the law looks at the matter from the point of view of the deceiver and not the deceived. [19] The accused in R v Dyonta & another 1935 AD 52 were convicted of fraud in that they falsely pretended to a Mr Potgieter that certain stones were diamonds in order to induce him to pay a certain price for the stones. The accused had been arrested immediately after they had handed the stones to Potgieter who, although he had pretended to be buying, had no intention of buying them. He had informed the police of the proposed sale and they were accordingly on hand when the delivery took place. The matter came before this court on a question of law reserved at the request of the State: whether there could be a conviction for fraud when the person to whom the representation was made at no stage intended to act on the representation. [20] Wessels CJ, in delivering the unanimous judgment of the court, reaffirmed the law as laid down in two previous judgments of this court, thus (at 57): „If the misrepresentation is one which in the ordinary course is capable of deceiving a person, and thus enabling the accused to achieve his object, the fact that the person to whom the representation is made has knowledge or a special state of mind which effectually protects him from all danger of prejudice does not entitle the accused to say that the false representation was not calculated to prejudice.‟ And, in answering the point of law in favour of the State, he concluded as follows (at 57): „The law looks at the matter from the point of view of the deceiver. If he intended to deceive, it is immaterial whether the person to be deceived is actually deceived or whether his prejudice is only potential.‟ [21] This approach has been consistently followed over more than eighty years. In S v Mngqibisa 2008 (1) SACR 92; [2007] ZASCA 119 (SCA), para 9, Mlambo JA said this: „Further clarification regarding the nature of the false representation came in R v Kruse 1946 AD 524 at 533 where the court stated that “ . . . if the false representation is of such a nature as, in the ordinary course of things, to be likely to prejudice the complainant, the accused cannot successfully contend that the crime of fraud is not established because the Crown has failed to prove that the false representation induced the complainant to part with his property.” This approach has consistently been followed over the years. See R v Dyonta and Another 1935 AD 52 at 57; R v Heyne and Others 1956 (3) SA 604 (A) at 622; S v Kruger and Another 1961 (4) SA 816 (A) at I 832D - E; and S v Friedman (1)1996 (1) SACR 181 (W).‟ (Also see S v Brown 2015 (1) SACR 211; [2014] ZASCA 217 (SCA), para 118.) [22] In the present case, an intention to deceive was proved. It was calculated to prejudice. Objectively, some risk of harm could have been caused. It need not be financial or proprietary or necessarily even to the person it was addressed (see R v Heyne & others 1956 (3) SA 604 (A), at 622F). In assessing prejudice it is significant to note that even though the transaction in question involved fake rhino horn it must indubitably be so that transactions of this kind contribute to the illegal trade in rhino horn, which we as a country must all be concerned about. The appellant was thus rightly convicted of fraud. [23] As to sentence: although the appeal was also directed against sentence, counsel for the appellant and for the State are ad idem that the sentence of six years‟ imprisonment is appropriate. I agree. In sentencing the appellant the trial court exercised its discretion judicially and the sentence does not induce a sense of shock (see S v De Jager 1965 (2) SA 616 (A) at 628H-629B). All the relevant factors and circumstances were well considered and duly taken into account by the trial court. When the reprehensibility of the conduct is assessed as well as the intention to deceive it is important to bear in mind that one is dealing with a policeman who was supposed to be on official duty at the time. Interference with the imposed sentence is, therefore, not warranted. [24] In the result the following order is made: „The appeal is dismissed.‟ ___________________ PA Meyer Acting Judge of Appeal Willis JA (dissenting) [25] Having read the judgment of Meyer AJA, I regret that I am unable to agree that the magistrate and the high court hearing the first appeal correctly found that the appellant was guilty of fraud. I should have found the appellant guilty of an attempt to contravene s 14 (2) of the Nature Conservation Ordinance 8 of 1969 and made an appropriate adjustment to sentence. The contravention of the Ordinance was alleged as an alternative count. This section reads as follows: „(14) (2) Except under authority of a permit which may be issued by the Administrator, no person shall- (a) possess, convey, buy, sell, grant, exchange, process or manufacture any product from any part of the body of a wild or exotic animal of a species specified in Schedule 3; (b) sell any such processed part or product; or (c) possess any processed part of product of a rhino horn.‟ Schedule 3 includes „all rhinoceroses‟. Section 40 provides for a penalty and shall be guilty of an offence as follows: „(1) Any person who- (a) contravenes or fails to comply with a provision of section 2 (3), 7, 14 (2), 15 (a), 16 (a) or 33; … shall be guilty of an offence and liable upon conviction – (i) In the case of an offence referred to in paragraph (a), to a fine not exceeding R 100 000 or to imprisonment for a period not exceeding 10 years or to both such fine and such imprisonment; …‟ The question of prejudice or potential prejudice as an element of fraud, took up much space in counsel‟s heads and some time was spent hearing argument on this point during the hearing of the appeal. This issue also provided the main reason why the high court granted special leave to appeal to this court. Following R v Heyne1 I agree with Meyer AJA that at least potential prejudice has been established in this case. This aspect therefore need not detain me. [26] Concerning the alternative charge, after setting out the facts, the high court said: „Voortspruitend uit voormelde, in besonder die feit dat die voorwerp „n nagemaakte renosterhoring was, kon daar uiteraard nie „n skuldigbevinding op die alternatiewe aanklag wees nie.‟ This may be translated as follows: „Arising from the above, in particular the fact that the item in question was a fake rhinoceros horn, there could not, in the nature of things, be a conviction on the alternative count.‟ (My translation.) I shall revert to the issue of the alternative count later. I accept, however, that the appellant cannot be found guilty of dealing in rhinoceros (rhino) horn. [27] In his judgment the magistrate said: „Beskudigde 1 het duidelik die wanvoorstelling gedoen deur voor te gee dat dit „n egte Renosterhoring is. Die ander elemente is ek tevrede, naamlik wederregtelikheid, kousale verband, potensiële nadeel en opset is teenwoordig. Beskuldigde 2 het baie duidelik saamgewerk met beskuldigde 1. Hy het haar al die pad vervoer vanaf Johannesburg na Kroontad. Hy het observasie gehou, terwyl sy die transaksie moes afhandel. Uit die staanspoor het sy ook vir die Staatsgetuie gesê dat hulle twee saam in die ding was, maar dat sy die onderhandelinge behartig. Dit is volgens die Staatsgetuies wie se weergawe deur die Hof aanvaar is. Sy hele houding en optrede is duidelik dat hy sou deel in die opbrengs en ek is tevrede dat hy as medepligtige net so skuldig soos beskudigde 1 is.‟ This may be translated as follows: „Accused 1 clearly made the misrepresentation by claiming that this was a genuine rhinoceros horn. I am satisfied that the other elements, namely, unlawfulness, causal connection, potential prejudice and intention were present. Accused 2 clearly worked together with accused 1. He transported her all the way from Johannesburg to Kroonstad. He kept watch while she concluded the transaction. From the outset, she [accused 1] said to the State witnesses that the two of them were working together in the matter but that she 1 R v Heyne & others 1956 (3) SA 604 (A) at, esp at 622E-F. See also The State v Kruger & another 1961 (4) SA 816 (A) at 833B-C. took care of the negotiations. This is according to the version of the State witnesses, which I accept. His [accused 2‟s] entire conduct and actions clearly show that he would share in the proceeds and I am satisfied that he, as an accomplice, was just as guilty as accused 1.‟ This passage was referred to by the high court with approval. [28] I accept that: (i) The appellant worked together with accused 1 in the transaction; and (ii) He transported her from Johannesburg to Kroonstad; and (iii) He kept watch for her during the transaction with the police officers; and (iv) Accused 1 told the police from the outset that she and the appellant worked together even though she took care of the negotiations; (v) The appellant would share in the proceeds of the crime; and that he was an accomplice to a crime. I am also of the opinion that the totality of the evidence compels the conclusion that the appellant could not reasonably have believed that he was involved in something other than a „rhino horn‟ transaction. In other words, he could not have believed, for example, that he was dealing in drugs, the illegal diamond trade or something completely lawful. My difference of conclusion from Meyer AJA on this point is therefore a narrow one. My point of departure from the magistrate, the high court and my colleagues is that I do not accept that it was proven, beyond a reasonable doubt, that he was an accomplice to the crime of fraud, even though he clearly was an accomplice to some kind of crime or another. To come to the conclusion that the appellant is guilty of fraud, one must draw inferences that I do not think can be justified in this case. [29] I agree that in her evidence in the witness box, accused 1 made accused 2 out to be a dealer. I accept that the appellant was a poor witness and that his version cannot be accepted. [30] It is, however, trite that the fact that the accused is an unsatisfactory - even a lying witness – does not necessarily justify the conclusion of his guilt.2 Care must be exercised in not drawing an inference of guilt merely because he was lying.3 2 See for example S v Mtsweni 1985 (1) SA 590 (A) at 593I-594D; S v Steynberg 1983 (3) SA 140 (A) at 146A -148D; R v Mlambo 1957 (4) SA 727 (A) at 738B-D and Goodrich v Goodrich 1946 AD 390. 3 See for example Mtsweni, supra. Ultimately, guilt is about the inferences that, as a matter of logic, may be drawn.4 Inference must carefully be distinguished from conjecture or speculation.5 [31] I do not see the relevance of Meyer AJA‟s reliance on S v Boesak.6 In that case it was said that: „If there is evidence calling for an answer, and an accused person chooses to remain silent in the face of such evidence, a court may well be entitled to conclude that the evidence is sufficient in the absence of an explanation to prove the guilt of the accused. Whether such a conclusion is justified will depend on the weight of the evidence.’7 (Emphasis added.) In this case the appellant, unlike Boesak, did give evidence in court. In any event, the weight of evidence in this case does not justify the conclusion that the appellant was guilty of fraud. Despite the appellant‟s lies and accused 1 having said that the appellant was the „dealer‟ in rhino horn, I do not think it can safely be concluded that the appellant either knew of the falsity of representations which accused 1 made to the police about the horn or that he knew it was a fake.8 In any event, it has been trite since R v Ncanana9 that the evidence of a co-accused should be treated with caution.10 In my opinion, in a case such as this, corroboration of accused 1‟s evidence on the directly relevant issue of his state of knowledge was needed before any inference as to his guilt on the count of fraud could be made.11 [32] The major difficulty for the State in this case is that the fake rhino horn was of a superlatively good quality. It was so good, in fact, that it was only the day after the arrest had been effected, when the object had been sent to the forensic laboratories, that the scandal of the imitation was laid bare for all to see. There were, no doubt, some red faces. The photographs handed in to court as exhibits tell a story. Made of synthetic fibre, the fake horn, as traded, looked indistinguishable from the real thing. When it was sawn through near the tip, it became apparent that it had even been 4 Ibid. 5 See for example Caswell v Powell Duffryn Associated Collieries [1939] 3 All ER 722 at 733, referred to with approval in S v Essack & another 1974 (1) SA 1 (A) at 16D and Mtsweni at 593F. 6 S v Boesak 2001 (1) SA 912 (CC). 7 Para 24. 8 I use the word „knew‟ in this judgment both in the direct sense (dolus directus) and the constructive sense (dolus eventualis) in that the appellant must have forseen the possibility that the rhino horn may have been a fake but was nevertheless content to proceed with the transaction on that basis. I deal with the question of dolus eventualis more fully later in the body of this judgment. 9 R v Ncanana 1948 (4) SA 399 (A). 10 At 405-6. 11 See S v Dladla 1980 (1) SA 526 (A) at 529A-530A and S v Johannes 1980 (1) SA 531 (A) at 532H- 533H. stuffed with paper and sawdust – presumably so that it would not sound hollow when handled and so that the weight would appear to be authentic. [33] Inspector Oberholzer was one of the police officers involved in the setting up of the trap and effecting the arrest of the two accused. He had 20 years of experience as a police officer, 15 of which were in the diamond and gold division and six in the combatting of crime relating to threatened species. He said at the time when he first saw the horn it looked „definitief eg‟ („definitely genuine or authentic‟ – my translation). [34] Although the evidence was that the appellant had been a police officer, there was no evidence that he was any kind of expert in what may constitute a rhino horn. Indeed, he said he worked in the section of the police dealing with murder and robbery and denied any knowledge of dealing in endangered species of animals. This was not disputed by the State. [35] As was said in R v Blom:12 „In reasoning by inference there are two cardinal rules of logic which cannot be ignored: The inference sought to be drawn must be consistent with all the proved facts. If it is not, the inference cannot be drawn. (1) The proved facts should be such that they exclude every reasonable inference save the one to be drawn. If they do not exclude other reasonable inferences, then there must be a doubt whether the inference sought to be drawn was correct.‟13 Blom was referred to in S v Mtsweni, which, as I have already indicated, related, in turn, to the inferences to be drawn in a situation that may include the fact that the accused was lying.14 Applying Blom, it cannot in my opinion be concluded, beyond reasonable doubt, that the appellant either knew that the item traded as rhino horn was a fake or that he did not.15 All that may safely be concluded is that he intentionally, and aware of the likely unlawfulness of his conduct, took part in dealing in an item which subsequently turned out to be fake. Of what – if anything – does this make him guilty? 12 R v Blom 1939 AD 188 13 At 202-203. 14 S v Mtsweni 1985 (1) SA 590 (A) at 593H. 15 Lest the point be lost, I repeat what I have said earlier that I use the word „knew‟ both in the direct sense (dolus directus) and in the constructive sense (dolus eventualis) that the appellant must have foreseen the possibility that the rhino horn may have been a fake but was nevertheless content to proceed with the transaction on that basis. [36] Section 256 of the Criminal Procedure Act 51 of 1977 (the CPA) provides that where the evidence does not prove the commission of the offence with which an accused person has been charged but proves the attempt to commit it, he or she may be found guilty of an attempt to commit the offence. The section reads as follows: „If the evidence in criminal proceedings does not prove the commission of the offence charged but proves an attempt to commit the offence or an attempt to commit any other offence of which an accused may be convicted on the offence charged, the accused may be found guilty of an attempt to commit that offence or, as the case may be, such other offence.‟ [37] In this case one must be wary of the trap of circuitous reasoning. This was the reasoning adopted by appellant‟s counsel. It goes like this: it cannot be proved that the appellant knew that the rhino horn was a fake and therefore he cannot be guilty of fraud but it also cannot be proven that he did not know that it was a fake and therefore he cannot be convicted of an attempt to sell rhino horn. The universe of possible options of what the appellant thought the object to be is limited to two: either he thought it was rhino horn or he did not. It must be one of these two and, therefore, if it cannot safely be concluded that he thought it was not rhino horn, it can at least safely be concluded that he thought that it was indeed rhino horn and therefore, in my opinion, that he was guilty of the lesser offence of an attempt to contravene the ordinance. [38] In this regard, the reasoning of Didcott and Wilson JJ in S v Dube16 is instructive. In that case the accused had been charged with alleged possession of a machine gun and ten rounds of live ammunition that its magazine contained, in the case of each, without the requisite permit, and thus to have contravened ss 32(1)(a) and 32(1)(e), read with s 39(1)(h) of the then applicable Arms and Ammunition Act 75 of 1969. The firearm in question was a pistol, known as a „Stetchkin‟. It was of Russian origin and had a calibre of nine millimetres. The accused admitted possession of the firearm but claimed that he did not know of its potential for automatic or sustained fire and, accordingly, that it was a machine gun. The magistrate disbelieved him and, relying on circumstantial evidence, concluded that the accused must, indeed, have known that the firearm was a machine gun. He convicted the accused as charged. On appeal, Didcott J, with whom Wilson J 16 S v Dube 1994 (2) SACR 130 (N). concurred, found: „That the appellant knew the pistol to be capable of automatic fire was not, I believe, established‟.17 The court set aside the conviction for possession of a machine gun and substituted it with a conviction of possession of a „plain firearm‟. In other words, the court, even though it could not be certain that the mental element of the accused‟s state of mind was that he thought the firearm was not a machine gun, it accepted that he at least thought it was a „plain firearm‟ because only one of two options was possible and the less serious one was therefore the safer one to conclude. [39] As this is a minority judgment and the issue of an intricate and technical nature I shall, however, deal more fully with which of the two options – that is, whether the appellant should be found guilty of fraud or an attempted contravention of the ordinance - is to apply. In Dube the court referred to S v Hlomza18 in which Corbett JA, delivering the unanimous judgment of this court said: „The true enquiry, as is indicated by the authorities quoted above, is whether or not the appellant knew that possession or dealing in the tablets in question was or might possibly be, unlawful, irrespective of whether he knew what law was being contravened and what the precise provisions of the law might be‟. The appellant in that case had been charged with possession of methaqualone. Corbett JA referred to S v Magidson19 with approval, where Ackermann J, with Gordon J concurring had found that knowledge may be inferred by reference to dolus eventualis.20 Corbett JA found that: „It seems very likely that appellant, living in the milieu which he did, would have been aware that there was such a thing as an illegal drug trade and that certain types of tablets were the subject matter of such trading.‟21 What is relevant here is that, although it was not proven that the accused knew that he was dealing in methaqualone, it was proven that he knew he was dealing in tablets, the trade of which was prohibited. That situation is different from one where a person thinks he is dealing in a prohibited object but in fact is not. I am mindful of the potential pitfalls in reasoning by analogy – the presumptions of similarity may not be justified – but reference thereto by way of intellectual construction is recognised 17 At 133h. 18 S v Hlomza 1987 (1) SA 25 (A) at 32F. 19 S v Magidson 1984 (3) SA 825 (T). 20 Magidson at 830A-B; Hlomza at 32B-C. 21 At 32I. by no less than The Oxford Dictionary as a useful tool.22 The situation here – in contrast to Magidson – is comparable to the drug dealer who thinks he is dealing in prohibited drugs, but is in fact dealing in tablets that are not prohibited – such as, for example, a placebo. [40] In Magidson, Ackermann and Gordon JJ confirmed a conviction of unlawful possession of imitation banknotes in contravention of s 21(d), read with s 21(c) of the Reserve Bank Act 29 of 1944. They referred with approval to the judgment of Marais J in S v White23 in which he found that the accused could not be found guilty on the main count (which related to deception and forgery) because it was not proven that the accused had the intention to defraud but merely that he had the intention to possess the imitation banknotes.24 The accused was convicted on the alternative count, which related to possession.25 [41] The facts in the case before us are somewhat different. It can neither be found that the appellant knew that he was dealing in fake rhino horn nor that he knew he was making a false representation. [42] It is not „any old‟ knowledge of unlawfulness that is sufficient to prove guilt. I do not understand Corbett JA, in Hlomza, to have said or even implied that this is so. It would amount to a re-instatement of the doctrine of versari in re illicata. 26 That is inconceivable. The doctrine was made inapplicable in South Africa after protracted debate by this court over a number of years. [43] The previous applicability of this doctrine was perhaps most famously set out in South Africa in R v Wallendorf & others27 as follows: „(I)t must be noted that there may be a guilty mind even though there is an absence of any intention knowingly to do the act which is prohibited by law. In many cases it is sufficient if the accused intended to commit a crime, even though it were different from that with which he is charged. Indeed, it has been held by many Judges that the mere fact that the accused 22 See for example The Oxford Dictionary 6 ed (2007). 23 S v White 1973 (4) SA 174 (W). 24 At 178A-D. 25 Ibid. 26 Commonly known among lawyers simply as „the versari doctrine‟, the maxim is more fully expressed as versari in reillicata imputantur omnia sequuntur ex delicto – those who engage in unlawful acts are held liable in law for all wrongs that arise therefrom. See for example S v Van Der Mescht 1962 (1) SA 521 (A) and S v Bernardus 1965 (3) SA 287 (A). The translation is my own. 27 R v Wallendorf & others 1920 AD 383. wilfully did something which he knew to be morally wrong supplies the mens rea which is necessary to commit a crime.‟28 In S v Van Der Mescht,29after an extensive analysis of the authorities, Steyn CJ criticised this passage found in Wallendorf.30 Following Van Der Mescht, the versari doctrine was decisively rejected as having no place in our law in S v Bernardus.31 The dolus – or more accurately the dolo malo– even if „eventualis‟ must relate to the specific act in question. Just as in Hlomza the dolus had to relate to illegal trade in drugs, and in Magdison and White to possession of false or reproduced bank notes, so too must the dolus in this case relate to the making of a false representation. It is also not sufficient that the dolus is an intention to deal unlawfully in the trade of rhino horn, in order to secure a conviction on the main count. [44] In S v Dougherty32 the court alluded to the fact that dolus means something more than mere unqualified intention and that the expression in our common law authorities that a crime must be committed dolo malo conveys a sense of „evil‟ intention – that is to say an intention, coupled with an awareness of knowledge of the wrongfulness of the act.33 I think the German word „Unrechtbewusstsein‟ referred to by Professor JC De Wet in his Strafreg captures this concept very well.34 [45] Before one can find that a person knew of the wrongfulness of his act of fraud, one must first be able to find that he knew not only that the representation had been made but also that it was false. In this case, as far as dolus directus is concerned, I do not think it can be concluded, beyond a reasonable doubt, that the appellant knew either that he was an accomplice to a false representation being made or that he knew that the horn was fake. Upon a consideration of whether dolus eventualis is present, I do not think that it has been proven that the appellant foresaw that a false representation might be made in regard to the sale of a rhino horn that was a fake or even that he foresaw the possibility that a fake rhino horn might be sold. 28 At 394. 29 S v Van Der Mescht 1962 (1) SA 521 (A). 30 At 534H. 31 S v Bernardus 1965 (3) SA 287 (A) at 298A-299H and 300H. 32 S v Dougherty 2003 (4) SA 229 (W). 33 Paras 35-37. This judgment was referred to with approval in this court in S v Mkhize (16/2013) [2014] ZASCA 52 (14 April 2014). 34 See S v Dougherty (supra) para 35 and J C De Wet and H L Swanepoel Strafreg 4 ed (1985) at 137. [46] In S v P35 and S v Du Preez36 it was made clear that when it comes to dolus eventualis the enquiry is not what the appellant ought to have foreseen but what he did foresee.37 When considering the crime of fraud, the objectivity with which the issue of potential prejudice is viewed „in the ordinary nature of things‟ - as set out in R v Kruse38and followed in Heyne39 - must not be confused with the test as to the subjective intention of an accused person when it comes to dolus. The subjective intent to conceal or pervert the truth remains an essential element of fraud.40 [47] I therefore do not see the relevance of Ex parte Lebowa Development Corporation Ltd41 upon which Meyer AJA has relied. As Meyer AJA has noted, Stegmann J said: „The essence of fraud involving dolus eventualis appears to be the deceit practised by the representor in suggesting that to be true which he knows may not be true. He knowingly exposes the representee to a risk (that the representation may be false) and deceitfully leaves the representee ignorant of exposure to that risk.‟ (Emphasis added.) In the case before us, I do not think it can be concluded, beyond reasonable doubt, that the appellant knew that it may not be true that the item in question was indeed a genuine rhino horn. [48] I am strengthened in my thinking that the appellant was wrongly convicted of fraud by reference to further cases dealing with imitations of the real thing. In Magdison the high court hearing the appeal agreed with the magistrate that „the reproductions were made on cheap paper which would on inspection, sight, touch and handling not easily mislead even an ignorant or illiterate person‟.42 That situation was very different from the one with which we now have to contend: the fake rhino horn was a most convincing imitation. [49] Similarly in White, Marais J said: 35 S v P 1972 (3) SA 412 (A). 36 S v Du Preez 1972 (4) SA 584 (A). 37 S v P at 416 et seq; S v Du Preez at 588H. 38 R v Kruse 1946 AD 524 at 533. 39 R v Heyne (supra) at 622G. 40 R v Davies 1928 AD 165 at 170; R y Myers 1948 (1) SA 375 (A) at 382-4 and Gollach & Gomperts (1967) (Pty) Ltd & others v Universal Mills & Produce Co (Pty) Ltd 1978 (1) SA 914 (A) at 926E. Reference to Gollach & Gomperts v Universal Mills has been more recently made with approval in this court in Rowe v Rowe 1997 (4) SA 160 (SCA) at 166B. 41 Ex parte Lebowa Development Corporation Ltd 1989 (3) SA 71 (T). 42 At 828B-C. „Nou moet ek sê dat daar een belangkrike feit is wat ten gunste van die beskudigde tel wat motief betref, en dit is dat die afdrukke wat gemaak is, gemaak is op afrolpapier, dit wil sê goedkoop papier, wat self deur ‟n onkundigde of ongeletterde persoon nie maklik by aanraking en beskouing en hantering aangesien sou gewees het vir papier waarop ‟n R10- noot gedruk is nie. Ons is almal bekend met die soort papier waaarop ons banknote gedruk is. Dit is papier wat hard voorkom, glad, en wat „n baie sterk geluid maak indien dit gevou of gekreukel word. Die papier waarop hierde afdrukke voor die Hof is – etlike honderde van hulle – beantwoord nie daardie beskrywing nie. Dit is die sterkste punt wat ten gunste van die beskuldigde tel wat sy motief betref‟.43 This may be translated as follows: „Now I must say that there is one important fact that operates in favour of the accused insofar as dolus is concerned, and that is that the paper upon which the reproductions were made is ordinary printing paper, that is to say cheap paper which, in itself cannot easily be confused, even by an ignorant or uneducated person with the paper upon which a R10 note is printed, when it is touched, looked at or manipulated. We are all familiar with the kind of paper upon which our banknotes are printed. It is paper which feels hard and smooth and which makes a very loud noise when it is folded or crumpled. The paper on which these reproductions are before the Court – several hundred of them – does not satisfy that description. This is the strongest point that operates in favour of the accused insofar as his intention is concerned.‟ (My translation.) [50] In White, the court referred with approval to S v Bell44 in which Miller J, with Caney J concurring, said albeit in the context of forgery rather than fraud: „The vital question in this case is whether the State discharged the onus of proving that the appellant made the false document in question with fraudulent intent. If the appellant did not act as he did with intent to defraud, or if he was not proved to have had that intent, to whatever other consequences his conduct may expose him, he was not guilty of the crime of forgery, for an intention to defraud is a necessary ingredient of that crime.‟ 45 (My emphasis.) Forgery and fraud are both closely related crimes, having similar requisites as to intention.46 43 At 175G-H. 44 In White at 177E. S v Bell 1963 (2) SA 335 (N). 45 At 337B. 46 See R v Hyams 1927 AD 35. [51] The facts of this case are distinguishable from those in S v Campbell47upon which the high court relied in confirming the conviction. In Campbell the accused had sold zirconia to the police, claiming they were diamonds. His own version of events was that he had been dealing in zirconia. Campbell therefore does not assist the State in this case. Similar considerations apply to a consideration of R v Dyonta & another48 upon which the high court and Meyer AJA have relied. In Dyonta, this court dismissed the appeal against a finding by Tindall J who had said: „The onus, of course, lay on the Crown to prove that the accused knew that the stones were not diamonds.‟49 Tindall J, referring to the evidence that the stones were obviously not diamonds and that the accused had claimed to have a knowledge of diamonds, found that the onus had been discharged by the Crown.50 Tindall J referred to R v Makokosa & another51 – which was concerned with dealing in fake diamonds – where the point about the onus was emphasised. [52] In Dube, Didcott J referred with approval to S v Kantor52in which Beadle CJ said: „To take another example: I assume from what was said by SCHREINER, JA, in the passage quoted, that to deal unlawfully in brass in the genuine belief that I was a “precious” metal, say gold, is an attempt to contravene a statute making it an offence to deal unlawfully in “precious” metals, notwithstanding the fact that brass is not a “precious” metal, and notwithstanding the fact that the accused‟s criminal purpose was thus impossible of attainment.‟53 This example by Beadle J, with whom Macdonald AJP and Macaulay AJA concurred, seems to me to be directly in point and singularly analogous. Once again, I am mindful of the caution that must be applied in reasoning by analogy. [53] The judgment of Schreiner JA to which Beadle CJ referred was R v Davies & another.54 Dube also refers thereto.55 The passage in Davies to which both Kantor and Dube referred is the following: 47 S v Campbell 1991 (1) SACR 503 (Nm). 48 R v Dyonta & another 1935 AD 52. 49 At 54. 50 Ibid. 51 R v Makokosa & another 1927 TPD 107. 52 R v Kantor 1969 (1) SA 457 (RAD). 53 At 460B-D. 54 R v Davies & another 1956 (3) SA 52 (A). 55 At 128B. „To sum up, then, it seems that on principle the fact that an accused‟s criminal purpose cannot be achieved, whether because the means are, in the existing or in all conceivable circumstances, inadequate, or because the object is, in the existing or in all conceivable circumstances unattainable, does not prevent his endeavour from amounting to an attempt.‟56 [54] It therefore seems to me that the correct conviction of the appellant should be one of attempt to commit the statutory offence of dealing in rhino horn in respect of which he was charged in the alternative (s 14(2) of Ordinance 8 of 1969 (Nature Conservation Ordinance). Obviously, the different conviction would result in a different sentence but as I am in the minority, no useful purpose would be served by setting out what I should consider an appropriate sentence, in all the circumstances, would be. I should have upheld the appeal against both conviction and sentence. ___________________ NP Willis Judge of Appeal 56 At 64A-B. APPEARANCES For Appellant: PW Nel Instructed by: Bloemfontein Justice Centre Bloemfontein For Respondent: AM Ferreira Instructed by: Director of Public Prosecutions Bloemfontein

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL FROM The Registrar, Supreme Court of Appeal DATE 31 March 2015 STATUS Immediate Please note that the media summary is for the benefit of the media and does not form part of the judgment. Ndwambi v The State (611/2013) [2015] ZASCA MEDIA STATEMENT Today, the Supreme Court of Appeal (SCA) dismissed the appeal by Muvhuso Calvin Ndwambi (the appellant) against a conviction of fraud and a sentence of six years’ imprisonment imposed by the Regional Court, Kroonstad and confirmed by the Free State High Court, Bloemfontein. Arising from an incident that occurred on 29 October 2003 at the Shell Ultra City, Kroonstad where a fake rhinoceroses (rhino) horn was sold to a policeman in a police trap for R350 000, the appellant and a co-accused were convicted of the crime of fraud committed in the course of the police trap. The evidence established that the appellant’s co-accused represented to the policeman that the item she was offering for sale was a rhino horn and that it originated from Mozambique. The asking price for what had been expressly represented to be a rhino horn was R350 000. The appellant was found to have been complicit in the transaction. The representation was false. The appellant contended in the SCA that the proven facts as found by the trial court did not establish all the elements of the crime of fraud. The evidence did not, so it was contended, prove either the required intent to deceive, which is one of the two principal aspects of the element of intent to defraud, or the element of prejudice. The SCA held that the evidence of the appellant and that of his co-accused having been correctly rejected as palpably false, left the trial court without the benefit of credible evidence from either of them and, with only the State evidence to determine their respective guilt or innocence of the charges they faced. The SCA held that the prima facie inference, unless gainsaid by credible and reliable evidence, was that the false representation had been made knowingly, or without belief in its truth, or without knowledge whether it was true or false but knowingly exposing the policeman or the State to a risk that it may be false and deceitfully leaving him ignorant of the exposure. It lay exclusively within the power of the appellant and his co-accused to show what the true facts were but they failed to give an acceptable explanation. The prima facie inference became conclusive in the absence of rebuttal. The SCA accordingly held that an intention to deceive was proved. It was calculated to prejudice. Objectively, some risk of harm could have been caused. It need not be financial or proprietary or necessarily to the person it was addressed. In assessing prejudice the SCA considered it significant to note that even though the transaction in question involved fake rhino horn it must indubitably be so that transactions of this kind contribute to the illegal trade in rhino horn, which we as a country must all be concerned about. The SCA concluded that the appellant was rightly convicted of fraud. In assessing the reprehensibility of the appellant’s conduct the SCA took account of the fact that the appellant is a policeman who was supposed to be on official duty at the time of the commission of the crime of fraud. The SCA concluded that the sentence of six years’ imprisonment is appropriate. The SCA accordingly dismissed the appeal against conviction and against the sentence of six years’ imprisonment. -- ends ---

3939

non-electoral

2022

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Reportable Case no: 1075/2020 In the matter between: EDEN CRESCENT SHARE BLOCK LTD Applicant and OLIVE MARKETING CC First Respondent ETHEKWINI MUNICIPALITY Second Respondent and SHEPSTONE & WYLIE Third Party Neutral citation: Eden Crescent Share Block Ltd v Olive Marketing CC and Others (1075/2020) [2022] ZASCA 177 (9 December 2022) Coram: Dambuza ADP, Molemela and Plasket JJA and Basson and Siwendu AJJA Heard: 9 November 2022 Delivered: This judgment was handed down electronically by circulation to the parties’ representatives by email, publication on the Supreme Court of Appeal website and release to SAFLII. The date and time for hand-down is deemed to be 11:00 am on 9 December 2022. Summary: Application for leave to appeal in terms of s 17(2)(d) of the Superior Courts Act 10 of 2013 – validity of servitude – whether servitude invalid on account of vagueness – whether general or specific servitude – whether special procedures envisaged by s 8(1)(c) of the Share Block Control Act 59 of 1980 and s 4B of the Housing Development Schemes for Retired Persons Act 65 of 1988 required for validity of servitude. ORDER On appeal from: KwaZulu-Natal Division of the High Court, Durban (Moodley J sitting as court of first instance): Eden Crescent Share Block Ltd’s (Eden) application for leave to appeal is dismissed. Eden is directed to pay the costs of Olive Marketing CC (Olive), including the costs of two counsel where employed. Olive’s application for leave to appeal against paragraph 6 of the high court’s order is dismissed. Olive is directed to pay the costs of the Ethekwini Municipality (Ethekwini), including the costs of two counsel where employed. Ethekwini’s application for leave to appeal against paragraph 7 of the high court’s order is dismissed. Ethekwini is directed to pay the costs of Shepstone & Wylie, including the costs of two counsel where employed. JUDGMENT Plasket JA (Dambuza ADP, Molemela JA and Basson and Siwendu AJJA concurring) [1] In application proceedings subsequently referred to trial in the KwaZulu-Natal Division of the High Court, Durban, the first respondent, Olive Marketing CC (Olive) succeeded in obtaining an order to enforce a servitude against the applicant, Eden Crescent Share Block Ltd (Eden). Its success meant that its conditional claim for damages against the second respondent, the Ethekwini Municipality (Ethekwini),1 joined as a defendant when the matter was referred to trial, and Ethekwini’s conditional claim against a number of third parties, including Shepstone & Wylie, the firm of attorneys which registered the servitude, were dismissed. Leave to appeal having been refused by the high court, Eden petitioned this court for leave, while Olive and Ethekwini petitioned for leave to appeal, conditionally, against the dismissal of their claims. This court made an order referring all of the applications for leave to appeal for oral argument in terms of s 17(2)(d) of the Superior Courts Act 10 of 2013, with the usual rider that the parties should be prepared to address the merits if called upon to do so. [2] Eden owns erf 11496, Durban, while Olive owns erf 12424, Durban which adjoins Eden’s property. I shall, unless the context otherwise requires, refer to these properties as ‘the Eden property’ and ‘the Olive property’. Both parties purchased their properties from Ethekwini. The deed of sale concluded by Ethekwini and Eden provided that a parking servitude of at least 250 parking spaces would be created over the property in favour of Olive’s property. In the deed of sale concluded by Ethekwini and Olive, it was recorded that the property enjoyed the benefit of a parking servitude over erf 11496. Eden has consistently refused to provide parking to Olive and has asserted that the servitude is invalid. This dispute resulted in the proceedings in the high court and is the subject matter of this application for leave to appeal. [3] The contours of the dispute are fairly narrow. While Olive, Ethekwini and Shepstone & Wylie, the only third party to participate in these proceedings, argue that the servitude is unimpeachable, Eden asserts that it is invalid for two broad reasons. First, it is a specific servitude that has not identified essential elements, namely the precise number and location of the parking spaces. As this has not been agreed, the servitude-creating agreement is inchoate, vague and unenforceable. Secondly, to the extent that the servitude amounted to an alienation of Eden’s property, because it was not approved in terms of the special procedures provided for in s 8(1)(c) of the Share 1 References to Ethekwini include, for the sake of convenience, its predecessor, the Durban City Council. Blocks Control Act 59 of 1980 (the Share Blocks Act) and s 4B of the Housing Development Schemes for Retired Persons Act 65 of 1988 (the Retired Persons Act), it is invalid. Background [4] An arrangement has been in place for over 60 years, by means of different mechanisms, in term of which the Eden property has provided parking for people using the Olive property. The potential for difficulties arising was, of course, limited while Ethekwini owned both properties. [5] As far back as the 1960s, Olive’s property was used as an ice rink. Later, a cinema was added to it. Eden’s property was initially required to provide parking for patrons of the ice rink and the cinema on the basis of a provision in a long lease. In early 1967, Ethekwini rezoned Eden’s property to provide, inter alia, that it ‘shall only be used for the parking of vehicles, and be fenced, hardened, arranged and laid out, and means of ingress and egress established, all to the satisfaction of the City Engineer’. [6] Ethekwini then began to negotiate with Durban Holiday Inn (Pty) Ltd (the Holiday Inn), which wished to build a hotel on the property. The lease that was concluded by Ethekwini and the Holiday Inn, in May 1972, provided that 250 parking spaces were to be reserved ‘exclusively for use by the patrons of the cinema and/or Icedrome’. This right was also confirmed in the lease concluded by Ethekwini and the operator of the ice rink and cinema. By this stage, the town planning scheme applicable to the Eden property had been amended to provide that, in addition to the parking required by the Holiday Inn, ‘250 parking spaces shall be provided for the exclusive use by patrons of the Cinema and/or Icedrome’. This provision remains in force to this day. [7] The Holiday Inn constructed a hotel on the Eden property. It also built a multi- storey parking lot, as an integrated component of the hotel. On two occasions, it applied unsuccessfully to Ethekwini for the relaxation of its obligation to provide 250 parking spaces for patrons of the Olive property. [8] In the early 1990s, the Holiday Inn ceded its lease to Renhill Properties Share Block Ltd. The parking obligation remained in place. In 1993, a property developer, Scott & Scott Property Investments CC (Scott & Scott) obtained a cession of the lease. The obligation to provide 250 parking spaces for patrons of the Olive property still remained in place. [9] In 1994, Scott & Scott and Ethekwini agreed that Eden would become the lessee of the property in order to develop a retirement scheme on it, and that, in due course, Eden would purchase the property from Ethekwini. In July 1994, Eden and Ethekwini concluded an agreement of sale in respect of the property. [10] The deed of sale provided, inter alia, that: the ‘existing lease of the lot shall terminate on date of transfer’;2 the property would only be used and developed ‘in accordance with all relevant Municipal By-Laws and Town Planning Scheme Regulations in force from time to time’;3 it would ‘only be used for the purpose defined in section 4C of the Housing Development Schemes for Retired Persons Act 65/1988’;4 and in the event of the cancellation of the agreement, Eden would ‘remain bound by the terms and conditions of the Notarial Deed of Lease in terms of which it occupies the lot and shall continue to abide by [the] terms of such Lease . . .’.5 2 Clause 3.1. 3 Clause 13.1. 4 Clause 13.2. Section 4C(1) of the Retired Persons Act provides: ‘(a) No developer shall alienate a right of occupation in relation to a housing interest which originated as from the commencement of the Housing Development Schemes for Retired Persons Amendment Act, 1990, or enter into an agreement having such effect or purporting to have such effect, unless the title deed of the land concerned to which such right relates, has, with the consent of the owner of that land and, if the land is encumbered by a mortgage bond, the consent of the mortgagee, or, in the case of a participation bond, the consent of the nominee company concerned as contemplated in the Participation Bonds Act, 1981 (Act 55 of 1981), in whose favour the bond is registered, been endorsed by a registrar as defined in section 102 of the Deeds Registration Act, 1937 (Act 47 of 1937), to the effect that such land is subject to a housing development scheme. (b) For the purposes of paragraph (a) it shall be deemed that a right of occupation in relation to a housing interest originates as soon as a developer alienates the first right of occupation in a housing development scheme.’ 5 Clause 16.3. [11] Clause 15 is central to this appeal. It is headed ‘PARKING SERVITUDE’ and provides: ’15.1 It is recorded that in term of clause 9 of the Deed of Lease l42/72 registered in respect of the lot, the Lessee (and in this case the Purchaser) is obliged to provide and have available parking on the lot for at least 250 motor vehicles for the Lessee of the adjoining property described as Lot 11444 Durban (the dominant tenement). 15.2 It is agreed that a parking servitude over the lot shall be created in favour of the dominant tenement and registered by Notarial Deed simultaneously with registration of transfer of the lot in the name of the Purchaser whereby parking for at least 250 motor vehicles is secured over the lot in favour of the dominant tenement. The cost of registering such servitude, which shall be prepared and registered by the City Council’s Attorneys, including survey costs and the preparation of the survey diagram, shall be borne by the Purchaser. 15.3 The servitude shall contain inter alia, the following conditions: 15.3.1 The servitude area shall be used for the purposes of parking at least 250 motor vehicles and shall be made available for the exclusive use of the dominant tenement. 15.3.2 The Purchaser may charge a tariff for the use of the servitude area comprising the parking area which may not be more than the average amounts charged for a similar period of time for parking by parking garages in the vicinity of the lot.’ [12] Despite clause 15.2 contemplating the simultaneous registration of the servitude and the transfer of the property, this did not happen. For pragmatic reasons, it was agreed by Eden and Ethekwini that transfer would proceed and the servitude would be registered later. Transfer occurred on 16 April1996. [13] The servitude was registered on 18 February 1997. The deed of servitude recorded that Eden had granted, on 28 July 1994, in favour of the Olive property, described as the dominant tenement, ‘in perpetuity, together with all the rights necessary and incidental to the use and enjoyment thereof, a certain Servitude to provide parking for at least 250 motor vehicles’ over the Eden property, described as the servient tenement. The servitude was subject to three conditions. They are: ‘(a) The cost of preparation and registration of the Deed of Servitude, including survey costs and preparation of the survey diagram shall be borne by the Grantor. (b) The Servitude area shall be used for the purpose of parking at least 250 motor vehicles and shall be made available for the exclusive use of the dominant tenement. (c) The Grantor may charge a tariff for the use of the servitude area comprising the parking area which may not be more than the average amounts charged for a similar period of time for parking, by parking garages in the vicinity of the servient tenement.’ [14] In or about August 2003, Ethekwini published a developers brief that called for offers to purchase the Olive property and proposals to develop it. The developers brief made specific reference to the parking servitude over the Eden property in favour of the Olive property. Olive submitted an offer on 19 September 2003. Olive and Ethekwini concluded an agreement of sale on 22 September 2008. Clause 8.3 of that agreement recorded that ‘a parking servitude has been created and registered over the adjoining property described as Erf 11496 Durban in favour of [erf 12424] . . . whereby parking for at least 250 motor vehicles has been secured for the exclusive use of patrons or users of [erf 12424]’. Transfer of the property was registered on 21 September 2009. The issues The nature of the servitude [15] The first attack on the validity of the servitude is that it is a specific, as opposed to a general, servitude that is void for two reasons. First, it does not identify the parking spaces. Secondly, the number of parking spaces it provides for is uncertain. [16] The second issue can be dealt with summarily. The servitude provides that Eden must make available to Olive parking for ‘at least 250 motor vehicles’. There is no uncertainty about this. All it means is that Eden must provide 250 parking spaces and, if it chooses or agrees to provide more, it may do so. As it may charge for the parking, there may be an incentive for it to offer more than 250 parking spaces. [17] I turn now to the first issue. It is necessary in the first instance to determine whether the servitude is a specific or general one. A general servitude was defined by Cameron and Froneman JJ, in Tshwane City v Link Africa and Others,6 to be a servitude that allows ‘the dominant owner to select the essential incidental rights of the necessary premises and to take access to them as needed for the exercise of the servitude’. [18] The way in which a problem such as this is to be approached was dealt with by Hefer JA in Nach Investments Ltd v Yaldai Investments (Pty) Ltd and Another.7 A deed of sale had provided that a seller ‘reserves to itself and its successors in title . . . a servitude of right of way in perpetuity . . . the exact route of which servitude is to be determined by agreement between the seller . . . and the purchaser . . .’. When no agreement had been reached despite several attempts, the purchaser applied for a declaratory order that the servitude was void for vagueness and invalid. [19] Hefer JA’s starting point was that the route of a right of way is not an essential term, in the sense that the parties are free to either constitute the right of way on a specific route or generally. If a general servitude is created, ‘the entire servient tenement is subject to the servitude and the grantee may select a route provided only that he does so civiliter modo’.8 Hefer JA then made a second observation about servitudes that do contain a reference to a route. He stated:9 ‘The second observation is that where the formulation does contain such a reference and the route is said to be determinable by agreement, the servitude may or may not be valid depending on the intention of the parties. If the intention is to constitute a specific right of way, ie one which may only be exercised along a specifically defined route, the agreement is inchoate at least as to a material term and for that reason it is unenforceable until the route is agreed upon. But the agreement is perfectly valid and enforceable if a general servitude is intended and there is a reference to a future agreement merely because the parties contemplate that the route will eventually be agreed upon. What is envisaged in such a case is an initial general right which may be converted to a specific one by subsequent agreement. Accordingly, where there is a dispute about the nature of the right conferred on the grantee in 6 Tshwane City v Link Africa and Others [2015] ZACC 29; 2015 (6) SA 440 (CC) para 142. 7 Nach Investments Ltd v Yaldai Investments (Pty) Ltd and Another 1987 (2) SA 820 (A). 8 At 831C-E. See too A J van der Walt The Law of Servitudes (2016) at 418-420. 9 At 831F-H. any given case, the intention of the parties is decisive. It is to be determined, of course, by interpreting the agreement according to the normal rules of construction.’ [20] Clause 15 of the deed of sale embodies the agreement to create the servitude and the deed of servitude mirrored its terms in material respects. Both instruments refer to the costs of a survey diagram being borne by Eden. When the servitude was registered, however, there was no survey diagram. One is not required for the registration of a general servitude. For what it is worth, the Registrar of Deeds in all likelihood must have been satisfied that he was dealing with a general servitude. More importantly, in both instruments, no reference is made to where on the servient property the parking spaces are to be; and no reference is made either of any agreement to agree to this in the future. The servitude is simply created ‘over the lot’ and ‘in favour of the dominant tenement’. This makes it clear that the parties intended that the entire servient tenement was subject to the servitude and that Olive had the right to select the parking spaces, subject to acting civiliter modo.10 From a practical perspective, I am sure that the civiliter modo principle would restrict the choice of parking spaces to within the parking garage. [21] My findings that the servitude is a general servitude, that no mention was made at all of where on the servient tenement the parking spaces were to be and no mention was made of this being agreed in the future, distinguish Seale and Others v Minister of Public Works and Others,11 which was relied on by Eden. In that case, the servitude had been held to have been a specific one that had identified three general locations for points of access to the Hartbeespoort Dam, the specifics of which had to be agreed to by the parties but had not been. In these circumstances, Van der Merwe JA held that ‘[m]aterial elements of the right of access would therefore only be determined by further agreement’ and this amounted to ‘an agreement to agree’,12 which was unenforceable as no deadlock-breaking mechanism had been put in place.13 10 This means no more than that Olive must, in choosing the parking spaces, act ‘reasonably viewed, with as much possible consideration and with the least possible inconvenience to the servient property and its owner’ (Anglo Operations Ltd v Sandhurst Estates (Pty) Ltd [2006] ZASCA 118; 2007 (2) SA 363 (SCA) para 21). 11 Seale and Others v Minister of Public Works and Others [2020] ZASCA 130. 12 Para 27. 13 Para 32. [22] The result of my findings set out above is that the servitude is not invalid on account of its failure to specify the location of the parking spaces. There are no reasonable prospects of success on appeal in relation to the first ground of attack on the validity of the servitude. The Share Blocks Act and the Retired Persons Act [23] I turn now to the question whether the servitude is invalid as a result of the absence of approvals in terms of s 8(1)(c) of the Share Blocks Act and s 4B of the Retired Persons Act. [24] Section 8(1)(c) of the Share Blocks Act provides: (1) Notwithstanding anything to the contrary contained in any law- . . . (c) a share block company shall not have the power, save with the approval by special resolution of a general meeting of the share block company, to alienate or cede, as the case may be, any immovable property of which it is the owner or any of its rights to immovable property of which it is not the owner and in respect of which it operates a share block scheme.’ [25] Section 4B of the Retired Persons Act provides: ‘(1) Unless at least 75 per cent of the holders of rights of occupation in a housing development scheme consent thereto the land concerned may not be alienated free from such rights . . (2) Any alienation taking place without the consent of the holders as contemplated in subsection (1) shall be null and void.’ Section 1 of the Act defines the term ‘alienate, in relation to a housing interest’, to mean: ‘(a) sell, exchange, lease, donate, grant or otherwise dispose of or place at disposal; or (b) the making of an irrevocable offer to acquire the interest for consideration.’ [26] The argument advanced on behalf of Eden was that because the servitude agreed to in July 1994, before any shares in the share block company were sold to retirees, was not registered simultaneously with transfer, on 16 April 1996, but only on 18 February 1997, transfer of an unencumbered property occurred and, when the servitude was registered, the encumbrance of the servitude amounted to an alienation. As an alienation of immovable property of a share block company requires the authorisation of a special resolution of a general meeting of the company, and this did not occur, the servitude is invalid. A similar argument was made in respect of s 4B of the Retired Persons Act: the alienation was never consented to by at least 75 percent of the holders of rights of occupation of the Eden property with the result that, in terms of s 4B(2), the alienation was a nullity. [27] In order to assess the merits of this argument, it is necessary to track the development of the right in favour of the Olive property to parking spaces on the Eden property. Clause 3.1 of the deed of sale provided that the lease that had been in place would only terminate on the date of transfer. The obligation to provide parking to patrons of the Olive property was a term of Eden’s lease. It was therefore obliged in terms of the lease to provide parking from the date of the signing of the deed of sale in July 1994 until the date of transfer on 16 April 1996. [28] Clause 15.2 of the deed of sale provided that the parking servitude would be created simultaneously with registration of transfer. As, by agreement, registration of the servitude did not occur at the same time as transfer, as initially envisaged, the servitude that came into existence on 16 April 1996 was unregistered from that day until 18 February 1997. [29] The effect of an unregistered servitude was set out as follows by van der Walt:14 ‘In this respect, registration is a validity requirement for the creation of servitudes; prior to or in the absence of registration, there is no valid servitude yet but merely a personal right that is valid only between the parties to the agreement in which it is embodied.’ He adds that the personal right includes a right to the co-operation of the other party in the registration of the servitude and personal rights identical to the servitude.15 In 14 Note 8 at 92-93. 15 Note 8 at 93, fn 112. Bowring NO v Vrededorp Properties CC and Another,16 Brand JA held that a purchaser with knowledge of an unregistered servitude ‘will be bound, not only to give effect to the servitude, but also to co-operate in having the servitude registered’. [30] So, from the date of transfer on 16 April 1996 until the registration of the servitude on 18 February 1997, the owner of erf 12424 – Ethekwini – enjoyed personal rights against Eden, in the terms embodied in clause 15 of the deed of sale, in respect of parking spaces for at least 250 vehicles on Eden’s property. On registration of the servitude, these personal rights were converted into real rights enforceable against Eden and its successors in title. And in the background, the town planning scheme imposed precisely the same obligation on Eden. [31] It is apparent from what I have set out above that there was no time, from when Eden first leased its property until the registration of the servitude, that it was free of the obligation to provide 250 parking spaces for the patrons of the Olive property. When it purchased the property it did so subject to the parking obligation and it agreed then to the creation of a parking servitude. It never enjoyed occupation or ownership of the property free from the parking obligation in one form or another. It cannot therefore be said to have alienated any part of its property. For this reason, s 8(1)(c) of the Share Blocks Act and s 4B of the Retired Persons Act have no application and have no effect on the validity of the servitude. In any event, having agreed to purchase the property subject to the parking obligation, the subsequent registration of the servitude in fulfilment of that obligation cannot be equated to an alienation of the property. [32] These provisions do not apply for another reason too. The deed of sale was signed in July 1994. It was signed on behalf of Eden by Mr Anthony Scott, a director of the sole shareholder of Eden, namely Scott & Scott. At that stage, Eden had not sold a single share to a retiree. That only commenced in December 1994. Neither the Share Blocks Act nor the Retired Persons Act have any application for that reason and 16 Bowring NO v Vrededorp Properties CC and Another [2007] ZASCA 80; 2007 (5) SA 391 (SCA) para 8. because, when Eden concluded the agreement of sale, it never alienated anything. Instead, it acquired the property, but it did so subject to the parking obligation. [33] My conclusion is that the servitude is not invalid on account of any conflict with the Share Blocks Act or the Retired Persons Act. There are consequently no reasonable prospects of Eden succeeding on appeal in relation to the second ground of attack on the servitude. The conditional applications for leave to appeal [34] After the matter was referred to trial, Olive initiated a claim for damages against Ethekwini. It was conditional on the high court finding that the servitude was invalid. As the high court pointed out, ‘absent a finding that the servitude is invalid, there is no dispute and no lis between [Olive] and [Ethekwini]’. As it upheld the validity of the servitude, it dismissed, in paragraph 6 of its order, Olive’s claim against Ethekwini with costs. Olive’s application for leave to appeal against this order is conditional on leave to appeal being granted to Eden. [35] After Ethekwini had been drawn into the fray, it initiated third party proceedings against, inter alia, Shepstone & Wylie. Its claim against Shepstone & Wylie was also conditional on the servitude being found to be invalid. As a result of the high court finding that the servitude was valid, it dismissed, in paragraph 7 of its order, Ethekwini’s conditional claim against Shepstone & Wylie with costs. Ethekwini’s application for leave to appeal against this order is also conditional on leave to appeal being granted to Eden. [36] Even though a central plank of the cases of Olive, Ethekwini and Shepstone & Wylie is the validity of the servitude, the basis for raising it differs from party to party. It is the basis for Olive’s case against Eden; it is the principal defence raised by Ethekwini against Olive’s claim; and it is likewise the principal defence of Shepstone & Wylie in the third party proceedings brought by Ethekwini. In this scheme, there is a lis between Olive and Eden, a separate conditional, lis between Olive and Ethekwini and yet another separate conditional lis between Ethekwini and Shepstone & Wylie. [37] As Eden’s application for leave to appeal cannot succeed, both Olive’s application for leave to appeal against the dismissal of its claim against Ethekwini, and Ethekwini’s application for leave to appeal against the dismissal of its third party claim against Shepstone & Wylie have no reasonable prospects of success. Both must be dismissed with costs. The order [38] I make the following order: Eden Crescent Share Block Ltd’s (Eden) application for leave to appeal is dismissed. Eden is directed to pay the costs of Olive Marketing CC (Olive), including the costs of two counsel where employed. Olive’s application for leave to appeal against paragraph 6 of the high court’s order is dismissed. Olive is directed to pay the costs of the Ethekwini Municipality (Ethekwini), including the costs of two counsel where employed. Ethekwini’s application for leave to appeal against paragraph 7 of the high court’s order is dismissed. Ethekwini is directed to pay the costs of Shepstone & Wylie, including the costs of two counsel where employed. ________________________ C Plasket Judge of Appeal APPEARANCES For the applicant: A Annandale SC and W N Shapiro SC Instructed by: Livingston Leandy Inc, Umhlanga Rocks McIntyre Van der Post, Bloemfontein For the first respondent: M Pillemer SC Instructed by: Eversheds Sutherland (KZN) Inc, La Lucia Honey Attorneys, Bloemfontein For the second respondent: G Goddard SC Instructed by: Luthuli Sithole Attorneys, Durban Matsepes Inc, Bloemfontein For the third party: S R Mullins SC and P J Wallis SC Instructed by: Clyde & Co, Sandton Honey Attorneys, Bloemfontein

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL FROM The Registrar, Supreme Court of Appeal DATE 9 December 2022 STATUS Immediate Please note that the media summary is for the benefit of the media and does not form part of the judgment. Eden Crescent Share Block Ltd v Olive Marketing CC and Others (1075/2020) [2022] ZASCA 177 (9 December 2022) MEDIA STATEMENT The Supreme Court of Appeal (SCA) today dismissed the application for leave to appeal, referred for oral argument, of Eden Crescent Share Block Ltd (Eden) against Olive Marketing CC (Olive). It also dismissed Olive’s conditional application for leave to appeal against the Ethekwini Municipality (Ethekwini), as well as Ethekwini’s conditional application for leave to appeal against a third party, Shepstone & Wylie. The matter concerned two neighbouring properties in Durban originally owned by Ethekwini. It sold one of them to Eden (the Eden property) and the other to Olive (the Olive property). For more than 60 years, an obligation had been in place in terms of which the Eden property was required to provide parking for patrons of the Olive property. This obligation had been part of every lease in respect of the Eden property and was also included in the town planning scheme. When Ethekwini sold the property to Eden, the parties agreed in the deed of sale to the creation of a servitude in favour of the Olive property in respect of parking for at least 250 motor vehicles. The servitude was to be registered simultaneously with the transfer of the property to Eden. For reasons of practicality, the parties later agreed that the registration of the servitude would occur after transfer. Eden, despite its agreement to the creation of the servitude, refused to allow Olive the use of parking spaces on its property. Olive applied in the KwaZulu-Natal Division of the High Court, Durban to enforce the servitude. The application was referred to trial whereupon Ethekwini was joined as a defendant. Its potential liability to Olive could only have arisen if it was found that the servitude was invalid. Ethekwini, in turn, joined a number of third parties, including Shepstone & Wylie, the attorneys who had registered the servitude. Its potential liability to Ethekwini was similarly dependant on a finding being made that the servitude was invalid. The high court found that the servitude was valid and ordered its enforcement. It consequently dismissed Olive’s conditional claim against Ethekwini and Ethekwini’s conditional claims against the third parties. Eden then applied for leave to appeal, which was refused by the high court. On petition to the SCA, it was ordered that the applications for leave to appeal of Eden against Olive, of Olive against Ethekwini and of Ethekwini against Shepstone & Wylie (the only third party taking part in the proceedings at that stage) were referred for oral argument. Eden argued that the servitude was invalid because it never specified the precise number of parking spaces that were to be made available and where on the Eden property those parking spaces were located. In addition, it argued that the servitude represented an alienation of its property and the special procedures required by the Share Block Control Act 59 of 1980 and the Housing Development Schemes for Retired Persons Act 65 of 1988 for the authorisation of the alienation of property had not been complied with. The SCA found that the number of parking spaces was clear: Eden had to provide 250 parking spaces and, if it wished to, it could provide more. On the question of the location of the parking spaces, it held that the servitude that had been created was a general, as opposed to a specific, servitude. In the absence of agreement, the dominant owner – Olive, in this case – had the right to choose the location of the parking spaces, subject to it exercising this right civiliter modo – reasonably and considerately. The SCA found that Eden’s reliance on the two statutes mentioned above was misplaced. As Eden had always occupied the property, whether as lessee or owner, subject to the parking obligation owed to the Olive property, and it had purchased the property on this basis, there had never been an alienation. Furthermore, having agreed to purchase the property subject to the parking obligation, the subsequent registration of the servitude in fulfilment of that obligation could not be said to be an alienation. As a result, the SCA dismissed Eden’s application for leave to appeal because it had no reasonable prospect of success on appeal. In these circumstances, Olive’s and Ethekwini’s conditional applications for leave to appeal were also dismissed as they too had no reasonable prospects of success. In all three applications, the costs followed the result.

2391

non-electoral

2013

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Case No: 765/12 Reportable In the matter between: GIVEN MABUNDA Appellant and THE STATE Respondent Neutral citation: Mabunda v S (765/12) [2013] ZASCA 30 (27 March 2013) Coram: Lewis and Leach JJA and Erasmus AJA Heard: 12 March 2013 Delivered: 27 March 2013 Summary: Robbery with aggravating circumstances ─ two counts of robbery committed at gunpoint the same night ─ appellant sentenced to two sentences of 15 years’ imprisonment that were not ordered to run concurrently ─ effective sentence of 30 years’ imprisonment too severe ─ on appeal, sentences ordered to run concurrently for a period of 12 years resulting in an effective sentence of 18 years’ imprisonment. ___________________________________________________________________ O R D E R ___________________________________________________________________ On appeal from: Limpopo High Court, Thohoyandou (Makhafola J sitting as court of first instance): (a) The appeal succeeds to the extent only that it is ordered that 12 of the 15 years’ imprisonment imposed in respect of count 2 are to run concurrently with the sentence of 15 years’ imprisonment imposed on count 1. (b) The appeal is otherwise dismissed. ___________________________________________________________________ J U D G M E N T __________________________________________________________________ LEACH JA (LEWIS JA and ERASMUS AJA concurring) [1] The appellant, Given Mabunda, was one of three accused tried in the Thoyoyandou High Court on two charges of robbery with aggravating circumstances. He was convicted as charged and sentenced to 15 years’ imprisonment on each count. As these sentences were not ordered to run concurrently to any extent, this amounted to an effective sentence of 30 years’ imprisonment. With the leave of the high court, the appellant appeals to this court solely against his sentence, leave to appeal against his conviction having been refused. [2] The charges brought against the appellant arose from two incidents that occurred during the course of the night of 5 May 2004 at Mashau in the province of Limpopo. The first, which gave rise to the first charge, took place at the home of Ms Rejoice Mudau who shared a house with her child and two elderly women described by her as ‘grannies’. After having watched television until 22h30 they were preparing for bed when three intruders, one of whom was armed with a firearm, used an iron bar to break into the house. One of the intruders slapped Ms Mudau and ordered her to hand over all her money if she did not want to die. She tried to fob him off by giving him a small amount of money she kept in a container on top of a wardrobe, but he was not satisfied and continued to threaten her until she eventually took out R1500 she had hidden in a purse under blankets in a cupboard. After this the intruders left, leaving their victims in tears. They took with them not only the cash I have mentioned but also Ms Mudau’s cellphone and its charger, as well as her necklace, a pair of earrings, a mini hi-fi and a TV aerial. Save for one earring and the cash, the other items were later recovered and returned by the police. [3] The second incident, which formed the basis of the second charge on which the appellant was prosecuted, took place later that night in the same area. It involved the theft of a number of cellphones that were in the possession of Mr Humbulani Matari who repaired cellphones for a living. As he did not have a workshop at the time, Mr Matari used to store the cellphones in his possession in a box which he entrusted to a security guard, Mr Nkwaku Muloto, who kept them overnight at the premises that he guarded. Later on the night in question three young men, one of whom was armed with a firearm, arrived at the premises and held up Mr Muloto at gunpoint. He was forced to prostate himself on the ground and was told not to do anything or else he would be killed. When pressed to produce either money or a firearm, he told his attackers that he had neither. However, in a state of fear, he told them of the box of cellphones which they proceeded to take. Before they left, one of the robbers expressed the desire to shoot Mr Muloto but was dissuaded from doing so by one of his companions. Having fired a shot into the air, presumably to discourage pursuit, the robbers then left. The value of the stolen cellphones was alleged in the charge sheet to be in excess of R6 000 although no evidence was led to establish this. [4] As appears from what I have said, both these robberies were associated with aggravating circumstances in that the complainants were threatened with firearms. Unfortunately, violent crime of this nature is endemic in this country and, in an attempt to combat offences of this nature, the legislature has provided a prescribed minimum sentence of 15 years’ imprisonment for a first offender who commits the offence of robbery with aggravating circumstances ─ see s 51(2)(a)(i) of the Criminal Law Amendment Act 105 of 1997 as read with Part II of Schedule 2 of that Act. The court a quo was therefore obliged to impose at least that sentence on each count unless there were ‘substantial and compelling circumstances’ as envisaged by s 53 of that Act which justified a lesser sentence. It concluded that there were no such circumstances and imposed the prescribed minimum sentence on each count; effectively a sentence of 30 years’ imprisonment. [5] The appellant’s appeal against this sentence was initially advanced on two legs. First, it was submitted that the court below had erred in finding that there were no substantial and compelling circumstances justifying a lesser sentence. Secondly, it was contended that even if the prescribed sentences should stand, the failure to order them to run concurrently to any extent rendered the cumulative effect thereof shockingly inappropriate and too severe. However when the matter was argued, counsel for the appellant found himself constrained to concede that there were no substantial and compelling circumstances which justified a sentence less than that prescribed for each count, and limited his argument to the second leg. In the light of the circumstances of the appellant, the nature of the crimes and the factors set out below, counsel’s concession was correctly made. [6] In arguing that the effective sentence of 30 years’ imprisonment was far too severe, it was stressed on the appellant’s behalf that he had been a first offender, in his mid-twenties at the time he committed the offences and that he had spent some seven months in detention before sentence had been imposed. These are obviously relevant factors and were, indeed, taken into account by the court a quo in considering sentence. But on the other hand, there are substantial aggravating features to be weighed in the scales. The two robberies were motivated by greed, were well planned and were clearly not the product of a sudden decision taken on the spur of the moment, the two incidents having taken place at night some 25 km from where the appellant lived. It is also necessary to remember that the victims were, with good reason, clearly terrified and feared for their lives. In addition the appellant and his companions physically broke into the home of Mrs Mudau where they preyed upon three defenceless women and a child. People are entitled to feel safe in their homes, and criminals who forcefully break into houses and violate the dignity and well-being of others by the threat of violence should feel the full might of the law if apprehended. In crimes like these, punishment and deterrence are factors that come to the fore in determining an appropriate sentence. [7] On the other hand, 30 years’ imprisonment is an extremely severe sentence. It is a sentence on a scale that should be reserved for those cases falling within the upper echelons of severity. And while by their very nature all cases of robbery with aggravating circumstances are severe, neither of these robberies was associated with the level of gratuitous violence which is unfortunately all too often the case. And although the victims were clearly terrified of being shot, and Mr Mudau was slapped, no further physical violence was inflicted and no bodily injuries of any severity suffered. Moreover the value of the items stolen, relatively speaking, was not great, and much was recovered. [8] Consequently, despite the various aggravating features that I have mentioned, neither robbery can be regarded as falling into the upper echelon of severity of crimes of this nature. In the light of these factors, while the individual sentences are not to be interfered with, the effective sentence of 30 years’ imprisonment must be regarded as being shockingly inappropriate. [9] As much as it is necessary both to punish the appellant and attempt to deter others from similar crimes, the effective sentence is one that is likely to break rather than to rehabilitate him. It would be wrong to sacrifice the appellant on the altar of deterrence. As was recently reaffirmed by this court, mercy and not a sledgehammer is the concomitant of justice.1 In my view, the interests of justice would be served by ordering 12 years of the sentences imposed on each count to run concurrently. This will oblige the appellant to serve an effective 18 years’ imprisonment. [10] The following order is made: (a) The appeal succeeds to the extent only that it is ordered that 12 of the 15 years’ imprisonment imposed in respect of count 2 are to run concurrently with the sentence of 15 years’ imprisonment imposed on count 1. (b) The appeal is otherwise dismissed. 1 S v Motswathuga 2012 (1) SACR 259 (SCA) para 8. ______________________ L E Leach Judge of Appeal APPEARANCES: For Appellant: M Madima Instructed by: Thohoyandou Justice Centre Thohoyandou Bloemfontein Justice Centre Bloemfontein For Respondent: R J Makhera Instructed by: The Director of Public Prosecutions Thohoyandou Director of Public Prosecutions Bloemfontein

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 27 March 2013 Status: Immediate Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal Neutral citation: Mabunda v S (765/12) [2013] ZASCA 30 (27 March 2013) The appellant was convicted on two charges of robbery with aggravating circumstances in the Thoyoyandou High Court. He was sentenced to 15 years’ imprisonment on each count. These sentences were not ordered to run concurrently which resulted in the appellant being effectively obliged to serve 30 years’ imprisonment. The appellant appealed to the Supreme Court of Appeal solely against his sentence. The two counts of robbery had occurred on the same night at Mashau in the province of Limpopo. On the first count, the home of a woman who lived with her child and two elderly women was invaded by the appellant who, together with two companions, broke in and held up the occupants at gunpoint. Having threatened the people in the house, they left after stealing approximately R1500 in cash, a cellphone, a small amount of jewellery and a mini hi-fi and a TV aerial. The second incident occurred when a night watchman guarding premises was held up at gunpoint. Under duress he informed the appellant and his companions of a box of cellphones that he was guarding valued in excess of R6000. The appellant and his companions proceeded to take them. In its judgment the Supreme Court of Appeal stressed the prevalence of offences of this nature and the necessity to act firmly in cases where offenders are convicted of robbery in such circumstances. However it concluded that the effective sentence of 30 years’ imprisonment was extremely severe, being a sentence that should be reserved for those cases fallen within the upper echelons of severity which, although severe these cases were not. It therefore directed that 12 years of the sentence imposed on the second count should run concurrently with the 15 years’ imprisonment imposed on the first count. The appeal therefore succeeded to that extent only which will oblige the appellant to serve 18 years’ imprisonment. ---ends---

3167

non-electoral

2007

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA JUDGMENT Not Reportable Case Number: 422 / 06 In the matter between THE PIETERMARITZBURG SOCIETY FOR THE PREVENTION OF CRUELTY TO ANIMALS APPELLANT and JUNAID PEERBHAI RESPONDENT Coram : CAMERON, PONNAN JJA ET SNYDERS AJA Date of hearing : 18 MAY 2007 Date of delivery : 29 MAY 2007 SUMMARY Motor vehicle collision - two irreconcilable versions - onus of proof - failure to discharge. Neutral citation: This judgment may be referred to as : Pietermarizburg SPCA v Peerbhai [2007] SCA 66 (RSA) ___________________________________________________________________ J U D G M E N T ___________________________________________________________________ PONNAN JA [1] This appeal is a sequel to a motor collision between a Nissan bakkie and a Toyota car that occurred at approximately 19:30 on 21 July 2001 in the vicinity of Woodhouse and Alice Grange Roads in Pietermaritzburg. In consequence of the collision the owner of the Nissan bakkie, the Pietermariztburg SPCA ('the appellant') sued the respondent, Mr Junaid Peerbhai, the driver of the Toyota, in the Pietermaritzburg Magistrates' Court for payment of R21 330 being damages allegedly suffered by it. [2] The claim was dismissed by the trial court with costs, as was an appeal to the Pietermaritzburg High Court (Baqwa AJ and Hugo J). The further appeal to this Court is with the leave of the High Court (Hugo J and Lopes AJ). [3] The magistrate in essence concluded that on a conspectus of all the evidence he was not persuaded one way or the other and, in the result, the appellant had not proved that the respondent was negligent. Moreover, according to the magistrate the appellant would in any event have failed on quantum as well. The conclusion that I reach on the first aspect renders it unnecessary for me to consider the second. [4] Each driver alleged that the other motor vehicle had veered onto its incorrect side of the road. Each asserted that he had been forced to take avoiding action but was unable by the exercise of reasonable care and skill to avoid the collision. Mr Alec Stewart Wylie, an employee of the appellant who was the driver of the Nissan at the relevant time, testified that he was returning to the property of the appellant in Woodhouse Road, where he then resided, when he observed the lights of an oncoming motor vehicle. As he negotiated a bend in the road he realised, 'at the last second', that the lights of the oncoming vehicle were on his side of the road. The vehicle was then no more than two-and-a-half to three metres away. He braked, hooted and swerved but was unable to avoid the collision with the oncoming motor vehicle, which according to him was straddling the middle line at the point of impact. [5] Mr Junaid Peerhbai testified that he was travelling together with two passengers in his father's Toyota motor vehicle from his home in the suburb of Allandale to Durban Road. According to him, whilst travelling on an incline in Woodhouse Road and just before Alice Grange Road veered to his left off Woodhouse Road, he observed an oncoming vehicle 'beginning to usurp' his lane. To avoid what he described as a head-on collision he swerved into Alice Grange Road but was unable to avoid the collision, which on his version occurred in Alice Grange Road. [6] The two versions were mutually destructive in the sense that the acceptance of the one necessarily had to lead to the rejection of the other. [7] A third witness, Ms Louise Janse van Vuuren who had apparently also witnessed the collision in question was called by the plaintiff. One would have thought that her evidence would have tipped the scales one way or the other. The trial court concluded that it did not. In that conclusion, in my view, the trial court cannot be faulted. According to Ms Janse van Vuuren, that evening she was awaiting the arrival of a friend who was en route to her home to take her to the cinema. When her friend called to inform her that she had lost her way, Ms van Vuuren set off on foot down Alice Grange Road, where she then lived, in the expectation that she could meet her friend at the intersection of Alice Grange and Woodhouse Roads. As she was approaching that intersection she observed what she described as a collision between a white bakkie with a canopy and another motor vehicle. From her vantage point the white bakkie was travelling in a direction roughly away from her and the other vehicle towards her. She was emphatic that it was the driver of the other motor vehicle (not the bakkie) who was in the wrong as his vehicle had veered onto its incorrect side of the road. In other respects her evidence was not only less than certain but difficult to reconcile with what was either common cause or undisputed between the drivers. Thus, for example, according to her, after the collision an argument ensued between the drivers. Both of them had testified, however, that they had exchanged particulars without any rancour or acrimony. Her evidence as to where the vehicles came to rest immediately after the impact was also at odds with the common cause facts. She did not observe the distinctive SPCA sign on the door of the bakkie, nor for that matter did she notice Peerbhai's two passengers. [8] I accept, as was urged upon us by counsel, that Ms van Vuuren was an honest and impartial witness. That, however, in and of itself cannot exonerate her evidence from careful scrutiny. The blemishes in her evidence to which I have already alluded render her observations neither reliable nor credible. Whilst the poor lighting and the distance of her vantage point from the collision explain many of the unsatisfactory features in her evidence, they hardly serve to explain the audible argument between the drivers that she allegedly overheard. That seemingly inconsequential piece of evidence is particularly troubling for it is irreconcilable with the evidence of both Wylie and Peerhbai and impacts in a direct and substantial way on her cogency as a witness. Taken together with the other criticisms that can be levelled against her, it ultimately impels one to the conclusion that her evidence does little to assist the appellant in the discharge of the onus that confronted it. [9] For, in a case such as the present, where there were two mutually destructive versions, the appellant, upon whom the onus rested, could succeed only if it satisfied the trial court on a preponderance of probabilities that its version was true and therefore acceptable, and the other version advanced by the respondent was either false or mistaken and fell to be rejected. That, in my view, the appellant did not do. Peerbhai came across as a mild-mannered, easy-going witness, who obviously made a good impression on the magistrate. Nothing in his evidence was inherently improbable and the version advanced by him was as plausible as that advanced by the appellant. In the circumstances the trial court was right to conclude that the onus resting on the appellant had not been discharged. [10] One final aspect merits mention. The amount claimed in this matter was R21 330 — paltry when compared to the legal costs that have hitherto been incurred in the courts below and will be incurred in this Court. The case raised no question of principle and there were no considerations which called for the attention of this Court. In order to avoid the clogging of the roll of this Court with matters that do not require its attention, it is important that lower courts give careful consideration to the grant of leave to appeal to this Court. The inappropriate granting of such leave results in cases of greater complexity, which are truly deserving of the attention of this Court, having to compete for a place on the court roll with a case which is not. (See Monyane and Others v The State [2006] SCA 141 (RSA) para 28.) [11] In the event the appeal is dismissed with costs _________________ V M PONNAN JUDGE OF APPEAL CONCUR: CAMERON JA SNYDERS AJA

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL FROM The Registrar, Supreme Court of Appeal DATE 29 May 2007 STATUS Immediate Please note that the media summary is for the benefit of the media and does not form part of the judgment. CASE THE PIETERMARITZBURG SOCIETY FOR THE PREVENTION OF CRUELTY TO ANIMALS v JUNAID PEERBHAI (Case No 422 / 06) Media Statement Today the Supreme Court of Appeal dismissed an appeal by the Pietermaritzburg SPCA. The appeal was a sequel to a motor vehicle collision between a Nissan bakkie owned by it and a Toyota car then driven by the respondent Mr Junaid Peerbhai. The collision occurred at approximately 19:30 on 21 July 2001 in the vicinity of Woodhouse and Alice Grange Roads in Pietermaritzburg. In consequence of the collision the SPCA sued Mr Peerbhai in the Pietermaritzburg Magistrates' Court for payment of R21 330 being damages allegedly suffered by it. The claim was dismissed in that court and then an appeal which followed to the Pietermaritzburg High Court was unsuccessful. The SCA held that there were two mutually destructive versions, the SPCA upon whom the onus rested could only succeed had it been able to satisfy the trial court that its version was true and acceptable and the version advanced by Mr Peerbhai was either false or mistaken and felt to be rejected. That, according to the SCA the Pietermaritzburg SPCA had failed to do. It accordingly concluded the trial court was correct in its conclusion that the SPCA had not discharged the onus resting upon it. The SCA re-iterated that law courts should give careful consideration to the grant of leave to appeal to it. In this matter given the value of the claim which was paltry when compared to the legal costs and the absence of any question of principle the SCA expressed reservations about the appropriateness of the High Court granting leave to appeal to it. --- ends ---

4128

non-electoral

2023

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Not Reportable Case no: 440/2022 In the matter between: MINISTER OF JUSTICE AND CORRECTIONAL SERVICES FIRST APPELLANT THE NATIONAL COMMISSIONER DEPARTMENT OF CORRECTIONAL SERVICES SECOND APPELLANT THE HEAD OF THE PRISON: ZONDERWATER PRISON THIRD APPELLANT and WILHELM PRETORIUS FIRST RESPONDENT DR JOHAN PRETORIUS SECOND RESPONDENT DR JOHAN (LETS) PRETORIUS THIRD RESPONDENT Neutral citation: Minister of Justice and Correctional Services and Others v Wilhelm Pretorius and Others (Case no 440/2022) [2023] ZASCA 155 (17 November 2023) Coram: DAMBUZA, MEYER, MATOJANE AND GOOSEN JJA AND UNTERHALTER AJA Heard: 13 September 2023 Delivered: 17 November 2023 Summary: Appeal – Superior Courts Act 10 of 2013, s 16(2)(a) – mootness – whether, irrespective of mootness, interests of justice require decision on appeal. ORDER On appeal from: Gauteng Division of the High Court, Johannesburg (Adams J with Mudau and Dippenaar JJ concurring), sitting as court of appeal): The appeal is dismissed with costs, including those of two counsel. JUDGMENT Meyer JA (Dambuza, Matojane and Goosen JJA and Unterhalter AJA concurring): [1] This is an appeal against the judgment and order of the full court of the Gauteng Division of the High Court, Johannesburg (the full court), per Adams J, with Mudau and Dippenaar JJ concurring, delivered on 21 January 2022. The first appellant is the Minister of Justice and Correctional Services (the minister), the second appellant, the National Commissioner: Department of Correctional Services (the national commissioner), and the third appellant, the Head of the Zonderwater Correctional Centre, Cullinan, Gauteng. The first respondent, Mr Wilhelm Pretorius, was registered for a doctoral degree in Theology at the University of Pretoria. The second respondent is his brother, Dr Johan Pretorius, a medical doctor who was registered for a masters degree in Biblical and Ancient Studies at the University of South Africa. The third respondent is their father, Dr Johan (Lets) Pretorius, a medical doctor, who was registered for an honours degree in Political Sciences at the University of South Africa. [2] The respondents were long term prisoners serving sentences of between 20 and 30 years’ imprisonment at the Zonderwater Correctional Centre, Cullinan, Gauteng. Although they had access to computers in the Zonderwater Correctional Centre’s computer room between the hours 7:00am and 2:00pm, they were not permitted to use their personal computers in their cells to progress their studies during the lengthy hours that they were locked up in their cells. They accordingly brought proceedings in the Gauteng Division of the High Court, Johannesburg (the high court), to challenge the Policy Procedures Directorate Formal Education (the policy), pursuant to which their requests to use their personal computers in their cells for the purpose of their studies, were declined. [3] On 14 May 2018, the high court, per Swanepoel AJ, granted an order in their favour. The order reads: ‘50.1 The Policy Procedures on Formal Education Programmes, as approved by the [National Commissioner: Department of Correctional Services], insofar as it relates to the use of personal laptops without a modem in any communal or single cell, is declared to constitute unfair discrimination in accordance with the provisions of the Promotion of Equality and Prevention of Unfair Discrimination Act 4 of 2000 [the Equality Act], as against applicants. 50.2 First, second and third applicants shall be entitled to use their personal computers without the use of a modem in their cells, for as long as they remain registered students with any recognized tertiary institution in South Africa. 50.3 All of applicants’ computers shall be made available for inspection at any given time by representative of the respondents. 50.4 First and second respondents shall pay the costs of the application jointly and severally, the one paying the other to be absolved.’ [4] Aggrieved by that order, the appellants, with leave of the high court, appealed to the full court. On 21 January 2022, the full court dismissed the appeal with costs. This appeal, with leave of this Court, lies against that order. Another appeal, involving similar facts and the same issues of law, was pending before this Court. It is the matter of Minister of Justice and Constitutional Development and Others v Ntuli (Judicial Inspectorate for Correctional services intervening as amicus curiae).1 The Ntuli appeal was enrolled for hearing in this Court on 12 May 2022. At the request of the appellants, due to their counsel’s indisposition, the parties agreed to request that the Ntuli appeal be removed from the roll. This Court considered it efficient and appropriate that this appeal and the Ntuli appeal be heard together, and both appeals were enrolled for hearing on 13 September 2023. [5] However, it turned out that the three Pretorius family members (the respondents in this appeal) were all released on parole, at the end of March 2022. They, therefore, 1 Minister of Justice and Constitutional Development and Others v Ntuli (Judicial Inspectorate for Correctional services intervening as amicus curiae) (539/2022) [2023] ZASCA 146 (8 November 2023) (Ntuli). adopted the stance that the appeal became moot. In a letter dated 30 March 2022, their attorney brought that fact to the attention of the State Attorney, representing the appellants. The appellants nevertheless elected to pursue this appeal. [6] Section 16(2)(a) of the Superior Courts Act 10 of 2013, stipulates: ‘(2) (a) (i) When at the hearing of an appeal the issues are of such a nature that the decision sought will have no practical effect or result, the appeal may be dismissed on this ground alone. (ii) Save under exceptional circumstances, the question whether the decision would have no practical effect or result is to be determined without reference to any consideration of costs.’ [7] It is clear from the factual circumstances that this matter is moot. In other words, a decision on appeal would have no practical effect or result. This, however, is not the end of the inquiry. The central question for consideration is whether, irrespective of its mootness, it is in the interests of justice for this court to decide the appeal.2 The interests of justice might well have compelled us to decide this appeal on its merits had it not been for this Court’s judgment in Ntuli. [8] The high court found the policy, insofar as it relates to the use of personal laptops without a modem in any communal or single cell, to constitute unfair discrimination in terms of the provisions of the Equality Act as against the three Pretorius family members. Hence, subparagraph 1 of the high court order. The full court endorsed that order. However, the parties could not demonstrate to us that Swanepoel AJ, who presided in the high court, had been designated as a presiding officer of the equality court. [9] The same happened in Ntuli. There this Court, per Unterhalter AJA, said: ‘[12] I consider, first, Mr Ntuli’s challenge to the policy under the Equality Act. Did the high court enjoy jurisdiction to entertain this challenge? I think not. A person wishing to institute proceedings under the Equality Act must notify the clerk of the equality court and a presiding officer of the equality court must decide whether the matter is to be heard in the equality court (s 20(3)(a)). Although every high court is an equality court in its area of jurisdiction, a judge of 2 Normandien Farms (Pty) Ltd) v South African Agency for Promotion of Petroleum, Exportation and Exploitation SOC Ltd & Others [2020] ZACC 5; 2020 (6) BLCR 748 (CC); 2020 (4) SA 409 (CC) paras 46-50. the high court can only serve as a presiding officer of the equality court if so designated (s 16(1)). [13] Designation is a ministerial act taken by the Minister after consultation with the Judge President (s 16(1)(b)). A high court judge, once designated, serves as a presiding officer of the equality court. Until so designated, a high court judge enjoys no such competence. When a matter comes before the high court which raises claims both under the Equality Act and outside of it, the judge of the high court before whom this matter is brought has the power to entertain all of these claims only if he or she is a judge designated as a presiding officer of the equality court. If the judge of the high court has not been so designated, then the judge cannot entertain those claims which have been brought under the Equality Act. [14] We raised this matter with the parties. They could not demonstrate to us that Matsemela AJ, who presided in the court below, had been designated as a presiding officer of the equality court. Once that is so, Matsemela AJ enjoyed no power to entertain Mr Ntuli’s claim under the Equality Act. The court below made an order that the policy is declared to constitute unfair discrimination in terms of the Equality Act. Matsemela AJ had no power to make such an order, and, as a result, that order must be set aside.’ [10] This court, therefore, inter alia set aside the order of the high Court granted under the Equality Act, it declared the policy, to the extent that it prohibits the use of personal computers in cells, constitutionally invalid and set it aside. It suspended that order for 12 months and directed the minister and the national commissioner, after consultation with the Judicial Inspectorate for Correctional Services, to prepare and promulgate a revised policy for correctional centres permitting the use of personal computers in cells for study purposes. Paragraph 6 of this Court’s order provides, inter alia, that: ‘6. Pending the revision of the education policy: 6.1 The applicant is entitled to use his personal computer in his cell, without the use of a modem, for as long as he remains a registered student with a recognised tertiary or further education institution in South Africa. 6.2 Any registered student in a correctional centre who needs a computer to support their studies, and/or any student who has registered for a course of study that requires a computer as a compulsory part of the course, is entitled to use their personal computer without the use of a modem in their cell for as long as they remain a registered student with a recognised tertiary or further education institution in South Africa.’ [11] This Court’s order in Ntuli, therefore, is not confined to Mr Ntuli, but extends to ‘[a’]ny registered student in a correctional centre who needs a computer to support their studies, and/or any student who has registered for a course of study that requires a computer as a compulsory part of the course’. [12] In the light of this Court’s order in Ntuli, paragraph 1 of the high court’s order need not be corrected in this appeal. Furthermore, the Pretorius family members, who are on parole, are afforded adequate protection against an infringement of their constitutionally entrenched right to further their education should their parole be revoked, and they are reincarcerated. [13] Finally, the matter of costs. The respondents request that the costs of the appeal should be awarded in their favour on the scale applicable as between attorney and client on the basis that: (a) the appellants steadfastly persisted with their appeal despite their knowledge that the Pretorius family members were released on parole almost eighteen months before the hearing of the appeal; and (b) the appellants failed to bring that fact to this Court’s attention prior to the granting of leave to appeal on 21 April 2022. I agree that the appellants should bear the respondents’ costs of the appeal. But this, in my view, is not one of those ‘rare’ occasions where a deviation from the ordinary rule that the successful party be awarded costs as between party and party, is warranted.3 [14] In the result, the appeal is dismissed with costs, including those of two counsel. ________________________ P MEYER JUDGE OF APPEAL 3 See LAWSA Vol 3 Part 2 (2 ed) para 320. Appearances First, second and third appellants: M T K Moerane SC (assisted by E B Ndebele) Instructed by: State Attorney, Johannesburg State Attorney, Bloemfontein First, second and third respondents: R du Plessis SC (assisted by A D Theart) Instructed by: Julian Knight and Associates Inc., Pretoria Rossouws Attorneys, Bloemfontein

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 17 November 2023 Status: Immediate The following summary is for the benefit of the media in the reporting of this case and does not form part of the judgments of the Supreme Court of Appeal Minister of Justice and Correctional Services and Others v Wilhelm Pretorius and Others (440/2022) [2023] ZASCA 155 (17 November 2023) Today, the Supreme Court of Appeal (SCA) dismissed an appeal from the full court of the Gauteng Division of the High Court, Johannesburg (the full court). The respondents were long term prisoners serving sentences of between 20 and 30 years’ imprisonment. The first respondent, Mr Wilhelm Pretorius, was registered for a doctoral degree in Theology at the University of Pretoria. The second respondent is his brother, Dr Johan Pretorius, a medical doctor who was registered for a degree in Biblical and Ancient Studies at the University of South Africa. The third respondent is their father, Dr Johan (Lets) Pretorius, a medical doctor, who was registered for an honours degree in Political Sciences at the University of South Africa. Although they had access to computers in the correctional centre’s computer room between the hours of 7:00am and 2:00pm, they were not permitted to use their personal computers in their cells to progress their studies during the lengthy hours that they were locked up in their cells. They sought to use a personal computer in their cells for study purposes, but their requests were rejected, as the departmental ‘Policy Procedure Directorate Formal Education Programmes’ (the policy) prohibits the use of a personal computer in a cell for study purposes. They accordingly brought proceedings in the Gauteng Division of the High Court, Johannesburg (the high court). On 14 May 2018, the high court, per Swanepoel AJ, granted an order in their favour. The policy, insofar as it relates to the use of personal laptops without a modem in any communal or single cell, was declared to constitute unfair discrimination in accordance with the Provisions of the Promotion of Equality and Prevention of Unfair Discrimination Act 4 of 2000 (the Equality Act), as against the respondents. Aggrieved by that order the Minister of Justice and Correctional Services, the National Commissioner: Department of Correctional Services and the Head of the Correctional Centre in question appealed to the full court. On 21 January 2022, the full court dismissed the appeal with costs. This appeal, with leave of this Court, lies against the order of the full court. Another appeal, Minister of Justice and Constitutional Development and Others v Ntuli (Judicial Inspectorate for Correctional Services intervening as amicus curiae) was enrolled for hearing together with this appeal, since the two appeals involve similar facts and the same issues of law. However, it turned out that the three Pretorius family members were all released on parole about 18 months prior to the hearing of the two appeals. The SCA held that it is clear from the factual circumstances that the Pretorius appeal is moot. A decision on appeal would have no practical effect or result. This, the SCA held, however, is not the end of the inquiry. The central question for consideration is whether, irrespective of its mootness, it is in the interests of justice for the SCA to decide the appeal. The interests of justice might well have compelled the SCA to decide this appeal on its merits, had it not been for the SCA’s judgment in the Ntuli appeal (Minister of Justice and Constitutional Development and Others v Ntuli ((Judicial Inspectorate for Correctional Services intervening as amicus curiae) (539/2022) [2023] ZASCA 146 (8 November 2023)). There, the SCA found that the constitutional right to further education is, at a minimum, a right to pursue further education, free of state interference. The policy prevents a prisoner from effectively pursuing his or her chosen course of study and, therefore, the SCA found the policy to infringe the constitutional right to further education. In the result, the SCA declared that the blanket policy prohibiting the use of personal computers in cells was constitutionally invalid and it set it aside. The order was not confined to Mr Ntuli but extends to any registered student in a correctional centre who needs a computer to support their studies, and/or any student who has registered for a course of study that requires a computer as a compulsory part of the course. The SCA, therefore, concluded that the appeal became moot when the three Pretorius family members were released on parole. The order in Ntuli affords adequate protection against infringements of their constitutionally entrenched right to further their education should the Pretorius family members’ bail be revoked, and they are reincarcerated. ~~~~the end~~~~

1456

non-electoral

2010

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Case No: 31/2010 In the matter between: ABSA BANK LIMITED Appellant and INTENSIVE AIR (PTY) LIMITED (IN LIQUIDATION) First Respondent GEOFF FERREIRA NO Second Respondent LESLIE MATUSON NO Third Respondent RISCHARD CASSIM NO Fourth Respondent Neutral citation: ABSA Bank v Intensive Air (31/2010) [2010] ZASCA 171 (1 DECEMBER 2010) Coram: HARMS DP, CACHALIA, SNYDERS and SHONGWE JJA and BERTELSMANN AJA Heard: 2 NOVEMBER 2010 Delivered: 1 DECEMBER 2010 Summary: Banking – banker and customer relationship – company income paid into sole director’s and shareholder’s personal account – credit in director’s account appropriated by bank setting it off against director’s debts owing to bank – no agreement with bank to hold funds credited to director’s account as those of the company – absence of ius in re. ______________________________________________________________ ORDER ______________________________________________________________ On appeal from: North Gauteng High Court, Pretoria (Hartzenberg and Claassen JJ and Mabuse AJ sitting as full court). The following order is made: 1. The appeal is upheld with costs, including the costs of two counsel. 2. The order of the full court is set aside and the following order is substituted therefore: ‘The appeal is dismissed with costs, including the costs of two counsel.’ ______________________________________________________________ JUDGMENT ______________________________________________________________ BERTELSMANN AJA (HARMS DP, CACHALIA, SNYDERS and SHONGWE JJA concurring). [1] Dr J W K Louw (‘Louw’), a Johannesburg heart surgeon, had a passion for flying. He established an air ambulance service in the eighties, first under the name ‘Care Air’ and then ‘Intensive Air’ of which he was the sole proprietor. He expanded the air ambulance into a full air travel operation during about 2001. [2] A licence to conduct air passenger travel services was issued to the first respondent, Intensive Air (Pty) Ltd, a company (‘the company’) with limited liability duly incorporated in terms of the Companies Act 61 of 1973. The company is in liquidation. Louw was the sole shareholder and director of the company. Louw opened several bank accounts with the appellant, Absa Bank Ltd, at the latter’s Private Bank Division. [3] One of the accounts opened by Louw was a cheque account with account number 4061777725, conducted in his personal name trading as ‘Intensive Air’. Louw identified himself as the sole proprietor of this business when the bank opened the account in his name. This account was described in the proceedings in the court of first instance as the ‘ticket account’ because all the proceeds of tickets sold by the company to its passengers on its regular flights, and no other funds, were deposited into this account. This account was opened in May 2000, some time before the air transport services commenced. [4] Other accounts opened by Louw with the bank in his own name included one called the ‘aircraft lease account’, upon which Louw obtained an overdraft of R25m. This sum Louw devoted to the purchase of several passenger aircraft in his personal capacity that he leased to the company. [5] Another account was conducted as Louw’s personal and practice account, while the company also conducted an account with the bank into which speed point payments were received. Further accounts in the name of both Louw and the company were opened at Standard Bank. [6] Louw was obliged to pay the interest to the bank on the overdraft of R25m on a monthly basis. The funds required for this purpose were transferred from the ticket account to the aircraft lease account. These interest payments were in turn credited as aircraft rental payments to Louw’s loan account in the company, which reflected a debt of R5m to Louw, arising from rentals and money lent and advanced when the company was liquidated. It is important to note that the loan account represented a reconstruction of these transactions by the company’s auditors as these were not properly recorded by Louw. [7] The funds in the ticket account were also used to pay other company expenses such as the fuel and the aircraft maintenance accounts. Some transfers were also made to Louw’s personal account. [8] Louw provided security for the bank’s claims against the company and himself in the form of a suretyship for the company’s liabilities, a cession of his loan account in the company, a cession of his policies, by registering bonds over his immovable properties and executing a cession of all sums standing to his credit in any account conducted with the bank. [9] The air passenger service ran into financial difficulties and the company was liquidated during the first half of 2002, the liquidation application having been lodged on 10 April 2002. At that date a credit balance of R293 656.56 was shown in the ticket account, which the bank appropriated by claiming that it was automatically set-off against Louw’s indebtedness to it. [10] The second to fourth respondents were appointed as the first respondent’s final liquidators. They regarded the payment of funds earned by the company into the ticket account as dispositions to the bank without value, liable to be set aside in accordance with s 26 of the Insolvency Act 24 of 1936 read with the provisions of s 340 of the Companies Act. They also claimed the credit balance in the ticket account, on the date of insolvency, as moneys earned by the company to which the latter was entitled. The bank disputed these assertions. Summons was issued. Respondents’ first claim was for payment of R7 387 957.34 as the total of all dispositions without value, while payment of the amount of R293 656.56 was demanded on the grounds that it ‘belonged’ to the company. The bank pleaded specifically that the ticket account was opened in Louw’s name as sole proprietor of ‘Intensive Air’. The respondents therefore had to prove that it was the company, and not Louw in his personal capacity, that was entitled to claim the credit balance in this account. [11] The respondents called the company’s financial manager, Mr Gerhard Louw (not related to Louw), as their first witness. He confirmed that the ticket account, on which he had signing powers, had been opened in Louw’s personal name and that the latter was the account holder. He explained that funds were channelled from this account to the aircraft lease account – which was also held in Louw’s name - and were further used to pay the company’s liabilities. [12] He testified that he had recommended that the company’s finances should be dealt with separately from the director’s affairs, but that his advice was not implemented. [13] The evidence of Mr Richard Evans, the company’s accountant, was also that the relevant accounts were held in Louw’s name and that the funds deposited into them were used to defray the company’s expenses. Evans regarded the book-keeping practices he found when he joined the company as unsatisfactory, but could not effect a change before the company was liquidated. [14] This was the sum total of the evidence presented to support the respondent’s claims. The other witnesses called by the respondents did not give any evidence that had a bearing on the issues in dispute between them and the bank. For reasons that remained unexplained Louw was not called to testify. The bank closed it case without calling witnesses. [15] The trial court dismissed both claims. It found that the ticket account was held by Louw personally. Money deposited into that account did not constitute a disposition to the bank. The first claim was dismissed on this ground. By the same token, the credit balance appropriated by set-off was held to have been Louw’s asset and not that of the company, rendering the second claim unenforceable. Leave to appeal to the full court was granted in respect of the second claim only. A petition to this court for leave to appeal against the dismissal of the first claim failed. [16] The full court upheld the appeal against the dismissal of the second claim. Relying upon this court’s judgment in Joint Stock Co Varvarinskoye v Absa Bank Ltd & others 2008 (4) SA 287 (SCA), it held that the liquidators had established that Louw had conducted the air service venture through the company and not in his own name. The funds deposited into the ticket account were thus those of the company and ‘belonged’ to the company. As a result the bank was not entitled to set-off any credit in the ticket account against any claim it might have against Louw personally. [17] The full court found support for this conclusion in the fact that Louw held a loan account in the company. The existence of this account, the full court reasoned, was proof that the affairs of the company were conducted separately from Louw’s financial dealings. It adopted the view that, had Louw’s funds been intermingled with those of the company, it would have been nonsensical to conduct the loan account at all. This finding is not supported by the evidence. [18] Special leave to appeal to this court having been granted, the bank argued that the full court erred in regarding funds deposited into the ticket account as those of the company. They ‘belonged’ to Louw as the latter had agreed with the company, whose sole shareholder, director and guiding mind he was, to deposit the income from the ticket sales into this account of which he was the holder. The respondents supported the full court’s reasoning. [19] Before further considering the judgment of the full court, it is useful to recall some basic principles in this area of the law. [20] The relationship between banker and client is one of debtor and creditor. ‘...it has long been judicially recognised in this country that the relationship between bank and customer is one of debtor and creditor. When a customer deposits money it becomes that of the bank, subject to the bank’s obligation to honour cheques validly drawn by the customer...’ per Holmes JA in S v Kearney 1964 (2) SA 495 (A) at 502-503. Although the liquidators proceeded from the assumption that the funds in Louw’s account ‘belonged’ to the company, their case clearly was not vindicatory or quasi-vindicatory, but contractual. Their case had to be that the company (and not Louw) represented by its sole director had opened the account with the bank and that it was the bank’s creditor, in spite of the fact that the bank’s Private Bank Division does not deal with corporate accounts and that the account was conducted in Louw’s name. [21] The respondents therefore had to prove that Louw was a disclosed agent of the company. The bank must have agreed to conduct the account on this basis: Dantex Investment Holdings (Pty) Ltd v National Explosives (Pty) Ltd (in liquidation)1990 (1) SA 736 (A) at 748E-749. Milne JA says at 749D-E: ‘…in our law, money held by virtue of a fiduciary relationship in which the holder stands to another is, unlike the position in English law, not deemed to be earmarked and is not charged with the fiduciary obligation.’ And at 749I ‘There is no evidence to suggest that the Bank agreed to hold the funds in respect of those cheques as agent for Dantex.’ Van den Heever J in Ex parte Estate Kelly 1942 OPD 265 at 272, states: ‘[b]y paying these monies into the bank, Kelly acquired a personal claim against the bank and his creditors have nothing but personal claims against him.’ [22] Had Louw been an undisclosed agent, the liquidators would have had no claim against the bank: Symon v Brecker 1904 TS 745. Had the company’s money been stolen, and had the thief paid off his overdraft with the stolen money, the company would have had no claim for repayment thereof against the bank, (First National Bank of Southern Africa Ltd v Perry NO & others 2001 (3) SA 960 (SCA) para 16) but would, of course, have had a claim against the thief and a possible enrichment action against anyone who knowingly received or retained the stolen money. Had the thief, however, deposited the stolen money into an account where it was still identifiable as the fruit of the misdeed, the company would have had a quasi-vindicatory claim to it : Nissan South Africa (Pty) Ltd v Marnitz NO & others (Stand 186 Aeroport (Pty) Ltd intervening) 2005 (1) SA 441 (SCA). The liquidators may also have shown that the rights of the account holder to operate upon the account had been limited in terms of an agreement between the company and the bank, as was the case in Varvarinskoye. [23] Turning then to the judgment appealed against, the full court appears to have overlooked the specific circumstances that prevailed in the Varvarinskoye matter. There, Absa Bank had been expressly informed that the moneys standing to the credit of an account conducted in the name of its client, MDM, were held specifically to provide a fund from which sub- contractors of the appellant joint stock company would be paid. Funds could only be withdrawn from this account for the purpose of effecting payment of approved sums to clearly identified sub-contractors. Every withdrawal had to be expressly authorised by the appellant. Absa Bank was fully aware of these facts and knew that MDM had no claim to the money deposited in the account in its name. MDM had signed cross-suretyships with and in favour of two associated companies that were clients of Absa Bank. When MDM and its associated companies experienced financial hardship and the associated companies were unable to meet their commitments to Absa Bank, the latter purported to appropriate the funds in the MDM account, claiming that the money deposited into the dedicated account became the property of the bank, as if the account had been opened by a client in the ordinary course of banking business. Only the account holder, it was argued, could claim the money standing to the credit of an account, and MDM’s claim had been extinguished by the set-off effected by enforcing the cross-suretyships. [24] On appeal in Varvarinskoye this court confirmed that if funds held in an account can be identified as having been reserved for or ‘belonging’ to another by agreement with the bank, the account holder is not entitled to deal with those funds. The person actually entitled thereto has a quasi-vindicatory claim to demand payment of such funds from the bank: Fedsure Life Assurance Co Ltd v Worldwide African Investment Holdings (Pty) Ltd & others 2003 (3) SA 268 (W). Should they become intermingled with other moneys in an account held by a person not entitled thereto, they can no longer be identified as funds to which a non-account holder has a better claim than the holder and the money becomes the property of the bank. The claimant is then left with only a personal claim against the holder of the account: Dantex Investment Holdings (Pty) Ltd supra. [25] By agreeing to the specific terms under which the MDM-account was conducted in Varvarinskoye, Absa Bank was placed in the position of the joint stock company’s agent holding the latter’s money as a separate fund reserved for a specific purpose. Absa Bank was therefore not entitled to appropriate the credit balance in MDM’s account to itself. To Absa Bank’s knowledge, the funds ‘belonged’ to the appellant and could not be set-off against MDM’s liabilities to Absa Bank. The appeal was upheld in accordance with basic principles and without purporting to create new ones. [26] The facts in this case differ significantly from those in Varvarinskoye. It is clear that the bank was not party to any agreement to treat the funds in Louw’s ticket account in any way other than those of the account holder. There is no evidence of any agreement other than that of client and banker entered into by Louw and the bank. While the bank was certainly aware of the fact that Louw was director and shareholder of the company, there was no suggestion made to it at any stage that Louw was not entitled in his personal capacity to the proceeds of the company’s ticket sales – which funds were in turn devoted in large measure to the payment of company expenses. The financial arrangements made by Louw in respect of his own and the company’s funds may have been unorthodox, imprecise and even chaotic, while the recordal of the various transactions in his and the company’s books of account may have been, as counsel for the bank put it during the hearing in the court of first instance ‘ an auditor’s nightmare’. It does not follow that he therefore did not conduct the ticket account in his personal capacity. [27] The existence of the loan account in the company does not contradict this conclusion. It does not, as the full court held, prove that the company and Louw conducted separate books and drew clear distinctions between transactions performed by the one or the other. The evidence of the financial director and the accountant emphasises that Louw transferred company earnings into accounts he held with the bank, intermingled them with his own funds and used the available financial resources to pay company and personal expenses. They confirmed that the loan account was basically created by the company’s auditors in an effort to untangle Louw’s various transactions in the company’s books. In any event the existence of its loan account did not establish that the bank had a contract with the company. [28] Louw clearly regarded the company and its business as his personal fiefdom which he could control as he pleased. His own financial fortunes were intertwined with those of the business. From the bank’s perspective there was no reason to suspect that the agreement between Louw and the company to transfer the proceeds of ticket sales into Louw’s personal account was anything but bona fide and untainted by any illegality. Unlawful conduct in respect of any arrangement between Louw and the company cannot be presumed: ‘[t]here exists a presumption in law that parties intend to perform agreements in a lawful manner’ per Snyders AJA in Wypkema v Lubbe 2007 (5) SA 138 (SCA) para 17 and Juglal NO & another v Shoprite Checkers (Pty) Ltd t/a OK Franchise Division 2004 (5) SA 248 (SCA). [29] The onus was on the respondents throughout to establish that the funds in the ticket account ‘belonged’ to the company. They failed to present any evidence that would justify this conclusion. The witnesses called in support of the respondents’ case had no knowledge of the agreements between Louw and the company and Louw and the bank. They could not gainsay that Louw was the contracting party who agreed with the bank to open the ticket account. Louw was the bank’s debtor and the set-off against the credit balance of this account was effective. [30] The appeal must succeed. The following order is made: 1. The appeal is upheld with costs, including the costs of two counsel. 2. The order of the full court is set aside and the following order is substituted therefore: ‘The appeal is dismissed with costs, including the costs of two counsel.’ ______________________ E BERTELSMANN Acting Judge of Appeal APPEARANCES: For appellant: F H Terblanche SC J E Smit Instructed by: Tim du Toit & Co Inc, Westcliff, Johannesburg Naudes Inc, Bloemfontein For respondent: F Snyckers Instructed by: Postma Attorneys c/o VFV Mseluku Attorneys, Pretoria Symington & De Kok, Bloemfontein

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 1 December 2010 Status: Immediate Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal. * * * ABSA BANK LTD v INTENSIVE AIR (PTY) LTD (IN LIQUIDATION) & OTHERS The Supreme Court of Appeal today overruled a decision of the full court of the Gauteng North (Pretoria) Division. The full court had held that the liquidators of the insolvent company Intensive Air (Pty) Ltd were entitled to claim a sum of R293 656.56 which had stood to the credit of an account held in the name of the company’s sole director. The account was opened before the company started its air passenger service operations. All moneys earned from ticket sales were paid into the director’s personal account, who devoted the funds to the payment of company and personal expenses. The director was indebted to the bank ia for the sum of R25m he had borrowed to purchase aircraft in his personal name, which aircraft he leased to the company. When the company was liquidated, the bank appropriated the money in the director’s account by set-off against the debts he owed to the bank taking place. The full court was of the view that the money, having been earned by the company, should accrue to the company as it represented a company asset. On appeal this finding was overruled. The general rule of banking law provides that money paid into a client’s account becomes the property of the bank, subject to the client’s claim to any credit in the account. Normally only the account holder is entitled to claim money in an account held in his or her personal capacity. A third party is only entitled to such funds if a special arrangement has been made with the bank that the money will be held on behalf of such third party; or in cases where the third party is able to show that money credited to another’s account ‘belongs’ to the third party, for instance in cases where stolen funds can be traced to a credit in another’s bank account. In the present instance no special arrangements had been made with the bank and there was no suggestion that the director’s arrangements in respect of the company finances were in any way untoward. There was no evidence that the director’s agreement with the bank was anything other than an ordinary banker-client relationship, with the result that the liquidator’s claim had to be dismissed.

2769

non-electoral

2012

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Case No: 440/2011 Reportable In the matter between: MICHAEL HATTINGH First Appellant EDWINA JUNITA HATTINGH Second Appellant PIETER HATTINGH Third Appellant and LAURENCE EDWARD JUTA Respondent Neutral citation: Hattingh v Juta (440/2011) [2012] ZASCA 84 (30 May 2012) Coram: Navsa, Nugent and Leach JJA Heard: 18 May 2012 Delivered: 30 May 2012 Summary: Family’s cultural rights under s 6(2)(d) of ESTA – what constitutes – section envisages rights of an associative nature. ___________________________________________________________________ O R D E R ___________________________________________________________________ On appeal from: Land Claims Court, held at Cape Town (Meer J and Gildenhuys J): 1. The appeal is dismissed. 2. The dates 12 May 2011 and 13 May 2011 in paras 1 and 2 of the order of the court a quo are amended to read 31 August 2012 and 1 September 2012, respectively. 3. There will be no order as to the costs of this appeal. ___________________________________________________________________ J U D G M E N T __________________________________________________________________ LEACH JA (NAVSA AND NUGENT JJA CONCURRING): [1] The issue in this appeal is whether the appellants were correctly evicted from a worker’s house on a smallholding known as Fijnbosch farm in the district of Stellenbosch (‘the farm’) that is owned by the respondent.1 The appellants have since December 2002 resided in the house together with the mother of the first and third appellants. On 10 May 2010 the Stellenbosch Magistrate’s Court dismissed an application brought by the respondent to evict the appellants from the house. The respondent thereafter successfully appealed to the Land Claims Court which, on 30 March 2011, set aside the magistrate’s order and substituted an order directing the appellants to vacate by 20 May 2011. With leave of the Land Claims Court, the appellants now appeal to this court against that order. [2] The first and third appellants are brothers, the sons of Mrs Magrieta Hattingh, a woman in her mid-sixties. The second appellant is the first appellant’s wife. At the time of the institution of the eviction proceedings in the magistrate’s court, the first and second appellant’s were both 29 years of age, while the third appellant was 37 1 More fully described as ‘Portion 9 (a portion of portion 2) of the farm Mendoza No 512, in the Municipality and Division Stellenbosch, Province Western Cape in extent: 1,4286 hectares’. years old. The first and second appellants have either two or three minor children (the papers are contradictory) who also live with them. [3] The respondent purchased the farm in 2002. At that time Mrs Hattingh was working for him as a domestic servant in his home in Stellenbosch, having been employed in this capacity since approximately 1994. After taking occupation of the farm, the respondent built himself a residence there, which was only completed in December 2003. However there was a worker’s house on the farm which the respondent agreed to allow Mrs Hattingh and her husband to use, and they moved in during December 2002. Although Mrs Hattingh only resumed full time employment with the respondent once his house had been completed, she continued to receive her full salary. The respondent also employed her husband as a gardener for a period. [4] Mrs Hattingh continued in the respondent’s employ until the end of 2005. The respondent avers that he ended her employment at that time as her health had deteriorated and she was unable to work. The appellants deny this, and allege that the termination of her employment occurred without any valid reason. It is unnecessary to determine this dispute for purposes of the present enquiry as it is common cause that, after her employment came to an end, the respondent allowed her to continue living in the worker’s house with her husband who was in poor health until he died from lung cancer in 2006. She continues to reside in the worker’s house to this day, not as an entitlement flowing from her employment with the respondent but solely due to his generosity and consent. [5] I turn to consider the position of the appellants. At the time the respondent purchased the farm, the appellants were living on another farm in the district owned by a Mr Nico Mostert. How long this had been the case and under what circumstances they came to be living there, is not disclosed in the affidavits. It is not clear whether Mrs Hattingh and her husband were living with them, although that may well have been the case. It is also not clear whether the appellants moved onto the respondent’s farm at the same time as Mrs Hattingh or shortly thereafter, although that is neither here nor there for present purposes. What is clear is that in December 2002, the same month in which Mrs Hattingh moved to the farm, they did so too and have remained residing there ever since. [6] According to the respondent, he allowed the appellants to move onto the farm on condition that they remained there for no longer than three months. This the appellants deny. While it is common cause that the second appellant worked for the respondent for a period, there is a dispute as to whether he had also employed the first and third appellants at any time. They allege that he did, but he denies this. Again it is unnecessary to resolve this dispute. What is common cause is that when the eviction application was launched all three appellants were working for different employers in Stellenbosch. [7] It is also common cause that when Mrs Hattingh moved onto the farm her third son, Ricardo, was at school at Graaff–Reinet. During his school holidays he returned home from time to time and lived on the farm with his parents. After leaving school Ricardo returned to Stellenbosch where he was able to find both work and accommodation in the town. However, when he changed jobs and took up work with an employer who did not provide accommodation, he too went to live with Mrs Hattingh and the appellants in the worker’s house on the respondent’s farm. It must immediately be recorded that the respondent does not seek to have Ricardo evicted and, as counsel for the respondent confirmed from the bar, is happy to allow him to reside with his mother. [8] The worker’s house on the farm where the appellants live consists of two interlinked units which were altered when they moved onto the farm to become effectively a single house. Since September 2006 the respondent has employed a Mr Gert Willemse as a general labourer and is of a mind to restore the house to its original condition of two living units with the intention to accommodate Mr Willemse in the one and Mrs Hattingh and Ricardo in the other. It was for this reason that he sought to evict the appellants. [9] In seeking to avoid eviction the appellants do not purport to rely upon any rights that they themselves hold under the Extension of Security of Tenure Act 62 of 1997 (‘ESTA’). Instead they contend that they are entitled to remain on the property by virtue of Mrs Hattingh who is an ‘occupier’ under ESTA, being entitled to exercise her rights as such under s 6(2)(d) thereof which provides: ‘Without prejudice to the generality of the provisions of section 5 and subsection (1), and balanced with the rights of the owner or person in charge, an occupier shall have the right ─ . . . (d) to family life in accordance with the culture of that family . . .’2 [10] It is the meaning of the phrase ‘family life in accordance with the culture of that family’ that lies at the heart of the dispute between the parties. In considering the issue, the court a quo took into account s 8(5) of ESTA which extends a right of residence to only a spouse or dependant of an occupier who dies, and commented that restricting family members only to those persons is an equitable formulation ‘[f]or were it otherwise, landowners would have the onus and intolerable burden of housing adult members or occupiers’ extended families indefinitely’. It therefore concluded that while in a specific situation a wider interpretation, which would permit other family members to reside with an occupier, could be accorded under the right to family life protected by s 6(2)(d), in such a case evidence in support of a wider interpretation would be necessary. It then proceeded to then rule against the appellants on the basis that they had failed to prove that family life as envisaged by their culture entitled them to reside with Mrs Hattingh, and that they were therefore not protected from eviction. [11] The appellants did not seek to impugn the approach that it was incumbent upon them to prove the cultural basis under s 6(2)(d), upon which they rely to avoid eviction from the respondent’s farm, and it is thus unnecessary to decide whether the court a quo’s reasoning in this regard was correct. However I certainly think that it would hardly require evidence to prove that a wife and minor dependants were family of an occupier, and a nuclear family of that nature would surely be regarded as a ‘family’ as envisaged by s 6(2)(d). But that is not the issue in the present case; it is whether the extended Hattingh family reside together in accordance with its culture. 2 There is a proviso to the subsection which is of no relevance to the present debate. [12] In arguing this to be the case, counsel for the appellants submitted that the concept of ‘culture’ as envisaged in s 6(2)(d) should be broadly interpreted and was in no way limited to considerations of race, ethnicity, religion, language and community. Rather he submitted that each family had to be considered individually to determine its culture, being the way in which it lived, and that although this might well be influenced by race, ethnicity, language, religion and the values and practices of the local community, such factors would not be determinative. [13] Essentially the appellant’s argument was that ‘culture’ as envisaged by s 6 was not a matter of association ─ rather it is a reflection of the ethos of the family itself and the way in which it lived ─ and is, as counsel for the appellant put it, ‘family sensitive’. Thus, so it was argued, the history of the appellants showed that they were members of a caring family who looked after and supported each other; who had lived together sharing the same accommodation for years; and who had been prepared to share their home with members of their extended family when the need arose, as it had when Ricardo changed employment and needed somewhere to live. These were their shared values which evidenced their culture. And as they lived together as part of that family culture, their continued residence on the farm was protected by s 6. [14] In construing s 6, the importance of family and family life must be borne in mind. South Africa has ratified the International Covenant on Civil and Political Rights, art 23(1) of which recognises that the family ‘is the natural and fundamental unit of society’ entitled to protection by society and the state. Article 18 of the African Charter on Human and People’s Rights contains a similar provision, and in art 8 of the European Convention on Human Rights and Fundamental Freedoms provision is made for the recognition and protection of a person’s ‘right to respect for his private and family life, his home and his correspondence’. In Huang v Secretary of State for the Home Department3 Lord Bingham, dealing with the core value of this latter article in an immigration context, commented:4 3 Huang v Secretary of State for the Home Department [2007] 2 AC 167 (HL); [2007] UKHL 11. 4 At para 18. ‘Human beings are social animals. They depend on others. Their family, or extended family, is the group on which many people most heavily depend, socially, emotionally and often financially.’ [15] In the Certification of the Constitution of the Republic of South Africa case5 the Constitutional Court, after recording that a survey of various national constitutions throughout the world shows that there to be no universal acceptance of a right to family life as fundamental in the sense that it required express constitutional protection, went on to observe:6 ‘The absence of marriage and family rights in many African and Asian countries reflects the multi-cultural and multi-faith character of such societies. Families are constituted, function and are dissolved in such a variety of ways, and the possible outcomes of constitutionalising family rights are so uncertain, that constitution-makers appear frequently to prefer not to regard the right . . . to pursue family life as a fundamental right that is appropriate for definition in constitutionalised terms. They thereby avoid disagreements over whether the family to be protected is a nuclear family or an extended family, . . . These are seen as questions that relate to the history, culture and special circumstances of each society, permitting no universal solutions.’ [16] Although the Constitutional Court found it unnecessary to constitutionally entrench the right to family life, which it felt was adequately protected by other provisions, it has subsequently recognised it as being a concomitant of the right to human dignity entrenched in s 10 of the Constitution: see eg the judgment in Dawood & another v Minister of Home Affairs & others.7 [17] Although the word ‘family’ is incapable of having a precise legal connotation or definition, it is apparent from what I have said that a right to family life is inherent in the fundamental right to human dignity enshrined in the Constitution. And, as 5 Ex parte Chairperson of the Constitutional Assembly: In re certification of the Constitution of the Republic of South Africa 1996 1996 (4) SA 744 (CC). 6 At para 99. 7 Dawood & another v Minister of Home Affairs & others; Shalabi & another v Minister of Home Affairs & others; Thomas & another v Minister of Home Affairs & others 2000 (3) SA 936 (CC) at paras 28- 37. enjoined by decisions such as Bato Star Fishing,8 it is the Constitution which provides the backdrop when seeking to interpret sections such as s 6(2)(d). [18] In considering the concepts of family life and culture through the prism of the Constitution, the decision in Pillay,9 a case to which we were most surprisingly not referred to by the parties, is instructive. In that matter the Constitutional Court was called on to deal with the issue of discrimination under s 6 of the so-called Equality Act10 in order to consider whether a learner of Hindu descent had been discriminated against by not being permitted to wear a nose-stud to school. That section reiterates the prohibition in ss 9(3) and 9(4) of the Constitution against unfair discrimination on a number of grounds, including culture. In this context the court were unanimous that the concept of ‘culture’ resisted any precise definition but in both the majority judgment of Langa CJ (with whom the other members of the court, save for O’Regan J concurred) as well as O’Regan J’s partial dissent, it was concluded that culture was an inherently associative practice and that, while differing from religion, cultural practices are often influenced by religious practices. But, as Langa CJ observed, ‘culture generally relates to traditions and beliefs developed by a community’.11 The learned Chief Justice went on further to hold: ‘ . . . cultural convictions or practices may be as strongly held and as important to those who hold them as religious beliefs are to those more inclined to find meaning in a higher power than in a community of people. The notion that “we are not islands unto ourselves” is central to the understanding of the individual in African thought. It is often expressed in the phrase umuntu ngumuntu ngabantu which emphasises “communality and the interdependence of the members of a community” and that every individual is an extension of others. According to Gyekye, “an individual human person cannot develop and achieve the fullness of his/her potential without the concrete act of relating to other individual persons”. This thinking emphasises the importance of community to individual identity and hence to human dignity. Dignity and identity are inseparably linked as one's sense of self- worth is defined by one's identity. Cultural identity is one of the most important parts of a person's identity precisely because it flows from belonging to a community and not from 8 Bato Star Fishing (Pty) Ltd v Minister of Environmental Affairs & others 2004 (4) SA 490 (CC) para 90. See further Department of Land Affairs v Goedgelegen Tropical Fruits (Pty) Ltd 2007 (6) SA 199 (CC) para 53. 9 MEC for Education, KwaZulu-Natal & others v Pillay 2008 (1) SA 474 (CC). 10 Promotion of Equality and Prevention of Unfair Discrimination Act 4 of 2000. 11 Para 47. personal choice or achievement. And belonging involves more than simple association; it includes participation and expression of the community's practices and traditions.’ (Footnotes omitted). [19] In her judgment O’Regan J stated that a cultural practice is ‘about a practice pursued by individuals as part of a community’.12 Indeed, as appears from her judgment, she was concerned that the approach of the majority judgment did not sufficiently acknowledge the associative nature of cultural practices and that the right to cultural life is a right to be practiced, not primarily as a sincere but personal belief, but as a member of the community. She then went on to state: 13 ‘Nevertheless, the need to investigate whether a particular property asserted practice is shared within the broader community, or portion of it and therefore understood as a cultural practice rather than a personal habit or preference, is central to determining whether a cultural claim has been established,’ and that:14 ‘My understanding of how our Constitution requires us to approach the rights to culture, therefore, emphasises four things: cultural rights are associative practices, which are protected because of the meaning that shared practices give to individuals and to succeed in a claim relating to a cultural practice a litigant will need to establish its associative quality; an approach to cultural rights in our Constitution must be based on the value of human dignity which means that we value cultural practices because they afford individuals the possibility and choice to live a meaningful life; cultural rights are protected in our Constitution in the light of a clear constitutional purpose to establish unity and solidarity amongst all who live in our diverse society . . .’(Emphasis added). [20] As is apparent from both judgments in Pillay, a person’s culture as envisaged by the Constitution is clearly not a matter of such person’s individual practice but a matter of association and practices pursued by a number of persons as part of a community. As O’Regan J concluded, the ‘anthropological conception of culture which refers to the way of life of a particular community’ is the concept of culture referred to in ss 30 and 31 of the Constitution, and that the rights in those sections are ‘associative rights exercised by individual human beings’ which ‘bolster the 12 Para 147. 13 Para 154. 14 Para 157. existence of cultural, religious and linguistic groups so long as individuals remain committed to living their lives in that form of association’.15 And while the majority judgment may have placed less emphasis on the associative nature of cultural practices, in a comment particularly damaging to the appellants’ contention Langa CJ, warned that ‘if too wide a meaning is given to culture “the category becomes so broad as to be rather useless for understanding differences among identity groups”'.16 [21] The right to a family life in accordance with the family’s ‘culture’ in s 6 of ESTA is clearly a reflection of the fundamental rights set out in ss 30 and 31 of the Constitution, namely, that every person has the right ‘to participate in the cultural life of their choice’ and to ‘enjoy their culture’ with other members of a cultural, religious or linguistic community.17 Bearing that in mind, the finding in Pillay that cultural rights protected by the Constitution are clearly associative in nature is fatal to the appellant’s argument that culture as envisaged in s 6(2)(d) of ESTA was non- associative and fell to be determined solely by the manner in which Mrs Hattingh and her extended family lived their lives. As the court a quo correctly found, the appellants did not seek to establish a cultural practice of association as envisaged by the Constitution to show that they that they and Mrs Hattingh were enjoying family life in accordance with the culture of their family. Indeed counsel for the appellants conceded that in the event of this court finding that culture was a matter of association shared by at least a portion of the community, the appeal must fail. 15 Para 150. 16 The quotation used by the learned Chief Justice is from Gutmann Identity in Democracy (Princeton University Press 2003) at 38. 17 The sections read as follows: ‘30. Language and culture. ─ Everyone has the right to use the language and to participate in the cultural life of their choice, but no one exercising these rights may do so in a manner inconsistent with any provision of the Bill of Rights. 31. Cultural, religious and linguistic communities. ─ (1) Persons belonging to a cultural, religious or linguistic community may not be denied the right, with other members of that community ─ (a) to enjoy their culture, practise their religion and use their language; and (b) to form, join and maintain cultural, religious and linguistic associations and other organs of civil society. (2) The rights in subsection (1) may not be exercised in a manner inconsistent with any provision of the Bill of Rights.’ [22] In the order of the court a quo, the appellants were given until 12 May 2011 to vacate the premises and, in the event that they failed to do so, the sheriff, with effect from the following day, was authorised to take the necessary steps to evict them. That order has been overtaken by events and, even though the appeal must fail, it is necessary to amend its terms to afford the appellants the adequate opportunity to arrange other accommodation. The parties were agreed that it would be fair to allow the appellants a period of some three months to do so. As this judgment will be delivered before the end of May 2012, this can be achieved by amending the dates in the order to 31 August 2012 and 1 September 2012, respectively. [23] Finally, dealing with the question of costs, the respondent who has at all times behaved with the utmost consideration towards Mrs Hattingh and her extended family, did not seek a costs order against the appellants. For this he is to be commended. [24] In the result the following order is made: 1. The appeal is dismissed. 2. The dates 12 May 2011 and 13 May 2011 in paras 1 and 2 of the order of the court a quo are amended to read 31 August 2012 and 1 September 2012, respectively. 3. There will be no order as to the costs of this appeal. . ______________________ L E Leach Judge of Appeal APPEARANCES: For Appellant 1st and 3rd: A C Dodson SC Instructed by: University of Stellenbosch Law Clinic Stellenbosch Honey Attorneys, Bloemfontein For Respondent: L F Wilken Instructed by: Bouwer Potgieter Inc, Strand Symington & De Kok Attorneys, Bloemfontein

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 30 May 2012 Status: Immediate Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal Neutral citation: Hattingh v Juta (440/2011) [2012] ZASCA 84 (30 May 2012) The three appellants reside on Fijnbosch farm in the district of Stellenbosch, a property owned by the respondent. They have done so since December 2002 when they moved into a house on the property which the respondent had permitted the mother of the first and third appellants to reside in. The respondent applied to the Stellenbosch Magistrate’s Court for an order evicting the appellants from the house. This application was unsuccessful but an appeal brought by the respondent to the Land Claims Court, Cape Town was upheld and, on 30 March 2011, that court set aside the magistrate’s order and issued an order directing the appellants to vacate the property by 20 May 2011. With leave of the Land Claims Court, the appellants then appealed to the Supreme Court of Appeal. In seeking to evade eviction the appellants contended that they are entitled to remain on the property by virtue of the mother of the first and third appellants, who is an occupier as envisaged by the Extension of Security of Tenure Act 62 of 1997, being entitled to exercise her right under s 6(2)(d) of the Act to have a family life in accordance with the culture of that family. The appellants alleged that the culture of their family was an issue which was family specific, that theirs was a caring family the members of whom supported and looked after each other and who had shared their home with each other. This it was submitted constituted their culture as envisaged by s 6(2)(d) which, so it was argued, should be broadly interpreted and was in no way limited to considerations such as race, ethnicity, religion, language and community. The appellants conceded that they had placed no evidence relevant to these latter factors before court and that, should it be held that culture was not a matter of a family’s individual practice but a matter of association and practices pursued by a number of persons as part of a community, they had not made out a case to avoid eviction. The Supreme Court of Appeal, with reference to the judgment of the Constitutional Court in MEC for Education, KwaZulu-Natal & others v Pillay 2008 (1) SA 474 (CC) concluded that ‘culture’ as envisaged by the section was an inherently associative practice pursued as individuals as part of a community. As the appellants had not failed to establish that in terms of an associative culture their family would have resided together in a manner in which they lived, the appeal had to fail. The appeal was therefore dismissed. ---ends---

3903

non-electoral

2022

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Reportable Case no: 855/2021 In the matter between: MOBILE TELEPHONE NETWORKS (PTY) LTD APPELLANT and THE COMMISSIONER FOR THE SOUTH AFRICAN REVENUE SERVICE RESPONDENT Neutral citation: Mobile Telephone Networks (Pty) Ltd v Commissioner for the South African Revenue Service (805/2021) [2022] ZASCA 142 (24 October 2022) Coram: DAMBUZA ADP, MAKGOKA and GORVEN JJA and WEINER and SALIE-HLOPHE AJJA Heard: 9 September 2022 Delivered: 24 October 2022 Summary: Tax law – Value-Added Tax Act 89 of 1991 – declaratory order – under which of ss 10(18) or 10(19) pre-paid vouchers fall – fact specific test – narrow basis for declaration of rights in tax matters – clear, uncontested facts necessary – no basis for declaration of rights. __________________________________________________________________ ORDER ______________________________________________________________________________ On appeal from: Gauteng Division of the High Court, Pretoria (Hughes J, sitting as court of first instance): The appeal is dismissed with costs, including those of two counsel where used. __________________________________________________________________ JUDGMENT __________________________________________________________________ Gorven JA (Dambuza ADP, Makgoka JA and Weiner and Salie-Hlophe AJJA concurring) [1] This appeal concerns the sale of certain vouchers by the appellant, Mobile Telephone Networks (Pty) Ltd (MTN). The respondent is the Commissioner for the South African Revenue Service (SARS).1 MTN provides a range of services to customers. As part of its offering, MTN sells what it refers to in the papers as ‘pre- paid multi-purpose vouchers’ (the pre-paid vouchers). Historically, the sale of the pre-paid vouchers was dealt with by MTN as falling under s 10(19) of the Value- Added Tax Act 89 of 1991 (the Act). On 15 November 2017, MTN sought a private binding ruling from SARS under s 41B of the Act, to the effect that the sale of the pre-paid vouchers could thenceforth be dealt with as falling under s 10(18) of the Act. 1 For the sake of convenience, I shall refer to the respondent as SARS despite the Commissioner of SARS being the party. The rulings mentioned hereunder are issued by the Commissioner but SARS as an entity gives effect to the rulings. I am mindful of the distinction between the Commissioner and SARS but this distinction is not material in this matter. [2] On 4 April 2019, after an extensive exchange of correspondence, SARS issued a private binding ruling to the effect that s 10(19), and not s 10(18), of the Act applied. Aggrieved by the ruling, MTN approached the Gauteng Division of the High Court, Pretoria, (the high court) for the following relief: ‘1. Declaring that the supply by the Applicant of pre-paid tokens or vouchers for a consideration denominated in Rand, entitling the holder to receive available services and products on the MTN mobile network, as selected by the holder, to the extent of the monetary value stated on or attributed to the tokens or vouchers (multi-purpose vouchers), constitutes a supply as envisaged in section 10(18) of the [Act]. 2. Declaring, accordingly, that the supply of such token or voucher is disregarded for the purposes of the [Act], except to the extent (if any) that the consideration for the multi-purpose voucher exceeds the monetary value stated thereon. 3. To the extent necessary declaring to be incorrect and/or setting aside the ruling issued by the Respondent on 4 April 2019, to the effect that the pre-paid vouchers fall within the ambit of section 10(19) of the [Act] and that value-added tax must accordingly be accounted for by the Applicant when the voucher is sold to the subscriber. 4. Directing the Respondent to pay the costs of this application.’ The high court, per Hughes J, entertained the application for declaratory relief but dismissed the application with costs. It is against that order that MTN appeals, with her leave. [3] The legislative backdrop to the matter frames the dispute. Section 7(1) of the Act levies a tax on ‘the supply by any vendor of goods or services supplied by him’. And ss 10(18) and (19) provide: ‘(18) Where a right to receive goods or services to the extent of a monetary value stated on any token, voucher or stamp (other than a postage stamp as defined in section 1 of the Postal Services Act, 1998, and any token, voucher or stamp contemplated in subsection (19)) is granted for a consideration in money, the supply of such token, voucher or stamp is disregarded for the purposes of this Act, except to the extent (if any) that such consideration exceeds such monetary value. (19) Where any token, voucher or stamp (other than a postage stamp as defined in section 1 of the Postal Services Act, 1998) is issued for a consideration in money and the holder thereof is entitled on the surrender thereof to receive goods or services specified on such token, voucher or stamp or which by usage or arrangement entitles the holder to specified goods or services, without any further charge, the value of the supply of the goods or services made upon the surrender of such token, voucher or stamp is regarded as nil.’ The former attracts VAT only at the time a voucher is used to procure goods or services rather than at the time the voucher is supplied. In the latter instance, VAT is levied on the sale of a voucher but no further VAT is levied when the voucher is ‘surrendered’. [4] MTN submitted that two types of vouchers supplied by it fall under the different sections concerned. The first type specifies the goods which can be obtained by using the voucher. An example given was a data voucher. What is purchased is the right to use the volume of data purchased. It cannot be used to access anything else. This type of voucher falls under s 10(19). The second type is the pre- paid vouchers. These have a rand value and can be used to access a wide range of services offered by MTN. They are not limited to specific services such as data. These are, MTN said, ‘typically referred to as “airtime” vouchers’.2 These, it contended, fall under s 10(18). [5] MTN analysed the key difference between the two provisions.3 Under s 10(18), the voucher specifies the value of goods or services that may be selected rather than specifying the goods or services which the voucher may be used to acquire from the vendor. Under s 10(19), the particular goods or services to which 2 Their emphasis. 3 SARS used slightly different wording but agreed on the distinction. the holder is entitled are specified rather than their value. SARS submitted that the enquiry was therefore whether: a) Airtime (the voucher) itself constitutes ‘goods’, alternatively whether what can be exchanged for the voucher constitutes ‘goods or services’ that are specified by usage or arrangement; or b) Airtime simply means the voucher itself, which is a form of currency that can be exchanged for an unspecified number of goods and services, akin to a gift voucher. SARS contended that the pre-paid vouchers fall under the first of these and MTN that they fall under the second. This is where the lines were drawn in the litigation. [6] In essence, this appeal relates to two main issues. The first is whether seeking a declaratory order was appropriate in the circumstances. The second is whether, if so, the ruling of SARS was incorrect. [7] As to the first issue, SARS submitted that the procedure utilised by MTN was impermissible. There were three bases to that contention. It amounted either to a review, an appeal, or an objection to the ruling, none of which are competent. [8] Prayer 3, which followed the declarations requested in prayers 1 and 2, sought to set aside the ruling. In general terms, decisions of functionaries may only be set aside on an application for the decision to be reviewed. SARS submitted that no review application was brought. In any event, no review could lie against the ruling because the definition of administrative action in s 1 of the Promotion of Administrative Justice Act 3 of 2000 (PAJA) requires the action in question to have a direct, external and final effect.4 In the present matter, the ruling would only have an effect once it was applied to an assessment. As such, it did not fall within the definition of administrative action and could not be reviewed under PAJA. [9] MTN conceded that the ruling did not amount to administrative action as defined in PAJA and was not reviewable. It submitted, however, that, if the declarators were granted and the ruling was not set aside, it would remain intact. But such a ruling binds only SARS.5 SARS can withdraw it at any time unless the withdrawal were to prejudice MTN. That would not be the case in this matter where the ruling was against the interpretation contended for by MTN. In any event, SARS submitted that the ruling would be withdrawn if it was contrary to declarations made by a court. MTN accepted this to be the case and, as a result, conceded that it was not entitled to the relief sought in prayer 3. [10] As regards the application amounting to an impermissible appeal, SARS contended that the ruling was not appealable, whether to the Tax Court or the High Court. Section 32(1) of the Act specifies those decisions of SARS which are susceptible of objection or appeal. Rulings under s 41B are not included. This much was also conceded by MTN. It submitted, however, that the application did not amount to an appeal. 4 The relevant parts of the definition of administrative action are: ‘. . . any decision taken, or any failure to take a decision, by- (a) an organ of state, when- (i) exercising a power in terms of the Constitution or a provincial constitution; or (ii) exercising a public power or performing a public function in terms of any legislation; or (b) a natural or juristic person, other than an organ of state, when exercising a public power or performing a public function in terms of an empowering provision, which adversely affects the rights of any person and which has a direct, external legal effect . . .’. 5 Section 82(1) of the Tax Administration Act 28 of 2011 (the TAA) which provides: ‘If an “advance ruling” applies to a person in accordance with section 83, then SARS must interpret or apply the applicable tax Act to the person in accordance with the ruling.’ [11] That leaves the question of an objection. SARS submitted that there are no provisions in the Act in terms of which to object to such a ruling. This is correct. In terms of s 83(1) of the Tax Administration Act 28 of 2011 (the TAA), the ruling only ‘applies’ to a taxpayer when it is put into effect. Once again, the ruling would be applied by SARS once a return had been submitted. Only at that point could an objection be lodged. [12] SARS drew attention to the special machinery created by the TAA for such disputes between SARS and taxpayers. It submitted that the appropriate course to be adopted by MTN was to utilise that machinery. It should submit a return which treats the supply of the pre-paid vouchers as falling under s 10(18). SARS would presumably reject such a return and issue an assessment based on the pre-paid vouchers falling under s 10(19). MTN would then be entitled to object to the assessment. If the objection was turned down, MTN could approach the Tax Court, which is a specialist court, and lead full evidence in support of its contention. If unsuccessful before the Tax Court, an appeal might thereafter lie to the full bench of the relevant High Court or to this Court.6 [13] MTN conceded that this procedure was available to it. However, it submitted that the application was not one which, in effect, objected to the ruling but was a 6 10 Lawsa 3 ed para 488 explains: ‘An appeal from the tax court lies to the full bench of the provincial division of the High Court having jurisdiction in the area where the tax court sat, or in two circumstances to the Supreme Court of Appeal. Those circumstances are where the court was initially composed of three judges and where the president of the tax court grants leave for a direct appeal.’ As authority for an appeal lying to the full bench rather than the full court, the learned author says, in footnote 18: ‘The language of s 133(2) has not been amended to take account of the Superior Courts Act 10 of 2013. As a result it is unclear whether an appeal from a tax court may lie to the full bench of a division sitting at a local seat of that division. It is submitted that it can in the light of s 6(4)(a) of the latter Act.’ legitimate approach to the high court for a declaration of rights. In this regard, it placed reliance on the matter of Commissioner for the South African Revenue Service v Langholm Farms (Pty) Ltd.7 In that matter, Langholm Farms had submitted a claim for diesel rebates. This triggered an audit by SARS. Following the audit, SARS indicated that it would issue a revised assessment disallowing the claim on grounds relating to the interpretation of s 75(1C)(a)(iii) of the Customs and Excise Act 91 of 1964. Langholm Farms approached the high court and succeeded in obtaining declaratory relief. On appeal, this Court set aside the declaratory order. [14] In dealing with an argument that the procedure of applying for declaratory relief was not competent, this Court held: ‘SARS made it clear that refunds may only be claimed on fuel that was delivered, stored and dispensed from storage facilities on the premises of Langholm. In so doing SARS expressed a clear view as to the proper construction of s 75(1C)(a)(iii). Langholm disagreed and responded with the application, in an effort to resolve this dispute. It is true that Langholm could have waited and provided SARS with the documents it required for a revised assessment, and then challenged such an assessment, and argued the point of law at that stage. The issue is whether it was obliged to do so. In my view there was nothing objectionable in Langholm seeking clarity on an issue of statutory interpretation that would clearly influence the outcome of SARS’ audit. If the court accepted Langholm’s view of the proper interpretation of s 75(1C)(a)(iii) of the Act, SARS would have had to return to the audit and re-assess its position in the light of any further information and debate with Langholm. There was little point in Langholm entering into a debate or providing further information when none of it would be at all relevant given SARS’ legal view. That is exactly the situation for which declaratory orders are made and seeking one in the context of a taxing statute was endorsed by the Constitutional Court in Metcash.’8 7 Commissioner for the South African Revenue Service v Langholm Farms (Pty) Ltd [2019] ZASCA 163. 8 Ibid para 10. The reference is to Metcash Trading Limited v Commissioner South African Revenue Services and Another [2000] ZACC 21; 2001 (1) SA 1109 (CC) para 44. [15] SARS conceded that declaratory relief is competent in tax matters. Its contention, however, was the ambit for the grant of declaratory relief in such matters is narrow. It submitted that the present matter did not meet the required criteria. It is not necessary to decide whether the application amounted to an impermissible objection. This part of the appeal must turn on whether MTN made out a case for the high court to entertain the application for declaratory relief. [16] It is correct that courts have jurisdiction to grant a declaration of rights in tax matters as was done in Langholm Farms. Metcash also made this clear: ‘But that does not mean that a court is prohibited from hearing an application for interlocutory relief in the face of a pending VAT appeal, or from granting other appropriate relief. Nor does it mean that the jurisdiction is theoretically extant but actually illusory. A court would certainly have jurisdiction to grant declaratory relief to such a vendor if, for instance, it were to be alleged that the Commissioner had erred in law in regarding the applicant as a vendor; or had misapplied the law in holding a particular transaction to be liable to VAT; or had acted capriciously or in bad faith; or had failed to apply the proper legal test to any particular set of facts.’9 In Metcash, Kriegler J referred with approval to the following dictum of McCreath J in Friedman and Others NNO v Commissioner for Inland Revenue: In re Phillip Frame Will Trust v Commissioner for Inland Revenue:10 ‘I am in agreement with the finding of the Court in that case that where the dispute involved no question of fact and is simply one of law the Commissioner and the Special Court are not the only competent authorities to decide the issue - at any rate when a declaratory order such as that in the present case is being sought.’ 9 Metcash para 71. 10 Friedman and Others NNO v Commissioner for Inland Revenue: In re Phillip Frame Will Trust v Commissioner for Inland Revenue 1991 (2) SA 340 (W) at 341I-J. The judgment of McCreath J was confirmed by this Court in Commissioner for Inland Revenue v Friedman and Others NNO [1992] ZASCA 190; 1993 (1) SA 353 (A); [1993] 1 All SA 306 (A). It dealt with the merits of the declaration granted by him without discussion of the point at issue here. [17] It is worth reviewing matters when the courts have exercised their jurisdiction to entertain applications for declaratory orders in tax matters. The facts in Langholm Farms11 were clear and uncontested. A discrete legal issue had arisen for decision. No further factual information was necessary to resolve that legal issue. The dispute was therefore ripe for a declaration of rights. In Friedman and Others NNO,12 the high court was asked to determine the legal question whether a testamentary trust was a person as defined in the Income Tax Act. There was once more an undisputed factual situation on which the court was asked to pronounce. In Chancellor, Masters and Scholars of the University of Oxford v Commissioner for Inland Revenue,13 the respondent did not dispute the facts put up by the appellant or provide any additional material facts.14 The matter turned on whether the appellant was liable to pay income tax on income derived from the activities of its publishing branch. In Commissioner for Inland Revenue v Shell Southern Africa Pension Fund,15 no affidavits were filed by SARS in answer to the application for a declaration. There was no factual dispute or lack of clarity. The issue was whether payment of a lump sum to a dependant of a member of the pension fund at the discretion of the fund’s committee constituted gross income or remuneration. And, finally, in the matter of Shell’s Annandale Farm (Pty) Ltd v Commissioner, South African Revenue Service,16 the question was whether Shell was liable for payment of VAT on compensation received for expropriation. SARS was content to argue on the facts put up by the applicant. 11 Footnote 6. 12 Footnote 9. 13 Chancellor, Masters and Scholars of the University of Oxford v Commissioner for Inland Revenue [1995] ZASCA 157; 1996 (1) SA 1196 (SCA); [1996] 1 All SA 287 (A). 14 University of Oxford at 1202C-E. 15 Commissioner for Inland Revenue v Shell Southern Africa Pension Fund 1984 (1) SA 672 (A). 16 Shell’s Annandale Farm (Pty) Ltd v Commissioner, South African Revenue Service 2000 (3) SA 564 (C). [18] The matters referred to above show that proceedings for declaratory relief in tax matters are entertained only in limited circumstances. All of them dealt with applications where there were clear and uncontested facts. That is the bare minimum requirement for a court to entertain declaratory relief. Even where that is the case, there are circumstances where a court will nevertheless decline to exercise its discretion to grant a declaratory order. This was explained by Van Dijkhorst J in Family Benefit Friendly Society v Commissioner for Inland Revenue and Another:17 ‘When a Court has to determine whether it should exercise its discretion in favour of a declaratory order considerations of public policy come into play. In matters like the present it is a weighty consideration that the Commissioner for Inland Revenue is placed in an invidious position. He is requested for a ruling, which he is not obliged to give. He gives an opinion ex gratia. Should it be favourable the taxpayer accepts it. Should it not be in his favour and the taxpayer is free to approach the Court to hear the dispute, then there is a danger that the Courts may be flooded with cases wherein entrepreneurs seek certainty about their tax liability before embarking on new ventures or schemes. The Commissioner would be in an invidious position if he is forced to defend every tentative opinion he expresses in a Court of law.’ In other words, there are considerations other than the question concerning clear and uncontested facts which weigh with courts. A primary concern is the opening of the floodgates for applications to court where certainty is sought from the court prior to applying a new strategy. [19] In the present matter, the first question is whether there is a clear, uncontested, sufficient, set of facts. The distinction between s 10(18) and s 10(19) of the Act is clear. The latter applies where the goods or services to which the holder of the voucher is entitled are specified on the voucher or, where not specified, where usage or arrangement entitles the holder to such specified goods or services. On the other 17 Family Benefit Friendly Society v Commissioner for Inland Revenue and Another 1995 (4) SA 120 (T) at 126C. hand, s 10(18) applies where there is no specification of goods or services, either by indication on the voucher, or by usage or arrangement. The factual enquiry is whether the pre-paid vouchers fall into one category or the other. Without that enquiry rendering a clear answer, the grant of declaratory relief would not be warranted. [20] SARS submitted that the factual position was far from clear. It said that MTN dealt with the application largely in the abstract. It had not put up sufficient or clear facts to allow the court to finally determine the entitlement of MTN to apply s 10(18) rather than s 10(19). In particular, the facts were not clear as to precisely how the pre-paid vouchers functioned. MTN had provided no evidence of ‘how vouchers are purchased, what information is provided to customers, and the manner in which vouchers are actually used by customers’. In addition, the concept of ‘airtime’ has evolved over time due to technology and the use of data and the like. In the result SARS submitted that, on the facts presented, it was not clear what ‘airtime’ actually connoted. Therefore the matter did not fall within the narrow purview of when a declaratory order would be entertained in tax matters. [21] MTN submitted that the facts were common cause. It might be so that certain explanations were accepted by SARS. However, the sticking point was the nature of what MTN termed ‘airtime’. The assertion of MTN was that airtime was not something in and of itself – it should be construed as a right to the supply of services. It explained that the pre-paid vouchers are purchased for a rand value. When activated, the subscriber: ‘. . . can access any services on the network, up to the value of the voucher. As the selected services are used or acquired, they are charged to the subscriber at the then prevailing tariff, and paid for through allocation or redemption of the available pre-paid funds attributable to the subscriber . . . The pre-paid amount is effectively currency from which the subscriber pays for the services selected from time to time.’ In support of that contention, MTN explained its administrative approach to the pre- paid vouchers. When such a voucher is activated, MTN ‘credits a sum of money equal to the face value of the voucher to a ledger account linked to the relevant SIM card . . .’. This was referred to by MTN as the subscriber’s ‘main wallet’. When the subscriber accesses a service on the network, MTN debits the cost of that service from the balance in the ‘main wallet’. [22] MTN sought to compare the pre-paid vouchers to retail vouchers issued by a shop or shopping centre. Retail vouchers are issued for a value and allow the purchase of any goods stocked at the shop or centre up to that value. They effectively function as currency when presented for the purchase of the selected item. So, too, submitted MTN, the pre-paid vouchers. They are issued for a value. The holder can redeem them for any services offered by MTN up to that value. [23] SARS submitted that this, and further explanations of MTN, were far from clear. It referred as an example to the terms and conditions governing the pre-paid vouchers. These stated: ‘“Airtime” means the prepaid value which when loaded onto your mobile device enables you to make or receive calls and/or send or receive SMSs and/or allows you to utilise internet services, or content services on the MTN network.’ SARS also pointed to the document put up by MTN to explain what was meant by Digital Services: ‘Digital services consist of content subscription services that allow MTN subscribers to subscribe to and consume Digital services like Gaming, Music, Video, Text based notification services etc in exchange for a daily/weekly/monthly/once off fee settled via airtime payment.’ [24] These explanations, it said, appear to support the notion that airtime is a commodity, contrary to what MTN claimed. Airtime is what is acquired by way of the pre-paid vouchers. It can then be utilised to obtain the other services offered by MTN. Hence the word ‘settled via airtime payment.’ There was, accordingly, no clear explanation of what is meant by airtime or how it functions. It seems to me that the submission of SARS concerning this lack of clarity has considerable merit. [25] SARS contended that there was a further less than clear aspect. MTN offers an extensive range of ‘services on the network’ to holders of the pre-paid vouchers. MTN submitted that the services offered were constantly expanding. In addition, it said that when a particular service was accessed, the subscriber cannot expect the cost to be the same as when the airtime voucher was purchased. When these were accessed, the current ruling cost would be deducted from the subscriber’s airtime balance. As a result, the services were not specified and did not fall under s 10(19). [26] But MTN put up some nine pages listing the services offered by it. SARS submitted that this tended to show that the pre-paid vouchers fell within s 10(19). This was because, even though those services were not specified on the pre-paid vouchers, the vouchers entitled them ‘to receive goods or services . . . which by usage or arrangement [entitled] the holder to specified goods or services’. In the result, SARS submitted that it was not clear that the services to which holders of the pre-paid vouchers were entitled were not specified by usage or arrangement. If they were so specified, the pre-paid vouchers would fall under s 10(19). [27] Considerable difficulty was experienced during argument in obtaining clarity on the nature of airtime as used by MTN and how the pre-paid vouchers function in practice. This also applied to the question of whether the services offered were specified by usage or arrangement. It seems to me that, at best, the factual position as to both of these aspects is distinctly opaque. This is not a matter where there is a set of clear, sufficient, uncontested, facts. The present matter therefore differs markedly from those mentioned above where our courts have entertained applications for declaratory orders in tax matters. In that regard, the high court erred when it held that ‘no . . . further facts or information would alter the respondent’s legal view’ and that ‘the applicant’s declaratory application is properly before this court’. [28] In any event, even if the facts were clear and uncontested, it is doubtful whether this matter warranted the exercise of the discretion of the high court to entertain the grant of declaratory relief. It was a classic case of MTN wishing to obtain clarity from the high court on whether it could depart from its prior practice of treating the pre-paid vouchers as falling under s 10(19) and apply a new approach of treating them as falling under s 10(18). It seems to me that the nature of the dispute lent itself more properly to resolution by use of the special machinery of the TAA set up for that purpose. To hold otherwise might well result in a deluge of similar applications. [29] For these reasons, I consider that the application for declaratory relief was not appropriate in this matter. That being the case, the second issue in the appeal as to whether the ruling was correct or not need not, indeed cannot, be decided. This all means that, although the high court incorrectly entertained declaratory relief, it was correct in dismissing the application. The appeal must therefore fail. Both parties agreed that the costs should follow the result. The use of two counsel was warranted. [30] In the result, the appeal is dismissed with costs, including those of two counsel where used. ____________________ T R GORVEN JUDGE OF APPEAL Appearances For appellant: M W Janisch SC Instructed by: Werksmans Attorneys, Sandton Symington De Kok Attorneys, Bloemfontein For respondent: A R Sholto-Douglas SC (with him S Dzakwa) Instructed by: State Attorney, Cape Town State Attorney, Bloemfontein

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 24 October 2022 Status: Immediate Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal. Mobile Telephone Networks (Pty) Ltd v Commissioner for the South African Revenue Service Today the Supreme Court of Appeal dismissed an appeal from the Gauteng Division of the High Court, Pretoria (per Hughes J). Mobile Telephone Networks (Pty) Ltd (MTN) offers two kinds of vouchers: vouchers for goods such as data, which can be used exclusively on data; and vouchers for a specified amount in Rands which can be used to access a range of services on the MTN network (the pre-paid vouchers). It sought a private binding ruling from the Commissioner for the South African Revenue Service that the pre-paid vouchers fell under the provisions of s 10(18) of the Value-Added Tax Act rather than s 10(19) which had previously been applied. Section 10(18) in essence attracts VAT at the time the voucher is used by the customer to obtain services rather than on its initial sale to the customer. The Commissioner’s ruling was adverse to MTN, to the effect that s 10(19) applied. MTN then approached the high court for declaratory orders to the effect that the pre-paid vouchers fell under s 10(18). The high court entertained the application for declaratory relief but refused the application on its merits. On appeal, the Supreme Court of Appeal held that declaratory orders in tax matters were competent. However, they were entertained in limited cases. Having reviewed a number of matters where they had been entertained, the bare minimum requirement was that the facts in the matter must be clear, sufficient, and uncontested. The Supreme Court of Appeal held that the facts in the present matter did not meet these criteria and, as a result, it was not appropriate to entertain the application for declaratory relief. That being the case, the merits could not be considered and the application was correctly dismissed by the high court, albeit for different reasons. As a consequence the Supreme Court of Appeal refused the appeal with costs.

2267

non-electoral

2009

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA JUDGMENT Case no: 204 / 08 ANDRIES PETRUS DU PLESSIS Appellant and RICHARD PROPHITIUS First Respondent ANNA MARGARETHA PROPHITIUS Second Respondent ___________________________________________________________________ Neutral citation: Du Plessis v Prophitius and Another (204/08) [2009] ZASCA 79 (3 June 2009) CORAM: NAVSA, VAN HEERDEN, PONNAN, SNYDERS JJA and KROON AJA HEARD: 22 MAY 2009 DELIVERED: 3 JUNE 2009 SUMMARY: Immovable property – transfer of ownership – validity of. ___________________________________________________________________ ___________________________________________________________________ ORDER ___________________________________________________________________ On appeal from: The High Court (Durban) (Nicholson J sitting as court of first instance). The appeal is dismissed with costs. ___________________________________________________________________ JUDGMENT ___________________________________________________________________ PONNAN JA (NAVSA, VAN HEERDEN, SNYDERS JJA and KROON AJA concurring): [1] The real point in issue in this appeal is the ownership of an undeveloped stand situated on the south coast of KwaZulu-Natal, more fully described as Erf 757, Palm Beach, Registration Division ET, in extent 1374 square metres (the property). The facts are not in dispute. A useful starting point is the history of the property. [2] On 31 March 1989, Robert and Betsy Campbell (the trustees), acquired the property in their capacity as trustees on behalf of the Campbell Children's Trust (the trust). On 22 January 2004, a written agreement of purchase and sale was concluded between the Trust and Whitkel Properties CC (Whitkel)1 in respect of the property for the sum of R45 000. [3] On 3 June 2004, the original deed of transfer (TE7413/89) in respect of the property was furnished by the trust to the conveyancing attorney who had been appointed in terms of the agreement to effect transfer of the property to Whitkel. 1 Cited as the 3rd Respondent in the court below but who took no part in the proceedings. During September 2004, a meeting of the trustees resolved to sell the property to Whitkel for the sum of R45 000 and authorised Robert Campbell (Campbell), in his capacity as trustee, to sign such documents as may have been necessary for the registration of the transfer into the name of Whitkel. On 9 September 2004, Campbell duly signed the power of attorney on behalf of the trust to cause transfer of the property to pass to Whitkel. [4] On 28 October 2004, Richard and Anna Margaretha Prophitius (the respondents), made a written offer to purchase the property for the sum of R195 000. The offer was accepted by the trustees on behalf of the trust two days later. As the trust claimed to have lost the original title deed, an application was made to the Registrar of Deeds, Pietermaritzburg2 in terms of Regulation 68 of the Regulations made in terms of s 10 of the Deeds Registries Act 47 of 1937 for the issue of a copy of the title deed. In his affidavit in support of that application, Campbell stated that the title deed '... has been lost or destroyed and notwithstanding diligent and extensive search cannot be found. The circumstances of the loss is unknown to me.' That allegation, to the knowledge of Campbell, was false. [5] In compliance with the Regulation, an advertisement was placed in the South Coast Herald on 3 December 2004 informing all interested persons of the trust's intention to apply for the issue of a certified copy of the title deed of the property ‘which has been lost or destroyed’. The Registrar of Deeds allowed transfer of the property to proceed without the original title deed and after due compliance with all of 2 The 5th respondent in the court below who took no part in the proceedings. the other formalities, the property was transferred to and registered in the names of the respondents by the Registrar of Deeds on 15 February 2005. [6] On 15 February 2005 and after the payment of disbursements, the balance of the purchase price due to the trust (R176 921.81) was transferred into its bank account by the conveyancing attorney. [7] In the meanwhile, on 26 December 2004, Whitkel concluded a written agreement of purchase and sale in respect of the property with the appellant, Andries du Plessis, for the price of R165 000. On 5 May 2005, there was a simultaneous transfer of the property from the trust to Whitkel and in turn from Whitkel to the appellant, and the balance of the purchase price (R39 423.97) was paid to the trust. During August 2005, concerned at not having received any rates accounts from the local authority in respect of the property, the respondents caused enquiries to be made through their attorney with, inter alia, the Registrar of Deeds. In response the Registrar of Deeds wrote: 'According to the records of this Office [the property] is registered in two different names as owners and held by two different Deed of Transfers, namely No. T20531/2005 and No. T6506/2005 respectively. The above registrations have resulted in a double registration. [The property] cannot be dealt with by any of these two owners until the High Court Order has been made regarding the rightful owner of the property.' [8] An exchange of correspondence between the appellant and the respondents in an endeavour to resolve the matter amicably proved fruitless. Impasse having been reached, the order alluded to in the letter of the Registrar of Deeds was sought by the respondents in the Durban High Court. That application was opposed by the appellant, who moreover launched a counter-application. Each party sought, in addition to the usual orders relating to costs, an order that: (a) they be declared to be the rightful owner of the property; (b) the transfer of the property to the other party be set aside; (c) the Registrar of Deeds be directed to amend the records in the Deeds Registry to give effect to the preceding orders. [9] Before Nicholson J the application succeeded and the counter-application failed. With the leave of the learned judge, the matter now serves before this Court on appeal. [10] In Legator McKenna Inc v Shea (143/2008) [2008] ZASCA 144 (27 November 2008) this court held that ‘the time has come for [it] to add its stamp of approval to the viewpoint that the abstract theory of transfer applies to immovable property as well’ (para 21). Brand JA, writing for a unanimous court stated (para 22): ’In accordance with the abstract theory the requirements for the passing of ownership are twofold, namely delivery – which in the case of immovable property, is effected by registration of transfer in the Deeds Office – coupled with a so-called real agreement or 'saaklike ooreenkoms'. The essential elements of the real agreement are an intention on the part of the transferor to transfer ownership and the intention of the transferee to become the owner of the property (see eg Air-Kel (Edms) Bpk h/a Merkel Motors v Bodenstein 1980 (3) SA 917 (A) at 922E-F; Dreyer and Another NO v AXZS Industries (Pty) Ltd [2006 (5) SA 548 (SCA)] para 17). Broadly stated, the principles applicable to agreements in general also apply to real agreements. Although the abstract theory does not require a valid underlying contract, eg sale, ownership will not pass – despite registration of transfer – if there is a defect in the real agreement (see eg Preller v Jordaan 1956 (1) SA 483 (A) 496; Klerck NO v Van Zyl and Maritz NNO [1989 (4) SA 263 (SE) at] 274A-B; Silberberg and Schoeman [The Law of Property 5ed (by Badenhorst, Pienaar and Mostert)] 79-80). [11] As I understood the argument on behalf of the appellant, it was contended that the trust as transferor had no intention to transfer ownership to the respondents. It is so that at the moment of passing of ownership the transferor must have the intention of transferring ownership (animus transferendi domini), which supplies the subjective element for the passing of ownership. Instead, so the contention goes, the trust was indifferent as to whether or not transfer eventuated. I cannot agree. In my view all the facts point firmly to an intention on the part of the trust to successfully cause transfer of the property to be registered into the names of the respondents. Thus, on 10 January 2005, the trust adopted a resolution authorising transfer to the respondents. To that end, Campbell was mandated to sign all such documents as may have been necessary. Pursuant to that resolution, during the succeeding week, Campbell signed an ‘affidavit by transferor’, a ‘certificate in respect of a transfer from a trust’ and a ‘power of attorney to transfer’ the property to the respondents. Those in my view were not the hallmarks of indifference, but rather positive acts with a single ultimate goal in mind – namely the transfer of the property into the names of the respondents for a price far in excess of that stipulated in the prior sale. [12] The second string to counsel’s bow was that the trust was motivated by a fraudulent intent. Assuming that to be so, that does not detract from the trust’s genuinely held intention to cause transfer of the property to be effected into the names of the respondents. If fraud was the motive, then the trust’s ultimate goal would have been the securing of payment of the higher purchase price offered by the respondents. That, in turn, was dependent upon the successful registration and transfer of the property into the names of the respondents. Were the property not to have been transferred, the fraudulent purpose would not have been achieved. It follows that the trust would in those circumstances have felt obliged to do all that was required of it with the requisite intention to ensure successful registration. That it ultimately did. [13] As to costs. The matter was devoid of any legal or factual complexity. There was thus no warrant for the employment of the services of two counsel by the respondents on appeal. Mr Kemp conceded as much. In those circumstances it would be wholly unjustified to mulct the appellant with those costs. The costs incurred by the respondents consequent upon the employment of two counsel accordingly falls to be disallowed. [14] In the result the appeal is dismissed with costs. _________________ V M PONNAN JUDGE OF APPEAL APPEARANCES: For Appellant: P M van Ryneveld Instructed by: Schürmann Joubert Attorneys Pretoria Symington and De Kok Bloemfontein For Respondent: K J Kemp SC S I Humphrey Instructed by: H P Steenkamp Attorneys Ballito McIntyre & Van Der Post Bloemfontein

SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL FROM The Registrar, Supreme Court of Appeal DATE STATUS Immediate Please note that the media summary is for the benefit of the media and does not form part of the judgment. Du Plessis v Prophitius and Another (204/08) [2009] ZASCA 79 (3 June2009) Media Statement Today the Supreme Court of Appeal ('SCA') dismissed an appeal by Andries du Plessis against a judgment of Nicholson J in the Durban High Court. Briefly stated, the facts giving rise to the litigation are: On 22 January 2004, Robert and Betsy Campbell, in their capacity as trustees on behalf of the Campbell Children's Trust, concluded a written purchase and sale agreement with Whitkel Properties CC in respect of a vacant stand situated on the south coast of Kwa-Zulu Natal for the purchase price of R45 000. Later that year they concluded a purchase and sale agreement with the unsuspecting respondents, Richard and Anna Prophitius, in respect of the same property for the sum of R195 000. During September 2004, Whitkel concluded a purchase and sale agreement in respect of the property with the appellant. On 15 February 2005, the property was transferred to and registered in the names of the respondents by the Registrar of Deeds, Pietermaritzburg. On 5 May 2005, there was a simultaneous transfer from the Trust to Whitkel and in turn from Whitkel to the appellant. As there was a dispute as to ownership of the property, the applicants approached the High Court for an order that they be declared the rightful owners of the property. The appellant opposed that application and counter-applied for the same relief. The respondents succeeded before Nicholson J. On appeal, it was contended on behalf of the appellants that the Trust had no intention to transfer ownership of the property to the respondents, but intended rather to defraud them. The SCA held that all the facts pointed firmly to an intention on the part of the Trust to successfully cause transfer of the property to be registered into the names of the respondents. As to the fraud - according to the SCA, if fraud was the motive, then the trust's ultimate goal would have been the securing of payment of the higher purchase price offered by the respondents. That in turn was dependent upon the successful registration and transfer of the property into the names of the respondents. Were the property not to have been transferred, the fraudulent purpose would not have been achieved. It followed that the trust must have held a genuine intention to pass ownership to the respondents. In those circumstances, the appeal had to fail. --- ends ---

3157

non-electoral

2007

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA JUDGMENT Case No: 100/06 REPORTABLE In the matter between MIDI TELEVISION (PTY) LTD Appellant and DIRECTOR OF PUBLIC PROSECUTIONS Respondent (WESTERN CAPE) Coram: HOWIE P, NUGENT, CLOETE, LEWIS JJA & SNYDERS AJA Heard: 19 MARCH 2007 Delivered: 18 MAY 2007 Summary: Restricting press freedom – prohibiting broadcast of documentary unless DPP permitted first to view it – whether constitutionally permitted. Neutral citation: This judgment may be referred to as Midi Television (Pty) Ltd v Director of Public Prosecutions [2007] SCA 56 (RSA) ____________________________________________________________ JUDGMENT ____________________________________________________________ NUGENT JA NUGENT JA: [1] On 15 June 2005 an awful crime was committed in Cape Town. Four men gained access to the home of Ms Norton, who was away at work at the time, snatched her six month old child from the arms of her domestic worker, and the child was deliberately stabbed to death. What had occurred immediately captured the attention of the public and received extensive media coverage, which continued as the police investigation progressed and suspects were arrested. (The trial of the suspects commenced subsequent to the commencement of these proceedings and was not completed at the time this appeal was heard.) [2] The appellant is a television broadcaster that broadcasts under the name ‘e-tv’ and I will refer to it by that name for convenience. Soon after the crime was committed e-tv decided to make a documentary relating to the events and their impact upon the child’s family for broadcast on a weekly current affairs programme. On 22 June 2005 it recorded interviews with various people, including Ms Norton’s brother and her domestic worker, who had witnessed what had occurred. A decision was taken not to broadcast the documentary before the police had made arrests. By 9 July 2005 four men and a woman had been arrested and charged and e-tv proceeded to schedule its broadcast. [3] It intended broadcasting the documentary on the night of Tuesday 2 August 2005. On Friday 29 July 2005 the Director of Public Prosecutions for the Western Cape (DPP) became aware that the documentary was to be broadcast. His representatives asked e-tv to allow them to view the documentary so as to satisfy themselves that the broadcast would not prejudice the forthcoming trial but e-tv refused. Discussions ensued, certain undertakings were offered to the DPP, but the impasse continued. On 2 August 2005 the DPP applied to the High Court at Cape Town as a matter of urgency for an order prohibiting the broadcast until he had been furnished with a copy of the documentary and had been afforded 24 hours to institute any further proceedings that he might consider to be necessary. E-tv agreed to suspend its broadcast pending the outcome of the application, thereby relieving the urgency, and answering and replying affidavits were filed. The matter came before Zondi AJ who granted the relief that was claimed.1 This appeal against that order is before us with his leave. [4] There is a preliminary matter that can be disposed of briefly. The DPP’s objection to the broadcast of the documentary has since been overtaken by events and he has withdrawn it. (As a result of the objection being withdrawn the documentary had been broadcast at the time this appeal was heard.) It was submitted on his behalf that this appeal will accordingly have no practical effect and should be dismissed on those grounds. Section 21A of the Supreme Court Act affords us a discretion to dismiss an appeal for that reason2 but I do not think this is a case in which we should do so. The case raises important questions of law on which there is little authority and they are bound to arise again. With the benefit we have had of full argument I think we should deal with those questions not only to resolve what was contentious between the parties but also for future guidance. [5] Freedom of expression, which includes freedom of the press and other media, is protected by s 16 of the Bill of Rights. That a free press (by which I mean the media in all its forms) is indispensable to democracy is axiomatic and has been articulated so often that nothing is served by adding to what has been said in that regard. Yet the constitutional promise of a 1 Reported as Director of Public Prosecutions (Western Cape) v Midi Television (Pty) Ltd t/a E TV 2006 (3) SA 92 (C). 2 Cf Coin Security Group (Pty) Ltd v SA National Union for Security Officers 2001 (2) SA 872 (SCA) para 8 and Land en Landbouontwikkelingsbank van Suid Afrika v Conradie 2005 (4) SA 506 (SCA). free press, like other constitutional promises, is not absolute. In issue in this appeal is the extent to which that protected freedom may be abridged in favour of preserving the integrity of the administration of justice. [6] It is important to bear in mind that the constitutional promise of a free press is not one that is made for the protection of the special interests of the press. As pointed out by Anthony Lewis, in a passage that was cited by Cameron J in Holomisa v Argus Newspapers Ltd:3 ‘Press exceptionalism – the idea that journalism has a different and superior status in the Constitution – is not only an unconvincing but a dangerous doctrine.’ The constitutional promise is made rather to serve the interest that all citizens have in the free flow of information, which is possible only if there is a free press. To abridge the freedom of the press is to abridge the rights of all citizens and not merely the rights of the press itself. [7] The extent to which the full enjoyment of a constitutionally protected right might be limited is circumscribed by the Constitution itself. Any such limitation is constitutionally permitted only if the limitation has its source in law of general application and only to the extent that the limitation is reasonable and justifiable in an open and democratic society based on human dignity, equality and freedom, taking into account, amongst others, the factors enumerated in s 36.4 [8] Law of general application that purports to curtail the full exercise of a constitutionally protected right might take the form of legislation, or a 3 1996 (2) SA 588 (W) at 610E. 4 36(1) The rights in the Bill of Rights may be limited only in terms of law of general application to the extent that the limitation is reasonable and justifiable in an open and democratic society based on human dignity, equality and freedom, taking into account all relevant factors, including – (a) the nature of the right; (b) the importance of the purpose of the limitation; (c) the nature and extent of the limitation; (d) the relation between the limitation and its purpose and (e) less restrictive means to achieve the purpose.’ rule of the common law, or even a provision of the Constitution itself. In each case the extent to which the intrusion that it purports to make upon a protected right is constitutionally valid is to be evaluated against the standard that is set by the provisions of s 36 because there are no other grounds upon which it is permissible to limit protected rights. [9] Where constitutional rights themselves have the potential to be mutually limiting – in that the full enjoyment of one necessarily curtails the full enjoyment of another and vice versa – a court must necessarily reconcile them. They cannot be reconciled by purporting to weigh the value of one right against the value of the other and then preferring the right that is considered to be more valued, and jettisoning the other, because all protected rights have equal value. They are rather to be reconciled by recognising a limitation upon the exercise of one right to the extent that it is necessary to do so in order to accommodate the exercise of the other (or in some cases, by recognising an appropriate limitation upon the exercise of both rights) according to what is required by the particular circumstances and within the constraints that are imposed by s 36. That they are to be reconciled within the constraints of s 36 is apparent from the following observation of Langa DCJ in Islamic Unity Convention v Independent Broadcasting Authority:5 ‘There is thus recognition of the potential that [freedom of] expression has to impair the exercise and enjoyment of other important rights, such as the right to dignity, as well as other State interests, such as the pursuit of national unity and reconciliation. The right is accordingly not absolute; it is, like other rights, subject to limitation under s 36(1) of the Constitution.’ [10] The proper enquiry when evaluating the extent to which protected rights might be limited by a statute (which must apply equally when 5 2002 (4) SA 294 (CC) para 30. See, too, Moseneke DCJ in South African Broadcasting Corporation Ltd v National Director of Public Prosecutions 2007 (1) SA 512 (CC) para 96 to similar effect, but cf Langa CJ et al para 42. protected rights are to be reconciled) was summarised by O’Regan J and Cameron AJ, in a passage from their dissenting judgment in S v Manamela6 that received the approval of the majority,7 as follows: ‘The approach to limitation is, therefore, to determine the proportionality between the extent of the limitation of the right considering the nature and importance of the infringed right, on the one hand, and the purpose, importance and effect of the infringing provision, taking into account the availability of less restrictive means available to achieve that purpose.’ [11] In determining the extent to which the full exercise of one right or the other or both of them might need to be curtailed in order to reconcile them what needs to be compared with one another are the ‘extent of the limitation’ that is placed upon the particular right, on the one hand, and the ‘purpose, importance and effect of the intrusion’, on the other hand. To the extent that anything needs to be weighed in making that evaluation it is not the relative values of the rights themselves that are weighed (I have said that all protected rights have equal value) but it is rather the benefit that flows from allowing the intrusion that is to be weighed against the loss that the intrusion will entail. It is only if the particular loss is outweighed by the particular benefit, to an extent that meets the standard that is set by s 36, that the law will recognise the validity of the intrusion. [12] It is an established rule of the common law that the proper administration of justice may not be prejudiced or interfered with and that to do so constitutes the offence of contempt of court. That is now reinforced by the constitutional right of every person to have disputes resolved by a court in a fair hearing8 and by the constitutional protection that is afforded to a fair criminal trial.9 It is not contentious in all open and democratic societies – and it was not contentious before us – that the 6 S v Manamela (Director-General of Justice Intervening) 2000 (3) SA 1 (CC) para 66. 7 See the majority in paras 33 and 34. 8 Section 34. 9 Section 35(3). purpose that is served by those principles of law provides a proper basis for limiting the protection of press freedom, and the reason for that is self- evident. The integrity of the judicial process is an essential component of the rule of law. If the rule of law is itself eroded through compromising the integrity of the judicial process then all constitutional rights and freedoms – including the freedom of the press – are also compromised. [13] The exercise of press freedom has the potential to cause prejudice to the administration of justice in various ways – it is prejudicial to prejudge issues that are under judicial consideration, it is prejudicial if trials are conducted through the media, it is prejudicial to bring improper pressure to bear on witnesses or judicial officers – and it is not possible to describe exhaustively how prejudice might occur. What is more relevant in all cases where there is the potential for prejudice is to determine when the risk of prejudice will be sufficient to constitute an interference with the administration of justice that justifies a corresponding limitation being placed on press freedom. For the administration of justice does not take place in private, completely shielded from public scrutiny and comment, and there is always the potential for some element of prejudice when the media report or comment on judicial proceedings. What must be guarded against, as pointed out by McLachlin J in a concurring opinion in Dagenais v Canadian Broadcasting Corporation10 (I will return to that decision), is the ‘facile assumption that if there is any risk of prejudice to a fair trial, however speculative, [a ban on publication] should be ordered.’ [14] I do not think that guidance11 is to be had in that regard from decisions of the United States Supreme Court in cases like Near v Minnesota,12 and New York Times Co. v United States.13 The extensive 10 (1995) 25 CRR. (2d) 1 at 47. 11 Cf Mandela v Falati 1995 (1) SA 251 (W); Government of the Republic of South Africa v ‘Sunday Times’ Newspaper 1995 (2) SA 221 (T). 12 283 US 697. protection that is afforded to the press in that country is dictated by the text and the historical setting of the First Amendment, which is not consonant with our Constitution. As pointed out by Kriegler J in Mamabolo:14 ‘[O]ur Constitution ranks the right to freedom of expression differently [to the First Amendment]. With us it is not a pre-eminent freedom ranking above all others. It is not even an unqualified right. The First Amendment declaims a unequivocal and sweeping commandment; section 16(1), the corresponding provision in our Constitution, is wholly different in style and significantly different in content.’ [15] Nonetheless, even in jurisdictions that do not recognise the degree of protection that is afforded by the First Amendment, the test to be overcome before publication will be susceptible to prior restraint has always been considerable. In England, before the introduction of the Contempt of Court Act 1981, Lord Scarman said in Attorney-General v British Broadcasting Corporation15 that ‘[t]he prior restraint of publication, though occasionally necessary in serious cases, is a drastic interference with freedom of speech and should only be ordered where there is a substantial risk of grave injustice.’ Similarly in Attorney-General v Times Newspapers Ltd16 it was said that a ban on publication to protect the administration of justice would be allowed only if there was ‘a real risk [of prejudice], as opposed to a remote possibility’,17 or a risk of prejudice that was ‘serious or real or substantial’.18 In Canada, before the decision of the Supreme Court in Dagenais,19 a publication ban could be ordered only if a ‘real and substantial risk of interference with the right to a fair trial’ could be demonstrated.20 The Australian High Court held in Hinch and Macquire 13 403 US 713. 14 S v Mamabolo (E-tv, Business Day and the Freedom of Expression Institute intervening) 2001 (3) SA 409 (CC) para 41. 15 (1981) AC 303 (CA) at 362. 16 1974 AC 273 (HL). 17 Lord Reid at 299A. 18 Lord Morris of Borth-y-Gest at 303B-C. 19 Cited above. 20 Dagenais, above, at 27-28. Broadcasting Holdings Ltd v Attorney General for the State of Victoria21 that a publication constituted contempt only if there was a ‘substantial risk of serious interference with the trial’. [16] What is required by all those tests (implicitly, even if not always expressed) before a ban on publication will be considered is a demonstrable relationship between the publication and the prejudice that it might cause to the administration of justice, substantial prejudice if it occurs, and a real risk that the prejudice will occur. In my view nothing less is required in this country and to the extent that the pre-constitutional decisions of this court in Van Niekerk22 and Harber23 might suggest otherwise24 I do not think they are consistent with what is to be expected in contemporary democracies. But merely to ask whether there is indeed a risk of prejudice that meets those criteria does not end the enquiry. For as I indicated earlier, the limitation must not only be directed towards a permitted end, but must also be no more than is necessary to achieve its permitted purpose. [17] In England, where s 4 of the Contempt of Court Act 1981 permits a ban on publication only where it is ‘necessary’ for avoiding a substantial risk of prejudice to the administration of justice, the Court of Appeal in R v Sherwood, ex parte Telegraph Group25 expressed the proper approach to the enquiry as follows: ‘[Would a publication ban eliminate the risk?] If not, obviously there could be no necessity to impose such a ban…. On the other hand, even if the judge is satisfied that an order would achieve the objective, he or she would still have to consider whether the risk could satisfactorily be overcome by some less restrictive means. If so, it could not be said to be ‘necessary’ to take the more drastic approach…. Suppose that the judge concludes that there is indeed no other way of eliminating the perceived risk of 21 (1987) 164 CLR 15. 22 S v Van Niekerk 1972 (3) SA 711 (A) at 724H. 23 S v Harber 1988 (3) SA 396 (A) at 422H-I. 24 In both cases it was held that a publication is capable of sustaining a charge of contempt if it ‘tends’ to prejudice the administration of justice. 25 (2001) 1 WLR 1983 at 1991G-1992A. prejudice; it still does not follow necessarily that an order has to be made. The judge may still have to ask whether the degree of risk contemplated should be regarded as tolerable in the sense of being “the lesser of two evils”. It is at this stage that value judgments may have to be made as to the priority between “competing public interests”.’ [18] That approach replicates the material elements of the analysis that was adopted by the Supreme Court of Canada in Dagenais,26 which in my view also reflects what is required by s 36 of our Constitution. In that case the Chief Justice, writing for the majority, said the following: ‘The party seeking to justify the limitation of a right (in the case of a publication ban, the party seeking to limit freedom of expression) bears the burden of justifying the limitation. The party claiming under the common law rule that a publication ban is necessary to avoid a real and serious risk to the fairness of the trial is seeking to use the power of the state to achieve this objective. A party who uses the power of the state against others must bear the burden of proving that the use of state power is justified in a free and democratic society. Therefore, the party seeking the ban bears the burden of proving that the proposed ban is necessary, in that it relates to an important objective that cannot be achieved by a reasonably available and effective alternative measure, that the proposed ban is as limited (in scope, time, content, etc.) as possible, and there is a proportionality between the salutary and deleterious effects of the ban. At the same time, the fact that the party seeking the ban may be attempting to safeguard a constitutional right must be borne in mind when determining whether the proportionality test has been satisfied.’ [19] In summary, a publication will be unlawful, and thus susceptible to being prohibited, only if the prejudice that the publication might cause to the administration of justice is demonstrable and substantial and there is a real risk that the prejudice will occur if publication takes place. Mere conjecture or speculation that prejudice might occur will not be enough. Even then publication will not be unlawful unless a court is satisfied that the disadvantage of curtailing the free flow of information outweighs its 26 Cited above, at p 39. advantage. In making that evaluation it is not only the interests of those who are associated with the publication that need to be brought to account but, more important, the interests of every person in having access to information. Applying the ordinary principles that come into play when a final interdict is sought, if a risk of that kind is clearly established, and it cannot be prevented from occurring by other means, a ban on publication that is confined in scope and in content and in duration to what is necessary to avoid the risk might be considered. [20] Those principles would seem to me to be applicable whenever a court is asked to restrict the exercise of press freedom for the protection of the administration of justice, whether by a ban on publication or otherwise. They would also seem to me to apply, with appropriate adaptation, whenever the exercise of press freedom is sought to be restricted in protection of another right. And where a temporary interdict is sought, as pointed out by this court in Hix Networking Technologies,27 the ordinary rules, applied with those principles in mind, are also capable of ensuring that the freedom of the press is not unduly abridged. Where it is alleged, for example, that a publication is defamatory, but it has yet to be established that the defamation is unlawful, an award of damages is usually capable of vindicating the right to reputation if it is later found to have been infringed, and an anticipatory ban on publication will seldom be necessary for that purpose. Where there is a risk to rights that are not capable of subsequent vindication a narrow ban might be all that is required if any ban is called for at all.28 It should not be assumed, in other words, that once an infringement of rights is threatened, a ban should immediately ensue, least of all a ban that goes beyond the minimum that is required to protect the threatened right. 27 Hix Networking Technologies v System Publishers (Pty) Ltd 1997 (1) SA 391 (A) at 401D-G. 28 Cf Cream Holdings Ltd v Banerjee [2004] 4 All ER 617 (HL), interpreting s 12(3) of the Human Rights Act 1998, which allows for a interim restraint on publication only if the court is satisfied that at trial the applicant is ‘likely to establish that publication should not be allowed’. [21] Turning to the present case the papers reflect a curious game of cat- and-mouse between the DPP and e-tv concerning the contents of the documentary: the DPP surmises what the documentary might contain, e-tv responds that he is wrong, the DPP challenges e-tv to demonstrate that he is wrong by producing the documentary, e-tv responds that it is not obliged to do so, and so it goes round in circles. I do not think we can become caught up in that. We cannot attach any weight to fragments of secondary evidence as to what the document might or might not contain. On the evidence that is before us the documentary is related to the crime and it contains interviews with at least two people who allege that they witnessed it, but beyond that we are in the dark as to its contents and the appeal must be considered on that basis. (The documentary has been broadcast since the order in this case was made but we cannot take account of that for purposes of this appeal.) [22] The DPP did not ask for an outright ban on publication and the reason for that is obvious: he did not know what the documentary contained and so he could not say that the administration of justice would be prejudiced if it was broadcast. All he could say was that the documentary might possibly have that effect, depending upon its contents, and he pointed to how that might occur. He suggested, for example, that in their interviews the witnesses might have given accounts that differed from what they told the police, with the result that the discrepancies might be used to discredit their evidence. It was also suggested that the safety of witnesses might be at risk if their identities were revealed to the public. As to the DPP’s first concern I would have thought that if witnesses have indeed given discrepant accounts of what they observed it would be more conducive to the interests of justice and of a fair trial that the discrepant accounts be exposed rather than that they be hidden. And bearing in mind the wide exposure that had been given to the identity of the witnesses by the time the documentary was to be broadcast the prospect that their safety would be further endangered by the broadcast seems to me to be remote. In any event those possibilities exist as no more than conjecture that falls altogether short of justifying an outright ban on publication and that is no doubt why such a ban was not sought. [23] But what the DPP sought instead was an order prohibiting e-tv from broadcasting the documentary until it provided a copy to the DPP and allowed him sufficient time to apply for a further order if he considered it to be necessary. In effect what he sought, and was granted, was an order compelling e-tv to disclose the documentary as a precondition to exercising its ordinary right to broadcast, which had the effect of banning publication unless e-tv submitted to the condition. [24] The learned judge in the court below was alive to the importance of protecting press freedom and referred extensively to cases to that effect both in this country and abroad. Against that he said that the right of the state to mount an effective prosecution must be balanced and he concluded as follows: ‘In my view in the interest of the administration of justice and the public, the right to freedom of expression should give way to a right to a fair trial. It is in the interest of the public that the [state] should effectively prosecute cases so that its safety and security is ensured. It will accordingly not be for the public good that information upon which the [state] will rely in prosecuting a case is used in a manner which undermines its obligation to fight crime’. To the extent that he meant that the conduct of a fair trial could not be permitted to be compromised by the exercise of press freedom the observation that he made is unexceptionable. But without a reasonable apprehension that the conduct of the trial would indeed be compromised by the broadcast of the documentary, that in itself provided no grounds for prohibiting the broadcast. If the documentary is broadcast and it is indeed unlawful then e-tv will be liable to prosecution but it cannot be prohibited without grounds for apprehending that it will be unlawful. The judge went on to express his reasons for granting the relief as follows: ‘In this matter the [DPP] does not seek to arbitrarily interfere with [e-tv’s] editorial independence. All that it seeks is to have access to the broadcast material in order to satisfy itself that its right to a fair trial is protected. The limitation to [e-tv’s] right to freedom of expression claim is in the circumstances reasonable. It is reasonable in relation to the interest that is sought to be protected and does not go beyond that interest. The restriction is not only rationally connected to a legitimate objective that is sought to be protected and does not go beyond that interest’. [25] The basis upon which the order was made, as appears from the passage that I referred to above, was to allow the DPP to satisfy himself that the administration of justice would not be prejudiced if the broadcast took place, and in that respect the learned judge erred. What was before the learned judge was an application for a final interdict (albeit that the duration of the interdict was limited to the period that e-tv resisted submitting to the condition) and it fell to be determined in accordance with ordinary principles.29 The question to considered was whether any law obliged e-tv to furnish a copy of the documentary to the DPP before it was broadcast, and not whether it was reasonable to require e-tv to do so. I have already pointed out that the law prohibits e-tv from broadcasting material that prejudices the administration of justice. But there is no general principle of our law, whether in the common law, or in a statute, or to be extracted from the Constitution, that obliged e-tv to furnish its material to the DPP before it was broadcast,30 and least of all a law that prohibited it from broadcasting the material unless it could first demonstrate that the publication would not be unlawful. The law generally allows freedom to publish and freedom is not subject to permission. In the 29 Setlogelo v Setlogelo 1914 AD 222 at 227. 30 Cf the Films and Publications Act 1996, which is not applicable in the present case. absence of a valid law that restricts that freedom a court is not entitled to impose a restriction of its own. [26] Counsel for the DPP submitted that the Promotion of Access to Information Act 2000 entitles the DPP to have access to the documentary, and that the effect of the order was merely to grant him such access. Perhaps the Act does entitle him to have access to the documentary, but access to information in terms of that Act is subject to compliance with a comprehensive process that contains its own checks and balances. There was no compliance in this case and the Act does not authorise a court to simply bypass those procedures. But even if the DPP were to be entitled to a copy of the documentary in terms of the Act it would not follow that he is entitled to a prohibition on publication until it is furnished. It was also submitted on his behalf that his request for disclosure of the documentary was eminently reasonable and again, perhaps it was, but that misses the point. The question is not whether it might have been reasonable for e-tv to have submitted to the request but rather whether it was obliged to do so in law. It was not. In the absence of a law obliging e-tv to furnish the documentary to the DPP before it was broadcast the first requirement for the grant of a final interdict – a clear right – was not met and the interdict ought to have been refused. [27] Counsel for the DPP asked what the DPP could be expected to have done to ensure that an imminent publication did not compromise an impending trial. I fear that he must do what any person must do in similar circumstances: he must expect that freedom will not be abused until he has adequate grounds for believing the contrary. But he may not require the press to demonstrate that it will act lawfully as a precondition to the exercise of the freedom to publish in the absence of a valid law that accords him that right. [28] The appeal is upheld with costs that include the costs of two counsel. The order of the court below is set aside and the following order is substituted: ‘The application is refused with costs that include the costs of two counsel.’ ___________________ R W NUGENT JUDGE OF APPEAL CONCUR: HOWIE P) CLOETE JA) LEWIS JA) SNYDERS AJA)

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 18 May 2007 Status: Immediate MIDI TELEVISION (PTY) LTD v DIRECTOR OF PUBLIC PROSECUTIONS (WESTERN CAPE) Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal. * * * The Supreme Court of Appeal (SCA) today (18 May 2007) held that a court may not prohibit a television broadcaster from broadcasting material until it had satisfied the Director of Public Prosecutions (DPP) that the broadcast would not interfere with a forthcoming criminal trial. It held that a prohibition on publication of material relating to forthcoming criminal proceedings was permitted only if it could be shown that the publication might cause substantial prejudice to the trial and that there was a real risk that the prejudice would occur. The appeal concerned a documentary that was made by e-tv concerning a crime that had been committed in Cape Town. The DPP insisted on viewing the documentary before it was broadcast so as to satisfy himself that it would not prejudice the forthcoming trial. When e-tv refused the DPP applied for and was granted an interdict by the High Court at Cape Town. The SCA said that the constitutional protection of press freedom may be abridged only to the extent that it is necessary to do so for the protection of other rights. It held that the DPP must expect that that freedom will not be abused until he has adequate grounds for believing the contrary. He may not require the press to demonstrate that it will act lawfully as a pre-condition to the exercise of the freedom to publish. That had not been demonstrated and the order should not have been made by the High Court. The order of the High Court was set aside.

459

non-electoral

2016

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Reportable Case No: 20772/2014 In the matter between: MERIAL FIRST APPELLANT MERIAL LIMITED SECOND APPELLANT MERIAL SOUTH AFRICA (PTY) LTD THIRD APPELLANT and CIPLA VET (PTY) LTD RESPONDENT Neutral Citation: Merial v Cipla Vet (20772/2014) [2016] ZASCA 57 (1 April 2016). Coram: Navsa ADP, Leach, Petse & Dambuza JJA and Kathree-Setiloane AJA Heard: 8 March 2016 Delivered: 1 April 2016 Summary: Patents – Validity – certainty of claim – compound consisting of a number of ingredients, each fulfilling a specific function – combination of potential ingredients to be selected accordingly – crystallisation inhibitor test to determine whether crystallisation inhibitor within scope of claim – whether dual functions of potential ingredients impact on clarity – interpretation of patent a process of construction by a mind willing to understand, not deconstruction by a mind desirous of misunderstanding – skilled addressee capable of understanding ambit of claim, and only real challenge to clarity based on contrived or „mythical‟ hypotheticals – patent not invalid for lack of clarity – infringement – held to have been proved. ______________________________________________________________________ ORDER ______________________________________________________________________ On appeal from: The Court of the Commissioner of Patents (Murphy J sitting as court of first instance). The following order is made: 1. The appeal is upheld with costs including the costs of two counsel. 2. The order of the court below is set aside and substituted as follows: „1. The defendant is interdicted and restrained from infringing claims 1, 2, 3, 7 to 15 and 18 to 20 of the patent. 2. The defendant is ordered to deliver up to the plaintiffs all infringing Fiprotec products in its possession or under its control. 3. An inquiry is ordered in relation to the damages suffered by the plaintiffs as a consequence of the infringement of the patent by the defendant alternatively an inquiry into the reasonable royalty to which the plaintiffs are entitled. 4. In the event of the parties being unable to reach an agreement as to the further pleadings to be filed, discovery, inspection or other matters of procedure relating to the inquiry, an order authorising any one of the parties to make application to the court for directions in regard thereto. 5. Each of the claims referred to in para 1 above of South African Patent Number 1996/8057 is certified as being valid in terms of section 74 of the Patents Act 57 of 1978. 6. The defendant is ordered to pay the plaintiffs‟ costs of suit, including the costs of two counsel and the qualifying fees of the plaintiffs‟ expert witnesses.‟ ______________________________________________________________________ JUDGMENT ______________________________________________________________________ Navsa ADP (Leach, Petse & Dambuza JJA and Kathree-Setiloane AJA concurring): [1] This appeal concerns the correctness of the finding of the Court of the Commissioner of Patents (Murphy J) that the respondent, Cipla Vet (Pty) Ltd (Cipla), a South African company, did not infringe Patent No. 96/8057, entitled „Anti-parasitic composition for the treatment and protection of pets‟. The first appellant, Merial, a company incorporated in France is the patentee and the second and third appellants, Merial Limited, a company incorporated in the UK, and Merial South Africa (Pty) Ltd, are licencees. The Commissioner held that the appellants had failed to discharge the onus upon them of proving that Cipla had infringed, and was continuing to infringe, claims 1, 2, 3, 7 to 15 and 18 to 20 of the patent. The Commissioner, however, also dismissed various other grounds of defence raised by Cipla in relation to the validity of the patent. I shall, in due course, allude to those. The appeal is before us with the leave of the Court below. [2] Cipla has since 2008 made, used, sold, offered for sale and imported a composition in the form of a ready-to-use solution for the treatment and protection of domestic animals which are infested with parasites or are likely to be infested with them, under the trade mark „Fiprotec‟, and continues to make, use, exercise, dispose or offer to dispose of and import the Fiprotec composition. Merial and the other appellants alleged that Cipla‟s conduct infringed the claims of the patent referred to in the preceding paragraph and that as a result of the infringement they have suffered damages in amounts which they are at present unable to quantify. In the event of their establishing infringement, the appellants sought an order that Cipla deliver up to them all infringing Fiprotec products in its possession and an order directing an inquiry into the damages suffered by the appellants as a consequence of the infringement. [3] Like Merial‟s product, „Frontline‟, which Cipla is accused of infringing, Fiprotec is a „spot-on‟ composition used in the treatment and protection of domestic animals. The term „spot-on‟ refers to a product which is applied locally to a limited area of the body of the animal but which, it is asserted, is effective over the entire body of the animal. The specification of the patent in suit states that the invention relates to a composition for the treatment and protection of animals such as cats and dogs, which are infested with parasites such as fleas, ticks and galls. [4] In response to Merial‟s claim of infringement in the court below, Cipla not only denied the infringement but challenged the validity of the patent on several grounds. Cipla did not, however, counterclaim for revocation of the patent as it was entitled to, in terms of s 65(4) of the Patents Act 57 of 1978 (the Act).1 In challenging the validity of the patent Cipla raised its lack of clarity, insufficiency and inutility. [5] All the claims listed above, other than claim 1, are dependant claims. As recorded by the court below, it was agreed by the parties that in the event of Merial having established an infringement of claim 1, it would be entitled to the relief claimed. [6] Claim 1 of the patent reads as follows: „Composition which is useful in particular for the treatment and protection of domestic animals which are infested with parasites or are likely to be infested with them, these compositions comprising in the form of a ready-to-use solution: (a) 1-[4CF3 2,6-Cl2phenyl] 3-cyano 4-[CF3-SO] 5-NH2 pyrazole (hereinafter referred to as “fipronil”); (b) a crystallization inhibitor which satisfies the test according to which: 0.3ml of a solution A comprising 10% (W/V) of fipronil in the solvent defined in (c) below, and 10% of this inhibitor, are placed on a glass slide at 20°C for 24 hours, after which fewer than 10 crystals, preferably 0 crystals, are seen with the naked eye on the glass slide; (c) an organic solvent having a dielectric constant of between 10 and 35, preferably of between 20 and 30; (d) an organic co-solvent which is a drying promoter, having a boiling point below 100°C, preferably below 80°C, and a dielectric constant of between 10 and 40, preferably of between 20 and 30, 1 That subsection provides: „In any proceedings for infringement the defendant may counterclaim for the revocation of the patent and, by way of defence, rely upon any ground on which a patent may be revoked.‟ wherein fipronil is present in a proportion of from 1 to 20% W/V in the composition.‟ [7] As can be seen, claim 1 postulates a composition which includes four constituents, namely, fipronil, a solvent, a co-solvent and significantly for the invention, a crystallisation inhibitor. In relation to the last-mentioned the specification states the following: „Yet another object of the invention is to provide such compositions which, when applied locally, will subsequently diffuse over the animal‟s entire body and then dry, while at the same time avoiding any phenomenon of crystallisation as far as possible. Yet another object of the invention is to provide such compositions which, after drying, do not affect the appearance of the coat and in particular do not leave crystals and do not make the coat sticky.‟ Fipronil itself was known at the priority date of the patent and appears to have been first used as an insecticide in crop science. It was also used in relation to parasites living externally on animals. So, the invention does not relate per se to the use of fipronil together with a solvent for topical applications on animals. What is claimed to be the invention is a composition which will minimize the phenomenon of crystallisation appearing on the skin of domestic animals such as dogs and cats. Simply put, the crystallisation inhibitor was intended to combat negative effects in relation to the possible appearance of crystals on the animal‟s coat. [8] Importantly, claim 1, by virtue of integer b) provides a test to determine which constituents or combination of constituents, will result in a crystallisation inhibitor within the scope of the claim. The test requires that a solution be prepared containing (i) 10% (w/v)2 of fipronil; and (ii) 10% of the crystallisation inhibitor of the allegedly infringing formulation (iii) both dissolved in the solvent present in the formulation in question. From this solution, 0.3ml is placed on a glass slide at 20°C for 24 hours. If, after 24 hours, fewer than 10 crystals are visible to the naked eye on the glass slide, then it follows that the crystallisation inhibitor will be within the scope of claim 1. 2 W/v is an abbreviation for „weight per volume‟. [9] The specification provides guidance on which types of solvents, co-solvents and crystallisation inhibitors are suitable for the claimed fipronil formulations. In this regard, the specification also provides preferred lists of chemicals for constituents of the formulation. Thus, the specification provides a list of potential and preferred organic solvents which may be used in preparations in accordance with the invention of the patent. [10] It is important, both in relation to Cipla‟s challenge of invalidity on the basis of lack of clarity and the appellants‟ assertion of infringement by Cipla, to have regard to the detail of the patent specification concerning the preferred organic solvents, co- solvents and crystallization inhibitors. The following appears: „As organic solvent c) which can be used in the invention, mention may be made in particular of: acetone, acetonitrile, benzyl alcohol, butyl diglycol, dimethylacetamide, dimethylformamide, dipropylene glycol n-butyl ether, ethanol, isopropanol, methanol, ethylene glycol monoethyl ether, ethylene glycol monomethyl ether, monomethylacetamide, dipropylene glycol monomethyl ether, liquid polyoxyethylene glycols, propylene glycol, 2-pyrrolidone, in particular N-methylpyrrolidone, diethylene glycol monoethyl ether, ethylene glycol, diethyl phthalate, or a mixture of at least two of these solvents. The preferred solvents c) are the glycol ethers, in particular diethylene glycol monoethyl ether and dipropylene glycol monomethyl ether. As crystallization inhibitor b) which can be used in the invention, mention may be made in particular of: - polyvinylpyrrolidone, polyvinyl alcohols, copolymers of vinyl acetate and vinylpyrrolidone, polyethylene glycols, benzyl alcohol, mannitol, glycerol, sorbitol, polyoxyethylenated sorbitan esters; lecithin, sodium carboxymethylcellulose; acrylic derivatives such as methacrylates and the like. . . .‟ (my emphasis.) [11] What follows in the specification as potential crystallisation inhibitors are lists of anionic surfactants,3 cationic surfactants, amine salts, non-ionic surfactants and 3 In Chambers Dictionary of Science and Technology (1974) „surfactant‟ is explained as follows: „An abbreviate form of surface active agent, ie a substance which has the effect of altering the interfacial tension of water and other liquids or solids, eg detergent or soap.‟ amphoteric surfactants. It ends with the statement „or preferably a mixture of two of these crystallisation inhibitors‟. The specification goes on to note the following: „In a particularly preferred manner, use will be made of a crystallisation inhibitor system, namely the combination of a film-forming agent of polymer type and a surfactant. These agents will be chosen in particular from the compounds mentioned as crystallisation inhibitor b). Among the film-forming agents of polymer type, which are particularly advantageous, mention may be made of: - the various grades of polyvinylpyrrolidone, - polyvinyl alcohols, and - copolymers of vinyl acetate and vinylpyrrolidone. As regards the surfactants, mention will be made most particularly of non-ionic surfactants, preferably polyoxethylenated sorbitan esters and in particular the various grades of polysorbate, for example polysorbate 80. The film-forming agent and the surfactant may in particular be incorporated in similar or identical amounts within the limit of the total amounts of crystallisation inhibitor which are mentioned elsewhere.‟ [12] As can be seen (and as I have emphasised in the quote above) the potential organic solvents include propylene glycol (PG) and diethylene glycol monoethyl ether (DGME) (which is sold by one company under the trademark Transcutol® and is often referred to as such). The preferred organic solvents are said to be the glycol ethers, in particular DGME (and dipropylene glycol monomethyl ether (DPGMME)). The patent teaches that these solvents can be used on their own or as a mixture of at least two of the listed solvents. [13] In respect of the co-solvent, the patent teaches that ethanol, isopropanol and methanol are suitable for use in the composition of the invention. The patent teaches that the organic co-solvent must be, in addition to being a co-solvent, a drying promoter. In simple terms, therefore, the co-solvent, being a „drying promoter‟, ensures that the formulation does not remain „wet‟ on the animal‟s skin and elsewhere for a prolonged period. In line with this, claim 1 of the patent provides that the co-solvent must be a drying promoter and must have a boiling point below 100°C, preferably below 80°C. [14] When what is set out in the preceding paragraphs is scrutinised, one will see that an item that appears as a contemplated organic solvent, is also envisaged as a crystallisation inhibitor. So, for example a preferred organic solvent in relation to integer b) is benzyl alcohol, which may also be a crystallization inhibitor. There is also an overlap between the items listed as potential solvents in terms of integer c) and the co- solvents in terms of integer d). In particular, the specification states that ethanol, isopropanol and methanol may be used as solvents in relation to integer c), all of which may also be used as co-solvents in relation to integer d). [15] Further, as can be seen from what is set out above, the specification lists a number of potential crystallisation inhibitors, including several film forming agents of polymer type, and several surfactants. The list ends with the statement that the crystallisation inhibitor (ie. that of claim 1) should „preferably [be] a mixture of at least two of these crystallization inhibitors‟. The specification further explains that, in a particularly preferred embodiment of the invention, use will be made of a crystallisation inhibitor system, namely the combination of a film-forming agent of polymer type and a surfactant (the subject of claim 11). The specification identifies certain „particularly advantageous‟ film forming polymers (including polyvinylpyrrolidone (PVP)) and surfactants (including Polysorbate 80/Tween 804) which may be included in the composition of claim 1. [16] Simply put, some of the contemplated constituent parts of the formulation envisaged in claim 1 may serve dual functionalities. It is those dual and interchangeable roles that Cipla finds objectionable. More will be said about this later. [17] To enable a proper appreciation of the issues and the evidence discussed hereafter it is necessary, at this stage, to have regard to the constituent parts of Fiprotec. In Cipla‟s plea, it admitted that Fiprotec has the ingredients set out hereafter. Professor Barbour‟s expert summary indicated the relative weights or volumes of the 4 Tween 80 appears to be a trade name. ingredients. Para 11 of the judgment of the court below noted the constituent parts of Fiprotec. The list that appears hereunder contains that list together with the relative value: (a) 9,7 % fipronil; (b) 50 % diethylene glycol monoethyl ether (DGME); (c) 27,7 % propylene glycol (PG); (d) 1,40 % polyvinylpyrrolidone (PVP) which is a polymeric film-forming agent; (e) 1 % polysorbate 80 (Tween 80) which is a non-ionic surfactant; (f) 10 % ethanol; and (g) 0,10 % butylated hydroxyanesole and 0,10% butylated hydroxytoluene which are antioxidants, as contemplated in claims 7, 8 and 19. All of these ingredients are specifically mentioned as preferred ingredients in the patent in suit, albeit sometimes in alternate functions. However, Cipla denied that ethanol was a co-solvent in its Fiprotec product as envisaged in integer d). It did not accept that the mixture of DGME and PG served the function of the organic solvent provided for in integer c) of claim 1. It was also not accepted that polyvinylpyrrolidone and the polysorbate 80 operated together as crystallisation inhibitors within the meaning of integer b) of claim 1. [18] Much of the proceedings in the court below involved evidence in relation to the integer b) test of claim 1. Both parties adduced evidence by respective experts in relation to the crystallisation inhibitor test set out in integer b). The experts reached opposite conclusions. Merial‟s expert, Dr Witchey-Lakshmanan (Dr Witchey) testified that she had successfully conducted the test set out in integer b). She concluded that the constituent parts of Fiprotec matched those of the patent and that Fiprotec satisfied the crystallization inhibitor test. As set out in the expert summary of Dr Witchey, she determined by way of integer b) „that the use of the PVP and Tween 80 in a ratio of 1,4 to 15 as a crystallisation inhibitor in the crystallisation inhibitor test of claim 1 results in fewer than 10 crystals being seen with the naked eye on the glass slide used in the test‟. Professor Barbour who testified on behalf of Cipla stated that he had conducted an 5 The ratio appears from what is set out in the preceding paragraph. experiment in line with integer b) using the actual ingredients of Fiprotec and that it had failed the crystallisation inhibitor test. He stated that when he conducted experiments using the method spelt out in the integer b) test, it resulted in heavy crystallisation beyond the parameters of that test. [19] At this stage, it is important to note that the ingredients used by Dr Witchey to conduct the integer b) test were supplied by Merial and not by Cipla, and so were not the exact same components as those used in the manufacture of Fiprotec, more especially from Cipla‟s perspective, the fipronil. However, Dr Witchey, in conducting the integer b) test used the same concentrations of fipronil as employed by Professor Barbour. This aspect on which Cipla relied in challenging the validity of Dr Witchey‟s integer b) test will be discussed in due course. It is an aspect which the court below considered significant in holding that the appellants had failed to prove infringement. [20] Whilst being critical of the test conducted by Professor Barbour, the court below reasoned and concluded as follows (para 55): „55. The evidence of [Cipla] therefore does not conclusively establish that Fiprotec does not include a crystallization inhibitor that satisfies the test in integer b). But that does not resolve the question of infringement. The onus is on [Merial] to establish positively, on a balance of probabilities, that Fiprotec does indeed include a crystallization inhibitor that satisfies the test in integer b). The weaknesses in [Cipla‟s] case is not to my mind sufficient to warrant an inference that the combination of PVP K30 and Polysorbate 80 in a ratio of 1,4:1 (mixed in a solution of DGME, PG and/or ethanol) will operate to inhibit fipronil sourced from “GSP crop science” [the supplier to Cipla] from producing fewer than 10 crystals. There is no reliable test before me which adequately demonstrates that fact. [Merial‟s] evidence shows that the Fiprotec crystallization inhibitor system will achieve that result in relation to fipronil produced and/or supplied by Merial. Neither that fact nor the flawed results of the tests of the defendant provide sufficient evidence to conclude on the probabilities that the crystallization inhibitor system in Fiprotec achieves the same result in relation to the fipronil used in Fiprotec supplied by GSP. A test on the constituents of the patented product does not prove the constituents of the alleged infringing product actually infringe. To my mind it is impermissible, from the perspective of logic and fairness, to infer that because the crystallization inhibitor proved successful in inhibiting the Merial fipronil from producing crystals that it has equal success in so inhibiting the fipronil in Fiprotec. The evidence is insufficient to reach that conclusion. While the different polymorphs6 of fipronil may be insignificant once in solution, their existence in different polymorphic form points to different manufacturing processes that may or may not account for impurities which could impact upon the process of crystallization. Whether that is or is not so can only be established once the actual ingredients in Fiprotec have been subjected to a reliable integer b) test – something which has not happened in this case. [21] The court below thus held that the appellants had failed to discharge the onus upon them to prove that Fiprotec infringes claim 1 of the patent.7 Nevertheless, the court went on to discuss the other defences pleaded by Cipla. [22] In dealing with Cipla‟s challenge to the validity of the patent on the basis of lack of certainty, the court below said the following (para 85): „85. The lack of clarity attack, however, evolved somewhat during evidence and argument. A further contention was made that the claims lack clarity because the same chemical can serve different functions in the composition of claim 1 of the patent. In particular, benzyl alcohol can serve as the organic solvent in integer c) as well as being the crystallization inhibiter in integer b). Also, ethanol and isopropanol can serve as a solvent in integer c) and as the co-solvent in integer d). As mentioned earlier, this prompted counsel for the defendant to argue that the patent is unclear because “the skilled addressee is left to hazard a guess as to whether any particular composition may constitute an infringement”.‟ [23] On this aspect Murphy J concluded as follows (paras 86 – 87): „86. I agree . . . that this attack goes to the issue of insufficiency not clarity in that it essentially alleges that the specification does not sufficiently describe the manner in which the invention is to be performed in order to enable the invention to be carried out by a person skilled in the art of the invention. The attack is not directed at the wording of claim 1. And, in any event, to the extent that any clarity issue arises on this basis it was never pleaded by the defendant and hence I am disinclined to entertain it. 6 Polymorphism is the property possessed by certain chemical compounds of crystallising in several forms which are structurally distinct. See Chambers Dictionary supra. Professor Barbour explained the concept as follows: „. . . [I]t is different crystalline forms of the same compound . . . the chemical bonding is different.‟ 7 Para 57 of the judgment. 87. In consequence, the defendant has made out no case of lack of clarity upon which it may rely as a defence to the action for infringement.‟ [24] The appellants, with the leave of the court below, appealed against the finding that they had failed to discharge the onus on them of proving that Cipla had infringed claims 1, 2, 3, 7 to 15 and 18 to 20 of the patent in suit and the consequent order dismissing the matter with costs, including the costs of two counsel. Murphy J had also rejected the defences raised by Cipla, set out in para 4 above. Before us Cipla‟s sole challenge to the validity of the patent was restricted to one based on a lack of clarity. Thus, in particular, it is worth noting that the defence of insufficiency was not persisted in. Since a decision in Cipla‟s favour on the clarity point would be dispositive of the appeal, it is to that issue that I now turn. [25] It was submitted on behalf of Merial that this court should refuse to entertain an appeal on the clarity point, since it had not been properly pleaded as a ground of challenge by Cipla. An examination of the plea reveals that the attack based on lack of clarity was limited and related to the meaning of the words „solvent‟, „co-solvent‟, „crystallization inhibitor‟ and „fewer than 10 crystals, preferably 0 crystals, are seen with the naked eye‟. Furthermore, it was pleaded that the crystallisation inhibitor test was not clear in that the objective physical results of that test may vary depending on the conditions under which the test is conducted, and that the observed results of that test may vary depending on the observer and the conditions under which they were observed. As can be seen, the ambit of Cipla‟s pleaded challenge to the validity of the patent was limited. Murphy J was correct, as noted above, when he recorded that the lack of clarity attack evolved during evidence and argument, and that in essence it was ultimately contended that the lack of clarity was brought about because of the dual role of constituent materials.8 There is also some force in the submission on behalf of Merial that the attack on the validity of the patent as pleaded, more properly resides under the ground of insufficiency, ie on the basis that the complete specification does not fully describe and ascertain the invention and, where necessary, illustrate or exemplify the 8 Para 85 of the judgment in the court below. invention and the manner in which it is to be performed.9 However, the question of the lack of clarity of the patent was explored fairly extensively when evidence was adduced in the court below and, in my view, consideration should therefore be given to Cipla‟s submissions on this aspect. [26] Before dealing with Cipla‟s submissions and considering whether they have any merit, it is necessary to remind ourselves of what a patent represents, and why the monopoly claimed by way of the patent, has to be clearly and succinctly defined. In Colgate-Palmolive Co v Unilever Ltd 1981 BP 121 (CP) at 124F-125F, Nicholas J said the following: „[A] patent represents a quid pro quo as it was aptly put by Viscount Dunedin in Pope Alliance Corporation v Spanish River Pulp and Paper Mills Limited [[1929] AC 46 RPC 23]. The quid is the monopoly conferred upon the patentee for a number of years; see sec 28(1) and 32 of the Act. The quo is the new knowledge which he presents to the public, and which, after the expiry of the patent, will be available for general utilisation. Hence the function of the claim is to inform prospective rivals of the limits of the field denied to them while the patent lasts; and the function of the body of the specification is to instruct the public how to carry out the invention when the field is eventually opened. As regards the claim, the legislature obviously intended that the monopoly must clearly and succinctly define the limits of the field closed to others, so that he who runs may read. As it was put by Galgut, J in Transvaal and OFS Chamber of Mines v Hukki [1964 BP 1 (T) at 212C-D]: “The public who uses this art, the persons trained in the art, should not be left to hazard any guess as to what the forbidden field is.”‟ (footnotes omitted.) [27] It is necessary to consider the required degree of sufficiency and clarity of the claims of a patent. In T D Burrell Burrell’s South African Patent and Design Law 3 ed (1999) para 4.37 at 197, the learned author, in dealing with the degree of clarity 9 See section 61(1)(e)(i) of the Act as a ground on which a patent may be revoked. It is well established that a challenge on the basis of insufficiency differs from that of a lack of clarity. The main ground of distinction is that the attack on lack of clarity is directed to the claims and not to the body of the specification, whereas in dealing with an objection based on insufficiency the whole specification must be considered. Essentially, the body of the specification (which goes to sufficiency) teaches how the invention works and/or how to operate it, while the claim (which goes to clarity) defines the limits of the monopoly claimed for the duration of the patent. Nevertheless, the evidence on lack of clarity may overlap with that on the question of insufficiency.See T D Burrell Burrell’s South African Patent and Design Law 3 ed (1999) para 4.36 at 196 and the authorities there cited. required, states that what is needed is „reasonable certainty‟. He goes on to note, with reference, inter alia, to Letraset Ltd v Helios Ltd 1972 BP 243 (A) at 247D-E and De Beers Industrial Diamond Division (Pty) Ltd v General Electric Company [1988] ZASCA 82; 1988 BP 124 (A) at 142C, that „[a]bsolutism does not perch happily upon the banner of our law‟. There is, however, a statutory obligation on a patentee to state in the claims clearly and distinctly what the invention is which it desires to protect.10 [28] Construing the meaning of the claims of the patent in the context of the rest of the specification is the first task the court must undertake. This was stated in Gentiruco AG v Firestone SA (Pty) Ltd 1972 (1) SA 589 (A) at 613F-H. At 614B of that case, which is still the leading case on the construction of patent specifications, the following appears: „Consequently, the rule of interpretation is to ascertain, not what the inventor or patentee may have had in mind, but what the language used in the specification means, i.e., what his intention was as conveyed by the specification, properly construed . . . .‟ [29] It was submitted on behalf of Cipla that when the words „solvent‟, „co-solvent‟ and „crystallisation inhibitor‟ are read in conjunction with the body of the specification „great uncertainty arises‟. The following appears in heads of argument on behalf of Cipla: „[W]hen read in the context of the specification, it is not possible from the meanings of these terms to determine the allocation of individual ingredients amongst the categories designated by the impugned terms, thus making it impossible to determine a definitive solution A, and thus perform the test for infringement.‟ In short, it was submitted on behalf of Cipla that a contextual interpretation of the claims of the patent exhibits a glaring uncertainty. Cipla contended that when, in addition, regard is had to the evidence of Professor Barbour that the effect of the interchangeable roles of the constituent elements of the formulation is confusing, its case on this aspect was overwhelming. 10 See Power Steel Construction Co (Pty) Ltd v African Batignolles Construction (Pty) Ltd 1955 BP 155 (A) at 162. [30] It was not suggested that the meaning of each of the words „solvent‟, „co-solvent‟, „crystallization inhibitor‟ is unclear in the abstract. As recorded in para 82 of the judgment of the court below, those words have ordinary meanings. What was postulated on behalf of Cipla was that viewed contextually, more particularly in relation to the duality and inter-changeability of functions set out in the body of the specification, uncertainty unfolds. [31] A reading of claim 1, in conjunction with the parts of the specification referred to above, does not, at least superficially, present any problems of comprehension. It is easy enough to understand the meaning of the words referred to above. Furthermore, as set out in para 7 above, when regard is had to claim 1 it is not difficult to understand that it postulates a composition which includes four constituents, namely fipronil, a solvent, a co-solvent and a crystallisation inhibitor. When the material parts of the specification on which Cipla relies are considered, one can see that some of the constituent parts may be used interchangeably, in combination, and can serve more than one constituent function. The question is whether it presents uncertainty from the perspective of the skilled addressee and in this regard the evidence of the respective experts is of assistance. [32] As set out in para 29 above, Cipla placed reliance on the evidence of Professor Barbour. In addition, Cipla pointed to the difficulties allegedly experienced by Dr Witchey when she was confronted with hypothetical formulations which, so it was submitted, demonstrated that the patent was unclear. Reliance was placed on the evidence of Professor Barbour in relation to the alleged lack of clarity of the formulation in question, despite the limited field of his experience, namely, crystallography. In this regard, Cipla placed reliance on Dr Witchey‟s acceptance that Professor Barbour was qualified to perform the crystallisation inhibitor test. Whilst it is true that Dr Witchey conceded that the patent is addressed to a team of professionals, as recorded by the court below, and that Professor Barbour was qualified to perform the crystallisation inhibitor test, she did not concede Professor Barbour‟s expertise as a formulation scientist. Dr Witchey testified that the skilled addressee would constitute a professional team, including a veterinary parasitologist and a formulation scientist. It is beyond doubt that Dr Witchey was a person skilled in the field of the invention of the patent with special knowledge in the area of formulating veterinary compositions for topical applications. She is a skilled formulation chemist whilst Professor Barbour is not. I shall deal with her evidence first and then consider whether Cipla‟s reliance on Professor Barbour‟s evidence is justified. [33] Dr Witchey confirmed what appeared in her expert summary, namely, that the term „co-solvent‟ is a chemical term referring to a solvent that is used in conjunction with another solvent to dissolve a solute and that co-solvent systems are routinely used in chemical and formulation systems. A co-solvent is simply a second solvent. [34] Significantly, Dr Witchey testified that the patent presents the use of a variety of solvents, co-solvents and crystallisation inhibitors and that from the viewpoint of a formulator this was fairly typical. She went on to state: „The lists of these materials are not overwhelming to a formulator because a formulator is used to these types of chemicals.‟ Dr Witchey read claim 1 of the patent as comprising a formulation having four constituent elements and thus four areas of functionality. First, there is the active ingredient, fipronil. Second, a solvent is required; third, an additional solvent, which has to be a drying agent; and, fourthly and significantly, a crystallisation inhibitor. [35] Later in her testimony Dr Witchey stated: „. . . [A]s I have mentioned formulators will try to formulate with complements having multiple functions and so it does not bother me that a co-solvent and a solvent could be the same thing.‟ In relation to percentage content in relation to what appears in claim 1, Dr Witchey indicated that one would have regard to the function served by a particular element. [36] As to the suggestion that a formulator would, in relation to the teaching of the patent, be faced with an infinite number of permutations from an infinite number of ingredients, Dr Witchey responded by stating that one would look at the function of a particular ingredient and follow the teachings of the patent and would not include an ingredient that does not serve the function that is required. Simply put, you would look at what the formula required and then select ingredients that would fulfil a particular function. It is necessary to repeat that the fact that one material might have more than one function did not trouble Dr Witchey. [37] Dr Witchey also considered whether there were attendant difficulties with the specification, stating that the contemplated organic solvent could be a mixture of at least two of them. The same applied to crystallisation inhibitors. Dr Witchey took the view that a skilled formulator would have no problem with a constituent part consisting of two materials fulfilling the same function. She reiterated that, in making a formula based on the patent or in deciding what would not infringe the patent, a skilled formulator would explore the functions of each of the constituent materials. [38] It was put to Dr Witchey that in terms of the patent, benzyl alcohol was envisaged as a potential organic solvent as well as a crystallisation inhibitor. She agreed that there were potential dual functions of constituent ingredients. A document was presented to Dr Witchey, which in counsel for Cipla‟s own words contained „mythical‟ compositions. The hypotheticals presented by these compositions were put to Dr Witchey. The document contained a composition in line with the constituents of Fiprotec and then variations, which were intended to show that it would not be possible, if one were to have a mixture of certain crystallisation inhibitors and solvents, to conduct the crystallisation inhibitor test. The argument was that, when faced with these „mythical‟ compositions, a skilled addressee would not be able to objectively determine which ingredients fell under which integer, and therefore would not be able to determine which ingredients must be included in the crystallisation inhibitor test as the solvent (integer c)), and which must be excluded as the co-solvent (integer d)). [39] When the constituent parts of the hypotheticals were put to Dr Witchey, she was „confused why someone would formulate this product in this way‟. She was referring here to the substantial number of contemplated excipients.11 She went on to state: „If the ingredients are present in the formula they serve some function within the formula. If they do not serve that function you do not put them in . . . . So my first question in looking at the formula is, why the formula is what it is. It does not make sense to me completely as a formulator.‟ She testified that the hypotheticals presented to her showed a naivety on the part of the formulator. When confronted with the teaching of the patent that benzyl alcohol can be used both as a solvent and as a crystallisation inhibitor and that this would present problems if one were to conduct the crystallisation inhibitor test to see if a product infringes, Dr Witchey stated that a formulator would work towards an understanding of what „mechanisms each [ingredient] provides . . . within the formulation and as such . . . try to make an assessment as to what the appropriate test would be.‟ She testified as follows: „A formulator prepares a series of different formulas before they even get to the integer b) test, to try and understand how the solution, the drug, how all of that interacts, how it behaves . . . .‟ Later, Dr Witchey stated: „So I would hope by the time the formulator gets to the point of sale of a product . . . the formulator has established in some kind of scientific sense . . . [how] to make a better assessment as to what would be a co-solvent, what would be a solvent, and what would be both.‟ Dr Witchey testified that in regard to Fiprotec there could be no confusion as to its constituent parts and as to the function of each element. She testified that in Fiprotec ethanol is the co-solvent, integer d) and that is why it was not included in the 11 In Chambers Dictionary supra, „excipient‟ is defined as: „The inert ingredient in a medicine which makes up and holds together the other ingredients.‟ Wikipedia defines „excipient‟ as: „An excipient is a natural or synthetic substance formulated alongside the active ingredient of a medication, included for the purpose of long-term stabilization, bulking up solid formulations that contain potent active ingredients (thus often referred to as "bulking agents," "fillers," or "diluents"), or to confer a therapeutic enhancement on the active ingredient in the final dosage form, such as facilitating drug absorption, reducing viscosity, or enhancing solubility.‟ Available at: https://en.wikipedia.org/wiki/Excipient accessed 30 March 2016. crystallisation test for Fiprotec. She pointed out that this was accepted by the parties to the litigation. On this she was essentially unchallenged. This is an aspect to which I will revert later, when I deal with the question of infringement. [40] In explaining how to decide what functionality to ascribe to an ingredient and more particularly, determining what is to be a solvent and what is to be a co-solvent Dr Witchey said the following: „A person does not work in a vacuum. A person works to a systematic scientific method that offers that understanding and that is what I am trying to say about the function of the materials.‟ [41] Dr Witchey went on to explain, in relation to claim 1, that the first information which a formulator would obtain would be the solubility of fipronil in the particular constituents. She postulated that there would be no problem with the solvent and insofar as the co-solvent was concerned, it was a solvent with a boiling point below 100°C and a dielectric constant between 10 and 40 which would serve as a drying promoter. As can be seen from the evidence of Dr Witchey a skilled formulator would have no difficulty in understanding the parameters of claim 1 and more particularly integer b). [42] I now turn to the evidence of Professor Barbour. It is necessary to record that his expert summary, not unsurprisingly, given the initially limited nature of Cipla‟s plea in relation to the patent‟s alleged lack of clarity (referred to in para 22 above), does not deal with the multifunctional role of constituent elements of the formula as presenting a problem other than rendering the meaning of the words „solvent‟ „co-solvent‟ and crystallisation inhibitor” unclear. It undoubtedly did not deal with the propositions put to Dr Witchey or with the „mythical‟ formulations presented to her. Professor Barbour‟s limited area of expertise, referred to above, might well be an additional explanation for this omission in his expert summary. [43] During his testimony in-chief, Professor Barbour stated that he found the various combinations and multiple potential functions of substances confusing. His testimony in this regard was brief. The „mythical‟ permutations presented to Dr Witchey were never put to Professor Barbour. Under cross-examination, Professor Barbour appeared to limit his criticism in respect of the lack of clarity of the patent to the multiple possible identities of ingredients. Under cross-examination he was asked: „Where is the lack of clarity?‟ His response was as follows: „The lack of clarity is in identifying a particular component listed as an example, that could be either part of the solvent or part of the crystallisation inhibitor or both.‟ Professor Barbour was asked what he identified as a problem in relation to the crystallisation inhibitor test and his response is not entirely clear. He conceded that the simple procedure for conducting the integer b) test was not ambiguous but went on to state: „So the identification of the compounds that have to be used to make the formulation, in other words to formulate the test, I have already said could be ambiguous in terms of the identification of which has which identity and making the solution and dispensing a drop. That is the easy part. And then at the end, making an observation and making a judgment about whether things are crystals or not crystals and so on, and then whether they should be counted and whether it should be nine or ten, I believe that is somewhat unscientific and ambiguous also in terms of what you count as a crystal.‟ [44] Professor Barbour was cross-examined further about his confusion concerning the dual identities of certain elements, more particularly in relation to the integer b) test. He stated that his problem was the dual identity of, for example, ethanol - being described both as a solvent and a co-solvent: „Let me elaborate on that. If ethanol is both the solvent and the co-solvent, what do we take from that? That means that some of the ethanol is the solvent and some of it is the co-solvent, So in other words, is it 60% of the ethanol is the solvent and 40% is the co-solvent?‟ Referred to the specifics of the integer b) test Professor Barbour accepted that the problem did not arise in relation to it. He accepted that for the purpose of the test he would use ethanol as the solvent. In a subsequent exchange with counsel on behalf of the appellants, Professor Barbour once again suggested hypothetical difficulties that one might encounter with dual functionalities of constituent elements and the problems that might be encountered in attempting to identify constituent parts of a formulation. [45] Cipla also relied on an affidavit by Professor Schuster, which was part of prior interdict proceedings. Dr Schuster appeared to have difficulty with the dual role of ingredients. The content of that affidavit was put to Dr Witchey at the time that Cipla was pursuing the hypotheticals referred to above. According to the affidavit he had regard to the teaching of the patent that compounds like polyethelyne glycol can be the crystallisation inhibitor and also taught that PG and DGME can be solvents and that solvents can be used in combination. Thus the patent contemplated that combinations of PG and DGME can be present in a formulation of the invention. Counsel on behalf of Cipla put it to Dr Witchey that this presented a problem in relation to the integer b) test, namely, having DGME as crystallisation inhibitor but regarding ethanol either as a co- solvent on the one hand or as a solvent on the other and that the same would apply to isopropanol. Dr Witchey responded by stating that there was no basis to accept that Professor Schuster knew about the materials within Fiprotec at the time that the interdict was sought and there was no way of knowing what other information he had at his disposal. She stated the following: „[L]et us say for the purposes of argument that DGME in this hypothetical formula also serves some function as a crystallisation inhibitor. You would not artificially remove, you would at least allow DGME to serve its other function as a solvent as well and that is not what is happening here.‟ [46] Dr Witchey went on to state: „As a formulator you try to understand what the functions are of each and try to apply your knowledge as best you can...[L]et us say for example that . . . fipronil were the active ingredient, PVP, benzyl alcohol and DGME were in fact the crystallisation inhibitor, ethanol and isopropanol were the co-solvents, what is left as the solvent? One has to address the solvent yet still. So certainly some assessment must be made to allow for a solvent but taking these step by step in this fashion gets to the point of not making sense to a formulator.‟ Later she stated: „I am saying that a formulator given this code, or a formulator having formulated, would have a better understanding of the functions or co-functions of each of these excipients‟. [47] Professor Schuster did not testify and we do not have the benefit of the content of his affidavit being subjected to further scrutiny. We are left to speculate about what was within his sphere of information. [48] The alleged uncertainty in relation to observance by the naked eye of the number of crystals set as the outer limit of acceptability in terms of the crystallisation inhibitor test was, with good reason, not persisted in. As recorded by the court below Professor Barbour rightly conceded that he had no difficulty measuring the crystallisation when he conducted the integer b) test with ordinary vision which, in appropriate circumstances, could be corrected by spectacles and that the factors that might possibly impact on crystallisation could be controlled. As to variable environmental conditions that might impact crystallisation it appears to be uncontested that normal laboratory conditions would suffice. That part of Cipla‟s case was not persisted in before us. [49] In Integrated Mining Systems (Pty) Ltd v Chamber of Mines of South Africa 1974 BP 281 (CP) at 310-311 the court said in relation to the assertion of insufficiency that courts will not find insufficiency simply because exceptional cases, or unlikely materials might come within the words of the specification and will not work. The same logic would apply to the hypotheticals presented in relation to the challenge based on lack of clarity. [50] Counsel on behalf of Cipla submitted that given the dual and interchangeable functionalities of elements in the specification one would not be in a position to „unscramble the egg‟. It was suggested that one would not be able to deconstruct a formulation. That of course would not be a problem with an allegedly offending product. One could subject it to analysis. When, however, there is a challenge to the validity of a patent without an allegedly offending product, on the basis of lack of clarity, then the question that must be addressed is whether the patent is reasonably certain. In Ausplow (Pty) Ltd v Northpark Trading 3 (Pty) Ltd & others [2011] ZASCA 123; 2011 BIP 12 (SCA) Harms JA stated that patents are about construction and not deconstruction of the text.12 In Ausplow this court referred (para 20 fn 10) to what was said in Lister v Norton Brothers and Co (1886) 3 RPC 199 (Ch D), namely, that „a patent must be read by a mind willing to understand, not by a mind desirous of misunderstanding‟. In my view the hypotheticals appear to have been employed with focused intent on misunderstanding. [51] It was contended on behalf of Cipla that one would not find reported cases in which one could find pharmaceutical formulations in respect of which constituents may be selected from one or more pharmaceutical ingredients that may be part of an admixture. However, this is incorrect. In Pharma Dynamics (Pty) Ltd v Bayer Pharma AG (formerly Bayer Schering Pharma AG) & another [2014] ZASCA 201; [2014] 4 All SA 302 (SCA), at para 29 the following appears, taken from the detailed disclosure of the invention there in question: „Bayer‟s case is that claim 1 protects the invention described by Prof Davies. The contrary position taken by Dr Rue and Pharma is that if there was indeed an invention as described by Prof Davies - which they denied – that is not the invention covered by claim 1. Although directly contradictory, each party found support for its interpretation in the body of the patent specification, which reads in relevant part, under the heading “Detailed disclosure of the invention”: “Drospirenone . . . is a sparingly soluble substance in water and aqueous buffers at various pH values. Furthermore, drospirenone is rearranged to an inactive isomer under acid conditions and hydrolysed under alkaline conditions. To ensure good bioavailability of the compound, it is therefore advantageously provided in a form that promotes rapid dissolution thereof. It has surprisingly been found that when drospirenone is provided in micronized form . . . rapid dissolution of the active compound from the composition occurs in vitro (“rapid dissolution” is defined as the dissolution of at least 70% over about 30 minutes . . . of drospirenone from a tablet preparation containing 3 mg of drospirenone in 900 ml of water at 37ºC determined by the USP XXIII Paddle Method using a USP dissolution test apparatus 2 at 50 rpm). Instead of 12 Para 20. providing the drospirenone in micronized form, it is possible to dissolve it in a suitable solvent, e.g. methanol or ethyl acetate, and spray it onto the surface of inert carrier particles followed by incorporation of the particles containing drospirenone on their surface in the composition. . . The composition of the invention may be formulated in any manner known in the pharmaceutical art. In particular, as indicated above, the composition may be formulated by a method comprising providing drospirenone and, if desired, ethinylestradiol in micronized form in said unit dosage form, or sprayed from a solution onto particles of an inert carrier in admixture with one or more pharmaceutically acceptable excipients that promote dissolution of the drospirenone and ethinylestradiol so as to promote rapid dissolution . . . on oral administration.”’ (my emphasis.) [52] As can be seen, Professor Barbour‟s criticism of the patent was tentative, confusing, at times contradictory and on the whole rather diluted. The number of crystals and the test as to whether they are visible to the naked eye are aspects on which I will comment in due course. Cipla bore the onus to prove the invalidity of the patent. The evidence of Professor Barbour, for the reasons set out above, is of no assistance. The evidence of Dr Witchey, by contrast, is a formidable obstacle in the way of Cipla‟s case on invalidity. [53] For all the reasons set out above Cipla‟s challenge to the patent in suit on the basis of lack of clarity must fail. [54] It is now necessary to turn to the question whether the appellants had satisfied the onus of proving infringement of the patent. A determination of the question as to whether a plaintiff has proved an infringement of its patent turns upon a comparison between the article or process, or both, involved in the alleged infringement and the words of the claims in the patent.13 It was accepted that in respect of the integer b) test, to which a substantial part of the proceedings in the court below was devoted, it was necessary to have regard to expert evidence. In the present case the principal actors 13 Stauffer Chemical Co & another v Safsan Marketing and Distribution Co (Pty) Ltd & others [1986] ZASCA 78; 1987 (2) 331 (A) at 342D-E. were again Professor Barbour and Dr Witchey, whose evidence on this subject will be adverted to in due course. [55] The issues concerning infringement were limited to the question whether ethanol is an organic co-solvent for the purposes of integer d) and whether the mixture of PVP and Tween 80 in Fiprotec is a crystallisation inhibitor for the purposes of integer b) and one which satisfies the test set out therein. In Dr Witchey‟s expert summary she matched the integers of the claims against the Fiprotec constituents and confirmed that DGME and PG is an organic solvent and that ethanol is a co-solvent in Fiprotec. She persisted in this view, notwithstanding that the ethanol could also, in certain formulations, be the solvent. This aspect was dealt with during the cross-examination of Dr Witchey as referred to in the discussion above14 in relation to the defence based on the lack of clarity. It will be recalled that Dr Witchey stated emphatically that in regard to Fiprotec there was no confusion as to its constituent parts and as to the function of each element and that it was accepted by the parties to the litigation that ethanol served as the co-solvent (integer d)). She was, as recorded above, essentially unchallenged in this as counsel on behalf of Cipla chose to move away from the discussion on the constituent parts of Fiprotec. Murphy J rightly recorded that Dr Witchey was unchallenged on this aspect.15 As pointed out above, the hypothetical formulations put to Dr Witchey do not detract from her essentially unchallenged and persuasive evidence on this aspect.16 [56] Following on the conclusion set out in the preceding paragraph, the remaining issue relates to the question whether the mixture of PVP and Tween 80 in Fiprotec is a crystallisation inhibitor falling within integer b) and one which meets the requirements of that test. The answer to that question turns on the experiments carried out by the parties‟ respective experts. 14 See para 39 above. 15 Para 61 of the judgment in the court below. 16 Professor Barbour in conducting his experiments in fact used ethanol as the co-solvent, even though he did this on the basis that Merial had advised it. He did not have any difficulty in conducting the integer b) test. [57] It is now necessary to consider the experiments conducted by Professor Barbour. His expert summary refers to three tests that he conducted in support of Cipla‟s case of non-infringement. He conducted tests B1, B2 and C. Cipla abandoned reliance on test C during the trial. As stated earlier, it is undisputed that Professor Barbour used the actual ingredients of Fiprotec and that the materials employed by Dr Witchey were supplied by the first appellant. [58] As appears from his expert summary Professor Barbour‟s tests, B1 and B2, used DGME and PG present in Cipla‟s product as the organic solvent and the PVP and Tween 80 of Cipla‟s product, as the crystallisation inhibitor. These tests were carried out at concentrations which accord with the requirements in claim 1. In other words, fipronil has a concentration of 10% and PVP and Tween 80, together, have the same concentration. The same solution was used in both tests and both tests failed according to Professor Barbour. [59] Murphy J took the view that Professor Barbour‟s tests were performed carelessly. In this regard, he accepted criticisms proffered by counsel on behalf of the appellants. In respect of test B1 Murphy J said the following (para 52): „The principal reason for which I hesitate to accept the results of [Professor] Barbour‟s Test B1, as scientifically establishing the failure of the crystallisation inhibitor in Fiprotec, is that there is a distinct possibility, if not probability, that an etching on the slide used by [Professor] Barbour (caused by a microscope) contributed significantly to the formation of crystals. Instead of using a clean, new slide, [Professor] Barbour used a five year-old glass slide which he took from his microscope. The etching was caused by the pressure of the component of the microscope holding the slide in place. [Professor] Barbour conceded that any scratching on a glass slide could encourage crystallisation. The photographic evidence in relation to Test B1 reveals that the solution may have pooled against the edge of the etching. This alone makes Test B1 unreliable and the results must be disregarded.‟ [60] In respect of test B2, Murphy J said the following (para 53): „. . . I agree . . . that the results of Test B2, conducted by [Professor] Barbour, are not sufficiently credible to definitively exclude integer b). In this instance, crystallisation materialised after 13 minutes, whereas it took 5 hours in Test B1 despite using the same solution, in the same laboratory at the same temperature. Normally, before one would see crystallisation, at least part of the solution would have to reach the saturation point of the solute in the solvent. Dr Witchey estimated that some 45 % of the solution would have to evaporate before the concentration of fipronil reached a point where the crystallisation inhibitor is even needed. To accept the results of Test B2 it must be accepted that 45 % of a solvent system having boiling points of 200°C (DGME) and 185°C (PG) evaporated in 13 minutes. The probabilities point to an error of some kind, inexplicable in the evidence. [Professor] Barbour might have been prudent when confronted with the rapid rate of evaporation in this test to have conducted a third test.‟ [61] As submitted on behalf of the appellants, it is true that Professor Barbour conducted his tests at relatively short notice and within time constraints. This was evidenced in the inconsistency between the results he obtained from tests B1 and B2. [62] It is also correct that Professor Barbour conceded that he had made „a careless mistake‟ in his summary when he spoke of a mixture of co-solvents. This amplifies the conclusion set out above in relation to his lack of expertise in relation to chemical formulations, but it is also true that his difficulty with dissolving the active ingredient was related to him not following the order in which the constituents were to be mixed. He was also rightly criticised for measuring the proportions of Tween 80 and DGME in v/v despite the facts that (i) Cipla‟s own supplier measures these materials in w/v and (ii) it would mean that the percentages of the crystallisation inhibitor would not equal 10%. He also wrongly described propylene glycol as „polyethylene glycol‟ (PG). All these factors point to a lack of application and conscientiousness. [63] In relation to test B1, the criticisms noted by Murphy J are justified. Professor Barbour knew that there was an etching on the reverse side of the microscope slide brought about by the pressure of the microscope but „hoped‟ that the drop in pursuance of the integer b) test would not spread beyond the etching. He accepted that scratching a glass slide was a well-known technique for encouraging crystallisation which for the purposes of the integer b) test had to be avoided. Professor Barbour‟s „hope‟ proved unfounded as the photographs show that the solution placed on the microscope‟s slide pooled against the edge of the etching. [64] In relation to test B2 Professor Barbour claimed that crystallisation manifested 13 minutes after the commencement of the trial. This differs vastly from the time of onset of crystallisation in relation to test B1. In relation to that test, crystallisation occurred after five hours. Professor Barbour used the same solution in the same laboratory at the same temperature. This was remarkable and ought to have given reason to pause. [65] In the result, Murphy J was correct to reach the conclusion that one could not rely on Professor Barbour‟s integer b) tests. [66] Murphy J, however, questioned the probative value of the tests conducted by Dr Witchey. He criticised her for not being able to offer any explanation as to why the results of her tests and those of Professor Barbour differed. This criticism discounts the Commissioner‟s own conclusions in relation to the reliability of the test conducted by Professor Barbour. [67] The court below considered whether the divergent results might have been due to the fact that Dr Witchey conducted her test in a weighing cabinet which may have inhibited evaporation and thus the formation of crystals, but rightly in my view accepted her evidence that the use of the cabinet was legitimate as it avoided artificial means of enhancing evaporation such as would occur where a convector flux was allowed to push across the surface of a slide. Leaving the slide in an open laboratory would, if it was exposed to air handling systems, enhance evaporation. Dr Witchey was satisfied that the cabinet was of sufficient size and sufficient configuration to allow free evaporation. [68] Continuing to explore the reason for divergent results, the court below considered that it might be due to the use by Dr Witchey, not of Cipla‟s own composition of fipronil, but of fipronil and PG sourced elsewhere. The Commissioner also noted that the DGME sourced by Dr Witchey was Transcutol V and not Transcutol P. [69] Murphy J considered fipronil to be the most important ingredient in the test, particularly since it was the active pharmaceutical ingredient. He speculated that different processes in producing the ingredients used by Dr Witchey might have caused the divergent results. Whilst Dr Witchey did agree that it would have been optimum to have conducted the test with the exact constituents of the infringing product, she did not concede that the tests conducted by her were therefore invalid. Murphy J also theorised that the fipronil supplied by Merial may have been in a different polymorphic form to that in Fiprotec. Having resorted to the speculation set out above, the court below found that there was no reliable test before it which adequately demonstrated that the crystallisation inhibitor system in Fiprotec (i.e. the combination of PVP K30 and Tween 80 (in a ratio of 1,4:1)) would inhibit fipronil sourced from GSP Crop Science (i.e. the fipronil used in Fiprotec) from producing fewer than 10 crystals in the crystallisation inhibitor test of claim 1. [70] As correctly pointed out on behalf of the appellants, there was no evidence before the Commissioner on which it might be found that Cipla‟s fipronil was in a different polymorphic form. It appears from documents put to Dr Witchey when she was testifying that the fipronil used by Cipla and that used by Merial had the same chemical abstract number. Similarly, although Dr Witchey used a slightly different form of DMGE (Transcutol V and not Transcutol P), she explained that these two compounds were „virtually identical‟ and this would not have materially affected the experiments. This was never seriously challenged. [71] Furthermore, it is so that there was no evidence adduced that there were different processes employed in relation to manufacture of Merial‟s fipronil or Cipla‟s, or that Cipla‟s fipronil contained impurities which may have impacted on crystallisation. [72] The most obvious cause for the discrepancies, as noted above, was the careless manner in which Professor Barbour conducted his tests as opposed to the more meticulous manner adopted by Dr Witchey. The high water mark of Professor Barbour‟s evidence was that fipronil from different sources might possibly have resulted in different impurities. The speculation referred to above discounted Professor Barbour using the same fipronil during the same series of tests but obtaining divergent results. I agree as submitted on behalf of the appellants that the impurities debate is a red herring. [73] Despite having rejected Cipla‟s defences relating to the validity of the patent, Murphy J nevertheless held that Dr Witchey‟s view, that ethanol was the co-solvent in the formulation, was not persuasive. Although Murphy J found that Professor Barbour, by using DGME and PG as the solvents, had, by implication, „arguably‟ accepted that ethanol was in fact the co-solvent in Fiprotec, he thought it important that Professor Barbour had testified that he had found the teaching of the patent confusing because of the dual identity of ethanol. The court below held that Dr Witchey had experienced difficulty in dealing with the hypotheticals presented to her. He concluded that Dr Witchey had failed to prove that Fiprotec included integer d) by failing to persuade him that ethanol was indeed the co-solvent. This aspect has been dealt with in some detail in relation to Cipla‟s challenge to the invalidity of the patent and I do not intend to repeat it, save to state that, for the reasons provided above, the court below erred in concluding as set out earlier in this paragraph. [74] The contention on behalf of Cipla, that Dr Witchey was evasive and refused to make concessions which were called for and that her stock response was to retreat into her expertise as a formulator is unwarranted. As stated earlier, she was entitled to rely on her expertise as a formulator. She is a formulation chemist trained as a chemical engineer with 25 years of experience in pharmaceutical product development. She is, as recorded by the court below, indisputably a person skilled in the art and thus an addressee of the patent. As demonstrated above, she was an impressive witness. The submission on behalf of Cipla that Professor Barbour, by contrast, was an excellent witness is equally unjustified. The weaknesses in his testimony have been referred to earlier in this judgment. [75] For completeness I record that Cipla presented evidence by a non-expert witness, a Mr Swiegers, that he had applied Fiprotec to a sample of dogs and that they all had crystals on their coats thereafter. In this regard there was countervailing evidence on behalf of the appellants. The court below disregarded Mr Swiegers‟ evidence on the basis that claim 1 of the patent presented no degree of visibility of crystals on the coat of an animal. The evidence in relation to the actual application of Fiprotec to the coat of an animal was not relied upon before us and need not detain us. [76] In my view the court below erred by not concluding that the appellants had proved on a balance of probabilities that there was an infringement of claim 1 and the other dependant claims. [77] The following order is made: 1. The appeal is upheld with costs including the costs of two counsel. 2. The order of the court below is set aside and substituted as follows: „1. The defendant is interdicted and restrained from infringing claims 1, 2, 3, 7 to 15 and 18 to 20 of the patent. 2. The defendant is ordered to deliver up to the plaintiffs all infringing Fiprotec products in its possession or under its control. 3. An inquiry is ordered in relation to the damages suffered by the plaintiffs as a consequence of the infringement of the patent by the defendant alternatively an inquiry into the reasonable royalty to which the plaintiffs are entitled. 4. In the event of the parties being unable to reach an agreement as to the further pleadings to be filed, discovery, inspection or other matters of procedure relating to the inquiry, an order authorising any one of the parties to make application to the court for directions in regard thereto. 5. Each of the claims referred to in para 1 above of South African Patent Number 1996/8057 is certified as being valid in terms of section 74 of the Patents Act 57 of 1978. 6. The defendant is ordered to pay the plaintiffs‟ costs of suit, including the costs of two counsel and the qualifying fees of the plaintiffs‟ expert witnesses.‟ ________________________ M S NAVSA Acting Deputy President APPEARANCES: For Appellants: L Bowman SC (with G Marriott) Instructed by: D M Kisch Inc., Pretoria Phatshoane Henney Attorneys, Bloemfontein For Respondents: C Puckrin SC (with R Michau SC) Instructed by: Brian Bacon Inc., Cape Town Webbers, Bloemfontein

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL FROM The Registrar, Supreme Court of Appeal DATE 1 April 2016 STATUS Immediate Please note that the media summary is for the benefit of the media and does not form part of the judgment. Merial v Cipla Vet (20772/2014) [2016] ZASCA 57 (1 April 2016) MEDIA STATEMENT Today, the Supreme Court of Appeal (SCA) upheld an appeal by Merial, Merial Limited and Merial South Africa (Pty) Ltd (the appellants), against an order by the Court of the Commissioner of Patents, in which it was found that Cipla Vet (Pty) Ltd (Cipla) had not infringed the appellants’ patent relating to an anti-parasitic treatment for domestic animals. Overturning this decision, the SCA found that Cipla’s product (‘Fiprotec’) had infringed the patent, and accordingly granted an order inter alia (i) interdicting Cipla from infringing the relevant claims in the patent; (ii) that Cipla deliver up all products infringing the patent; (iii) that an inquiry be held to determine damages or a reasonable royalty; and (iv) certifying as valid the relevant claims in terms of s 74 of the Patents Act 57 of 1978. The main issues before the SCA were whether the patent was invalid for lack of clarity, and whether the patent had in fact been infringed. The patent in suit was for an anti-parasitic treatment for domestic animals, which when applied would cover the coat of the animal. The active anti-parasitic ingredient of the treatment was a compound known as ‘fipronil’, which had previously been patented. However, an unpleasant side effect of fipronil was that it tended to crystallise on the animals’ coats, leaving them sticky. What distinguished the patent in suit from previous patents was the presence of a ‘crystallisation inhibitor’, which reduced the degree of this crystallisation. The patent consisted of four ingredients, each of which served a specific function: first, the fipronil, which was the active anti-parasitic ingredient; second, the crystallisation inhibitor; third, a solvent; and fourth, a co-solvent (ie a second solvent) which also acted as a drying promoter. For each ingredient (other than fipronil), the patent listed a number of possible compounds which could be used, either alone or in combination with one another. However, the patent taught that the compounds selected to act as the crystallisation inhibitor would also have to satisfy a ‘crystallisation inhibitor test’. This test was conducted using all the chosen ingredients but excluding the co-solvent. Cipla challenged the validity of the patent on the basis that this crystallisation inhibitor test rendered the claims unclear. The basis for this was that there was some overlap between the compounds that could make up the various ingredients, for example, a compound which could be used as the solvent could also be used as the co-solvent and/or the crystallisation inhibitor. As a result, Cipla’s argument went, it was not always possible to objectively determine which compound formed part of which ingredient, and accordingly it was not always possible to objectively determine which compounds should be excluded from the test. To support this argument, Cipla presented a number of complex hypothetical compounds in order to demonstrate the lack of clarity. The SCA held that the interpretation of a patent is a process of construction by a mind willing to understand, not deconstruction by a mind desirous of misunderstanding. After reviewing the expert evidence, the court held that a skilled addressee was capable of understanding the ambit of the claims, and the existence of contrived or ‘mythical’ hypotheticals did not render the patent in suit invalid for lack of clarity. Concerning the question of infringement, Cipla argued that Fiprotec did not infringe the patent in suit because it did not satisfy the crystallisation inhibitor test, and therefore it did not come within the scope of the patent’s claims. It based this argument on experiments conducted by its expert which purportedly demonstrated that Fiprotec did not satisfy the crystallisation inhibitor test. However, the SCA held that the manner in which these experiments had been carried out was open to criticism and that their results were unreliable. Accordingly, the experiments conducted by the appellants’ expert witness, which showed that Fiprotec did in fact satisfy the crystallisation inhibitor test, were to be preferred, and Fiprotec was held to infringe the patent in suit. In coming to this conclusion, the SCA also noted that the court below was wrong to reject the appellants’ expert’s experiments on the basis that the ingredients she used were sourced from another supplier (and were not precisely the same as those used in Fiprotec). The SCA held that this was irrelevant, as there was no evidence that this would have made any material difference to their chemical composition or the results of the experiments she had conducted. The SCA accordingly upheld the appeal, and held that the appellants’ patent had been infringed by Cipla, and granted the order described above. --- ends ---

1388

non-electoral

2010

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Case No: 416/09 In the matter between: DISTELL LIMITED First Appellant STELLENBOSCH FARMERS’ WINERY LIMITED Second Appellant and THE COMMISSIONER FOR THE SOUTH AFRICAN REVENUE SERVICE Respondent Neutral citation: Distell v CSARS (416/09) [2010] ZASCA 103 (13 September 2010) Coram: HARMS DP, HEHER, MHLANTLA JJA, EBRAHIM AND K PILLAY AJJA Heard: 18 August 2010 Delivered: 13 September 2010 Updated: Summary: Customs and Excise – Act no 91 of 1964 – tariff classification – ‘wine coolers’ – whether ‘other fermented beverages’ or ‘mixtures of fermented beverages and non-alcoholic beverages’ – whether water is a ‘non-alcoholic beverage’. ___________________________________________________________________________________ _ ORDER On appeal from: North Gauteng High Court (Pretoria) (Ebersohn AJ, Webster and Molopa JJ sitting as court of appeal): 1. The appeal succeeds with costs including the costs of two counsel. 2. The order of the court a quo is set aside and replaced by the following: ‘1. The appeal succeeds with costs including the costs of two counsel. 2. Save for the costs order granted in favour of the second appellant the order of the High Court is set aside and in its place the following order is made: “(a) The determination made by the Commissioner for the South African Revenue Service (“the Commissioner”) on 13 October 2004 that the products listed in Annexure “A” (the “final wine cooler products”) fall to be classified in tariff item 104.15.50 before the amendment of Part 2A of Schedule 1 to the Customs and Excise Act, 91 of 1964 (“the Act”), dated 18 February 2004, is hereby corrected by substituting therefor a determination that prior to the said amendment only the wine portion used in the manufacture of the final wine cooler products is liable to excise duty under item 104.15.10 of Part 2A of Schedule 1 to the Act. (b) The determination made by the Commissioner on 13 October 2004 that the final wine cooler products fall to be classified in tariff item 104.17.15 after the amendment of Part 2A of Schedule 1 to the Act (dated 18 February 2004) is hereby corrected by substituting therefor a determination that after the said amendment the whole of the final wine cooler products is classifiable in tariff item 104.17.22 of Part 2A of Schedule 1 to the Act. (c) The determinations made by the Commissioner on 13 October 2004 that Bernini Sparkling Grape Beverage and Crown Premium fall to be classified in tariff item 104.17.15 after the amendment of Part 2A of Schedule 1 to the Act (dated 18 February 2004) are hereby corrected by substituting therefor a determination that the whole of the said products is classifiable in tariff item 104.17.22 of Part 2A of Schedule 1 to the Act.” _____________________________________________________________________________________ _ JUDGMENT _____________________________________________________________________ HEHER JA (HARMS DP, MHLANTLA JJA, EBRAHIM and K PILLAY AJJA concurring): [1] This case concerns the correct classification of ten wine coolers1 for the purposes of excise duty payable in terms of the Customs and Excise Act 91 of 1964 (‘the Act’) and the consequential relief to which the appellants are entitled if they succeed on the classification issue. [2] The first appellant (‘Distell’) has manufactured alcoholic beverages for many years. It acquired the business of the second appellant (‘SFW’)2 with effect from 1 January 2001. SFW also manufactured such beverages. [3] Prior to 1 January 2001 SFW manufactured Crown. Distell continued to do so after the acquisition. Before and after, it manufactured the other nine wine coolers. [4] The classification of the wine coolers was, for the most part, the subject of determinations made by the respondent (‘the Commissioner’) on various dates in terms of s 47(9)(a) of the Act. The appellants contest the latest determination in respect of each cooler. The relief claimed by the appellants in the courts below took the form of appeals in terms of s 47(9)(e), or, as an alternative, applications to compel the Commissioner to correct determinations ‘made in error’, as contemplated in s 47(9)(d)(i), and, in respect of Crown (during a limited period when it was not the subject of any determination), declaratory relief. 1 According to the evidence the wine coolers consist of variations of an unfortified wine base to which flavouring and water are added and the mixture is carbonated to produce the end product. The ten wine coolers are Bernini Sparkling Grape Beverage (‘Bernini’); Crown Premium (‘Crown’);Bernini Dry Grape Liquor; Tiffany’s Bucks Fizz Cooler; Tiffany’s Blackcurrant Cooler; River Dew Peach Chenin Blanc Cooler; River Dew Raspberry Pinotage Cooler; River Dew Tropical Sauvignon Blanc Cooler; River Dew Blackcurrant Cabernet Cooler; and Castell Ginger Fizz Cooler. 2 The locus standi of SFW, a subject of dispute in the court a quo, is now moot. [5] In terms of s 47(1) of the Act duty is payable on, inter alia, all ‘excisable goods’ in accordance with the provisions of Schedule 1 to the Act. The term ‘excisable goods’ is defined as meaning goods specified in Part 2 of Schedule 1. Part 1 of Schedule 1 contains descriptive headings and sub-headings3 for the purposes of classifying goods in relation to duties payable under Part 1 (customs duty) and other parts of Schedule 1. Section A of Part 2 to the Schedule uses these tariff headings for the purpose of identifying, by way of item numbers, the goods which constitute ‘excisable goods’ and the excise duty payable on them. The excise headings in Part 2A mirror the tariff headings in Part 1 (sometimes with minor differences which may limit the goods within the excise headings but can never broaden the class). Part 2A of Schedule 1 was amended with effect from 18 February 2004. The classification issue will require a consideration of the position both before and after the amendment. The facts and history of the dispute [6] As will appear, each product is a composite and the descriptive tariff headings which must be considered are by no means sharply defined, and it is, therefore, hardly surprising that neither the appellants nor the Commissioner has been consistent in its views concerning the correct classification of the coolers. Each side treats the vacillations of the other as opportunism. It is in my view unnecessary to attach epithets to the conduct of either. [7] On 17 July 1995 the Commissioner issued a written tariff determination to SFW in terms whereof Crown was determined to be (i) classified under tariff heading 22.06.00.90 of Part 1 of Schedule 14, and hence (ii) liable to excise duty in terms of item 104.15.80 of Part 2A of Schedule 1. [8] On 1 December 1995 the Part 2A determination was amended by the 3 Based on the international Harmonized System for the Classification of Goods. 4 The precise terms of this and other headings are set out below. In this judgment the abbreviation ‘TH’ will be used to designate a heading in Part 1. Commissioner from item 104.15.80 to item 104.15.50. [9] On 21 June 1996 the Commissioner issued a determination that classified Bernini under TH 22.06.00.90 and item 104.15.80. In September of that year it amended the latter classification to item 104.15.50. [10] For reasons not germane to the appeal Distell paid duty on Bernini at the rate specified in item 104.15.10 (a lower rate than 104.15.50) until August 2002. The appellants’ view in the current litigation is that no duty at all was payable on Bernini as a cooler, but only on the wine used in making it. On that basis, any overpayment was mainly attributable to duty having been paid on the full volume of Bernini and not just on the wine content. [11] On 14 August 2002 the Commissioner issued a determination to Distell in respect of the other eight coolers. This was the first determination in respect of these. The determination was in line with those made for Crown and Bernini, ie TH 22.06.00.90 and item 104.15.50. Shortly before issuing this determination, at a meeting on 22 July 2002 the SARS officials had explained their view as being that the coolers were a mixture of wine and a non-alcoholic beverage in the form of water.5 Thus, at that stage, SARS’s approach on the classification question was what the appellants contend in this appeal. [12] Distell, whose opinion had until then been that excise duty was payable on the coolers, but at the rate contained in item 104.15.10, investigated the matter further. Its conclusion was that the mixtures falling under the second part of TH 22.06 were not excisable as such and that Distell should be paying excise duty only on the wine component and at the 104.15.10 rate. This was explained and motivated in a letter from its consultant, KPMG, to SARS of 7 October 2002. [13] In regard to the eight coolers that had been the subject of the August 2002 determination, SARS conceded the position in a letter of 12 March 2003: the determination was amended in accordance with Distell’s representations. At the same time SARS confirmed that duty (at the 104.15.10 rate) was payable only on the wine content of the coolers. However, in another letter of the same date the Commissioner refused to amend the 1995/1996 determinations for Crown and Bernini, holding that any appeal in that regard was time-barred in terms of s 47(9)(f), this despite its implicit acknowledgement that those determinations were wrong in law. [14] Distell remonstrated without effect against what it regarded as inconsistent and unjust treatment. On 15 December 2003 it gave notice in terms of s 96 of the Act of its intention to institute legal proceedings against the Commissioner and launched the application which gave rise to this appeal on 6 May 2004. At that stage SARS’s attitude was still that the coolers were mixtures falling under the second part of TH 22.06. [15] In the meantime, with effect from 18 February 2004, Part 2A of Schedule 1 had been amended. The effect of the amendment was to make clear that all beverages classifiable under TH 22.06 would be liable for the same excise duty. [16] Appellants’ counsel submitted before us that, when the application was launched, SARS began to look for arguments to support the very large amounts of duty which Distell and SFW had overpaid. Be that as it may, in three letters to Distell and SFW dated 13 October 2004 SARS certainly adopted a new position, namely that the coolers were not mixtures falling under the second part of TH22.06, but, instead, fermented beverages, falling within the first part of that heading. [17] In consequence of those letters, the Commissioner: (i) determined the Part 1 classification of Crown to be amended from TH22.06.00.90 to TH22.06.00.80 from that date (ie 13 October 2004) and subject to excise duty in terms of item 104.17.15; (ii) confirmed the Part 2A classification of Crown (made in 1995) in terms of item 104.15.50 prior to the statutory amendment of 18 February 2004; (iii) determined Bernini to be classified under TH22.06.00.80 with effect from the date of determination and subject to excise duty in terms of item 104.17.15; 5 ‘By virtue of the General Notes to Chapter 22 and the terms of headings 22.01 and 22.02’. (iv) withdrew the determination of 12 March 2003 relating to the eight wine coolers (ie other than Crown and Bernini); (v) determined those coolers to be classified under TH22.06.00.80 of Schedule 1 with effect from 14 August 2002 and subject to excise duty under item 104.15.50 before the statutory amendment of 18 February 2004 and under item 104.17.15 after that amendment. [18] On or about 12 October 2005 Distell applied successfully to join SFW as a second applicant. [19] The classification application was argued before Seriti J in September 2006. On 1 November 2006 the learned judge dismissed the application with costs but subsequently granted the appellants leave to appeal to the Full Court. [20] The appeal was argued on 13 August 2008. The appellants refined the relief claimed by them without objection from the respondent. The relief that they then sought (and the order which they now seek on appeal) was as follows: ‘1. The appeal is upheld with costs, including those attendant on the employment of two counsel. 2. Save for the costs order granted in favour of the second appellant, the order of the Court a quo is set aside and replaced with the following orders: 2.1 The determination made by the Commissioner for the South African Revenue Service (“the Commissioner”) on 13 October 2004 that the products listed in Annexure “A” (the “final wine cooler products”) fall to be classified in tariff item 104.15.50 before the amendment of Part 2A of Schedule No 1 to the Customs and Excise Act, No 91 of 1964 (“the Act”), dated 18 February 2004, is hereby corrected by substituting therefor a determination that prior to the said amendment only the wine portion used in the manufacture of the final wine cooler products is liable to excise duty under item 104.15.10 of Part 2A of Schedule No 1 to the Act. 2.2 The determination made by the Commissioner on 13 October 2004 that the final wine cooler products fall to be classified in tariff item 104.17.15 after the amendment of Part 2A of Schedule No 1 to the Act (dated 18 February 2004) is hereby corrected by substituting therefor a determination that after the said amendment the whole of the final wine cooler products is classifiable in tariff item 104.17.22 of Part 2A of Schedule No 1 to the Act. 2.3 In respect of the period prior to 18 February 2004, the determination made by the Commissioner on 10 September 1996 in respect of Bernini Sparkling Grape Beverage (such determination having been confirmed on 13 October 2004) is set aside and substituted with the following determination: “Only the wine portion used in the manufacture of Bernini Sparkling Grape Beverage is subject to excise duty under tariff item 104.15.10 of Part 2.4 of Schedule No 1, as it read prior to 18 February 2004.” 2.4 In respect of the period prior to 1 January 2001, the determination made by the Commission on 30 November 1995 in respect of Crown Premium (such determination having been confirmed on 13 October 2004) is set aside and substituted with the following determination: “Only the wine portion used in the manufacture of Crown Premium is subject to excise duty under tariff item 104.15.10 of Part 2.4 of Schedule No 1, as it read prior to 18 February 2004.” 2.5 In respect of the period 1 January 2001 to 18 February 2004 it is declared that only the wine portion used in the manufacture of Crown Premium was subject to excise duty under tariff item 104.15.10 of Part 2A of Schedule No 1, as it read prior to 18 February 2004. 2.6 The determinations made by the Commissioner on 13 October 2004 that Bernini Sparkling Grape Beverage and Crown Premium fall to be classified in tariff item 104.17.15 after the amendment of Part 2A of Schedule No 1 to the Act (dated 18 February 2004) are hereby corrected by substituting therefor a determination that the whole of the said products are classifiable in tariff item 104.17.22 of Part 2A of Schedule No 1 to the Act. 2.7 The first respondent shall pay the applicants’ costs including those attendant on the employment of two counsel.’ [21] On 3 April 2009 the Full Court (per Ebersohn AJ, Webster and Molopa JJ concurring) dismissed the appeal with costs. This Court thereafter granted special leave to appeal. Sources of law [22] The legal sources applicable to tariff classification are- (a) Schedule 1 to the Act, Part 1 of which deals with customs duties, and Part 2 with excise duties. Part 1 contains the wording of the tariff headings, section notes and chapter notes. The tariff headings in Part 1 are used in Part 2 for purposes of imposing excise duty. Schedule 1 also contains, in section A of the General Notes, the General Rules for the Interpretation of the Harmonized System. In the present matter Interpretative Rules 1, 3 and 6 may have relevance. (b) The Explanatory Notes to the Harmonized System (sometimes called ‘Brussels Notes’) issued from time to time by the World Customs Organization. In terms of s 47(8)(a) of the Act, the interpretation of any tariff heading or sub-heading in Part 1 of Schedule 1, the general rules for the interpretation of Schedule 1, and every section note and chapter note in that Part, is ‘subject to’ the Explanatory Notes. (c) The Case Law In Secretary for Customs and Excise v Thomas Barlow and Sons Ltd6 Trollip JA referred to Rule 1 of the Interpretative Rules which states that the titles of sections, chapters and sub- chapters are provided for ease of reference only and that, for legal purposes, classification as between headings shall be determined according to the terms of the headings and any relative section or chapter notes and (unless such headings or notes otherwise indicate) according to paragraphs 2 to 5 of the Interpretative Rules. He pointed out that this rendered the relevant headings and section and chapter notes not only the first but also the paramount consideration in determining which classification should apply in any particular case. The Explanatory Notes, he said, merely explain or perhaps supplement the headings and section and chapter notes and do not override or contradict them. In International Business Machines SA (Pty) Ltd v Commissioner for Customs and Excise7 Nicholas AJA identified three stages in the tariff classification process: ‘first, interpretation – the ascertainment of the meaning of the words used in the headings (and relative section and chapter notes) which may be relevant to the classification of the goods concerned; second, consideration of the nature and characteristics of those goods; and third, the selection of the heading which is most appropriate to such goods.’ There is no reason to regard the order of the first two stages as immutable. [23] As to the Interpretative Rules, reference has been made above to the content of 6 1970 (2) SA 660(A) at 675H-676F. 7 1985 (4) SA 852 (A) at 863G-H. Rule 1. Rule 3 provides that when goods are prima facie classifiable under two or more headings, the heading which provides the most specific description shall be preferred to headings providing a more general description. Rule 6 applies the same principle mutatis mutandis as between sub-headings. The nature and characteristics of the wine coolers [24] In applying the three stages of tariff classification in this case it is convenient to consider first the nature and characteristics of the wine coolers, as without such an understanding the importance of the words used in the headings may be lost or undervalued. [25] The manufacturing process of the coolers was described in an affidavit by a Distell employee, Duncan Green. He stated that the coolers consist of ‘a wine base to which water, sweetening agents and flavouring agents are added’. He annexed to his affidavit detailed recipes for each product. The differences in the processes are only material in relation to an alternative argument raised by counsel for the Commissioner. For present purposes the Bernini recipe may be cited as an example of the similarities. [26] The first part of the Bernini recipe describes the manufacturing of the ‘concentrate’, a blending of sweetening agents, fining agents and a small amount of water with base wine, an ordinary wine with an alcohol content of between 12% and 13%. The next part of the recipe requires the blending of the concentrate with additional water (described as ‘de- aerated, carbonated process water’) to achieve a 50:50 blend with the concentrate. The wine in the ‘concentrate’ is ordinary wine without the removal of volume ie the concentrate is not reduced to a syrup. The intermediate phase of the product is a ‘concentrate’ because it has a higher alcohol content than the intended end-product, the cooler. [27] The recipes for Crown and the eight other coolers are essentially the same as that of Bernini, save that in the case of some of the coolers there is no intermediate concentrate: instead the full amount of water (not yet carbonated) is added to the wine together with the flavourants and fining agents and the full-volume product then goes to the bottling plant where it is carbonated and bottled. Words used in the Headings, Chapter Notes and Tariff Items [28] It is common cause that the relevant chapter of Part 1 is chapter 22, headed ‘BEVERAGES, SPIRITS AND VINEGAR’. [29] Tariff Headings 22.01 and 22.02 deal with (in summary) unsweetened and sweetened water respectively. (Neither such is excisable under Part 2A.) TH 22.03 deals with beer made from malt, and is not relevant. [30] THs 22.04, 22.05 and 22.06 read as follows: ‘22.04 - WINE OF FRESH GRAPES, INCLUDING FORTIFIED WINES; GRAPE MUST OTHER THAN THAT OF HEADING 20.09 22.05 - VERMOUTH AND OTHER WINE OF FRESH GRAPES FLAVOURED WITH PLANTS OR AROMATIC SUBSTANCES 22.06 - OTHER FERMENTED BEVERAGES (FOR EXAMPLE, CIDER, PERRY, MEAD); MIXTURES OF FERMENTED BEVERAGES AND MIXTURES OF FERMENTED BEVERAGES AND NON-ALCOHOLIC BEVERAGES, NOT ELSEWHERE SPECIFIED OR INCLUDED.’ (The later headings in chapter 22 are of no significance.) [31] TH22.06 thus falls into two parts, namely (a) the part before the semi-colon (ie other fermented beverages such as cider, perry and mead) and (b) the part thereafter (which covers two types of mixtures, namely (i) mixtures of fermented beverages, and (ii) mixtures of fermented beverages and non-alcoholic beverages). [32] As regards excise duty, the relevant item prior to 18 February 2004 was item 104.15.8 The relevant items from 18 February 2004 are items 104.15 and 104.17.15 and 104.17.22.9 The relevant excise items in Part 2A use the THs 22.04, 22.05 and 22.06. The dispute between the parties concerns the interpretation of these headings and their application to the wine coolers. [33] The debate focuses mainly on TH22.06. The Commissioner’s case is that the coolers are ‘other fermented beverages’ under the first part of 22.06. His argument in support of that classification is the following: (a) The coolers are not like, for example, wine and lemonade, the result of a fermented beverage and a proper non-alcoholic beverage simply mixed together; they are designer products made in a single process that, for purely practical reasons, is subdivided into two stages. The outcome of the process is, in each case, a fermented beverage. (b) Shorn of adornment, the processes are no different from that employed to make a cup of coffee (using coffee, milk and sugar): although a mixture of two or more ingredients Tariff Item Tariff Heading Description 104.15 .05 .10 .40 .50 .60 .70 .80 22.04 22.05 22.06 Wine of fresh grapes, including fortified wines: grape must other than that of heading 20.09 Vermouths and other wine of fresh grapes flavoured with plants or aromatic substances Other fermented beverages (for example, cider, perry and mead): Sorghum beer (excluding beer made from preparations based on sorghum flour) Unfortified still wine Fortified still wine Other still fermented beverages, unfortified Other still fermented beverages, fortified Sparkling wine Other fermented beverages (excluding sorghum beer)’ Tariff Item Tariff heading Description 104.15 22.04 Wine of fresh grapes, including fortified wines; grape must, other than that of heading no 20.09 22.05 Vermouths and other wine of fresh grapes flavoured with plants or aromatic substances. .02 Sparkling wine .04 Unfortified wine .06 Fortified wine 104.17 22.06 Other fermented beverages, (for example, cider, perry and mead); mixtures of fermented beverages and mixtures of fermented beverages and non-alcoholic beverages, not elsewhere specified or included: .05 Traditional African beer as defined in Additional Note 1 to Chapter 22 .15 Other fermented beverages, unfortified .17 Other fermented beverages, fortified .22 Mixtures of fermented beverages and mixtures of fermented beverages and non-alcoholic beverages .90 Other’ may result in an end product that may be consumed as such (eg sweetened milk or sugar water), and although some people may have a preference as to the order in which the ingredients are to be added, nothing turns on these matters. Irrespective of how one goes about it, the final product will not be a mixture of the ingredients, but a new designer product: coffee. [34] By contrast the appellants’ case is that the coolers fall under the second part of TH22.06 (‘mixtures’), being a mixture of a fermented beverage (wine) and a non-alcoholic beverage (water). An explanation of the relief claimed by the appellants and why they regard it as important [35] To explain the significance of the two competing positions for purposes of excise duty in Part 2A, one must distinguish between the period before and after 18 February 2004. [36] Before 18 February 2004- (a) Item 104.15 in Part 2A included only the first part of TH22.06. Accordingly, it is common cause that if, as the appellants contend, the wine coolers are mixtures that fall under the second part of TH22.06, no excise duty was payable on the coolers up to that date. (b) Excise duty was, however, payable on the manufacture of the wine used in creating the wine coolers. This duty was payable in terms of item 104.15.10 (‘unfortified still wine’) read with TH22.04 (‘wine of fresh grapes . . .’). (c) However, the Commissioner’s case is that the coolers are ‘other fermented beverages’ and that the first part of TH22.06 was certainly covered by excise item 104.15. In that case the coolers would fall under excise sub-item 104.15.50 (‘Other still fermented beverages, unfortified’). (d) The result would be, on the Commissioner’s case, that the appellants had to pay duty not only on the wine alone, but also on the coolers containing the same wine (which, because of the addition of water, would have a larger volume). Moreover, the rate imposed by item 104.15.50 was higher than the rate imposed by item 104.15.10. (e) The different contentions of the parties are also relevant to the question of rebates on the excise duty payable in respect of the wine used in making the coolers. This will be dealt with below. [37] From 18 February 2004: (a) Item 104 in part 2A was amended by removing TH22.06 from item 104.15 and creating a new excise item, 104.17, to deal with TH22.06 which it now covers in its entirety (and not merely the first part as previously). (b) It is common cause that excise duty is, in terms of item 104.17, payable on the coolers. However, the appellants contend that, because the coolers fall under the second part of TH22.06, they should be classified under excise sub-item 104.17.22, whereas the Commissioner (consistent with his contention that they fall under the first part of TH22.06) argues that the coolers are to be classified under excise sub-item 104.17.15. (c) The difference is not relevant to the rate of excise duty payable on the coolers, since the rates in items 104.17.15 and 104.17.22 have been the same. However, the classification is of importance when it comes to rebates on the excise duty payable on the wine used in making the coolers. [38] In the debate between the parties rebates are relevant in respect of the period before and after 18 February 2004 for the reasons which follow: (a) As noted, excise duty is payable on the wine manufactured for use in making the coolers. Up to 18 February 2004 this duty was payable in terms of item 104.15.10 read with TH22.04. As from that date the duty on the wine has been payable in terms of item 104.15.04 read with TH22.04. (The change in the numbering of the sub-items is not material – both deal with ‘unfortified wine’.) (b) If excise duty is also payable on the coolers such duty (whether under the old item 104.15.50 or the new item 104.17.15 or 104.17.22) would be payable at a higher rate and on a larger volume. The larger volume would include the wine on which duty (albeit at a lower rate) had already been paid. (c) To prevent this double taxation, s 75(1)(d) read with Schedule 6 allows a manufacturer of excisable goods in certain circumstances to claim a rebate in respect of duty paid on excisable goods used in the manufacture of other excisable goods. (d) Prior to 1 April 2006 the relevant rebate item in Schedule 6 was item 606.22.10. This item did not deal specifically with wine used in the manufacture of mixtures falling under TH22.06, but provided for a full rebate of duty for excisable goods in a customs and excise warehouse ‘entered for use in the manufacture, by reprocessing, of excisable goods of the same or another class or kind’. This was the rebate item Distell initially applied for the wine used in making the coolers. (e) But Schedule 6 was amended with effect from 1 April 2006. An item 620 was introduced dealing specifically with wine and fermented beverages. Item 620.05.03 allows a full rebate of duty for unfortified wine ‘entered for use in the manufacture of . . . mixtures of fermented beverages and mixtures of fermented beverages and non-alcoholic beverages of item 104.17.22’ (i.e.) mixtures as contemplated in the second part of TH 22.06). There is, however, no rebate item for wine entered for use in the manufacture of ‘other fermented beverages’ (ie beverages contemplated in the first part of TH 22.06). (f) In regard to the rebate regime up to 1 April 2006, the Commissioner responded to the application brought by the appellants in this matter by notifying Distell, in para 22.7 of an opposing affidavit filed on 6 May 2005, of his decision that as from the date of delivery of that affidavit Distell would no longer be allowed to enter the wine under rebate item 606.22.10. In other words, the Commissioner specifically sought to exact double tax from Distell. (g) In regard to the rebate regime from 1 April 2006, the Commissioner’s excise determination in respect of the coolers has become directly relevant because the new rebate item 620.05.03 permits a full rebate for unfortified wine used in making ‘mixtures’ (ie beverages falling under the second part of TH22.06) but contains no rebate for wine used in making ‘other fermented beverages’ (ie beverages falling under the first part of TH22.06). (h) Accordingly, if the appellants are right that the coolers are ‘mixtures’ falling under the second part of TH22.06, the position as from 1 April 2006 is that, because Distell has been paying excise duty (at a higher rate) on the wine coolers (inclusive of the wine forming part thereof), Distell would be entitled to a rebate on the excise duty paid on the earlier manufacture of the wine. Effectively, Distell would pay excise duty once on the finished product, a result that, so the appellants submit, would be both just and intended by the legislature. (i) However, the Commissioner’s excise determination is that the coolers are not mixtures but fall under the first part of TH22.06. Rebate item 620 does not accommodate this situation and the appellants thus have to pay duty on the original wine and, again (at a higher rate and on a larger volume) on the coolers. (j) The appellants therefore submit that the Commissioner’s excise determination gives rise to an oppressive and unjust result. Moreover, they contend, the very formulation of rebate item 620.05 (read with note 3 thereto) shows that the Commissioner’s excise classification of the coolers is wrong. Rebate item 620.05 allows a full rebate on wine entered for use in making sparkling wine, fortified wine, mixtures and spirits of item 104.20. The thinking of the legislature is, according to appellants’ counsel, quite clear: if wine is used in making another excisable beverage it should enjoy a full rebate; the reason why rebate item 620.05 does not mention wine used in making ‘other fermented beverages’ (ie beverages falling under the first part of TH22.06) is that the legislature knew that the first part of TH22.06 did not apply to wine-based beverages (for reasons which will be considered below). The Commissioner’s contested excise determinations in the present case fly in the face of this statutory scheme. [39] Clearly, the financial consequences of the classification issue are substantial and ongoing. If Distell’s submissions are valid the payment of double duty is understandably regarded by it as a serious injustice. [40] As noted earlier, the Commissioner contends that the coolers are classifiable under the first part of TH22.06 as ‘other fermented beverages’, whereas the appellants submit that they are classifiable under the second part as mixtures. By the time of the hearing in the court a quo the Commissioner disputed that water was a ‘non-alcoholic beverage’ for tariff purposes. On the Commissioner’s argument, this rendered irrelevant the fact that, prior to 18 February 2004, item 104.15 did not include the second portion of TH22.06 dealing with mixtures. According to the Commissioner, the relevant tariff item in Part 2A was item 104.15.50, ‘Other still fermented beverages, unfortified’. [41] Although Chapter 22 is titled ‘BEVERAGES, SPIRITS AND VINEGAR, Interpretative Rule 1 states that such titles are for ease of reference only and that, for legal purposes, classification must be determined according to the terms of the headings and relevant section and chapter notes. Accordingly, the appellants’ counsel rightly placed no reliance on such force as the title might lend to their argument. [42] The wine component of the coolers ie the wine before it is mixed with the water, is ordinary wine falling under TH 22.04, ‘wine of fresh grapes’. The explanatory notes to TH 22.04 state that this tariff heading includes ordinary wine. [43] The water component of the coolers, ie the water which is, prior to mixing, added to the wine, is unsweetened water falling under TH 22.01. That item itself states that ‘waters’ for the purpose of the heading include natural waters. The Explanatory Notes on TH22.01 provide that the item includes natural waters of all kinds. (Chapter Notes 1(b) and (c) and the corresponding Explanatory Note A state that seawater and distilled or conductivity water – do not fall under chapter 22.) [44] As regards the end product (the wine coolers manufactured through a process of mixing), the parties were ad idem that TH22.06 applied, the dispute being confined to whether it fell into the first or second part of the item. Can the wine coolers be accommodated in the first part of TH 22.06 under the rubric ‘Other fermented beverages’, as the Commissioner has classified them? [45] The rationale for so placing the coolers, according to counsel, was that they are ‘designer products’ in which the wine component, the product of a fermentation process, imbues the mixture of wine, water, sweeteners and flavourant with the element of fermentation and renders the finished product a fermented beverage. When the court put to counsel that, properly interpreted, a ‘fermented beverage’ was one where the beverage was the end product of a fermentation process, he maintained his initial stance but conceded that if such should be the correct interpretation, ‘the Commissioner has no argument’. [46] A moment’s reflection will demonstrate that the proposition put to counsel must be correct. The wine component is, of course, separately manufactured, anterior to use for any other purpose such as its adoption as a base for a wine cooler. The wine is, of itself, classifiable under TH22.04. By reason of a note to TH22.06 it is excluded from the scope of TH22.06 and is, therefore, not a ‘fermented beverage’ for the purpose of the heading. The recipe for each cooler shows that fermentation does not occur in the process and plays no role in bringing about the product. Thus, production of the coolers is devoid of any fermentation process and they are not ‘fermented beverages’ in the normal sense of the term. That this is so is borne out by reference to the extensive examples in the notes to TH22.06 of the fermented beverages which are among those included.10 In every case the beverage named is one which is the final product of a fermentation process, albeit enhanced by additives, as in the case of hydromel vineux. As appellants’ counsel submitted (see para 38(j) above) the absence of wine used in making ‘other fermented beverages’ from rebate item 620.05 is consistent with its exclusion from TH22.06. [47] On this ground alone the determinations made by the Commissioner in respect of each of the coolers was wrong in substance and must be set aside. [48] Counsel for the appellants was not satisfied with the extent of such a victory. He pointed out that the relief which his clients had sought in the court below also provided for the substitution of the Commissioner’s determinations by orders as to the correct headings which should be applied. 10 ‘(1) Cider, an alcoholic beverage obtained by fermenting the juice of apples. (2) Perry, a fermented beverage somewhat similar to cider made with the juice of pears. (3) Mead, a beverage prepared by fermenting a solution of honey in water. (The heading includes hydromel vineux – mead containing added white wine, aromatics and other substances.) (4) Raisin wine (5) Wines obtained by the fermentation of fruit juices, other than juice of fresh grapes (fig, date or berry wines), or of vegetable juices, with an alcoholic strength by volume exceeding 0.5% vol. (6) “Malton”, a fermented beverage prepared from malt extract and wine lees. (7) Spruce, a beverage made from leaves or small branches of the spruce fir or from spruce essence. (8) Saké or rice wine. (9) Palm wine, prepared from the sap of certain palm trees. (10) Ginger beer and herb beer, prepared from sugar and water and ginger or herbs, fermented with yeast. All these beverages may be either naturally sparkling or artificially charged with carbon dioxide. They remain classified in the heading when fortified with added alcohol or when the alcohol content has been increased by further fermentation, provided that they retain the character of products falling in the heading.’ [49] Although counsel for the Commissioner resisted such relief on the ground that the further determinations should be left to his client, the parties have long been ad idem that if the coolers are to find a home in the tariff schedule, the only suitable heading is TH22.06. The matter has been fully argued and it is desirable that we resolve the dispute which remains over the second half of that heading. In this regard the decisive issue is the meaning and scope of the expression ‘non-alcoholic beverage’. Is water a ‘non-alcoholic beverage’ within the context of TH22.06? [50] Although there are dissenting voices, the balance of dictionary definitions favours the view that the meaning of ‘beverage’ is wide enough to include ordinary water. That feasible breadth of interpretation has been recognized in reported cases.11 Whether it bears the wider or a narrower meaning (which excludes water) depends upon the context in which the word is used, in the present case TH22, and, particularly, in sub-heading 06 . [51] There are strong linguistic indications of an intention that water was regarded by the legislator as a non-alcoholic beverage. The Explanatory Notes to TH22 state, under ‘General’, that the products covered in the chapter fall into four main groups, the first of which is ‘Water and other non-alcoholic beverages and ice’, thereby conveying that water is part of the genus of non-alcoholic beverages. To like effect is the formulation of TH22.02 which states that the heading covers sweetened waters ‘and other non-alcoholic beverages’ (excluding fruit and vegetable juices falling under TH20.09). The Explanatory Notes to the same heading state that it covers ‘non-alcoholic beverages . . . not classified under other headings, particularly heading 20.09 or 22.01’ (my emphasis). As TH22.01 relates only to unsweetened water, the express exclusion is, in context, consistent only with the understanding that such water is regarded a ‘non-alcoholic beverage’. [52] In the specific context of TH22.06, the second half of the heading is directed at combinations of fermented beverages and non-alcoholic beverages which together result in a product which possesses a commercial or trade potential (as with all products in the tariff schedules). The wine coolers are designer products in that sense which have a 11 See for example Re Bristol-Myers Company (Pty) Ltd v Commissioner of Taxation [1990] FCA 200; Perrier Group of Canada Inc v Canada [1996] 1 FC 586. drawing power over and above that of the wine constituent alone (which, as earlier noted has already been brought within the excise regime, upon its creation, within TH22.04). The water component is not simply incidental but plays an important role in providing the character of the finished product. The parties are agreed that if the coolers cannot be brought within TH22.06 there is no apparent place for them in the existing tariff headings. Since, for the reasons set out above, the first part of the heading is inapposite, only the second can accommodate the coolers. In the circumstances, given the ‘added value’ contributed by the water element, the recognition of water as a non-alcoholic beverage for the purposes of TH22.06 seems entirely consistent with the commercial rationale of the tariff. Moreover, it is clear, that were the cooler to utilize lemonade instead of water, the second part of the heading would apply: the explanatory note says so explicitly. I can find no reason in principle to distinguish between two non-alcoholic liquids, both potable, that perform the same function as a mixing component, such that one should be excluded from the operation of the heading and the other be included. [53] Counsel for the Commissioner have referred to contra-indications in the structure of TH22. These are, however, at best, equivocal. They are not strong enough to outweigh the persuasive considerations to which I have drawn attention. I conclude, therefore, that the appellants’ contention that water is to be understood as a non-alcoholic beverage within the framework of TH22.06 must be upheld. [54] In their heads of argument counsel for the Commissioner submitted that by reason of the formulation of the recipes, certain of the coolers were a textbook example of an “alcoholic preparation” as contemplated by TH21.06.90:12 According to Explanatory Note (7) to TH21.06.90 the heading includes the following (if not covered by any other heading): ‘(7) Non-alcoholic or alcoholic preparations (not based on odoriferous substances) of a kind used in the manufacture of various non-alcoholic or alcoholic beverages. These preparations can be obtained by compounding vegetable extracts of heading 13.02 with lactic acid, tartaric acid, citric acid, phosphoric acid, preserving agents, foaming agents, fruit juices, etc. The preparations contain (in whole or in part) the flavouring ingredients which characterize a particular beverage. As a result, the beverage in question can usually be obtained simply by diluting the preparation with 12 ‘Food preparations not elsewhere specified or included: Other’. water, wine or alcohol, with or without the addition, for example, of sugar or carbon dioxide gas. Some of these products are specially prepared for domestic use: they are also widely used in industry in order to avoid the unnecessary transport of large quantities of water, alcohol, etc. As presented, these preparations are not intended for consumption as beverages and thus can be distinguished from the beverages of Chapter 22.’ [55] Counsel further submitted that, even if water were, on a proper interpretation, to be regarded as a ‘non-alcoholic beverage’, the coolers were, in their perfected state, a mixture of an ‘alcoholic preparation’ and a ‘non-alcoholic beverage’ and not a mixture of a ‘fermented beverage’ and a ‘non-alcoholic beverage’. Whether the coolers were ‘alcoholic preparations’ within the ambit of TH21.06.90 was, however, in the first instance, a question of fact. The appellants were not confronted with either the facts or the legal conclusions to be drawn from them until they received counsel’s heads of argument in this appeal. Quite apart from the composition of the alcoholic compound, the note requires that ‘as presented’ the alcoholic preparations concerned are not intended for consumption as beverages. No evidence was adduced as to when, if at all, and in what state, presentation occurred. In these circumstances no case was made out by the Commissioner for the relevance of TH21.06.90 in the classification of the coolers. It is in the circumstances not an answer that counsel can rely on. [56] In the result the appeal must succeed in relation to all the coolers concerned. The terms of the relief to which the appellants are entitled [57] Counsel for the Commissioner, relying on 3 M South Africa (Pty) Ltd v The Commissioner for the South African Revenue Service and Another13, submitted that any claim for refunds will be limited to the two years immediately before the amendment of the tariffs in question. Because the same rate of excise duty has, since 18 February 2004, been payable on all products classifiable under TH22.06, the appellants would not, in their submission, be entitled to any refund irrespective of by whom the amendment is made or its effective date. Appellants’ counsel dispute the interpretation that their opponents have placed on the judgment. They submit that the judgment is irrelevant to the present case 13 (272/09) [2010] ZASCA 20 (23 March 2010) at paras 21 to 27. and that the practical effects of the amendment must be adduced from the terms of the statute. For the reasons which follow I think their submission is correct. [58] In the 3 M case an incorrect and adverse determination made by the Commissioner on 9 April 1991 was eventually corrected by him in the taxpayer’s favour on 21 November 2006. In terms of s 47(9)(d)(i)(bb) of the Act the amended determination was made effective from 9 April 1991. The question arose as to the extent of the refunds to which the taxpayer was entitled in consequence of the amended determination. This involved an interpretation of s 76B(1)(a)(i), which limits refunds to goods entered for home consumption ‘during a period of two years immediately preceding the date of such determination, new determination or amendment, whichever date occurs last . . .’. The taxpayer argued that the date of the amendment was its effective date (9 April 1991) so that it could claim refunds on goods entered on or after 9 April 1989. The Commissioner argued that the date of amendment was when it was issued (21 November 2006) so that the taxpayer could only claim refunds on goods entered on or after 21 November 2004. The Court upheld the Commissioner’s contention. [59] In 3 M the adverse determination of 1991 had not been the subject of an appeal under s 47(9)(e). The determination was simply amended by an exercise of the Commissioner’s power of amendment under s 47(9)(d)(i). When there is an appeal under s 47(9)(e), the two year period is reckoned backwards from the date of the appeal, even though the court’s order amending the determination might only be made some time later (see the proviso to s 76B(1)(a)(i) and the 3 M judgment at paras 22 and 24). [60] In the present matter, unlike 3 M, the Commissioner has not as yet corrected the determinations which the appellants say are (and which I have found to be) wrong. The relief which the appellants seek in respect of the disputed determinations is based on appeals under s 47(9)(e), alternatively, are orders compelling the Commissioner to correct the determinations under s 47(9)(d)(i). In respect of Crown, where no determination existed for the period 1 January 2001 to 18 February 2004, Distell seeks declaratory relief. The period prior to 18 February 2004 [61] In respect of this period one must distinguish between the eight wine coolers, Bernini and Crown. [62] As regards the eight coolers, in his adverse determination of 13 October 2004 the Commissioner amended his earlier favourable determination of 12 March 2003 retrospectively to 14 August 2002, purporting to act in terms of s 47(9)(d)(i). Distell appealed timeously against the determination in its amended notice of motion dated 15 December 2004. Because of the success of its appeal, Distell would, in terms of the proviso to s 76B(1)(a)(i) be entitled to refunds in respect of Bernini entered for home consumption on or after 15 December 2002. The effect of the 3 M judgment is that the two-year period would not take Distell back to the effective date of the amended determination made on 13 October 2004 namely to 14 August 2002. [63] The practical importance of the appeal in respect of the eight wine coolers prior to 18 February 2004 is also to prevent the Commissioner from asserting an entitlement to underpaid duty. An order in terms of para 2.1 is therefore justified. 14 [64] As regards Bernini (prior to 18 February 2004), the adverse determination was made in September 1996. Distell brought a belated appeal against this determination, 14 See para 20 above. All subsequent references to the relief claimed refer to the terms of the proposed order set out there. relying on s 47(9)(e), and, alternatively, on enforcing the Commissioner’s duty to correct his erroneous determination, relying on s 47(9)(d)(i). [65] The s 47(9)(e) appeal is dependent on condonation. As regards the period prior to 18 February 2004, the appellants accept that the Commissioner’s letter of 13 October 2004 was not a fresh determination in respect of the classification of Bernini under Part 2A but merely confirmation that the Commissioner was adhering to the determination of 10 September 1996. Unless there was a timeous appeal against the determination (s 49(7)(f)) or a discretionary extension of time (in terms of s 96(1)(c)), the determination of 10 September 1996 could not be challenged by way of appeal nor could a declaratory order be obtained inconsistent with the terms of such determination: Samcor Manufacturing (Pty) Ltd v Commissioner SARS.15 [66] The period of delay was about 8 years. The courts below refused condonation. Distell’s case was that the 1996 determination did not come to the attention of its officials who had been querying the Bernini classification. The evidence to establish this alleged failure was, however, hearsay in nature. It also lacked credibility to the extent that, when an opportunity arose in August 2002 to draw the attention of SARS to the non-receipt of the determination, and in circumstances which called for such a response, no protest was forthcoming. I do not therefore find reason to override the decisions of the lower courts. [67] The appellants argued in the alternative for a duty on the Commissioner under s 47(9)(i) to amend determinations made in error even in cases where an appeal was no longer available. However, as counsel concede, should there be an enforced correction under s 47(9)(d)(i), the two-year period would be reckoned backwards from the date on which the enforced amendment were to be made. Since that date lies in the future, the effect of the 3 M judgment is that there would be no right to a refund in respect of any part 15 2002 (4) SA 823 (SCA) at paras 22 to 31. of the period up to 18 February 2004. The relief claimed in para 2.3 is, for these reasons, refused. [68] The position in respect of Crown prior to 18 February 2004 (where the adverse determination was made in December 1995) would be the same as for Bernini, but for the fact that, in the case of Crown, there was no determination at all in respect of the period from 1 January 2001 (when Distell took over the manufacture of Crown from SFW) until 18 February 2004 (when the 1995 determination was rendered redundant because of the statutory amendment). The belated s 47(9)(e) appeal could obviously have no bearing on the position between 1 January 2001 and 18 February 2004. Because the purported s 47(9)(e) appeal was only filed in May 2004 (without furnishing grounds for the exercise of condonation) neither a s 47(9)(e) appeal nor an enforced correction under s 47(9)(d)(i) would enable the appellants to claim refunds in respect of the period prior to 1 January 2001. The relief in para 2.4 is therefore refused. [69] There was no determination for Crown in force during the period 1 January 2001 to 18 February 2004. In terms of s 76B(1)(e), in respect of this period, Distell would have had to apply for refunds within two years from the date of entry of the goods for home consumption. As counsel readily conceded, there was no proof that it had done so. The relief claimed in para 2.5 therefore serves no apparent purpose. [70] It may further be recorded that the Commissioner has (through his counsel) tendered consent to an order that he amend the 1995 and 1996 determinations given to SFW and Distell in respect of Crown and Bernini respectively, should this Court find (as it has) that the coolers are mixtures of fermented beverages and non-alcoholic beverages. Such an order would have no practical effect. The period from 18 February 2004 [71] The determinations made by the Commissioner in his letters of 13 October 2004 classified Bernini, Crown and the other eight wine coolers in a particular way as from 18 February 2004 (the date on which Schedule 1 to the Act was amended). In respect of those determinations there were timeous s 47(9)(e) appeals by way of the appellants’ amended notice of motion of 15 December 2004 or the further amended notice of motion dated 2 June 2005. [72] Accordingly, and irrespective of the date of this judgment, the two-year period contemplated in the proviso to s 76B(1)(a)(i) would permit the appellants to claim refunds on all goods entered for home consumption on or after 18 February 2004: a period of two years reckoned backwards from the date of the s 47(9)(e) appeals would pre-date 18 February 2004. The orders sought in paras 2.2 and 2.6 accordingly serve a legitimate purpose and must be granted. [73] In the result the following order is made: 1. The appeal succeeds with costs including the costs of two counsel. 2. The order of the court a quo is set aside and replaced by the following: ‘1. The appeal succeeds with costs including the costs of two counsel. 2. Save for the costs order granted in favour of the second appellant the order of the High Court is set aside and in its place the following order is made: “(a) The determination made by the Commissioner for the South African Revenue Service (“the Commissioner”) on 13 October 2004 that the products listed in Annexure “A” (the “final wine cooler products”) fall to be classified in tariff item 104.15.50 before the amendment of Part 2A of Schedule 1 to the Customs and Excise Act, 91 of 1964 (“the Act”), dated 18 February 2004, is hereby corrected by substituting therefor a determination that prior to the said amendment only the wine portion used in the manufacture of the final wine cooler products is liable to excise duty under item 104.15.10 of Part 2A of Schedule 1 to the Act. (b) The determination made by the Commissioner on 13 October 2004 that the final wine cooler products fall to be classified in tariff item 104.17.15 after the amendment of Part 2A of Schedule 1 to the Act (dated 18 February 2004) is hereby corrected by substituting therefor a determination that after the said amendment the whole of the final wine cooler products is classifiable in tariff item 104.17.22 of Part 2A of Schedule 1 to the Act. (c) The determinations made by the Commissioner on 13 October 2004 that Bernini Sparkling Grape Beverage and Crown Premium fall to be classified in tariff item 104.17.15 after the amendment of Part 2A of Schedule 1 to the Act (dated 18 February 2004) are hereby corrected by substituting therefor a determination that the whole of the said products is classifiable in tariff item 104.17.22 of Part 2A of Schedule 1 to the Act.” ____________________ J A Heher Judge of Appeal HARMS DP (concurring) [74] I have read the judgment of my colleague Heher JA and agree with the order proposed by him. His judgment deals comprehensively with the arguments raised before us based on the multifarious issues defined in the papers. They were the consequence of inconsistent approaches and frequent changes of mind by all the parties. The Full Court added a discussion of matter not raised by either party, namely, the application of the Promotion of Administrative Justice Act 3 of 2000 to the case. In the course of this the issue, which ought to be a straightforward interpretation issue, became blurred. [75] The case is about excise duty. Duty is payable on all excisable goods in accordance with the provisions of schedule 1 at the time of entry for home consumption of such goods (s 47 (1) of the Customs and Excise Act 91 0f 1964). The goods on which the commissioner wished to levy a duty are, generically speaking, wine coolers. The entry of the ingredients of the wine coolers (such as the wine component) for home consumption and excise payable thereon is not for present purposes relevant. [76] A wine cooler, as appears from the main judgment, is in general terms made by first preparing a concentrate consisting of wine and flavouring and sweetening agents. The concentrate is then mixed or blended with water to produce a 50:50 blend. This, once carbonated, is the wine cooler which, depending on its classification in schedule 1, may be subject to excise duty. [77] The commissioner sought to impose a duty on wine coolers for the period preceding 18 February 2004 under a tariff heading ‘other still fermented beverages, unfortified’. It was common cause that there was no other applicable tariff heading which had to be considered. The commissioner was wrong. Wine coolers are not ‘still’ beverages – they are carbonated. In addition, wine coolers are not ‘fermented’ beverages – they may contain a fermented product, namely wine, but that does not mean that they are on entry for home consumption fermented products. [78] The 2004 amendment created the source of the second dispute. The commissioner argued that wine coolers are fermented beverages falling under the heading ‘other fermented beverages (for example, cider, perry and mead)’. Cider is obtained by fermenting the juice of apples, perry is similar but obtained from pears, and mead is prepared by fermenting honey in water. Apart from the fact that wine coolers are clearly not of the same genus as the examples, they are, as mentioned, not ‘fermented’ beverages. This puts an end to the commissioner’s attempted classification. [79] What is left for consideration is whether, as submitted by the appellants, wine coolers are ‘mixtures of fermented beverages and non-alcoholic beverages’. Since wine is a fermented beverage the question depends on whether water is, in context, a ‘beverage’. The irony of the case is that if we accept the commissioner’s argument that water is not a beverage it means that wine coolers cannot be classified under this tariff heading and in the absence of an alternative argument for the one rejected in the previous paragraph it would mean that, as before, wine coolers per se were since the amendment not subject to excise duty. [80] The main judgment deals at some length with the meaning of ‘beverage’ in the present context and comes to the conclusion that it includes water. This means that the appellants’ submission about the correct tariff heading is accepted as correct. The matter is not without its difficulties but since the appellants insist that water is a beverage and the commissioner is not prejudiced if we find accordingly I accept the conclusion. __________________ L T C Harms Deputy President APPEARANCES APPELLANTS: A P Joubert SC with him O L Rogers SC Instructed by Cliffe Dekker Hofmeyr Inc, Johannesburg; Webbers, Bloemfontein RESPONDENT: C E Puckrin SC with him J A Meyer SC and I A Enslin Instructed by State Attorney, Pretoria; State Attorney, Bloemfontein

Supreme Court of Appeal of South Africa MEDIA STATEMENT From: The Registrar, Supreme Court of Appeal Date: 13 September 2010 Status: Immediate Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal. In Distell v CSARS (Appeal 416/09) the SCA has ended a long-running dispute between the Commissioner of Customs and Excise and the liquor producer Distell Ltd over the tariff classification of ‘wine coolers’, in favour of the manufacturer. The effect of the judgment, which effectively overturns the rulings in two lower courts, is that such coolers fall to be classified as ‘mixtures of fermented beverages’ (wine) and ‘non-alcoholic beverages’ (water) and not as ‘other fermented beverages’ as contended by the Commissioner. --ends--

3750

non-electoral

2022

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Reportable Case no: 219/2021 In the matter between: CAXTON AND CTP PUBLISHERS AND PRINTERS LIMITED APPELLANT and NOVUS HOLDINGS LIMITED RESPONDENT Neutral citation: Caxton and CTP Publishers and Printers Limited v Novus Holdings Limited (Case no 219/2021) [2022] ZASCA 24 (09 March 2022) Coram: PETSE AP and MOLEMELA, PLASKET and HUGHES JJA and UNTERHALTER AJA Heard: 09 November 2021 Delivered: This judgment was handed down electronically by circulation to the parties' legal representatives by email, publication on the Supreme Court of Appeal website and release to SAFLII. The date and time for hand-down is deemed to be 09h45 on 09 March 2022. Summary: Practice and procedure – Uniform Rules – rule 35(12) – production of documents mentioned in or referred to in the other party's affidavit – obligation on such party to produce documents sought by opponent – no obligation to produce documents sought if such documents irrelevant or not material or protected by privilege or no longer in the possession of the party required to produce the documents concerned. ORDER On appeal from: Western Cape Division of the High Court of South Africa, Cape Town (Baartman J, sitting as court of first instance): 1 The appeal is upheld with costs, including the costs of two counsel. 2 The order of the high court is set aside and in its place is substituted the following order: '2.1 The respondent is directed to produce for inspection and copying the documents specified below within 30 (thirty) days of the date of this order pursuant to the appellant's notice in terms of rule 35(12) delivered on 11 August 2020. 2.2.1 Judge Harms' "report" prepared pursuant to s 165(4) of the Companies Act 71 of 2008 and submitted to Novus' Board on 28 May 2020 referred to in paragraphs 21 to 28 of the respondent's answering affidavit in the main application under case no 8908/2020 (the main application). 2.2.2 The "predecessors" to the "Commission Agreement", referred to in paragraph 27 of the answering affidavit in the main application. 2.2.3 The "documentation at Novus' disposal" to which Judge Harms was "given full access" referred to in paragraph 28 of the answering affidavit in the main application. 2.2.4 All "reports to the Department of Basic Education (DBE)" referred to in paragraph 195.2 of the answering affidavit in the main application. 2.2.5 All "invoices together with all supporting documents" submitted to the DBE, as referred to in paragraph 197 of the answering affidavit in the main application. 2.2.6 All "reports" submitted to the DBE by Lebone, as referred to in paragraph 198 of the answering affidavit in the main application, but only to the extent that they may be different to the reports referred to in paragraph 2.2.4 above. 2.2.7 All "annual inflation adjustments" and supporting "documentary evidence" submitted by Lebone to the DBE, referred to in paragraphs 199 and 200, respectively, of the answering affidavit in the main application. 2.2.8 All "invoices" submitted by Lebone to Novus for the "printing of 50% of all the required covers, tear-outs, and stickers", referred to in paragraph 201 of the answering affidavit in the main application. 2.2.9 "The contract with the DBE" that "Novus had to comply with", as referred to in paragraph 225.1 of the answering affidavit in the main application, and "the contract" that the "DBE made payment of invoices in accordance with", referred to in paragraph 244 of the answering affidavit in the main application (and each "contract", to the extent that paragraph 225.1 and paragraph 244 may refer to two separate contracts). 2.2.10 The "meticulously completed Proof of Deliveries (POD's)" that were "collated and submitted with the invoice to the DBE", referred to in paragraph 225.1 of the answering affidavit in the main application. 2.2.11 The "other impugned agreements" and "the impugned agreements" that were "negotiated and concluded" at the time that none of Novus's current directors served as directors, as referred to in paragraphs 290.3 and 290.4 of the answering affidavit in the main application. It is further directed that the documents referred to in paragraph 2 above are to be provided subject to the following confidentiality regime: 3.1 Novus will provide the documents to Caxton's attorneys of record, and in doing so will indicate which documents Novus claims are confidential (the confidential documents). 3.2 Save for purposes of consulting with counsel or any independent experts or unless the Court orders otherwise, Caxton's attorneys of record shall not disclose directly or indirectly to any other party (including Caxton) any part of the confidential documents. 3.3 Caxton's attorneys of record and independent experts given access to the confidential documents pursuant to paragraph 3.2 above will sign a confidentiality undertaking confirming that they will not disclose directly or indirectly the contents of the confidential documents to any other party (including Caxton) other than a party that has also signed a confidentiality undertaking in terms of paragraph 3.2 above. 3.4 In the event that Caxton's attorneys of record, on behalf of Caxton, dispute that any document or documents asserted by Novus to be confidential is or are, in fact, confidential, then Caxton's attorneys of record are given leave, on behalf of Caxton, to urgently approach the Court on the same papers, supplemented as may be necessary, for an order providing for the exclusion of such document or documents from the confidentiality regime. 3.5 Confidential documents may only be referred to in affidavits deposed to by the legal representatives or independent experts of the parties, and any such affidavits will also be treated as confidential. Caxton is ordered to file its replying affidavit in the main application within 20 days after receipt of all the documents pursuant to paragraphs 2 and 3 above. The respondent in the interlocutory application is ordered to pay the costs of such application, including the costs of two counsel where so employed.' JUDGMENT Petse AP (Molemela, Plasket and Hughes JJA and Unterhalter AJA concurring): Introduction [1] The Companies Act1 permits a certain category of persons2 to serve a demand on a company requiring the company concerned to commence or continue legal proceedings, or take related steps, to protect the interests of the company in question.3 In the context of the facts of this case the appellant, Caxton and CTP Publishers and Printers Limited (Caxton) falls within the class of persons contemplated in s 165(2) of the Companies Act who may serve a demand upon a company, namely, the respondent, Novus Holdings Ltd (Novus), to commence or continue legal proceedings, or take related steps, to protect the legal interests of the company concerned. If the company upon which a demand has been served refuses to initiate or continue legal proceedings, the person who made the demand in terms of s 165(2) may apply to court for leave to bring or continue legal proceedings in the name and on behalf of the company concerned.4 This is precisely what happened in this case. The parties [2] Novus is a public company listed on the Johannesburg Securities Exchange. Novus' core business entails the publication and printing of books, magazines, newspapers and related activities. It is the respondent both in the 1 Act 71 of 2008 (the Companies Act). 2 See s 165(2) of the Companies Act. 3 See s 165 of the Companies Act which is quoted in full in paragraph 5 below. 4 Section 165(5). main application, which is still pending, and in the interlocutory application, related to the main application, the latter application being at the centre of this appeal. [3] Caxton is likewise a public company and, like Novus, is one of the largest publishers and printers in the country of books, magazines, newspapers and related activities. It is also listed on the Johannesburg Securities Exchange. Caxton and Novus are commercial competitors. Caxton is a minority shareholder in Novus, holding 7,5 per cent of the latter's shares. Background [4] The facts upon which this appeal hinges are fairly straightforward and may be summarised as follows. On 7 April 2020, and pursuant to s 165(2) of the Companies Act, Caxton served a demand upon Novus to institute legal proceedings against Lebone Litho Printers (Pty) Ltd (Lebone). According to Caxton, the envisaged legal proceedings would seek to have a commission agreement (and any related agreements) concluded between Novus and Lebone declared illegal and void. In terms of the impugned agreement, Novus undertook to pay commission to Lebone in relation to a public procurement contract between Novus, on the one hand, and the Department of Basic Education (DBE), on the other, for the printing, packaging and distribution of school workbooks throughout the country. [5] Section 165 of the Companies Act, which is headed 'Derivative actions', in relevant parts provides: '(1) Any right at common law of a person other than a company to bring or prosecute any legal proceedings on behalf of that company is abolished, and the rights in this section are in substitution for any such abolished right. (2) A person may serve a demand upon a company to commence or continue legal proceedings, or take related steps, to protect the legal interests of the company if the person— (a) is a shareholder or a person entitled to be registered as a shareholder, of the company or of a related company; (b) is a director or prescribed officer of the company or of a related company; (c) is a registered trade union that represents employees of the company, or another representative of employees of the company; or (d) has been granted leave of the court to do so, which may be granted only if the court is satisfied that it is necessary or expedient to do so to protect a legal right of that other person. (3) A company that has been served with a demand in terms of subsection (2) may apply within 15 business days to a court to set aside the demand only on the grounds that it is frivolous, vexatious or without merit. (4) If a company does not make an application contemplated in subsection (3), or the court does not set aside the demand in terms of that subsection, the company must— (a) appoint an independent and impartial person or committee to investigate the demand, and report to the board on— (i) any facts or circumstances— (aa) that may give rise to a cause of action contemplated in the demand; or (bb) that may relate to any proceedings contemplated in the demand; (ii) the probable costs that would be incurred if the company pursued any such cause of action or continued any such proceedings; and (iii) whether it appears to be in the best interests of the company to pursue any such cause of action or continue any such proceedings; and (b) within 60 business days after being served with the demand, or within a longer time as a court, on application by the company, may allow, either— (i) initiate or continue legal proceedings, or take related legal steps to protect the legal interests of the company, as contemplated in the demand; or (ii) serve a notice on the person who made the demand, refusing to comply with it. (5) A person who has made a demand in terms of subsection (2) may apply to a court for leave to bring or continue proceedings in the name and on behalf of the company, and the court may grant leave only if— (a) the company— (i) has failed to take any particular step required by subsection (4); (ii) appointed an investigator or committee who was not independent and impartial; (iii) accepted a report that was inadequate in its preparation, or was irrational or unreasonable in its conclusions or recommendations; (iv) acted in a manner that was inconsistent with the reasonable report of an independent, impartial investigator or committee; or (v) has served a notice refusing to comply with the demand, as contemplated in subsection (4)(b)(ii); and (b) the court is satisfied that— (i) the applicant is acting in good faith; (ii) the proposed or continuing proceedings involve the trial of a serious question of material consequence to the company; and (iii) it is in the best interests of the company that the applicant be granted leave to commence the proposed proceedings or continue the proceedings, as the case may be. . . . (7) A rebuttable presumption that granting leave is not in the best interests of the company arises if it is established that— (a) the proposed or continuing proceedings are by— (i) the company against a third party; or (ii) a third party against the company; (b) the company has decided— (i) not to bring the proceedings; (ii) not to defend the proceedings; or (iii) to discontinue, settle or compromise the proceedings; and (c) all of the directors who participated in that decision— (i) acted in good faith for a proper purpose; (ii) did not have a personal financial interest in the decision, and were not related to a person who had a personal financial interest in the decision; (iii) informed themselves about the subject matter of the decision to the extent they reasonably believed to be appropriate; and (iv) reasonably believed that the decision was in the best interests of the company. (8) For the purposes of subsection (7)— (a) a person is a third party if the company and that person are not related or interrelated; and (b) proceedings by or against the company include any appeal from a decision made in proceedings by or against the company. . . . (14) If the shareholders of a company have ratified or approved any particular conduct of the company— (a) the ratification or approval— (i) does not prevent a person from making a demand, applying for leave, or bringing or intervening in proceedings with leave under this section; and (ii) does not prejudice the outcome of any application for leave, or proceedings brought or intervened in with leave under this section; or (b) the court may take that ratification or approval into account in making any judgment or order. (15) Proceedings brought or intervened in with leave under this section must not be discontinued, compromised or settled without the leave of the court. (16) For greater certainty, the right of a person in terms of this section to serve a demand on a company, or apply to a court for leave, may be exercised by that person directly, or by the Commission or Panel, or another person on behalf of that first person, in the manner permitted by section 157.' [6] Invoking s 165(4), Novus appointed retired Deputy President of the Supreme Court of Appeal, Justice Louis Harms, as an independent and impartial person (the independent and impartial person) to investigate the demand, and thereafter to report to its board of directors on the matters set out in s 165(4).5 5 Section 165(4) reads: '(4) If a company does not make an application contemplated in subsection (3), or the court does not set aside the demand in terms of that subsection, the company must— (a) appoint an independent and impartial person or committee to investigate the demand, and report to the board on— (i) any facts or circumstances— (aa) that may give rise to a cause of action contemplated in the demand; or (bb) that may relate to any proceedings contemplated in the demand; (ii) the probable costs that would be incurred if the company pursued any such cause of action or continued any such proceedings; and Upon receipt of the independent and impartial person's report, Novus advised Caxton that the latter's demand to institute legal proceedings against Lebone was declined. Undaunted, Caxton instituted the main application6 against Novus, in which leave is sought to bring the envisaged action in the latter's name and on its behalf. [7] Unsurprisingly, Novus has steadfastly resisted the relief sought by Caxton in the main application. In its answering affidavit in the main application, Novus makes reference to several documents, one of which is the s 165(4) report, in terms of which it sought to demonstrate that the proposed action lacked any prospect of success or was simply devoid of merit. [8] Novus' multiple references to certain documents in its answering affidavit prompted Caxton to ask for the production of the documents concerned by invoking rule 35(12) of the Uniform Rules. This, too, was resisted by Novus, who refused to make any of the documents sought available to Caxton for its inspection and, if deemed necessary, copying. Caxton then brought the interlocutory application in the Western Cape Division of the High Court, Cape Town (the high court), in terms of rule 30A of the Uniform Rules, to compel the production for inspection and copying of the documents sought. Caxton's interlocutory application takes centre stage in this appeal. (iii) whether it appears to be in the best interests of the company to pursue any such cause of action or continue any such proceedings; and (b) within 60 business days after being served with the demand, or within a longer time as a court, on application by the company, may allow, either— (i) initiate or continue legal proceedings, or take related legal steps to protect the legal interests of the company, as contemplated in the demand; or (ii) serve a notice on the person who made the demand, refusing to comply with it.' 6 The main application was instituted on 10 July 2020. [9] In support of the interlocutory application, Mr Paul Michael Jenkins, Caxton's chairman, stated, to the extent relevant for present purposes, as follows: '25 I shall indicate below that all the documents forming the subject matter of this application are (a) in Novus's possession, (b) not privileged, and (c) relevant to issues in the main application. In the circumstances, Caxton is entitled to the documents, and this Court should order Novus to provide them subject to a suitable confidentiality regime. In Novus's refusal letter, it objects to production of the documents on three broad grounds: 27.1 It says that the documents are not relevant. 27.2 It says one of the documents (i.e. the Harms report) is privileged. 27.3 It says that the documents are confidential, and disputes that the confidentiality regime proposed by Caxton would adequately protect the confidentiality of the documents (although it does not propose any alternative). . . . The confidentiality of documents does not provide a basis for refusing to furnish them. At best, it justifies the imposition of a confidentiality regime involving the granting of restricted access to those documents. As I shall indicate below, Caxton has no difficulty with the imposition of such a confidentiality regime. . . . In South African law there are two types of legal privilege: legal advice privilege and litigation privilege. Although Novus appears to rely only on the latter, I briefly summarise each below and explain why neither applies to the Harms report. . . . Litigation privilege protects communications between legal advisers and their clients on the one hand and third parties on the other hand, provided that: - the communication was made for purposes of being placed before the legal adviser in order to enable him or her to give legal advice; - the communication was made for the purpose of pending litigation or litigation that was contemplated as likely at the time; and - as with legal advice privilege, the legal adviser must have been acting in his or her capacity as a legal professional, the communication must have been made in confidence, and the communication or advice should not facilitate the commission of a crime or fraud. . . . 40.2 Section 165(4) requires an independent and impartial person to conduct an investigation of a section 165(2) demand and to report to the Board of a company. The investigator is statutorily required to report on facts or circumstances that may give rise to a cause of action as specified in the section 165(2) demand; the probable costs of any such action; and whether it is in the best interests of the company to pursue that action. The investigator is not called upon to give legal advice. The mandate is investigative. The report and its recommendations do not constitute legal advice. 40.3 Moreover, in this matter the investigator is not a practising attorney or advocate, or even an in-house legal adviser. Judge Harms is a judge (albeit that he has been discharged from active service). He does not hold himself out as a professional legal adviser. There is no suggestion by Novus that Judge Harms was retained to provide legal advice in a professional capacity. Judge Harms undertook a statutory investigation pursuant to section 165(4) at the behest of Novus. . . . Moreover, section 165(5) of the Companies Act contemplates that one of the jurisdictional requirements for an application in terms of section 165(5) is if the Court finds that a report in terms of section 165(4) "was inadequate in its preparation, or was irrational or unreasonable in its conclusions or recommendation". The Court could only assess this if the report were placed before it, and if the parties could interrogate whether the report was inadequate or was irrational or unreasonable in its conclusions. Section 165(5) therefore makes it plain that, even if section 165(4) reports are legally privileged (which is denied for the reasons given above), the privilege would be overridden by legislation. If this Court were to take a different view of the matter and were to find that the Harms report is protected by privilege, then Novus has in any event waived any privilege that may be found to exist.' [10] In Novus' opposition to the application to compel, Mr Neil Birch, its Chief Executive Officer, (again to the extent here relevant) stated: '9. The substantive right to institute or continue proceedings in the name of the company is created by statute and arises only when leave is granted by a court to obtain to institute or continue proceedings in the name of the company. . . . . . . 13. To the contrary, Caxton insists on being granted access to the investigator's report and to Novus' books of account and records beyond the scope of sections 26 and 31 of the Act and whilst its rights in present context are limited to only the invocation of the procedural leverage mechanism provided for in section 165. 14. In doing so, Caxton thwarts the nature of the main proceedings and attempts to convince that its own interpretation of the general processes of discovery in ordinary proceedings between parties asserting substantive rights must trump the specific provisions of section 165. . . . 15.4. Yet, if Caxton is now (in the preliminary process of consideration of the exercise of the leverage right) granted the relief sought on the interlocutory proceedings to obtain access to Novus' books connected with the contemplated legal proceedings, Caxton (through its agents) would be in possession of Novus' records that are protected by confidentiality and legal privilege. The confidentiality regime does little to console. Caxton's legal representative has acted as its advisor since at least 2014 in all of the bitter feuds that characterised the fierce rivalry between the parties who are the biggest competitors in the market segment. Since 2016 Nortons also acted as Caxton's legal advisors in respect of the prolonged DBE tender review proceedings. Caxton's legal representatives may be bound by their undertaking of confidentiality, but they would hardly be able to clear their minds of the information to which they would be made privy. To expect of them to divorce their minds in future advice to Caxton from the information to which they have been made privy would be tantamount to assuming godly abilities on their part. . . . 24. Having regard to the above, Caxton is not entitled to the documentation demanded in the interlocutory applications. . . . . . . 27. The essential feature of discovery is that the person requiring discovery is in general only entitled to discovery once the battle lines are drawn and the legal issues discovered. It is not a tool designed to put a party in a position to draw the battle lines and establish the legal issues. . . . 32. Neither the application contemplated in section 165(5) of the Act, nor the Court's rules of procedure can be used by a disgruntled party (such as Caxton) to launch a fishing expedition for facts to found an action. If Caxton is unable in its demand and in the founding affidavit to the main application to set forth a cogent, albeit not necessarily with the precision required for pleading, basis for the company to institute the contemplated proceedings, Caxton is acting vexatiously. . . . 70. For the above reason, none of the documents which Caxton requires Novus to produce for inspection are relevant to the issues in the main application: 70.1 Item 1: The Harms Report: 70.1.1. The Harms Report was prepared for the primary purpose of advising the Board on aspects relating to the proposed litigation contemplated in the Demand. The content of the Harms Report formed part of the information that was considered by the Board before deciding to refuse to comply with the Demand. 70.1.2. Neither the Board's decision nor the Harms Report forms the subject-matter of the main application and neither are relevant to the issues therein. 70.1.3. Caxton has to demonstrate with reference to documentation and evidence in its possession why it should be granted leave, notwithstanding the Board's decision to refuse to litigate against Lebone. 70.2. Items 2, 4, 5, 6, 7, 8, 9, 10 and 11: 70.2.1. As I have already indicated above, Caxton misconstrued the nature of the main application and its entitlement to documentation and information. 70.2.2. Caxton is not required to convince the Court in the main application that Novus has an unassailable case against Lebone. 70.2.3. Caxton accordingly does not have to allege every fact required to sustain a cause of action and/or furnish the Court with evidence or facta probantia in support of each and every of those facts. 70.2.4. What Caxton has to demonstrate is that the proceedings which Caxton wishes to institute against Lebone in Novus' name "involves a trial of a serious question of material consequence" to Novus. 70.2.5. None of the documents which Caxton seek under the above item numbers relate to any aspect of section 165 of the Act which Caxton is required to satisfy. Those documents are consequently irrelevant to the issues in the main application. 70.3 Item 3: the information that Judge Harms was given access to: 70.3.1. The Harms Report was prepared for the primary purpose of advising the Board on aspects relating to the proposed litigation contemplated in the Demand. 70.3.2. The documents and information which was provided to him for the purposes of conducting his investigation are irrelevant to the issues in the main application. 70.3.3. Caxton has to demonstrate with reference to documentation and evidence in its possession why it contends that the Court should interfere in Novus' management, disregard the Board's decision not to litigate against Lebone and grant Caxton leave to litigate in the name and on behalf of Novus against Lebone. . . . 77. The very purpose of the report was to provide Novus' Board with legal advice on aspects relating to litigation which Caxton demanded Novus should commence against Lebone. Differently put, the Harms Report was prepared by the Board's mandatee for the sole purpose of him advising the Board in coming to its decision whether Novus should commence the litigation as demanded by Caxton, or not. 78. Without the Demand, which by its very nature contemplated litigation, the Harms Report would not have existed. The Harms Report was accordingly prepared in circumstances and for the very purpose that litigation was contemplated. This included, amongst also the proceedings contemplated in the Demand, the invoking by Caxton of its procedural leverage right in terms of section 165.' [11] Caxton's application to compel the production of the documents sought came before Baartman J, who dismissed it with costs. In dismissing the application, the learned Judge held, in essence, that all of the documents required by Caxton were irrelevant. Insofar as the report of the independent and impartial person is concerned, the high court held that it was, by its very nature and the circumstances attendant upon its production, privileged. And, further, that Novus had not, by quoting parts of the report, waived the privilege attaching to the report. In elaboration, the high court concluded that the fact that the report 'was commissioned in circumstances where litigation was contemplated'7 was reinforced by the undisputed and long litigation history between the parties, who are business arch-rivals. [12] Subsequently, on 2 March 2021, the learned Judge granted Caxton leave to appeal against her judgment to this court, noting that she was 'persuaded that there is "some other compelling reason why the appeal should be heard".' [13] The central issue in this appeal, crisply stated, is whether the documents sought by Caxton in terms of its rule 35(12) notice delivered on 11 August 2020, all of which were referred to in Novus' answering affidavit in the main application, are relevant and therefore ought to be produced for inspection and copying. In addition, the appeal raises the question whether the report of the independent and impartial person is privileged and thus protected against disclosure. If the report is found to be privileged, an allied issue will arise, namely whether in quoting virtually the entire conclusion of the report in its answering affidavit Novus had, as a result, waived the privilege attaching to the report. [14] Rule 35(12) provides: '(a) Any party to any proceeding may at any time before the hearing thereof deliver a notice [as near as may be] in accordance with Form 15 in the First Schedule to any other party in whose pleadings or affidavits reference is made to any document or tape recording to – (i) produce such document or tape recording for inspection and to permit the party requesting production to make a copy or transcription thereof . . . . . . . 7 Caxton and CTP Publishers and Printers Limited v Novus Holdings Limited (case no 8908/2020) (WCC) Unreported para 18. (b) Any party failing to comply with the notice referred to in paragraph (a) shall not, save with the leave of the court, use such document or tape recording in such proceeding provided that any other party may use such document or tape recording.' [15] There are two features that strike one about the provisions of rule 35(12). First, to invoke the rule, the pleadings or affidavits of the other party must make reference to the document or tape recording concerned. Thus, any such reference will trigger the right of the adversary to require that such document(s) or tape recording(s) be produced for inspection, copying or transcription. [16] It must, however, be pointed out that what is meant by the word 'reference' requires some elucidation in at least two fundamental respects. The document or tape recording must have been referred to in a party's pleadings or affidavits in general terms, a detailed or descriptive reference is not required.8 However, a mere reference by deduction or inference does not suffice for purposes of rule 35(12).9 On this score, what this court said most recently in Democratic Alliance and Others v Mkwebane and Another 10 is instructive. The court said the following: '. . . What will not pass muster is where there is no direct, indirect or descriptive reference but where it is sought through a process of extended reasoning or inference to deduce that the document may or does exist. Supposition is not enough.' (Footnotes omitted.) [17] The second point that requires emphasis is that the rationale for a party's entitlement to see a document or tape recording, referenced in the other party's pleadings or affidavits, is that a party cannot ordinarily be required to answer 8 Cullinan Holdings Ltd v Mamelodi Stadsraad 1992 (1) SA 645 (T) at 648A-D; Protea Assurance Co Ltd and Another v Waverley Agencies CC and Others 1994 (3) SA 247 (C) at 248H; Business Partners Ltd v Trustees, Riaan Botes Family Trust, and Another 2013 (5) SA 514 (WCC) at 518G-519F. 9 See, for example, Penta Communication Services (Pty) Ltd v King and Another 2007 (3) SA 471 (C) at 436B- C; Holdsworth and Others v Reunert Ltd 2013 (6) SA 244 (GNP) at 246I-J. 10 Democratic Alliance and Others v Mkhwebane and Another [2021] ZASCA 18; [2021] 2 All SA 337 (SCA); 2021 (3) SA 403 (SCA) para 28. issuably before they are given the opportunity to inspect and copy, or transcribe the document or tape recording mentioned in the adversary's pleadings or affidavits.11 [18] Further, a party failing to comply with such notice 'shall not, save with the leave of the court, use such document or tape recording in such proceeding'. However, the other party's failure to produce the document(s) or tape recording(s) does not preclude the party that called for the production of such document(s) or tape recording(s) from using the document(s) or tape recording(s) in question. [19] The nature and effect of the sanction against the defaulting party contained in rule 35(12) was explained by Botha J in Moulded Components and Rotomoulding South Africa (Pty) Ltd v Coucourakis and Another12 thus: 'The sanction provided for in Rule 35(12) is, in my view, quite different in nature and effect from the kind of sanction envisaged in Rule 30(5). The sanction in Rule 35(12) is of a negative nature, being to the effect that the party failing to comply with the notice shall not . . . use the document in question, provided that any other party may use such documents. It is a sanction that comes into operation automatically upon non-compliance with the provisions of the Rule. Rule 30(5), on the other hand, operates in an entirely different manner. Under that Rule a party making a request, or giving a notice, as the case may be, to which there is no response by the other party, may give a further notice to the other party that after the lapse of seven days application will be made for an order that the notice or request be complied with, or that the claim or defence be struck out, as the case may be. Failing compliance within the seven days mentioned, application may then be made to Court and the Court may make an appropriate order. That is a positive form of relief provided for and, as I have said, in my view it is quite different from the sanction contained in Rule 35(12).' 11 See in this regard: Protea Assurance Co Ltd and Another v Waverley Agencies CC and Others 1994 (3) SA 247 (C) at 249B. 12 Moulded Components and Rotomoulding South Africa (Pty) Ltd v Coucourakis and Another 1979 (2) SA 457 (W) at 459F-460A (Coucourakis). [20] However, 'a party who gives notice under rule 35(12) may not be content with just the negative sanction provided by the rule'. So said Ponnan JA in Centre for Child Law v The Governing Body of Hoërskool Fochville and Another,13 who went on to state that '[i]n that event it is to rule 30A that such a party must turn'. [21] The learned Judge of Appeal continued (para 16): 'Under rule 30A a party making a request, or giving a notice, to which there is no response by the other party, may through a further notice to the other party warn that after the lapse of ten days application will be made for an order that the notice or request be complied with, or that the claim or defence be struck out, as the case may be. Failing compliance within the ten days mentioned, application may then be made to court and the court may make an appropriate order. That, as Botha J described it in Coucourakis (at 459H), is a "positive form of relief".' [22] Former rule 30(5) – which was operative when Coucourakis was decided – was later repealed and substituted with the current rule 30A, which reads: '(1) Where a party fails to comply with these Rules or with a request made or notice given pursuant thereto, or with an order or direction made in a judicial case management process referred to in rule 37A, any other party may notify the defaulting party that he or she intends, after the lapse of 10 days from the date of delivery of such notification, to apply for an order– (a) that such rule, notice, request, order or direction be complied with; or (b) that the claim or defence be struck out. (2) Where a party fails to comply within the period of 10 days contemplated in subrule (1), application may on notice be made to the court and the court may make such order thereon as it deems fit.' 13 Centre for Child Law v The Governing Body of Hoërskool Fochville and Another [2015] ZASCA 155; [2015] 4 All SA 571 (SCA); 2016 (2) SA 121 (SCA) para 15 (Hoërskool Fochville). [23] As to the ambit of rule 35(12), the court in Gorfinkel v Gross, Hendler & Frank14 stated as follows: '[P]rima facie there is an obligation on a party who refers to a document in a pleading or affidavit to produce it for inspection if called upon to do so in terms of Rule 35(12). That obligation is, however, subject to certain limitations, for example, if the document is not in his possession and he cannot produce it, the Court will not compel him to do so. (See the Moulded Components case supra at 461D-E.) Similarly, a privileged document will not be subject to production. A document which is irrelevant will also not be subject to production. As it would not necessarily be within the knowledge of the person serving the notice whether the document is one which falls within the limitations which I have mentioned, the onus would be on the recipient of the notice to set up facts relieving him of the obligation to produce the document.'15 [24] Much later, in Unilever plc and Another v Polagric (Pty) Ltd,16 Thring J referred with approval to the dictum in Gorfinkel mentioned in the preceding paragraph. However, in Hoërskool Fochville this court expressed serious reservations about the correctness of the statement in Gorfinkel to the effect that the party who makes reference to documents in its pleadings or affidavits bears the onus to set up facts 'relieving him of the obligation to produce the document' required by his or her adversary. This court said that: 'Approaching the matter on the basis of an onus may well be to misconceive the nature of the enquiry. . . That notwithstanding, it is important to point out that the term onus is not to be confused with the burden to adduce evidence (for example that a document is privileged or irrelevant or does not exist).'17 (Footnotes omitted.) [25] I propose dealing first with the law relating to the obligation of a party who makes reference in its pleadings or affidavits to documents or tape 14 Gorfinkel v Gross, Hendler & Frank 1987 (3) SA 766 (C) (Gorfinkel). 15 At 774G-J. 16 Unilever plc and Another v Polagric (Pty) Ltd 2001 (2) SA 329 (C). 17 Hoërskool Fochville para 18. recordings to produce those documents or tape recordings when a demand therefor has been made by the adversary. First, it is necessary to emphasise that the underlying purpose for production of documents for inspection and copying or transcribing as part of the broader discovery mechanism is to assist the parties and the court in discovering the truth and to promote a just and expeditious determination of the case.18 [26] Unlike the other rules relating to discovery generally, rule 35(12) is designed to cater for a different set of circumstances. Its provisions are generally deployed to require the production of documents or tape recordings before the close of pleadings or the filing of affidavits. In Unilever,19 the objective of rule 35(12) was explained, with reference to previous decisions of our courts,20 thus: '[A] defendant or respondent does not have to wait until the pleadings have been closed or his opposing affidavits have been delivered before exercising his right under Rule 35(12): he may do so at any time before the hearing of the matter. It follows that he may do so before disclosing what his defence is, or even before he knows what his defence, if any, is going to be. He is entitled to have the documents produced "for the specific purpose of considering his position".' [27] That the ambit of rule 35(12) is very wide admits of no serious doubt. Its extensive reach was explained by Friedman J in Gorfinkel21 as follows: 'There are undoubtedly differences between the wording of Rule 35(12) and the other subrules relating to discovery, for example subrules (1), (3) and (11) of Rule 35. The latter subrules specifically refer to relevance whereas subrule (12) contains no such limitation and is prima facie cast in terms wider than subrules (1), (3) and (11). 18 Santam Ltd and Others v Segal 2010 (2) SA 160 (N) 162E-F; MV Alina II, Transnet Ltd v MV Alina II 2013 (6) SA 556 (WCC) at 563F-G. 19 At 336G–J. 20 See, for example, Erasmus v Slomowitz (2) 1938 TPD 242 at 244; Gehle v McLoughlin 1986 (4) SA 543 (W) at 546D; Protea Assurance Co Ltd and Another v Waverley Agencies CC and Others 1994 (3) SA 247 (C) at 249B-D. 21 At 773G-J. It is nevertheless to my mind necessarily implicit in Rule 35(12) that there should be some limitation on the wide language used. One such limitation is that a party cannot be compelled under Rule 35(12) to produce a document which is privileged.' [28] In order for the production of a document to be compellable under rule 35(12) it is necessary that reference to such document must have been made in the adversary's pleadings or affidavits. In Magnum Aviation Operations v Chairman, National Transport Commission, and Another, 22 the court, in ordering the applicant to produce documents to which reference had been made in the founding affidavits, said the following relative to rule 35(12): 'In my opinion the ordinary grammatical meaning of the words is clear: once you make reference to the document, you must produce it. Even more is it so in this case where the implication in paras 19.4 and 19.6 is that, if the NTC had called for and looked at the financial statements of Operations, it might well have come to a different conclusion.'23 I agree with this analysis. [29] In similar vein, Friedman J put it thus in Gorfinkel (at 774E-H): 'As Rule 35(12) can be applied at any time, ie before the close of pleadings or before affidavits in a motion have been finalised, it is not difficult to conceive of instances where the test for determining relevance for the purposes of Rule 35(1) cannot be applied to documents which a party is called upon to produce under Rule 35(12), as for example where the issues have not yet become crystallised. Having regard to the wide terms in which Rule 35(12) is framed, the manifest difference in wording between this subrule and the other subrules, ie subrules (1), (3) and (11) and the fact that a notice under Rule 35(12) may be served at any time, ie not necessarily only after the close of pleadings or the filing of affidavits by both sides, the Rule should, to my mind, be interpreted as follows: prima facie there is an obligation on a party who refers to a document in a pleading or affidavit to produce it for inspection if called upon to do so in terms of Rule 35(12).' 22 Magnum Aviation Operations v Chairman, National Transport Commission, and Another 1984 (2) SA 398 (W). 23 At 400B-D. See also Penta Communication Services (Pty) Ltd v King and Another 2007 (3) SA 471 (C) para 14. [30] In Independent Newspapers (Pty) Ltd v Minister for Intelligence Services (Freedom of Expression Institute as Amicus Curiae) In re: Masetlha v President of the Republic of South Africa and Another, 24 the Constitutional Court underscored the importance of disclosure in court proceedings. It stated as follows: 'Ordinarily courts would look favourably on a claim of a litigant to gain access to documents or other information reasonably required to assert or protect a threatened right or to advance a cause of action. This is so because courts take seriously the valid interest of a litigant to be placed in a position to present its case fully during the course of litigation. Whilst weighing meticulously where the interests of justice lie, courts strive to afford a party a reasonable opportunity to achieve its purpose in advancing its case. After all, an adequate opportunity to prepare and present one’s case is a time-honoured part of a litigating party’s right to a fair trial.' Although these remarks were made in a different context, by parity of reasoning, they apply with equal force to the circumstances of this case. [31] The other point that bears emphasising is that as this court rightly observed in Hoërskool Fochville, a court considering an application under rule 30A to compel production of documents sought pursuant to rule 35(12) enjoys a general discretion 'in terms of which it is required to try to strike a balance between the conflicting interests of the parties to the case'.25 And that the court 'should not fetter its own discretion in any manner and particularly not by adopting a predisposition either in favour of or against granting production'.26 In the same case, Ponnan JA added that 'a court will not make an order against 24 Independent Newspapers (Pty) Ltd v Minister for Intelligence Services (Freedom of Expression Institute as Amicus Curiae) In re: Masetlha v President of the Republic of South Africa and Another [2008] ZACC 6; 2008 (5) SA 31 (CC); 2008 (8) BCLR 771 (CC) para 25. 25 Hoërskool Fochville para 18. 26 Ibid. a party to produce a document that cannot be produced or is privileged or irrelevant'.27 [32] The juridical framework within which a court considering an application to compel production of documents or tape recordings sought pursuant to rule 35(12) was neatly captured by Navsa ADP in Democratic Alliance and Others v Mkwebane and Another as follows:28 'To sum up: It appears to me to be clear that documents in respect of which there is a direct or indirect reference in an affidavit or its annexures that are relevant, and which are not privileged, and are in the possession of that party, must be produced. Relevance is assessed in relation to rule 35(12), not on the basis of issues that have crystallised, as they would have, had pleadings closed or all the affidavits been filed, but rather on the basis of aspects or issues that might arise in relation to what has thus far been stated in the pleadings or affidavits and possible grounds of opposition or defences that might be raised and, on the basis that they will better enable the party seeking production to assess his or her position and that they might assist in asserting such a defence or defences. In the present case we are dealing with defamatory statements and defences such as truth and public interest or fair comment that might be raised. The question to be addressed is whether the documents sought might have evidentiary value and might assist the appellants in their defence to the relief claimed in the main case. Supposition or speculation about the existence of documents or tape recordings to compel production will not suffice. In exercising its discretion, the court will approach the matter on the basis set out in the preceding paragraph. The wording of rule 35(12) is clear in relation to its application. Where there has been reference to a document within the meaning of that expression in an affidavit, and it is relevant, it must be produced. There is thus no need to consider the submission on behalf of the respondents in relation to discovery generally, namely, that a court will only order discovery in application proceedings in exceptional circumstances.' 27 Ibid. 28 Paragraph 41. [33] Recognising that some of the documents requested in its rule 35(12) notice might well contain commercially sensitive information, Caxton proposed that the production of such documents could, by agreement between the parties, be made subject to an appropriate confidentiality regime limiting their inspection to Caxton's attorneys, counsel and independent experts. However, Novus was unpersuaded by the effectiveness of the proposed confidentiality regime. Consequently, Novus remained steadfast in its objection to the production of the documents sought. [34] As already indicated, Novus' blanket refusal to produce the documents listed in Caxton's rule 35(12) notice precipitated the delivery by the latter of a rule 30A notice on 19 August 2020. And, in accordance with the wording of rule 30A, the notice cautioned Novus that unless it purged its non-compliance with the rule 35(12) notice and produce the requested documents, Caxton would, after five days of the date of service of the rule 30A notice, apply to court for an order compelling the production of the documents sought. Similarly, Caxton's rule 30A notice failed to elicit the desired outcome. [35] The principles that have crystallised over the years and may be extracted from the various decisions of our courts can be succinctly stated as follows. As a general rule, a document to which reference has been made in a pleading or affidavit is susceptible to production.29 Nevertheless, a court will refuse to order production of a document that is not in the possession or under the control of the other party or which is privileged or irrelevant.30 By relevance is meant that 29 Democratic Alliance and Others v Mkwebane and Another [2021] ZASCA 18; [2021] 2 All SA 337 (SCA); 2021 (3) SA 403 (SCA) para 41; Contango Trading SA v Central Energy Fund SOC Ltd [2019] ZASCA 191; [2020] 1 All SA 613 (SCA); 2020 (3) SA 58 (SCA) para 9. 30 Democratic Alliance and Others v Mkwebane and Another [2021] ZASCA 18; [2021] 2 All SA 337 (SCA); 2021 (3) SA 403 (SCA) para 41; Centre for Child Law v The Governing Body of Hoërskool Fochville and Another [2015] ZASCA 155; [2015] 4 All SA 571 (SCA); 2016 (2) SA 121 (SCA) para 18. the document or tape recording in question 'might have evidentiary value' or 'might assist' the party seeking production in relation to any 'aspects or issues that might arise' in light of the facts stated in the pleadings or affidavits.31 [36] To conclude on this aspect, it is necessary to emphasise that a court considering an application to compel production of the documents or tape recordings which are the subject of a rule 35(12) notice exercises a discretion in a broad sense.32 A court exercising a discretion in the true sense may properly come to different decisions having regard to a wide range of equally permissible options available to it. A discretion in the true sense was described by E M Grosskopf JA in Media Workers Association of South Africa and Others v Press Corporation of South Africa Ltd ('Perskor')33 in these terms: 'The essence of a discretion in this narrower sense is that, if the repository of the power follows any one of the available courses, he would be acting within his powers, and his exercise of power could not be set aside merely because a Court would have preferred him to have followed a different course among those available to him.' [37] An appellate court may therefore interfere with the exercise of a discretion in the true sense by a court of first instance only if it can be demonstrated that the latter court exercised its discretion capriciously or on a wrong principle, or has not brought an unbiased judgment to bear on the question under consideration, 'or has not acted for substantial reasons'.34 In 31 Democratic Alliance and Others v Mkwebane and Another [2021] ZASCA 18; [2021] 2 All SA 337 (SCA); 2021 (3) SA 403 (SCA) para 41; Swissborough Diamond Mines (Pty) Ltd and Others v Government of the Republic of South Africa and Others 1999 (2) SA 279 (T) at 316G. 32 Naylor and Another v Jansen [2006] ZASCA 94; [2006] SCA 92 (RSA); 2007 (1) SA 16 (SCA) para 14; Gaffoor NO and Another v Vangates Investments (Pty) Ltd and Others [2012] ZASCA 52; 2012 (4) SA 281 (SCA); [2012] 2 All SA 499 (SCA) para 41. 33 Media Workers Association of South Africa and Others v Press Corporation of South Africa Ltd ('Perskor') 1992 (4) SA 791 (A) at 800E-H. 34 Benson v SA Mutual Life Assurance Society 1986 (1) SA 776 (A) at 781I-782B and the cases therein cited; Hotz and Others v University of Cape Town [2017] ZACC 10; 2017 (7) BCLR 815 (CC); 2018 (1) SA 369 (CC) para 28. contrast, where the court of first instance exercised a wide or broad discretion an appellate court is in as good a position to exercise this type of discretion and would not hesitate to interfere in circumstances where, in its view, the court of first instance exercised its discretion improperly.35 Accordingly, to all intents and purposes the question here boils down to the simple fact as to whether on a consideration of all the relevant factors the high court came to a correct decision when it refused to order production of documents that are: (i) relevant; (ii) in the possession of the other party; and (iii) not protected by legal privilege. Borrowing the phraseology used by the Constitutional Court, '[t]he question is a simple one: was the High Court right or wrong in its conclusion?'.36 This is against the backdrop of what this court said in Democratic Alliance v Mkwebane, that '[t]he wording of rule 35(12) is clear in relation to its application. Where there has been reference to a document within the meaning of that expression in an affidavit, and it is relevant, it must be produced'.37 [38] For the sake of completeness on this score, it is necessary to emphasise that in the context of rule 35(12) the discretion with which the court is vested is narrowly circumscribed. Thus, once the applicant has established the requisite elements set out in this rule, the scope, if any scope exists at all, to refuse relief to the applicant is limited. Accordingly, in the event that a court seized with an application to produce documents subject to the rule 35(12) notice concludes that the documents sought to be produced: (a) have been referenced in the adversary's pleadings or affidavits; (b) are relevant; and (c) are not privileged, the application for their production must, in the ordinary course, necessarily succeed. It is therefore in the light of the foregoing principles that this appeal 35 Hoërskool Fochville para 30; Contago paras 28-34; Democratic Alliance v Mkwebane paras 42-45. 36 See in this regard: Helen Suzman Foundation v Judicial Service Commission [2018] ZACC 8; 2018 (4) SA 1 (CC); 2018 (7) BCLR 763 (CC) para 80. 37 Democratic Alliance v Mkwebane para 41. must be considered and determined, with due regard to the nature of the relief sought by Caxton in its main application. Relief sought in main application [39] The provisions of s 165, to the extent relevant for present purposes, have already been quoted extensively in paragraph 5 above. As is apparent from the text of s 165 itself, the section creates a statutory dispensation in terms of which a person – within the meaning of the section – may bring legal proceedings in the name and on behalf of a company. In order to do so, such a person must, as a general rule and absent exceptional circumstances,38 first serve a demand on the company concerned to commence or continue with legal proceedings. As already indicated above, having received a demand from Caxton as contemplated in ss 165(2) and (3), Novus appointed an independent and impartial person to investigate the demand and report to its board. 39 Upon receipt of the report, Novus declined to commence legal proceedings. As a result, Caxton applied to court for leave to bring the envisaged proceedings in the name and on behalf of Novus. For the court to grant Caxton leave to do so, Caxton must establish the existence of one or more of the jurisdictional requirements stipulated in s 165(5)(a) of the Companies Act. I interpose to mention that this issue presents no controversy, it being common cause between the parties that Caxton has done so. [40] In addition, it will be incumbent upon Caxton to satisfy the court that: (a) in seeking leave, it is acting in good faith; (b) the proposed proceedings involve the trial of a serious question of material consequence to Novus; and (c) it is in the best interests of Novus that Caxton be granted leave to commence the 38 See s 165(6) of the Companies Act. 39 Section 165(4). proposed proceedings. 40 Section 165(7) of the Companies Act, in turn, ameliorates the position of the company – Novus in this case – by creating a rebuttable presumption that, if the proposed action is against a third party, and the company has decided not to bring the proposed action – as Novus has – granting leave will not be in the best interests of the company – in this case Novus – if certain requirements are met. Some of these requirements are, for example, whether all of the directors who participated in the decision; '(i) acted in good faith for a proper purpose; (ii) did not have a personal financial interest in the decision, and were not related to a person who had personal financial interest in the decision; (iii) informed themselves about the subject matter of the decision to the extent they reasonably believed to be appropriate; and (iv) reasonably believed that the decision was in the best interests of the company'.41 Contentions of the parties [41] The contentions of the parties may briefly be stated as follows. Caxton contended that: (a) all of the documents required in terms of its rule 35(12) notice are referred to – albeit not annexed – in Novus' answering affidavit in the main application and are in the latter's possession; and (b) all of the documents are relevant, and to the extent that privilege is asserted in relation to one of them – ie the report of the independent and impartial person – the document concerned was not created for the purpose of being placed before a legal advisor in order to obtain legal advice; and that, in any event, even if the report is privileged, such privilege was waived when Novus chose to quote extensively from the report in its answering affidavit. Consequently, Caxton argued, the high court should have ordered production of the documents requested, and therefore erred in not doing so. 40 Sections 165(5)(b)(i), (ii) and (iii) of the Companies Act. 41 Section 165(7)(c) of the Companies Act. [42] For its part, Novus contended that none of the documents requested by Caxton in the latter's rule 35(12) notice is relevant. What is more, Novus submitted, the report of the independent and impartial person prepared pursuant to 165(4) of the Companies Act is immune from disclosure by virtue of its privilege. The foundation for this contention was that the report came into being for the purpose of litigation that was contemplated as likely at the time of its production. Furthermore, it was argued that the documents are confidential and that the confidentiality regime proposed by Caxton does not adequately protect its commercial interests. And, more compelling, that, in any event, the high court properly exercised its discretion in terms of rule 30A in refusing production of the documents sought. Were the documents sought referred to in Novus' affidavits? [43] The touchstone for production of documents or tape recordings pursuant to rule 35(12) is whether any 'reference' to the documents or tape recordings in question has been made in the other party's pleadings or affidavits. [44] In this matter Novus has, in resisting the relief claimed in the main application, made extensive references to a host of documents to demonstrate that Caxton's application is unmeritorious. In addition, Novus asserted that Caxton's invocation of s 165 of the Companies Act is a ruse used in order to harass Novus, Caxton's commercial arch-rival. Insofar as the report of the independent and impartial person is concerned, Novus contended that it is protected against production by virtue of the litigation privilege attaching to it. Thus, barring the issue of privilege (and whether Novus has waived privilege) the first requirement of rule 35(12) has been satisfied. Are the documents required relevant to the issues between the parties? [45] In order to determine whether the documents that are the subject-matter of this appeal are relevant, it is necessary first to have regard to the kernel of the dispute between the parties in the main application. As already indicated, that Caxton has the requisite legal standing to bring the main application is not in dispute. Nor is it contested that all the documents sought are in the possession or control of Novus. What is, however, hotly contested by Novus is whether Caxton has made out a case in order to satisfy the court in due course that: (a) in instituting the main application it is acting in good faith; (b) the proposed proceedings involve the trial of a serious question of material consequence to Novus; and (c) it is in the best interests of Novus that Caxton should be granted leave to commence the proposed proceedings in the name and on behalf of Novus. [46] With respect to all of these issues, it is as well to bear in mind that it is not for this court in the present matter to make findings that Caxton has satisfied the requirements of s 165(5)(b). That will be a matter for the court seized with the main application in due course. All what Caxton need establish in this appeal is that the documents bear relevance to the issues raised in the main application. This can be demonstrated with reference to the fact that the documents were called in aid and heavily relied upon by Novus in opposing the relief sought by Caxton. In Democratic Alliance v Mkwebane,42 this court stated that reliance on a document or tape recording by an adversary 'is a primary indicator of relevance'. Whilst acknowledging that such reliance cannot be used as 'the sole indicator', this court nevertheless recognised that the materiality of the document 'in relation to the issues that might arise or to a defence that is available to the party seeking production'43 is another important consideration. As to the latter 42 Paragraph 34. 43 Paragraph 34. aspect, there can be no doubt that in relying on the documents in question, Novus sought to dispel the notion harboured by Caxton that its dealings with the DBE and Lebone are tainted with impropriety on its part. That is one of the critical issues that will loom large in the main application. [47] In Gorfinkel, Friedman J had occasion to consider the issue of relevance in relation to rule 35(12). After making reference to previous decisions of our courts, and in particular Universal City Studios v Movie Time,44 the learned Judge said:45 'With regard to relevance there must also, in my view, be some limitation read into Rule 35(12). To construe the Rule as having no limitation with regard to relevance could lead to absurdity. It would be absurd to suggest that the Rule should be so construed that reference to a document would compel its production despite the fact that the document has no relevance to any of the issues in the case. It is not difficult to conceive of examples of documents which are totally irrelevant. Booysen J in the Universal City Studios case gave one such example. What is more difficult to decide is where the line should be drawn. A document which has no relevance whatsoever to the issues between the parties would obviously, by necessary implication, be excluded from the operation of the Rule. But would the fact that a document is not subject to discovery under Rules 35(1), 35(3) or 35(11) render it immune from production in terms of Rule 35(12)?' [48] The learned judge then continued:46 'In my view the parameters governing discovery under Rules 35(1), 35(3) and 35(11) are not the same as those applicable to the question whether a document is irrelevant for the purposes of compliance with Rule 35(12). A party served with a notice in terms of Rule 35(1) is obliged to make discovery of documents which may directly or indirectly enable the party requiring discovery either to advance his own case or to damage that of his opponent or which may 44 Universal City Studios v Movie Time 1983 (4) SA 736 (D). at 774A-C. 45 Gorfinkel at 774A-D. 46 Gorfinkel at 774C-F. fairly lead him to a train of enquiry which may have either of these consequences. Documents which tend merely to advance the case of the party making discovery need not be disclosed.' He then concluded that the party who had made reference to the documents sought was under an obligation to produce them. [49] As previously indicated, the high court refused to order production of the documents sought, because it found, in essence, that they were irrelevant to the issues raised in the main application. And that, as a result, Caxton would derive no benefit from the production of the documents in question. In reaching that conclusion the high court erred. As Friedman J rightly observed in Gorfinkel 'the parameters governing discovery under Rules 35(1), 35(3) and 35(11) are not the same as those applicable to the question whether a document is irrelevant for the purposes of compliance with Rule 35(12)'. In contrast, the scope of rule 35(12) is wide enough to cover every situation where the party calling for production of documents requires them for purposes of assessing his or her position.47 And this is precisely what obtains in this case. [50] I turn now to consider the individual categories of documents whose production Caxton sought to compel in this matter. This aspect of the case raises the question as to whether on an objective evaluation of the issues raised in the main application the documents sought are relevant. An allied question is whether one of the documents, namely the report, is privileged. In resisting the application to compel production of the documents, Novus disputed their relevance. In its answering affidavit in the main application, Novus accepted that the report was produced pursuant to s 165(4) of the Companies Act by the independent and impartial person who was instructed to investigate Caxton's 47 See Democratic Alliance v Mkwebane para 34, and the authorities discussed therein. demand and to report to the Board on the facts or circumstances that bear on the demand. Yet, it asserted in its answering affidavit that the 'very purpose of the report was to provide Novus' Board with legal advice relating to litigation which Caxton demanded Novus should commence against Lebone'. Is the report of the independent and impartial person privileged? [51] Novus asserted that the report is privileged and therefore protected from disclosure. In particular, it relied on litigation privilege contending that when the independent and impartial person was appointed pursuant to s 165(4) litigation was contemplated as likely. In order to sustain a defence based on litigation privilege, it is incumbent upon Novus to establish that: (a) the communication sought to be protected was made for the purpose of being placed before its legal advisor with a view to give legal advice; and (b) the communication was made for the purpose of either pending litigation or litigation that was contemplated as likely at the time. [52] In Competition Commission v Arcelormittal South Africa Ltd and Others,48 it was stated that litigation privilege, which is one of two components of legal privilege, is designed to 'protect communications between a litigant or his legal advisor and third parties, if such communications are made for the purpose of pending or contemplated litigation. It applies typically to witness statements prepared at a litigant's instance for this purpose. The privilege belongs to the litigant, not the witness, and may be waived only by the litigant'. Such communications are therefore protected from disclosure unless the privilege attaching thereto has been waived by the litigant. (See D T Zeffert and A P Paizes The South African Law of Evidence 3 ed (2017) at 732-745. 48 Competition Commission of South Africa v Arcelormittal South Africa Ltd and Others [2013] ZASCA 84; [2013] 3 All SA 234 (SCA); 2013 (5) SA 538 (SCA) para 20. [53] It was contended on behalf of Novus that the s 165(4) report constitutes a communication between Novus and the independent and impartial person, who is a third party. And the fact that s 165(4) itself contemplates litigation by Novus against Lebone, in accordance with the demand, places the report squarely in the realm of professional privilege. [54] Counsel for Caxton countered Novus' contention by submitting that the report was sought and prepared solely for the purpose of meeting the requirements of s 165(4) of the Companies Act. Thus, so it was argued, there could be 'no suggestion that it was created for the purpose of being placed before Novus' attorneys or other legal advisors so that they could provide legal advice. [55] The contention advanced on behalf of Novus prompts the following question: what is the object and purpose of s 165(4) of the Companies Act. Section 165(4) was quoted in full in paragraph 5 above. Briefly stated, its provisions are to the effect that if a company chooses not to act in accordance with s 165(3) it must appoint an independent and impartial person to investigate the demand and thereafter report to the board of directors on certain aspects as therein stipulated. And, within 60 days of the demand or any extended period, either initiate or continue legal proceedings or serve a notice on the person who served the demand refusing to comply therewith. [56] On this score, it is as well to remember that the logical point of departure in any interpretive exercise is the language of the instrument itself in the light of its context and purpose, all of which constitute a unitary exercise.49 These 49 Natal Joint Municipal Pension Fund v Endumeni Municipality [2012] ZASCA 13; [2012] 2 All SA 262 (SCA); 2012 (4) SA 593 (SCA) para 18. See also: S v Zuma and Others [1995] ZACC 1; 1995 (2) SA 62 (CC) para 18; Kubyana v Standard Bank of South Africa Ltd [2014] ZACC 1; 2014 (3) SA 56 (CC); 2014 (4) BCLR 400 (CC) para 18. interpretive precepts, aptly described as 'the triad of the text, context and purpose' in Capitec Bank Holdings Limited and Another v Coral Lagoon Investments 194 (Pty) Ltd and Others,50 were said to be 'the relationship between the words used, the concepts expressed by [the] words and the place of the contested provision within the scheme of the agreement (or instrument) as a whole that constitutes the enterprise by recourse to which a coherent and salient interpretation is determined'. Bearing these considerations in mind, it becomes readily apparent that having regard to the language, context and purpose of s 165(4), its manifest and primary purpose would be frustrated if the interpretation for which Novus contended were to be ascribed to this provision. [57] The key object and purpose of s 165(4) is, as is manifest from the text itself, to enable a company faced with a demand pursuant to s 165(2) to obtain an objective assessment by an independent and impartial person after investigating the demand and advising on its implications as contemplated in s 165(4)(a)(i)-(iii). Thus, in appointing the independent and impartial person, Novus was constrained by the strictures of s 165(4), because it had elected not to avail itself of the mechanism for which s 165(3) provides. Furthermore, whatever doubt there may have been as to the purpose for which the report was prepared is dispelled by the report itself, in which the independent and impartial person himself explicitly refers to what he understood to be his 'obligations as set out in s 165(4) of the Companies Act to report to the Board'. Thus, his brief from Novus was unequivocal: consider the demand by Caxton and advise the board on the issues spelt out in the section itself. 50 Capitec Bank Holdings Limited and Another v Coral Lagoon Investments 194 (Pty) Ltd and Others [2021] ZASCA 99; [2021] 3 All SA 647 (SCA); 2022 (1) SA 100 (SCA) para 25. [58] That the board might also have intended to submit the report to Novus' legal advisers for legal advice cannot change the essential character and key purpose of the report as explained in the preceding paragraph. In any event, as this court pointedly remarked in Contango,51 the mere say-so of the litigant that a document is protected by litigation privilege is not 'sufficient to withhold disclosure of a document.52 Rather, it is the 'purpose for which the document was prepared' that 'lay at the heart of the analysis'.53 [59] Accordingly, the point here is this: the key object of the report of the independent and impartial person is to advise the board of directors on the matters specified in s 165(4)(a) of the Companies Act. Put differently, the purpose sought to be achieved under s 165(4) is to determine whether or not the demand has substance and issues related thereto. This is therefore the overriding consideration in determining the status of the report. [60] That this must be so is made plain when the wording of the provisions of s 165(4)(b)(i) is contrasted with that of s 165(4)(b)(ii). It is manifest from a textual, purposive and contextual reading of s 165(4)(a) that the appointment of an independent and impartial person or committee is designed to establish whether or not the demand made on the company to 'initiate or continue legal proceedings as contemplated in the demand' is well-founded. This is further underscored by the fact that s 165(4)(b)(i) requires the company – within 60 days or within the extended period allowed by a court – to either initiate or continue with the legal proceedings contemplated in the demand. Alternatively, 51 Contango Trading SA v Central Energy Fund SOC Ltd [2019] ZASCA 191; [2020] 1 All SA 613 (SCA); 2020 (3) SA 58 (SCA). 52 Contango para 34. 53 Ibid. the company may instead 'serve a notice on the person who made the demand refusing to comply with it'. [61] Counsel for Novus sought to circumvent this interpretation by arguing that the interpretation for which Caxton contended was not the sole purpose of the provision under consideration. He submitted that the provision has a secondary purpose which was to advise Novus' board of directors with respect to the legal proceedings contemplated in the demand and, to that extent, the report is protected by legal privilege. In my view such a reading of the provision, that is s 165(4), would undermine the architecture of s 165 as a whole and render it unworkable in some respects. If Novus' proposed meaning of s 165(4) were to prevail, one may then rhetorically ask: how the person who has made a demand on the company in terms of s 165(2) could, for example, impugn the report of the independent and impartial person or committee under s 165(5)(a)(i), (ii) and (iii) of the Companies Act if it is protected against disclosure by virtue of being privileged. [62] As to several purposes to which a statutory provision may be directed, the learned author R Sullivan in her work titled Statutory Interpretation 2 ed (2007) at 196 states: 'Even though we often speak of "the" purpose of legislation, as if there were only one, it is apparent that every piece of legislation has multiple purposes that operate at different levels of generality. In sophisticated purposive analysis the interpreter attempts to identify and work with the primary objects, the secondary considerations, and the specific functions of legislation at all levels, from the words to be interpreted and the provision in which they appear to larger units of legislation and the Act as a whole.' Accordingly, it seems that the various purposes of legislation – if there be more than one – must be balanced and, if necessary reconciled in light of the context and meaning of the Act as a whole. And, as Smith J observed in General Accident, Fire and Life Assurance Corporation Ltd v Goldberg54 a document does not become 'privileged merely because afterwards the persons who obtained the report find it desirable or necessary to submit it to their legal advisors'. [63] A further indication of the difficulty encountered by Novus on this score is that, as submitted on behalf of Caxton, s 165 too gives a further legislative indication that points away from the notion 'that s 165(4) reports attract legal privilege'. This is so, Caxton argued, because s 165(5)(a)55 of the Companies Act 'contemplates that one of the jurisdictional requirements for an application under s 165(5) is if the court finds that a report in terms of s 165(4) "was inadequate in its preparation, or was irrational or unreasonable in its conclusions or recommendations".' I agree with counsel for Caxton that a determination of the kind envisaged in s 165(5)(a)(iii) can realistically be made only after the report has been placed before the court, and the parties themselves have had the opportunity to assess whether such report satisfies the requirements of s 165(5)(a)(iii), namely if it is adequate, rational or reasonable in its conclusions. In the final result, I accordingly find that the report is not privileged. Thus, Novus is under an obligation to produce the report pursuant to Caxton's demand therefor in terms of rule 35(12). [64] This conclusion renders it unnecessary to consider Caxton's alternative argument, namely whether Novus, by quoting the conclusion of the report extensively in its answering affidavit thereby waived any privilege that might otherwise have attached to the report. 54 General Accident, Fire and Life Assurance Corporation Ltd v Goldberg 1912 TPD 494 at 502. 55 Section 165(5) quoted in paragraph 5 above. The relevance of the individual documents [65] Having disposed of both the procedural and substantive obstacles placed on Caxton's path to procure production of the documents sought, it is timely to consider the individual items (of the various documents) and, briefly, the ground(s) upon which their production was sought. As already pointed out above, Caxton sought production of the s 165(4) report. The report itself alludes to the limitations inherent in the investigation conducted by the independent and impartial person pursuant to s 165(4). Its disclosure, argued Caxton, is necessary in order to determine the bona fides of Novus' directors in declining to institute the proposed proceedings. In addition, upon sight of the report, so it was contended, Caxton can then determine whether the requirements of s 165(5)(a)(iii) have been met. Thus, the question whether the report can bear scrutiny in the context of s 165(5)(a)(iii) can only be answered once the report has been analysed. Both Novus and Caxton have each advanced competing contentions in the main application that seek to support the case of the one and undermine that of the other. Consequently, the information contained in the report may be useful to or destructive of either party's case on this score. [66] Items 2 and 11 make reference to commission agreements concluded in April 2018 between Novus and Lebone but effective from November 2015. In the main application, Caxton seeks to have the commission agreements declared illegal. Caxton asserted that for the commercial rationale for such agreements to be properly assessed it will be necessary to scrutinise those agreements, including those that preceded them. As the commission agreements are at the core of Caxton's demand, there is, in my view, much to be said for this contention. [67] Item 3 represents the documentation that Novus placed at the disposal of the independent and impartial person pursuant to s 165(4) of the Companies Act. Caxton asserted that this class of documentation is critical in determining the question whether it was of such a nature as to enable the obligation arising from s 165(4) being properly discharged. In addition, so Caxton argued, the documentation will have a bearing on how the presumption created in s 165(7) would, in the end, operate; that is, in favour of, or against, either of the antagonists in the litigation. In my view there is considerable force in Caxton's contentions. [68] Items 4 and 6 related to reports that Lebone prepared periodically for submission to the DBE. According to Caxton, these reports bear relevance to the nature and extent of the work done by Lebone and whether the amount paid to it by Novus in accordance with their commission agreements was commensurate with the work that Lebone performed. Thus, these reports are relevant to the issues raised in the main application. [69] Item 5 represents invoices and supporting documents submitted to the DBE. In its answering affidavit, Novus asserted that: '. . . Lebone is tasked with ensuring that a streamlined process is implemented to make sure that the invoices together with all supporting documents are obtained and submitted to the DBE for payment in the shortest possible time. It is mainly for the successful execution of this function that Novus agreed to make the additional commission payments to Lebone if timeous payment is received from the DBE.'56 From these invoices, Lebone would be paid commission ranging from 10% to 13% depending on whether the DBE effected payment in settlement 'timeously' or not. The case sought to be made by Caxton in relation to this item in the 56 Answering affidavit in the main application para 197. proposed action is that Novus' commission payments to Lebone were disproportionate to the amount of work performed by the latter. This item, too, is relevant. [70] Item 7 relates to what is termed 'annual inflation adjustments' and supporting 'documentary evidence' prepared and submitted to the DBE by Lebone for which the latter was paid commission by Novus. [71] Item 8 represents invoices generated by Lebone and submitted to Novus in respect of 50% 'printing works for covers, tear-outs and stickers' as an integral part of the workbooks contract between the DBE and Novus. Caxton requires these documents which, according to it, 'will demonstrate how much Lebone was paid for the work that was outsourced to it by Novus'.57 [72] Item 9 relates to payments made by the DBE directly to Lebone in settlement of invoices prepared by and submitted by Lebone. Caxton asserted that these documents are relevant in order to determine whether there was not an overlap between the amounts payable by the DBE directly to Lebone and the commission paid by Novus to Lebone for work done by the latter with respect to the workbooks contract between the DBE and Novus. [73] Item 10 relates to proof of deliveries (PODs) in respect of the workbooks contract between the DBE and Novus. According to Novus, the PODs were 'meticulously completed' and were 'collated and submitted with the invoice to the DBE'. The preparation and submission of these documents was Lebone's responsibility, which was required to ensure that all was in order so that settlement of the invoice amount to Novus could be effected without delay. For 57 Paragraph 80 of Caxton's heads of argument. its endeavours, Lebone was paid a commission. Again, Caxton contended that these documents are relevant to demonstrate the nature and extent of the work performed by Lebone to justify the commission paid to Lebone by Novus. [74] Novus' sole objection to the production of the documents in issue is that they are all irrelevant to the proper determination of the main application. In elaboration, Novus contended that there is no demonstrable benefit that would accrue to its shareholders in the envisaged proceedings. On the contrary, argued Novus, there is a real likelihood that the proposed proceedings will be prejudicial to its shareholders. Caxton's true motives, asserted Novus, is to bring it to its knees and thus eliminate it as a formidable arch-competitor. [75] As to the relevance of the documents in issue, I am persuaded that a case has been made out to compel their production. Novus itself heavily relied on these documents to bolster its case that the relief sought by Caxton in the main application ought to be declined. Insofar as the other bases upon which counsel for Novus relied to object to the production of the documents, I consider that they all represent matters that are either not in our remit or can properly be ventilated during the hearing of the main application. For the foregoing reasons therefore, I am prepared to order the production of the documents in issue for inspection and copying by Caxton subject to the qualification set out in paragraph 78 below. [76] Novus also argued that production of the documents sought should be refused because Caxton invoked rule 35(12) after Novus had delivered its answering affidavit as a disguised attempt to obtain facts that Caxton requires to support its application; and that taking cognisance of the well-established rule that an applicant must stand or fall by its founding papers,58 Caxton's application to compel production of documents at this stage of the proceedings ought to be refused. These contentions cannot be sustained. The first difficulty with them is that they entirely ignore the plain wording of rule 35(12), which accords any party to any proceedings 'at any time before the hearing thereof' a right to call upon any other party in whose pleadings or affidavits reference is made to any document to produce such document. The other insurmountable difficulty for Novus is that Caxton, as the applicant in the main application, could not have invoked rule 35(12) until and unless reference was made to 'any document' in Novus' answering affidavit. Thus, the invocation of rule 35(12) by Caxton was triggered only when reference was made to the documents in question in Novus' answering affidavits. And, as already pointed out in paragraph 26 above, unlike rule 35(1),(2) or (3), rule 35(12) is designed to cater for a different set of circumstances. [77] What is more is that Caxton is entitled to have sight of the documents referenced in Novus' answering affidavit so as to deal with them in its replying affidavit. Thus, Caxton does not, as Novus asserted, seek the documents to make out a case in reply but rather to deal with Novus' defences raised in the latter's answering affidavit. Confidentiality [78] There is one final issue relating to the principal relief sought by Caxton to address in this judgment. That issue concerns the contention advanced by Novus in resisting the interlocutory application, namely that the documents required contain sensitive commercial information that should not be disclosed, especially to a business rival and competitor like Caxton. The disclosure of 58 Director of Hospital Services v Mistry 1979 (1) SA 626 (A) at 635-636 in fine. sensitive commercial information by way of discovery is not novel. In countering Novus' contention, Caxton submitted in its heads of argument that the inspection of confidential documents may be circumscribed to protect the commercial interests of the party asserting confidentiality. In so doing, a court will strive to strike a fine balance between the competing interests of the litigants. A court will, in exercising its discretion, not adopt a predisposition either in favour of or against permitting production of the documents concerned. This was recognised in Crown Cork & Seal Co Inc and Another v Rheem South Africa (Pty) Ltd and Others. 59 There, the court stated that a conflict will occasionally arise between the necessity to protect one party's confidential information on the one hand, and 'the need to ensure that a litigant is entitled to present his case without unfair halters' on the other.60 And all of this will be considered against the backdrop of the importance of the role fulfilled by discovery in the resolution of legal disputes. In order to resolve this conundrum, Schutz AJ in Crown Cork held that a court could impose 'appropriate limits' on the right of a litigant to have sight of the adversary's confidential documents.61 [79] In the same case, the learned Acting Judge went on to say: 'No less in South Africa than in England does the conflict arise between the need to protect a man's property from misuse by others, in this case the property being confidential information, and the need to ensure that a litigant is entitled to present his case without unfair halters. And, although the approach of a Court will ordinarily be that there is a full right of inspection and copying, I am of the view that our Courts have a discretion to impose appropriate limits when satisfied that there is a real danger that if this is not done an unlawful appropriation of property will be made possible merely because there is litigation in progress and because the litigants are entitled to see documents to which they would not otherwise 59 Crown Cork & Seal Co Inc and Another v Rheem South Africa (Pty) Ltd and Others 1980 (3) SA 1093 (W) (Crown Cork). 60 Crown Cork at 1100A-B. 61 Crown Cork at 1100B-C. have lawful access. But it is to be stressed that care must be taken not to place undue or unnecessary limits on a litigant's right to a fair trial, of which the discovery procedures often form an important part.'62 The requirement for a fair trial is now buttressed by the values underpinning our constitutional order.63 [80] As pointed out by Botha J some four decades ago in Moulded Components, the court may, in granting the application – for production of confidential documents – impose suitable conditions relative to their inspection so as to protect the party asserting confidentiality as far as might be practicable. There, the inspection of the documents subject to production was confined to the experts of the applicant, of course as assisted by the applicant's legal representative, to the exclusion of the litigants themselves. [81] Permitting the production of confidential documents subject to appropriate limits is now firmly established in our law. As it was expressed by Mthiyane JA more than a decade ago in Tetra Mobile Radio (Pty) Ltd v Member of the Executive Council of the Department of Works and Others:64 '. . . [I]f there was any apprehension on the part of the respondent regarding any specific document, that concern could be met by making an order similar to the one granted by Schwartzman J in ABBM Printing & Publishing (Pty) Ltd v Transnet Ltd [1998 (2) SA 109 (W) at 122I-J to 123A-B; 1997 (10) BCLR 1429; [1997] 4 All SA 94], where the parts of the documents in respect of which disclosure might result in breach of confidence were to be identified and marked as confidential and the applicant’s attorney was prohibited from disclosing such parts to any other party, including the applicant, save for the purpose of 62 Crown Cork at 1100A-D. 63 See, for example, De Beer NO v North-Central Local Council and South-Central Local Council and Others 2001 (11) BCLR 1109 (CC); 2002 (1) SA 429 (CC) paras 10, 11 & 13. 64 Tetra Mobile Radio (Pty) Ltd v Member of the Executive Council of the Department of Works and Others [2007] ZASCA 128; [2007] SCA 128 (RSA); 2008 (1) SA 438 (SCA) para 14 (Tetra Mobile). See also Comair Ltd v Minister for Public Enterprises and Others 2014 (5) SA 608 (GP); Helen Suzman Foundation v Judicial Service Commission [2018] ZACC 8; 2018 (4) SA 1 (CC); 2018 (7) BCLR 763 (CC) paras 73-75. consulting with counsel or an independent expert. In that way a fair balance could be achieved between the appellant’s right of access to documentation necessary for prosecuting its appeal, on the one hand, and the third respondent’s right to confidentiality, on the other.' [82] The decision of this court in Bridon International Gmbh v International Trade Administration Commission and Others65 endorsed the adoption of the confidentiality regime crafted by the court a quo and observed that: 'As to the solution preferred by the court a quo, Bridon's main objection is that it is difficult to apply in practice and that it provides no absolute guarantee against leakage. Though these objections are not without substance, the types of restrictions imposed in the court a quo's order are not novel. Despite Bridon's pessimistic predictions similar orders had been granted before, for example, in Moulded Components and Rotomoulding South Africa (Pty) Ltd v Coucourakis and Another 1979 (2) SA 457 (W) and in Crown Cork & Seal Co Inc and Another v Rheem South Africa (Pty) Ltd and Others 1980 (3) SA 1093 (W). More recently, this type of order has also been used as a mechanism in the application of s 45(1) of the Competition Act 89 of 1998, which is very similar in wording to s 35(3), in that it requires the Competition Tribunal to "make any appropriate order concerning access to that confidential information" (see Competition Commission v Unilever plc and Others 2004 (3) SA 23 (CAC) at 30F-I).' [83] It is not without significance that whilst Caxton's notice of appeal makes reference to a proposed confidentiality regime to be adopted in the event of the appeal succeeding, Novus contented itself with merely rejecting the proposed regime without suggesting an alternative regime. This was the position it elected to adopt even in its answering affidavit when resisting the production of the documents sought. Therefore, the task of this court is not made any easier because of the stance assumed by Novus relative to this aspect. However, it must be said that Novus' failure to address this aspect pertinently in its answering 65 Bridon International Gmbh v International Trade Administration Commission and Others [2012] ZASCA 82; [2012] 4 All SA 121 (SCA); 2013 (3) SA 197 (SCA) para 35. affidavit is not without consequences. Without any tenable explanation as to why the confidentiality regime proposed by Caxton is inadequate, there is no reason to fault the protection that it affords. The replying affidavit in the main application [84] Finally, it is necessary to deal with Caxton's quest to be afforded sufficient time within which to file its replying affidavit in the main application. It goes without saying that Caxton's replying affidavit is considerably long overdue. Caxton deliberately elected not to file its replying affidavit pending the outcome of its application to compel the production of the documents it sought from Novus. [85] There is nothing in the language of rules 35(12) and 30A to suggest that once a demand has been made for the production of the documents to which the rule 35(12) notice relates, the party seeking such documents is excused from complying with the timeframes prescribed in terms of Uniform Rule 6(5)(d)(ii)66 or 6(5)(e),67 as the case may be. In Potpale Investments (Pty) Ltd v Mkhize,68 Gorven J rightly observed that the delivery of a notice in terms of rule 35(12) or (14) does not suspend the period referred to in rule 26 or any other rule. Whilst there is much to be said for the view expressed by the learned Judge, sight should however not be lost of the fact that it is open to the court, in the exercise of its discretion, to extend the time periods prescribed in terms of the rules whenever 66 Rule 6(5)(d)(ii) reads: 'within fifteen days of notifying the applicant of his or her intention to oppose the application, deliver his or her answering affidavit, if any, together with any relevant documents.' 67 Rule 6(5)(e) reads: 'Within 10 days of the service upon the respondent of the affidavit and documents referred to in subparagraph (ii) of paragraph (d) of subrule (5) the applicant may deliver a replying affidavit. The court may in its discretion permit the filing of further affidavits.' 68 Potpale Investments (Pty) Ltd v Mkhize 2016 (5) SA 96 (KZP) para 18. a proper case therefor has been made out by the party seeking such indulgence. Indeed, this is what Uniform Rule 27 itself contemplates. [86] It is as well to remember that the manifest purpose of discovery is, as was stated in Durbach v Fairway Hotel, Ltd,69 'to ensure that before trial both parties are made aware of all the documentary evidence that is available. By this means the issues are narrowed and the debate of points which are incontrovertible is eliminated'. Accordingly, discovery assists the parties and the court in discovering the truth, and, in doing so, helps towards a just determination of the case. This also saves costs.70 [87] As the time for the delivery of Caxton's replying affidavit has long come and gone, it made perfect sense therefore for Caxton to ask for leave to deliver its replying affidavit only once it has had the opportunity to inspect and copy the documents that Novus is required to produce in terms of this judgment. And given the voluminous nature of the documents involved, it is eminently reasonable and fair that it be afforded a reasonable period within which to do so. This will be reflected in the order made below. Similarly, it is only fair that Novus should be afforded a reasonable period of time within which to produce the documents sought. This, too, is catered for in the order below. The order [88] For all the foregoing reasons the appeal must succeed and, in the result, the following order is made: The appeal is upheld with costs, including the costs of two counsel. 69 Durbach v Fairway Hotel, Ltd 1949 (3) SA 1081 (SR) at 1083. 70 Santam Ltd and Others v Segal 2010 (2) SA 160 (N) at 162E-F; MV Alina II Transnet Ltd v MV Alina II 2013 (6) SA 556 (WCC) at 563F-G. The order of the high court is set aside and in its place is substituted the following order: '2.1 The respondent is directed to produce for inspection and copying the documents specified below within 30 (thirty) days of the date of this order pursuant to the appellant's notice in terms of rule 35(12) delivered on 11 August 2020. 2.2.1 Judge Harms' "report" prepared pursuant to s 165(4) of the Companies Act 71 of 2008 and submitted to Novus' Board on 28 May 2020 referred to in paragraphs 21 to 28 of the respondent's answering affidavit in the main application under case no 8908/2020 (the main application). 2.2.2 The "predecessors" to the "Commission Agreement", referred to in paragraph 27 of the answering affidavit in the main application. 2.2.3 The "documentation at Novus' disposal" to which Judge Harms was "given full access" referred to in paragraph 28 of the answering affidavit in the main application. 2.2.4 All "reports to the Department of Basic Education (DBE)" referred to in paragraph 195.2 of the answering affidavit in the main application. 2.2.5 All "invoices together with all supporting documents" submitted to the DBE, as referred to in paragraph 197 of the answering affidavit in the main application. 2.2.6 All "reports" submitted to the DBE by Lebone, as referred to in paragraph 198 of the answering affidavit in the main application, but only to the extent that they may be different to the reports referred to in paragraph 2.2.4 above. 2.2.7 All "annual inflation adjustments" and supporting "documentary evidence" submitted by Lebone to the DBE, referred to in paragraphs 199 and 200, respectively, of the answering affidavit in the main application. 2.2.8 All "invoices" submitted by Lebone to Novus for the "printing of 50% of all the required covers, tear-outs, and stickers", referred to in paragraph 201 of the answering affidavit in the main application. 2.2.9 "The contract with the DBE" that "Novus had to comply with", as referred to in paragraph 225.1 of the answering affidavit in the main application, and "the contract" that the "DBE made payment of invoices in accordance with", referred to in paragraph 244 of the answering affidavit in the main application (and each "contract", to the extent that paragraph 225.1 and paragraph 244 may refer to two separate contracts). 2.2.10 The "meticulously completed Proof of Deliveries (POD's)" that were "collated and submitted with the invoice to the DBE", referred to in paragraph 225.1 of the answering affidavit in the main application. 2.2.11 The "other impugned agreements" and "the impugned agreements" that were "negotiated and concluded" at the time that none of Novus's current directors served as directors, as referred to in paragraphs 290.3 and 290.4 of the answering affidavit in the main application. It is further directed that the documents referred to in paragraph 2 above are to be provided subject to the following confidentiality regime: 3.1 Novus will provide the documents to Caxton's attorneys of record, and in doing so will indicate which documents Novus claims are confidential (the confidential documents). 3.2 Save for purposes of consulting with counsel or any independent experts or unless the Court orders otherwise, Caxton's attorneys of record shall not disclose directly or indirectly to any other party (including Caxton) any part of the confidential documents. 3.3 Caxton's attorneys of record and independent experts given access to the confidential documents pursuant to paragraph 3.2 above will sign a confidentiality undertaking confirming that they will not disclose directly or indirectly the contents of the confidential documents to any other party (including Caxton) other than a party that has also signed a confidentiality undertaking in terms of paragraph 3.2 above. 3.4 In the event that Caxton's attorneys of record, on behalf of Caxton, dispute that any document or documents asserted by Novus to be confidential is or are, in fact, confidential, then Caxton's attorneys of record are given leave, on behalf of Caxton, to urgently approach the Court on the same papers, supplemented as may be necessary, for an order providing for the exclusion of such document or documents from the confidentiality regime. 3.5 Confidential documents may only be referred to in affidavits deposed to by the legal representatives or independent experts of the parties, and any such affidavits will also be treated as confidential. Caxton is ordered to file its replying affidavit in the main application within 20 days after receipt of all the documents pursuant to paragraphs 2 and 3 above. The respondent in the interlocutory application is ordered to pay the costs of such application, including the costs of two counsel where so employed.' X M PETSE ACTING PRESIDENT SUPREME COURT OF APPEAL APPEARANCES For the appellant: A Cockrell SC (with him A Coutsoudis) Instructed by: Nortons Inc., Johannesburg McIntyre Van der Post Attorneys, Bloemfontein For the respondent: P G Cilliers SC (with him J L Mÿburgh) Instructed by: Van der Spuy & Partners, Cape Town Phatshoane Henney Attorneys, Bloemfontein

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 09 March 2022 Status: Immediate The following summary is for the benefit of the media in the reporting of this case and does not form part of the judgments of the Supreme Court of Appeal Caxton and CTP Publishers and Printers Limited v Novus Holdings Limited (Case no 219/2021) [2022] ZASCA 24 (10 March 2022) The Supreme Court of Appeal (SCA) today upheld an appeal brought by Caxton and CTP Publishers and Printers Limited (Caxton) against the decision of the Western Cape Division of the High Court of South Africa, Cape Town (Baartman J, sitting as court of first instance). The appeal was upheld with costs, including the costs of two counsel. The order of the high court was set aside and substituted with the order of the SCA in terms of which the respondent, Novus Holdings Ltd (Novus) was directed to produce all of the documents required by Caxton pursuant to the latter's notice under rule 35(12). The facts may be summarised as follows. On 7 April 2020, and pursuant to s 165(2) of the Companies Act 71 of 2008 (the Companies Act), Caxton served a demand upon Novus, in terms of which it demanded that Novus institute legal proceedings against Lebone Litho Printers Proprietary Limited (Lebone). According to Caxton, the envisaged legal proceedings would seek to have a commission agreement (and any related agreements) concluded between Novus and Lebone declared invalid and unenforceable. In terms of the impugned agreement, Novus undertook to pay commission to Lebone in relation to a public procurement contract between Novus, on the one hand, and the Department of Basic Education (DBE) on the other for the printing, packaging and distribution of school workbooks throughout the country. Invoking s 165(4) of the Companies Act, Novus appointed a retired Judge as an independent and impartial person (independent and impartial person) to investigate the demand, and thereafter to report to its board of directors on the matters set out in s 165(4). Upon receipt of the independent and impartial person’s report, Novus advised Caxton that the latter’s demand to institute legal proceedings against Lebone was declined. Undaunted, Caxton instituted the main application against Novus, in which leave was sought to bring the envisaged action in the latter’s name and on its behalf. Novus resisted the relief sought in the main application by Caxton. In its answering affidavit in the main application, Novus made reference to several documents, one of which was the s 165(4) report, in terms of which it sought to demonstrate that the proposed action lacked any prospect of success or was simply devoid of merit. Novus’ multiple references to a number of documents in its answering affidavit prompted Caxton to ask for the production of the documents concerned by invoking rule 35(12) of the Uniform Rules of Court. This, too, was resisted by Novus, who refused to make any of the documents sought available to Caxton for the latter’s inspection and, if deemed necessary, copying. Constrained by Novus’ unwavering stance, Caxton then brought the interlocutory application in the Western Cape Division of the High Court, Cape Town (the high court), in terms of rule 30A of the Uniform Rules, to compel the production for inspection and copying of the documents sought. Caxton’s interlocutory application took centre stage in this appeal. Caxton’s application to compel the production of the documents sought came before Baartman J, who dismissed it with costs. In dismissing the application, the learned Judge held, in essence, that all of the documents required by Caxton were irrelevant. Insofar as the report of the independent and impartial person was concerned, the high court held that it was, by its very nature and the circumstances attendant upon its production, privileged. And, further, that Novus had not, by quoting parts of the report, waived the privilege attaching to the report. In elaboration, the high court concluded that the fact that the report ‘was commissioned in circumstances where litigation was contemplated’ was reinforced by the undisputed and long litigation history between the parties, who were business arch-rivals. The high court granted Caxton leave to appeal against the judgment to the SCA. The central issue in this appeal was whether the documents sought by Caxton in terms of its rule 35(12) notice delivered on 11 August 2020, all of which were referred to in Novus’ answering affidavit in the main application, were relevant and therefore ought to have been produced for inspection and copying. A related issue was whether one of these documents, namely the report of the independent and impartial person appointed by Novus pursuant to s 165(4) of the Companies Act to investigate the demand, was privileged and thus protected against disclosure by virtue of its privileged status. If the report was found to be privileged, an allied issue would have arisen, namely whether in quoting virtually the entire conclusion of the report in its answering affidavit Novus had, as a result, waived the privilege attaching to the report. The SCA found that the upshot of the relevant principles was that as a general rule, a document to which reference has been made in an adversary's pleadings or affidavits was susceptible to production. The SCA nevertheless noted that a court would refuse to order production of a document that was not in the possession or under the control of the other party or which was privileged or irrelevant. By relevance, the SCA explained, was meant that the document or tape recording in question ‘might have evidentiary value’ or ‘might assist’ the party seeking production in relation to any ‘aspects or issues that might arise’ in light of the facts stated in the pleadings or affidavits. Furthermore, it was necessary to emphasise that a court considering an application to compel production of the documents or tape recordings which are the subject of a rule 35(12) notice exercised a narrowly circumscribed discretion. With regard to the issue of whether the documents sought were referred to in Novus’ affidavits, the SCA found that the decisive touchstone for production of documents or tape recordings pursuant to rule 35(12) was whether any ‘reference’ to the documents or tape recordings in question has been made in the other party’s pleadings or affidavits. In this matter Novus had, in resisting the relief claimed in the main application, made extensive references to a host of documents to demonstrate that Caxton’s application was unmeritorious. In addition, Novus asserted that Caxton’s invocation of s 165 of the Companies Act was a ruse employed in order to harass Novus, who was Caxton’s commercial arch-competitor. Insofar as the report of the independent and impartial person was concerned, Novus contended that it was protected against production by virtue of the litigation privilege attaching to it. Thus, the SCA held that barring the issue of privilege the requirements of rule 35(12) were satisfied. With regard to the issue of whether the documents required were relevant to the issues between the parties, the SCA found that it was well to bear in mind that it was not for the SCA in this matter to make definitive findings that Caxton had satisfied the requirements of s 165(5)(b) of the Companies Act. That would be a matter for the court that would be seized with the main application in due course to determine those questions. For the SCA’s purposes, it sufficed to state that all what Caxton needed to establish was that the documents bore relevance to the issues raised in the main application. This could be demonstrated with reference to the fact that the documents were called in aid and heavily relied upon by Novus in opposing the relief sought by Caxton. The SCA considered the individual categories of documents whose production Caxton sought to compel in this matter. This aspect of the case raised the question as to whether on an objective evaluation of the issues raised in the main application the documents sought were relevant. An allied question was whether one of the documents, namely the report, was privileged. The SCA found that the key object of the report of the independent and impartial person was to advise the board of directors on the matters specified in s 165(4)(a) of the Companies Act. Put differently, the purpose sought to be achieved under s 165(4) was to determine whether or not the demand had substance. This was therefore the overriding consideration in determining the status of the report. Further, the SCA agreed with counsel for Caxton that a determination of the kind envisaged in s 165(5)(a)(iii) could realistically be made only after the report had been placed before the court, and if the parties themselves had had the opportunity to assess whether such report satisfied the requirements of s 165(5)(a)(iii), namely if it was adequate, rational or reasonable in its conclusions. In the final result, the SCA accordingly held that the report was not privileged. Thus, Novus was under an obligation to produce the report pursuant to Caxton’s demand therefor in terms of rule 35(12). This conclusion rendered it unnecessary to consider Caxton’s alternative argument, namely whether Novus, by quoting the conclusion of the report extensively in its answering affidavit thereby waived any privilege that might otherwise have attached to the report. The SCA thereafter considered the individual items (of the various documents) and, briefly, the ground(s) upon which their production was sought. As to the relevance of the documents in issue, the SCA found that it was persuaded that a case had been made out to compel their production. Insofar as the other bases upon which counsel for Novus relied to object to the production of the documents, the SCA considered that they all represented matters that were either not in the SCA’s remit or could properly be ventilated during the hearing of the main application. For the foregoing reasons, therefore, the SCA was prepared to order the production of the documents in issue for inspection and copying by Caxton subject to a confidentiality regime. This was necessary because Novus, in resisting the interlocutory application asserted that the documents required contained sensitive commercial information that should not be disclosed, especially to a business rival and competitor like Caxton. In countering Novus’ contention, Caxton submitted that the inspection of confidential documents may be circumscribed to protect the commercial interests of the party asserting confidentiality. The SCA found that the disclosure of sensitive commercial information by way of discovery was not novel. Permitting the production of confidential documents subject to appropriate limits was now firmly established in our law. Accordingly, the SCA held that the documents in issue were to be produced subject to the prescribed confidentiality regime. ~~~~ends~~~~

2358

non-electoral

2009

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA JUDGMENT Case No: 338/09 In the matter between: JACOBUS PETRUS CHRISTIAAN MOSTERT SNR 1st APPELLANT JACOBUS PETRUS CHRISTIAAN MOSTERT JNR 2nd APPELLANT V THE STATE RESPONDENT Neutral citation: Mostert v The State (338/2009) [2009] ZASCA 171 (1 December 2009). Coram: Navsa, Mthiyane, Heher JJA, Leach et Griesel AJJA Heard: 4 November 2009 Delivered: 1 December 2009 Summary: Unauthorized abstraction of water from a river – whether state limited to prosecution of statutory offences and common law prosecutions are excluded – effect of s 98 of the National Water Act of 1998. ______________________________________________________________ ORDER ______________________________________________________________ On appeal from: North Gauteng High Court (Basson J and Smith AJ sitting as court of appeal). The following order is made: 1. The appeal against the appellants’ convictions on counts 3 and 4 is dismissed. 2. The appeal against the sentence imposed in respect of counts 3 and 4 is upheld and the sentence altered as set out below. 3. The respondent’s cross-appeal in regard to count 1 (fraud) is upheld and the high court’s order upholding the appellants’ appeal against their conviction on that count is set aside. 4. The respondent’s cross-appeal in regard to count 2 (theft) is dismissed. 5. The order of the high court is altered to read as follows: ‘(a) The appeal in respect of the first appellant’s conviction on counts 2, 5, 6 and 7 and the second appellant’s conviction on counts 2, 5 and 6 is upheld and such convictions and the sentences imposed in respect thereof are set aside. (b) The appeal in respect of the appellants’ convictions on counts 1, 3 and 4 is dismissed. (c) In respect of their conviction on count 1 (fraud) each appellant is sentenced to a fine of R20 000 or 12 months’ imprisonment, wholly suspended for four years on condition he is not convicted of fraud committed during the period of suspension and for which he is sentenced to imprisonment without the option of a fine. (d) The appeal against the sentence imposed in respect of counts 3 and 4 is upheld, the sentence is set aside and (both counts being taken together for purposes of sentence) replaced in the case of each appellant with a fine of R5 000 or six months’ imprisonment.’ ______________________________________________________________ JUDGMENT LEACH AJA (NAVSA, MTHIYANE, HEHER JJA et GRIESEL AJA concurring) [1] The two appellants, who are father and son, grow sugarcane in a joint enterprise on the farm ‘Dadelvlak’1 in the district of Barberton. The farm is riparian to the Lomati River from which the appellants abstract water to irrigate their lands. It also falls within the Lomati Irrigation District which was established on 31 October 1969 under the provisions of s 71(1) of the Water Act 54 of 1956 (‘the 1956 Act’) and in respect of which the Lomati Irrigation Board (‘the complainant’) was simultaneously created under s 79(1) of that Act.2 [2] The functions of the complainant included the exercise of control over the water in the Lomati River within its area of control and the regulation of the amount of water abstracted by farmers within its irrigation district. In order to monitor the quantity of water being abstracted, the complainant required the farmers to register their pump stations and to have them fitted with a water flow monitoring system known as a ‘WAMS’.3 The practice was for each farmer periodically to read the meter on the WAMS and to report the quantity of water consumed to the complainant. These readings were also verified from time to time by the complainant’s official, referred to in evidence as the ‘waterfiskaal’4, who made periodic spot-checks on the farms and personally took readings from the WAMS units. [3] For these purposes the appellants had registered only a single pump- station, known as pump-station 46, in respect of Dadelvlak. However, in July 1 The full name is ‘Dadelvlak 506 JU’. 2 Proclamation 286, 1969 published in GG2551 of 31 October 1969. 3 An acronym for ‘Water Administration Monitoring System’. 4 The water bailiff. 2004 the complainant learned that the appellants had constructed a second pump-station (referred to in evidence as pump-station 46.1) on the farm, which was not registered and had not been fitted with a WAMS. Understandably, the complainant suspected the appellants of using pump- station 46.1 to abstract water from the river which was not being reflected in their water consumption returns. It was later also discovered that the electrical wiring leading to the WAMS fitted to pump-station 46 appeared to have been interfered with in such a way that the pump could be operated without the water abstracted being recorded. [4] These discoveries set in train a series of events which in April 2006 culminated in the two appellants being arraigned in the Magistrate’s Court at Malelane on seven criminal charges. In addition to various charges under the National Water Act, 36 of 1998 (‘the 1998 Act’), they were also charged with the common law crimes of fraud and theft. Despite both appellants denying their guilt, the first appellant was convicted on all counts while the second appellant was convicted on six of the seven counts. They were then both sentenced to either pay substantial fines or to undergo imprisonment. [5] An appeal to the High Court, Pretoria succeeded to the extent that the appellants’ convictions and sentences on all but two counts were set aside, including those of fraud and theft, while the sentence imposed on the remaining two counts, which were taken together for purpose of sentence, was reduced. With leave of the high court, the appellants now appeal to this court against their two remaining convictions and their sentence. On the other hand, the state sought and obtained leave to appeal on points of law against the high court’s decision in regard to the charges of fraud and theft. [6] In the light of this background, the charges levied by the state which have to be considered are the following: Count 1 – it being alleged that the appellants committed the offence of fraud by knowingly providing the complainant with false readings of the quantities of water they had abstracted from the river at pump-station 46 during the period 1998 to 2005 (in the alternative, it was alleged they were guilty of the theft of the water that had been abstracted through this pump-station but not reflected in their water consumption returns); Count 2 – it being alleged that the appellants are guilty of theft in that during the period 1998 to 2005 they stole an unknown quantity of water which they had abstracted through pump-station 46.1; Count 3 – it being alleged that the appellants contravened s 151(1)(e) of the 1998 Act in that they wrongfully, unlawfully, intentionally or negligently tampered or interfered with the WAMS measuring device fitted to pump- station 46; Count 4 – it being alleged that the appellants contravened s 151(1)(j) of the 1998 Act by unlawfully, intentionally or negligently committing an act detrimentally affecting a water resource by illegally abstracting water from the Lomati River at both pump-stations 46 and 46.1 during the period 1998 to 2005. [7] The appellants attacked the validity of all these charges. Not only did they support the court a quo’s decision that it had not in law been open to the state to charge them with fraud and theft, but they also contended that the charges under the 1998 Act could not be brought against them as the complainant was continuing to operate under the 1956 Act at the material time, despite the 1998 Act having been brought into operation. In order to consider these contentions, it is useful to give a brief historical overview of certain of the laws relating to the use of water. [8] Water being a scarce and valuable commodity in a country such as ours which is often wracked by drought, it is hardly surprising that prior to Union in 1910 the Cape, Natal, Transvaal and Orange Free State had each passed legislation which differed in terms of effect but controlled the use of public water for purposes of irrigation. It is unnecessary to detail these differences in this judgment as the legislation in question was repealed by The Irrigation and Conservation of Waters Act 8 of 1912 (‘the 1912 Act’). Inter alia, it created irrigation districts,5 as well as irrigation boards for each such 5 Section 81. district,6 which were imbued with various powers, including the power to construct and maintain reservoirs, channels and other irrigation works. They were also charged with the obligation to obtain and conserve the supply of water and to arrange for an equitable distribution of any water stored or diverted by any such works7 and, in order to do so, were empowered to make bye-laws and rules prescribing ‘the manner of regulating the flow of water and the distribution from and use of water in the board’s channels and other works’.8 [9] The 1912 Act was repealed by the 1956 Act. Not only did it retain the common law distinction between private and public water which had been recognised in the 1912 Act, but it regulated the use of public water, providing for it to be used for agricultural, urban or industrial purposes. It vested the use of public water for agricultural purposes in the owner of land riparian to the public stream in question.9 It also provided for the creation of irrigation districts10 as well as an irrigation board for each irrigation district,11 which were required, inter alia,12  to protect the sources of the water of any public stream in its irrigation district,  to prevent the waste of the water in any public stream, to prevent any unlawful abstraction or storage of public water,  to exercise general supervision over all public streams within the irrigation district,  to investigate and record the quantity or share of water which every person having any right and respect of such water was entitled to use,  to supervise and regulate the distribution and use of the water of all or any of the public streams within its irrigation district,  for that purpose, to erect and maintain such devices for measuring and defining the flow of the water or controlling its diversion, and 6 Section 83. 7 Section 89(2). 8 Section 95(b). 9 Section 9(1). 10 Sections 71 to 77. 11 Section 79. 12 Section 89.  generally to supervise within the irrigation district the storage, diversion and use of water in public streams. [10] The 1956 Act was repealed and replaced by the 1998 Act which fundamentally reformed South African water law. The common law distinction between public water and private water was no longer recognised as a basis for entitlement to the use of water. Instead, under s 2 of the 1998 Act, government at national level was granted the overall responsibility for and authority over the country’s water resources and their use. Section 3 recognises national government, acting through the minister13 as the public trustee of the nation’s water resources, as having the power to regulate the use, flow and control of all water in the country. Section 4 goes on to prescribe who is entitled to use water, and the use of water otherwise than as permitted under the Act is both prohibited and criminalised.14 [11] In addition, the 1998 Act does away with the system of irrigation districts and their associated irrigation boards and replaces them with a system of ‘catchment management agencies’ and ‘water user associations’. The former have as their purpose the delegation of the management of ‘water resources’ (defined as including ‘water courses, surface water, estuaries or aquifers’)15 ‘to the regional or catchment level and to involve local communities’.16 The latter are intended to be ‘in effect co-operative associations of individual water users who wish to undertake water-related activities for their mutual benefit’.17 Section 98(4) provides that within six months of the commencement of the Act an irrigation board established in terms of any law in force immediately before the 1998 Act came into operation, is to submit to the minister a proposal to transform the board into a water user association – which proposal the minister, under s 98(5), may either accept, with or without amendment, or reject. If the proposal is accepted, the minister is to gazette a declaration to that effect. 13 Defined as the Minister of Water Affairs and Forestry. 14 Section 151(1)(a) as read with s 151(2). 15 Section 1. 16 See the explanatory note to Chapter 7 of the 1998 Act. 17 See the explanatory note to Chapter 8 of the 1998 Act. [12] Section 98(2) of the 1998 Act is a ‘sunset clause’. It provides: ‘A board continues to exist until it is declared to be a water user association in terms of subsection (6) or until it is disestablished in terms of the law by or under which it was established, which law must, for the purpose of such disestablishment, be regarded as not having been repealed by this Act.’ In addition, s 98(3) provides that: ‘(a) the name, area of operation, management, property, rights, liabilities, obligations, powers and duties of a board remain the same as immediately before the commencement of this Act; (b) this section does not affect the continuity, status, operation or effect of any act or omission of a board, or of any by-law made by a board, before the commencement of this Act; (c) any person holding office with the board when this Act commences continues in office for the term of that person’s appointment; and (d) if a position becomes vacant prior to the declaration of the board as a water user association, the board may fill the vacancy according to the procedures laid down by or under the law which applied to that board immediately before the commencement of this Act.’ The clear intention of these provisions is that existing water irrigation boards should continue in operation until they are restructured as water user associations. (Although strictly speaking it should not be taken into account in interpreting the Act18 this is confirmed by the explanatory note to chapter 8 of the Act, into which s 98 falls). [13] Notwithstanding the six month period prescribed by s 98(4), the complainant was neither disestablished nor transformed into a water user association, and was still continuing to operate by virtue of the provisions of s 98(2) and (3) at the time of the appellants’ trial, some eight years after the 1998 Act had come into operation. How this somewhat surprising state of affairs came about is, however, neither here nor there and, for present purposes, it must be accepted that at all times material to the charges brought against the appellants the complainant had continued to exist and to operate with the obligations, powers and duties it had enjoyed under the 1956 Act. 18 See s 1(4) of the 1998 Act. [14] In the light of this, the appellants argued that the charges brought against them under the 1998 Act were not competent as, so they submitted, the 1956 Act had continued to be in force in the complainant’s irrigation district – and it did not create similar statutory offences. In my view, for the reasons that follow, this cannot be accepted. [15] While it is so that the complainant had continued to exist and exercise the functions it had performed under the 1956 Act, this does not mean that the 1956 Act had not been repealed throughout the country, including within its irrigation district. The complainant’s existence and functions were merely preserved as a temporary measure to enable it to continue to operate. Had the legislature intended the 1956 Act not to have been repealed within the areas of operation of irrigation boards established under that Act when the 1998 Act came into operation, it would have been a simple matter for it to have said so. It did not do so, and such an intention is not a necessary inference. Indeed, the provisions of the 1998 Act clearly indicate the contrary. Thus, for example, a person who enjoyed an existing lawful water use before the commencement of the 1998 Act, was permitted under the provisions of s 34 of the latter Act to continue to exercise that use. The explanatory note to part 3 of chapter 4 of the 1998 Act, into which s 34 falls, gives the following relatively simple and accurate summation of the provisions of that part of the chapter: ‘This Part permits the continuation under certain conditions of an existing water use derived from a law repealed by this Act. An existing lawful water use, with any conditions attached, is recognised but may continue only to the extent that it is not limited, prohibited or terminated by this Act. No licence is required to continue with an existing lawful water use until a responsible authority requires a person claiming such an entitlement to apply for a licence. If a licence is issued it becomes the source of authority for the water use. If a licence is not granted the use is no longer permissible.’ [16] Thus, although an irrigation board might continue to exist and operate with the various duties and obligations it had under the 1956 Act despite the coming into operation of the 1998 Act, it does so by reason of the provisions of the latter which clearly apply within the irrigation district of each such an irrigation board and regulates the use of water. Accordingly, anyone who commits an offence envisaged by s 151 of the 1998 Act may be charged under that Act, even if the offence is committed within the irrigation district of an irrigation board established under the 1956 Act which continues to exist and operate by reason of s 98 of the 1998 Act. [17] It was therefore clearly competent for the state, in counts 3 and 4, to charge the appellants with offences under s 151 of the 1998 Act. Whether the evidence establishes their guilt on these counts is another matter, to which I shall return in due course. [18] It is convenient at this stage to consider the issue raised in the cross- appeal, namely, whether it was competent to charge the appellants with the common law offences of fraud (count 1) and theft (count 2, and as an alternative on count 1) or whether the state was limited to charging them with no more than the statutory offences created by the 1998 Act. The cross- appeal flows from the court quo's finding that the legislature, by comprehensively regulating the use of water by way of the 1998 Act in which it created numerous statutory offences, necessarily intended to limit the prosecution of persons for offences in relation to water and its use to those it had provided under that Act, and had excluded common law offences the elements of which overlapped with such statutory offences. [19] In my view, the court a quo misdirected itself in this regard. The mere fact that certain conduct might constitute an element of both a common law offence and a statutory offence is not in itself any reason to find that the legislature intended only the statutory offence to be capable of prosecution. There are numerous instances where certain conduct will be an element of both a common law and statutory offence. An obvious example which springs to mind is the negligent driving of a motor vehicle. This amounts to a statutory offence and an essential element of the common law offence of culpable homicide where it results in a loss of life. But that is no bar to the offender being charged with culpable homicide and, in the alternative, the statutory offence of negligent driving. Indeed, this court has recognised that in certain cases where conduct which amounts to a statutory offence overlaps with the common law offence, the penalty prescribed for the statutory offence may in certain circumstances be a useful guide in considering an appropriate sentence for a conviction of the common law offence.19 [20] I accept that, in principle, the legislature could bar the prosecution of certain common law offences and restrict the prosecuting authority to bringing charges solely in respect of statutory offences. But there is no provision in the 1998 Act which specifically debars common-law offences relating to water or its misuse, nor can such a provision be found by necessary implication, and the court quo erred in finding that the appellants could not be prosecuted for common law offences. [21] While I thus see no reason why a charge of fraud could not be brought against the appellants, that is not the end of the matter in respect of whether water pumped out of the Lomati River could be the subject of a charge of theft, an issue which needs more detailed examination. [22] Roman law recognised certain things as being res extra patrimonium which were incapable of being owned, including those things classified as res communes being ‘things of common enjoyment, available to all living persons by virtue of their existence’.20 Public water, running in a river or a stream, was recognised as being res communes and therefore incapable of being owned.21 These Roman law principles were adopted by Roman–Dutch law and subsequently recognised in South Africa.22 Indeed, s 6(1) of the 1956 Act specifically provided that ‘there shall be no right of property in public water and the control and use thereof shall be regulated as provided in this Act.’ 19 Eg R v Sacks 1943 AD 413 at 428 and R v Mzwakala 1957 (4) SA 273 (A) at 279B-C. 20 See eg J A C Thomas Textbook of Roman Law (1976) at 129. 21 Justinian Institutes 2.1.1 and Lawsa (1st re-issue) vol 30 par 358. 22 Lawsa op cit. [23] As water in a public stream was therefore incapable of being owned, it was also incapable of being stolen23 and I did not understand the state to contend otherwise. However, it submitted that the fundamental changes brought about by the 1998 Act resulted in this no longer being an accurate reflection of our law. Its argument in this regard was based on the Act having specifically placed water resources under the trusteeship of national government as I have already mentioned in para 10 above. But I do not see how the fact that government now exercises administration and control over water flowing in a river means it must now be regarded as capable of being owned and thus capable of being stolen. Effectively the 1998 Act does no more than place all water within the aegis of state control, which control the state had in any event exercised over public water before it came into operation. The legislature created various statutory offences under the 1998 Act and, if it had wished to create the offence of theft of water, it could easily have done so. It did not. Instead, in s 151(1)(a) it made the use of water other than as prescribed by the Act an offence. [24] Accordingly, my prima facie view is that water flowing in a stream or river (a water resource as envisaged by the 1998 Act) is not capable of being stolen, so that a riparian owner who abstracts more water from such a water resource than that to which he or she is legally entitled may commit a statutory offence under s 151 of the 1998 Act but does not commit the offence of theft. However, it is not necessary to reach a final decision on this issue as, even if it had been competent for the state to charge the appellants with theft, that charge could only have been sustained if the appellants had taken more water than what they had been entitled to abstract. On appeal, the court a quo concluded that the evidence in the trial court had failed to establish that to have been the case, and for that reason the appellants’ conviction for theft could not stand. The ratio of the decision of the court a quo was based on this factual finding, not on the point of law that a charge of theft could not be brought. Its observation to the effect that a charge of theft of water was inappropriate was no more than a passing comment and was not the 23 J Burchell Principles of Criminal Law 3 ed (2005) at 167. underlining reason why the conviction of theft was set aside. That being so, the court a quo erred in granting leave to appeal on a point of law in respect of the theft charge which could not determine the appellants’ guilt or otherwise on that charge. And in any event, I agree that the state failed to establish that the appellants had abstracted more water from the river than that to which they had been entitled, even if the circumstances were such that their actions gave rise to a very real suspicion that they had done so. In these circumstances the cross-appeal in relation to the charge of theft cannot succeed. [25] I turn to consider whether the evidence established the appellants’ guilt on the three remaining counts. It was argued on behalf of the appellants that the evidence of a state witness, David Maduna, an employee of the appellants, should be disregarded as he had not been properly sworn in by the magistrate. The point is debateable but, for purposes of this appeal, I intend to accept that no account should be had of his evidence. The remaining witnesses were found by the magistrate to be reliable and the attack upon their honesty and credibility contained in the appellants’ heads of argument was not only unjustified and groundless but was, in the main, based on speculation and matters not raised in evidence. The appellants did not testify and, in these circumstances, there is no reason not to accept those factual findings of the trial magistrate, which were also accepted by the court a quo. [26] As I have mentioned, the appellants’ farm lies within the irrigation district of the complainant. The appellants registered a single pump-station with the complainant which was fitted with a WAMS to measure the amount of water they abstracted from the Lomati River. In terms of an undertaking they had given, the appellants periodically passed on the readings to the complainant. Those readings were verified from time to time by the waterfiskaal. Despite the complainant having been entitled to make bye-laws, the scheme appears to have been administered by consent rather than by the passing of bye-laws or regulations. [27] In July 2004 the waterfiskaal, Mr du Toit, discovered that the appellants had built pump station 46.1 on the their farm to which there was no WAMS or similar system fitted, and were using it to pump water from the Lomati River to a nearby storage dam on the farm – from which water was led to irrigate certain lands. This was reported to the complainant whose committee took the matter up with the appellants and informed them that the pump-station was illegal and that they were to fit it with a WAMS. They agreed to do so at their own cost, but it was subsequently ascertained that the flow-meter was mounted inside the pump-house which was locked, and thus did not comply with the complainant’s specifications as it was not accessible to the waterfiskaal. [28] As a result of certain information received, the complainant also suspected that the WAMS unit at pump-station 46 had been de-activated so that the appellants could pump water from the river which would not be recorded. This led to the complainant obtaining a warrant to carry out an inspection on the appellants’ farm. Consequently, on 3 March 2005 a qualified electrical contractor, Mr WJ de Beer, inspected pump-station 46 in the company of the second appellant. When the second appellant unlocked the pump-house, De Beer noticed that the pump was running but that the WAMS was not registering the water flow. The cause of this was found to be that the electrical wiring leading to the WAMS had been bridged. It is unnecessary to deal with the technical evidence save to state that it was quite clear that the electrical circuits had been altered so that the pump could run without the WAMS system reading the quantity of water being abstracted. [29] This evidence, unchallenged as it was by the appellants, establishes that the appellants pumped an unknown quantity of water out of the river at pump station 46 which was not registered on the WAMS system affixed to that pump. As the figures recorded by the WAMS were forwarded to the complainant as being the appellant’s water consumption from the river, the appellants therefore intentionally brought the complainant under the impression that they had abstracted less water than they had actually done. It also prevented the waterfiskaal from verifying the accuracy of the figures that appellants had submitted. In a nutshell, the appellants deceived the complainant in regard to the quantity of water they had abstracted from pump station 46. [30] The court a quo appears to have found that the misrepresentation made by the appellants could not be regarded as being unlawful as there was no statutory obligation on their part to provide correct information. But that misses the true issue, namely, that the appellants intended to and did in fact deceive the complainant by forwarding water consumption figures which they knew were incorrect. The complainant was required to protect the sources of the water in the river, to prevent any unlawful abstraction of such water, to exercise general supervision over the river and to recall, supervise and regulate the use of the water in the river.24 The complainant was thus clearly prejudiced by the appellants’ misrepresentations as it relied on the accuracy of the information it received as to the water abstracted from the river in order to discharge its functions. The essence of fraud is the deception of the victim by way of misrepresentation causing prejudice or intentional prejudice, and it matters not that the appellants were not under a statutory obligation to provide accurate figures. Misrepresentations were clearly made by both appellants, either in concert or by making common cause with the actions of each other, and caused either direct or potential prejudice to the complainant. Consequently, while the appellants cannot be found guilty of theft of the unknown quantity of water which they abstracted but did not account for to the complainant, there is no reason why they cannot be found guilty of fraud. I have no difficulty in concluding that the state established the guilt of both appellants on count 1. [31] In relation to count 3, it is alleged by the state that the appellants contravened s 151(1)(e) of the 1998 Act by having wrongfully and intentionally tampered or interfered with the WAMS device fitted to pump station 46. That the device was interfered with by way of a carefully crafted bridging device being fitted to its electrical system leading is clear. This was done within the 24 See para 9 above. pump-station which was locked and to which only the appellants had access. The irresistible inference is that the appellants were directly responsible for the installation of the bridging device to enable them to run the pump without the WAMS recording the amount of water being abstracted. The only real defence to the charge offered by the appellants in the appeal was that they could not be charged under s 151 of the 1998 Act. But, for the reasons already given, there is no merit in that defence. Again, I have no difficulty in concluding that the appellants were correctly convicted on this charge. [32] The charge against the appellants in to count 4 was that they had contravened s 151(1)(j) of the 1998 Act by unlawfully abstracting water from the Lomati River at both pump-stations 46 and 46.1. The essence of an offence under s 151(1)(g) is an act ‘which detrimentally affects or is likely to affect a water resource’. It is clear that the appellants pumped quantities of water from the Lomati River, which is a ‘water resource’ as defined, at both those pump stations for which they did not account to the complainant. This would have occurred whenever water was abstracted from pump station 46.1 (which was not fitted with a WAMS) and when the water abstracted from pump-station 46 was not recorded by its WAMS due to the meter having been cut out of the electrical system by the unauthorised bridge. [33] As the complainant was charged with the administration of the water in the river and obliged to supervise and regulate its use, the appellants’ actions would clearly either have detrimentally affected the river or have been likely to have done so. I therefore have no difficulty in finding that the appellants were correctly convicted on count 4 as well. [34] I turn now to the question of sentence. At the outset, I shall deal with count 1 ie the count of fraud. For purposes of sentence, the trial court took this conviction together with the conviction of theft on count 2 and imposed a fine of R30 000 or 18 months’ imprisonment wholly suspended for five years on certain conditions. Of course, the appellants are now to be sentenced merely for the single count of fraud. Nevertheless, the offence is a severe one, relating as it does to a scarce natural resource. In these circumstances I am of the view that it would be appropriate to sentence each appellant to a fine of R20 000 or 12 months’ imprisonment but to suspend the sentence in its entirety for five years on condition that he is not convicted of fraud committed during this period of suspension for which he is sentenced to imprisonment without the option of a fine. [35] The court a quo took both counts 3 and 4 together for the purposes of sentence, and sentenced each appellant to a fine of R5 000 to be paid to the complainant within 30 days or six months’ imprisonment. Although the appellants appealed against both the amount they were ordered to pay as well as the length of the period of imprisonment imposed as an alternative, they were, if anything, leniently treated and I see no reason to interfere. However, the condition that the amount of R5 000 be paid to the complainant is inappropriate. Not only does the complainant possibly not still exist, but effectively the court imposed a compensatory order in respect of which the procedures, required by s 152 of the 1998 Act and s 300 of the Criminal Procedure Act 51 of 1977, were not followed. The parties therefore agreed that this court should alter the sentence to reflect the amount as a fine payable to the state. [36] In the result, I order as follows: 1. The appeal against the appellants’ convictions on counts 3 and 4 is dismissed. 2. The appeal against the sentence imposed in respect counts 3 and 4 is upheld and the sentence altered as set out below. 3. The respondent’s cross-appeal in regard to count 1 (fraud) is upheld and the high court’s order upholding the appellants’ appeal against their conviction on that count is set aside. 4. The respondent’s cross-appeal in regard to count 2 (theft) is dismissed. 5. The order of the high court is altered to read as follows: ‘(a) The appeal in respect of the first appellant’s conviction on counts 2, 5, 6 and 7 and the second appellant’s conviction on counts 2, 5 and 6 is upheld and such convictions and the sentences imposed in respect thereof are set aside. (b) The appeal in respect of the appellants’ convictions on counts 1, 3 and 4 is dismissed. (c) In respect of their conviction on count 1 (fraud) each appellant is sentenced to a fine of R20 000 or 12 months’ imprisonment, wholly suspended for four years on condition he is not convicted of fraud committed during the period of suspension and for which he is sentenced to imprisonment without the option of a fine. (d) The appeal against the sentence imposed in respect of counts 3 and 4 is upheld, the sentence is set aside and (both counts being taken together for purposes of sentence) replaced in the case of each appellant with a fine of R5 000 or six months’ imprisonment.’ ________________ L E LEACH ACTING JUDGE OF APPEAL APPEARANCES: COUNSEL FOR APPELLANTS: J Nel INSTRUCTED BY: Coert Jordaan Attorneys, Nelspruit CORRESPONDENT: Giorgi en Gerber Attorneys, Bloemfontein COUNSEL FOR RESPONDENT: L Kok INSTRUCTED BY: Director of Public Prosecutions, Pretoria CORRESPONDENT: Director of Public Prosecutions, Bloemfontein

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 1 December 2009 Status: Immediate Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal. J P C MOSTERT SNR & ANOTHER v THE STATE The two appellants, farmers who irrigate from the Lomati River, were convicted in the Magistrate’s Court at Malelane on charges of fraud and theft as well as various contraventions of the National Water Act 36 of 1998. They appealed to the High Court, Pretoria. That court held that the state had proved only two contraventions under Act 36 of 1998 and that it had not been competent for the state to charge the appellants with fraud and theft as the legislature had intended to exclude common law offences. In a further appeal, the Supreme Court of Appeal today ruled that the high court had erred in regard to this latter issue and that the state had been entitled to charge the appellants with common law offences. The court found that the appellants had been guilty of fraud and two of the statutory offences with which they had been charged that that the state had failed to prove that they had taken water to which they had not been entitled. The court expressed the view, however, that in law a person could probably not be guilty of the theft of water out of a river.

3683

non-electoral

2021

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Reportable Case No: 296/2020 & 226/2021 In the matter between: MULTICHOICE SUPPORT SERVICES (PTY) LTD APPELLANT and CALVIN ELECTRONICS T/A BATAVIA TRADING FIRST RESPONDENT MUDUMELA CALVIN THITOVHELWI SECOND RESPONDENT Neutral citation: MultiChoice Support Services (Pty) Ltd v Calvin Electronics t/a Batavia Trading and Another (case no 296/2020 and 226/2021) [2021] ZASCA 143 (8 October 2021) Coram: MBHA, SCHIPPERS JJA and POTTERILL, PHATSHOANE and MOLEFE AJJA Heard: 19 August 2021 Delivered: This judgment was handed down electronically by circulation to the parties' representatives by email, publication on the Supreme Court of Appeal website and release to SAFLII. The date and time for hand-down is deemed to be 09h45 on 8 October 2021. Summary: Law of contract – cancellation in terms of provisions of contract – contracting party applying for interdict to stop cancellation pending judicial review of decision to cancel – interdict granted – cancellation of contract not reviewable – does not involve control of public power – not administrative action – neither reviewable under principle of legality – interdict legally unsustainable – contempt of court – order based on legally unsustainable interdict – fatally defective – requisites for contempt in any event not met – execution of contempt order granted in terms of s 18 of Superior Courts Act 10 of 2013 – also defective – execution requirements not met. ORDER On appeal from: Limpopo Division of the High Court, Polokwane (Phatudi J sitting as court of first instance): The appeal under case no 226/2021: 1 The appeal is upheld with costs on the scale as between attorney and client, including the costs of two counsel. 2 The order of the high court is set aside and replaced with the following order: ‘The application is dismissed with costs on the scale as between attorney and client, including the costs of two counsel, where so employed.’ On appeal from: Limpopo Division of the High Court, Polokwane (Tshidada AJ sitting as court of first instance): The appeal under case no 296/2020: 1 The appeal is upheld with costs on the scale as between attorney and client, including the costs of two counsel. 2 The order of the high court is set aside and replaced with the following order: ‘The application is dismissed with costs on the scale as between attorney and client, including the costs of two counsel, where so employed.’ JUDGMENT Schippers JA and Potterill AJA (Mbha JA and Phatshoane and Molefe AJJA concurring) [1] These are two related appeals. The first, which is with the leave of this Court, is against an order of Phatudi J in the Limpopo Division of the High Court Polokwane (the high court), declaring that the appellant was in contempt of an order issued by that court (per Makgoba JP) on 26 November 2019. The second, which is before us by way of the appellant’s automatic right of appeal in terms of s 18(3) of the Superior Courts Act 10 of 2013 (the Act), concerns the correctness of an order made by the high court (Tshidada AJ) that an order which was the subject of an appeal (the contempt order by Phatudi J), be put into operation. The facts [2] The appellant, MultiChoice Support Services (Pty) Ltd (MultiChoice), provides satellite television, audio channels and related facilities and services to subscribers. The respondents, Calvin Electronics t/a Batavia Trading and Mr Mudumela Calvin Thithovhelwi (hereafter referred to as Calvin) in 2015 concluded an agency agreement in terms of which Calvin, as agent, was responsible for soliciting subscriptions, collection of subscription fees and activating customer accounts (the agency agreement). The parties entered into an accredited installers agreement in 2016 (the installers agreement). Under that agreement Calvin was appointed as an accredited installer of MultiChoice’s equipment and granted access to its information technology systems known as the Clarity and SAP systems (MultiChoice’s systems). [3] On 30 September 2019 MultiChoice gave Calvin written notice of termination of the agency agreement. A similar notice terminating the installers agreement was sent on 11 October 2019. For convenience, we refer to these notices of termination of the agreements as ‘the September terminations’. The effects of September terminations were mainly that Calvin could no longer trade as a MultiChoice agent and installer and was denied access to its systems. The September terminations led to a flurry of seven applications brought before three different high courts during the period November 2019 to February 2020. [4] On 8 November 2019 Calvin approached the Limpopo Division of the High Court, Thohoyandou, on an urgent basis to reverse the effects of the September terminations. Phatudi J struck that application from the roll for want of urgency and granted a punitive costs order against Calvin. That application was not re-enrolled by Calvin on the ordinary court roll. Instead, it abandoned the application. [5] On 20 November 2019 Calvin filed an application in the high court, Polokwane, to ‘review’ MultiChoice’s decision to terminate the agreements. In answer MultiChoice filed a notice of its intention to raise questions of law at the hearing of that application.1 These questions were principally that the parties had agreed that MultiChoice was entitled to cancel the agreements at its sole discretion for any reason whatsoever. Consequently, the decisions to terminate the agreements could never constitute ‘administrative action’ as defined in the Promotion of Administrative Justice Act 3 of 2000 (PAJA), and were thus not reviewable. The review application has to date not been prosecuted. [6] On 25 November 2019 Calvin issued a second urgent application in the high court. On 26 November 2019 Makgoba JP granted an order (without reasons) directing MultiChoice to restore Calvin’s access to the IT systems, pending the finalisation of the review application filed on 20 November 2019. MultiChoice was also interdicted from preventing Calvin from performing its obligations as a service provider under the agency and installer agreements. MultiChoice complied with this order and Calvin was granted access to its systems. MultiChoice was provided with the reasons for the order of Makgoba JP only in February 2020. 1 The notice was filed in terms of rule 6(5)(d)(iii) of the Uniform Rules of Court. [7] After MultiChoice had restored Calvin’s access to its systems, an investigation by MultiChoice revealed that Calvin and its employees, in breach of both agreements, had engaged in misconduct and fraud which caused MultiChoice to suffer financial loss of R2 258 710.58. MultiChoice no longer wished to continue with the business relationship between the parties and the agreements were no longer commercially viable to MultiChoice. Consequently, on 18 December 2019 the attorneys acting for MultiChoice sent fresh notices of termination of the agency and installer agreements to Calvin (the December terminations). [8] On 20 December 2019 MultiChoice issued an application in the Gauteng Division of the High Court, Johannesburg, for a declaratory order to confirm the validity of the December terminations. Pursuant to these terminations, on 20 January 2020 MultiChoice deactivated Calvin’s access to its systems. [9] This deactivation, according to Calvin, constituted contempt of court; and on 31 January 2020 it launched an application in the high court to hold MultiChoice in contempt of the order issued by Makgoba JP. The contempt application came before Phatudi J who granted an order (without reasons) on 5 February 2020, declaring that MultiChoice was in contempt of the order of Makgoba JP (the contempt order). On the same day MultiChoice delivered an application for leave to appeal against the contempt order. The judgment of Phatudi J containing the reasons for the contempt order was delivered on 6 May 2020. [10] On 12 February 2020 the application by MultiChoice for a declaratory order to confirm the validity of the December terminations was heard by Campbell AJ. The judge noted that MultiChoice had provided credible evidence of fraud that justified the December terminations, but was of the view that granting the declaratory order would be in conflict with the contempt order of Phatudi J. He decided not to dismiss the application ‘because of the real possibility of a miscarriage of justice’. For these reasons, Campbell AJ postponed the application to a date after the determination of the appeal against the contempt order, and costs were reserved. [11] On 19 February 2020 Calvin brought an urgent application in terms of s 18(3) of the Act for the execution of the contempt order. The application was heard on 28 February 2020 by Tshidada AJ who made an order on 14 April 2020 directing that the contempt order operate and be executed in full, pending the outcome of the application for leave to appeal that order. The foundational order [12] The order of Makgoba JP granting Calvin an interdict restoring its access to MultiChoice’s systems pending a review of the decision to terminate the agreements in September 2019, was the foundation of everything that followed. If that order is unsound in law, then neither the contempt order nor the order of Tshidada AJ is legally sustainable. Indeed, this was rightly conceded by counsel for Calvin. In this regard, the dictum of Snyders JA in Von Abo2 is apposite: ‘As a matter of logic the second order arose from the first order and has no independent existence separate from the first order. As the second order was given in consequence of the first order, and would not nor could have been given if it were not for the first order, it follows that if the first order is wrong in law, the second order is legally untenable.’ [13] The order of Makgoba JP in relevant part reads: ‘2. The Respondent is hereby directed to forthwith take all the necessary steps to restore and re-instate the First Applicant onto the respondent’s system known as CLARITY AND SAP 2 Government of the Republic of South Africa and Others v Von Abo [2011] ZASCA 65; [2011] 3 All SA 261 (SCA); 2011 (5) SA 262 (SCA) para 18. (“system”) for certain service areas in Thohoyandou, pending the finalization of the application filed on 20 November 2019 for review of the Respondent’s decision to terminate the agency and Accredited Installer agreements, on 30 September 2019, under case number 8053/2019. 3. The respondent is hereby forthwith interdicted and restrained from preventing the First Applicant from utilizing the equipment and/or facilities for the service areas, pending the finalization of the application filed on 20 November 2019, for review of the Respondent’s decision to terminate the agency and Accredited Installer agreements on 30 September 2019 under case number 8053/2019. 4. The respondent is hereby interdicted and restrained from preventing the First applicant from performing its obligations as a service provider to the respondent in terms of the Agency agreement dated 1 July 2014 and the Accredited installer agreements on 30 September 2019 under case number 8053/2019.’ [14] This order, unfortunately, is erroneous in a number of respects. First it is trite that a decision by a contracting party to cancel a contract concluded between two private parties, cannot form the subject of judicial review – the power of courts to review the lawfulness, reasonableness and procedural fairness of decisions or actions taken by public bodies. The cancellation of the agreements by MultiChoice had nothing to do with the control of administrative power, or the method of such control: judicial review of administrative action.3 [15] Second, the decision by MultiChoice to cancel the agency and installer agreements, was not ‘administrative action’ as defined in PAJA. In Grey’s Marine4 Nugent JA said: ‘Administrative action is . . . in general terms, the conduct of the bureaucracy (whoever the bureaucratic functionary might be) in carrying out the daily functions of the State, which necessarily involves the application of policy, usually after its translation into law, with direct and immediate consequences for individuals or groups of individuals.’ 3 C Hoexter Administrative Law in South Africa 2 ed (2012) at 108. 4 Grey’s Marine Hout Bay (Pty) Ltd and Others v Minister of Public Works and Others [2005] ZASCA 43; 2005 (6) SA 313 (SCA) para 24. Neither was the decision to cancel the agreements conceivably the exercise of public power other than administrative action, that could render it subject to review in terms of the principle of legality, sourced in the rule of law, a founding value of the Constitution.5 [16] Third, it was clear from the relief sought in the review application – which formed the basis of the interdict – that Calvin was not seeking the review of an administrative decision. Instead, what it sought was an order: ‘1. Reviewing, setting aside the decision to terminate an agreement (Agency agreement) between the Applicant and Respondent in terms of a letter of termination dated the 30th day of September 2019. 2. Reviewing, setting aside and/or correcting the decision to terminate an agreement (Accredited installer Agreement) between the Applicant and Respondent in terms of a letter of termination dated the 11th day of October 2019.’ (Emphasis added.) [17] Fourth, a simple reading of the notices of termination and the agreements reveals that what was in issue between the parties was a contractual dispute arising from the election by MultiChoice to exercise its contractual right to terminate the agreements. Clause 3.3 of the agency agreement provided: ‘MultiChoice shall be entitled in its sole discretion, at any time, and for any reason whatsoever, to terminate this Agreement without liability by providing the agent 30 days prior written notice.’ Likewise, clause 5.4 of the installer agreement read: ‘MultiChoice shall be entitled in its sole discretion, at any time, and for any reason whatsoever, to terminate this Agreement without liability. Where MultiChoice elects to terminate this Agreement pursuant to this clause 5.4, MultiChoice will give the Accredited Installer 30 (thirty) days prior written notice to this effect.’ Clause 17.5 provided: 5 Hoexter op cit fn 3 at 121ff. ‘Notwithstanding the above, MultiChoice shall have the right to cancel this Agreement with the Accredited Installer upon 30 days’ notice for any reason whatsoever including but not limited to fraudulent activity by the Installer.’ [18] Lastly, the orders directing MultiChoice forthwith to grant Calvin access to its systems, and interdicting and restraining MultiChoice from preventing Calvin from utilising its equipment or facilities or performing its obligations as a service provider, was directly at odds with what the parties had agreed upon, expressed in plain language. The effect of these orders was to nullify MultiChoice’s contractual remedies, amend the agreements, and to improve Calvin’s position. [19] In the result the appeals must succeed. On a proper appreciation of the nature of dispute between the parties, and the defences raised by MultiChoice, Calvin was not entitled to any relief. Although this conclusion effectively disposes of the two appeals, counsel for MultiChoice has criticised the high court’s interpretation and application of the principles in relation to contempt and the execution of an order under s 18 of the Act. We must proceed to address these criticisms and determine whether they are valid, since otherwise the high court’s interpretation would remain authoritative generally, and in the Limpopo Division of the High Court in particular. Did MultiChoice commit contempt of court? [20] The requisites for an order of civil contempt are well-settled. The applicant must prove the existence of the order; service or notice; and wilfulness and mala fides beyond reasonable doubt. Once the applicant has proved the order, notice and non-compliance, the respondent’s conduct is presumed to be both wilful and mala fide and it bears an evidential burden to rebut that presumption.6 For an act to constitute civil contempt, there must have been an intention to defeat the course of justice.7 [21] Phatudi J, in his reasons for holding MultiChoice in contempt, stated that its unilateral termination of the agreement was not only objectively unreasonable, ‘but wilful and thus devoid of any bona fides’. The judge found that MultiChoice’s termination of the agreements at its sole discretion and for any reason, could ‘only be invoked if there were good grounds justifying the [abrupt] termination thereof’. The imputations of fraud by MultiChoice were ‘clearly premature’. Its submissions to justify non-compliance with the order of Makgoba JP were ‘simply untenable’. Even if MultiChoice was entitled commercially to terminate the contracts, that alone did not entitle it to act unilaterally, which ‘in itself amounted to wilful and mala fide disregard of a court order’. And even if MultiChoice had relied on the alleged fraud, it was incumbent on MultiChoice to comply with the order of Makgoba JP on the principle laid down in Oudekraal:8 an administrative decision remained valid until set aside. Phatudi J went on to say that, on the assumption that MultiChoice had uncovered fraud, that possibly would have entitled it to apply for an interdict against Calvin and its employees, ‘instead of invoking self-help and despoiled as they did the applicants in their business operations’. [22] These findings are unsustainable on the evidence and the law. On the papers before the court and in law, it could not be suggested that MultiChoice had ‘despoiled’ Calvin or resorted to self-help. On the contrary, Calvin’s case was not 6 Fakie NO v CCII Systems (Pty) Ltd [2006] ZASCA 52; 2006 (4) SA 326 (SCA) paras 7-8 and 42; affirmed in Pheko and Others v Ekurhuleni Metropolitan Municipality (Socio-Economic Rights Institute of South Africa (No 2) [2015] ZACC 10; 2015 (5) SA 600 (CC) para 36. 7 Gauteng Gambling Board and Another v MEC for Economic Development, Gauteng [2013] ZASCA 67; 2013 (5) SA 24 (SCA) para 51. 8 Oudekraal Estates (Pty) Ltd v City of Cape Town and Others 2004 (6) SA 222 (SCA). that it had been wrongfully deprived of possession of MultiChoice’s systems. Further, the high court’s finding is contradicted by the fact that MultiChoice sought a court’s imprimatur for the December terminations. As stated, MultiChoice had exercised its contractual right to unilaterally terminate the contracts in terms of a procedure to which the parties had specifically agreed. It was entitled to do so on any ground of cancellation specified in the agreements, including Calvin’s fraud. The conclusion that this in itself constituted contempt or that the imputations of fraud were premature, is incorrect. As stated earlier, the decision to terminate the agreements was not administrative action and therefore the Oudekraal principle was inapplicable. [23] On the evidence, Calvin simply did not prove non-compliance with the Makgoba JP order. That order was based on the September terminations. By contrast, the December terminations were issued on the basis of new facts uncovered after MultiChoice had restored Calvin’s access to its systems in terms of the Makgoba JP order – an elaborate scheme of fraud by Calvin and its employees that resulted in MultiChoice suffering a loss of some R2.25 million. Those facts were not, and could not have been, before Makgoba JP. Moreover, the order of Makgoba JP could not prevent MultiChoice from exercising its contractual rights in accordance with the terms of the agreements in the future. Neither could that order give Calvin carte blanche in relation to its obligations under the agreements in the future. [24] Given that Calvin did not discharge the onus of showing non-compliance with the Makgoba JP order, the presumption of wilfulness and mala fides did not arise. But even if Calvin had proved non-compliance, the presumption of wilfulness and mala fides would have been easily rebutted. A deliberate disregard of a court order is not enough, since the alleged contemnor may genuinely, albeit mistakenly, believe itself to act in the way claimed to constitute the contempt.9 The facts show that the MultiChoice had issued the December terminations bona fide in the light of new facts – the fraud perpetrated by Calvin and its employees on MultiChoice, detailed in the answering affidavit in the contempt application, and to which Calvin chose not to reply. [25] For the above reasons, Calvin did not even begin to make out a case that MultiChoice was guilty of contempt of court. For this reason also, the appeal must succeed. The execution of the contempt order [26] Section 18(1) of the Act provides that the execution of a decision which is the subject of an application for leave to appeal, is suspended pending the decision of that application or the appeal, unless the court under exceptional circumstances orders otherwise. In terms of s 18(3), the party who applies for execution of the decision must in addition prove that it will suffer irreparable harm if the court does not make an execution order, and that the other party will not suffer irreparable harm if it does. An applicant must therefore prove both exceptional circumstances and the requisites of irreparable harm.10 [27] It is impossible to lay down precise rules as to what constitutes exceptional circumstances.11 Each case must be decided on its own facts.12 The prospect of success in the pending appeal is a relevant consideration and if it is doubtful, a court deciding an application under s 18(3) would be less inclined to grant it.13 9 Fakie fn 6 para 9; affirmed most recently by the Constitutional Court in Secretary of the Judicial Commission of Inquiry into Allegations of State Capture, Corruption and Fraud in the Public Sector including Organs of State v Zuma and Others [2021] ZACC 18; 2021 (5) SA 327 (CC) paras 41-43. 10 University of the Free State v Afriforum and Another [2016] ZASCA 165; [2017] 1 All SA 79 (SCA); 2018 (3) SA 428 (SCA) para 11. 11 Ntlemeza v Helen Suzman Foundation and Another [2017] ZASCA 93 (9 June 2017) para 37. 12 UFS v Afriforum fn 10 para 13. 13 UFS v Afriforum fn 10 paras 14-15. [28] Calvin alleged that the following constituted exceptional circumstances. MultiChoice had ‘without cause resorted to self-help’ and denied Calvin access to its systems. It had to close shop, nine of its employees were without a job and Calvin was liable for rental of its premises. It had already suffered irreparable harm despite the fact that it had achieved success in the high court (the order of Makgoba JP and the contempt order). [29] The high court (Tshidada AJ) accepted that these allegations constituted exceptional circumstances. In our view they do not. As this court stated in UFS v Afriforum,14 in evaluating the circumstances upon which an applicant relies, ‘what is sought is an extraordinary deviation from the norm, which, in turn, requires the existence of truly exceptional circumstances to justify the deviation’. Calvin failed to establish the requirements of s 18(1) of the Act. The high court held that Calvin had been ‘successful in the two previous applications pending the review application . . . therefore should not be deprived [of] the benefit of the said orders’. Those orders however, were fatally defective for the reasons advanced above. Calvin did not demonstrate any prospect of success on appeal. [30] What is more, the court overlooked the fact that the December terminations and the consequent denial of Calvin’s access to MultiChoice’s systems came about as a result of its own conduct – fraud by Calvin and its employees, causing MultiChoice to suffer substantial financial loss. In its answering affidavit MultiChoice demonstrated that the fraud which had commenced before the September terminations, was resumed upon the grant of the Makgoba JP order. The evidence that MultiChoice had suffered a loss of approximately R2.25 million and continued to suffer loss, went unchallenged and was met with a bald denial. In these circumstances it could never be suggested, let alone concluded, 14 UFS v Afriforum fn 10 para 13. that the so-called harm to Calvin outweighed the irreparable harm to MultiChoice. Calvin simply failed to meet the requisites of s 18(3) of the Act. [31] For these reasons, the high court’s findings that it was ‘startling’ that MultiChoice had not reported the matter to the police; that ‘[n]o persuasive reason was advanced . . . for such a glaring omission’; and that the apparent aim of MultiChoice was ‘simply to terminate the agreement without the parties engaging each other and attempting to find an amicable solution to the problem’, which was ‘unsustainable’, are unfortunate. The court failed to appreciate that MultiChoice was exercising a right to terminate the contracts on grounds which the parties had expressly agreed upon, and its order must accordingly be set aside. Costs [32] Counsel for MultiChoice submitted that in the circumstances, a punitive costs order was justified, for two reasons. The first was that Calvin’s conduct amounted to an abuse of court process. The second was that both agreements provided for costs on the scale of attorney and own client: the agency agreement in the event of a breach of any of its provisions; and the installer’s agreement when a party enforced its rights under it. [33] In Public Protector v SARB,15 the Constitutional Court affirmed the principle pertaining to punitive costs: ‘More than 100 years ago, Innes CJ stated the principle that costs on an attorney and client scale are awarded when a court wishes to mark its disapproval of the conduct of a litigant. Since then this principle has been endorsed and applied in a long line of cases and remains applicable. Over the years, courts have awarded costs on an attorney and client scale to mark their disapproval of fraudulent, dishonest or mala fides (bad faith) conduct; vexatious conduct; and conduct that amounts to an abuse of the process of court’. 15 Public Protector v South African Reserve Bank [2019] ZACC 29; 2019 (9) BCLR 1113 (CC); 2019 (6) SA 253 (CC) para 223. [34] In our view, Calvin throughout has abused the process of court – it has used the procedures permitted by the rules of court for a purpose other than the pursuit of the truth16 – to ensure access to MultiChoice’s systems without any legal basis therefor. After its application had been struck from the roll by the Limpopo High Court, Thohoyandou on 8 November 2019, about two weeks later Calvin launched a second application in Polokwane for substantially the same relief. On 25 November 2019 Calvin brought an urgent application for an interdict, pending a ‘review’ of the decision to cancel the agreements. It did this on a patently untenable legal basis – the cancellation decision was not administrative action – well-knowing that MultiChoice was entitled to cancel the agreements in accordance with their terms. That Calvin’s aim was merely to gain access to the MultiChoice systems, is buttressed by the fact that to date it has not prosecuted the pending review application. [35] In the application by MultiChoice before Campbell AJ to confirm the December terminations, Calvin raised technical objections and skirted around the real issue: whether MultiChoice was entitled to cancel the agreements on account of fraud – a term that Calvin knew it had agreed to. Next, Calvin thwarted the December terminations by launching an unmeritorious application for contempt of the Makgoba JP order. It was clear that on any reasonable construction of that order, it did not extinguish or limit the contractual right of MultiChoice to cancel the agreements on new grounds. [36] Despite this, Calvin brought an application under s 18 of the Act to execute the contempt order, after MultiChoice had filed an application for leave to appeal that order. The s 18 application was hopelessly deficient, and merely underscored 16 Beinash v Wixley 1997 (3) SA 721 (SCA) at 734E-734G; [1997] 2 All SA 241 (A) at 251. Calvin’s purpose in using court process for an ulterior purpose: to gain access to MultiChoice’s systems. [37] Apart from all of this, Calvin’s conduct was vexatious in that MultiChoice was put through unnecessary trouble and expense in opposing each application brought by Calvin. This too, justifies an order for costs on an attorney and client scale.17 And MultiChoice is entitled to costs on this scale in terms of the agreements. [38] In the result, the following orders are issued: The appeal under case no 226/2021: 1 The appeal is upheld with costs on the scale as between attorney and client, including the costs of two counsel. 2 The order of the high court is set aside and replaced with the following order: ‘The application is dismissed with costs on the scale as between attorney and client, including the costs of two counsel, where so employed.’ The appeal under case no 296/2020: 1 The appeal is upheld with costs on the scale as between attorney and client, including the costs of two counsel. 2 The order of the high court is set aside and replaced with the following order: ‘The application is dismissed with costs on the scale as between attorney and client, including the costs of two counsel, where so employed.’ 17 Zuma v The Office of the Public Protector and Others [2020] ZASCA 138 para 20. ___________________ A SCHIPPERS JUDGE OF APPEAL __________________________ S POTTERILL ACTING JUDGE OF APPEAL Appearances: For appellant: M Sello SC (with her J J Meiring) Instructed by: Cliffe Dekker Hofmeyer, Sandton Webbers Attorneys, Bloemfontein For respondents: M Ramoshaba (with him Z Ndlokovane) Instructed by: Mvundlela & Associates, Johannesburg Maduba Attorneys Inc, Bloemfotein

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 08 October 2021 Status: Immediate The following summary is for the benefit of the media in the reporting of this case and does not form part of the judgments of the Supreme Court of Appeal MultiChoice Support Services (Pty) Ltd v Calvin Electronics t/a Batavia Trading and Another (Case no 296/2020 and 226/2021) [2021] ZASCA 143 (08 October 2021) ___________________________________________________________________________ Today the SCA upheld two appeals against orders made the Limpopo Division of the High Court, Polokwane (high court) and set them aside. The first was an order declaring that the appellant, MultiChoice, was guilty of contempt of court (the contempt order) when in September 2019 it cancelled two agreements concluded with the respondents (Calvin), hereafter ‘the September cancellations’. The agreements cancelled were an agency agreement and an accredited installers agreement (installers agreement) in terms of which Calvin was appointed as an agent and installer of MultiChoice’s equipment. Calvin was granted access to the I.T systems of MultiChoice under the installers agreement. The second order was one executing the contempt order (the execution order). Both the contempt order and the execution order were based on an interdict granted by the high court in terms of which MultiChoice was directed to restore Calvin’s access to MultiChoice’s I.T systems; to grant Calvin access to its equipment; and to permit Calvin to continue as an agent of and service provider, pending a ‘review’ of the decision by MultiChoice to cancel the agreements. MultiChoice complied with this order. The SCA however held that the order was legally unsustainable because the cancellation of the agreements was an act by a private contracting party in the enforcement of its rights under the agreement. This act was not subject to judicial review: it had nothing to do with the exercise of public power and did not constitute administrative action as defined in the Promotion of Administrative Justice Act 3 of 2000. Neither was the decision to cancel a violation of a principle of legality sourced in the rule of law, a founding value of the Constitution. Since this order was foundational to the contempt order and execution order, those orders were fatally defective and had to be set aside. The SCA held that in any event Calvin failed to prove that MultiChoice had committed contempt of court. In December 2019 MultiChoice cancelled the agreements a second time based on new facts established after the September cancellations: fraud perpetrated by Calvin and its employees causing MultiChoice to suffer loss of some R2.25 million (the December cancellations). Calvin failed to establish that MultiChoice wilfully and mala fide had not complied with the interdict, and the contempt order should not have been issued. The SCA held further that Calvin simply did not meet the requisites of s 18 of the Superior Courts Act 10 of 2013 for the execution of the contempt order. It did not prove exceptional circumstances or that it would suffer irreparable harm if the contempt order was not implemented, or that MultiChoice would not suffer irreparable harm if it was. This execution order likewise should not have been granted. Finally, Calvin was ordered to pay costs on an attorney and client scale, for three reasons. The first, Calvin had abused court process: to ensure its continued access to MultiChoice’s I.T systems, well knowing that MultiChoice was entitled to cancel the agreements in accordance with their terms. Second, it had put MultiChoice to unnecessary trouble and expense in opposing the unmeritorious applications brought by Calvin. Third, the agreements provided that Calvin would be liable for costs on an attorney and client scale.

2472

non-electoral

2014

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT NOT REPORTABLE Case No: 585/2013 In the matter between: GLEN MORARE APPELLANT and SA RAIL COMMUTER CORPORATION LIMITED RESPONDENT Neutral citation: Morare v SA Rail Commuter Corporation Limited (585/2013) [2014] ZASCA 7 (13 March 2014) Coram: Navsa, Theron and Wallis JJA and Swain and Mathopo AJJA Heard: 28 February 2014 Delivered: 13 March 2014 Summary: Delict – appellant claiming he was pushed through an open door of a train and suffered injuries – appellant failed to prove he was on a train operated by respondent – appeal dismissed. ORDER On appeal from the full court of the South Gauteng High Court, Johannesburg, sitting as the court of appeal (Kathree-Setiloane J with Saldulker J concurring, Makgoka J dissenting): 1 The appeal is dismissed with no order as to costs. JUDGMENT _______________________________________________________________ Swain AJA (Navsa, Theron and Wallis JJA and Mathopo AJA concurring): [1] The appellant, Mr Glen Morare, claimed payment of damages in the sum of R1 900 000 from the respondent, SA Rail Commuter Corporation Limited (SA Rail), in the South Gauteng High Court (Randera AJ). Mr Morare alleged that whilst being conveyed on a train operated by SA Rail he was attacked by unknown persons and pushed through an open door, whilst the train was in motion. He said that as a consequence he was seriously injured. He claimed compensation from SA Rail on the basis that SA Rail had negligently failed to ensure his safety whilst being conveyed on the train and had failed to take steps to prevent the train travelling whilst the door in question was open, which had enabled his assailants to eject him from the train. [2] By consent between the parties the issues of liability and quantum were separated in terms of rule 33(4) of the Uniform Rules of Court and the court of first instance was asked to determine only the issue of the liability of SA Rail to compensate Mr Morare. [3] That issue was resolved in favour of Mr Morare in the form of an order declaring that SA Rail was liable to compensate Mr Morare ‘for such damages as he was able to prove in consequence of being pushed out of the train on 7 November 2008 at or near Doornfontein Station’. The trial court accepted his evidence that he was travelling on a train from Park Station to Naledi and SA Rail was liable to compensate him for the injuries he sustained as a result of being ejected from the train. [4] An appeal to the South Gauteng full court by SA Rail, was successful, the order being set aside and replaced with an order dismissing Mr Morare’s claim with costs. The present appeal is with the leave of this court. [5] From the outset SA Rail placed in issue the following allegations made by Mr Morare in his particulars of claim: ‘5.1 On the 07th November 2009 at approximately 20h10 at Park Station, the Plaintiff boarded the commuter train traveling from Park Station to Naledi Station. 5.2 Between Doornfontein and Braamfontein, the Plaintiff was attacked and was pushed and/or became dislodged from the said train at a dangerous and inopportune moment by persons unknown to the Plaintiff. 5.3 The Plaintiff was pushed through the open door of the moving train.’ The entire factual basis for Mr Morare’s claim depended on his having been on a train. This was in issue, because although it was uncontested that Mr Morare had been found alongside the railway tracks at Doornfontein Station which is east of Park Station, the train to Naledi from Park Station travels west towards Braamfontein. [6] Mr Morare had to prove on a balance of probabilities that he had been a passenger on a train operated by SA Rail. Intrinsically linked to proof of this issue was proof of Mr Morare’s allegations as to where he had boarded the train, the time he did so, where the train was headed and where the incident occurred. His difficulty was that he was found at a place in the opposite direction from that in which he claimed to have been travelling. [7] Mr Morare testified that on the day in question he had finished working as a packer at a Pick & Pay family store at Craighall at 18h00, after working overtime. He travelled in a taxi from Craighall to Park Station in order to board a train to travel to his home in Naledi, Soweto. He was familiar with the route and the train he had to catch, because he had been travelling by train between his home and work for at least five months prior to the incident. [8] Having arrived at Park Station he boarded the train at some time between 19h00 and 20h00, from platforms one and two, as these platforms were combined in the same area. The train he boarded was travelling to Naledi via Braamfontein and Mayfair. He agreed that platforms one and two were known as the Soweto platforms because trains travelling west to Naledi and Soweto departed from these platforms. The first stop at Braamfontein Station was only a few hundred metres down the line so that you could, according to Mr Morare, see the trains at Braamfontein Station from Park Station. He agreed that Doornfontein Station was in the opposite direction to Braamfontein Station from Park Station. [9] When it was put to Mr Morare in cross-examination that SA Rail would lead evidence that he was found injured at Doornfontein Station and he was asked how he got there, he replied ‘I ask myself, how did I get to Doornfontein’. When it was suggested to him that the question was whether he was on a train at all he replied ‘Yes, I was on the train’. When it was then put to Mr Morare that he could not have been on the train to Naledi, he replied ‘I was assaulted. I cannot say we were on the train going towards Doornfontein or towards Braamfontein’. When pressed for an explanation he said ‘I do not have any’. [10] Evidence that Mr Morare was found injured alongside the tracks at Doornfontein Station was given by Ms Elizabeth Khumalo, a segment security commander employed by SA Rail, who explained that her duties included receiving reports of any incidents from the joint operation centre of SA Rail and then attending the scene of the incident to investigate. A guard or train driver who witnessed an incident would usually report it to the joint operation centre. [11] Ms Khumalo gave evidence as to what Mr Morare said to her as well as what she was told at the scene by a security guard named Mr Mshengu employed by Hlanganani Security, who apparently found Mr Morare injured next to the track and moved him onto the platform. In turn SA Rail led the evidence of Mr Patrick Seshonga, a supervisor employed by Hlanganani Security who, apart from giving direct evidence that Mr Morare was lying injured on the platform when he came on the scene, also gave evidence as to what Mr Morare said to him, and what he was told by Mr Mshengu, and another security guard employed by Hlanganani Security, Mr Kuba. No regard was paid to the admissibility of any of these statements, or the weight to be attached to them during the proceedings before the court of first instance. Simply put, one of the statements made by Mr Morare was a previous consistent statement and the statements by Mr Mshengu and Mr Kuba were hearsay evidence. Mr Shepstone, who appeared on behalf of the appellant, sought to find corroboration for Mr Morare’s evidence that he had been travelling on a train at the relevant time, in the statements made to Mr Khumalo and Mr Seshonga by Mr Morare, Mr Mshengu and Mr Kuba. I will assume in favour of Mr Morare that these statements are admissible and only deal with the weight to be attached to their content. [12] Ms Khumalo confirmed that trains from Park Station bound for Naledi, Soweto departed from platforms one and two. She said that there was a train known as Jigaleza that ran in the opposite direction from Park Station via Doornfontein to Naledi and Soweto, during the peak hour in the morning, but that this train did not operate during the afternoon and evening, which are the times relevant to the incident. Ms Khumalo said that trains that travelled from Park Station towards Doornfontein in the evening did not travel to Naledi, but travelled to Springs, Pretoria and Thembisa. She was emphatic that no trains travelled to Naledi from Park Station via Doornfontein in the evening. This evidence was never challenged by Mr Morare. In addition, when cross- examined she said that if Mr Morare had been travelling on a train to Naledi in the evening, he would not have been found at Doornfontein Station, but would rather have been found between Johannesburg and Braamfontein. [13] I turn to Ms Khumalo’s evidence of what transpired at Doornfontein Station. She said Mr Mshengu was on the scene when she arrived and she found Mr Morare lying on the platform. Doornfontein Station was not operational at the time as it was being renovated for the Soccer World Cup, with the result that trains did not stop there and commuters did not enter the station. Ms Khumalo said Mr Mshengu informed her that Mr Morare had been found lying next to the tracks and had been moved to the platform. Although badly injured, Mr Morare was able to furnish his personal details such as his name, identity number, home address and telephone number. She asked Mr Morare whether he had a ticket to which he replied ‘no’. Mr Morare told her that he had been robbed and pushed from the train but did not say he had been assaulted. However, she agreed that it was recorded in the occurrence book of the joint operations centre at 21h50 that she had reported that ‘at Doornfontein there is a person who has been hit by a train’. Mr Louw, counsel representing SA Rail, however, agreed when questioned by the court of first instance that this ‘is a generic term used for an accident’. This concession is somewhat startling when regard is had to clause 10 of the railway occurrence report, partially completed by Ms Khumalo at the scene, which provides for a number of ways in which a person may be killed or injured by a train. [14] Be that as it may, Ms Khumalo also agreed that there was a later entry in the occurrence book that recorded at 00h25 that she had reported ‘that at Doornfontein Station Glen Morare of 5605 Protea Glen alleged that he jumped from unknown metro and is 30 years of age contact no. 987-2733 fell between km points AE12/631 and AE 12/729 as jumped off . . . was not in possession of valid ticket’. She initially agreed that she had reported that Mr Morare had jumped from the train and that she had obtained this information from Mr Morare. She however then added that the word ‘jumped’ was totally wrong. There is, however, a later entry in the occurrence book at 00h30 to which Ms Khumalo was not referred, which refers to a report by her ‘that the person . . . was hit by the train at 20:48’. [15] Mr Patrick Seshonga gave evidence that he was employed by Hlanganani Security to ensure that the line between the platform end of Doornfontein Station and Johannesburg Station was patrolled. He had posted two guards to patrol that portion of the line. There is considerable confusion concerning the identity of these two guards. Mr Seshonga mentioned three names, namely Mr Mshengu, Mr Bonga and Mr Malopa. Counsel then continued on the basis that Mr Mshengu and Mr Bonga were one and the same and that Mr Malopa was Mr Kuba. However, it is plain from the documents that Mr Mshengu and Mr Bonga are different people and Mr Bonga was patrolling the section between Doornfontein and Johannesburg with Mr Kuba. It seems likely that Mr Mshengu was patrolling between Doornfontein and Jeppe. [16] Mr Seshonga had been unable to trace Mr Mshengu and Mr Kuba had since died. No mention is made of any endeavours to trace Mr Bonga. He stated he was at Park Station and received a report from the joint operation centre that a person had been found at Doornfontein Station. He immediately went there and found Mr Morare lying on platforms two and three in the company of Mr Mshengu and Mr Kuba. Ms Khumalo had already arrived at the scene and he questioned Mr Morare after Ms Khumalo had already done so. Mr Seshonga said he asked Mr Mshengu and Mr Kuba what had happened. Mr Seshonga’s evidence was as follows ‘they tell me the guy is falling off from the train’ and ‘they said they saw the train, it was (indistinct). He said they fell off . . . They said he fell to the train, so the train was in motion . . .’. This evidence was inconsistent with the statements he obtained from Mr Kuba, Mr Bonga and Mr Mshengu, none of whom claimed to have seen Mr Morare fall from the train. Mr Morare told Mr Seshonga that he was travelling to Naledi and was robbed in the train. He asked Mr Morare for his name, address and his ticket, but Mr Morare did not have a ticket. Mr Seshonga confirmed that it was only the morning trains that travelled from Park Station in the direction of Doornfontein to Naledi, which was never challenged by Mr Morare. By reference to the occurrence report that he completed at the scene, he confirmed that Mr Morare told him he was travelling home from work at the time. [17] SA Rail had placed in issue the allegation made by Mr Morare that at the time of the accident he was in possession of a valid train ticket. Both Ms Khumalo and Mr Seshonga independently asked Mr Morare whether he had a ticket to which he replied ‘no’. That this was his reply is confirmed by the fact that they both recorded Mr Morare’s answer in the relevant railway occurrence reports, which they had completed independently and contemporaneously at the scene of the incident. When this evidence was put to Mr Morare in cross- examination his reply was ‘they did not search me’. Ms Khumalo and Mr Seshonga confirmed they did not search Mr Morare, because that was the function of the police. When Mr Morare was asked whether he remembered them asking whether he had a ticket he said he did not. However, when regard is had to the evidence of Ms Khumalo and Mr Seshonga that Mr Morare was able to furnish them with his name, identity number, home address and telephone number, there can be no reason to doubt Mr Morare’s ability to understand the question and furnish a reliable answer. Although maintaining he did not remember being asked he never disputed that he had given such an answer. When giving evidence Mr Morare maintained that when he boarded the train he was in possession of a monthly ticket. Included in the record is a document which appears to be a metro monthly train ticket valid from Naledi to Johannesburg for November 2008. However, there is no evidence to prove its authenticity or any admission by SA Rail in this regard. Indeed it is recorded in the rule 37 minutes that ‘the truth and correctness’ of any documents were not admitted and would have to be proved. The court of first instance accordingly erred when it found that a valid ticket was annexed to the particulars of claim and was not placed in dispute. I am accordingly satisfied that Mr Morare failed to prove that he had been in possession of a valid train ticket at the time. [18] It is quite clear that Mr Morare could not have boarded a train at Park Station, at that time of the night, to travel home to Naledi via Braamfontein Station as he says he did. Mr Morare could not have been mistaken about the train he boarded. The westbound Soweto train to Naledi leaves from platforms one and two at Park Station. That is the train he had taken on a regular basis to travel home from work for the previous five months. Trains travelling east leave from platform nine. I accordingly disagree with the conclusion of the appeal court that the only reasonable inference is that Mr Morare boarded the wrong train. No evidence was led to suggest that because of the injuries he had sustained his mental faculties had been impaired, or that he was unable to recall what he was doing immediately before the incident. On Mr Morare’s version of events there is no logical reason why he would be on a train travelling in the opposite direction to that which he had to board to get home. On this basis there is no reasonable ground for concluding on a balance of probabilities that Mr Morare was travelling on a train and that his injuries were caused by being thrown off that train. [19] As regards the costs of the appeal Mr Smit, who appeared for SA Rail, did not persist in a prayer for costs against Mr Morare. He also informed us that SA Rail was not intent on recovering the costs of the trial or the previous appeal from Mr Morare. [20] The following order is accordingly granted: 1 The appeal is dismissed with no order as to costs. K G B SWAIN ACTING JUDGE OF APPEAL Appearances: For the Appellant: R Shepstone Instructed by: Diale Attorneys, Benoni Morobane Inc, Bloemfontein For the Respondent: M Smit Instructed by: Cliffe Dekker Hofmeyr Inc, Sandton McIntyre & Van Der Post, Bloemfontein

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL FROM The Registrar, Supreme Court of Appeal DATE 13 March 2014 STATUS Immediate Please note that the media summary is for the benefit of the media and does not form part of the judgment. Morare v SA Rail Commuter Corporation Limited (585/2013) [2014] ZASCA 7 (13 March 2014) Media Statement The SCA dismissed an appeal by Mr Glen Morare in which he had claimed damages from SA Rail Commuter Corporation Limited alleging that SA Rail had negligently fail to ensure his safety whilst travelling on a train. He alleged that he had been assaulted and pushed through an open door of the train by unknown assailants, resulting in serious injury. SA Rail denied any negligence and placed in issue whether Mr Morare was travelling on a train at the time. The SCA held that Mr Morare had failed to prove on a balance of probabilities that he was travelling on a train. --- Ends ---

67

non-electoral

2017

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Reportable Case no: 615/2016 In the matter between: AON SOUTH AFRICA (PTY) LTD APPELLANT and CORNÉ VAN DEN HEEVER NO FIRST RESPONDENT MARYNA ESTELLE SYMES NO SECOND RESPONDENT GLENRAND MIB FINANCIAL SERVICES (PTY) LTD (IN LIQUIDATION) THIRD RESPONDENT Neutral citation: AON South Africa (Pty) Ltd v Van den Heever NO (615/2016) 2017 ZASCA 66 (30 May 2017) Coram: NAVSA, THERON, WALLIS, PETSE and ZONDI JJA Heard: 19 May 2017 Delivered: 30 May 2017 Summary: Res judicata – requirements – issue estoppel – identity of interest between plaintiffs in the two actions sufficient to satisfy requirement of same party – identity of issues and claims in both actions ORDER On appeal from: Gauteng Local Division, Johannesburg of High Court (Moshidi J, sitting as court of first instance): (1) The appeal is upheld with costs. (2) The order of the high court is set aside and replaced with the following order: „(a) The special plea is upheld in relation to claims A, B and C. (b) Claims A, B and C are dismissed. (c) The plaintiffs are to pay the defendant‟s costs in relation to the defence of claims A, B and C including the costs consequent upon the separate determination of the special plea.‟ JUDGMENT Wallis JA (Navsa, Theron, Petse and Zondi JJA concurring) Introduction [1] This is the second occasion on which the events surrounding the collapse and liquidation of New Protector Group Holdings (Pty) Ltd (New Protector) have come before this court.1 Both cases flowed from the acquisition by New Protector of the business of Protector Group Holdings (Pty) Ltd (Protector). The Industrial Development Corporation (IDC) financed that purchase. Prior to its liquidation New Protector paid Protector some R63 million in discharge of the purchase price of the 1 The first occasion was in Glenrand MIB Financial Services (Pty) Ltd and Others v Van den Heever NO and others [2012] ZASCA 195; [2013] 1 All SA 511 (SCA), referred to hereafter as the „previous judgment‟. business.2 Of that sum, R50 million was paid to Glenrand MIB Financial Services (Pty) Ltd (Financial Services) as the purchase price of its 65 percent stake in Protector. That was sold to a company called Freefall Trading 65 (Pty) Ltd (Freefall), which held a 49 per cent stake in New Protector. [2] Financial Services was a wholly owned subsidiary of Glenrand MIB Ltd (Glenrand) existing solely for the purpose of holding the 65 percent interest in Protector. It used the entire sum of R50 million to repay an existing indebtedness to Glenrand of some R38 million and a dividend to Glenrand of some R12 million. Both the previous action and the present one have been directed at recovering that sum for the ultimate benefit of New Protector‟s creditors, of which the IDC is by far the largest. The involvement of the appellant, AON South Africa (Pty) Ltd (AON), arose because, shortly before the previous action reached finality, it acquired Glenrand‟s business and assumed liability for any claims against Glenrand. It accordingly intervened in the previous action and was the defendant in the present case. Glenrand was deregistered in 2011. [3] The previous litigation was brought by the liquidators of Protector and cited both Financial Services and Glenrand as defendants. At the end of the day, after the appeal to this court, the liquidators succeeded against Financial Services on the ground of enrichment alone. Within a few months of the previous judgment Financial Services was liquidated and its liquidators instituted proceedings against AON. This appeal arises from a special plea by AON flowing from the fact that the previous 2 We were informed that Protector guaranteed repayment of this loan, thereby giving the IDC a claim against Protector when that company was liquidated. litigation against Glenrand, and therefore indirectly against AON, was resolved in its favour. It contended that it was not open to the present plaintiffs to commence proceedings in order to pursue what was in essence the same claim. In legal terms it said that the issues raised by the present case were resolved in its favour in the previous litigation and are res judicata as against Financial Services‟ liquidators. The form of res judicata on which it relies is commonly referred to as issue estoppel. The special plea was heard separately and dismissed by Moshidi J. This appeal is with his leave. The factual background [4] The background was largely set out in the previous judgment of this court from which I have borrowed freely. The business of Protector in the health sector of the economy was markedly different from that of Glenrand. In 2003 Glenrand decided to dispose of its interest in Protector. In August 2003 two directors of Protector, Messrs Van Rensburg and Seelenbinder, indicated an interest in acquiring that interest. They already held, through Protector Group Management Company (Pty) Ltd (PGMC), the remaining 35 percent in Protector. On 10 November 2003 the board of directors of Financial Services adopted a resolution to dispose of that shareholding by entering into an agreement with „Newco or its nominee‟. An agreement to that effect was signed on 15 December 2003. The signatory on behalf of the purchaser was Mr Van Rensburg. The price payable to Financial Services was R 50 million and Glenrand was to be released from a suretyship obligation on behalf of Protector. [5] On 4 March 2004 Messrs Van Rensburg and Seelenbinder purported to nominate Freefall as the purchaser in terms of this agreement. The previous judgment held that this nomination was ineffective to create any obligation on the part of Freefall to pay the agreed purchase price for Financial Services stake in Protector, because the agreement itself was invalid and unenforceable.3 Nonetheless it held that the payment of R50 million to Financial Services was made on the footing that it was in discharge of the purchase price payable by Freefall to Financial Services under the invalid agreement. [6] Messrs Van Rensburg and Seelenbinder lacked the resources to purchase Financial Services‟ interest in Protector. They approached the IDC for a loan. The loan was approved on 25 November 2003 on condition that the transaction would be structured as a black empowerment transaction. That led, early in 2004, to the creation of New Protector, an entity in which Freefall would have a 49 percent stake, with the remaining 51 percent to be held by a black empowerment partner. Thereafter New Protector purchased the business of Protector as a going concern. This sale required the approval of the Competition Commission. On 5 March 2004, before that approval was obtained, the IDC released a little over R69 million to New Protector. From these funds an amount of R50 million was paid into the trust account of a firm of attorneys, to be held by it pending such approval and, on approval, to be paid to Financial Services. [7] On 15 March 2004, after Competition Commission approval was obtained, the attorneys paid the R50 million, plus accrued interest of nearly R1 million, into Glenrand‟s bank account. Apparently Financial Services did not have its own bank account. Its books of account showed an historic indebtedness to Glenrand of a little over R38 million, incurred 3 Previous judgment paras 29 and 31. when it acquired the 65 per cent stake in Protector. This indebtedness was set off against the R50 million. On 13 June 2005 Financial Services declared a dividend of nearly R12 million in favour of Glenrand and once again this was discharged by set-off. The historical debt and the dividend together totalled exactly R50 million. That amount, plus the interest accruing on it while it was held in trust, accordingly ended up in the hands of Glenrand. No underlying transaction has been identified justifying Glenrand in retaining the accrued interest as against Financial Services and this will need to be dealt with separately. For the present it can be ignored. [8] The picture that emerges is that the IDC lent money to New Protector and R50 million of that money found its way by the route described above to Glenrand. The intermediaries, in the form of New Protector, Protector and Freefall, were all insolvent and unable to pay their debts when the business of New Protector failed in the second half of 2004.4 Financial Services was a shell company with no assets after its disposal of its interest in Protector. Realistically the only prospect of recovering this R50 million was if liability could be laid at the door of Glenrand. That is what the liquidators of Protector set out to do in the first case and it is what the liquidators of Financial Services are seeking to do in this case. 4 It was provisionally liquidated on 2 September 2004. The principal reason for this was the loss of its main money-generative contract as a medical scheme administrator. See Phodiclinics (Pty) Ltd and Others and Protector Group Medical Services (Pty) Ltd (in Liquidation) and Others [2007] ZACT 17 paras 54 to 66. The previous litigation [9] The liquidators of Protector brought an action against Financial Services, Glenrand, Freefall, Messrs Mansfield and Harpur, two of the directors of Glenrand, and Messrs Seelenbinder and Van Rensburg. During the course of the litigation Freefall was deregistered and Mr Seelenbinder sequestrated, but that did not affect the issues canvassed at the trial. Claims were advanced against Financial Services and Glenrand on five grounds and there was a separate claim against the four individuals. These aimed primarily at the recovery of the R50 million, but under some heads the claim was for the full amount of slightly more than R69 million released to New Protector by the IDC on 5 March 2004. [10] Claim A sought to recover from Financial Services and Glenrand, together with all the other defendants, an amount of over R63 million, made up of three disbursements from the sum paid to Protector by New Protector and emanating from the IDC loan. The largest disbursement was the R50 million paid to Financial Services. It was alleged that Protector: „in collusion with the Defendants conceived a scheme whereby, out of the funds paid to [Protector] for the sale of its business to [New Protector] … [Financial Services] would be paid R50 000 000,00 …‟ The pleading alleged that the scheme was implemented and that, as a result, Financial Services, alternatively Glenrand, received R50 million. It claimed that the scheme fell within s 31(1) of the Insolvency Act 24 of 1936 (the Insolvency Act), which provides that: „After the sequestration of a debtor‟s estate the court may set aside any transaction entered into by the debtor before the sequestration, whereby he, in collusion with another person, disposed of property belonging to him in a manner which had the effect of prejudicing his creditors or of preferring one of his creditors above another.‟ Claim E was based on the same alleged scheme. The relevant allegation was that the scheme had been „conceived and implemented with the intention of defrauding the general body of [Protector‟s] creditors‟. [11] Claim B was a claim that Financial Services, alternatively Glenrand, intentionally and unlawfully appropriated the amount of R50 million upon its transfer from the attorneys to Glenrand‟s bank account. In substance it was a claim that they stole the money. Like claims A and E, it involved allegations of dishonesty against Financial Services and Glenrand. The individuals allegedly responsible for such dishonesty were their co-defendants, Messrs Mansfield and Harpur, who were directors of all three companies involved in these allegations, namely, Financial Services, Glenrand and Protector. They had resigned as directors of Protector after the sale of the business of Protector to New Protector was approved on 2 March 2004 and before the IDC released part of the loan to New Protector. [12] Claim C was based upon the proposition that payment of the sum of R50 million to Financial Services, alternatively Glenrand, was not due to either of them; was made at the expense of Protector; and resulted in one or other of them, in the alternative, being enriched. Lastly, so far as Financial Services and Glenrand were concerned claim D was based on s 26(1) of the Insolvency Act. It was alleged that the payment of the amount of R50 million to Financial Services, alternatively Glenrand, was a disposition by Protector of its property made without value and therefore recoverable by the liquidators of Protector. The further claim F was brought only against the four directors. It alleged a breach of their fiduciary duties to Protector, such breach being constituted by the alleged collusive scheme. [13] In sum therefore, claims A, E and F were all based on the existence of a scheme that the liquidators of Protector contended was dishonest. The alleged scheme was said to be the brainchild of the four directors. Claim B was also based on dishonesty by the directors in the form of a theft of the money paid by New Protector to Protector. Only the enrichment claim and the claim under s 26(1) of the Insolvency Act were not founded on the dishonest conduct of the directors. [14] A lengthy trial ensued before Monama J. Senior counsel appeared on behalf of the liquidators and two senior counsel appeared together on behalf of the defendants other than Van Rensburg, that is, Financial Services, Glenrand, and Messrs Mansfield and Harpur. By arrangement with these defendants Van Rensburg was not represented and testified for the liquidators. These defendants made common cause in their defence to the litigation. At the end of the trial claims A and E were abandoned by Protector‟s liquidators and they indicated that they were not seeking judgment against Glenrand. Notwithstanding that concession, Monama J entered judgment against Financial Services and Glenrand jointly and severally for repayment of the R50 million plus the interest accrued on that amount while the attorneys held it in trust. He did so on the basis that claims B (misappropriation of money), C (unjust enrichment) and D (disposition without value) were well founded. He also upheld claim F against the four directors personally. [15] Prior to the appeal from that judgment the liquidators of Protector abandoned the judgment against Glenrand in its entirety. Nonetheless the present appellant, which had by then assumed Glenrand‟s liabilities and intervened in the proceedings, appeared in order to seek an order for costs. The appeal by Financial Services on the misappropriation claim and the disposition without value were upheld, but the judgment against Financial Services was sustained on the grounds of unjust enrichment. As mentioned above, this was based on a finding that the contract in terms of which Freefall purchased Financial Services‟ stake in Protector was invalid and unenforceable. The appeal against the judgment on claim F also succeeded. [16] When dealing with the misappropriation claim this court made a clear finding that there was no intention to defraud the creditors of Protector. In the light of that finding it was conceded that claim F, the claim that the directors had breached their fiduciary duties by colluding in the conception and implementation of the alleged scheme, also had to fail and the appeal against the judgment on this claim was upheld. In sum therefore, this court held on the basis of the full record of the trial, in which both Mr Harpur and Mr Mansfield gave evidence, that the liquidators of Protector had failed to prove the existence of a scheme as alleged or any dishonesty on the part of the directors. The present litigation [17] Financial Services was liquidated after the previous judgment was delivered. Although different individuals were appointed as liquidators to those appointed for Protector, they came from the same company, D & T Trust (Pty) Ltd, and the litigation they instituted was clearly driven by the creditors of Protector. The sole target of the action was AON by virtue of its having assumed the obligations of Glenrand. The claims being advanced were statutory claims arising under the Insolvency Act‟s provisions for attacking dispositions by insolvents. It is unclear on what basis AON can be pursued on these claims, but as no point has been taken in that regard I will assume, notwithstanding certain reservations, that AON‟s assumption of liability for the obligations of Glenrand included the claims as formulated in these proceedings.5 [18] Turning to the pleadings the liquidators of Financial Services seek to recover the full amount of R50 million, plus the interest that accrued on it while it was in the attorneys‟ trust account, but they divide the claim into three separate components, namely the set-off component, the dividend and the interest. In all three instances the claim commences with the allegation that the entire amount of R50 million plus interest constituted property of Financial Services. In respect of the set-off of Financial Services historic debt of approximately R38 million, reliance is placed on s 30(1) of the Insolvency Act, which reads: „If a debtor made a disposition of his property at a time when his liabilities exceeded his assets, with the intention of preferring one of his creditors above another, and his estate is thereafter sequestrated, the court may set aside the disposition.‟ In order to pursue this claim successfully the liquidators of Financial Services will need to prove that Financial Services contemplated liquidation and intended to prefer Glenrand over their other creditors, by permitting the amount of R50 million to be paid into Glenrand‟s bank account, so that set-off would occur by operation of law.6 [19] In regard to the dividend paid to Glenrand the liquidators of Financial Services adopt a twofold approach. They contend that the 5 The relevant sections provide for a court to set aside the disposition. The right to approach a court for the setting aside of the disposition vests in the first instance in the liquidator. Such claims arise on liquidation and have the effect of creating an indebtedness where none previously existed. See Duet and Magnum Financial Services CC (in liquidation) v Koster [2010] ZASCA 34; 2010 (4) SA 499 (SCA) paras 11-13. By the time any such right arose in this case and inhered in the liquidators, Glenrand had been deregistered. AON is a separate legal entity to Glenrand and it played no part in the transactions giving rise to this litigation. Hence my reservations. It is unclear whether the provisions of s 116(6)(b) and (7)(b) of the Companies Act 71 of 2008 operate to impose liability on AON in respect of dispositions, but that is not the case pleaded. 6 Pretorius NO v Stock Owners’ Co-operative Co Ltd 1959 (4) SA 462 (A) at 471B-472G; Cooper and Another NNO v Merchant Trade Finance Ltd 2000 (3) SA 1009 (SCA) paras 6-16. payment was made with an intention to prefer Glenrand and falls to be set aside under s 30(1) of the Insolvency Act. To that extent the basis for the claim is the same as that in respect of the set-off amount. But they also contend that the payment was made pursuant to a collusive scheme conceived with the intention of defrauding and prejudicing Financial Services‟ creditors. Here the liquidators rely on s 31(1) of the Insolvency Act. Collusion in this context means an agreement between two or more parties that has a fraudulent purpose.7 It is a conniving together of the insolvent and another to practise a fraud on the insolvent‟s other creditors.8 [20] The last claim by the liquidators of Financial Services is to recover the interest that accumulated on the sum of R50 million while it was held in the attorneys‟ trust account, during the period when the sale of business from Protector to New Protector was awaiting Competition Commission approval. This claim is not made in terms of the provisions of the Insolvency Act, but on the simple basis that the interest accrued in favour of Financial Services and neither the set-off in relation to its historic indebtedness to Glenrand, nor the payment of the dividend affected it. Accordingly it remained Financial Services money, albeit that it was being held on its behalf in Glenrand‟s bank account. [21] The special plea is that the liquidators of Financial Services are not entitled to pursue these claims against AON in the light of the previous judgment. It proceeds as follows. In the previous litigation the substantial issue was the recovery from Financial Services and Glenrand of the 7 Meyer NO v Transvaal Lewendehawe Koöperasie Bpk 1982 (4) SA 746 (A) 771C-D. 8 Finn’s Trustee v Prior 1919 EDL 133 at 137 approved in Gert de Jager (Edms) Bpk v Jones NO en McHardy NO 1964 (3) SA 325 (A) 331A. capital amount of R50 million and the interest accrued thereon. Financial Services and Glenrand made common cause in that litigation. The judgment granted against Glenrand in the high court was abandoned prior to the appeal to this court. The appeal to this court dismissed all claims based on dishonesty. In those circumstances and by reason of:  considerations of public policy;  the principles of fairness and particularly that AON should not be exposed to a second trial;  the fact that the same sum of money paid in the same circumstances is in issue;  the facts, evidence and the underlying cause of the claim being, by and large, similar to the facts, evidence and underlying cause of the first action; and  the question of the payment of the money having previously been definitively disposed of; AON contends that the liquidators of Financial Services are precluded by the exceptio res judicata vel litis finitae, or issue estoppel, from pursuing the present proceedings. The exceptio rei judicata [22] As mentioned earlier the plea of res judicata in this case takes the attenuated form commonly referred to as issue estoppel. Res judicata deals with the situation where the same parties are in dispute over the same cause of action and the same relief,9 and in the form of issue estoppel arises: 9 National Sorghum Breweries (Pty) Ltd (t/a Vivo African Breweries) v International Liquor Distributors (Pty) Ltd [2000] ZASCA 70; 2001 (2) SA 232 (SCA) para 2 (per Olivier JA); Prinsloo NO and Others v Goldex 15 (Pty) Ltd [2012] ZASCA 28;2014 (5) SA 297 (SCA) (Goldex) para 23. „Where the decision set up as a res judicata necessarily involves a judicial determination of some question of law or issue of fact, in the sense that the decision could not have been legitimately or rationally pronounced by the tribunal without at the same time, and in the same breath, so to speak, determining that question or issue in a particular way, such determination, though not declared on the face of the recorded decision, is deemed to constitute an integral part of it as effectively as if it had been made so in express terms …‟ 10 [23] Although initially controversial that decision has subsequently been endorsed by this court as falling within the realm of res judicata.11 The current state of the law was summarised by Scott JA in the following passage:12 „Following the decision in Boshoff v Union Government 1932 TPD 345 the ambit of the exceptio res judicata has over the years been extended by the relaxation in appropriate cases of the common-law requirements that the relief claimed and the cause of action be the same (eadem res and eadem petendi causa) in both the case in question and the earlier judgment. Where the circumstances justify the relaxation of these requirements those that remain are that the parties must be the same (idem actor) and that the same issue (eadem quastio) must arise. Broadly stated, the latter involves an enquiry whether an issue of fact or law was an essential element of the judgment on which reliance is placed. Where the plea of res judicata is raised in the absence of a commonality of cause of action and relief claimed it has become commonplace to adopt the terminology of English law and to speak of issue estoppel. But, as was stressed by Botha JA in Kommissaris van Binnelandse Inkomste v Absa Bank Bpk 1995 (1) SA 653 (A) at 669D, 670J-671B, this is not to be construed as implying an abandonment of the principles of the common law in favour of those of English law; the defence remains one of res judicata. The recognition of the defence in such cases will however require careful scrutiny. Each case will depend on its own facts and any extension of the defence will be on a case-by-case basis … Relevant 10 Boshoff v Union Government 1932 TPD 345 at 350-351 citing Spencer-Bower‟s Res Judicata. 11 Kommissaris van Binnelandse Inkomste v ABSA Bank Bpk [1994] ZASCA 144; 1995 (1) SA 653 (A) at 669F-G. 12 Smith v Porritt & others [2007] ZASCA 19; 2008 (6) SA 303 (SCA) para 10. considerations will include questions of equity and fairness not only to the parties themselves but also to others. As pointed out by De Villiers CJ as long ago as 1893 in Bertram v Wood (1893) 10 SC 177 at 180, “unless carefully circumscribed, [the defence of res judicata] is capable of producing great hardship and even positive injustice to individuals”.‟ [24] The high court held that the special plea failed on all three aspects of the defence of res judicata. It said that the parties were different because the plaintiffs in this case are the liquidators of Financial Services, whereas in the previous case the plaintiffs were the liquidators of Protector. As regards the causes of action it compared the relevant facts on which the claims in each case were based and held that they were entirely different. It is unclear on what basis it thought that the relief claimed was different, as it gave no explanation for that conclusion. Discussion [25] It is correct that there is a technical distinction between the plaintiffs in the present action and the plaintiffs in the previous action, but that is a matter of form not substance. The liquidators of Protector are the persons who sought and obtained the liquidation of Financial Services and they did so on the basis of the judgment they obtained in the previous action. As matters stand at present they are the only creditor of Financial Services.13 The sole purpose of the litigation is to recover the amount of R50 million, in order that it can be distributed to Protector on the winding up of Financial Services. To all intents and purposes the liquidators of Financial Services are merely surrogates for the liquidators of Protector. 13 There is a notional possibility, if this action succeeded, that AON might be able to prove a late claim for the historic debt that Financial Services owed to Glenrand but it was not suggested that this affected the position. The fact that the liquidators of both companies are employees of the same firm of professional liquidators lends emphasis to this point. [26] As far as the defendants in the two actions are concerned, Glenrand (in whose shoes AON stands) was a defendant in the previous action. It is true that at the end of the trial no relief was sought against it but that cannot matter, especially as the trial judge disregarded that and granted judgment against it. It was a party to the previous appeal, if only for the purpose of obtaining an order for costs, the judgment having been abandoned. The same attorneys and counsel represented it and Financial Services in that case. That emphasises the commercial reality that there was a complete identity of interests between it and Financial Services, both in the transactions that gave rise to that litigation and in the litigation itself. Financial Services was a special purpose vehicle that existed solely for the purpose of holding Glenrand‟s 65 per cent interest in Protector. The individuals whose conduct was examined in the previous case were directors of both Glenrand and Financial Services. In those circumstances it seems to me that there was a complete identity of interests between them and it would be artificial to say that findings against or in favour of Financial Services in the previous case would not be binding upon Glenrand. [27] I do not think that this involves any significant development of the law in this regard. Res judicata has always been available as a defence against the privies of parties to earlier litigation. Voet‟s description of those who are the same parties for the purposes of res judicata goes well beyond those who are privies in the strict sense of deriving their rights from a party to the original litigation.14 In addition the joint stock company and similar entities, enjoying limited liability, were unknown to Voet, and the concepts he employed must be adapted to our modern commercial world. In Goldex15 Brand JA said: „In this case Prinsloo not only represented the trust, he was the controlling mind of that entity. It would therefore surprise me if the controlling mind were not bound by an earlier decision that he committed fraud, while the mindless body of the trust was held bound by that finding.‟ Likewise the sole member of a close corporation has been held to be the privy of the corporation itself.16 In the present case Glenrand, through its directors Messrs Mansfield and Harpur, was the controlling mind of Financial Services. It would be extremely surprising then to learn that, after a trial where the evidence of those two men had been heard, Glenrand could, in subsequent litigation, dispute findings made against Financial Services. In Caesarstone17 I adverted to this type of situation and said: „Subject to the person concerned having had a fair opportunity to participate in the initial litigation, where the relevant issue was litigated and decided, there seems to me to be something odd in permitting that person to demand that the issue be litigated all over again with the same witnesses and the same evidence in the hope of a different outcome, merely because there is some difference in the identity of the other litigating party.‟ I conclude that the approach of the trial judge was incorrect. It focussed too much on the fact that the plaintiffs in the two actions were liquidators of two separate companies and insufficiently on the fact that there was a 14 Johannes Voet The Selective Voet being the Commentary on the Pandects (Gane‟s translation, 1957) 44.2.5, vol 6 at 558. He included a principal and agent; the pledgor and pledgee in relation to the right to possession of the thing pledged; two joint and several debtors or creditors in relation to a claim to a thing, and a surety and the principal debtor as falling within the concept of „the same parties‟ for the purposes of res judicata. 15 Prinsloo & others v Goldex supra para 15. 16 MAN Truck & Bus (SA) (Pty) Ltd v Dusbus Leasing CC and Others 2004 (1) SA 454 (W) paras 38-39. 17 Caesarstone Sdot-Yam Ltd v The World of Marble and Granite 2000 CC and Others [2013] ZASCA 129; 2013 (6) SA 499 (SCA) para 43. complete identity of interests between the two sets of liquidators and a similar identity of interests between the defendants in both actions. [28] In fairness to counsel for the respondents I did not understand him to challenge this approach. His focus lay on the next issue, namely whether the decision in the previous case involved a finding on an issue that would be determinative of the outcome of the present case. That turned largely on the following two paragraphs from the previous judgment dealing with the misappropriation claim: „The IDC knew that Glenrand MIB was selling its 65 per cent shareholding in Protector and the IDC intended, when its board approved the financing on 25 November 2003, that the proceeds of the loan would be applied towards settling the purchase price of the sale of shares of Glenrand MIB and PGMC. The IDC‟s recognition that the proceeds of the loan would immediately be applied towards paying for Glenrand MIB‟s shares in Protector, was in full knowledge of the IDC‟s decision that ultimately the business of Protector would be located in a new vehicle, which would represent a consortium led by a BEE shareholder. There is no evidence to suggest that the IDC, and all the other relevant parties, in agreeing or arranging that the proceeds of the loan should be paid to the shareholders of Protector, intended to defraud the creditors of Protector. The common intention of Glenrand MIB, the IDC, and of Seelenbinder and Van Rensburg, was that the money should be applied to discharge Freefall‟s indebtedness arising from the sale of shares by Glenrand MIB and PGMC. In the circumstances, the respondents have not made out a case for dishonesty on the part of Harpur and Mansfield [the two relevant directors of Glenrand and Financial Services]. It was not established that, in arranging that part of the proceeds of the IDC loan be paid to Financial Services, they had the subjective intention to steal the money. It follows that the claim of theft cannot be sustained.‟ The existence of a collusive scheme was not canvassed separately in the High Court judgment from which this appeal lay because judgment was not sought or granted on claims A and E. But this reasoning is entirely inconsistent with the existence of such a scheme. Counsel very properly accepted that the effect of the abandonment of these claims was that they stood on the same footing as if they had been dismissed. [29] Starting with the claim to recover the dividend on the basis that it was paid pursuant to a collusive transaction between Financial Services and Glenrand, that case requires the liquidators to prove that the decision by Glenrand, as the sole shareholder of Financial Services, to declare a dividend was the product of a fraudulent agreement between the two companies, represented by Messrs Mansfield and Harpur, directed at defrauding the other creditors of Financial Services. Bearing in mind that Financial Services was not a trading entity it had no other creditors save, for the purposes of this argument, Protector in respect of its enrichment claim. So any collusive arrangement had to be one dishonestly determined with a view to defeating that enrichment claim. [30] Such a claim is entirely inconsistent with the findings by this court in the previous judgment. Two findings in particular are important. The first is that all the parties to the payment by Protector to Financial Services were aware of the payment and intended that it be made in precisely the manner that in fact occurred. A finding in the present litigation that Messrs Mansfield and Harpur were aware of the existence of an enrichment claim by Protector to recover the payment made by it to Financial Services would fly in the face of that. The second, and even more important finding, was that there was no evidence of an intention to defraud the creditors of Protector and no evidence of dishonesty on the part of Messrs Mansfield and Harpur. If they were not dishonest in securing that Protector paid Financial Services R50 million, they could not possibly have been dishonest in securing that Financial Services, itself merely a vehicle for holding Glenrand‟s interest in Protector, paid that amount by lawful means to Glenrand. [31] Counsel sought to circumvent this difficulty by compartmentalising (as he put it) the period leading up to the payment to Financial Services and the subsequent period when the set-off occurred and the dividend was paid. In so doing he sought to contend that although the previous judgment effectively rejected the notion that the payment to Financial Services was a product of the fraudulent and collusive scheme originally pleaded, there remained scope for a different collusive scheme conceived and concluded at a later stage. He placed the dividing line between the compartments at 5 March 2004 when the IDC released the funds to New Protector. However, nothing occurring between that date and 22 June 2004, when payment was made to Glenrand, warranted drawing a line at the earlier date. Indeed, until the latter date, the absence of Competition Commission approval for the sale of Protector‟s business to New Protector meant that Financial Services had no claim to the R50 million. The enrichment claim could only arise once payment was made on 22 June 2004. [32] If there is to be a compartmentalisation, the defining line between the two must be drawn as at 22 June 2004, the date on which Financial Services was paid. In regard to the period after that date the dividend was paid over nearly a year later on 13 June 2005. The allegation in the particulars of claim in the present litigation was that, in the intervening period, the leading individual behind the BEE partner in New Protector approached Mr Harpur and accused Financial Services of having stolen the purchase price of R50 Million. This caused Mr Harpur to enquire from Mr Seelenbinder how the funds flowed from Protector into the attorneys‟ trust account. The plaintiffs allege that, in the light of the explanation he received, Mr Harpur became aware that Financial Services had no entitlement to the payment of the R50 Million, alternatively he became aware that Protector had a claim to recoup this amount. That formed the basis for the allegation that the payment of the dividend was part of a collusive scheme „conceived with the intention of defrauding and prejudicing‟ Financial Services‟ creditors, in other words, Protector. [33] There are overwhelming difficulties confronting this argument. It sought to excise a component of the claims of collusion and dishonesty made in the first action and to characterise it as a separate collusive transaction. It aimed at revisiting issues already dealt with in the previous case and was inconsistent with the findings in the previous judgment. Financial Services had contended in relation to the enrichment claim that it had bona fide disgorged the R50 million by way of the set-off and payment of the dividend. In rebuttal the liquidators of Protector referred to the approach to Mr Harpur, the allegation that the money had been stolen and Mr Harpur‟s enquiry to Mr Seelenbinder in regard to the flow of funds. The manner in which this court dealt with that evidence refutes the claim of collusion that the present plaintiffs seek to advance. [34] The present claim depends upon a finding that Mr Harpur knew when the dividend was paid that Protector was entitled to its repayment by Financial Services. That is inconsistent with the finding this court made in relation to this evidence. It highlighted the fact that in Mr Seelenbinder‟s explanation it emerged that the funds advanced to New Protector and paid to Protector had been routed via a firm of accountants in Namibia which paid the R50 million into the attorneys‟ trust account. The reason given for adopting this course was a concern that otherwise the payment might have involved a contravention of s 38 of the Companies Act 61 of 1973. Mr Harpur testified that he thought there was nothing untoward in this and disputed the suggestion that he must have known that something was amiss and that Financial Services was not entitled to retain the money. [35] This evidence was not rejected. The previous judgment accepted that there was no evidence of dishonesty on the part of Mr Harpur in receiving payment of the R50 million. On this issue it held that, as an experienced CEO of the company, he „should have been alerted to a possible contravention of s 38 of the Companies Act‟ and „should have investigated the validity of Seelenbinder‟s claim that this had been averted by directing the funds through Namibia‟. Its conclusion, in rejecting the defence of non-enrichment, was that “Financial Services and Harpur should have been aware that Financial Services had been enriched sine causa at the expense of Protector‟. That is inconsistent with a finding that Mr Harpur was in fact aware that Protector had a valid enrichment claim against Financial Services. [36] The collusion case that the liquidators of Financial Services now seek to run would involve a reconsideration of this very evidence. The court would be required to find that Mr Harpur knew, as a matter of fact, that the payments were made in circumstances amounting to a contravention of s 38 and that he deliberately thereafter secured the declaration and payment of the dividend in order to defeat Protector‟s enrichment claim. That would be inconsistent with the findings in the previous case. To achieve that result the trial court would have to hear the evidence of the same witness, Mr Harpur, and conclude that he was lying if he repeated his previous testimony. That is precisely the situation that the recognition of the defence of res judicata is intended to prevent. [37] The compartmentalisation argument also underpinned the contention that the statutory claims to set aside both the set-off and the payment of the dividend as undue preferences were not defeated by reliance on res judicata in the form of issue estoppel. To recapitulate, those claims required proof of the intention to prefer, as shown by proof that liquidation was contemplated and that the payment in question was made with the intention to prefer Glenrand over Protector. But central to such a case was the proposition that Glenrand, through Mr Harpur, was aware of the existence of Protector‟s enrichment claim. A finding to that effect would be inconsistent with the findings made by this court in the previous judgment. [38] Even on its own terms therefore the compartmentalisation argument cannot succeed. But its own terms are entirely artificial and contrary to the evidence that led this court to hold, in the passages cited in [28] above, that all the parties were aware of the payments to be made using the funds provided by the IDC and in particular were aware that the price of R50 million that Financial Services required for its 65 per cent stake in Protector would be paid from these funds. The previous judgment held that Messrs Harpur and Mansfield were not guilty of fraud in relation to that payment and were not dishonest. The reason is not far to seek. It was that the transaction originated in the decision by Glenrand to dispose of its interest in Protector. Central to that decision was that Financial Services would no longer serve any purpose. Retaining the proceeds of the sale in its books, but not its bank account because it had none, would serve no useful or conceivable purpose. [39] From the outset the entire transaction was posited on Glenrand receiving the proceeds of the disposal. In the first instance they would be used to recoup the initial cost of the investment in Protector, as reflected in Financial Services‟ historical indebtedness to Glenrand. Set-off occurred the moment the funds arrived in Glenrand‟s bank account. There could be no question of compartmentalisation in that situation as the argument based on it depended upon events subsequent to the receipt of the funds. As far as the dividend was concerned this was nothing more than the mechanism whereby receipt of the balance of the proceeds by Glenrand would be reflected in the books of account of Financial Services as having passed to Glenrand. The notion that it occurred in consequence of a collusive agreement between Financial Services and Glenrand is wholly inconsistent with the factual findings underpinning the previous judgment. [40] My conclusion is that the claims advanced in these proceedings by the liquidators of Financial Services involve the reconsideration of the very evidence and issues that were the subject of determination in the previous action. Insofar as the relief was concerned it was not suggested that it was not the same in both actions. Both were directed at recovering from Glenrand the R50 million paid to Financial Services as the price for its 65 per cent stake in Protector. With respect, the court below erred in holding otherwise by looking mechanically at the elements of the causes of action in the two cases, instead of examining the issues that had been determined in the previous case and comparing them with the issues that would need to be determined if the present case went to trial. [41] The elements of res judicata in the form of issue estoppel were accordingly satisfied and the special plea should have been upheld. During the course of argument it was pointed out to counsel that the special plea could not have any application to the claim in respect of the interest that accrued on the sum of R50 million while it was held in the trust account of the attorneys pending the decision by the Competition Commission. For some reason, possibly oversight, neither the set-off nor the dividend included this amount. It accordingly remained an amount to which Financial Services was entitled, albeit that it was held in Glenrand‟s bank account. Whether AON has some other ground for resisting this claim is not an issue for determination in this appeal and must be left for the further conduct of the proceedings. Result [42] The appeal must succeed and the order made by the high court must be set aside. It will be replaced by a suitable order upholding the special plea in regard to claims A, B and C, but not D. The costs of the appeal and the determination of the special plea must follow the result. [43] I make the following order: (1) The appeal is upheld with costs. (2) The order of the high court is set aside and replaced with the following order: „(a) The special plea is upheld in relation to claims A, B and C. (b) Claims A, B and C are dismissed. (c) The plaintiffs are to pay the defendant‟s costs in relation to the defence of claims A, B and C including the costs consequent upon the separate determination of the special plea.‟ M J D WALLIS JUDGE OF APPEAL Appearances For appellant: R Stockwell SC Instructed by: Fluxmans Inc, Johannesburg; Lovius Block Attorneys, Bloemfontein For respondent: P F Rossouw SC Instructed by: De Vries Inc, Sandton; Matsepes Inc, Bloemfontein.

Supreme Court of Appeal of South Africa MEDIA SUMMARY– JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 30 May 2017 Status: Immediate Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal. AON South Africa (Pty) Ltd v Van den Heever NO The SCA today upheld an appeal by AON South Africa (Pty) Ltd against a decision by the Gauteng Local Division, Johannesburg dismissing a special plea. The litigation flowed from the collapse and liquidation of New Protector Holdings (Pty) Ltd (New Protector), which had bought the business of Protector Group Holdings (Pty) Ltd (Protector) with the assistance of a loan from the IDC. The loan had been used by New Protector to pay the purchase price of the business of Protector. In turn Protector used R50 million of the money lent to it to pay Glenrand MIB Financial Services (Pty) Ltd (Financial Services) for its 65 % stake in Protector. Financial Services was a wholly owned subsidiary of Glenrand MIB Ltd (Glenrand). AON’s involvement arose because it purchased Glenrand’s business after the events giving rise to the litigation. In previous litigation brought by the liquidators of Protector against Glenrand, Financial Services and two directors of both companies, the SCA had held that there was no dishonesty involved in the underlying transactions and that all parties to the transaction, including the IDS, were aware of the use to which the funds lent by the IDC were to be put. It upheld an enrichment claim by Protector against Financial Services on the basis that the contract under which Financial services had sold its interest in Protector was invalid. On the basis of this claim the liquidators of Protector sought and obtained the liquidation of Financial Services and commenced the present litigation against AON. The claims advanced against AON sought to recover the sum of R50 million paid to Financial Services that had been the subject of the previous litigation. This amount had been used by Financial Services to discharge a loan given to it by Glenrand when it acquired the stake in Protector and to pay a dividend to Glenrand. The claims were based on allegations that the discharge of this debt and the payment of the dividend were undue preferences in terms of the Insolvency Act in that they had been paid when Glenrand was aware that Financial Services was not entitled to be paid the R50 million and in contemplation of Financial services liquidation, with the intention of preferring Glenrand over Protector. Alternatively it was alleged that the dividend was paid as part of a collusive scheme to prefer Glenrand over Protector. The SCA upheld the special plea of res judicata on the basis that these contentions had been fully explored in the previous case and the factual findings made by the court were inconsistent with them. It is a principle of law that there must be finality to litigation and where the same issue has been determined in litigation between the same parties, or persons with whom they have an identity of interest, those issues may not be reopened in subsequent litigation. Here the issues were the same, the subject matter of the claim – the sum of R50 million – was the same and there was a complete identity of interest between the parties. Accordingly the special plea of res judicata was upheld.

2816

non-electoral

2012

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Case No: 630/11 Reportable In the matter between: DIANE JEAN THEART APPELLANT and HANS-PETER WOLFGANG SCHEIBERT FIRST RESPONDENT JAN WILLY SUNDBY SECOND RESPONDENT THE MASTER OF THE HIGH COURT THIRD RESPONDENT THE REGISTRAR OF DEEDS FOURTH RESPONDENT Neutral citation: Theart v Scheibert (630/11) [2012] ZASCA 131 (27 September 2012). Coram: Cloete, Cachalia, Malan and Tshiqi JJA and Erasmus AJA Heard: 5 September 2012 Delivered: 27 September 2012 Summary: Wills ─ mutual will ─ interpretation ─ massing ─ presumption of destruction where original will cannot be found. ______________________________________________________________ ORDER ______________________________________________________________ On appeal from: Western Cape High Court, Cape Town (Cloete AJ sitting as court of first instance): The appeal succeeds, and the second respondent is ordered to pay the costs of the appellant and the first respondent, including the costs of two counsel where employed. The order of the court a quo is set aside and the following order is substituted therefor: ‘(a) An order is granted in terms of paragraphs 4.1, 4.2 and 4.3 of the notice of motion. (b) The second respondent is ordered to pay the costs of the applicant and the first respondent, including the costs of the interlocutory application and the costs of two counsel where employed.’ ______________________________________________________________ JUDGMENT ______________________________________________________________ CLOETE JA (CACHALIA, MALAN, TSHIQI JJA AND ERASMUS AJA CONCURRING): [1] On 28 March 1983 Mr Kristian Jens Korsgaard and Mrs Isabel Louisa Wilhelmina Korsgaard executed a mutual will (the mutual will) with the appellant as a beneficiary. In what follows I shall refer to Mr Korsgaard as ‘the testator’, to Mrs Korsgaard as ‘the testatrix’ and to them jointly as ‘the testators’. The principal questions on appeal are the interpretation of the mutual will and whether it was revoked. The first respondent is the executor of a will (the new will) made by the testator after the testatrix had died, and the second respondent, the testator’s nephew, is the beneficiary under that will. The third respondent is the Master of the High Court, Cape Town, who did not participate in these proceedings. The fourth respondent is the Registrar of Deeds, Cape Town, who filed a report stating that the records of the Deeds Registry reflected that immovable property (referred to below) was registered in the name of the testator and that the title was not endorsed to give effect to the mutual will. [2] The relevant facts are these. The testator was born in Norway in 1908 and grew up in that country. He came to South Africa in the early 1940’s where he worked on whaling vessels based near Cape Town. In the mid- 1940’s he gave up whaling, took up employment in the Cape Town harbour and rented accommodation in Green Point, where he met the testatrix. [3] The testator purchased 19 Dysart Road, Green Point (the property) in 1946 and the property was registered in his name in February 1947. A few weeks later, in March 1947, the testator and the testatrix married each other. It was common cause on appeal that the marriage was in community of property and accordingly, that on their marriage they owned the property in equal and undivided shares. They lived at the property until their deaths. [4] In about 1954 the appellant, who was then nine years old, and her brother began living permanently with the testators. The appellant was born in 1945. Her mother was the daughter of the testatrix by a previous marriage. The testators raised the appellant as if she were their daughter. After the appellant’s brother died, the appellant was the testatrix’s only living descendant and remained so until her own child was born. [5] On 28 March 1983 and in Cape Town the testators executed the mutual will. The testatrix gave the appellant a copy of that will at about the time it was executed. The original cannot be found. It was not produced to the Master. The copy in the appellant’s possession was authenticated by one of the persons that had witnessed the original and this evidence was not challenged by the respondents. [6] The testatrix died on 11 February 1990. Two death notices were filed with the Master in terms of s 7 of the Administration of Estates Act 66 of 1955 ─ one by the testator, and one by Ms M M Brink who described herself in the notice she filed as a nurse/friend and who the appellant asserts was the testator’s then girlfriend. The death notices are each dated 4 December 1997, ie more than seven years after the testatrix’s death. Both notices stated ─ incorrectly ─ that the testatrix was married by ante-nuptial contract and that she had died intestate. On 30 June 1998 Ms Brink filed an inventory of the testatrix’s estate with the Master in terms of s 9 of the Administration of Estates Act which ─ again incorrectly ─ reflected that the testatrix owned no immovable property and that the only moveable property she owned consisted of clothes of no commercial value. On 2 July 1998 the Master wrote to the testator in the following terms: ‘SIR ESTATE LATE: I L KORSGAARD As the Inventory reflects no assets at all the matter is regarded as finalized and will be filed off record.’ [7] After the testatrix’s death, the relationship between the appellant and the testator deteriorated. (I shall deal with this aspect in more detail later in the judgment.) The testator then executed at least three wills in which the appellant was not a beneficiary: one on 5 October 2005, one on 6 December 2006 and the last, the new will, on 15 March 2008. The sole heir in all of these wills was the second respondent. It was common cause that in each will the testator intended to bequeath the property in its entirety to him. [8] The testator died on 6 May 2008. The first respondent, his executor, drew up a liquidation and distribution account reflecting the terms of the new will and awarded the property to the second respondent. The appellant lodged objections with the Master asserting the validity and enforceability of the mutual will. The Master required the dispute to be resolved by the high court, and the application which culminated in this appeal was launched in the Western Cape High Court, Cape Town, by the appellant. In her founding affidavit, the appellant contended that the mutual will effected a massing of the estates of the testator and testatrix; and in the notice of motion, the appellant made claims in the alternative depending on whether the court found that the testator had adiated under the mutual will. [9] The main relief, sought on the basis that the testator had adiated, was: ‘1. That it is declared that the will of the late Kristian Jens Korsgaard dated 15 March 2008 (“the new will”), a copy of which is annexed to the founding affidavit, marked “C”, to the extent that it purports to dispose of assets which constituted a part of the erstwhile matrimonial estate of the late Kristian Jens Korsgaard and the late Isabel Louisa Wilhelmina Korsgaard, including certain immovable property situated at 19 Dysart Road, Green Point, is invalid and unenforceable. 2. That it is declared that the joint will of the late Kristian Jens Korsgaard and the late Isabel Louisa Wilhelmina Korsgaard, dated 28 March 1983 (“the joint will”), a copy of which is annexed to the founding affidavit, marked “A”, is the will in terms of which assets which constituted a part of the erstwhile matrimonial estate of the late Kristian Jens Korsgaard and the late Isabel Louisa Wilhelmina Korsgaard, including certain immovable property situated at 19 Dysart Road, Green Point, must devolve. 3. That the third respondent is directed to accept the joint will as the will in terms of which assets which constituted a part of the erstwhile matrimonial estate of the late Kristian Jens Korsgaard and the late Isabel Louisa Wilhelmina Korsgaard, including certain immovable property situated at 19 Dysart Road, Green Point, must devolve.’ The alternative relief sought was: ‘4.1 That it is declared that the new will, to the extent that it purports to dispose of one half of the assets which constituted a part of the erstwhile matrimonial estate of the late Kristian Jens Korsgaard and the late Isabel Louisa Wilhelmina Korsgaard, including and undivided half share in certain immovable property situated at 19 Dysart Road, Green Point, is invalid and unenforceable. 4.2 That it is declared that the joint will is the will in terms of which one half of the assets which constituted a part of the erstwhile matrimonial estate of the late Kristian Jens Korsgaard and the late Isabel Louisa Wilhelmina Korsgaard, including an undivided half share in certain immoveable property situated at 19 Dysart Road, Green Point, must devolve. 4.3 That the third respondent is directed to accept the joint will as the will in terms of which one half of assets which constituted a part of the erstwhile matrimonial estate of the late Kristian Jens Korsgaard and the late Isabel Louisa Wilhelmina Korsgaard, including an undivided half share in certain immovable property situated at 19 Dysart Road, Green Point, must devolve.’ [10] The high court (Cloete AJ) non-suited the appellant and refused leave to appeal. The appeal is accordingly with the leave of this court. [11] The high court came to the conclusion that ‘the joint will did not establish a massing of estates’ and went on to find that even if it did, the testator had not adiated. Both massing and adiation are issues on appeal. The high court did not make a finding that the joint will had been revoked, as the second respondent contends, but did conclude that the appellant had probably not rebutted the presumption that ‘when a will which was last known to have been in the possession of the testator cannot be found upon his death, he is presumed to have destroyed it with the intention to revoke it’. Revocation remains an issue in the appeal. Then finally, the high court concluded that the alternative relief sought in paragraph 4 of the notice of motion could not competently be sought against the estate of the testator. This finding is also challenged on appeal. [12] It would be convenient to commence with the question whether the mutual will effected a massing. The relevant clauses in the will are the following: ‘2. We appoint the survivor of us to be the Executor/Executrix of this our Will and Administrator/Administratrix of our Estate, granting unto each other all the powers allowed in Law and particularly the power of assumption. 3. We appoint the survivor of us to be the sole and universal heir/heiress to the whole of our Estate and Effects whether movable or immovable and wherever situate and whether in possession, reversion, expectancy or contingency. 4. In the event of our dying simultaneously or in circumstances where it is difficult or impossible to determine the first dying of us or on the death of the survivor of us, then and in that event we declare our Last Will and Testament to be as follows: 4.1 We appoint as Executrix of this our Will, Administratrix of our Estate and Trustee hereunder, DIANE JEAN CHESTER (born Kells), presently of Cape Town, hereby granting unto her all such powers and authorities as are required or allowed in Law, especially the powers of assumption. . . . 5. We give and bequeth the whole of our Estate and Effects movable and immovable, of every description and wheresoever situate, whether same may be in possession, reversion, remainder, expectancy or contingency to DIANE JEAN CHESTER (born Kells).’ [13] The appellant’s counsel contends that the mutual will effected a massing of the estates of the testators for the purposes of a joint disposition to her; and that as the testator had accepted a benefit from the testatrix under the mutual will, he had lost the right to revoke his part of the mutual will in accordance with the decision in The Receiver of Revenue, Pretoria v C H Hancke 1915 AD 64 at 71-72. The consequence, according to the appellant’s counsel, was that the new will was of no effect and the appellant was entitled to inherit the property. [14] Counsel for the second respondent contended, at least in this court, that clause 3 of the mutual will constituted an out and out bequest of inter alia the property to the second respondent which vested on the testatrix’s death; and that clause 5 of the will was a bequest to the appellant by the testator alone, which he was free to revoke. The consequence, according to the second respondent’s counsel, was that the new will was valid and that the second respondent was entitled to inherit the property. [15] The high court gave a third interpretation to the mutual will. It held that: ‘[C]lauses 3 and 5 are utterly irreconcilable unless subject to a qualification, namely that clause 5 will only operate upon the happening of certain of the events in clause 4, namely upon the simultaneous death of the testator and testatrix, or in circumstances in which it is difficult or impossible to determine the first dying (thus implying some sort of virtually simultaneous death). This interpretation would render the words “or on the death of the survivor of us” in clause 4 pro non scripto but would certainly give meaningful effect to the content of the joint will. This interpretation also clearly militates against any massing of the estate(s) of the testator and testatrix.’ [16] It is convenient to start with the interpretation given by the high court. That interpretation offends against the well-established canon of construction that where it is possible to reconcile and give effect to every clause in a will, that interpretation should be adopted: see for example Smith v Smith 1913 CPD 869 at 878. In my view, clause 3 is not irreconcilable with clause 5. It seems plain from the mutual will that clause 3 governs the position where the first spouse has died and there is a survivor, and that clause 5 governs the position where the survivor has died. That is the sequence of the will: the bequest to the survivor is in clause 3; inter alia the death of the survivor is contemplated in clause 4; and the bequest to the appellant follows in clause 5. Clause 4 contemplates three possible situations: both spouses dying simultaneously (the first possibility) or virtually simultaneously (the second possibility) and the death of the survivor after the first dying (the third possibility). In the first, there will be no survivor and in the second, no survivor for practical purposes, and clause 3 would therefore not operate in either case. The third possibility deals with the position ‘on the death of the survivor of us’ and clause 3 would therefore be applicable. But clause 4 continues, in regard to the third possibility, with the words ‘then and in that event we declare our Last Will and Testament to be as follows’. These words cannot refer to the first dying, who would already have died. This conclusion is reinforced by the provision in clause 4.1 appointing an executor. That provision also cannot be applicable to the first dying as the first dying appointed the survivor as his/her executor in terms of clause 2. The words can therefore only refer to the survivor. The last part of clause 4 must accordingly be interpreted as meaning ‘on the death of the survivor of us, then and in that event the survivor declares his/her Last Will and Testament to be as follows’. The question is what is to be made of clause 5: is it the bequest of the survivor alone and therefore revocable by the survivor (as counsel for the second respondent contends), or is it a bequest by both testators; and if the latter, was there a massing of estates? [17] To my mind, in answering the first question, the most important fact to be taken into account is that clause 5 does not form part of clause 4. That is an indication that it is not intended to be disposition solely by the survivor after the first dying has died. Had that been the intention, clause 5 would simply have followed on as the last sub-paragraph of the immediately preceding clause, where it would have been governed by the words that I have interpreted as meaning ‘on the death of the survivor of us, then and in that event the survivor declares his/her Last Will and Testament to be as follows’; and the provisions of clause 5 would then have been a bequest by the survivor alone. But clause 5 stands on its own. Apart from that, to quote Milne J in D’Oyly-John v Lousada 1957 (1) SA 368 (N) who at 374D-375A dealt with a similar argument on a similar will and said inter alia: ‘I cannot help thinking that if the testators had intended to make the survivor of them the absolute heir of the first-dying and that the rest of the will . . . should be that of the survivor only, they would have worded the will quite differently. They could so easily have said, for example, “(1) We will that, upon the death of the first-dying, the survivor shall be his or her full and sole heir absolutely, without conditions of any kind. (2) Clauses 3 to 6 of this will are intended to be in no sense a joint disposition but solely the will of the survivor which he or she may revoke at any time notwithstanding that he or she may have accepted the bequest contained in clause 1.” Whether this will was made with or without legal assistance, I find it impossible to believe that the framers of its terms intended them to be equivalent to the clauses I have suggested.’ In the present case the will was indeed drawn up by an attorney. I therefore reject the interpretation of the will urged on us by the second respondent’s counsel and find that clause 5 is the bequest of both the first dying and the survivor. [18] I turn to consider the appellant’s argument that the mutual will effected a massing of the testators’ estates. The problem that arises in cases such as the present is that the testators referred to themselves using the first person plural. The semantic result is that the testators appear to make dispositions of each other’s property, and if the will is taken at face value, it can easily lead to the interpretation that massing was intended whereas that might not have been their true intention. [19] In the mutual will, ‘we’ and ‘our’ were used in clauses 2 and 3, which is grammatically correct in as much as both testators were simultaneously making a will in the same terms; but in truth, each testator could only have been saying ‘I’ and ‘my’, and to that extent the will stands to be interpreted as the separate will of each, although contained in one document. I have already pointed out that the third possibility envisaged in clause 4 can only apply to the survivor. The question that remains to be answered is whether the will effects a massing. [20] The correct approach to the interpretation of a joint or mutual will was authoritatively laid down by this court in Rhode v Stubbs 2005 (5) SA 104 (SCA) paras 16-18 (my translation): ‘[16] When two (or more) testators make a testamentary disposition together, grammatical uncertainty frequently arises. The use of the (appropriate) first person plural does not convey unambiguously to a reader of the will whether each testator is expressing his wishes only on his own behalf, or also on behalf of the other testator(s). Our law finds a solution to the problem of interpretation to which this structural lack of clarity gives rise in the rule that mutual or joint wills of spouses married in community of property must in the first instance be read as separate wills. The person analysing such a will proceeds on the hypothesis that he or she is dealing with separate wills until the contrary clearly appears. The reason for this approach is embedded in our common law. [17] In Joubert v Ruddock and Others 1968 (1) SA 95 (E) at 98F-G, Eksteen J quotes a passage from Van Leeuwen’s Censura Forensis 3.11.6 in which he underlines the importance of the principle that a person ought to remain capable of changing his will until the end of his days, and motivates this proposition by saying (Schreiner’s translation) “. . . there is nothing to which men are more entitled than that their power of making a last will should be free, and hence the rule; that no one can deprive himself of this power”. [18] The proposition is not correct without qualification. A testator can deprive himself of the right to make a will by massing, but if there is any doubt about his intention, the will must be interpreted so as to leave the greatest possible freedom of testation. That gives rise to the subordinate rule of interpretation, the presumption against massing, that applies when the golden rule for the interpretation of wills, ie to give meaning to a testator’s words within the framework of a will, fails due to vagueness or ambiguity.’ [21] Following the approach in Rhode, I find no indication, much less a clear indication, that massing was intended in the situation envisaged in the mutual will that has eventuated, viz where the one testator has survived the other. The test for massing applied to the facts of this case is whether the testatrix disposed of the testator’s share of the joint estate as well as her own, either after her death or after the death of the testator: Rhode paras 11-13 and authorities there referred to. The will is ambiguous in that it is not clear whether the testators intended that the appellant was to inherit from the first dying, subject to rights to the estate of the latter that are conferred on the survivor during the survivor’s lifetime (no massing); or whether the testators intended that the first dying’s estate was to be consolidated with that of the survivor for the purposes of a joint disposition to the appellant on the death of the survivor (massing). In view of the ambiguity, and on the authority of Rhode, the presumption against massing is decisive. [22] I therefore reject the interpretation put upon the will by the appellant’s counsel. I find that the testators intended that the estate of the first dying would devolve upon the survivor; that rights to that estate were conferred on the survivor during the latter’s lifetime; and that the estate of the first dying and the estate of the survivor would separately devolve upon the appellant when the survivor died. It was suggested in argument that the rights conferred on the survivor were those of a fiduciary under a fideicommissum residui. I do not believe that to be correct, as there is no indication that the survivor was given a power of alienation (see the cases discussed in M M Corbett, Gys Hofmeyr and Ellison Khan The Law of Succession in South Africa 2ed (2001) at 328-329). But it is not necessary to determine the exact nature of the rights conferred on the survivor, who in the event was the testator, as the primary asset to which the appellant lays claim is the property; there is no suggestion that there is a dispute in respect of any other assets; and the testator has died. [23] As I have found that there was no massing, the question of adiation falls away. It is therefore not necessary to decide which of the two approaches summed up in the judgment of Van Winsen J (Steyn J concurring) in Ex parte Estate van Rensburg 1965 (3) SA 251 (C) at 255E-256E, should prevail. No argument was addressed to this court on the question and it would accordingly be undesirable to comment further. [24] The further consequence of the finding that there was no massing, is that the appellant is entitled to succeed to the testatrix’s half share of the joint estate in terms of the mutual will ─ unless the testatrix revoked the dispositions she made therein. I now turn to consider that question. [25] The second respondent’s counsel relied on the rebuttable presumption that when a will that was last known to be in the testator’s possession cannot be found, the testator is presumed to have destroyed it with the intention of revoking it: In re Beresford, Ex parte Graham (1883) 2 SC 303; Ex parte Slade 1922 TPD 220; Ex parte Warren 1955 (4) SA 326 (W). But the argument falls to be rejected on both the facts and the law. [26] So far as the facts are concerned, in order to be effective, revocation would have had to take place before the testatrix’s death. But there is no apparent reason for her to have done so. On the contrary, the evidence points the other way. According to the appellant, the relationship between her and the testatrix ‘was de facto that of a mother and daughter. It was a close and loving relationship, and remained so until her death’. This evidence is supported by the evidence of the appellant’s erstwhile sister-in-law, who deposed to an affidavit in which she stated: ‘3. After my brother’s marriage to the applicant, I became a close friend of the applicant and of her family, including her grandmother, Isobel Korsgaard (“the testatrix”) and her step-grandfather Jens Korsgaard (“the testator”). I visited them regularly. Our friendship survived the applicant’s divorce from my brother. 4. I regularly saw the testatrix and the testator in the company of the applicant and I was thus able to witness their interaction with the applicant. 5. The testatrix and the testator were both very family oriented. They treated the applicant as an own child. This accorded with my understanding that they had in fact raised the applicant as if she were their own child. . . . 7. I am able to say, on the basis of my personal observation, that until the testatrix died in 1990 there was no deterioration in the relationship between the applicant, on the one hand, and the testatrix and testator, on the other. It was apparent to me that their relationship was and remained a close and loving one.’ The appellant has admitted that some two years after the testatrix’s death, her relationship with the testator did deteriorate. The second respondent has attempted to put the date earlier by asserting that the appellant’s relationship with both the testator and the testatrix had deteriorated during the testatrix’s lifetime; but according to the appellant, he was not in a position to comment on her relationship with the testatrix, because he only started visiting the testator after the testatrix had died. The affidavits of other persons on which the second respondent relies, also relate to the period after the testatrix had died. There is accordingly no conflict of fact on this point and the evidence of the appellant stands uncontroverted. In addition there are the following facts. The appellant was, on the death of her brother, the testatrix’s only surviving descendant. The testatrix gave the appellant a copy of the mutual will at about the time it was executed. Having made a will, there is no apparent reason why she would have decided to disinherit the appellant and to die intestate. On the other hand, there was every reason why the testator would seek to destroy the will after the testatrix’s death because he did not wish the appellant to inherit anything ─ and that state of mind may explain the late filing of the death notices and the inventory with their incorrect contents, and may further explain why the testator did not disclose the existence of the mutual will to the persons who drew up his three subsequent wills. [27] For these reasons, even if the presumption applied, it was in my view (and contrary to the tentative view of the high court) clearly rebutted. But in order for the presumption to apply, it must be established that the will was last known to be in the testator’s possession ─ because the presumption, according to the first and third authorities to which I have already referred in para 25 above, does not apply if the will was in the hands of a third party. The high court held that ‘[i]n correspondence annexed to the applicant’s founding papers the applicant (through her attorney) informed the first respondent that the original will “was handed to the testator and testatrix. ... The present whereabouts of the original document are unknown” and that the applicant “is unable to confirm (or deny) that the original will was ever lodged with the Master of the High Court”’. But the first passage quoted by the high court from the letter sent by the appellant’s attorneys is preceded by the words: ‘To the best of our client’s knowledge’. Those words clearly indicate that the appellant was unable to say one way or the other what the actual position was. There was simply no evidence to indicate who was in possession of the mutual will before the testatrix’s death. The presumption accordingly did not arise. [28] The final question, apart from costs, is whether the high court was correct in making the following finding: ‘Further, the applicant cannot seek a declaratory order against the estate of the testator (which is being dealt with by the executor in terms of the new will), obliging such executor to deal with those assets which might have devolved upon the testator in accordance with the will of the testatrix. . . . The alternative relief sought by the applicant lies, not against the testator’s estate, but against the estate of the testatrix which is not a party to these proceedings.’ The conclusion of the high court cannot be supported. It may be that the high court overlooked the fact that para 4.3 of the notice of motion was directed at the Master, not the second respondent. Be that as it may, no part of the alternative relief sought would have the effect of compelling the first respondent to distribute any asset in the testator’s estate otherwise than in accordance with the new will. Paragraph 4.1 of the notice of motion is directed at an amendment of the liquidation and distribution account filed with the Master by the first respondent in respect of the very estate he is administering, so as to exclude the testatrix’s estate. The purpose of paras 4.2 and 4.3 of the notice of motion is to procure recognition by the Master of the mutual will as the testamentary instrument under which the assets in the testatrix’s estate, including her half share in the property, fall to be administered. Such recognition is a necessary prerequisite for the appointment by the Master of an executor for the testatrix’s estate. No executor was appointed on her death because, as I have said, an inventory was filed with the Master that indicated that her estate comprised only clothing of no commercial value. The relief sought in paras 4.1 to 4.3 of the notice of motion should accordingly have been granted. The appeal must therefore succeed to this extent. [29] That brings me to the question of costs. The parties were agreed that the costs of an interlocutory application should be costs in the cause; and that the costs, including the costs of the first respondent, should be paid by the loser in this litigation. The parties were also agreed that the costs of appeal should include the costs of two counsel, where employed. It seems to me that as the appellant had to go to the high court and this court to obtain the relief to which she was entitled, she should have the costs in both courts. [30] The following order is made: The appeal succeeds, and the second respondent is ordered to pay the costs of the appellant and the first respondent, including the costs of two counsel where employed. The order of the court a quo is set aside and the following order is substituted therefor: ‘(a) An order is granted in terms of paragraphs 4.1, 4.2 and 4.3 of the notice of motion. (b) The second respondent is ordered to pay the costs of the applicant and the first respondent, including the costs of the interlocutory application and the costs of two counsel where employed.’ _______________ T D CLOETE JUDGE OF APPEAL APPEARANCES: For Appellant: S P Rosenberg SC (with him T R Tyler) Instructed by: Lamprecht Attorneys, Cape Town Honey Attorneys, Bloemfontein For Respondent: J G Dickerson SC (with him D van Reenen) Instructed by: Scheibert & Associates, Cape Town Lovius Block Attorneys, Bloemfontein

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 27 September 2012 Status: Immediate Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal. ALEX ROUX v RYAND KAREL HATTINGH The Supreme Court of Appeal (SCA) today dismissed an appeal by Mr Alex Roux against an order of the Western Cape High Court, Cape Town, declaring that he was delictually liable for the neck injuries sustained by Mr Ryand Hattingh during a rugby match between Laborie High School and Stellenbosch High School. The evidence established that Ryand had complained about Alex’s conduct prior to the conduct that resulted in the injuries. As the forwards were forming a scrum Alex had shouted the word ‘jack-knife’ and had then blocked the channel into which Ryand’s head was meant to go. Because his channel had been blocked, Ryand’s head was forced down under Alex. This resulted in Ryand’s neck being broken. The hooker who had replaced Ryand had also complained about similar conduct against Alex. The latter had denied any wrongdoing on his part. Faced with two conflicting versions, the high court had accepted the evidence of Ryand and rejected that of Alex. It had found that Alex had acted intentionally when he first shouted the word ‘jack-knife’ before blocking Ryand’s channel and that Alex’s conduct was wrongful as it was deliberate, extremely dangerous and a serious violation of the rules of the game. Alex then appealed to the SCA against the order of the high court. Before the SCA there were three issues. First, whether the credibility and other factual findings made by the high court could be assailed. The SCA found that the findings of the high court could not be faulted and that its conclusion that Alex had acted deliberately was unimpeachable. Second, whether Alex’s conduct was indeed wrongful. In respect of this issue, the SCA held that the conduct was wrongful. It reasoned that the ‘jack-knife’ manoeuvre executed by Alex was in contravention of the rules as well as contrary to the spirit and conventions of the game; that because it had a code name, the manoeuvre must have been planned and it was consequently also executed deliberately; that it was extremely dangerous; and that Alex must have foreseen that the manoeuvre was likely to cause injury to Ryand but proceeded to execute it nonetheless. Third, whether, in the event of the high court’s factual findings being accepted and the conduct being regarded as intentional and wrongful, all of Ryand’s injuries were caused by Alex. The SCA came to the conclusion that all the injuries were caused by Alex and dismissed an expert’s suggestion to the contrary as having no factual foundation. The SCA then considered the legal principles which would apply to delictual claims arising from injuries sustained during a game such as rugby. It concluded that only conduct which constitutes a flagrant contravention of the rules of rugby and which is aimed at causing serious injury or which is accompanied by full awareness that serious injury may ensue, will be regarded as wrongful and attract legal liability for the resulting harm.

3234

non-electoral

2007

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA JUDGMENT REPORTABLE Case number: 377/2006 In the matter between: STALWO (PTY) LTD APPELLANT and WARY HOLDINGS (PTY) LTD FIRST RESPONDENT REGISTRAR OF DEEDS SECOND RESPONDENT CORAM: FARLAM, LEWIS, JAFTA, PONNAN et MAYA JJA HEARD: 19 SEPTEMBER 2007 DELIVERED: 28 SEPTEMBER 2007 Summary: Contract of sale of land – whether suspensive condition a tacit term – whether tacit term offends against sec 2(1) of the Alienation of Land Act 68 of 1981 – meaning of ‘agricultural land’ as defined in section 1 of the Subdivision of Agricultural Land Act 70 of 1970. Neutral citation: This judgment may be referred to as Stalwo v Wary Holdings [2007] SCA 133 (RSA) MAYA JA/ MAYA JA [1] This appeal concerns the validity of an agreement of sale of land concluded by the parties. The Port Elizabeth High Court (Liebenberg J) dismissed the appellant’s application to have the agreement declared binding on the parties, unconditional and of full force and effect and declined to order the respondent to pass transfer of the land to it. The appeal is with the leave of the court below. [2] On 6 December 2004, consequent on an advertisement placed by the respondent in the East Cape Property Guide for the sale of ‘PLOTS FOR LIGHT INDUSTRIAL’, the parties concluded an agreement worded as follows: ‘SALE FROM WARY HOLDINGS (PTY) LTD TO STALWO (PTY) LTD OF PLOTS 5, 6, 7, & 8 OF PROPOSED SUBDIVISION PORTION 54 OF THE FARM NO 8 PORT ELIZABETH FOR THE SUM OF R550 000 (five hundred and fifty thousand rand) excluding agent’s commission. Payment: Cash against transfer Occupation: 10 January 2005 Possession: On transfer Occupational rental: R2500 per month in advance Agreed this 6th day of December, 2004 …’ [3] The land, which the appellant intended to use for industrial purposes, was at this stage zoned as ‘agricultural land’. However, the respondent had lodged an application for its rezoning and subdivision with the relevant local authority. The appellant, aware of these facts and the possibility that the application could be rejected and the sale unravelled, duly took occupation of the land on lease and took various steps to prepare it for use. On 26 August 2005 the local authority finally granted its approval subject, however, to various conditions which included a requirement that the respondent effect certain substantial improvements relating to an access way, storm water drainage system and other essential services on the land. Consequently, the respondent sought to increase the purchase price of the property on the basis that the financial costs involved in complying with these conditions significantly exceeded its expectations when the agreement was concluded. As was to be expected, the appellant was not amenable to the increase in price. This is what sparked the present dispute. [4] In the court below, the respondent1 opposed the application on the basis that the agreement was invalid for two reasons. First, it did not comply with the provisions of s 2(1) of the Alienation of Land Act 68 of 1981 (the Alienation Act) as it did not contain a material term, expressly agreed upon by the parties that it was subject to a suspensive condition that the land was to be subdivided; that it did not describe the land sufficiently and that it omitted another material term relating to payment of the agent’s commission. Secondly, it was in contravention of s 3(a) and s 3(e)(i) of the Subdivision of Agricultural Land Act 70 of 1970 (the Agricultural Land Act),2 which prohibit the subdivision of agricultural land and the sale of a portion of agricultural land, without the written permission of the Minister of Agriculture, as the land in issue is ‘agricultural land’ within the meaning of section 1(i)(a) of the Agricultural Land Act, such permission not having been obtained in this matter. 1 The other respondent, the Registrar of Deeds, Cape Town, abided the decision of the court below and is not involved in these proceedings. 2 The Agricultural Land Act was repealed by the Subdivision of Agricultural Land Act Repeal Act of 1998, but this statute has not yet come into operation. [5] The court below found that the agreement did not fall foul of the provisions of the Alienation Act. However, it concluded that the disputed land constituted ‘agricultural land’ and that the lack of ministerial consent rendered the agreement invalid. Leave to appeal was granted only against this finding. In this court, the respondent did not concede the correctness of the other finding of the court below relating to the Alienation Act. As it was entitled to do, in view of the fact that it did not seek a variation of the substantive order appealed against,3 its counsel persisted with the argument advanced in the court below in this regard. The issues to be determined in this appeal therefore remain those that were before the court below, save that only the issue relating to the suspensive condition, as regards the point arising from the Alienation Act, remains in contention. I deal with them in turn. The Alienation of Land Act [6] Counsel for the respondent submitted that while the agreement contained the essentialia of a valid sale, it nevertheless failed to record a material term, expressly agreed upon by the parties prior to the conclusion of the agreement, that the sale was conditional upon the subdivision of the land. The omission conflicted with the requirements set out in s 2(1) and rendered the agreement invalid, so the argument went. [7] Section 2(1),4 whose objective is to achieve certainty in transactions involving the sale of fixed property regarding the terms agreed upon and 3 See, for example, Municipal Council of Bulawayo v Bulawayo Waterworks Co Ltd 1915 AD 611 at 624, 631 and 632; Western Johannesburg Rent Board v Ursula Mansions (Pty) Ltd 1948 (3) SA 353 (A) where it was held at 355: ‘[I]t is open to a respondent on appeal to contend that the order appealed against should be supported on grounds which were rejected by the trial judge: he cannot note a cross-appeal …unless he desires a variation of the order’; Holland v Deysel 1970 (1) SA 90 (A) at 93D-E. 4 According to this subsection ‘[n]o alienation of land … shall be of any force or effect unless it is contained in a deed of alienation signed by the parties thereto or by their agents acting on their written authority.’ limit disputes,5 requires an agreement for the sale of land to be in writing and signed by the parties. That means that the essential terms of the agreement namely, the parties, the price and the subject-matter, must be in writing and defined with sufficient precision to enable them to be identified. And so must the other material terms of the agreement. [8] What precisely is meant in this context by the expression ‘material term’ need not be decided. I say this because it was not in dispute between the parties that their agreement was subject to a suspensive condition that the land was to be subdivided in order to create the contemplated plots and that such condition constituted a material term of the contract.6 It was merely argued on the appellant’s behalf that the suspensive condition was implicit in the description ‘…plots 5, 6, 7 and 8 of the proposed subdivision’ embodied in the agreement which both parties knew, in any event, could not be fulfilled without the approval of the subdivision, and that it should be ‘read in’ as a tacit term. In response, the respondent’s counsel contended that having expressly agreed on the suspensive condition, the parties’ failure to reduce it to writing precluded the appellant from importing it into the agreement as a tacit term as it now sought to do. [9] Before a court can imply a tacit term or term implied from the facts, which it may infer from the express terms of the contract and the surrounding circumstances,7 it must be satisfied upon a consideration, in a reasonable and businesslike manner, of the terms of the contract and the admissible evidence of surrounding circumstances, that an implication 5 Wilken v Kohler 1913 AD 135 at 142; Clements v Simpson 1971 (3) SA 1 (A) at 7A-B. 6 See in this regard Johnstone v Leal 1980 (3) SA 927 (A) at 937G – 938A; Van Leeuwen Pipe and Tube (Pty) Ltd v Murray 1985 (3) SA 396 (D); Jones v Wykland v Properties 1998 (2) SA 355 (C). 7 Alfred McAlpine & Son (Pty) v Transvaal Provincial Administration 1974 (3) 506 at 531E-532A; Delfs v Kuehne & Nagel (Pty) Ltd 1990 (1) SA 822 (A) at 827B-G; Wilkins v Voges 1994 (3) SA 130 (A). necessarily arises that the parties intended to contract on the basis of the suggested term.8 [10] Regard being had to all the relevant facts, there is no dispute as to what was in both parties’ minds in this matter: namely that the existence of the agreement depended wholly on the success of the subdivision application, which would create the plots of land being sold, and that even though they did not expressly say so in the agreement, they intended to contract on that basis. [11] To find that the tacit term contended for by the appellant exists, it seems to me that once such intention is established, it matters not whether it was expressly agreed or necessarily imported that the agreement would be suspended pending approval of the subdivision application. This view finds support in Wilkins v Voges,9 where Nienaber JA said: ‘A tacit term in a written contract, be it actual or imputed, can be the corollary of the express terms – reading, as it were, between the lines – or it can be the product of the express terms read in conjunction with evidence of admissible surrounding circumstances. Either way, a tacit term, once found to exist, is simply read or blended into the contract: as such it is “contained” in the written deed. Not being an adjunct to but an integrated part of the contract, a tacit term does not in my opinion fall foul of either the clause in question or the [Alienation of Land ] Act.’ (‘Emphasis added’.) [12] I am satisfied in the circumstances, as was the court below, that it was a tacit term of the agreement that it would remain suspended until the subdivision application lodged by the respondent was finally determined. The agreement therefore complies with the provisions of s 2(1) of the Alienation Act. 8 Alfred McAlpine & Son (Pty) Ltd v Transvaal Provincial Administration supra at 5312H – 533A. 9 Supra at 144C-D. The Subdivision of Agricultural Land Act [13] I turn to consider whether or not the agreement falls foul of the provisions of the Agricultural Land Act. The only question to be decided in this regard is the nature of the land when the agreement was concluded as only a finding that it was ‘agricultural land’ within the meaning of the Agricultural Land Act will bring it within its purview. [14] The definition of agricultural land is contained in section 1 of the Agricultural Land Act which reads: ‘“(i) agricultural land” means any land, except- (a) land situated in the area of jurisdiction of a municipal council, city council, town council, village council, village management board, village management council, local board, health board or health committee …, but excluding any such land declared by the Minister after consultation with the executive committee concerned and by notice in the Gazette to be agricultural land for the purposes of this Act; . . . Provided that land situated in the area of jurisdiction of a transitional council as defined in section 1 of the Local Government Transition Act, 1993 (Act No 209 of 1993), which immediately prior to the first election of the members of such transitional council was classified as agricultural land, shall remain classified as such.’10 [15] The following facts were common cause. At the time of the conclusion of the agreement, the land fell under the jurisdiction of the Nelson Mandela Metropolitan Municipality (the NMMM), a category A municipality in terms of s 2 of the Local Government: Municipal Structures Act 117 of 1998 (the Municipal Structures Act).11 Prior to the establishment 10 The proviso was inserted by Proclamation R100 of 1995 published on 31 October 1995. 11 Section 2 of the Municipal Structures Act provides: ‘An area must have a single category A municipality if that area can reasonably be regarded as – (a) a conurbation featuring – (i) areas of high population density; (ii) an intense movement of people, goods, and services; extensive development; and of the NMMM,12 the land fell under the jurisdiction of the Port Elizabeth Transitional Rural Council (the PETRC), a transitional council as contemplated in s 1 of the Local Government Transition Act 209 of 1993 (the Transition Act).13 [16] The first the question that arises is whether the NMMM is a ‘municipal council, city council or town council’ within the meaning of the definition of ‘agricultural land’ in the Agricultural Land Act. The latter Act does not define these terms. However, s 93(8) of the Municipal Structures Act provides that ‘[w]ith effect from 5 December 2000 … any reference in a law referred to in item 2 of Schedule 6 to the Constitution of the Republic of South Africa, 1996…, to a municipal council, municipality, local authority or another applicable designation of a local government structure, must be construed as a reference to a municipal council or a municipality established in terms of this Act, as the case may be.’ In terms of item 2 of Schedule 6 of the Constitution ‘all law that was in force when the new Constitution took effect, continues in force, subject to any amendment or repeal and consistency with the new Constitution’ and ‘old order legislation …does not have a wider application; territorially or otherwise, than it had before the [interim] Constitution took effect unless subsequently amended to have a wider application and continues to be administered by the authorities that (a) multiple business districts and industrial areas; (b) a centre of economic activity with a complex and diverse economy; (c) a single area for which integrated development planning is desirable; and (d) having strong interdependent social and economic linkages between its constituent units.’ 12 In terms of the Municipal Structures Act and Provincial Notice 85 of 2000 published on 27 September 2000. 13 In terms of section 1 ‘“transitional council” includes a local government co-ordinating committee, a transitional local council and a transitional metropolitan council for the pre-interim phase, and a transitional local council and a transitional metropolitan council for the interim phase’; ‘“interim phase” means the period commencing on the day after elections are held for transitional councils … and ending with the implementation of final arrangements to be enacted by a competent legislative authority’; and ‘pre-interim phase’ means ‘the period commencing on the date of commencement of this Act and ending with the commencement of the interim phase’. administered it when the new Constitution took effect, subject to the new Constitution.’ [17] To my mind, there is no question that the Agricultural Land Act is a piece of the ‘old order legislation’ envisaged by the Constitution and s 93(8) of the Municipal Structures Act. That being so, the words ‘municipal council, city council, town council’ in the definition of ‘agricultural land’ in the Agricultural Land Act must be construed to include a category A municipality such as the NMMM. [18] This finding elicits another question: Did the land retain its original status as ‘agricultural land’ by virtue of the proviso in the definition of ‘agricultural land’ (as it was classified as such prior to the election of the first members of the PETRC) notwithstanding that it now falls within the area of jurisdiction of a municipal council? [19] In this regard, the court below held: ‘The proviso, in my view, provides a point in time with reference to which it must be established if land qualifies as agricultural land. If at that point in time, it is to be regarded as agricultural land it remains so notwithstanding any changes to local government structures and their boundaries. This point in time is the first election of the members of the transitional council. As stated above, it is common cause that at this point in time Portion 54 qualified as agricultural land. It follows that it remained so and still was agricultural land at the time the agreement was entered into.’ [20] This conclusion was based on the judgment in Kotze v Minister van Landbou.14 In this case, Van der Westhuizen J considered whether ‘agricultural land’ as defined in s 1 of the Agricultural Land Act still exists in view of the constitutional changes to the system of local government in 14 2003 (1) SA 445 (T). the context of category B and C municipalities. The learned judge found that the effect of s 151 of the Constitution, which provides that ‘the local sphere of government consists of municipalities which must be established for the whole of the territory of the Republic’, and the Municipal Structures Act, which established new, different categories of municipalities with extended boundaries, was to create ‘wall to wall municipalities’ such that all land now falls within municipal jurisdictions, thereby rendering the Agricultural Land Act ineffective. He held that as this could not have been the intended result, the local government structures referred to in s 1 had to be interpreted to mean what they meant when the Act was promulgated15 (which required a narrow interpretation of ‘municipal council’ to exclude latter-day municipalities such as the NMMM): in the event, the proviso meant that since all land within the Republic fell within areas of jurisdiction of transitional councils when these entities were established by the Transition Act, any land which was classified as ‘agricultural land’ immediately prior to the election of the first members of the transitional councils retains that classification, for as long as the proviso remains in force. [21] Counsel for the appellant challenged the correctness of this interpretation of the proviso arguing, inter alia, that, if accepted, its effect would be that the status of agricultural land would remain perpetually frozen from the time when transitional councils were established and would not be determined by whether or not land is situated within the area of jurisdiction of the local government structures listed in the definition of ‘agricultural land’. Developing this argument, he contended for a narrow interpretation of the proviso which, he submitted, simply served to preserve the status quo 15 In this regard, the learned judge relied on Finbro Furnishers (Pty) Ltd v Registrar of Deeds, Bloemfontein 1985 (4) SA (A) at 804D-E, where this court held that ‘the words of a statute must be construed (unless subsequent legislation declares otherwise) as they would have been interpreted on the day when the statute was passed.’ pending the demarcation and establishment of the final new order local government structures at which time the land fell within the jurisdiction of the NMMM and lost its historical character. I agree. [22] The proposition that the intention of the framers of the Agricultural Land Act contemplated the concept of ‘agricultural land’ as fluid rather than static, changing with the expansion of local authorities and the creation of new ones, seems to me to be eminently sound. This intention can be gleaned from the wording of s 3(f) of the Act in terms of which ‘no area of jurisdiction, local area, development area, peri-urban area referred to in paragraph (a) or (b) of the definition of ‘agricultural land’ in section 1, shall be established on, or enlarged so as to include, any land which is agricultural land…unless the Minister has consented in writing.’16 In cases where the Minister granted such permission the land obviously ceased to be agricultural land. Followed to its logical conclusion, this reasoning does not permit the narrow approach adopted by the court below. Thus, any exercise in the interpretation of the proviso cannot ignore the present day municipal structures created by the Municipal Structures Act. The court in Kotze in my view misapplied the principle set out in Finbro.17 [23] It further seems to me that the purpose of the proviso must be determined in the light of the legislative scheme which guided the restructuring process of local government; from the promulgation of the first statute in the exercise, the Transition Act of 1993, through to the final demarcation brought about by the Local Government: Municipal Demarcation Act 27 of 1998 and the Municipal Structures Act which 16 See also Geue v Van der Lith 2004 (3) SA 333 (SCA) para 8. 17 In Finbro the court took the lack of any definition of the word ‘mineral’ as an indication that the Legislature intended it to have a wide meaning to enable the inclusion in its meaning of substances which were not yet discovered when the relevant act, the Deeds Registry Act was enacted in 1937. established new categories of municipalities – to use existing statutory provisions until new ones could be enacted. A similar view was expressed by Conradie JA in an analogous situation in CDA Boerdery Edms Bpk v Nelson Mandela Metropolitan Municipality,18 where he said: ‘[I]n the process of constructing the new edifice and before it could stand on its own, some of the essential transition measures … were legislatively imperfect. They were makeshifts, intended to remain in force, messy as they were, until they were repealed by the Act that completed the design of the new structure…. But before the structure was finished, all the provinces in the new South Africa were, temporarily, intended to make do with what they had inherited from the provinces in the old South Africa.’ [24] It is well to consider that the proviso was enacted within the context of the Transition Act which, as indicated, was itself meant to provide interim measures such as the establishment of interim municipal structures to promote the contemplated constitutional restructuring of local government, pending the final demarcation of municipal boundaries. The proviso makes specific reference to ‘land situated in the area of jurisdiction of a transitional council’ which it states ‘shall remain classified as such’. From the ordinary grammatical meaning of the words, I am unable to read any meaning other than that the proviso was meant to operate only for as long as the land envisaged therein remained situated in the jurisdiction of a transitional council. It was a simple matter for the Legislature to say so expressly if it intended such land to retain the classification after transitional councils ceased to exist. [25] Bearing in mind the trite principle that exceptions to general rules (such as the proviso) are to be read restrictively,19 I am persuaded that the 18 2007 (4) SA 276 (SCA) para 30. His was a dissenting judgment but not in relation to this dictum. 19 Norwich Union Life Insurance Society v Dobbs 1912 AD 395 at 399; South African Broadcasting Corporation v Pollecutt 1996 (1) SA 546 (SCA) at 556D. Legislature enacted the proviso as a stopgap measure, based on the realisation that the effect of the Transition Act, which would establish municipalities for rural areas for the very first time, would be to include transitional councils within the meaning of ‘municipal council’ envisaged in the definition of ‘agricultural land’, thus excluding certain agricultural land from the definition – clearly an untenable situation. Therefore, once the PETRC was disestablished and the land fell within the jurisdiction of the NMMM, it ceased to be agricultural land within the meaning of the Agricultural Land Act and the agreement is not affected by the proviso. In my view, the fact that the proviso remains in the statute book takes the matter no further. Accordingly, the interpretation afforded to it by the court below and the Kotze judgment cannot be sustained. [26] I am fortified in this view by the following. First, the approach adopted by the court below is incompatible with and does not give credence to the radically enhanced status and power the new constitutional order accorded to local government.20 Municipalities are no longer the pre- constitutional creatures of statute confined to delegated or subordinate legislative powers, which could be summarily terminated and their functions entrusted to administrators appointed by the central or provincial governments. They have mutated to interdependent and, subject to permissible constitutional constraints, inviolable entities with latitude to define and express their unique character and derive power direct from the Constitution or from legislation of a competent authority or from their own laws.21 To my mind, this status necessarily includes the competence and capacity on the part of municipalities to administer land falling within their areas of jurisdiction without executive oversight. 20 CDA Boerdery v Nelson Mandela Metropolitan Municipality 2007 (4) SA 276 (SCA) paras 33-40. 21 Fedsure Life Assurance v Greater Johannesburg TMC 1999 (1) SA 374 (CC) paras 31 and 38; City of Cape Town v Robertson 2005 (2) SA 323 (CC) para 60. [27] In any event, the Minister, in terms of the very definition of agricultural land, retains the power to exclude any land from the exceptions imposed by it, and declare it ‘agricultural land’ for purposes of the Agricultural Land Act, a fact which, with respect, the learned judges in Kotze and the court below seem to have overlooked, their reasoning being premised on the basis that any other interpretation of the proviso would lead to the emasculation of the Agricultural Land Act. The object of the Agricultural Land Act, as expressed in its preamble, is ‘to control the subdivision of agricultural land’ so as to prevent the fragmentation of farming land into small, uneconomic units.22 Section 3 of the Act still prohibits subdivision of agricultural land without the Minister’s permission. Having regard to these provisions there clearly is no possibility that this objective may be thwarted. [28] In conclusion, I am satisfied that the disputed land, which is in fact no longer used as agricultural land, is not agricultural land. The provisions of s 3 of the Agricultural Land Act have no application to the parties’ agreement and the Minister’s consent is not required as a prerequisite for its validity. [29] For these reasons the appeal is allowed with costs, such costs to include the costs occasioned by the employment of two counsel. The order made by the court below is set aside and the following order is substituted: ‘1. The agreement of sale entered into between the first respondent and the applicant on 6 December 2004 in respect of Plots 5, 6, 7 and 8 of the proposed subdivision of Portion 54 of the Farm Kuyga No 8, Western District Council, Port Elizabeth (the property), is declared binding on the parties and unconditional and of full force and effect. 22 Geue v Van der Lith 2004 (3) SA 333 (SCA) para 5. 2. The first respondent is ordered to take all steps and to sign all documents as may be necessary to effect transfer of the property to the applicant against compliance by the applicant of its own obligations in terms of the agreement of sale. 3. The first respondent is ordered to pay the costs of this application.’ …………………… MML MAYA JUDGE OF APPEAL CONCUR: FARLAM ) LEWIS ) JAFTA ) PONNAN )

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL MEDIA ALERT – STALWO v WARY HOLDINGS From: The Registrar, Supreme Court of Appeal Date: 28 September 2007 Status: Immediate Please note that the media alert is intended for the benefit of the media and does not form part of the judgement of the Supreme Court of Appeal The Supreme Court of Appeal today upheld an appeal against a judgment of the Port Elizabeth High Court in which it dismissed the appellant’s application to have the parties’ agreement of sale of land declared binding on them, unconditional and of full force and effect and declined to order the respondent to pass transfer of the land to it. The issues in the appeal were whether the agreement (a) offended against the provisions of (a) s 2(1) of the Alienation of Land Act 68 of 1981 because it failed to record a material term upon which the parties had expressly agreed, that the sale was conditional upon the success of a subdivision and rezoning application to the relevant local authority and (b) whether the land (which now fell under the jurisdiction of Nelson Mandela Metropolitan Council having previously been under the jurisdiction of the Port Elizabeth Transitional Rural Council) was ‘agricultural land’ as contemplated in the definition of ‘agricultural land’ in s 1 of the Subdivision of Agricultural Land Act 70 of 1970 which excludes land within a municipality; in which event it would be rendered invalid because permission had not been obtained for the subdivision and sale of the land from the Minister of Agriculture in accordance with s 3 of this Act. The SCA decided both issues in the appellant’s favour. Regarding the first issue, it was found that a tacit term could be imported into the parties’ contract that it was subject to the suspensive condition as it was clear that they intended to contract on that basis, whether or not that term was expressly agreed upon. The second issue turned on the interpretation of the proviso in s 1 of the Subdivision of Agricultural Land Act which excludes from the exceptions set out in the definition ‘land situated in an area of jurisdiction of a transitional council as defined in s 1 of the Local Government Transition Act 209 of 1993, which immediately prior to the first election of the members of such transitional council was classified as agricultural land’. The SCA held that the Nelson Mandela Metropolitan Council is a municipality as contemplated in the definition. It held further that the proviso must be interpreted restrictively, as it is an exception to the general rule, and within the context of the legislative scheme which guided the restructuring process of local government which was to use existing statutory provisions (such as the proviso) until new ones could be enacted. The SCA held that the proviso was an interim measure which was meant to operate only for as long as the land envisaged therein remained situated in the jurisdiction of a transitional council. The SCA concluded that the land lost its historical character as agricultural land once it was brought within the Nelson Mandela Metropolitan Municipality and that, accordingly, it did not fall within the purview of the Subdivision of Agricultural Land Act.

2822

non-electoral

2012

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Case No: 874/11 Reportable In the matter between: THE LAW SOCIETY OF THE NORTHERN PROVINCES Appellant and SIPHIWE FREEMAN DUBE Respondent Neutral citation: Law Society of the Northern Provinces v Siphiwe Dube (874/2011) [2012] ZASCA 137 (27 September 2012). Coram: Mthiyane DP, Heher,Mhlantla, Pillay and Petse JJA Heard: 27 August 2012 Delivered: 27 September 2012 Summary: Attorneys Act 53 of 1979 – misconduct – appropriate order – suspension or removal from roll – whether court a quo misdirected itself in the exercise of its discretion in relation to an appropriate sanction – whether the general rule relating to costs in matters involving the law society should have been applied – acts of dishonesty not so serious to warrant removal from roll – attorney conditionally suspended from practice – costs order altered. _____________________________________________________________________ ORDER _____________________________________________________________________ On appeal from: North Gauteng High Court, Pretoria (Mothle and Raulinga JJ sitting as court of first instance): The appeal is dismissed save for paragraph 3 of the order of the court below which is set aside and substituted with the following: ‘3. The respondent is ordered to pay the costs of the application on an attorney and client scale.’ The respondent is ordered to pay the costs of the appeal. _____________________________________________________________________ JUDGMENT _____________________________________________________________________ MHLANTLA JA (MTHIYANE DP, HEHER, PILLAY and PETSE JJA concurring): [1] The appellant is the Law Society of the Northern Provinces incorporated in terms of section 56 of the Attorneys Act 53 of 1979 (the Act). The respondent is Mr Siphiwe Freeman Dube, an attorney practising in the province of Gauteng. The appellant launched an application in the North Gauteng High Court, Pretoria in terms of section 22(1)(d) of the Act and sought an order that the respondent’s name be struck from the roll of attorneys. Instead of granting the relief sought, the court below (Mothle J, Raulinga J concurring) suspended the respondent from practice for one year. It further ordered him to pay R80 000 to his former employer and R15 000 to a former client. Other ancillary orders relating to his employment were made. The respondent was also ordered to pay the appellant’s costs of the application on the party and party scale. The appellant appeals against two of the orders contending that the respondent should have been struck off the roll and that a punitive costs order should have been issued against him. The appeal is with the leave of the court below. [2] Section 22(1)(d) of the Act provides that a person who has been admitted and enrolled as an attorney may on the application of the law society be struck off the roll or suspended from practice if he or she, in the discretion of the court, is not a fit and proper person to continue to practise as an attorney. [3] Regarding applications of this nature, Harms DP stated in Law Society, Northern Provinces v Mogami:1 ‘Applications for the suspension or removal from the roll require a three-stage enquiry. First, the court must decide whether the alleged offending conduct has been established on a preponderance of probabilities, which is a factual enquiry. Second, it must consider whether the person concerned is “in the discretion of the court” not a fit and proper person to continue to practise. This involves a weighing-up of the conduct complained of against the conduct expected of an attorney and, to this extent, is a value judgment. And third, the court must enquire whether in all the circumstances the person in question is to be removed from the roll of attorneys or whether an order of suspension from practice would suffice….’ [4] In Summerley v Law Society, Northern Provinces,2 Brand JA enunciated the test to be applied during the third stage of the enquiry as follows: ‘The third enquiry again requires the Court to exercise a discretion. At this stage the Court must decide, in the exercise of its discretion, whether the person who has been found not to be a fit and proper person to practise as an attorney deserves the ultimate 1 Law Society, Northern Provinces v Mogami 2010 (1) SA 186 (SCA) para 4. 2 Summerley v Law Society, Northern Provinces 2006 (5) SA 613 (SCA) para 2. penalty of being struck from the roll or whether an order of suspension from practice will suffice.’ [5] Before us there is no dispute between the parties about the findings of the court below in respect of the first and second stages of the enquiry. The appeal concerns the third stage and in that regard two issues arise for consideration in this appeal. First, whether the sanction imposed by the court below is appropriate having regard to the respondent’s unprofessional conduct and dishonesty. Put differently, the issue is whether the court misdirected itself in the exercise of its discretion in relation to an appropriate sanction. Second, whether the respondent should have been ordered to pay the costs of the application on a punitive scale. [6] The application launched by the appellant in the court below arose from the following factual background. The respondent was admitted as an attorney of the North Gauteng High Court on 12 February 2007 at the age of 28 years. On 1 February 2008, he was employed by Maluleke Msimang & Associates, a firm of attorneys in Pretoria, (the firm) as a professional assistant. On 7 October 2008, whilst still in the employ of the firm, unbeknown to his employers and without their consent, the respondent approached the appellant and registered an attorney’s practice with the latter under the name of Freeman Dube Attorneys. In his application for registration, he advised the appellant that although he was opening his own practice, he would still remain in the employ of the firm. The respondent commenced practising for his own account on 1 November 2008. [7] The firm subsequently discovered that the respondent had stolen some of its clients’ files. It was established that in certain instances the respondent’s practice was acting for the firm’s clients. In one particular instance a conflict of interest had arisen when in the same matter he acted through his practice on behalf of a claimant in a third party claim whilst he simultaneously acted on instructions of his employer and represented the Road Accident Fund (RAF), a statutory insurer established in terms of the Road Accident Fund Act 56 of 1996. [8] On 5 June 2009, the firm launched an application in the high court and sought an interdict against the respondent for the delivery of its clients’ files. The application was settled on the basis that the respondent would return the files and pay an amount of R80 000 to the firm, being the fees due to it upon receipt of the proceeds of a third party claim from the RAF. On 3 July 2009 the respondent signed an undertaking to pay the R80 000 but failed to do so. The firm lodged a complaint with the appellant. The complaint related to the respondent’s unprofessional conduct relating to his failure to obtain its consent before registering his practice, the theft of the files as well as his failure to pay over to the firm the amount of R80 000. [9] The appellant, through its staff, conducted its own investigation and uncovered further acts of misconduct and dishonesty against the respondent. These related firstly, to the respondent’s failure to comply with rule 70 of the appellant’s rules (the rules), which required timeous submission of an auditor’s report. In this regard, the respondent was obliged to have submitted an opening auditor’s report on or before 28 February 2009 and an auditor’s report for the period ending 28 February 2009 on or before 31 August 2009. The respondent obtained unqualified audit reports. These were however only submitted on 27 October 2009 without any explanation for the late submission. Secondly, the respondent had simultaneously acted on behalf of the plaintiff and the defendant in a third party claim and when the matter was settled, had contravened rule 68.8 in that he had delayed in making payment to a client or misappropriated the funds. Thirdly, he had submitted a bill of costs that included false items to the RAF. In this regard, the respondent had claimed fees for travelling from Pretoria to Limpopo and attending court when he in fact never did so. He further claimed counsel’s fee of R13 750 when no advocate nor attorney attended court. [10] As a result of this discovery, the appellant launched an application in two parts in the court below. Part A was for an interim order suspending the respondent from practice pending the final determination of part B of the application to have his name struck off the roll. On 17 December 2009, Botha J granted the interim order suspending the respondent. He referred the matter back to the appellant to appoint a disciplinary committee to hold an inquiry into the allegations of unprofessional conduct against the respondent. [11] The appellant instituted the disciplinary inquiry. The respondent faced several charges involving dishonesty, unprofessional conduct and non-compliance with the rules. Some of the charges were withdrawn at the commencement of the inquiry. The respondent pleaded guilty and was found guilty of the late submission of the auditor’s reports, conducting a practice for his own account without the consent of his employer, theft of three client files from his employer and creating a conflict of interest when he simultaneously acted for the plaintiff and the defendant in the same third party claim. [12] The inquiry was finalised on 9 June 2010 and after consideration of all the evidence, the respondent was found not guilty of overcharging a client. He was in addition to the charges referred to in para 11 above found guilty of the following charges: (a) submitting an account to the RAF for payment which included false items in a party and party bill of costs; (b) misappropriating an amount of R15 000 from the proceeds of a third party claim; (c) practising as an attorney for his own account without being in possession of a fidelity fund certificate in contravention of section 41(1) and (2) of the Act; and (d) failing to honour an undertaking to pay an amount of R80 000 to the firm on receipt of the proceeds of a third party claim from the RAF. [13] After the conclusion of the disciplinary enquiry, the appellant served a supplementary affidavit on the respondent detailing the investigations conducted by a firm of accountants appointed by the appellant as well as the findings and recommendation of the disciplinary committee. The council of the appellant resolved to launch an application for the respondent’s name to be struck from the roll of attorneys. The respondent did not file any affidavit to contest the allegations in the supplementary affidavit. [14] Part B of the application was heard by the court below. It concluded that the respondent was not a fit and proper person to continue practising as an attorney as provided for in section 22(1)(d) of the Act. The court found that the respondent was naïve, immature, lacked experience and insight and had as a result succumbed to greed. It accepted that the respondent had committed acts of dishonesty and stated that he had come perilously close to having his name struck from the roll. It concluded that such a sanction was too severe and was not suitable under the circumstances. The court held that an appropriate order would be one suspending him from practice for a certain period and ordering him to repay his ill-gotten gains. It accordingly issued an order suspending the respondent from practice for one year and imposed further restrictions on him after the expiry of the period of suspension. In this regard, he was precluded from practising for his own account either as a principal or in partnership or in association with or as a director of a private company for a period of two years after the expiry of the period of suspension. The court further ordered him to pay R80 000 to his former employer and R15 000 to a former client as well as the costs of the application on a party and party scale. [15] As I said earlier in this judgment, the court below, in the exercise of its discretion, declined to grant the order sought by the appellant and suspended the respondent from practice. It is trite that a court of appeal has limited powers to interfere with the discretion of a lower court. In Law Society of the Northern Provinces v Sonntag,3 Malan JA remarked that: ‘The decision whether an attorney who has been found unfit to practise should be struck off or suspended is a matter for the discretion of the court of first instance. That discretion is a “narrow”one: “The consequence is that an appeal court will not decide the matter afresh and substitute its decision for that of the court of first instance; it will do so only where the court of first instance did not exercise its discretion judicially, which can be done by showing that the court of first instance exercised the power conferred on it capriciously or upon a wrong principle, or did not bring its unbiased judgment to bear on the question or did not act for substantial reasons, or materially misdirected itself 3 Law Society of the Northern Provinces v Sonntag 2012 (1) SA 372 (SCA) para 14, quoting Botha v Law Society, Northern Provinces 2009 (1) SA 227 (SCA) para 3. in fact or in law. It must be emphasised that dishonesty is not a sine qua non for striking-off.”’ [16] Before I deal with the main issue it is appropriate that I dispose of the issues relating to the general acts of misconduct and breach of the rules by the respondent. These are the non-compliance with rule 70 and the failure to honour an undertaking to pay his former employer. Non-compliance with rule 70 [17] In this regard, it was submitted on behalf of the appellant that the respondent breached rule 70 in that he had failed to submit the auditor’s reports and practised without the fidelity fund certificate. The evidence revealed that the opening auditor’s report was submitted six months after its due date whilst the annual report was two months late. Both reports were unqualified. The purpose of rule 70 is to satisfy the appellant that the attorney’s accounting records are kept in accordance with the Act and the rules and that an attorney handles and administers trust moneys properly and responsibly. The misconduct in issue here related to the late submission of the reports. It seems to me that the respondent was slack in the conduct of his practice and compliance with the rules. That may have been due to the fact that he had just commenced practising for his own account. It is apposite to state that in so far as the annual report for the period ending 28 February 2010 is concerned, an auditor’s certificate was in fact submitted on time and was unqualified. This, in my view, is an indication that the respondent had learnt from his previous experience. I consider that a warning would be an appropriate sanction for a transgression of this nature. Failure to honour the undertaking [18] I turn to the respondent’s failure to honour the undertaking. It is not in dispute that the respondent failed to honour the undertaking dated 3 July 2009. He only paid his former employer on 24 March 2012. In this court, it was submitted on behalf of the respondent that the evidence showed that on receipt of the proceeds of the third party claim, Mr Msimang, a senior partner of the firm, had acceded to the respondent’s request to grant him an extension of the period within which to pay the R80 000. No evidence was presented on behalf of the appellant to contest this explanation. In the result, we have to accept that the respondent had made prior arrangements with Mr Msimang in this regard. Acts of dishonesty [19] As regards the acts that involved an element of dishonesty, the appellant’s legal representative submitted that the sanction imposed was too lenient and that the court misdirected itself in the exercise of its discretion. It was contended that the court did not have regard to the general principles applicable where an attorney is found guilty of a transgression involving dishonesty. He argued that the transgressions by the respondent when viewed cumulatively are so serious as to warrant the removal of his name from the roll. Although this argument merits serious consideration, I think it falls to be rejected. It is true that the respondent made himself guilty of certain serious transgressions. But every case must be considered against the setting of its own peculiar facts. In my view, some of the complaints against the respondent lacked particularity whilst the others varied in seriousness. These are the theft of three files, the misappropriation of an amount of R15 000, the submission of an inflated bill of costs, registration of the respondent’s practice without his employer’s knowledge and consent and the issue relating to conflict of interests. I propose to deal with each of these transgressions in turn. Theft of files [20] There is no doubt that the theft of client files by an employee is a serious transgression. The respondent has to be censured. Misappropriation of funds [21] Mr Motimele, an attorney in Limpopo, was involved in a motor collision and sustained bodily injuries. The respondent acted for Mr Motimele in his third party claim. The matter was settled and the RAF paid a lump sum of R15 000. The respondent transferred the entire amount to his business account and when challenged about the transfer, stated that he had concluded an oral loan agreement with Motimele. The appellant did not provide any evidence to contest the respondent’s explanation. It was not shown that the respondent was untruthful. Be that as it may, it is irregular and unethical for an attorney to conclude a loan agreement with his or her client. Submission of an inflated bill of costs [22] The third act involving dishonesty relates to the submission of a bill of costs to the RAF. As indicated earlier in this judgment, the respondent had claimed fees for travelling from Pretoria to Limpopo and attending court when he in fact never did so as well as counsel’s fee when no legal representative attended court. The respondent in his answering affidavit admitted submitting the bill of costs with the false items and expressed remorse for his conduct. He accordingly did not lie under oath. The RAF did not suffer any prejudice as the act of dishonesty was discovered before the bill of costs was taxed. One must infer though that the respondent intended to mislead the RAF and has to be censured. Registration of the respondent’s practice [23] The issue of the registration of the respondent’s practice was clarified by the appellant’s legal representative. He informed us that an attorney may conduct a practice for his or her own account whilst employed by another firm of attorneys provided he or she has obtained prior consent from his or her employer to register the practice. He submitted that the respondent committed an act of dishonesty when he failed to disclose to his employer his intention to register the practice. With that submission I agree. He further contended that the court below erred in failing to treat the omission as dishonest but conceded that the respondent’s failure did not of itself warrant an order for striking off. Conflict of interests [24] Counsel for the respondent conceded that it bordered on dishonesty for the respondent to represent the plaintiff and the defendant simultaneously in a third party claim and fail to disclose such fact to them. Be that as it may, the evidence against the respondent is far from satisfactory. The complaint against the respondent was not adequately investigated. The evidence does not indicate whether the respondent had charged both parties or whether either of the parties was prejudiced in any way. The matter was settled. Nothing flows from this complaint. [25] To sum up the respondent was young, immature and inexperienced. He stole three files. He was guilty of other transgressions that rendered him unfit to practise his profession. It was irregular and unethical for him to borrow money from a client, albeit a colleague. He admitted his mistakes, which indicates a measure of remorse. He has not attempted to deceive the court. In Law Society of the Cape of Good Hope v C,4 Galgut AJA said with regard to the implications of a striking-off order: ‘The implications of a striking-off order are serious and far-reaching. Such an order envisages that the attorney will not be re-admitted to practise unless the Court can be satisfied by the clearest proof that the applicant has genuinely reformed, that a considerable time has elapsed since he was struck off, and that probability is that, if reinstated, he will conduct himself honestly and honourably in the future.’ [26] Although each case stands against the setting of its own facts and circumstances, it is necessary to have a look at comparable cases in determining whether the court below misdirected itself in the exercise of its discretion. [27] The first of these examples is Kekana v Society of Advocates of South Africa,5 where the appellant had been practising as an advocate for four years. He and his colleague had appeared as pro deo counsel at Tzaneen Circuit Court. After the conclusion of the trial, they submitted inflated claims to the Department of Justice together with their pro deo claims (they had apparently entertained women). On two separate occasions, they claimed the cost of restaurant meals. The accounts reflected two main courses for each person per night. The bar council held an internal enquiry and later launched an application for the removal of their names from the roll of advocates. The appellant in his answering affidavit made a false statement and denied the presence of the female companions. He asserted that he and his colleague were very hungry and each had consumed two main courses on each night. He repeated this statement in his oral evidence. The court rejected his testimony as false. 4 Law Society of the Cape of Good Hope v C 1986 (1) SA 616 (A) at 640C-D. 5 Kekana v Society of Advocates of South Africa 1998 (4) SA 649 (SCA). His name was struck off the roll for perpetuating the lies under oath (in his affidavit and in court). [28] In Law Society of the Cape of Good Hope v Peter,6 the respondent decided to set up practice as a sole practitioner shortly after her admission as an attorney. She experienced financial problems and in the process misappropriated R20 000 to cover the expenses of her practice. The court held that the theft was not the result of a character defect inherent in her but rather a moral lapse brought about by the pressure she had been under. The court confirmed the order of the court of first instance suspending the respondent from practice. [29] There is no doubt that the appellant in Kekana was a senior advocate with more experience and should have known better. He committed perjury, whereas the respondent in this matter admitted his transgressions and showed remorse. He provided plausible explanations where necessary. [30] Having regard to the sanctions imposed in the above-mentioned cases as well as the respondent’s personal circumstances, the finding of the court below cannot be faulted. It correctly set out the nature of the case, the substance of the charges against the respondent and the findings of the disciplinary committee. After evaluating the evidence, it declared that the respondent was not a fit and proper person to practise as an attorney. The court below thereafter proceeded to the third leg of the enquiry. It correctly identified three acts of dishonesty and took into account the respondent’s personal circumstances and that he had been in 6 Law Society of the Cape of Good Hope v Peter 2009 (2) SA 18 (SCA). practice for a relatively short period. In its judgment, the court referred to Peter to show that the respondent in that case was not struck off the roll notwithstanding the fact that she was dishonest. It concluded that the principle of redemption should apply. [31] The court set safeguards with regard to the respondent’s future employment. It is common cause that the respondent has been suspended from practice since December 2009 when the interim order was issued. He has accordingly been excluded from the legal profession for almost three years. He is furthermore precluded from practising for his own account or either as a partner or a director for a period of two years upon the expiry of the suspension period. It was conceded on behalf of the appellant that there is no evidence that the respondent may repeat the offences, more so since the respondent will not practise for his own account. There is a further precaution in that the respondent, should he elect to practise for his own account after the expiry of all these periods, will have to satisfy the court that he has redeemed himself. In this regard the appellant has the right to present evidence relating to the respondent’s fitness. [32] The court below was very conscious that the respondent’s conduct had brought him to the brink of striking off. In concluding that he should not be pushed over the edge it looked not at the individual offences but at their cumulative effect and it made a value judgment on the rehabilitative prospects of the respondent. The orders issued by the court below reveal that it fairly weighed all the relevant factors including its duty to protect the public and the profession. I cannot conclude that it misdirected itself in the exercise of its discretion. There is accordingly no basis for this court to interfere. The appeal against the order of suspension falls to be dismissed. [33] The final issue is costs. The general rule in matters of this kind, is that the respondent has to pay the costs of the law society on an attorney and client scale. This is so because the appellant is not an ordinary litigant as it performs a public duty. It is obliged to approach the court when a complaint, in particular one involving an act of dishonesty, is lodged against an attorney. The appellant in this matter did not act on its own frolic. It was accordingly entitled to an appropriate costs order. There was no reason for the court below to depart from the general rule. In the result, the court below erred and should have ordered the respondent to pay the costs of the application on a punitive scale. The appellant is also entitled to its costs on appeal notwithstanding the fact that the order of the court below has not been set aside and replaced with an order striking the name of the respondent off the roll. [34] In the result, the following order is made: The appeal is dismissed save for paragraph 3 of the order of the court below which is set aside and substituted with the following: ‘3. The respondent is ordered to pay the costs of the application on an attorney and client scale.’ The respondent is ordered to pay the costs of the appeal. _____________________ N.Z MHLANTLA JUDGE OF APPEAL APPEARANCES: For Appellant: J Leotlela Instructed by: Rooth & Wessels Inc, Pretoria Naudes Attorneys, Bloemfontein For Respondent: Q Pelser SC Instructed by: TT Hlapolosa Inc, Pretoria Matsepes, Bloemfontein

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 27 September 2012 Status: Immediate Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal. LAW SOCIETY OF THE NORTHERN PROVINCES v SIPHIWE DUBE The Supreme Court of Appeal (SCA) today dismissed an appeal by the Law Society of the Northern Provinces (the Law society) against an order of the North Gauteng High Court, Pretoria suspending Mr Siphiwe Freeman Dube from practice for one year. However, the SCA held that the high court had erred in not ordering Mr Dube to the pay costs of the Law society on a punitive scale. It accordingly substituted the order of the high court with an order directing Mr Dube to pay the costs of the application on an attorney and client scale. Notwithstanding the dismissal of the appeal on the merits, the SCA ordered Mr Dube to pay the Law society’s costs of the appeal. Mr Dube, who was admitted as an attorney in 2007, was appointed as a professional assistant by Maluleke Msimang & Associates, a firm of attorneys in Pretoria (the firm) in February 2008. He registered his own practice with the law society whilst still employed by the firm and without its consent. He commenced practising for his own account in November 2008. The firm later discovered that Mr Dube had stolen its clients’ files and that he had created a conflict of interest by acting, through his own practice, for a claimant in a third party claim whilst simultaneously acting for the Road Accident Fund (RAF) on the instructions of the firm in the same matter. The firm launched an application which was subsequently settled on the basis that he would return the files and pay R80 000 to the firm, being the fees due to it upon receipt of the proceeds of a third party claim from the RAF. Mr Dube returned the files but failed to honour his undertaking to pay the R80 000. The firm then lodged a complaint of unprofessional conduct against him with the law society. The Law society conducted its own investigations and discovered further transgressions by Mr Dube. First he had failed to submit auditor’s reports for his practice on time, thereby contravening rule 70 of its rules. Second, he had contravened rule 68.8 in that he had delayed to account to his client when the matter was settled or had misappropriated the funds. Third, he had submitted a bill of costs that included false items to the RAF. The Law society launched an application in the high court for an order striking Mr Dube’s name off the roll of attorneys. An interim order, suspending him from practice, was issued. When the striking off application came before the high court, it held that the order sought was a severe sanction. It instead made an order suspending Mr Dube from practice for one year and imposed certain restrictions regarding his employment after the expiry of the suspension period. It further ordered him to pay the Law society’s costs on a party and party scale. The Law society then appealed to the SCA against these orders. Regarding the appeal against the order of suspension, the SCA held that the orders issued by the high court revealed that it had fairly weighed all the relevant factors, including its duty to protect the public and the attorneys’ profession. This court concluded that the high court had exercised its discretion properly and that there was no basis to interfere. On the issue of costs, the SCA held that the Law society had not acted on a frolic of its own and that there was no reason for the high court to depart from the general rule that a respondent has to pay costs of the Law society on an attorney and client costs. It accordingly made the orders referred to above.

1389

non-electoral

2010

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA JUDGMENT Case No: 105/2010 In the matter between: WOODLANDS DAIRY (PTY) LTD First Appellant MILKWOOD DAIRY (PTY) LTD Second Appellant and THE COMPETITION COMMISSION Respondent Neutral citation: Woodlands Dairy v Milkwood Dairy (105/2010) [2010] ZASCA 104 (13 September 2010) Coram: Harms DP, Lewis, Heher, Ponnan JJA and Ebrahim AJA Heard: 24 August 2010 Delivered: 13 September 2010 Summary: Competition Act 89 of 1998 –– requirements for valid complaint initiation and referral – power to issue interrogation summons – validity of summons – consequence of invalid initiation ___________________________________________________________________ ORDER ___________________________________________________________________ On appeal from: Competition Appeal Court (Davis JP with Patel JA and Dambuza AJA sitting as court of appeal): 1. The appeal is upheld with costs. 2. The order of the Competition Appeal Court is set aside and replaced with an order in the following terms: a. The appeal against the order of the Competition Tribunal of 17 March 2009 is upheld with costs and the cross-appeal is dismissed with costs. b. Paragraphs 2 to 8 of that order are set aside and replaced with an order in the following terms: i. The complaints initiated by the Competition Commission against the applicants during 2006 are set aside. ii. The referral of those complaints on 7 December 2006 by the Competition Commission to the Competition Tribunal is set aside. iii. The Competition Commission is directed to return forthwith to the applicants all documents and copies thereof in its or its legal representatives’ possession and control procured from the applicants together with transcripts of the interrogations of Dr Kleynhans, Mr Gush and Mr Fick, including the documents attached to affidavits included in the papers filed by the Competition Commission before the Competition Tribunal in the main proceedings. iv. The Competition Commission is to pay the costs of the proceedings. 3. All costs orders include the costs of two counsel. __________________________________________________________________ JUDGMENT ___________________________________________________________________ HARMS DP (LEWIS, HEHER, PONNAN JJA AND EBRAHIM AJA concurring) INTRODUCTION [1] This is an appeal from the Competition Appeal Court (‘CAC’) consequent to the grant of special leave to appeal by this court. The appellants are Woodlands Dairy (Pty) Ltd and Milkwood Dairy (Pty) Ltd. They purchase raw milk from dairy farmers for resale, presumably after processing and packaging. They, and a number of other major players in the field, stand accused before the Competition Tribunal of ‘cartel activities’, more particularly, contraventions of certain provisions of s 4(1) of the Competition Act 89 of 1998. [2] Shortly before the scheduled hearing before the tribunal of the complaint referral the appellants applied for an in limine determination of certain issues. The object of the exercise was to obtain a number of orders which, if granted, would have put an end to the proceedings, at least as far as they were concerned. The tribunal upheld some of the points raised but dismissed the others on the assumption that those upheld made their consideration unnecessary. It found that two summonses issued in terms of s 49A (one against Woodlands and the other against Milkwood) to submit to interrogations and produce documents were void. It did not declare the evidence that had been obtained pursuant to the summonses to be inadmissible and held that questions relating to admissibility had to be dealt with during the main hearing on the merits. Consequently the tribunal issued an order for the preservation of this evidence. This meant that the proceedings had to continue. [3] The appellants appealed to the CAC and the commission lodged a cross- appeal against para 1 of the order which declared that the summonses were void. The CAC upheld the appeal and the cross-appeal, both in part. It agreed with the tribunal that the Woodlands summons was void but held in favour of the commission that the Milkwood summons was not. It found for the appellants that the tribunal did not have the power to issue a preservation order and accordingly set it aside. Instead the CAC ordered the commission to return all the evidence obtained by virtue of the Woodlands summons to Woodlands. [4] The order to hand the inadmissible evidence to Woodlands gave rise to a dispute between the parties. They disagreed about its effect and the appellants asked the CAC to clarify its order. They simultaneously applied for special leave to appeal to this court. The commission, in turn, applied for leave to cross-appeal. The CAC granted some of the clarification sought and dismissed the applications to appeal and cross-appeal. [5] One of the grounds on which leave to appeal was refused was that the tribunal and the CAC are specialists tribunals while this court is not one. However, as will appear in due course, the issues in this case do not touch on any specialist areas but are issues similar to those that are dealt with by this court on a regular basis. But that on its own would obviously not be a ground for special leave. [6] Although the appellants sought and were granted special leave to appeal, the commission neither sought nor received similar leave. This means that the order of the CAC setting aside the Woodlands summons with the consequent clarification order stands. THE RELEVANT STATUTORY PROVISIONS [7] Before attempting to explain the issues in any detail it is necessary to place the provisions of the Act in so far as they impact on this case in context. The purpose of the Act is, in general terms, to promote and maintain competition in the Republic (s 2). In consequence, the Act applies to all economic activity within, or having an effect on, the country (s 3). It prohibits in chapter 2 certain restrictive horizontal practices (s 4) and also some vertical ones (s 5), and the abuse of dominance (s 8). [8] The administration of the Act is in the hands of the Competition Commission. Its chief executive officer, the Commissioner, is responsible for the general administration of the commission and for carrying out any functions assigned to it in terms of the Act (s 22). Some of the responsibilities of the commission are to ‘investigate and evaluate alleged contraventions of Chapter 2’, to refer matters to the tribunal, and to appear before it as claimant cum prosecutor (s 21(1)). [9] Chapter 5 of the Act, entitled ‘investigation and adjudication procedures’, is divided into five parts. Important for present purposes are parts B and C: part B deals with powers of search and summons, and part C with complaint procedures. The other parts deal with confidentiality, tribunal hearings and appeals and reviews. This chapter in its present form was inserted by amendment during 2000, and is not clear as to the sequence of steps that have to be followed in relation to the initiation of a complaint, the investigation, the use of the power to summon witnesses to testify and produce documents, and the referral of complaints to the tribunal. This, in turn, has given scope for delaying tactics through preliminary proceedings in different cases before the tribunal and the CAC. [10] The Act, unnecessarily, reminds us that it must be interpreted in a manner that is consistent with the Constitution and which gives effect to the purposes set out in s 2 of the Constitution. Importantly, in the context of this case is that the Constitution is based on the rule of law, affirms the democratic values of dignity and freedom, and guarantees the right to privacy, a fair trial and just administrative action. Also important is the fact that the actions of the commission in relation to chapter 2 complaints, which are administrative, may lead to punitive measures. The so-called ‘administrative penalties’ (more appropriately referred to as ‘fines’ in s 59(2)) bear a close resemblance to criminal penalties. This means that its procedural powers must be interpreted in a manner that least impinges on these values and rights. [11] I accordingly disagree with the view of the CAC that because it is difficult to establish the existence of prohibited practices a generous interpretation of the commission’s procedural rights would be justified. This approach would imply that the more difficult it is to prove a crime, such as corruption, the fewer procedural rights an accused would have. [12] The tribunal, after a hearing in relation to a prohibited practice, may make an appropriate order in terms of s 58(1). Such a matter may reach the tribunal as a result of a referral of a complaint to it by the commission (s 50(1)). In other words, a complaint referral by the commission is (subject to s 51) a jurisdictional fact for the exercise of the tribunal’s powers in respect of prohibited practices. [13] A complaint has to be ‘initiated’. The commissioner has exclusive jurisdiction to initiate a complaint under s 49B(1). The question then arises whether there are any jurisdictional requirements for the initiation of a complaint by the commissioner. I would have thought, as a matter of principle, that the commissioner must at the very least have been in possession of information ‘concerning an alleged practice’ which, objectively speaking, could give rise to a reasonable suspicion of the existence of a prohibited practice. Without such information there could not be a rational exercise of the power. This is consonant with the provisions of s 49B(2)(a) which permit anyone to provide the commission with information concerning a prohibited practice without submitting a formal complaint. [14] The section also deals with the submission of formal complaints. A formal complaint is one submitted by a member of the public (a ‘complainant’) in the prescribed form and not one put in motion by the commissioner (s 49B(2)(b)).1 [15] In both instances, whether upon initiation of a complaint by the commissioner or on receipt of a complaint in the prescribed form, the commissioner ‘must’ direct an inspector to investigate the complaint as quickly as practicable (s 49B(3)). [16] The use of the word ‘must’ gave rise to debate. The commission submitted that an investigation by the commission may precede the initiation of a complaint by the commissioner while the appellants contended that the investigation must follow the initiation. The word ‘must’ has often been equated with ‘may’ in the course of statutory interpretation. But that depends on context and, as Davis JP said in the court below, submissions about the meaning of the Act ‘must be tested against the wording employed by the Act’. [17] There can be little doubt that in the case of the submission of a formal complaint by a complainant such an investigation is necessary. It would otherwise not be possible for the commission to refer the complaint to the tribunal or to issue a notice of non-referral to the complainant (s 51). [18] It is conceivable that the commissioner, by virtue of facts submitted informally or from facts obtained by the commission in the course of another investigation, may wish to initiate a complaint and to dispense with a subsequent investigation. It would accordingly appear reasonable to assume that in this case one could read ‘must’ as ‘may’. The problem is that Parliament chose to deal with the two cases in an identical manner. The same word cannot bear different meanings in the same sentence depending on the circumstances. Even recourse to purposive construction superimposed on benevolent construction does not help. Furthermore, Parliament 1 Clover Industries Ltd v Competition Commission; Ladismith Cheese (Pty) Ltd v Competition Commission CAC cases 78/CAC/Jul08 and 81/CAC/Jul08 paras 9 and 12. was quite particular in its use of ‘may’ and ‘must’ in this Act. In the preceding two subsections and the subsequent one the word ‘may’ is used. Why then the use of ‘must’ in this subsection if ‘may’ was intended? One finds the same pattern in other sections of the Act (compare s 50(3) and s 52(2)). [19] The complaint must be initiated against ‘an alleged prohibited practice’. In this regard the CAC has held in Sappi2 that ‘the Commission is not empowered to investigate conduct which it generally considers to constitute ‘anti-competitive behaviour’ and that a complaint can relate only to ‘an alleged contravention of the Act as specifically contemplated by an applicable provision thereof by that complainant’. Otherwise, the CAC said in that case, the commission would act beyond its jurisdiction. No one submitted that this approach is in any respect incorrect. [20] It is only during this investigation (‘an investigation in terms of this Act’) that the commissioner may summon persons for purposes of interrogation and production of documents (s 49A(1) read with s 49B(4)). I do not accept the submission on behalf of the commission that these far-reaching invasive powers may be used by the commissioner for purposes of a fishing expedition without first having initiated a valid complaint based on a reasonable suspicion. It would otherwise mean that the exercise of this power would be unrestricted because there is no prior judicial scrutiny as is the case with a search warrant under s 46. THE 2005 COMPLAINT INITIATION [21] Mrs Louise Malherbe, a dairy farmer from Riversdal, wrote a letter to the commission during June 2004. She alleged that three milk distributors (Nestlé, Parmalat and Ladismith Cheese) were guilty of cartel activities by fixing the price of fresh milk. It is common cause that the letter was not a formal complaint by a ‘complainant’ as meant in s 49B(2)(b) but that it contained information submitted to the commission under s 49B(2)(a). [22] Her information was followed up by two inspectors in the employ of the commission, Messrs Liebenberg and Theron. They obtained confirmation from other 2 Sappi Fine Paper (Pty) Ltd v Competition Commission of SA and Papercor CC 23/CAC/SEP02 para 35 and 39. sources that corroborated Mrs Malherbe’s allegations of price fixing or manipulation by Parmalat and Ladismith Cheese. They did not find any evidence of wrongdoing by Nestlé but they established that another distributor, Clover, may have been abusing its dominance in contravention of s 8. [23] In line with the provisions of the Act they submitted a memorandum to the then commissioner, Mr Simelane, in which they set out the information at their disposal, and they recommended that a complaint be initiated against Parmalat and Ladismith Cheese regarding the fixing of the purchase price of milk in terms of s 4(1)(b). They also recommended that a complaint be initiated against Clover under s 8 of the Act. They did not, in particular, recommend any complaint initiation against Nestlé or any other member of the industry and also did not suggest that they had any information about contraventions of any other provisions of the Act. [24] The commissioner did not follow their recommendations. If he had, the present proceedings would never have arisen. He instead initiated a single complaint ‘concerning’ these three entities on 9 February 2005. The initiating statement recorded that the purpose of the ‘contact’ reflected in the Liebenberg/Theron memorandum was ‘to establish whether there is anticompetitive behaviour “at any level” in the [milk producing] industry’. The commissioner then stated that he had formed the belief ‘that there exists anticompetitive behaviour in the milk industry’. He formed this belief, he said, in the light of the memorandum, a letter (we now know that it was Mrs Malherbe’s), and public comments two years earlier by the Minister of Agriculture about the alleged high prices of food products. [25] He added, senselessly, that he had ‘in addition, further information’ but then referred again to the information in the memorandum which he already had listed. This, he said, gave information about ‘possible’ price fixing in contravention of s 4(1)(b)(i) by Parmalat and Ladismith Cheese and ‘indicated’ the abuse of a dominant position by Clover, something covered by s 8. [26] The commissioner then, in the light of the above, initiated without any qualification ‘a full investigation into the milk industry’. The commissioner appears to have been oblivious to the fact that he was supposed to initiate a complaint against an alleged prohibited practice and that this should have led to a direction to an inspector to investigate. He also ignored the fact that his initiation ran foul of the Sappi principles set out earlier. As said by the tribunal below, competition law is about anti-competitive effects that take place in markets and not in industries and that it seems highly unlikely that even the ‘most egregious industry’ in the country could be suspected of every crime in the Act. In addition, the commissioner did not have any material to support his belief that there was illegal anti-competitive behaviour in the industry as a whole. [27] The subsequent events provide conclusive evidence that this initiation was seriously flawed. On 22 March 2005, the commissioner issued a commission summons against Dr Kleynhans, the then managing director of Woodlands, to be interrogated and produce documents in relation to an ‘investigation into the milk industry’. The summons recorded that it had been issued in connection with a ‘full’ investigation based on the commissioner’s reasonable belief in the existence of anti- competitive behaviour in the milk industry, which, apart from price fixing (s 4(1)(b)) and abusive behaviour (s 8), ‘included’ ‘restrictive vertical practices’ (s 5) – something that had not even been mentioned in the complaint initiation. This, by the way, belies the commission’s argument that the initiation was limited to the three entities mentioned and in respect of the prohibited practices identified in the complaint initiation. It is not necessary to detail the content of the summons because both the tribunal and the CAC have found that it was so improper, overbroad and vague that it had to be set aside. [28] In response to the summons the attorneys for Woodlands politely sought some particulars to enable Dr Kleynhans to comply fully with the demand. The commission’s response is revealing. It said that a complaint had been initiated against Parmalat, Ladismith Kaas and Clover in order to establish whether there is anti-competitive behaviour at any level of the industry thereby allowing the commission the opportunity to evaluate the whole industry. This, too, refutes the commission’s belated restrictive interpretation of the complaint initiation. [29] The interrogation of Dr Kleynhans took place. His complaints about the nature of the investigation and the scope and meaning of the summons were brushed aside in an unseemly and threatening manner. Requests for elucidation were either evaded or ignored.3 [30] Then followed a summons for the interrogation of Mr Fick of Milkwood concerning, once again, an ‘investigation into the milk industry’. He was ordered to bring with him any ‘other’ documents or items in his possession or under his control ‘that relate to this matter’. This summons differed from the Woodlands summons in that it did not give a list of documents. He was told that he would be asked about possible price fixing in the market and abusive behaviour and also about issues arising from the information submitted in response to a summons dated 22 March 2005. The summons or information was not more closely identified but one may now surmise that it was the Woodlands summons of that date. [31] As mentioned, the tribunal held that this summons was also bad but the CAC held otherwise. The tribunal reasoned that a summons in terms of s 49A requires the stipulation of a prohibited practice accompanied by some particularity as to its nature, something that was missing. The CAC, however, held that the prohibited practices had been disclosed because Fick was entitled to see the information submitted pursuant to the 22 March summons. The first problem with this is that the validity of a summons must appear ex facie the document and does not depend on a possible request for further particulars. In addition, since the information obtained pursuant to that summons was, according to the CAC, tainted and could not have been used by the commission, it is difficult to see how that information could have given validity to the summons and be used to extract information from Fick. The CAC also did not mention the other problems with the summons such as the unbounded request for documents nor did it consider whether there was any indication on the papers that Fick was in fact entitled to see the information (see s 45 and 45A). [32] The CAC also failed to deal with the proceedings pursuant to the summons. Fick was informed, as the interrogation began, that the investigation was in relation to prohibited practices including possible collusion and/or price fixing, abusive 3 The order of the CAC included the setting aside of a summons concerning one Gush. This part of the order is not subject of the appeal and need not be considered but has to be reflected in the ultimate order to the extent that the order of the CAC is not in issue. behaviour as well as vertical practices in the milk industry and that the party subject to the complaint was Parmalat. This statement was palpably untrue. Three companies were named in the initiation and Parmalat was but one of them. Parmalat was not suspected of abusive behaviour – that was Clover. What was not said was that Woodlands was being investigated. And it was also not said that the whole purpose of the interrogation was to extract information from Fick about the relationship between Woodlands and Milkwood. As Fick said (something the commission did not even deem worthy of reply) the whole enquiry targeted the relationship between Milkwood and Woodlands, and not one question was asked during the entire interrogation about Parmalat. [33] I now revert to the 2005 initiation. The tribunal did not deal with its invalidity because of its finding that the summonses were bad for other reasons. The CAC did not deal with the issue in its main judgment but belatedly during the course of its judgment dealing with the merits of the application for leave to appeal. It focussed on the question whether it is possible to initiate a complaint against cartels within an industry without naming any one of the parties thereto and expressed the view that any finding that a party has to be mentioned would amount to Austinian formalism of the kind of jurisprudence employed during apartheid. [34] The problem with this generalisation and tar brushing is that it ignored the structure of the Act, the impact of the Constitution on its interpretation, the CAC’s own jurisprudence, not only in Sappi but also Glaxo Wellcome,4 and the relevant facts. The CAC did not take into account that the initiation must at least have a jurisdictional ground by being based on a reasonable suspicion. The initiation and subsequent investigation must relate to the information available or the complaint filed by a complainant. [35] There is in any event no reason to assume that an initiation requires less particularity or clarity than a summons. It must survive the test of legality and intelligibility. There are reasons for this. The first is that any interrogation or discovery summons depends on the terms of the initiation statement. The scope of a summons may not be wider than the initiation. Furthermore, the Act presupposes 4 Glaxo Wellcome (Pty) Ltd v National Association of Pharmaceutical Wholesalers 15/CAC/Feb02. that the complaint (subject to possible amendment and fleshing out) as initiated will be referred to the tribunal. It could hardly be argued that the commission could have referred an investigation into anti-competitive behaviour in the milk industry at all levels to the tribunal. [36] Members of the supposed cartel were in fact mentioned in the initiating statement. It was therefore not a case where no cartel member had been identified. The problem is that there were no facts that could have given rise to any suspicion that others were involved. A suspicion against some cannot be used as a springboard to investigate all and sundry. This does not mean that the commission may not, during the course of a properly initiated investigation, obtain information about others or about other transgressions. If it does, it is fully entitled to use the information so obtained for amending the complaint or the initiation of another complaint and fuller investigation. THE 2006 COMPLAINT INITIATIONS [37] The commissioner did not refer the 2005 complaint to the tribunal. This explains why the invalidity of this complaint did not form the basis of a prayer in the notice of motion. The commissioner instead referred six complaints that were initiated during 2006. The first was dated 13 March and accused Woodlands and others of fixing the purchase price of raw milk. Two other complaints involving Woodlands were initiated on 12 May and, finally, on 6 December one was initiated against Woodlands and Milkwood. The remaining complaint did not affect either of the appellants. All the complaints involving one or both of the appellants related to practices prohibited by s 4(1). [38] The appellants sought an order setting these complaints and consequent referral on 7 December aside. Their argument was premised on a finding that all the commission’s evidence against them was derived from the invalid 2005 initiation and subsequent tainted interrogations and production of documents. Since the commission’s investigation preceded these complaints it placed, according to the argument, the cart before the horse which means that the commission acted beyond its powers. [39] It is necessary to emphasise that the CAC, in its clarification judgment, made it clear that its intention was to ensure that all documentation procured pursuant to the investigation and other steps taken by the commission pursuant to the tainted Woodlands summons had to be placed beyond the use of the commission because Woodland’s privacy had been unfairly breached. It crafted the clarification order on that basis. [40] The commission, as mentioned, did not appeal this order and did not seek to argue that the approach of the CAC towards tainted evidence was flawed. It follows that the same approach has to be adopted towards the Milkwood evidence in view of the finding earlier that it, too, was likewise tainted. [41] Both the tribunal and the CAC found that the commission’s whole case against the appellants was derived from the impugned interrogations. These findings were based, presumably, on an allegation in the founding affidavit that it was apparent from the commission’s founding affidavit in the referral, witness statements and argument that the evidence obtained through the tainted investigation forms the basis of the referral in relation to the appellants and was inextricably part thereof. [42] The allegation was denied in the answering affidavit in bald terms with reference to ‘all of the reasons set out above’. There were no preceding reasons and this means that that the denial was meaningless. Counsel for the commission nevertheless sought to rely on inferences from other facts for the submission that there may have been further untainted facts which could have justified the referral and that it should be left to the tribunal to determine whether there was any admissible evidence. I agree that as a general rule it is preferable to leave such a determination to the tribunal during the referral hearings. [43] The general rule does not, however, find application in the present proceedings. The problem for the commission derives from the terms of the 2006 complaint initiations. They all explicitly relate back to the investigation under the 2005 complaint and state that they were drawn as a consequence of that investigation. In other words, the 2006 complaints were the direct consequence of an invalid complaints procedure. Without the invalid complaint initiation and subsequent investigation these complaints against the appellants would not have seen the light of day. It follows that by applying the approach in Pretoria Portland Cement5 the consequent referral should have been set aside, unfortunate as the result might be in the circumstances. CONCLUSION [44] It follows from this that the appeal should be upheld and that the 2006 complaints and the subsequent referral to the tribunal should be set aside. The relief granted by the tribunal in relation to the summonses has in a sense become moot but will for the sake of clarity be retained. The same applies to the clarification order of the CAC. It is not necessary to deal with Woodland’s separate attack in relation to the fifth complaint. [45] The commission, in its heads of argument, raised the issue of waiver but did not address it during oral argument. The issue was dealt with in some detail by both the tribunal and the CAC and there is no reason to revisit the matter. The commission also complained about what it called the delaying tactics of the parties cited in the referral. Although one has to agree that such tactics are to be deprecated and that tribunals and courts should take a strong stand where feasible, it is not possible to dismiss a valid complaint of this nature merely because of delay. [46] There did not appear to be any disagreement between the parties that the result should determine costs, also in relation to the proceedings before the tribunal, and that the costs of two counsel should be allowed. The appellants sought costs of a third counsel and costs on the scale as between attorney and client. There is no justification for such an order. THE ORDER [47] The following order is made: 1. The appeal is upheld with costs. 2. The order of the Competition Appeal Court is set aside and replaced with an order in the following terms: a. The appeal against the order of the Competition Tribunal of 17 March 2009 is upheld with costs and the cross-appeal is dismissed with costs. b. Paragraphs 2 to 8 of that order are set aside and replaced with an order in the following terms: 5 Pretoria Portland Cement Co Ltd v Competition Commission 2003 (2) SA 385 (SCA) paras 71-73. i. The complaints initiated by the Competition Commission against the applicants during 2006 are set aside. ii. The referral of those complaints on 7 December 2006 by the Competition Commission to the Competition Tribunal is set aside. iii. The Competition Commission is directed to return forthwith to the applicants all documents and copies thereof in its or its legal representatives’ possession and control procured from the applicants together with transcripts of the interrogations of Dr Kleynhans, Mr Gush and Mr Fick, including the documents attached to affidavits included in the papers filed by the Competition Commission before the Competition Tribunal in the main proceedings. iv. The Competition Commission is to pay the costs of the proceedings. 3. All costs orders include the costs of two counsel. _____________________ L T C Harms Deputy President APPEARANCES APPELLANT/S J J Gauntlett SC (with him R G Buchanan SC and F B Pelser) Instructed by: Rushmere Noach Inc, Port Elizabeth Webbers Attorneys, Bloemfontein RESPONDENT/S: A R Bhana SC (with him A J Coetzee and T Dalrymple) Instructed by Knowles Husain Lindsay Inc, Sandton McIntyre & Van der Post, Bloemfontein

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL MEDIA SUMMARY – JUDGMENT DELIVERED IN COURT OF APPEAL 13 September 2010 STATUS: Immediate WOODLANDS (PTY) LTD AND MILKWOOD DAIRY (PTY) LTD V THE COMPETITION COMMISSION Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal The Supreme Court of Appeal upheld an appeal against an order of the Competition Appeal Court (CAC) and held that the complaints initiated by the commission against the appellants were set aside and the court further directed the commission to return all documents and copies in its possession belonging to the appellants The appellants were allegedly involved in unfair competition by fixing prices of raw milk. A complaint was lodged against other firms and as consequence the commission initiated without any qualification a full investigation into the milk industry and complaints against them. The SCA set aside the decision of the CAC because the commission relied on an invalid initiation and therefore the commission acted beyond its power. The SCA held that the 2006 complaints were the direct consequence of an invalid complaints procedure and without the invalid complaint initiation and subsequent investigation these complaints against the appellants would not have seen the light of day.

415

non-electoral

2016

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Not Reportable Case No: 32/2015 In the matter between: RENASA INSURANCE COMPANY LIMITED APPELLANT and CHRISTOPHER BRIAN WATSON FIRST RESPONDENT FLASHCOR 201 CC SECOND RESPONDENT Neutral citation: Renasa Insurance Company Limited v Watson (32/2014) [2016] ZASCA 13 (11 March 2016) Coram: Ponnan, Tshiqi, Saldulker and Mbha JJA and Fourie AJA Heard: 22 February 2016 Delivered: 11 March 2016 Summary: Insurance policy ─ alleged fraudulent claim ─ arson ─ insurer failing to discharge onus of proving that insured was the arsonist or that insured is precluded from claiming loss due to his failure to take reasonable steps and precautions to prevent the loss. ORDER On appeal from: Western Cape Division of the High Court, Cape Town (Savage AJ sitting as court of first instance): The appeal is dismissed with costs. ___________________________________________________________________ JUDGMENT ___________________________________________________________________ Fourie AJA (Ponnan, Tshiqi, Saldulker and Mbha JJA concurring): [1] This appeal has its origin in a fire that erupted during the morning of 10 January 2011 in industrial premises in Elsies River, Cape Town (the premises) owned by the second respondent, Flashcor 201 CC (Flashcor). The premises were let to the first respondent, Mr C B Watson (Watson), who conducted a print finishing business from the premises under the name and style of Canterbury Coaters. [2] The appellant, Renasa Insurance Company Limited (Renasa), is an insurer which had insured Watson and Flashcor, with inception from 1 October 2007, under a written short-term insurance policy against loss or damage caused by, inter alia, fire. In terms of the latest annual policy renewal undertaken on 20 October 2010, Renasa indemnified Watson as the sole proprietor of Canterbury Coaters against the loss or damage of plant, machinery and stock suffered as a consequence of fire for an agreed insured sum of R17 545 871. In addition, Renasa insured Flashcor against the loss of or damage to the buildings on the premises as a consequence of fire for an agreed insured sum of R640 001-91. [3] Pursuant to the fire of 10 January 2011, Watson and Flashcor lodged claims with Renasa under the insurance policy for payment of the amount of R17 545 871 for the loss or damage caused to the plant and machinery, and R640 001-91 for the damage to the building, respectively. Renasa, however, repudiated the claims with the result that Watson and Flashcor instituted action against Renasa in the Western Cape High Court, Cape Town, for payment of the amounts claimed under the insurance policy. [4] The matter first came before Davis J who dealt with the issue of Watson‟s locus standi. Renasa contended that Canterbury Coaters was in fact a partnership between Watson and Mr P Hampson (Hampson), but after hearing evidence Davis J held that, although Hampson had made an investment in the business, Canterbury Coaters was at all material times a sole proprietorship owned by Watson. [5] It was subsequently agreed by the parties and ordered by the court below in terms of Uniform rule 33(4), that the issue as to Renasa‟s liability to make payment of the claims would be adjudicated first, with the issue regarding the quantum of the claims to stand over for later determination, if necessary. The trial then proceeded before Savage AJ. After hearing evidence the trial judge held in favour of Watson and Flashcor, declaring Renasa to be liable for such loss as they may prove they have suffered as a consequence of the damage caused by the fire. Renasa now appeals, with the leave of the court a quo, against the whole of this order. [6] Renasa‟s repudiation of the claims under the policy and its defence in the court a quo and on appeal, was based on two provisions, pleaded in the alternative, under the General Conditions of the insurance policy. These are clauses 8 and 5, respectively. [7] Clause 8 of the General Conditions provides that: „8. Fraud If any claim under this policy is in any respect fraudulent or if any fraudulent means or devices are used by the insured or anyone acting on their behalf or with their knowledge or consent to obtain any benefit under this policy or if any event is occasioned by the wilful act or with the connivance of the insured, the benefit afforded under this policy in respect of any such claims shall be forfeited.‟ [8] Clause 5 of the General Conditions reads as follows: „5. Prevention of Loss The insured shall take all reasonable steps and precautions to prevent accidents or losses.‟ [9] In paragraph 9.3 of its plea Renasa denied liability to indemnify Watson and Flashcor under clause 8 on the basis that: „9.3.1 On or about 10 January 2011 the first plaintiff [Watson] acting alone and/or in his capacity as a member of the second plaintiff [Flashcor], alternatively, parties unbeknown to the defendant [Renasa], but on the instruction, and with the first and/or second plaintiff‟s knowledge and consent, and with their connivance, set fire to the immovable property and the movable equipment situate thereon, with a view to fraudulently obtaining a benefit under the policy to which the insured would ordinarily not be entitled to. 9.3.2 Accordingly, in terms of clause 8 of the policy, any claim which either the first and/or the second plaintiffs may have been entitled to, is forfeited.‟ [10] In its trial particulars, Renasa alleged that the fire was ignited by Watson and/or those instructed by him on 10 January 2011 between 08h00 and 09h00. Renasa futher placed reliance on the „deliberate participation of the plaintiffs in some manner in the happening of the fire at the property‟ in breach of General Condition 8 of the policy, and „on any and all acts and representations of the plaintiffs, which were calculated to conceal or otherwise to prevent the detection of the plaintiffs‟ deliberate participation in some manner in the happening of the fire.‟ [11] In the alternative, Renasa pleaded that the plaintiffs had breached clause 5 of the General Conditions of the policy, in that: „9.5.1 It was an express, alternatively implied, further alternatively tacit term of the policy that: 9.5.1.1 The first and second plaintiffs were obliged to take all reasonable steps and precautions to prevent the fire, and losses sustained in consequence thereof. . . . 9.5.2 In breach of the aforegoing and aware that the premises, and the goods situate thereon were subject to a fire risk on 10 January 2011, the plaintiffs failed to take any or all reasonable steps and precautions to prevent the fire, and losses sustained in consequence thereof, in circumstances where had the first and/or second plaintiff done so, a fire would have been avoided. 9.5.3 In the premises, defendant is not obliged to pay plaintiffs the sum claimed or any portion thereof.‟ [12] In its trial particulars, Renasa alleged that the steps that Watson and Flashcor ought to have taken to prevent or avoid the fire were: not to leave the property unattended, ensure that the accelerants deployed therein for the purposes of setting fire thereto were not ignited, secure the property to prevent access by an intruder, direct employees to remain in attendance to deter an intruder from gaining access to the property, summon the fire department and discontinue the electricity supply to the premises. [13] It was common cause that Watson and Flashcor established prima facie that their claims fell within the ambit of the promised protection offered by the policy. Therefore, Renasa as the insurer bore the onus of establishing its right to repudiate their claims for the reasons pleaded by it. See Commercial Union Assurance Company of South Africa Ltd v Kwazulu Finance and Investment Corporation and another 1995 (3) SA 751 (A) at 756H-I; (414/93) [1995] ZASCA 63 (30 May 1995). [14] Turning firstly to the defence based on clause 8 of the General Conditions, Renasa had to prove on a balance of probabilities that Watson acting alone, or parties unbeknown to Renasa acting on the instructions of Watson and/or Flashcor, and with their knowledge, consent and connivance, set fire to the premises in order to fraudulently obtain a benefit under the policy. As was reiterated by the trial judge, it is not for Watson or Flashcor to disprove Watson‟s guilt as an arsonist, nor that someone else set fire to the premises. Savage AJ concluded that, upon a conspectus of the evidence as a whole, Renasa had failed to discharge the onus of showing that Watson deliberately set fire to the premises, or that others with his and/or Flashcor‟s knowledge and consent did so. Renasa contends that, in so finding, the trial judge misdirected herself in material respects. [15] As relevant background it is necessary to set out in some detail the events of 10 January 2011 leading up to and following the eruption of the fire. Watson, who resided on a farm in the Piketberg district, 120 kilometres from the premises, left his residence in the early hours of the morning of 10 January 2011. The reason for his early departure was to ensure that he would be at the premises when the workforce arrived for the new work year after the end of year holidays. It was established by means of a tracking device in the vehicle driven by Watson that he had arrived at the premises at 06h19. He had a set of keys which allowed him entry to the premises. He says that he experienced some difficulty in unlocking and opening the outer perimeter gate whereafter he found the main door to the premises unlocked. [16] Watson described how he then entered the premises through the front door and established that the burglar alarm and CCTV system had been disarmed. Upon entering he immediately smelt petrol and when he entered the factory area of the premises, there was a strong odour of petrol everywhere. He was met by a carefully constructed arson scene with a number of plastic drums filled with petrol strategically suspended from the cable trays above the printing and other machines in the factory area. Mr Leon Niemand, a specialist fire investigator who testified on behalf of Renasa, described the modus operandi employed as one where the tops and doors of the machines were left open and the hanging drums were positioned more or less horizontally by stringing them together with fishing gut fed through holes drilled in the bottom of the drums. This prevented the fuel in the drums from spilling, but once the gut would part the drums would swing into a vertical position and spill the fuel onto the fire thereby destroying or damaging the printing and other valuable machines. [17] Watson testified that he had also noticed that the boot of his Audi TT RS Quattro sports car, which he had parked in the factory area on 7 January 2011, was open. On closer examination he found a fuel-drenched cloth in the boot of the car. I should add that this sports car was less than a year old and was clearly a prized possession of his. [18] According to Watson he was in a state of shock while surveying this surreal scene. He established that the electricity supply to the machines had been cut by switching off the electrical circuit breakers. He then decided to alert the police and found their emergency number (10111) in the telephone directory. His telephone records confirm that he phoned the emergency number at 06h32 and members of the Elsies River Police Station were despatched to the scene. Watson went outside to await the police who arrived at the premises at 06h45. Constables Sampson and Petersen were the police members who attended the scene after they had received notice of the complaint at 06h34. They entered the premises with Watson and surveyed the well-constructed arson scene in the factory. They found no one else on the premises nor any evidence of forced entry. They confirmed that the burglar alarm and CCTV system had been disconnected. [19] The police witnesses also confirmed that Watson‟s sports car was parked in the factory area with its boot open. They thought that paraffin had been poured in the car while Watson was of the view that it was diesel. After conferring, the constables informed Watson that they did not want him to remain at the premises and asked him to follow them to the police station to open a criminal case docket. Watson and the police left the premises and he locked the door and security gate. The tracker device in his truck recorded him leaving the premises at 07h00 for the nearby Elsies River Police Station where he arrived at 07h03. [20] Upon leaving the premises, Constables Sampson and Petersen took no steps to secure the scene nor did they ask Watson to arrange private security to do so. They did not cordon off the premises or the building and apparently made no attempt to notify the fire brigade or any other emergency services of the potential fire threat. [21] At the police station Watson was kept waiting for a while before a policewoman with a poor command of English took his statement. She warned him not to re-enter the premises as the forensic division of the police would contact him to take fingerprints. He called an employee, Ms Ravenscroft, and instructed her to advise the other employees that they should go home. This she did, except that she could not succeed in contacting one person, Mr George Mpumalani, an employee who was still on his way to work. [22] Watson then returned to the premises where he arrived at 08h11. He sat outside in his truck and soon thereafter Mr Mpumalani arrived. Watson advised him that there would be no work that day. Watson‟s understanding was that the police were now in control of the scene and would contact him when they needed access to the premises. He had faith in the police to disarm what he described as the „bomb‟ at the premises and believed that they would do what was necessary. He was very distraught and needed to talk to someone, so he decided to visit friends in Claremont with whom he normally stayed when he was in Cape Town. He left the premises at 08h19 and arrived at his friends‟ house in Claremont at 08h44. This was confirmed by Ms Jessica Gaine who testified that, upon his arrival, Watson was very distressed. While Watson was there he received a telephone call from his business associate, Hampson, to say that the building on the premises was on fire. [23] Watson returned to the premises where he arrived at 09h33. By then the fire had been extinguished by members of the fire fighting services which had been called to the scene. Mr Mark Bywater of a neighbouring business noticed smoke coming out of the roof of the factory building on the premises and he used a forklift truck to remove the motorised steel gate so that the fire department could gain access to the premises. Bywater testified that he telephoned Hampson, with whom he was acquainted, to advise him of the fire, but upon breaking the news to him, Hampson seemed rather unconcerned. He said that he thought that Hampson would have acted a little more shocked, but he did not. When, during cross-examination, Bywater was asked about Hampson‟s reaction he said that „he was about as calm as you are now‟. [24] Mr Albertus Hanekom of the fire department testified that the call reporting the fire had been received at the fire station at 09h02 and they responded immediately arriving at the premises at 09h10. They had to force the office door open to gain entry to the premises, whereupon they discovered the fire in the factory section. He gained the impression that there were multiple fires and he noticed that all the 25 litre plastic drums that had apparently been hanging from ropes suspended from the cable trays, had by then dropped to the floor spilling fuel onto the fire. He immediately suspected arson and upon extinguishing the fire, the premises were handed over to Warrant Officer Nimb of the SAPS who arrived on the scene at 10h50. [25] Warrant Officer Nimb formed the opinion that access to the scene was gained by a person who had a key to the premises. It was clear to him that the motive was arson and his impression was that there had been several separate fires on the scene. He was unable to say how these fires were caused nor was he able to say whether the fires were started manually or by means of a delay device. He confirmed that Watson‟s Audi sports car was parked in the factory area with an open boot, in which there was a white cloth which smelt strongly of diesel. The premises were cordoned off by the police, although Watson did testify that at the initial stage the scene was crawling with people, estimating there to have been at least 30 people inside the premises. In the days after the fire the scene was visited by a number of expert witnesses, almost exclusively at the request of Renasa. I will in due course refer to their evidence and the conclusions drawn by them from what they observed at the scene. [26] Against the above background, it was common cause between the parties that the fire was as a result of arson. What Renasa set out to prove through their witnesses is that Watson was the arsonist. This necessarily involved establishing how, on the probabilities, Watson would have initiated the fire. As emphasised by Van Blerk JA in Taljaard v Sentrale Raad vir Koöperatiewe Assuransie Beperk 1974 (2) SA 450 (A) at 451A-B: „Die bewyslas het deurgaans by die respondent [the insurer] berus om „n brandstigting te bewys en dat appellant [the insured] die huis aan die brand gesteek het. Die brandstigting en die identiteit van die brandstigter is onderling afhanklik van mekaar. Alhoewel daar nie „n plig op die respondent gerus het om deur getuienis alle moontlike oorsake van die brand uit te skakel nie . . . moet hy die hof oortuig dat sy verduideliking van hoe die brand ontstaan het die korrekte een is . . . op grond dat dit die mees aanneemlike en waarskynlikste is. . . .‟ [27] With regard to the discharging of the onus on a balance of probabilities Holmes JA said the following in Ocean Accident and Guarantee Corporation Limited v Koch 1963 (4) SA 147 (A) at 159B-C: „As to the balancing of probabilities, I agree with the remarks of Selke J in Govan v Skidmore 1952 (1) SA 732 (N) at p 734, namely “. . . in finding facts or making inferences in a civil case, it seems to me that one may, as Wigmore conveys in his work on Evidence, 3rd ed, para 32, by balancing probabilities select a conclusion which seems to be the more natural, or plausible, conclusion from amongst several conceivable ones, even though that conclusion be not the only reasonable one.”‟ [28] Renasa‟s witnesses were unable to provide any clarity as to how the fire started, and in particular, whether it was started manually or by means of some delay device. Ms A Burger (Burger), Renasa‟s primary fire expert and investigator agreed that she could establish no cause and no origin for the fire and that she was able to point to a range of possible causes only. She testified that there were „separate areas of fire where there is burning‟. She readily conceded that there was a multitude of possibilities as to how and where the fire started. Therefore she could not present the court with a probable cause or the origin of the fire. She was unable to locate a delay device, although she agreed that one would normally expect a fire investigator to find such a device had it been used to ignite the fire. She added, though, that in one per cent of cases a delay device may not be found and that this could be one of those cases. [29] It appears from the evidence of Burger that Renasa had placed some limitations on her investigation as to the cause and the origin of the fire. For example, she was only allowed to test two samples taken from the areas where severe localised fire damage was observed, whilst she agreed that the better way of doing it would have been to have sifted through the burnt material in search of evidence of a delay device. Be this as it may, the fact of the matter is that Burger was unable to make any meaningful contribution in determining the probable cause or the origin of the fire. [30] Mr G B Vincent (Vincent), an independent loss adjuster, who was one of the first on the scene on behalf of Renasa, testified that there were about nine „different manual points of ignition‟, but qualified this statement by adding „when I say manual ignition I am saying manual ignition as against spontaneous combustion‟. During cross-examination he explained that his understanding of „manual‟ is that it involved someone being there to light the fire. However, Vincent by his own admission is not a fire expert and his „opinion‟ as to the manner of ignition of the fire amounted to no more than „in my mind at that stage they [the points of ignition] must have been manual‟. [31] Mr I R Mumford (Mumford), an industrial engineer who testified on behalf of Renasa, also speculated as to how the fire could have started, explaining that electricity could have been the source to ignite a fire, eg by using a heating coil, but added that there was no evidence that electricity was used to start this fire. Mumford alluded to internet articles regarding delay devices used to ignite fires, but readily conceded that he could not provide meaningful assistance as he is „definitely not a fire forensic expert‟. [32] In the result the trial court found itself in a situation where, on the evidence, there appeared to have been multiple points of ignition, or „seats‟ of fire as suggested by Burger, that were isolated from any electrical or heat source that could act as the medium for ignition. None of Renasa‟s witnesses, including Warrant Officer Nimb, could explain how, on the probabilities, all these fires were ignited and whether ignition was manual or by means of a delay device. [33] This notwithstanding, counsel for Renasa submitted that Renasa had proved that ignition was not manual, but by means of an unknown and unlocated delay device and that Watson was the arsonist who set the device. To this end counsel employed a process of inferential reasoning by submitting that, apart from Watson, „there is simply no-one else who would have used such a device in order to ignite the fire‟ and the fact that no delay device was found „is testimony to the ingenuity of the arsonist ─ and there was no-one who had shown more ingenuity during the course of this trial than Mr Watson‟. These are self-serving submissions unsupported by the evidence. Moreover, the reasoning is circuitous. Significantly too, it was never put to Watson how he is alleged to have started the fire, whether manually or by means of a delay device, nor when he is alleged to have ignited the fire. [34] Above all Renasa was faced with the improbability ─ indeed the illogicality ─ as to why, if Watson was the arsonist who had carefully prepared the scene and was ready to set the tinderbox alight, he would summon the police thereby thwarting his intention to burn down the factory. Counsel for Renasa submitted that this was a calculated move on the part of Watson, which he described as „a bold move to create an alibi‟ and that had the police not left the scene, Watson could „have loudly proclaimed to the world that [he] had saved his premises‟. [35] I must confess that the logic of this submission escapes me. As held by the court a quo, if Watson was the arsonist, he would then have had to gamble on the fact that the police, once called, would either not arrive or would act contrary to their duties and standing orders by leaving the scene unsecured. To my mind, one would ordinarily expect the police, when summoned to a scene of this nature, to take the necessary steps to manage the scene and prevent the flammable liquid from being ignited. The phone call to the police would therefore effectively have thwarted his carefully planned operation to burn the factory down. Such behaviour would, in my opinion, make no sense and it rather shows that Watson was not the arsonist. I should also add that it was not put to Watson in cross-examination that he called the police in order to create an alibi for himself. [36] There is the further strange conduct on the part of Watson, if he was the arsonist, to park his Audi in the building with the intention of having it destroyed by the fire. The evidence shows that he could have sold the vehicle, had he chosen, in the market for virtually the same price that he had paid for it, yet he rather took the risk that the insurer of the Audi (not Renasa) may not compensate him for the damage to the vehicle. Had he been short of funds he could have sold it for close to R700 000 as testified to by the sales manager of the Audi Centre, Claremont, Cape Town. I should mention that, immediately upon being paid out by his insurer, Watson purchased a similar vehicle. In view of the above, I agree with the conclusion of the trial judge that the inference that Watson started the fire and placed his beloved Audi on the scene is not the more plausible. Quite the contrary, it is in fact illogical and untenable. [37] Counsel for Renasa placed much store on what he described as Watson‟s powerful motive to commit the arson. He submitted that the financial evidence showed that the business of Canterbury Coaters was in decline, was unlikely to survive and at best for Watson was barely profitable. He also emphasised that should the claim succeed almost the entire, very large, windfall generated by the fire would accrue to Watson. He was therefore the one person who could possibly have benefited from the fire. [38] This submission is largely based upon the evidence of Ms D Ladopoulos (Ladopoulos), an accountant who testified on behalf of Renasa. An analysis of her evidence, however, shows that the dark picture which she sought to depict of the business of Canterbury Coaters, was based on a forward-looking viability analysis, coupled with her prediction that at some point in the future the business would run into financial difficulty, which would only be deferred by funds derived from the sale of the stock and the Audi vehicle. However, it does not appear to me that the financial evidence as a whole justified this bleak prognosis, particularly when one has regard to the concessions made by Ladopoulus during cross-examination. [39] Ladopoulos conceded that, as at the date of the fire, Watson was factually solvent with a nett asset value of approximately R5 million, having assets of approximately R6,5 million and liabilities of approximately R1,5 million. She further accepted that, at the time of the fire, Watson had access to funds of R1,4 million, made up of the balance in his bond account, cash at the bank, stock in the factory and the Audi. [40] This resulted in the further concession by Ladopoulos that there were no indications of commercial insolvency on the part of Watson at the time of the fire. All of his staff had been paid, he had taken healthy drawings from the business, was the proud owner of a new Audi TT sports car, was living on a beautiful farm and had no liabilities, save for a modest bond account. Nor did he have any creditors of note demanding payment from him. In addition, independent evidence showed that a large order had been placed with Canterbury Coaters to commence in January 2011, which could not be proceeded with due to the damage caused by the fire. To this I should add that Watson‟s accountant, Mr Swanepoel, testified that he did not regard the business as being in any financial trouble at the time. [41] In my view, the financial evidence presented by Renasa falls well short of proof that Watson had a motive to burn the factory down due to the precarious financial position of the business. On the contrary, I am in agreement with the trial court that Ladopoulos failed to take sufficient account of the overall financial position of Watson over a number of years and that she placed insufficient emphasis on the fact that he was not trading in insolvent circumstances. The conduct of Watson following the fire, by being prepared to settle for second hand machines as he was keen to get his factory up and running, also does not fit the profile of an arsonist who was facing financial ruin or motivated by financial gain. [42] Finally, in this regard, I agree with the submission on behalf of Watson, that it is difficult to accept that a commercially solvent businessman with a nett asset value of R5 million, including a paid-up vehicle with a marketable value of R690 000, cash in the bank of R120 000, a debtors‟ book of R560 000 and stock worth R270 000, as well as a large order waiting to be completed early in the new year, would resort to complex fraud and arson, rather than simply liquidating some of his assets, if he thought he was in need of funds. [43] It should be borne in mind that the trial judge found Watson to be a credible witness. She had the opportunity of assessing Watson‟s credibility as a witness over a period of seven days, which included four and a half days under cross-examination while he was unrepresented. Counsel for Renasa submitted that the judge a quo had misdirected herself in accepting Watson‟s evidence. However, in her closely reasoned judgment the trial judge carefully considered all the facts and circumstances relevant to the reliability of Watson as a witness, and I find no room for interfering with her finding in this regard. As held by the court a quo, Watson was certainly argumentative, cautious and wary of being misinterpreted. I should add that he was also rather verbose in answering questions, particularly under cross- examination. However, this does not necessarily indicate a lack of honesty on his part, but rather appears to be, as held by the court below, „the conduct of a man who had risked much in running a high court trial against an institutional opponent in circumstances in which it was clear that Renasa had from early on fingered him as the culprit‟. [44] The trial judge concluded that the fire was probably ignited manually and that the use of a delay device could be excluded as no such device was found. As recorded above, Renasa contends that the trial court ought to have found that Watson was the arsonist who started the fire by means of a delay device. As I understood Renasa‟s case, Watson would have ignited the fire by means of a remote delay device after departing from the premises at 08h19, but not later than 09h02. In fact, it was submitted on behalf of Renasa that it was inconceivable that an arsonist would have risked manually igniting the fire during this critical period (08h19-09h02) on Monday 10 January 2011, the first day of work, in broad daylight with people around, especially also after the police had already attended the scene. According to Renasa the fire could only have been ignited by means of a delay device. [45] However, the difficulty facing Renasa is the lack of a factual basis for the drawing of an inference that a delay device was used to ignite the fire and that Watson was the arsonist. There is simply no evidence (whether direct or circumstantial or any other probative material) as to how the fire started (the source of the ignition); where the fire started (the point(s) of ignition or fire origin) and at what time it ignited. In the absence of proof of these crucial elements, the trial court correctly held that, in weighing the cumulative effect of all the proven facts, Renasa had not discharged the onus of showing that Watson deliberately set fire to the premises, or that others with his knowledge or consent did so. It follows that the court a quo correctly dismissed Renasa‟s defence based on clause 8 of the General Conditions of the insurance policy. [46] This brings me to Renasa‟s alternative defence based on clause 5 of the insurance policy. It immediately strikes one that the factual premise of this defence is wholly at odds with that of the main defence based on clause 8. In the case of the latter, Renasa contends that Watson was the arsonist who ignited the fire by means of a delay device. The alternative defence, however, is based on a factual premise that the fire was ignited manually by an unknown arsonist who had no connection with Watson, and Watson is said to have been at fault by failing to take reasonable steps to prevent the arsonist from so doing. As recorded earlier, the critical time when Watson was supposed to have taken these steps was between the time of his departure from the premises at 08h19 and 09h02. [47] The case law dealing with the interpretation of provisions in insurance contracts similar to clause 5, was considered by the full court in Santam Limited v CC Designing CC 1999 (4) SA 199 (C). It concluded that a clause of this nature should not be construed as an exclusion of liability where the loss was caused merely by the negligence of the insured, but that proof of recklessness is required. The court a quo, relying on this judgment of the full court, held that Renasa failed to prove recklessness on the part of Watson and that the alternative defence could accordingly not succeed. Counsel for Renasa submitted that the bar was set too high by requiring Renasa to prove recklessness on the part of Watson. [48] In view of the conclusion that I have reached on the alternative defence, it is not necessary to consider whether or not the full court in Santam Limited v CC Designing CC, and accordingly the court a quo too, correctly interpreted clause 5. Having regard to the wording of clause 5, it is at the very least clear that to require an insured to take steps to prevent a loss, proof of foreseeability of loss eventuating is required. This would require proof that the reasonable person in the position of the insured would have foreseen the reasonable possibility of the loss eventuating and would therefore have taken reasonable steps to prevent same. [49] As recorded earlier, Renasa itself contends that it is inconceivable that an unknown arsonist would have risked manually igniting the fire during this critical period. This proposition was put to Watson during cross-examination and he agreed with it, as appears from the following extract of the record: „. . . it is inconceivable, and I put it that high, that he [the arsonist] would have done it on the first day of work . . . between 8:30 and 9:30 ─ I would say it is inconceivable that anybody would do that. I totally agree with you.‟ [50] It therefore became common cause that a reasonable person in the position of Watson would not have foreseen, as a reasonable possibility, that an unknown arsonist would have attempted to manually ignite the fire after Watson‟s departure from the premises. It accordingly follows that a reasonable person would not have foreseen, as a reasonable possibility, that his or her conduct in leaving the premises unattended during this period, would cause loss to eventuate by virtue of the fire being ignited manually by an unknown arsonist. Therefore, in these circumstances, Watson could hardly have been required to take steps to guard against loss caused by an eventuality which was inconceivable. I accordingly conclude that the alternative defence of Renasa also had to fail. [51] In the result the appeal is dismissed with costs. ________________________ P B FOURIE ACTING JUDGE OF APPEAL APPEARANCES: For Appellant: R W F Macwilliam SC Instructed by: Everinghams Inc, Cape Town Webbers, Bloemfontein For Respondent: A D Brown Instructed by: De Klerk and Van Gend Inc, Cape Town McIntyre and Van der Post, Bloemfontein

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL FROM The Registrar, Supreme Court of Appeal DATE 11 March 2011 STATUS Immediate Please note that the media summary is for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal. Renasa Insurance Company Limited v Watson (32/2014) [2014] ZASCA 13 (11 March 2016) This appeal has its origin in a fire that erupted during the morning of 10 January 2011 in industrial premises in Elsies River, Cape Town. Pursuant thereto the respondents sought indemnification from their insurer, the appellant, for the loss they suffered as a consequence of the fire. The insurer repudiated the claims and the Western Cape High Court found in favour of the respondents awarding them their respective claims. This finding was upheld by the Supreme Court of Appeal on the basis that the appellant had failed to discharge the onus of proving its defence, namely that the first respondent was the arsonist who had set fire to the premises, alternatively that the respondents are precluded from claiming loss due to a failure to take reasonable steps and precautions to prevent the loss. --- ends ---

4063

non-electoral

2023

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Reportable Case no: 534/2022 In the matter between: DISCOVERY INSURE LIMITED APPELLANT and TSHAMUNWE MASINDI RESPONDENT Neutral citation: Discovery Insure Limited v Masindi (534/2022) [2023] ZASCA 101 (14 June 2023) Coram: PETSE AP and SALDULKER, MABINDLA-BOQWANA and WEINER JJA, and MASIPA AJA Heard: 10 May 2023 Delivered: 14 June 2023 Summary: Insurance policy – interpretation of terms of policy providing for forfeiture of benefits under policy – enforceability of such terms – whether a partly fraudulent and partly genuine claim results in forfeiture of entire claim, retrospective from either date of reported incident or actual incident date, entitling insurer to repayment of amounts already paid arising from such incident. ORDER On appeal from: Gauteng Division of the High Court, Johannesburg (Khumalo J, sitting as court of first instance): The appeal is upheld with costs. Paragraphs 1, 2 and 3 of the order of the high court are set aside and substituted with the following: ‘1 Judgment is granted against the defendant in favour of the plaintiff for: (a) Payment of the sum of R1 594 980.12. (b) Interest on the aforesaid amount at the rate of 10.25% per annum calculated from 8 June 2017 to date of final payment.’ JUDGMENT Petse AP and Masipa AJA (Saldulker, Mabindla-Boqwana and Weiner JJA concurring): Introduction [1] This appeal raises a crisp and interesting interpretation issue, namely whether a partly fraudulent and partly genuine claim arising from the same incident results in the forfeiture by the insured of the claim in its entirety. An allied issue, if the principal question is answered in the affirmative, is this: Is the insurer, in that event, entitled to repayment of the amounts already paid to the insured, in settlement of the insured's claim, arising from the same incident, when it is subsequently discovered that part of the claim was tainted by fraud? [2] The appellant, Discovery Insure Limited (Discovery), says that both questions must be answered in the affirmative. For his part, the respondent, Mr Tshamunwe Masindi, says the answer to both questions is No. The answer to these questions hinges on the interpretation of the terms of Discovery's insure plan policy contract (the policy) that the respondent took out with Discovery during April 2016, with effect from 1 May 2016. [3] On 14 December 2017 Discovery commenced the present proceedings in the Gauteng Division of the High Court, Pretoria (the high court) against the respondent in which Discovery sought repayment of the sum of R1 647 592.67 together with ancillary relief and costs of suit. The respondent resisted the claim on various grounds. In due course the action came on trial before Khumalo J. The learned Judge allowed the claim in part and ordered the respondent to pay a sum of R675 000 to Discovery together with interest thereon and costs of suit on the scale as between attorney and client. With leave of the high court, Discovery now appeals against part of the judgment to this Court. Background facts [4] The essential facts, which are largely common cause, are the following. As already indicated above, the respondent took out the policy for specified insured risks, described as a Discovery Insure Plan, to insure, inter alia, his dwelling in Pretoria and household contents, against certain risks resulting in total loss or damage howsoever caused. The policy provided, amongst other things, that if the risks insured against eventuated, resulting in damage to his residence, rendering it unsuitable for human habitation, Discovery would be obliged to compensate the respondent for the resultant damage to the buildings and household contents, and, where applicable, to reimburse the respondent for his out of pocket expenses incurred for what the policy described as emergency accommodation. [5] It is common cause that the policy further provided, amongst other things, that: if any portion of a claim lodged with Discovery by the respondent is fraudulent, Discovery would be entitled to cancel the policy with retrospective effect from the date of the reported incident, or alternatively the actual date of the incident – whichever was the earlier. Consequently, Discovery asserted that it had a right to reclaim all amounts paid to the insured, ie the respondent in this instance, subsequent to the retrospective cancellation date. [6] On 11 November 2016, following the occurrence of the risk insured against, the respondent submitted a single claim under the building section of the policy for losses caused by storm damage to his residence. The claim was made up of two components. The first represented costs of repairs to the respondent's residence and damage to household contents. The second was for emergency accommodation. Consequently, at various times between 7 December 2016 and 25 May 2017, Discovery paid to the respondent the aggregate amount of R1 594 980.12 in settlement of both components of the claim. We pause here to mention that the sum of R675 000 represented the amount claimed in respect of emergency accommodation. This was the portion of the claim tainted by fraud. This is not in dispute. The sum of R972 597.67 was paid by Discovery to the respondent in settlement of the damage to the respondent's residence and household contents component. This component of the claim, it is common cause, was untainted by fraud and therefore legitimate. [7] When evidence of the fraud came to light, following investigations undertaken by Discovery, Discovery notified the respondent that it was exercising its right, as it was entitled in terms of the policy, to cancel the policy with retrospective effect from the date of the incident, ie 10 November 2016, that had triggered the claim. In addition, Discovery claimed repayment of the full amount it had already paid out to the respondent between 7 December 2016 to 25 May 2017. As already mentioned, the respondent failed to repay the amount reclaimed, prompting Discovery to institute the action mentioned in paragraph 3 above against the respondent. [8] As already indicated above, the respondent resisted the claim on various grounds. In particular, the respondent asserted that nowhere does the policy contain an express provision to the effect that on the retrospective termination of the policy, the insured would be liable to repay all the benefits already paid by the insurer before termination including benefits relating to claims not tainted by fraud. We pause here to mention that it was, however, not in dispute that on the occurrence of any of the events stipulated in clause 5.13 of the policy plan, Discovery would acquire a right to cancel the policy retrospectively at its sole discretion. Following a trial, the high court was satisfied that part of the claim lodged by the respondent was fraudulent. [9] In the event, and contrary to what Discovery had asserted, the high court held that Discovery was not entitled to repayment of the full amount claimed. Rather, the high court held, Discovery was entitled to repayment of only that portion of the claim that was tainted by the undisputed fraud. The underlying reasoning of the high court was, in essence, predicated on two bases. First, the high court held that the insured had acquired accrued rights to the payment of the genuine portion of his claim, and that those rights remained intact, unaffected by the subsequent fraud. Secondly, it held that the policy clause that provided for forfeiture of claims tainted by fraud was, for all intents and purposes, a penalty clause, in terms of the Conventional Penalties Act (the Act).1 Thus, the high court concluded, its enforcement would – to the extent that to do so would enable Discovery to recoup even the amount paid in settlement of the genuine portion of the insurance claim – result in disproportionate prejudice to the respondent. Consequently, the high court declined to enforce the clause. [10] In this regard, it bears mentioning that in coming to this conclusion, the high court heavily relied on the decision of this Court in Lehmbecker's Earthmoving and Excavators (Pty) Ltd. v Incorporate General Insurances Ltd.2 There, this Court held that the words 'all benefits under this policy shall be forfeited' upon the making of a fraudulent claim were clearly capable of bearing the meaning that, as from the time that a fraudulent claim was made, the insured should have no further benefit or claim under the policy, and, therefore, valid claims already accrued and those already paid out to the insured, remain intact and unaffected by subsequent, unrelated fraudulent claims. In Lehmbecker's Earthmoving this Court, in essence, held that the comparable clause there under consideration could not be said to have unequivocally provided for forfeiture of valid claims which had already accrued prior to the fraudulent claim.3 We shall revert to this aspect later. Issues [11] There are three cardinal issues that fall to be determined in this appeal. They are: 1 The Conventional Penalties Act 15 of 1962. 2 Lehmbecker's Earthmoving and Excavators (Pty) Ltd. v Incorporate General Insurances Ltd 1984 (3) SA 513 (A) (Lehmbecker's Earthmoving). 3 Ibid at 522A-D. (a) First, the interpretation of clause 5.13 read with clause 5.5 of the Plan Guide – which is the schedule to the policy – and the Agreement of Loss, which is an integral part of the Plan Guide. More pertinently, the appeal raises the question whether these clauses, properly construed, entitle Discovery to repayment of all amounts paid to the respondent subsequent to the insured event, when the insured, ie the respondent, with full knowledge of his misrepresentation, submitted a partly fraudulent claim; (b) Secondly, whether the doctrine of accrued rights finds application in the context of the facts of this case, and if so, whether the relevant clauses, which are central to this appeal, operate to disgorge the compensation already paid to the respondent in respect of the genuine portion of his claim; (c) Thirdly, whether the high court was correct in its characterisation of the relevant clauses of the Plan Guide, ie clauses 5.13 and 5.5, as constituting penalty clauses, thereby justifying the high court's refusal to enforce the clauses in question. We pause here to mention that insofar as the third issue is concerned, neither party had raised it before the high court. Nor did the high court afford the parties the opportunity to address the issue. We shall revert to this aspect later. [12] It is convenient at this stage to set out the two clauses which are central to the outcome of this appeal. These are clauses 5.13 and 5.5 of the Plan Guide. Clause 5.13, which is headed 'Fraud, misrepresentation and inaccurate information', reads as follows: 'All benefits in terms of this Plan in respect of any claim will be lost and this plan may be voided or cancelled at our discretion:  Where there is a misrepresentation, non-disclosure, misdescription by you or anyone acting on your behalf; or  If false or incomplete information is supplied for any fact and/or circumstance in connection with an application for cover or in connection with a claim in terms of this Plan by you or anyone acting on your behalf; or  If any claim or part thereof under this Plan is in any way fraudulent, or if fraudulent means or devices are used by you or any acting on your behalf to get any benefit under this Plan is occasioned by your intentional conduct or any person acting on your behalf or with your involvement;  If any fraudulent information and/or document whether created by you or any other party is provided to us by you or anyone acting on your behalf or with your involvement in support of any claim under this Plan and whether or not the claim is itself fraudulent.  If the size of any claim is inflated by you or anyone acting on your behalf or with your involvement, for any reason whatsoever, and whether the claim itself is fraudulent. Where any benefit under this Plan is forfeited in circumstances set out in this section, we will have the right to cancel your Plan retrospective to the reported incident date or actual incident date, whichever is the earliest.' [13] Clause 5.5, which is headed 'Breach of conditions requiring your assistance', reads as follows: 'We reserve the right to cancel your Plan and claim repayment from you for any amounts we have paid in settlement of your claim if you breach or fail to comply with our procedure and the rules set out in this Plan Guide.' [14] It bears mentioning that our courts have on numerous occasions in the past pertinently observed that fraudulent insurance claims are not a rare phenomenon. Regrettably, such claims appear to be rising unabated. In order to protect themselves against fraudulent claims, insurers 'as masters of their own policies'4 have now resorted to incorporating in their policy contracts appropriate clauses designed to protect themselves against such claims. Such clauses, as a general rule, provide for forfeiture of the benefits that the insured would ordinarily derive from the policy in the absence of fraud or misrepresentation of the true facts. This then raises the question whether clauses 5.5 and 5.13 of the Plan Guide quoted above go far enough to achieve this purpose. [15] In the high court, as in this Court, the fate of the litigation hinged on the meaning and import of clauses 5.5 and 5.13 of the Plan Guide. Thus, it is necessary to say something about the proper approach to interpretation of documents, whether statutes, or contracts, or other documents. This approach was restated and clarified in the oft-cited decision of this Court in Natal Joint Municipal Pension Fund v Endumeni Municipality 5 in which Wallis JA, writing for the unanimous court, put it thus: 'Interpretation is the process of attributing meaning to the words used in a document, be it legislation, some other statutory instrument, or contract, having regard to the context provided 4 Schoeman v Constantia Insurance Co Ltd [2003] ZASCA 48; [2003] 2 All SA 642 (SCA) para 24 (Schoeman). 5 Natal Joint Municipal Pension Fund v Endumeni Municipality [2012] 2 All SA 262 (SCA); 2012 (4) SA 593 (SCA) (Endumeni). by reading the particular provision or provisions in the light of the document as a whole and the circumstances attendant upon its coming into existence. Whatever the nature of the document, consideration must be given to the language used in the light of the ordinary rules of grammar and syntax; the context in which the provision appears; the apparent purpose to which it is directed and the material known to those responsible for its production...A sensible meaning is to be preferred to one that leads to insensible or unbusinesslike results or undermines the apparent purpose of the document.'6 [16] The learned Judge of Appeal continued: 'In resolving the problem the apparent purpose of the provision and the context in which it occurs will be important guides to the correct interpretation. An interpretation will not be given that leads to impractical, unbusinesslike or oppressive consequences or that will stultify the broader operation of the legislation or contract under consideration.'7 [17] There are also decisions that have emphasised that the process of interpretation is a unitary exercise, not a mechanical consideration of the text, context and purpose of the instrument under consideration.8 Most recently, the essence of what the interpretative exercise entails was explained by Unterhalter AJA in Capitec Bank Holdings Limited and Another v Coral Lagoon Investments 194 (Pty) Ltd and Others 9 thus: 'It is the language used, understood in the context in which it is used, and having regard to the purpose of the provision that constitutes the unitary exercise of interpretation. I would only add that the triad of text, context and purpose should not be used in a mechanical fashion. It is the relationship between the words used, the concepts expressed by those words and the place of the contested provision within the scheme of the agreement (or instrument) as a whole that constitutes the enterprise by recourse to which a coherent and salient interpretation is determined.'10 6 Ibid para 18. 7 Ibid para 26. 8 See, for example, in this regard: Chisuse and Others v Director-General, Department of Home Affairs and Another [2020] ZACC 20; 2020 (10) BCLR 1173 (CC); 2020 (6) SA 14 (CC) para 52; University of Johannesburg v Auckland Park Theological Seminary and Another [2021] ZACC 13; 2021 (8) BCLR 807 (CC); 2021 (6) SA 1 (CC) para 65. 9 Capitec Bank Holdings Limited and Another v Coral Lagoon Investments 194 (Pty) Ltd and Others [2021] ZASCA 99; [2021] 3 All SA 647 (SCA); 2022 (1) SA 100 (SCA). 10 Ibid para 25. [18] It is against this backdrop, and bearing in mind the principles of interpretation discussed above, that we now turn to the merits of the case. [19] In the high court the fate of the litigation hinged on the question whether clauses 5.13 and 5.5, on their proper interpretation, had the effect of depriving the respondent of 'accrued rights'. We have put the words 'accrued rights' in inverted commas for reasons that will become apparent later. As the high court saw it, the question was whether the respondent was liable to refund the moneys already paid to him by Discovery, in settlement of his claim for loss and emergency accommodation, even in respect of items that were not tainted by fraud, before the cancellation of the policy. The high court accepted that the respondent was not entitled to any benefits under the policy after the cancellation of the policy. Therefore, the high court, in the view it took of the matter, proceeded to consider whether Discovery was, on the evidence presented, entitled to re-imbursement of the amounts already paid in respect of the genuine portion of the claim prior to cancellation of the policy. In this regard, the high court appeared to have taken the view that the termination of the policy took place after payment in settlement of the claim had already been made to the respondent. Hence, its decision against Discovery on this score. [20] Relying on two decisions of this Court in Lehmbecker's Earthmoving11 and Schoeman12 the high court found, in the first place, that the cancellation clause upon which Discovery relied did not affect the respondent's genuine claims. Secondly, the high court held that the relevant clauses did not affect rights that had already accrued to the respondent. In the third place, the high court opined that clauses 5.13 and 5.5, in any event, amounted to penalty clauses and therefore fell foul of the provisions of the Act. Thus, the high court concluded that clauses 5.13 and 5.5 were, by virtue of being penalty clauses, not enforceable. We consider all three bases that were the pillars on which the edifice of the high court's reasoning rested, in turn, below. [21] By way of prelude it is apposite at this juncture to say the following. As a general rule insured persons are under a duty to act in good faith in their dealings with insurers. 11 Footnote 1 above at 522E-F. 12 Schoeman para 24. And that, ordinarily, a wilful lodgement of a false claim by the insured constitutes a breach of that duty of good faith which entitles the insurer to terminate the policy. That eventuality would then relieve the insurer, in the absence of an express term to the contrary, of liability under the policy from the time of termination of the policy. The effect of this would be that rights and obligations that had accrued before termination would remain unaffected by the termination.13 [22] But as we now know, in this case Discovery seeks more than what has been stated in the preceding paragraph. Pinning its faith on clauses 5.13 and 5.5, Discovery requires of this Court to ascribe a meaning to clause 5.13 that recognises the right to terminate the policy with retrospective effect from the date, not of the discovery of the respondent's fraud, but from the date on which the incident that gave rise to the claim occurred, namely 10 November 2016. If Discovery's contention is upheld it would result in the respondent also forfeiting entitlement to all the amounts already paid to him between 5 December 2016 and 26 April 2017. This then raises the question whether, in the context of the facts of this case, this is legally and contractually tenable. In this regard clauses 5.13 and 5.5 take the centre stage. The parties' contentions [23] The submissions advanced on behalf of Discovery may, for convenience, be shortly summarised as follows: (i) clause 5.13 explicitly provides that lodgement of a fraudulent claim by the insured results in the benefits under the policy being forfeited if the insurer elects to cancel the policy; (ii) the forfeiture of benefits under the policy entailed that the insured would not only lose the right to claim insurance benefits under the policy but would also lose the right to retain the proceeds if the benefits have already been paid out; (iii) having regard to the fact that termination of the policy would be retrospective from the date on which the incident which gave rise to the claim arose, (ie 10 November 2016), the insurer is entitled to reclaim the full amount if part of the claim was tainted by fraud. 13 See, for example, in this regard: Nash v Golden Dumps (Pty) Ltd [1985] ZASCA 6; [1985] 2 All SA 161 (A) at 22D-I; Thomas Construction (Pty) Ltd. (in Liquidation) v Grafton Furnitue Manufacturers (Pty) Ltd 1988 (2) SA 546 (AD) at 563J-564D. [24] In support of its contentions in relation to (i) and (ii) in the preceding paragraph, Discovery called into aid Santam Bpk v Potgieter.14 In Santam it was held that the fact that the insured forfeited all the benefits under the policy with retrospective effect meant, as its corollary, that the insurer was entitled to the repayment of all the amounts previously paid to the insured pursuant to the latter's claim. [25] We have earlier noted that forfeiture clauses of the kind like the ones under consideration in this case are now a common feature in insurance contracts.15 And the rationale for such clauses was explained in Schoeman.16 As a general rule such clauses are viewed as valid and therefore enforceable.17 As Lehmbecker's Earthmoving tells us, they are designed to protect the insurer against fraudulent claims and, in the words of Miller JA, to 'discourage attempts to gain undue advantage [by the insured] by lodging falsely inflated claims'.18 Thus, if unbeknown to the insurer, the insured submits a fraudulent claim which is then paid out, the former would be entitled to recover the full amount paid out to the latter.19 [26] On behalf of the respondent it was accepted that the issues raised in this case fall to be determined with reference to clause 5.13 of the Plan Guide. Furthermore, counsel for the respondent readily acknowledged without question that, insofar as the fraudulent component of the respondent's claim is concerned, the respondent is liable to pay back the ill-gotten gains because he was not entitled thereto in accordance with the ordinary principles of our law. [27] However, to the extent that Discovery invokes clause 5.13 of the policy to seek repayment of the untainted component of the claim, the respondent contended that this particular clause does not provide such a remedy. Counsel for the respondent laid great stress in his heads of argument upon the fact that clause 5.13 'does not contain an express provision that determines that on the retrospective termination of the policy the defendant becomes liable for the repayment of any or all benefits paid by 14 Santam Bpk v Potgieter 1997 (3) SA 415 (O) (Santam). 15 See, for example, Lehmbecker's at 519B-E. 16 Schoeman para 25. 17 Lehmbecker's Earthmoving at 520F-G. 18 Ibid at 520F-G. 19 See generally, for example, Santam at 423E; E.R Hardy Ivamy General Principles of Insurance Law 6ed at 114 para 176. [Discovery] in respect of claims not tainted by fraud'. Much was also made of the fact that the 'express wording of clause 5.13 is not wide enough to allow an interpretation of this clause to include a repayment of claims not tainted by fraud'. [28] According to the respondent, Discovery might well have had a point if it had incorporated an express clause 'as [insurers are] masters of their policies' entitling it to validly reject a partly fraudulent claim and thereby obliging the insured to repay even the portion of the claim not tainted by fraud. On its terms, so the argument went, clause 5.13 does not permit the importation of a tacit term to this effect. It was then argued, with reference to Lehmbecker's Earthmoving and Schoeman, that Discovery's reliance on clause 5.13, in particular, was misplaced. [29] The contentions advanced by counsel for the respondent relying on Lehmbecker's Earthmoving and Schoeman render it necessary to analyse those decisions to determine whether they support those contentions in the context of the facts of this case. As we see it, those cases are materially distinguishable on their facts from the facts of this case. The relevant clause under consideration in Lehmbecker's Earthmoving reads as follows:'... if any claim be in any respect fraudulent ..."all benefit under this policy shall be forfeited".' It was not in dispute in Lehmbecker's Earthmoving that the insured had submitted a fraudulent claim in relation to an incident different to the one in respect of which the insured had submitted a genuine claim. The question then arose as to whether the fact that the insured had lodged a fraudulent claim under the same policy, albeit arising from a different incident, had the effect of depriving the insured of his entitlement to compensation for the genuine claim. This Court recognised that the answer to this question depended on whether the relevant clause providing for forfeiture went far enough to support the contentions of the insurer. This Court acknowledged that the clause there under consideration was designed to 'lend protection to the insurer against fraudulent claims and to discourage attempts to gain undue advantage by lodging falsely inflated claims'.20 After analysing various judgments here and abroad, Miller JA, whilst accepting that the language of the clause was undoubtedly wide, nevertheless opined that 'in the absence of clear and entirely unambiguous provision therefor in the 20 Lehmbecker's Earthmoving at 520F-G. contract' the clause he considered in that case did not affect rights 'which had accrued and became due and payable prior to the subsequent breach causing the premature termination of the policy...'.21 [30] The next decision to be mentioned and heavily relied upon by the respondent is Schoeman. There, this Court had to consider whether it could as a matter of principle import penalty principles of English law to address the question whether the insured could be absolved of liability in circumstances where the insured had inflated the amount of her claim. In declining this invitation, this Court held that there would be no justification for doing so. [31] Writing for the unanimous court, Marais JA said the following: 'The implications of that judgment upon a case where there is only one incident giving rise to a claim and that claim is partly, but not wholly, fraudulent are not entirely clear. By parity of reasoning it can be argued that the right to claim the indemnity accrued before the making of the partly fraudulent claim and that the subsequent fraud cannot preclude the insured from claiming what was truly due under the policy. Such an argument could not succeed in the face of an express clause such as there was in Lehmbecker’s case for it would render the clause entirely nugatory. But where there is no such clause it is difficult to see why the reasoning based upon the accrual of the liability to indemnify prior to the fraud should not lead to the same conclusion.'22 Emboldened by the last sentence of what Marais JA said in the above quoted passage, counsel for the respondent argued that in the present case clause 5.13 does not go far enough so as to encompass genuine claims to absolve the insurer of liability to indemnify the insured in respect of rights that had already accrued prior to the fraud that led to the retrospective termination of the policy by the insurer. In this case, it will be recalled that the total proceeds of the genuine component of the respondent's claim in respect of the damage to his residence and household contents amounted to R972 592.67. It is this amount that the respondent asserted is not recoverable by Discovery because it had not only already accrued but also paid out to him at the time when Discovery terminated the policy. 21 Ibid at 522E-F. 22 Para 20. [32] Counsel's argument is plainly unsustainable. The answer to it is to be found in clause 5.13 itself. In our view the clause is clear and unambiguous. Thus, effect must be given to it. In addition, to construe clause 5.13 as the respondent would have it, would subvert the well-established tenets of interpretation of documents. What is more, the underlying purpose that clause 5.13 was designed to serve, namely to protect Discovery against fraudulent claims and 'discourage attempts [by insured persons] to gain undue advantage by lodging falsely inflated claims' would be undermined. As Wallis JA pertinently observed in Commissioner for the South African Revenue Service v United Manganese of Kalahari (Pty) Ltd '...context is as important in construing statutes as it is in construing contracts or other documents...'23 And, more than a decade previously in Bato Star Fishing (Pty) Ltd v Minister of Environmental Affairs & Others,24 the Constitutional Court made plain that 'the emerging trend in the interpretation of documents is to have regard to the context in which the words occur, even where the words to be construed are clear and unambiguous'.25 (Emphasis added.) [33] What is more, the respondent's contentions to the contrary conveniently ignore what Marais JA said in Schoeman that: 'When there is added to that the fact that insurance companies are masters of their own policies in the sense that they are free to unilaterally devise them, the insured has no say in the process, and that it is a simple matter to include an appropriate clause to protect the insurer against fraudulent claims by providing for forfeiture...'26 Consequently, in incorporating clause 5.13 in the policy in issue here, Discovery did precisely what Marais JA had in mind when he made the remarks just quoted above. And we can conceive of no cogent reasons why full effect should not be given to this clause. [34] In sum, when the respondent purported to submit his claim on 11 November 2016 there was no longer an extant insurance policy because it had already been terminated with retrospective effect from 10 November 2016 – the date of the incident 23 Commissioner for the South African Revenue Service v United Manganese of Kalahari (Pty) Ltd [2020] ZASCA 16; 2020 (4) SA 428 (SCA) para 17. 24 Bato Star Fishing (Pty) Ltd v Minister of Environmental Affairs & Others 2004 (4) SA 490 (CC). 25 Ibid para 90. 26 Schoeman para 24. – pursuant to clause 5.13. Therefore, to ascribe to clause 5.13 the meaning for which the respondent contended would, as Marais JA put it in Schoeman, 'render the clause entirely nugatory'.27 [35] It remains briefly to deal with the final argument advanced on behalf of the respondent. It is this. The forfeiture clause (ie clause 5.13) is to all intents and purposes a penalty clause which is, for that reason, not enforceable. It is not necessary to delve into this aspect. It suffices merely to point out that neither party raised this issue in their pleadings. Nor was it canvassed at the trial. It emerged for the first time in the judgment of the high court. The parties were at no stage alerted to it. It bears repeating that this Court has more than once cautioned against Judges straying outside of the facts presented to the court by the litigants. In Fischer and Another v Ramahlele and Others28 this Court said the following on this score: 'Turning then to the nature of civil litigation in our adversarial system it is for the parties, either in the pleadings or affidavits, which serve the function of both pleadings and evidence, to set out and define the nature of their dispute and it is for the court to adjudicate upon those issues. That is so even where the dispute involves an issue pertaining to the basic human rights guaranteed by our Constitution, for ‘it is impermissible for a party to rely on a constitutional complaint that was not pleaded’. There are cases where the parties may expand those issues by the way in which they conduct the proceedings. There may also be instances where the court may mero motu raise a question of law that emerges fully from the evidence and is necessary for the decision of the case. That is subject to the proviso that no prejudice will be caused to any party by its being decided. Beyond that it is for the parties to identify the dispute and for the court to determine that dispute and that dispute alone. It is not for the court to raise new issues not traversed in the pleadings or affidavits, however interesting or important they may seem to it, and to insist that the parties deal with them. The parties may have their own reasons for not raising those issues. A court may sometimes suggest a line of argument or an approach to a case that has not previously occurred to the parties. However, it is then for the parties to determine whether they wish to adopt the new point. They may choose not to do so because of its implications for the further conduct of the proceedings, such as an adjournment or the need to amend pleadings or call additional 27 Schoeman para 20. 28 Fischer and Another v Ramahlele and Others [2014] 3 All SA 395 (SCA) (Fischer). See also: Advertising Regulatory Board NPC and Others v Bliss Brands (Pty) Ltd [2022] ZASCA 51; [2022] 2 All SA 607 (SCA); 2022 (4) SA 57 (SCA) paras 9-10. evidence. They may feel that their case is sufficiently strong as it stands to require no supplementation. They may simply wish the issues already identified to be determined because they are relevant to future matters and the relationship between the parties. That is for them to decide and not the court. If they wish to stand by the issues they have formulated, the court may not raise new ones or compel them to deal with matters other than those they have formulated in the pleadings or affidavits.'29 [Citations omitted.] [36] For all the aforegoing reasons, we do not agree with the interpretation of clause 5.13 favoured by the high court. As already stated, its interpretation entirely overlooked the fact that clause 5.13 explicitly provides that upon breach of its terms, Discovery would be entitled to terminate the policy with retrospective effect from the date of the incident giving rise to the claim, ie 10 November 2016. Bearing in mind this crucial consideration, we are driven to the conclusion that when the respondent lodged the claim on 11 November 2016, he had already forfeited all the benefits under the policy. Simply put, once the policy was terminated on 10 November 2016 there was no policy in extant under which the respondent could claim any of the benefits that would otherwise have been available to him had the policy not been terminated a day earlier. Concomitantly, Discovery was under no obligation to pay out any moneys to the respondent on 5 December 2016 onwards because the policy had, on 10 November 2016, already terminated. [37] Accordingly, we consider that Discovery was entitled to a refund of all the moneys previously paid out by it to the respondent and, thus, to the relief it sought in the high court. In these circumstances the appeal should, therefore, succeed. There was no issue in relation to costs, which must therefore follow the result. Order [38] In the result, the following order is made: The appeal is upheld with costs. Paragraphs 1, 2 and 3 of the order of the high court are set aside and substituted with the following: ‘1 Judgment is granted against the defendant in favour of the plaintiff for: (a) Payment of the sum of R1 594 980.12. 29 Ibid paras 13-14. (b) Interest on the aforesaid amount at the rate of 10.25% per annum calculated from 8 June 2017 to date of final payment.’ ____________________ X M PETSE ACTING PRESIDENT OF THE SUPREME COURT OF APPEAL __________________________ M B S MASIPA ACTING JUDGE OF APPEAL APPEARANCES For appellant: L M Spiller Instructed by: Keith Sutcliffe & Associates Incorporated, Randburg Hendre Conradie Inc (Rossouws Attorneys), Bloemfontein For respondent: N C Louw (heads of argument prepared by V Vergano) Instructed by: Warrener de Agrela and Associates, Edenvale Honey Attorneys, Bloemfontein

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 14 June 2023 Status: Immediate The following summary is for the benefit of the media in the reporting of this case and does not form part of the judgments of the Supreme Court of Appeal Discovery Insure Limited v Masindi (534/2022) [2023] ZASCA 101 (14 June 2023) Today, the Supreme Court of Appeal (SCA) upheld with costs an appeal against the judgment of the Gauteng Division of the High Court, Johannesburg (the high court). The issue before the SCA was whether Discovery Limited (Discovery) was entitled to terminate the insurance policy with retrospective effect from the date of the occurrence of the incident giving rise to the claim, and reclaim the monies paid to Mr Masindi pursuant to a partially fraudulent claim. Mr Masindi took insurance with Discovery during May 2016 in terms of which he insured, amongst others, his residential property located in Pretoria and household contents. The policy covered repairs to the insured residence and made provision for alternate emergency accommodation in the event the insured property was damaged and, as a result became uninhabitable. The material terms of the policy were that if any claim or part thereof was fraudulent Discovery would have the absolute right to cancel the policy retrospectively from the date of the reporting of the incident or the actual date of the incident, in which event the insured would forfeit all the benefits under the policy from the date of cancellation. On 11 November 2016, an incident occurred which caused damage to the insured property and rendered the residence uninhabitable as also loss of household contents. Mr Masindi claimed for the repairs to his insured residence, compensation for damages to the household contents and reimbursement for the emergency accommodation expenses. Unbeknown that part of the claim was fraudulent, Discovery paid the claim in full. Subsequently, it was discovered that part of the claim relating to emergency accommodation was fraudulent. Consequently, Discovery cancelled the policy retrospectively from 11 November 2016 and reclaimed the full amount it had paid out by way of compensation to Mr Masindi. The high court held that Discovery was only entitled to the portion of the claim that was not tainted by fraud. It deemed the fraud clause in the policy to be akin to a penalty clause which the high court found to be disproportionate to the prejudice suffered by Discovery as a result of the fraud, and consequently declined to enforce it. Concerning the merits of the appeal, the SCA considered three issues, namely: (i) the correct interpretation of the fraud clause; (ii) the application of the doctrine of accrued rights; and (iii) the characterisation by the high court of the fraud clause as a penalty under the Conventional Penalties Act and the consequent refusal to enforce it. The SCA accepted, as trite, that insurance companies have the right to incorporate comprehensive forfeiture clauses in their policies and where such clauses are included and are similar to the one upon which Discovery relied, then the insurer would be entitled to reclaim the full amount paid in settlement of the claim that subsequently turned out to be partly genuine and partly fraudulent. On the facts of the case, the SCA held that the doctrine of accrued rights found no application since there could be no rights accrued, as the forfeiture clause applied with retrospective effect from the date of the incident giving rise to the claim. Regarding the Conventional Penalties Act, it was held that this was not the issue before the high court as it had not been raised by the parties. The SCA also reiterated, with reference to judicial authority, that courts were not permitted to stray outside the issues raised by the litigants themselves. Hence, the appeal was upheld and the order of the high court set aside. ~~~~ends~~~~

191

non-electoral

2017

IN THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Case No: 1272/2016 Reportable In the matter between: COCHRANE STEEL PRODUCTS (PTY) LTD APPELLANT and M-SYSTEMS GROUP RESPONDENT Neutral citation: Cochrane Steel Products (Pty) Ltd v M-Systems Group (1272/2016) [2017] ZASCA 189 (13 December 2017) Coram: Navsa ADP and Ponnan and Bosielo JJA and Tsoka and Schippers AJJA Heard: 22 November 2017 Delivered: 13 December 2017 Summary: Disclaimer and admission in relation to the trade mark ‘CLEARVU’ – registration of mark giving no right to the exclusive use of the words ‘clear’ and view’ separately and apart from the mark – admission that the registration of this mark shall not debar others from the bona fide descriptive use in the course of trade of the words ‘clear view’ and ‘view’. ORDER On appeal from: Gauteng Division of the High Court, Pretoria (Basson J sitting as court of first instance): Save for the amendment of para 1.2 of the order of the court below by the deletion of the words ‘The trade mark registrant admits that’, the appeal is dismissed. JUDGMENT NAVSA ADP (Ponnan and Bosielo JJA and Tsoka and Schippers AJJA concurring): [1] The appellant, Cochrane Steel Products (Pty) Ltd (Cochrane), applied for the registration of the mark ‘CLEARVU’ in two categories, one in Class 6 (in respect of non-electric cables and wires of common metal; metal fences; metal mesh; pipes and tubes of metal) and another in Class 37 (in relation to building, construction, repair and installation services) of the International Classification of Goods and Services. The applications were opposed by M-Systems Group (Pty) Ltd (M- Systems), which at the time was a competitor of Cochrane in producing and installing fencing products. [2] The basis of the opposition was that the mark was not registerable in that: (i) it consists exclusively of an indication which may serve in trade to designate the kind, quality, intended purpose or other characteristics of the goods or service (s 10(2)(b) of the Trade Marks Act 194 of 1993 (the Act); (ii) it is not capable of distinguishing the goods and services for which it is to be used (ss 9(1) and 10(2)(a) of the Act). [3] The Gauteng Division of the High Court, Pretoria (Basson J), ordered the registration of the mark subject to the following: 1.1. The registration of this mark shall give no right to the exclusive use of the word “clear” and “view” separately and apart from the mark; 1.2. The trademark registrant admits that the registration of this mark shall not debar others from the bona fide descriptive use in the course of trade of the words “clear view” and “view”. [4] The reasons supplied by the court below for imposing those orders are exceptionally brief and are contained in the following two paragraphs: ‘52. In conclusion it is necessary to briefly deal with the opponent’s submission, although in the alternative, for the entry of one or more endorsements. More in particular it is submitted that the Court should not allow the applicant to become entitled to any exclusive right to the word “clear” or “view” (or “VU”) when used in relation to fences (separately from “CLEARVU”). 53. I am in agreement with this submission and [have] made it part of my order in so far as the words “clear” and “view” (not “VU”) is concerned.’ [5] It is solely against those orders that the present appeal by Cochrane, with the leave of the court below, is directed. M-Systems has since been placed in liquidation and the liquidators elected to abide the decision of this court. [6] In the two paragraphs that follow, I set out a pictorial depiction of some of the products manufactured by Cochrane together with descriptions employed by it in relation thereto. I also deal with how competitors in the fencing industry describe their products. [7] In its opposition to the registration of the mark, M-Systems rightly described Cochrane as a manufacturer of physical perimeter security barriers and provided pictures from the latter’s website depicting the fencing alongside the mark. The fencing products were described, inter alia, as an ‘invisible wall’ which apparently is a mark that belongs to Cochrane and as a ‘shadow wall’. A balustrade manufactured by Cochrane is described as transparent. Some of the pictorial depictions drawn from the website and supplied by M-Systems appear hereunder. It appears from what is set out above that a key characteristic of the fence is that whilst it serves as a barrier, it does not obstruct sight. The point made by M-Systems is that the misspelling in the composite mark ‘CLEARVU’ of the word ‘view’ does not detract from it being comprised in its ordinary meaning of the words ‘clear’ and ‘view’. [8] M-Systems, in its objection to the mark, supplied material from websites operated by a number of other companies within the security barrier industry in which they use the words ‘clear’ and ‘view’ in describing their fencing products. One company is called C-Thru Fencing which equates to fencing through which one has a view. Another competitor, Betafence, offers products called ‘Betaview’. Trellidor, also referred to as a competing company produced a product called ‘Trellidor Clear Guard’. Trellidor describes its products as ‘security screens that provide a clear view’. They go on to say that their products enable users to ‘enjoy the view without feeling vulnerable’, ‘allow unobstructed views of the outdoors’, ‘appear to be invisible while helping to protect against unwanted intruders’ and ‘provide security without detracting from the views or aesthetics of the premises’. Clear View Security Solutions, yet another competitor that sells a range of products which they describe as ‘clear security solutions’, including ‘clear bars’, ‘clear armed bars’ and ‘clear gates’. It explains on its website that all of its products ‘ensure that no light or view is lost’. In part of its answer to the objection, Cochrane stated that CLEAR VIEW is registered as a trade mark in the name of Clear View Security Solutions and says that there is no reason why the mark cannot be a good trade mark in relation to burglar bars made of impact resistant transparent Perspex-type material. [9] It is well to bear in mind certain foundational principles in relation to trade marks. Trade mark law is concerned with the conveyance of information regarding trade origin. At the heart of trade mark law is truth in competition.1 In Commercial Auto Glass (Pty) Ltd v BMW AG 2007 (6) SA 637 (SCA) para 8, Harms ADP said the following: ‘The object of trade mark law as reflected in s 34(1)(a) and (b) is to prevent commercial “speech” that is misleading. Trade mark use that is not misleading (in the sense of suggesting provenance by the trade mark owner) is protected, not only constitutionally but in terms of ordinary trade mark principles. As Justice Holmes said [in Prestonettes Inc v Coty 264 US 359 (1924) at 368]: “When the mark is used in a way that does not deceive the public, we see no sanctity in the word as to prevent its being used to tell the truth.”’ [10] The principles and precepts of trade mark law are abused when they are used, not for their legitimate purpose, but in order to prevent or inhibit competition. In Société des Produits Nestlé SA v Cadbury UK Ltd [2012] EWHC 2637 (Ch) Birss J said the following: ‘Conventional trade marks such as trade names (“Cadbury”) or logos (such as a glass and a half of milk on a bar of Cadbury’s Dairy Milk) do not give rise to the same conceptual problems as what have been called “exotic” trade marks such as smells, colours per se and other things. The attraction of a trade mark registration is that provided it is used and the fees are paid, it gives a perpetual monopoly. The problem is the same as the attraction but from the other perspective. Unless the registration of trade marks is kept firmly in its proper sphere, it is capable of creating perpetual unjustified monopolies in areas it should not.’ [11] More than 100 years ago Cozens-Hardy MR in the case In Re: Joseph Crossfield & Sons, Limited [1910] 1 Ch 13 (CA) made the following statement: ‘Wealthy traders are habitually eager to enclose part of the great common of the English language and to exclude the general public of the present day and of the future from access to the enclosure . . . The Court is careful not to interfere with other persons’ rights further 1 See Webster and Page South African Law of Trademarks, service edition 17 at 1-3, para 1.1. than is necessary for the protection of the claimant, and not to allow any claimant to obtain a monopoly further than is consistent with reason and fair dealing.’ [12] It is against that background that the orders of the court below, the subject of this appeal, have to be considered. Section 15 of the Act provides as follows: ‘If a trade mark contains matter which is not capable of distinguishing within the meaning of section 9, the registrar or the court, in deciding whether the trade mark shall be entered in or shall remain on the register, may require, as a condition of its being entered in or remaining on the register – (a) That the proprietor shall disclaim any right to the exclusive use of all or any portion of any such matter to the exclusive use of which the registrar or the court hold him not to be entitled; or (b) That the proprietor shall make such other disclaimer or memorandum as the registrar or the court may consider necessary for the purpose of defining his rights under the registration: Provided that no disclaimer or memorandum on the register shall affect any rights of the proprietor of a trade mark except such as arise out of the registration of the trade mark in respect of which the disclaimer is made.’ [13] Disclaimers are typically in the form set out in para 1.1 of the order made by the court below.2 A trade mark proprietor cannot bring an action for infringement in respect of the use of a disclaimed feature. But a disclaimer does not affect a proprietor’s right at common law and if he shows that use by the defendant of the disclaimed feature is likely to result in the defendant’s goods being passed off as the goods or services of the plaintiff he is entitled to an interdict.3 [14] Paragraph 1.2 of the order of the court below is in the form of an admission. This is a practice which is unique to South Africa. As pointed out by Webster and Page, the practice is common in the case of the deliberate misspelling of ordinary descriptive words which other traders may wish to use in relation to particular goods or services. Further, the admission is in respect of the word in its ordinary meaning.4 The authors go on to say the following: 2 Webster and Page South African Law of Trade Marks, para 9.18 at 9-16, service issue 19. 3 Webster and Page, para 9.19 at 9-16, service issue 19. 4 Webster and Page, para 9.20 at 9-17, service issue 19. ‘The practice is, however, not consistent and seems to have evolved into a requirement that an admission be entered whenever the particular feature is a misspelling of a word, whether such word is only remotely one which others may wish to use descriptively or whether it is in fact wholly descriptive or otherwise non-distinctive. In any event, since the phonetic equivalent of a non-distinctive word is itself non-distinctive it would seem to follow that if the word itself is one which ought to be disclaimed then its phonetic equivalent should also be disclaimed, and not only be the subject of an admission.’ The authors state that an admission may be called for where matter is not directly descriptive of the goods or services, but which could conceivably be used in advertising or in a manner not directly describing the goods. [15] Section 15 of the Act is not concerned with the question of whether a trade mark itself is incapable of distinguishing, but whether matter contained in a trade mark lacks this capability. In this regard see Cadbury (Pty) Ltd v Beacon Sweets & Chocolates (Pty) Ltd & another 2000 (2) SA 771 (SCA) para 4. Beacon’s composite mark in that case consisted of a plate of sweets, a little man made of sweets and a prominent blank space under the name Liquorice Allsorts. It was registered subject to the following disclaimer: ‘Registration of this trade mark shall give no right to the exclusive use of the sweet device [the plate], separately and apart from the mark. The applicant undertakes that, in use, the blank space shall be occupied only by matter of a wholly descriptive or non-distinctive character, or by a trade mark registered in the name of the applicant in respect of the same goods, or by a trade mark of which the applicant is a registered user in respect of the same goods, or by a trade mark of a registered user with the consent of the proprietor of such a mark or the blank space will be left vacant. The applicant undertakes that in use the trade mark will only be used in respect of goods containing or including liquorice or liquorice flavour.’ [16] Contending that the name Liquorice Allsorts is descriptive of the product and therefore not capable of distinguishing in the trade mark law sense, Cadbury applied, without attacking the validity of the original registration of the trade mark, for an additional disclaimer, namely that the registration ‘shall also give no right to the exclusive use of the name Liquorice Allsorts, separately and apart from the mark’. The court concluded that Beacon was not entitled to the exclusive use of Liquorice Allsorts because it was used by Beacon and others in the trade to describe the product and not to distinguish Beacon’s product from that of others.5 [17] In Cadbury, Harms JA recorded that since the court below had found in favour of Beacon the question of the exercise of a discretion in relation to the disclaimer did not arise. He noted that there was established authority that a court on appeal has an original discretion in that regard.6 [18] Paragraphs 13 and 14 of Cadbury are apposite. They read: ‘13. As was pointed out by the hearing officer in Philip Morris Inc’s Trade Mark Application [1980] RPC 527 at 532-3, a disclaimer is, theoretically, never necessary since registration of a trade mark cannot give rise to any rights except those arising from the mark as a whole. It has nonetheless a function. Primarily, it is to prevent the registration of a composite mark from operating so as to inhibit the use of the disclaimed element by others. Beacon, relying upon the fact that the name Liquorice Allsorts is the dominant part of the trade mark, is asserting trade mark rights in Liquorice Allsorts per se against others based upon this registration. It also has a pending application for the registration of Liquorice Allsorts simpliciter. This is therefore a textbook case for a disclaimer. . . . 14. The court below . . . accepted Beacon’s argument that Cadbury was sufficiently protected by the provisions of s 34(2)(c) of the Act which provides, inter alia, that a registered trade mark is not infringed by the use of any bona fide description or indication of the kind of the goods concerned. Cadbury, if its allegations are to be accepted, is thus without a disclaimer possessed of a perfect defence. I find the attitude unrealistic because I cannot see why Cadbury should be put to the trouble and expense of first manufacturing and selling and then be subjected to the risk of infringement litigation where the Legislature has given it a simple remedy akin to a declaration of rights to obtain certainty. I do realise that due to the proviso to s 15, Beacon may nevertheless attempt to assert rights to Liquorice Allsorts by means of a common-law action based upon passing-off (cf Antec International Ltd v South Western Chicks (Warren) Ltd [1997] FSR 278), but that is not a sufficient reason to refuse the relief sought since the nature of the protection provided by that action differs from trade mark protection.’ 5 See paras 2 and 12. 6 The following are the authorities there cited: Distillers Corporation (SA) Ltd v Stellenbosch Farmers Winery Ltd 1979 (1) SA 532 (T), Estee Lauder Cosmetics Ltd v Registrar of Trade Marks 1993 (3) SA 43 (T) and Media Workers Association of South Africa & others v Press Corporation of South African Ltd (‘Perskor’) 1992 (4) SA 791 (A). [19] In determining whether a discretion should be exercised in favour of the entry of a disclaimer and admission, it is necessary to have regard to Distillers Corporation (SA) Ltd v S.A. Breweries Ltd & another; Oude Meester Groep Bpk. & another v S.A. Breweries Ltd 1976 (3) SA 514 (A). There this court was considering, in relation to an application for an entry for disclaimers, the composite trade mark ‘Oude Meester’, which had undoubtedly become distinctive. At 552H-553A, the court said the following: ‘Now Meester is not a coined or invented word, inherently adapted to distinguish the goods to which it relates. It is, like its English equivalent, Master, and ordinary, well known word to be found in any dictionary. As a noun it ordinarily connotes a superior person of knowledge, experience, competence, skill, or authority; therefore, when used in a trade mark in relation to goods, normally it impliedly lauds the quality of those goods. The same commendation is usually conveyed when it is used adjectively of a person; and when so used of a thing, that the thing is made by a “master”.’ The court, whilst acknowledging that the mark ‘Oude Meester’, by its use as a whole had become distinctive, held that such use does not ‘ordinarily or necessarily mean that Meester per se has thereby become distinctive’. It found that the court below had accordingly correctly entered disclaimers. [20] In Distillers, Trollip JA also had to consider an order similar in form to para 1.2 in the present case. Trollip JA stated that what was there under consideration was not a disclaimer in the usual form. He had regard to the contention on behalf of one of the parties that it was not a disclaimer, but rather an ‘admission’. Noting that the entry of admissions was a peculiarly South African practice, particularly where the trade mark contains words that are regarded as being reasonably required for use in the trade, he stated that the purport or effect of admissions ‘does not appear to be entirely clear; and it is difficult to understand on what basis the distinction between disclaimers and admissions is drawn’. He proceeded to construe the ‘admission’ as a disclaimer and in that regard said the following: ‘That construction does not, in my view, do any violence to the wording or effect of the entry. For by not debarring others from using Meester, the entry in effect disclaims Distillers’ right to the exclusive use thereof.’7 The same applies here. 7 Pages 553G-554C of Distillers. [21] Returning to the facts of the present case, the ‘VU’ in the composite mark ‘CLEARVU’, is a deliberate misspelling of the ordinary word ‘view’ and is understandable in light of the nature of the product and what it intends to convey. To state, as Cochrane does, that it does not embody a misspelling of the ordinary English word ‘view’, but that it is a coined word which just happens to be the phonetic equivalent of the ordinary English word ‘view’ is to strain to avoid the implication that commonly, admissions are entered when there is a misspelling of a word and to seek a monopoly that extends beyond that which is acceptable. Moreover, as pointed out above in para 14, with reference to Webster and Page, the phonetic equivalent of a non-distinctive word is itself non-distinctive and it would seem to follow that if the word itself is one that ought to be disclaimed then its phonetic equivalent should also be disclaimed. [22] In my view, neither Cochrane, nor any other trader, is entitled to appropriate exclusively the ordinary English words ‘clear’ and ‘view’, which, in effect, constitute the composite mark. Furthermore, those words are commonly used descriptively in relation to fencing products. The registration of the mark should not operate to inhibit the use by others of the disclaimed elements. As in Cadbury, this case calls out for a disclaimer in the terms directed by the court below. Traders should not be put to the trouble and expense of manufacturing and selling their products and then be subjected to the risk of infringement litigation where the Act has provided a mechanism to provide certainty.8 It follows for the reasons set out above that the orders of the court below were warranted, save that para 1.2 should be amended by the deletion of the words: ‘The trademark registrant admits that’ [23] The following order is made: Save for the amendment of para 1.2 of the order of the court below by the deletion of the words ‘The trade mark registrant admits that’, the appeal is dismissed. 8 In this regard se para 14 of Cadbury in which the protection provided by s 34 (2)(c) of the Act was discussed. ______________________ M S Navsa Acting Deputy President Appearances: For the Appellant: O Salmon SC Instructed by: Rademeyer Attorneys c/o Klagsbrun Edelstein Bosman De Vries Inc., Pretoria Honey Attorneys, Bloemfontein For the Respondent: No appearance

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY - JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL FROM : The Registrar, Supreme Court of Appeal DATE 22 November 2017 STATUS Immediate Please note that the media summary is for the benefit of the media and does not form part of the judgment. Cochrane Steel Products (Pty) Ltd v M-Systems Group (1272/2016) [2017] ZASCA 189 (22 November 2017) MEDIA STATEMENT Save for a minor adjustment to the order of the Court below, the Gauteng Division of the High Court, Pretoria, the Supreme Court of Appeal today dismissed an appeal by Cochrane Steel Products against endorsements imposed by that court as a condition of registration of the trade mark ‘CLEARVU’. The court below ordered the registration of the mark subject to the following conditions: 1.1 The registration of this mark shall give no right to the exclusive use of the word ‘clear’ and ‘view’ separately and apart from the mark; 1.2 The trademark registrant admits that the registration of this mark shall not debar others from the bona fide descriptive use in the course of trade of the words ‘clear view’ and ‘view’. The SCA considered that the composite mark was a deliberate misspelling of the ordinary words ‘clear’ and ‘view’. It held that neither Cochrane nor any other trade was entitled to appropriate those words exclusively. Furthermore, those words were commonly used to describe perimeter fencing products such as those produced by Cochrane and its competitors. The SCA had regard to the second condition imposed by the court below and held that in truth it was a disclaimer rather than an admission. It found that the disclaimers were rightly entered and dismissed the appeal.

1398

non-electoral

2010

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Case no: 262 / 03 ROSCHEN SAMUELS Appellant and THE STATE Respondent ____________________________________________________________ Neutral citation: Samuels v The State (262/03) [2010] ZASCA 113 (22 September 2010) BENCH: NAVSA and PONNAN JJA and K PILLAY AJA HEARD: 14 SEPTEMBER 2010 DELIVERED: 22 SEPTEMBER 2010 SUMMARY: Sentence – possession of unlicensed firearm – over emphasis of general deterrence and public safety – on appeal 11 years after conviction and sentence – sentence of imprisonment set aside and replaced with a fine. ____________________________________________________________ ______________________________________________________________________ ORDER ______________________________________________________________________ On appeal from: The South Gauteng High Court (Johannesburg) (Epstein AJ and Roux AJ sitting as court of appeal). The appeal against sentence is allowed. The sentence imposed by the magistrate is set aside and there is substituted therefor the following sentence: ‘A fine of R6 000, payment whereof is deferred until 31 March 2011, or six months’ imprisonment’. ______________________________________________________________________ JUDGMENT ______________________________________________________________________ PONNAN JA ( JA and JA concurring): [1] The appellant, Roschen Samuels, was convicted pursuant to a guilty plea in the Johannesburg Regional Court of contravening s 2 read with s 39(2) of the Arms and Ammunitions Act 75 of 1969 (the Act) and sentenced to a term of imprisonment of two years. [2] In amplification of his plea the appellant adduced a statement in terms of s 112 of the Criminal Procedure Act 1997, which read: '1 I am the accused in this matter. I admit that I am guilty of contravening section 2 read with sections 39(2) and 40 of Act 75 1969. I admit that on the 22nd day of March 1999 and at or near Hamilton Street, Newclare, Johannesburg I did wrongfully and unlawfully have in my possession an arm to with a 9mm pistol. I admit that I was having the aforesaid pistol in my possession without being the holder of a valid licence for this arm. I admit that I was aware that it was illegal to carry or possess a firearm and/or pistol without the necessary licence for same and that my actions were punishable in law. I further wish to state that I have made this statement out of my own free will and was not forced or unduly influenced to make same.' [3] As is evident from his statement it was limited to an admission of the essential elements of the offence charged. Aside from the following two questions by the magistrate, the record which spanned all of three pages is ominously silent: 'Questions from the court to the public prosecutor: Did the fire-arm have any serial no on it? No. Question from the court to the defence: How did the accused come in possession of the fire-arm? The accused picked the fire-arm up. He wanted to keep it. When he saw the SAP on the day of his arrest he threw it away.' [4] Moreover there is no judgment on sentence to speak of. What motivated the magistrate is to be discerned from the statement that she filed in terms of Rule 67 of the Magistrates’ Court Rules. That too was brief. The relevant portion, without emendation, reads: 'The court reads every day of people being murdered or robbed and the fire-arms were used, and that suspects are usually in the age group of the accused. The defence mentioned that the court did not take into consideration that this fire-arm had no cartridge or ammunition. But the accused decided to keep this fire-arm. And you will only keep it for one purpose and that is to use it, even if it is to protect yourself, then it seems the he will have no problem to get a cartridge or communication. If the accused were in possession of a cartridge and ammunition then that would have been a second count and would the court have dealt with it further on that count.' [5] Aggrieved by what he considered to be an excessive sentence, the appellant appealed to the Johannesburg High Court. Epstein AJ (Roux AJ concurring) held: 'Section 39(2)(a) of the Act provides for a maximum of ten years imprisonment for the possession of more than one firearm and it is submitted that this section cannot be applicable to the appellant. The maximum sentence applicable to the appellant is that contained in section 39(2)(b) of the Act which provides for a maximum of a fine of R12 000.00 or imprisonment of three years or both’. The court accordingly concluded: 'A sentence of direct imprisonment is appropriate in this case. I have taken into account the accused's age and the fact that he was a first offender as mitigating factors. In view of the misdirection I am entitled to interfere with the sentence. In my view, taking into account the aforementioned mitigating factors, the sentence imposed by the magistrate should be reduced. The sentence imposed by the magistrate is set aside and substituted with the following: "The accused is sentenced to a period of imprisonment of 18 months of which 6 months are suspended for a period of three years on condition that the accused is not convicted within the aforementioned period of the same crime or any arising from the Arms and Ammunitions Act, 75 of 1969." ' [6] It is against the effective sentence of 12 months’ imprisonment that the further appeal to this court is directed. The appeal is before us with the leave of the court below. At the time of the commission of the offence the appellant was a 21-year old first offender, who was earning approximately R2 000 per month as a casual employee. For reasons that are not entirely clear and in any event not necessary to traverse, it has taken all of 11 years for the matter to be heard by this court. We were informed from the bar that the appellant is now in permanent employment earning R5 000 and that he has since fathered a child. [7] One would have thought that such facts as served before the magistrate were insufficient to have enabled her to exercise a proper sentencing discretion. As to both the crime and the appellant there are significant gaps that one needs for responsible sentencing. We know very little about the crime, for example, how or where exactly did the appellant come to acquire possession of the firearm? How long did he have possession of it? Why did he decide to keep it? And of the appellant himself we know as little. What are his scholastic achievements? What type of work does he do? What is his work record? Most importantly is he the type of young man who should go to gaol? [8] Despite the fact that the appellant was represented before the magistrate there nonetheless remained a duty on her to call for such evidence as was necessary to enable her to exercise a proper judicial sentencing discretion. For, as S v Siebert1 made plain: 'Sentencing is a judicial function sui generis. It should not be governed by considerations based on notions akin to onus of proof. In this field of law, public interest requires the court to play a more active, inquisitorial role. The accused should not be sentenced unless and until all the facts and circumstances necessary for the responsible exercise of such discretion have been placed before the court.’ The judgment added: ‘[A]n accused should not be sentenced on the basis of his or her legal representative’s diligence or ignorance’. Whilst I am alive to the very trying conditions under which magistrates work in this country and their justifiable need to eradicate the enormous case backlogs that confront them, this nonetheless may well have been the kind of matter where, given the paucity of information, the magistrate should have called for a pre-sentence report. Absent such a report the magistrate was unable to explore all of the available sentencing options and to choose one that best served the interests of this particular case. [9] An enlightened and just penal policy requires consideration of a broad range of sentencing options from which an appropriate option can be selected that best fits the unique circumstances of the case before the court. It is trite that the determination of an appropriate sentence requires that proper regard be had to the well known triad of the crime, the offender and the interests of society. After all any sentence must be individualised and each matter must be dealt with on its own peculiar facts. It must also in fitting cases be tempered with mercy. Circumstances vary and punishment must ultimately fit the true seriousness of the crime. The interests of society are never well served by too harsh or too lenient a sentence. A balance has to be struck. [10] It was urged upon us that correctional supervision would have been an appropriate sentence for the appellant. Sentencing courts must differentiate between those offenders who ought to be removed from society and those who although deserving of punishment should not be removed. With appropriate conditions correctional supervision can be made a suitably severe punishment even for persons 1 1998 (1) SACR 554 (SCA) at 558j-559a. convicted of serious offences.2 Correctional supervision, as a possibility, did not even merit any mention in either the judgment of the magistrate or that of the court below. I venture to suggest that that sentence may well have commended itself as one that was fair and just in this case. But the extraordinary passage of time encountered here renders it inappropriate. It seems to me that it would hardly serve the interests of justice for the matter to be remitted to the trial court 11 years after the appellant’s conviction for him to be sentenced afresh. That, on the view that I take of the matter, excludes correctional supervision as a sentencing option. [11] It is not entirely clear to me why it was thought that direct imprisonment was the only appropriate sentence. What seemed to weigh with both courts was the prevalence of violent crimes executed with unlicensed firearms. Epstein J put it thus: 'The prevalence of violent crime with the use of firearms and the terrible consequences that are associated therewith cannot be overemphasised. The people of the city of Johannesburg and its surrounds are terrorised on a daily basis by unscrupulous criminals who perform the most horrific and heinous crimes using firearms.' That consideration was deserving of and warranted appropriate recognition in the determination of an appropriate sentence. Regrettably, it ignored crucial evidence that the firearm had no cartridge or ammunition. Moreover, as I shall hope to show, the prevalence of violent crime was a factor hardly to be taken into account against the appellant personally. [12] The appellant was a young - evidently immature - man, who, when he saw the police became so afraid that he threw the firearm away. Hardly the reaction of someone intent on using the firearm for some nefarious purpose. More likely, one suspects, is the inference that he picked up the firearm out of idle curiosity. If that is so, as it certainly seems to be on such evidence as is available, then the link sought to have been made between him and violent crime is devoid of any foundation. That speculative hypothesis should have been displaced by one more charitable to the appellant, namely that he acted with immaturity and a lack of sophistication when he picked up the firearm. And, 2 S v Ingram 1995 (1) SACR 1 (A). when he decided to retain possession of it, he was not motivated by a desire to use it for any nefarious purpose thereafter. [13] Epstein AJ stated: ‘in considering an appropriate sentence it is necessary to take into account the deterrent factor, not only in respect of the appellant but also in respect of other persons who are in possession of unlicensed firearms’. I cannot imagine that the appellant is ever likely to repeat what he did. Deterrence is therefore only relevant in respect of other would-be offenders. There as well the appellant is being punished with imprisonment to deter others who stand on a very different footing to him, namely those who make themselves guilty of violent crimes and utilise unlicensed firearms to achieve that end. It is hard to resist the conclusion that the appellant is being rendered a sacrificial lamb on the altar of general deterrence. [14] It follows on the view that I take of the matter that the requisite balance was not struck as the offence and the interests of society were over emphasised and conversely the interests of the accused under emphasised. Moreover, the only two factors relied upon for the conclusion that imprisonment was warranted, namely general deterrence and the prevalence of violent crime are, as I have demonstrated, less apposite to the appellant than appears to have been thought by either of the courts below. [15] What one sees here is excessive devotion to the furtherance of the cause of deterrence and the protection of the public interest but insufficient weight to other factors that may lessen the gravity of the offence in the circumstances of this particular case.3 Thus no or insufficient consideration was given to the following factors: that he was a first offender; that the firearm given its state when found could not have been put to any immediate unlawful use; that he became so frightened upon seeing the police that he immediately attempted to dispose of the firearm; that following upon his arrest he made a full confession to the police; that he fully co-operated and demonstrated his remorse by pleading guilty at the first available opportunity; and most importantly as I 3 S v Maseko 1982 (1) SA 99 (A). have stated, that he did not retain the firearm for any other nefarious purpose. All of those were weighty factors and undoubtedly served to lessen the gravity of the offence in regard to the appellant on the facts of this case. And yet none of them either individually or cumulatively received due recognition in the determination of an appropriate sentence. The result was the imposition of punishment that was grossly disproportionate to what could be considered fair in the circumstances of this case. [16] Moreover, in the last 11 years whilst his appeal to this court has been pending the appellant has managed to avoid any further brush with the law. And as his counsel points out in all of that time he also has had to endure the mental anguish that is conjured up by the threat of imprisonment. The legislature has provided for a sentence of imprisonment for a period not exceeding three years or a fine not exceeding R12 000 or both. Both the public interest and the need to do justice to the appellant would be well served by the imposition of a fine. I may add that no consideration was given to the payment of a fine as a sentencing option. That may have been on account of the fact that the appellant was then in casual employment and perhaps it was thought that such a sentence would not have served any meaningful purpose. But as S v Mosia4 made clear the court can direct that the fine be paid in instalments, if necessary over a period for as long as five years. That makes it possible in appropriate circumstances for even a humble wage earner, to escape imprisonment. In that way an accused person is offered a real alternative to imprisonment and by having to prune his income over a fairly protracted period the long term deterrent effect of punishment is enhanced. [17] I have in mind a fine sufficiently severe as to represent real punishment. Ordinarily it may have been more appropriate for it to have been coupled with a wholly suspended sentence of imprisonment to enhance its deterrent value. But on account of the passage of time and his maintaining a clean slate during that period a suspended sentence has been rendered largely superfluous. A suspended sentence as well therefore falls to be excluded as a sentencing option. We were informed from the bar that were we inclined to impose a fine in the region of half of that prescribed by the 4 1988 (2) SA 730. legislature, which seems to me just and fitting, the appellant should be allowed in terms of s 297(5)(a) of the Criminal Procedure Act something in the order of six months to effect payment. [18] In the result: The appeal against sentence is allowed. The sentence imposed by the magistrate is set aside and there is substituted therefor the following sentence: ‘A fine of R6 000, payment whereof is deferred until 31 March 2011, or six months’ imprisonment’. _________________ V M PONNAN JUDGE OF APPEAL APPEARANCES: For Appellant: J P Myburgh Instructed by: Sarlie & Ismail Inc Johannesburg Mthembu & Van Vuuren Inc Bloemfontein For Respondent: M P D Mothibe Instructed by: The Director of Public Prosecutions Witwatersrand Local Division The Director of Public Prosecutions Provincial Division Free State

REPUBLIC OF SOUTH AFRICA SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL FROM The Registrar, Supreme Court of Appeal DATE 22 September 2010 STATUS Immediate Please note that the media summary is for the benefit of the media and does not form part of the judgment. Samuels v The State (262/03) [2010] ZASCA 113 (22 September 2010) Media Statement Today the Supreme Court of Appeal (SCA) upheld an appeal by Roschen Samuels against an effective sentence of one year's imprisonment imposed on him for being in possession of a unlicensed firearm. The appellant pleaded guilty in the Johannesburg Regional Court to a charge of having contravened s 2 of the Arms and Ammunitions Act and was sentenced to a term of imprisonment of two years. In his plea explanation he admitted that on 22 March 1999 in the Newclare area of Johannesburg he wrongfully and unlawfully had in his possession a 9mm pistol. He appealed against that sentence to the Johannesburg High Court. The high court found that the regional court had misdirected itself. It accordingly set aside the sentence and substituted for it a sentence of 18 months’ imprisonment of which six months were suspended. Aggrieved by that sentence the appellant appealed further to the SCA with the leave of the high court. At the time of the commission of the offence the appellant was a 21-year old first offender who was earning approximately R2 000 per month as a casual employee. For reasons that were not entirely clear, it had taken all of 11 years for the appeal to be heard. The SCA was of the view that the facts that served before the magistrate were insufficient to have enabled her to exercise a proper sentencing discretion and that this was the kind of matter where the magistrate ought to have called for a pre-sentence report in order to enable her to exercise a proper judicial sentencing discretion. In the view of the SCA, it was important for sentencing courts to differentiate between those offenders who ought to be removed from society and those who although deserving of punishment should not be so removed. The SCA held that although correctional supervision may well have commended itself in this case, given the extraordinary passage of time it was no longer appropriate. It was not entirely clear to the SCA why both the high court and regional court thought that direct imprisonment was the only appropriate sentence. What seemed to weigh with both courts was the prevalence of violent crimes executed with unlicensed firearms. Whilst that consideration was deserving of and warranted appropriate recognition in the determination of an appropriate sentence, it ignored crucial evidence that the firearm had no cartridge or ammunition. The SCA took the view that the appellant was a young, evidently immature, man who had picked up and retained the discarded firearm not for any other nefarious purpose but rather out of idle curiosity. The SCA reasoned that the appellant is not ever likely to repeat what he did. Deterrence was therefore only relevant in respect of other would-be offenders. As the appellant was being punished with imprisonment to deter others who stand on a very different footing to him, namely those who make themselves guilty of violent crimes and use unlicensed firearms to achieve that end, it was difficult to resist the conclusion that the appellant was being rendered a sacrificial lamb on the altar of general deterrence. The SCA accordingly concluded that the punishment imposed was grossly disproportionate to what could be considered fair in the circumstances of the case. It accordingly set aside the sentence of imprisonment and replaced it with a fine of R6 000, payment of which was deferred until 21 March 2011. --- ends ---

1404

non-electoral

2010

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Case no: 046/10 CEDRIC MAPANDE Appellant and THE STATE Respondent ______________________________________________________________ Neutral citation: Mapande v S (046/10) [2010] ZASCA 119 (29 September 2010) CORAM: Navsa, Heher and Bosielo JJA HEARD: 10 September 2010 DELIVERED: 29 September 2010 SUMMARY: Appeal against conviction on the basis that identification evidence insufficient and that evidence of co-accused ought not to have been accepted ─ held that evidence sufficient to found conviction. Appeal against sentence on the basis that insufficient consideration given to personal circumstances and that the court had erred in not concluding that there were substantial and compelling circumstances ─ held that conclusion on imposition of minimum sentence correct. ______________________________________________________________ ______________________________________________________________ ORDER ______________________________________________________________ On appeal from: Limpopo High Court (Thohoyandou) (Hetisani J sitting as court of first instance). The appeal against both conviction and sentence is dismissed. ______________________________________________________________ JUDGMENT ______________________________________________________________ NAVSA JA (Heher and Bosielo JJA concurring) [1] This appeal, with the leave of this court, against conviction and sentence is without any merit. The appellant, Mr Cedric Mapande, was convicted with three other accused in the Thohoyandou High Court on one count of robbery with aggravating circumstances and was sentenced to 15 years’ imprisonment. [2] It was the State’s case that on 27 June 2000 the appellant, together with three others, had gone to the house of Mrs Elelwani Friedah Chabalala at River Plaas and had forced her at gunpoint to part with approximately R20 000 in cash, clothing, a blanket, a camera, a cell phone and shoes. According to the State, the appellant was not one of the two robbers who had entered the home ─ he waited in the vehicle parked outside. [3] A co-accused, Mr Balaganani Thomas Nematswerani, testified in support of the State’s case, implicating the appellant. According to Mr Nematshwerani, the appellant was fully involved in the planning and execution of the robbery. The appellant’s role at the scene was to ensure that the getaway vehicle was protected during the robbery. His evidence was corroborated in material respects by Mrs Chabalala and another witness in support of the State’s case, namely, Mr Charles Chabalala. The latter testified that the appellant and another person had made enquiries earlier on the day of the robbery about the house at which the robbery was committed. According to Mr Chabalala, the appellant and his companion were travelling in a motor vehicle, the registration of which he had noted and which ultimately was supplied to the police. It is common cause that that vehicle was used in the commission of the robbery. Mrs Chabalala’s evidence coincided with Mr Nematswerani’s testimony of the manner in which the robbery was committed. Mr Chabalala had also identified the appellant at an identification parade. [4] The appellant chose not to testify. His appeal was based on two grounds. First, that the identification evidence was insufficient to found a conviction. It was submitted on his behalf that Mr Chabalala had testified that the enquiries referred to above were made at a place called Tshabani, located approximately 11 kilometres away from the scene of the robbery. Second, that the court below had erred in uncritically accepting the evidence of the appellant’s co-accused. [5] The submissions referred to in the preceding paragraph are fallacious. In the scheme of things the geographical distance between the place where the enquiries were made and the location where the robbery took place is minimal and can easily be traversed by a motor vehicle in a short space of time. The evidence of Mr Chabalala is but one part of the totality of the evidence on which the conviction was based. It fits in neatly with the testimony of Mrs Chabalala and that of the appellant’s co-accused, Mr Nematswerani. [6] The inconsistencies between a written statement made by the co- accused and his evidence in court do not militate against the acceptability of his testimony in relation to the count of robbery presently under consideration. It is true that Mr Nematswerani was untruthful when he testified that he only participated in the robbery presently under consideration and in other robberies because he was an informer for the South African Police Services. He was rightly disbelieved on that aspect of his evidence. It was a desperate attempt by him to avoid the consequences of his unlawful activities. It does not follow that because he gave false evidence in this regard that the remainder of his relevant testimony is also untrue. One must guard against the natural impulse to use that lie to reject otherwise plausible and corroborated testimony. [7] In Schmidt Rademeyer Schmidt Bewysreg 4 ed (2000) p 106 the following appears: ‘Hoewel die hof uit ‘n leuen kan aflei dat ‘n getuie ook elders valse getuienis gelewer het, is die normale gevolg dat slegs die bewese onware getuienis uitgewis word. Die leuen verswak dus normaalweg nie die ander getuienis nie.’ See also S v Oosthuizen 1982 (3) SA 571 (T) and the other authorities referred to by the learned authors. [8] Of course, a court must be cautious in approaching the evidence of an accomplice and must in determining the guilt of an accused have regard to the totality of evidence and be conscious of the burden of proof that rests on the State. [9] It was submitted on behalf of the appellant that Mr Charles Chabalala did not identify the appellant as a robber but only testified that he was one of a party of two who, earlier on the day of the robbery, had made enquiries concerning the house at which the robbery was later committed. That is true. However, the following has to be pieced together. First, there is the evidence of Mr Nematswerani implicating the appellant. Before us, no reason was suggested for Mr Nematswerani’s random selection of the appellant as a co- perpetrator. Second, Mrs Chabalala’s account of the robbery was consonant with Mr Nematswerani’s testimony about how it occurred. Third, there is the evidence of Mr Chabalala, that the appellant had been in the car used in the robbery, making enquiries earlier that day about the house at which it was perpetrated ─ Mr Chabalala was immediately suspicious to the extent that he recorded the registration number which was ultimately supplied to the police and which was traced back to the robbery. Importantly, the appellant failed to testify and challenge any of the evidence set out above, implicating him. [10] If a witness has given evidence directly implicating an accused the latter can seldom afford to leave such testimony unanswered. Although evidence does not have to be accepted merely because it is uncontradicted, the court is unlikely to reject credible evidence which the accused him or herself has chosen not to deny. In such instances the accused’s failure to testify is almost bound to strengthen the case of the prosecution.1 In S v Chabalala 2003 (1) SACR 134 (SCA) para 21 the following was stated: ‘The appellant was faced with direct and apparently credible evidence which made him the prime mover in the offence. He was also called on to answer evidence of a similar nature relating to the parade. Both attacks were those of a single witness and capable of being neutralised by an honest rebuttal. There can be no acceptable explanation for him not rising to the challenge. If he was innocent appellant must have ascertained his own whereabouts and activities on 29 May and be able to vouch for his non-participation. . . . To have remained silent in the face of the evidence was damning. He thereby left the prima facie case to speak for itself. One is bound to conclude that the totality of the evidence taken in conjunction with his silence excluded any reasonable doubt about his guilt.’ See also S v Boesak 2001 (1) SACR 1 (CC) para 24. [11] In the present case Mr Chabalala’s evidence about the enquiries made by the appellant and his testimony linking the appellant to the vehicle used in the robbery called for an answer as did the testimony of Mr Nematswerani implicating him. At his peril, the appellant chose not to testify. In these circumstances the court below was correct in convicting him. [12] In respect of sentence it was contended on behalf of the appellant that the court had not taken his personal circumstances into account and had erred in concluding that there were no substantial and compelling circumstances justifying a deviation from the prescribed 15 year-term of imprisonment. [13] The submissions in the preceding paragraph are baseless. Whilst it is true that the court below (Hetisani J), could have been more expansive in describing the respective robbers’ personal circumstances, it is clear that it took into account the appellant’s degree of participation in the robbery, namely, that he waited outside whilst the robbery was being perpetrated. The court below took into account that the appellant had received his share of the 1 D T Zeffert, A P Paizes, A St Q Skeen The South African Law of Evidence (2003) p 127. cash proceeds of the robbery and that he had identified completely with the planning and execution of the robbery. There is nothing to indicate that there is anything in the appellant’s personal circumstances that was not noted that would have had a bearing on the sentence. The court below spoke in general terms about the motivation for the minimum sentencing regime and the frequency of crimes of violence. The court below clearly took the view that there were no substantial and compelling circumstances justifying a departure from the prescribed minimum sentence, a conclusion with which I can find no fault. [14] For all the reasons set out above the following order is made: The appeal against both conviction and sentence is dismissed. _________________ M S NAVSA JUDGE OF APPEAL APPEARANCES: For Appellant: M E Mokgotho Instructed by Justice Centre, Polokwane Justice Centre, Bloemfontein For Respondent: R J Makhera Instructed by Director of Public Prosecutions, Polokwane Director of Public Prosecutions, Bloemfontein

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 29 September 2010 Status: Immediate Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal On 29 September 2010 the Supreme Court of Appeal handed down judgment in Cedric Mapande v The State, dismissing an appeal against both conviction and sentence. The appellant had been charged with robbery with aggravating circumstances. It was alleged that he and three others had gone to the home of Mrs Elelwani Friedah Chabalala at River Plaas and had forced her at gunpoint to part with approximately R20 000 in cash, clothing, a blanket, a camera, a cell phone and shoes. According to the State, the appellant was not one of the two robbers who had entered the home ─ he waited in the vehicle parked outside. The Thohoyandou High Court convicted the appellant and he was sentenced to 15 years’ imprisonment. The appellant appealed on the basis that the identification evidence was insufficient to found a conviction. In respect of sentence it was contended on behalf of the appellant that the court had not taken his personal circumstances into account and had erred in concluding that there were no substantial and compelling circumstances justifying a deviation from the prescribed 15 year-term of imprisonment. A co-accused, Mr Balaganani Nematswerani, had testified and implicated the appellant. Mr Nematswerani was one of two robbers who had entered Mrs Chabalala’s home with a firearm. The appellant contended that Mr Nematswerani had been found by the court below to be a liar on other aspects of his testimony and that the court below should not uncritically have accepted the evidence implicating him. In short, the appellant submitted that Mr Nematswerani’s evidence in this regard should have been rejected. This court took into account that there had been corroboration for Mr Nematswerani’s evidence. First, there was the evidence of Mr Charles Chabalala, who had testified that earlier on the day of the robbery, the appellant was one of a party of two who had made enquiries about the house at which the robbery was perpetrated. Importantly, the two persons involved were travelling in the motor vehicle that had been used in perpetrating the robbery. Mr Nematswerani’s evidence of the manner in which the robber was perpetrated tied-in with Mrs Chabalala’s description of how it had occurred. This court held that Mr Nematswerani’s untruthful testimony that he had committed this and other robberies in his role as a police informer did not necessarily mean that he was lying in respect of the appellant’s role in the robbery under consideration. It considered the corroboration of his evidence referred to above. Furthermore, this court considered it important that the appellant had chosen not to testify. It noted that where a witness has given evidence directly implicating an accused the latter can seldom afford to leave such testimony unanswered. Although evidence does not have to be accepted merely because it is uncontradicted, the court is unlikely to reject credible evidence which the accused him or herself has chosen not to deny. In such instances the accused’s failure to testify is almost bound to strengthen the case of prosecution. This court held that the appellant had been rightly convicted. In respect of sentence this court stated that although the court below could have been more expansive in describing the respective robbers’ personal circumstances it was clear that it took into account his degree of participation of the robbery and that he had received his share of the cash proceeds of the robbery. The appellant had participated in the planning and execution of the robbery. There is nothing to indicate that there is anything in the appellant’s personal circumstances that was not noted that would have had a bearing on the sentence. The court below considered the frequency of crimes of violence and spoke about the motivation for the minimum sentencing regime. The court below concluded that there were no substantial and compelling circumstances justifying a departure from the prescribed minimum sentence, a conclusion with which this court could find no fault. It consequently dismissed the appeal against both conviction and sentence.

1419

non-electoral

2010

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Case No: 623/2009 No Precedential Significance In the matter between: ABRAM SELLO Appellant and INSPECTOR GROBLER First Respondent INSPECTOR J CLAASEN Second Respondent MINISTER OF SAFETY & SECURITY Third Respondent NATIONAL DIRECTOR OF HEALTH MEDICINE REGULATORY AFFAIRS, INSPECTORATE & LAW ENFORCEMENT Fourth Respondent Neutral citation: Sello v Grobler (623/09) [2010] ZASCA 134 (1 October 2010) Coram: MPATI P, LEWIS, PONNAN, CACHALIA JJA and K PILLAY AJA Heard: 20 August 2010 Delivered: 1 October 2010 Summary: Search and seizure ─ unlawfulness admitted ─ whether appellant entitled to return of all seized items. ___________________________________________________________ ORDER On appeal from: South Gauteng High Court (Johannesburg) (Jajbhay J sitting as court of first instance): The appeal is upheld with costs. The order of the court below is set aside and substituted with an order in the following terms: ‘(a) The respondents’ searches of the applicant’s pharmacy and home on 8 July 2008 are declared unlawful. (b) The respondents’ are directed forthwith to return to the applicant all items seized pursuant to those unlawful searches that the appellant may lawfully possess. (c) The respondents’ are ordered to pay the costs jointly and severally, the one paying the other to be absolved.’ ___________________________________________________________ JUDGMENT K PILLAY AJA (Mpati P, Lewis, Ponnan and Cachalia JJA concurring) [1] The appellant, Abram Sello, is a pharmacist and owner of Lake Field Pharmacy, situated at shop 23, Lakefield, Benoni, Gauteng. [2] Towards the end of June 2008 the Organised Crime Unit of the South African Police Services, of which the first and second respondents are members, received information from members of the Medicines Regulatory Affairs Inspectorate (‘MRAI’) that the appellant was suspected of selling scheduled medicines and or substances without the necessary prescriptions. [3] Acting on that information on 8 July 2008, the first and second respondents, together with members of the MRAI, decided to set a trap at the appellant’s pharmacy in accordance with the provisions of s 252A of the Criminal Procedure Act 51 of 1977. In furtherance of the trap exercise a female inspector, Heather Conradie, was given two marked one hundred rand notes to purchase Stilpain and Stilnox tablets. She proceeded to the appellant’s pharmacy where she was assisted by Thobeka Gladys Bambisa, an employee of the appellant. Ms Bambisa supplied her with those tablets against payment of the sum of R155 for the Stilnox and R14 for the Stilpain tablets. The tablets were schedule five drugs and despite the fact that they required a prescription were sold by Ms Bambisa without one. Moreover, Ms Bambisa, who was not a pharmacist, was not permitted to dispense medication. [4] The appellant was not in the pharmacy when the transaction was concluded. Upon his arrival he was informed of the trap and in his presence his pharmacy was searched by the police and inspectors of the MRAI. The police seized various items including scheduled medicines with blister strips and expiry dates that had been removed. In a back room of the pharmacy a drum containing Myprodol capsules in a transparent plastic bag were found. [5] Andrew Colin Brandon, a risk officer, employed by Adcock Ingram Healthcare (Pty) Ltd, arrived at the pharmacy. He identified his company as the source of the Myprodol. According to him the capsules are not sold in containers as found in the appellant’s pharmacy but rather, after being processed, are placed in blue containers similar to the one discovered in the backroom of the pharmacy. Pholconcor tablets with batch number 080331 and Ziak tablets with batch number 0714962 were also found. William Daniel Botha from Pharmaceutical Healthcare Distributors identified these tablets as part of a batch which had been stolen from their warehouse. Other items such as computers and the appellant’s laptop were seized. The appellant and his employee, Ms Bambisa, were then arrested. Thereafter his motor vehicle which was parked outside the pharmacy was searched. His identity book, cheque books, personal documents, and his house, shop and car keys were taken. A trip to his home followed. A search there yielded more tablets in a box, similar to the ones found in the pharmacy. From his home R114 000 cash was taken. [6] These common cause facts provided a backdrop for an application launched by the appellant, in the South Gauteng High Court, for an order declaring the searches carried out at the appellant’s home and pharmacy on 8 July 2008 unlawful and the forthwith return of all items seized. The application was dismissed by Jajbhay J with costs. Leave to appeal was granted to this court. [7] In his founding affidavit the appellant alleged that the search and seizure operation were conducted in violation of his ‘right to privacy, his right to trade freely and without a lawful basis’. In addition he averred that he was at all times in ‘peaceful and undisturbed possession’ of all the items seized. [8] It is not disputed that in respect of the aforesaid searches the police acted without a warrant. That is not in itself a ground for finding that the searches and seizures were unlawful. But before us counsel for the respondents conceded that the searches were unlawful. That was for two reasons. First, although s 22 of the Criminal Procedure Act 51 of 1977 authorizes seizure without a warrant where a police official believes that the delay occasioned by obtaining a warrant would defeat the object of the search, the police advanced no grounds for such a belief. Second, the inspectors of the MRAI had not shown that they were authorized to conduct searches in terms of the Medicines and Related Substances Control Act 101 of 1965. That concession so, the appellant contended, entitled him to the return of all the items seized. As this issue was not fully ventilated on the papers, the matter was postponed to enable the legal representatives, after fuller consultation with the parties, to file a schedule of those items that they agreed could be returned to the appellant. We have since been advised that no consensus could be reached between the parties. [9] It is common cause that criminal proceedings against the appellant are still pending at which some of the seized items may be required by the State as evidence. It was not disputed that amongst the items seized were allegedly stolen items and expired medication, some without proper identifying details. Since the seizure certain other drugs have also expired. All of those items obviously cannot be returned to the appellant. [10] The appellant does not in his founding affidavit deal with his lawful entitlement to have possessed all the items seized nor does he allege what exactly he is lawfully entitled to have returned. Rather he contents himself with the allegation that he was in peaceful and undisturbed possession of the seized items. That would have sufficed had this been a spoliation application. But it is not. It follows that we can only order the return of those items that the appellant is lawfully entitled to possess. [11] In the circumstances the following order is made: The appeal is upheld with costs. The order of the court below is set aside and substituted with an order in the following terms: ‘(a) The respondents’ searches of the applicant’s pharmacy and home on 8 July 2008 are declared unlawful. (b) The respondents’ are directed forthwith to return to the applicant all items seized pursuant to those unlawful searches that the appellant may lawfully possess. (b) The respondents’ are ordered to pay the costs jointly and severally, the one paying the other to be absolved.’ ___________________ K Pillay Acting Judge of Appeal APPEARANCES APPELLANT: Z Omar of Zehir Omar Attorneys, Springs EG Cooper Majiedt Inc, Bloemfontein RESPONDENTS: TF Mathibedi (with him TK Manyage) Instructed by State Attorneys, Johannesburg State Attorneys, Bloemfontein

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL 1 October 2010 STATUS: Immediate Sello v Grobler (623/09) [2010] ZASCA 134 (1 October 2010) Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal. Today the SCA upheld an appeal by the appellant, a pharmacist, against an order of the South Gauteng High Court dismissing an application to declare a search and seizure operation conducted at his pharmacy and home in Benoni, Gauteng, unlawful. The search and seizure exercise was a joint operation between members of the Organised Crime Unit of the South African Police Service and the members of the Medical Regulatory Affairs Inspectorate. The items seized during the search included items allegedly stolen, expired medicines and other medicines which had no proper identifying details. The respondents conceded during argument that the search was unlawful. The only issue the SCA had to decide was which items the appellant was lawfully entitled to have returned to him. The SCA held that, since the appellant did not set out in his founding affidavit the items he was entitled to have returned to him, the court could order the return, to him, of only those items he was lawfully entitled to possess.

3285

non-electoral

2020

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Reportable Case No: 940/18 In the matter between: KWADUKUZA MUNICIPALITY APPELLANT and LAHAF (PTY) LTD RESPONDENT Neutral Citation: KwaDukuza Municipality v Lahaf (Pty) Ltd (840/18) [2020] ZASCA 09 (18 March 2020) Coram: PETSE DP and LEACH, ZONDI, PLASKET and MBATHA JJA Heard: 12 November 2019 Delivered: 18 March 2020 Summary: Interpretation of a town planning scheme which applies exclusively to Lifestyle Centre, Ballito – meaning of the phrase 'the total gross lettable area (GLA) of the Property' – starting point is the language of the zoning provision which must be construed in the light of its context, the apparent purpose to which it is directed and material known to those responsible for its production. ______________________________________________________________ ORDER ______________________________________________________________ On appeal from: The KwaZulu-Natal Division of the High Court, Pietermaritzburg (Chili J sitting as court of first instance): The appeal is upheld with costs. The order of the court below is set aside and replaced with the following order: ‘The application is dismissed with costs.’ ______________________________________________________________ JUDGMENT ______________________________________________________________ Zondi JA (Petse DP concurring): [1] This appeal concerns the interpretation of the words ‘the total Gross Lettable Area (GLA) of the Property’, in a single zone in a town planning scheme which applies exclusively to the Lifestyle Centre (Centre) in Ballito, KwaZulu Natal. The scheme was approved by the appellant, KwaDukuza Municipality, in 2000. The scheme controls limit the permissible GLA for the Lifestyle Centre in terms of maximum square metres on the property. The precise meaning of GLA determines the nature and extent of what can lawfully be built at the Lifestyle Centre. The dispute is whether the third restriction in Table D : Density Zone of the current zoning (approved in November 2011), which refers to ‘the total GLA of the property’, should be interpreted to mean only the area of ‘shops’ as defined in the scheme clauses or all areas capable of being leased. [2] The respondent, Lahaf (Pty) Ltd, contended that the word 'GLA' must be interpreted to mean only the area of 'shops' as defined in the scheme clauses, that is to say, the areas let out by the respondent to be used as shops and all areas used exclusively by a shop tenant. On the other hand, the appellant contended that 'GLA' comprises all areas notionally capable of being let including storage areas and receiving yards. In other words, it draws no distinction between shop and non-shop areas. [3] The dispute arose in those circumstances. The respondent and two of its tenants submitted to the appellant building plans for approval but, because of the disagreement regarding the meaning to be ascribed to 'GLA' the appellant had not considered the relevant plans. The apparent basis for the appellant’s stance was its contention that what the respondent had built and proposes building at the Lifestyle Centre contravenes the limitations imposed on the property in terms of its zoning controls. The respondent’s position was that what it had built complies with applicable zoning provisions and scheme controls and what it intended to build complied or was capable of compliance. In short, the parties are in dispute as to which built areas in the centre constitute GLA and which areas do not. [4] As a result of the disagreement, the respondent, on 27 March 2015, approached the Kwa-Zulu Natal Division of the High Court, Pietermaritzburg (the high court) seeking an order that: It is declared that the term 'GLA' in the zoning controls of Ballito Town Planning Scheme for Special Zone 10: Lifestyle Centre: 1.1 means ‘gross leasable area’ and relates only to the relevant retail space for the exclusive use of retail shop tenants; 1.2 excludes uses other than ‘shop’ as defined in the scheme, and other uses as set out in sub-paras 1.2.1 to 1.2.12; 1.3 is measured according to the formula in the South African Property Owners’ Association Guide, namely to the centre line of demising walls, to the inside finished surface of external walls and to the centre line of the shop front boundary; 1.4 The respondent sought an order directing the appellant to consider the three sets of the building plans submitted by respondent in the light of the declared definition of the GLA within 60 days of the order; it further sought an order that the appellant be ordered to consider all other building plans submitted to it by the respondent or its tenants in the light of the definition of GLA also within 60 days of the order. [5] The high court (Chili J) accepted the respondent’s contention and granted a declaratory order to that effect. It, among others, directed the appellant to consider the relevant building plans submitted to it by the respondent or its tenants in accordance with the declared definition of 'GLA'. The appellant’s appeal, with leave of this court, is directed at the conclusions and findings on which the order of the high court is based. [6] The interpretation of the relevant provision of the zoning control should be considered in the context of these facts. The Ballito Lifestyle Centre (Centre) is situated on erven 3671 and 2348 Ballitoville (the property). The respondent is the registered owner of erf 3671 which it acquired from Paul & Bruce Investments (Pty) Ltd during July 2009. The Centre is situated within KwaDukuza Municipality area and falls under the Ballito Town Planning Scheme. [7] The individual erven on which the Lifestyle Centre has been built were all originally part of the Ballito Business Park and zoned variously ‘Activity’, ‘Agricultural’ and ‘Public Open Space’. The controls which applied to the erven zoned ‘Activity’ prescribed the maximum floor area ratio (FAR) at 1, coverage of 70% and set a height limitation of 3 storeys. (Paragraph 25). In terms of the zoning provisions shops were permitted on ‘Activity’ erven by special consent, but limited to 200 m². This limitation had been removed in respect of some of the original erven forming part of the Lifestyle Centre which had been zoned ‘Activity’, but not others. The creation of Special Zone 10: Lifestyle Centre. [8] In approximately 2000 the previous owners of the property, Seaward Estates, submitted an application to the appellant to rezone components of the property to create Special Zone 10: Lifestyle Centre. This was achieved by rezoning approximately 4.7 hectares of agricultural land to Activity and by converting the Activity into the Lifestyle Centre. It was envisaged that the Special Zone would apply to the Lifestyle Centre. The Lifestyle Centre was to be different from a conventional shopping centre. It was to include lifestyle components, such as restaurants, a nursery, large open walkways and water features alongside conventional retail outlets and service providers such as the Post Office and Banks. In the rezoning application the Lifestyle Centre was described as ‘a holistic complex of shops, restaurants and entertainment facilities which have, in addition to conventional shops, a focus on the outdoor living and a plant nursery together with recreational and entertainment uses such as an animal farm, gymnasium/health centres, open air tea gardens and extensive landscaping’. [9] It was further stated in the application that the purpose of the rezoning application was the creation of a larger single site to accommodate a more holistic shopping/Lifestyle Centre Complex, which could not be developed over the 12 individual erven as they existed. [10] The rezoning application proposed certain scheme controls which would apply to the Lifestyle Centre zone. These introduced the term ‘GLA’ but unfortunately ‘GLA’ was not defined in the scheme and is still not defined. [11] The rezoning application was granted and ‘Special Zone 10: Lifestyle Centre’ was established with its own zoning controls as set out in the following table: TABLE C : USE ZONE : ACTIVITY ZONE USE ZONE (1) NOTATION (2) PURPOSES FOR WHICH BUILDINGS MAY BE ERECTED AND USED (3) PURPOSES FOR WHICH BUILDINGS MAY BE ERECTED AND USED ONLY WITH SPECIAL CONSENT (4) PURPOSES FOR WHICH BUILDINGS MAY NOT BE ERECTED AND USED (5) Special Zone 10 Life Style Centre Agriculture Arcade or Pedestrian Mall Arts and Crafts Workshop Commercial Workshop Educational Building Laundrette Office Building Place of Public Crèche Dwelling House Funeral Parlour Motor Car Showroom Municipal Parking Garage Public Office Building and land uses not included in Columns 3 and Amusement Place of Public Assembly Private Recreation Area Recreational Building Restaurant Shop (restricted to 14000m2gla) Residential Building Service Industrial TABLE D : DENSITY ZONE DENSITY ZONE (1) MAXIMUM PERMITTED F.A.R., COVERAGE AND HEIGHT (2) ADDITIONAL CONTROLS (3) COLOUR NOTATION ON SCHEME MAP (4) Special Zone 10 Life Style Centre 1:70:3 1. Accommodation of motor vehicles to be provided on the lot as per Clause 6.4 2. Subject to the provision of a sewage disposal system to the satisfaction of the Local Authority 3. Total floorspace shall not exceed 25000m2gla [12] As the above schedules demonstrate the adopted scheme controls comprised Table C and Table D. Table C dealt with permitted use of space and Table D dealt with density controls. (This you would find at page 87 of the record). In terms of Table C a maximum of 14 000 m2 of GLA could be used for shops. In terms of Table D the permitted GLA for total floor space was 25 000 m2. The second amendment to the zoning. [13] Again during July 2005 the former owners of the property submitted an application pursuant to s 47 of the Town Planning Ordinance, 27 of 1949 to amend the scheme controls applicable to Special Zone 10 so as to increase the maximum permitted GLA allowed for shops from 14 000 m² to 25 000 m² and remove the restriction on total floor space of 25 000 m² GLA in Table D. This application was granted on 17 October 2005 (p 95).The Council of the appellant resolved that the application for the proposed scheme amendment be approved as follows: '1. PROPOSED REZONING OF ERVEN 2334, 2335 and 2336 BALLITOVILLE, DOUGLAS CROWE PLACE, BALLITO BUSINESS PARK FROM "ACTIVITY ZONE" TO "SPECIAL ZONE '10' LIFESTYLE CENTRE" PURPOSES; AND 2. PROPOSED AMENDMENT TO "TABLE D : DENSITY CONTROLS" AS APPLICABLE TO THE "SPECIAL ZONE 10' LIFESTYLE CENTRE" BY INCREASING THE 'GROSS LEASEABLE AREA (GLA)" IN RESPECT OF "SHOP" TO 25 000 SQUARE METERS AND BY DELETING "ADDITIONAL CONTROL 3" WHICH LIMITS THE TOTAL FLOOR SPACE TO 25 000 SQUARE METRES GLA.' As a result of the amendment Table C and Table D were amended in the following manner: TABLE C : USE ZONE : SPECIAL ZONE 10 : LIFESTYLE CENTRE Use Zone (1) Notation on scheme map (2) Purposes for which buildings may be erected and used (3) Purposes for which buildings may be erected and used only with special consent (4) Purposes for which buildings may NOT be erected and used (5) Special Zone 10 Lifestyle Centre Red Cross Hatch Agriculture Arcade or Pedestrian Mall Arts & Crafts Workshop Commercial Workshop Educational Building Laundrette Office Building Place of Public Amusement Private Recreation Area Recreational building Restaurant Shop Restricted to 25000m2 GLA Building and land uses NOT included in Columns 3 and 4 TABLE D : DENSITY ZONE: SPECIAL ZONE 10: LIFESTYLE CENTRE Density Zone (1) Maximum permitted F.A.R., Coverage and height (2) Additional Controls (3) Colour notation on scheme map (4) Special Zone 10 Life Style Centre 1:70:3 1. Accommodation of motor vehicles to be provided on the lot as per Clause 6.4 2. Subject to the provision of a sewage disposal System to the satisfaction of the Local Authority 3. Total Floor Space be restricted to 25000m2 It is apparent from Table D that, as from 17 October 2005, a reference to GLA in para 3 in the third column was omitted following the amendment. The third amendment to the zoning. [14] During October 2007, the respondent submitted a further application to amend scheme controls applicable to Special Zone 10: Lifestyle Centre to increase the total floor space from 25 000m² to 28 000m². At the time the respondent sought an additional space to enable it to construct a gym and lease that area to Virgin Active Gym. The Virgin Active Gym did not constitute a shop in terms of the scheme clauses. On 4 June 2008 the executive committee of the appellant resolved to increase the permitted GLA from 25 000m² to 28 000m². But for some other reason, the appellant erroneously amended the scheme controls by increasing GLA rather than the floor area. This error was, however, subsequently rectified by the municipal officials on 3 September 2008 to reflect that what was increased was the total floor area from 25 000m² to 28 000m² not GLA. Again a reference to GLA in Column 3, para 3 of Table D was omitted. The result of the amendment was that Tables C and D were amended as follows: TABLE C : USE ZONE : SPECIAL ZONE 10 : LIFESTYLE CENTRE Use Zone (1) Notation on scheme map (2) Purposes for which buildings may be erected and used (3) Purposes for which buildings may be erected and used only with special consent (4) Purposes for which buildings may NOT be erected and used (5) Special Zone 10 Lifestyle Centre Red Cross Hatch Agriculture Arcade or Pedestrian Mall Arts & Crafts Workshop Commercial Workshop Educational Building Laundrette Office Building Place of Public Amusement Private Recreation Area Recreational building Restaurant Shop Restricted to 25000m2 GLA Building and land uses NOT included in Columns 3 and 4 TABLE D : DENSITY ZONE: SPECIAL ZONE 10: LIFESTYLE CENTRE Density Zone Maximum permitted F.A.R., Coverage and height Additional Controls Colour notation on scheme map (1) (2) (3) (4) Special Zone 10 Life Style Centre 1:70:3 1. Accommodation of motor vehicles to be provided on the lot as per Clause 6.4 2. Subject to the provision of a sewage disposal System to the satisfaction of the Local Authority 3. Total Floor Space be restricted to 28000m2 The fourth amendment to the zoning. [15] During June 2011, the respondent applied for a further amendment of the zoning controls. The respondent sought to delete the restriction (restricted to 25 000 m2 GLA) in Table C in so far as it applied to the total shop GLA and remove condition 3 in Table D limiting total floor space (total floor space restricted to 28 000 m2). In para 3.3 of the application the respondent explained the purposes of the amendment: 'The proposed amendments referred to in paragraph 3.1 above, therefore entails the deletion of the current "Shop" and "Total Floor Space" restriction, as tabulated in paragraph 3.2 above. The density parameters will then simply be applied conventionally, being the maximum permitted F.A.R., Coverage and Height, as tabulated in "Table D: Density Zone: Column 2 of Special Zone 10: Lifestyle Centre", being 1 : 70 and 3 respectively.' [16] On 19 October 2011, Mr FG van der Merwe, a Registered Planner, prepared a valuation report on behalf of the appellant. According to Van der Merwe the purpose of the application was ‘to seek Council’s consideration for an application brought in terms of the Act, for the removal of a restriction. The ultimate purpose being to amend the current “Table C : Use Zone and Table D: Density Zone” as they apply to the “Special Zone 10: Lifestyle Centre”, to . . . permit an increase in the Gross Leasable Area (GLA) applicable to the Property…’ [17] Under the heading ‘Evaluation’ Van der Merwe set out the following background: 'Evaluation During July 2005, an application was submitted by Paul & Bruce Investments (Pty) Ltd to rezone certain components of the [applicant’s] Property to "Special Zone 10 : Lifestyle Centre" purposes, as well as to increase the maximum permitted G.L.A. (gross leasable area) of "shop" from 14000m2 to 25000m2. The said application further proposed the deletion of the total floor space requirement of 25000m2 G.L.A. The above application was approved by the Municipality and subsequently became the subject of an appeal in terms of Section 47 bis C of the Town Planning Ordinance (Ordinance No. 27 of 1949). The Provincial Planning and Development Commission subsequently resolved to dismiss the appeal brought by the appellants, thereby giving effect to the KwaDukuza Council decision, with amended controls in Table C and Table D. As mentioned above, the previous application submitted by Paul & Bruce Investments (Pty) Ltd was (apart from rezoning certain components of the application property) to increase the maximum G.L.A. for "shop" from 14000m2 to 25000m2 as well as to delete . . . the total floor space requirement of 25000m2 G.L.A. The restriction placed on the maximum G.L.A. for "shop" has, since the introduction of the "Special Zone 10 : Lifestyle Centre" into the Ballito town planning scheme clauses, been an additional control with specific reference to "shop" only. Resulting from the resolution taken by the Provincial Planning and Development Commission, referred above, not only buildings erected for "shop" use, but the total development of the Property was restricted to 25000m2. During October 2007 the Applicant had to again submit an application to amend the scheme, with specific reference to "Special Zone 10 : Lifestyle Centre", to increase the total floor area from 25000m2 to 28000m2. Such application was approved during September 2008. Generally, the purposes for which buildings may be erected and used in "Special Zone 10 : Lifestyle Centre", other than "shop" ought to be restricted by the maximum permitted F.A.R. of 1, Coverage of 70% and Height of 3 storeys. The latter principle applies to all adjoining erven situated within the Ballito Business Park, zoned for "Activity" purposes. This principle also applied to the Property, prior to its initial rezoning during the year 2000. It is the Applicant's intention to further develop the Ballito Lifestyle Centre in the near future and therefore this application for the removal of the mentioned additional controls, hereby simplifying the development controls applicable to the Property.' [18] After setting out how the respondent’s zoning scheme had developed over the years and the proposed amended development controls sought by the respondent, Van der Merwe went on to state: 'The concerns raised by the Objector, as well as the KZN Department of Transport are shared, in the sense that traffic impact is a major consideration along the MR 398 and MR 445. The Lifestyle Centre was not ever intended to become a conventional centre with conventional town planning controls and it is therefore submitted that some form of additional control be maintained to limit the total G.L.A. of the Centre until such time as the larger central business area has been re-evaluated in terms of the Kwadukuza Scheme review process. It is also important that further controls be introduced to control future expansions to the Lifestyle Centre, in the context of the Department of Transport's as well as Municipality's future road and public transport upgrading initiatives. The Applicant was requested to provide a detailed site development plan, depicting the actual areas of expansion required. Attached hereto, marked C, is a detailed site development plan as referred to above, which depicts the areas of extension envisaged by the Applicant in the short to medium term. It is submitted that consideration can be given to logical and minor extensions to the current G.L.A., but limited to the current anchor tenants. Such minor extensions should be limited to. No more than 20% of the current G.L.A. per anchor tenant shopping unit and aimed at the creation of storage space as well as a more functional shop layout. Such extensions should also be limited to the southern and south western parts of the Centre, thereby not creating the opportunity for further self contained shopping units, resulting in a further impact on the current access and parking situation. Based on the above, it is submitted that the proposed extension to Woolworths, Spar as well as the administration unit of the Centre be supported. The proposed extension to Mica is substantial and not considered appropriate in the context outlined in the paragraph above. It is therefore recommended that consideration be given to an additional G.L.A. of 3000m2 only.' (My own emphasis.) [19] After evaluating the application Van der Merwe made the following recommendation: 'RECOMMENDATION RESPONSIBLE OFFICIAL 1. That based on the information provided above, as well as the Applicant's response to the objection raised, the application in terms of Chapter 6 [Section 65(1) thereof] of the KZN Planning & Development Act (Act no. 6 of 2008), for the removal of restrictions be APPROVED but subject to the following underlined amendments to "Special Zone 10: Lifestyle Centre": TABLE C : USE ZONE : SPECIAL ZONE 10 : LIFESTYLE CENTRE USE ZONE (1) NOTATION ON SCHEME MAP (2) PURPOSES FOR WHICH BUILDINGS MAY BE ERECTED AND USED (3) PURPOSES FOR WHICH BUILDINGS MAY BE ERECTED AND USED ONLY WITH SPECIAL CONSENT (4) PURPOSES FOR WHICH BUILDINGS MAY NOT BE ERECTED AND USED (5) Special Zone 10 Lifestyle Centre Red Cross Hatch Agriculture Arcade or Pedestrian Mall Arts & Crafts Workshop Commercial Workshop Educational Building Laundrette Office Building Place of Public Amusement Private Recreation Area Recreational building Restaurant Shop Crèche Dwelling House Funeral Parlor Motor Car Showroom Municipal Parking Garage Public Office Residential Building Service Industrial Building and land uses NOT included in Columns 3 and 4 TABLE D : DENSITY ZONE : SPECIAL ZONE : LIFESTYLE CENTRE DENSITY ZONE (1) MAXIMUM PERMITTED F.A.R., COVERAGE & HEIGHT (2) ADDITIONAL COTROLS (3) COLOUR NOTATION ON SCHEME MAP (4) Special Zone 10 Lifestyle Centre 1 : 70 : 3 1. Accommodation of motor vehicles to be provided on the lot as per Clause 6.4 2. Subject to the provision of a sewerage disposal system to the satisfaction of the Local authority. 3. The total G.L.A. of the Property be restricted to 31 000m2 and no development exceeding 28 000m2 of G.L.A. will be permitted unless prior approval has been given by both the Municipality as well as the KZN Provincial Department of Transport; of a Traffic Impact Assessment, which is to be undertaken at the cost of the owner. That the further extensions be limited to those areas indicated on the plan – (ref: 0309 100/3) attached to the EDP October 2011 Agenda. The proposed extension to the Mica shopping unit, as shown on the said plan is not supported. Red cross hatch 2. That both the Applicant as well as the Objector be informed of their rights to Appeal in terms of the provisions of the KZN Planning & Development Act (Act no. 6 of 2008). 3. . . . .' [20] The appellant adopted Van der Merwe’s recommendation and passed a resolution to that effect. The appellant’s decision granting the application to amend the scheme controls was communicated to Helena Jacobs, the respondent’s Town and Regional Planner, on 14 November 2011. [21] To sum up, the following controls applied before and after they were amended in November 2011.Under Table C the maximum GLA for the building erected and used as a shop was 25 000 m2 and in Table D the floor space restriction of 28 000 m2 applied. The purpose of the application was to remove the restriction of shop GLA of 25 000 m2 in Table C and to remove the floor space restriction of 28 000 m2 in Table D. The respondent needed additional space to extend Woolworths, Spar, Administration Unit and Mica. The application was considered by Van der Merwe on behalf of the appellant. He prepared a report for the appellant. It is significant to note that in his report Van der Merwe pertinently stated that the restriction placed on the maximum GLA for ‘shop’ has since the introduction of the ‘Special Zone 10: Lifestyle Centre’ into the Ballito town planning scheme clauses, been an additional control with specific reference to ‘shop’ only which confirms that the GLA has always been associated with ‘shops’. [22] Mr van der Merwe suggested that logical and minor extensions to current GLA of 25 000 m2 be granted but by no more than 20 percent of 25 000 m2. His suggestion accordingly was that the GLA be extended by 5000 m2 to 30 000 m2. He, however, recommended that the application be approved subject to certain conditions to be included in Table D, additional control 3, in order to address the concerns raised by a certain objector. Instead of increasing the GLA to 30 000 m2 he recommended that it be increased to 31,000 m2 but that the consent of the appellant and the provincial Department of Transport be obtained for any development exceeding 28 000 m2. His recommendation was that the restriction of shop GLA of 25 000 m2 in Table C be removed. [23] This analysis provides the context, the purpose of the amendment of the controls and the background to their amendment in the light of which they should be construed. [24] In the high court the appellant submitted that when the zoning was changed in November 2011 Table C was amended to remove the restriction on GLA of ‘shop’. It argued that Table D was amended to limit the total GLA of the Centre, and to introduce controls relating to traffic and where expansion might take place. The appellant contended that it was only in Table C (which deals with use zone) that GLA relates to premises used as ‘shop’. The appellant argued that Table D (which deals with density) never distinguished between shop and non-shop space, or between types of use at all. The appellant argued that prior to September 2005 and since November 2011 Table D fixed permissible density by reference to the GLA of the total property, between those dates it was fixed with reference to total floor area. [25] The high court rejected the construction contended for by the appellant that GLA means anything whether it is lifestyle component or retail type component. The high court held that it was satisfied that, based on the correspondence exchanged between the parties’ legal representatives and in particular the letter addressed to the appellant's attorneys of record by the respondent's attorneys on 24 August 2012, the parties had by their conduct understood the term GLA to refer to shop space. The high court accepted the construction contended for by the respondent on the grounds, first, that it was consistent with the manner in which the parties had implemented the zoning provisions, as reflected in the correspondence exchanged between the parties’ attorneys. Secondly, that the interpretation contended for by the respondent advanced the purpose of the scheme. This holding was based on the reasoning that, if it were to adopt the construction of GLA contended for by the appellant that would result in uncertainty, because such interpretation would render the meaning of GLA elastic. Finally, the high court held that the interpretation of GLA contended for by the respondent had to be preferred to that of the appellant as it would avoid absurdity and unconstitutionality. The high court accordingly granted an order in terms of prayers 1.1; 1,2; 1.3; 2 and 3 of the notice of motion. [26] Before this court counsel for the appellant submitted that the words ‘the total GLA of the Property’ do not mean only the GLA of shops if the words are given their ordinary meaning, in the light of the ordinary rules of grammar and syntax. He argued that it was not contextually or purposively possible to ascribe a special meaning or different meaning to the words ‘the total GLA of the property’ so as to make them mean ‘the GLA of shops only’. [27] One is required to interpret the zoning provisions in accordance with the principles enunciated in recent cases such as KPMG1, Endumeni2, Bothma-Batho3 and Dexgroup4. The approach to interpretation of written instruments, be they contracts or statutes is usefully summarized thus in Dexgroup para 16: ‘…These cases make it clear that in interpreting the starting point is inevitably the language of the document but it falls to be construed in the light of its context, the apparent purpose to which it is directed and the material known to those responsible for its production. Context, the purpose of the provision under consideration in the background to the preparation and production of the document in question are not secondary matters introduced to resolve linguistic uncertainty but are fundamental to the process of interpretation from the outset’. [28] Having regard to the context in which the words are used, the purpose to which they are directed and how their inclusion in Table D of Special Zone 10 came about, I conclude that the words ‘the total GLA of the property’ should be interpreted to comprise areas leased out by the respondent to be used as ‘shop’ and all the areas used exclusively by the shop tenant. My 1 KPMG Chartered Accountants (SA) v Securefin Ltd and Another 2009 (4) SA 399 (SCA) paras 29-40. 2 Natal Joint Municipal Fund v Endumeni Municipality 2012 (4) SA 593 (SCA) para 18. 3 Bothma-Batho Transport 2014 (2) SA 494 (SCA) para 12. 4 Dexgroup Pty Ltd v Trustco Group International (Pty) Ltd [2013] ZASCA 120; [2014] (1) All SA 375(SCA). conclusion is based on the following. First, it is apparent from the history of the Lifestyle Centre that the whole purpose of its design was to create a mix of uses and was to include lifestyle features such as restaurants, a nursery, large open walkways and water features and service providers such as the Post Office and banks. In terms of the design, the Lifestyle Centre was to be different from a conventional shopping centre dominated by retail outlets. The whole purpose of creating the Lifestyle Centre would be defeated if GLA was not confined to shops, because, on the appellant’s interpretation of GLA, all lifestyle features such as restaurants, nurseries, animal farms, a gymnasium, open air tea gardens and an open air theatre would fall within the definition of GLA, because notionally they are capable of being leased out. The result is that lifestyle features and service providers such as the banks and Post Office would compete with shops for permissible space which could lead to a situation where there would be no lifestyle features or service providers, because all GLA will be taken up by shops. This would undermine the whole notion of a Lifestyle Centre as conceived by the respondent from the outset. [29] Secondly, if regard is had to the conduct of the parties both before and immediately after the amendment of the zoning provisions in November 2011 it is apparent that both parties understood GLA as comprising shop retail space and this position is reflected in the correspondence exchanged between the parties’ legal representatives.5 Additionally in his evaluation report dated 19 October 2011 Van der Merwe stated that ‘the restriction placed on the maximum G.L.A. for “shop” has, since the introduction of the “Special Zone 10 : Lifestyle Centre” into the Ballito town planning scheme clauses, been an additional control with specific reference to “shop” only.’ This approach is justified in this matter because this practice provides evidence which demonstrates that for a period of time both the appellant and the respondent shared a common understanding that GLA only relates to retail space.6 5 Commissioner, South African Revenue Services v Bosch [2014] ZASCA 171; 2015 (2) SA 174 (SCA) para 17. 6 Marshall NO v Commissioner for the South African Revenue Service [2008] ZACC 11; 2019 (6) SA 246 (CC) para 10. [30] That both parties understood that GLA relates only to 'shop' is further demonstrated by the following instances. Firstly, during 2006 in an appeal by a third party to the Provincial Planning and Development Commission against changes to the zoning provisions, the appellant's legal representatives submitted written argument defending its decision to grant an application to amend the zone controls by increasing the GLA from 14 000 to 25 000 m2 and removing a total floor space restriction. The appellant argued that the increase in GLA in respect of shops did not give the respondent a blank cheque for development because the proposed development would still be subject to floor area ratio ('FAR'), coverage and height restrictions. The extent of the property exceeds 69 000 m2, leaving a balance above the GLA limit of 25 000 m2, which applied at the time, of more than 44 000 m2. It would be absurd to suggest that the appellant's legal representative was contending that 44 000 m2 would constitute areas that could not be let out at all. [31] Secondly, during December 2008, the appellant approved the as-built plans for the second phase of the development of the Lifestyle Centre. At that time, the limit on GLA was 25 000 m2. In respect of those plans the respondent had calculated GLA on its interpretation and the appellant's current interpretation. On the appellant's current interpretation, GLA per that plan was 24 874 m2 excluding the area occupied by the nursery. At that stage, the nursery measured 2 751 m2. Had the nursery been taken into account by the appellant in calculating GLA, the appellant could never have approved the plans for phase 2 (as it did) because GLA, on its current version, would have been 27 625 m2 when the limit was 25 000 m2. The appellant now contends that, because a nursery is capable of being let out, it falls to be included in GLA (despite having earlier admitted that a nursery was a lifestyle component). If this was the case, the appellant could never have approved the plan during December 2008. [32] To sum up, bearing in mind that when the amendment was sought in June 2011 the shop GLA restriction of 25 000 m2 applied, it is quite inconceivable that the words ‘the total GLA of the Property’ appearing in Table D, additional control 3 were intended to apply to all areas - shop and non- shop areas- at the Centre. If it were so, it means that there would be no more space for accommodating lifestyle features and service providers at the Centre which in terms of the scheme clauses are excluded from the definition of ‘shop’. [33] The next question is what uses at the Lifestyle Centre should be excluded from the definition of 'shop' for the purposes of zoning controls. In terms of scheme clauses 'shop' "means a building or land used for any retail trade or business wherein the primary purpose is the selling of goods and appliances by retail and includes a building used for the purpose of a hairdresser, ticket agency, showroom (including motor showroom restricted to the display and sale of vehicles only), auction mart or for the sale of food and drink for consumption off the premises or for the reception of goods to be washed, cleaned, altered, dry-cleaned or repaired and includes ancillary buildings ordinarily incidental to the conduct of the retail business, but does not include an industrial building, garage, service station, milk depot or hotel". I did not understand counsel for the appellant to dispute that the definition of a 'shop' excludes all uses as set out in paras 1.2.1 to 1.2.12 of the notice of motion. In these circumstances there existed no legal basis for the appellant to have refused to consider the building plans submitted to it by the respondent and two of its tenants. [34] What remains to be considered is the relief. The high court granted the relief sought in prayers 1 to 4 of the notice of motion. In terms of paragraph 2 of the order, the appellant was directed to consider building plans concerned in terms of the declared definition of GLA and make decision within 60 days of the grant of the order. In paragraph 3 the high court ordered the appellant to consider all other building plans submitted to it by the respondent or its tenants in the light of the declared definition of GLA and make a decision within 60 days from the date of the submission of such plans to the appellant. In my view paragraphs 2 and 3 of the order should be amended in line with s 7 of the National Building Regulations and Building Standards Act, 103 of 1977 (the Building Standards Act) which governs the process of approving building plans. In terms of s 7 of the Building Standards Act a local authority must consider the building control officer’s recommendation made in terms of s 6. If a local authority is satisfied that the application for approval complies with the requirements of the Building Standards Act and other applicable law, it must grant the approval unless it is satisfied that the erection of the building to which the plans relate will trigger one of the disqualifying factors. In that event, the local authority must refuse to grant its approval in respect thereof and give written reasons for such refusal. [35] It is therefore not necessary to include in paras 2 and 3 of the order a stipulation directing the appellant to consider the building plans concerned in the light of the declared definition of GLA. [36] Had this been the majority judgment, I would have granted an order in the following terms: 1 The appeal is dismissed with costs including costs of two counsel. 2 Paragraphs [1] 1.1; 1.2 and 1.3 of the order of the high court are confirmed. 3 Paragraphs 2 and 3 of the order of the high court are set aside and replaced with the following: '1. The respondent is ordered to consider the building plans submitted to it by the applicant with plan numbers 12/05/289; 12/08/523 and 13/06/307, and either approve such plans or properly inform the applicant in writing of the reason for any refusal, within 60 days of the grant of the order in this matter; 2. The respondent is further ordered to consider all other building plans submitted to it by the applicant or its tenants and either approve such plans or properly inform the applicant or the party submitting such plans in writing of the reason for any refusal, within 60 days of the grant of this order.' _____________ D H Zondi Judge of Appeal Mbatha JA (Leach JA concurring) [37] I have had the benefit of reading the judgment of my brother Zondi JA (the main judgment). The main judgment dealt with the interpretation of the town planning scheme which applies exclusively to the Lifestyle Centre in Ballito. In the main judgment, Zondi JA found in favour of the respondent in respect of both issues. I respectfully hold a different view. The crux of the matter is whether the total GLA of the Ballito Lifestyle Centre should be interpreted to mean only the area relating to the shops as defined in the scheme or rather to mean all the retail areas let out by the respondent. [38] It is apposite that one should understand what is meant by the town planning scheme before dealing with the interpretation of the term GLA. The scheme is an essential part of the Town Planning Programme. The Constitutional Court, in City of Johannesburg Metropolitan Municipality v Gauteng Development Tribunal & others [2010] ZACC 11; 2010 (6) SA 182 (CC) para 57, aptly described the term municipal planning as follows: ‘the term [municipal planning] is not defined in the Constitution. But “planning” in the context of municipal affairs is a term which has assumed a particular, well- established meaning which includes the zoning of land and the establishment of townships. In that context, the term is commonly used to define the control and regulation of the use of land.’ [39] The land management or town planning lies in the hands of the municipality through the scheme. The municipality exercises control of the town planning process through the scheme, hence applications for rezoning and special consents are to be made. The scheme may therefore be amended from time to time to accommodate changes in the development of the town. [40] This court, in JDJ Properties CC and Another v Umgeni Local Municipality and Another [2012] ZASCA 186; 2013 (2) SA 3955 (SCA) para 28, stated that the Town Planning Ordinance 27 of 1949 (Kwa-Zulu Natal) contained the general purpose of a town planning scheme which is to achieve ‘a co-ordinated and harmonious development of the municipal area . . . in such a way as will most effectively tend to promote health, safety, order, amenity, convenience and general welfare’. In general town planning schemes are conceived not only in the interests of the general public but in the interests of inhabitants of the area covered by the scheme. (Administrator Transvaal and the Firs Investments (Pty) Ltd v Johannesburg City Council 1971 (1) SA 56 (A) at 70D; BEF (Pty) Ltd v Cape Town Municipality & others 1983 (2) SA 387 (C) at 401F). [41] The previous applications for rezoning were submitted to the appellant in terms of s 47 of the Town Planning Ordinance 27 of 1949. The current planning legislation applicable to KwaDukuza is the KwaZulu-Natal Planning and Development Act 6 of 2008. The former, amongst other things, provides for the adoption, replacement and amendment of the scheme. Most significantly, it provides for the alteration, suspension and deletion of restrictions to land. The aim being to promote a uniform planning and development system, which treats all citizens of the province equitably, provide a fair and equitable standard of planning and development to everyone and favour lawful development and other values. In this regard, the appellant was empowered to alter the previous determinations on the GLA, for the purposes of controlling density in line with the development of the town and the nature of the Lifestyle Centre. Therefore the provisions of the scheme apply to the respondent as well. The appellant being a regulatory authority has a duty to amend the scheme for the benefit of the inhabitants of the area covered by the scheme. In that regard it has a duty to balance the interests of the public as well as those of the respondent, the developer. [42] The respondent had a duty to submit plans for approval prior to commencing with building extensions on the Lifestyle Centre. The respondent’s reliance on previously approved plans under previous schemes instead of the current version of the town planning scheme was misplaced. By so doing the respondent tried to bypass the special zoning provisions in the current scheme. [43] In seeking an order compelling the appellant to consider the plans the respondent was forcing the appellant to consider plans that would be in line with its own definition of GLA. The calculations of the GLA by the respondent were made ex post facto the submission of the plans for approval. The respondent caused the buildings to be built without approved plans and was trying to regularize the position by relying on the previous determinations by the appellant. [44] In considering how the term GLA should be defined, a material consideration should be the nature of the Lifestyle Centre, as the term GLA is not defined in the scheme. It is common cause that the nature of the Lifestyle Centre, rezoned to Special Zone 10, is not a conventional shopping complex. The main judgment describes it as a holistic complex of shops, restaurants and entertainment facilities, with the focus on outdoor living areas, including a nursery, having recreational facilities like an animal farm, gymnasium, wellness centre, open air gardens and extensive landscaping. It is clear from this description that the purpose of a lifestyle centre is for ‘lifestyle’ enjoyment rather than for shopping. It inconceivable that the meaning of GLA was intended to apply to shops only to the exclusion of other lettable areas, as this would go against the nature and purpose of the Lifestyle Centre. The dominance of the shops over the lifestyle activities was never envisaged in the town planning scheme. [45] I do not agree that the definition for which the appellant contends will defeat the purpose of a Lifestyle Centre. A lifestyle centre was not intended to have the shops dominate the entire development area. The finding in the main judgment that the proposed development would still be subject to the floor area ratio (FAR), coverage and height restriction, would defeat the purpose of a lifestyle centre. [46] My colleague is of the view that it is quite inconceivable that the words the total GLA of the property appearing in Table D, additional control 3, were intended to apply to all areas, shop and non-shop areas. This was introduced as a measure of control in the latest scheme to control density. The increase in shop area only, would have the effect of increasing density to the Lifestyle Centre, without consideration of the traffic volumes and environmental impact on the part of the town. The appellant confirmed that in the previous schemes the nursery was not taken into account. However, it was considered when the current controls were introduced in November 2011 to limit the total GLA. There is nothing amiss with regard to that amendment, as the nursery is a lettable area. [47] In Tronox KZN Sands (Pty) Ltd and KwaZulu-Natal Planning and Development Appeal Tribunal and Others [2016] ZACC 2; 2016 (4) BCLR 469 (CC), the Constitutional Court confirmed that municipal planning decisions lie within the exclusive competence of municipalities. The term GLA can therefore not be interpreted in isolation from the considerations taken into account by the appellant when amending the scheme. The short to medium term solutions, limiting extensions to no more than 20 percent of the current GLA per anchor tenant, mostly to the southern and south western parts of the centre, to curtail the impact on the current access and parking areas were well considered and within the competency of the appellant. The extension of the MICA shop was not accepted as it was too substantial. This was in line with Van der Merwe’s recommendations which were based on traffic considerations which have not been challenged by the respondent. Van der Merwe recommended that the total GLA of the property be restricted to 31 000 m² and that the development was not to exceed 28 000 m² subject to approval by the appellant and the Department of Transport. [48] Van der Merwe, an expert, who considered the application by the respondent, proposed progressive adjustments to accommodate the respondent’s plans, subject to the approval by the Department of Transport. This was done after consideration of the concerns raised by an objector and the Department of Transport. The main considerations being traffic consideration along the MR398 and MR445 and that the Lifestyle Centre was never intended to be a conventional shopping complex. It was therefore incumbent upon the appellant to place additional controls to limit the total GLA of the centre, until such time as the larger central business area had been evaluated in terms of the Kwa-Dukuza Scheme review process. [49] Town planning, management and considerations of traffic volumes lie only within the competency of the appellant. The respondent seemed to suggest that because the town has not grown in terms of development and volumes in traffic the rules which were applicable when the town was static, should apply in the present times. The GLA definition which should be accepted is the one provided in Table D, as it caters for density controls of the centre. The term GLA should be interpreted in the context of the nature of the centre and purposively. Density control is the main consideration here, not the ambitions of the respondent. [50] For the definition of GLA, one can only look at the definition provided in Table D, which deals with density controls. It refers to ‘the total GLA of the property’ it does not refer to ‘the total GLA of the shop’. The meaning of the words interpreted in their context and purposively, within the constraints imposed by the language should be accepted as the proper interpretation. (See Natal Joint Municipal Pension Fund v Endumeni Municipality [2012] ZASCA 13; [2012] 2 ALL SA 262 (SCA) para 20–24). Density control is the main controlling factor in considering the proposals by the respondent. [51] The scheme defines ‘Gross shop area’ – ‘as the sum of the floor areas of both the storage and retail areas of a shop and shall include wall thickness and basements used other than for parking purposes but shall exclude public convenience’. This is significant as it shows that the GLA applies to all lettable areas. The purpose of leasing property is to generate income from all lettable areas hence GLA should apply not only to shops, but to exclusive use areas and the nursery. [52] There is nothing irregular from the proposals made by Van der Merwe that the proposed amendment related to the GLA of the property. In considering which meaning should be accepted, a businesslike meaning needs to be adopted rather than an unbusinesslike meaning, which undermines the purpose of a Lifestyle Centre. Van der Merwe was open- minded in stating that should the appellant wish to consider a further development of the centre; it will have to be subject to ‘the pre-approval of other state organs.’ [53] The current planning legislation, the KwaZulu-Natal Planning and Development Act 6 of 2008, provides in s 6(7) that the current scheme replaces all planning schemes within the area of its operation. Furthermore, in s 6(10) it provides that ‘[a]ny extension to buildings or structures on land contemplated in subsection 9 must comply with the scheme’. Section 9(1) provides that the municipality may initiate the amendment of the scheme. These provisions allow for a rectification on any previous genuine mistakes in the scheme by both parties. Even if there was no mistake on the part of the parties, it could still be argued that the previous amendments were in line with the existing scheme at the time. The appellant in this case was not bound by previous rulings on rezoning and special consent which were made in line with the previous schemes. The current approvals should be in line with the scheme that is currently in existence. [54] The recommendations made by Van der Merwe that the total GLA, of the property will be permitted subject to the approval of the appellant and the KZN Department of Transport should prevail. The definition of the GLA of the shop as stated in the main judgment is not in line with the nature of the centre and the current scheme of the KwaDukuza town. [55] I respectfully find that the appellant should not be ordered to consider the plans submitted by the respondent. The respondent knew very well that it had to obtain approval before building. The interpretation of GLA as contended for by the respondent was to try to regularize the illegal building without the approved plans. This was a ruse on the part of the respondent. [56] The appellant did not refuse to consider the plans submitted by the respondent. The appellant merely sent a referral to the respondent in terms of s 7(5) of the National Building Regulations and Building Standards Act 103 of 1977, advising the respondent that it will refuse to approve plans whilst the GLA on the property exceeded the permitted area in terms of the current scheme. The appellant was exercising its regulatory authority in this regard. [57] In the result, I make the following order: The appeal is upheld with costs. The order of the court below is set aside and replaced with the following order: ‘The application is dismissed with costs.’ __________________ YT Mbatha Judge of Appeal Plasket JA (Leach JA concurring) [58] I agree with the order proposed by my sister Mbatha. I am consequently unable to agree with the conclusion reached by my brother Zondi. I shall set out briefly my reasons for that disagreement. [59] As Zondi JA has set out the facts and the context within which the interpretation of the zoning scheme must occur, I proceed directly to our point of divergence. That involves a consideration of the use and density controls from the inception of the zoning scheme to the last amendments that were effected in 2011, and which apply at present. [60] At its inception, the use controls applicable to the lifestyle centre referred to a restriction of 14 000m2 GLA in relation to shops and, in the density controls, it was provided that the total floor space could not exceed 25 000m2 GLA. [61] When the scheme was amended in July 2005, GLA in respect of shops in the use controls was increased to a maximum of 25 000m2 and, in the density controls, total floor space was limited to 25 000m2. Total floor space was thus de-linked from GLA. [62] When the scheme was amended in October 2007, GLA in respect of shops continued to be restricted to 25 000m2 in the use controls and, in the density controls, total floor space was increased to 28 000m2. Again, no linkage between total floor space and GLA was maintained. [63] Finally, when the scheme was amended in 2011, the prior reference to GLA in relation to shops was deleted in the use controls, and the density controls were amended to provide that the ‘total G.L.A. of the Property be restricted to 31 000m2 and no development exceeding 28 000m2 of G.L.A. will be permitted unless . . .’. [64] What emerges from this history of the use and density controls is that over a period of time, the appellant, in successive amendments, moved steadily away from the original linkage between shops and GLA as the means to achieve the unique features of the lifestyle centre. [65] The complete de-linking of GLA from shops in the 2011 amendment cannot be wished away. The words used in the use and density controls cannot simply be ignored. To read into those words precisely what the appellant deliberately left out would be to legislate for the appellant, rather than to interpret the product of the appellant’s application of mind. [66] I do not believe that the plain meaning of the use and density controls, within their historical context, can be trumped by reliance on the purpose of the scheme: if the result of the 2011 amendment was impermissible for want of a proper purpose on the part of the appellant, review rather than interpretation would be the remedy. [67] In my view, the respondent was not entitled to the declarator that the term ‘GLA’ in the scheme relates ‘only to the relevant retail space for the exclusive use of retail shop tenants’ and ‘excludes uses other than “shop” as defined in the scheme . . .’. The rest of the relief that was sought and granted was reliant on the grant of this declarator. The application in the court below ought, for this reason, to have been dismissed. [68] In the result, I would uphold the appeal with costs, set aside the order of the court below and replace it with an order dismissing the application with costs. _________________ C Plasket Judge of Appeal APPEARANCES: For appellant: G D Goddard SC Instructed by: Shepstone & Wylie Attorneys, Umhlanga Rocks Webbers, Bloemfontein For respondent: A M Annandale SC A J Boulle Instructed by: Richard Evans & Associates, Kloof Symington & De Kok Inc, Bloemfontein

SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL FROM The Registrar, Supreme Court of Appeal DATE 18 March 2020 STATUS Immediate Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal. KwaDukuza Municipality v Lahaf (Pty) Ltd (940/18) [2020] ZASCA 09 (18 March 2020) Today the Supreme Court of Appeal (SCA) upheld an appeal, from the KwaZulu-Natal Division of the High Court, Pietermaritzburg (high court), with costs. The appeal concerned the interpretation of the words ‘the total Gross Lettable Area (GLA) of the Property’, in a single zone in a town planning scheme which applies exclusively to the Lifestyle Centre (Centre) in Ballito, KwaZulu Natal. A brief background of the matter is that, the respondent, Lahaf (Pty) Ltd, and two of its tenants submitted to the appellant, KwaDukuza Municipality, building plans for approval. The appellant did not consider the plans. The appellant’s stance was that what the respondent had built and proposes building at the Lifestyle Centre contravenes the limitations imposed on the property in terms of its zoning controls. The parties were in dispute as to which built areas in the centre constitute GLA and which areas do not. The respondent, thereafter, sought an order in the high court directing the appellant to consider the three sets of building plans submitted by the respondent in light of the declared definition of the GLA within 60 days of the order. The high court accepted the respondent’s contention and held that the interpretation of GLA contended for by the respondent had to be preferred to that of the appellant as it would avoid absurdity and unconstitutionality. The appellant was directed to consider the relevant building plans submitted to it by the respondent or its tenants in accordance with the declared definition of 'GLA'. In the Supreme Court of Appeal (SCA), the appellant submitted that the 'GLA' comprises all areas notionally capable of being let including storage areas and receiving yards. It drew no distinction between shop and non-shop areas. The respondent contended that the word 'GLA' must be interpreted to mean only the area of 'shops' as defined in the scheme clauses, that is to say, the areas let out by the respondent to be used as shops and all areas used exclusively by a shop tenant. In the SCA, per Mbatha JA (Leach JA concurring) (the majority judgment), considered how the term GLA should be defined. In considering how GLA should be defined the nature of the Lifestyle Centre, as the term GLA is not defined in the scheme, should be taken into account. A Lifestyle Centre is not a conventional shopping complex. In considering which meaning should be accepted, a businesslike meaning needs to be adopted rather than an unbusinesslike meaning, which undermines the purpose of a Lifestyle Centre. The SCA, per Mbatha JA, held that it was inconceivable that the meaning of GLA was intended to apply to shops only to the exclusion of other lettable areas, as this would go against the nature and purpose of the Lifestyle Centre. GLA applies to all lettable areas, this is further evident by how ‘Gross shop area’ is defined in the scheme. The purpose of leasing property is to generate income from all lettable areas hence GLA should apply not only to shops, but also to exclusive use areas and the nursery. The majority judgment went on and held that the appellant should not be ordered to consider the plans submitted by the respondent unless if compliant with the appellant’s interpretation of GLA. The respondent knew very well that it had to obtain approval before building. The interpretation of GLA as contended for by the respondent was to try to regularize the illegal building without the approved plans. In a concurring judgment penned by Plasket JA (in which Leach JA concurred), Plasket JA concurred with the order of majority judgment albeit for different reasons. Plasket JA disagreed with the conclusion reached by Zondi JA, he held that based on history of the use and density controls what emerges over a period of time, is that the appellant, in successive amendments, moved steadily away from the original linkage between shops and GLA as the means to achieve the unique features of the lifestyle centre. Plasket JA went on to hold that the meaning of the use and density controls, within their historical context, cannot be trumped by reliance on the purpose of the scheme. In a dissenting judgment written by Zondi JA, Zondi JA (in which Petse DP concurred) held that based on the history of the Lifestyle Centre, the whole purpose of its design was to create a mix of uses and it was to include lifestyle features such as restaurants, a nursery, large open walkways and water features and service providers such as the Post Office and banks. The Lifestyle Centre was to be different from a conventional shopping centre dominated by retail outlets. The purpose of creating the Lifestyle Centre would be defeated if GLA was not confined to shops, because all lifestyle features such as restaurants, nurseries, animal farms, a gymnasium, open air tea gardens and an open air theatre would fall within the definition of GLA, as a result of the notion that they are capable of being leased out. For such reasons the words ‘the total GLA of the property’ have to be interpreted to comprise areas leased out by the respondent to be used as ‘shop’ and all the areas used exclusively by the shop tenant. In the result, Zondi JA would have dismissed the appeal with costs including the costs of two counsel and the appellant would have been ordered to consider the building plans submitted to it by the respondent. The appeal was upheld with costs.

2982

non-electoral

2015

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Not Reportable Case no: 20191/14 In the matter between: DORMELL PROPERTIES 282 CC APPELLANT and ALWYN GIDEON BAMBERGER RESPONDENT Neutral citation: Dormell Properties 282 CC v Bamberger (20191/14) [2015] ZASCA 89 (29 May 2015) Coram: Lewis, Shongwe and Majiedt JJA and Schoeman and Mayat AJJA Heard: 15 May 2015 Delivered: 29 May 2015 Summary: Civil Procedure – particulars of claim premised on an invalid suretyship agreement – breach of an offer to lease agreement containing a suretyship clause not expressly pleaded but annexed to the particulars of claim as if incorporated – surety not afforded an opportunity to raise the defence of the benefit of excussion – fatal to the landlord‟s case. ORDER ________________________________________________________________ On appeal from: The Western Cape Division of the High Court, Cape Town (Savage AJ with Yekiso J concurring, sitting as court of appeal): The appeal is dismissed with costs, including the costs of two counsel. JUDGMENT ________________________________________________________________ Shongwe JA (Lewis and Majiedt JJA and Schoeman and Mayat AJJA concurring) [1] This appeal concerns a claim against a surety for damages resulting from a breach of a lease agreement. The appellant, Dormell Properties 282 CC (Dormell), successfully sued Edulyn (Pty) Ltd (Edulyn), as the first defendant in its capacity as the tenant. The respondent, Mr A G Bamberger, was sued as the second defendant in his capacity as surety for the obligations of Edulyn. Both Edulyn and Bamberger were sued in the Bellville Magistrate‟s Court jointly and severally, the one paying the other to be absolved. Bamberger in turn successfully appealed against the judgment and order of the Bellville Magistrate‟s Court to the court a quo (Western Cape Division, Cape Town, Savage AJ with Yekiso J concurring). This appeal is with the leave of this court. It should be noted at the outset that at the time when the appeal was heard by this court, Edulyn had been liquidated. [2] Edulyn made a written offer on 12 September 2008 to lease certain premises situated at shop 26, Cobble Walk, corner De Villiers Road and Verdi Boulevard, Sonstraal Heights, Durbanville, Western Cape (the premises), which offer Dormell, as owner and landlord, accepted on 16 September 2008. The terms and conditions of the lease were fully set out in the offer to lease. Of significance are clauses 9.1, 9.2 and 10 which read as follows: ‘9 Offer and Agreement 9.1 This offer is irrevocable and open for acceptance by the Landlord by noon on the sixtieth day following the date of signature hereof by the Tenant, unless another date is stipulated in “I” below, following which it shall become a building agreement (“the Agreement”). Upon acceptance hereof by the Landlord, this offer shall become a binding agreement, mutatis mutandis with the terms and conditions of the Landlord‟s Agreement of Lease assigned to this project (a copy of the lease can be viewed at the following address: Suite OG, Nautica, The Waterclub, Beach Road, Granger Bay, 8005). 9.2 The parties agree that after acceptance hereof they will sign the Lease for the premises whereupon this Agreement will fall away. A copy of the Lease is filed with and available for inspection at the offices of GAIN CC, Suite OG, Nautica, The Waterclub, Beach Road, Granger Bay. Any failure so to sign shall not, however, affect the validity of this Agreement, but the duty to sign shall be enforceable at the instance of either party and pending such signature the provisions of 9.2 shall apply. Should there be any conflict between this Agreement and the Lease, the terms of this Agreement will prevail. 10 Suretyship The person/s signing this Offer on behalf of the Tenant, if such be the case, hereby guarantees the Tenant‟s obligations to the Landlord and undertake/s in his/her/their personal capacity and on behalf of the Tenant, to procure that such of the Directors and/or Shareholders and/or members and/or partners and/or spouse of the Tenant, as the case may be, as the Landlord requires, will, if the Landlord requires, guarantee the obligations of the Tenant to the Landlord.‟ [3] Bamberger, as the sole director of Edulyn, represented and signed the offer to lease on behalf of Edulyn. By doing so, he also bound himself as surety for Edulyn‟s obligations under the lease. The lease was due to commence on 1 November 2008 and terminate on 31 October 2013. In the particulars of claim, Dormell alleged, inter alia, that the offer to lease annexed should be read as if incorporated in the particulars. But no express mention was made of clause 10 which bound Bamberger as a surety. [4] As clause 9 quoted above stated, the parties agreed that they would sign a further agreement of lease, the terms of which were to be found at the address referred to. But failure to sign the memorandum would not affect the validity of the offer to lease. And if there was conflict between the offer signed and the terms of the lease to be signed, the former would prevail. [5] As fate would have it, Bamberger did sign the memorandum anticipated in the offer to lease, but Dormell, for some unknown reason, did not. And after signing, on 21 October 2008, Bamberger signed yet another suretyship, purporting to bind himself as surety and co-principal debtor for the fulfilment of the obligations of Edulyn as tenant. It is significant to mention that this deed of suretyship was made an annexure to the memorandum of agreement of lease, and was annexed to Dormell‟s particulars of claim as if it were the instrument that bound Bamberger as surety and co-principal debtor. The deed of suretyship was expressly said to arise „from the Agreement of Lease to which this Suretyship is annexed‟. More will be said on this aspect later in the judgment. [6] Dormell‟s first claim against Bamberger was premised on the suretyship signed by him on 21 October 2008 to fulfil the obligations of Edulyn. It was alleged, which allegation was not denied by Bamberger, that Edulyn had failed to pay the rental, hence the breach of the offer to lease. As a consequence, Dormell cancelled the agreement of lease on 9 March 2009. The second claim was based on the fact that Edulyn unlawfully remained in occupation of the premises, despite the cancellation. It was alleged further that the unlawful holding over of the premises made Edulyn liable for the monthly rental and associated charges arising from its continued unlawful occupation of the premises. The trial court granted judgment in favour of Dormell. [7] While the action against Edulyn and Bamberger was pending, Dormell issued an application to have Edulyn and all those occupying the premises by, through or under it evicted from the premises. The full court that dealt with the eviction application on appeal found that Bamberger had bound himself as surety for the obligations of Edulyn. It also found that Bamberger had admitted in his answering affidavit that he was bound as surety. The eviction order was granted with costs. [8] However, the court a quo upheld the appeal against the decision to award damages against Bamberger on the basis that, because the deed of suretyship was attached to an invalid memorandum of lease, the suretyship was also invalid. Savage AJ said that „A contract of suretyship requires a valid principal obligation with someone other than the surety as debtor and the liability of the surety does not arise until this principal obligation has been contracted (Caney [C F Forsyth and J T Pretorius Caney’s The Law of Suretyship in South Africa 6 ed (2010)] at 47)‟. Dormell does not take issue with the finding in principle. Savage AJ also found that the admission of liability as surety in the eviction application was not binding on Bamberger in the action for damages. [9] Before us, the appellant attacked the judgment and order of the court a quo on the basis that – although the appellant conceded that no express reference to the suretyship clause was made in the particulars of claim – „in the circumstances of this case the omission caused no prejudice to Bamberger‟ and secondly, that „the rules of pleading in the Magistrate‟s Court at the time were less stringent than those pertaining to High Court pleadings.‟ Dormell contended that Bamberger was sued together with Edulyn on the basis that he was a continuing covering surety for Edulyn‟s obligations to Dormell. This argument was put forward on the basis that Bamberger did not dispute that he had signed the deed of suretyship and that he had admitted in his answering affidavit during the eviction application that he had bound himself as a surety and co-principal debtor for Edulyn‟s obligations [10] On the other hand, Bamberger contended that Dormell‟s cause of action, as pleaded ab initio, was premised on the deed of suretyship and not on the offer to lease containing the suretyship clause. It was argued further that no reference at all was made in the particulars of claim to the suretyship clause in the offer to lease. It was contended further that „it is not open to Dormell at this stage, to seek to rely upon the suretyship clause – doing so amounts, effectively, to an amendment of its particulars of claim in order to advance a case which has not been pleaded.‟ In a nutshell, Bamberger contended that he was denied the opportunity to raise any defence he could legally have been permitted to raise, „had the suretyship clause been an issue in the trial court.‟ I shall deal later with the possible defences that Bamberger says he could have raised. [11] Generally, it is accepted that the purpose of pleadings is to define the issues for the parties and the court. Pleadings must set out the cause of action in clear and unequivocal terms to enable the opponent to know exactly what case to meet. Once a party has pinned its colours to the mast it is impermissible at a later stage to change those colours. This general proposition is applicable in motion proceedings as well as in action proceedings (see Diggers Development (Pty) Ltd v City of Matlosana [2011] ZASCA 247; [2012] 1 All SA 428 (SCA) para 18; Naidoo v Sunker [2011] ZASCA 216; [2012] JOL 28488 (SCA); Swissborough Diamond Mines (Pty) Ltd v Government of the Republic of South Africa 1999 (2) SA 279 (T) at 323F-234C; Minister of Safety and Security v Slabbert [2009] ZASCA 163; [2010] 2 All SA 474 (SCA) para 21-22). [12] It is settled law that a party who wishes to claim on a deed of suretyship must comply with the ordinary rules relating to pleading of a contract. In the present case, Dormell should have alleged, inter alia, a valid contract of suretyship that complied with the provisions of the General Law Amendment Act 50 of 1956 – the terms of the deed of suretyship must have been embodied in a written document signed by or on behalf of the surety which identified the creditor, the surety and the principal debtor. It must have alleged the cause of the debt in respect of which the defendant undertook liability as well as the actual indebtedness of the principal debtor – that is, the amount owed and that it was due. [13] In the present case, we know that the deed of suretyship was invalid because the suretyship was annexed to an agreement of lease which was not signed by Dormell, as the landlord. The deed expressly guaranteed the obligations of Edulyn under that agreement. Failure to sign that agreement of lease by Dormell meant that it did not come into existence: thus the suretyship to which it was annexed was in respect of a non-existent obligation and was accordingly unenforceable. Therefore Dormell could not have relied on the deed of suretyship as pleaded in the particulars of claim. As I have indicated earlier, the appellant conceded the invalidity but averred that there was no prejudice to Bamberger in relying instead on the suretyship embodied in the offer to lease which was itself still valid. [14] In their plea to the particulars of claim Edulyn and Bamberger denied liability for arrear rental and damages for holding over, but asserted also that the anticipated memorandum of lease had not been signed by Dormell and that the suretyship was in respect of a non-existent obligation. It was at this stage, after the plea, that Dormell should have applied for an amendment of the particulars of claim so as to rely on the clause in the offer to lease guaranteeing Edulyn‟s obligations under it as against Bamberger, rather than the deed of suretyship. Dormell did not amend its particulars of claim. This failure to amend was fatal, it was submitted, to Dormell‟s case, particularly since no explanation was proffered for the failure to effect the amendment. [15] Counsel for Dormell submitted that, despite the principle that the object of pleading is to define the issues and that the parties will be kept strictly to their pleadings, within those limits the court has a wide discretion: Robinson v Randfontein Estates Gold Mining Co Ltd 1925 AD 168 at 173. The question arises: how far does this „wide discretion‟ stretch? Can the exercise of this discretion go as far as placing Bamberger at a disadvantage in that he could not be permitted to raise any legal defence, be it a dilatory defence or not? I do not think so. [16] Generally a court‟s discretion in relation to pleadings is based upon a consideration of all the factors involved, taking into account fairness to the parties. The exercise of the discretion is not unlimited and must be judicially justifiable. If the outcome of the exercise of a discretion will prejudice a party such as Bamberger, a court should be slow to exercise the discretion. (Fourway Haulage SA (Pty) v South African National Road Agency Ltd [2008] ZASCA 134; 2009 (2) SA 150 para 14, which allowed a legal issue not canvassed in the pleadings or at the trial to be argued on appeal. See contra Presidency Property Investments (Pty) Ltd & others v Patel 2011 (5) SA 432 (SCA) para 21). In the present case, as discussed below, Bamberger would have conducted his case materially differently if Dormell‟s case had been properly pleaded. Therefore the prejudice to Bamberger that would result requires exercising the discretion in favour of him if he can show how he might have conducted himself differently had the claim against him been pleaded on the basis of the offer to lease rather than the deed of suretyship. [17] Counsel for Bamberger submitted that, had the matter been properly pleaded, he could have raised a number of defences that had not been pleaded and canvassed during the course of the trial. I shall deal with only two of the defences since Bamberger did not press the others at the hearing. [18] The first defence that could have been argued, it was submitted, was that „unlike the deed of suretyship, the offer to lease was not co-signed by Bamberger‟s wife‟. As they are married in community of property „and since his wife has not consented to the signing of the offer to lease the suretyship clause (clause 10 of the offer to lease) was invalid by virtue of s 15(2)(h) of the Matrimonial Property Act 88 of 1984, in that the suretyship was not executed in the ordinary course of Bamberger‟s business but the business of Edulyn‟. However, as Dormell argued, there is an answer to the defence in s 15(6) of the Matrimonial Property Act. It provides that the provisions of s 15(2)(h), inter alia, do not apply where an act contemplated in para (h) is performed by a spouse in the ordinary course of his profession, trade or business. The evidence before the trial court clearly showed that Bamberger, though he referred to himself as a financial advisor, was the sole director and shareholder of Edulyn. He described himself as the owner of the Silverspoon restaurant, which occupied the leased premises. His son managed the restaurant but had no role in Edulyn itself. The conclusion that he signed the offer to lease in the „ordinary course of business‟ is inescapable. The fact that this defence was not raised in the plea and at the trial thus did not prejudice Bamberger. [19] At the hearing before us, Bamberger raised another point which was not canvassed in his heads of argument. Counsel submitted that it was open to Dormell to raise a defence of non-excussion under the guarantee in the offer to lease. Because Bamberger was sued in his capacity as a surety he was entitled to have the benefit of excussion. Dormell should have proceeded against Edulyn first (as principal debtor) unless Bamberger had waived his right to raise the defence of the benefit. The authors C F Forsyth and J T Pretorius in Caney’s The Law of Suretyship in South Africa, above at 128, hold the view that the benefit of excussion „is a dilatory defence which the surety may elect to set up if the creditor first sues him. If the surety intends to raise the defence, he must do so in initio litis; it is too late to raise it after litis contestatio. It certainly cannot be raised for the first time on appeal‟. (See Hurley v Marais (1883-1884) 2 SC 155 at 158; Klopper v Van Straaten (1894) 11 SC 94 at 98 and Worthington v Wilson 1918 TPD 104 at 107). [20] If the defence of non-excussion succeeds, the court may postpone the proceedings pending excussion of the principal debtor or grant absolution against the creditor. In this matter, if the clause in the offer to lease in terms of which Bamberger guaranteed Edulyn‟s obligations under the lease had been pleaded, Bamberger would have been able to raise the benefit of excussion, since he had not waived it when he had signed the offer to lease. He did not raise the defence in his plea or at the trial because the deed of suretyship was pleaded instead. In that deed he had waived the various benefits available to sureties including that of excussion. [21] The guarantee that Bamberger gave under the offer to lease did not include a waiver of any of the benefits accorded to a surety. If Dormell were able, at appellate level, to rely on the guarantee in the offer to lease, Bamberger‟s defence that Edulyn had not yet been excussed would be of no value: Edulyn had already been liquidated. [22] Dormell argued, on the other hand, that the benefit of excussion is a dilatory plea which would have postponed the inevitable. I do not agree. As the authors in Caney’s The Law of Suretyship in South Africa have said, the defence must be raised in initio and not after litis contestatio. Edulyn had not been liquidated at the time when the summons was issued. This court cannot speculate on whether or not Edulyn would have been in a position to settle its debts at that time. Bamberger would thus suffer prejudice if this court were to allow Dormell to rely on the guarantee in the offer to lease. [23] For the above reasons the appeal is dismissed with costs, including the costs of two counsel. _______________________ J B Z Shongwe Judge of Appeal Appearances For the Appellant: E W Fagan SC (with him J P Steenkamp) Instructed by: Ben Groot Attorneys, Cape Town; Symington & De Kok, Bloemfontein. For the Respondent: J A Newdigate SC (with him W P Coetzee) Instructed by: Gerhard Gous Attorneys, Cape Town; Honey Attorneys, Bloemfontein.

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 29 May 2015 Status: Immediate Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal. * * * DORMELL PROPERTIES 282 CC V ALWYN GIDEON BAMBERGER The SCA, today, dismissed with costs, the appeal in Dormell Properties 282 CC v Mr Alwyn Gideon Bamberger. Dormell had sued Edulyn (Pty) Ltd, as tenant and Bamberger as surety. Edulyn was subsequently liquidated before the matter came to this court. Dormell had concluded an offer to lease with Edulyn and Bamberger, which contained a suretyship claim. The offer to lease made provision of signing an agreement of lease at a later stage. However Dormell failed for some unknown reason to sign the said agreement of lease but Bamberger signed it. Subsequently Bamberger also signed a Deed of Suretyship which was annexed to the invalid agreement of lease. When Dormell sued Bamberger, it did so, on the basis of the Deed of Suretyship which turned out to be invalid. Bamberger then raised the defence of the benefit of excussion – in that he had not been given the opportunity to raise this defence as he had been sued on an invalid Deed of Suretyship. This court found that Mr Bamberger had been prejudiced as the claim had not been based on the offer to lease but on the Deed of Suretyship.

3439

non-electoral

2020

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Reportable Case no: 1104/2019 In the matter between: ALTECH RADIO HOLDINGS (PTY) LIMITED FIRST APPELLANT THOBELA TELECOMS (RF) (PTY) LIMITED SECOND APPELLANT ABSA BANK LIMITED THIRD APPELLANT and CITY OF TSHWANE METROPOLITAN MUNICIPALITY RESPONDENT Neutral citation: Altech Radio Holdings (Pty) Limited and Others v City of Tshwane Metropolitan Municipality (1104/2019) [2020] ZASCA 122 (5 October 2020) Bench: PONNAN, WALLIS, DAMBUZA and MOLEMELA JJA and SUTHERLAND AJA Heard: 24 August 2020 Delivered: This judgment was handed down electronically by circulation to the parties' representatives by email, publication on the Supreme Court of Appeal website and release to SAFLII. The date and time for hand-down is deemed to be 10:00 am on 5 October 2020. Summary: Legality review – delay – whether delay unreasonable – whether delay should be condoned. __________________________________________________________________ ORDER __________________________________________________________________ On appeal from: Gauteng Division of the High Court, Pretoria (Baqwa J sitting as court of first instance): (a) The appeal is upheld with costs, including those of two counsel. (b) The order of the court below is set aside and replaced by: ‘The application is dismissed with costs, including those of two counsel.’ __________________________________________________________________ JUDGMENT __________________________________________________________________ Ponnan JA (Wallis, Dambuza and Molemela JJA and Sutherland AJA concurring) [1] State self-review is a novel, but burgeoning, species of judicial review that has occupied the attention of our courts in a number of recent decisions.1 Although it seems axiomatic that unlawful conduct must be undone, to borrow from Dr Seuss ‘simple it’s not’. Particularly worrisome are public procurement cases, where, as here, an organ of state seeks to undo its own prior decisions. 1 Buffalo City Metropolitan Municipality v Asla Construction (Pty) Limited [2019] ZACC 15; 2019 (4) SA 331 (CC) para 111. [2] In this matter, the respondent, the City of Tshwane Metropolitan Municipality (the City), has sought to review its own decisions, because, so it asserts, it failed to comply with its own rules, misinterpreted certain statutory prescripts and maladministered its own tender process in respect of the appointment of a service provider for a municipal broadband network project (the project). [3] As at 2013 the City owned an existing communications network infrastructure of approximately 500 km of fibre. However, that was considered inadequate. The City accordingly embarked upon the project with a view to developing a smart city. The primary objective of the envisaged smart city was to improve service delivery as well as lower the costs of government services and operational requirements. According to the City, the purpose of building a carrier grade broadband network (the network) was to support and accelerate the delivery of municipal services, provide socio-economic development and bridge the digital divide. [4] The project was spearheaded by Mr Jason Ngobeni, the then City Manager, and Mr Dumisani Otumile, the Chief Information Officer of the City. At a special Mayoral Committee meeting held on 15 May 2013 a business case for undertaking the project was presented and approved. The initial public tender, which was advertised on 27 May 2013, had to be aborted. During August 2014 the tender process for the project re-commenced. On 3 September 2014, Mr Otumile sent a draft Request for Proposal (RFP) to the chair of the Bid Specification Committee and on 15 September 2014 the RFP together with an invitation to bidders was published. [5] By the closing date for the submission of tenders, namely, 14 October 2014, eight submissions were received by the Bid Evaluation Committee (BEC) of the City. On 11 May 2015 the BEC resolved to recommend the first appellant, Altech Radio Holdings (Pty) Limited (Altech), as the successful bidder. The City awarded the tender to Altech on 9 June 2015. That very day, Mr Ngobeni recorded in a letter to Altech that any agreement ‘will likely be through a special purpose vehicle to be incorporated . . . for [the] successful funding of the project’. In due course, a special purpose vehicle (SPV) was established for the project in the guise of the second appellant, Thobela Telecoms (RF) (Pty) Limited (Thobela). [6] Upon the award of the tender, the third appellant, ABSA Bank Limited (ABSA) and the Development Bank of Southern Africa (the DBSA) (the lenders) committed to providing Thobela with financing for the project. On 30 March 2016, ABSA, Thobela and the City’s attorney, Kunene Ramapala Inc (KR Inc) held a conference call with a view to the preparation of a draft agreement. ABSA thereafter furnished KR Inc with certain suggested revisions to the draft agreement, whereafter the Council of the City (the Council) approved the draft agreement. On 28 April 2016 the Council passed a resolution approving the conclusion of a Build Operate and Transfer agreement (the BOT agreement) with Thobela. On 20 April 2016, KR Inc provided ABSA with the final version of the BOT agreement. The BOT agreement was signed by the City and Thobela on 5 May 2016. [7] In the meanwhile, KR Inc had provided ABSA with a draft Tripartite agreement (the Tripartite agreement) on 18 April 2016. The next day, the City, KR Inc, Thobela and ABSA met to negotiate and finalise the terms of the Tripartite agreement. On 4 August 2016, and following extensive negotiations, ABSA, Thobela and the City concluded the Tripartite agreement, in which ABSA (with the support of the DBSA) agreed to grant loans and make funds available to enable Thobela to meet its obligations under the BOT agreement to the City. [8] The BOT and Tripartite agreements provided for the funding, construction, operation and maintenance of 1500 km of fibre-optic cable known as the Tshwane broadband network. In accordance with the City’s developmental goals, the network was intended to cover currently underserviced areas, which are principally in the poorer parts of the City. The duration of the project was to be for 18 years, split into a 3-year build phase and a 15-year maintenance phase. In terms of the BOT agreement, Thobela was required to build, operate and maintain the network for a period of 18 years from the effective date of the agreement (namely 31 August 2016) and to fund the capital cost of doing so. Ownership of the network would transfer to the City for R1 at the end of the 18-year period or on termination of the BOT agreement, if terminated earlier. In the event of early termination, payments might be due depending on the reason for the termination as set out in the early termination clauses of the BOT agreement. [9] The capital costs were to be principally funded by loans from the lenders. The total funding for the project was R1,335 billion. The total senior debt funding commitment by ABSA and the DBSA on the project was R934 million (being 70% of the total funding), the balance being equity and loan funding to the tune of R401 million. [10] There were two key aspects to the project’s commercial viability. The first was that the City had committed to being the ‘anchor customer’ of the network. It had agreed to pay a service fee to Thobela for the duration of the BOT agreement in exchange for the level of service specified therein. The fee was described as the ‘offtake amount’, being an annual service fee of R244 million, payable on a monthly basis once all 400 of the City’s designated service sites, termed CPEs, had been installed. The service fee was to be phased-in in proportion to the number of CPEs installed. The second key aspect was the potential for the future commercialisation of the network’s surplus capacity. [11] On the day prior to the signing of the Tripartite agreement, the 2016 South African municipal elections were held to elect councils for all district, metropolitan and local municipalities in each of the country’s nine provinces. Although the ruling political party, the African National Congress (ANC), secured the highest number of votes overall nationally, it lost control of three metropolitan municipalities, including the City. The official opposition party, the Democratic Alliance (the DA), became the head of a coalition government of the City’s municipality. The municipal elections ushered in a new Municipal Council, Speaker, Mayor and Mayoral Committee. On 19 August 2016 the new municipal councillors were sworn in and Mr Solly Msimanga of the DA became the Executive Mayor of the City. [12] Having won control of the City, the DA set its sights on a number of procurement contracts, including the BOT agreement, which, so it stated, had been targeted for ‘review and possible cancellation’. But at least a year was to pass before the City applied on 22 August 2017 to the Gauteng Division of the High Court, Pretoria for an interdict coupled with a review application. Relief was sought in two parts. Under Part A, the City sought to urgently interdict the implementation of the agreements. Under Part B, the City sought to review certain decisions taken by its own officials over the period September 2014 to April 2016. The target of the application under Part B was the tender process and the subsequent contracts concluded by the City including the BOT and Tripartite agreements. Altech, Thobela and ABSA, who were cited by the City as the first to third respondents respectively, opposed the application. The remaining respondents, who were cited by virtue of their interest in the matter, took no part in the proceedings. [13] The urgent application served before Brenner AJ on 19 and 21 September 2017. On the latter date, the learned judge struck the application from the roll for want of urgency and ordered the City to pay punitive costs on the scale as between attorney and client. [14] Part B was enrolled as a special motion and heard by Baqwa J over a period of four days from 22 to 25 May 2018. The application succeeded. On 16 July 2019 the learned judge issued the following order: ‘1) The award of the tender, with tender number GICT 01/2014/15, for the provision of a municipal broadband network project to ARH, which decision was communicated to it on 11 June 2015 in a letter dated 9 June 2015 including any purported amendment of such letter is declared invalid and set aside. 2) The decision of the Municipal Council of the Tshwane Metropolitan Municipality, in its entirety to inter alia, approve the terms and sign-off of the build, operate and transfer agreement (“the BOT agreement”) of the Tshwane Broadband Network for the City of Tshwane taken on 28 April 2016 is declared invalid and set aside. 3) The decisions of the erstwhile Group Chief Information Officer and City Manager to amend clause 4.1 of the BOT Agreement which was subsequently entered into between the City of Tshwane and Thobela on 5 May 2016, the effect of which was to extend the period provided for the fulfilment of the suspensive conditions alternatively, their purported waiver of such conditions is declared unlawful and set aside. 4) The following contracts concluded pursuant to the tender award have lapsed and are unenforceable, alternatively, are invalid and are set aside, - 4.1 the BOT agreement 4.2 The Tripartite Agreement entered into between the City of Tshwane, Thobela, and Absa Bank Limited, signed on 4 August 2016. 5) The first, second and third respondents are ordered to pay the costs of the application, which costs include the employment of three counsel.’ [15] The appeal by Altech, Thobela and ABSA is with the leave of Baqwa J granted on 17 September 2019. Their case is that the delay by the City in launching the review application is so manifestly and egregiously unreasonable that it cannot be overlooked or condoned. That, so the argument goes, is dispositive of the appeal in their favour. In the alternative, it is contended that if the delay falls to be condoned and if any of the grounds of review advanced by the City are upheld, then it would not be just and equitable for the BOT and Tripartite agreements to be set aside and that in the exercise of our remedial discretion under s 172 of the Constitution, we should decline to do so.2 [16] The delay rule is a principle that flows directly from the rule of law and its requirement for certainty. The Constitutional Court has held that there is a strong public interest in both certainty and finality.3 The City asserts that it was compelled 2 See inter alia State Information Technology Agency SOC Ltd v Gijima Holdings (Pty) Ltd [2017] ZACC 40; 2018 (2) SA 23 (CC) and Buffalo City Metropolitan Municipality v Asla Construction (Pty) Ltd (Asla Construction) [2019] ZACC 15; 2019 (4) SA 331 (CC) paras 65-71. 3Khumalo and Another v Member of Executive Council for Education: KwaZulu-Natal [2013] ZACC 49; 2014 (5) SA 579 (CC) para 47. as a matter of constitutional duty to bring the review application. Whilst this may be so, there nonetheless was a duty on it to do so expeditiously. [17] Despite concerns having been expressed about the increasing reliance on legality review at the expense of the constitutionally mandated legislation, the Promotion of Administrative Justice Act of 2000 (PAJA), it is now settled that an organ of state seeking to review its own decision must do so under the principle of legality and cannot rely on PAJA.4 Prof Hoexter observes that ‘the development of the principle of legality is another illustration of the vigour and fecundity of the rule of law’. She does add however that ‘in short, the courts made the principle of legality mean whatever they wanted it to mean as they went about creating a sort of common law for the constitutional era’.5 [18] A legality review, unlike a PAJA review, does not have to be brought within a fixed period. However, whilst the 180-day bar set by s 7(1) of PAJA (which may be extended under s 9) does not apply to a legality review, in both, the yardstick remains reasonableness. It is a long-standing rule that a legality review must be initiated without undue delay and that courts have the power (as part of their inherent jurisdiction to regulate their own proceedings) to either overlook the delay or refuse a review application in the face of an undue delay.6 4 Gijima fn 2 above. 5 C Hoexter ‘South African Administrative Law at a Crossroads: The Paja and the Principle of Legality’ adminlawblogorg 28 April 2017. 6 Khumalo and Another v Member of the Executive Council for Education, KwaZulu Natal [2013] ZACC 49; 2014 (5) SA 579 (CC) para 44. [19] The test for assessing undue delay in the bringing of a legality review application is: first, it must be determined whether the delay is unreasonable or undue (this is a factual enquiry upon which a value judgment is made, having regard to the circumstances of the matter); and, second, if the delay is unreasonable, whether the court’s discretion should nevertheless be exercised to overlook the delay and entertain the application.7 [20] As it was recently put in Valor IT v Premier, North West Province and Others:8 ‘Whether a delay is unreasonable is a factual issue that involves the making of a value judgment. Whether, in the event of the delay being found to be unreasonable, condonation should be granted involves a ‘factual, multi-factor and context-sensitive’ enquiry in which a range of factors – the length of the delay, the reasons for it, the prejudice to the parties that it may cause, the fullness of the explanation, the prospects of success on the merits – are all considered and weighed before a discretion is exercised one way or the other.’ [21] The City appears not to dispute that there has been a delay, but suggests that the delay is not unreasonable. The application was launched more than two years after the decision to award the tender to Altech, some 16 months after the Council had approved the BOT agreement and a year after the Tripartite agreement had been signed. 7 Ibid. 8 Valor IT v Premier, North West Province and Others [2020] ZASCA 62; [2020] 3 All SA 397 (SCA) para 30; See also Aurecon South Africa (Pty) Ltd v City of Cape Town [2015] ZASCA 209; 2016 (2) SA 199 (SCA) para 17; City of Cape Town v Aurecon South Africa (Pty) Ltd [2017] ZACC 5; 2017 (4) SA 223 (CC) para 46. [22] It was incumbent on the City to provide a full explanation covering the entire period of the delay.9 The explanation, such as it is, for the most part, is superficial and unconvincing. The City does not raise any allegations of corruption or fraud. Although various conjectural and speculative hypotheses of malfeasance were initially advanced in the founding affidavit, the City appears to have confined itself in reply to complaints of ‘serious mismanagement’. But it makes no case that any of the appellants are responsible for or connived in such maladministration or mismanagement. The procurement process commenced during September 2014. Many of the City’s key personnel, who had been involved in the tender process and the conclusion of the agreements, remained in the employ of the City after the August 2016 Municipal elections. They were thus in a position (and ought) to have provided explanations for the delay. [23] The City does not rely on a cover-up or contend that documents or information was destroyed or concealed by officials loyal to the previous administration. There is no evidence of what steps, if any, were taken in order to obtain the necessary information; on what dates and by whom such steps were taken; what sources were accessed or why any of these attempts proved unsuccessful. Nor, when, how and who allegedly did not co-operate. The City chose not to ask officials such as Mr Ngobeni or Mr Otumile to assist with their investigation. It says that it decided not to ask them for any information because the investigation was ‘sensitive’ and consulting with them ‘may well compromise the investigation’. Those two individuals, who deposed to confirmatory affidavits in support of the appellants’ 9 Asla Construction para 80. case, said that they were available and willing to assist the City, but were never contacted. [24] The core contention advanced by the City is that the delay is justified because the DA only won control of the City in August 2016 and thereafter required time to investigate the alleged irregularities perpetrated under the previous ANC-controlled administration. That contention appears to have found favour with Baqwa J, who held: ‘. . . officials of the previous administration who vacated their positions with the [City] were no longer there to account for their omissions and the new officials had to find their way virtually in the dark to establish the correctness or otherwise of the decisions of their predecessors. . . .’ [25] I cannot agree with the learned judge. At the level of law, a change in political control of an organ of state, such as the City, is irrelevant. The City is a single juristic entity. It accepts that the change in political administration did not make it a different juristic entity. In any event, at the level of fact, as I shall show, in this case much of the evidence relied on was known (or ought to have been known) to the DA well before it assumed control of the City. [26] As early as 25 February 2015, Mr Msimanga had labelled the project ‘a dodgy deal’. On 16 February 2016 he and the DA spokesperson for finance, Mr Lex Middleberg, declared at a press conference that the BOT agreement and broadband project were irregular. On 28 April 2016 a comprehensive report spanning 288 pages was tabled before the Council. It highlighted many of the issues subsequently relied upon by the City in its review application. Those issues were debated during the Council meeting, whereafter the BOT agreement was approved. The DA participated in the debate and its councillors, including Mr Middleberg, requested that their dissenting votes be recorded. [27] During December 2014, the City engaged a firm of external consultants, SekelaXabiso (SkX) to conduct an assurance review of the procurement process followed for the project. It has since emerged that even prior to the award of the tender, on 6 March 2015, the City had received a draft probity report prepared by SkX. In the report, SkX identified issues that, as it was put, may have a negative impact on the next stage of the tender process, which could pose reputational damage or financial risk to the City. [28] Despite this, on 26 May 2015 the BEC recommended that Altech be appointed as the successful bidder for the project. The recommendation came after SkX had published its final probity report on 20 March 2015, which recorded that the concerns raised could be addressed during the contractual negotiation phase. Notwithstanding the two SkX probity reports, the City proceeded to the next phase of the project. Importantly, the City retained SkX as it advisors on the project even after the DA took over the administration. [29] Shortly after the DA took over the administration of the City, KR Inc was mandated in August 2016 to conduct an in-depth due diligence exercise in relation to the procurement process. KR Inc produced a detailed 161-page due diligence report. In the meanwhile, on 30 June 2016 the Auditor General (AG) had prepared a report as part of the annual audit of all state entities. This report was communicated to the City on 14 November 2016. As the City has pointed out ‘the report is extremely critical of the broadband project to the point that it states that all expenditure on the project constitutes irregular expenditure.’ There is no doubt that the DA was aware of the report, which it publicised on 15 December 2016. [30] On the basis of the information that the City then had at its disposal, namely, the council report, the SkX probity report, the KR Inc due diligence report and certainly by no later than the receipt of the AG’s report in November 2016, all of the grounds ultimately relied upon in the review application, were well within the DA- led City’s knowledge. Despite this, the City continued with the project. [31] What is more, the City blew hot and cold. On 13 July 2016, KR Inc addressed a letter to Thobela indicating that the City regarded the finalisation of the project as critical and that it would not allow any further extensions of the date for the fulfilment of the suspensive conditions beyond 31 August 2016. This caused Thobela to waive the outstanding suspensive conditions in the BOT agreement, which had been inserted for its benefit. [32] On 14 October 2016 the then Acting City Manager, who had been appointed under the new DA regime, addressed a letter to Thobela emphasising that the BOT agreement was binding on it and took issue with the delays in ordering equipment necessary for the project. The letter stated that ‘both parties have contractual obligations imposed on them by the BOT agreement which was entered into after 10 months of intense negotiations. The BOT agreement was then signed . . . after both parties were satisfied with its terms and we can confirm that no party signed under duress’. [33] On 21 November 2016 the City wrote to Thobela demanding that it ‘commence performance and proceed in terms of the agreement immediately’ and threatened cancellation of the agreement if it failed to do so. However, less than a month later, in the course of his 100-day speech on 12 December 2016, Mayor Msimanga announced that the City would ‘submit the broadband contract to a transactional advisor to check legality and value for money of the contract’. [34] Following on Mr Msimanga’s announcement, on 14 December 2016, a DA member of Council, Mr Brink, directed a letter to the Acting City Manager that ‘the broadband contract be placed on hold pending the outcome of the aforesaid transactional audit’ and required confirmation ‘that this instruction will be given, and executed’. On 20 December 2016 Mr Brink issued a similar instruction to the new Acting City Manager. Whilst his first instruction had not been acted upon, his second had the desired effect. The new Acting City Manager instructed Mr Otumile to ensure that the ‘decision of the Executive Mayor is adhered to and implemented and that the broadband rollout is immediately put [on] hold until such time that the said audit is completed’. [35] Mr Otumile, in turn, informed Altech that the project had to be put on hold until the transactional audit had been completed. On 21 December 2016 Thobela responded to Mr Otumile’s email. It indicated that whilst it supported the transactional audit, it would not consent to the suspension of the agreements. On the same day, the City proceeded to deny Thobela, Altech and their sub-contractors access to the sites. This continued into January 2017. On 13 January 2017 Thobela served a notice of breach on the City itemising damages and demanding that the latter forthwith allow it access to the site for the purposes of performing its contractual obligations. [36] Whilst this was playing itself out, Mr Brink despatched an email to various councillors and City officials on 15 January 2017 in which he inter alia stated that: he had ‘put the brakes on the project’; ‘the direct parties to the agreement are tenderpreneurs’ and when ‘we were in opposition we had serious reservations about this agreement’. [37] The City eventually only agreed to allow Altech and Thobela to return to the site after they had threatened on 1 February 2017 to institute urgent proceedings to enforce their rights under the BOT agreement. On 9 February 2017 the City advised that Thobela ‘may immediately continue with the project and that it will be granted access to the premises to enable it to continue with the implementation of the Tshwane broadband network’. The letter was attached to an email from Mr Brink dated 10 February 2017, in which he recorded that a meeting had been held between the administration officials of the City and representatives of Altech and Thobela the previous day and the City had decided to allow the project to continue ‘in tandem’ with the audit. [38] Minutes of a steering committee meeting held four days later record that the City required the project to be fast-tracked to make up for the two months lost. The project then proceeded with only minor disruptions, but evidently not fast enough for the City. On 22 May 2017, the City directed four letters to Thobela. It was clear from these letters that the City wanted the project expedited and demanded a revised fast-track plan from Thobela for this purpose. [39] The fact that the City had commenced with the preparation of its review application was not disclosed to any of the appellants. When precisely it resolved to do so, is unclear. As the City put it: ‘at the end of April 2017, and pursuant to persistent demands by Thobela, the City decided that it had little choice but to seek legal redress’ and briefed its attorneys in ‘about May 2017’. [40] That notwithstanding, at the management and steering committee meetings of 6 and 7 July 2017, the City agreed to a new expedited schedule, which provided for the completion of the project by 31 March 2019. During July 2017, when there were delays caused by community unrest, which prevented contractors accessing the site, the City requested Thobela to ‘redirect work to a different site in the interim while the City endeavours to resolve the community unrest issue in order to avoid delays on the project’. [41] By 31 August 2016 all of the conditions precedent to the BOT agreement had been fulfilled or waived. The BOT agreement accordingly became unconditional. Financial close, namely the stage when all of the conditions have been met or waived and the lenders authorise the drawdown of the funds, occurred on 9 December 2016. Before allowing Thobela access to the funds, the lenders specifically required comfort from KR Inc. Without such comfort, they would not have allowed Thobela access to the funds. On 9 December 2016, KR Inc provided ABSA with the comfort sought, in the form of an opinion, which, inter alia, stated that the BOT and Tripartite agreements ‘constitutes legal, valid and binding obligations of the [City] enforceable against the [City] in accordance with its terms’ and that the [City] complied with all relevant laws, regulations and policies, including but not limited to, its procurement framework and policies . . . in connection with the tender’. [42] As a direct result of KR Inc’s opinion, the lenders signed the financing agreements relating to the project and, on 15 December 2016, ABSA provided Thobela with the first drawdown to fulfil part of its obligations to the City under the BOT agreement. According to Thobela, to facilitate the fast-tracking of the project demanded by the City, it was forced to draw down on the facility with the lenders. [43] The appellants were not privy to the various reports or the internal workings of the City and had arranged their affairs on the strength of the fact that the tender had been lawfully awarded and the BOT agreement validly concluded. As at 15 January 2018, Altech and Thobela had incurred costs and liabilities to the tune of approximately R610 million. And, by the time that the review application was launched, the build phase of the project was 34% complete. [44] The project has since been frozen. It cannot be salvaged or repurposed because it was specifically designed to meet the City’s requirements. What has been constructed thus far can provide no service to the City and is effectively useless. Altech and Thobela have also parted with possession of the equipment and materials installed at the various sites. There is every possibility that some of the equipment may since have been lost or damaged or simply diminished in value. Given that the equipment is specifically marked and branded for the City, to the extent that it may be recoverable, it is likely to be of little or no value to Altech and Thobela. The prejudice to the appellants as well as the residents of the City, who remain saddled with a dysfunctional municipal IT network for which the City currently pays R226 million per annum, is manifest. The City is forced at a substantial additional annual cost to supplement its existing network, because its ability to render services on the existing network is severely restricted. [45] The high court failed entirely to have regard to the position of the lenders. The lenders had no involvement until the award of the tender. They only became involved after Altech’s appointment. There then followed extensive negotiations, before the Tripartite agreement was concluded. At no stage did the City disclose any concerns to the lenders. The City’s failure to communicate with the lenders is important because in the event of a material adverse effect event, including the threatened cancellation of the tender or BOT agreement by the City, the lenders would have been entitled to refuse to extend further financing to Thobela. The City was aware of these terms affording the lenders protection but did nothing to alert them that it entertained concerns and was contemplating challenging the BOT agreement. The City thereby denied the lenders the opportunity to mitigate the potential adverse consequences of the cancellation of the BOT or Tripartite agreements. [46] The position of the DBSA is most telling. On 8 December 2016 the DBSA wrote to the Acting City Manager, noting with some concern the statements that had been attributed to the new Mayor regarding transactions that may be up for review by the City. The letter stated: ‘[W]e . . . request that you please advise the DBSA should there be any reason for the bank not to proceed with its financing of this project in its current form. Should such grounds exist we would highly appreciate, given that drawdown on the project facility is imminent, if the DBSA could please be finished therewith within the next week.’ That letter went unanswered. [47] On 22 February 2017 the DBSA despatched another letter to the City, in which it recorded that: (i) a further drawdown on the loan facility was imminent; (ii) it had, in the past received and relied on various communications from or on behalf of the City that the tender and BOT agreement was valid and enforceable; (iii) the works were progressing under the BOT agreement, lending further support to the view that the BOT agreement and underlying procurement processes were valid; and (iv) seeking confirmation by 24 February 2017, before it advanced the second drawdown, that the City still regarded the BOT agreement as valid, binding and enforceable and that there were no threatened administrative law challenges and no other reason for it not to continue. [48] Once again there was no response from the City and so the DBSA despatched yet a further letter on 27 February 2017, which recorded that, in addition to the prior assurances received from the City, the DBSA would also rely, in effecting payment to Thobela, on the City’s failure to respond negatively to the earlier letter of 22 February. On 28 February 2017 the DBSA received a response, in which the Acting City Manager said no more than he had received the DBSA’s letter of 22 February and would reply by 3 March 2017. On 1 March 2017 the DBSA wrote again drawing attention to the City’s failure to respond timeously to its correspondence and intimated that, in consequence, it had effected payment of the second tranche due to Thobela, as it was obliged to do. [49] Eventually, on 8 March 2017 the DBSA received a response from the City, which was dated 3 March 2017. The City did not provide the DBSA with the requested assurances. What it said was the following: ‘1. The current administration of the [City] has commissioned an audit of all major existing procurement contracts awarded by the [City]. The contract between the [City] and Thobela is one of the contracts currently under audit. 2. There is currently no pending judicial review of the decision by the [City] to award the contract to Thobela and/or the contract concluded between it and the [City].’ [50] There appears to be no acceptable explanation for the City’s excessive delay, as well as inconsistent and vacillating conduct, which has caused extensive hardship to the appellants and other interested parties. On the City’s own version, the facts relevant to some of the grounds of review were known to the City and its new political masters long before the BOT agreement was even signed. The facts relevant to most of the other grounds of review were known to them before the rollout of funds on the project commenced in December 2016. It is not correct that a bright line can simply be drawn between what happened before the municipal elections and what happened thereafter. [51] Moreover, despite having knowledge of some of the alleged irregularities for more than two years, the City both encouraged and demanded that Altech and Thobela accelerate the project and make up for lost time, thereby causing them to take a multitude of steps and to incur huge expenditure. It is noteworthy that in his correspondence, Mr Brink identified a number of the grounds relied upon by the City in support of its review application, which did not require investigation of the sort undertaken by the City over the course of the next nine months. He also emphasised the position of innocent third parties as well as the constitutional obligation resting on the City to act immediately. [52] The City was also fully aware of the involvement of ABSA and the DBSA as lenders, the terms on which they were lending money and the possible risk of loss to them. At no stage prior to 22 August 2017, when the review application was launched, did the City give any indication to the lenders that the award of the tender was tainted with irregularities or that the transactions in which the lenders had become involved were susceptible to being impugned. This, despite the fact that the City knew of the alleged irregularities of which it now complains either at about the time of their occurrence or, at the very latest, certainly before any of the funds were advanced. Had the City acted with proper expedition and been candid about its intention to review the award of the tender, the bulk of the expenditure incurred could have been avoided. [53] It nonetheless remains to consider whether the prospects of success on the merits, tips the scales in the City’s favour. The City’s grounds of review turned, in the first place, on alleged irregularities and discrepancies in the tender documents and the evaluation of the bids and, in the second, on the alleged failure in concluding the BOT agreement to follow the mandatory processes required by the Local Government: Municipal Finance Management Act 56 of 2003 (the MFMA), particularly s 33 and the provisions regulating public-private partnerships. [54] Search hard enough in public procurement cases, such as this and one will surely find compliance failures along the way. There will seldom be a public procurement process entirely without flaw. But, perfection is not demanded and not every flaw is fatal. Nor does every flaw in a tender process amount to an irregularity, much less a material irregularity. Public contracts do not fall to be invalidated for immaterial or inconsequential irregularities. Indeed, as it has been put, ‘[n]ot every slip in the administration of tenders is necessarily to be visited by judicial sanction’.10 [55] In this case, counsel for the City appeared to accept the difficulty in setting aside the BOT agreement on the basis of the original irregularities in the tender process. It is accordingly only to the second leg, namely the City’s failure to comply with s 33 of the MFMA, that one need turn.11 The high court held that the City had 10 Moseme Road Construction CC and Others v King Civil Engineering Contractors (Pty) Ltd and Another [2010] ZASCA 13; 2010 (4) SA 359 (SCA) para 21. 11 Section 33 of the MFMA headed ‘Contracts having future budgetary implications’, provides: ‘(1) A municipality may enter into a contract which will impose financial obligations on the municipality beyond a financial year, but if the contract will impose financial obligations on the municipality beyond the three years covered in the annual budget for that financial year, it may do so only if - (a) the municipal manager, at least 60 days before the meeting of the municipal council at which the contract is to be approved – (i) has, in accordance with section 21A of the Municipal Systems Act – (aa) made public the draft contract and an information statement summarising the municipality’s obligations in terms of the proposed contract; and (bb) invited the local community and other interested persons to submit to the municipality comments or representations in respect of the proposed contract; and (ii) has solicited the views and recommendations of – (aa) the National Treasury and the relevant provincial treasury; (bb) the national department responsible for local government; and (cc) if the contract involves the provision of water, sanitation, electricity, or any other service as may be prescribed, the responsible national department; (b) the municipal council has taken into account – (i) the municipality’s projected financial obligations in terms of the proposed contract for each financial year covered by the contract; (ii) the impact of those financial obligations on the municipality’s future municipal tariffs and revenue; (iii) any comments or representations on the proposed contract received from the local community and other interested persons; and (iv) any written views and recommendations on the proposed contract by the National Treasury, the relevant provincial treasury, the national department responsible for local government and any national department referred to in paragraph (a)(ii)(cc); and (c) the municipal council has adopted a resolution in which – (i) it determines that the municipality will secure a significant capital investment or will derive a significant financial economic or financial benefit from the contract; (ii) it approves the entire contract exactly as it is to be executed; and (iii) it authorises the municipal manager to sign the contract on behalf of the municipality. (2) The process set out in subsection (1) does not apply to – (a) contracts for long-term debt regulated in terms of section 46(3); not understood that the BOT agreement did not include Altech/Thobela assuming responsibility for the existing network and the financial implications of this. But, the draft BOT agreement that was considered by the City plainly stated as much. The high court held that ‘the best way to afford the new network was for the service provider to be responsible for both the existing budget to be “reprioritised” and the extended network’. [56] The City currently pays R226 million per annum for its outdated and dysfunctional network. In the course of his 100-day speech, Mr Msimanga acknowledged that ‘[t]he ICT infrastructure we inherited was dilapidated and overrun with outdated software, service out of warranty, and the city’s entire network left vulnerable and exposed’. The project committed the City to an annual cost of R244 million for a network that would replace the dysfunctional existing network and greatly extend its capacity and range of coverage. The BOT agreement provided the City with a 30% share of the net profit after tax that Thobela would derive from the commercialisation of the excess capacity on the network. It was envisaged that this would materially reduce the actual cost and might even allow the City to offset the offtake amount in its entirety. It would almost inevitably cover the (b) employment contracts; or (c) contracts – (i) for categories of goods as may be prescribed; or (ii) in terms of which the financial obligation on the municipality is below – (aa) a prescribed value; or (bb) a prescribed percentage of the municipality’s approved budget for the year in which the contract is concluded. (3) (a) All contracts referred to in subsection (1) and all other contracts that impose a financial obligation on a municipality – (i) must be made available in their entirety to the municipal council; and (ii) may not be withheld from public scrutiny except as provided for in terms of the Promotion of Access to Information Act, 2000 (Act No. 2 of 2000). (b) Paragraph (a)(i) does not apply to contracts in respect of which the financial obligation on the municipality is below a prescribed value. (4) This section may not be read as exempting the municipality from the provisions of Chapter 11 to the extent that those provisions are applicable in a particular case. difference of R18 million between what the City was paying for its dysfunctional network, which ought to have been replaced years ago, and the R244 million offtake amount. [57] The fact that the offtake amount had been provided for in the City’s budget was specifically confirmed in a letter dated 14 October 2016, which was addressed by the Acting City Manager to Thobela. The letter pointed out that the ‘costs have already been fixed and factored into the budget’. Further, KR Inc expressly recorded in the due diligence report that: (i) the tender was correctly awarded; (ii) the project had been budgeted for; and, (iii) the City would not seek special funds for the project, but leverage funds from its existing budget. The City adduced no acceptable factual evidence to dispute the correctness of these previous communications. Importantly, the City was not paying for the build phase of the project. It is thus unclear how they were supposed to budget for the future in respect of the project, any more than they budget for other future items of expenditure. It follows that on this score the high court erred. [58] A consideration that appeared to have weighed with the high court in setting aside the BOT agreement, is that Altech ‘failed to identify itself appropriately in its bid documents’. It is plain from the documents that Altech had submitted a bid on the basis that if successful, the project would be performed by a project company or SPV established for that purpose. There was no confusion or ambiguity in that regard. The then City Manager, Mr Ngobeni, understood as much. [59] Altech framed its bid in that fashion, because it anticipated that in a project financing transaction of this kind, it would inevitably be necessary to house the project in a project company or SPV. Thobela and ABSA explained in their affidavits why this was necessary and that this is the usual practice, even in contracts with organs of state arising from public procurement processes. As a special purpose project finance vehicle, Thobela’s sole purpose and business was the building and operating of the network for the City and the ultimate transfer of that network to the latter. The lenders confirmed that this is common in BOT and similar project finance type transactions, including transactions involving state owned enterprises and organs of state. [60] The draft BOT agreement circulated for comment expressly provided that the envisaged service provider would be a project company and not Altech itself. The proposed shareholding in the project company was specified in the report that served before the Council on 28 April 2016. The City took no issue with this. Nor, did the other role players including the National and Provincial Treasury, who commented on the draft agreement during the s 33 process. [61] Further, KR Inc recorded in the due diligence report that: ‘. . . the project was eventually awarded to Altech . . . Who indicated in their tender response letter that in order to run the project, they would form a consortium which may consist of individuals from [various named entities] It envisaged at the tender stage that the parties would form a SPV for purposes of the project. Subsequently, the SPV was formed and finally named Thobela Telecoms Proprietary Limited.’ Well aware that the BOT agreement was with Thobela and not Altech, KRI Inc certified that the agreement constituted ‘legal, valid and binding obligations of the City’. This disposes of the s 33 ground. [62] Turning to the public-private partnership (PPP) ground: In terms of the MFMA Regulations – ‘public-private partnership means a commercial transaction between a municipality and a private party in terms of which a private party – (a) performs a municipal function for or on behalf of a municipality, or acquires the management or use of municipal property for its own commercial purposes, or both performs a municipal function for or on behalf of a municipality and acquires the management or use of municipal property for its own commercial purposes; and (b) assumes substantial financial, technical and operational risks in connection with – (i) the performance of the municipal function; (ii) the management of use of the municipal property; or (iii) both; and (c) receives a benefit from performing the municipal function or from utilizing the municipal property or from both . . . .’12 [63] The project was not a PPP because it did not involve the performance of a municipal function or the provision of a municipal service, and it did not involve the use of municipal property for commercial gain. Municipalities have no constitutional competence in relation to telecommunications.13 The obligation of Thobela to build and operate the network and to provide services to the City did not therefore amount to the performance of a municipal function or the provision of a municipal service. [64] The BOT agreement did not involve the management or use of municipal property for Thobela’s own commercial purposes. Under the BOT agreement, Thobela would use its own network. It is only at the end of the operating period that 12 ‘Municipal Public-Private Partnership Regulations GN R309, GG 27431, 1 April 2005.’ 13 City of Tshwane Metropolitan Municipality v Link Africa (Pty) Ltd and Others [2015] ZACC 29; 2015 (6) SA 440 (CC) para 186. the network would be transferred to the City. At no stage whilst Thobela would be deriving commercial profit, would the network be municipal property. Nor does the fact that the network would run on or over municipal land bring it within the definition of a PPP. It follows that the high court erred in finding that the City ought to have followed the procedures for a PPP. [65] The high court failed to weigh-up the consequences of setting aside, against not setting aside, the BOT and Tripartite agreements. As this court observed in Millennium Waste Management (Pty) Ltd. v Chairperson of the Tender Board: Limpopo Province and Others:14 ‘The difficulty that is presented by invalid administrative acts, as pointed out by this court in Oudekraal Estates, is that they often have been acted upon by the time they are brought under review. That difficulty is particularly acute when a decision is taken to accept a tender. A decision to accept a tender is almost always acted upon immediately by the conclusion of a contract with the tenderer, and that is often immediately followed by further contracts concluded by the tenderer in executing the contract. To set aside the decision to accept the tender, with the effect that the contract is rendered void from the outset, can have catastrophic consequences for an innocent tenderer, and adverse consequences for the public at large in whose interests the administrative body or official purported to act. Those interests must be carefully weighed against those of the disappointed tenderer if an order is to be made that is just and equitable.’ [66] It is so that in Millennium Waste this court ordered that the tender be evaluated afresh. It did so, because a tender had been unlawfully disqualified and had not been evaluated. Importantly, this is not as simple a contract as was the case in Millennium Waste. It is a substantial contract, with implications for millions of the City’s residents. Millennium Waste recognised that following upon the acceptance of a 14 Millennium Waste Management (Pty) Ltd. v Chairperson of the Tender Board: Limpopo Province and Others [2007] ZASCA 165; 2008 (2) SA 481 (SCA); para 23. tender, parties usually proceed to implement the tender and that further agreements are concluded. That is precisely what has occurred here. The high court failed to consider the indivisible nature of these arrangements, which renders the setting aside of the BOT agreement completely impracticable.15 [67] The high court ignored the fact that the build phase of the project was 34% complete and that in excess of R610 million had already been expended on the project. It also ignored the fact that following upon the conclusion of the BOT and Tripartite agreements, further agreements had to be concluded for the engineering, procurement, construction, operation and maintenance of the network. During December 2016, three batches of equipment with a total value of R184 million arrived in South Africa, the first on the 13th, the second on the 19th and the third on the 21st. On 14 December 2016, Thobela purchased 850 km of fibre duct from Dark Fibre Africa Proprietary Limited for an amount of R114 million. These are by no means exhaustive. When the proceedings were brought, Thobela owed Altech R220 million in respect of work done by the latter on the project and its capital exposure to the lenders stood at R258 million. These debts attract interest. Thobela will no doubt be confronted with claims from the lenders and, in turn, will presumably look to the City to make good those losses. Should the lenders come short, they may well also set their sights on the City. The upshot of all of this is that one way or another the setting aside of the BOT and Tripartite agreements will not be the end of the matter. 15 Moseme Road Construction CC and Others v King Civil Engineering Contractors (Pty) Ltd and Another [2010] ZASCA 13; 2010 (4) SA 359 (SCA) paras 16 – 20. [68] I think that the court was far too receptive to the City’s case. In focusing as closely as it did on the asserted irregularities, it lost from sight that it was engaged in a ‘multi-factor and context-sensitive’ enquiry. The court accordingly ignored almost entirely the other considerations alluded to in Valor IT v Premier, North West Province and Others.16 [69] When all is said and done, there is no escape from the facts. Even though armed with the evidence upon which it now relies, the City, both under its previous administration and also the present administration, sat back over a protracted period, but wants this indifference to be disregarded entirely. The City had several opportunities to have alerted the appellants to its misgivings or brought review proceedings. It did neither. This inaction has left the appellants, financially exposed. The appellants, who were entirely removed from the tender, could not second-guess the regularity of the procurement process of an organ of state. The funders and the other appellants were entitled to assume that the City would have acted in a manner that is fair in all the circumstances.17 They were also entitled to assume that the City would have complied with its own internal arrangements and formalities.18 [70] There seems much to be said for the suggestion that the City is not truly trying to vindicate the rule of law, but using the review to evade, rather than assert its constitutional obligations. The City has not jettisoned the idea of a broadband 16 Valor IT v Premier, North West Province and Others [2020] ZASCA 62; [2020] 3 All SA 397 (SCA) para 30; See also Aurecon South Africa (Pty) Ltd v City of Cape Town [2015] ZASCA 209; 2016 (2) SA 199 (SCA) para 17; City of Cape Town v Aurecon South Africa (Pty) Ltd [2017] ZACC 5; 2017 (4) SA 223 (CC) para 46. 17 Minister of Health and Another v New Clicks South Africa (Pty) Ltd and Others [2005] ZACC 14; 2006 (2) SA 311 (CC) paras 152 -155. 18 City of Tshwane Metropolitan Municipality v RPM Bricks Proprietary Ltd [2007] ZASCA 28; 2008 (3) SA 1 (SCA) para 12. project. What it envisages, should the BOT and Tripartite agreements be set aside, is ‘the provision of a network as envisaged by the BOT Agreement, but on such terms [as] are more favourable to the COT and the conclusion of which would be lawful’. In a similar vein, in his email of 15 January 2017, Mr Brink stated: ‘[t]he end result is to provide an auditing firm with a concise brief as to what suspicions to confirm, and questions to answer as to the validity of the agreement, and its possible renegotiation’. The City thus seemed intent on invoking administrative law remedies to strike what it hoped would be a better bargain for itself. In this regard it is noteworthy that none of the unsuccessful tenderers challenged the outcome. In any event, the expert evidence adduced by the appellants was that the Altech ‘solution offered provides the City with the best value proposition’. It is indeed so that the evidence of an expert, tendered because of his (or her) special knowledge, skill or experience, must of course be regarded with a measure of caution. But here, there was simply nothing to gainsay the evidence. [71] The objective of state self-review should be to promote open, responsive and accountable government. The conduct of the City renders the delay so unreasonable that it cannot be condoned without turning a blind eye to its duty to act in a manner that promotes reliance, accountability and rationality and that is not legally and constitutionally unconscionable.19 Here, the delay is stark and the egregious conduct on the part of the City, even starker. The City has a ‘higher duty to respect the law’. It is not ‘an indigent and bewildered litigant, adrift in a sea of litigious uncertainty, to whom the courts must extend a procedure-circumventing lifeline’.20 19 KwaZulu-Natal Joint Liaison Committee v MEC Department of Education, KwaZulu-Natal and Others [2013] ZACC 10; 2013 (4) SA 262 (CC) paras 57 and 63. 20 MEC for Health, Eastern Cape and Another v Kirland Investments (Pty) Ltd [2014] ZACC 6; 2014 (3) SA 481 (CC) para 82. [72] Given the excessive delay, the absence of a reasonable and satisfactory explanation for the delay, the unconscionable and highly prejudicial conduct of the City and the lack of merit in the review the court below ought not to have condoned the delay. [73] Before closing it is necessary to pass some comments about: first, the role of KR Inc; and, second, the record and the approach of the legal practitioners in compliance with the rules of this court. Of the first: The conflict is plain. KR Inc has acted throughout for the City. They were immersed in the procurement process from the outset. They represented the City with regard to the award of the tender, the conclusion of the BOT agreement and the conclusion of the Tripartite agreement. Throughout that process, they engaged on behalf of the City with Thobela, Altech and the lenders. [74] They had also undertaken an in-depth due diligence exercise and signed off on the project in a detailed report and furnished the lenders with the comfort that they had sought. It was obviously furnished in the knowledge that it would be acted upon. Indeed, it was. The lenders proceeded to advance funds to Thobela for the project. KR Inc were particularly well placed to provide the assurances sought. And, as officers of the court, they would undoubtedly have been aware of the implications and weight of their opinion. This is especially so, since they specifically acknowledged that: ‘the opinion . . . may be disclosed by [ABSA] in connection with any due diligence or other defence advanced or made by you in any court proceedings, arbitration, action or other legal proceedings . . . arising in relation to the proposed financing provided to the Service Provider as set out in the [BOT agreement]’. For all this, KR Inc continues to act for the City in these proceedings. It should not have done so especially as members of the firm were clearly potential witnesses in the proceedings. [75] As to the second: The parties evidently made no real attempt to comply with the rules of this court in preparing the record. How else can one make sense of a record in excess of 5000 pages, consisting of 12 volumes, sixteen 16 core bundle volumes and two index volumes? Inexplicably, the core bundle exceeds the main record of the proceedings by some 750 pages. ‘Sub-rule 8(7)(c) makes it plain that the core bundle is to be prepared as an adjunct to the appeal record.’21 It should have consisted of a conveniently arranged and accessible collection of those documents to which it was anticipated special reference would be made during the hearing of the appeal. Although the correspondence exchanged between the attorneys in purported compliance with Rules 7, 8 and 9 was included in the record, it is difficult to discern how they fixed on the portions considered essential to the determination of the appeal. [76] Those rules are augmented by the requirement of a practice note in terms of rule 10A(ix). One of the items to be dealt with in the practice note, which is to accompany counsel’s heads of argument, is ‘a list reflecting those parts of the record that, in the opinion of counsel, are relevant to the determination of the appeal.’ As 21 Africa Solar (Pty) Ltd v Divwatt (Pty) Ltd 2002 (4) SA 681 (SCA) paras 39 to 45. Sub-rule 8(7) provides as follows: ‘(7)(a) A core bundle of documents shall be prepared if to do so is appropriate to the appeal. (b) The core bundle shall consist of the material documents of the case in a proper, preferably chronological, sequence. (c) Documents contained in the core bundle shall be omitted from the record, but the record shall indicate where each such document is to be found in the core bundle.’ Harms JA explained in Caterham Car Sales & Coachworks Ltd v Birkin Cars (Pty) Ltd and Another:22 ‘The object of the note is essentially twofold. First, it enables the Chief Justice in settling the roll to estimate how much reading matter is to be allocated to a particular Judge. Second, it assists Judges in preparing the appeal without wasting time and energy in reading irrelevant matter. Unless practitioners comply with the spirit of this requirement, the objects are frustrated and this in turn leads to a longer waiting time for other matters.’ [77] In addition, rule 10A(b) requires ‘a certificate signed by the legal practitioner responsible for the heads of argument that rules 10 and 10A(a) have been complied with’. Although certificates in accordance with rule 10A(b) were filed in this matter, it was clear that rule 10A(ix) had initially been observed only in the breach.23 It was accordingly, necessary to call for revised practice notes to be filed by counsel. Counsel were informed that they were required to indicate with greater specificity the portions of the record considered necessary for the determination of the appeal. The revised practice notes filed in response to the directive from the judges hearing the appeal are instructive. Three of the four counsel, made no reference whatever to the main record. The fourth referred only to a total of 76 of the 2327 pages. The upshot is that, on any basis, little regard could have been had to the rules of this court in the preparation of the record. [78] Should there be a sanction? This court has previously emphasised that practitioners may in appropriate circumstances be penalised if the rules are ignored.24 Whilst the primary obligation to prepare the record rested with the appellants, in this 22 Caterham Car Sales & Coachworks Ltd. v Birkin Cars (Pty) Ltd. and Another 1998 (3) SA 938 (SCA) para 36. 23 Van Aardt v Galway [2011] ZASCA 201; 2012 (2) SA 312 (SCA) paras 32-38. 24 Premier, Free State, and Others v Firechem Free State (Pty) Ltd [2000] ZASCA 28; 2000 (4) SA 413 (SCA) paras 40-44. case it is apparent that all parties were equally to blame for the non-compliance. I have considered whether some or other punitive order for costs should not be made, but in view of the fact no one party can be singled out and that all parties were at fault in respect of the preparation of the record, it seems to me, on reflection, that a special cost order is not clearly warranted. I am also alive to the fact that, on account of the project having been brought to an abrupt halt because of the litigation, a significant measure of urgency attached to the appeal, which had to be heard on an expedited basis. [79] In the result: (a) The appeal is upheld with costs, including those of two counsel. (b) The order of the court below is set aside and replaced by: ‘The application is dismissed with costs, including those of two counsel.’ _________________ V M Ponnan Judge of Appeal APPEARANCES For First Appellant: A Subel SC (with him E Kromhout) Instructed by: Lowndes Dlamini Attorneys, Sandton Phatshoane Henney, Bloemfontein For Second Appellant: M Chaskalson SC (with him I Currie) Instructed by: ENSafrica, Sandton Webbers, Bloemfontein For Third Appellant: G Marcus SC (with him M Musandiwa) Instructed by: Norton Rose Fullbright, Sandton Webbers, Bloemfontein For Respondent: M Rip SC (with him R Raubenheimer and L Nyangiwe) Instructed by: Kunene Ramapala Inc., Braamfontein Blair Attorneys, Bloemfontein

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY Altech Radio Holdings (Pty) Ltd and Others v City of Tshwane Metropolitan Municipality (Case no 1104/2019) [2020] ZASCA 122 From: The Registrar, Supreme Court of Appeal Date: 5 October 2020 Status: Immediate The following summary is for the benefit of the media in the reporting of this case and does not form part of the judgment of the Supreme Court of Appeal Today the Supreme Court of Appeal (SCA) handed down judgment in an appeal against an order of the Gauteng Division of the High Court, Pretoria (Baqwa J, sitting as court of first instance). The matter concerned so-called self-review of administrative action, whereby an organ of state seeks to have its own administrative decision undone through the process of judicial review. In this case it was the respondent, the City of Tshwane Metropolitan Municipality (the City), that sought to have its decision to award a tender to the first appellant, Altech Radio Holdings (Pty) Ltd (Altech), and the conclusion of certain contracts flowing from that decision, reviewed and set aside. The reviewable irregularities included noncompliance with its own rules, the misinterpretation of certain statutory prescripts, and maladministration in the tender process, so the City asserted. The City intended developing a ‘smart’ city. On 15 September 2014 and after identifying its existing communications network infrastructure as inadequate for this purpose, The City published a Request for Proposal (RFP) and an invitation to bidders in respect of a municipal broadband network project (the project). Eight bids were received in response to the tender invitation and, after consideration, the City’s Bid Evaluation Committee (BEC) resolved to recommend Altech as the successful bidder. On 9 June 2015 the City awarded the tender to Altech. The agreement was to be executed through a special purpose vehicle (SPV) for the successful funding of the project, which would be the second appellant, Thobela Telecoms (RF) (Pty) Ltd (Thobela). Upon the award of the tender the third appellant, ABSA Bank Limited (ABSA), together with the Development Bank of Southern Africa (the DBSA), committed to providing Thobela with financing for the project. Subsequent to negotiations on a draft agreement between ABSA, Thobela and the City’s attorney, Kunene Ramapala Inc (KR Inc), the Council of the City (the Council) duly resolved to approve the conclusion of a Build Operate and Transfer (BOT) agreement with Thobela, in terms of which Thobela was required to build, operate and maintain a 1500 km network of fibre-optic cable known as the Tshwane broadband network (the network) for a period of 18 years, split into a 3-year build phase and a 15-year maintenance phase, and to fund the capital cost of doing so. Simultaneous negotiations were underway on a so-called Tripartite agreement, which was then concluded between ABSA, Thobela and the City on 4 August 2016, wherein ABSA (with the support of the DBSA) agreed to grant loans and make funds available to enable Thobela to meet its obligations owed to the City under the BOT agreement. The total funding of the project was R1.335 billion. There were two key aspects to the project’s commercial viability. One was that the City had committed to being the ‘anchor customer’ of the network. To this end, it agreed to pay to Thobela an annual service fee of R244 million once all 400 of the City’s designated service sites (CPEs) had been installed. Second was the potential for the future commercialisation of the network’s surplus capacity. However, municipal elections held one day prior to the conclusion of the Tripartite agreement saw the African National Congress (ANC) lose control of three metropolitan municipalities, one being the City. The Democratic Alliance (the DA) became the head of a coalition government of the City’s municipality, with Mr Solly Msimanga sworn in as its Executive Mayor. After gaining control of the City, the DA targeted a number of procurement contracts for ‘review and possible cancellation’, including the BOT agreement. On 22 August 2017 that agreement became the subject of a review application in the Gauteng Division of the High Court, Pretoria. The City sought, firstly, to urgently interdict the implementation of the agreements and, secondly, to review certain decisions taken by its own officials over the period between April 2014 and September 2016 – essentially the tender process and the subsequent contracts concluded by the City, including the BOT and Tripartite agreements. The urgent application (Part A) was in due course struck from the roll for want of urgency and the City was ordered to pay punitive costs on the scale as between attorney and client. The review application (Part B) was heard by Baqwa J and ultimately succeeded: The City’s decisions to (i) award the tender to Altech; (ii) approve and conclude the BOT agreement; and (iii) amend the BOT agreement to extend the period provided for the fulfilment of the suspensive conditions were reviewed and set aside. So, too, were the BOT and Tripartite agreements – concluded pursuant to the tender award – invalidated and set aside. Altech, Thobela and ABSA took issue with this decision and appealed to the SCA. The SCA noted that the City had launched the legality review application more than two years after the decision to award the tender to Altech, some 16 months after the Council had approved the BOT agreement, and one year after the Tripartite agreement was concluded. The principle issue on appeal was thus whether this delay was unreasonable or undue; and, if so, whether the court’s discretion was nevertheless to be exercised by overlooking the delay and entertaining the application. The SCA noted that the delay rule is a principle flowing directly from the rule of law and its requirement for certainty, in which there is a strong public interest. It was incumbent on the City to provide a full explanation covering the entire period of the delay. The SCA found the explanation to be superficial and unconvincing. The City contended that the delay was justified because the DA had only won control of the City in August 2016 and thereafter required time to investigate the alleged irregularities perpetrated under the previous ANC-controlled administration. The SCA rejected this line of reasoning in law and in fact. It held that a change in political control of an organ of state such as the City was irrelevant, for it was a single juristic entity and the change in political administration did not change that. And, as a matter of fact, much of the evidence that was relied on was known or ought to have been known to the DA before it assumed control of the City. By November 2016 the City was already possessed of the information underlying all of the grounds of review it ultimately relied on in the review application, yet chose to continue with the project nonetheless. The City had evidently changed its attitude towards upsetting the contract on a few occasions. It pointed to the end of April 2017 as the time when it decided to seek legal redress, but had agreed to an expedited performance schedule at the management and steering committee meetings of 6 and 7 July 2017. In addition, before ABSA and the DBSA gave Thobela access to the funds, they sought confirmation of the lawfulness of the agreements from the City’s attorney. KR Inc in turn confirmed that the agreements were valid and legally binding on the City and that the City had complied with all of the relevant legislation – not least its protection framework and policies – in connection with the tender. On the strength of this, ABSA and the DBSA signed the financing agreements and the first cash drawdown in order for Thobela to fulfil part of its BOT obligations to City. The SCA concluded that there was no acceptable explanation for the City’s excessive delay, nor its inconsistent and vacillating conduct. The SCA proceeded to the second enquiry, viz. whether the prospects of success on the merits meant that the unreasonable delay was nevertheless to be condoned. As to certain irregularities in the tender process, it was noted that public contracts did not fall to be invalidated on the basis of immaterial or inconsequential flaws. The City’s submissions relating to its non-compliance with s 33 of the Constitution and also the Municipal Finance Management Act 56 of 2003 were quickly disposed of. The SCA held that the high court had erred in finding that the City ought to have followed the procedures for a public-private partnership (PPP) because the project did not involve the performance of a municipal function or the provision of a municipal service, nor did it involve the use of municipal property. It further held that the high court had erred in its assessment of the consequences of setting aside the BOT and Tripartite agreements. It found that the high court was too receptive to the City’s case and, as a result, lost sight of the multi-factor and context-sensitive enquiry with which it was engaged. In the result, the appeal was upheld with costs, including those attendant upon the employment of two counsel. ________________________________________

3306

non-electoral

2006

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA Reportable CASE NO 608/2004 In the matter between LEO MANUFACTURING CC Appellant and ROBOR INDUSTRIAL (PTY) LTD t/a ROBOR STEWARTS & LLOYDS Respondent Coram: Zulman, Van Heerden JJA and Cachalia AJA Heard: 28 FEBRUARY 2006 Delivered: 20 MARCH 2006 Summary: Rule 49(3) of the Magistrates’ Court Act, 32 of 1944 precludes a Magistrates’ Court from rescinding a default judgment in the absence of the applicant for rescission setting out the grounds of the defendant’s defence to the claim. This is so even if the proceedings in which the judgment was obtained are a nullity. Neutral citation: This judgment may be referred to as Leo Manufacturing CC v Robor Industrial (Pty) Ltd t/a Robor Stewarts & Lloyds [2006] SCA 19 (RSA) ___________________________________________________________ JUDGMENT ___________________________________________________________ ZULMAN JA [1] The issue in this appeal is whether the provisions of Magistrates’ courts rule 49(3) preclude a court from rescinding a default judgment granted in circumstances where the proceedings are a nullity, because the grounds of defence have not been set out in the application for rescission. [2] The relevant history of the matter is as follows: (a) The ‘proceedings’ in this matter commenced with the issue of a summons in the Durban Magistrates’ Court on 25 September 2001 in which the respondent (plaintiff) claimed payment of R62 998,07 in respect of goods sold and delivered. The defendant was cited in the summons incorrectly as ‘Leon Manufacturing CC t/a Manufacturing CC t/a Leon Manufacturing’ as opposed to Leo Manufacturing CC t/a Leon Manufacturing. (My emphasis.) (b) Unsuccessful attempts were made on 1 October and 30 November 2001 by the sheriff to serve the summons. (c) On 21 February 2002 service of the summons was effected by affixing same to the main door of an allegedly chosen domicilium citandi et executandi in terms of rule 9(6). The sheriff’s return of service describes the defendant as ‘Leon Manufacturing CC t/a Leon Manufac.’ (d) The respondent then filed a request for default judgment with the clerk of the court citing Leon Manufacturing CC t/a Leon Manufacturing as the defendant. On 13 May the clerk of the court granted default judgment in the sum of R62 998,07 together with interest and costs in terms of the request made. (e) A writ was issued by the respondent on 14 May 2002. After various attempts to serve the writ failed, it was reissued on 30 August 2002. In the writ as reissued, the name of the defendant was altered to read (correctly) Leo Manufacturing CC t/a Leon Manufacturing. (f) On 1 November 2002 the sheriff attached a number of assets of the appellant. (g) This gave rise to an application launched by the appellant on 26 November 2002 for the setting aside of the attachment on the basis that the appellant was never served with the summons. The reason given was that the appellant had, prior to the date of service of the summons, changed the address of its registered office from the address where the summons was served. It appears from the relevant form annexed by the appellant to its replying affidavit in its subsequent application for rescission of the default judgment (form CK 2A) that this was indeed done with effect from 23 January 2001. It was therefore contended that no judgment had been granted in favour of the respondent and, consequently, that the writ was a nullity. The respondent brought a counter-application for the amendment of the citation of the appellant so as to cite the appellant by its correct name, ‘Leo’ instead of ‘Leon’ Manufacturing CC. (h) In a judgment dated 4 April 2003, the Durban Magistrates’ Court refused the application for setting aside the writ and granted the counter- application to amend the citation of the appellant. (i) An application for rescission of the judgment was then launched by the appellant on 8 May 2003. In the founding affidavit in support of the application, the appellant alleged that there had not been proper service of the summons. Consequently, it was contended that the proceedings were a nullity, the judgment should not have been entered and the appellant was accordingly entitled to have the judgment set aside. No grounds were set out in the founding affidavit in respect of the appellant’s defence to the respondent’s claim in the initiating summons. The application was opposed by the respondent who filed an answering affidavit. The appellant then filed a replying affidavit which also failed to set out properly any defence on the merits to the claim. (j) Judgment was delivered by another magistrate of the Durban Magistrates’ Court on 15 July 2003 dismissing the appellant’s rescission application with costs. The appellant thereupon appealed to the Full Court of the Natal Provincial Division. The appeal was dismissed with costs, as was an application for leave to appeal to this court. However pursuant to a petition such leave was granted by this court. (k) The respondent has filed a notice intimating that it does not intend to oppose the appeal and that it abides the decision of this court. [3] Magistrates’ courts rule 49(3) provides: ‘Where an application for rescission of a default judgment is made by a defendant against whom the judgment was granted, who wishes to defend the proceedings, the application must be supported by an affidavit setting out the reasons for the defendant’s absence or default and the grounds of the defendant’s defence to the claim.’ [4] As previously stated the appellant at no time set out ‘the grounds of its defence’ to the respondent’s claim as required by rule 49(3). It was upon this basis that the magistrate and the court a quo refused to rescind the default judgment. Reference was made to two cases, namely, Cooper & Ferreira v Magistrate for the District of Humansdorp1 and F & J Car Sales v Damane.2 In Cooper & Ferreira it was held, with reference to rule 49(2) (the predecessor to the present rule 49(3)), that it is clear that an application for rescission has to be supported by an affidavit setting out not only the reasons for the defendant’s absence or default, but also the grounds of the defendant’s defence to the action or proceedings in which the judgment was given.3 In the F & J case, which dealt specifically with the present rule 49(3), the Full Court came to exactly the 1 [1997] 1 All SA 420 (E). 2 2003 (3) SA 262 (W). 3 Supra at 429 c-g. same conclusion. [5] I will assume, without deciding the matter, that the default judgment granted in this matter was void ab origine by reason of non- service of the initiating summons upon the appellant. However I am of the opinion that the second magistrate was correct when, after referring in his judgment to the cases of Cooper & Ferreira4 and Standard Bank of SA Ltd v El-Naddaf5, he stated that: ‘Now following the rationale of those two decisions, it is totally unnecessary for the Court to rule whether the default judgment was void ab origine or not. The fact of the matter is, and this point has been taken by the Respondent, that there is absolutely no mention of a defence set out in the initial affidavit and there is the mere mention of a possible defence in the replying affidavit. It certainly does not comply with the requirements that it be set out with sufficient particularity so as to enable the Court to determine whether or not there is a valid and bona fide defence.’ [6] Put differently, the provisions of rule 49(3) are peremptory when a court considers an application to rescind a default judgment. More particularly the wording of the sub-rule makes it clear that the grounds of the defendant’s defence to the claim must be set out. Where the objection is that the judgment was void ab origine, compliance with rule 49(3) nevertheless involves further proof of the existence of a valid and bona fide defence to the claim.6 [7] In so far as sub rule 49(8) may be relevant to the matter, in that it specifically refers to the rescission or variation of a judgment which is 4 Supra. 5 1999 (4) SA 779 (W). 6 See HJ Erasmus and DE van Loggerenberg Jones & Buckle: The Civil Practice of the Magistrates’ Courts in South Africa 9ed (1977, with loose-leaf updates) Volume II: The Rules p 49-8. sought inter alia on the ground that it is void ab origine and requires the application to be served and filed within one year after the applicant first had knowledge of such voidness, this in no way overrides the provisions of rule 49(3). Rule 49(8) simply provides a different time period for the filing and service of an application for rescission of a judgment (not only a default judgment) on certain specified grounds. 7 In their comment upon rule 49(8), the learned authors Erasmus and Van Loggerenberg8 make the point that an applicant seeking rescission of a default judgment on the grounds that the judgment in question is void ab origine must (in terms of rule 49(3)) set out a defence ‘with sufficient particularity’ so as to enable the court to decide whether or not there is a valid and bona fide defence. [8] In the circumstances the appeal is dismissed with such costs as the respondent might have incurred. _____________________ R H ZULMAN JUDGE OF APPEAL CONCUR: ) VAN HEERDEN JA ) CACHALIA AJA 7 Where the alleged ground for rescission of a default judgment is not one of the grounds specified in rule 49(8), then the application for rescission must be served and filed ‘within 20 days after obtaining knowledge of the judgment’ (rule 49(1)). 8 Op cit p 49-12.

MEDIA STATEMENT – CASE HEARING IN SUPREME COURT OF APPEAL Leo Manufacturing cc v Robor Industrial (Pty) Ltd t/a Robor Stewarts & Lloyds Supreme Court of Appeal -608/2004 Hearing date:28 February 2006 Judgment date: 20 March 2006 Rule 49(3) of the Magistrates’ Court Act, 32 of 1944 precludes a Magistrates’ Court from rescinding a default judgment in the absence of the applicant for rescission setting out the grounds of the defendant’s defence to the claim. This is so even if the proceedings in which the judgment was obtained are a nullity. Media Summary of Judgment The Supreme Court of Appeal (the SCA) (Judges Zulman, Van Heerden and Acting Judge Cachalia) today dismissed an appeal against a judgment given in the High Court, Pietermaritzburg. The High Court in dismissing an appeal from the Magistrate’s Court, Durban, held that the magistrate was correct in requiring the appellant (Leo Manufacturing CC) to set out its defence fully when applying to rescind a default judgment granted in favour of Robor Industrial (Pty) Ltd t/a Robor Stewart & Lloyds. This requirement is clearly set out in the relevant rules of the Magistrate’s Court.

408

non-electoral

2016

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Case No: 20604/14 In the matter between Not Reportable MINISTER OF POLICE APPELLANT and STEVE DLWATHI RESPONDENT Neutral citation: Minister of Police v Dlwathi (20604/14) [2016] ZASCA 6 (2 March 2016) Coram: Cachalia, Majiedt, Saldulker and Swain JJA and Baartman AJA Heard: 16 FEBRUARY 2016 Delivered: 2 MARCH 2016 Summary: Damages – facial injuries, loss of hearing and depression resulting from unlawful assault by police – general damages award of R675 000 for pain, suffering, disfigurement and loss of the amenities of life excessive – reduced to R200 000. ______________________________________________________________ ORDER ______________________________________________________________ On appeal from: Gauteng Local Division of the High Court, Johannesburg (Siwendu AJ sitting as court of first instance): The appeal is upheld in part. Paragraph 1 of the order of the court below is set aside and substituted with the following: ‘The Defendant is to pay the Plaintiff the sum of R200 000 for general damages.’ The appellant is ordered to pay the respondent’s costs of appeal. ______________________________________________________________ JUDGMENT ______________________________________________________________ MAJIEDT JA (Cachalia, Saldulker and Swain JJA and Baartman concurring): [1] This appeal concerns an award of damages made by the Gauteng Local Division of the High Court, Johannesburg (Siwendu AJ sitting as court of first instance). The award was made for injuries sustained by the respondent, Mr Steve Dlwathi, and their sequelae as a consequence of an unlawful assault on him by members of the South African Police Service (SAPS), acting within the course and scope of their employment with the appellant, the Minister of Police. The merits of the claim were conceded and the court below was seized only with the quantum of damages. Leave to appeal was granted by the court a quo in respect of the award for general damages and for loss of future earnings. This court granted leave in respect of the award for past loss of income. [2] At the hearing before us the appeal against the award for past loss of income and for future loss of earnings was abandoned during the course of the hearing and the only remaining issue was the award for general damages. It is necessary, however, to say something later about the abandoned part of the appeal. I record at the outset that counsel who appeared for the Minister in this court did not appear at the trial. [3] The events which gave rise to the claim are briefly these. Mr Dlwathi was a practising advocate of the Johannesburg Bar at the time of the assault. He was unlawfully assaulted in the presence of friends by members of the SAPS on 24 June 2005. At that time Mr Dlwathi was in his sixth year of private practice. The Minister initially admitted the nature and extent of the physical injuries sustained by him but not their psychological effects on him. [4] The physical injuries were agreed at a pre-trial conference to be the following: (a) damage to, amongst others, the tympanic membrane of the left ear with resultant loss of hearing; (b) blunt force trauma to the head and jaw resulting in, amongst others, facial and dental injuries with multiple loss and damage to Mr Dlwathi’s teeth and the temporo mandibular joints; (c) blunt force trauma to the face resulting in lacerations and bleeding; (d) a soft tissue injury to the cervical spine. As regards the psychiatric effect of the assault the parties agreed that ‘the Plaintiff manifests symptoms of depression. The degree and/or extent of such depression remains in dispute and furthermore, whether or not the Plaintiff is suffering from post-traumatic stress disorder’. In respect of the psychological effect of the assault, the parties agreed that those were as set out in the reports of their respective experts, Dr Naude (for the respondent) and Ms Motsamai (for the appellant). Dr Naudé and Ms Motsamai agreed in a joint minute that after the assault Mr Dlwathi: (i) experienced a significant deterioration in his functioning; (ii) has no self-confidence and feels self-conscious about his appearance and the difficulty with his teeth; (iii) has memory and concentration difficulties; (iv) has withdrawn from his hobbies, social and leisure time activities; (v) is more irritable and has developed depression and anxiety; (vi) suffers from post-traumatic stress. [5] It was also common cause that, as a result of his injuries, Mr Dlwathi would have to use a hearing aid to compensate for his hearing loss and to undergo extensive surgery to his jaw. On Mr Dlwathi’s version, his practice suffered as briefs from attorneys dwindled, causing him to close his practice and to resign from the Johannesburg bar during 2009. He ascribed this to the ongoing psychological and psychiatric effects of his ordeal, including loss of both memory and concentration, intolerance, impatience and irritability, sleeplessness and significant depression. [6] The court below found that the evidence adduced proved that Mr Dlwathi suffered from ‘severe and/or major clinical depression . . . .’ It, however, found the probabilities evenly balanced in respect of his alleged post-traumatic stress disorder and found against him on this aspect. The court below accepted that his depression was chronic and that the prognosis in that respect was poor. [7] After a consideration of the common cause and proved facts as well as awards in comparable cases, the learned judge awarded a globular sum for pain, suffering, disfigurement and the loss of amenities of life in the amount of R675 000. As stated, this is the only remaining issue before us. [8] It is well established that an assessment of an appropriate award of general damages (sometimes also referred to as non-pecuniary damages) is a discretionary matter and has as its objective to fairly and adequately compensate an injured party (see Protea Assurance Co Ltd v Lamb 1971 (1) SA 530 (A) at 534H-535A and Road Accident Fund v Marunga ZASCA (144/2002) [2003] ZASCA 19; 2003 (5) SA 164 (SCA) para 23). An appellate court will interfere with an award for general damages in instances of a striking disparity between what the trial court awarded and what the appellate court considers ought to have been awarded (Protea at 535A; Marunga para 23). It will also interfere where there has been an irregularity or misdirection (Minister of Safety and Security v Scott & another ZASCA (969/2013) [2014] ZASCA 84; 2014 (6) SA 1 (SCA) para 42). A misdirection might sometimes appear from a court’s reasoning and in other instances it might be inferred from a grossly excessive award (Minister of Safety and Security v Kruger ZASCA (183/10) [2011] ZASCA 7; 2011 (1) SACR 529 (SCA) para 27). In the course of her judgment, the learned judge in the court below made the following remarks: ‘. . . the court is of the view that the time has come to distinguish those cases, such as this one, where damages incurred arise out of an unwarranted, callous attack and violation that goes beyond the bounds of legitimate law enforcement to clearly signal that such conduct will not be tolerated. The defendant and the plaintiff cannot both be embraced under the same cloak when weighing considerations of what is just and fair regardless of the circumstances of the case.’ [9] In my view the learned judge misdirected herself by introducing a punitive element in the award of general damages so as to deter the kind of unlawful conduct to which the police subjected Mr Dlwathi. It should be borne in mind that general damages are awarded for bodily injury, which includes injury to personality. Its object is to compensate loss, not punish the wrongdoer. If it were otherwise awards would be made even where no loss is suffered. It is apparent that this misdirection resulted in the learned judge making what I regard as an excessive award. [10] The amount of R675 000 for general damages, therefore, does not accord with awards in comparable cases. While there is no hard and fast rule, some guidance may be derived from comparable cases in assessing general damages (Protea at 535B–536B). Mr Dlwathi must be compensated for the pain and suffering (both physical and mental) he had to endure, as well as for his loss of the amenities of life and disfigurement from permanent minor facial scarring. It is plain that, while he has not been rendered unemployable (he now works for the Department of Justice as a senior State advocate in a specialised unit of the prosecutions branch), he will not be able to pursue his first career choice as an advocate in private practice. His emotional well-being has been seriously compromised and his major depressive disorder is in all probability of a permanent nature. At the very least, the prognosis for treatment of that disorder is poor. [11] In supporting the award made by the court below, counsel for Mr Dlwathi referred us to a number of what he contended are comparable cases. These range from cases involving dental and facial injuries to head injuries with associated anxiety and mood disorders and to those involving the violation of dignity and reputation. It is axiomatic that no two cases are exactly the same. I do not deem it necessary to trawl through all the authorities cited by counsel. Since the emphasis during oral argument was on the last mentioned category of cases (involving, amongst others, head or brain injuries), it will suffice to consider only some of those. [12] The awards in those cases were significantly higher than the awards in the other categories of cases referred to, no doubt due to the significant brain injuries in all of them. In this regard, while it is certainly not conclusive, it is of considerable significance that the cases relied on most heavily by Mr Dlwathi’s counsel are all categorized under ‘very severe brain damage’ in M M Corbett and D P Honey The Quantum of Damages in Bodily and Fatal Injury Cases Vol VI (2013) (C & H). Mr Dlwathi did not sustain any brain damage as a consequence of the unlawful assault. It is, however, common cause that his psychiatric and psychological deficits are the sequelae of the assault perpetrated on him. I next consider some of the cases cited by counsel. [13] First there is Torres v Road Accident Fund (C & H Vol VI at A 4-1) where an amount of R600 000 was awarded as general damages in 2007, which equates to R1 025 000 in present day value. There the plaintiff had, however, suffered, amongst other injuries, a severe diffuse brain injury with significant neuro-cognitive and neuro–behavioural deficits. In Raupert v Road Accident Fund (2153/2008) [2011] ZAECPEHC (1 February 2011]; (C & H Vol VI at A 4-52) the plaintiff had sustained, amongst other injuries, a very significant head injury consisting of extensive fracturing of the skull with bifrontal lobe contusions, subarachnoid haemorrhage and generalised brain oedema. She was awarded R750 000 as general damages in 2011 – R949 000 in today’s monetary terms. In Smit v Road Accident Fund (24883/2008) [2012] ZAGPPHC 294 (16 November 2012); (C & H Vol VI at A 4-188) an amount of R650 000 was awarded for general damages in 2012 (present day value: R779 000) for a moderate to severe organic brain syndrome with associated frontal lobe symptomatology and post-traumatic epilepsy as well as a fractured right femur. A similar award was made in that same year (2012) in Potgieter v Road Accident Fund (2416/05) [2012] ZAECPCHC 99 (18 December 2012) (C & H Vol VI at A 4-195) for a severe head injury comprising a traumatic brain injury with considerable frontal lobe dysfunction and other soft tissue injuries and lacerations of the scalp. [14] The most recent award referred to is Mofokeng v Road Accident Fund (11101/2009) [2014] ZAGPJHC 160 (1 July 2014) (C & H Vol VII at B 4 – 12) where the plaintiff had been awarded R700 000 for general damages (present day value R772 000) for a moderately severe head injury and soft tissue injuries to the neck and lower back. The brain injury was referred to as a diffuse rotational shear injury, characterised by an effective disconnection between the frontal lobes and the rest of the brain. [15] It is readily apparent that the cases discussed above do not lend much assistance in assessing what the fair and adequate compensation in this case should be. They all involve moderate to severe head and brain injuries arising from motor vehicle accidents. This is not the case here. – Mr Dlwathi’s deficits are the effects of the indignity and humiliation of an unlawful public assault. He did not sustain any brain injuries as a result of the assault. In deciding what an appropriate award would be to provide some solace to him and to compensate him for the pain and suffering, disfigurement and loss of the amenities of life, one will have to have regard to cases which are ‘broadly similar in all material respects’ (per Van Blerk JA in Marine and Trade Insurance Co Ltd v Goliath 1968 (4) SA 329 (A) at 333G). These cases will deal with separate areas of similarity to the present instance. [16] I start with Van der Merwe v Minister van Veiligheid en Sekuriteit en ander (716/07) [2009] ZANCHC 72 (27 November 2009]; (C & H Vol VI at K 2 – 1). There a 63 year old successful building contractor had been unlawfully arrested and detained in police custody for two and a half hours. As a result he was severely traumatised and had to undergo psychological and psychiatric treatment, without success. He presented with symptoms of depression and symptoms typically associated with post-traumatic stress disorder. He was awarded R25 000 in 2009, which equates to R32 000 in present day value. [17] In Sokombela v Minister of Safety and Security (C & H Vol V, G6–1), the plaintiff had sustained a fractured mandible, laceration of the tongue, soft palate and lower lip and the destruction of two lower teeth (which subsequently had to be removed) after a bullet from a firearm had struck him behind the right ear and had exited through his mouth. Although these injuries are similar to those sustained by Mr Dlwathi, they are considerably more severe. In that instance the plaintiff was awarded R70 000 for general damages in 2003 (presented day value: R134 330). [18] An assessment of appropriate general damages with reference to awards made in previous cases is, as Nugent JA observed in Minister of Safety and Security v Seymour (295/05) [2006] ZASCA 71; 2006 (6) SA 320 (SCA) para 17, ‘fraught with difficulty . . . (t)he facts of a particular case need to be looked at as a whole and few cases are directly comparable . . . (t)hey are a useful guide to what other courts have considered to be appropriate but they have no higher value than that’. [19] After careful consideration and having regard to the physical and emotional sequelae of the assault upon Mr Dlwathi (in particular the poor prognosis in respect of his depression), I am of the view that an award of R200 000 for general damages will be fair and adequate compensation in this case. In arriving at this amount I have derived some guidance from the awards made in Van der Merwe and Sokombela, above. [20] It is necessary to say something briefly about the manner in which the trial was conducted by the Minister’s legal representatives. During the course of the proceedings counsel for the Minister made a number of concessions and agreed that joint minutes and written reports of various experts would be admitted as evidence. These concessions and agreements resulted in the contents of joint minutes and/or written expert reports becoming common cause. Inexplicably though, the Minister’s new legal team on appeal sought to challenge, in their main heads of argument, some of these agreed facts and contended that Mr Dlwathi’s failure to call some of these experts to adduce evidence at the trial, should be held against him. They however, abandoned this stance in their supplementary heads of argument. One of the issues which then became common cause was the fact that Mr Dlwathi suffered from depression as a consequence of the assault. The concession on behalf of the Minister in this regard is surprising as the evidence adduced by Mr Dlwathi on his aspect was not too strong. In the main, that evidence emanated from Dr Larry Grinker, a specialist psychiatrist called by Mr Dlwathi. But Dr Grinker’s conclusions appear to a large extent to be based on Mr Dlwathi’s own narrative of the symptoms of his depression. There was no corroboration to support this diagnosis. Mr Dlwathi’s own narrative of his depression in its various forms appears doubtful or, at best for him, exaggerated. He testified that, as a result of the assault, he felt despondent, lost and downcast and had lost his confidence and self-esteem. As a result he gave away his briefs, remained at home for some time and, upon his return to practice, battled to re-establish what he claimed used to be a flourishing junior advocate’s practice. Eventually he said he resigned from the Bar and closed his practice. [21] In my view the concession that Mr Dlwathi ‘manifested symptoms of depression’ and, more importantly, that there was no need to adduce the evidence of experts (other than Dr Grinker) on this aspect of Mr Dlwathi’s case was incorrectly made. The manner in which this and other concessions were made caused the trial Judge some exasperation, quite understandably so. As a result of this ill-considered concession, the fact of Mr Dlwathi’s questionable depressive disorder and, to a lesser extent, the precise gravity thereof, largely fell away as an issue at the trial. There was also a lack of clarity on the part of counsel who appeared for the Minister in this court regarding the computation of the past and future loss of earnings, which they initially sought to challenge before us. This difficulty was largely due to a small but important part of the record not having been transcribed. Counsel for the Minister, however, accepted the correct state of affairs as explained in this court by Mr Dlwathi’s counsel (who had also appeared for him at the trial). As a consequence, the Minister’s challenge to the awards for past and future loss of earnings, was eventually abandoned before us. [22] Lastly, there is the question of costs in this court and the punitive costs award made by the trial judge. As to the former – while the Minister has attained some success on appeal as far as the significant reduction in the amount of general damages is concerned, that was a relatively minor part of the case in the court below and before us. The larger part of the claim concerned past and future loss of earnings and it took up most of the time at the trial. That was also the case in this court until the appeal on these aspects was abandoned in the circumstances outlined above. The appellant’s rather limited success in this court requires in my view an order for costs in the respondent’s favour. With regard to the costs in the court a quo, the learned trial judge made a punitive costs order on an attorney and own client scale against the Minister. In exercising her discretion in this regard, the learned trial judge took into account the following factors: (a) ‘her disquiet and dismay at the poor conduct of the matter which led to inordinate delays, adjournments and a failure to narrow the issues timeously through the pre-trial conference processes provided for in the Rules of Court’; (b) the numerous ad hoc agreements and pre-trial conferences in the course of the hearing as a consequence of the laxity on the part of the Minister’s legal team; (c) during the trial expert witnesses had not been provided with relevant information and reports by the Minister’s legal representations, adversely affecting the calling of witnesses and the duration of the trial; (d) the unseemly and unprofessional conduct, leading to inordinate delays in the prosecution of the dispute. The difficulties enunciated above are borne out by the record. There are no grounds to interfere with the discretion exercised in this regard. [19] The following order is made: The appeal is upheld in part. Paragraph 1 of the order of the court below is set aside and substituted with the following: ‘The Defendant is to pay the Plaintiff the sum of R200 000 for general damages.’ The appellant is ordered to pay the respondent’s costs of appeal. ________________________ S A MAJIEDT JUDGE OF APPEAL APPEARANCES For Appellant: M Khoza SC and Z Gumede Instructed by: State Attorney, Johannesburg State Attorney, Bloemfontein For Respondent: M van den Barselaar Instructed by: Joe Hubbart Attorneys, Johannesburg Honey Attorneys, Bloemfontein

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL MEDIA SUMMARY – JUDGMENT DELIVERED IN COURT OF APPEAL 2 March 2016 STATUS: Immediate THE MINISTER OF POLICE v DLWATHI (20604/14) Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal The Supreme Court of Appeal (the SCA) today partly upheld an appeal in this matter which concerns an award of damages made by the Gauteng Local Division of the High Court, Johannesburg, for physical and psychological injuries sustained by the respondent in the course of an unlawful assault by members of the South African Police Service (SAPS). The respondent, Mr Steve Dlwathi, an advocate in the employ of the National Prosecuting Authority, sustained facial injuries, a loss of hearing and a depressive disorder as a consequence of the unlawful assault. At that time he was a practising advocate at the Johannesburg Bar. At the hearing the appellant, the Minister of Safety and Security (the Minister), abandoned an appeal against the awards for past loss of earnings and future loss of earnings. All that remained for the SCA to decide was the award for general damages for pain, suffering, disfigurement and loss of the amenities of life. After considering the well established objective of an award of general damages, as laid down by case law, namely fair and adequate compensation, and having regard to awards in comparable cases, the SCA reduced the amount of R675 000 for general damages awarded by the trial court to the sum of R200 000. The SCA, however, dismissed the appeal against the punitive costs order made against the Minister. In doing so the SCA held that costs is a discretionary matter and that the trial Judge’s reasons for that order are indeed borne out by the record. In the result the appeal was upheld in part only insofar as the award of general damages was reduced. -- ends --

4032

non-electoral

2023

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Not Reportable Case No: 250/2022 In the matter between: DANIEL NEL PRETORIUS APPELLANT and AGRICULTURAL RESEARCH COUNCIL RESPONDENT Neutral citation: Pretorius v Agricultural Research Council (Case no 250/22) [2023] ZASCA 76 (29 May 2023) Coram: SCHIPPERS, CARELSE, MABINDLA-BOQWANA, GOOSEN and MOLEFE JJA Heard: 18 May 2023 Delivered: 29 May 2023 Summary: Law of contract – lease of farm – agreement allowing renewal provided lessee not in default of its terms – purported renewal by lessee whilst in default of obligations – invalid – counterclaim for lost profits arising from sublease – unsustainable as purported renewal of agreement of no force or effect – lessee issuing cheque for arrear rental – payment stopped – claim on dishonoured cheque upheld. ________________________________________________________________ ORDER ________________________________________________________________ On appeal from: Gauteng Division of the High Court, Pretoria (Louw J sitting as court of first instance): The appeal is dismissed with costs, including the costs of two counsel. ________________________________________________________________ JUDGMENT ________________________________________________________________ Schippers JA (Carelse, Mabindla-Boqwana, Goosen and Molefe JJA concurring) [1] This is an appeal against an order of the Gauteng Division of the High Court, Pretoria (the high court), directing the appellant, Mr Daniel Nel Pretorius (the defendant), to pay the sum of R439 300.92 together with interest and costs to the respondent, the Agricultural Research Council (the plaintiff), in respect of arrear amounts owing under a lease agreement. The high court (Louw J) also dismissed the defendant’s counterclaim for payment of R4 860 000 for lost profits, with costs. The appeal is with its leave. [2] The basic facts are largely common ground and can be briefly stated. On 1 August 2001 the parties concluded a written lease agreement in terms of which the plaintiff let a farm known as Plot 103, Kameeldrift, Pretoria (the property), to the defendant for a period of nine years and 11 months, which commenced on 1 August 2001, terminating on 30 June 2011 (the initial agreement). [3] The initial agreement contained the following terms. The defendant would be invoiced for rental (R350 per hectare per year with an annual escalation of 10% on the ground only) during March of every year, ending on 31 March. The rental invoice had to be paid by no later than 31 May of each year. The defendant was given an option to renew the lease, subject to the express condition that the right of renewal could not be exercised while he was in breach or default of any of the terms of the agreement. [4] At first the rental was paid annually in accordance with the terms of the initial agreement. However, that changed when the defendant made arrangements with the plaintiff to make frequent payments during the course of the year, instead of paying an annual amount. The defendant fell into arrears with his payment obligations and on 13 October 2009, the outstanding balance owed to the plaintiff was R206 219.43. Consequently, the defendant signed an acknowledgement of debt (AOD) on 2 November 2009, in terms of which he admitted that he was indebted to the plaintiff in respect of municipal services to the property in the sum of R206 219.43. The defendant paid this amount in instalments to the plaintiff. [5] Subsequently, the defendant again fell into arrears with his payment obligations under the initial agreement. On 15 October 2010 he signed a second AOD in terms of which he acknowledged his indebtedness to the plaintiff in the amount of R203 043.95, in respect of municipal charges (the second AOD). The defendant undertook to pay this amount by way of a minimum monthly instalment of R20 000 and to settle the outstanding balance by 31 March 2011. The first monthly instalment was payable by 25 November 2010 and each subsequent instalment had to be paid on or before the 25th day of each succeeding month, until the arrears and interest were paid. [6] On 25 November 2010, whilst in arrears with his obligations under the initial agreement, the defendant purported to exercise the option to renew that agreement in writing. The plaintiff therefore contended that the purported renewal was of no force and effect, and that the initial agreement came to an end by the effluxion of time on 30 June 2011. [7] After 30 June 2011, the defendant continued to occupy the property. The plaintiff’s case was that this occupation was in terms of a month-to-month agreement. The defendant denied this. He claimed that the initial agreement had been renewed and that he was entitled to occupy the property until 31 May 2021. [8] On 28 March 2014 the plaintiff’s attorneys informed the defendant that the plaintiff had cancelled the lease agreement, gave him notice to vacate the property by 30 July 2014, and demanded payment of arrear amounts arising from his lease of the property in the sum of R439 300.92. The defendant’s response to the termination notice was that it was a repudiation of the agreement, which was not accepted, and he tendered payment of the arrears. On 20 June 2014 the defendant issued the plaintiff with a cheque for the arrears in the sum of R439 300.92. When the plaintiff presented the cheque for payment, it was dishonoured – the defendant had stopped payment. [9] The plaintiff then sued the defendant in the high court for payment of arrear rental in the amount of R502 707.84, founded on an alleged month-to-month lease agreement; alternatively, for payment of R439 300.92 based on the dishonoured cheque. The defendant brought a counterclaim for payment of R4 860 000 for lost profits, allegedly arising from an oral agreement which he had entered into on 2 July 2012, to sublease the property to a third party until 31 May 2021. The plaintiff raised a special plea of prescription to the defendant’s counterclaim, namely that it was served more than three years after the date on which the claim arose. [10] The high court decided the issue of prescription in limine, on the assumption that the defendant had exercised his right to renew the lease in accordance with the terms of the initial agreement. The plea of prescription was upheld. The court found that prescription began to run on 28 March 2014, ie the date on which the plaintiff allegedly repudiated the agreement, and that a period of more than three years had elapsed before the defendant’s counterclaim was served on the plaintiff on 6 July 2017. Consequently, the counterclaim was dismissed with costs. The high court dismissed the plaintiff’s claim for arrear rental based on a month-to-month agreement. The alternative claim for payment of R439 300.92, founded on the dishonoured cheque, succeeded. [11] The main issue on appeal is the validity of the defendant’s purported renewal of the initial agreement on 25 November 2010. As already stated, he was precluded from exercising the option to renew the lease if he was in breach or default of any of its terms. When the defendant ostensibly exercised that right, he was in arrears with his payment obligations under the initial agreement. He signed the second AOD in which he accepted that he owed the plaintiff R203 043.95, being arrears in respect of municipal charges. [12] Counsel for the defendant however argued that the option was validly exercised, because he ‘was not in breach of the second AOD’. That AOD, so it was argued, ‘was a pactum non petendo in the form of a waiver of the plaintiff’s right to cancel the agreement’, and ‘an alteration of the defendant’s payment obligations’, which ‘constituted an amendment of the initial agreement’. Then it was submitted that the AOD was ‘not merely a concession by the plaintiff to the defendant, but a waiver that was contractual in form’. [13] The argument is misconceived. First, a defence of waiver must be pleaded, which the defendant failed to do.1 What is more, the party relying on the waiver of a contractual right bears the onus to allege and prove that the other party had full knowledge of that right when it allegedly abandoned it.2 Clear proof of a waiver is required: it must be shown that the party alleged to have waived not only acted with full knowledge of its rights, but that its conduct is irreconcilable with the continued existence of such rights, or with the intention of enforcing them.3 The defendant neither alleged nor proved that the plaintiff had waived any right under the initial agreement. [14] Secondly, the argument that the second AOD amended the initial agreement is directly at odds with clause 24.1 of the agreement. It provided: ‘24 Non-waiver 24.1 Neither party shall be regarded as having waived, or be precluded in any way from exercising, any right under or arising from this lease by reason of such party having at any time granted any extension of time for, or having shown any indulgence to, the other party with reference to any payment or performance hereunder, or having failed to enforce, or delayed in the enforcement of, any right of action against the other party.’ [15] Thus, the initial agreement was not altered in any way by the execution of the second AOD, which was nothing more than an indulgence granted to the defendant. In any event, the agreement contained a non-variation clause, designed to prevent informal or oral variations without a written agreement between the parties, and which eliminates any disagreement about whether any amendment to the initial agreement was concluded. Clause 23.1 provided that the lease ‘constitutes the entire agreement between the parties’. Clause 23.3 stated: 1 Montesse Township and Investment Corporation (Pty) Ltd and Another v Gouws NO, and Another [1965] 4 All SA 285 (A); 1965 (4) SA 373 (A) at 381B-C. 2 Feinstein v Niggli and Another [1981] 2 All SA 92 (A); 1981 (2) SA 684 (A) at 698F; Borstlap v Spangenberg en Andere [1974] 4 All SA 25 (A); 1974 (3) SA 695 (A) at 704E-H. 3 Borstlap fn 2 at 704E-H; Road Accident Fund v Mothupi [2000] 3 All SA 181 (A); 2000 (4) SA 38 (SCA) para 19. ‘No variation or consensual cancellation of this agreement shall be of any force or effect unless reduced to writing and signed by both parties.’ A clause such as this, described as ‘the doctrine that contracting parties may validly agree in writing to an enumeration of their rights, duties and powers in relation to the subject-matter of a contract, which they may alter only by again resorting to writing’,4 remains enforceable.5 [16] The second AOD was the clearest admission by the defendant: (i) that he was in default of his obligations under the initial agreement; (ii) as to how the default arose; and (iii) of the steps taken to cure the default. The high court thus correctly found that the defendant was in default of his obligations under the initial agreement when he purported to exercise the option to extend the lease. [17] This finding has four consequences. The first is that on 2 July 2012, the defendant could not have entered into any sublease of the property until 31 May 2021, for the simple reason that he had no right to do so: the main lease had not been extended. The second is that the foundation of the defendant’s counterclaim has been destroyed. The third is that the issue of prescription does not arise, and no more need be said about it. And the fourth is that the cheque which the defendant issued to the plaintiff for payment of arrear amounts, could never have been subject to the condition he purportedly imposed – that the plaintiff should honour the terms of the initial agreement, which had expired on 30 June 2011 and was not validly renewed. [18] What remains is the plaintiff’s alternative claim for payment of R439 300.92, based on the dishonoured cheque. The defence that the cheque was issued subject to the condition that the plaintiff honours the terms of the lease 4 Brisley v Drotsky 2002 (4) SA 1 (SCA) para 89 per Cameron JA; SA Sentrale Ko-Op Graanmaatskappy Bpk v Shifren en Andere 1964 (4) SA 760 (A) at 767A-B. 5 G B Bradfield Christie’s Law of Contract in South Africa 7 ed (2016) at 518. agreement, and that it should not persist with its cancellation of the defendant’s lease and vacation of the property on 30 July 2014, falls away. The defendant’s counsel, relying on Saambou-Nasionale Bouvereniging,6 submitted that the claim based on the dishonoured cheque could not succeed because there was no underlying agreement that justified its issue. [19] The submission however is unsustainable on the evidence and the law. As in the case of waiver, the defendant did not plead that there was no reasonable cause to issue the cheque. On the contrary, he testified that as at 28 March 2014, his account with the plaintiff was in debit in the sum of R439 300.92. He said that he ‘was in arrears in an amount of R439 000 in terms of the extended lease agreement’, and that he had never denied that he owed the plaintiff money. [20] The defendant’s reliance on Saambou-Nasionale Bouvereniging is misplaced. It is authority for the proposition that reasonable cause for the issue of a cheque exists where the drawer and the payee agree as to what the proceeds of the cheque are to be used for. By this agreement the bond between the negotiable instrument contract and the underlying relationship is established.7 That is the case here: the parties agreed that the cheque for R439 300.92 was in settlement of the defendant’s indebtedness arising from his lease of the property. It matters not that the plaintiff did not establish that his continued occupation was in terms of a month-to-month lease: the fact is that the defendant continued to lease the property after the initial agreement had come to an end, and he became indebted to the plaintiff in the amount of R439 300.92 under that lease. [21] The plaintiff established the requisites for its claim on the cheque in the sum of R439 300.92. A cheque is a bill payable on demand, which can be 6 Saambou-Nasionale Bouvereniging v Friedman 1979 (3) SA 978 (A). 7 Saambou-Nasionale Bouvereniging fn 6 at 992G-H. presented for payment on any date within a reasonable time after its issue.8 The plaintiff was the legal holder of the cheque signed by the defendant as drawer, as a result of which he incurred personal liability on the cheque.9 It was presented for payment but dishonoured by non-payment. Notice of dishonour is dispensed with because the defendant countermanded payment.10 [22] In the result, the appeal is dismissed with costs, including the costs of two counsel. __________________ A SCHIPPERS JUDGE OF APPEAL 8 Navidas (Pty) Ltd v Essop; Metha v Essop 1994 (4) SA 141 (A) at 152E. Section 43(2)(b) of the Bills of Exchange Act 34 of 1964 provides: ‘A bill is duly presented for payment if it is presented in accordance with the following rules, namely- . . . (b) if the bill is payable on demand, presentment must, subject to the provisions of this Act, be made within a reasonable time, within the meaning of subsection (3), after its issue, in order to render the drawer liable, and within such a reasonable time after its endorsement, in order to render the indorser liable.’ 9 Marshall and Another v Bull Quip (Pty) Ltd [1983] 1 All SA 96 (A); 1983 (1) SA 23 (A) at 28A. 10 Braz v Afonso and Another [1997] 4 All SA 428 (SCA); 1998 (1) SA 573 (SCA) at 579I-580C. Appearances: For appellant: A B Rossouw SC and A P J Bouwer Instructed by: MacRobert Attorneys, Pretoria Honey Attorneys, Bloemfontein For respondent: B L Manentsa and Z Ngakane Instructed by: Adams & Adams, Pretoria Phatshoane Henney Attorneys, Bloemfontein

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 29 MAY 2023 Status: Immediate The following summary is for the benefit of the media in the reporting of this case and does not form part of the judgments of the Supreme Court of Appeal Pretorius v Agricultural Research Council (Case no 250/22) [2023] ZASCA 76 (29 May 2023) Today, the Supreme Court of Appeal (SCA) handed down judgment dismissing an appeal against a decision of the Gauteng Division of the High Court, Pretoria (the high court). The issue before the SCA was whether the defendant’s purported renewal of a lease agreement concluded on 25 November 2010 (the initial agreement) between the Agricultural Research Council (the plaintiff) and Mr Daniel Nel Pretorius (the defendant), was valid. In terms of the lease, the plaintiff let a farm known as Plot 103, Kameeldrift, Pretoria (the property), to the defendant for a period of nine years and 11 months, which commenced on 1 August 2001, terminating on 30 June 2011. It contained a term that gave the defendant an option to renew the lease, subject to the express condition that the right of renewal could not be exercised while he was in breach or default of any of the terms of the initial agreement. The defendant again fell into arrears with his payment obligations under the initial agreement. On 15 October 2010, he signed an acknowledgment of debt (AOD) in terms of which he acknowledged his indebtedness to the plaintiff in the amount of R203 043.95, in respect of municipal charges. The defendant undertook to pay this amount by way of a minimum monthly instalment of R20 000 and to settle the outstanding balance by 31 March 2011. On 25 November 2010, whilst in arrears with his obligations under the initial agreement, the defendant purported to exercise the option to renew that agreement in writing. The plaintiff contended that the purported renewal was of no force and effect, and that the initial agreement came to an end by the effluxion of time on 30 June 2011. After 30 June 2011, the defendant continued to occupy the property. The plaintiff’s case was that this occupation was in terms of a month-to-month agreement. The defendant denied this. He claimed that the initial agreement had been renewed and that he was entitled to occupy the property until 31 May 2021. Counsel for the defendant argued that the option was validly exercised, because he was not in breach of the AOD; and that the AOD constituted a waiver of the plaintiff’s right to cancel the agreement and an alteration of the defendant’s payment obligations, which constituted an amendment of the initial agreement. The SCA found that the defendant had neither alleged nor proved that the plaintiff had waived any right under the initial agreement, and that it had not been amended by the AOD. It held that the AOD was the clearest admission by the defendant: (i) that he was in default of his obligations under the initial agreement; (ii) as to how the default arose; and (iii) of the steps taken to cure the default. The SCA concluded that the high court thus correctly found that the defendant was in default of his obligations under the initial agreement when he purported to exercise the option to extend the lease. Consequently, the appeal was dismissed with costs, including the costs of two counsel. ~~~~ends~~~~

3785

non-electoral

2022

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Not Reportable Case no: 390/2021 In the matter between: LOSKOP LANDGOED BOERDERY (PTY) LTD FIRST APPELLANT WILLEM ADRIAAN PIETERS SECOND APPELLANT RIAAN PIETERS THIRD APPELLANT and PETRUS MOELESO FIRST RESPONDENT DAVID M MOFOKENG SECOND RESPONDENT MAKIE MOELESO (TSHABALALA) THIRD RESPONDENT NINI MABE FOURTH RESPONDENT Neutral citation: Loskop Landgoed Boerdery (Pty) Ltd and Others v Petrus Moeleso and Others (390/2021) [2022] ZASCA 53 (12 April 2022) Coram: VAN DER MERWE, MOCUMIE, NICHOLLS, MBATHA, and CARELSE JJA Heard: 8 March 2022 Delivered: This judgment was handed down electronically by circulation to the parties’ legal representatives via email. It has been published on the Supreme Court of Appeal website and released to SAFLII. The date and time for hand-down is deemed to be at 10h00 on 12 April 2022. Summary: Land – Extension of Security of Tenure Act 62 of 1997 – occupiers – overgrazing of land – remedies of owner – removal of livestock does not constitute ‘eviction’ of occupier – both owner and occupier have duty to prevent overgrazing in terms of Conservation of Agricultural Resources Act 34 of 1983 – court orders not sought by applicants and not supported by pleadings – respondents not afforded opportunity to state case – livestock removed without sanction of court – self-help remedy – mandament van spolie. ___________________________________________________________________ ORDER ___________________________________________________________________ On appeal from: Land Claims Court, Randburg (Yacoob J, sitting as court of first instance): The appeal succeeds in part. The appeal in respect of para 1 of the Land Claims Court’s order is dismissed. The appeal succeeds in respect of para 2 of the Land Claims Court’s order which is set aside and replaced with the following: ‘The respondents are ordered to forthwith restore possession of the two grazing camps on the farm Barnea 231 within the district of Bethlehem, Free State Province allocated to the applicants prior to dispossession.’ The appeal succeeds in respect of para 4 of the Land Claims Court’s order, which is set aside and replaced with the following: ‘Each party to pay its own costs.’ No order as to costs of the appeal is made. ___________________________________________________________________ JUDGMENT ___________________________________________________________________ Carelse JA (Van der Merwe, Mocumie, Nicholls and Mbatha JJA concurring): [1] The primary issue in this appeal involves the reduction of the respondents’ grazing area from two camps to one camp, on the farm Barnea 231 within the district of Bethlehem, Free State Province (the farm) This appeal arises from proceedings instituted in the Land Claims Court, Randburg (LCC) by the respondents (who were the applicants in the court a quo) for certain declaratory orders. [2] The owner of the farm is the second appellant, Mr W A Pieters. On 1 March 2018, however, the first appellant, Loskop Boerdery (Pty) Ltd, took over the farming operations on the farm. The third appellant, Mr Riaan Pieters, is the son of Mr W A Pieters and the sole director of the first appellant. It may safely be assumed that he at all relevant times acted on behalf of the first and second appellants. The first respondent, Mr Petrus Moeleso, was born in 1974 and has, since birth, resided on the farm with his parents and continues to do so. In 1999, Mr Petrus Moeleso started working on the farm for Mr W A Pieters. In 2008, his contract of employment was terminated and he has since not worked on the farm. The second respondent, Mr David Mofokeng; the third respondent, Ms Maki Moeleso; and the fourth respondent, Ms Nini Mabe, reside on the farm. [3] According to the respondents, they inherited 24 cattle and initially had the use of three grazing camps for their livestock. Mr Petrus Moeleso alleged that in 2002, Mr W A Pieters informed him that he intended reducing the three camps to two grazing camps and offered to feed the first respondent’s cattle during the winter months. These allegations, including the number of cattle the respondents own, were disputed by the appellants but do not require determination because they are not material to the outcome of this appeal. [4] It was not disputed that the respondents were occupiers in terms of the Extension of Security of Tenure Act 62 of 1997 (ESTA)1 on the farm. It was also not disputed that as on 1 March 2018 the respondents had consent to keep cattle on the farm and were allocated two grazing camps for the purposes of grazing. It was further not disputed that the camps allocated to the respondents became overgrazed and required rehabilitation for a period of two years.2 1 Section 1 of ESTA defines ‘occupier’ as follows: ‘a person residing on land which belongs to another person, and who has or [sic] on 4 February 1997 or thereafter had consent or another right in law to do so . . .’. 2 See para 8 below. [5] In the LCC, the applicants sought the following orders: ‘1. THAT the Respondents be ordered to restore the Applicants’ rights at the farm known as Barnea 231 in the District of Bethlehem, Free State Province. 2. THAT the Respondents unilateral conduct reducing the applicant’s grazing camp and stopped feeding [the respondent]’s cattle in winter seasons as previously agreed and practiced for a long period be declared unlawful. 3. THAT the Respondents conduct of preventing Applicants cattle access to water be declared unlawful. 4. GRANTING the Applicants further and/or alternative relief.’ As a result of the reduction of the grazing area that was allocated to the respondents, they were left with only one small camp on which to graze their cattle. The effect of this, so the respondents alleged, was an eviction through the back door as well as self- help. [6] Pursuant to the provisions of the Conservation of Agricultural Resources Act 43 of 1983 (CARA), the appellants obtained a report, dated May 2018, from an ecological specialist, Mr Rikus Lamprecht of Eco Focus, who opined that the grazing camps used by the respondents were ‘seriously overgrazed’. A copy of the report and a letter, dated 30 May 2018, were sent to the respondents and the Department of Rural Development and Land Reform (the Department), demanding that the respondents remove their cattle from the farm. In the event that the respondents refused to comply, the appellants warned that ‘[]f the cattle of the occupiers are not removed from the farm within 7 (SEVEN) days after the date of this correspondence, we put on record that we have received instructions from our client to urgently approach the Court with an urgent application for an order that the occupiers’ cattle is to be removed from our client’s farm as per the recommendations of the specialist appointed by our client, with reference to the report by Eco Focus annexed hereto.’ [7] Because the respondents refused to comply with the demand, the appellants removed the cattle from the two overgrazed camps to another camp on the same farm. This was done to avoid being criminally charged for contravening the provisions of CARA, so the appellants submitted. The removal was therefore effected despite the refusal of the respondents to consent thereto. [8] It was common cause that the appellants did not bring an application to relocate the respondents’ cattle to another camp on the same farm. However, the appellants launched proceedings in the magistrates’ court to remove the respondents’ cattle from the farm. This application is still pending. Pertinently, Mr Riaan Pieters in his answering affidavit in the present matter stated the following: ‘I admit that I later reduced the grazing area of the Applicants by one camp due to the fact that that specific grazing camp is totally overgrazed, which is a serious contravention of the provisions of inter alia the so called CARA Act. Despite the request made to the Applicants to remove their cattle from the farm, the Applicants refused to adhere to the request whereafter I removed the cattle of the Applicant’s out of that specific camp which was severely overgrazed.(My emphasis) [9] On 2 December 2020, the LCC per Yacoob J found in favour of the respondents and granted an order in the following terms: ‘1. The respondents’ conduct in reducing the grazing available to the applicants in the absence of a court order is unlawful. 2. The respondents are ordered to restore to the applicants the right to graze on a camp of at least similar capacity to the camp from which the applicant’s livestock has been removed, on the farm known as Barnea 231 in the District of Bethlehem, Free State Province. 3. The applicants are granted leave to institute action proceedings to determine their entitlement to winter fodder. 4. The respondents are to pay the costs of this application, jointly and severally.’ The application for leave to appeal was granted by Yacoob J in respect of paragraphs 1, 2 and 4 (costs order) of its order. Leave to appeal against para 3 of the court’s order was not granted on the basis that it was not a final order. [10] The LCC understood that one of the issues it had to decide was whether the reduction of the grazing area that the respondents had the use of was unlawful or wrongful. The appellants contended that because of the non-compliance with CARA, its reduction of the grazing area and the removal of the respondents’ cattle was not unlawful and that any order restoring the status quo ante would have the effect of the appellants acting unlawfully. [11] It is trite that where a landowner needs to rehabilitate farmland, because of overgrazing, the landowner is entitled (within the law) to remove the cattle for such purpose, and after the land is rehabilitated, the cattle can be returned.3 It is also not disputed that the provisions of CARA impose an obligation on both the landowner and anyone who utilises farmland for grazing to protect the area from overgrazing. [12] Before I deal with the primary issue in this case, I deal with the finding by the LCC at paras 43-44 of the judgment that ‘the actions of [the appellants] in reducing the grazing area available to [the respondents] do amount to an attempt to evict in terms of the definition in ESTA. The order I propose to make would not amount to an order requiring anyone to commit an offence, since I simply order [the appellants] to ensure that grazing of similar capacity and quality is made available. It does not have to be the same camp that has been overgrazed’. I disagree with this finding for the reasons set out herein below. [13] It was common cause that the respondents’ cattle were not removed from the farm, but were relocated to another grazing area on the same farm. ESTA defines ‘evict’ to mean: ‘to deprive a person against his or her will of residence on land or the use of land or access to water which is linked to a right of residence in terms of this Act, and “eviction” has a corresponding meaning’. [14] In Adendorffs Boerderye v Shabalala and Others [2017] ZASCA 37 (SCA), it was held that: ‘It thus follows that his rights of grazing [do] not derive from ESTA. He has a personal right to use the land for the purpose of grazing. I agree with the remarks by Pickering J in Margre Property Holdings CC v Jewula [2005] 2 All SA 119 (E) at 7 when he said the following: “The right of an occupier of a farm to use the land by grazing livestock thereon is a right of a very different nature to those rights specified in s 6(2) [in ESTA]. In my view such use was clearly not the kind of use contemplated by the Legislature when granting to occupiers the right to use the land on which they reside. Such a right would obviously intrude upon the common law rights of the farm owner and would, in my view, thereby amount to an arbitrary deprivation of the owner’s property. There is no clear indication in the Tenure Act such an intrusion was intended. It is relevant in this regard that [the] respondent is neither an employee 3 See Adendorffs Boerderye v Shabalala and Others [2017] ZASCA 37 (SCA); and Minister of Rural Development and Land Reform v Normandien Farms (Pty) Ltd and Others; Mathimbane and Others v Normandien Farms (Pty) Ltd and Others [2017] ZASCA 163 (SCA); 2019 (1) SA 154 (SCA); [2018] 1 All SA 390 (SCA). [nor] a labour tenant as defined by section 1 of the Land Reform (Labour Tenants) Act 3 of 1996. His right, if any, to graze stock on the farm does not derive from that Act. In my view the use of land for purposes of grazing stock is pre-eminently a use which would be impossible to regulate in the absence of agreement between the parties. I am satisfied in all the circumstances that an occupier is not entitled as of right to keep livestock on the farm occupied by him as an adjunct of his right of residence. His entitlement to do so is dependent on the prior consent of the owner of the property having been obtained.”.’4 [15] Section 6 of ESTA provides: ‘Rights and duties of occupier – (1) Subject to the provisions of this Act, an occupier shall have the right to reside on and use the land on which he or she resided and which he or she used on or after 4 February, 1997, and to have access to such services as had been agreed upon with the owner or person in charge, whether expressly or tacitly. (2) Without prejudice to the generality of the provisions of section 5 and subsection (1), and balanced with the rights of the owner or person in charge, an occupier shall have the right– (a) to security of tenure; (b) to receive bona fide visitors at reasonable times and for reasonable periods; (c) to receive postal or other communication; (d) to family life in accordance with the culture of that family; (dA) . . . (e) not to be denied or deprived of access to water; and (f) not to be denied or deprived of access to educational or health services.’ [16] In Serole and Another v Pienaar [1999] 1 All SA 562 (LCC); 2000 (1) SA 328 (LCC), the court, correctly in my view, held that: ‘Section 6(2) sets out some instances of use. All of them relate to the occupation of the land, and do not bear upon the land itself. . . Although the specific instances of use in section 6(2) are set out “without prejudice to the generality” of the provisions of sections 5 and 6(1), they still serve as an illustration of what kind of use the legislature had in mind when granting to occupiers the right to “use the land” on which they reside. . . A Court will not interpret a statute in a manner which will permit rights granted to a person under that statute to intrude upon the common-law rights of another, unless it is clear that such intrusion was intended.’5 4 Paragraph 28. 5 Paragraph 16. [17] This Court, in Minister of Rural Development and Land Reform v Normandien Farms (Pty) Ltd and Others, Mathibane and Others v Normandien Farms (Pty) Ltd and Others [2017] ZASCA 163; [2018] 1 All SA 390 (SCA); 2019 (1) SA 154 (SCA), held that: ‘In my view Normandien was not seeking to “evict” the occupants within the meaning of the LTA. The term “eviction” in the LTA connotes a deprivation of the right of occupation or use of land as a result of the purported termination or repudiation of that right by the person in control of the land, whether the owner or lessee. This is apparent from the circumstances which must be present in order to justify an eviction, as specified in s 7(2), and from the fact that, in terms of s 6, proceedings for eviction can only be instituted by the owner or by someone else (e.g. the lessee) with the owner’s sworn support. In the present case Normandien did not purport to terminate or repudiate the relationship between itself and the occupants as labour tenants. Normandien did not contend that the occupants no longer had the right to reside on the farm. Normandien did not contend that the occupants’ right, as between themselves and Normandien, to graze their livestock on the farm as an incident of their occupation was at an end. Normandien asserted that the continued presence of the livestock on the farm contravened CARA and this was damaging Normandien’s land and causing Normandien to be in violation of its obligations under CARA. If the Agriculture Minister had brought proceedings to enforce CARA through the removal of the livestock, it could hardly have been contended that he was applying for the occupants’ “eviction” for purposes of the LTA. Such a contention would imply that the Agriculture Minister would be powerless to act without the owner’s sworn support, which would be untenable. The position is no different where a private party with locus standi seeks to enforce CARA.’6 Although this dictum was made in the context of the Land Reform (Labour Tenants) Act 3 of 1996 it is equally applicable to this matter. [18] Furthermore, para 2 of the LCC’s order7 was misconceived. As a general principle a court should not range beyond that on which it has been asked to adjudicate. In other words, it should adjudicate the case made out in the papers and the issues raised therein. The LCC did not forewarn the appellants that it was contemplating such an order. The LCC simply granted the order without affording the 6 Paragraphs 59-60. 7 ‘The respondents are ordered to restore to the applicants the right to graze on a camp of at least similar capacity to the camp from which the applicant’s livestock has been removed, on the farm known as Barnea 231 in the District of Bethlehem, Free State Province.’ appellants an opportunity to respond. Importantly, the papers did not disclose any legal basis for a right to alternative grazing. Paragraph 2 of the order was also impermissibly vague and prejudicial, and cannot stand. [19] The LCC and the parties have mischaracterised the issues8 for determination in this appeal. As I see it, the real dispute between the parties was whether the respondents were in peaceful and undisturbed possession of the grazing camps prior to being spoliated, and not whether the respondents’ possession was based on any right. The respondents in para 1 of its notice of motion sought a restoration order. In other words, the respondents sought relief in the form of the mandament van spolie. [20] On the appellants’ own version, the respondents were deprived of possession of the two grazing camps that they had been given consent to use. In Nino Bonino v De Lange 1906 TS 120, the court stated that: ‘It is a fundamental principle that no man is allowed to take the law into his own hands; no one is permitted to dispossess another forcibly or wrongfully and against his consent of the possession of property, whether movable or immovable. If he does so, the Court will summarily restore the status quo ante, and will do that as a preliminary to an inquiry or investigation into the merits of the dispute. It is not necessary to refer to any authority upon a principle so clear.’9 In a decision of this Court, in Bon Quelle (Edms) Bpk v Munisipaliteit van Otavi 10 it was specifically held that the mandament van spolie is available for the restoration of the lost possession (in the sense of quasi-possession, which consists of the actual use of the servitude) of a right of servitude. In this case, a right of servitude of grazing could therefore be spoliated. The dispossession of the actual possession of the two camps or the quasi-possession in respect thereof by the respondents without consent or a court order, was unlawful and amounted to a spoliation. [21] In light of the aforegoing, and on the basis that the respondents had been spoliated, para 1 of the LCC’s order was correctly granted. Paragraph 2 of the LCC’s order should be reformulated to provide that the respondents’ possession of the camps, of which they had been dispossessed, should be restored forthwith. 8 See para 10 above. 9 At 122. 10 Bon Quelle (Edms) Bpk v Munisipaliteit van Otavi 1989 (1) SA 508 (A); [1989] 1 All SA 416 (A). [22] In addition, something needs to be said about the manner in which the legal representatives of both parties have pleaded their case. It is expected that at the very least legal representatives should ensure that the essential facts of the case should be pleaded with sufficient clarity and particularity. In this case the pleadings of both parties alleged the bare minimum. As a result of the lack of the essential averments, it is not surprising that the issues in this case have been mischaracterised. [23] Finally, the LCC ordered costs against the appellants. In terms of the jurisprudence of the LCC, costs should only be ordered in exceptional circumstances.11 In my view, there were no circumstances warranting a departure from the ordinary rule. A costs order against the appellants was not warranted and each party should pay its own costs in the proceedings in the LCC. The second issue is the costs of the appeal. The usual order is that costs should follow the result. In the appeal, the appellants have had partial success, therefore no order as to costs of the appeal is made. [24] I therefore make the following order: The appeal succeeds in part. The appeal in respect of para 1 of the Land Claims Court’s order is dismissed. The appeal succeeds in respect of para 2 of the Land Claims Court’s order which is set aside and replaced with the following: ‘The respondents are ordered to forthwith restore possession of the two grazing camps on the farm Barnea 231 within the district of Bethlehem, Free State Province allocated to the applicants prior to dispossession.’ The appeal succeeds in respect of para 4 of the Land Claims Court’s order, which is set aside and replaced with the following: ‘Each party to pay its own costs.’ No order as to costs of the appeal is made. 11 See Hlatshwayo & Others v Hein 1999 (2) SA 834 (LCC); Tsotetsi & Others v Raubenheimer NO and Others 2021 (5) SA 293 (LCC). ____________________ Z CARELSE JUDGE OF APPEAL APPEARANCES For Appellants: J S Stone Instructed by: Niemann Grobbelaar Attorneys, Bethlehem Phatshoane Henney Attorneys, Bloemfontein For Respondents: G Shakoane SC Instructed by: Finger Attorneys, Bloemfontein

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 12 April 2022 Status: Immediate The following summary is for the benefit of the media in the reporting of this case and does not form part of the judgments of the Supreme Court of Appeal Loskop Landgoed Boerdery (Pty) Ltd and Others v Petrus Moeleso and Others (390/2021) [2022] ZASCA 53 (12 April 2022) The Supreme Court of Appeal (SCA) today upheld an appeal in part against the order of the Land Claims Court, Randburg (LCC), and which order of the LCC was set aside and replaced with an order, inter alia, restoring possession of the use of land for grazing livestock, to the respondents. No order as to costs of the appeal was made. The primary issue in the appeal involved the reduction of the respondents’ grazing area from two camps to one camp, on the farm Barnea 231 within the district of Bethlehem, Free State Province (the farm). The appeal arose from proceedings instituted in the LCC by the respondents for certain declaratory orders. The owner of the farm was the second appellant, Mr W A Pieters. On 1 March 2018, however, the first appellant, Loskop Boerdery (Pty) Ltd, took over the farming operations on the farm. The third appellant, Mr Riaan Pieters, is the son of Mr W A Pieters and the sole director of the first appellant. The first respondent, Mr Petrus Moeleso, was born in 1974 and has since birth resided on the farm. The second respondent, Mr David Mofokeng; the third respondent, Ms Maki Moeleso (Tshabalala); and the fourth respondent, Ms Nini Mabe, resided on the farm. It was not disputed that as on 1 March 2018 the respondents had consent to keep cattle on the farm and were allocated at least two grazing camps for the purposes of grazing. It was further not disputed that the camps allocated to the respondents became overgrazed and required rehabilitation for a period of two years. The appellants removed the cattle from the two overgrazed camps to another camp on the same farm. The removal was effected despite the refusal of the respondents to consent thereto. It was common cause that the appellants did not bring an application to relocate the respondents’ cattle to another camp on the same farm. The SCA found that para 2 of the LCC’s order (wherein the appellants were ordered to restore to the respondents the right to graze on a camp of at least similar capacity to the camp from which their livestock had been removed) was misconceived. This was on the grounds that the LCC did not forewarn the appellants that it was contemplating such an order. The LCC simply granted the order without affording the appellants an opportunity to respond. Importantly, the papers did not disclose any legal basis for a right to alternative grazing. The SCA further found that para 2 of the order was also impermissibly vague and prejudicial, and thus could not stand. The SCA found further that the LCC and the parties had mischaracterised the issues for determination in the appeal. The real dispute between the parties, the SCA found, was whether the respondents were in peaceful and undisturbed possession of the grazing camps prior to being spoliated, and not whether the respondents’ possession was based on any right. This, because the respondents sought relief in the form of the mandament van spolie in terms of para 1 of its notice of motion. In this regard, the SCA found that, on the appellants’ own version, the respondents were deprived of possession of the two grazing camps that they had been given consent to use. Thus, dispossession of the actual possession of the two camps or the quasi-possession in respect thereof by the respondents without consent or a court order, was unlawful and amounted to a spoliation. The SCA therefore held that para 1 of the LCC’s order (wherein the appellants’ conduct in reducing the grazing available to the respondents in the absence of a court order was held to be unlawful) was correctly granted. Paragraph 2 of the LCC’s order was reformulated to provide that the respondents’ possession of the camps, of which they had been dispossessed, had to be restored forthwith. Finally, the SCA found that a costs order against the appellants was not warranted by the LCC and each party should have paid its own costs in the proceedings in the LCC. With regard to the costs of the appeal, the SCA held that the appellants had partial success, therefore no order as to costs of the appeal was made. ~~~~ends~~~~

536

non-electoral

2016

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Reportable Case No: 799/15 In the matter between: LUVUYO NICOLAAS MBELE APPELLANT and ROAD ACCIDENT FUND RESPONDENT Neutral citation: Mbele v Road Accident Fund (799/15) [2016] ZASCA 134 (29 September 2016) Coram: Shongwe, Saldulker, Swain and Zondi JJA and Dlodlo AJA Heard: 26 August 2016 Delivered: 29 September 2016 Summary: Road Accident Fund Act 56 of 1996 – a claim for future medical expenses based on an undertaking in terms of s 17(4)(a)(i) of the Act in respect of an action for damages arising from a motor vehicle accident lodged in terms of s 17(1) of the Act is not subject to prescription under the Prescription Act 68 of 1969, instead, s 23(3) of the Road Accident Fund Act as it read prior to its amendment in 2008 is applicable. ORDER ________________________________________________________________ On appeal from: Western Cape Division of the High Court, Cape Town (Savage J sitting as court of first instance). 1 The appeal is upheld with costs. 2 The order of the court a quo is set aside and substituted with the following: ‘The special plea of prescription is dismissed with costs.’ JUDGMENT ________________________________________________________________ Shongwe JA (Saldulker, Swain, Zondi JJA and Dlodlo AJA concurring) [1] This appeal concerns the question whether an undertaking that was made by the respondent, the Road Accident Fund (the Fund), in terms of s 17 (4)(a)(i) of the Road Accident Fund Act 56 of 1996 (the Act) for future medical and hospital expenses, has prescribed. This issue depends for its resolution on whether the relevant prescription legislative regime applicable is s 23(3) of the Act or s 11(d) of the Prescription Act 68 of 1969 (the Prescription Act). Related to this issue is the question of what the effect of the amendment of s 23(3) of the Act is on the respondent’s plea of prescription. [2] On 7 July 2006 the appellant was injured in a motor vehicle collision. He instituted action proceedings against the Fund in terms of s 17(1) and in accordance with the procedure set out in s 24 of the Act. The summons in that action was lodged timeously in 2007 and the claim was subsequently settled. The settlement agreement was made an order of court on 21 April 2009 and included, inter alia, payment of a lump sum in excess of R2 million for general damages and the costs of suit. Prior to the conclusion of the settlement agreement the Fund made an undertaking, on 23 October 2008, in terms of s 17(4)(a)(i) of the Act to compensate the appellant for the costs of future medical and hospital expenses, after the costs have been incurred and upon proof thereof (the undertaking). [3] In the light of the undertaking the appellant, around October 2010, sent a letter of demand to the Fund and requested payment in respect of hospital and medical expenses, and presented proof of the expenses he allegedly incurred. It appears that this letter was received by the Fund in November 2010, but no payment was forthcoming. [4] Subsequently, on 10 April 2013, the appellant served a summons on the Fund claiming, in terms of the undertaking, the sum of R94 063.28. The appellant alleged that this sum was for medical and hospital expenses and that he had furnished the Fund with the proof of these expenses, but that the Fund failed to pay. In opposing the action the Fund filed a special plea that the appellant’s claim had prescribed within a period of three years from the date that the abovementioned expenses were allegedly incurred. According to the appellant, these expenses were incurred in or about June 2009. Therefore, the Fund contended, the claim prescribed in or before July 2012. [5] In the court a quo, the parties agreed on a stated case upon which the Fund’s special plea of prescription was to be argued. In terms of the stated case, it was uncontested that the undertaking had been issued by the Fund on 28 October 2008, and that it was for payment of future hospital and medical treatment incurred, on proof thereof. It was also uncontested that the appellant had not been paid in terms of the undertaking. The Fund however contended that the undertaking was contractual and not purely statutory in nature; that it amounted to a debt and that its obligation to pay arose once the appellant incurred the debt and had furnished proof. Thus, the debt had prescribed in terms of s 11(d) of the Prescription Act which provides that the periods of prescription of debts shall, save where an Act of Parliament provides otherwise, be three years in respect of any other debt. [6] On the other hand the appellant contended that there was no prescription applicable as regards the undertaking, and that the Fund was obliged to compensate him in terms of his claim regardless of the date of treatment or service because his claim was not susceptible to prescription, due to the fact that it formed part of a unitary claim instituted and prosecuted in terms of s 17(1) of the Act. In other words when the settlement agreement was reached, which included the undertaking, the Fund admitted liability for future medical and hospital expenses incurred as part of its liability for all the heads of damages claimed. [7] The matter was eventually set down for the hearing of the special plea. The court’s view was that the undertaking was a contractual obligation which was separate from the s 17(1) claim instituted by the appellant in 2006. It equated the undertaking to a discrete and new agreement and accordingly found that the Prescription Act was applicable. This meant, the court continued, that since the appellant had failed to claim within three years from the date upon which the debt became due, his right to claim had prescribed as provided in s 11(d) of the Prescription Act. Accordingly, it upheld the Fund’s plea with costs. The current appeal is against this order upholding the special plea and is with leave of the court a quo. [8] Before us, counsel for the appellant persisted with his submission that any claim lodged in terms of the undertaking does not and cannot attract prescription. He argued further that the undertaking does not create a new and independent contractual obligation or a distinct claim based on a different cause of action. His view was that for purposes of prescription, the provisions of the Act as it appeared prior to its amendment was applicable. [9] It is indeed a startling proposition by the appellant that claims in terms of an undertaking in terms of the Act do not prescribe at all, and counsel was unable to provide any authorities to support such a proposition. I do not agree with his contention and I am of the view that it has no merit. The law encourages finality in litigation therefore no claim can exist indefinitely. (See Road Accident Fund & another v Mdeyide [2012] ZACC 18; 2011 (2) SA 26 (CC) para 8.) [10] On its part, the Fund argued that the undertaking constituted a new cause of action which is susceptible to prescription. Counsel for the Fund submitted that the undertaking is a stand-alone agreement which creates a new contractual foundation and which exists independently of the claim in terms of s 17(1) of the Act. As regards prescription, the Fund submitted that s 23(3) of the Act prior to its amendment did not specify undertakings and was limited to s 17(1) claims and consequently, the applicable prescription period was provided for in s 11(d) of the Prescription Act. Counsel also submitted that the nature of the claim transforms into something else, which he was however unable to describe. He argued that the introduction of s 17(4)(a) of the Act was a deviation from the common law rule of delictual claims. It is indeed so and as Trollip JA remarked in Marine & Trade Insurance Co Ltd v Katz NO 1979 (4) SA 961 (A) at 970C- D: ‘The purpose of the provision [Section 21 (IC)(a)] was to innovate a departure from the common law.’ Section 21(IC)(a) of the Compulsory Motor Vehicle Insurance Act 56 of 1972 is the predecessor of s 17(4)(a) of the Act. [11] Counsel for the Fund referred us to Stupel & Berman Inc v Rodel Financial Services (Pty) Ltd [2015] ZASCA 1; 2015 (3) SA 36 (SCA) para 15 and to Lieberman v Santam Ltd 2000 (4) SA 321 (SCA) in support of the proposition that in an agreement couched as an undertaking, the undertaking creates a new contractual foundation for a valid and enforceable obligation to pay which exists independently of any previous obligation under the Act. In Stupel & Berman the cause of action related to a transaction of purchase and sale which involved the transfer of immovable property. This case had nothing to do with a collision regulated by the Act and is distinguishable from the present case, because the undertaking referred to there was indeed a stand-alone agreement between Rodel, on the one hand, and Stupel & Berman on the other hand, from which certain obligations arose for Stupel & Berman. Stupel & Berman acted as the conveyancing attorneys. [12] The Lieberman case is also distinguishable from the present case. In para 12 Vivier JA observed that: ‘It is sufficient to say that the agreement provided the appellant with a contractual basis upon which to found a cause of action for payment which he was free to invoke if he so chose’. In that case the cause of action was not the collision itself but the action was based on an agreement entered into by the parties whereby the fund admitted liability and agreed to pay 50 per cent of such losses and damages as might be agreed between the parties or ordered by the court. It was not an undertaking in terms of s 17(4)(a) of the Act. The parties had also concluded a verbal agreement in terms whereof the Fund had undertaken not to plead prescription before a particular date. All in all, both cases do not deal with the provisions of s 17(1) and 17(4)(a) of the Act. In Nonkwali v Road Accident Fund [2008] ZASCA 3; 2009 (4) SA 333 (SCA) para 8 Maya JA (as she then was) correctly observed that there was a plethora of authorities to the effect that a claimant seeking compensation for damages sustained as a result of wrongful and negligent driving under the Act had ‘… but a single, indivisible cause of action and that the various items constituting the claim were thus not separate claims or separate causes of action.’ She referred with approval to what Corbett JA said in Evins v Shield Insurance Co Ltd 1980 (2) SA 814 (A) at 836D-E. (See also Evins at 837A-C). [13] It is necessary, before I proceed to deal with the issues raised in paragraph 1 above, to set out the relevant legislative provisions of the Act dealing with the prescription of undertakings both prior to and after the Act was amended in 2008. Before its amendment s 23 of the Act read as follows: ‘(3) Notwithstanding subsection (1), no claim which has been lodged in terms of s 24 shall prescribe before the expiring of a period of five years from the date on which the cause of action arose.’ This subsection was amended with effect from 1 August 2008, by s 10 of the Road Accident Fund Amendment Act 19 of 2005, and currently reads as follows: ‘(3) Notwithstanding subsection (1), no claim which has been lodged in terms of section 17 (4) (a) or 24 shall prescribe before the expiry of a period of five years from the date on which the cause of action arose.’ The only difference between the unamended version and the amended one is the insertion of s 17(4)(a). This insertion, in my view, buttresses the proposition that the legislative regime that determines prescription in claims lodged in terms of s 24 read with s 17(1) of the Act shall be the Road Accident Fund Act and not the Prescription Act. [14] For the present purposes it is clear that the Prescription Act is not relevant. It is also not clear from the court a quo’s judgment why it saw fit to apply it. My understanding is that as part of the settlement, the Fund undertook to compensate the appellant for future medical and hospital expenses, after such expenses have been incurred and proved. Had there been no collision which resulted in the injuries to the appellant and the admission of liability by the Fund, the undertaking would not have come into existence. Thus the claim filed in terms of s 17(1) read with s 24 of the Act, which claim included future medical and hospital expenses is the basis upon which the undertaking in terms of s 17(4)(a)(i) of the Act was issued. It cannot be that this claim is a separate claim unrelated to a claim in terms of s 17(1) of the Act. Accordingly, it is ineluctable that the period of prescription of a claim under s 17(4)(a) the Act can only be determined in terms of s 23 of the Act and not in terms of the Prescription Act. The principles governing the interpretation of statutes must apply as explained in Natal Joint Municipal Pension Fund v Endumeni Municipality [2012] ZASCA; 2012 (4) SA 593 para 18 that interpretation is a process of attributing meaning to the words used in a document read in context and having regard to the purpose of the provision. (See also Bothma-Batho Transport (EDMS) Bpk v S Bothma & Seun Transport (EDMS) Bpk [2013] ZASCA 176; 2014 (2) SA 494 para 10.) [15] What I need to emphasize is that future medical expenses in relation to a claim in terms of s 17(1) of the Act cannot constitute a separate and distinguishable claim but it is an integral and indivisible part of a third party claim for damages. (See Evins v Shield Insurance Co Ltd at 836A – 837D; Nokwali v Road Accident Fund [2008] ZASCA 3; 2009 (4) SA 333 (SCA) paras 8 – 9. Klaas v Union and South West Africa Insurance Co Ltd 1981 (4) SA 562 (A) at 577D-H. H B Klopper in his article ‘Prescription of Obligations Arising from Undertaking Issued by the Road Accident Fund in Pursuance of Section 17(4)(a) of the Road Accident Fund Act 56 of 1996’, 2014 (77) THRHR 485 at 488 observes that ‘[a]n undertaking issued in terms of the strict wording of s 17(4)(a) also does not create a contractual relationship between the claimant and the Fund’. He opines that it is only rights contractually created that are susceptible to prescription as being a debt, and cites s 10 of the Prescription Act and Evins at 838. I agree with the learned author. It is clear from the above discussion that s 17(4)(a) of the Act does not create any new and independent contractual obligation or a debt independent of s 17(1). [16] Furthermore the Constitutional Court has put paid to the question of which legislative regime is applicable in these circumstances. In Road Accident Fund & another v Mdeyide para 50, Van der Westhuizen J observed that: ‘There is therefore a clear reason for the difference between the Prescription Act and the RAF Act. The Prescription Act regulates the prescription of claims in general, and the RAF Act is tailored for the specific area it deals with, namely claims for compensation against the Fund for those injured in road accidents. The legislature enacted the RAF Act – and included provisions dealing with prescription in it – for the very reason that the Prescription Act was not regarded as appropriate for this area. Looking for consistency in this context is a quest bound to fail.’ [17] The Act was established, in my view, to give the greatest possible protection and to promote the socio-economic rights of victims of motor vehicle accidents. It must be construed at all times to give access to courts and justice rather than to limit access to justice. (See Law Society of South Africa & another v Minister for Transport & another [2010] ZACC 25; 2011 (1) SA 400 (CC) para 40; Mvumvu & others v Minister of Transport & another [2011] ZACC 1; 2011 (2) SA 473 (CC) at 479 para 20; Englebrecht v Road Accident Fund & another [2007] ZACC 1; 2007 (6) SA 96 (CC) para 23 and Aetna Insurance Co v Minister of Justice 1960 (3) SA 273 (A) at 285E-F.) [18] In summary, in my view, s 17(1) to (4), 23(1) to (3) and 24 of the Act, must be read together. The reference in s 23(3) of the Act (before its amendment) to a ‘claim which has been lodged in terms of s 24’ must include a claim for the payment of future medical expenses, A claim in terms of s 17(1) read with s 17(4) of the Act ‘includes a claim for the costs of the future accommodation of any person in a hospital or nursing home or treatment of or rendering of a service or supplying of goods. . .’. This claim is lodged in terms of s24, accompanied by the requisite medical report. The Fund is thereafter entitled to furnish an undertaking to cover the payment of future medical expenses. The third party cannot however claim or insist that the Fund furnish an undertaking, (see Marine & Trade supra at 970H), and consequently such a ‘claim’ cannot be ‘lodged’ for the purposes of s 23(3). The furnishing of an undertaking does not alter the fact that the claim for future medical expenses is and remains one in terms of s 17(1), which is lodged in terms of s 24. It does, however, affect ‘the date upon which the cause of action arose’ for the purposes of s 23(3) of the Act, in respect of individual claims which are covered by the undertaking. This ‘date’ must be the date when a complete cause of action arises, entitling the third party to institute action for recovery of the claims covered by the undertaking. [19] A complete cause of action in respect of future medical claims covered by an undertaking must arise when the costs are incurred. In terms of s 17(4)(a)(i) of the Act, the Fund is only obliged to compensate the third party in respect of the costs ‘after the costs have been incurred and on proof thereof’. In addition, the Fund is only obliged to compensate the third party for the reasonable costs of the defined medical expenses, which may not necessarily be their actual cost. (See Marine & Trade supra at 972). If the Fund declines to pay the medical costs claimed, the third party will have to institute action within five years of the complete cause of action arising, being the date when the costs were incurred. A complete cause of action cannot arise as at the time of the accident, in respect of future medical expenses covered by an undertaking, as these costs have not yet been incurred. If this were not so, the recovery of any medical expenses incurred more than five years after the accident would be precluded. [20] Although the claim for future medical expenses forms an integral and indivisible part of a third party claim for damages, the effect of an election by the Fund to furnish an undertaking in terms of s 17(4)(a) of the Act, is that payment of these costs only falls due ‘after the costs have been incurred’. This does not mean that a separate and distinct cause of action is created in respect of future medical claims covered by the terms of an undertaking, but that the obligation on the part of the Fund to make payment of these damages only arises after the medical costs have been incurred and the third party has thereby acquired a complete cause of action. [21] The subsequent amendment of s 23(3) of the Act to include a reference to s 17(4)(a) of the Act confirms and clarifies the position, that prescription in respect of claims for payment of medical expenses, covered by the terms of an undertaking, only intervenes ‘five years from the date on which the cause of action arose’. The reference in s 23(3) to a ‘claim which has been lodged in terms of s 17(4)(a). . .’ can only refer to a claim for payment of medical expenses covered by the requisite undertaking and not to the undertaking itself. As pointed out, this is because a third party cannot claim or insist that the Fund furnish an undertaking and consequently such a claim cannot be ‘lodged’ for the purposes of s 23(3). [22] In this case the appellant’s hospital and medical expenses were incurred in June 2009 and summons was issued on 9 April 2013 to recover these expenses. Summons was accordingly issued within the period of five years as provided for in s 23(3) of the Act and the claims of the appellant had not prescribed. [23] The following order is made: 1 The appeal is upheld with costs. 2 The order of the court a quo is set aside and substituted with the following: ‘The special plea of prescription is dismissed with costs.’ __________________ J B Z Shongwe Judge of Appeal Appearances For the Appellant: E Lombard Instructed by: A Batchelor & Associates, Cape Town; McIntyre & Van der Post, Bloemfontein. For the Respondent: A Bhoopchand Instructed by: Mayats Attorneys, Cape Town; Symington & De Kok, Bloemfontein.

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL FROM The Registrar, Supreme Court of Appeal DATE 29 September 2016 STATUS Immediate Please note that the media summary is for the benefit of the media and does not form part of the judgment. Mbele v Road Accident Fund (799/2015) [2016] ZASCA 134 (29 September 2016) MEDIA STATEMENT The Supreme Court of Appeal today upheld an appeal against a judgment of the Western Cape Division of the High Court, Cape Town, concerning the prescription of an undertaking made by the Road Accident Fund (the Fund) in terms of s 17(4)(a)(i) of the Road Accident Fund Act 56 of 1996 (the Act). The question was two-fold, ie whether a claim based on an undertaking that was made by the Fund in terms of s 17(4)(a)(i) of the Act for future medical and hospital expenses has prescribed, and whether the relevant prescription legislative regime applicable is s 23(3) of the Act or s 11(d) of the Prescription Act 68 of 1969. Related to these issues was the question of what the effect of the amendment of s 23(3) of the Act was on the Fund’s plea of prescription. The Supreme Court of Appeal held that the appellant’s claim in terms of s 17(4)(a)(i) of the Act in respect of an action for damages arising from the motor vehicle accident, lodged in terms of s 17(1) of the Act, was not subject to prescription under the Prescription Act, instead, s 23(3) of the Act as it read prior to its amendment in 2008, was applicable, as it did not constitute a new cause of action. --- ends ---

1502

non-electoral

2008

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: Monday 22 September 2008 Status: Immediate Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal Sandton Civic Precinct (Pty) Ltd v City of Johannesburg & Bombela Consortium (458/2007) [2008] ZASCA 104 (September 2008) In a judgment delivered today, the Supreme Court of Appeal has dismissed an appeal in which a company sought to assert the contested rights to develop the Sandton Civic Precinct, a valuable ten-acre publicly-owned piece of land in the heart of Sandton. The appellant, a private company whose largest shareholder is Mr Bart Dorrestein, formerly chief executive officer of Stocks & Stocks Limited, relied on a resolution the Eastern Metropolitan Local Council (EMLC) adopted in November 2000. That resolution ‘resolved to recommend’ that (subject to certain conditions) the development rights be awarded to the Sandton Civic Precinct Consortium (the Consortium). But the City of Johannesburg (the EMLC’s successor) in 2005 adopted a further resolution, in which it resolved not to proceed with the previous award. Instead, it re-investigated the development rights, and decided to go ahead with the Bombela Consortium (Bombela). The Johannesburg high court dismissed the company’s claim on the ground that the 2000 resolution was not legally enforceable, since it was only a recommendation, and did not create legal rights. The SCA took a different approach to the high court. It left the question whether the 2000 resolution created enforceable legal rights open. Instead, the SCA found that the company seeking to assert the legal rights did not have proper title (legal standing) to do so. The crux of the SCA’s decision is that the company did not represent, and had no title to represent, the two black economic empowerment entities who were an integral part of the Consortium the 2000 resolution envisaged. At the time of the resolution, the Consortium consisted of Mr Dorrestein’s interests (ceded to him by Stocks & Stocks), JHI Development Management (Pty) Ltd (a property-development company), and two black empowerment entities – Ndodana Becker & Associates, whose sole proprietor was Mr Webster Ndodana (Ndodana) and ‘Sithembele (Pty) Ltd/Domestic Workers Association Investment Company (Pty) Ltd’ (DWA). But Mr Ndodana fell out of the picture because he joined Bombela. And DWA was never incorporated at all. Mr Dorrestein claimed that the interests of the two BEE partners were being ‘held in trust by myself pending the acquisition of a suitable black economic empowerment substitute’. But the SCA rejected this claim. The resolution expressly envisaged and named its BEE components. Mr Dorrestein had no title to hold their rights ‘in trust’. Nor had he obtained those rights by cession or by any other means. The SCA held that the appellant company had thus failed to establish the legal lineage between itself and the rights-acquiring entity the 2000 resolution mentioned. This was not just a technical point, but a fundamental and substantive gap in the company’s case. It had failed to show that it was the rights-bearing entity – or was acting on the authority of that entity, or had acquired its rights. There was no suggestion in the 2000 resolution that the council regarded the consortium’s black economic empowerment constituents as substitutable at will. The SCA pointed out that the Consortium the resolution envisaged no longer exists at all – indeed, two of the entities (the BEE components) never came into existence at all. In these circumstances the appellant company had failed to show that it is entitled to assert the claim it invokes. The appeal was therefore dismissed. Unusually, however, the SCA refused to grant the successful City a costs award against the appellant company. The SCA held that there were singular features of this case which lead to the conclusion that the company should not pay the City’s costs. The City’s behaviour toward the appellant company was consistently deplorable. Rightly or wrongly, the company believed itself to be the holder of valuable rights arising from an important resolution of the council, dealing with a major public venture. Despite the importance of the matter, the City lost the original minutes of the November 2000 meeting at which the resolution was adopted, and the company was obliged to reconstruct the resolution through painstaking collection of alternative evidence. After it had done so, the City behaved with less than courtesy, and less than candour, in dealing with its claims. As early as 2003, the City’s property-owning and development company resolved to stop dealing with the appellant company. Yet for two years more the company was kept on a string. Letters were not answered, inquiries were ignored and information was not supplied. The SCA held that this was unacceptable behaviour for a public body, particularly one dealing with an entity which has incurred significant costs in relation to a public development project in which it believed, not unreasonably, that it was partnering the City. In all these circumstances the SCA as a mark of its disapproval of the City’s conduct deprived the City of its costs, in the SCA as well as in the high court.

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: Monday 22 September 2008 Status: Immediate Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal Sandton Civic Precinct (Pty) Ltd v City of Johannesburg & Bombela Consortium (458/2007) [2008] ZASCA 104 (September 2008) In a judgment delivered today, the Supreme Court of Appeal has dismissed an appeal in which a company sought to assert the contested rights to develop the Sandton Civic Precinct, a valuable ten-acre publicly-owned piece of land in the heart of Sandton. The appellant, a private company whose largest shareholder is Mr Bart Dorrestein, formerly chief executive officer of Stocks & Stocks Limited, relied on a resolution the Eastern Metropolitan Local Council (EMLC) adopted in November 2000. That resolution ‘resolved to recommend’ that (subject to certain conditions) the development rights be awarded to the Sandton Civic Precinct Consortium (the Consortium). But the City of Johannesburg (the EMLC’s successor) in 2005 adopted a further resolution, in which it resolved not to proceed with the previous award. Instead, it re-investigated the development rights, and decided to go ahead with the Bombela Consortium (Bombela). The Johannesburg high court dismissed the company’s claim on the ground that the 2000 resolution was not legally enforceable, since it was only a recommendation, and did not create legal rights. The SCA took a different approach to the high court. It left the question whether the 2000 resolution created enforceable legal rights open. Instead, the SCA found that the company seeking to assert the legal rights did not have proper title (legal standing) to do so. The crux of the SCA’s decision is that the company did not represent, and had no title to represent, the two black economic empowerment entities who were an integral part of the Consortium the 2000 resolution envisaged. At the time of the resolution, the Consortium consisted of Mr Dorrestein’s interests (ceded to him by Stocks & Stocks), JHI Development Management (Pty) Ltd (a property-development company), and two black empowerment entities – Ndodana Becker & Associates, whose sole proprietor was Mr Webster Ndodana (Ndodana) and ‘Sithembele (Pty) Ltd/Domestic Workers Association Investment Company (Pty) Ltd’ (DWA). But Mr Ndodana fell out of the picture because he joined Bombela. And DWA was never incorporated at all. Mr Dorrestein claimed that the interests of the two BEE partners were being ‘held in trust by myself pending the acquisition of a suitable black economic empowerment substitute’. But the SCA rejected this claim. The resolution expressly envisaged and named its BEE components. Mr Dorrestein had no title to hold their rights ‘in trust’. Nor had he obtained those rights by cession or by any other means. The SCA held that the appellant company had thus failed to establish the legal lineage between itself and the rights-acquiring entity the 2000 resolution mentioned. This was not just a technical point, but a fundamental and substantive gap in the company’s case. It had failed to show that it was the rights-bearing entity – or was acting on the authority of that entity, or had acquired its rights. There was no suggestion in the 2000 resolution that the council regarded the consortium’s black economic empowerment constituents as substitutable at will. The SCA pointed out that the Consortium the resolution envisaged no longer exists at all – indeed, two of the entities (the BEE components) never came into existence at all. In these circumstances the appellant company had failed to show that it is entitled to assert the claim it invokes. The appeal was therefore dismissed. Unusually, however, the SCA refused to grant the successful City a costs award against the appellant company. The SCA held that there were singular features of this case which lead to the conclusion that the company should not pay the City’s costs. The City’s behaviour toward the appellant company was consistently deplorable. Rightly or wrongly, the company believed itself to be the holder of valuable rights arising from an important resolution of the council, dealing with a major public venture. Despite the importance of the matter, the City lost the original minutes of the November 2000 meeting at which the resolution was adopted, and the company was obliged to reconstruct the resolution through painstaking collection of alternative evidence. After it had done so, the City behaved with less than courtesy, and less than candour, in dealing with its claims. As early as 2003, the City’s property-owning and development company resolved to stop dealing with the appellant company. Yet for two years more the company was kept on a string. Letters were not answered, inquiries were ignored and information was not supplied. The SCA held that this was unacceptable behaviour for a public body, particularly one dealing with an entity which has incurred significant costs in relation to a public development project in which it believed, not unreasonably, that it was partnering the City. In all these circumstances the SCA as a mark of its disapproval of the City’s conduct deprived the City of its costs, in the SCA as well as in the high court.

2641

non-electoral

2014

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Reportable Case No: 725/13 In the matter between: SPRING FOREST TRADING 599 CC APPELLANT and WILBERRY (PTY) LTD t/a ECOWASH FIRST RESPONDENT COMBINED MOTOR HOLDINGS LIMITED SECOND RESPONDENT t/a THE GREEN MACHINE Neutral citation: Spring Forest Trading v Wilberry (725/13) [2014] ZASCA 178 (21 November 2014) Coram: Lewis, Cachalia, Bosielo and Swain JJA and Mocumie AJA Heard: 10 November 2014 Delivered: 21 November 2014 Summary: Contract – non-variation clause providing for cancellation to be in writing and signed by the parties – whether cancellation by email valid – Whether ss 13(1) and (3) of the Electronic Communications and Transactions Act 25 of 2002 applies – Whether interim interdict pendente lite appealable. ___________________________________________________________________ ORDER ___________________________________________________________________ On appeal from: KwaZulu-Natal Local Division, Durban (Madondo J sitting as court of first instance): The appeal is upheld with costs. The order of the high court is set aside and in its place the following is substituted: ‘The application is dismissed with costs.’ ___________________________________________________________________ JUDGMENT ___________________________________________________________________ Cachalia JA (Lewis, Bosielo and Swain JJA and Mocumie AJA concurring) [1] This is an appeal from a decision of the high court, KwaZulu-Natal, Durban (Madondo J) granting interim relief pendente lite. The order was granted following an urgent application by Wilberry (Pty) Ltd t/a as Ecowash against Spring Forest Trading 599 CC and Combined Motor Holdings Limited t/a The Green Machine (CMH). CMH is cited because it has an interest in the relief claimed, but is not party to this appeal. So the protagonists in this appeal are Spring Forest Trading 599 CC and Wilberry (Pty) Ltd t/a Ecowash. They shall be referred to as the appellant and respondent respectively. [2] The appeal concerns a series of emails purporting to consensually cancel written agreements between the parties. The agreements required any ‘consensual cancellation’ to be in writing and signed by them. The Electronic Communications and Transactions Act 25 of 2002 (the Act) gives legal recognition to transactions concluded electronically by email. The dispute between the parties requires us to consider whether their exchange of emails met the writing and signature requirements of the Act thereby constituting a consensual cancellation. [3] The learned judge found that the e-mail communications as a fact did not evince an intention to cancel the agreements, but merely recorded the inconclusive negotiations between the parties to that end. And, that in any event, the parties had not specified that their agreements could be cancelled by the exchange of emails. He thus held that the Act did not apply to the emails and that the appellant’s purported cancellation of the agreements was in conflict with the terms of their written agreements, and therefore invalid. This appeal is with his leave. [4] The facts are uncomplicated. The respondent is the proprietor of an ‘Eco- Wash System’ operated from one of its ‘Mobile Dispensing Units’ (MDU’s). The business involves washing cars in the parking lots of shopping malls, office parks, hotels and hospitals. The parties concluded a written agreement (the master agreement) on 28 April 2012 in terms of which the respondent appointed the appellant as its operating agent. This gave the appellant the right to promote, operate and rent out the respondent’s MDU’s to third parties. The agreement contained a non-variation clause providing that no variation or consensual cancellation would be effective unless reduced to writing and signed by both parties. [5] On 20 June and 23 July 2012 the parties concluded four subsidiary rental agreements all of which were subject to the respondent’s standard terms of business as set out in the master agreement. The rental agreements permitted the appellants to lease the respondent’s MDU’s at four locations. They also contained non-variation clauses providing that ‘no variation . . . or agreement to cancel shall be of any force and effect unless in writing and signed by both you and us’. [6] The appellant was not able to meet its rental commitments under the rental agreements on 1 February 2013. The parties then met in Durban on the morning of 25 February 2013 to discuss how they should proceed in light of the appellant’s failure to meet its rental obligations. The respondent was represented at the meeting by Mr Nigel Keirby-Smith and the appellant by Mr Gregory Stuart Hamilton and Mr Walter Burger. Keirby-Smith put four proposals to the appellant’s representatives. They undertook to consider these and respond after the meeting. [7] Hamilton dispatched an email to Keirby-Smith later that morning at 11h44 am confirming the proposals. It read: ‘Hi Nigel, Thanks for meeting with Walter and I today. I would like to clarify the options that you mentioned to us today. 1/ Pay a cash amount of R1 600 000.00 for the balance of 2 years. 2/ Cancel agreement and walk away. 3/ Carry on operating but we would end up in court. 4/ Pay R1 000.00 per month for 5 years with 15 % escalation. Please confirm the above then we will advise tomorrow. Kind Regards Greg.’ At 11h56 am, Hamilton sent a further email to Keirby-Smith: ‘Hi Nigel, [Fu]rther to my previous mail, to clarify point 2. Please confirm that should we elect this option to walk away, there [wi]ll be no further claim or legal action from either side. Kind Regards Greg.’ At 12h18 pm, Keirby-Smith replied: ‘Hi Greg, That is correct subject to my last reply. Nigel.’ The ‘last reply’ referred to in the email above was sent from Keirby-Smith’s address ([email protected]) at 12h05 pm. It read: ‘All arrear rentals due at the date of handover will be due. Henry Wilkinson Chief Executive Officer.’ At 04h02 pm, Hamilton sent the final email in this exchange: ‘Dear Henry and Nigel, [A]s per our discussion this morning and follow up emails, we thank you for the 4 options offered to us. We confirm that we accept your second offer whereby we will return all equipment leased to us and that there shall be no further legal recourse from either party. We would like all equipment picked up on or before 28 February 2013 so that we do not incur further lease costs for the following month. Kind Regards Greg.’ [8] On 13 March 2013, the appellant paid the arrear rentals. However, it continued operating its car washing business at the locations covered by the rental agreements. It says it was entitled to do this as both the master and rental agreements between it and the respondent had been cancelled. And following the cancellation it entered into an agreement with another entity – CMH – to use its mobile cleaning devices at the locations from which it had been operating. [9] The respondent denies that the agreements were validly cancelled. It therefore sought and was granted interdictory relief to protect its proprietary rights in its MDU’s pending the institution of an action for breach of the agreements. [10] The appellant’s case is this. The respondent offered four options to the appellant at the meeting on 25 February 2013. The appellant accepted the second option – that it could cancel the agreements and walk away – in writing by email. The parties agreed further in the series of emails that once the appellant had paid the arrear rental, which it did on 13 March 2013, and the respondent’s equipment had been returned, which was also done, there had been a consensual cancellation of the agreement. The cancellation meets with the requirements for the information to be recorded in writing and signed by the parties in terms of s 13(3) of the Act. [11] The respondent disputes the appellant’s argument. It contends that the email exchange was merely a negotiation between the parties regarding the appellant’s breaches and did not amount to a consensual cancellation of the agreements, a contention that the high court upheld. At best for the appellant, says the respondent, the emails refer only to the rental agreements, not the master agreement. However, if they do evince a cancellation of both the master and the rental agreements, the emails did not comply with s 13(1) of the Act. This is because the section requires an ‘advanced electronic signature’ to be used on an email when a signature is required by law – as specified by the non-variation clause in this case – and no such signature appears on the emails. In addition, s 13(3), relied upon by the appellant to bring the emails within the ambit of the Act, does not apply for reasons given later in this judgment.1 [12] The respondent’s contention that the emails merely record a negotiation and do not amount to an agreement to cancel is utterly without merit. The emails say emphatically and unambiguously that once the appellant settles the arrear rental and returns the respondent’s equipment it may ‘walk away’ without any further legal obligation. This can only mean – and did mean – that the parties considered that all agreements between them (the master and subsidiary rental agreements) would be cancelled once the appellant had satisfied two obligations: payment of the arrear rental and return of equipment. The obligations were met and the agreements 1 Sections 13(1) and (3) are set out below para [17]. therefore do evince a consensual cancellation. Whether this cancellation by email fulfilled the requirements of the non-variation clauses to be in writing and signed by both parties requires a consideration of the relevant provisions of the Act. [13] Before I consider these it is necessary to remind ourselves that when parties impose restrictions on their own power to vary or cancel a contract – as they did in this case – they do so to achieve certainty and avoid later disputes. The obligation to reduce the cancellation agreement to writing and have it signed was aimed at preventing disputes regarding the terms of the cancellation and the identity of the parties authorised to effect it. Our courts have confirmed the efficacy of such clauses.2 [14] It is apparent from the parties’ opposing contentions that the proper interpretation of ss 13(1) and (3) lies at the heart of this dispute. But these provisions have to be analysed in their context. This requires us to consider other sections that also have a bearing on this analysis. [15] The Act’s main objective is to ‘enable and facilitate electronic communications and transactions in the public interest’.3 ‘Electronic communications’ is defined as ‘communication by means of data messages’. ‘Transaction’ is defined to include ‘a transaction of either a commercial or non-commercial nature . . .’. An email means ‘electronic mail, a data message used or intended to be used as a mail message between the originator and addressee in an electronic communication’.4 It is thus common ground that the email-exchange between the parties is governed by the Act. 2 SA Sentrale Ko-op Graanmaatskappy Bpk v Shifren & andere 1964 (4) SA 760 (A); Brisley v Drotsky 2002 (4) SA 1 (SCA). See generally R H Christie & G B Bradfield Christie’s The Law of Contract in South Africa 6 ed at 464-466. 3 Section 2(1) of the Act. 4 Section 1 of the Electronic Communications and Transactions Act 25 of 2002. [16] One of the Act’s aims is to promote legal certainty and confidence in respect of electronic communications and transactions.5 So, when interpreting the Act, the courts are enjoined to recognise and accommodate electronic transactions and data messages in the application of any statutory law or the common law.6 Thus when there are formal requirements of writing and signature imposed by statute or the parties to a transaction, these can generally be satisfied through electronic transactions.7 There are, however, exceptions where agreements may not be generated electronically. These are the agreements for the sale of immovable property, wills, bills of exchange and stamp duties.8 [17] A legal requirement for an agreement to be in writing, subject to the exceptions mentioned above, is satisfied if it is in the form of a data message.9 There is no dispute in this case that the emails met this requirement. The real dispute is about whether or not the names of the parties at the foot of their emails constituted signatures as contemplated in ss 13(1) and (3). Section 13 reads as follows: ‘(1) Where the signature of a person is required by law and such law does not specify the type of signature, that requirement in relation to a data message is met only if an advanced electronic signature is used. (2) . . . (3) Where an electronic signature is required by the parties to an electronic transaction and the parties have not agreed on the type of electronic signature to be used, that requirement is met in relation to a data message if- (a) a method is used to identify the person and to indicate the person's approval of the information communicated; and (b) having regard to all the relevant circumstances at the time the method was used, the method was as reliable as was appropriate for the purposes for which the information was communicated.’ 5 Section 2(1)(e). 6 Section 3 of the Act. 7 Section 4(1) provides that the Act applies to any electronic transaction or data message: Christie’s The Law of Contract in South Africa op cit at 109. 8 These are specifically provided for in ss 4(3) and 4(4) of the Act read with the applicable schedules. 9 Section 12(a). [18] It is apparent that the Act distinguishes between instances where the law requires a signature and those in which the parties to a transaction impose this obligation upon themselves. Where a signature is required by law and the law does not specify the type of signature to be used, s 13(1) says that this requirement is met only if an ‘advanced electronic signature’ is used. Where, however, the parties to an electronic transaction require this but they have not specified the type of electronic signature to be used, the requirement is met if a method is used to identify the person and to indicate the person’s approval of the information communicated (s 13(3)(a)); and having regard to the circumstances when the method was used, it was appropriately reliable for the purpose for which the information was communicated (s 13(3)(b)).10 [19] The respondent submits that the phrase: ‘Where the signature of a person is required by law’ (emphasis added) in s 13(1) it should be interpreted not only to include formalities required by statute but must also incorporate instances where parties to an agreement impose their own formalities on a contract, as in this case. And, so the contention goes, because the parties required their signatures for the contracts to be cancelled the requirement could only be satisfied by the use of an advanced electronic signature as contemplated in s 13(1), which did not occur in this case. [20] In my view the respondent’s reliance on s 13(1) is misplaced for two reasons. First, the non-variation clauses were agreed upon by the parties: they were not imposed upon the parties by any law.11 Secondly, when one has regard to the purpose for which an advanced electronic signature is required it is apparent that it does not apply to the private agreements between these parties. 10 Christie’s The Law of Contract in South Africa op cit p 110. 11 See for example s 6(12) of the Companies Act 71 of 2008. [21] An ‘advanced electronic signature’ is a signature which results from a process accredited by an Accreditation Authority.12 It is used for accredited ‘authentication products and services’ which are designed to identify the holder of the electronic signature to other persons. An application for accreditation must be made in a prescribed manner supported by prescribed information and accompanied by a non- refundable fee. Furthermore, elaborate and strict criteria are applicable for the accreditation of authentication products and services to which the electronic signature relates. [22] There is no suggestion that either of the parties’ businesses deal in products and services to which contracts that require advanced electronic signatures as envisaged in the Act relate. And to impose the onerous requirements and criteria for accreditation upon the parties in this case would have a detrimental effect on electronic transactions, and the obligation of the courts, when interpreting the Act, to recognise and accommodate electronic transactions and data messages in the application of any statutory law or the common law. In addition, it would render s 13(3) – which provides for private agreements between parties – superfluous. In my view s 13(1) does not apply in the circumstances of this case, and on the face of it, s 13(3) does. [23] The respondent, however, says that even if s 13(3) does apply to private agreements between parties the section does not assist the appellant. It advances three grounds to support this submission: First, it contends that the emails do not and cannot constitute a separate electronic transaction because they pertain to the oral negotiations about the written agreements. Secondly, even if they do constitute a separate electronic transaction, the parties did not require an electronic signature as envisaged in the section; and finally, there was no reliable method used whereby the parties were identified and indicated their approval of the information communicated in the emails. 12 Sections 1 and 37 of the Act. [24] Regarding the first ground – that the emails do not constitute a separate transaction – the simple answer is that they do. The oral negotiations between the parties were reduced to writing in the form of emails and constituted an agreement to cancel their written agreements. And s 22(1) of the Act says emphatically that ‘[A]n agreement is not without legal force and effect merely because it was concluded partly or in whole by means of data messages’. [25] As to the second ground – the requirement for an ‘electronic signature’ – a brief discussion on how the courts generally approach signature requirements is necessary. Commonly understood a signature is ‘a person’s name written in a distinctive way as a form of identification . . . .’13 But this is not the only way the law requires a document to be signed. In the days before electronic communication, the courts were willing to accept any mark made by a person for the purpose of attesting a document, or identifying it as his act, to be a valid signature. They went even further and accepted a mark made by a magistrate for a witness, whose participation went only as far as symbolically touching the magistrate’s pen.14 [26] The approach of the courts to signatures has therefore been pragmatic, not formalistic. They look to whether the method of the signature used fulfils the function of a signature – to authenticate the identity of the signatory – rather than insist on the form of the signature used. [27] The Act describes an electronic signature – which is not to be confused with an advanced electronic signature – as ‘data attached to, incorporated in, or logically associated with other data and which is intended by the user to serve as a signature’.15 Put simply, so long as the ‘data’ in an email is intended by the user to serve as a signature and is logically connected with other data in the email the requirement for an electronic signature is satisfied. This description accords with the 13 Concise Oxford Dictionary 12 ed. 14 Putter v Provincial Insurance Co Ltd & another 1963 (3) SA 145 (W) at 148F-G. 15 Section 1. practical and non-formalistic way the courts have treated the signature requirement at common law. [28] The argument that s 13(3) does not apply because the parties did not require an electronic signature as contemplated in the section, is based, in my view, on a misreading of the section. It envisages a situation where a signature is required by the parties but the parties have not specified the type of electronic signature that is required.16 Here the parties did require a signature to cancel the agreement, but when they cancelled the agreement by email they did not specify the type of electronic signature that was required. So, the section does apply in the circumstances of this case. The typewritten names of the parties at the foot of the emails, which were used to identify the users, constitute ‘data’ that is logically associated with the data in the body of the emails, as envisaged in the definition of an ‘electronic signature’. They therefore satisfy the requirement of a signature and had the effect of authenticating the information contained in the emails. [29] The third ground for which the respondent contends – that there was no reliable method used in the emails whereby the parties were identified and indicated their approval of the information communicated – is also without merit. There is no dispute regarding the reliability of the emails, the accuracy of the information communicated or the identities of the persons who appended their names to the emails. On the contrary, as I have found earlier, the emails clearly and unambiguously evinced an intention by the parties to cancel their agreements. It ill- behoves the respondent, which responded to clear questions by email itself, to now rely on the non-variation clauses to escape the consequences of its commitments made at the meeting on 25 February 2013 which were later confirmed by email. [30] I turn to the final issue in this appeal. At the outset the parties were asked to address the question as to whether the order of the high court, being an interim order 16 Christie’s The Law of Contract in South Africa op cit p 110. pending an action for damages to be instituted by the respondent against the appellant for breach of contract, was appealable. [31] In granting the relief sought the court found that the appellant had established that, on a proper interpretation of the emails, the written agreements and the relevant provisions of the Act, the respondent had established a ‘clear right’ to the relief claimed. The order thus disposes of the main issue between the parties concerning the cancellation of the agreements. This means that the respondent’s right to claim damages for breach of contract is no longer an issue open for consideration by the trial court. All that remains, once the respondent commences its action for breach of contract, is to prove and quantify its contractual damages. The interdict restraining the appellant from conducting its business in competition with the respondent is therefore final in effect, and appealable. On this the parties agree. [32] The following order is made: The appeal is upheld with costs. The order of the high court is set aside and in its place the following order is substituted: ‘The application is dismissed with costs.’ _________________ A CACHALIA JUDGE OF APPEAL APPEARANCES For Appellant: C T Vetter Instructed by: Shepstone & Wylie Attorneys, Durban Webbers, Bloemfontein For First Respondent: M E Stewart Instructed by: Biccari Bollo Mariano Inc, Durban E G Cooper Majiedt Inc, Bloemfontein

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 21 November 2014 Status: Immediate Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal. SPRING FOREST TRADING 599 CC v WILBERRY (PTY) LTD t/a ECOWASH & ANOTHER The Supreme Court of Appeal (the SCA) today upheld an appeal against a decision of the High Court KwaZulu-Natal holding that it was not permissible for a written agreement, which required cancellation to be in writing and signed by the parties, to be cancelled by email. The parties to the dispute were Wilberry (Pty) Ltd (Wilberry) and Spring Forest Trading (Spring Forest). They entered into several agreements in terms of which Spring Forest leased from Wilberry its Mobile Dispensing Units for use in its car wash business. The agreements contained clauses providing that the agreements may only be cancelled in writing and signed by the parties. Spring Forest was no able to meet its rental commitments and the parties met in Durban of 25 February 2013 and agreed to cancel their agreements. The terms of the cancellation were recorded in an email exchange. The names of the parties appeared at the foot of each email. Spring Forest then entered into an agreement with another entity to conduct the same business. In response Wilberry instituted proceedings in the Durban High Court to interdict Spring Forest from continuing its business on the grounds that this was in breach of their agreements. The interdict was sought pending an application for breach of contract that Wilberry was to institute against Spring Forest within 30 days of the interdict. The high court grant the interdict and Spring Forest appealed to the SCA. On appeal the SCA held that the email exchange between the parties met the requirements for the cancellation agreement to be in writing. It also held that the typewritten names of the parties at the foot of the emails constituted electronic signatures as envisaged in s 13(3) of the Electronic Communications and Transactions Act 25 of 2002. The signatures therefore complied with the requirements of the parties for the cancellation agreement to be signed by them. The SCA therefore upheld the appeal by Spring Forest and ordered Wilberry to pay the costs of the appeal.

2498

non-electoral

2014

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT REPORTABLE Case No: 359/2013 In the matter between: AFRICAST (PTY) LIMITED APPELLANT and PANGBOURNE PROPERTIES LIMITED RESPONDENT Neutral citation: Africast v Pangbourne Properties (359/13) [2014] ZASCA 33 (28 March 2014) Coram: Lewis, Mhlantla, Bosielo and Theron JJA and Mathopo AJA Heard: 18 February 2014 Delivered: 28 March 2014 Summary: Where a suspensive condition is not fulfilled timeously it lapses and the parties are not bound by it even though one has performed fully. ORDER On appeal from: South Gauteng High Court, Johannesburg (Sutherland J sitting as court of first instance): The appeal is dismissed with costs. JUDGMENT Lewis JA (dissenting): [1] The respondent, Pangbourne Properties Ltd (Pangbourne), is a public company listed on the Johannesburg Stock Exchange. Its principal business is the acquisition and letting of commercial and industrial premises. The appellant, Africast (Pty) Ltd (Africast), is a company within a group that undertakes property investment and development. In late 2006 and for the first two months of 2007 the parties negotiated about the development of commercial property in Sunninghill, Johannesburg, which they designated ‘The District’. Their representatives agreed on the terms of a contract for the building of commercial premises by Africast; for the letting of those premises to tenants and for the cession of the rights under the leases to Pangbourne, which was obliged to pay the purchase price for the improved properties to Africast only on transfer of the properties and cession of the leases. [2] At issue in this appeal is the question whether the contract lapsed because of the non-fulfilment of a suspensive condition. The condition was that Pangbourne give written notice of the approval by its board of directors, within seven working days of the conclusion of the contract. The question in turn depends on the construction of the provision embodying the suspensive condition. [3] It is common cause that Pangbourne, some 18 months after the signing of the agreement, decided that the condition had not been fulfilled within the stipulated period, and that it was accordingly not bound by the contract. It refused to furnish bank guarantees in respect of the fulfilment of its payment obligation to Africast. At that stage the buildings had been constructed in accordance with the contract. And Pangbourne’s employees had been involved on a regular basis with the whole development. [4] Africast regarded Pangbourne’s decision as a repudiation of the contract: it accordingly cancelled and sued for damages for breach of contract. The South Gauteng High Court (Sutherland J) held that the condition had not been fulfilled timeously; that Pangbourne was not bound by the contract and that Africast was accordingly not entitled to damages. The question of damages was not traversed in the high court since it had ordered, at the request of the parties (and in terms of Rule 33(4) of the Uniform Rules of Court), that the question of the enforceability of the contract, and the measure of damages be determined separately from the quantification of damages. However, it declined to deal with the appropriate measure of damages, quite understandably in view of its finding that Pangbourne was not bound by the contract in the first place. Africast appeals to this court with the leave of the high court. [5] Some factual background is necessary before the provision in question, and the high court’s finding, are discussed. The negotiations between the parties culminated in a written document signed on 5 March 2007 by Pangbourne’s group company secretary, Mr J J Groenewald, and a director, Mr Kennedy. They also signed an addendum to the contract, including, inter alia, further suspensive conditions (all of which were fulfilled), on 11 April 2007. Mr J Weaver, Africast’s representative, signed both the agreement and the addendum on 11 April. Groenewald and Kennedy did not actually have the authority to bind Pangbourne to any contract, a fact not in dispute. For the conclusion of any contract in respect of which a sum in excess of R50 million was payable, Pangbourne board approval was necessary. And for a contract sum that was less than R50 million, only the chief executive officer of Pangbourne had authority to bind the company, and then only with the approval of the investment committee. [6] The provision at issue, clause 16.1, of the signed document read: ‘This agreement is subject to the suspensive condition (stipulated for the benefit of Pangbourne Company and which may be waived by written notice given by Pangbourne Company to the Seller Company [Africast] on or before the date for fulfillment of this condition) that within 7 days (excluding Saturday, Sundays and public holidays) after the date on which this agreement is concluded (or such other period/s as the parties may agree to in writing from time to time) Pangbourne Company gives Seller Company written notice that its board of directors has approved the purchase of the property by Pangbourne Company in terms of this agreement. This condition is not capable of fictional fulfillment.’ (My emphasis.) [7] On Friday 20 April 2007 Pangbourne’s board of directors signed a written resolution approving the acquisition of the property from Africast and an agreement with Africast to construct an office park, the total ‘purchase consideration’ being some R66 698 792, payable on completion of the development. The resolution also authorized any two directors or a director and the company secretary to sign the ‘Property Sale Agreement, which includes the Development Agreement’. [8] Thus seven business days after the signing of the agreement the Pangbourne board approved the contract that had been signed by Groenewald and Kennedy on its behalf. The following Monday, 23 April, a firm of attorneys acting for Pangbourne lodged an intermediate business merger notice relating to the development with the Competition Commission. [9] On the same day, 23 April 2007, Mr B Logan, a partner of Africast in the development of The District, sent an email to an employee of Pangbourne, Mr A Joannides, about another matter, but asked: ‘How is your board approval looking for The District?’ Joannides replied: ‘Although I don’t have confirmation, I believe it was approved.’ And on 25 April 2007, another employee of Pangbourne, Mr R de Villiers, sent an email with the board resolution attached to it to Logan, stating ‘Herewith Pangbourne Board approval as requested’. [10] The question that arises is whether the communication of the fact of board approval – the condition that had to be fulfilled – was timeous: did it occur within seven business days of the conclusion of the contract? Africast argued both in the high court and on appeal that the contract was concluded only when the Pangbourne board approved the contract on 20 April 2007. The condition was thus fulfilled within seven business days when De Villiers advised Africast on 25 April that the board had approved the contract and sent a copy of the board resolution to it. [11] Pangbourne argued, on the other hand, that the contract was concluded on 11 April 2007 when the contract was signed by representatives of Pangbourne and Africast. Accordingly, it contended, the condition had not been fulfilled timeously and the contract had lapsed before 25 April when written notification of the board approval was sent to Africast. [12] Sutherland J in the high court found that ‘conclude’ in clause 16.1 bore its ordinary meaning – to reach finality – and that the contract was thus concluded when the parties’ representatives had agreed on the terms and signed it on 11 April 2007. The learned judge considered that this was not only the intrinsic meaning of the word, but that, if read in the context of the provision as a whole, any other meaning would be illogical: how can one suspend an agreement that ‘has yet to be concluded?’ he asked. [13] The high court accordingly found that the contract had lapsed by the time that Pangbourne notified Africast that its board had approved the conclusion of the contract. It also rejected Africast’s arguments that Pangbourne had waived the right to fulfillment of the condition, or that Pangbourne was estopped from asserting that it was not relying on the non-fulfillment of the condition. Africast’s claim for damages for breach of contract was thus dismissed. [14] Africast’s principal argument on appeal is that the high court’s interpretation of clause 16.1 of the agreement was wrong. It argues in the alternative that Pangbourne is estopped from asserting that the contract is not binding because, by its conduct over a lengthy period, it misrepresented that it regarded the contract as having been concluded on 20 April, when the board approved the resolution. An alternative argument on estoppel is that Pangbourne’s conduct amounted to a representation that it would not rely on non-fulfillment of the suspensive condition. [15] I shall deal first with the interpretation of the meaning of the word ‘conclude’ in clause 16.1 and the construction of the provision as a whole since I consider these dispositive of the appeal. It is trite that in interpreting a provision of a contract a court must have regard to the contract as a whole, starting with the words used. But a court must also examine those words in the context in which they were used, taking into account the factual matrix. (See KPMG Chartered Accountants (SA) v Securefin Ltd 2009 (4) SA 399 (SCA) para 39, followed in Natal Joint Municipal Pension Fund v Endumeni Municipality 2012 (4) SA 593 (SCA).) [16] Much evidence was led by Africast in an attempt to shed light on what the parties had intended when agreeing on the wording of clause 16.1. The chief witnesses for Africast were Groenewald and Hutchison, formerly the company secretary and a director and chief executive officer of Pangbourne respectively. It transpired during the course of their evidence that the management of the company had changed during 2008 and that was when Pangbourne had decided to treat the contract as having lapsed. Groenewald and Hutchison had left the company when the new management stepped in. So had all the directors who had been in office in April 2007. Logan and Weaver from Africast testified as well. Of course all of their views of what the contract meant were inadmissible and irrelevant. But significantly all agreed that from the date when the board had approved the contract until well into 2008, they had worked on the assumption that the contract was binding. And the objective evidence bears that out. I shall not traverse it since it was clear from both parties’ conduct that the obligations under the contract were performed until guarantees for payment of the price by Pangbourne were required by Africast. [17] The high court held that the contract became binding – but subject to the suspensive condition – when it was signed by the representatives of the parties. One cannot speak of a contract subject to a suspensive condition as becoming binding only on the fulfillment of the condition, said the court. Africast’s argument on appeal is, however, that the condition – the happening of an uncertain future event – was not the approval of Pangbourne’s board itself. It was instead the giving of written notice of the fact of the approval. Until the board did approve the contract it was not concluded: it had not reached finality. The signature of the document by Groenewald and Kennedy did not give rise to a binding agreement. It could not because they had no authority to bind Pangbourne. Only the board had that authority. [18] The uncontradicted evidence of Groenewald was that he had authority to sign documents on behalf of Pangbourne, but not to bind it to any contract. Only its board could bind Pangbourne to a contract the cost of which exceeded R50 million. The same was true of Kennedy. They could thus not have concluded the contract – brought it to finality – on behalf of Pangbourne. Accordingly, neither Africast nor Pangbourne was bound by the contract until there was board approval. If the board did not approve the contract, or before it did, either party could have refused to comply with it. The board approval on 20 April 2007 resulted, therefore, in the conclusion of the contract. [19] What, then, does one make of the condition? Africast argued that the fulfillment of the condition occurred when written notice of the board approval was sent by Pangbourne to Africast on 25 April, well within the seven business days of the conclusion of the contract. And from then on, both parties treated the contract as binding. That was why, on 23 April (the same day as Joannides of Pangbourne wrote to Logan stating that he thought the board approval had been given), Pangbourne’s then attorneys filed a notice of merger with the Competition Commission. [20] Pangbourne argued that this case was the same as that in Pangbourne Properties Ltd v Basinview Properties (Pty) Ltd [2011] ZASCA 20 where Pangbourne escaped a contract that was conditional on the approval of its board of directors. The difference between these cases, however, is that in Basinview the Pangbourne board did not in fact approve the contract. There was no fulfillment of the condition. [21] Pangbourne argued also that the word ‘concluded’ in clause 16.1 of the contract had been carefully chosen: the draftsman intended that the conclusion would be the moment when negotiations between the parties were closed. Negotiations, it said, are not concluded when a board authorizes a contract. They are concluded when the parties have reached agreement on the terms of the contract. The relevant question, however, is when the contract became binding, subject to the suspensive condition. The high court found, as I have said, that it was on the signature of the document. But since neither party was bound until there had been Pangbourne board approval, it would be stretching the ordinary meaning of the words used to find that all that was intended was that negotiations were concluded, although the contract would not be binding. [22] Accordingly I consider that the high court erred in its interpretation of the provision at issue. The contract was concluded only when the Pangbourne board approved it on 20 April 2007, and on 25 April, when written notification of the approval was given to Africast, it ceased to be conditional. This interpretation is consonant with the contract as a whole and with the conduct of the parties for a considerable period after conclusion. Africast was thus entitled to cancel the contract on the basis of Pangbourne’s repudiation, and to claim damages for breach of contract. The alternative arguments of Africast based on waiver and estoppel thus fall away. [23] I have had the benefit of reading the judgment of my learned colleague Theron JA. I agree with her that from a reading of the pleadings what seemed to be in dispute was the authority of Groenewald and Kenndey to sign the agreement. But that was certainly not in dispute at the time of the trial and it was not argued before us. Neither party submitted in heads of argument or at the hearing that the authority to sign the contract was an issue. It was clear that they had authority to sign a contract on behalf of Pangbourne. They even warranted in the agreement that they had that authority, as Theron JA has said. The real question was whether they could bind Pangbourne prior to board approval. The high court did not address this issue. As it saw the matter, the question for decision was whether the reference to concluding the contract was a reference to signing on behalf of Pangbourne or binding it, subject to the condition that board approval be given. It held that the acts of signature amounted to conclusion of the contract. As I have said, the high court erred. It was not possible for Groenewald and Kennedy to bind Pangbourne, and therefore to conclude the contract. The contract was concluded only on board approval even though it had been signed before then. [24] The high court declined to deal with the measure of damages given, as I have said, its finding that Pangbourne was not bound by the contract. While the question of damages was traversed to some extent in the pleadings and the evidence, and some argument was addressed to this court on whether Africast was entitled only to the value of The District, or to loss of profit as well, it seems to me that a finding as to the appropriate measure of damages is inappropriate without also having evidence as to quantum – a matter that the parties left over for later decision in the event of Africast being successful in its claim. I consider that since the matter must be remitted to the high court in any event to determine the quantum of damages, it is appropriate for it also to consider the measure by which they are to be calculated. [25] I would have made the following order: 1 The appeal is upheld with costs, including those of senior counsel, and the matter is remitted to the high court to determine the measure and quantum of damages to which the appellant is entitled. 2 The order of the high court is replaced with: ‘(a) The contract between the parties is binding. (b) The defendant repudiated the contract and the plaintiff was entitled to cancel it and claim damages for breach of contract. (c) The defendant is liable for the costs of the hearing during February 2012, including those of senior counsel.’ ____________ C H Lewis Judge of Appeal Theron JA (Mhlantla and Bosielo JJA and Mathopo AJA concurring) [26] I have read the judgment of Lewis JA and regret, for the reasons set forth below, that I am unable to agree therewith. [27] The facts of this matter are largely common cause. On 5 March 2007, Mr Groenewald, Pangbourne’s group company secretary, and Mr Kennedy, one of its directors (the signatories), signed a written property agreement (the agreement) in terms of which the property forming the subject matter of the agreement was sold to Pangbourne. On 11 April 2007 they signed an addendum to the agreement. The representative of Africast, Mr John Weaver, signed the agreement and the addendum on 11 April 2007. [28] The agreement contained the following suspensive condition: ‘16.1 This agreement is subject to the suspensive condition (stipulated for the benefit of PANGBOURNE COMPANY and which may be waived by written notice given by PANGBOURNE COMPANY to SELLER COMPANY on or before the date for fulfilment of this condition) that within 7 days (excluding Saturdays, Sundays and public holidays) after the date on which this agreement is concluded … PANGBOURNE COMPANY gives SELLER COMPANY written notice that its board of directors has approved the purchase of the property by PANGBOURNE COMPANY in terms of this agreement,… (Emphasis added.) 16.2 If this condition is not fulfilled or waived, then this agreement will terminate and neither party will have a claim against the other as a result thereof.’ It is important to note that the suspensive condition would be fulfilled not when Pangbourne’s board of directors approved the agreement, but when Pangbourne gave Africast written notice that its board had approved the purchase of the property. [29] On Friday, 20 April 2007, Pangbourne’s board approved the acquisition of the property, the entering into of a development agreement with a total purchase consideration of R66 698 792 and authorised two directors or a director and the company secretary to sign the property sale agreement which included the development agreement. On 25 April 2007, Pangbourne gave Africast written notice of the board’s approval. [30] It was common cause that from 25 April 2007 onwards, the date on which notification of the board’s approval was sent to Africast, the parties acted on the basis that the agreement was valid and binding. During 2008, virtually the whole of Pangbourne’s management was replaced. The new board of directors decided not to proceed with the agreement and adopted the view that there was no contractual obligation on it to do so in that the suspensive condition had not been fulfilled. [31] Africast contended that the contract was concluded on 20 April 2007 when it was approved by Pangbourne’s board and the notice given on 25 April 2007 was within the seven day period. Pangbourne, on the other hand, argued that the agreement was concluded on 11 April 2007 and the suspensive condition ought to have been fulfilled by 20 April 2007. [32] It is appropriate to have regard to the pleadings filed by the parties. Africast, in its particulars of claim, allege that: ‘6A.1 … Although Mr Kennedy and Mr Groenewald signed the agreement and addendum before 20 April 2007, they were not authorised to do so until the defendant’s board of directors had resolved to proceed with the acquisition of the property. This was only done on 20 April 2007 when the defendant’s board of directors accepted the recommendation of the investment committee and resolved to proceed with the acquisition of the property, to enter into a development agreement with the plaintiff and to authorise persons to sign the property sale agreement. 6A.2 Messrs Kennedy and Groenewald were only authorised to sign the property sale agreement which includes the development agreement … on 20 April 2007.’ [33] Pangbourne, in its plea, alleged that it had authorised the signatories to sign the agreement for and on behalf of the company and that the signatories had warranted, in writing, that they were duly authorised to sign the agreement. It further recorded that: ‘3A.1 The defendant denies that Messrs Groenewald and Kennedy were not authorised to sign the said contract and addendum before 20 April 2007. 3A.2 The said persons were duly authorised to sign contracts on behalf of the defendant by the defendant’s ordinary administrative practices, procedures and customs. 3A.3 The said persons signed the contract and addendum subject thereto that the defendant’s board of directors would authorise the transaction reflected in the contract and addendum.’ [34] It is clear from the pleadings that the dispute between the parties was whether the signatories were authorised to sign the agreement. The witnesses who testified on the question of authority were Groenewald and Hutchison, Pangbourne’s former chief executive officer. According to Groenewald, he and Kennedy were authorised to sign the agreement on behalf of Pangbourne. [35] Groenewald explained that in respect of transactions exceeding R50 million, approval of the board of directors would usually be sought via a round robin of emails or faxes, which, if approved, would be converted to a resolution at the next board of directors’ meeting. This evidence was confirmed by Hutchison who went further and said that Pangbourne’s board had, prior to 20 April 2007, and in terms of a round robin resolution, approved the agreement. It is clear from Hutchison’s evidence that Groenewald and Kennedy had authority to sign an agreement in respect of which the contract value exceeded R50 million, provided it contained a suspensive condition such as the one encapsulated in clause 16.1 of the agreement. [36] The agreement itself points towards the authority of the signatories. In the agreement and immediately below the signatures of both Groenewald and Kennedy, the following appears: ‘for PANGBOURNE COMPANY, the signatory warranting that he is duly authorised hereto’ [37] A contract containing a suspensive condition is enforceable immediately upon its conclusion but some of the obligations are postponed pending fulfilment of the suspensive condition. If the condition is fulfilled the contract is deemed to have existed ex tunc. If the condition is not fulfilled, then no contract came into existence.1 Once the condition is fulfilled, ‘[T]he contract and the mutual rights of the parties relate back to, and are deemed to have been in force from, the date of the agreement and not from the date of the fulfilment of the condition, ie ex tunc.’2 [38] The case as pleaded by Africast, that the signatories were not authorised to sign the agreement, does not accord with the evidence of Groenewald and Hutchison. Based on their evidence, there is no doubt in my mind that the signatories had authority to sign the agreement in terms of Pangbourne’s internal arrangements. I agree with the finding of the high court that ‘the notion that Kennedy and Groenewald acted without authority on 11 April when they signed the contract was not established by the facts adduced in evidence’. [39] A distinction must be drawn between the authority of the signatories to sign the agreement and their authority to bind Pangbourne to the agreement. Upon signature of the agreement an inchoate agreement came into being, pending the fulfilment of the suspensive condition.3 In the event that the suspensive condition was not fulfilled, neither party would be bound to the agreement.4 1 See generally, R H Christie and G B Bradford The Law of Contract in South Africa 6th ed (2011) at 151-153; S W J Van der Merwe, L F van Huyssteen, M F B Reinecke and G F Lubbe Contract General Principles 4th ed at 253 and the authorities cited there at footnote 276. 2 ABSA Bank Ltd v Sweet & others 1993 (1) SA 318 (C) at 323A-B. 3 Joseph v Halkett (1902) 19 SC 289 at 293. More recently, see the summary of the law undertaken by Tebbutt J in ABSA Bank Ltd v Sweet & others 1993 (1) SA 318 (C) at 323. 4 The terms of clause 16.2, quoted in para 27 above, accords with the legal position in this regard. [40] In my view, the agreement was concluded upon signature thereof on 11 April 2007. The terms of the suspensive condition were not met. It follows that the contractual relationship between the parties lapsed due to non-fulfilment of the suspensive condition. [41] Africast, in its pleadings, appears to suggest that the lack of authority on the part of the signatories was ratified on 20 April 2007, when they were ‘authorised to sign the property sale agreement’.5 If the decision taken by Pangbourne’s board on 20 April 2007 constituted ex post ratification of what the signatories had done, then the contract would have been enforceable from the time of signature on 11 April 2007. Ratification operates ex tunc and not nunc. Upon ratification of an act, the obligation incurred by the act is dated at the time of the conclusion of the act not at the time of the ratification.6 The effect of a valid ratification would be that the unauthorised act, namely the signature, would be assumed to have been authorised when it was performed.7 In the light of my finding that the signatories had the requisite authority to sign the agreement, it is not necessary to make a determination relating to whether Pangbourne’s board had ratified their conduct. [42] In the result the appeal is dismissed with costs. _______________ L V Theron Judge of Appeal 5 Paragraph 3 of the resolution of Pangbourne’s board dated 20 April 2007, relating to the agreement and the authority of the directors reads: ‘THAT any two Directors or a Director and the Company Secretary be, as they hereby are, authorised to sign the Property Sale Agreement which includes the Development Agreement, and that a Director or the Company Secretary be, as they hereby are, authorised to sign all the necessary documentation to give effect to the resolution including, but not limited to, conveyancing documents, power of attorney to transfer, bond registration documents, and all other relevant documentation to finalise the transaction.’ 6 Reid & others v Warner 1907 TS 961 (the judgment by Innes CJ and Wessels J at 976). 7 Breytenbach v Frankel & another 1913 AD 390 at 401. APPEARANCES: For the Appellant: G C Pretorius SC Instructed by: Cliffe Dekker Hofmeyr, Johannesburg Phatshoane Henney, Bloemfontein For the Respondent: P F Louw SC Instructed by: Kokinis Inc, Johannesburg McIntyre & van der Post, Bloemfontein

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 28 March 2014 Status: Immediate Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal. Africast v Pangbourne Properties (359/13) [2014] ZASCA (2014) The Supreme Court of Appeal handed down judgment today in an appeal from the South Gauteng High Court, Johannesburg. The respondent (Pangbourne) is a public company listed on the Johannesburg Stock Exchange, with its principal business being acquisition and letting of commercial and industrial premises. The appellant (Africast) is a company within a group that undertakes property investment and development. Between 2006 and 2007 the parties negotiated the development of commercial property in Sunninghill, Johannesburg, which they designated ‘The District’. Their representatives agreed on the terms of a contract for the building of commercial premises by Africast; for the letting of those premises to tenants and for the cession of the rights under the leases to Pangbourne, which was obliged to pay the purchase price for the improved properties to Africast only on transfer of the properties and cession of the leases. The agreement between the parties contained a suspensive condition to the effect that Pangbourne give written notice of the approval by its board of directors within seven working days of the conclusion of the contract. It is common cause that Pangbourne, some 18 months after the signing of the agreement, decided that the particular suspensive condition contained in the agreement between the parties had not been fulfilled within the stipulated period, and that it was accordingly not bound by the contract. It refused to furnish bank guarantees in respect of the fulfilment of its payment obligation to Africast. At that stage the buildings had been constructed in accordance with the contract, and Pangbourne’s employees had been involved on a regular basis with the whole development. Africast regarded Pangbourne’s decision as a repudiation of the contract: it accordingly cancelled and sued for damages for breach of contract. Having separated the determination of the merits and the quantum in this matter, the high court, in pronouncing on the merits, held that the condition had not been fulfilled timeously; that Pangbourne was not bound by the contract and that Africast was accordingly not entitled to damages. Africast appeals that finding with the leave of the high court. The issue before this court was therefore whether the contract had indeed lapsed because of the non-fulfilment of the suspensive condition, and in particular the interpretation and application of the term ‘conclusion’ in the agreement. Before this court, Africast contended that the contract was concluded only when the Pangbourne board approved the contract on 20 April 2007. The condition was thus fulfilled within seven business days. Conversely, Pangbourne argued that the contract was concluded on 11 April 2007 when the contract was signed by representatives of Pangbourne and Africast. Accordingly, it contended, the condition had not been fulfilled timeously and the contract had lapsed before 25 April when written notification of the board approval was sent to Africast. In holding that the signatories of the agreement on behalf of Pangbourne were authorised to do so in terms of Pangbourne’s internal arrangements, this court noted that, upon such signature, an inchoate agreement came into being pending the fulfilment of the suspensive condition. This occurred on 11 April 2007. It follows that, by 25 April, the contractual relationship between the parties lapsed due to non-fulfilment of the suspensive condition. As a result thereof, no contract came into existence and thus neither party was bound to the agreement. In the result the appeal is dismissed with costs.

2617

non-electoral

2014

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Not Reportable Case no: 871/13 In the matter between: SIYABONGA JANTJIES APPELLANT and THE STATE RESPONDENT Neutral citation: Jantjies v S (871/13) [2014] ZASCA 153 (29 September 2014) Coram: Shongwe, Majiedt and Mbha JJA Heard: 10 September 2014 Delivered: 29 September 2014 Summary: Criminal law – whether on the proved facts the deceased committed suicide or whether she was killed by an intruder or by the appellant – circumstantial evidence sufficient to found a conviction on murder – proved facts sufficient to infer that the appellant killed the deceased. ORDER ________________________________________________________________ On appeal from: Eastern Cape High Court, Grahamstown (Lowe J and Alkema J, sitting as court of appeal): The appeal is dismissed. JUDGMENT ______________________________________________________________ Shongwe JA (Majiedt and Mbha JJA concurred) [1] This appeal is against a conviction on a charge of murder (dolus eventualis) by the Regional Court Middelburg (Eastern Cape). The appellant, Mr Siyabonga Jantjies, was sentenced to 10 years’ imprisonment. Leave to appeal against the conviction was granted to the High Court (Eastern Cape, Grahamstown), which appeal was dismissed and the application for leave to appeal to this court suffered the same fate. This appeal is with leave of this court. [2] The issues in dispute will be best understood in the context of the following facts, which are mostly common cause or beyond dispute. Regarding the incident itself, the facts emanate from the appellant’s plea explanation and his testimony, since there were no other eyewitnesses. The deceased was the appellant’s girlfriend. During the afternoon of 17 September 2008 they were together at the deceased’s place of residence. The appellant received a phone call from an ex-girlfriend which phone call upset the deceased. A heated argument ensued. The deceased grabbed a big knife and tried to stab the appellant who managed to grab her and they both wrestled for possession of the knife. The appellant succeeded in dispossessing her of the knife and he threw the knife on the bedside. The appellant left the room to calm down. According to him, as he was leaving the deceased told him that she was going to kill herself, because he was now going to his ex-girlfriend. [3] The appellant’s version is that, upon his return to the deceased’s room approximately half an hour later, he found the lights off. The deceased was lying under a blanket on the bed. He took off his clothes and slept next to the deceased. He alleges that he was not aware at that time that the deceased was injured. In the morning he tried to awake the deceased, because she had to go to school but she did not respond. He tried several times unsuccessfully. He noticed that she was injured and bleeding. According to the appellant he decided to go to his cousin whom he informed of what had happened the night before, though his cousin denies having been told the details. His cousin phoned the appellant’s father who turned up without delay. The appellant says that he told his father the whole story of what had happened. His father also denied that he was told the whole story, more particularly that the deceased was bleeding and appeared to have been injured. The three of them decided to go to the police station to report that the deceased would not wake up. [4] At the police station, they made a report and two police officers were then assigned to accompany them to the deceased’s place of residence. They found the deceased lying on her stomach on the bed under a blanket in a pool of blood. An ambulance was summoned and the deceased was certified dead right there. The details of what happened further will be unravelled as the story unfolds. [5] The State led the evidence of Mthobeli Fuzani, the appellant’s cousin who confirmed that the appellant arrived at his place and reported that his girlfriend, the deceased, would not wake up when he tried to awaken her. He further testified that the appellant did not tell him why the deceased would not wake up. The prosecutor brought to his attention that he was deviating from his statement he made to the police, for instance that in his statement he had said that the appellant said to him that he (appellant) had done ‘kak’. The witness denied having said that and said that was not his statement and also denied having signed the statement. The prosecutor did not impeach the witness, but simply left it at that. The defence did not cross examine this witness. [6] The next witness was the appellant’s father (Mr Jantjies Senior) who confirmed that he was called and upon arrival, he found the appellant crying and was told that the appellant’s girlfriend, the deceased, would not wake up. The appellant did not know why she would not wake up and he then suggested they all go to the police station. Mr Jantjies was asked several times what the appellant said was the reason for her not waking up – he replied persistently that the appellant never disclosed the reason. The prosecutor brought to his attention that in his statement to the police he said that the appellant said he had killed his girlfriend, the deceased. He denied having said that, although he admitted making a statement and signed it, but denied that it was read back to him. [7] The State led the evidence of Sergeant Sobandla (SAPS). She testified that she and Constable Makehle received a murder complaint while patrolling and drove to the police station. At the police station they found the appellant and his father and cousin. Commander Ackerman (SAPS) told them that the appellant’s father told him (Ackerman) that he had brought his son to the police station because his son had stabbed his girlfriend, the deceased. This evidence was provisionally admitted as it was hearsay evidence, until Ackerman came to testify and confirm it. Ackerman was not called to testify – hence this piece of evidence was correctly disregarded by the trial court. They all proceeded to the deceased’s place of residence and found her lying on her stomach under a blanket on the bed. Upon questioning by Sobandla, the appellant is alleged to have made certain admissions which the trial court found to be inadmissible, because Sobandla had not warned or informed the appellant of his right to remain silent prior to questioning him. The knife was also found and she testified that she noticed stab wounds on the front of the deceased’s body. The appellant was then arrested. [8] Dr de Beer testified by reading and explaining the contents of the post mortem report because he did not compile the report. Dr Schmidt, who is now deceased, performed the post mortem examination and compiled the report. Dr de Beer testified that the deceased sustained six stab wounds, three of them on the chest, (one penetrated the heart), two on the neck and one on her back. He also expressed an opinion that it was improbable for the deceased to have stabbed herself six times and specifically on her back. He explained that the three wounds penetrated the chest – therefore she could not have had the power to do it three times. In his opinion someone else must have inflicted the stab wounds. [9] The appellant testified that he had recounted the details of the incident to his cousin and to his father, as set out in paragraphs 2 and 3 above. There is a clear contradiction on this aspect, as the cousin and the father said that the appellant did not disclose the details of what had happened. More will be said later in the judgment regarding this aspect. He denied having told his father that he had done ‘kak’. [10] The trial court concluded that the appellant, his father and cousin were mendacious witnesses. The appellant had told the court that when he spoke to his cousin and father he related the whole episode of what had happened after he received a phone call from his ex-girlfriend. The appellant’s version was rejected by the trial court. [11] On appeal before us the conviction was attacked on the grounds that at the close of the State’s case there was no evidence that the appellant had committed the murder or had committed any offence, which is a competent verdict on a charge of murder. He argues further that his application for a discharge in terms of s 174 of the Criminal Procedure Act 51 of 1977 was unjustifiably refused. Therefore, so the argument went, the refusal to discharge him amounted to a breach of his rights guaranteed by the Constitution. It was submitted that there was no possibility of a conviction other than if the appellant entered the witness box and incriminated himself. The provisions of s 174 do not refer to a possibility of a conviction but clearly state that ‘… the court is of the opinion that there is no evidence that the accused committed the offence …’ In S v Luxaba 2001 (2) SACR 703 (SCA) at para 9, the court observed that the refusal to discharge an accused at the conclusion of the State’s case entails the exercise of a discretion and is not subject to appeal. In my view s 35 (3) of the Constitution 108 of 1996 which guarantees to every person the right to a fair trial, has not removed this discretion. Admittedly, the discretion must be exercised judicially. [12] The high-water mark of the appellant’s counsel’s submissions was in respect of the evidence of Dr De Beer. Counsel argued that the post mortem report says nothing about the deceased’s lungs collapsing – whereas Dr de Beer opined that one of the three stab wounds to the chest of the deceased would have caused the collapse of the lung immediately. This comment was elicited by a question from the defence to the effect that it was possible for someone to stab himself or herself six times. Dr de Beer testified that ‘all things are possible’ but that it was improbable, because the injured person would have lost a lot of blood and would therefore be powerless. [13] The respondent contended that the trial court as well as the court a quo was alive to the fact that it was not the appellant’s case that the deceased committed suicide; this much counsel for the appellant conceded. The respondent further correctly contended that the matter must be decided on circumstantial evidence. [14] It is common cause that the crux of this matter is about drawing a reasonable inference from the proved facts. (See R v Blom 1939 AD 188 at 202 – 203) where Watermayer JA observed that: ‘In reasoning by inference there are two cardinal rules of logic which cannot be ignored: (1) The inference sought to be drawn must be consistent with all the proved facts. If it is not, the inference cannot be drawn. (2) The proved facts should be such that they exclude every reasonable inference from them save the one sought to be drawn. If they do not exclude other reasonable inferences, then there must be a doubt whether the inference sought to be drawn is correct.’ The common cause and proved facts are – the appellant and the deceased were lovers; on 17 September 2008, an argument ensued between them; the deceased grabbed a knife and attacked the appellant; a struggle over the knife followed. The appellant’s evidence is that he overpowered her and threw the knife away and left the room – he came back later and slept next to the deceased without waking her up or talking to her. In the morning he says he tried to wake her up as she was to go to school, but she would not wake up. He noticed blood on her and decided to involve the elders. [15] A peculiar feature is that the appellant, after realizing that the deceased was injured, did not seek medical assistance. There is evidence that one of the inhabitants of the house was a lady employed by an ambulance service. The appellant did not even attempt to invoke the assistance of this lady or to call the police for help, instead he went to his cousin who later telephoned the appellant’s father. [16] It is common cause that on their way to the police station, the appellant, his father and his cousin passed the deceased’s house. The defence argued that the appellant was shocked and could not think properly – therefore justifying his failure to call for medical assistance first. However, it gets more intriguing because the cousin and his father also never thought of first going to where the deceased was first before reporting to the police, though they were not as shocked as the appellant. The reasonable response to be expected from the appellant was to seek medical help and, while waiting for such help, he could then have called the elders and the police – more especially since on his version the deceased had threatened to kill herself the previous night. [17] It is folly to think that circumstantial evidence means some sort of weaker or less reliable evidence. (See DT Zeffertt, AP Paizes & A st Q Skeen: The South African Law of Evidence at 94; S v Mcasa & another (delivered 15/9/2003 – unreported, case no. 638/2002) para 8; and Hoffmann: S A Law of Evidence (1st ed 1963) at 31). In the present case there is compelling circumstantial evidence. Dr de Beer, an experienced medical practitioner, is an expert. We were urged by counsel for the appellant not to accept Dr de Beer’s evidence at face value. Dr de Beer confirmed what is contained in the post mortem report and that the stab wound to the heart was the cause of death. Most scientific evidence is circumstantial – for instance DNA and fingerprints evidence, are all scientifically determined by experts. I cannot, for a second, ignore Dr De Beer’s evidence because it is moreover logical. (See S v Van der Meyden 1999 (2) SA 79 (W) at 82D-E). In this case circumstantial evidence is the only evidence linking the appellant to the crime of murder, over and above his explanation. [18] I associate myself with the conclusion of the trial court that the appellant’s cousin and father are mendacious witnesses, clearly trying to protect the appellant. Appellant’s counsel conceded that the contradiction between the appellant, his father and cousin, referred to above, is crucial. The appellant testified that he told them the details of what had happened prior to him calling them – the cousin and the father denied that he did, all they said, was that he said to them, that his girlfriend, the deceased would not wake up. One is driven to the conclusion that they were untruthful on this aspect in order to protect the appellant. [19] I am unable to find that the trial court as well as the court a quo misdirected themselves in the analysis of the evidence. Davis AJA in R v Dhlumayo & another 1948 (2) SA 677 (A) at 705 observed that: ‘The trial Judge has advantages – which the appellate court cannot have – in seeing and hearing the witnesses and in being steeped in the atmosphere of the trial. Not only has he had the opportunity of observing their demeanour, but also their appearance and whole personality. This should never be overlooked.’ The possibility that the deceased stabbed herself six times to death is excluded by the medical evidence and the location of the wounds. The further possibility that she could have been killed by an intruder can also be excluded – no forced entry was evident. Thus the only reasonable inference to be drawn on the proved facts and circumstances is that the appellant is the killer and that he had the requisite intent to kill the deceased. It was held in R v De Villiers 1944 AD 493 at 508 – 9 that a court should not consider each circumstance in isolation and draw inferences from each single circumstance but that taken as a whole, the evidence is beyond reasonable doubt inconsistent with innocence. (See Schwikkard PJ and Van der Merwe SE: Principles of Evidence at 505; R v Mthembu 1950 (1) SA 670 (A)). [20] For the reasons stated above the appeal must fail. [21] I propose the following order: The appeal is dismissed. _____________________________ J B Z SHONGWE JUDGE OF APPEAL Appearances For the Appellant: J W Wessels Instructed by: S.B Maqungu Attorneys, Port Elizabeth; Lovius Block, Bloemfontein. For the Respondent: M September Instructed by: The Director of Public Prosecutions, Grahamstown; The Director of Public Prosecutions, Bloemfontein.

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 29 September 2014 Status: Immediate Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal. * * * SIYABONGA JANTJIES V THE STATE The SCA today dismissed the appeal of Siyabonga Jantjies, who was convicted of murder by the regional court – Middelburg (Eastern Cape). His appeal to the high court (Eastern Cape, Grahamstown) was also dismissed. He appealed to this court with the leave of this court. The SCA found that on the proved facts the deceased did not commit suicide, nor was she killed by an intruder but that the appellant is the person who killed her. The proved facts are that the deceased and Siyabonga Jantjies were lovers. They had a quarrel – she attacked him with a knife. He dispossessed her of the knife and left the room in which they both resided. He came back some 30 minutes later, slept next to the deceased, though he was not aware at that stage that she was injured. He tried to wake her up the following morning but she would not wake up. He realized that she was injured and bleeding. He reported to his cousin and father. The three of them did not go to where she was lying injured to offer any assistance but drove straight to the police station to report Together with the police they proceeded to where the deceased was and they found her dead. This court concluded that there was sufficient circumstantial evidence to found a conviction on murder. On the proved facts it was sufficient to infer that the appellant killed the deceased.

1265

non-electoral

2008

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA JUDGMENT Not Reportable CASE NO: 453/07 In the matter between: PATRICK LANGEVELDT APPELLANT versus THE STATE RESPONDENT ____________________________________________________________________________________ CORAM: MPATI AP, STREICHER, HEHER JJA and LEACH, KGOMO AJJA Date of hearing: 20 MAY 2008 Date of delivery: 02 JUNE 2008 Summary: Motor collision – factual dispute – no misdirection on the part of trial court Neutral citation: P Langeveldt v The State (453/2007) [2008] ZASCA 81 (2 June 2008) ____________________________________________________________________________________ KGOMO AJA [1] The appellant was convicted in the Stellenbosch Regional Court on 22 July 2002 of culpable homicide arising from the alleged negligent or reckless driving of a motor vehicle and was sentenced to four years imprisonment in terms of s 276(1)(i) of the Criminal Procedure Act, 51 of 1977. On appeal to the Cape High Court (Louw J, Zondi AJ concurring) his conviction was confirmed but the sentence was altered to one of three years imprisonment in terms of s 276(1)(i) of the Act. This appeal, with leave of the court a quo, is against the conviction only. [2] It is common cause that a head-on collision occurred on 31 January 1998 between the motor vehicle driven by the appellant and that driven by Mr Douglas. The appellant was the sole occupant of his car whereas Douglas had his wife, daughter and son, Marius, as passengers in his car. Marius, who was badly injured and hospitalized for several months, and the appellant were the only survivors of the accident. [3] It was further common cause that the collision took place on Douglas’s side of the road and the appellant’s wrong side of the road. The appellant was driving from his friend’s home out of Stellenbosch while the Douglas family was driving in the opposite direction into Stellenbosch. [4] The appellant’s defence is succinctly captured by his counsel in his heads of argument: ‘Gegewe die feite in die onderhawige saak het Appellant getuig dat hy die oorledene se voertuig waargeneem het op `n afstand van `n 100 meter, die voertuig het oor beweeg na sy baan, hy het remme getrap wat veroorsaak het dat sy voertuig oor beweeg het na die regter baan terwyl die oorledene op sy beurt weer teruggekeer het na die linker baan wat `n kop aan kop botsing veroorsaak het.’ [5] The state relied on the evidence of four witnesses. The first was a Mr Davids, who testified that he was driving his employer’s vehicle at the Old Helshoogte Road and Kahler Street junction. He had the right of way. The appellant entered the junction without stopping. Davids applied his brakes and just managed to avoid a collision. The appellant, slouched heavily towards the front passenger’s seat with his head leaning on one shoulder, simply drove on as if nothing had happened. Davids was now heading in the same direction as the appellant and witnessed him ignoring another stop sign. He further noticed appellant’s vehicle traveling in a zigzag fashion on a straight road. The appellant inexplicably from time to time accelerated or slowed down. Davids reckoned that the appellant posed a danger to other road users and, by way of his municipal car radio, notified the traffic police accordingly, before he turned off in another direction. [6] Ms Lambrechts and Ms Nel, sisters, testified that they were driving in Bird Street, Stellenbosch and heading towards Koelenhof. While waiting at a red traffic light they noticed the appellant approaching from their right in Bell Street. He turned into Bird Street and in doing so narrowly missed colliding with the kerb on his left and with vehicles traveling in the opposite direction in Bird Street. The appellant tilted perceptibly towards the passenger’s seat during his driving. The ladies drove behind him. They observed him speed away and then reduce speed for no apparent reason. His vehicle also swerved from side to side even though he managed to keep it in his correct lane. Ms Nel, who was the passenger, noted the registration of the appellant’s vehicle because she and Ms Lambrechts who was driving, realized that they were witnessing an accident waiting to happen. According to the sisters the appellant sped away as they were approaching a bend. They lost sight of him momentarily at that point and then heard a bang. When they came around the bend they realized that a collision had occurred and when another vehicle stopped at the scene they turned around in order to report the matter to the police. [7] The crucial witness for the State was the surviving member of the Douglas family, Marius. He was accused by the defence of concocting a version. The magistrate found him to be an honest and credible witness. There is no reason to differ from this finding. [8] Marius’s acceptable and accepted evidence boils down to the following. His father was the driver of their car and he was the front passenger. He was 16 years old at that stage. The family was on their way to have dinner with a relative. They were on time and his father drove normally (‘binne perke … en rustig’), although he was unsure of the exact speed. His father kept to his correct side of the road throughout. He became aware of the appellant’s vehicle when it was practically upon them on their side of the road. As Marius was not the driver there was no need for him to have been vigilant and to have become aware of the impending danger before he actually did. Counsel’s criticism of him in this regard is unfounded. What is certain is that if his father’s vehicle had swerved in the violent fashion described by the appellant and at high speed, he would have been aware of it. [9] The magistrate also found Davids and the two sisters to be credible witnesses. It is significant that they all described, in essentially similar terms, the erratic manner in which appellant was driving at different locations. All these witnesses alluded to the contorted posture that the appellant adopted while driving. This points to the fact that the appellant, for whatever reason, was not fully in control of himself, let alone his vehicle. [10] On the other hand the appellant stated that he had three or four glasses of wine over a period of some six hours, during which he also had a meal, at his friend’s place. He over-elaborated on how carefully he drove from his friend’s home and even recalled how considerate he was at the stop streets and the robots, what speeds he travelled at, where he accelerated and why. He denied that he was drunk or that he drove in the manner described by the witnesses. He described his extraordinary posture to a chronic back problem. He acknowledged that at one stage he drove on the edge of the road but explained that he did so to pick up his cell phone from the front passenger’s seat when it was ringing. [11] The appellant blamed Douglas for causing the accident and stated that all he did was to take emergency evasive action in the manner and for the reason described in para 4 above. His counsel submitted that support for his version is to be found in the brake marks which were unbroken for a distance of 15 meters and started on the appellant’s side of the road leading up to the point of impact on his incorrect side of the road. [12] The magistrate was not impressed with the appellant’s evidence and rejected it as not being reasonably possibly true. Appellant’s concession concerning his awkward posture in the vehicle, his driving on the edge of the road and his erratic driving lends credence to the truthfulness of the evidence given by Davids and the two sisters. [13] The magistrate carefully evaluated the evidence of all witnesses. He was of the view that appellant’s erratic driving and awkward posture indicated intoxication. He gave reasons for such finding and did not misdirect himself in any way. In fact, in his heads of argument, appellant’s counsel conceded that the appellant was possibly drunk. He stated: ‘Dit word nietemin toegegee dat die Appellant in die lig van die getuienis van Davids en die twee susters moontlik onder die invloed van drank was. Gevolglik moet hy, met respek aan daardie oortreding skuldig bevind word.’ [14] Appellant’s counsel argued furthermore that there was no reason for the appellant to have braked, as he did, leaving the oblique tyre burn marks across the road, if something untoward had not been noticeable in the driving of Douglas. There may have been some merit in this submission had it not been for the fact that according to his own evidence the appellant was driving at about 120 km per hour immediately before the collision and had consistently shown lack of control over his vehicle; and had it not been for the credible evidence of Marius to the effect that there was nothing untoward in the driving of Douglas. In the light of that evidence we cannot find that the magistrate was not correct in concluding that the negligence of the appellant had been established. [15] I make the following order: The appeal is dismissed. ________________________ F D KGOMO ACTING JUDGE OF APPEAL CONCUR: ) MPATI AP ) STREICHER JA ) HEHER JA ) LEACH JA

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 2 June 2008 Status: Immediate P LANGEVELDT v THE STATE Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal In a judgment delivered today, the Supreme Court of Appeal dismissed the appellant’s appeal against his conviction of culpable homicide. The appellant, a 49-year old man, was convicted in the Stellenbosch Regional Court on 22 July 2002 of culpable homicide arising from the negligent or reckless driving of a motor vehicle. Three members of the Douglas family (husband, wife and daughter), who were in the car driven by Mr Douglas died in the accident. The appellant contended that Mr Douglas (who was also killed) caused the accident by having swerved into appellant’s path and back into his (the deceased’s) correct side of the road where the collision took place. Appellant maintained Mr Douglas caused a ‘sudden state of emergency’ which resulted in the appellant making the wrong choice and thus causing the accident. In dismissing the appeal the SCA pointed out that the conclusion of the regional magistrate, with which the High Court agreed, was based largely on factual and credibility findings emanating from the evidence of various State witnesses and the discredited evidence of the appellant. The SCA found that Mr Douglas kept to his correct lane throughout and that the appellant, who had driven dangerously over some distance, drove directly into the path of Mr Douglas, recklessly causing the head-on collision that claimed the lives of the aforesaid Douglas family, from which only a fourth member survived. (Appellant did not appeal against his three years imprisonment sentence).

3478

non-electoral

2020

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Reportable Case no: 6/2020 In the matter between: NATIONAL UNION OF METAL WORKERS OF SOUTH AFRICA FIRST APPELLANT THE FURTHER DEFENDANTS AS SET OUT IN PLAINTIFFS’ COMBINED SUMMONS AND THE ANNEXURES THERETO SECOND TO ONE HUNDRED AND SIXTY THIRD APPELLANT and DUNLOP MIXING AND TECHNICAL SERVICES (PTY) LTD FIRST RESPONDENT DUNLOP BELTING PRODUCTS (PTY) LTD SECOND RESPONDENT DUNLOP INDUSTRIAL HOSE (PTY) LTD THIRD RESPONDENT Neutral citation: National Union of Metal Workers of South Africa and Others v Dunlop Mixing and Technical Services (Pty) Ltd and Others (Case no 6/2020) [2020] ZASCA 161 (7 December 2020) Coram: WALLIS, MOLEMELA, SCHIPPERS, DLODLO JJA and GOOSEN AJA Heard: 13 November 2020 Delivered: This judgment was handed down electronically by circulation to the parties’ legal representatives by email. It has been published on the Supreme Court of Appeal website and released to SAFLII. The date and time for hand-down is deemed to be 09h45 on 7 December 2020. Summary: Interpretation of statutes –– whether s 11 of the Regulation of Gatherings Act 205 of 1963 applies to a picket authorised by a registered trade union pursuant to s 69 of the Labour Relations Act 66 of 1995 (LRA) ––picket under the LRA is not a gathering - Regulations of Gatherings Act inapplicable – appeal upheld. ORDER On appeal from: KwaZulu-Natal Division of the High Court, Pietermaritzburg (Van Zyl J, sitting as court of first instance). 1. The appeal is upheld with costs, including the costs consequent upon the employment of two counsel. 2. The order of the high court is set aside and replaced with the following order: ‘1. An authorised picket in terms of s 69(1) of the Labour Relations Act 66 of 1965 is not a gathering to which s 11 of the Regulation of Gatherings Act 205 of 1993 is applicable. 2. The plaintiffs are ordered to pay the costs of the preparation and argument of the special case, such costs to include those consequent upon the employment of two counsel.' JUDGMENT Goosen AJA (Wallis, Molemela, Schippers and Dlodlo JJA concurring) [1] Is a picket, organised by a trade union in furtherance of a protected strike, a ‘gathering’ to which the provisions of the Regulation of Gatherings Act, 205 of 1993 (the Gatherings Act) apply? That is the central question in this appeal. The Kwazulu-Natal Division of the High Court, Pietermaritzburg, Van Zyl J, held in the affirmative. [2] The question came before the high court in the following circumstances. The first appellant is a registered trade union. Its members are employed by the respondents at their plants in Howick, KwaZulu-Natal. On 4 July 2012 the first appellant referred a labour dispute to the Commission for Conciliation Mediation and Arbitration (the CCMA). The dispute remained unresolved and the CCMA duly issued a certificate of outcome to that effect. The first appellant accordingly gave notice of the intention of its members to embark upon strike action. [3] In furtherance of the strike action, the first appellant authorised the holding of a picket outside the premises of the respondents at Induna Mill Road, Howick. On 22 August 2012, the picket allegedly became a violent demonstration in which damage to property resulted. That day, the Labour Court issued an order, at the instance of the respondents, restraining the appellants from engaging in unlawful acts. The order included a ‘perimeter order’ prohibiting the holding of a picket within 50 metres of the access road to the respondents’ premises. Between 22 August and 27 September 2012, various acts of violence are alleged to have occurred, resulting in damage to property owned by the respondents and its employees. [4] On 23 May 2013, the respondents issued summons against the appellants for damage to property and the costs of security services. The claims allegedly constituted ‘riot damage’ as contemplated in s 11 of the Gatherings Act. The appellants’ defence, in sum, was this. The picket was one in furtherance of a protected strike, authorised in terms of s 69 of the Labour Relations Act, 66 of 1995 (the LRA). The Gatherings Act does not apply and the claims, if any, are to be adjudicated by the Labour Court. In any event, s 67(2) of the LRA confers upon the appellants immunity from civil claims of the sort instituted. [5] The parties agreed that the following legal questions be separately adjudicated by the high court upon agreed facts, namely whether: a) The picket convened by the first appellant constituted a gathering to which the provisions of the Gatherings Act are applicable at all, and, if so b) Whether the appellants are entitled to claim immunity from the civils claims in terms of the LRA? [6] The hearing on the separated issues took place before Van Zyl J on 19 August 2015. Judgment was delivered on 13 September 2019. The high court answered the first question in the affirmative. It made no order in relation to the second question, holding that it was a matter to be determined by the trial court in due course. Leave to appeal to this court was granted on 18 December 2019. The provisions of the LRA [7] Chapter IV of the LRA regulates and gives effect to the right to strike guaranteed by s 23(2) of the Constitution. It provides in ss 64 to 66 for the types of disputes in respect of which strike action may be called; the procedures to be followed; and for secondary strike action. Section 67, in its relevant part, provides that: ‘(1) In this Chapter, “protected strike” means a strike that complies with the provisions of this Chapter and “protected lock-out” means a lock-out that complies with the provisions of this Chapter. (2) A person does not commit a delict or a breach of contract by taking part in – (a) a protected strike or a protected lock-out; or (b) any conduct in contemplation or in furtherance of a protected strike or a protected lock-out. (3) to (5) … (6) Civil legal proceedings may not be instituted against any person for – (a) participating in a protected strike or protected lock-out; or (b) any conduct in contemplation or in furtherance of a protected strike or protected lock-out. (7) … (8) The provision of subsections (2) and (6) do not apply to any act in contemplation or in furtherance of a strike or a lock-out, if that act is an offence.’ [8] Section 68, in its relevant part, provides further that: ‘(1) In the case of any strike or lock-out, or any conduct in contemplation or in furtherance of a strike or lock-out, that does not comply with the provisions of this Chapter, the Labour Court has exclusive jurisdiction – (a) To grant an interdict or order to restrain – (i) any person from participating in a strike or any conduct in contemplation or in furtherance of a strike; or (ii) any person from participating in a lock-out or any conduct in contemplation or in furtherance of a lock-out; (b) to order the payment of just and equitable compensation for any loss attributable to the strike or lock-out, or conduct, having regard to – (i) whether – (aa) attempts were made to comply with the provisions of this Chapter and the extent of those attempts; (bb) the strike or lock-out or conduct was premeditated; (cc) the strike or lock-out or conduct was in response to unjustified conduct by another party to the dispute; and (dd) there was compliance with an order granted in terms of paragraph (a); (ii) the interests of orderly collective bargaining; (iii) the duration of the strike or lock-out or conduct; and (iv) the financial position of the employer, trade union or employees respectively. [9] Section 69 deals with picketing. The section underwent significant amendment in 2014 and 2019 in relation to the establishment of picketing rules by agreement between parties to a labour dispute or by the CCMA where no such agreement can be achieved.1 It is not necessary to deal with these provisions, which were inapplicable when the events in issue here occurred. In its relevant part, the section provides as follows. ‘(1) A registered trade union may authorise a picket by its members and supporters for the purposes of peacefully demonstrating – (a) in support of any protected strike; or (b) in opposition to any lock-out. (2) Despite any law regulating the right of assembly, a picket authorised in terms of subsection (1) may be held – (a) in any place to which the public has access but outside the premises of an employer; or (b) with the permission of the employer, inside the employer’s premises.’ The provisions of the Gatherings Act [10] Section 17 of the Constitution guarantees to everyone ‘the right, peacefully and unarmed, to assemble, demonstrate, to picket and to present 1 See the Labour Relations Amendment Acts 6 of 2014 and 8 of 2018. The latter introduced a number of provisions regarding the powers of the CCMA to determine picketing rules. Most significant, it introduced subsection (6A) which provides that the commissioner conciliating a dispute must determine picketing rules at the same time as issuing a certificate as contemplated by s 64 (1) (a), ie the certificate that would entitle a trade union to embark upon strike action. petitions’. The Gatherings Act2 gives expression to this constitutionally guaranteed right. It does so by providing a procedure for the convening of gatherings and demonstrations; the giving of notice of a gathering; requiring consultations and negotiations to ensure that the conduct of a gathering proceeds peaceably and that the rights of all parties are protected; and by providing for liability in certain circumstances. [11] For present purposes, it is necessary to highlight certain defined terms which occur in the Gatherings Act. [12] A ‘demonstration’ includes any ‘demonstration by one or more persons, but not more than 15 persons, for or against any person, cause, action or failure to take action’. A ‘gathering’ means, ‘any assembly, concourse or procession of more than 15 persons in or on any public road … or any public place or premises wholly or partly open to the air – (a) at which the principles, policy, actions or failure to act of any government, political party or political organization, whether or not that party or organization is registered in terms of any applicable law, are discussed, attacked, criticized, promoted or propagated; or (b) held to form pressure groups, to hand over petitions to any person, or to mobilize or demonstrate support for or opposition to the views, principles, policy, actions or omissions of any person or body of persons or institution, including any government, administration or governmental institution.’ [13] Chapter 1 deals with procedures for the convening of gatherings. The procedure involves the interaction of three key persons. Firstly, an organisation or a group of persons wishing to convene a gathering is required 2 The Gatherings Act was assented to on 14 January 1994 at a time when the Interim Constitution (Act 104 of 1993) made provision for the right of assembly. It came into operation on 15 November 1996, after the adoption of the Constitution 1996. to appoint a ‘convener’ and a deputy whose responsibility it is to give notice of the gathering and to represent the organisation of group in its interaction with public officials. Secondly, the local authority, in whose area a gathering is to be held, is required to appoint a ‘responsible officer’ and a deputy whose task it is to exercise the powers and discharge the duties of a responsible officer as defined by the Gatherings Act. Thirdly, the Commissioner of the South African Police is required to appoint and designate an ‘authorised member’ of the South African Police, whose task it is to represent the police in the course of any consultations or negotiations relating to the holding of a gathering or its conduct. [14] Section 3 provides that the convener of a gathering shall give written notice of the intended gathering. Such notice is to be given to the responsible officer of the local authority concerned not later than seven days prior to the holding of the gathering. [15] Subsection (3) sets out the requirements for the giving of proper notice of a gathering. It requires that: 'The notice referred to in subsection (1) shall contain at least the following information: (a) The name, address and telephone and facsimile numbers, if any, of the convener and his deputy; (b) the name of the organization or branch on whose behalf the gathering is convened or, if it is not so convened, a statement that it is convened by the convener; (c) the purpose of the gathering; (d) the time, duration and date of the gathering; (e) the place where the gathering is to be held; (f) the anticipated number of participants; (g) the proposed number and, where possible, the names of the marshals who will be appointed by the convener, and how the marshals will be distinguished from the other participants in the gathering; (h) in the case of a gathering in the form of a procession – (i) the exact and complete route of the procession; (ii) the time when and the place at which participants in the procession are to assemble, and the time when and the place from which the procession is to commence; (iii) the time when and the place where the procession is to end and the participants are to disperse; (iv) the manner in which the participants will be transported to the place of assembly and from the point of dispersal; (v) the number and types of vehicles, if any, which are to form part of the procession; (i) if notice is given later than seven days before the date on which the gathering is to be held, the reason why it was not given timeously; (j) if a petition or other document is to be handed over to any person, the place where and the person to whom it is to be handed over.' [16] The rest of the chapter deals with consultations and negotiations between the parties involved; the imposition of conditions to which the gathering may be subject; judicial proceedings relating to such conditions, and the prohibition of gatherings in certain circumstances. [17] Chapter 4, which is relevant to the present matter, deals with civil and criminal liability which may arise from the convening of a gathering. Section 11 provides that: ‘(1) If any riot damage occurs as a result of- (a) a gathering, every organization on behalf of or under the auspices of which that gathering was held, or, if not so held, the convener; (b) a demonstration, every person participating in such demonstration, shall, subject to subsection (2), be jointly and severally liable for that riot damage as a joint wrongdoer contemplated in Chapter II of the Apportionment of Damages Act, 1956 (Act No. 34 of 1956), together with any other person who unlawfully caused or contributed to such riot damage and any other organization or person who is liable therefor in terms of this subsection. (2) It shall be a defence to a claim against a person or organization contemplated in subsection (1) if such person or organization proves – (a) that he or it did not permit or connive at the act or omission which caused the damage in question; and (b) that the act or omission in question did not fall within the scope of the objectives of the gathering or demonstration in question and was not reasonably foreseeable; and (c) that he or it took all reasonable steps within his or its power to prevent the act or omission in question: Provided that proof that he or it forbade any act of the kind in question shall not by itself be regarded as sufficient proof that he or it took all reasonable steps to prevent the act in question. (3) For the purposes of – (a) recourse against, or contribution by, any person who, or organization which, intentionally and unlawfully caused or contributed to the cause of any riot damage; or (b) contribution by any person who, or organization which, is jointly liable for any riot damage by virtue of the provisions of subsection (1), any person or organization held liable for such damage by virtue of the provisions of subsection (1) shall, notwithstanding the said provisions, be deemed to have been liable therefor in delict. (4) The provisions of this section shall not affect in any way the right, under the common law or any other law, of a person or body to recover the full amount of damages arising from the negligence, intentional act or omission, or delict of whatever nature committed by or at the behest of any other person. [18] The term ‘riot damage’ is defined to mean ‘any loss suffered as a result of any injury to or the death of any person, or any damage to or destruction of any property, caused directly or indirectly by, and immediately before, during or after, the holding of gathering’. The findings of the high court [19] The high court found that the provisions of the LRA and the Gatherings Act are reconcilable and are not in conflict. It found that the participants in a protected strike and duly authorised picket would enjoy the protection afforded by s 67(2) for so long as they did not commit any act amounting to an offence. In the event that they did, then they would become liable to prosecution and to payment of delictual damages. In the event of a delictual claim, they would be entitled to raise the defences provided by s 11(2) of the Gatherings Act. [20] In coming to this conclusion, the high court relied upon the judgment in South African Transport and Allied Workers Union v Garvas and Others [2012] ZACC 13; 2013 (1) SA 74 (CC) (SATAWU (CC)) at para 56 where the majority held that: ‘Section 11 (1) holds organisers of a gathering liable for riot damage subject to section 11(2), which provides a limited defence to a claim of this kind. The effect of these specific provisions, in the context of the Act as a whole, is to render holders of a gathering organised with peaceful intent liable for riot damage on a wider basis than is provided for under the law of delict. This is all the more so given the extremely wide definition of riot damage in the Act.’ [21] The high court found that the Constitutional Court did not consider that the provisions of s 11(1) of the Gatherings Act were irreconcilable with the provisions of the LRA. [22] The high court’s reliance upon SATAWU (CC) was misplaced. That matter is entirely distinguishable on the facts. In that matter, the trade union had, in the context of a protracted strike in the transport industry, convened a march in terms of the Gatherings Act. Notice of the intended procession had been given in terms of s 3 of the Gatherings Act; the route had been determined; marshals were appointed; and the trade union as convener had participated in discussions with the responsible authority in the local authority and the authorised member in the Police Service. [23] On the day of the procession extensive damage was caused to several small and other businesses, allegedly by participants in the procession. Some of the persons affected thereby instituted action against the conveners of the march in terms of s 11 of the Gatherings Act. SATAWU pleaded, inter alia, that the words ‘was not reasonably foreseeable’ in s 11(2)(b) of the Gatherings Act limited the right to freedom of assembly and rendered the section constitutionally invalid. This issue was determined against SATAWU by the high court. The Supreme Court of Appeal in South African Transport and Allied Workers Union v Garvas and Others [2011] ZASCA 152; 2011 (6) SA 382 (SCA), dismissed the appeal. In the Constitutional Court the issue which fell to be decided was whether s 11(2) of the Gatherings Act unjustifiably limited the right of assembly guaranteed by the Constitution. The Constitutional Court was not concerned with the interplay between the Gatherings Act and the LRA, nor was it required to address the question whether there was a conflict between the two Acts. It was not dealing with the question whether a claim arising from riot damage lay against the organisers of a picket in the context of a protected strike. [24] The high court’s finding that the provisions of the LRA and the Gatherings Act are not in conflict was not premised upon an analysis and interpretation of the provisions of the respective Acts. Its reasoning proceeded on the basis that the ‘immunity’ provided by ss 67(2) and 67(6) must be read with s 67(8). This latter subsection provides that the ‘immunity’ does not apply in the event the conduct complained of, amounts to an offence. In such event the conduct would fall outside of the ambit of what is permitted by s 69 of the LRA. On this basis, it was found that liability would arise under s 11 of the Gatherings Act. [25] The high court did not deal with s 68 of the LRA. Subsection (1)(b) of that section, as recorded above, provides that the Labour Court has exclusive jurisdiction to order the payment of just and equitable compensation for any loss attributable to conduct which does not comply with the provisions of the LRA. The contentions of the parties [26] Counsel for the appellants argued that the high court had not only misconstrued the effect of the arguments advanced before it regarding the protection afforded by s 67(2) of the LRA, it had erred in finding that the provisions of the LRA and the Gatherings Act were not in conflict. [27] It was submitted that the appellants were not arguing for a blanket immunity from claims such as those pursued by the respondents. On the contrary, such claims would be cognisable in proceedings before the Labour Court on the basis of s 68(1)(b) which provides for an award of just and equitable compensation. It was argued that the LRA made provision for a specialised regime to cater for the exercise of the right to strike and to engage in conduct in furtherance of such right. This includes the right to picket as a particular expression of the right of assembly. The LRA, so it was submitted, regulated the exercise of this right and provided remedies for the unlawful exercise of such right. The Gatherings Act, on the other hand, constitutes general legislation which has as its purpose the regulation of the right of assembly outside of the ambit of the exercise of that right in the context of strike action permitted by the LRA. Neither the definition of ‘gathering’ nor the procedural requirements for the convening of a gathering find any application in the context of a picket. In the circumstances s 11 does not apply in the event that a picket authorised in terms of the LRA gives rise to injury or damage to property. [28] The respondents argued that the LRA, properly construed, does not deal comprehensively with circumstances such as those in the present case. Liability under s 11 of the Gatherings Act does not depend upon non- compliance with the procedural and other requirements for the convening of a gathering. Section 11 is a separate statutory provision which establishes liability upon the convener or organiser of a gathering in circumstances where riot damage ensues. The definition of a ‘gathering’ is sufficiently broad to encompass a picket authorised in terms of the LRA. It was submitted that the remedy provided by s 68(1)(b) is limited and does not encompass the ordinary delictual remedies available to an aggrieved party. On this basis it was submitted that s 11 provides an ‘additional’ or ‘separate’ remedy to those provided by the LRA. The interpretation of the statutory provisions [29] The essential purpose of the LRA is to give expression to the right of all employees to fair labour practices; to regulate the employment relationship in a manner that balances the rights and interests of the parties thereto; and to provide a purpose-built framework for bargaining, negotiation and dispute resolution. [30] It is apposite to highlight what this court has held in relation to the purpose of the LRA in Motor Industry Staff Association v Macun NO and Others [2015] ZASCA 190; 2016 (5) SA 76 (SCA) at paras 18 – 20: ‘The LRA was enacted, inter alia, to “change the law governing labour relations”, to “give effect to section 23 of the Constitution”, and to “promote and facilitate collective bargaining at the work place and sectorial level”. As noted by Ngcobo J at paragraph 123 of Chirwa …, section 157(2) of the LRA, which deals with where the Labour Court and the High Court have concurrent jurisdiction, has to be construed in the light of the primary objectives of the LRA. The Constitutional Court has put it beyond doubt that the primary objective of that Act was to establish a comprehensive legislative framework regulating labour relations. An allied objective, expressly stated in the preamble to the LRA, was to “establish the Labour Court and Labour Appeal Court as superior courts, with exclusive jurisdiction to decide matters arising from the [LRA]”. … In Chirwa, Ngcobo J indicated that in the light of what is set out above, section 157(2) has to be narrowly construed and that it should be confined to issues where a party relies directly on the provisions of the Bill of Rights. The Constitutional Court, in Gcaba, considered the tensions that might arise in relation to the interpretation of section 157 of the LRA and related provisions. Van der Westhuizen J noted the principle that “legislation must not be interpreted to exclude or unduly limit remedies for the enforcement of Constitutional rights” (para 55). Alongside that, however, is the consideration that “the Constitution recognises the need for specificity and specialisation in a modern and complex society under the rule of law” (para 56). The following paragraph in Gcaba is significant: “. . . Therefore, a wide range of rights and the respective areas of law in which they apply are explicitly recognised in the Constitution. Different kinds of relationships between citizens and the State and citizens amongst each other are dealt with in different provisions. The legislature is sometimes specifically mandated to create detailed legislation for a particular area, like equality, just administrative action (PAJA) and labour relations (LRA). Once a set of carefully crafted rules and structures has been created for the effective and speedy resolution of disputes and protection of rights in a particular area of law, it is preferable to use that particular system. This was emphasised in Chirwa by both Skweyiya J and Ngcobo J. If litigants are at liberty to relegate the finely tuned dispute-resolution structures created by the LRA, a dual system of law could fester in cases of dismissal of employees.” (Footnotes omitted.) The approach to be followed, in summary, is as follows: The LRA is Legislation envisaged by the Constitution. In construing the provisions of the LRA, the two objectives referred to above must be kept in mind. Section 157(2) of the LRA was enacted to extend the jurisdiction of the Labour Court to disputes concerning the alleged violation of any right entrenched in the Bill of Rights which arise from employment and labour relations, rather than to restrict or extend the jurisdiction of the high court. The Labour Court and Labour Appeal Court were designed as specialist courts that would be steeped in workplace issues and be best able to deal with complaints relating to labour practices and collective bargaining. Put differently, the Labour and Labour Appeal Courts are best placed to deal with matters arising out of the LRA.’ [31] Insofar as the interpretation of the provisions of the LRA and the Gatherings Act are concerned, two things flow from these dicta. The first concerns the, by now well-established, approach to the interpretative exercise set out in Natal Joint Municipal Pension Fund v Endumeni Municipality 2012 (4) SA 593 (SCA), which requires that the purpose of the provisions and the context in which they occur guide a holistic interpretation which gives effect to the operation of the legislation concerned. The second aspect requires that where the legislature provides specialised provisions to deal with a particular area of legal relations, they are to be applied in preference to general provisions which cover the same or similar relations (see Sidumo v Rustenburg Platinum Mines Ltd [2007] ZACC 22; 2008 (2) SA 24 (CC) at para 103). [32] As an adjunct to this latter aspect is the principle, endorsed by this court in Minister of Justice and Constitutional Development and Others v Southern African Litigation Centre (Helen Suzman Foundation and Others as Amici Curiae) [2016] ZASCA 17; 2016 (3) SA 317 (SCA) at para 102, that later legislative enactments which manifestly intend to regulate the whole subject matter are to be applied within their own sphere of operation to the exclusion of the earlier provisions. In this instance the LRA constitutes the later enactment. [33] Turning first to the interpretative exercise. A ‘picket’ is not defined by the LRA. In its ordinary meaning, however, a ‘picket’ consists of a group of people who congregate or march outside a shop or factory to protest about something or to prevent other persons from entering. The term ‘picket’ is used, more often than not, in the context of strike action to indicate a ‘barrier’ brought about by the strike action. Its purpose is to further the objects of the strike action by encouraging those employees who have not joined the strike action to do so by withdrawing their labour. A ‘picket-line’ serves to discourage non-striking workers, suppliers and customers from entering the work premises. Picketing has been associated with trade union organisation and worker strikes since the earliest days of industrialisation. By its nature, a picket serves to broaden the impact that the withdrawal of labour of striking workers has upon the employer. It does so by seeking to disrupt operations which would otherwise continue despite the strike. [34] A picket is, accordingly, conduct to which employees may legitimately resort in order to further the objects of strike action. It is for this reason that the LRA seeks to regulate the exercise of the right to picket and to ensure that the interests of both parties to the dispute are balanced in the exercise of that right. This is now achieved by those provisions of s 69 which require the establishment of picketing rules. [35] In order to lawfully engage in a picket, the picket must be authorised by a registered trade union in support of a protected strike. Its purpose must be peaceful and it must occur ‘outside the premises of the employer’ or, with permission, inside the premises of the employer. As long as its purpose is peaceful and it is conducted peacefully in support of or in furtherance of a protected strike, the trade union and the participants in the picket fall within the ambit of the provisions of the LRA and enjoy the protection afforded by ss 67(2) and (6) thereof. [36] Such protection is, however, lost in the event that any act, constituting an offence, is committed in furtherance of a strike. Conduct which does not comply with the provisions of the Chapter regulating strike action, renders the party responsible for such conduct liable, in terms of s 68(1), to remedies which the Labour Court may impose. [37] Having regard to the purpose of these provisions, read within their context, this must mean that conduct committed during the course of an otherwise lawfully convened picket which constitutes an offence, renders the person or persons or organisation responsible for such conduct liable to such orders as may be made pursuant to s 68 of the LRA. [38] Counsel for the respondents conceded that the general provisions of the Gatherings Act do not, and cannot, apply to a picket authorised in terms of the LRA. Thus it was accepted that the notice provision in s 3 of the Gatherings Act can find no application to a picket; nor do the provisions which stipulate particular roles and responsibilities for ‘responsible authorities’ appointed by a local authority in whose area a picket is held. It is also not conceivable that a picket can be prohibited in terms of s 5 of the Gatherings Act in the light of the clear and unambiguous provisions of s 68(1)(a) of the LRA. [39] Counsel argued however, that the use of the phrase ‘despite any law regulating the right of assembly’ in s 69(2) of the LRA excludes only the procedural requirements which otherwise apply to a gathering convened in terms of the Gatherings Act. The phrase, it was submitted, suggests that a picket is nevertheless to be regarded as a gathering within the broad definition of that term in the Gatherings Act. Counsel submitted that liability, in terms of s 11 of the Gatherings Act, is not contingent upon non-compliance with any of the provisions of that Act. It arises upon the occurrence of riot damage as a result of a gathering. Thus, it was argued, s 11 provides a remedy whether or not the gathering is one convened in terms of the Gatherings Act. [40] In developing the argument counsel submitted that the remedy provided by s 68(1)(b) of the LRA, is a statutory one which is limited in its scope. It is therefore to be construed as a remedy provided in addition to the ordinary remedies available in delict or other statutory remedies for conduct giving rise to damage. [41] The essential difficulty with this proposition is that it requires a finding that a picket, as a particular type of gathering or demonstration, while not otherwise regulated by the provisions of the Gatherings Act, nevertheless falls within the ambit of s 11 for purposes of liability for ‘riot damage’. This would require that s 11 be abstracted from the Gatherings Act and construed as a wholly separate statutorily sanctioned cause of action available to a party suffering damage consequent upon a picket authorised in terms of the LRA. To hold thus would require that this court ignores both the detailed regulation of gatherings in terms of the Gatherings Act and the comprehensive regulation of conduct in furtherance of strike action by the LRA. It would also require that later legislative enactments specifically designed to deal with pickets and picketing within the context of a labour dispute do not supersede earlier legislative provisions enacted for a wholly different and more general purpose. [42] There is, in my view, no basis for such a strained interpretation of the respective Acts. Whilst a picket linguistically may fall within the ambit of what constitutes a gathering, it remains a particular form of organised expression which is central to the exercise of the right to strike. The LRA recognises this by making detailed provision for the exercise of that right. It does so by providing for the establishment of picketing rules and for a mechanism by which disputes relating to such rules may be resolved. It deals with picketing within the context of protected strikes and lock-outs and specifically provides for the consequences of conduct which does not comply with the LRA. [43] The inclusion of the phrase ‘despite any law regulating the right of assembly’ is one introduced ex abundanti cautela to signify what the section already makes plain, namely, that the convening of a picket is regulated by the provisions of the LRA. Its inclusion does not suggest that a picket is, for purposes other than the organising thereof, to be regarded as a gathering to which the Gatherings Act applies. If that had been the intention, no doubt the section would have stated as much. [44] The Gatherings Act is general legislation which gives effect to the constitutional right of assembly. It establishes a set of procedures which have as their purpose the balancing of the rights of parties affected by the exercise of the right of assembly. It provides protection for those parties and, in circumstances where riot damage occurs, provides a remedy as well as a set of defences. As was noted by the Constitutional Court in SATAWU (CC) at para 38: ‘Gatherings, by their very nature, do not always lend themselves to easy management. They call for extraordinary measures to curb potential harm. The approach adopted by Parliament appears to be that, except in the limited circumstances defined, organisations must live with the consequences of their actions, with the result that harm triggered by their decision to organise a gathering would be placed at their doorsteps. This appears to be the broad objective sought to be achieved by Parliament through section 11. The common-law position was well known when section 11 was enacted. The limitations of a delictual claim for gatherings-related damage in meeting the policy objective gave rise to the need to enact section 11 to make adequate provision for dealing with the gatherings-related challenges of our times.’ [45] It is equally true that the legislature was aware of the existence of the provisions of the Gatherings Act when it enacted the LRA and made specific provision for the convening of pickets and for recourse in the event that a picket or conduct in furtherance of strike action gives rise to loss. [46] The LRA deals comprehensively with the subject matter of picketing as a form of demonstration in the context of strike action. Accordingly, s 11 of the Gatherings Act does not apply to claims for loss attributable to conduct committed during the course of a picket authorised in terms of the LRA. It follows that the question reserved for determination by the high court ought to have been answered in the negative. In the light of this it is unnecessary to consider the second question relating to the availability of the defences provided by s 67 of the LRA. [47] Regrettably, it is necessary to deal with the fact that Van Zyl J took four years to deliver his judgment in this matter. The judgment provides no explanation for this extraordinary delay. We were informed by counsel that whereas the underlying labour dispute had long since been resolved, the consequences, in the form of the civil litigation, are self-evidently not. The prejudice caused by a delay of four years in determining an antecedent legal issue in the action, is manifest. How it can have taken the judge four years to decide this issue and to deliver his judgment defies understanding. If there was a reasonable explanation or excuse it ought to have been set out in the judgment. It is, after all, on the basis of the judgments delivered by judges that they are held accountable for the administration of justice under their auspices. [48] The absence of any explanation by the judge concerned suggests that there is none. A four-year delay in the delivery of a judgment constitutes an unconscionable dereliction of duty on the part of the judge. It is a matter which ought to enjoy the consideration of the Judge President of the Division concerned. The order [49] In the result I make the following order: 1. The appeal is upheld with costs, including the costs consequent upon the employment of two counsel. 2. The order of the high court is set aside and replaced with the following order: ‘1. An authorised picket in terms of s 69(1) of the Labour Relations Act 66 of 1965 is not a gathering to which s 11 of the Regulation of Gatherings Act 205 of 1993 is applicable. 2. The plaintiffs are ordered to pay the costs of the preparation and argument of the special case, such costs to include those consequent upon the employment of two counsel.' ________________________ G. GOOSEN ACTING JUDGE OF APPEAL Appearances For appellants: M. Pillemer SC & P. Schumann Instructed by: Brett Purdon Attorneys, Durban. Phatshoane Henney Attorneys, Bloemfontein. For respondents: C. Watt-Pringle SC & A. Cook Instructed by: Farrell & Associates, Durban. Rossouws, Bloemfontein.

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL FROM: The Registrar, Supreme Court of Appeal DATE: 7 December 2020 STATUS: Immediate Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal. NUMSA and Others v Dunlop Mixing and Technical Services (Pty) Ltd and Others (6/2020) [2020] ZASCA 161 (7 December 2020) The Supreme Court of Appeal (the SCA) today upheld an appeal against an order by the KwaZulu-Natal Division of the High Court, Van Zyl J, that section 11 of the Regulation of Gatherings Act, 205 of 1993 (the Gatherings Act) applies to a picket authorised in terms of the Labour Relations Act, 66 of 1995 (the LRA). During August 2012 members of the National Union of Metal Workers of South Africa (NUMSA) who were employed by Dunlop Technical Services (Pty) Ltd and its associated companies (Dunlop) embarked upon a protected strike. On 22 August 2012 a picket authorised by NUMSA at the Dunlop plants at Howick, KwaZulu-Natal became violent, resulting in damage to property. The picket was authorised in terms of s 69 (1) of the LRA. On 23 May 2013 Dunlop instituted a claim for damages against NUMSA and its members involved in the strike action. The claim was founded on s 11 of the Gatherings Act which provides for liability of a convener of a gathering in circumstances where riot damage results from such gathering. NUMSA defended the action and pleaded that s 11 of the Gatherings Act does not apply to a picket which is authorised in furtherance of a protected strike. It asserted that the LRA is specialist legislation which serves to regulate labour disputes; that the picket was regulated by the provisions of the LRA and that the Labour Court enjoys exclusive jurisdiction to deal with conduct which is not in accordance with the provisions of the LRA. NUMSA further asserted that the LRA provides immunity from civil claims which arise from conduct in furtherance of a protected strike. The parties agreed that this aspect be separately adjudicated by the high court. Van Zyl J, who heard the matter on 19 August 2015, delivered his judgment on 13 September 2019, ruling that s11 of the Gatherings Act applies to a picket authorised in terms of the LRA. The SCA found that a picket is not a gathering for the purposes of s 11 of the Gatherings Act. It found that the LRA makes comprehensive provision for conduct in furtherance of a strike, including the holding of a picket. A picket is a long established form of conduct to further the objects of strike action. The Gatherings Act consists of general legislation which gives effect to the constitutionally protected right of assembly. None of the procedural or other substantive provisions of the Gatherings Act have any application to a picket authorised in terms of s 69 of the LRA. The SCA found that precedence must be given to specialist and later legislation which seeks to regulate legal relations within its own sphere of operation. Since the LRA also provides for liability in the event that conduct does not comply with the LRA, legal principle requires that the provisions of the LRA apply to the exclusion of the Gatherings Act. The SCA therefor set aside the high court’s order and substituted it for an order that s 11 of the Gatherings Act does not apply. The SCA noted that the judgment in the high court was delivered 4 years after the matter was argued. It noted that the judge had provided no explanation for such an extraordinary delay in his judgment. The absence of such explanation, which ought to have been provided, indicated that no reasonable explanation could be provided. In the circumstances it found that the delay constituted an unconscionable dereliction of duty on the part of the judge. It suggested that the Judge President of the Division ought to act upon the matter.

3299

non-electoral

2006

IN THE SUPREME COURT OF APPEAL OF SOUTH AFRICA REPORTABLE Case no: 164/2005 In the matter between SIAS SMITH APPELLANT and THE ROAD ACCIDENT FUND RESPONDENT Coram: MPATI DP, NAVSA, CONRADIE, LEWIS and HEHER JJA Heard: 27 FEBRUARY 2006 Delivered: 17 MARCH 2006 Summary: Motor Vehicle Insurance – Road Accident Fund Act 56 of 1996 – liability of Fund to indemnify negligent defendant. Damages – Apportionment of Damages Act 34 of 1956, s 2(1) – whether Road Accident Fund a joint wrongdoer with negligent defendant. Neutral citation: This judgment may be referred to as S Smith v RAF [2006] SCA 12 (RSA). ____________________________________________________________________ _ JUDGMENT ____________________________________________________________________ _ HEHER JA HEHER JA: [1] A plaintiff who is unable to identify a defendant cannot pursue a cause of action. Motor vehicle accidents lend themselves to drivers who disappear and leave their victims without recourse. In 1964 the legislature, recognizing the social inequity of such cases, provided for payment of compensation from a fund where the identity of the owner or driver could not be established. All succeeding legislation has made equivalent provision, that presently in force being s 17(1)(b) of the Road Accident Fund Act 56 of 1996. In this matter the appellant seeks to extend the right of recourse against the Road Accident Fund to a negligent driver who is sued by a third party (as defined in s 17(1)) in the circumstances described below. [2] In the High Court of the Eastern Cape Mary Pedro claimed payment of R2 563 728,20 from the appellant as damages for injuries sustained by her while being conveyed as a fare-paying passenger in a vehicle negligently driven by the appellant. The amount of her claim took into account an amount of R25 000 paid by the Fund in accordance with its liability under s 18(1)(b) of the Act. The appellant defended the action. In his plea he alleged that the collision was caused wholly or in part by a Sentra vehicle and/or a Mazda vehicle and that the details of the registration, owners and drivers of the two vehicles were unknown to him. [3] The appellant caused a third party notice in terms of rule 13(1) to be served on the Fund in which he alleged that the Fund was obliged by s 17(1) of the Act to compensate Pedro for the loss or damage she had suffered as a result of her bodily injuries1. However, if the court were to find that he had negligently contributed to the incident and to the injuries thus sustained, then, so the appellant alleged, he and the Fund would be joint wrongdoers as against the plaintiff, save that he would be excused by the provisions of 21 of the Act, read together with 18, thereof from liability for the first R25 000,00 of any damages suffered by the plaintiff. Accordingly the appellant sought a conditional order ‘1. Declaring that the Defendant and the [Fund] are joint wrongdoers as against the Plaintiff; 2. Determining the respective degrees of blame of the Defendant and the [Fund]; 3. Declaring that in the event of the Defendant effecting payment to the Plaintiff of such amount as might be awarded in favour of the Plaintiff against the Defendant, then and in that event the Defendant will be entitled to recover so much thereof as equates to the percentage degree of blame of the Defendant; 4. An appropriate award as to costs, including the costs of the Plaintiff’s action against the Defendant.’ The Fund disputed the entitlement of the appellant to join it as a joint wrongdoer and to claim relief based on such a joinder. The dispute was tried between the Fund and the appellant as a preliminary issue at the trial. [4] The court a quo upheld the objections of the Fund and dismissed the claims in the third party notice with costs. The judgment of Liebenberg J is reported sub nom Smith v Road Accident Fund at [2004] 4 All SA 579(E). The appellant now appeals with leave of that court against its order. 1 ‘17(1) The Fund or an agent shall- (a) subject to this Act, in the case of a claim for compensation under this section arising from the driving of a motor vehicle where the identity of the owner or the driver thereof has been established; (b) subject to any regulation made under section 26, in the case of a claim for compensation under this section arising from the driving of a motor vehicle where the identity of neither the owner nor the driver thereof has been established, be obliged to compensate any person (the third party) for any loss or damage which the third party has suffered as a result of any bodily injury to himself or herself or the death of or any bodily injury to any other person, caused by or arising from the driving of a motor vehicle by any person at any place within the Republic, if the injury or death is due to the negligence or other wrongful act of the driver or of the owner of the motor vehicle or of his or her employee in the performance of the employee’s duties as employee.’ [5] Certain propositions enunciated by the court a quo have been accepted by appellant’s counsel as correct. They are supported by authority and the legislation and need merely to be stated. 1. The object of the Act is the payment of compensation in accordance with its terms for loss or damage wrongfully caused by the driving of motor vehicles. 2. The effect of the Act is to substitute the Fund as a defendant in place of the wrongdoer. 3. The liability of the Fund is to compensate a person (the third party) who has suffered loss or damage as a result of bodily injury to himself or herself or the death of or any bodily injury to any other person. 4. When the driver or owner of an offending vehicle cannot be identified s 17(1)(b) provides for a claim to be made against the Fund ‘subject to any regulation made under s 26’. 5. The regulations which have been made under s 26 may only be invoked by the third party. 6. Certain of the regulations require strict compliance before the liability of the Fund can arise.2 7. No regulations have been published which may be invoked by or confer benefits on persons in the position of the appellant, ie defendants in proceedings under the Act. [6] The appellant’s counsel did not dispute that to grant the relief sought by his client would be to concede a right to claim against the Fund without the strict compliance with the regulations which is required of the third party before the Fund attracts liability. The court a quo described such a conclusion as ‘unsustainable’. Given the reasons for the existence of strict requirements in unidentified vehicle cases3 that was an appropriate criticism. Before us counsel was unable to urge any 2 Eg reg 2(1)c; see Road Accident Fund v Thugwana 2004 (3) SA 169 (SCA). 3 Mbatha v Multilateral Motor Vehicle Accidents Fund 1997 (3) SA 713 (SCA) at 718G-I. good reason to favour a negligent driver/defendant above the third party. Nor did he explain why his client should be entitled to claim an indemnification in respect of a claim by the third party which the latter could not herself have recovered from the Fund (because of the limitations placed on the claim of a passenger). [7] Faced with the legislative intention as it emerges from the propositions to which I have referred, counsel sought refuge in what he called a ‘necessary implication’. As I understood it, the argument ran like this: the Apportionment of Damages Act 34 of 1956 confers a right upon a wrongdoer sued delictually to claim an apportionment from a joint wrongdoer; the unknown driver is a joint wrongdoer as against the third party; if the third party had instituted action relying on the negligence of the unknown driver the Fund would have stepped into the shoes of that driver; by joining the Fund the defendant is merely doing what the third party could have done, thereby enabling the court to determine who should pay compensation to the third party, a determination which is consistent with the purpose of the Act and the objects of the Fund; indemnification is merely ‘the flip side’ (counsel’s phrase) of compensation. Thus, so the argument ran, the relief which the appellant claimed was inherent in the Act and necessary to ensure that its objects were not frustrated. [8] Alternatively, so counsel submitted, his client’s entitlement to an indemnification flowed from the clear wording of s 2(1) of the Apportionment of Damages Act.4 [9] In my view the submissions are contrived and untenable. I have drawn attention to the substance of s 17 of the Act, viz the compensation of victims of road accidents arising out of death or bodily injury. The appellant is not a victim and the 4 ‘(1) Where it is alleged that two or more persons are jointly or severally liable in delict to a third person (hereinafter referred to as the plaintiff) for the same damage, such persons (hereinafter referred to as joint wrongdoers) may be sued loss against in the same action.’ which he seeks indemnification is purely pecuniary in nature. The designated beneficiary of the Fund is not the uninjured negligent driver but the victim of his driving. The Act and regulations manifest a clear and consistent intention in this regard. To imply the existence of a right in such a person to sue the Fund for a contribution or indemnity would fly in the face of reason and be contrary to the express terms of the Act. The limitation cannot have been accidental nor does the exclusion of persons in the position of the defendant give rise to an anomaly since it is fair to say that such a negligent driver does not even have a moral claim on the Fund. [10] Counsel’s reliance on the Apportionment of Damages Act is also misplaced. That statute does not, as counsel submitted, create a cause of action in s 2(1). What it does is to provide a means of sharing the burden of damages between joint wrongdoers in delict. Prima facie the Fund is not such a wrongdoer when an unidentified driver or owner is involved because its liability is essentially statutory, proof of a delict alone being, by reason of the regulations to the Act, wholly insufficient to establish a cause of action against it.5 But the legislature has, in the circumstances of this appeal, put the matter beyond doubt by providing (in s 3 of the Apportionment of Damages Act6) that s 2 applies where a liability is imposed in terms of the Road Accident Fund Act. While the Fund is a person on whom liability is imposed in circumstances contemplated in that Act to the third party, it is not, as I have found, under any liability to a negligent driver who inflicts loss or damage upon a third party. The consequence is that the Fund cannot be a joint wrongdoer with the appellant in the circumstances of this appeal. 5 I express no opinion as to the correctness of the opposite conclusion reached by Du Plessis AJ in Maphosa v Wilke en andere 1990 (3) SA 789(T) at 798A-G in relation to the liability of the Fund when the driver is identifiable. 6 ‘The provisions of section two shall apply also in relation to any liability imposed in terms of the Motor Vehicle Accident Act, 1986 (Act 84 of 1986), on the State or any person in respect of loss or damage caused by or arising out of the driving of a motor vehicle.’ [11] The appeal has no merit. It is dismissed with costs. __________________ J A HEHER JUDGE OF APPEAL MPATI DP )Concur NAVSA JA ) CONRADIE JA ) LEWIS JA )

Supreme Court of Appeal of South Africa MEDIA STATEMENT From: The Registrar, Supreme Court of Appeal Date: Friday 17 March 2006 Status: Immediate On 17 March 2006 the Supreme Court of Appeal delivered judgment in the matter of Sias Smith v The Road Accident Fund. Mr Smith was the defendant in an action in the Port Elizabeth High Court. The plaintiff claimed damages for bodily injuries suffered by her resulting from the negligent driving of a motor vehicle by the defendant in which she was a fare-paying passenger. The defendant denied liability. He pleaded that the accident had been caused by the negligence of two other vehicles whose drivers and details were unknown to him. The defendant joined the Fund as a third party under the rules of court alleging that if he were found to have been negligent such negligence fell to be apportioned against the drivers of the other two vehicles, that the Fund was liable to compensate the plaintiff for damages suffered at the hand of those persons and that the Fund was accordingly to be regarded as a joint wrongdoer with him and liable to compensate the plaintiff according to the proportionate negligence of those drivers. He claimed indemnification from the Fund in accordance with such an apportionment. The Fund denied that it was a joint wrongdoer and denied further liability to compensate the plaintiff or to indemnify the defendant against part of any order for damages made in favour of the plaintiff. The trial court upheld the Fund’s objection. It dismissed the defendant’s conditional claim for an indemnification. The defendant appealed. The SCA dismissed the appeal. It held that- (1) an uninjured negligent driver has no claim against the Fund in the circumstances relied on by the defendant; (2) the benefits conferred by the RAF Act on an injured third party in the case of the negligence of an unidentified driver are not available to a defendant whose negligence contributed to the injuries; (3) the Fund cannot be a joint wrongdoer for the purposes of apportioning damages unless it is liable under the RAF Act, which, as against the defendant in this case, it was not. --ends--

4134

non-electoral

2023

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Not Reportable Case no: 1156/2022 In the matter between: CIBA PACKAGING (PTY) LTD T/A CIBAPAC APPELLANT and TIMELINK CARGO (PTY) LTD RESPONDENT Neutral citation: Ciba Packaging (Pty) Ltd t/a Cibapac v Timelink Cargo (Pty) Ltd (1156/2022) [2023] ZASCA 161 (28 November 2023) Coram: MAKGOKA, HUGHES and MABINDLA-BOQWANA JJA and BINNS-WARD and TOKOTA AJJA Heard: 7 November 2023 Delivered: 28 November 2023 Summary: Civil procedure – appealability of dismissal of an exception – restatement of principles. ORDER On appeal from: Gauteng Division of the High Court, Johannesburg (Matojane J, sitting as court of first instance): The appeal is struck from the roll, with costs. JUDGMENT Mabindla-Boqwana JA (Makgoka and Hughes JJA and Binns-Ward and Tokota AJJA concurring): [1] The appeal concerns the much debated and recurring question of the appealability of a court order. The Gauteng Division of the High Court, Johannesburg (the high court) dismissed an exception raised by the appellant, Ciba Packaging (Pty) Ltd t/a Cibapac (Cibapac), to the particulars of claim of the respondent, Timelink Cargo (Pty) Ltd (Timelink). The appeal is with the leave of the high court. [2] Timelink instituted an action against Cibapac, in the high court. It alleged in its particulars of claim that during December 2011, it concluded an agreement with Cibapac. In terms of the agreement, it would supply freight services for Cibapac within three days of receipt of written purchase orders from Cibapac. The services would be rendered at Timelink’s usual rate, alternatively at the reasonable rate determined according to the industry standard. In addition, Cibapac would be liable for all necessary disbursements incurred in the rendering of services on its behalf. [3] Timelink further alleged that during December 2019 to March 2020, it rendered the services in terms of the agreement, as a result of which it became entitled to receive payment in the sum of R1 652 678.80. On 3 April 2020, it sent a letter of demand to the Cibapac claiming payment of the alleged debt. [4] In addition, it made the following allegations: (a) on 14 May 2020, Cibapac was placed under business rescue; (b) Cibapac admitted its indebtedness to it and recorded it as a creditor in its business rescue plan; (c) the business rescue plan was adopted in September 2020; and (d) the business rescue plan terminated on 18 December 2020 after the business rescue practitioner filed a notice of substantial implementation. Timelink pleaded that it did not participate in the business rescue proceedings. [5] Cibapac filed an exception to Timelink’s particulars of claim on the grounds that the particulars of claim did not disclose a cause of action. This, Cibapac alleged, was because Timelink’s claim was barred by the provisions of s 154(2) of the Companies Act 71 of 2008 (the Act), which reads as follows: ‘(1) A business rescue plan may provide that, if it is implemented in accordance with its terms and conditions, a creditor who has acceded to the discharge of the whole or part of a debt owing to that creditor will lose the right to enforce the relevant debt or part of it. (2) If a business rescue plan has been approved and implemented in accordance with this Chapter, a creditor is not entitled to enforce any debt owed by the company immediately before the beginning of the business rescue process, except to the extent provided for in the business rescue plan.’ [6] The thrust of Cibapac’s exception was therefore this. Timelink was seeking to enforce a debt allegedly owed by Cibapac immediately before the beginning of the business rescue process. Since Timelink did not plead that the business rescue plan allowed for the enforcement of its alleged debt, its particulars of claim did not disclose a cause of action. [7] The high court dismissed the exception with costs. Relying on this Court’s interpretation of s 154(2) in Van Zyl v Auto Commodities (Pty) Ltd, 1 it reasoned as follows: ‘. . . the approval and implementation of the business rescue plan do not necessarily discharge the debt. It cannot be said that the pleadings are excipiable on every interpretation that can reasonably be attached to it. On a reading of the particulars of claim, the claim in respect of the breach of oral contract has been set out to enable the excipient to respond to it. I find that the plaintiff’s cause of action is not dependent on the allegations relating to business rescue proceedings pleaded in paragraph 10 of the particulars of claim. I, therefore, find that the excipient can respond to the claim for breach of the oral agreement, and it follows that the exception must fail.’ [8] The issue in the appeal is whether the high court’s order dismissing the exception is appealable; and, if so, whether Timelink’s particulars of claim are excipiable on the basis that they do not disclose a cause of action. [9] The general principle is that the dismissal of an exception is not appealable, save where the exception challenges the jurisdiction of the court.2 This Court, in TWK Agriculture Holdings (Pty) Ltd v Hoogveld Boerderybeleggings (Pty) Ltd and 1 Van Zyl v Auto Commodities (Pty) Ltd [2021] ZASCA 67; 2021 (5) SA 171 (SCA); [2021] 3 All SA 395 (SCA). 2 Maize Board v Tiger Oats Limited and Others [2002] 3 All SA 593 (A); 2002 (5) SA 365 (SCA) para 14. Others, recently confirmed this.3 One of the exceptions raised in TWK was that the plaintiff had no cause of action to secure an appraisal remedy in terms of s 164 read with s 37(8) of the Act, unless the company had more than one class of shares. That was an alleged statutory prerequisite, which was, at best for the defendant, found to be no more than a question of law. [10] Cibapac accepted the position as set out in TWK. It sought to distinguish its case on the basis that its exception went to the competence or the jurisdiction of the high court to determine the matter before it, and as such is appealable because it fell within the exception to the rule in respect of the non-appealability of orders dismissing exceptions recognised in TWK.4 Counsel for Cibapac argued that it is not competent for the court to entertain a claim, such as the one advanced by Timelink in its summons, because, so he submitted, the claim is expressly prohibited by s 154(2) of the Act. [11] As to the exception itself, counsel submitted that the cause of action as pleaded by Timelink could not be divorced from the allegations relating to the placing of Cibapac in business rescue and the existence and termination of the business rescue plan. Because of these allegations, so it was contended, Timelink had the onus to plead why the prohibition in s 154(2) of the Act was not applicable. 3 TWK Agriculture Holdings (Pty) Ltd v Hoogveld Boerderybeleggings (Pty) Ltd and Others [2023] ZASCA 63; 2023 (5) SA 163 (SCA) paras 9 and 43. 4 TWK paras 10 and 43. [12] The submission in relation to the appealability issue is unsustainable for reasons explained in TWK as follows:5 ‘Maize Board does recognise a carve-out to the rule that the dismissal of an exception is not appealable. An order dismissing an exception will be appealable where the exception challenges the jurisdiction of the court. That is so for reasons that were explained in Moch. Where the challenge concerns the jurisdiction of a court, and hence the competence of a judge to hear the matter, the decision of the court is considered definitive, and appealable. This is consistent with the principles enunciated in Zweni because the decision as to jurisdiction is considered final. This position is entirely justified because an error as to jurisdiction, if not subject to appellate correction, would permit the court below to proceed with a matter when it had no competence to do so, rendering what it did a nullity. That is plainly an undesirable outcome. Furthermore, a challenge to jurisdiction is taken at the commencement of proceedings. Until this challenge is finally resolved, a court should not exercise coercive powers that compel compliance.’ (My emphasis.) [13] Counsel for Cibapac submitted that Cibapac’s exception is similar to the situation in Moch v Nedtravel (Pty) Ltd t/a American Express Travel Service,6 which had to do with the appealability of an order dismissing an application for recusal. This is not so. In Moch, the Court underscored that: ‘A decision dismissing an application for recusal relates, as we have seen, to the competence of the presiding judge; it goes to the core of the proceedings and, if incorrectly made, vitiates them entirely. . . That a decision dismissing an application for recusal has such a bearing stands to reason because it reflects on the competence of the presiding judge to define the parties’ rights and to grant or refuse the relief claimed. For this very reason it is comparable with a decision on a plea to a court’s jurisdiction . . .’7 (My emphasis.) 5 TWK para 43, referring to Maize Board v Tiger Oats Limited and Others [2002] 3 All SA 593 (A); 2002 (5) SA 365 (SCA); Moch v Nedtravel (Pty) Ltd t/a American Express Travel Service 1996 (3) SA 1 (A) and Zweni v Minister of Law and Order [1993] 1 All SA 365 (A); 1993 (1) SA 523 (A). 6 Moch v Nedtravel (Pty) Ltd t/a American Express Travel Service 1996 (3) SA 1 (A). 7 Moch at 10D-G. [14] The objective of limiting the appeal of a dismissal of an exception to challenges of jurisdiction, is evident from these cases. Proceeding with a matter in circumstances where a judicial officer is not competent to grant or refuse the relief sought, goes to the heart of the proceedings. An order issued by a court that lacks jurisdiction will vitiate the entire proceedings and it is final. An error committed in those circumstances cannot be corrected or revisited by that court at a later stage. [15] That is, however, not what we are dealing with in the present matter. Here, the high court has jurisdiction to determine the action brought by Timelink. It may grant or refuse the claim. It may base its refusal of the claim on the legal challenge posed by s 154(2) of the Act or on other bases. Thus, any view taken by the high court when dismissing the exception is capable of being altered by the court deciding the matter on trial. That order will be competent. In Blaauwbosch Diamonds Ltd v Union Government (Minister of Finance),8 this Court had this to say: ‘. . . one would say that an order dismissing an exception is not the final word in the suit on that point that it may always be repaired at the final stage. All the Court does is to refuse to set aside the declaration; the case proceeds; there is nothing to prevent the same law points being re-argued at the trial; and though the Court is hardly likely to change its mind there is no legal obstacle to its doing so upon a consideration of fresh argument and further authority.’ [16] Counsel further placed reliance on the minority judgment of the Constitutional Court in Baliso v Firstrand Bank Limited t/a Wesbank,9 which he contended characterised non-compliance with a provision of a statute as a matter going to the 8 Blaauwbosch Diamonds Ltd v Union Government (Minister of Finance) 1915 AD 599 at 601. 9 Baliso v Firstrand Bank Limited t/a Wesbank [2016] ZACC 23; 2016 (10) BCLR 1253 (CC); 2017 (1) SA 292 (CC). competence of the court and hence its jurisdiction. This, he submitted, the majority judgment did not disagree with. [17] The exception in Baliso concerned non-compliance with the notice required under s 127(2) of the National Credit Act 34 of 2005 (the NCA). Section 130(3)(a) of the NCA permits a court to determine a matter in respect of a credit agreement, only after procedures required by ss 127, 129 or 131 have been complied with, where those sections apply. [18] The majority judgment observed that regardless of the outcome of the exception, the applicant was in a position to provide evidence at the trial that he was not given proper notice in terms of s 127(2) of the NCA. ‘After hearing evidence from both parties, the presiding judicial officer would then have to assess this evidence in order to decide whether proper notice was given’.10 It further found that the dismissal of the exception was not final in its effect, neither was it definitive of the rights of the parties, nor dispositive of any substantial portion of the relief sought in the main proceedings, as required in Zweni.11 The appealability test was, therefore, not met.12 [19] The minority, however, adopted a different view. It held that the decision sought to be appealed against related to the jurisdiction or competence of the high court to determine the matter before it did, and, as such, the decision (of the high court) was appealable. It further held that s 130(3) of the NCA introduced a 10 Baliso para 19. 11 Zweni v Minister of Law and Order [1993] 1 All SA 365 (A); 1993 (1) SA 523 (A). 12 Baliso para 20. precondition that must exist before the court may have the competence or jurisdiction to determine the matter. [20] One of the relevant passages referred to in Baliso reads as follows: ‘This Court made it clear that section 191(5) concerns jurisdiction. Given the use of “if” and “may” in section 191(5), and “may” and “only if” in section 130(3) of the Act, it seems to me that section 130(3) relates to the competence or jurisdiction of the court. Its effect is that, the court will have no jurisdiction in respect of a matter where the procedures prescribed by section 127(2) have not been complied with. Therefore, compliance with the procedure in section 127(2) goes to the competence or jurisdiction of the court. A decision that there has been compliance with section 127(2) is a decision on the competence or jurisdiction of the court. Once a court of first instance has made a decision on jurisdiction, it cannot alter that decision later.’13 (My emphasis.) [21] The majority had recognised that compliance with the relevant sections of the NCA is a prerequisite for determining the matter. Nevertheless, it concluded that the question of whether proper notice was given would be assessed when evidence was presented in the trial.14 [22] Even if the approach adopted by the minority were to be accepted, it is not supportive of Cibapac’s contention. There is no precondition required to be fulfilled in the current matter before the high court could determine the matter. It has jurisdiction. Baliso dealt with a completely different set of circumstances and is clearly distinguishable from the present case. The minority, in any event, characterised the court’s decision on the dismissal of the exception as one that could not be altered later.15 13 Baliso para 68. 14 Baliso para 19. 15 Baliso para 68. [23] As in TWK, the dismissal of the exception in this case has nothing to do with jurisdiction. At best, it turns on the question of law ‘that [has] nothing to do with the competence of the trial court to try the action. Rather, the trial court can consider again whether the dismissal of the exception was correct’.16 [24] Evidence may be required in relation to what is provided for in the business rescue plan in relation to Timelink’s claim, taking into account the provisions of s 154(2) of the Act. Facts surrounding its alleged non-participation in the business rescue proceedings may, among other issues, also be relevant. All these matters should be decided with finality at the trial. Given the findings on appealability, it is not necessary to decide whether the exception is good in law or not. [25] In the end, counsel for Cibapac submitted that Cibapac is not seeking the dismissal of the action, but for Timelink to be afforded an opportunity to amend its particulars of claim. This is a further indication that the dismissal of the exception did not finally dispose of the issue between the parties and confirms the fact that the high court has jurisdiction over the matter. [26] In light of the order of the high court not meeting the requirements of appealability, the appeal must be struck from the roll, with costs following the result. [27] The following order is made: The appeal is struck from the roll, with costs. 16 TWK para 44. __________________________ N P MABINDLA-BOQWANA JUDGE OF APPEAL Appearances For the appellant: L E Combrink SC with W J Pietersen Instructed by: Venns Attorneys, Pietermaritzburg Honey Attorneys, Bloemfontein For the respondent: K Gounden Instructed by: Larson Falconer Hassan Parsee Inc, Durban Hendre Conradie Inc, Bloemfontein.

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 28 November 2023 Status: Immediate The following summary is for the benefit of the media in the reporting of this case and does not form part of the judgments of the Supreme Court of Appeal Ciba Packaging (Pty) Ltd t/a Cibapac v Timelink Cargo (Pty) Ltd (1156/2022) [2023] ZASCA 161 (28 November 2023) Today, the Supreme Court of Appeal (SCA) struck from the roll, with costs, an appeal against the judgment of the Gauteng Division of the High Court, Johannesburg (the high court), which dismissed an exception raised by the appellant, Ciba Packaging (Pty) Ltd t/a Cibapac (Cibapac), to the particulars of claim of the respondent, Timelink Cargo (Pty) Ltd (Timelink). The issue in the appeal was whether the high court’s order dismissing the exception was appealable; and, if so, whether Timelink’s particulars of claim were excipiable on the basis that they did not disclose a cause of action. The thrust of Cibapac’s exception was that Timelink was seeking to enforce a debt allegedly owed by Cibapac immediately before the beginning of the business rescue process under which Cibapac was placed. Since Timelink did not plead that the business rescue plan allowed for the enforcement of its alleged debt, Cibapac alleged that its particulars of claim did not disclose a cause of action. Hence, Timelink’s claim was barred by the provisions of s 154(2) of the Companies Act 71 of 2008 (the Act). Cibapac argued further that its exception was appealable, because it was not competent for the court to entertain a claim such as the one advanced by Timelink in its summons, as the claim was expressly prohibited by s 154(2) of the Act. The SCA restated the general principle that the dismissal of an exception was not appealable, save where the exception challenged the jurisdiction of the court. The SCA found that in this matter the high court had jurisdiction to determine the action brought by Timelink. It might grant or refuse the claim. It might base its refusal of the claim on the legal challenge posed by s 154(2) of the Act or on other bases. Thus, any view taken by the high court when dismissing the exception was capable of being altered by the court deciding the matter on trial. That order would be competent. The SCA found further that there was no precondition required to be fulfilled in the matter before the high court could have determined the matter. It thus had jurisdiction. As the dismissal of the exception in this case had nothing to do with jurisdiction, the SCA found that it was not appealable. Given the findings on appealability, the SCA found that it was not necessary to decide whether the exception was good in law or not. ~~~~ends~~~~

2397

non-electoral

2013

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Case No: 341/2012 Reportable In the matter between: THE LAW SOCIETY OF THE CAPE OF GOOD HOPE APPELLANT and MICHAEL WHARTON RANDELL RESPONDENT Neutral citation: Law Society of the Cape of Good Hope v MW Randell (341/2012) [2013] ZASCA 36 (28 March 2013) Coram: Mthiyane DP, Majiedt JA and Van der Merwe, Swain and Mbha AJJA Heard: 21 February 2013 Delivered: 28 March 2013 Summary: Application for stay of civil proceedings pending finalisation of criminal proceedings ─ nature of discretion vesting in the court to grant stay ─ accused not compelled to make statement in civil proceedings ─ right to remain silent not violated ─ prejudice justifying intervention not shown. _____________________________________________________________________ ORDER On appeal from: Eastern Cape High Court, Grahamstown (Smith J sitting as court of first instance): The appeal is upheld with costs on an attorney and client scale, and the order of the court a quo is set aside and replaced with the following. ‘The application is dismissed with costs on an attorney and client scale.’ ___________________________________________________________ JUDGMENT MTHIYANE DP (MAJIEDT JA AND VAN DER MERWE, SWAIN AND MBHA AJJA.CONCURRING) [1] The respondent, Michael Wharton Randell, is a duly admitted attorney of the high court practising as such in Port Elizabeth. He is currently facing charges of fraud and theft involving a sum of R2,4 million which he together with two other persons are alleged to have misappropriated while they were trustees of the Greenwood Property Trust (the Trust), the sole beneficiary of which was the Greenwood Primary School, Port Elizabeth (the school). The criminal proceedings against the respondent are still pending. [2] Prior to the disposal of the criminal proceedings of the appellant, the Law Society of the Cape of Good Hope, launched an application in the Eastern Cape High Court for the removal of the respondent’s name from the roll of attorneys. The application is based on the same facts which are the subject of the criminal proceedings pending against the respondent in the Commercial Crimes Court in Port Elizabeth. Without filing an answering affidavit in opposition to the application to strike him off, the respondent launched a counter application for a stay of the striking off application, pending the disposal of the criminal proceedings. [3] The question arising in this appeal is whether the court below was entitled to grant a stay of the civil proceedings, even though there was no compulsion on the respondent to file an answering affidavit in opposition to the striking off application. There is a further aspect to be considered and it is the question whether the respondent proved that he will suffer prejudice if he made a sworn statement in opposition to the striking off application. The appeal is with leave of the court below. [4] A brief history of the matter is necessary to put the legal and factual issues in this case in proper context. The respondent was one of the three trustees of the Trust which was established in 1999. The sole beneficiary of the trust, was as I have said, the school. [5] In 1999 the Trust purchased land and buildings adjacent to the school (the property) for a consideration of R500 000. The Trust in turn leased the property to the school and the rental was used to cover instalments on the mortgage bond finance provided by the Standard Bank. [6] During the period March 2005 to August 2005 the trustees amended the trust deed and established themselves as trust beneficiaries. [7] On 21 April 2006 the trust sold the property to a developer for R3,5 million, the developer also agreeing to fund the erection of a facility on the school’s grounds to the value of R1,5 million. [8] On 27 June 2006 the trustees met and resolved that R2,4 million of the purchase price was to be distributed to the respondent and the other trustees. [9] Mr S C Kapp, a chartered accountant and partner of Mozars Moores Rowland, the auditors of the school and the accountants of the trust, queried this transaction and when he did not receive what he considered to be a satisfactory explanation he concluded that the trustees had misappropriated the sum of R2,4 million. A further unsatisfactory feature in his view was the amendment of the trust deed by the respondent and his co-trustees, the appointment of themselves as the additional beneficiaries, the amount of the purchase consideration and the distribution of R2,4 million amongst themselves, all of which took place without the knowledge of the school’s governing body. Mr Kapp decided to report the matter to the police and the respondent was as a consequence duly charged for fraud and theft. [10] In the light of the above facts the appellant concluded that the respondent had made himself guilty of dishonourable, dishonest and disgraceful conduct which was of such a nature that he was not a fit and proper person to continue practising as an attorney. In terms of its obligation under s 22(1)(d) of the Attorneys Act 53 of 1979, the appellant launched an application for the removal of the respondent’s name from the roll of attorneys. [11] It is these proceedings that the respondent sought to have postponed pending the finalisation of the criminal proceedings against him. He submitted that by making a sworn statement in advance of the criminal proceedings he might be prejudiced and his right in terms of s 35(1)(c) of the Constitution, not to be compelled to make any confession or admission that could be used in evidence against him, might be violated. He also claimed that he was entitled to remain silent pending the finalisation of the criminal trial and that his right to do so under s 35(1)(a) of the Constitution would be compromised. [12] The respondent’s contentions found favour with Smith J. In granting a stay of the application the learned judge cited the general principle articulated by Corbett J in Du Toit v Van Rensburg 1967 (4) SA 433 (C) at 435H, which is to the following effect: ‘. . . [W]here civil proceedings and criminal proceedings arising out of the same circumstances are pending against a person it is the usual practice to stay the civil proceedings until the criminal proceedings have been disposed of.’ In the judge’s view ‘[t]he principle at the root of this practice is that the accused might be prejudiced in the criminal proceedings if the civil proceedings were heard first’. He disagreed with the approach adopted in Davis v Tip NO 1996 (1) SA 1152 (W). After alluding to the principle at the root of the practice of staying civil proceedings until the criminal proceedings had been disposed of in certain circumstances, the judge said the court has only to be satisfied that there is a danger that the accused person might be prejudiced in the conduct of his defence. He stated that the ‘qualification that there must be an element of state compulsion before a court can stay civil proceedings under these circumstances, was superimposed for the first time in the Davis case’. I do not agree. In my view the golden thread that runs through the previous cases that were considered in Davis (Du Toit; Irvin & Johnson Ltd v Basson 1977 (3) SA 1067 (T); Kamfer v Millman & Stein NNO 1993 (1) SA 122 ( C)) to mention just a few) is that they all involved sequestration proceedings, in which the examinee respondent was required to subject himself or herself to interrogation or to answer questions put to him or her by the provisional trustee. Clearly in each one of those cases there was an element of compulsion because s 65 of the Insolvency Act prior to its amendment provided that the person concerned was not entitled to refuse to answer questions. The examinee’s position was only ameliorated by the intervention of the court in the exercise of its discretion which in most cases involved directing that the examinee should not be interrogated (Gratus & Gratus (Prop) Ltd v Jackelow 1930 WLD 226 at 231). This is how the general principle was applied long before Davis. The element of compulsion is not something that was introduced or superimposed by the decision in Davis. [13] The approach adopted by the court below is, with respect, erroneous in two important respects. The first involves its broad formulation of the general principle applied in determining whether a stay should be granted where civil and criminal proceedings arising out of the same circumstances are pending against a person and there is a likelihood of prejudice to the person concerned if he or she made a statement prior to the disposal of the criminal proceedings. On the approach adopted by the court below, the power to grant a stay under these circumstances would be unlimited. One would envisage a situation where a stay will be refused because, as Nugent J correctly pointed out in Davis, civil proceedings invariably create the potential for information damaging to the accused person being disclosed by the accused person himself, not least so because it will often serve his or her interests in the civil proceedings to do so. [14] The second important respect in which the court erred is with regard to the application of the principle to the facts. In my view the respondent failed to show that he would be prejudiced if the application to strike him off the roll was proceeded with. I will deal more fully with this aspect later in the judgment. [15] I turn now to the general principle, as it applies where there are both criminal and civil proceedings pending which are based on the same facts. The usual practice is to stay the civil proceedings until the criminal proceedings have been adjudicated upon, if the accused person can show that he or she might be prejudiced in the criminal proceedings should the civil proceedings be heard first. (Du Toit at 435H-436B; Irvin & Johnson at 1072H-1073B; Kamfer at 125E-126D; Davis at 1157B-E. [16] A series of previous decisions in this connection have dealt with applications for a stay in the context of sequestration proceedings pending the determination of the criminal proceedings. In those cases the examinee respondent was obliged to submit to compulsory interrogation in terms of s 65 of the Insolvency Act and to answer questions put to him or her by the provisional trustee. The general approach of the courts in this regard was not to stay the sequestration proceedings, but rather to ameliorate the potential prejudice by directing that, pending the disposal of the criminal proceedings there should be no interrogation of the insolvent (see Gratus at 231). In Gratus the applicant had applied for sequestration of the estate of the respondent whom it had formerly employed as a clerk whilst criminal proceedings on a charge of theft were still pending against him. The charge related to the money the respondent had allegedly stolen from the applicant. The respondent applied for a stay of the sequestration proceedings pending the finalisation of the criminal proceedings. He contended that any statement he made in the sequestration proceedings would seriously prejudice him in his defence at the criminal trial. The court refused to grant a stay of the sequestration proceedings but to avoid possible prejudice to the respondent, it ordered that he not be examined under the Insolvency Act or interrogated by the provisional trustee. One would then immediately realise that the court intervened to ameliorate any state compulsion that existed arising from the obligation on the part of the examinee respondent to answer questions put to him in the interrogation which was sought to be pursued under the Insolvency Act. This occurred long before the decision in Davis. [17] Under s 65(2) of the Insolvency Act, compulsion flowed from the fact that the examinees could not decline to answer any question upon the ground that the answer would tend to incriminate them, or upon the ground that they were to be tried on a criminal charge and might be prejudiced at such trial by their answers. Their opposition was ameliorated by the subsequent amendment. Section 65(2A) now provides for some protection to persons under interrogation. The new section requires that part of the proceedings in which they are required to answer such questions should be held in camera and further that their answers to such questions should not be published. Prior to the amendment the information elicited at these proceedings had generally been admissible in subsequent criminal proceedings. It is for this reason that a practice developed whereby civil proceedings were stayed until criminal proceedings arising from the same facts had been disposed of. (Du Toit at 435H). [18] In the present matter the respondent is under no compulsion to respond to the allegations in the striking off application. In this appeal we are requested to consider the question of how the court should deal with the situation where a party who faces criminal proceedings is called upon to answer allegations in related civil or disciplinary proceedings, without being compelled to do so. The party concerned may be faced with the choice of abandoning a defence to the civil or disciplinary proceedings or waive his right to remain silent. This is the position in which the appellant finds himself. In Davis the court had to consider a situation which is not dissimilar to what we are dealing with in the present matter. In that case there was no legal compulsion on the respondent to testify. The court held that the preservation of his rights lay entirely in his hands. The court had to consider an application to review a ruling by a chairperson of a disciplinary enquiry, refusing an application by an employee of the Johannesburg City Council for a stay of the disciplinary proceedings pending the final determination of the criminal charges of fraud and theft. The court upheld the chairperson’s refusal to stay the disciplinary proceedings pending the determination of the criminal proceedings and dismissed the application for review. [19] As I have said, Nugent J pointed out that civil proceedings invariably create the potential for information damaging to an accused person to be disclosed by the accused person himself, not least because it will serve his or her interest in the civil proceedings. He emphasised that where the courts have intervened, there has been a further element, which has been a potential for state compulsion to divulge information. He pointed out that even in those cases the courts have not generally suspended civil proceedings, but have in appropriate cases ordered that the element of compulsion should not be implemented. I have already referred to how the court in Gratus refused to grant a stay of the sequestration proceedings but ameliorated the prejudice by directing that the respondent not be examined under the Insolvency Act or interrogated by the provisional trustee. (Gratus at 231.) [20] The approach of Nugent J in Davis has been followed in a number of subsequent cases, eg Fourie v Amatola Water Board (2001) 22 ILJ C94 (LC); Gilfillan t/a Grahamstown Veterinary Clinic v Bowker 2012 (4) SA 465 (E); Seapoint Computer Bureau (Pty) Ltd v McLoughlin & De Wet NNO 1997 (2) SA 636 (W); Nedcor Bank Ltd v Behardien 2000 (1) SA 307 (C). In Seapoint Navsa J followed and applied the principle in Davis and stressed that in principle a party should be left to his or her choice as to how he or she conducts the civil proceedings. The learned judge pointed out that allegations in pending criminal investigations or proceedings, without indicators that state compulsion or coercive means are to be employed in the civil proceedings, are not sufficient to prove prejudice of a kind that will justify a stay (at 649H-I). [21] In Equisec (Pty) Ltd v Rodriguez & another 1999 (3) SA 113 (W) Nugent J again had the opportunity to express himself on the subject. He was called upon to consider an application for a stay of sequestration proceedings until such time as the related criminal proceedings had reached finality. Alluding to the dilemma in which a party requesting a stay found himself, he remarked (at 115A-C): ‘Where a person is accused of having committed an act which exposes him to both a civil remedy and a criminal prosecution, he may often find himself in a dilemma. While on the one hand he may prefer for the moment to say nothing at all about the matter so as not to compromise the conduct of his defence in the forthcoming prosecution, on the other hand, to do so may prevent him from fending off the more immediate civil remedy which is being sought against us. When he finds himself in that dilemma he might appeal to a court to resolve it for him, which is what has occurred in the case which is now before us.’ [22] The judge elaborated further as follows: ‘There are two circumstances in which the first respondent will face the prospect of disclosing information which may be relevant to whether he has committed the offence with which he is now charged. (at 116A-E) Firstly, he is called upon in these proceedings to answer the allegations made against him by the applicant in the founding affidavit if he is to avoid his estate being placed under a final sequestration order. There is, of course, no legal compulsion upon him to do so. Whether a court should intervene to relieve a person of the perhaps difficult choices he faces in that regard was considered by me in Davis v Tip No and Others 1996 (1) SA 1152 (W). . . . I see no reason to depart from the conclusion which was reached in those cases. In my view, the choice which the first respondent may face between abandoning his defence to the civil proceedings or waiving his right to remain silent (cf Templeman LJ in Rank Film Distributors Ltd and Others v Video Information Centre and Others [1982] AC 381, especially at 423D-G) does not constitute prejudice against which he should expect to be protected by a Court and I would not exercise my discretion in favour of the first respondent on those grounds alone.’ [23] In my view the approach in Davis is sound and does no more than reiterate the approach of the previous decisions; namely that a stay will only be granted where there is an element of state compulsion impacting on the accused person’s right to silence. It is true that the judges in those cases do not specifically refer to compulsion but this is a matter of deduction made from the way the general principle was applied in matters which primarily involved sequestration proceedings. The development and formulation of the principle occurred in the context of sequestration proceedings. There is no authority to support the proposition that the principle is of application in ordinary civil proceedings not involving an element of compelled response on the part of the party who seeks a stay of civil proceedings. Our courts have only granted a stay where there is an element of state compulsion. [24] This also appears to be the approach in certain foreign jurisdictions. In Jefferson Ltd v Bhetcha [1979] 2 All ER 1108 (CA) at 1112-1113 the Court of Appeal in England dismissed an application by an accused person for the stay of civil proceedings for the recovery of moneys pending the finalisation of the related criminal proceedings. In dismissing the application the court emphasised that there was no established principle of law that if criminal proceedings were pending against a defendant in respect of the same subject matter, he or she should be excused from taking any further steps in the civil proceedings which might have the result of disclosing what his defence or is likely to be, in the criminal proceedings. [25] Jefferson was followed in R v BBC, x p Lavelle [1983] 1 All ER 241 (QBD) at 255 where Woolf J stressed that there should be no automatic intervention by the court. The learned judge pointed out that while the court must have jurisdiction to intervene to prevent serious injustice occurring, it will only do so in very clear cases in which the applicant can show that there is a real danger and not merely notional danger that there would be a miscarriage of justice in criminal proceedings if the court did not intervene. [26] In V v C [2001] EWCA Civ 1509, the court of appeal in deciding whether a stay of proceedings should have been granted because the privilege against self-incrimination constrained the defendant from putting forward a defence, pointed out that there was no absolute right for a defendant in civil proceedings not to have judgment entered against him or her simply because the privilege against self-incrimination was raised. The court refused the appeal on the basis that there was no need for the stay. It held that the defendant was entitled to enjoy the privilege against self-incrimination but if he was to exercise it he would have to suffer the consequences in the civil proceedings. [27] Turning to the facts of this case the judge in the court below proceeded from the assumption that prior to Davis the applicable legal principle was that where civil and criminal proceedings arising out of the same circumstances were pending, the civil proceedings had to be stayed and that the question of compellability was a later requirement introduced for the first time. He asserted that the element of compulsion was not required in Du Toit and that Corbett J considered the legal principle to be of application if there was likelihood that the accused person would be prejudiced. [28] The interpretation and the application of the principle in Du Toit as articulated and applied by the judge a quo is, with respect, not entirely accurate. The question of compellability has always been regarded as a relevant factor in a court’s approach to the determination of whether a real likelihood of prejudice has been established. In Du Toit, and so too in Gratus and other cases mentioned earlier, there was an element of compulsion. It is for that reason that Corbett J in Du Toit made an order that ‘the examination or interrogation of the respondent in terms of the Insolvency Act shall not take place pending the finalising of the application for sequestration’. The object of crafting the order in those terms was to ameliorate the impact of the compulsion contained in s 65(2) (prior to its amendment), in terms of which the examinee respondent was ‘not entitled at such interrogation to refuse to answer any questions upon the ground that he is to be tried on a criminal charge and maybe prejudiced at such trial by his or her answers’. A similar example of intervention is also to be found in Gratus where in order to avoid possible prejudice to the respondent, the court ordered that he not be examined under the Insolvency Act or interrogated by a provisional trustee. Absent any compulsion under the relevant provisions of the Insolvency Act the courts in Du Toit, Gratus and the other cases I have referred to above, would have been slow to grant a stay of the civil proceedings. [29] If the approach adopted in the court below is taken to its logical conclusion, in every case where civil and criminal proceedings are pending and there is a likelihood of prejudice, the court will be vested with unlimited jurisdiction to stay the civil proceedings until the criminal proceedings have been finalised, even where there is no compulsion on the part of the person concerned to disclose his or her defence ─ where the person concerned is faced with a ‘hard choice’. [30] It seems to me that the nature of the discretion to be exercised by courts in cases such as this is very limited in scope and ambit. In Davis the discretion was described by Nugent J as follows (at 1157D-E): ‘Although the principle has been articulated in the language of a discretion, this may be misleading. I do not understand the decided cases to have held that a Court may direct the civil proceedings to continue even where it has been found that they may prejudice an accused person. On the contrary, it is clear that once the potential for prejudice has been established the Courts have always intervened to avoid it occurring. In that sense then it has no discretion.’ The judge pointed out further that the potential for prejudice is limited to cases where there is a further element present, namely ‘the potential for State compulsion to divulge information’. (at 1157F-G) [31] I agree with the approach in Davis. I also think that to extend the court’s intervention to cases where an applicant for a stay of the civil proceedings has a ‘hard choice’ to make, would bring the right to remain silent into disrepute. The ratio for the discretion being narrowly circumscribed is that a distinction must be maintained between the situation where an individual has the choice whether to testify (even though the alternatives over which he has a choice are equally unattractive) and where he is compelled to because a failure to do so attracts a penalty. (at 1158H-J). According to the decision in Davis this is necessary to ensure that the ‘salutary principle’, enshrined in the right to silence is not to be extended beyond its true province and thereby risk falling into disrepute (at 1158I-J). [32] The respondent in this case falls outside the category of parties who are subject to compulsion to testify or to disclose their defence. He has a ‘hard choice’ to make as to whether he should respond to the allegations in the striking off application or face the consequences of not responding. In my view, the learned judge’s broad formulation of the general principle applicable to applications for a stay was erroneous. The only prejudice the court below referred to was that ‘making a sworn statement in opposition to the main application might serve to prejudice the respondent in the conduct of his defence in the criminal matter’. The respondent however denies any wrongdoing and if he were to respond, would in any event probably file an exculpatory statement. Any claim to violation of the respondent’s right to silence appears to be illusory. On the papers the respondent has already disclosed essentials of his defence when he filed a plea in a related civil matter. Significantly he has not sought to stay those proceedings. I do not see how he could claim that filing an answering affidavit in the striking off application would prejudice him. [33] The matter is of huge public importance. The respondent is an officer of the court whose position requires scrupulous integrity and honour. He is facing grave allegations of dishonesty and impropriety. In assessing prejudice generally the judge a quo regrettably appears to have focused solely on the respondent’s practice. He pointed out that there was no evidence of wrongdoing in the respondent’s trust account. This appears to avoid the issue because probity and fitness to remain in office of an attorney does not depend solely on whether the attorney’s trust account is intact. These are factors which the judge a quo should also have taken into consideration in the overall consideration of the question of prejudice. It was prejudice not only to the respondent that he had to consider but also the protection of the public interest. In failing to consider the above factors, the judge erred. [34] Before concluding, I would like to refer to a further point made by the respondent’s counsel during argument. Counsel submitted that the application for a stay of the striking off proceedings was interlocutory and therefore not appealable. The argument is without merit. The order by Smith J to stay the application to strike off was final in effect, in that it disposed of all the issues relevant to the said application. In any event, the contention advanced on the respondent’s behalf is in conflict the decision of this court in Clipsal Australia (Pty) Ltd v GAP Distributors 2012 (2) SA 289 (SCA), in which an application to stay contempt proceedings was held to be appealable. [35] In the result the appeal is upheld with costs on an attorney and client scale, and the order of the court a quo is set aside and replaced with the following. ‘The application is dismissed with costs on an attorney and client scale.’ ______________________ K K MTHIYANE DEPUTY PRESIDENT APPEARANCES For Appellant: S Rosenberg SC Instructed by: Bisset Boehmke McBlain, Cape Town Webbers, Bloemfontein For Respondent: M Osborne Instructed by: Nettletons, Grahamstown Claude Reid Inc, Bloemfontein

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL FROM The Registrar, Supreme Court of Appeal DATE 28 March 2013 STATUS Immediate Please note that the media summary is for the benefit of the media and does not form part of the judgment. THE LAW SOCIETY OF THE CAPE OF GOOD HOPE v MW RANDELL (341/2012) [2013] ZASCA 36 (28 MARCH 2013) Today the Supreme Court of Appeal (SCA) upheld an appeal by the Law Society of the Cape of Good Hope, against a judgment and order of Smith J in the Eastern Cape High Court, Grahamstown, in which he granted an order staying the application to strike off Mr Michael Wharton Randell. Mr Randell is facing charges of fraud and theft arising out of his alleged misconduct as one of the trustees of the Greenwood Property Trust. The Greenwood Primary School was the sole beneficiary of the Trust. It is alleged that Mr Randell and his co-trustees collaborated to add themselves as beneficiaries and later appropriated R2.4 million from the trust. When the Law Society applied to have Mr Randell’s name removed from the roll of attorneys, he successfully applied to have the striking off proceedings stayed pending the finalisation of the criminal proceedings against him. He argued that he would be prejudiced in his defence in that he would be obliged to show his hand and his right to remain silent would be violated. He had already, denied the allegations against him in a related civil matter. The Eastern Cape high court agreed with him but the SCA disagreed, holding that that Mr Randell was not entitled to a stay of the civil proceedings, where there was no compulsion on him to enable a sworn statement in his defence in apportion to the striking off application. The SCA held that when he had a choice, either to respond or not, the court ‘could not intervene’. The court also pointed out that Mr Randell had failed to show that he would suffer prejudice if he made a statement because he had in any event denied that he had been guilty of any wrongdoing. Accordingly the appeal by the Law Society was upheld by the SCA and the order of the Eastern Cape high court was altered to one dismissing Mr Randell’s application for a stay with an order, and further dismissed his application for a stay of the striking off proceeding with costs on an attorney and client scale.

1519

non-electoral

2008

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA JUDGMENT Case No: 432/07 In the matter between: KHOLISILE MANTSHA APPELLANT v THE STATE RESPONDENT Neutral citation: Mantsha v The State (432/2007) [2008] ZASCA 121 (26 September 2008) Coram: Heher JA, Jafta JA et Maya JA Heard: 15 September 2008 Delivered: 26 September 2008 Summary: Appeal against refusal of condonation for failing to lodge an appeal timeously – requirements therefor and grounds on which the appeal court will interfere. ____________________________________________________________ ORDER ____________________________________________________________ On appeal from: Cape High Court (Thring J and Irish AJ sitting as the appeal court) (1) The appeal is dismissed. ___________________________________________________________ JUDGMENT ___________________________________________________________ JAFTA JA (HEHER JA and MAYA JA concurring) [1] In June 1998 the appellant was convicted of various offences in the regional court and on 7 August he was sentenced to an effective 15 years’ imprisonment. Immediately after sentencing he indicated to the presiding magistrate that he wished to lodge an appeal. He was advised to approach the Legal Aid Board for legal assistance. On 29 August 1998 an attorney – Mr Lloyd Fortuin – was appointed to represent him. But Fortuin took no steps towards the prosecution of the appeal. [2] On 10 September 2002 the appellant – acting in person – sent a notice of appeal to the clerk of the court. As the lodging of his appeal was late by more than four years, the appellant also filed an ‘application for condonation’. Meanwhile the record of his trial and the tapes on which the proceedings were recorded had been lost in the regional court at an unknown date. The presiding magistrate’s notes also could not be traced. As a result the record could not be reconstructed. [3] The appellant’s application for condonation was heard by the Cape High Court in 2005. Thring J (Irish AJ concurring) dismissed it on the basis that the explanation given for the delay was unsatisfactory and inadequate. The matter was struck off the roll. The present appeal is against that order and as it was not necessary the appellant did not seek leave of the court below1. [4] Although the appellant was represented by an attorney at the hearing of the condonation application in the court below, the document setting out the explanation for the delay was drafted by the appellant himself. His attorney was content to argue the matter on the basis of papers drawn by the appellant without supplementing or amending them. [5] In terms of Rule 67 (1) of the Magistrate’s Court rules as it then read, the appellant ought to have lodged his notice of appeal within 14 days from the date on which he was sentenced2. As the appellant was seeking an indulgence, he was required to show good cause for condonation to be granted. Good (or sufficient) cause has two requirements. The first is that the applicant must furnish a satisfactory and acceptable explanation for the delay. Secondly, he or she must show that he or she has reasonable prospects of success on the merits of the appeal. 1 S v Gopal 1993 (2) SACR 584 (SA); S v Leon 1996 (1) SACR 671 (A) and S v Mohlathe 2000 (2) SACR 530 (SCA). 2 Rule 67 (1) then provided: ‘A convicted person desiring to appeal under section 103 (1) of the Act shall within 14 days after the date of conviction, sentence or order in question, lodge with the clerk of the court a notice of appeal in writing in which he shall set out clearly and specifically the grounds, whether of fact or law or both fact and law, on which the appeal is based.’ [6] In this matter the appellant’s application did not deal with prospects of success on the merits of his conviction and sentence. As regards the delay he furnished the following explanation: ‘On the 10 August 1998 I applied for Legal Aid in Athlone Justice Centre. On the 29 August 1998 Mr Lloyd Fortuin was appointed as my legal representative. He consulted with me as soon as he was appointed to inform me about his duty. He told me that he was appointed to represent me on the appeal itself, he is also investigating the chances of appealing the case. Mr Fortuin came to me on the 17 January 2002 that he will be closing the file of my appeal temporally because the legal aid failed to honour its agreement of paying for his services on this matter. He wishes that I will persue the legal aid personally to honour its promises. He also told me that yes he wishes to do the appeal after developing a relationship between us, as we have been corresponding for more than 3 years. But my duty was to persue legal aid. He also told me about the recommendations. He was to make to the Legal Aid Board. He never mentioned to me that he was only appointed only to investigate the chances of the appeal. I was led to believe I had a lawyer for my appeal. I came to understand that when the clerk of the court in Wynberg court wrote me a letter telling me that I have to note an appeal and condonation. The clerk of the court Miss S Francke told me that Mr Fortuin was only appointed to investigate that letter came to me on the 9 October 2002. Eversince 1998 I have been writing to numerous government departments seeking legal advice in order to persue my appeal but all of them kept referring me to one office, the Athlone Justice Centre for assistance. That office to me is of no assistance. On the 2 July 2002 Ms Desai who is the senior executive at Justice Centre wrote me a letter and said I do not qualify for legal aid as I have served more than six months of my sentence and that is according to the guide policy of 2002 Legal Aid paragraph 3.1.2.8. I fail to understand that because I applied 3 days after my sentence and it is a failure within their office not to speed up my process.’ [7] The above explanation was not contained in a sworn statement or affidavit. It was set out in a document titled ‘notice of condonation’. The court below was willing to overlook the procedural imperfection and made allowance for the fact that the document was drawn by the appellant himself. Guided by considerations such as the length of the delay, the explanation therefor and the prospects of success on the merits, the court a quo found that the delay was inordinately long and that non- compliance with Rule 67 (1) was gross. [8] The court below assessed the explanation given by the appellant in the context of his right to appeal entrenched in s 35 of the Constitution. Applying the principle of fairness to both the appellant and the State, the court below concluded that in the absence of a satisfactory explanation, condonation ought to be refused. The court reasoned thus: ‘The longer the delay, generally speaking, the more reluctant will a court of appeal be to condone it and the more persuasive will the explanation for the delay have to be before condonation can be granted. In this case the explanation is, in my view, far from satisfactory or persuasive. In fact, in my opinion it is totally inadequate.’ [9] This court has a restricted power of interference with the decision of a court a quo in relation to a condonation application. It must be persuaded that that court did not exercise a judicial discretion.3 In Mabaso v Law Society, Northern Provinces and Another4, the Constitutional Court succinctly outlined the test in the following terms: ‘The Rules of [the Supreme Court of Appeal] provide that it may condone the failure to comply with its Rules, and condonation will ordinarily be granted when sufficient cause is shown. It is trite law that a court considering whether or not to grant condonation exercises a discretion. The discretion must, of course, be exercised judicially on a consideration of all the facts and “in essence it is a matter of fairness to 3 In the sense discussed in S v Leon 1996 (1) SACR 671 (A) at 673b-h; see also S v Basson 2007 (3) SA 582 (CC) at paras 110-111. 4 2005 (2) SA 117 (CC) para 20. both sides”. It is clear that the SCA may decide an application for condonation without considering the merits of the case, though it does so only where there is a gross and flagrant failure to comply with its Rules. Ordinarily the approach of an Appellate Court to the exercise of such a discretion is that it will not set aside the decision of the lower court “merely because the Court of appeal would itself, on the facts of the matter before the lower court, have come to a different conclusion; it may interfere only when it appears that the lower court had not exercised its discretion judicially, or that it had been influenced by wrong principles or a misdirection on the facts, or that it had reached a decision which in the result could not reasonably have been made by a court properly directing itself to all the relevant facts and principles”.’ [10] The court a quo was well aware that allowance had to be made for the appellant’s own involvement in the pursuit of his appeal. But it also recognised, very properly, that such involvement could not supplement fundamental lacunae in the substance of the application. [11] In considering an application for condonation a court must take into account a number of considerations. These include the extent of non- compliance and the explanation given for it; the prospects of success on the merits; the importance of the case; the respondent’s interest in the finality of the judgment; the convenience of the court and the avoidance of unnecessary delay in the administration of justice.5 [12] Before us, although the appellant’s attorney conceded that the explanation given for the delay was inadequate, he argued that the court below was wrong in finding that ‘nothing happened’ from the moment the appellant was sentenced until 10 September 2002 when a notice of appeal was lodged. He submitted that Mr Fortuin was instructed to prosecute the appeal but failed to do so. The error pointed out by the attorney does not affect the inadequacy of the explanation given for the 5 Federated Employers Fire and General Insurance Co Ltd v McKenzie 1969 (3) SA 360 (A); S v Adonis 1982 (4) SA 901 (A) and S v Di Blasi 1996 (1) SACR 1 (A). delay. Even if the step taken by the appellant in instructing Mr Fortuin is discounted from the period of four years, there remains a period of three and half years for which there was no explanation furnished. Where non- compliance with the rules is time-related, the explanation must cover the entire period. In Uitenhage Transitional Local Council v SA Revenue Service6, Heher JA repeated the admonition previously issued to practitioners who bring applications such as the present. He said: ‘One would have hoped that the many admonitions concerning what is required of an applicant in a condonation application would be trite knowledge among practitioners who are entrusted with the preparation of appeals to this Court: condonation is not to be had merely for the asking; a full, detailed and accurate account of the causes of the delay and their effects must be furnished so as to enable the Court to understand clearly the reasons and to assess the responsibility. It must be obvious that, if the non- compliance is time-related then the date, duration and extent of any obstacle on which reliance is placed must be spelled out.’7 [13] Moreover the attorney who represented the appellant in the court below did not heed the above admonition.8 She did not apply her mind to the propriety of the form followed by the appellant in drafting the papers. Nor does she appear to have considered whether the notice filed set out an acceptable explanation for the delay. Not only did Fortuin not make an affidavit corroborating the appellant and explaining his own conduct, but no explanation was offered by the appellant for the failure to obtain such an affidavit. From the heads of argument she filed on the appellant’s behalf in this court, it seems that she does not appreciate the basic requirements for a successful application for condonation. Her heads of argument also omitted to deal with the test for interference by this court 6 2004 (1) SA 292 (SCA). 7 Id para [6]. 8 Not the attorney who appeared before us in the appeal. in orders refusing condonation. I mention these matters not as criticism of the appellant, but rather to emphasise that the seriously inadequate case originally made by the appellant gained nothing by what was done on his behalf by his legal representatives prior to the hearing in this court. [14] Regarding prospects of success on appeal, the appellant’s attorney submitted before us that, since the record has been lost and cannot be reconstructed, the appellant has good prospects of success. Reliance for this proposition was placed on S v Chabedi9 where this court said: ‘On appeal, the record of the proceedings in the trial Court is of cardinal importance. After all, that record forms the whole basis of the rehearing by the Court of appeal. If the record is inadequate for a proper consideration of the appeal it will, as a rule, lead to the conviction and sentence being set aside.’ [15] The above statement must be read in context. There can be no doubt that the setting aside of a conviction and sentence, in a case where the record is lost, is not based on a finding made after consideration of the merits. That such a result will follow, if condonation is granted, cannot lay the foundation for the submission that the appeal has prospects of success on its merits. It follows that the appellant’s reliance on Chabedi was misplaced. It was necessary, in the circumstances, that the appellant took the court a quo into his confidence concerning the evidence led in the case. That the record was missing did not detract from this duty; that would simply have rendered it more difficult for the state to rebut his say- so. But he made no effort in this regard. [16] It follows from what I have said that the approach of the court a 9 2005 (1) SACR 415 (SCA) para 5. quo cannot be faulted. In the result the appeal is dismissed. ________________ C N JAFTA JUDGE OF APPEAL APPEARANCES: FOR APPELLANT: C B Brand Instructed by Justice Centre, Cape Town Legal Aid Board, Bloemfontein FOR RESPONDENT: M Allie Instructed by The Director of Public Prosecution, CAPE TOWN The Director of Public Prosecution BLOEMFONTEIN

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 26 September 2008 Status: Immediate K MANTSHA v THE STATE Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal In a judgment delivered today, the Supreme Court of Appeal has dismissed an appeal against the decision of the Cape High Court, in terms of which that court had refused Mr Kholisile Mantsha – the appellant – permission to prosecute his appeal. Mr Mantsha was convicted of robbery, unlawful possession of a fire-arm and ammunition and two counts of attempted murder. The regional court sentenced him to a total of 15 years’ imprisonment on 7 August 1998. Upon intimating that he wished to appeal, an attorney was appointed by the Legal Aid Board to represent him in the appeal process. But that attorney failed to prosecute his appeal. In September 2002, Mr Mantsha himself lodged papers relating to his appeal but then it was too late. He was required to lodge his appeal within 14 days from the date of sentencing. Since his appeal was then out of time, he was required to ask for permission to prosecute it. Such request required that he furnishes the court with a reasonable explanation for the delay and show that he had prospects of success in the merits of the appeal. Since the papers were prepared by Mr Mantsha himself, they did not satisfy these requirements. However before his request was heard by the Cape High Court, the Legal Aid Board appointed another attorney to represent him. This attorney failed to correct the papers and argued his case on the basis of the defective papers. His request was dismissed by the Cape High Court and the attorney concerned lodged a further appeal to the SCA. In dismissing the appeal the SCA was very critical of the quality of the legal representation Mr Mantsha has received at the hands of the attorney appointed by the Legal Aid Board.

3286

non-electoral

2006

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA Reportable CASE NO 50/2005 In the matter between NATIONAL SORGHUM BREWERIES LTD Appellant and CORPCAPITAL BANK LTD Respondent ______________________________________________________________ CORUM: MPATI DP, NUGENT, JAFTA JJA and COMBRINCK, MAYA AJJA HEARD: 21 NOVEMBER 2005 DELIVERED: 23 FEBRUARY 2006 Neutral citation: This judgment may be referred to as National Sorghum Breweries Ltd v Corpcapital Bank Ltd [2006] SCA 1 (RSA) ______________________________________________________________ Summary : Contract - interpretation - non-variation clauses found not applicable to subsequent cession agreements. ______________________________________________________________ ______________________________________________________________ JUDGMENT ______________________________________________________________ JAFTA JA [1] As a general rule a creditor is free to cede its rights in whatever form it chooses. It does not need its debtor’s consent nor is it necessary for it to give notice to the debtor. But this power can be restricted by means of a contract to which the creditor is a party. In that case the creditor would be required to comply with the terms of the restriction when ceding its rights. The issue in this appeal is whether the creditors’ powers to cede rights were restricted by non- variation clauses contained in contracts they had concluded with third parties. [2] The respondent, Corpcapital Bank, instituted an action against the appellant (which I will refer to as the defendant) in the Johannesburg High Court for the recovery of damages arising from the alleged breach of various lease agreements. Corpcapital Bank was formerly known as Fulcrum Science and Technology Bank Ltd, and was at times referred to simply as Fulcrum Bank, but for convenience I will refer to it throughout this judgment as Corpcapital Bank. [3] Corpcapital Bank instituted the action in its capacity as the cessionary of the rights in various lease agreements (referred to in the evidence as ‘full maintenance rental agreements’) that were concluded between the defendant and a company called Afinta Financial Services (Pty) Ltd (Afinta Financial Services). In terms of those agreements the latter company leased vehicles to the defendant. The defendant challenged Corpcapital Bank’s right to sue, contending that the rights of Afinta Financial Services had not been validly ceded. The court a quo (Cachalia J) was asked to determine that issue separately from the other issues. It dismissed the defence with costs and the defendant appeals against that order with the leave of the court a quo. [4] The facts are briefly these. Afinta Financial Services carried on a vehicle leasing business and leased vehicles to various customers, including the defendant. In February 1999 Afinta Financial Services and Corpcapital Bank Ltd became parties to a joint venture that was to continue the leasing business. The joint venture was to be conducted through the medium of a company called Afinta Finance Ltd (Afinta Finance) that was owned by the joint venturers. [5] The joint venturers agreed that at the outset Afinta Financial Services would transfer certain of its existing lease agreements to Afinta Finance and that it would thereafter direct all new business to Afinta Finance. The business was to be financed by loans to be made to Afinta Finance by Corpcapital Bank that were to be secured by a cession to Corpcapital Bank of the debtors of Afinta Finance. [6] To that end the various parties signed two standard-form agreements referred to as ‘Master Cession Agreements’ on 26 February 1999. One purported to be a cession from Afinta Financial Services to Afinta Finance. The document however reflected a cession in securitatem debiti when the intention was to effect an out and out cession. The other cession between Afinta Finance and Corpcapital Bank correctly reflected a cession in securitatem debiti as intended by the parties. Both agreements were substantially the same and provided for the cession from the cedent to the cessionary of ‘the [lease agreements] listed on a document completed and signed by the Cedent in the form of the Schedule annexed hereto as Annexure “A”’. Each agreement contained a non-variation clause in the following terms: ‘1. no variation, alteration, consensual cancellation, addition to or novation of this cession and no waiver by [the cessionary] of any of its rights hereunder shall be of any force or effect unless reduced to writing and signed by [the cessionary’s] authorised representative and [the cedent or the cedent’s] duly authorised representative.’ [7] The lease agreements that were to be transferred at the outset had to meet the credit criteria of Corpcapital Bank. For purposes of identifying such agreements a firm of auditors was appointed to conduct a due diligence investigation, which was completed only in June 1999. By then Afinta Financial Services and Afinta Finance were no longer satisfied that the master cession they had signed on 26 February 1999 was an appropriate instrument for achieving their purpose, probably because they realised that the master cession had been a cession in securitatem debiti and not an out and out cession. As a result a new agreement (which they referred to as a ‘sale’ agreement) was concluded by Afinta Financial Services and Afinta Finance on 14 July 1999. [8] The sale agreement provided in Clause 1 as follows: ‘[Afinta Finance] hereby purchases from [Afinta Financial Services] all right, title and interest in and to the Vehicle Finance debts set out in column “F” of annexure A hereto (“debts’) and all of its claims and rights of action against the debtors set out in column “D” of annexure A hereto (“debtors”) including the cession and transfer of all rights in and to the debts’. It also incorporated, by reference to another agreement that the parties had concluded, a non-variation clause in the following terms: ‘1. No amendment or consensual cancellation of this agreement or any provision or term thereof or of any agreement or other document issued or executed pursuant to or in terms of this agreement and no settlement of any disputes arising under this agreement and no extension of time, waiver or relaxation or suspension of any of the provisions or terms of this agreement or other document issued pursuant to or in terms of this agreement shall be binding unless recorded in a written document signed by the parties.’ [9] Attached to the sale agreement as annexure A was a list of about eighty lease agreements that had been concluded between Afinta Financial Services and its customers, included amongst which were eleven lease agreements with the defendant. [10] Subsequent to the conclusion of the sale agreement some of debts that had been ‘sold’ were found to be irrecoverable and by agreement between Afinta Financial Services and Afinta Finance a list was prepared of other lease agreements that were to be ceded in their stead. Later a further list was compiled under similar circumstances. Those lists between them reflected seven further lease agreements with the defendant. Neither of the lists was signed by either Afinta Financial Services or Afinta Finance. [11] Earlier I pointed out that a ‘master cession’ was signed by Afinta Finance and Corpcapital Bank on 26 February 1999 in contemplation of the cession of debts from the former to the latter as security for loans that were to be advanced by Corpcapital Bank. Because the rights that were to be transferred by Afinta Financial Services to Afinta Finance at the outset – and thereafter ceded to Corpcapital Bank – had yet to be identified the master cession naturally did not reflect any ceded debts at the time the document was signed. But once the relevant lease agreements had been identified, and Afinta Financial Services had purported to transfer them to Afinta Finance, various schedules were prepared purporting to record a cession of the rights in those agreements to Corpcapital Bank pursuant to the master cession. In February 2000 those schedules were consolidated into a single schedule. It is not disputed that the consolidated schedule was signed on behalf of Afinta Finance, but it was not signed by or on behalf of Corpcapital Bank. Amongst the lease agreements reflected on the schedule were the eighteen lease agreements with the defendant to which I referred earlier and those lease agreements are the subject of the action with which this appeal is concerned. It is alleged that the defendant breached the agreements, with resultant damage, which Corpcapital Bank seeks to recover as cessionary. [12] The argument advanced on defendant’s behalf, both in this court and the court below was that there was no valid cession of debts from Afinta Financial Services to Afinta Finance in respect of the seven lease agreements that were not reflected in the original annexure to the ‘sale’ agreement because, so it was contended, the purported addition of those lease agreements constituted a variation of the ‘sale’ agreement that did not comply with the formalities of the non-variation clause in the sale agreement. Moreover, it was argued on behalf of the defendant that there was no valid cession by Afinta Finance to Corpcapital Bank of the rights arising from any of the eighteen lease agreements because the later addition of the schedule constituted a variation of the master cession that similarly did not comply with the required formalities. [13] The court a quo found that the purported cession to Afinta Finance of the seven lease agreements, and the purported cession to Corpcapital of all eighteen lease agreements, constituted amendments of the ‘sale’ agreement and the master cession respectively. It went on to find, however, relying on a remark to that effect in Aussenkehr Farms (Pty) Ltd v Trio Transport 2002 (4) SA 483 (SCA) 494A1, which the learned judge considered to be binding upon him, that the non-variations clauses in each case could not be relied upon by a third party (the defendant) where ‘the parties to the agreement (the cedent and the cessionary) were not relying on the provisions of their contract requiring written variations or amendments’. In the circumstances, the learned judge concluded, it was ‘not open to the defendant to attack the consensus achieved by Afinta Finance and Afinta Financial Services, (and similarly the consensus achieved between Afinta Finance and Corpcapital Bank) and, as a third party, to insist upon formalities between them’. 1 ‘… if the parties were not contending that a written termination was needed it was not open to the defendant to argue invalidity of the act.’ [14] I have some doubt that contractually created rights and obligations may vary depending upon the perspective from which they are viewed. The remark to that effect in Aussenkehr Farms, which the learned judge relied upon, was clearly obiter, and may also have overlooked the earlier decision of this court in Traub v Barclays National Bank Limited 1983 (3) SA 619 (A) 631E-633A in which the topic was more extensively considered albeit in another context. But it is not necessary to consider that issue further in the present case because in my view the court a quo erred in any event in relation to the construction of the various agreements. [15] The ‘sale’ agreement between Afinta Financial Services and Afinta Finance regulated the transfer of the rights in the lease agreements referred to in the annexure (annexure A). Their later agreements – concluded by their conduct in preparing the two further lists when seen in the context in which they did so – to transfer the rights in seven further leases did not purport to amend any of the terms of the former transaction. They were no more than later transactions in similar terms, which the sale agreement did not preclude them from concluding, and which required no formalities to be valid. The defendant’s reliance on the non-variation clause in the ‘sale’ agreement was quite misconceived because no amendment to that agreement purported to be effected at all. It follows that the rights relating to all eighteen vehicles leased to the defendant were properly transferred to Afinta Finance. [16] Similarly the master cession concluded between Afinta Finance and Corpcapital Bank on 26 February 1999 did not purport to preclude the parties from ceding rights in the future. Indeed, the master cession contemplated that future cessions would be effected, and its very purpose was to regulate the terms that would govern those cessions. What was required to effect such future cessions on the terms agreed to in the master cession was no more than that the relevant lease agreements should be listed in a schedule compiled and signed by Afinta Finance, which is what occurred in relation to the eighteen lease agreements that are now in issue. The parties did not thereby purport to vary or alter, or even add to, the master cession. On the contrary, they purported only to give the master cession its intended effect. [17] It was also submitted on behalf of the defendant that Corpcapital Bank’s pleaded case did not rely upon cessions effected by the parties subsequent to the conclusion of each of the written agreements. That is not correct. On the contrary, the very case that Corpcapital Bank pleaded was that the relevant cessions were effected subsequent to the conclusion of the respective written agreements. Indeed, it is difficult to see how its case could have been pleaded in any other form. [18] In the circumstances the court a quo correctly dismissed the defence, albeit on incorrect grounds. The appeal is dismissed with costs, including costs occasioned by the employment of two counsel. _____________________ C N JAFTA JUDGE OF APPEAL CONCUR: ) MPATI DP ) NUGENT JA ) COMBRINCK AJA ) MAYA AJA

Supreme Court of Appeal of South Africa MEDIA SUMMARY – JUDGMENT DELIVERED IN SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 23 February 2006 Status: Immediate NATIONAL SORGHUM BREWERIES LTD v CORPCAPITAL BANK LTD Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal In a judgment delivered today, the Supreme Court of Appeal (the SCA) has dismissed the appeal by National Sorghum Breweries (NSB) against the judgment of the Johannesburg High Court. Corpcapital Bank sued NSB in the high court for damages arising out of breach of various lease agreements. In terms of these agreements NSB had leased 18 vehicles from a company called Afinta Financial Services. The latter company later transferred its rights in the agreements to another company which ceded them to the bank as security for loans the bank had granted it. NSB challenged the bank’s right to sue, arguing that there had not been a proper cession of rights. The high court ruled that NSB could not raise such a defence. Dissatisfied with the ruling NSB appealed to the SCA which held that the rights in all affected lease agreements had been ceded to the bank. As a result the bank was entitled to sue NSB.

3702

non-electoral

2021

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Not Reportable Case No: 749/2020 In the matter between: EDWIN HUBERT VAN DER MERWE APPELLANT and BONNIEVALE PIGGERY (PTY) LTD RESPONDENT Neutral citation: Van der Merwe v Bonnievale Piggery (Pty) Ltd (749/2020) [2021] ZASCA 162 (1 December 2021) Coram: SALDULKER ADP and SCHIPPERS, NICHOLLS, MBATHA and HUGHES JJA Heard: 4 November 2021 Delivered: This judgment was handed down electronically by circulation to the parties' representatives by email, publication on the Supreme Court of Appeal website and release to SAFLII. The date and time for hand-down is deemed to be 09h45 on 1 December 2021. Summary: Contract – interlinked contracts for sale of pork products – prices in sale contract market related – parties unable to reach agreement on price – no consensus – contractual arrangement ended – counterclaim for breach of contract – party allegedly failing to adjust prices – not giving written notice of inability to do so – not proved – delict – unlawful competition – use of confidential information to poach customers – not established – appeal dismissed. ________________________________________________________________ ORDER ________________________________________________________________ On appeal from: Western Cape Division of the High Court, Cape Town (Binns- Ward, Steyn and Sher JJ, sitting as court of appeal): The appeal is dismissed with costs, including the costs of only senior counsel. ________________________________________________________________ JUDGMENT ________________________________________________________________ Schippers JA (Saldulker ADP and Nicholls, Mbatha and Hughes JJA concurring) [1] The appellant, Mr Edwin van der Merwe (the defendant), is a former seller of slaughtered pig carcasses (carcasses), supplied by the respondent, Bonnievale Piggery (Pty) Ltd (the plaintiff), which keeps and rears pigs for slaughter, under a series of interlinked agreements. In 2013 the plaintiff instituted action against the defendant for payment of R1 196 868,84, which was the outstanding balance due in respect of carcasses supplied to the defendant, interest and short payment of purchases. [2] Part of the defendant’s initial defence to the action was that he had been overcharged for carcasses purchased, and that the plaintiff had not complied with the requirements of the National Credit Act 34 of 2005 (the NCA) by granting him credit without being registered as a credit provider. The defendant also alleged that he had a claim against the plaintiff for breach of contract, alternatively delict, for unlawful competition, that exceeded the amount of the plaintiff’s claim. [3] The case was tried before Parker J in the Western Cape Division of the High Court, Cape Town. The parties agreed to a separation of the issues in terms of rule 33(4) of the Uniform Rules of Court (the Rules) as follows: ‘The issue of quantum and causation of the defendant’s counterclaim (in the event of liability being established) is stayed until the other issues in dispute between the parties are disposed of.’ It is plain that causation, an essential element of a delictual claim, should not have been separated from the defendant’s claim for unlawful competition. To do so was misconceived. This Court has repeatedly stated that a trial court must be satisfied that it is proper to make an order under rule 33(4), which should be made only after ‘careful thought has been given to the anticipated course of the litigation as a whole that it will be possible properly to determine whether it is convenient to try an issue separately’.1 [4] Aside from this, the trial judge made an order that the defendant had ‘successfully established liability by the plaintiff and . . . [was] entitled to claim such damages as may be proved in due course’, apparently on the basis of breach of contract. This order however was made in circumstances where the defendant had invoked rule 22(4) of the Rules, which required the judgments on the plaintiff’s claim and the claim in reconvention to be given pari passu.2 [5] In the trial court the defendant’s counsel conceded that the defendant had received and was obliged to pay for the carcasses referred to in the invoices that formed the subject of the particulars of claim. The trial judge however dismissed 1 Denel (Edms) Bpk v Vorster 2004 (4) SA 481 (SCA) para 3; Government of the Western Cape: Department of Social Development v C B and Others [2018] ZASCA 166; 2019 (3) SA 235 (SCA) paras 19-21. 2 Rule 22(4) in relevant part reads: ‘If by reason of any claim in reconvention, the defendant claims that on the giving of judgment on such claim, the plaintiff's claim will be extinguished either in whole or in part, the defendant may in his plea refer to the fact of such claim in reconvention and request that judgment in respect of the claim or any portion thereof which would be extinguished by such claim in reconvention, be postponed until judgment upon the claim in reconvention. Judgment on the claim shall, either in whole or in part, thereupon be so postponed . . . .’ the plaintiff’s claim with costs. The plaintiff was granted leave to appeal to a full bench of the high court. [6] Before the full court it was conceded by the defendant’s counsel that the point based on the NCA had no merit. He informed the full court that the point had been abandoned at the trial, but that did not appear from the record or the judgment of the trial judge. The defendant also abandoned his claim for payment of the amounts overcharged by the plaintiff. That left the nature of the parties’ business relationship and whether the defendant had established his claim in reconvention, namely that he had suffered damages because of the plaintiff’s alleged breach of contract and unlawful competition. [7] The full court (Binns-Ward, Steyn and Sher JJ) upheld the appeal. It held that the business relationship between the parties had come to an end in July 2012 when they could not agree on a price for carcasses, and that the defendant’s counterclaim based on breach of contract and unlawful competition could not be sustained on the evidence. The full court set aside the trial court’s order and granted judgment against the defendant in favour of the plaintiff for payment of the sum of R1 196 868,84, together with interest and costs. It dismissed the claim in reconvention with costs. The appeal is before us with the leave of this Court. [8] Before us the parties accepted that the defendant’s claim of unlawful competition should be decided, despite the fact that the element of causation had been excluded from the issues for decision under rule 33(4). It was also accepted that on the evidence, the full court had been in a position to decide both the claims in convention and reconvention. [9] The basic facts were largely common ground. In 2005 the parties orally entered into a business relationship which included: (i) contracts for the sale of carcasses concluded on the basis of periodically agreed prices; (ii) an exclusive supply agreement; and (iii) a sole distributorship agreement. The business relationship, and with it the interlinked contracts, were of indefinite duration and terminable at the instance of either party. [10] The plaintiff granted the defendant a credit facility in terms of which he agreed to pay amounts due for carcasses within 14 days of the date of invoice, and interest at 2% above the prime rate in the event that he failed to do so. The defendant concluded a written cession of his book debts to the plaintiff as security for his obligations under the credit facility (the cession of book debts). In terms of the cession of book debts, the defendant undertook to furnish the plaintiff at regular intervals with particulars of all his debtors, the amount of their indebtedness and details of securities held for those debts. [11] In terms of the supply agreement, the plaintiff agreed to supply carcasses to the defendant at reasonable, market related wholesale prices that would follow market fluctuations. From the outset it was agreed that the plaintiff would also supply pigs to Winelands Pork, a pig-slaughtering abattoir and wholesale business involved in a joint venture with the plaintiff, as the defendant did not buy all the plaintiff’s pigs and they had to be sold elsewhere. Under the distributorship agreement the defendant exclusively sold carcasses to the retail market for his own account and under his own brand to customers in the Western Cape. He agreed not to sell carcasses in the area in which Winelands Pork sold its products. The parties agreed not to compete in their respective areas of distribution. [12] The prices at which carcasses were sold to the defendant in the various contracts of sale were negotiated and changed at least four times a year, and depending on what happened in the market in the Western or Southern Cape, would move either up or down. Prices were determined according to the size of carcasses and the season. Broadly, smaller carcasses fetched higher prices than ones in the heavyweight category. The prime marketing period for pork generally was from October to December each year. During the winter months the turnover of carcasses was lower because the pigs remained longer in the plaintiff’s pens and grew in size and weight. This was a recurrent situation which resulted in an oversupply of pigs, which the defendant referred to as a ‘bottleneck’. [13] Throughout their relationship and despite constant arguments about prices, the parties were able to address the problem of oversupply of pigs by reaching agreement on prices in the numerous sale agreements between 2005 and 2012. The defendant had often complained that the prices were too high, but ultimately accepted them. However, in July 2012 the parties were unable to reach agreement on the price for some 1300 pigs in the heavyweight category that needed to be taken out of the plaintiff’s piggery. Consequently, the parties’ business relationship came to an end. [14] The plaintiff’s claim was for payment of carcasses delivered to the defendant in January and February 2013. As stated, the defendant conceded that he had obtained the benefit of those carcasses and had to pay for them. He asserted that the amount counterclaimed for loss of profits should be set off against any amount granted in judgment by the trial court. In his evidence the defendant confirmed receipt of the carcasses forming the subject of the plaintiff’s claim and that he had intended to pay the amount demanded. He said that he started withholding payments from the plaintiff because he realised that he would have to close his business, he had no money and there were 14 families dependent on the work which he provided. [15] The plaintiff had thus established its claim and it should not have been dismissed by the trial court at the end of the first stage hearing. That this was a misdirection was conceded by the defendant’s counsel before the full court. The alleged breach of what the defendant called a ‘Supplier/Distribution Agreement’ and a ‘sole and exclusive distributorship’, that formed the basis of the counterclaim, did not detract from the plaintiff’s entitlement to payment of carcasses sold and delivered to the defendant under the sale agreements, for on- sale by the defendant. [16] The remaining issue then is whether the defendant had proved breach of contract and unlawful competition as alleged in his counterclaim. As to the former, he asserted that in terms of a supplier/distribution agreement, the plaintiff had agreed to supply him with carcasses ‘at reasonable and market wholesale prices’; that it would reduce those prices if there were negative market price fluctuations; and that the plaintiff would furnish him with written reasons if it was unable to adjust its prices. He alleged that in the course of the agreement the parties would become privy to confidential information and operational secrets. They had agreed, so it was alleged, that they would not utilise this information for their own advantage, and specifically that they would not solicit or accept business from each other’s customers. [17] The defendant averred that in terms of the sole and exclusive distributorship, the prices of products sold to him ‘would be market related and follow market trends up or down’ and be linked to those charged to Winelands Pork, with a premium of 40c per kilogram excluding a slaughtering fee of R1 per kilogram. During the existence of the agreement or thereafter, the plaintiff would not canvass or sell pork products to the defendant’s customers or compete with him in any way. [18] The defendant alleged that the plaintiff had breached the distributorship agreement in the following respects. It refused to adjust its pork prices downwards in accordance with prevailing market trends. Between July 2011 and February 2013 the plaintiff increased the margin of prices charged to the defendant but not to Winelands Pork. From July 2012 it refused to deliver sufficient product for the defendant to service his market, as a result of which the defendant was forced to purchase pork products from Hunters Vlei, a competitor of the plaintiff. From June 2012 to February 2013, and with a view to putting him out of business, the plaintiff had unlawfully competed with the defendant by selling pork products directly to his customers at lower prices. [19] As a result of the plaintiff’s alleged breach of contract and unlawful competition, the defendant had been overcharged in the amount of R851 900,12 over a period of 20 months, totalling some R2.5 million. The defendant asserted that he had suffered a loss of profits in the sum of R12 467 307,73 in respect of his category A clients (those exclusively supplied by the defendant). He inferred that he had suffered a loss in the same amount in relation to his category B clients (whom the defendant did not exclusively supply). [20] In its plea to the counterclaim the plaintiff admitted that it would have obtained confidential information by virtue of the cession of book debts, but denied that it had unlawfully competed with the defendant. The plaintiff also denied the defendant’s allegations regarding breach of contract and pleaded that the sales agreement could in any event not continue because the parties could not reach agreement on the selling price of pork products. [21] The question of what would happen to their business relationship and the interlinking agreements if the parties could not agree on a price for carcasses was at the heart of the dispute between them. In July 2012 the dispute about the price of some 1300 pigs that had to be cleared out of the plaintiff’s pens had reached an impasse, as neither side would compromise. Around 17 July 2012 there was a meeting at a coffee shop in Bonnievale to resolve the impasse. Mr Johan Broodryk, the owner of Bonnievale Abattoir, agreed to reduce the slaughtering fee charged to the defendant. Mr Burger, on behalf of the plaintiff, was willing to reduce the price of carcasses. The defendant was asked to sell the oversupply at lower profit margins. The parties however could not reach agreement on the price which, the full court held, resulted in the failure of the entire contractual scheme through no fault of either of them. [22] However, before us counsel for the defendant submitted that the parties could not reach agreement on the purchase price because the plaintiff had failed to adjust its prices downwards. This, it was argued, was borne out by the objective facts and evidence. After the July 2012 meeting the defendant had written to the plaintiff informing it of the prices at which it could sell the 1300 carcasses, to which it never received a reply. The next thing the defendant knew, so it was submitted, was that the plaintiff had delivered a large amount of carcasses to the defendant’s main customer and excluded him as the middleman, which was ‘a planned strategy’. [23] These submissions are unsound. There is no evidence that the plaintiff breached the sales or supply agreement because it failed to adjust prices downwards. That much is clear from the defendant’s own evidence. He conceded that in all the years until July 2012, he had accepted the prices of carcasses, even when there was no downward adjustment that he wished for. On those occasions he had made a loss or a very small profit. As the defendant put it: ‘So there were times when I did not agree and then I just tried to deal with it’ (My translation).3 3 ‘So daar is tye wat ek nie saamgestem het nie en dan het ek dit maar probeer verwerk.’ And contrary to the defendant’s assertion, there was simply no evidence that the plaintiff had undertaken to furnish him with written reasons if it was unable to adjust its prices. [24] The facts militate against an inference of any planned strategy to exclude the defendant from the contractual arrangement with the view to taking over his customers. Rather, the evidence shows the contrary. It was never suggested, nor could it be, that the meeting at Bonnievale was not a genuine attempt to resolve the impasse on price. The defendant’s own actions after that meeting are consistent with his acceptance that the parties’ business relationship had come to an end. [25] On 24 July 2012, some seven days after the Bonnievale meeting – and after the plaintiff allegedly had sold pork products to his customer, Striker Meats – the defendant wrote to the plaintiff as follows: ‘Due to your action to market pigs on your own it is very important that I must know the following: 1. Availability of pigs from today until the 1st of October. 2. Availability from the 1st October forward. I need your urgent reply because I have to secure my business and for future marketing.’ This letter does not contain a hint of any breach of contract, let alone that the plaintiff had breached the distribution agreement, by refusing to adjust its pork prices downwards and delivering insufficient product to the defendant, as alleged in the counterclaim. This, when on the defendant’s version the supply and distributorship agreements were still extant. The letter also says nothing about unlawful competition. [26] What is more, in a letter to the plaintiff dated 4 September 2012, the defendant proposed a new arrangement. He expressed his willingness to sell all the plaintiff’s pigs to customers at fixed prices to be agreed upon. He suggested that certain customers be charged a higher price than others. In evidence the defendant conceded that this was an attempt to conclude a new agreement with the plaintiff. It was the clearest indication that the defendant accepted that the parties’ contractual arrangement had terminated at the end of July 2012. The full court thus correctly concluded that the cancellation question, ie whether the plaintiff had cancelled the contractual arrangement because the defendant had bought carcasses from a competitor, was immaterial. [27] Moreover, the attempt to conclude a new agreement was directly at odds with the defendant’s case that the plaintiff had from ‘September 2012 onwards, in breach of the (still existing) agreement’ sold products directly to his customers. And when he wrote the letter of 4 September 2012, the defendant himself was delivering pork products on behalf of the plaintiff to his former customers. [28] It was common ground that there was never a fixed price and the standard according to which the price had to be determined, had to be market related. Although the concept ‘market related price’ is not a precisely defined term, it was not necessary for the parties, in order for their contract to be valid and not void for vagueness, to formulate a precise mathematical criterion for the determination of the price.4 The parties had to negotiate the price for each sale. They had always managed to reach agreement on price or, at the very least, the defendant accepted the price even in the absence of a downward adjustment that he sought, until 2012, when there was a deadlock: the parties could not reach consensus. There was no objectively determinable external standard or mechanism to resolve this deadlock, such as the determination of the price by a third party.5 4 Letaba Sawmills (Edms) Bpk v Majovi (Edms) Bpk [1993] 1 All SA 359; 1993 (1) SA 768 (A) at 775A-C. 5 Compare Letaba Sawmills (Edms) Bpk v Majovi (Edms) Bpk [1993] 1 All SA 359; 1993 (1) SA 768 (A) at 774B- C. [29] The submission by the defendant’s counsel that there was an external standard according to which the price could be determined, namely reasonable and market related wholesale prices that followed market fluctuations, is correct. But this was not a deadlock-breaking mechanism. The market related price was simply a measure according to which prices would be negotiated. It was no more than an indicator that oriented the parties to prices at which carcasses generally were sold in the industry: the relevant market would provide the framework within which the prices for carcasses in each sale would be negotiated and determined. Put differently, the parties agreed that the price of carcasses would be related or connected to pork market prices, and determined by negotiation. They did not agree that the price of carcasses would be charged at the prevailing market price in the various contracts of sale, or in the event that the parties could not themselves agree on a price. [30] The defendant’s claim for damages in contract was based on the plaintiff’s alleged breach of the sole distributorship agreement. The defendant claimed that the plaintiff, utilising confidential information (obtained by virtue of the cession of book debts), had canvassed his category A customers and sold pork products to them at lower prices, between the end of June 2012 and the end of February 2013. From September 2012 onwards the plaintiff sold directly to the defendant’s category B customers. It was argued that the plaintiff had wilfully created the situation in June/July 2012 so as to ‘convert’ itself to a wholesaler, on the back and in the place of the defendant. [31] When the parties could not reach consensus on the price of carcasses in July 2012, the contractual arrangement, and with it the sole distributorship agreement, came to an end. On the facts, the defendant thereafter raised no complaint of breach of contract (or unlawful competition) by the plaintiff. He continued to purchase carcasses from the plaintiff on an ad hoc basis on credit, but in lesser quantities, secured by the credit facility. Contrary to the conclusion of the trial court, there was nothing ‘ludicrous’ about the credit facility and the cession of book debts continuing in existence after the termination of the parties’ business relationship. The defendant accordingly had no enforceable cause of action in contract.6 [32] Before us counsel for the defendant fairly conceded that in the absence of direct evidence of a planned strategy by the plaintiff to exclude the defendant as the middleman (or engineering a situation so as to become a wholesaler), the Court was asked to draw such an inference from the proved facts. Given the facts stated in paragraph 24 to 26 above, and specifically the parties’ efforts to resolve the impasse on price in 2012 and the defendant’s attempt to negotiate a new contract, the inference sought is neither plausible nor readily apparent.7 Any suggestion that Mr Broodryk, the owner of Bonnievale Abattoir, was party to a scheme to take over the defendant’s business, is absurd. [33] Regarding the plaintiff’s claim for contractual damages, the trial court made findings of fact that were unsupported by the evidence, and critical to its decision that the defendant had established liability on the part of the plaintiff. It found that in the cession of book debts, the plaintiff: ‘. . . actually confirmed in writing that it has access to confidential information that is of substantial value to the defendant and in respect of which the defendant is entitled to protection.’ The judge went on to say: ‘. . . I see no reason why the plaintiff should not be held liable to that which it agreed to in writing in this regard.’ 6 Liberty Group Ltd and Others v Mall Space Management CC t/a Mall Space Management [2019] ZASCA 142; 2020 (1) SA 30 (SCA) para 32. 7 Ocean Accident and Guarantee Corporation Ltd v Koch 1963 (4) SA 147 (A) at 159A-D, affirmed in Kruger v National Director of Public Prosecutions [2019] ZACC 13; 2019 (6) BCLR 703 (CC) para 79. [34] Aside from the defendant’s credit application, the cession of book debts was the only written agreement concluded between the parties. The cession however contains no acknowledgement by the plaintiff of access to confidential information in respect of which the defendant was entitled to protection. In fact, the defendant’s case was that the plaintiff had orally agreed to non-disclosure of confidential information: the counterclaim states that it ‘was understood that in the course of the Supplier/Distributor Agreement the parties would become privy to confidential information and operational secrets’.8 And the defendant adduced no evidence of this so-called confidential information and operational secrets. Solely for these reasons, the trial court’s order that the defendant had established liability on the part of the plaintiff was unsustainable. [35] There are further reasons why the order cannot be sustained. The trial court stated that the facts of the matter were ‘tantamount to a restraint agreement’, and that ‘unlawful interference in the business of the defendant’ could ‘occur in various forms’. It then proceeded to apply the principles relating to restraint of trade agreements to the contractual relationship between the parties and held that ‘the defendant had a protectable interest in the form of confidential information that the plaintiff had access to’, which the plaintiff had breached. The judge concluded: ‘I thus find that the plaintiff has failed to discharge the burden of proving that the restraints are not justified on the basis of protecting confidential information or trade connections. The contractual terms in the distribution agreement for the protection of confidential information are enforceable.’ [36] There was of course no onus on the plaintiff to prove any of the claims asserted in the defendant’s counterclaim. The trial court conflated unlawful interference in the defendant’s business (unlawful interference with contractual 8 Emphasis added. relations – a delictual claim) with agreements in restraint of trade. It then applied the principles in Basson9 concerning the reasonableness of a restraint of trade agreement and came to the conclusion that the defendant had breached the sole distributorship agreement, ie that its terms were enforceable. This was a material error of law: there was no restraint of trade agreement between the parties. The issue was whether the plaintiff had breached the sole distributorship agreement or competed unlawfully with the defendant. [37] Furthermore, the information that the defendant furnished in the cession of book debts was not given in circumstances giving rise to an obligation of confidence. The cession of book debts was nothing more than a standard security cession concluded by a debtor buying goods from a supplier. For such cession to be effective, the cessionary must necessarily have access to details of the cedent’s debtors and the prices at which it sells goods to them in order to enforce its rights under the agreement. [38] Apart from this, the information furnished by the defendant was not confidential in nature, having the necessary quality of confidence deserving of protection. The prices of pork products, the main participants in the industry who were fiercely competitive, who their customers were and the prices charged by them, were all matters of public knowledge. Indeed, the evidence shows that the defendant had utilised this very information, which was in the public domain, when negotiating prices with the plaintiff in the various contracts of sale. [39] What all of this shows is that the defendant failed to prove that the plaintiff had breached the sole distributorship agreement. The full court rightly dismissed his claim on this ground. 9 Basson v Chilwan and Others [1993] 2 All SA 373 (A); 1993 (3) SA 742 (A) at 767F-H. [40] The defendant’s alternative claim of unlawful competition can be dealt with shortly. It was submitted that the plaintiff’s conduct was ‘the most classic case of unlawful interference with a contractual relationship’, and that it wilfully created the situation in July 2012 to become a wholesaler in place of the defendant. The latter submission however has no basis in the evidence for the reasons already advanced. [41] In Schultz v Butt,10 unfair competition was described thus: ‘As a general rule, every person is entitled freely to carry on his trade or business in competition with his rivals. But the competition must remain within lawful bounds. If it is carried on unlawfully, in the sense that it involves a wrongful interference with another’s rights as a trader, that constitutes an injuria for which the Aquilian action lies if it has directly resulted in loss.’ [42] Since the delict of unlawful competition is based on the Aquilian action, the defendant had to prove wrongfulness. It is only when the competition is wrongful that it becomes actionable. In Phumelela v Gründlingh,11 the Constitutional Court formulated the test for wrongfulness as follows: ‘The question is whether, according to the legal convictions of the community the competition or the infringement on the goodwill is reasonable or fair when seen through the prism of the spirit, purport and objects of the Bill of Rights. Several factors are relevant and must be taken into account and evaluated. These factors include the honesty and fairness of the conduct involved, the morals of the trade sector involved, the protection that positive law already affords, the importance of competition in our economic system, the question whether the parties are competitors, conventions with other countries and the motive of the actor.’ [43] The defendant simply failed to establish wrongfulness. The plaintiff’s conduct would have been wrongful only if it had intentionally induced the 10 Schultz v Butt [1986] 2 All SA 403 (A); 1986 (3) SA 667 (A) at 678F-H. 11 Phumelela Gaming and Leisure Limited v Gründlingh and Others [2006] ZACC 6; 2006 (8) BCLR 883 (CC); 2007 (6) SA 350 (CC) para 34; Masstores (Pty) Limited v Pick ‘n Pay Retailers (Pty) Ltd [2016] ZACC 42; 2017 (1) SA 613 (CC); 2017 (2) BCLR 152 (CC) para 29. defendant’s customers to breach their contract with him.12 There was however no evidence as to the nature and content of any contractual relationship between the defendant and any of his customers. The high watermark of his case on this score was that he had been informed by the owner of Striker Meats that the plaintiff had decided to exclude the defendant from the sale of pork products, which in any event was inadmissible hearsay evidence. In short, there was no factual or legal basis for the defendant’s claim of unlawful competition. [44] What remains is the submission on behalf of the defendant that the trial judge had made ‘strong and well-reasoned credibility findings’ against the plaintiff’s main witness, Mr Burger, to which the full court was bound. It suffices to say that the full court was in a position to come to a clear conclusion that the trial court was plainly wrong, and little weight could be attached to its credibility findings.13 Regarding costs, both parties were ably represented by only senior counsel in the trial and the appeal before the full court. Consequently, the costs of two counsel in this appeal are not justified. [45] In the result, the appeal is dismissed with costs, including the costs of only senior counsel. ___________________ A SCHIPPERS JUDGE OF APPEAL 12 Masstores (Pty) Limited v Pick ‘n Pay Retailers (Pty) Ltd [2015] ZASCA 164; 2016 (2) SA 586 (SCA); [2016] 2 All SA 351 (SCA) para 22. 13 Bernert v Absa Bank Ltd [2010] ZACC 28; 2011 (4) BCLR 329 (CC); 2011 (3) SA 92 (CC) para 106. Appearances For appellant: R S van Riet SC Instructed by: Dirk Kotze Attorneys, Cape Town Symington & De Kok Attorneys, Bloemfontein For respondent: A Beyleveld SC and I Bands Instructed by: Wheeldon Rushmere & Cole Inc, Cape Town Honey Attorneys, Bloemfontein

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 1 December 2021 Status: Immediate The following summary is for the benefit of the media in the reporting of this case and does not form part of the judgments of the Supreme Court of Appeal Van der Merwe v Bonnievale Piggery (Pty) Ltd (749/2020) [2021] ZASCA 162 (1 December 2021) Today the Supreme Court of Appeal (SCA) dismissed an appeal by the appellant with costs, including the costs of senior counsel. The appellant, Mr Edwin van der Merwe (the plaintiff), is a former seller of pork products. The respondent, Bonnievale Piggery (Pty) Ltd (the defendant), keeps and rears pigs for slaughter. In 2005 the parties entered into a business relationship which included contracts for the sale of pork products concluded on the basis of periodically agreed prices, an exclusive supply agreement and a sole distributorship agreement. Their business relationship and the interlinked contracts were of indefinite duration, terminable at the instance of either party. In terms of the sales agreement the parties agreed that the plaintiff would sell pork products to the defendant at reasonable, market-related wholesale prices that would follow market fluctuations. Under the supply agreement the plaintiff agreed to supply pork products exclusively to the defendant. In terms of the sole distributorship agreement the defendant would be the sole distributor of the plaintiff’s products under his own brand to customers in the Western Cape. In 2013 the plaintiff instituted action against the defendant for payment of R1 196 868,84, for pork products supplied. The defendant admitted receipt of these products and that he was liable to pay for them, but alleged that he had a counterclaim against the plaintiff for some R12,5 million for breach of contract, alternatively unlawful competition. The Western Cape Division of the High Court, Cape Town (the high court), dismissed the plaintiff’s claim and upheld the defendant’s counterclaim. The court made an order that the defendant had successfully established liability by the plaintiff and was entitled to claim such damages as may be proved in due course. The plaintiff was granted leave to appeal to a full bench of the high court. The full court held that the business relationship between the parties had come to an end in July 2012 when they could not agree on a price for pork products, and that the appellant’s counterclaim based on breach of contract and unlawful competition could not be sustained on the evidence. The full court set aside the trial court’s order and granted judgment against the appellant in favour of the respondent for payment of the sum of R1 196 868,84, together with interest and costs. It dismissed the claim in reconvention with costs. The defendant was granted leave to appeal to the SCA. The SCA held that plaintiff had proved its claim and that the defendant had not proved his counterclaim based on breach of contract or unlawful competition. It held that the full court was correct in concluding that the parties’ business relationship had come to an end in July 2012 when they could not agree on the price of pork products. The defendant did not prove his counterclaim for breach of contract. In seeking to conclude a new agreement with the plaintiff in September 2012, he had accepted that their business relationship ended in July 2012. The defendant also failed to prove his claim for unlawful competition. He presented no evidence to show that the plaintiff had interfered in the contractual relationships between him and his customers. The appeal was accordingly dismissed. --------oOo--------

3793

non-electoral

2022

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Reportable Case No: 222/2020 In the matter between: FRANNERO PROPERTY INVESTMENTS 202 (PTY) LTD (Previously Frannero Property Investments 202 CC) APPLICANT and CLEMENT PHUTI SELAPA FIRST RESPONDENT DIMAKATSO SEMELA SECOND RESPONDENT KHENSASI MABUNDA THIRD RESPONDENT GEORGE NGOVENI FOURTH RESPONDENT FREDDY RAPAO FIFTH RESPONDENT SYLVIA MABUNDA SIXTH RESPONDENT UNLAWFUL OCCUPIERS OF PORTION 35 OF THE FARM WATERVAL 306, REGISTRATION DIVISION JQ, NORTH WEST PROVINCE SEVENTH RESPONDENT RUSTENBURG LOCAL MUNICIPALITY EIGHTH RESPONDENT DPARTMENT OF RURAL DEVELOPMENT AND LAND REFORM NINTH RESPONDENT DEPARTMENT OF LOCAL GOVERNMENT AND HUMAN SETTLEMENT TENTH RESPONDENT together with UNIVERSITY OF THE FREE STATE LAW CLINIC AMICUS CURIAE Neutral citation: Frannero Property Investments 202 (Pty) Ltd v Clement Phuti Selapa and Others (case no 222/2020) [2022] ZASCA 61 (29 April 2022) Coram: DAMBUZA and MOTHLE JJA and MEYER, SMITH and WEINER AJJA Heard: 30 November 2021 Delivered: This judgment was handed down electronically by circulation to the parties' representatives by email, publication on the Supreme Court of Appeal website and release to SAFLII. The date and time for hand-down is deemed to be 10h00 on 29 April 2022. Summary: Land tenure - Extension of Security of Tenure Act 62 of 1997 – onus to prove application of – the party who invokes the Act bears the onus – sufficient evidence must be tendered. ORDER On appeal from: North West Division of the High Court, Mahikeng (Nobanda AJ with Hendricks DJP and Nonyane AJ concurring, sitting as court of appeal): Special leave to appeal is granted; In relation to the respondents whose names appear in schedule A attached to this order the appeal is dismissed; In relation to the rest of the respondents the appeal is upheld. The order of the full court is set aside and replaced with the following order: ‘1 The appeal is upheld. 2 The application is referred back to the high court for determination of the application brought in terms of the Prevention of Illegal Eviction from and Unlawful Occupation of Land Act 19 of 1998. 3 There shall be no order as to costs’. There shall be no order as to costs. JUDGMENT Dambuza JA (Mothle JA and Meyer, Smith and Weiner AJJA concurring) Introduction [1] The issue in this application for special leave to appeal is whether a community of about 300 people who occupied the applicant’s property known as Portion 35 of the Farm Waterval 306 in Rustenburg, Northwest Province (the property), were occupants under the Extension of Security of Tenure Act 62 of 1997 (ESTA). Aligned to that is the question whether the termination of their rights to occupy the property by the applicant was lawful, and whether the order of eviction sought by the applicant should be granted. [2] Following its termination of the rights of the community to occupy the property, the applicant, Frannero Property Investments 202 (Pty) Ltd (Frannero), brought an application in the North West Division of the High Court, Mahikeng (Djaje J (high court)) to evict them from the property in terms s 4 of the Prevention of Illegal Eviction from and Unlawful Occupation of Land Act 19 of 1998 (PIE Act). That court found that it had no jurisdiction to hear the eviction application because the first to seventh respondents were occupiers in terms of ESTA and that their occupancy rights had not been lawfully terminated as prescribed in that Act. On appeal, the full court of that Division (Nobanda AJ with Hendricks DJP and Nonyane AJ concurring), confirmed the finding that the respondents were occupiers under ESTA and dismissed the appeal. This application for special leave to appeal follows the dismissal of that appeal. BACKGROUND [3] The property was initially owned by Rustenburg Platinum Mines (RPM). It was used as a water source in that water was pumped from it to RPM’s mining sites. A single rondavel on the property was used to accommodate RPM’s employees who worked on the water pumps. [4] In 1983 the property was registered in the name of Mr Felix Formariz. He then built a house thereon. In 1992 he came to live on the property. From 1996 he started constructing more buildings on the property consisting of small rooms with a general ablution area.1 From 2000 he started leasing the rooms to mine workers through oral rental agreements concluded with them. Occupation was on 1 The respondents asserted that Mr Formariz came to live on the property in 1990. This dispute of fact has no significant bearing on the real issues in this court. a month to month basis. Rental was payable at the beginning of each month, and the agreements were terminable on a month’s notice by either party. Only the tenant and one other person were permitted to occupy a room. Mr Bucks was employed as a manager of the rental enterprise. Between 2001 and 2010 various tenants came to occupy the property and then vacated it. [5] After Mr Bucks’ departure, Mr Formariz discovered that his tenants had developed a practice of vacating the rooms without giving notice, and they would substitute unauthorised tenants when vacating the rooms. Some of the unauthorised tenants defaulted on rental payments. In 2011 Mr Formariz employed Mr Francisco de Matos as the manager. By this time the rental buildings consisted of 5 blocks, referred to as Blocks A, B, C, D and O. Only Block B had power supply, with a commensurately higher monthly rental. [6] During 2012 Mr Formariz applied successfully to the Portfolio Committee: Planning and Human Settlement at Rustenburg Local Municipality, in terms of s 96 read with s 69 of the Town Planning and Township Ordinance 15 of 1986, for the establishment of an Industrial Township known as Waterval East Extension 60 on the property. The property was rezoned accordingly in September 2012. By this time 50% of the tenants were defaulting with rent payment. Mr de Matos held meetings with the tenants to discuss the non-payment of rentals. At those meetings the establishment of the Industrial Township on the property and an impending sale thereof to the applicant were also discussed. However, the non- payment of rentals persisted despite the discussions. [7] Mr Formariz instructed his attorney, Mr Adriaan Wessels, to assist in resolving the problems experienced with the tenants. At a meeting held with the tenants during October 2012, Mr Wessels advised the tenants that because non- payment of rentals had persisted, eviction orders had been obtained against several ‘illegal occupiers’. He also advised them again about the rezoning of the property, together with the imminent sale thereof to the applicant. [8] On 29 October 2012 a sale agreement was concluded between Mr Fomariz and the applicant’s predecessor in title. In that same year the applicant took occupation of the property and was in charge thereof. The tenants were advised that the rental agreements concluded with Mr Fomariz would be honoured, provided that they paid the rentals. During August 2014 the applicant had the number of the industrial erven on the property increased from 22 to 34. It then gave written notices of cancellation of the lease agreements, through its attorneys, during September 2014 to all tenants in the following terms: ‘WRITTEN NOTICE OF CANCELLATION OF VERBAL LEASE AGREEMENT To: All TENANTS and OCCUPIERS residing at the property known as PLOT 35 WATERVAL. . . . We confirm the following: l) The premises occupied by you was sold to the client and stands to be registered in the name of our clients shortly; 2) In terms of the sale agreement all risk and benefit have already passed to the purchasers and it is as a result thereof that they have several rights, including the right to let these premises to you, to accept rent, to cancel such lease agreement and to claim occupation, possession and undisturbed use of the premises; 3) You are a tenant of these premises in terms of a verbal lease agreement between yourself and the previous landowner, Mr Felix Formariz, alternatively in respect of a verbal lease agreement between yourself and the client, which agreement was concluded after the client had purchased the property from the previous landowner; 4) The property was rezoned by the Rustenburg local Municipality to industrial land and the client intends developing an Industrial park on the property; 5) Prior to our client purchasing the property you were verbally informed of the fact that these premises were to be sold and that the new owner will claim ownership of the property; 6) During 2012 and after several applications for eviction were concluded by the previous landowner - Mr Felix Formariz, one Mr Adriaan Wessels from the firm Grabler Vorster Attorneys attended the premises and met with all tenants at that stage occupying the premises. Amongst others it was discussed that the premises was then in the process of being sold, that the premises were never zoned for the purpose of residential housing and that the new landowners will require the tenants to vacate the premises at some stage; 7) Subsequent to the aforementioned you have remained in occupation of the premises by virtue of your verbal lease agreement with Mr Felix Formariz, alternatively by virtue of your verbal lease agreement with our client; 8) Take note that this however now serves as your 30 (THIRTY) days written notice of cancelation of the verbal lease agreement and your lease shall terminate on the 31st of October 2014; 9) You are therefore required to vacate the premises by no later than 31 October 2014; 10) Should you fail to vacate as aforesaid your occupation of the premises shall become illegal on the 1st of November 2014 in terms of Section 4 of the Prevention of Illegal Eviction from and Unlawful Occupation of land Act 19 of 1998 as you will then not have any consent or permission from the purchaser to occupy the premises; 11) Should you fall to vacate the client will stand to suffer damages in respect of the loss of beneficial occupation of the premises being withheld from them and further damages; TAKE NOTICE: 1) You are hereby informed in writing that this serves as your 30 (THIRTY) DAYS WRITTEN NOTIFICATION OF THE CANCELLATION OF YOUR VERBAL LEASE AGREEMENT; 2) Your lease term shall terminate on the 31st of OCTOBER 2014; 3) You are Informed in writing that you should deliver all keys to the said premises at Grobler Levin Soonlus Attorneys at the corners of Beyers Naude Avenue and Brink Streets, Rustenburg by no later than 14:00pm on 31 October 2014; 4) Should you fail to adhere to any of the above mentioned, an application for your eviction from the premises will follow. You shall be held liable for all costs of the Application for your Eviction, which will be issued as a matter of urgency, as well as further damages which may have been caused by your Unlawful Occupation of the said property.’ It is not in dispute that the notice was delivered to all the tenants. [9] Through their attorneys, the tenants denied that they had been advised of the impending sale of the property. More pertinently they asserted that they had been in occupation of the property for almost 30 years and the applicant could not cancel the agreement unilaterally and without an order of court. [10] Subsequent thereto, Mr Formariz, who was still the legal owner of the property, instructed the municipality to disconnect the electricity supply to the property. A borehole located on the property also stopped working. This caused the tenants to institute proceedings in the Rustenburg Magistrates Court, seeking an order against the applicant for restoration of the disconnected services (the spoliation application). However, that application was later withdrawn. The applicant refused to have the electricity reconnected, even though the respondents did make a payment towards the electricity account. For their part the tenants refused to pay rent and, in addition to demanding restoration of electricity supply, they wanted their rooms upgraded and the property cleaned. They were told that this could not happen in view of the anticipated change of ownership. Ultimately, the Rustenburg Municipality made arrangements for water supply and cleaning of the property. [11] On 27 February 2015, the sale agreement concluded with the applicant’s predecessor in title was cancelled and replaced with one concluded with the applicant. According to the applicant, by May 2015 the amount of outstanding rentals had escalated to R944 504.50. The property was transferred to the applicant on 7 August 2015. In that same month the applicant instituted proceedings in the high court for eviction of the respondents. [12] In the application for eviction, the first six respondents were the six tenants that had been the applicants in the spoliation application (in the magistrates court), as office bearers of the tenants’ representative organization. The seventh respondent were the rest of the tenants, cited as ‘Unlawful Occupiers of Portion 35 of the Farm Waterval 306, Registration Division JQ, North West Province’. [13] Mr Francois Grobler, the applicant’s director, explained in the founding affidavit the difficulties of tracking down each and every tenant because they worked different shifts and because of the unauthorised sub-letting. He estimated the average period of occupation of the current occupants to be no longer than three years. [14] As foreshadowed in the cancellation notices the applicant contended that the respondents were unlawful occupiers of the property. It pleaded that cancellation of the leases was effected in terms of the oral lease agreements, alternatively, in terms of the Rental Housing Act 50 of 1999. It asserted that the respondents stopped paying rent in 2014 and arrear rentals had accumulated to R944 504.50. It lamented the poor condition of the property, saying that the respondents were living in hazardous conditions as there was neither water nor electricity supply on the property. It contended that there was sufficient alternative accommodation in Rustenburg wherein they could be accommodated. [15] In asserting their claim that they were occupants in terms of ESTA, the respondents highlighted that they had the previous owner’s consent to occupy the property from 2000 until 2012, and thereafter the applicant’s consent until, at least, 2014. They insisted that they had been in occupation for more than 5 years and disputed the validity of the cancellation, saying they were never afforded an opportunity to make representations prior to termination of their rental agreements. The termination of their lease agreements was therefore not just and equitable, so they contended. They pleaded that some of them were not employed, and others earned less than R5000 per month. They maintained that their rental agreements were terminated because the applicant wanted to develop the property into an industrial park rather than because of arrear rentals. [16] In the answering affidavit, Mr Paulino Chivola Chivura alleged that he had lived on the property since 1990 and that at some stage he was the manager and assisted in collecting rentals, a claim which was disputed by Mr Formariz. The disputed fact was not material because, as will become apparent in the discussion that follows, the respondents (or some of them) started to reside on the property, at the latest, from 2001. When the notices of lease cancellation were issued in 2014, the earliest occupants had been occupiers for 13 years. Although Mr Chivura insisted that the present respondents had been in occupation since 1997, he did not deny that over time, there was no control over tenants’ change of occupancy of the property. And it was not in dispute that the notices of termination of occupancy rights were given to all tenants that were in occupation in 2014. [17] The Municipality lamented the shortage of housing, land and financial resources to enable it to meet its Constitutional obligation of providing residents with housing. The Municipal Manager, Mr Nqobile Sithole, stated that contrary to the applicant’s contention, it was ‘impossible’ for the municipality to provide housing accommodation to the large number of respondents in this case. He listed several other landowners within the Rustenburg Municipality precinct who, collectively, were trying to evict about 4000 tenants. [18] In dismissing the appeal, the full court found that the high court had correctly upheld the respondent’s special plea, that the respondents were occupiers under ESTA and that it lacked jurisdiction to determine the application. However, contrary to the finding of the high court, the full bench found that the onus was on the respondents rather than the applicant, to show that their occupation was regulated under ESTA, including proving that their income was less than the prescribed amount of R5 000.00.2 The respondents had discharged that onus, so held the full court. In this court [19] The application for special leave to appeal was premised on the ground that the respondents had failed to prove that they were occupiers in terms of ESTA. It was submitted on behalf of the applicant that once the 30 day period given in the cancellation notices expired the respondents became unlawful occupiers. [20] However, the relief sought by the applicant had transformed to include an order that, in the event of this Court finding that it was just and equitable to grant an eviction order, such order should be made conditional on the State buying the property or finding alternative accommodation for the respondents within two months of the order. In the event of that option not succeeding, the State had to consider expropriating the property from the applicant or paying constitutional damages to it, so it was contended. These suggestions emanated from the contents of an affidavit filed by the ninth respondent, the Department of Rural Development and Land Reform, in which it was stated that the Department was investigating the possibility of acquiring the property. But that is as far as the communication by the Department went. No proper case had been made for this Court to make an order compelling the Government to buy the property from the applicant. 2 In 2018 this amount was increased to R13 625.00 by GN 72 dated 16 February 2018 and GN 84 dated 23 February 2018. Appeal Discussion [21] In Randfontein Municipality v Grobler & Others3 this Court said the following about the two pieces of legislation on which the parties rely in this case: ‘ESTA and PIE were adopted with the objective of giving effect to the values enshrined in ss 26 and 27 of the Constitution. The common objective of both statutes is to regulate the conditions and circumstances under which occupiers of land may be evicted. The main distinction is that broadly speaking ESTA applies to rural land outside townships and protects the rights of occupation of persons occupying such land with consent after 4 February 1997, whilst PIE is designed to regulate eviction of occupiers who lack the requisite consent to occupy. Occupiers protected under ESTA are specifically excluded from the definition of 'unlawful occupier' in PIE. An order for the eviction of occupiers may be granted under ESTA by a competent court on just and equitable grounds, having regard to the different considerations applicable in each instance. The Land Claims Court is a specialist tribunal established by s 22 of the Restitution of Land Rights Act 22 of 1994 and enjoys jurisdiction, subject to ss 17, 19, 20 and 22 of ESTA, to deal with cases determined under ESTA. It follows, therefore, that if the land was occupied with consent, either express or tacit, the jurisdiction of the High Court to deal with it is excluded in the absence of consent to its jurisdiction.’ This excerpt sums up the legal principles applicable in the determination of the issues in this appeal. [22] The jurisdictional facts for the application of ESTA relate to: (a) the person occupying the land, and (b) the land that is occupied. In terms of s 1(1)(x) of ESTA an ‘occupier’ is: ‘a person residing on land which belongs to another, and who as on 4 February 1997, or thereafter, had consent or another right in law to do so, but excluding – (a) a labour tenant in terms of the Land Reform (Labour Tenants) Act, 1996 (Act No 3 of 996); and (b) a person using or intending to use the land in question mainly for industrial, mining, commercial or commercial farming purposes, but including a person who works the land 3 Randfontein Municipality v Grobler and Others [2009] ZASCA 129; [2010] 2 All SA 40 (SCA) at para 4. himself or herself and does not employ any person who is not a member of his or her family; and (c) a person who has an income in excess of the prescribed amount.’ [23] Section 2 regulates the land to which ESTA applies. Section 2(1) provides that ESTA applies to: ‘ . . . all land other than land in a township established, approved, proclaimed or otherwise recognised as such in terms of the law, or encircled by such a township or townships . . .’ [24] Consistent with the basic common law principle that ‘the party who alleges must prove’, which is applicable in the determination of the incidence of the onus in civil cases, the burden to prove that ESTA applies in relation to a specific occupier rests on the occupier who invokes the application of the Act. The occupier must bring herself within the ambit of the Act by proving that she complies with all the components of the definition of an occupier in the Act, including that she is not excluded from the application of the Act under s1(1)(x).4 [25] However, the occupier is assisted by a number of presumptions contained in the Act. In relation to consent s 3(4) of the Act provides that: ‘For the purposes of civil proceedings in terms of this Act, a person who continuously and openly resided on land shall be presumed to have consent unless the contrary is proved.’ There is also a deeming provision provided for in s 3(5) of the Act in terms of which a person who has continuously and openly resided on land for a period of three years shall be deemed to have done so with the knowledge of the owner or a person in charge. [26] In relation to the land occupied a presumption that operates in favour of the occupier is contained in s 2(2) of the Act, to the effect that: 4 Skhosana and Others v Roos t/a Roos se Oord and Others 2000 (4) SA 561 (LCC) at 572H-574. See also CP Smith Evictions and Rental Claims- A practical guide Chapter 5 at para 5.9.4. ‘(2) Land in issue in any civil proceedings in terms of the Act shall be presumed to fall within the scope of this Act until the contrary is proved.’ This presumption meant that once the respondents raised the special plea under ESTA, the property had to be presumed to fall within the scope of the Act unless the applicant proved the contrary. In any event there was no dispute about the fact that when the property was zoned in 2012, the respondents were already tenants thereon. [27] The dispute related to whether they were the kind of persons who qualified as occupiers in terms of ESTA. Apart from the fact that the presumptions operated in favour of the respondents, an acknowledgement that the respondents did, at some stage, have consent to reside on the property, or could be presumed to have had such consent, was implicit in the applicant’s own case, although much was made of the inability to ascertain when exactly some of the occupiers took occupation. Such acknowledgement was apparent from the cancellation notices. Therefore the respondents did not need to prove that they did have consent to reside on the property. [28] However, the onus to prove that they were not disqualified under the exclusions remained unsatisfied. Once more it was apparent from the evidence that the respondents were not labour tenants and they were not using or intending to use the property for industrial, mining or commercial purposes. What remained was for them to prove that their income did not exceed the prescribed amount. [29] The evidence tendered by the respondents in this regard consisted of a single sentence in Mr Chivura’s answering affidavit, that the ‘[m]ajority of the Respondents are unemployed and do not earn an income in excess of R5 000 per month’. Such a bare averment was not adequate for the discharge of the onus on the respondents to prove that their income did not exceed the prescribed maximum income. The respondents’ income was a matter peculiarly within their knowledge. Casting the burden of proof on them in this regard was not unduly harsh. On the other hand placing such a burden on the applicant would cause undue hardship. [30] Mr Chivura’s evidence was hearsay. He did not explain how he got to know of the income earned by each tenant or ‘most tenants’ on the property. He did not specify the amount of income earned by such tenants nor did he identify the respondents who were unemployed or earned less than R5000.00. Only 15 of the 48 deponents to confirmatory affidavits filed with his answering affidavit said they were unemployed. The rest said they were employed but did not divulge their earnings. They merely stated the dates on which they took occupation of the property and then went on to confirm the contents of Mr Chivura’s affidavit in so far as it related to them. Yet Mr Chivura never referred to any of his co- respondents by name. Curiously, Mr Chivura gave no evidence as to his own employment details and earnings. Then there was no evidence on the rest of the 300 occupants. Consequently only the 15 respondents brought themselves within the ambit of ESTA. [31] It was submitted on behalf of the applicant that if this court were to grant leave to appeal and uphold the appeal it should decide the eviction application in line with the suggested order. On the other hand the amicus submitted that there was insufficient information on record, particularly on the respondents’ circumstances and the impact the eviction would have on them. This court should therefore refer the matter back to the high court. [32] It was the responsibility of the respondents to respond in full to the allegations made by the applicant in support of the PIE application. Such is the nature of motion proceedings. In the answering affidavit Mr Chivura stated that the 48 affidavits represented a portion of the respondents’ confirmatory affidavits and that the remainder would be made available to the court should it be necessary to do so. No further evidence was made available to court. There is no explanation as to what the anticipated evidence would be and why it was not tendered to court as would be expected. [33] Nevertheless it is true that because of the technical approach adopted by the respondents in raising their special plea, neither the high court nor the full bench dealt with the merits of the application brought by the applicant based on the PIE Act. This is in contrast to the position in Odvest 182 (Pty) Ltd) v Occupiers of Portion 26 (Portion of Portion 3) of Farm Klein Bottelary No 17, Botfontein Road (‘The Property’) and Others5 wherein, although pleading that ESTA was applicable instead of PIE, the occupiers consented to the jurisdiction of the high court. In this case this Court would be determining the issues brought under the PIE Act for the first time on appeal, something which it has always been reluctant to do. In fact, there is no decision of the high court on the PIE Act application. It would therefore be undesirable for this court to determine the issues arising in that application on appeal. [34] In the end I am satisfied that the applicant did make out a proper case for special leave to be granted in this case. The approach to determination of the onus and satisfaction thereof under ESTA is significant and important. Its clarification will benefit not only the applicant; it is a point of law of general public importance. [35] The following order is granted: Special leave to appeal is granted; 5 Odvest 182 (Pty) Ltd v Occupiers of Portion 26 (Portion of Portion 3) of Farm Klein Bottelary No 17, Botfontein Road (‘The Property) and Others (19695/2012) [2016] ZAWCHC 133 (14 October 2016). In relation to the respondents whose names appear in schedule A attached to this order the appeal is dismissed; In relation to the rest of the respondents the appeal is upheld. The order of the full bench is set aside and replaced with the following order: ‘1 The appeal is upheld. 2 The application is referred back to the high court for determination of the application brought in terms of the Prevention of Illegal Eviction from and Unlawful Occupation of Land Act 19 of 1998. 3 There shall be no order as to costs.’ There shall be no order as to costs. ________________ N DAMBUZA JUDGE OF APPEAL SCHEDULE A 1. Bontie Dlamini, 2. Caroline Sebaya, 3. Khensane Jane Mabunda. 4. Kholiwe Blayi, 5. Masego Philadelphia Khoza, 6. Mpho Lekaba, 7. Nkhabeng Thresia, 8. Okafor Pased, 9. Petrus Bushy Sebaya, 10. Pretty Lesego Mashigo, 11. Saphirah Busang, 12. Sebase Precy Mokgwatsane 13. Thotyelwa Motshwaedi, 14. Victor Nyatho, and 15. Zukiswa Mkrweqe. Appearances: For applicant: JHF Pistor SC with GV Maree Instructed by: Falcon & Hume Inc, Sandton Webbers, Bloemfontein For respondents: No appearance For amicus: JFD Brand with RN Ozoemena

THE SUPREME COURT OF APPEAL OFSOUTH AFRICA MEDIA SUMMARY OF JUDGMENT DELIVERED FROM The Registrar, Supreme Court of Appeal DATE 29 April 2022 STATUS Immediate Please note that the media summary is for the benefit of the media and does not form part of the judgment. Frannero Property Investments 202 (Pty) Ltd v Clement Phuti Selapa and Others (case no 222/2020) [2022] ZASCA 61 (29 April 2022) MEDIA STATEMENT Today the Supreme Court of Appeal upheld in part an appeal against an order granted by the full bench of the North West Division of the High Court, Mahikeng. The full bench dismissed an appeal by Frannero Property Investments 202 (Pty) Ltd against an order of a single judge of the same division. In terms of the earlier court order an eviction application instituted in terms of the Prevention of Illegal Eviction from and Unlawful Occupation of Land Act 19 of 1998 (PIE Act) was dismissed on the basis that the high court lacked the jurisdiction to hear the application. Frannero’s property, known as Portion 35 of the Farm Waterval 306 in Rustenburg, Northwest Province (the property), is occupied by a community of about 300 people. Before the sale of the property in 2012, the previous owner, Mr Felix Formariz, had been the owner since 1983. Throughout the years he built small rooms which he, from the year 2000, rented out to mine workers working at nearby mining sites. Oral lease agreements were concluded and rental was payable monthly. Between 2001 and 2010 various tenants, some unauthorised, came to occupy the property and then vacated it. During 2012 Mr Formariz held a meeting with the tenants to remind them of their rental obligations since some were defaulting in payments, as well as to inform them that the property had been rezoned to an industrial township and was to be sold to Frannero. The non-payment of rentals persisted despite the discussions. In September 2014 Frannero gave all the tenants written notices terminating their occupancy rights and had the electricity supply to the property disconnected. In August 2015 Frannero instituted eviction proceedings in the high court against the tenants in terms of the PIE Act. The high court dismissed the application on the basis that it lacked jurisdiction to hear the application as the tenants were occupiers in terms of the Extension of Security of Tenure Act 62 of 1997 (ESTA). The court found that the onus rested on Frannero, as the applicant for eviction to show that ESTA was not applicable. On appeal, the full bench confirmed the finding that the tenants were occupiers under ESTA and dismissed the appeal. The full bench, however, found that the onus rested on the tenants, rather than Frannero, to show that their occupation was regulated under ESTA and that they had successfully done so. In partially upholding the appeal against the order of the full bench the SCA held that the jurisdictional facts for the application of ESTA relate to: (a) the person occupying the land, and (b) the land that is occupied. Having found that there was no dispute regarding the fact that the tenants at some stage had consent to occupy the property, the SCA held that they had to show that their income did not exceed the maximum amount of income prescribed for the application of ESTA. The SCA held that consistent with the basic common law principle that ‘the party who alleges must prove’, which is applicable in the determination of the incidence of the onus in civil cases, the burden to prove that ESTA applies in relation to a specific occupier rests on the occupier who invokes the application of the Act. The Court found that the evidence provided by some of the tenants in that regard was vague and inadequate and that the onus to prove that they were not disqualified under the exclusions remained unsatisfied. Only the 15 tenants who gave evidence that they were unemployed were found to have brought themselves within the ambit of ESTA. It is only in relation to them that the appeal by Frannero was dismissed. The appeal in relation to the rest of the tenants was upheld. The SCA referred the matter back to the high court for the determination of the eviction application in terms of the PIE Act. --- ends --

3389

non-electoral

2020

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Reportable Case no: 555/19 In the matter between: THE ROAD ACCIDENT FUND APPELLANT and THANDISWA LINAH MBELE RESPONDENT (In her personal capacity and on behalf of her four minor children) Neutral citation: The Road Accident Fund v Mbele (555/19) [2020] ZASCA 72 (22 June 2020) Coram: MAYA P and ZONDI, PLASKET and NICHOLLS JJA and EKSTEEN AJA Heard: No oral hearing in terms of s 19(a) of the Superior Courts Act 10 of 2013 Delivered: This judgment was handed down electronically by circulation to the parties’ legal representatives by email, publication on the Supreme Court of Appeal website and release to SAFLII. The date and time for hand-down is deemed to be 10h00 on 22 June 2020. Summary: Motor vehicle accidents – claim for damages under Road Accident Fund Act 56 of 1996 – whether a Reach Stacker is a ‘motor vehicle’ as defined in the Road Accident Fund Act – purposes for which vehicle is generally used ought to be taken into account in determining objectively the use for which it had been designed – Reach Stacker found to be a motor vehicle as defined. ORDER On appeal from: Western Cape Division of the High Court (Gamble, Le Grange JJ and Sievers AJ, sitting as court of appeal): The appeal is dismissed with costs including the costs of two counsel where employed. JUDGMENT Zondi JA (Maya P and Plasket and Nicholls JJA and Eksteen AJA concurring) [1] The issue in this appeal is whether a large industrial vehicle called a Reach Stacker is a motor vehicle as contemplated in s 1 of the Road Accident Fund Act 56 of 1996 (RAF Act). A photograph of this vehicle is attached to this judgment as annexure ‘A’. The appellant, the Road Accident Fund (RAF), contended that a Reach Stacker is not a motor vehicle and that the respondent’s claim was not competent in terms of the RAF Act. The precise nature of a Reach Stacker is important because it determines the competence of a claim under the RAF Act by a person who alleges that he or she has suffered damage or loss resulting from a collision with a Reach Stacker. The full bench of the Western Cape Division of the High Court (high court), reversing the decision of the court of first instance, held that a Reach Stacker is a motor vehicle as contemplated in s 1 of the RAF Act. [2] The issue arose in the following circumstances. On 20 February 2010 Mr Simphiwe Robert Makutoana (the deceased) was a pedestrian at the Multipurpose Terminal, Cape Town Harbour, where he was employed as a stevedore when a Reach Stacker operated by one Mr Eugene Andrea collided with him. The deceased died as a result of the injuries he sustained in the collision. The respondent, Ms Thandiswa Linah Mbele, the deceased’s common law wife, instituted action for loss of support in the high court against the RAF for the payment of damages she and her four minor children suffered as a result of the death of the deceased. Ms Mbele’s claim against the RAF for loss of support was based on the provisions of the RAF Act. [3] The RAF disputed liability and alleged, among others, that the Reach Stacker was not a motor vehicle as defined in the RAF Act, thereby asserting that Ms Mbele did not have a claim under the Act. By agreement between the parties the high court made an order in terms of rule 33(4) of the Uniform Rules of Court that the question whether the Reach Stacker was a motor vehicle as defined in the RAF Act be adjudicated first, and that all other issues be postponed for later determination. [4] In the event, the trial proceeded before Desai J, who after hearing evidence on the separated issue, determined that the Reach Stacker was not a motor vehicle as contemplated in the RAF Act and dismissed Ms Mbele’s claim. Ms Mbele, with leave granted by Desai J, appealed to the full bench of the same Division. The full bench (Gamble, Le Grange JJ and Sievers AJ concurring) upheld the appeal. It found that the Reach Stacker concerned was a motor vehicle as contemplated in s 1 of the RAF Act. The full bench accordingly set aside the order made by Desai J and ordered the RAF to pay Ms Mbele’s costs, including the qualifying expenses of her expert witness, Mr Barry Grobbelaar. The appeal, with the special leave of this Court, is against this finding. The parties agreed to have it determined without an oral hearing in terms of s 19(a) of the Superior Courts Act 10 of 2013. [5] As I have already stated, the issue is whether the Reach Stacker is a motor vehicle as defined in s 1 of the RAF Act. This section defines a ‘motor vehicle’ as ‘any vehicle designed or adapted for propulsion or haulage on a road by means of fuel, gas or electricity, including a trailer, a caravan, an agricultural or any other implement designed or adapted to be drawn by such motor vehicle’. The definition displays three requirements before a vehicle qualifies as a motor vehicle for purposes of the RAF Act. The vehicle (a) must be propelled by fuel, electricity or gas and (b) must be designed for propulsion (c) on a road. Such a vehicle includes a trailer, caravan or implements designed to be drawn by a motor vehicle as defined. The design of a Reach Stacker [6] The Reach Stacker under consideration was designed primarily for lifting, manoeuvring and stacking containers in the container yards of small terminals or medium sized ports. It is able to transport containers for short distances relatively quickly and stack them. It is able to operate in tight spaces. For this purpose, the Reach Stacker is equipped with a boom capable of being extended and raised hydraulically. The boom is mounted on a chassis. The vehicle has six wheels. The four front wheels (two left and two right) are driven by the engine and the machine is steered by means of its rear wheels (one left and one right). It is the latter that provides the manoeuvrability in tight spaces. It is fitted with rear-view mirrors. [7] This specific Reach Stacker is equipped with full road-going lighting, including high beam and low beam headlights, tail lights, indicators, brake lights, reverse lights and position lights. It is furthermore fitted with windscreen wipers and washers, a hooter and a handbrake. The overall length of the Reach Stacker (without the boom) is 11.5m. The height and width of the reach stacker are indicated in the specifications as being 4.5m and 4.15m, respectively. Its service weight is 71 800kg. [8] The Reach Stacker has no suspension system between the wheels and the body. Suspension is only provided by the spring characteristics of the pneumatic tyres. The top speed of the Reach Stacker is 24.5km/h when it is unloaded, and 22km/h at the rated load. It is fitted with a four speed automatic gearbox with four forward and four reverse gears. The Reach Stacker is registered for use on public roads and has the registration number CA825213. It is fitted with a Scania six cylinder, four-stroke diesel engine with a 12 litre capacity. The power and torque ratings of the engine are provided as being 243kW at 2 100rpm and 1 589Nm at 1 400rpm. [9] It is clear from its features that the Reach Stacker is propelled by means of diesel fuel and the evidence was that it transported containers on roads within the port premises. This Court in Road Accident Fund v Mbendera 2004 (4) All SA 25 (SCA) (para13) held that the word ‘road’ in s 1 of the RAF Act is not limited to a public road. To that extent the Reach Stacker meets two of the requirements of the definition section, that is, ‘propulsion by diesel on a road’. The question is whether the fact that it was designed primarily for use in container yards and to load containers onto ships, off load them and stack them, disqualifies it from being a ‘motor vehicle’ as contemplated in the RAF Act. Put differently, the question is whether the Reach Stacker was designed for or adapted for propulsion or haulage on a road. Whether the Reach Stacker was designed for or adapted for propulsion or haulage on a road [10] The meaning of the words ‘motor vehicle’ appearing in s 1 of the RAF Act has received judicial attention in cases such as Chauke v Santam Limited 1997 (1) SA 178 (SCA); [1997] 4 All SA 59 (A); Road Accident Fund v Mbendera, supra; Mutual and Federal Insurance Co Ltd v Day 2001 (3) SA 775 (SCA); [2001] 4 All SA 6 (A); Road Accident Fund v Vogel 2004 (5) SA 1 (SCA); Road Accident Fund v Van den Berg 2006 (2) SA 250 (SCA); and Bell v Road Accident Fund 2007 (6) SA 48 (SCA). [11] This Court in Chauke, which concerned whether a forklift is a motor vehicle, set out the test to be applied in determining whether a vehicle is a motor vehicle as defined in the RAF Act as follows (at 183A-D): ‘The correct approach to the interpretation of the legislative phrase quoted above is to take it as a whole and to apply to it an objective, common sense meaning. The word “designed” in the present context conveys the notion of the ordinary, everyday and general purpose for which the vehicle in question was conceived and constructed and how the reasonable person would see its ordinary, and not some fanciful, use on a road. If the ordinary, reasonable person would perceive that the driving of the vehicle in question on a road used by pedestrians and other vehicles would be extraordinarily difficult and hazardous unless special precautions or adaptation were effected, the vehicle would not be regarded as a “motor vehicle” for the purposes of the Act. If so adapted such vehicle would fall within the ambit of the definition not by virtue of being intended for use on a road but because it had been adapted for such use.’ [12] The test whether a vehicle is designed for use on a road is objective. The question is whether a reasonable person viewing the vehicle in question would come to the conclusion that such vehicle when used on a road will not create a danger to other road users. In this regard, design features such as lights, indicators, field of vision, hooter, maximum speed and engine output are all considerations which apply in deciding whether or not there is compliance with the definition. [13] Courts have not been consistent in their application and interpretation of the Chauke test. Chauke concerned a ‘Clark forklift’. The forklift in question had neither lights nor indicators. It did not have a hooter. It had a top speed of 8km/h. It was not used on a road. It was used in and out of the warehouse and in the yard. The evidence established that it operated in a restricted area and under limited conditions. The forklift drivers were not allowed to drive out of the premises. It could not be registered in terms of the statutory licensing rules unless modified. [14] In Day, a ‘Komatsu forklift’ was not held to be a motor vehicle as it posed a hazard to other road users and steering it in traffic was considered extraordinarily difficult and hazardous. [15] In Bell, a ‘flatbed transporter’ operating on the airside area of the airport was held to be a motor vehicle. It was used at the airport to ‘transport baggage and cargo from its place of origin within the confines of the terminal, to next to an aircraft, on the airside of the airport’.1 [16] In Vogel, Marais JA pointed out that it was clear from this Court’s interpretation of s 1 of the RAF Act that the road referred to in the definition ‘is not just any kind of road however restricted public access, whether vehicular or on foot, may be, but a road which the public at large and other vehicles are entitled to use and do use; and in general parlance, a public road. . . [and] the mere fact that the item is capable of being driven on a public road is not per se sufficient to bring it within the definition.’2 The learned judge emphasised that the appropriate test is whether general use on public roads is contemplated. He went on to state: ‘[6] If, objectively regarded, the use of the item on a public road would be more than ordinarily difficult and inherently potentially hazardous to its operator and other users of the road, it cannot be said to be a motor vehicle within the meaning of the definition [Chauke at 183C]. (I infer that this is because it then cannot reasonably be said to have been designed for ordinary and general use on public roads.) [7] I should add that I do not read the previous judgments of this Court as laying down that unless the item in question can be characterised as in para [6] it must be regarded as satisfying the requirements of the definition of motor vehicle. I understand this characterisation to be merely one of many conceivable indications that an item was not designed for general use on public roads. The use of a particular item on a public road may not be inherently difficult or dangerous but it may still not qualify as a vehicle designed for the purposes set out in the definition of s 1 of the Act. [8] That an item may have been designed primarily for a purpose not covered by the definition of motor vehicle in the Act does not necessarily disqualify it from being regarded as a motor vehicle as defined. If it was also designed to enable it to be used on public roads in the usual manner in which motor vehicles are used and if it can be so used without the attendant difficulties and hazards referred to in para [6], it would qualify as a motor 1 Bell para 6. 2 Vogel paras 3-4. vehicle as defined. In short, such latter use need not be the only or even the primary use for which it was designed.’3 [17] Marais JA doubted the soundness of the suggestion in Chauke that the words ‘designed for’ have a less subjective connotation than the words ‘intended for’. He stated at para 10: ‘Indeed, when Olivier JA ultimately formulated his own interpretation [Chauke at 183B] of what the word “designed”, in the context of the Act, conveyed, he posited both a subjective and an objective test. To say that the word “conveys the ordinary, everyday and general purpose for which the vehicle was conceived and constructed” (my emphasis) is to postulate a subjective test. To add “and how the reasonable person would see its ordinary, and not some fanciful, use on a road” postulates an objective test.’ Footnotes omitted. [18] In Van den Berg, Streicher JA rejected Marais JA’s interpretation of the Chauke test. He stated at para 7 that: ‘Olivier JA made it clear that he was of the view that “an objective, common sense meaning” should be applied to the phrase “designed for”. When he immediately thereafter said that the word “designed” in the present context conveys the notion of the ordinary, everyday and general purpose for which the vehicle in question was conceived and construed, he was, in my view, referring to the general purpose for which the vehicle, objectively determined, was conceived and construed.’ [19] Streicher JA went on to say at paras 8 and 17: ‘[8] It is common cause that the PTR [pneumatic tyre roller] is used to compact road surfaces. It does not, however follow that it was not designed to be used for other purposes as well. If one of those other purposes it was designed for is to travel on a road it falls within the definition and qualifies as a motor vehicle as defined.’ ‘[17] In the light of the fact that the PTR is in fact generally used for travelling on a public road from one construction site to another and that its design is such that it can safely be done, I am of the view that one cannot but conclude that it was designed for that purpose, whatever other purposes it may have been designed for.’ 3 Day para 14. [20] The full bench in this matter, applying the reasoning in Van den Berg, held at para 29 that ‘it is clear that the Reach Stacker was designed and equipped to be self- propelled around the harbour along roads and over areas such as parking and storage lots adjacent thereto, in the ordinary course of its work. The fact that it may need to be escorted along certain of those routes does not. . . detract from the fact that this is part and parcel of its everyday work, just as an. . . electrical transformer, would similarly be required to be escorted along a public road due to the fact that it exceeds the permissible width for travel without an escort.’ [21] The appellant attacked the reasoning of the full bench on two grounds. First, that it erred in its application of the law by relying upon the findings in Van den Berg in its judgment. The appellant argued that Van den Berg was distinguishable from Chauke. The argument was that when Streicher JA in Van den Berg applied the reasonable person test, he did so from the point of view that the PTR was designed for road use, and the only design limitation, being the maximum speed, did not constitute a danger of such magnitude so as to ‘conclude that the vehicle was not designed for use on a road’. [22] For this reason, so it was argued, Streicher JA did not have to fully apply the second leg of the Chauke test to all the design features and limitations of PTR, that is, determining whether a reasonable person would perceive the vehicle’s ‘ordinary use’ on a road as ‘extraordinarily difficult and hazardous’. This was because, the argument proceeded, the evidence showed that the PTR had been designed for propulsion on the road, and safely so, whether for compacting road surfaces or travelling between construction sites. [23] Secondly, it was submitted by the appellant that the full bench erred in its application of the test enunciated in Chauke in its determination of the features, purpose and intended use of the Reach Stacker. The appellant argued that in relying on Van den Berg the full bench ignored the fact that the design features and limitations of the vehicles were distinguishable between Chauke and Van den Berg. Further, in Van den Berg the court did not consider the second leg of the Chauke test, that is, the ‘ordinary use’ as perceived by a reasonable person, because the court, at the outset, had determined that the PTR had been designed to travel on roads, and safely so, from the time it was ‘conceived and constructed.’ It was accordingly submitted by the appellant that had the full bench properly applied the Chauke test to the vehicle under consideration, as was applied in Day and Vogel, it should have found that the ‘ordinary, everyday and general purpose’ of the Reach Stacker and its ‘ordinary use’ on the road, did not render it a ‘motor vehicle’ in terms of RAF Act. [24] The criticism of the full bench’s reasoning is unjustified. The full bench made it clear in para 33 of its judgment that ‘[o]bjectively viewed, the designers of the Reach Stacker would have contemplated that it would be required to be propelled along such roads in the harbour.’ It reached this conclusion after analysing evidence regarding the Reach Stacker’s area of operation as well as its design features. The intended utility of the Reach Stacker is wholly different to the vehicle in Day, a Clark forklift, and Vogel, a mobile Hobart ground power unit, whose primary function was to supply power to stationary aircraft. The vehicle under consideration is designed and suitable for travelling on a road within the port. This Court in Mbendera (para14) made it clear that the purposes of forklifts, cranes, lawnmowers and mobile power units are very different. [25] In my view, the Reach Stacker under consideration is a motor vehicle as defined in s 1 of the RAF Act. Despite its imposing and gigantic size in terms of mass (71.8 tons), width (4.15m), length (11.5m), height (4.5m) and speed limitation of 24km/h, objectively viewed, it cannot be said that its driving on a road used by pedestrians and other vehicles would be extraordinarily difficult and hazardous. It is fitted with all the controls and features required to be fitted to a motor vehicle so as to enable it to be used with safety on a road outside the container yard and port terminal where it primarily operates. [26] It has a number of features of a motor vehicle mentioned above and is driven in a manner similar to a motor vehicle. Mr Harry Sonnie, the RAF’s expert witness, conceded that the Reach Stacker has been adapted for use on a road. It is apparent that certain features of the Reach Stacker such as its huge size, pneumatic tyres, four wheels at the front and a steering axle at the back, are there in order to enable it to perform its primary function of lifting heavy cargo containers including manoeuvring in very tight spaces. Its other features, such as its maximum speed of 24km/h, driving lights, indicators, windscreen wipers and a hooter enable it to be used with safety on a public road when it travels from port to port to either load or transport containers. [27] Moreover, because of its operation on Transnet premises, the Reach Stacker was required to be registered and was registered for use on public roads in terms of the National Road Traffic Act. Mr Grobbelaar, the respondent’s expert witness explained that that was so ‘because there is other traffic on the road when it travels between two ports, it’s on a road where there’s other public traffic’. Mr Sonnie’s contrary version that the Reach Stacker was registered ‘solely for Bidvest’s identification’ as in general Reach Stackers are not required to have a roadworthy certificate, but only a load test one as they are built for the purpose of lifting cargo, cannot be correct. The reasons advanced by Mr Grobbelaar appear to me to be so compelling that I have no hesitation in accepting them. The probabilities are that the Reach Stacker was registered because of the nature of the area and the surroundings in which it operated. [28] It was Grobbelaar’s evidence that the use of the vehicle under consideration is not hazardous ‘if it’s used the way it’s supposed to be used and. . . driven [the] way it’s supposed to be driven’ and he added that ‘when it travels within the confines of … where the incident happened and where there is that road, there it travels on its own, and when it travels from where it’s stored to where it works. But if it were to go outside that environment, it would have to have escort vehicles at the front and the back to take it, and it does, it does travel.’ When asked why it would travel outside of the confined area, Mr Grobbelaar responded ‘[t]o take it to a different section in the harbour’. As regards the layout of the road of the scene of the incident, Mr Grobbelaar testified, based on the observation he made when he visited the scene, that the road used by the Reach Stackers to travel from one container yard to the other is ‘a normal road between [the] buildings with a centre line, a broken centre line, and which carries traffic in both directions’ and that they use ‘a two-way road, where there’s also other traffic, to convey these containers.’ I did not understand Mr Sonnie to be disputing this evidence. [29] In the result the appeal is dismissed with costs including costs of two counsel where employed. _________________ ZONDI JA JUDGE OF APPEAL Appearances: For appellant: R Jaga SC (with him D Pillay) Instructed by: Mayats Attorneys, Claremont c/o Symington De Kock Attorneys, Bloemfontein For respondent: R van Rooyen SC (with him E Benade and N Mashava) Instructed by: DSC Attorneys, Cape Town c/o Rosendorff, Reitz & Barry Attorneys, Bloemfontein

SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL FROM The Registrar, Supreme Court of Appeal DATE 22 June 2020 STATUS Immediate The Road Accident Fund v Mbele (Case no 555/2019) [2020] ZASCA 72 (22 June 2020) Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal. Today the Supreme Court of Appeal (the SCA) dismissed the appeal by the appellant, the Road Accident Fund (the RAF), against the decision of the Western Cape Division of the High Court (the high court). Mr Simphiwe Robert Makutoana (the deceased) was a pedestrian at the Multipurpose Terminal, Cape Town Harbour when a large industrial vehicle Reach Stacker collided with him. The deceased died as a result of the injuries he sustained in the collision. The respondent, Ms Thandiswa Linah Mbele, the deceased’s common law wife, instituted action for loss of support in the high court against the RAF for the payment of damages she and her four minor children suffered as a result of the death of the deceased. Ms Mbele’s claim against the RAF for loss of support was based on the provisions of the Road Accident Fund Act 56 of 1996 (the RAF Act). The RAF defended the action and contended that Ms Mbele’s claim was incompetent as a Reach Stacker was not a motor vehicle as contemplated in s 1 of the RAF Act. The issue in this appeal therefore is whether the Reach Stacker is a motor vehicle as contemplated in s 1 of the RAF Act. The SCA held that the definition of a motor vehicle in terms of the RAF Act displays three requirements: (a) the vehicle must be propelled by fuel, electricity or gas and (b) must be designed for propulsion (c) on a road. Regarding the first requirement, the SCA held that it was clear from its features that the Reach Stacker was propelled by means of diesel fuel; and the evidence was that it transported containers on roads within the port premises. The SCA held that the test whether a vehicle is designed for use on a road is objective. The question is whether a reasonable person viewing the vehicle in question would come to the conclusion that such vehicle when used on a road will not create a danger to other road users. In this regard, design features such as lights, indicators, field of vision, hooter, maximum speed and engine output are all considerations which apply in deciding whether or not there is compliance with the definition. The SCA held that, regarding the second and third requirement, despite its imposing and gigantic size in terms of mass, width, length, height and low speed limitation, objectively viewed, it cannot be said that driving the Reach Stacker on a road used by pedestrians and other vehicles would be extraordinarily difficult and hazardous. This is on the basis that it was fitted with all the controls and features required to be fitted to a motor vehicle so as to enable it to be used with safety on a road outside the container yard and port terminal where it primarily operates. It also had a number of features of a motor vehicle and was driven in a manner similar to a motor vehicle. Moreover, because of its operation on terminal premises, the Reach Stacker was required to be registered and was registered for use on public roads in terms of road traffic legislation. In the circumstances, the SCA held that the Reach Stacker was a motor vehicle as defined in s 1 of the RAF Act, and the appeal was accordingly dismissed.

3704

non-electoral

2021

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Reportable Case no: 643/2021 In the matter between: AFRICAN TRANSFORMATION MOVEMENT APPELLANT and THE SPEAKER OF THE NATIONAL ASSEMBLY FIRST RESPONDENT THE PRESIDENT OF THE REPUBLIC OF SOUTH AFRICA SECOND RESPONDENT AFRICAN NATIONAL CONGRESS THIRD RESPONDENT DEMOCRATIC ALLIANCE FOURTH RESPONDENT ECONOMIC FREEDOM FIGHTERS FIFTH RESPONDENT INKATHA FREEDOM PARTY SIXTH RESPONDENT FREEDOM FRONT PLUS SEVENTH RESPONDENT UNITED DEMOCRATIC MOVEMENT EIGHTH RESPONDENT AFRICAN INDEPENDENT CONGRESS NINTH RESPONDENT CONGRESS OF THE PEOPLE TENTH RESPONDENT GOOD PARTY ELEVENTH RESPONDENT AFRICAN CHRISTIAN DEMOCRATIC PARTY TWELFTH RESPONDENT PAN AFRICANIST CONGRESS OF AZANIA THIRTEENTH RESPONDENT AL-JAMA-AH FOURTEENTH RESPONDENT Neutral citation: African Transformation Movement v The Speaker of the National Assembly and Others (Case no 643/2021) [2021] ZASCA 164 (2 December 2021) Coram: PETSE AP, NICHOLLS and GORVEN JJA and KGOELE and SMITH AJJA Heard: 3 November 2021 Delivered: This judgment was handed down electronically by circulation to the parties’ representatives by email, publication on the Supreme Court of Appeal website and release to SAFLII. The date and time for hand-down is deemed to be 09h45 on 2 December 2021. Summary: Review – rationality – request for vote by secret ballot – discretion of Speaker – requirement that requesting party discharge onus to prove need for secret ballot – no onus on requesting party – Speaker materially misconstruing basis on which to exercise discretion – reviewable – appeal upheld. _____________________________________________________________ ORDER ________________________________________________________________________ On appeal from: Western Cape Division of the High Court, Cape Town (Lekhuleni AJ, sitting as court of first instance) judgment reported sub nom African Transformation Movement v Speaker of the National Assembly and Others [2021] 2 All SA 757 (WCC): The appeal is upheld with costs, such costs to include those occasioned by the employment of two counsel. The order of the high court is set aside and the following order is substituted: ‘1 The decision by the first respondent to decline the applicant’s request for the motion of no confidence in the President to be conducted by secret ballot is reviewed and set aside. The applicant’s request for such motion to be conducted by secret ballot is remitted to the first respondent for a fresh decision. The first respondent is ordered to pay the applicant’s costs of suit, such costs to include those occasioned by the employment of two counsel.’ _____________________________________________________________ JUDGMENT _____________________________________________________________ Gorven JA (Petse AP, Nicholls JA and Kgoele and Smith AJJA concurring) [1] This appeal arises from a motion of no confidence in the President of the Republic of South Africa (the President), Mr Cyril Ramaphosa.1 It was tabled by the appellant in this matter, the African Transformation Movement (the ATM), on 11 February 2020. The basis for the motion was, in essence, the contention of the ATM that State Owned Entities had collapsed on the watch of the President, that he had misled Parliament in stating that there would be no load-shedding but that this had eventuated, and other aspects of alleged poor performance of his role. [2] Having tabled the motion, the ATM, on 24 February 2020, requested that the first respondent, the Speaker of the National Assembly (the Speaker), hold the vote of no confidence by secret ballot. Salient points raised by the ATM in support of the request were: ‘The learnings from the 2017 Unanimous Judgment of the highest Court in the land, the Constitutional Court in the matter between the United Democratic Movement v Speaker and others were seminal in providing guidance on how the Speaker is to exercise this enormous power, so that rationality is observed. We take liberty to remind the Speaker about some of the considerations and constraints that the Speaker should take into account in exercising the power to decide whether or not to grant the secret ballot, as per the Constitutional Court judgment in the aforementioned case. . . . Considerations ● That there must be a proper and rational basis which makes the Speaker decide whether the vote in a motion of no confidence against the President should be through an open or secret ballot. 1 Section 102(2) of the Constitution provides for motions of no confidence in the President. It reads: ‘If the National Assembly, by a vote supported by a majority of its members, passes a motion of no confidence in the President, the President and the other members of the Cabinet and any Deputy Ministers must resign.’ ● The power that is vested in the Speaker in deciding to grant or not to grant a secret ballot in a motion of no confidence belongs to the people and therefore it must not be exercised arbitrarily or whimsically. ● The Speaker when exercising the power must be guided by the need for effective accountability; what is in the best interests of the people and obedience to the Constitution. ● The Speaker must always consider real possibilities of corruption and whether all Members of Parliament will be able to exercise their votes in a manner that will not expose them to illegitimate hardships. ● The Speaker must also consider whether the prevailing atmosphere is generally peaceful or toxified and highly charged when deciding to grant or deny a secret ballot. Constraints ● To enhance the accountability obligation of the President. ● To allow members to honour their constitutional obligation without fear. ● To note that the consequences of a dishonest vote are adverse or injurious not so much to the individual member but to our democracy. ● To note that dishonesty in the form of bribes can cause a member not to vote according to his or her conscience. ● To note that anybody including members of Parliament or the Judiciary anywhere in the world could potentially be “bought”. ● “When money or oiled hands determine the voting outcome particularly in a matter of such monumental importance, then no conscience or oath finds expression”. It is common cause that some members of the governing party may have been persuaded by the solid grounds for the motion of no confidence in President Ramaphosa but may be constrained by party line which in terms of the obligation to their “oath of office and to the people of South Africa” is inconsequential.’ [3] On 26 November 2020, the Speaker advised the ATM that the motion would be debated on 3 December 2021. On 26 November 2020, the ATM telephonically enquired concerning a response to the request that the vote be held by secret ballot. The Speaker then sent a letter dated 5 March 2020 (the 5 March letter), declining the request. She averred that it had been sent to the ATM on that date. The ATM denies having received the 5 March letter prior to 26 November 2020, but nothing turns on this issue. On 27 November 2020, the ATM requested the Speaker to review her decision but, by letter dated 30 November 2020, the Speaker indicated that she stood by her initial decision. [4] This prompted the ATM to launch an urgent application in the Western Cape Division of the High Court, Cape Town (the high court). A rule nisi with the following interim relief was sought: ‘. . . 2.1 The decision by the [Speaker declining] the request by the [ATM] to decide the motion of no confidence in the President by secret ballot be and is hereby set aside. 2.2 The request by the [ATM] for a motion of no confidence in the President to be decided by secret ballot, be remitted to the [Speaker] for her to make a fresh decision on the voting mechanism to be used in the parliamentary sitting scheduled for 3 December 2020 which is to commence at 14h00. 2.3 In deciding on the voting mechanism to be implemented . . . the [Speaker] be directed to take cognisance of: 2.3.1 all issues of freeness and fairness; 2.3.2 the individual consciousness of the voter or the individual MP casting the vote rather than the mandate of the political party in which the voter affiliates, and 2.3.3 the [Speaker’s] request that such voting be conducted by way of secret ballot. . . . .’ [5] It was directed that the application be heard on 3 and 4 February 2021. As a result, the ATM requested that its motion not be tabled so as to await the outcome of the application. The Speaker was cited as the first respondent. A number of other respondents were cited and served. None of the other respondents opposed the application or took part in the appeal. The matter was heard by Lekhuleni AJ and, after reserving judgment, the application was dismissed with costs on 26 March 2021. The appeal is before us with the leave of the high court. [6] It was agreed by all that the matter is foursquare a rationality review. In Ronald Bobroff and Partners Inc v De La Guerre; South African Association of Personal Injury Lawyers v Minister of Justice and Constitutional Development,2 the Constitutional Court explained the basis for a rationality review: ‘A rationality enquiry is not grounded or based on the infringement of fundamental rights under the Constitution. It is a basic threshold enquiry, roughly to ensure that the means chosen in legislation are rationally connected to the ends sought to be achieved. It is a less stringent test than reasonableness, a standard that comes into play when the fundamental rights under the Bill of Rights are limited by legislation.’ This dictum referenced the matter of Albutt v Centre for the Study of Violence and Reconciliation and Others (Albutt):3 ‘The Executive has a wide discretion in selecting the means to achieve its constitutionally permissible objectives. Courts may not interfere with the means selected simply because they do not like them, or because there are other more appropriate means that could have been selected. But, where the decision is challenged on the grounds of rationality, courts are obliged to examine the means selected to determine whether they are rationally related to the objective sought to be achieved. What must be stressed is that the purpose of the enquiry is to determine not whether there are other means that could have been used, but 2Ronald Bobroff and Partners Inc v De La Guerre; South African Association of Personal Injury Lawyers v Minister of Justice and Constitutional Development [2014] ZACC 2; 2014 (3) SA 134 (CC); 2014 (4) BCLR 430 (CC) para 7. 3 Albutt v Centre for the Study of Violence and Reconciliation and Others [2010] ZACC 4; 2010 (3) SA 293 (CC); 2010 (5) BCLR 391 (CC) para 51. whether the means selected are rationally related to the objective sought to be achieved. And if, objectively speaking, they are not, they fall short of the standard demanded by the Constitution. . . .’ And it was further explained in Democratic Alliance v President of the Republic of South Africa and Others (Democratic Alliance):4 ‘. . . Once there is a rational relationship, an executive decision of the kind with which we are here concerned is constitutional.’ Significantly for the present matter, it went on to hold: ‘It follows that both the process by which the decision is made and the decision itself must be rational. . . .’5 [7] In United Democratic Movement v Speaker of the National Assembly and Others (UDM),6 the Constitutional Court spoke on whether a vote by secret ballot is permissible: ‘Both possibilities of an open or secret ballot are constitutionally permissible. Otherwise, if Members always had to vote openly and in obedience to enforceable party instructions, provision would not have been made for a secret ballot when the President, Speaker, Chairperson of the National Council of Provinces and their Deputies are elected. And the Constitution would have made it clear that voting would always be by open ballot.’ It is thus common ground that the Speaker has the power to direct that a vote in the National Assembly be held by secret ballot. [8] For the purpose of this appeal it is accepted by the Speaker that there is no onus on a requesting party such as the ATM to make out a case for a vote 4 Democratic Alliance v President of the Republic of South Africa and Others [2012] ZACC 24; 2013 (1) SA 248 (CC); 2012 (12) BCLR 1297 (CC) para 32. 5 Democratic Alliance para 34. 6 United Democratic Movement v Speaker of the National Assembly and Others [2017] ZACC 21; 2017 (5) SA 300 (CC); 2017 (8) BCLR 1061 (CC) para 60. Sections 86, 52 and 64 of the Constitution read with Part A of Schedule 3 to the Constitution were referenced as authority for the second sentence of the quote. by secret ballot. The Speaker accepted the finding of the high court on that issue. In my view, as will become apparent from the discussion below, that concession was correct. As such, the parties agreed that that issue is not before us. The only issue on appeal is a narrow one as will become clear in due course. [9] In the present matter, the objective sought to be achieved is the proper exercise of the discretion of the Speaker in deciding on a request for a vote by secret ballot. The ATM submits that the Speaker failed to appreciate that a party requesting such a vote has no onus to discharge. This, it says, visits her decision with gross irrationality.7 Since she failed to appreciate ‘how she was to go about making her decision she could not properly and lawfully apply her mind to the merits’.8 In such circumstances, the correctness of the ultimate decision is irrelevant. [10] For this proposition, the ATM called in aid the matter of Allpay Consolidated Investment Holdings (Pty) Ltd v Chief Executive Officer of the South African Social Security Agency and Others.9 Here, the Constitutional Court held: ‘This clear distinction, between the constitutional invalidity of administrative action and the just and equitable remedy that may follow from it, was not part of our pre-constitutional common-law review. The result was that procedure and merit were sometimes intertwined, especially in cases where the irregularity flowed from an error of law. This was not, however, a general rule and did not necessarily apply where procedural fairness was 7 Hirt and Carter (Pty) Ltd v IT Arntsen N O and Others [2021] ZASCA 85. 8 ATM’s emphasis. 9 Allpay Consolidated Investment Holdings (Pty) Ltd and Others v Chief Executive Officer of the South African Social Security Agency and Others [2013] ZACC 42; 2014 (1) SA 604 (CC); 2014 (1) BCLR 1 (CC) para 26. See also Hirt and Carter fn 7 above. compromised. Even under the common law the possible blurring of the distinction between procedure and merit raised concerns that the two should be not be confused: “Procedural objections are often raised by unmeritorious parties. Judges may then be tempted to refuse relief on the ground that a fair hearing could have made no difference to the result. But in principle it is vital that the procedure and the merit should be kept strictly apart, since otherwise the merits may be prejudged unfairly.”’10 That application was brought under the Promotion of Administrative Justice Act 2 of 2000 (PAJA). [11] Albutt also treated procedural fairness as a requirement for rationality in a context where PAJA did not apply. It related to a decision to pardon certain convicted offenders by way of a special dispensation process. Albutt held that the victims of the offences were entitled to be heard prior to such a decision being made. It framed the enquiry as follows: ‘. . . The question for determination is reduced to whether the decision to exclude victims from participating in the special dispensation process is rationally related to the objectives that the President set out when he announced the process.’11 The court analysed the facts required to arrive at a decision and held, in developing the reasoning underlying that matter: ‘. . . As with the TRC process, the participation of victims and their dependants is fundamental to the special dispensation process.’12 and: ‘. . . It follows therefore that the subsequent disregard of these principles and values without any explanation was irrational. On this basis alone, the decision to exclude the victims from participating in the special dispensation process was irrational.’13 10 References omitted. The quote is from H W R Wade Administrative Law 6 ed (1988) at 533-4. The footnote states that ‘[the] remarks are as applicable to our law as they are to English law’. 11 Albutt para 52. 12 Albutt para 61. 13 Albutt para 69. and finally: ‘. . . Indeed, the context-specific features of the special dispensation and in particular its objectives of national unity and national reconciliation, require, as a matter of rationality, that the victims must be given the opportunity to be heard in order to determine the facts on which pardons are based.’14 And, as noted above, in Democratic Alliance, it was held that the process of arriving at a decision must be rational. It is thus correct, as contended by the ATM, that where the procedure or approach decided on to determine the facts on which a decision is to be based is incorrect, this gives rise to irrationality. The rational connection must, accordingly, be that the chosen procedure will provide the correct facts and circumstances on which to found the decision in question. [12] The Speaker submitted that, if it is to found a rationality review, the incorrect procedure used must be material to the decision arrived at. I have no difficulty with that proposition. It seems to me that this goes to the heart of the rational connection test. If the decision is founded on a procedure which failed to understand the nature of the discretion to be exercised, this will be material. This was explained in a decision of this court in Hirt and Carter (Pty) Ltd v IT Arntsen N O and Others (Hirt and Carter):15 ‘An error of law can, in appropriate circumstances, found a review in terms of the common law. This is so when the error is material and affects the outcome of the proceedings. . . So too, where it can be said that the tribunal asked itself the wrong question or based its decision on some matter not prescribed for its decision or failed to apply its mind to the relevant issues in accordance with the behests of a statute.’ 14 Albutt para 72. 15 Hirt and Carter para 30. Hirt and Carter follows a long line of cases such as Hira v Booysen,16 where Corbett JA held that our courts draw a distinction between an error of law on the merits and a mistake which causes the decision-maker to fail to appreciate the nature of the discretion or power conferred upon him and as a result the power is not exercised.17 [13] On the basis of Hira v Booysen, the power to make a decision is not exercised if decision makers misunderstand the nature of the discretion afforded them. If the correct legal basis on which to arrive at a decision is misconstrued, the decision cannot be rationally connected to the purpose for which the power to decide is granted. Such a decision is vitiated by irrationality. [14] Having set out the basic principles governing a rationality review involving procedure, it remains to consider their application to the decision of the Speaker in the present matter. As indicated in UDM, the court held that the Speaker has the power to decide whether to hold a vote of no confidence in the President by open or secret ballot. Significantly, it said: ‘But, read together, sub-rules (1) and (3) of rule 104 empower the Speaker to predetermine a manual voting system that may not permit a recordal or disclosure of the names and votes of Members. That is an indiscriminate manual secret ballot procedure. Indiscriminate because it is not limited to the election of the President, Speaker or Deputy Speaker. It is not incident-specific and must thus apply just as well to any incident of voting for which the Speaker may prescribe a secret ballot including the removal of the President. The 16 Hira v Booysen 1992 (4) SA 69 (A). 17 Hira v Booysen at 90. National Assembly has, through its Rules, in effect empowered the Speaker to decide how a particular motion of no confidence in the President is to be conducted.’18 The neutrality of the last sentence makes clear that, when a motion of no confidence in the President is to be decided, the Speaker must ‘. . . decide how. . . [it] is to be conducted’. This does not seem to me to presuppose a default position of either an open or a secret ballot. It simply requires a decision on how that particular motion is to be conducted. The slate is clean. UDM explains that this involves a judgment call by the Speaker: ‘. . . But, when a secret ballot would be appropriate, is an eventuality that has not been expressly provided for and which then falls on the Speaker to determine. That is her judgement call to make, having due regard to what would be the best procedure to ensure that Members exercise their oversight powers most effectively. . . .’19 The crisp issue in this matter is whether the Speaker correctly approached the matter in order to make that judgment call. [15] In this regard, the Constitutional Court mentioned certain factors to be taken into account by the Speaker, as well as some constraints. The bedrock principle is that members of the National Assembly: ‘. . . are required to swear or affirm faithfulness to the Republic and obedience to the Constitution and laws. Nowhere does the supreme law provide for them to swear allegiance to their political parties . . . in the event of conflict between upholding constitutional values and party loyalty, their irrevocable undertaking to in effect serve the people and do only what is in their best interests must prevail . . . .’20 This, in turn, means that, in a motion of no confidence: ‘Each Member must, depending on the grounds and circumstances of the motion, be able to do what would in reality advance our constitutional project of improving the lives of all 18 UDM para 67. 19 UDM para 68. 20 UDM para 79, citing s 48 of the Constitution read with item 4 of Schedule 2. citizens, freeing their potential and generally ensuring accountability for the way things are done in their name and purportedly for their benefit. So, the centrality of accountability, good governance and the effectiveness of mechanisms created to effectuate this objective, must enjoy proper recognition in the determination of the appropriate voting procedure for a particular motion of no confidence in the President. That voting procedure is situation- specific. Some motions of no confidence might require a secret ballot but others not, depending on a conspectus of circumstances that ought reasonably and legitimately to dictate the appropriate procedure to follow in a particular situation.’21 [16] As soon as one says that the decision on a voting procedure is ‘situation- specific’ and involves a ‘conspectus of circumstances’, it implies a fresh consideration on each occasion such a vote is called for. This, again, shows that a neutral point of departure is appropriate. [17] With that backdrop, the approach taken by the Speaker to exercise her discretion must be evaluated. In order to do so, the reasons given by the Speaker for her decision must be examined. These were given on three different occasions. Two were contained in the 5 March letter and that of 30 November 2020 and the third in her answering affidavit. It is worth quoting excerpts from the 5 March letter and the answering affidavit which bear on her approach in arriving at the impugned decision. [18] The Speaker said, in the 5 March letter: ‘The Constitutional Court has indicated that a secret ballot becomes necessary where the prevailing atmosphere is toxified or highly charged. You have not offered proof of a highly charged atmosphere or intimidation of any member(s) in this particular case.’ 21 UDM para 83. The 5 March letter also contended that the ATM had ‘not proffered concrete evidence that members would deviate from’ their ‘oath of faithfulness to the Republic and obedience to the Constitution and laws’. [19] The following relevant averments are found in the answering affidavit: ‘In the first instance, the ATM is the subject of an onus to place sufficient reasons or evidence before me that would constitute compelling reasons for me to exercise my discretion in its favour. In the absence of such compelling reasons or evidence, any Member, if the ATM’s conduct is to be accepted, would be able to force a motion of no confidence to be held by secret ballot relying solely on their ipse dixit, the consequence of which would be to render nugatory the discretion afforded to me.’ And, later: ‘What the Court should not lose sight of more than anything else is that the ATM itself bore a burden to place cogent and compelling reasons before me as to why secrecy on the facts of this case was justified.’ Further: ‘Moreover, the ATM did not and cannot present a single shred of evidence that demonstrates a reasonable basis for a secret ballot. It relies on unsubstantiated and speculative claims to justify a secret ballot. I am advised that if the ATM is correct, it would make a mockery of what the Constitutional Court held in the UDM case. This is because by simply asking for a secret ballot – without presenting any objective reasons justifying same, as the ATM has done in these proceedings – my discretion will be reduced to a rubber stamp and I will be compelled to grant it.’ [20] What is clear from these responses is that the Speaker held the view that the ATM bore an onus to show the need for a secret ballot by producing evidence or reasons for that procedure to be adopted. It is clear that she did not understand her need to approach the motion of no confidence by deciding ‘. . . what would be the best procedure to ensure that Members exercise their oversight powers most effectively. . .’.22 She did not set out to determine ‘. . . the appropriate voting procedure for [that] particular motion of no confidence. . . ’.23 She did not have as her point of departure that ‘. . . some motions of no confidence might require a secret ballot but others not, depending on a conspectus of circumstances that ought reasonably and legitimately to dictate the appropriate procedure to follow in [that] particular situation’.24 [21] The imposition of an onus on a party requesting that a vote of no confidence be held by secret ballot is a fundamentally flawed approach to the exercise of the discretion of the Speaker. She asked the wrong question. It was ‘has the ATM discharged the onus to convince me to decide that a vote by secret ballot should be held’. That question implied a point of departure that, absent the discharge of such an onus, a vote of no confidence in the President should be by open ballot. She did not ask ‘what would be the best procedure to ensure that Members exercise their oversight powers most effectively’ as regards this particular vote of no confidence, given a conspectus of the reasonable and legitimate circumstances obtaining at that time which could assist in arriving at that decision. She laboured under a misconception that, if a requesting party did not have to discharge an onus, any request for a secret ballot had to be approved. This shows that she misunderstood the nature of the discretion to be exercised. The incorrect procedure of requiring the ATM to discharge an onus was material to the resulting decision. 22 UDM para 68. 23 UDM para 83. 24 Ibid. [22] There was thus a failure to exercise the discretion accorded to her. All of this demonstrates that the decision of the Speaker was vitiated by irrationality. As such, the high court should have reviewed and set aside her decision. This all means that the appeal should be upheld. [23] It was conceded by the Speaker that there was no reason why costs, either in this Court or in the high court, should not follow the result. Nor can I think of any. [24] In the result, the following order issues: The appeal is upheld with costs, such costs to include those occasioned by the employment of two counsel. The order of the high court is set aside and the following order is substituted: ‘1 The decision by the first respondent to decline the applicant’s request for the motion of no confidence in the President to be conducted by secret ballot is reviewed and set aside. The applicant’s request for such motion to be conducted by secret ballot is remitted to the first respondent for a fresh decision. The first respondent is ordered to pay the applicant’s costs of suit, such costs to include those occasioned by the employment of two counsel.’ ____________________ T R GORVEN JUDGE OF APPEAL Appearances For appellant: A Katz SC (with him M Mhambi) Instructed by: MB Magigaba Attorneys, Durban Matsepe Attorneys, Bloemfontein For first respondent: K Premhid Instructed by: State Attorney, Cape Town State Attorney, Bloemfontein For second to fourteenth respondents: No appearance

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 2 December 2021 Status: Immediate Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal. African Transformation Movement v The Speaker of the National Assembly and Others [2021] ZASCA 164 Today the Supreme Court of Appeal upheld an appeal from the Western Cape Division of the High Court, Cape Town (per Lekhuleni AJ). The African Transformation Movement (ATM) tabled a motion of no confidence in the President of the Republic in the National Assembly. It thereafter requested that the Speaker hold the vote of no confidence by secret ballot. When she declined this request, the ATM requested that she reconsider. She reconsidered but again declined. The ATM then approached the high court to review this decision but the application was dismissed. On appeal, with the high court having given leave, the ATM contended that the decision of the Speaker offended the rationality principle and should have been reviewed and set aside on that basis. The aspect of this principle relied upon was that the Speaker had believed that, for her to allow the vote to proceed by way of secret ballot, the ATM bore an onus to show the need for a secret ballot by producing evidence or reasons for that procedure to be adopted. The ATM submitted that since the Speaker had failed to appreciate ‘how she was to go about making her decision she could not properly and lawfully apply her mind to the merits’. In such circumstances, the correctness of the ultimate decision is irrelevant. The high court found that there was no such onus to discharge. This was accepted by the Speaker for the purposes of the appeal. She contended, however, that the procedure she adopted arrived at the correct decision. That being the case, the procedural error was not a material one and that her decision was not susceptible of review. The SCA analysed the Constitutional Court judgment in the matter of United Democratic Movement v Speaker of the National Assembly and Others. The correct point of departure requires a conspectus of the reasonable and legitimate circumstances obtaining at that time which could assist in determining the best procedure to ensure that Members exercise their oversight powers accorded them under the Constitution most effectively as regards a particular vote of no confidence. The imposition of an onus on a party requesting that a vote of no confidence be held by secret ballot was a fundamentally flawed approach to the exercise of the discretion of the Speaker. She asked the wrong question. It was ‘has the ATM discharged the onus to convince me to decide that a vote by secret ballot should be held’. That question implied a point of departure that, absent the discharge of such an onus, a vote of no confidence in the President should be by open ballot. She did not approach the decision from a situation-specific perspective. This shows that she misunderstood the nature of the discretion to be exercised. The incorrect procedure of requiring the ATM to discharge an onus was material to the resulting decision. There was thus a failure to exercise the discretion accorded to her. The exercise of her discretion was not rationally related to the purpose for which it had been given. The SCA thus upheld the appeal with costs and substituted a decision reviewing and setting aside the decision of the Speaker to refuse the request of the ATM. The matter was referred back to the Speaker for a fresh decision.

4155

non-electoral

2023

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Reportable Case No: 1297/2022 In the matter between: SOUTH AFRICAN MUNICIPAL WORKERS’ UNION NATIONAL MEDICAL SCHEME (SAMWUMED) APPELLANT and CITY OF EKURHULENI FIRST RESPONDENT MOSO CONSULTING SERVICES (PTY) LTD SECOND RESPONDENT THE REGISTRAR OF MEDICAL SCHEMES THIRD RESPONDENT THE FINANCIAL SECTOR CONDUCT AUTHORITY FOURTH RESPONDENT THE SOUTH AFRICAN LOCAL GOVERNMENT ASSOCIATION FIFTH RESPONDENT THE SOUTH AFRICAN MUNICIPAL WORKERS UNION (SAMWU) SIXTH RESPONDENT INDEPENDENT MUNICIPAL AND ALLIED WORKERS UNION (IMATU) SEVENTH RESPONDENT BONITAS MEDICAL FUND EIGHT RESPONDENT HOSMED MEDICAL SCHEME NINTH RESPONDENT KEY HEALTH MEDICAL SCHEME TENTH RESPONDENT LA HEALTH MEDICAL SCHEME ELEVENTH RESPONDENT THE EMPLOYEES OF THE CITY OF EKURHULENI TWELFTH RESPONDENT THE SOUTH AFRICAN LOCAL GOVERNMENT THIRTEENTH RESPONDENT Neutral Citation: South African Municipal Workers’ Union National Medical Scheme (SAMWUMED) v City of Ekurhuleni and Others (1297/2022) [2023] ZASCA 182 (22 December 2023) Coram: Nicholls and Matojane JJA and Chetty, Masipa and Unterhalter AJJA Heard: 20 November 2023 Delivered: This judgment was handed down electronically by circulation to the parties’ representatives via email, publication on the Supreme Court of Appeal website and release to SAFLII. The date and time for hand-down is deemed to be 11h00 at 22 December 2023. Summary: Collective agreement – s 23 of the Labour Relations Act 66 of 1995 – parties to a collective agreement – medical schemes – accreditation of medical schemes under a collective agreement – intentional and unlawful interference with contractual relationship – s 65 of the Medical Schemes Act 131 of 1998 – Regulation 28 – legality of territorial limitation in a broker agreement with a medical scheme. __________________________________________________________________ ORDER ___________________________________________________________________ On appeal from: Gauteng Local Division of the High Court, Johannesburg (Oosthuizen-Senekal AJ): The appeal is upheld, the costs of the appeal, including the costs of the application for leave to appeal, are to be borne jointly by the first and second respondents; The orders of the high court are set aside and substituted with the following: ‘1. The first respondent is ordered to accept member application forms and other documents and communications directly from the applicant, and to duly process such applications and related documents submitted by the applicant, for so long as the applicant remains an accredited medical scheme in terms of the collective agreement; 2. It is declared that the second respondent is not entitled to payment of broker fees by the applicant in respect of the employees of the first respondent, in the absence of a written broker agreement having been concluded between the applicant and the second respondent and in the absence of the second respondent having actually rendered broker services; 3. The first and second respondents are interdicted, for so long as the applicant remains an accredited medical scheme in terms of the collective agreement: 3.1 from taking any steps that would prevent or hinder the applicant from marketing its scheme and benefit options and rendering services to its members and all prospective members who are employees of the first respondent by way of the applicant’s own internal consultants or independent brokers appointed by the applicant, should it so wish; 3.2 from holding out that the second respondent is the exclusive broker for the five medical schemes accredited in terms of the collective agreement concluded on 9 September 2015, and that no other brokers or consultants will be allowed to service employees of the first respondent; 3.3 from refusing to accept member application forms and other documents and communications submitted to the first respondent by the applicant, and from refusing to duly process such applications and related documents; 3.4 from insisting that all medical scheme member application forms and other related documents and communications be submitted to the second respondent, as opposed to the first respondent; 3.5 from insisting that payment of broker fees be made by the applicant to the second respondent in the absence of a written broker agreement between the applicant and the second respondent and/or in the absence of the second respondent having actually rendered broker services; 3.6 from approaching members of the applicant and requesting them to execute service notes in favour of the second respondent, in the absence of a written broker agreement between the applicant and the second respondent and/or in the absence of the second respondent having actually rendered broker services to members of the applicant. 4. The first and second respondents are jointly ordered to pay the costs of this application.’ __________________________________________________________________ JUDGMENT __________________________________________________________________ Unterhalter AJA (Nicholls, Matojane JJA and Chetty and Masipa AJJA concurring) Introduction [1] The appellant, the South African Municipal Workers’ Union National Medical Scheme (SAMWUMED) is a self-administered medical scheme. It is registered in terms of s 24 of the Medical Schemes Act 131 of 1998 (the Act). In September 2015, the South African Local Government Association (SALGA) concluded a collective agreement with two trade unions, one of which was the South African Municipal Workers’ Union (the collective agreement). In terms of Clause 9 of the collective agreement, the Bargaining Council, the South African Local Government Bargaining Council (SALGBC) must annually accredit medical schemes which qualify for employer contributions. Employees who are scheme members may annually elect to move to another accredited medical scheme. Clause 15 of the collective agreement provides criteria for the recognition of medical schemes. In terms of Clause 15.3.2, accredited medical schemes may market their schemes annually between October and November (the window period) to better inform members who might wish to switch medical schemes. SAMWUMED had for a number of years been accredited by the SALGBC, and was so again in September 2020. Four other medical schemes were also accredited. [2] SAMWUMED had, through its own consultants, and prior to January 2020, marketed its scheme, as the collective agreement permitted it to do, to employees who were members of accredited medical schemes or wished to become members. In January 2020, SAMWUMED received a letter from the first respondent, the City of Ekurhuleni (COE). COE informed SAMWUMED that it had appointed Alexander Forbes Health (Pty) Ltd (AFH) as broker service consultants to provide services to COE employees, pensioners, and the COE itself. SAMWUMED was informed that its medical scheme had been allocated to AFH. COE requested SAMWUMED to ‘rescind all existing medical aid brokerage contracts’ and stipulated that no other medical aid consultants would be allowed to service employees of COE. SAMWUMED was required to ensure that AFH was paid broker fees for the services it rendered. Like broker appointments were made by COE to the other accredited medical schemes. [3] For reasons that are not explained, the second respondent, Moso Consulting Services (Pty) Ltd (Moso) replaced AFH as the broker appointed by the COE to employees, COE, SAMWUMED and the other medical schemes. SAMWUMED did not accede to the appointment of Moso. Nor did it accept that it was required to market its scheme in the window period through Moso, and pay Moso brokerage fees to do so. SAMWUMED had marketed its scheme, in prior years, by using its own internal consultants, and wished to continue doing so. [4] SAMWUMED had, on 5 April 2019, concluded a written broker agreement with Moso (the Moso agreement). SAMWUMED appointed Moso to market SAMWUMED’s range of products and render services to its members. It did so on a non-exclusive basis. And, of consequence for this matter, to perform these services within a defined territory. That territory was defined to mean the City of Johannesburg and its municipal entities. The territory, as defined, does not include the COE. I shall refer to this as the territorial limitation. [5] In November 2020, SAMWUMED wrote to COE. It requested COE to reconsider its decision to preclude SAMWUMED’s internal consultants from providing services to COE employees and pensioners. No response was forthcoming. SAMWUMED also wrote to Moso and complained that Moso was not permitted to render services outside the territory allocated to it in the Moso agreement, without the prior written consent of SAMWUMED. Moso, it alleged, was in breach of the Moso agreement by seeking to render services on behalf of SAMWUMED to employees of COE. [6] SAMWUMED did not receive the undertakings it sought from either COE or Moso. It then applied to the high court, Gauteng Division, Johannesburg (the high court) for the following relief, in relevant part: ‘1. An order declaring that the first respondent [COE] is in breach of the collective agreement concluded on 9 September 2015; 2. An order compelling the first respondent [COE] to comply with the collective agreement concluded on 9 September 2015, more specifically to allow the applicant to freely market its scheme and benefit options and to render services to its members and all prospective members who are employees of the first respondent, unhindered and by way of the applicant’s own internal consultants or independent brokers appointed by the applicant, should it so wish; 3. An order compelling the first respondent [COE] to accept member application forms and other documents and communications directly from the applicant, and to duly process such applications and related documents submitted by the applicant; 4. An order declaring that the second respondent [MOSO] is not entitled to payment of broker fees by the applicant in respect of the employees of the first respondent [COE], in the absence of a written broker agreement having been concluded between the applicant and the second respondent [Moso] and in the absence of the second respondent [Moso] having actually rendered broker services; 5. An order interdicting and restraining the first and second respondents [COE and Moso]: 5.1 from taking any steps that would prevent or hinder the applicant to market its scheme and benefit options and render services to its members and all prospective members who are employees of the first respondent by way of the applicant’s own internal consultants or independent brokers appointed by the applicant, should it so wish; 5.2 from holding out that the second respondent [Moso] is the exclusive broker for the five medical schemes accredited in terms of the collective agreement concluded on 9 September 2015, and that no other brokers or consultants will be allowed to service employees of the first respondent [COE]; 5.3 from refusing to accept member application forms and other documents and communications submitted to the first respondent by the applicant, and from refusing to duly process such applications and related documents; 5.4 from insisting that all medical scheme member application forms and other related documents and communications be submitted to the second respondent, as opposed to the first respondent; 5.5 from insisting that payment of broker fees be made by the applicant to the second respondent in the absence of a written broker agreement between the applicant and the second respondent and/or in the absence of the second respondent having actually rendered broker services; 5.6 from approaching members of the applicant and requesting them to execute service notes in favour of the second respondent [Moso], in the absence of a written broker agreement between the applicant and the second respondent and/or in the absence of the second respondent [Moso] having actually rendered broker services to members of the applicant; 6. That the first respondent [COE] be ordered to pay the costs of this application; 7. Should any party/person oppose the present application, ordering such party/person to pay the costs of this application jointly and severally with the first respondent.’ [7] Both the COE and Moso opposed the application, and filed answering affidavits. In addition, Moso brought a counter-application which, in relevant part, sought declaratory relief that the Moso agreement does not preclude Moso from rendering services outside the territorial area defined in the agreement. This relief was, in turn, opposed by SAMWUMED. [8] The high court (per Oosthuizen-Senekal AJ) dismissed SAMWUMED’s application, with costs, such costs to be limited to the hearing of the matter. It found that SAMWUMED was not a party to the collective agreement, and hence, SAMWUMED enjoyed no rights under the collective agreement. As to the territorial limitation that SAMWUMED sought to impose upon Moso, the high court found this limitation to offend against the right of employees to choose a broker, and, furthermore, offended against the Financial Advisory and Intermediary Service Act 37 of 2002 (FAIS Act) and its Code of Conduct. The high court declined to decide Moso’s counter-application. [9] With the leave of the high court, SAMWUMED appeals to this court. COE elected to abide our judgment. Moso opposed the appeal but was at pains to emphasize the limited ambit of its opposition. Moso, as in the high court, opposed the final relief set out in prayers 4, 5.5 and 5.6 of the notice of motion. It was common ground between the parties that this appeal was not concerned with the alternative interim relief that was originally sought in the notice of motion. By way of further clarification, counsel for Moso, during oral argument, made it plain that Moso’s case rested on the proposition that the territorial limitation in the Moso agreement was unenforceable. Moso did not seek to defend the position of COE. Indeed it disavowed the conduct of the COE that had sought to impose Moso upon SAMWUMED as its exclusive broker to market its scheme to employees of COE. As Moso’s counter-application was not determined by the high-court, and Moso had made no cross-appeal, Moso correctly submitted that the counter-application was not before us. The COE appeal [10] The principal relief that SAMWUMED sought against COE was that COE must comply with the collective agreement and permit SAMWUMED to market its scheme and benefit options to employees of COE. In addition, SAMWUMED should be permitted to render services to employees of COE who are members or prospective members of SAMWUMED. It will be recalled that clause 15.3.2 of the collective agreement states that accredited medical schemes may market their schemes annually during the window period. Membership of an accredited medical scheme is an important benefit enjoyed by employees under the collective agreement, to which employers are required to contribute. The collective agreement permits employees who are scheme members of accredited schemes to transfer from one scheme to another. To allow scheme members to make informed choices, the collective agreement provides for a window period during which accredited schemes may market their schemes. [11] In addition, the collective agreement, in terms of clause 15.2 sets out the criteria for the accreditation of medical schemes. Among these criteria, a scheme must demonstrate the service levels to which it will adhere to process claims and pay accounts. The collective agreement requires an accredited scheme to perform these services. Part of the relief sought by SAMWUMED is that it should be permitted to render these services to its members who are employees of COE, without having Moso imposed upon it as the intermediary through which this will be done. [12] The high court held that SAMWUMED is not a party to the collective agreement, and therefore it cannot seek the enforcement of this agreement. SAMWUMED is not reflected as a party to the collective agreement. The collective agreement makes provision, as I have sketched above, for the accreditation of schemes so that employees may enjoy the benefit of selecting and joining a scheme to which their employers contribute. To protect the interests of employees, the marketing of the schemes, in the window period, secures competition between accredited scheme to enhance informed choices by employees. Hence, Clause 15.3.2 provides that accredited medical schemes may market their schemes. [13] Does this provision give rise to any enforceable right on the part of SAMWUMED? SAMWUMED is not reflected as a signatory to the collective agreement. SAMWUMED nevertheless contended that it was a party to the collective agreement because the collective agreement was a contract for the benefit of a third party. Total South Africa (Pty) Ltd1 sets out what is required to find that a provision of an agreement constitutes a stipulation for the benefit of a third party (a stipulation alteri): the provision cannot simply be designed to benefit a third person or merely do so; the parties to the contract must have the intention that a third person can, by adopting the benefit, become a party to the contract. [14] I should have been inclined to conclude that Clause 15.3.2 was designed to benefit accredited medical schemes and that SAMWUMED had adopted this benefit by marketing its scheme over a number of years. However, the collective agreement cannot constitute a stipulation for the benefit of a third party because the collective agreement is a statutory construct. A collective agreement is defined in s 213 of the Labour Relations Act 66 of 1995 (the LRA) to mean, ‘a written agreement concerning terms and conditions of employment or any other matter of mutual interest concluded by one or more registered trade unions, on the one hand, and, on the other hand – (a) one or more employers; (b) one or more registered employers’ organisations; or (c) one or more employers and one or more registered employers’ organisations.’ [15] A collective agreement, in terms of these provisions of the LRA, is not an agreement concluded with an accredited medical scheme. Section 23 of the LRA 1 Total South Africa (Pty) Ltd v Bekker NO 1992 (1) SA 917 (A) at 625. sets out the legal effect of a collective agreement. The collective agreement binds the parties to the agreement. Since the statutory definition of a collective agreement identifies the parties to such an agreement, this statuory scheme makes no provision for a collective agreement to bind parties who fall outside of the definition. The LRA thus excludes a collective agreement containing a stipulation for the benefit of a third party, if that third party is not a party falling within the statutory definition. To like effect, s 31 of the LRA binds parties to the bargaining council who are also parties to the collective agreement. SAMWUMED is not such a party. Section 32 of the LRA does permit of the extension of a collective agreement to a non-party upon request by the bargaining council to the Minister. But there is no suggestion this has taken place. [16] It follows that SAMWUMED is not a party to the collective agreement. The parties who concluded the collective agreement, whatever their intention, could not, as a matter of law, have made SAMWUMED, upon adopting the benefit conferred by the collective agreement, a party to the agreement. The LRA excludes such an outcome, by definition. The COE was, in terms of clause 1 of the collective agreement, required to observe the terms of the agreement, including clause 15.3.2. But that duty gave rise to no right on the part of SAMWUMED to enforce that duty because SAMUWUMED was not a party to the collective agreement. [17] This conclusion does not entail that clause 15.3.2 had no efficacy. Section 27 of the LRA provides for the establishment of bargaining councils. Among the powers conferred upon bargaining councils by s 28 of the LRA is to establish and administer medical schemes for the benefit of parties to the bargaining council or their members (s 28(1)(g)). Section 33A of the LRA empowers a bargaining council to monitor and enforce compliance with its collective agreements. [18] Under the collective agreement with which this case is concerned, the SALGBC was the bargaining council that concluded the collective agreement. Clause 9 of the collective agreement regulates membership of medical schemes and contributions to these schemes. The SALGBC must accredit medical schemes against stipulated criteria. Employers, which includes COE, must make contributions on behalf of their employees to accredited medical schemes. Employees must belong to one of the accredited medical schemes, unless they elect to belong to no medical scheme. And, as I have referenced, on an annual basis, employees are afforded a choice before 1 January to move to an accredited medical scheme. [19] The collective agreement thus confers important benefits upon employees to choose an accredited medical scheme; to switch schemes annually; and to enjoy the compulsory contributions of employers. The collective agreement deputes the SALGBC to give effect to this scheme. SALGBC has done so. The accreditation of SAMWUMED, and four other medical schemes, by SALGBC is to be found in circular 12/2020 issued by SALGBC. It records the schemes accredited for 2021 by SALGBC’s executive council. It also records that the accredited schemes may market their schemes from 1 October 2020 – 30 November 2020. [20] The accreditation of SAMWUMED by SALGBC constitutes an agreement. How otherwise could an accredited medical scheme be held to the obligations set out in clause 15 of the collective agreement? The collective agreement, for example, in clause 15.6 sets out a code of conduct to which accredited medical schemes are obliged to adhere. Accredited medical schemes can only be bound to adhere to the code of conduct by reason of their agreement with SALGBC. They cannot be bound to do so by the collective agreement because, as I have found, they are not parties to that agreement. Thus, accredited medical schemes derive their rights and obligations from their agreement with SALGBC, arising from their accreditation by SALGBC. [21] That agreement provides in express terms for the right of accredited medical schemes to market their schemes, as reflected in circular 12/2020. The agreement also neccesarily entails that accredited medical schemes are entitled and required to service their members who are employees that have opted to join one or other of the accredited schemes. That is so because the very essence of what a medical scheme registered in terms of the Medical Schemes Act 131 of 1998 (MSA) must do is to process the claims of its members and provide the benefits to which their membership entitles them. That is also the plain entitlement of employees under the collective agreement which SALGBC is mandated to bring about by way of accreditation. I therefore find that the accreditation of SAMWUMED constituted an agreement between it and SALGBC that conferred a right upon SAMWUMED to market their scheme in the window period and service those employees who opted to become members of SAMWUMED. [22] SAMWUMED’s principal cause of action was to enforce what it conceived to be its rights under the collective agreement and COE’s breach of that agreement. That cause of action cannot prevail because SAMWUMED enjoyed no rights under the collective agreement. However, SAMWUMED’s application framed an alternative cause of action. It alleged that the conduct of COE ‘constitutes unlawful and intentional interference with the rights of SAMWUMED and its employees to lawfully participate in the market comprised of the COE’s employees’. SAMWUMED did not elaborate upon the source of its right to participate in this market. However, there are sufficient averments in the founding affidavit as to its accreditation by SALGBC to derive the source of its rights to be the agreement between SAMWUMED and SALGBC that I have identified. [23] The question that then arises is whether SAMWUMED has made out a cause of action based on these averments. In Lanco2 it was held that the delict of the 2 Lanco Engineering CC v Aris Box Manufacturers (Pty) Ltd 1993 (4) SA 378 (D) at 384. unlawful and intentional interference by a third party in a party’s contractual relationship may be sustained, even though the interference does not consist of an inducement to breach the contract. The Constitutional Court gave further treatment to this species of delictual liability in Masstores.3 Though the case concerned unlawful competition, together with the holding in Country Cloud,4 the following may be stated of a cause of action founded upon the delict of unlawful interference with contractual relations. First, the delict must comport with the general principles of Aquilian liability. Second, the unlawfulness requirement is not confined to the inducement of a breach of contract. An unlawful interference with contractual relations is ultimately based upon the duty not to cause harm and to respect rights. Third, fault is satisfied by proof of intent which may consist of dolus eventualis (and perhaps even negligence). The degree of fault may also be relevant to the enquiry as to unlawfulness. [24] Does the conduct of COE amount to an unlawful interference with the contractual relationship subsisting between SAMWUMED and SALGBC? It will be recalled that what COE sought to impose upon SAMWUMED was the interposition of Moso as the exclusive broker and intermediary that SAMWUMED was required to use to service its members who were employees of COE and to market its scheme during the window period. SAMWUMED was also required to pay Moso for rendering its services as a broker, and to cancel any agreements that it might have concluded with other brokers. SAMWUMED was, under this imposition, not to make use of its own employees to market its scheme and service COE employees who were members of the scheme. [25] Clause 1 of the collective agreement bound employers falling within SALGBC to observe the terms of the agreement. COE is such an employer. It was 3 Masstores (Pty) Ltd v Pick n Pay Retailers (Pty) Ltd 2017 (1) SA 613 (CC). 4 Country Cloud Trading CC v MEC, Department of Infrastructure Development 2015 (1) SA 1 (CC). bound to observe the collective agreement. The collective agreement, as I have observed, provided for the accreditation of medical schemes and stipulated for a regime under which employees could choose from among the accredited schemes and benefit from their membership. That regime permitted accredited schemes to market their schemes during the window period and to service their members. Nothing in this regime limited the freedom of accredited medical schemes to determine how to do so. It did not require the use by accredited medical schemes of brokers, much less permit employers to impose the use of brokers upon these schemes. [26] The conduct of COE clearly interfered with the contract subsisting between SAMWUMED and SALGBC. It did so by restricting the means by which SAMWUMED could carry out its duties to service its members and exercise its right to market its scheme in the window period. The collective agreement placed no restraints upon SAMWUMED of the kind that COE sought to impose. COE had a duty to observe the terms of the collective agreement. It did not do so. Rather, it sought to impose a broker upon SAMWUMED and stipulated conditions under which SAMWUMED could enjoy its rights and carry out its duties under the agreement with SALGBC. That was plainly harmful to SAMWUMED because it imposed a broker that SAMWUMED did not either need or wish to employ, and at a cost that SAMWUMED was required to meet. This amounts to unlawful interference in the contractual relationship subsisting between SAMWUMED and SALGBC. [27] Nor can there be doubt that COE interfered with the required intent. It knew that SAMWUMED was an accredited medical scheme in terms of the collective agreement. It knew what the collective agreement permitted SAMWUMED to do. Yet COE decided to act as it did knowing it would interfere with the manner in which SAMWUMED enjoyed its accreditation from SALGBC and cause it loss. The COE is thus liable for its unlawful and intentional interference with the contractual relationship subsisting between SAMWUMED and SALGBC. [28] While SAMWUMED, for the reasons given, cannot enjoy the relief sought in its notice of motion that is predicated upon breach by COE of the collective agreement and the enforcement of that agreement, SAMWUMED has made out a case to prevent COE from: imposing Moso upon SAMWUMED; requiring SAMWUMED to pay Moso for its unwanted services; and restricting the basis upon which SAMWUMED may carry out its duties and enjoy its rights under its agreement with SALGBC. The Moso appeal [29] I turn next to consider the appeal of SAMWUMED against the dismissal by the high court of the relief it sought against Moso. It will be recalled that Moso does not seek to defend the conduct of COE and its unilateral imposition of Moso as a broker upon SAMWUMED. Moso confined its case to one issue. It contended that it was not confined by the territorial limitation contained in its broker agreement with SAMWUMED, and hence it was at liberty to offer its services to SAMWUMED (outside of the territorial limitation), and to COE, and its employees. If the territorial limitation is lawful and remained enforceable, Moso accepts that SAMWUMED was entitled to restrain it from offering its services outside of the agreed territorial limitation. [30] Moso sought to impugn the territorial limitation on three grounds. First, it contended that the territorial limitation offends against s 65 of the MSA read with Regulation 28 promulgated in terms of the MSA. Second, it submitted that the territorial limitation offends against public policy and it is thus rendered unenforceable. Third, it claims that SAMWUMED has waived the territorial limitation. I consider each of these grounds in turn. [31] Section 65 of the MSA provides for the accreditation of brokers and their compensation. Regulation 28(1) prohibits any person from being compensated by a medical scheme in terms of s 65, unless the broker has entered into a prior written agreement with the medical scheme concerned. Regulation 28(6)(a) renders the ongoing payment of a broker by a medical scheme conditional upon the broker meeting the service levels agreed upon in the written agreement between the broker and the medical scheme. Regulation 28(7) requires a medical scheme to discontinue payment to a broker upon notice that a member or employer no longer requires the services of that broker. [32] Moso reads these provisions to mean that members enjoy free choice as to whether to use a broker and which broker they wish to select. Provided the broker is accredited and the other stipulations as to compensation are met, that choice is sovereign and the territorial limitation is repugnant to that sovereignty. Moso, with the high court, also rely upon the provisions in s 1(1) of the Financial Advisory and Intermediary Services Act 37 of 2002 (the FAIS Act) read with section 20 of its code of conduct which are said to privilege the free choice of clients to appoint (and dismiss) a broker. Moso also placed reliance on the decision of this Court in Hlela5 and the decision of the appeals committee of the Council for Medical Schemes in LA Health Medical Scheme.6 [33] Nothing in s 65 or Regulation 28 forbids the adoption of a territorial limitation in the written agreement between a medical scheme and a broker. What is required is that there should be a written agreement; and Regulation 28 regulates some of the contents of that agreement, such as the maximum compensation payable to a broker for the introduction of a member and the rendering of ongoing services. Furthermore Regulation 28(3) proscribes certain differential compensation. This 5 Hlela v SA Taxi Securitisation (Pty) Ltd 2014 JOL 32305 (SCA). 6 LA Health Medical Scheme v The Office of the Registrar & Others CMS Ref: CMS 76106. scheme of regulation contains certain prohibitions and imposes certain requirements. But beyond these stipulations, the Regulation runs out, and it is permissive. Thus, there must be a written agreement between a broker and a medical scheme; and it must comply with certain content requirements and prohibitions. Nothing in the Regulation, however, states or implies that a broker agreement cannot contain a territorial limitation upon where it is that the broker may render its services. [34] Moso contended that s 65 of the MSA read with Regulation 28 is predicated upon the primacy of member choice. And the territorial limitation is a constraint upon such choice and is thus prohibited. This reasoning does not hold. First, it is the medical scheme that appoints the broker to secure introductions and render services, on its behalf, to members for which the medical scheme compensates the broker. It is for the medical scheme to decide whether to appoint brokers, and if it does, how and where to deploy them under service levels set out in a written broker agreement. Brokers may have utility in one area, but not in another. The medical scheme may choose, as in this case, to use its own employees to service its members in a particular area. These are all choices for the medical scheme to make and nothing in Regulation 28 says otherwise. [35] Second, Regulation 28(7) simply prevents a medical scheme from compensating a broker if a member or employer no longer requires the broker’s services. This provision recognises that a member or employer may not wish to receive the services of a particular broker. Upon notice of this, the broker may no longer be compensated. It is not possible to derive from this provision that members may dictate to a medical scheme that every broker appointed by a medical scheme must be available to provide services to them or, more radically, that if a medical scheme has appointed no brokers at all, they must do so to provide members with some (unspecified) plurality of choice. Regulation 28 does not so provide. Very considerable complexity would arise if a regulation sought to do so, requiring detailed provisions, that are not to be found in Regulation 28. [36] Third, as I have observed, Regulation 28 is predicated upon the premise that it is for medical schemes to decide whether to appoint brokers and if so, how many, in what areas and on what terms. The logic of this is well understood. Provided there are a sufficient number of medical schemes competing for members, it is for the schemes to decide how to win members and service their needs. If the medical schemes make bad choices and service suffers, members will switch. The Regulation could have been constructed on a different regulatory premise of broker plurality, but nothing indicates the adoption of such a scheme. [37] Fourth, the Hlela decision and the provisions of the FAIS Act provide no assistance, even of an analogical kind. In Hlela, it was the clients who had appointed the broker, and the question was whether their choice of broker could be rejected under s 20 of the FAIS Code of Conduct. This Court held that it could not. Regulation 28, however, is not concerned with a member’s appointment of a broker. Under Regulation 28, the medical schemes may appoint brokers, and members can choose whether to use their services. That entails no recognition of some requirement that a medical scheme, at the instance of a member, must appoint a broker or do so on particular terms. Much less, the further entailment that territorial limitations are impermissible. I find nothing in the reasoning in LA Health Medical Scheme that persuades me of a different conclusion. And hence, the contention of Moso that the territorial limitation is repugnant to s 65 of the MSA and Regulation 28 falls to be rejected. [38] Moso next advanced the submission that the territorial limitation offends against public policy and is therefore rendered unenforceable. It relied upon Beadica,7 and certain of the cases of the Constitutional Court analysed in Beadica. The majority in Beadica held that the value of honouring obligations freely and voluntarily entered into has no primacy in the pantheon of public policy, it is one of the number of constitutional rights and values that may be implicated in deciding whether the enforcement of a contractual term is contrary to public policy.8 [39] Following Beadica, the fact that Moso agreed to the territorial limitation does not exhaust the considerations of public policy that might bear upon the enforcement of such a provision. Moso reprises its invocation of the value that should attach to the freedom of members to choose a broker, and that the territorial limitation restricts such choice. The statutory scheme, analysed above, does not reflect this value. Rather, it recognises that a member does not need to use a broker if they should choose otherwise. Apart from the statutory scheme, I do not apprehend that the territorial limitation offends against any important constitutional right or value. It simply constitutes a means by which medical schemes may choose to provide services through brokers. This is a matter of efficacy. Other means may also be effective. But it is hard to see how an insistence that once a broker is appointed by a scheme that broker must be entitled to operate without territorial limitation infringes upon any constitutional right or value. Nor has a case been made that the territorial limitation has led to any deterioration of the service rendered by SAMWUMED or any lack of competitive alternatives for employees of COE who might want to switch medical schemes. The invocation of broker choice is an abstract claim, without an obvious constitutional mooring. [40] It follows that I can discern no consideration of public policy that counts in favour of rendering the territorial limitation unenforceable. On the contrary, Moso 7 Beadica 231 CC & Others v Trustees, Oregan Trust & Others 2020 (5) SA 247 (CC). 8 Ibid at para [87]. agreed to this restriction in its broker agreement with SAMWUMED, and there is no reason why it should not be held to it. Moso’s challenge on this score must fail. [41] Finally, Moso contends that SAMWUMED waived or abandoned the territorial limitation during the currency of the broker agreement with Moso. Moso avers that SAMWUMED appointed Moso to render brokerage servies in the city of Tshwane; Moso introduced 596 new members and was paid by SAMWUMED. SAMWUMED contests this version; it sets out the history of its broker agreements with Moso, over the years, which have defined different territories, but these appointments, prior in time to the current agreement, could not amount to a preemptive waiver of a later agreement. [42] It is unnecessary to resolve this factual dispute. The version offered by Moso is struck by clauses 13.1 and 13.2 of the broker agreement. They provide that no variation of the terms of the agreement shall be binding unless reduced to writing and signed by the parties; and further, that no indulgence shall constitute a waiver, nor preclude the grantor (of the indulgence) from exercising any rights. The documentary evidence proferred by Moso does not meet the standard set by clause 13.1 to effect a valid variation. And to the extent that SAMWUMED permitted Moso to introduce new members in Tshwane, no such indulgence can constitute a waiver. The waiver challenge must be rejected. [43] It follows that Moso’s challenges to the territorial limitation cannot succeed. As counsel made plain at the commencement of his oral submissions, if this Court should reach this conclusion, then SAMWUMED’s appeal must be upheld and it is entitled to the relief that Moso contested. Conclusion [44] SAMWUMED has prevailed against COE, and its appeal must be upheld. SAMWUMED is not entitled to relief predicated upon the enforcement of the collective agreement. It is entitled to the relief in its notice of motion that protects it from the conduct of COE that sought to impose a broker upon SAMWUMED, and the entailments of that conduct. As against COE, the orders sought in prayers 3,5 and 6 of the notice of motion should thus be granted. Although COE abided the judgment of this Court, it did not abandon the order of the high court in its favour. This meant that SAMWUMED was required to come to this Court to appeal the high court’s order. Once that is so, SAMWUMED is entitled to the costs of the appeal as against COE, on an unopposed basis. [45] As to the appeal against the dismissal by the high court of the relief sought by SAMWUMED against Moso, Moso opposed the appeal on a limited basis, and, in particular limited its opposition to the issue of the territorial limitation and prayers 4 and 5.5. That opposition has not succeeded. SAMWUMED’s appeal is upheld as against Moso. Costs must follow that result. [46] The following order is made: The appeal is upheld, the costs of the appeal, including the costs of the application for leave to appeal, are to be borne jointly by the first and second respondents; The orders of the high court are set aside and substituted with the following: ‘1. The first respondent is ordered to accept member application forms and other documents and communications directly from the applicant, and to duly process such applications and related documents submitted by the applicant, for so long as the applicant remains an accredited medical scheme in terms of the collective agreement; 2. It is declared that the second respondent is not entitled to payment of broker fees by the applicant in respect of the employees of the first respondent, in the absence of a written broker agreement having been concluded between the applicant and the second respondent and in the absence of the second respondent having actually rendered broker services; 3. The first and second respondents are interdicted, for so long as the applicant remains an accredited medical scheme in terms of the collective agreement: 3.1 from taking any steps that would prevent or hinder the applicant from marketing its scheme and benefit options and rendering services to its members and all prospective members who are employees of the first respondent by way of the applicant’s own internal consultants or independent brokers appointed by the applicant, should it so wish; 3.2 from holding out that the second respondent is the exclusive broker for the five medical schemes accredited in terms of the collective agreement concluded on 9 September 2015, and that no other brokers or consultants will be allowed to service employees of the first respondent; 3.3 from refusing to accept member application forms and other documents and communications submitted to the first respondent by the applicant, and from refusing to duly process such applications and related documents; 3.4 from insisting that all medical scheme member application forms and other related documents and communications be submitted to the second respondent, as opposed to the first respondent; 3.5 from insisting that payment of broker fees be made by the applicant to the second respondent in the absence of a written broker agreement between the applicant and the second respondent and/or in the absence of the second respondent having actually rendered broker services; 3.6 from approaching members of the applicant and requesting them to execute service notes in favour of the second respondent, in the absence of a written broker agreement between the applicant and the second respondent and/or in the absence of the second respondent having actually rendered broker services to members of the applicant. 4. The first and second respondents are jointly ordered to pay the costs of this application.’ _________________________ DN UNTERHALTER ACTING JUDGE OF APPEAL APPEARANCES For Appellant: E Kromhout Instructed by: Malatji & Co Inc., Sandton Honey Attorneys, Bloemfontein For Second Respondent: Y Alli Instructed by: Wadee Attorneys, Johannesburg Webbers Attorneys, Bloemfontein

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 22 December 2023 Status: Immediate The following summary is for the benefit of the media in the reporting of this case and does not form part of the judgments of the Supreme Court of Appeal South African Municipal Workers’ Union National Medical Scheme (SAMWUMED) v City of Ekurhuleni and Others (1297/2022) [2023] ZASCA 182 (22 December 2023) (1297/2022) [2023] ZASCA 182 (22 December 2023) Today, the Supreme Court of Appeal (SCA) upheld an appeal from the Gauteng Division of the High Court, Johannesburg (high court). The appeal centred around a dispute between the South African Municipal Workers’ Union National Medical Scheme (appellant), a self-administered medical scheme registered in terms of s 24 of the Medical Schemes Act 131 of 1998 (the Act), and the City of Ekurhuleni (COE). In terms of a collective agreement entered into by the South African Local Government Association, the South African Local Government Bargaining Council must annually accredit medical schemes which qualified for employer contributions and the appellant had, for a number of years, been accredited in this regard. In 2020, the appellant received a letter from COE, indicating that Alexander Forbes Health (Pty) Ltd (AFH) had been appointed as a broker to the appellant to provide services to COE and its employees. The appellant was informed that it was to rescind all its existing broker contracts. It also had to ensure that AFH was paid the requisite broker fees for services rendered. Subsequently, Moso Consulting Services (Pty) Ltd (Moso) replaced AFH as the appointed broker. The appellant declined to accede to this appointment, nor did it accept that it was required to market its scheme or render any other service through Moso. The appellant wished to continue to do so through its internal consultants employed by the appellant. In light of these developments, the appellant addressed a letter to COE, requesting it to reconsider the imposition of Moso. The appellant also wrote to Moso to inform it that it was not allowed to render services which fell outside the confines of its agreement with the appellant. That agreement confined Moso to particular territory, being, in essence, Johannesburg. Before the high court, the appellant’s claim was dismissed on the basis that the appellant was not a party to the collective agreement, and therefore enjoyed no rights under the agreement. Furthermore, the appellant efforts to restrict Moso in the territorial performance of its activities, was found to offend it the rights of employees to choose a broker. It would also offend against the Financial Advisory and Intermediary Service Act 37 of 2002 and its code of conduct. On appeal before this Court, the appellant sought to compel COE to comply with the collective agreement and to permit the appellant to market its scheme and benefit options, as well as render services, to employees of COE. Additionally, the appellant sought to render these services and market its offerings without having Moso imposed upon it as intermediary. This Court examined the matter and confirmed that the appellant was not a party to the collective agreement, and did not have any rights under this agreement. A collective agreement, this Court found is a statutory construct. Section 23 of the Labour Relations Act 66 of 1995 (LRA) sets out who the legal effects of a collective agreement. A medical scheme is not recognized as a party to the collective agreement by the LRA, and thus the appellant could claim no rights under the collective agreement. However, the LRA provided for the establishment of bargaining councils. The collective agreement in question deputed the South African Local Government Bargaining Council (SALGBC) to accredit medical schemes for the benefit of employees. SALGBC accredited the appellant and in so doing concluded an agreement, from which these parties derived rights and obligations. The appellant sought to enforce what it considered its rights under the collective agreement. That claim could not prevail., But the appellant had pleaded an alternative cause of action: that the conduct of COE unlawfully and intentionally interfered with the contractual relations of the appellant. This Court found that this cause of action was good in law, and then considered the proposition whether COE’s conduct constituted unlawful interference with the agreement between the appellant and SALGBC. It found that COE’s conduct clearly unlawfully interfered, as it restricted the means by which the appellant could carry out its duties to its members, including its right to market its scheme. The collective agreement did not place any restraints upon the appellant of the kind COE sought to impose. COE’s imposition of a broker was held to constitute intentional and unlawful interference with the contractual relationship subsisting between the appellant and SALGBC. Additionally, the appellant sought relief against Moso. Moso contended that it was not confined to the territory set out in its broker agreement with the appellant. Moso held that the territorial restriction In the agreement offended against s 65 of the Medical Schemes Act; that it was against public policy and that the appellant had waived its rights under the agreement with Moso. However, this Court decided that the territorial restraint did not restrict the choice of brokers that the Medical Schemes Act protected; nor was the restraint against public policy; and the appellant had not waived its rights under the agreement with Moso. In the result, the appeal was upheld and the order of the high court was substituted with orders permitting the appellant to render its services as an accredited medical scheme. ~~~~ends~~~~

477

non-electoral

2016

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Reportable Case No: 238/2015 In the matter between: THE REGISTRAR OF MEDICAL SCHEMES FIRST APPELLANT THE COUNCIL FOR MEDICAL SCHEMES SECOND APPELLANT and GENESIS MEDICAL SCHEME RESPONDENT Neutral citation: Registrar of Medical Schemes v Genesis Medical Scheme (238/2015) [2016] ZASCA 75 (27 May 2016) Coram: Cachalia, Seriti, Willis and Dambuza JJA and Tsoka AJA Heard: 11 May 2016 Delivered: 27 May 2016 Summary: Medical Schemes Act 131 of 1998 – members’ funds allocated to members’ savings accounts are ‘trust property’ in terms of the Financial Institutions (Protection of Funds) Act 28 of 2001 and are to be accounted for separately in terms of ss 4(4) and (5) of that Act, read together with s 35(9)(c) of the Medical Schemes Act 131 of 1998. ___________________________________________________________________ ORDER On appeal from: Western Cape Division of the High Court, Cape Town (Davis J sitting as court of first instance), judgment reported sub nom as Genesis Medical Scheme v Registrar of Medical Schemes & another 2015 (4) SA 91 (WCC): The appeal is upheld with costs. The order of the court a quo is set aside and replaced with the following: ‘The application is dismissed with costs.’ ___________________________________________________________________ JUDGMENT Cachalia JA (dissenting with Dambuza JA) [1] This is an appeal from the Western Cape Division of the High Court, Cape Town (Davis J), upholding a review by Genesis Medical Scheme (the respondent) against a decision of the Registrar of Medical Schemes, the first appellant, to reject its Annual Financial Statement (AFS) for the year 2012. The Registrar did so for the reason that the respondent had reflected the funds in its members’ personal medical saving accounts (PMSAs) as its own assets, instead of treating them as funds held in trust on behalf of its members. [2] In a now reported judgment the court a quo upheld the respondent’s contention that PMSA funds were correctly reflected as its own assets, and that in rejecting its AFS the registrar had erred in law.1 The Registrar appeals this finding with leave of that court. The second appellant, the Council of Medical Schemes, is cited as the organ of state responsible for the functioning of medical schemes.2 [3] On 19 June 2013 the Registrar informed the respondent that he had rejected its 2012 AFS because of the manner in which it had reported the funds in the PMSAs. The respondent then instituted review proceedings under s 6(2)(d) of the Promotion of Administrative Justice Act 3 of 2000 on the grounds that the registrar’s decision was materially influenced by an error of law. [4] The source of this error, it contended and still contends, was the incorrect construction placed on the relevant provisions of the Medical Schemes Act 131 of 1998 (the MSA), its regulations and the Financial Institutions (Protection of Funds) Act 28 of 2001 (the FI Act) in the judgment of Registrar of Medical Schemes v Ledwaba NO (Omnihealth).3 The judgment pertained to a medical scheme known as Omnihealth Medical Aid Scheme (Omnihealth) that was liquidated. The liquidators contended that PMSA funds were the assets of Omnihealth and fell into the insolvent estate. The court disagreed, holding that these funds constituted trust property of the members as contemplated in s 4(5) of the FI Act and therefore did not fall into the scheme’s insolvent estate. [5] A few years after the Omnihealth judgment the Council and the Registrar issued several circulars prescribing the form in which PMSA funds were henceforth to be reported in the AFS of medical schemes. In summary the circulars provided that: Contributions received by medical schemes from their members must be retained in a trust account separate from any of its other bank accounts; interest and other income earned on PMSA funds are to accrue to the members’ PMSA 1 Genesis Medical Scheme v Registrar of Medical Schemes & another 2015 (4) SA 91 (WCC). 2 Section 7(b) of the Medical Schemes Act 131 of 1998. 3 Registrar of Medical Schemes v Ledwaba NO & others [2007] JOL 19202 (T). balances; and PMSA funds are no longer to be reflected in the balance sheets and income statements of the AFS. [6] The respondent’s 2012 AFS and returns did not comply with these prescriptions. The Registrar accordingly rejected them. It is however common ground that these circulars are not themselves legally binding. Based as they are on the Omnihealth judgment, they only have the force of law if the judgment reflects the correct legal position. [7] In the court a quo the respondent contended that the incorrect way in which the Omnihealth judgment interpreted the relevant provisions of the MSA in particular leads to what this court has described as ‘insensible or unbusinesslike’ results.4 The court a quo upheld this contention, which then gave rise to conflicting interpretations in two provincial divisions. The Registrar supports the construction in Omnihealth, and the respondent that of the court a quo. [8] The MSA and the regulations5 promulgated thereunder (the regulations) govern the conduct of medical schemes by providing for their rules, finances and for the Registrar’s regulatory powers. Section 29 of the MSA lists a number of specific matters for which their rules must provide, while s 30 enumerates the general provisions for which their rules may provide. [9] An important feature of the MSA and the regulations is their treatment of a medical scheme’s finances. In particular, the legislative scheme aims to ensure that the scheme’s finances are properly maintained and effectively scrutinised. This is important because a medical scheme is in essence a mutual aid society funded by members’ contributions. It has no source of revenue other than these contributions (and the returns on the investment of any surplus after the benefits have been paid) from which benefits are paid to or on behalf of members. These contributions include 4 Natal Joint Municipal Pension Fund v Endumeni Municipality [2012] ZASCA 13; 2012 (4) SA 598 (SCA) para 18. 5 General Regulations, GN R1262, GG 20556, 20 October 1999. those made to PMSAs the purpose of which is to provide members with an optional facility to cover health care costs not covered by the scheme. [10] Section 26(1)(c) specifies that members’ contributions, including any other amounts such as interest, are to be received into a bank account the medical scheme must establish and control. Such contributions evidently become assets of the scheme. Section 26(2) is emphatic that ‘[n]o person shall have any claim on the assets or rights or be responsible for any liabilities or obligations of a medical scheme, except in so far as the claim has arisen or the responsibility has been incurred in connection with transactions relating to the business of the medical scheme’. [11] Against this background, s 35 of the MSA provides that a medical scheme shall ‘at all times maintain its business in a financially sound condition’. The medical scheme must achieve this by: (i) having assets, the aggregate value of which, on any day, is not less than the aggregate of (a) the aggregate value on that day of its liabilities and (b) the nett assets as may be prescribed (s 35(1)(a) read with s 35(3)); (ii) providing for its liabilities (s 35(1)(b)); and (iii) generally conducting its business so as to be in a position to meet its liabilities at all times (s 35(1)(c)). [12] Section 35(7) provides that a medical scheme may invest its funds in any manner provided for by its rules. [13] Section 35(9)(c), which lies at the heart of this appeal, says that the amounts standing to the credit of members’ PMSAs constitute ‘liabilities of a medical scheme’ for the purposes of the MSA. These funds must accordingly be taken into account for purposes of the calculations as set out in s 35(3) and must be provided for as required by s 35(1)(b) and (c). [14] Section 37 deals with a medical scheme’s AFSs. Sections 37(2)(a), (b) and (c) require a balance sheet, income statement and cash flow statement. Section 37(4)(a) specifies that the AFS must be prepared in accordance with general accepted accounting practice. This means simply that they should present the state of affairs of the scheme fairly.6 [15] Section 38 gives the registrar the power reject the annual financial statements of a medical scheme if he is of the opinion that they do not comply with any of the provisions of the MSA or do not ‘correctly reflect the revenue and expenditure or financial position’ of the medical scheme. The Registrar purported to act under this provision in rejecting the respondent’s AFS. [16] The relevant rules of the respondent, with which we are concerned, are rules 14.5 and rule 1.1 of Appendix 2. The former provides that the balance standing to the credit of a member in a PMSA ‘shall, at all times remain the property of the member’, subject to the provisions dealing with savings accounts; the latter that the PMSAs in certain benefit options shall be available ‘for the exclusive purpose of paying benefits for the member of his or her dependants’. [17] Regulation 10(1) limits the amount a medical scheme may allocate to a PMSA to 25 per cent of the members’ total gross contribution. [18] Regulations 10(3) and 10(4) prescribe the manner in which the funds deposited in a PMSA are to be dealt with. Regulation 10(3) says that these ‘shall be available for the exclusive benefit of the member and his or her dependants’, subject 6 Novick & another v Comair Holdings Ltd & others 1979 (2) SA 116 (W) at 140G-141A. however to the proviso that the medical scheme may use those funds ‘to offset debt owed by the member to the medical scheme following that member’s termination of membership of the medical scheme’. Regulation 10(4) provides for the transfer of credit balances in a member’s PMSA (as envisaged in s 35(9)(c)) to another medical scheme or to a different benefit option with a PMSA, as the case may be, when the member changes medical schemes or benefit options. [19] The financial matters of medical schemes are further regulated by the FI Act, because a medical scheme is a ‘financial institution’ as defined in s 1 of the FI Act. I consider its provisions later. [20] The central dispute between the parties lies in the proper construction given to s 35(9) of the MSA. In Omnihealth the liquidators contended that because the liabilities of a medical scheme include the amount standing to the credit of a member’s PMSA, as s 35(9)(c) requires, the funds in this account had to be an asset of the scheme. This was for the simple reason that from an accounting point view, the financial records of a scheme cannot show a liability without also showing a corresponding asset. PMSA funds were therefore not trust property as defined in s 1 of the FI Act.7 The court rejected this contention. It found that the legislative framework and Omnihealth’s rules required the credit balances in the PMSA’s to be treated as trust property and that any accounting difficulties this may cause cannot alter the substantive law.8 I consider the court’s reasoning later in this judgment. [21] Mr Brett has represented the Registrar in both provincial divisions, and now appears before us. For his main contention – that funds in the PMSAs are trust assets and not the assets of the respondent – he relies heavily on regs 10(1) and 10(3), and also rules 14.5 and 1.1 of Appendix 2. He submits that the fact that these regulations provide that a portion of members’ contributions are allocated to an account in the name of a member, held separately, and are available for the 7 The relevant portion of s 1 of the FI Act is set out at para 41 below. 8 Omnihealth at 7. exclusive benefit of the member are strong indicia that these funds are trust property. This is buttressed by the rules providing that the funds are ‘the property’ of members to be used for their exclusive benefit. He submits that the rules comply with reg 10. [22] Section 30(1)(e) permits a scheme to make provision in its rules for the allocation of funds to a member’s PMSA ‘within the limit and in the manner prescribed . . . to be used to pay for any relevant health service’. (Emphasis added.) However, neither the rules, which regulate the relationship between a medical scheme and its members, nor the regulations determining the limits of funds to be allocated to PMSAs, and the manner in which they are to be dealt with, have any bearing on the question whether the funds in a PMSA constitute trust property. The nature of these funds can only be determined by examining the relevant provisions of the MSA. The content of the rules and the regulations cannot be used as an aid to the construction of the MSA.9 [23] I therefore turn to the relevant provisions of the MSA. It is evident that the MSA does not treat PMSA funds as trust property. If the lawmakers intended PMSAs to be treated as such one would have expected specific language indicating as much.10 There is none. And Mr Brett relied on none. The MSA simply does not contemplate medical schemes holding any trust property. The only mention of ‘assets held in trust’ is in s 26(3), which refers to assets held for the medical scheme by another person, not by a scheme on behalf of another person. 9 EA Kellaway Principles of Legal Interpretation of Statutes, Contracts and Wills (1995) at 208-209; Moodley v Minister of Education & Culture, House of Delegates & another 1989 (3) SA 221 (A) at 233E-F. 10 See eg s 79 of the Attorneys Act 53 of 1979. It reads: ‘Trust property not to form part of assets of practitioner.—Notwithstanding anything to the contrary in any law or the common law contained, trust property which is expressly registered in the name of a practitioner, or jointly in the name of a practitioner and any other person in his or her or their capacity as administrator, trustee, curator, or agent, as the case may be, shall not form part of the assets of that practitioner or other person.’ [24] The MSA treats members’ contributions in the following manner. All contributions are deposited into the bank account established and controlled by the medical scheme as required by s 26(1)(c). Once this happens the member loses ownership of these funds; they become the property of the bank and are the assets of the scheme, regardless of whether a proportion of the funds are allocated to a PMSA afterwards. Members do not deposit earmarked funds with their medical scheme for a PMSA. Contributions are deposited into the scheme’s bank account, and the scheme allocates a portion of this amount to the member’s PMSA. Any payments of members’ benefits, payable under the rules, will be debited to this bank account, as s 26 (4) specifies. [25] It is apposite to refer to a simple example to explain what happens in the process. If the amount contributed is R100, this will be what is represented in the medical scheme’s books as an asset. Of this amount let’s say the scheme allocates R25 to the PMSA, which is 25 per cent of the gross contribution of the member, and also the maximum allocation reg 10(1) permits to be made to a PMSA in a financial year. [26] Section 35(9) says that this R25, once allocated, becomes a liability of the scheme, and s 35(9)(c) specifically says this liability is reflected as a credit in the member’s PMSA. The credit balance therefore represents a current, not a contingent liability. [27] Now s 35(1) requires a medical scheme to have sufficient assets as contemplated in s 35(3) so that it is in a position to meet its liabilities at all times. From ordinary accounting principles, the R25 allocated to the PMSA, which is a liability in the books of the scheme, must therefore have a corresponding asset in its books. Otherwise it will not have an asset to meet this liability. The credit entry in the member’s PMSA must therefore have a corresponding debit entry in its books. If the asset were the trust property of the member and is not to be reflected in the scheme’s balance sheet as an asset of the scheme, as the Registrar contends, the scheme would not be able to meet this liability for the simple reason that it cannot use the assets of a third person (the member) to meet its own liabilities. [28] The Registrar’s contention has the absurd result that in order to comply with s 35(1)(b) and (c), a medical scheme must hold assets equivalent to the total value of the PMSA funds under its control, the PMSA funds themselves not constituting assets of the medical scheme for these purposes. Thus, if the scheme has R20 million in PMSA funds under its control, it would have to show cash on hand in the same amount, but exclude the PMSA funds, to satisfy this legislative requirement. For every rand of PMSA funds under its control, the medical scheme would have to find, elsewhere, a rand to match it. That is unworkable because medical schemes do not have any source of revenue (save for investment returns) other than contributions paid by their members. [29] Moreover, the interpretation advanced on behalf of the appellants has the result that the member from whose contribution R100 is allocated to his or her PMSA now appears to have an asset worth R200: R100 in the form of cash in the bank and a further R100 in the form of a claim for payment against the scheme. [30] Furthermore, reg 29(2) requires that a medical scheme maintain accumulated funds expressed as a percentage of gross annual contributions for the relevant accounting period which may not be less that 25 per cent. Gross annual contributions include amounts allocated to members’ PMSAs. ‘Accumulated funds’ is defined in reg 29(1) as meaning the net asset value of the medical scheme. It is incongruous that the regulations should determine the accumulated funds to be maintained as a percentage of contributions if, according to the Registrar, a portion of those contributions do not constitute an asset of the medical scheme. [31] For a medical scheme to maintain a solvency reserve that is equal to at least 25 per cent of gross annual contributions, and for purposes of calculating the amount required to be kept in reserve, the medical scheme must include the amounts that are later allocated by it to its members’ PMSAs. [32] It does not make commercial sense for the legislature to have intended savings accounts to be held in trust, outside the reach of the medical scheme, and simultaneously to insist that the medical scheme’s solvency reserve must be higher than would otherwise be necessary because savings allocations are included in the calculation. If the intention was to exclude PMSAs from the medical scheme entirely, then PMSAs should form no part of any further calculation regarding solvency. [33] The solvency reserve is designed for prudential reasons. If PMSAs are held outside the scheme, as postulated by the Registrar, then it makes no sense that the scheme should hold a reserve that includes PMSA funds. To put it differently, not all medical schemes operate PMSAs (because it is optional, in terms of s 30 of the MSA), and yet the solvency reserve applies equally to all schemes. If PMSAs are not the asset or liability of the medical scheme, then there can be no reason for the solvency reserve to apply to them. [34] Section 35(7) also provides an important contextual indication that PMSA funds are not the members’ trust property. It allows a medical scheme to invest ‘its funds’ in any manner provided for by its rules. The section makes no distinction between PMSA funds and other funds, which one would have expected if the PMSA funds were ring-fenced as trust property and thus precluded from being invested as the scheme’s funds. [35] In my view the plain meaning of the provisions relating to PMSAs in the MSA permits no interpretation other than that the funds allocated to PMSAs are not the trust property of the members, but remain the assets of the medical scheme. The scheme is entitled, indeed obliged, to treat these funds as its own assets and to reflect them accurately as such in its AFSs. [36] The Registrar’s resort to the regulations to interpret the MSA is not only impermissible as I have pointed out, but amounts to pulling himself up by his own bootstraps. Besides, the regulations do not support his construction either. The reference in s 10(3) and rule 1.1 in Annex 11 to the funds in the PMSA being available for the exclusive benefit of the member, requires no more than that the scheme maintains funds equivalent to those of in PMSAs for the use of the members concerned, as distinct from the general pool of contributions used to pay for members’ benefits generally. Similarly reg 10(4) entitles a member to have amounts standing to the credit in the PMSA to be transferred to another scheme or benefit option, which is consistent with it being for the member’s exclusive benefit. By contrast the R75, used in our example earlier, is not for the member’s exclusive benefit, and is lost to the member if not used. [37] The reference in rule 14.5 to the funds in PMSAs remaining ‘the property’ of the members comes closer to the idea that these funds may be considered trust property. But, as with the regulations the rule also cannot be used to interpret the Act. And in the context of how the MSA and the regulations treat PMSAs, the word ‘property’ can only mean that these funds must be used in the manner specified in the regulations, ie, for the member’s exclusive benefit. It cannot mean that the member has ownership of the funds because as I have explained earlier, ownership is lost when the money is deposited into the medical scheme’s bank account. Neither can it mean that it is the member’s trust property for the reasons given earlier. [38] This brings me to Mr Brett’s alternative contention: that the funds in PMSAs are trust funds as envisaged in ss 4(4) and 4(5) read with the definition of trust property in s 1 of the FI Act. In Omnihealth the court found that Omnihealth’s rules, which like the respondent’s specify that PMSA’s remain the property and are for the exclusive benefit of the member, and reg 10, bring it within the ambit of definition of ‘trust property’ in the FI Act.11 11 Registrar of Medical Schemes v Ledwaba NO & others [2007] JOL 19202 (T) at 3-5. [39] However, I have already held that the question whether PMSA funds are trust property must be determined within the four corners of the MSA, and not the rules and regulations. Similarly this question cannot be determined by reference to the FI Act. [40] The purpose of the FI Act is inter alia to provide for the investment, safe custody and administration of funds and trust property by financial institutions, and to improve the enforcement powers of curators (s 5) and of the registrars of financial institutions (s 6) (defined to include the Registrar). [41] Section 1 of the FI Act defines trust property as ‘any corporeal or incorporeal, movable or immovable asset invested, held, kept in safe custody, controlled, administered or alienated by any person, partnership, company or trust for, or on behalf of, another person, partnership, company or trust . . . .’ And a ‘financial institution’ includes a medical scheme as contemplated in the MSA, which means that the provisions of FI Act apply to the MSA. [42] It is apparent from ss 2 and 3 that the FI Act deals with both funds and trust property held by financial institutions, and ss 5 and 6 with the enforcement powers of curators and registrars. While the enforcement provisions of the FI Act apply to medical schemes, not all funds held by medical schemes constitute trust property. Only if the nature of the funds held by a medical scheme makes it trust property will s 4 of FI Act apply.12 And as I have pointed out the nature of the funds held in PMSAs can only be determined by reference to the MSA and not the FI Act. 12 Section 4(1) provides that a financial institution that ‘administers trust property under any instrument or agreement may not cause such trust property to be invested other than in a manner directed in, or required by, such instrument or agreement’, and s 4(2) provides for investment in the absence of such direction or requirement. Section 4(4) provides that trust property must be kept separate from assets belonging to the financial institution concerned, and s 4(5) says that such trust property ‘under no circumstances forms part of the assets or funds of the financial institution’ concerned, despite ‘anything to the contrary in any law or the common law’. [43] It follows that Omnihealth’s determination that PMSAs constituted trust property as contemplated in the FI Act, was incorrect. Mr Brett’s alternative submission must accordingly also fail. [44] It is necessary to return to two aspects of Omnihealth’s reasoning to support its conclusion that a deposit into a trust account is capable of being treated as a liability even though there is no corresponding asset, and that whatever accounting difficulties there may be cannot alter the substantive law. It relied on Fuhri v Geyser NO13 as authority to underpin these findings, and its reasoning proceeded as follows: When a trust creditor hands money to a trustee the former immediately becomes the creditor of the latter for the amount to be held in trust. This is so, said the court, regardless of whether the trustee kept the trust money in a separate account or becomes the owner of the money. The implication is that there is, in the case of a deposit into a trust account, a liability without a corresponding asset. [45] It must, however, be pointed out that in Fuhri the court was concerned with money held in trust by an attorney. Section 33(7) of the Attorneys, Notaries and Conveyancers Admission Act 23 of 1934 then determined how such funds are to be dealt with. In the present matter we are concerned with the prior question, whether the funds in the PMSAs are indeed trust funds. This question, as I have said, is to be determined primarily with reference to the relevant provisions of the MSA. And only if this question is decided in the affirmative would provisions of the FI Act pertaining to trust property apply. [46] In any event, Fuhri does not support the proposition that trust property creates a liability (in the sense of a debt) without a corresponding asset. All that Hefer J said was that when an attorney receives an amount of money ‘for the account of the client, a debt immediately arises . . . for the payment of the amount to the client’.14 But this ‘debt’ is not a liability in the sense in which the word is used in s 35(9) of the 13Fuhri v Geyser NO & another 1979 (1) SA 747 (N) at 749A-750A. 14 Ibid at p 749F. MSA. Rather, it is an obligation to account for the money deposited. The ownership of money deposited into an attorney’s trust vests in the bank.15 The attorney is entitled to operate the account and make withdrawals from it, and the client is entitled to claim from the attorney the amount due to him.16 [47] Secondly, the learned judge’s finding that the accounting difficulties presented by s 35(9)(c) cannot have a bearing on the substantive law as to how these funds are to be treated in the accounting records rests, with respect, on the incorrect assumption that the proper accounting treatment of these funds is not a matter of substantive law. Section 37(4) requires, as a matter of law, that AFSs be prepared in accordance with general accounting principles. And a failure to do so permits the registrar to reject the AFS for want of compliance with any provision of the Act, including s 37. Section 35, which has been the focus of this appeal, deals with the financial arrangements including the requirement that the business of the scheme is maintained in a manner that is financially sound. The obligation to comply with these provisions, and to ensure that these arrangements are fairly reflected in the financial statements, is a substantive legal requirement. The Registrar’s difficulty explaining, in his answering affidavit, where the corresponding asset of the liability in s 35(9) comes from, and how it is to be represented in the accounting books, shows his failure to come to grips with this legal requirement, and cannot be dismissed as a mere accounting difficulty. [48] I therefore conclude that Omnihealth incorrectly determined PMSA funds to be trust property, and the court below correctly reviewed and set aside the Registrar’s decision to reject the respondent’s 2012 AFS. [49] For these reasons I would have dismissed the appeal with costs of two counsel. 15 Ibid at p 749C-D. 16 Ibid at p 749D-E. _______________ A Cachalia Judge of Appeal Willis JA (Seriti JA and Tsoka AJA concurring) [50] I have had the privilege of reading the judgment prepared by my brother Cachalia. I regret that I am unable to agree with him. Our differences on the issue are fundamental and irreconcilable. I do accept, however, that this is a technically difficult case because it requires a harmony between the law and basic principles of accounting. In broad terms, despite some points of difference, I side with the judgment of Du Plessis J in Omnihealth17 and disagree with the reasoning of Davis J in the court a quo.18 [51] It is clear to me, if one reads the Regulations as a whole, taken together with the answering affidavit, the circulars issued both by and on behalf of the Registrar and the correspondence between the parties, that the system of savings accounts with medical schemes was designed and regulated to assist those members of medical schemes who are not fortunate enough to have full and comprehensive medical cover. The system of savings accounts enables members to put away funds for medical treatment for which they are not covered and also to save funds for medical treatment in their old age – when, in the ordinary experience of humankind, we all tend to be beset by ailments more than when we are young. Over time, the amount that a member may build up in his or her savings account may be considerable. These funds may have taken many years to accumulate. 17 Registrar of Medical Schemes v Ledwaba NO & others in the Transvaal Provincial Division (unreported case number 18545/06, delivered on 30 January 2007) (Omnihealth). 18 Reported sub nom Genesis Medical Scheme v Registrar of Medical Schemes & another 2015 (4) SA 91 (WCC). [52] For reasons that will emerge more fully later, I emphasise that these observations as to how and why the system of savings accounts operates are conclusions of fact and not of law. This system of provision for future medical treatment by way of savings is recognised by s 35(9)(c) of the Medical Schemes Act 131 of 1998 (MSA), which, as I shall later show, provides for specific accounting measures which cater therefor. My reasoning on this aspect is ‘top-down’ rather than ‘bottom-up’. In other words, although the facts emerge from the Regulations, the interpretation of those Regulations derives from s 35(9)(c) of the MSA and not the other way round. [53] It bears repeating that Omnihealth was a medical scheme which had gone insolvent. Critically relevant was whether the amount standing to the credit of members’ savings accounts fell to be available for the general concursus creditorum (the general body of creditors)19 or whether it stood outside thereof. Du Plessis J, relying on the definition of trust property in the Financial Institutions (Protection of Funds) Act 28 of 2001 (the FI Act), found that these savings were trust property (and, therefore, necessarily stood outside of the concursus). The issue is one of fundamental importance: are members’ savings accounts, which may have painstakingly been built up over a number of years, ‘ring-fenced’ against claims by the general body of creditors or are they not? [54] It would offend against justice if funds of this nature were available to the predations of the concursus creditorum in the event of the insolvency of a medical scheme. Moreover, it requires no financial genius to understand that medical schemes, unless properly managed, can easily become insolvent. Regulation designed to protect members of medical schemes is therefore hardly surprising and, indeed, desirable. In finding that Omnihealth was wrongly decided, the effect of Cachalia JA’s judgment is that members’ savings accounts are indeed available to the concursus creditorum in the event of the insolvency of a medical scheme. Of 19 The Latin term concursus creditorum means more than ‘the general body of creditors’. It means something like this: ‘the creditors, coming together and waiting, expectantly, for at least some of their money back’. The density of the Latin term probably explains its retention among lawyers. course, no interpretation of law by the courts should be too strained, but the divination of justice is an important aid and is constitutionally enjoined in terms of the 39(2) of the Constitution. Besides, the publica utilitas of law was recognized by Johannes Voet as being a vital consideration when interpreting the law.20 [55] The FI Act is, as its long title makes clear, social legislation designed to protect funds placed with financial institutions. The definitions section defines any medical scheme contemplated in the MSA to be a financial institution. It defines ‘trust property’ as: ‘any corporeal or incorporeal, movable or immovable asset invested, held, kept in safe custody, controlled, administered or alienated by any person, partnership, company or trust for and on behalf of, another person, partnership, company or trust, hereinafter referred to as the principal.’ In my opinion, there can be no question that funds invested by members of a medical scheme in their savings accounts with that scheme constitute incorporeal assets invested, controlled and administered by the scheme for and on behalf of its members. Therefore, Du Plessis J was correct in finding that these saving fund contributions constituted trust property. [56] Section 4(4) of the FI Act provides as follows: ‘A financial institution must keep trust property separate from assets belonging to that institution and must, in its books of account, clearly indicate the trust property as being property belonging to a specified principal.’ (My emphasis.) Furthermore, s 4(5) of the FI Act provides that: ‘Despite anything to the contrary in any law or the common law, trust property invested, held, kept in safe custody, controlled or administered by a financial institution or a nominee company under no circumstances forms part of the assets or funds of the financial institution or such nominee company.’ 20 J Voet Commentarius Ad Pandectas (1723) 1.3.17. (translated by Sir Percival Gane in The Selective Voet being the Commentary on the Pandects (1955)). See also L C Steyn Uitleg van Wette 5 uitg (1981) p 124. [57] Thus, in unmistakable terms, this subsection ring-fences items such as the savings accounts of members of a medical scheme from any concursus creditorum. Not only does s 4(4) provide that these must be accounted for separately but also provides the indicator as to how the books of account are to show the amounts standing to the credit of a member’s savings account as a liability of the scheme with there being a corresponding asset showing these assets as being separate from those of the scheme. [58] The Registrar was, in my opinion, correct to attempt to apply an interpretation of the applicable statutory framework that was consistent with Omnihealth. I also agree with the Registrar that the accounts of the respondent were misleading inasmuch as they did not reflect the special status of funds standing to the credit of the members’ savings accounts. After all, one of the important functions of audited sets of accounts is that they inform all those who may be interested in doing business with the person concerned, whether that person is likely to be able to meet his or her intended obligations. [59] Mr Burger, who appeared for the respondent, relied inter alia, on the fact that when Mr Tegobo Maziya, the Head: Financial Supervision wrote on behalf of the Registrar in a circular to all medical schemes that: ‘The savings account and the bank balances representing the savings balances will no longer be reflected in the Statement of financial position (Balance sheet).’, he was requiring that the savings account balances of members be ‘off balance sheet’. That is incorrect. Section 35(9)(c) of the MSA requires that: ‘For the purposes of this Act, the liabilities of a medical scheme shall include – . . . (c) the amount standing to the credit of a member’s personal savings account.’ [60] Clearly, this requires that a medical scheme’s liability to its members in respect of their savings account must be an ‘on balance sheet’ item. In terms of the first principles of double-entry bookkeeping, for every liability there is a corresponding asset. This is commonly known as a ‘contra’. There must and will be a ‘contra’, appearing in the assets of a medical scheme, for its liability to its members in respect of their savings account. I shall deal with this aspect later. [61] The Registrar was wrong to have required liabilities to be ‘off balance sheet’ when a plain and sensible reading of the MSA required that they should be ‘on’. I am fortified in this opinion by s 37(4)(a) of the MSA that requires that the annual financial statements of a medical scheme shall be prepared ‘in accordance with general[ly] accepted accounting practice’ and s 37(4)(c), which requires that these financial statements must ‘fairly present the state of affairs’ of a medical scheme. [62] The respondent did not, however, make the requirement that personal medical savings accounts (PMSA funds) should be ‘off balance sheet’ a basis for the review. Indeed it could not do so. The basis upon which the respondent approached the court and short-circuited the exhaustion of the Medical Council’s internal procedures was the correctness or otherwise of the decision (and therefore the order) in Omnihealth. [63] At this stage, we have no way of knowing whether, had the internal procedures been followed, the issue of ‘on balance sheet’ or ‘off’ would have been satisfactorily dealt with. The only reason that the court a quo gave, when granting leave to appeal against its judgment to this court, was the existence of Omnihealth, which it found to be wrong. The fact that the Registrar may have been wrong in requiring members’ savings accounts to be ‘off balance sheet’ was not a ground for the review and cannot be considered at this stage. [64] Regulation 10(5) of the MSA21 provides that when a member terminates his or her membership and thereby withdraws cash from his or her personal medical 21 Medical Schemes Act 131 of 1998 Regulations, GN R1262, GG 20556, 20 October 1999 (as amended). savings account, without transferring the funds to a savings account at another medical scheme, he or she is liable to tax. It would not only be absurd but also unjust if a members’ savings account was available to the concursus creditorum but also taxable at the same time. [65] In addition, in terms of regulation 10(3), if a member owes a debt to a medical scheme at the termination of his membership of the medical scheme, that member may use PMSA funds standing to his credit to offset such debt. If PMSA belongs to a medical scheme, how can set-off operate against the member’s own debt? It makes no sense at all. The issue of set-off can only arise if PMSAs are assets of the members and not of the medical scheme. [66] I disagree with Cachalia JA insofar as his understanding of the function of that the solvency reserve is concerned. The reserve must be held in proportion to gross annual contributions. (The emphasis is my own.) The solvency reserve cannot protect funds saved by members over a number of years. The solvency reserve is designed to ensure that a scheme can meet its current and relatively short-term future obligations for medical expenses in terms of its own rules. (Again, the emphasis is mine.) [67] Both Cachalia JA and Davis J have found that the Omnihealth was wrong in holding that the funds in members’ saving accounts was ‘trust property’ within the meaning thereof as defined in the FI Act. For reasons that have been given above, I disagree with them. I also disagree with Davis J in his finding that this interpretation in Omnihealth would, if correct, require that for every rand of PMSA funds under its control, a medical scheme would have to find an additional rand (over and above the corresponding contra) in order for its assets to match its liabilities. This is, in my respectful opinion, simply cannot be supported: it does not make sense. Moreover, it contradicts the professional and independent advice of the South African Institute of Chartered Accountants (SAICA). I shall deal with this aspect more fully later. I have similar, but less vivid, reservations concerning Cachalia JA’s construction of the accounting consequences that derive from holding that members’ savings accounts constitute ‘trust property’ in terms of the definition thereof in the FI Act. [68] I also disagree with Cachalia JA that the Registrar impermissibly resorted to the regulations to interpret the MSA and amounts to his ‘pulling himself up by his own bootstraps’. Ever since the judgment of Lord De Villiers CJ in Chotabhai v Union Government (Minister of Justice) and Registrar of Asiatics,22 it has been our law that, unless it would result in repugnancy or a practical impossibility, it is reasonable to construe two or more different pieces of legislation as co-existing and to interpret them in a manner that is mutually consistent.23 I have no difficulty in reading the MSA, the FI Act and the Regulations harmoniously and in conformity with the conclusion reached in Omnihealth. I fully accept, however, in line with Moodley v Minister of Education & Culture, House of Delegates & another,24 that it is not permissible to treat an Act of Parliament and the regulations made thereunder as a single piece of legislation and to use the latter as an aid to the interpretation of the former.25 Even without reference to the Regulations, the same conclusion that Omnihealth was correct can be reached. Indeed, Du Plessis J came to his conclusion without any reference to the Regulations. [69] It hardly needs be stated that Du Plessis J did not have the benefit of the recommendations of the SAICA, which were made in response to his judgment in Omnihealth. He also had the intellectual humility to acknowledge that, in respect of the treatment of the issue in the accounts, he would need expert advice. In my respectful opinion, Omnihealth did, however, show considerable confusion about accounting methods and was incorrect in holding that: ‘In our law it does not follow, because the amount standing to the credit of a member’s personal savings account is regarded as a liability, that the PMSA- funds must be an asset of the scheme’. This criticism does not alter the fact that the order given was the correct one. 22 Chotabhai v Union Government (Minister of Justice) and Registrar of Asiatics 911 AD 13. 23 At 23. 24 Moodley v Minister of Education & Culture, House of Delegates & another 1989 (3) SA 221 (A). 25 At 223E-F. See also Rossouw & another v Firstrand Bank Ltd [2010] ZASCA 130; 2010 (6) SA 439 (SCA) para 24 and Trustco Group International (Pty) Ltd v Vodacom (Pty) Ltd [2016] ZASCA 56 (1 April 2016) para 14. [70] A proper answer to the issue is, in my opinion, to be found in the concept of commixtio in our law. The matter has been dealt with by this court in Louw NO & others v Coetzee & others.26 The money contributed by members to their savings account with a medical scheme inevitably becomes scrambled, jumbled up or mixed up with the other cash contributions which it receives. In Louw, the court had to deal with a similar situation – funds deposited with a bank, which it is trite become owned by the bank once they have been deposited therewith.27 Lewis AJA said: ‘As long as the records of the bank show that a particular amount is designated as being due to a particular customer, there would appear to be no difficulty in finding that a bank holds money that is deposited or invested in trust for that customer.’28 The cash, of course, is and remains that of the bank. This is the position despite the fact that the funds are held in trust for a customer. [71] Mutatis mutandis, the following would appear to be the position as to how a medical scheme would deal with its contra for the liability in respect of members’ savings accounts: As long as the balance sheet of the medical scheme shows that a particular amount is designated as being due to members in respect of members’ savings accounts, there is no difficulty in finding that the scheme holds cash that has been deposited or invested in trust for those members. [72] By reason of restrictions imposed by ss 4(4) and 4(5), together with the application of the law of commixtio, the contra for its liability to members in respect of their savings accounts, to be reflected in the assets of the medical scheme, would be in the cash which it holds. The balance sheet would have to designate, in a manner consistent with generally accepted accounting practice, the extent of which such cash holdings were held for and on behalf of members in respect of their savings 26 Louw NO & others v Coetzee & others [2002] ZASCA 156; 2003 (3) SA 329 (SCA). 27 See Louw (above) para 12 and the authorities therein cited. 28 Ibid. account. The ledgers of the scheme would have to keep account of the amount standing to the credit of each individual member’s savings account. [73] I am mindful of the fact that in Louw this court held that the bank continued to be free to deal with the funds as it wishes,29 whereas in the case of a medical scheme it is not. Of course this is so. In Louw the court was dealing with the trust funds of attorney deposited with a bank. Here we are dealing with how the medical scheme accounts for its very own trust funds which it holds, separately and on behalf of others that have invested with itself. The legal consequences of these two separate issues may differ – and indeed do so. The point is, however, that it is quite easily possible, both legally and in the practice of accounting, to hold an asset such as cash, on behalf of another, and to make this fact clear to the world. [74] It is for this reason that I agree with the submission of the Registrar that Fuhri v Geyser NO & another30 is irrelevant to and finds no application in the present case. Fuhri dealt with an attorney’s trust account and not ‘trust property’ as defined in the definitions section and ss 4(4) and 4(5) of the FI Act. The two are not coextensive. [75] Moreover, in the Registrar’s circular letter of 16 February 2001, referring to the audit and accounting guide approved by the SAICA, it is indicated in para 3.2 that funds of the kind in question should be classified as ‘reserves’, the precise description of which is left to the medical scheme concerned. [76] In this way, not only can a medical scheme properly account to all who may have an interest in its affairs for how it holds the savings contributions of its members but also justify and ensure the separation of these funds from any claims by a concursus creditorum in future. 29 Paragraph 13. 30 Fuhri v Geyser NO & another 1979 (1) SA 747 (N). [77] Just as one can distinguish, in a balance sheet, between assets that are held as 'Land and Buildings' and 'Debtors', for example, so one can distinguish between asset funds that are held as 'Trust Property' (as defined in the FI Act) and other funds. It is as simple as that. In other words, the medical scheme tells the world that it holds the 'trust property' as funds but for restricted purposes. It tells the world that these funds, held as ‘trust property’, are ring-fenced, as a matter of law. In other words, the funds are highly liquid for certain specified purposes (claims in respect of members’ savings accounts) but are otherwise illiquid. Potential creditors, interested in doing serious business with any person can call for that person’s audited balance sheet. Creditors of medical schemes cannot then legitimately complain later that these funds are not available to the concursus. They were, in effect, alerted well in advance. Fundamental to the principle of protecting certain assets of a debtor from claims by the concursus creditorum (for example, creditors secured by a first mortgage bond registered over immovable property) is the publicity, given well in advance to the world, that these assets may be beyond the reach of the concursus. [78] Accordingly, the following order is made: The appeal is upheld with costs. The order of the court a quo is set aside and replaced with the following: ‘The application is dismissed with costs.’ _______________ N P Willis Judge of Appeal APPEARANCES For Appellant: J J Brett SC Instructed by: Savage Jooste & Adams c/o Bisset Boehmke McBlain, Cape Town Symington & De Kok, Bloemfontein For Respondent: S F Burger SC (with him G Cooper) (Heads of argument prepared by E Fagan SC and E van Huyssteen) Instructed by: Clyde & Co, Cape Town Lovius Block, Bloemfontein

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL FROM The Registrar, Supreme Court of Appeal DATE 27 May 2016 STATUS Immediate Registrar of Medical Schemes & another v Genesis Medical Scheme (238/2015) [2016] ZASCA 75 (27 May 2016) Please note that the media summary is for the benefit of the media and does not form part of the judgment. This morning, the Supreme Court of Appeal (SCA) upheld, with costs, an appeal against an order in the Western Cape High Court, Cape Town and replaced that court’s order with one dismissing the application with costs. The high court had reviewed and set aside the decision by Registrar of Medical Schemes to reject the annual financial statements and returns of the Genesis Medical Scheme for the 2012 financial year. The case turned on whether or not the contribution by members of a medical scheme to their savings accounts with that scheme constituted ‘trust property’ as defined in the Financial Institutions (Protection of Funds) Act 28 of 2001 (the FI Act) and, accordingly, had to be accounted for separately in the medical scheme’s annual financial statements and returns. There have been two conflicting decisions in the country. In Registrar of Medical Schemes v Ledwaba NO & others in the Transvaal Provincial Division (unreported case number 18545/06, delivered on 30 January 2007, widely known as ‘Omnihealth’, the North Gauteng High Court in Pretoria found that these savings were indeed ‘trust property’ as defined in the FI Act. In the decision in the Western Cape High Court, against which this appeal was heard, it was held that Omnihealth had been wrongly decided and that these savings did not constitute such ‘trust property’ and should not therefore be accounted for separately in the medical scheme’s financial statements. Critically relevant to the issue is the consequence that, if the savings contributions constitute ‘trust property’, they therefore necessarily stand beyond the reach of the concursus creditorum in the event of the insolvency of any medical scheme. By a majority (Willis JA, Seriti JA and Tsoka AJA concurring), the SCA found that the Omnihealth was correct and that the decision in the Western Cape High Court was wrong. Accordingly, the majority held that the appeal must succeed. The minority (Cachalia and Dambuza JJA) found conversely: that the decision in the Western Cape High Court was the correct one and that Omnihealth was wrong.

4021

non-electoral

2023

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Reportable Case No: 1300/2021 In the matter between: CHAVONNES BADENHORST ST CLAIR COOPER N O FIRST APPELLANT SUMIYA ABDOOL GAFAAF KHAMMISA N O SECOND APPELLANT and CURRO HEIGHTS PROPERTIES (PTY) LTD RESPONDENT Neutral Citation: Cooper N O and Another v Curro Heights Properties (Pty) Ltd (1300/2021) [2023] ZASCA 66 (16 May 2023) Coram: ZONDI, MOCUMIE, MOTHLE, MEYER and MOLEFE JJA Heard: 2 March 2023 Delivered: 16 May 2023 Summary: Sale of land – Validity of – formalities – Alienation of Land Act 68 of 1981 – section 2(1) – requires the whole contract, all its material terms, to be reduced to writing and signed - material terms not confined to the essentialia of a contract of sale, viz, the parties, merx and pretium – whether a term constitutes a material term is determined with reference to its effect on the rights and obligations of the parties – subdivision in this instance constitutes material term – failure to reduce such material term to writing signed by or on behalf of parties results in non-compliance with s 2(1) - effect of – contract null and void - Contract – Validity of - lack of consensus between the parties in respect of the merx – effect of – contract null and void. ___________________________________________________________________ ORDER ___________________________________________________________________ On appeal from: Western Cape Division of the High Court, Cape Town (Goliath DJP sitting as a court of first instance): The appeal is upheld with costs. The order of the high court is set aside and in its place is substituted the following: ‘(a) The written sale of land agreement concluded between the parties on 14 November 2016 and its addendum concluded on 18 April 2017, are declared void ab initio due to non-compliance with section 2(1) of the Alienation of Land Act 68 of 1981 and for want of consensus between them in respect of the merx. (b) The respondent is to pay the applicants’ costs.’ ___________________________________________________________________ JUDGMENT ___________________________________________________________________ Meyer JA (Zondi, Mocumie, Mothle and Molefe JJA concurring): [1] This appeal concerns the crisp issue whether a written sale of land agreement is null and void ab initio due to non-compliance with s 2(1) of the Alienation of Land Act 68 of 1981 (the Act) and for want of consensus between the parties in respect of the merx. [2] The appeal is against the whole judgment and order of the Western Cape Division of the High Court, Cape Town (the high court) delivered on 18 August 2021. The first and second appellants, Mr Chavonnes Badenhorst St Clair Cooper and Ms Sumiya Abdool Gafaaf Khammisa N N O, are the joint liquidators (the liquidators) of Nomic 151 (Pty) Ltd (in liquidation) (Nomic). The respondent is Curro Heights Properties (Pty) Ltd (Curro), its sole director being Mr Rhett Molyneux (Mr Molyneux). [3] The liquidators and Curro concluded a written sale of land agreement in terms whereof the liquidators sold certain land that fell into the estate of Nomic to Curro as part of the winding up of Nomic’s affairs. The liquidators sought certain declaratory relief from the high court, inter alia a declarator that the agreement is invalid for non- compliance with s 2(1) of the Act or for want of consensus in respect of the merx (the subject-matter of the sale). Having found that the agreement complied with s 2(1) of the Act, that there was such consensus and that it was not validly cancelled, Goliath DJP dismissed the application and did not make any order as to costs. The appeal is with leave of the high court. [4] The land in question is unimproved erven described as erven 19548, 19563, 19564 and 19565 in the district of Mossel Bay, Western Cape (the erven). Erf 19565 is a private ‘ring road’ that provides access to various erven, including other subdivided erven that do not fall within the estate of Nomic. Curro sought to purchase the land with the aim of subdividing and developing them into residential erven. [5] On 8 April 2016, a written sale of land agreement was concluded between the liquidators and Curro (its name at that time was K2015420767/07 (Southern Africa) (Pty) Ltd), represented by Mr Molyneux, in terms whereof the liquidators sold the land to Curro at a purchase price of R5.5 million plus value added tax (VAT). The merx was recorded to be ’Road Portion of Erf 19555 Mossel Bay with extent of approximately 4 816 m²’ (the ring road), ‘Erf 1948 Mossel Bay being 3 600m²’, ‘Erf 19563 being 1.99 Ha’ and ‘Erf 19564 Mossel Bay being 7378 m²’. After the written sale of land agreement had been concluded, it was realised that the measurement of the ring road was incorrectly recorded. The parties accordingly concluded a written addendum to the written sale of land agreement wherein the measurement of the ring road was rectified to ‘9045 Square Metres’. However, the parties did not realise that the written sale of land agreement also erroneously recorded the ring road’s erf number as ‘19555’ instead of ‘19565’. As a result of Curro’s failure to make payment of the deposit, the written sale of land agreement was cancelled (the cancelled agreement). [6] On 14 November 2016, the liquidators and Curro, represented by Mr Molyneux, concluded yet another written sale of land agreement in terms whereof the same land was sold to Curro for a purchase price of R4.5 million plus VAT (the agreement). It contemplated for the liquidators to receive expeditious payment of the whole purchase price and the passing of ownership of the land to Curro. A deposit of 10% of the purchase consideration, R450 000, was payable within three days after signature of the agreement and the balance of the purchase price was payable against registration of transfer of the land into the name of Curro. Transfer was to be given ‘as soon as possible but not after 16 JANUARY 2017’. The same erroneous recordal of the ring road’s erf number crept into the agreement, although this time its measurement was correctly recorded. The parties are ad idem that their common intention was to refer to erf ‘19565’ and not to ‘19555’. By Curro’s own admission, the liquidators ‘never intended to sell Erf 19555 and [Curro] also did not intend to purchase this erf. The [liquidators] intended to sell Erf 19565 which is the property that fell into the estate of Nomic that had to be wound up’. [7] This makes perfect sense because ‘[l]iquidation proceedings are strictly proceedings to constitute a concursus creditorum. The liquidation process continues until the company's affairs have been finally wound up, and the company is dissolved’.1 Nomic had been placed in liquidation as far back as 26 June 2012 and the liquidators were appointed in March 2013. Yet, by November 2016 the liquidators had not yet fulfilled their statutory obligations to finally wind up its affairs for it to be dissolved. [8] The difficulties with the sale of the land to Curro commenced soon after the conclusion of the agreement. Curro failed to pay the R450 000 deposit within three days of the signature date. After payment of the deposit had been demanded by the liquidators on 12 December 2016, and before any steps had been taken by them to cancel the agreement, Curro remedied its breach and paid the deposit. However, the passing of ownership to Curro could no longer occur on or before 16 January 2017 as agreed to in clause 4 of the agreement. The liquidators were willing to salvage the sale to enable them to finally wind up the affairs of Nomic and cause its demise. The parties, therefore, concluded a written addendum to the agreement on 18 April 2017 (the addendum) in terms whereof clause 4 of the agreement was amended to read that ‘[t]ransfer shall be given and taken as soon as possible’. 1 Lutchman N O and Others v African Global Holdings (Pty) Ltd [2022] ZASCA 66; [2022] 3 All SA 35 (SCA); 2022 (4) SA 529 (SCA) para 29. [9] It was only during the process of preparing the transfer documents that the erroneous recordal of the ring road’s erf number was detected. At the behest of the liquidators, a second addendum was prepared to correct the erroneous recordal of the ring road’s erf number. It was signed by the liquidators on 3 May 2017 and sent by their attorneys to Mr Molyneux for his signature on behalf of Curro. Mr Molyneux responded by email on 5 June 2017, stating essentially that due to investigations that he did on the preceding Friday (some months after the agreement had been concluded) he realised that erf 19565 extends into the adjacent Nurture Park development and that, that part of the erf would also vest in Curro if effect is given to the sale. He accordingly suggested that that part of the ring road be excluded from the sale and that erf 19565 be subdivided. He asked how the ‘impasse’ should be ‘rectified’. [10] The liquidators were still willing to attempt to salvage the sale in order to cause the demise of Nomic. Negotiations ensued between the parties in respect of the subdivision of the ring road with a view of ensuring that effect could be given to the sale. The negotiations might or might not have resulted in an informal arrangement or even an oral agreement, but no formal written agreement or addendum was ever concluded and signed by or on behalf of the parties. [11] No subdivision materialised during the next few years. On 1 November 2019, almost three years after the agreement had been concluded, the liquidators, through their attorneys, in writing made it clear to Curro that they would no longer entertain any further indulgences in respect of the subdivision of the ring road and they demanded signature of the necessary documents to allow ownership of the land to pass to Curro. Curro did not accede to the liquidators’ demand. By letter dated 10 March 2020, the liquidators called upon Curro to remedy its breach within 21 days. This was not done and by email dated 31 August 2020, they advised Curro that they had cancelled the agreement insofar as it had ever been valid. On 10 September 2020, the liquidators initiated the application under consideration to enable them to lawfully sell the land to a third-party buyer and finally wind up Nomic’s affairs for it to be dissolved. [12] This brings me to the declarator that the agreement is void for want of consensus in respect of the merx at the time of its conclusion. One of the essentialia of any contract of sale is the merx. On the one hand, the liquidators intended to sell the whole of erf 19565, which is the property that fell into the estate of Nomic. On the other, Mr Molyneux on behalf of Curro stated in the answering affidavit that Curro never intended to purchase that part of erf 19565 that extends into Nurture Park. On the probabilities, however, it would appear that at the time of the conclusion of the agreement both the liquidators and Curro intended to sell and buy the whole of erf 19565. It was only after the conclusion of the agreement – due to the investigations that Mr Molyneux undertook – that Curro, on Friday 2 June 2020, realised that the part of erf 19565 (the ring road) that extends into Nurture Park would also vest in Curro if effect is given to the agreement. [13] But, it must be acknowledged that ‘[m]otion proceedings, unless concerned with interim relief, are all about the resolution of legal issues based on common cause facts’ and, ‘[u]nless the circumstances are special they cannot be used to resolve factual issues because they are not designed to determine probabilities’.2 Even if I were to accept that Curro’s version is improbable in certain respects, the matter is to be decided without the benefit of oral evidence. I, therefore, have to accept the facts alleged in Curro’s answering affidavit ‘unless they constituted bald or uncreditworthy denials or were palpably implausible, far-fetched or so clearly untenable that they could safely be rejected on the papers’. A ‘finding to that effect occurs infrequently because courts are always alive to the potential for evidence and cross-examination to alter its view of the facts and the plausibility of the evidence’.3 The test in that regard is ‘a stringent one not easily satisfied’.4 The rationale for its stringency is this: ‘As everybody who has anything to do with the law well knows, the path of the law is strewn with examples of open and shut cases which, somehow, were not; of unanswerable charges which, in the event, were completely answered; of inexplicable conduct which was fully explained; of fixed and unalterable determinations that, by discussion, suffered a change.’5 2 National Director of Public Prosecutions v Zuma [2009] ZASCA 1; [2009] 2 All SA 243 (SCA); 2009 (2) SA 277 (SCA) para 26. 3 Media 24 Books (Pty) Ltd v Oxford University Press Southern Africa (Pty) Ltd [2016] ZASCA 119; [2016] 4 All SA 311 (SCA); 2017 (2) SA 1 (SCA) para 36. 4 Mathewson and Another v Van Niekerk and Others [2012] ZASCA 12 para 7. 5 The well-known dictum of Megarry J in John v Rees and Others; Martin and Another v Davis and Others; Rees and Another v John [1970] 1 Ch 345; [1969] 2 All ER 274. [14] That stringent test has not been satisfied in this instance. I conclude, therefore, that the agreement is null and void ab initio for want of consensus in respect of the merx at the time of its conclusion. A plea of rectification thus does not avail Curro. This is so, because rectification of a written agreement is a remedy available to parties in instances where an agreement reduced to writing, through a mistake common to the parties, does not reflect the true intention of the contracting parties. ‘It is not the agreement between the parties which … is rectified. The Court has no power to alter it. To do so would be to amend their common intention and in effect to devise a fresh pact for them. That is their exclusive prerogative. All that the Court ever touches is the document’.6 The onus is on a party seeking rectification to show, on the balance of probabilities, that the written agreement does not correctly express what the parties had intended to set out in the agreement.7 [15] Next, the declarator that the agreement is of no force or effect for non- compliance with s 2(1) of the Act. The section reads thus: ‘No alienation of land after the commencement of this section shall, subject to the provisions of section 28, be of any force or effect unless it is contained in a deed of alienation signed by the parties thereto or by their agents acting on their written authority.’ The result of non-compliance with s 2(1), is ‘that the agreement concerned is of no force or effect. This means that it is void ab initio and cannot confer a right of action’.8 [16] Section 2(1) requires the whole contract of sale – its material terms – to be reduced to writing signed by or on behalf of the parties. The material terms of the contract are not confined to those prescribing the essentialia of a contract of sale, namely the parties to the contract, the merx and the pretium. Generally speaking, these terms, and especially the essentialia, must be set forth with sufficient accuracy and particularity to enable the identity of the parties, the amount of the purchase price and the identity of the subject-matter of the contract, and also the force and effect of other material terms of the contract, to be ascertained without recourse to evidence of 6 Spiller and Others v Lawrence [1976] 1 All SA 553 (N); 1976 (1) SA 307 (N) at 310E-F. 7 Soil Fumigation Services Lowveld CC v Chemfit Technical Products (Pty) Ltd [2004] 2 All SA 366 (SCA); 2004 (6) SA 29 (SCA) para 21. 8 Johnston v Leal 1980 (3) SA 927 (A) (Johnston) at 939A. This Court in Rockbreakers and Parts (Pty) Ltd v Rolag Property Trading (Pty) Ltd [2009] ZASCA 102; 2010 (2) SA 400 (SCA); [2010] 1 All SA 291 (SCA) (Rockbreakers) para 6 held that Johnston ‘summed up the legal effect of the predecessor to s 2(1), which was materially in the same terms’. an oral consensus between the parties.9 Whether a term constitutes a material term is determined with reference to its effect on the rights and obligations of the parties.10 It has been held that subdivision materially affects the rights and obligations of the parties to a contract in a given case.11 [17] This is such a case, inter alia, for the following reasons: First, there is no express reference to a subdivision in the agreement or the addendum and the possibility of a subdivision of the ring road was only raised for the first time by Mr Molyneux on 5 June 2017, some six months after the agreement had been signed. Even if the negotiations that ensued thereafter resulted in a subsequent informal agreement having been reached regarding subdivision of the ring road, then, of course, there would be non-compliance with s 2(1) in that the whole contract is not in writing and signed by or on behalf of the parties.12 The consequence of this is that the contract of sale is null and void. [18] Second, the agreement and the addendum bestowed rights on the liquidators to receive expeditious payment of the whole purchase price and the passing of ownership of the land to Curro. Third, which of the parties would have carried the obligation to cause the subdivision to be effected and the liability for the costs thereof? Fourth, what would have been the rights and obligations of the parties in the event of the subdivision not having been approved? [19] Fifth, if that part of the ring road that runs into Nurture Park was subdivided from the remainder of the ring road, ownership of which would have passed to Curro, then ownership of the part that runs into Nurture Park would have remained in the estate of Nomic, unless the liquidators would have been able to alienate it, which possibility is speculative and would otherwise not have been the case. The whole of the land, including the ring road - erf 19565 - fell into the estate of Nomic and had to be sold as part of the process of winding up its affairs for its demise to result. 9 Johnstone fn 9 above at 937G-938C. 10 Rockbreakers fn 9 above para 8. 11 Ibid. 12 Johnston fn 9 above at 939G-H. [20] I conclude, therefore, that the agreement and the addendum concluded between the parties are null and void ab initio also due to non-compliance with s 2(1) of the Alienation of Land Act. [21] In the result the following order is made: The appeal is upheld with costs. The order of the high court is set aside and in its place is substituted the following: ‘(a) The written sale of land agreement concluded between the parties on 14 November 2016 and its addendum concluded on 18 April 2017, are declared void ab initio due to non-compliance with section 2(1) of the Alienation of Land Act 68 of 1981 and for want of consensus between them in respect of the merx. (b) The respondent is to pay the applicants’ costs.’ ________________ P A MEYER JUDGE OF APPEAL Appearances For the applicant: L N Wessels Instructed by: Sandenbergh Nel Haggard, Bellville Spangenberg Zietsman Bloem Inc, Bloemfontein For the respondent: R Molyneux in person, with leave of the high court

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 16 May 2023 Status: Immediate The following summary is for the benefit of the media in the reporting of this case and does not form part of the judgments of the Supreme Court of Appeal Cooper N O and Another v Curro Heights Properties (Pty) Ltd (1300/2022) [2023] ZASCA 66 (16 May 2023) Today, the Supreme Court of Appeal (SCA) handed down judgment upholding an appeal against the decision of the Western Cape Division of the High Court, Cape Town (the high court). The issue before the SCA was whether a written sale of land agreement was null and void ab initio due to non-compliance with s 2(1) of the Alienation of Land Act 68 of 1981 (the Act) and for want of consensus between the parties in respect of the merx (the subject-matter of the sale). The first and second appellants, Mr Chavonnes Badenhorst St Clair Cooper and Ms Sumiya Abdool Gafaaf Khammisa N N O, were the joint liquidators (the liquidators) of Nomic 151 (Pty) Ltd (in liquidation) (Nomic). The respondent was Curro Heights Properties (Pty) Ltd (Curro), its sole director being Mr Rhett Molyneux (Mr Molyneux). On 8 April 2016, a written sale of land agreement was concluded between the liquidators and Curro, represented by Mr Molyneux, in terms whereof the liquidators sold land to Curro at a purchase price of R5.5 million plus value added tax (VAT). The merx was recorded to be ‘Road Portion of Erf 19555 Mossel Bay with extent of approximately 4 816 m²’ (the ring road), ‘Erf 1948 Mossel Bay being 3 600m²’, ‘Erf 19563 being 1.99 Ha’ and ‘Erf 19564 Mossel Bay being 7378 m²’. After the written sale of land agreement was concluded, it was realised that the measurement of the ring road was incorrectly recorded. The parties accordingly concluded a written addendum to the written sale of land agreement wherein the measurement of the ring road was rectified. However, the parties did not realise that the written sale of land agreement also erroneously recorded the ring road’s erf number as ‘19555’ instead of ‘19565’. On 14 November 2016, the liquidators and Curro, represented by Mr Molyneux, concluded yet another written sale of land agreement in terms whereof the same land was sold to Curro for a purchase price of R4.5 million plus VAT (the agreement). The same erroneous recordal of the ring road’s erf number crept into the agreement, although this time its measurement was correctly recorded. The parties were ad idem that their common intention was to refer to erf ‘19565’ and not to ‘19555’. On 5 June 2017, Mr Molyneux, by email, stated that due to investigations that he conducted, he realised that erf 19565 extended into the adjacent Nurture Park development and that that part of the erf would also vest in Curro if effect was given to the sale. He accordingly suggested that that part of the ring road be excluded from the sale and that erf 19565 be subdivided. No subdivision materialised during the next few years. On 1 November 2019, almost three years after the agreement had been concluded, the liquidators, through their attorneys, in writing made it clear to Curro that they would no longer entertain any further indulgences in respect of the subdivision of the ring road and they demanded signature of the necessary documents to allow ownership of the land to pass to Curro. Curro did not accede to the liquidators’ demand. By letter dated 10 March 2020, the liquidators called upon Curro to remedy its breach within 21 days. This was not done and by email dated 31 August 2020, they advised Curro that they had cancelled the agreement. On 10 September 2020, the liquidators sought certain declaratory relief from the high court, inter alia a declarator that the agreement was invalid for non-compliance with s 2(1) of the Act and for want of consensus in respect of the merx. In respect of the issue of consensus, the SCA found that at the time of the conclusion of the agreement the liquidators intended to sell the whole of erf 19565, which is the property that fell into the estate of Nomic, and on Curro’s own version it never intended to purchase that part of erf 19565 that extends into Nurture Park. The SCA therefore concluded that the agreement was null and void ab initio for want of consensus at the time of its conclusion. In respect of s 2 of the Act, the SCA held that the section requires the whole contract of sale – its material terms – to be reduced to writing signed by or on behalf of the parties. The material terms of the contract are not confined to those prescribing the essentialia of a contract of sale, namely the parties to the contract, the merx and the pretium. Generally speaking, these terms, and especially the essentialia, must be set forth with sufficient accuracy and particularity to enable the identity of the parties, the amount of the purchase price and the identity of the subject-matter of the contract, and also the force and effect of other material terms of the contract, to be ascertained without recourse to evidence of an oral consensus between the parties. Whether a term constitutes a material term is determined with reference to its effect on the rights and obligations of the parties. The SCA held that subdivision materially affects the rights and obligations of the parties to the agreement in this case. There was no express reference to a subdivision in the agreement or the addendum, as the possibility of a subdivision of the ring road was only raised for the first time by Mr Molyneux on 5 June 2017, some six months after the agreement had been signed. The SCA therefore concluded that the agreement and the addendum concluded between the parties were null and void ab initio due to non-compliance with s 2(1) of the Act. ~~~~ends~~~~

2290

non-electoral

2009

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA JUDGMENT Case No: 555/08 In the matter between : RONBEL 108 (PTY) LTD Appellant (Reg No 2003/026780/07) and SUBLIME INVESTMENTS (PTY) LTD Respondent (In liquidation) (Represented by its Liquidator S L Anticevich NO) Neutral citation: Ronbel v Sublime (555/08) [2009] ZASCA 103 (18 September 2009) Coram: STREICHER, NUGENT, VAN HEERDEN JJA, HURT and GRIESEL AJJA Heard: 3 SEPTEMBER 2009 Delivered: 18 SEPTEMBER 2009 Summary: Section 359(2) of Companies Act 61 of 1973 – no notice to liquidator of intention to continue legal proceedings – proceedings considered to be abandoned – court’s discretion to otherwise direct – long delay in bringing application. ORDER On appeal from: High Court, Johannesburg (Bruinders AJ sitting as court of first instance). The appeal is dismissed with costs. JUDGMENT STREICHER JA (NUGENT, VAN HEERDEN JJA, HURT and GRIESEL AJJA concurring) [1] Upon registration of a special resolution by a company that it be wound up voluntarily all civil proceedings against the company are suspended until the appointment of a liquidator.1 A person who intends to continue with such proceedings must, within four weeks after such appointment, give three weeks’ notice of his intention to continue the proceedings, to the liquidator, before doing so.2 If notice is not so given the proceedings are considered to have been abandoned unless the court otherwise directs.3 The appellant’s application for such a directive in respect of an action instituted by Absa Bank Limited, which thereafter 1 Section 359(1) of the Companies Act 61 of 1973 provides: ‘(1) When the Court has made an order for the winding-up of a company or a special resolution for the voluntary winding-up of a company has been registered in terms of section 200 – (a) all civil proceedings by or against the company concerned shall be suspended until the appointment of a liquidator; and (b) . . ..’ 2 Section 359(2)(a) provides: ‘(2)(a) Every person who, having instituted legal proceedings against a company which were suspended by a winding-up, intends to continue the same . . . shall within four weeks after the appointment of the liquidator give the liquidator not less that three weeks’ notice in writing before continuing or commencing the proceedings.’ 3 Section 359(2)(b) provides: ‘(b) If notice is not so given the proceedings shall be considered to be abandoned unless the Court otherwise directs.’ ceded its claim to the appellant, was dismissed by the High Court, Johannesburg, per TJ Bruinders AJ, and this is an appeal against his judgment. The appeal is with the leave of the court below. [2] Absa instituted action against Sublime Investments (Pty) Ltd, formerly known as Capitol Hill Investments (Pty) Ltd. The matter was set down for trial on 30 April 2003 but shortly before the trial was due to commence, Sublime, by special resolution, resolved that it be voluntarily wound up and such winding-up commenced upon the registration of the resolution.4 As a result, in terms of s 359(1)(a) of the Companies Act 61 of 1973, the action was suspended pending the appointment of a liquidator. Section 1 provides that unless the context otherwise indicates ‘liquidator’ includes a duly appointed provisional liquidator. But in Strydom NO v MGN Construction (Pty) Ltd & another: In re Haljen (Pty) Ltd (in liquidation) 1983 (1) SA 799 (D) at 806B-807H Booysen J held, correctly in my view, that in the case of s 359 the context indeed indicates otherwise and that, in terms of the section, proceedings are suspended pending the appointment of a final liquidator. The correctness of this decision was not challenged by either of the parties. [3] A Mr Anticevich was appointed as provisional liquidator and subsequently, on 1 July 2004, as final liquidator. During the period approximately July to August 2003 Mr Loubser, in his capacity as an employee of Absa, made enquiries about the assets of Sublime and was informed by Anticevich: (a) The company was the owner of an immovable property with improvements on it, namely a fuel filling station; 4 Section 352(1) provides: ‘A voluntary winding-up of a company shall commence at the time of the registration in terms of section 200 of the special resolution authorising the winding-up.’ (b) The property was subject to a long term lease in favour of Zenex Oil (Pty) Ltd; (c) All the future rent had been paid in advance, prior to the liquidation, so that the company would at least for a substantial period of time not receive any income in the form of rent; (d) The lease was registered and was for a period of 20 years of which 11 years remained; (e) The only future income of the company would be a contribution by the lessee to the rates and taxes payable on the property; (f) A notarial bond was registered in favour of Zenex to secure its rights and upon a sale of the property Zenex had a right of first refusal; and (g) Apart from the property, small outstanding debts appeared to be the only other assets. [4] According to the statement of affairs in terms of s 363 required of the directors of Sublime, dated 9 April 2003, the liabilities of the company were reflected as R2 720 651. The assets were reflected as R120 030 comprising the immovable property at a value of R90 000 and outstanding book debts of R30 030. Save for an additional liability of R5 940 in respect of arrear salaries these were also the assets and liabilities according to the final liquidator’s report dated 12 July 2004. [5] No claims were proved at the first meeting of creditors arranged for 19 May 2004. Absa decided to refrain from submitting and proving a claim, principally because, if it did submit a claim, it, in the light of the information at its disposal, could become liable for a contribution towards the administration costs. However, towards the middle of 2004 the appellant expressed an interest in acquiring Absa’s claims and entered into negotiations with Absa regarding the acquisition of its claims. Towards the end of October 2005 they reached agreement that – (a) Absa would cede to the appellant all of its rights, title and interest in and to the claims held by Absa against the company. (b) In consideration for the cession the appellant would pay Absa an amount of R250 000. (c) A claim would be prepared in the name of Absa and submitted for proof. [6] Pursuant to the agreement Absa’s claims were ceded to the appellant on 31 October 2005 and at a meeting of creditors held on 24 May 2006 the appellant submitted Absa’s claims supported by affidavits deposed to by Loubser on behalf of Absa for proof. The claims were opposed by Mr van Zyl, the company’s director, and member on the grounds that they had been ceded to the appellant before they were submitted for proof, that the claims were in terms of s 359(2)(b) considered to be abandoned; that the claims had become prescribed and that the quantum of the claims could not be established by a certificate of indebtedness. [7] As set out above, s 359(2) provides as follows: ‘(a) Every person who, having instituted legal proceedings against a company which were suspended by a winding-up, intends to continue the same . . . shall within four weeks after the appointment of the liquidator give the liquidator not less than three weeks’ notice in writing before continuing or commencing the proceedings. (b) If notice is not so given the proceedings shall be considered to be abandoned unless the Court otherwise directs.’ It is common cause that Absa had not given the liquidators notice in terms of s 359(2)(a) of an intention to continue the proceedings. Consequently the proceedings (not the claims) must be considered to have been abandoned unless a court otherwise directs. [8] As a result of the opposition to the Absa claims the appellant launched the application which is the subject matter of this appeal, in terms of which it applied to be substituted for Absa in the action instituted by Absa and for a direction in terms of s 359(2)(b) that the proceedings should not be considered to have been abandoned. [9] The court below found that the deliberate decision by Absa not to notify the liquidator that it intended to proceed with the action constituted evidence that the action had been abandoned and held that the appellant, in the circumstances, had failed to provide a satisfactory explanation for not having notified the liquidator of its intention to continue with the proceedings within the time period prescribed in terms of s 359(2)(b). [10] The appellant referred to the fact that the allegation in its founding affidavit that the liquidator had not been prejudiced by Absa’s failure to give the required notice is not disputed by the respondent and submitted that, in the circumstances, the court below should have exercised its discretion in its favour. In this regard the appellant referred to Baskin v Levey & others NNO 1967 (3) SA 121 (W) at 123F-124A where Boshoff J, referring to s 118 of the Companies Act 46 of 1926, the predecessor of s 359 said: ‘The purpose of this section is to prevent a newly-appointed liquidator from being embarrassed by an action before he has had an opportunity of considering the matter, and to prevent costs being incurred by the institution of proceedings between the time when the winding-up order has been made and the liquidator has been appointed; Randfontein Extension Ltd v South Randfontein Mines Ltd and Others 1936 WLD 1 at p 3. If no such notice has been given to a liquidator, proceedings are to be considered abandoned to bring about finality so that the liquidator may be in a position to report to the creditors of his company as accurately as possible on the state of and the claims against the company. It would, therefore, seem that a liquidator would, generally speaking, be entitled to oppose an application for the purging of a default if he can show that he had been prejudiced by the default or that the excuse advanced by the applicant is not bona fide and reasonable or, if it is necessary, to insist on terms on which an applicant should be allowed either to continue or to commence proceedings.’ [11] Section 118 of the Companies Act 46 of 1926 provided that in default of a notice of intention to continue proceedings suspended by a winding-up, ‘the proceedings shall be considered to be abandoned unless the Court finds that there was a reasonable excuse for the default’. Having omitted the requirement of a reasonable excuse in s 359(2)(b) it is clear, in my view, that the legislature intended to give a court an unfettered discretion to decide whether or not to direct that proceedings should not be considered to be abandoned. In exercising this discretion a court should naturally have regard to the interests of all interested parties being the creditors, liquidator and members.5 [12] In Umbogintwini Land & Investment Co (Pty) Ltd (in liquidation) v Barclays National Bank Ltd & another 1987 (4) SA 894 (A) Viljoen JA said in respect of s 359(2)(b):6 ‘The provision was designed, in my view, to afford the liquidator an opportunity, immediately after his appointment, to consider and assess, in the interests of the general body of creditors, the nature and validity of the claim or contemplated claim and how to deal with it – whether, for instance, to dispute or settle or acknowledge it.’ [13] Although no prejudice is alleged by the appellant the liquidator had, contrary to the interests of the general body of creditors of the appellant, not been given an opportunity immediately after his appointment to consider and assess the nature and validity of Absa’s claim against the appellant. The reason why the liquidator had not been afforded that opportunity is that Absa decided not to proceed with the proceedings and not to prove a claim against Sublime for fear of being held liable for a contribution. When Absa took that decision information as to the assets and liabilities of Sublime was available and known to Absa. Only about two 5 See P M Meskin Henochsberg on the Companies Act Vol 1 5 ed (2008) p 761. 6 At 910H-I. years after the time for giving notice of intention to continue with the proceedings had expired, was an attempt made by the appellant, not Absa, to prove the claims. The application for a directive followed more than six months later. [14] Absa took a deliberate decision not to proceed with the action and there is no allegation that it changed that decision for as long as it had an interest in the claim against Sublime, ie up to the date of the cession of that claim 16 months after the appointment of a final liquidator. Absa does not deny having had knowledge of the provisions of s 359(2)(b) and must be assumed to have had such knowledge. These facts justify the inference that Absa in fact abandoned the action. The appellant submitted that the fact that Absa entered into negotiations with the appellant indicated that it had not abandoned the action. In my view the negotiations may be an indication that Absa had not abandoned its claims, not that Absa had not abandoned the action. If Absa had not abandoned the action it would have considered it prudent to give notice in terms of s 359(2)(a). But even if Absa had not in fact abandoned the action there is no reason why the court below should have exercised its discretion in favour of an applicant (the appellant) who wishes to proceed with an action which the plaintiff in that action (Absa) had decided not to proceed with some two and a half years previously. [15] The appeal should therefore be dismissed. But it should be added that the court below said in its judgment that there was further evidence that ‘the claim’ had been abandoned. Whether or not the claim had been abandoned was not an issue in the case and the court below probably meant to say that there was further evidence that the action had been abandoned. [16] For these reasons the appeal is dismissed with costs. __________________ P E STREICHER JUDGE OF APPEAL Appearances: For Appellant: M P van der Merwe Instructed by Bieldermans Inc, Johannesburg Schoeman Maree Inc, Bloemfontein For Respondent: M Smit Instructed by Melamed & Hurwitz Inc, Johannesburg Rosendorff Reitz Barry, Bloemfontein

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 18 September 2009 Status: Immediate Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal. * * * RONBEL 108 (PTY) LTD v SUBLIME INVESTMENTS (PTY) LTD The SCA today dismissed an appeal against a judgment of the High Court, Johannesburg. After Absa had instituted action against the respondent for payment of an amount alleged to be due to it, the respondent was placed under liquidation. Absa, for fear of becoming liable for a contribution towards the costs of administration of the respondent, decided not to proceed with the legal proceedings. Consequently Absa did not give notice to the liquidator of an intention to continue the proceedings. As a result Absa is deemed to have abandoned the proceedings unless a court otherwise directs. Subsequent to having decided not to proceed with the proceedings Absa ceded its claim against the respondent to the appellant. The appellant thereafter applied to the High Court for a directive that the proceedings are not to be considered to have been abandoned. The SCA held that the High Court correctly dismissed the application. It held that the facts justified the inference that Absa in fact abandoned the proceedings and that there was in any event no reason why the High Court should have exercised its discretion to declare that proceedings are not considered to have been abandoned in favour of an applicant (the appellant) who wishes to proceed with an action which the plaintiff in that action (Absa) had decided not to proceed with, some two and a half years previously.

3870

non-electoral

2022

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Reportable Case No: 730/2021 In the matter between: MINISTER OF POLICE FIRST APPELLANT GEZANI MICHAEL CHABALALA SECOND APPELLANT SELLO CHAUKE THIRD APPELLANT SIMPHIWE LAURENS DANTI FOURTH APPELLANT and SAMUEL MOLOKWANE RESPONDENT Neutral citation: Minister of Police and Others v Samuel Molokwane (730/2021) [2022] ZASCA 111 (15 July 2022) Coram: VAN DER MERWE, SCHIPPERS and MAKGOKA JJA and MUSI and MAKAULA AJJA Heard: 13 May 2022 Delivered: 15 July 2022 Summary: Civil Procedure – s 2(2) of State Liability Act 20 of 1957 –– whether failure to serve summons against Minister of Police on State Attorney nullified summons. ___________________________________________________________________ ORDER ___________________________________________________________________ On appeal from: Gauteng Division of the High Court, Pretoria (Van der Schyff J, sitting as a court of first instance): The appeal is dismissed with costs, including costs of two counsel where so employed. ___________________________________________________________________ JUDGMENT ___________________________________________________________________ Makgoka JA (Van der Merwe and Schippers JJA and Musi and Makaula AJJA concurring): [1] The appeal turns on whether the respondent’s omission to serve a copy of a summons issued against the first appellant, the Minister of Police (the Minister), on the State Attorney, rendered the summons a nullity, despite a copy having been served on the Minister. The Gauteng Division of the High Court, Pretoria (the high court) concluded that it did not, and dismissed two special pleas raised by the appellants based on such non-service. The high court subsequently granted the appellants leave to appeal to this Court. [2] The factual background is briefly this. On 2 December 2015, Mr Molokwane (the respondent) instituted action in the high court against the first appellant, the Minister, the second, third and fourth appellants, in which the respondent claimed damages arising from alleged wrongful arrest and assault by the second to fourth appellants on 8 February 2014. It is common cause that the second to fourth respondents were acting within the course and scope of their employment with the Minister, and they were, respectively, served with copies of the summons on 8 December 2015. There is no controversy about service on these appellants. It is the service on the Minister which is at the heart of the appeal. [3] Service of the process commencing litigation against members of the national executive, such as the Minister, is governed mainly by s 2(2) of the State Liability Act 20 of 1957 (the State Liability Act). Before its amendment, and at the relevant period to this matter, that section read as follows: ‘(1) In any action or other proceedings instituted by virtue of the provisions of section 1, the executive authority of the department concerned must be cited as nominal defendant or respondent. (2) The plaintiff or applicant, as the case may be, or his or her legal representative must, within seven days after a summons or notice instituting proceedings and in which the executive authority of a department is cited as nominal defendant … has been issued, serve a copy of that summons… on the State Attorney.’ [4] The above provisions were not complied with, as the respondent caused a copy of the summons to be served on the Minister at his official place of business, Wachthuis, 231 Pretorius Street, Pretoria, on 4 December 2015. It was never served on the State Attorney as prescribed in s 2(2) of the State Liability Act. There was no appearance to defend by any of the appellants. Consequently, the respondent obtained default judgment on 4 March 2016 against the appellants, in terms of which liability and quantum of the claim were separated in terms of rule 33(4) of the Uniform Rules of Court (the Uniform Rules) and liability was determined in favour of the respondent against the first, third and fourth appellants on the basis that the respondent was entitled to recover his full proven or agreed damages against the appellants. The determination of the respondent’s quantum was postponed sine die. [5] The order granting default judgment was served on the Minister on 22 March 2016. On 26 March 2018, the respondent lodged an application against the Minister for the determination of quantum. That application was served on the State Attorney on 24 August 2018, and on the Minister at his official place of business. The respondent also served a notice of intention to amend his particulars of claim; the amended pages to the particulars of claim; and the order granting default judgment on 4 March 2016, as mentioned already. The application for the determination of quantum was set down for 10 September 2018. [6] On 29 August 2018, the State Attorney, on behalf of all the appellants, delivered a notice of intention to oppose that application. On 6 September 2018 the State Attorney launched an application on behalf of the appellants to stay the application for the determination of quantum, pending the rescission of the default judgment granted on 4 March 2016. On 25 November 2019 the respondent abandoned the default judgment in terms of rule 41(2) of the Uniform Rules. On 13 December 2019 the State Attorney delivered a notice of intention to defend the action on behalf of the appellants and subsequently delivered their plea to the respondent’s particulars of claim. [7] On 3 September 2020 the appellants delivered an amended plea, in which they raised two special pleas, in the alternative. The main plea was based on non- compliance with s 2(2) of the State Liability Act, as mentioned already. It was contended that because there was no service of a copy of the summons on the State Attorney, the respondent’s summons was a nullity. Alternatively, the appellants pleaded that in the event it was found that service was effected on the State Attorney on 24 August 2018 (when the application for determination of quantum against the Minister was served on the State Attorney) the respondent’s claim had prescribed, as that occurred more than three years after the respondent’s cause of action arose on 8 February 2014. [8] The special pleas were placed before the high court by way of a Special Case and Statement of Facts in terms of rule 33(1) and (2) of the Uniform Rules, which set out the issues for determination. It was agreed, among other things, that ‘if the defendants’ special pleas [were] dismissed the trial is to immediately proceed in respect of the issue of the defendants’ liability.’ [9] The high court considered the purpose of s 2(2) of the State Liability Act, and reasoned that the non-service on the State Attorney did not render the summons a nullity. At most, the high court held, the non-service constituted an irregular step, which could be rectified. It further held that, in any event, the ‘irregular step’ of non-service became moot when the State Attorney formally placed itself on record on behalf of the appellants, exchanged pleadings with the respondent’s attorneys, and participated in a pre-trial conference. The high court concluded that the appellants had failed to demonstrate that they were prejudiced by non-service on the State Attorney. It accordingly dismissed the appellants’ special pleas. [10] In this Court, the submissions on behalf of the appellants were as follows. Service upon the State Attorney was ‘mandatory’ in terms of s 2(2) of the State Liability Act, as that provision was ‘couched in peremptory terms by the use of the words “must within 7 days serve”.’ As the State Liability Act does not make provision for condonation for non-compliance with the service on the State Attorney, a court had no power to condone such non-compliance. In the result, the special plea of non-service should have been upheld. Alternatively, the high court should have found that the respondent’s action had been extinguished by prescription by the time summons was served on the State Attorney on 24 August 2015. [11] The approach to s 2(2) propounded on behalf of the appellants is incompatible with the approach to the interpretation of similar provisions by our courts. As explained in All Pay Consolidated Investment Holdings (Pty) Ltd and Others v The Chief Executive Officer, South African Social Security Agency and Others [2013] ZACC 42; 2014 (1) SA 604 (CC); 2014 (1) BCLR 1 (CC) para 30, the strict mechanical approach of drawing ‘formal distinctions between “mandatory or peremptory” provisions on the one hand and “directory” ones on the other, the former needing strict compliance on pain of non-validity, and the latter only substantial compliance or even non- compliance, has been discarded’. [12] The jettisoning of the ‘mechanical approach’ has its origin in Maharaj and Others v Rampersad 1964 (4) SA 638 (A). After having concluded that the legislative provision it was concerned with was peremptory, the court went on to enquire whether it was fatal that it had not been strictly complied with. This Court laid down the following test at 646C-E: ‘. . .The enquiry, … is not so much whether there has been ‘exact’, ‘adequate’ or ‘substantial’ compliance with this injunction but rather whether there has been compliance therewith. This enquiry postulates an application of the injunction to the facts and a resultant comparison between what the position is and what, according to the requirements of the injunction, it ought to be. It is quite conceivable that a court might hold that, even though the position as it is, is not identical with what it ought to be, the injunction has nevertheless been complied with. In deciding whether there has been a compliance with the injunction the object sought to be achieved by the injunction and the question of whether this object has been achieved, are of importance.’ [13] In Nkisimane and Others v Santam Insurance Co Ltd 1978 (2) SA 430 (A) at 433H-434A the following was said about the categorisation of statutory requirements as ‘peremptory’ or ‘directory’: ‘… They are well-known, concise, and convenient labels to use for the purpose of differentiating between the two categories. But the earlier clear-cut distinction between them (the former requiring exact compliance and the latter merely substantial compliance) now seems to have become somewhat blurred. Care must therefore be exercised not to infer merely from the use of such labels what degree of compliance is necessary and what the consequences are of non or defective compliance. These must ultimately depend upon the proper construction of the statutory provision in question, or, in other words, upon the intention of the lawgiver as ascertained from the language, scope, and purpose of the enactment as a whole and the statutory requirement in particular…’. [14] In Ex Parte Mothuloe (Law Society, Transvaal, Intervening) 1996 (4) SA 1131 (T) at 1132F, it was observed, with reference to Maharaj and other authorities, that there was a ‘. . .trend in interpretation away from the strict legalistic to the substantive. . .’. It was emphasised that even though the provisions of an Act are peremptory, the question needs to be asked whether or not exact compliance therewith is required. Consequently, the answer will ‘. . . be sought in the purpose of the statutory requirement which is to be ascertained from its language read in the context of the statute as a whole’. [15] The ‘trend’ referred to above was applied in Weenen Transitional Local Council v Van Dyk 2002 (4) SA 653 (SCA) where it was emphasised that in matters such as the present, the question is whether there has been compliance with the statutory provisions viewed in the light of their purpose. This Court trenchantly observed at para 13: ‘… Legalistic debates as to whether the enactment is peremptory (imperative, absolute, mandatory, a categorical imperative) or merely directory; whether ‘shall’ should be read as ‘may’; whether strict as opposed to substantial compliance is required; … etc may be interesting, but seldom essential to the outcome of a real case before the courts. They tell us what the outcome of the court’s interpretation of the particular enactment is; they cannot tell us how to interpret. These debates have a posteriori, not a priori significance. . . .’ [16] This approach received the imprimatur of the Constitutional Court in African Christian Democratic Party v Electoral Commission and Others [2006] ZACC 1; 2006 (3) SA 305 (CC); 2006 (5) BCLR 579 (CC) para 25. There, it was held that the adoption of the purposive approach in our law has rendered obsolete all the previous attempts to determine whether a statutory provision is directory or peremptory on the basis of the wording and subject of the text of the provision. The question was thus ‘whether what the applicant did constituted compliance with the statutory provisions viewed in the light of their purpose’. A narrowly textual and legalistic approach is to be avoided. [17] There is also the injunction in s 39(2) of the Constitution, which enjoins courts, when interpreting any legislation, to promote the spirit, purport and objects of the Bill of Rights. Thus, where a provision is reasonably capable of two interpretations, the one that better promotes the spirit, purport and objects of the Bill of Rights should be adopted.1 The right implicated in this case is that of access to courts, enshrined in s 34 of the Constitution.2 Consistent with this injunction, the interpretation of s 2(2) of the State Liability Act must be one which promotes this right, by considering the underlying purpose of the section, rather than merely its text. This purposive approach is far more consistent with our constitutional values, than reading the section narrowly and strictly, as preferred by the appellants. [18] With these interpretive iterations in mind, I turn to s 2(2) of the State Liability Act. Its purpose, especially the requirement that a summons must be served on the State Attorney within seven days after it was issued, is clearly to ensure that the relevant ‘executive authority’ (the Minister in this case) is afforded effective legal representation in the matter by the State Attorney. If the State Attorney provides such legal representation, in any manner whatsoever, despite it not having been served by 1 Wary Holdings (Pty) Ltd v Stalwo (Pty) and Another [2008] ZACC 12; 2009 (1) SA 337 (CC); 2008 (11) BCLR 1123 (CC) paras 46, 84, 107. 2 Section 34 of the Constitution of Republic of South Africa, 1996 provides: ‘Access to courts 34. Everyone has the right to have any dispute that can be resolved by the application of law decided in a fair public hearing before a court or, where appropriate, another independent and impartial tribunal or forum.’ the sheriff within seven days of the process commencing such proceedings, this purpose would have been served. That would also be the position where, as in the present case, there was no service on the State Attorney at all. In other words, it is not so much about how the State Attorney obtained the knowledge of the process commencing proceedings, as the representation of the party in the legal proceedings itself. [19] In the present case, a copy of the summons was served on the Minister. In the midst of legal and technical arguments advanced on behalf the Minister, there is deafening silence on the Minister’s part as to what he did with the summons after receiving it. The critical point, however is that the State Attorney effectively represented the Minister in this action, by entering appearance to defend the action if de novo, by filing a plea and by being able to be ready for trial. Thus, the purpose of the section has been achieved. The Minister’s contention that, despite a copy of the summons having been served on him, the summons should nevertheless be declared a nullity solely because it has not been served on the State Attorney, is simply untenable. [20] One of the overarching considerations in matters of this nature is prejudice. In the present case, I am unable to discern any prejudice suffered by the Minister as a result of non-service of a copy of the summons on the State Attorney. The Minister has not pointed to any. As I have said he was able to serve a plea in which he responded to the respondent’s allegations in the combined summons. The absence of prejudice is also evident from the fact that in the statement containing the agreed facts, the Minister asserts none. Instead, the parties agreed that in the event the special pleas were dismissed, the trial would proceed immediately on the issue of liability. To my mind, this is the clearest indication that the Minister suffered no prejudice. [21] Furthermore, the respondent’s condonation application for the late service of his statutory notice in terms of s 3 of the Institution of Legal Proceedings against Certain Organs of State Act 40 of 2002 (Legal Proceedings Act), was granted. In terms of s 3(4)(b)(iii) of the Legal Proceedings Act, the court granting such application must be satisfied, among others, that the organ of state was not unreasonably prejudiced by the failure which necessitated the condonation application. The application for condonation was served on the State Attorney, who at that stage, was already on record on behalf of all the appellants. If ever there was prejudice, one would have expected the Minister to place the necessary facts before the court to establish it. Instead, the Minister decided not to oppose the application. It must therefore be accepted that no prejudice occurred to the Minister. [22] It remains to consider briefly, the appellants’ alternative special plea of prescription. As mentioned already, the appellants contended that service on the State Attorney had occurred more than three years (on 24 August 2018) after the respondent’s cause of action arose on 8 February 2014. In terms of s 11(d) of the Prescription Act 68 of 1969 (the Prescription Act), the respondent’s claim would have prescribed after three years, ie on 7 February 2017. Section 15 of the Prescription Act provides that the running of prescription shall be interrupted by the service on the ‘debtor’ of any process whereby the creditor claims payment of the debt. There is no dispute that the Minister is the ‘debtor’ as envisaged in s 15(1) of the Prescription Act. [23] The respondent’s condonation application for the late service of his statutory notice in terms of s 3 of the Legal Proceedings Act, was granted. Similar to the issue of prejudice as discussed above, in terms of s 3(4)(b)(i) of the Legal Proceedings Act, the court granting an application for condonation must be satisfied, among others, that the debt had not been extinguished by prescription. To the extent the high court has granted the condonation, it, of necessity, found that the respondent’s claim had not been extinguished by prescription. The issue is thus res judicata, and no longer open to the appellants to assert it. [24] The plea of prescription in any event had no merit. It is correct that when this section is read with s 2 of the Legal Proceedings Act, service on the State Attorney, instead of the Minister, would have been effective service to interrupt prescription. However, this does not mean that the State Attorney replaced the Minister as the ‘debtor’. Viewed in this light, service on the Minister, as it happened in the present case, was effective for the purpose of interrupting prescription. The fact that the summons has not been served within the prescripts of s 2(2) of the State Liability Act, does not affect this. For purposes of interrupting prescription, there was service of ‘a process’ on the Minister. I am fortified in this view by the fact that, where summons is served without giving the statutory notice in terms of s 3 of the Legal Proceedings Act within the prescribed period, or at all, such service is nevertheless effective for the interruption of prescription if condonation is subsequently granted.3 [25] In all the circumstances the high court was correct to dismiss the special pleas. The appeal must, accordingly, fail. [26] In the result the following order is made: The appeal is dismissed with costs, including costs of two counsel where so employed. __________________ T MAKGOKA JUDGE OF APPEAL 3 See Minister of Safety and Security v De Witt [2008] ZASCA 103; 2009 (1) SA 457 (SCA) para 18. APPEARANCES: For appellants: H C Janse van Rensburg (with him J J van Rensburg) Instructed by: State Attorney, Pretoria State Attorney, Bloemfontein. For respondent: T Odendaal (heads of argument having been prepared by J P Van den Berg SC and T Cooper) Instructed by: Adams & Adams, Pretoria Honey Attorneys, Bloemfontein.

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY FROM: The Registrar, Supreme Court of Appeal DATE: 15 July 2022 STATUS: Immediate Please note that the media summary is for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal. Minister of Police and Others v Samuel Molokwane (730/2021) [2022] ZASCA 111 (15 July 2022) Today, the Supreme Court of Appeal, per Makgoka JA (Van der Merwe, Schippers and Musi and Makaula AJJA concurring), handed down a judgment dismissing an appeal against an order of the Gauteng Division of the High Court, Pretoria, which had dismissed two special pleas by the Minister of Police (the Minister). The respondent, Mr Molokwane, had issued a summons against the Minister and the second to fourth appellants for damages allegedly suffered due to unlawful arrest and assault by the second to fourth appellants. At that time, and before its amendment, s 2(2) of the State Liability Act 20 of 1957 (State Liability Act) provided that a copy of a summons against the Minister had to be served on the State Attorney within seven days of it being issued. Mr Molokwane did not comply with this requirement. Instead, he caused a copy of the summons to be served on the Minister at his official place of business in Pretoria. The State Attorney became aware of the legal proceedings after default judgment had been obtained against the Minister. The respondent abandoned the default judgment, whereafter, the State Attorney filed a notice a notice of intention to defend and a plea. Later, the State Attorney filed a special plea asserting that the non-service on it, rendered the summons a nullity. Alternatively, it was contended that the respondent’s claim had become prescribed by the time the State Attorney gained knowledge of the summons. The high court dismissed the special pleas on the basis there had been substantial compliance with the provision, but subsequently granted leave to appeal to the Supreme Court of Appeal. Before the Supreme Court of Appeal, it was contended on behalf of the Minister that because the provisions of s 2(2) State Liability Act were couched in ‘peremptory’ terms, non-compliance therewith was fatal, and rendered the summons a nullity. The Court rejected this submission, and pointed that in our law, the approach is no longer focussed on whether a statutory provision was peremptory or directory, but on the purpose of the provision. In the present case, the purpose of s 2(2) of the State Liability Act was to ensure that the Minister is afforded effective legal representation by the State Attorney. If the State Attorney provides such legal representation, in any manner whatsoever, despite it not having been served by the sheriff within seven days of the process commencing such proceedings, this purpose would have been served. In the present case, the Court took into consideration that the State Attorney delivered a notice of intention to defend on behalf of the Minister after it became aware of the legal proceedings; delivered a plea; participated in a pre-trial conference and expressed his readiness to proceed with the trial in the event the special plea failed. The Court also considered the fact that the non-service of a copy of the summons on the State Attorney occasioned no prejudice to the Minister. As regards the alternative special plea of prescription, the Court found it to be without merit. The Court pointed out that, for purposes of prescription, service on the Minister would have been effective to interrupt prescription, albeit not within the prescripts of s 2(2). Accordingly, the Court dismissed the Minister’s appeal with costs. ***END***

1370

non-electoral

2010

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Case no: 437/2009 In the matter between: DELPHISURE GROUP INSURANCE BROKERS CAPE (PTY) LTD Appellant and GYSBERT JOHANNES KOTZé DIPPENAAR First Respondent GERRIT ANDRIES VISSER Second Respondent BEXSURE (PTY) LTD Third Respondent Neutral citation: Delphisure Group Insurance Brokers Cape v Dippenaar (437/09) [2010] ZASCA 85 (31 May 2010) Coram: MPATI P, NUGENT, MALAN and LEACH JJA and SERITI AJA Heard: 4 May 2010 Delivered: 31 May 2010 Summary Delict – negligence – claim for damages for negligent misrepresentation – claim upheld. ______________________________________________________________ ORDER ______________________________________________________________ On appeal from: Western Cape High Court (Cape Town) (Ms Acting Justice Dicker sitting as court of first instance): 1. The appellant’s appeal in respect of the claim of the first respondent is dismissed. 2. The appeal in respect of the claim of the second respondent is upheld, and para 3 of the order of the court a quo is set aside and substituted with the following: ‘The second plaintiff’s claim against the second defendant is dismissed, and the second plaintiff is to pay 30 per cent of the second defendant’s costs.’ 3. The appellant is to pay the first and third respondent’s costs of appeal, such costs to include the costs of two counsel where so employed. 4. The second respondent is to pay 30 per cent of the appellant’s costs of appeal, such costs to include the costs of two counsel. ______________________________________________________________ JUDGMENT ______________________________________________________________ LEACH JA (MPATI P, NUGENT, MALAN JJA and SERITI AJA concurring): [1] This case involves a delictual claim for pure economic loss suffered as a result of a misrepresentation of fact. The first and second respondents farm wheat in the Piketburg district of the Western Cape. The appellant (‘Delphisure’) is an insurance brokerage that devised a crop insurance product known as Farmsure which was marketed by the third respondent (‘Bexsure’) for the 2004 growing season. Both the first and second respondents applied for Farmsure insurance, but it later transpired that no such product in fact existed as, despite all its efforts, Delphisure had not succeeded in having it underwritten by an insurer. When their crops failed, the first and second respondents instituted action in the High Court, Cape Town against both Delphisure and Bexsure whom they alleged had misrepresented that the Farmsure product was in place, thereby causing them not to take out insurance with another insurer, Mutual and Federal Insurance Company Ltd (‘Mutual & Federal’), and claiming as damages the amounts they would have been paid by Mutual & Federal if it had insured their crops. The claim succeeded solely against Delphisure (the court a quo held that Bexsure had not known that Farmsure did not exist at the material time). With leave of the court a quo, it appeals to this court against that decision. [2] Not only does Delphisure sell insurance on behalf of insurance companies but it acts as an administrator of insurance products sold to third parties and is an accredited agent of the international insurer Lloyds of London (‘Lloyds’) on whose behalf it has been mandated to market a range of short term insurance policies. Farming in this country is an enterprise often afflicted by natural perils, and many farmers insure their crops against failure. In 2002 and 2003, Delphisure marketed a crop insurance policy in the Northern Cape. Underwritten by Lloyds and issued by the Cape Insurance Company Ltd, this was a policy devised for the benefit of the members of the Griqualand West Co-operative Society. It generated considerable interest and Mr ‘Vango’ Kolovos, at the time Delphisure’s general manager, was approached by a representative of Bester Feed & Grain Exchange (Pty) Ltd, a substantial player in the grain industry in the Western Cape that handled the wheat of several hundred wheat farmers, to ascertain whether it would be possible to arrange a similar crop insurance product for farmers in the Western Cape. [3] Kolovos recognised crop insurance as being a potentially lucrative product, particularly in the Western Cape where wheat is produced on a large scale, and entered into negotiations involving the third respondent (‘Bexsure), a company in the same stable as Bester Feed & Grain, as well of representatives of Lloyds, to see if it would be possible to devise a suitable product. In doing so, Kolovos attempted to devise an insurance model that would satisfy Lloyds’ requirements to underwrite the product. Crucial to its acceptance were what Kolovos described as the necessary demographics, which included the geographical situation of the farms to be insured, the likely quantities of wheat to be produced and insured, and the anticipated value of the insured risk. It was of importance to Lloyds for the risk to be spread, and consequently any model in which most of the farmers taking insurance were from the same district was regarded as undesirable as a localised crop failure in that district could hold disastrous consequences for an insurance underwriter. [4] In addition, in order to provide a new product likely to sell, Kolovos had to come up with a model that had advantages over the products of competitors already in the market. In this regard, other insurers offered cover for no more than 65 per cent of a farmer’s anticipated crop and did not offer so-called ‘emergence cover’ which insured farmers in the event of their crops not germinating and emerging from the ground. Indeed, the other cover available was conditional upon a certificate of emergence being issued once sufficient germination and emergence had taken place. Kolovos decided to better this in his model by providing for a product allowing a farmer an election to take up to 100 per cent crop cover and also to include emergence cover (the attraction of the latter being that if germination did not take place the farmers would still receive compensation for their production costs in preparing the soil and planting). [5] All of this required ongoing consultations and negotiations. In a letter addressed to Kolovos on 25 February 2003, the financial director of Bexsure, after providing certain information relevant to a potential insurance product, concluded ‘ . . . we need to be assured that you will be able to supply us with a product as described with the necessary underwriting and legal requirements being met’. Kolovos responded by expressing the opinion that Bexsure’s requirements were achievable but that it would be necessary to provide an extremely detailed presentation to insurers in London to obtain approval. [6] It soon became clear that it was too late to arrange any insurance for the 2003 season and it was decided to attempt to do so in the following year. Consultations continued, during which Lloyds stated that the policy should use the terms of policies that were tried and tested. This led to the policy wording of Mutual & Federal’s crop insurance being used, adapted to provide for both a choice of up to 100 per cent crop cover as well as emergence insurance. In addition, a schedule of premium rates was prepared and the product was given the name ‘Farmsure’. The suggestion by Kolovos of a condition that at least half the farmers in each co-operative should take the cover was regarded by Bexsure as impractical, as Kolovos ultimately conceded. But despite all of this, Lloyds did not give Kolovos its unconditional support, and still needed to be persuaded by the demographics before agreeing to underwrite the product. [7] Rumours about a new crop insurance product to be marketed by Bexsure began to do the rounds in the farming community of the Western Cape as the 2004 growing season approached. As a result, and as it was the intention for Farmsure to be marketed through farmers’ co-operatives who would collect the premiums from their members by debiting their accounts, Bexsure arranged a meeting in Stellenbosch on 21 April 2004 to which it invited representatives of a number of co-operatives, including Mr Danie Gouws, an insurance consultant who was at the time employed by the co- operative known as Boland Agri. In addition, a number of private insurance brokers also attended, including Mr Le Roux van Wyk, who had persuaded Lizelle Scott (a director of Bexsure who was primarily involved in the marketing of Farmsure) to allow him to attend as he had a number of farming clients who were interested in the rumoured new crop insurance product. [8] The meeting was addressed by Kolovos who, when he later testified, attempted to persuade the court a quo that he had explained that Farmsure was not yet in existence but was conditional upon acceptance by Lloyds, and that such acceptance was in turn conditional upon the demographics of the model being met by the number of sales, the amount of insurance that was taken up, the average percentage of the crops insured and the geographical spread of the farmers who purchased the product. As against this allegation, the weight of the evidence led from the witnesses Scott, Van Wyk and Gouws, was that Kolovos formally announced the Farmsure product, stated that it was fully underwritten by Lloyds and stressed its advantages by providing emergence cover and a choice of insurance for up to 100 per cent of the crop. In the light of the weight of this evidence and the inherent probabilities, the court below correctly found that Kolovos’s evidence on this score could not be accepted and that he had indeed created the impression that the Farmsure product was available and was underwritten by Lloyds. [9] Presumably Kolovos did not make it plain that Lloyds had not yet approved the Farmsure policy as it would have been impossible to market non-existent insurance. However, he did ask the co-operatives to complete questionnaires in order to ascertain how many members in each co-operative were likely to insure their wheat crops during the forthcoming season, what premiums were likely to be generated, and the anticipated quantity of wheat likely to be insured. These completed questionnaires were returned to him within a day. As time was of the essence (farmers were due to begin planting within a few weeks and it had been agreed that the final cut-off date for Farmsure applications would be 10 May 2004) on 26 April 2004, Kolovos telefaxed the following letter to Bexsure: ‘This serves to confirm and indicate the parameters of the anticipated insurance. 1. As per the attached, being the minimum figures for crop per each Co-op and the minimum in total to have a successful crop model. 2. Acceptance by Lloyds of London of the exclusion of the 50% ruling as indicated by your motivational letter. 3. Premiums to be paid by the Co-op or the farmers by no later than the end of the month of the effective date of the crop policy. 4. All policies to be written by no later than 10 May 2004. 5. Based on the presales figures, a final decision of acceptance will be made by the underwriter. The crop certificates are in the process of being created and will be available by Wednesday 28 April.’ [10] The schedule attached to this letter contained a synopsis of the information contained in the completed questionnaires, including details of the geographical areas in which the farmers who were likely to purchase Farmsure conducted their farming operations and the anticipated quantity of the crops that would be insured. Scott testified that on receipt of this letter she was both anxious and confused as she wanted urgently to start marketing the product and had understood Kolovos at the Stellenbosch meeting to say that it was in place. She therefore contacted him, and he advised her that everything was in fact in order but that she should not start marketing until he provided the necessary documentation. To that end, a Bexsure logo was e- mailed to Delphisure for incorporation onto application forms. These documents, once so prepared, were generated by Delphisure’s computer system and made available to Bexsure. [11] On 28 April 2004, Kolovos gave Scott the go-ahead to market Farmsure. As part of her marketing strategy, she arranged a meeting on 5 May 2004 at the Winkelshoek building at Piketberg, commonly known as the ’Rietdak’. This meeting was attended by a number of farmers, including the first and second respondents, both of whom had already applied to Mutual & Federal for crop insurance for the season. The application of the first respondent had already been accepted, although it was conditional upon the issue of an emergence certificate, while that of the second respondent was subject to approval after an inspection of his farm had been conducted (an issue to which I shall return in due course). However, both had been so intrigued by the rumours of the Farmsure product that they had arranged for their insurance broker, Van Wyk, to obtain quotations of the anticipated cost of premiums from Bexsure on their behalf. [12] At the meeting, Scott gave details of what Farmsure offered, explained that the cut-off date for applications was 10 May 2004 and informed those present that the product was in existence and was fully underwritten by Lloyds. The first and second respondents found the product to be so attractive that, immediately after the meeting, they both contacted their broker, Van Wyk, through whom they had placed their applications for crop insurance for the season with Mutual & Federal, and asked him to see if he could arrange for those applications to be withdrawn or cancelled. Van Wyk went ahead and succeeded in doing so. Meanwhile the first and second respondents applied to Bexsure for Farmsure insurance for the 2004 season. [13] Unfortunately for all concerned, the sales of Farmsure for various reasons failed to meet the demographic requirements of Lloyds. Despite meetings and negotiations being held with various farmers and other interested parties, and attempts being made to attract underwriting from other quarters, none of which is necessary to detail for purposes of this judgment, it proved impossible to obtain underwriting for Farmsure which therefore never saw the light of day. While this was going on, the crops planted by the first and second respondents germinated but, despite their initial promise, ultimately failed due to adverse weather conditions. As the first and second respondents were left uninsured due to the Farmsure policies for which they had applied having been still-born and their Mutual & Federal applications having been cancelled, they were understandably aggrieved. And so, in due course, they instituted action claiming the amounts they alleged they would have recovered from Mutual & Federal had they not cancelled their applications on the strength of Scott’s misrepresentation at the Rietdak meeting that the Farmsure cover was in place and fully underwritten by Lloyds. [14] It is convenient at this stage to consider Delphisure’s contention that Scott knew at the time of the Rietdak meeting that the Farmsure product was not finally in place and was dependent upon the demographics obtained from the sales of the product being sufficient to persuade Lloyds to accept the model – it being its contention either that it could not be held responsible for Scott’s failure to inform the meeting of the true state of affairs, alternatively, that even if it was responsible, Scott was a joint wrongdoer whose actions rendered Bexsure jointly and severally liable with it to the first and second respondents. [15] Scott denied that she was aware that Farmsure still had to be accepted by Lloyds at the time and testified that Kolovos had brought her under the impression that everything was in order. It was argued by Delphisure that she could not be believed, particularly in the light of the fifth point in the letter of 26 April 2004 in which it was stated that a final decision on acceptance would be made by the underwriter based on the ‘pre-sales figures’ which, so it contended, were the figures which would be forthcoming after the policy had been marketed. This cannot be so. Not only would it be a contradiction in terms to refer to the figures of actual sales as a ‘pre-sales figures’ but, bearing in mind that the schedule attached to the letter contained an analysis of anticipated sales derived from the questionnaires which had been completed, the reference therein to pre-sales figures could only have meant those figures set out in the schedule. Accordingly, the letter meant only one thing, namely, that Delphisure was awaiting a final decision by the underwriter (Lloyds) to be taken on strength of the information set out in the schedule. Accordingly, when Kolovos later told Scott everything was in order and subsequently, on 28 April 2004, gave her the green light to go ahead to market Farmsure, she was entitled to think that on the strength of pre-sales figures attached to the schedule to the letter of 2 April, Lloyds had agreed to underwrite the product. In any event, Scott was not likely to go out and market a product which to her knowledge did not exist, and the probabilities are overwhelming that she only did so as she was under the impression that since 26 April Lloyds’ requirements had been met and that it had agreed to underwrite the product. The argument that Scott was thus aware at the Rietdak meeting on 5 May that the Farmsure product was not in place cannot be sustained. [16] This conclusion is relevant to the question of negligence, an issue to which I now turn, the test for which is so well known that it need not be repeated. In considering the question of negligence, it is necessary to consider the foreseeability of harm, an issue which is also relevant to the question of legal causation as I shall mention in due course. [17] In regard to foreseeability, a reasonable person in Kolovos’ position when he instructed Scott to commence her marketing operations would have appreciated that she would be under the false impression that Lloyds had agreed to underwrite Farmsure and that, in marketing the product, she would represent that it was available and underwritten by Lloyds. Indeed that would be a major marketing tool, and he therefore caused Scott to go out into the farming community to spread false information in order to sell crop insurance in the hope that the sales which were forthcoming would persuade Lloyds to agree to underwrite the product. [18] In order to avoid the obvious consequences flowing from such conduct, counsel for Delphisure argued that it had not been reasonably foreseeable at the time that any farmer who applied for Farmsure cover would suffer a loss in the event of Lloyds ultimately declining to underwrite the product. This contention was based on the fact that no other crop insurance was available as all other insurers had already closed their applications for the 2004 season. Accordingly, so it was argued, the only farmers who it could be foreseen might apply for Farmsure cover were those who would not have been insured against crop failure in any event, and that a reasonable person would not have foreseen that farmers who had already applied for insurance cover would cancel or withdraw their applications in respect of that cover – or, at the very least, would only have foreseen that those who had already applied for insurance would only cancel such applications once they had applied for and been granted Farmsure insurance. Consequently, so the argument went, the loss suffered by the first and second respondents, who had withdrawn their applications for crop cover from Mutual & Federal and who were left without cover when the Farmsure product was stillborn, was not reasonably foreseeable [19] These contentions, too, must be rejected. Farmsure’s selling point was that it was a product superior to the other crop insurance then available, offering both crop cover of up to 100 per cent and emergence cover – both of which were not elsewhere available. A reasonable person would therefore have realized that farmers who had already applied for crop insurance from competitors such as Mutual & Federal might seek to resile therefrom and apply for Farmsure insurance instead. The likelihood of such action was all the more real in the light of, first, the considerable interest and enthusiasm that Farmsure had generated in the farming community as had become apparent at the meeting at Stellenbosch on 24 April 2004, secondly, that even though the cut–off date for other insurances had passed such applications might not yet have been accepted (as was indeed the case with the application of the second respondent) and, thirdly, that even if such applications for other insurance products had been accepted, the insurance would still be conditional upon the issue of a certificate of emergence after germination of the crop, and that it was only at that stage that farmers who had applied for such insurance would be obliged to pay their premiums. As planting for the 2004 season was still to take place, the issue of emergence certificates and the obligation to pay premiums were still a long way off and, in these circumstances, a reasonable person in Kolovos’s postion would have foreseen that farmers who had already applied for crop insurance for the 2004 season, on hearing of the considerable advantages of the Farmsure product, might well decide to cancel their applications for other insurance before they had to pay their premiums and, instead, apply for a Farmsure policy – and that in doing so they would not necessarily wait to see if their Farmsure applications were successful. After all, they would have no reason to think that those behind a new product would not wish to accommodate as much business as possible and reject their applications. Nor would they wish to run the risk of becoming obliged to pay crop insurance premiums to two different insurers. It was thus clearly foreseeable that farmers might well cancel their applications for crop cover that were still pending and, in that event, they would be left without crop insurance for the 2004 season should Lloyds decline to underwrite Farmsure and would suffer financial loss if their crops were to fail. The loss suffered by the first and second respondents was therefore reasonably foreseeable. [20] Also relevant to the question of negligence is whether steps could have been taken to guard against the loss. It was a simple matter for Kolovos to have done so. All that was required of him was to tell the truth, something which would in any event have been expected from an honest insurance broker. Had he not misrepresented to Scott that the Farmsure product was fully underwritten by Lloyds when he instructed her to go out to market it, she would not have brought the first and second respondents under the impression that the Farmsure product was available. Although, as Kolovos emphasised, the Farmsure application form proclaimed that the insurance would only become effective upon acceptance of the application, that is a standard term in all applications for insurance. And there is a considerable difference between representing, on the one hand, that an insurance policy exists but that an application has to be accepted before it becomes effective and, on the other, that an insurance policy does not exist and may only come into existence should the underwriter in the future agree to act as insurer. The standard terms of the policy if anything added to the misrepresentation of the existence of the product. [21] Kolovos in fact took no steps to guard against the clearly foreseeable harm which might be suffered by persons in the position of the first and second respondents in the event of them being enticed into applying for Farmsure cover. In these circumstances, negligence on the part of Kolovos was clearly established, and the fact that Scott was the person who made the actual misrepresentation to the first and second respondents in marketing the policy on his instructions does not entitle Delphisure to escape responsibility.1 [22] At the same time, Delphisure’s argument that Scott was also negligent can be rejected. As I have said, there was no reason for her to have suspected that the Farmsure product had not been approved by Lloyds and she was clearly under the impression that the necessary underwriting was in place. That misunderstanding was a reasonable one, and I am not persuaded that the court a quo in any way erred in finding that Scott had not acted negligently in misrepresenting the position to the first and second respondents. Its finding in that regard must stand. 1 Ruto Flour Mills (Pty) Ltd v Moriates & another 1957 (3) SA 113 (T) at 115F-116A. [23] I turn now to consider the question of the wrongfulness of Kolovos’s misrepresentation. Where a claim is for pure economic loss,2 even if the conduct causing such loss is negligent, it will only be regarded as unlawful and therefore actionable if there are public or legal policy considerations which require liability to follow for the damage it caused.3 [24] As has been correctly observed, it is something of an understatement to say that liability always depends on the facts of each given case as there are certain categories of cases in which liability will almost indubitably follow.4 But each case must be considered on its own merits and there is no simple litmus test that can be applied to determine whether in all cases liability should follow. Despite that, in Fourway Haulage SA (Pty) Ltd v SA National Roads Ltd 5 Brand JA expressed the view that our law has moved beyond the stage where liability will be dependent upon the ‘idiosyncratic views of the individual judge as to what is reasonable and fair’, and echoed the words of Nugent JA in Minister of Safety and Security v Van Duivenboden6 that ‘what is called for is not an intuitive reaction to a collection of arbitrary factors but rather a balancing against one another of identifiable norms’. To that may be added that such a process involving criteria to which recognition has been given in the past as either favouring or operating against the recognition of liability will advance the cause of certainty in judicial decisions, a result to which it is always necessary to strive. 2 As that concept was explained in Telematrix (Pty) Ltd t/a Matrix Vehicle Trading v Advertising Standards Authority 2006 (1) SA 461 (SCA); [2006] 1 All SA 6 (SCA) para 1. 3 See eg Fourway Haulage SA (Pty) Ltd v SA National Roads Agency Ltd 2009 (2) SA 150 (SCA): [2008] ZASCA 134 para 12 and the cases there cited. 4 Telematrix para 15. 5 Para 21. 6 2002 (6) SA 431 (SCA) para 21. [25] Bearing that in mind, I turn to considerations of policy which are relevant. One important factor is of course the fear of so called ‘boundless liability’ and an appreciation that the law will recognise liability more readily where there is not a limitless number of claimants likely to bring a multiplicity of actions.7 Gleaned from previous decisions, important considerations to which regard may be had are the following (the list is not intended to be exhaustive):  Whether the plaintiff was vulnerable to the risk (which would favour a finding of liability) or could have avoided it by contractual means such as a disclaimer (which would operate against liability);  Whether the extension of liability would impose an unwarranted burden on a defendant or, conversely, whether it would not unreasonably interfere with the defendant’s commercial activities as the defendant was already under a duty to take reasonable care in respect of third parties;  The nature of the relationship between the parties, contractual or otherwise;  Whether the relationship between the parties was one of ‘proximity’ or closeness;  Whether the statement was made in the course of a business context or in providing a professional service ;  The professional standing of the maker of the statement; 7 Fourways paras 23 and 24.  The extent to which the plaintiff was dependant upon the defendant for information and advice;  The reasonableness of the plaintiff relying on the accuracy of the statement. [26] In considering these factors, it is of considerable importance that this is not a case in which there is likely to be boundless liability involving an unlimited number of claimants. The misrepresentation was made to a limited class, being the farmers to whom Farmsure was offered. Counsel for Delphisure also correctly conceded that this was not a case in which the risk could have been avoided by contractual means or in which the extension of liability would impose an unwarranted burden upon Delphisure. It is also relevant that Kolovos knew that the representation that Lloyds had underwritten the Farmsure product was of great importance in persuading farmers to purchase it, and his misrepresentation in that regard was made in the course of his business by a man of substantial professional standing to parties who were vulnerable to the risk and were dependant upon him for the accuracy of the information. [27] In the light of all the features that I have just mentioned, this is a clear case in which considerations of policy should impose liability for the negligent misrepresentation if it caused the loss suffered by the first and second respondents. [28] Having determined the issue of wrongfulness against Delphisure, it becomes necessary to consider the issue of causation. This involves two distinct enquiries: first, the application of the so-called ‘but-for’ test in order to determine whether the particular action concerned can be identified as the cause without which the loss in question would not have been suffered;8 the second being the question of legal causation, sometimes referred to as remoteness of damage,9 being whether the wrongful act is sufficiently closely linked to the loss to attract legal liability. The latter enquiry is also determined by considerations of policy but, although there may be an overlapping with the factors to be taken into account, wrongfulness should not be confused with legal causation or remoteness: and conduct which may be regarded as wrongful may well also be too remote for liability to follow.10 [29] It was common cause on appeal that both factual and legal causation had been established in respect of the claim of the first respondent who, had he not withdrawn his application for insurance with Mutual & Federal after Scott’s promotion at the Rietdak meeting on 5 May 2004, would have insured his crop with Mutual & Federal and been paid compensation when it failed. In these circumstances, it was correctly common cause that the loss suffered by the first respondent was a direct result of the misrepresentation and sufficiently closely linked to the misrepresentation to attract legal liability. 8 Cf International Shipping Co (Pty) Ltd v Bentley 1990 (1) SA 680 (A) at 700F-G. 9 Cf Fourway Haulage para 30-31. 10 Cf Fourway Haulage para 31-32. [30] On the other hand, the issue of factual causation in respect of the second respondent’s claim is not as straight-forward. It was contended that the second respondent had not shown that but for Scott’s presentation at the Rietdak meeting his loss would not have been suffered. The argument in this regard was twofold. First, it was argued that even had the misrepresentation relating to Farmsure not been made, the second respondent would in any event have cancelled his application to Mutual & Federal and would thus have been uninsured during the forthcoming growing season. Secondly, it was argued that even if the second respondent had been insured by Mutual & Federal, it would in all probability have refused to pay him compensation under the policy due to misrepresentations he had made in his application form. [31] Before Mutual & Federal would accept the second respondent’s application for insurance cover, it was necessary for his farm to be inspected to verify that it was likely to produce the anticipated yield reflected in the application. Although this was really nothing more than a formality according to the witness Mr E D Rabie, who admired the second respondent as a farmer and in whose hands the decision on acceptance lay, it led to Mr Lou Robertson, an agricultural insurance assessor, being delegated by Janie Louw Brokers to visit the second respondent’s farm. This he did on 3 May 2004. Unfortunately for him, he arrived without having made an appointment and incurred the ire of the second respondent for failing to do so. However, the second respondent invited him into his office where they discussed the provisions of Mutual & Federal’s policy. It immediately became apparent that the second respondent had a problem with the policy being conditional upon satisfactory emergence of the crop. Robertson telephoned the offices of Janie Louw Brokers and obtained confirmation that the insurance was indeed conditional upon acceptable emergence after germination, that the policy did not include emergence cover and that, consequently, pre-emergence input costs would not be covered. According to Robertson, when the second respondent heard this he said he would not take the cover. Robertson then left the farm without doing the necessary inspection. [32] There is no reason not to accept Robertson’s evidence in this regard, his testimony having been corroborated by the content of a contemporaneous note he made shortly after the incident. The second respondent’s evidence in this regard was most unsatisfactory. He stated that he could not recall the conversation but that emergence cover was of no real consequence to him as germination was never a problem in the district in which he farmed. However, he appears to have attempted to downplay the importance of emergence cover as, shortly after Robertson had left the farm, he telephoned his insurance broker, Van Wyk, who had sent Robertson to inspect the farm. According to Van Wyk, although the second respondent complained about Roberson having arrived at his farm without having arranged to do so, they also discussed the provisions of Mutual & Federal’s policy and whether it provided for emergence cover (which provides support for Robertson’s version). Their conversation appears to have become heated and, accordingy to Van Wyk, he told the second respondent to keep his Mutual & Federal application ‘on the table’ – from which it must be inferred that the second respondent had said that he wished to withdraw it – until there was certainty over what Farmsure would offer. It was only on 5 May 2004, after the presentation by Scott at the Rietdak meeting, that the second respondent telephoned and instructed him to cancel his Mutual & Federal application. [33] There is no reason to reject Robertson and Van Wyk, whose evidence on this issue, supported as it is by Robertson’s contemporaneous note, is far more compelling than that of the second respondent. It is clear from this that emergence cover was of importance to the second respondent. Not only did he tell Robertson that he did not want Mutual & Federal’s policy as it lacked emergence cover but he refused to allow him to carry out his inspection while knowing it was necessary for his application to be approved. Although this may in part have been due to his anger at Robertson’s unannounced arrival, he subsequently told Van Wyk that he did not want to proceed with his application. In these circumstances the fact that Van Wyk persuaded him not to withdraw his application until he had found out more about the Farmsure product so that he could make an informed decision, does not indicate a fixed intention to persist with his application should Farmsure not prove to be more attractive. [34] In order to succeed, the second respondent must show that even if there had been no talk of the Farmsure product, he would have insured his crop with Mutual & Federal. Van Wyk persuaded the second respondent not to immediately withdraw his application to Mutual & Federal only because he believed the Farmsure product existed. There is nothing to show that he would have persuaded the second respondent not to withdraw his Mutual & Federal application if there had been no talk of Farmsure, and at no stage did the second respondent testify that he would have elected to persist with his application had the Farmsure option not been offered to him. In the light of the evidence of Robertson and Van Wyk, his denial that he had said that he did not want Mutual & Federal’s insurance was clearly false. But in the light of his denial, he could hardly have testified that he would have changed his mind had he known the true state of affairs in regard to the Farmsure product, and there is no acceptable evidence that justifies such a conclusion. [35] The second respondent has therefore failed to show that but for the misrepresentation that was made by Kolovos he would have been insured by Mutual & Federal. That being so, he failed to establish the necessary element of causation and his claim ought to have been dismissed. The appeal in respect of his claim must be upheld. [36] Consequently, Delphisure is liable to the first respondent for whatever damages he suffered as a result of Kolovos’ negligent misrepresentation that led to him not being able to recover compensation from Mutual & Federal when his crop failed. The quantum of his damages is agreed, being the sum he was awarded in the court a quo, and the appeal in respect of his claim must accordingly fail. However, the appeal in respect of the second respondent’s claim must be upheld as he failed to prove that the appellant’s misrepresentation caused him to suffer loss. In the light of this conclusion, only paragraph 3 of the order of the court a quo which dealt with the second respondent’s claim needs to be altered. [37] The general rule is for costs to follow the event. The present matter is made more complicated by Delphisure having failed in respect of the claim of one plaintiff but succeeded in respect of the claim of the other. In these circumstances it would be unfair to burden the unsuccessful plaintiff (the second respondent) with all of Delphisure’s costs. An examination of the record shows that about 30 per cent of the duration of the trial related solely to the claim of the second respondent. In addition, the second respondent was one of three respondents in the appeal, and the only one that was unsuccessful. In these circumstances I think it is fair to all to order the second respondent to pay 30 per cent of Delphisure’s costs in both the trial and the appeal. [38] Two other issues must be briefly mentioned in regard to costs. First, Delphisure contended in its heads of argument that if it was to be held liable so, too, should Bexsure as a result of Scott’s negligence. In response, Bexsure contended in its heads that it could not be held liable at this stage as Delphisure had not served a notice on it under rule 13(8) and there was no lis between them as defendants. This gave rise to Delphisure bringing a conditional application for leave to serve a notice under rule 13(8) should Bexsure’s contentions be upheld. There is no merit in Bexsure’s argument and its counsel, wisely, abandoned the point during the appeal. In any event, in the light of the finding that Scott had not been negligent, the issue is academic and I mention it only in order to record that we were informed by counsel for the parties that no costs order relating to this application would be sought. Secondly, certain parties employed two counsel, and the costs attendant upon doing so are justifiable. [40] It is therefore ordered: 1 The appellant’s appeal in respect of the claim of the first respondent is dismissed. 2 The appeal in respect of the claim of the second respondent is upheld, and para 3 of the order of the court a quo is set aside and substituted with the following: ‘The second plaintiff’s claim against the second defendant is dismissed, and the second plaintiff is to pay 30 per cent of the second defendant’s costs.’ 3 The appellant is to pay the first and third respondent’s costs of appeal, such costs to include the costs of two counsel where so employed. 4 The second respondent is to pay 30 per cent of the appellant’s costs of appeal, such costs to include the costs of two counsel. ___________________ L E LEACH JUDGE OF APPEAL APPEARANCES APPELLANT: D Mitchell SC (with him A Kantor) Instructed by Edward Nathan Sonnenbergs, Cape Town Webbers, Bloemfontein FIRST AND SECOND: N Treurnicht SC (with him H du Toit) RESPONDENT Instructed by Werksman, Tyger Valley McIntyre & Van der Post, Bloemfontein THIRD RESPONDENT: R S van Riet SC Instructed by Rufus Dercksen & Partners, Stellenbosch Honey Attorneys Inc, Bloemfontein

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 31 May 2010 Status: Immediate Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal DELPHISURE GROUP INSURANCE BROKERS CAPE (PTY) LTD versus GYSBERT JOHANNES KOTZé DIPPENAAR GERRIT ANDRIES VISSER BEXSURE (PTY) LTD The first and second respondents, wheat farmers from Piketberg, cancelled applications they had made to Mutual & Federal Insurance Co Ltd for crop insurance for the 2004 growing season upon the appellant having marketed an alternative product known as Farmsure for which they applied instead. When it later became apparent that Farmsure did not exist, it was too late for them to obtain other insurance and, when their crops failed, they suffered financial loss which they were unable to recoup from insurance. They sued the appellant for damages, contending that as a result of the appellant’s negligent misrepresentation that the Farmsure product existed they had suffered loss. Their claims succeeded in the Western Cape High Court. The appellant appealed to the Supreme Court of Appeal, which today upheld the appeal in part, the court having concluded that the second respondent would probably have withdrawn his crop insurance application to Mutual & Federal and been uninsured even had the appellant’s misrespresentaton not been made. However the appeal against the claim of the first respondent was dismissed, the court holding that the misrepresentation had been negligently made, that it had been unlawful and that it caused the first respondent to suffer loss in circumstances in which the appellant should be held liable.

3665

non-electoral

2021

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Not reportable Case No: 900/2020 In the matter between: PICK ’N PAY RETAILERS (PTY) LTD APPELLANT and CHERYLENE SARAH PILLAY RESPONDENT Neutral citation: Pick ’n Pay Retailers (Pty) Ltd v Pillay (900/2020) [2021] ZASCA 125 (29 September 2021) Coram: NAVSA ADP, MOCUMIE, MAKGOKA, SCHIPPERS and GORVEN JJA Heard: 6 September 2021 Delivered: This judgment was handed down electronically by circulation to the parties’ representatives by email, publication on the Supreme Court of Appeal website and release to SAFLII. The date and time for hand-down is deemed to be 10h30 on 29 September 2021. Summary: Negligence – foreseeability of harm – failure to guard against – shopper injured when struck by automated boom gate – exit of parking area frequently used by shoppers at shopping centre – after incident certain safety measures implemented – shopping centre owner negligent. ORDER On appeal from: KwaZulu-Natal Division of the High Court, Pietermaritzburg (Poyo-Dlwati J and Govindasamy AJ sitting as court of appeal): The appeal is dismissed with costs. JUDGMENT Schippers JA (Navsa ADP, Mocumie, Makgoka, and Gorven JJA Concurring): [1] The issue in this appeal, which is before us with the leave of this Court, is whether the appellant, Pick ’n Pay Retailers (Pty) Ltd (the defendant), was negligent in the operation of an automated Centurion Sector boom gate (the boom) controlling the exit of vehicles from a parking area for persons with special needs and parents with small children at Pick ’n Pay Hypermarket in Durban North (the shopping centre). The respondent, Ms Cherylene Pillay (the plaintiff), was struck on her head by the boom as it descended from a vertical position. [2] The basic facts are uncontroversial. The boom consists of a three-metre aluminium pole painted in white and red, which is fairly prominent. The pole weighs 2.4 kg. The box containing the mechanism of the boom is bright yellow and plainly visible. The boom is located on a sidewalk, directly opposite an entrance to the shopping centre. Directly adjacent to the entrance is a pedestrian sidewalk all along the building, running parallel to the road in respect of which the boom controls egress. There are bollards between the road and the sidewalk, to discourage pedestrians from walking in the road. At the entrance to the shopping centre opposite the boom, for a short distance, the bollards are joined by chains to prevent pedestrians from walking directly under the boom in its vertical position. [3] On 10 December 2015 the plaintiff and her colleague, Ms Geraldine Leach, had finished shopping at the hypermarket and were walking on the road towards the parking area to Ms Leach’s car. They were engaged in conversation. The plaintiff was in a hurry and did not pay attention to her surroundings. She looked straight ahead. She did not see the boom in the vertical position and said that had she seen it, she would not have walked under it. [4] The boom descended and struck both the plaintiff and Ms Leach. The plaintiff sustained an axial impact type of injury to her head, was disoriented and suffered concussion. She was hospitalised on two separate occasions, once in 2015 and then in 2016. She was diagnosed as suffering from moderate concussion and sustained a strain-sprain injury to her cervical spine. The plaintiff had to undergo physiotherapy and received pain medication for cervical neck spasm. Due to the injury the plaintiff may continue to suffer episodes of neck spasm and headache on a regular basis which would require pain relief and physiotherapy. Ms Leach also sustained an injury in the region of her eye, which had caused bleeding. [5] The plaintiff instituted proceedings against the defendant in the Durban Magistrate’s Court. In the particulars of claim she alleged that the incident was caused by the sole negligence of the defendant. The asserted grounds of negligence were as follows. The boom was positioned immediately adjacent to a popular pedestrian walkway. Its descent mechanism operated without due regard to the presence of pedestrians and there was no warning sign or sound to alert pedestrians to its operating danger. The defendant should reasonably have foreseen the possibility that the boom could cause injury to persons frequenting the shopping centre, and failed to take steps to guard against such occurrence. [6] These grounds of negligence were denied in the plea. The defendant alleged that it had implemented and maintained reasonable systems to ensure that the parking area was clear of obstacles and hazards, which would render it unsafe for the public. In the event that the plaintiff established that the defendant, its employees or agents were negligent as alleged, the defendant denied that such negligence caused the incident. Alternatively, the defendant pleaded that the incident occurred as a result of contributory negligence on the part of the plaintiff and the defendant. The defendant also alleged that a tacit agreement had been concluded between the parties that it would not be held liable for any loss or damage. This defence was based on what the defendant said were prominent notices informing the public that they entered the shopping centre at their own risk. [7] The magistrate’s court dismissed the plaintiff’s claim. It concluded that the plaintiff had not proved that she had been injured by the boom or that the defendant had been negligent. The court also found that the notices disclaiming liability for loss or injury, prominently displayed at the shopping centre, constituted a tacit agreement between the parties which absolved the defendant from liability. The defendant, advisedly, did not persist in this defence on appeal to this Court. [8] An appeal to the KwaZulu-Natal Division of the High Court, Pietermaritzburg (Poyo-Dlwati J and Govindasamy AJ), succeeded with costs. The high court found that the defendant should have foreseen the possibility of harm. It was not uncommon for shoppers to walk on the road right next to the boom, instead of using the pedestrian walkway. Indeed, this was the route of choice for shoppers to get to their vehicles. They would then walk under the boom when it was in the raised position, instead of walking safely past it. [9] The high court found that the risk of harm presented by the boom was reasonably foreseeable. Shoppers could be struck by the boom which would automatically and unexpectedly descend. The court concluded that the plaintiff had been inattentive; that she had failed to observe or pay proper attention to the boom; and that she could have avoided it. The plaintiff was thus contributorily negligent. The high court set aside the magistrate’s order and replaced it with an order directing the defendant to pay 60% of the plaintiff’s proved or agreed damages. [10] Before us the argument was confined. Counsel for the defendant conceded that the plaintiff had established that a reasonable person in the position of the defendant would have foreseen the reasonable possibility of the boom descending and striking a person. This concession was rightly made. The plaintiff sustained an injury at a busy shopping centre with a large parking area. Ms Lerina Coles, the shopping centre manager, conceded in evidence that shoppers with trolleys usually walked on the same section of road where the boom was in operation and where the plaintiff had been injured; that there was no warning sign in that vicinity drawing attention to the danger of the boom; and that the route taken by the plaintiff and Ms Leach to get to the parking area was the route of choice for shoppers. [11] What is more, in September 2015, about three months before the incident, the boom had descended unexpectedly and struck a person, breaking the frame of his glasses. Fortunately, he sustained no injuries. As a result of that incident, a prominent four-sided warning sign stating, ‘CAUTION BOOM OVERHEAD’ was erected at the entrance to the shopping centre and next to the yellow box of the boom, so that persons approaching the boom from either direction would be alerted to it. The word ‘CAUTION’ is shown in red lettering against a white background and below it, the words ‘BOOM OVERHEAD’ appear in white lettering against a red background. These signs however had not been erected when the plaintiff was injured. Significantly, Ms Coles testified that the erection of the sign had no effect on pedestrian traffic patterns. [12] Although the risk of the boom descending and striking a person was reasonably foreseeable, counsel for the defendant submitted that the plaintiff had not proved that the defendant was negligent. The risk of injury was negligible, so it was submitted, because the impact of being struck by the boom was equivalent to a ‘pat on the shoulder’. Put differently, counsel on behalf of the defendant submitted that a reasonable person in the position of the defendant would not have foreseen the possibility of injury being caused. In this regard emphasis was placed on the lightweight aluminium material and that the boom was designed to reverse upon touching an obstacle. This is an aspect explored further, later in this judgment, when the expert evidence is scrutinised. [13] In Kruger v Coetzee1 Holmes JA formulated the test for negligence as follows: ‘For the purposes of liability culpa arises if: (a) A diligens paterfamilias in the position of the defendant- 1 Kruger v Coetzee 1966 (2) SA 428 (A) at 430E-F. (i) would foresee the reasonable possibility of his conduct injuring another in his person or property and causing him patrimonial loss; and (ii) would take reasonable steps to guard against such occurrence; and (b) the defendant failed to take such steps.’ [14] In Sea Harvest Corporation2 Scott JA stated that dividing the issue of negligence into various stages, however useful, was no more than an aid or guideline in resolving the issue: in the final analysis the true criterion for determining negligence was whether in the particular circumstances the conduct complained of fell short of the standard of the reasonable person.3 There is no universally applicable formula which would prove to be appropriate in every case.4 [15] In the light of recent authorities, J R Midgley and J C van der Walt in Lawsa have made the following observation:5 ‘When assessing negligence, the focus appears to have shifted from the foreseeability and preventability formulation of the test to the actual standard: conduct associated with a reasonable person. The Kruger v Coetzee test, or any modification thereof, has been relegated to a formula or guide that does not require strict adherence. It is merely a method for determining the reasonable person standard, which is why courts are free to assume foreseeability and focus on whether the defendant took the appropriate steps that were expected of him or her.’ [16] Applied to the present case, the question is thus whether in the particular circumstances, the defendant took appropriate steps to avoid injury to pedestrians. In support of the argument that the risk of injury was negligible, the defendant’s 2 Sea Harvest Corporation (Pty) Ltd and Another v Duncan Dock Cold Storage (Pty) Ltd and Another 2000 (1) SA 827 (SCA); [2000] 1 All SA 128 (A) para 21. 3 Sea Harvest Corporation fn 2 para 21; Minister of Safety and Security v Carmichele 2004 (2) BCLR 133 (SCA); 2004 (3) SA 305 (SCA) para 45. 4 Sea Harvest Corporation fn 2 para 22. 5 15 Lawsa 3 ed at 284 para 155. counsel relied on the evidence of Mr Shalendra Parbhoo, the project manager (formerly a senior technician) of the company which had installed and serviced the boom. He testified that it was likely that he would have tested the operation of the boom when it was installed in 2012. [17] At the entry to the parking area, the operation of the boom was remotely controlled by a security guard, who would open it. A metal sensing loop installed in the roadway underneath the boom would detect the presence of a vehicle. Upon the lapse of five seconds (a default factory setting), the boom would close only after a vehicle had cleared the sensing area of the loop. According to the factory default settings generally used, it took two seconds for the boom to move from the fully lowered position to the fully raised position. The boom would remain in the raised position for 15 to 20 seconds, and return to the lowered position in two seconds, covering a distance of about three metres along a curve. [18] At the exit of the parking area, the position was different to entry. The boom operated automatically. In the exit direction the vehicle would drive over a second metal sensing loop which caused the boom to move to its raised position. It would close only after metal had been detected and then cleared from the metal- sensing safety loop beneath the pole. [19] When the boom was installed Mr Parbhoo tested the operation of the boom as it came down from the raised to the lower position, using a vehicle and his body. The boom has a built-in circuit that allows it to change direction when it comes into contact with a person or an object. In the case of a vehicle, a sensor in the boom caused it to stop and go back to its fully open position. When he stood under the boom as it was returning to the lower position, Mr Parbhoo conducted two tests, standing and facing the pole: the first with his shoulder; and the second, with an outstretched arm under it. In the first test, Mr Parbhoo described the impact of the boom coming down on his shoulder as ‘a firm pat on the shoulder’; the boom stopped and reverted to its fully open position. In the second test, his arm was pushed down as it was not strong enough to stop the boom but when he used both arms, that was sufficient to reverse the operation of the boom and caused it to return to the fully open position. [20] I do not think that it can be inferred from these controlled tests – with an expectation that the boom will impact a person on a particular part of his body – that the risk of injury to members of the public was negligible, and consequently that the defendant was not required to take appropriate steps to protect them from injury. It is striking that Mr Parbhoo did not place his head or any part of his face in the path of the boom. One’s head is obviously less capable of yielding than one’s shoulder. That the defendant was required to take reasonable steps is grounded in common sense and illustrated by the facts of this very case. [21] A boom weighing 2.4 kg coming from it’s raised to its lowered position over a distance of some three metres in two seconds, and which strikes a pedestrian without warning, is likely to cause injury. In this case, it struck the plaintiff and Ms Leach simultaneously, causing the plaintiff to sustain a moderate to severe injury with long-term effects. This is how the plaintiff described the incident: ‘The boom, I did not see it, I continued walking. Suddenly there was almost a burning sensation, pain, it was sudden pain, and I screamed and I turned around and my friend also made some sort of murmur and when I turned around Geraldine was bleeding from her eye . . . as I turned to my right to look at her, she was on the right of me, I saw blood trickling down her face.’ [22] Then there is the incident in September 2015 when the boom unexpectedly struck a pedestrian, breaking the frame of his glasses. That incident too, could have resulted in serious injury, for example, if the lenses of the glasses had been broken. The only step taken after the September 2015 incident was to order and wait for the warning sign. So, pedestrians were not protected any more than they had been when the incident occurred. Since there was a person operating the boom for entry to the parking area, reasonable steps would at least have required that a person operate it at the exit while the warning sign was being manufactured. [23] The fact that the path taken by the plaintiff was the route of choice for shoppers with their trolleys, cannot be overemphasised. Mr Parbhoo said that a metal trolley would activate the boom, and thus move it to its fully raised position. He had tested this with a sheet of metal, roughly the size of an A4 book. There obviously was no vehicle near the boom when it struck the plaintiff and Ms Leach. It is inevitable that a trolley would activate the boom and inattentive pedestrians or those engaging in conversation would be unaware of a boom in a raised position for 15 to 20 seconds, particularly in the absence of a vehicle. The boom would then return to its lowered position in two seconds, which is likely to cause injury to persons in its path. [24] It is therefore not surprising that after the incident involving the plaintiff, the vehicle-sensing loop at the exit of the parking area was decommissioned. Mr Parbhoo testified that the operation of the boom at the exit was no longer automated but remotely controlled by a security guard, as was the case at the entrance to the parking area. [25] The defendant also had the speed of the rising or lowering of the boom increased from two seconds to 4.6 seconds. Mr Parbhoo conceded that the slower speed of 4.6 seconds was much safer and would give a person in its path an opportunity of avoiding a slower descending boom. The defendant would never have taken these steps if it considered that the risk of injury to members of the public was negligible. [26] That the defendant appreciated that the risk of injury was significant, is also illustrated by the fact that it had taken steps to erect warning signs after the September 2015 incident. The defendant recognised that a warning had to be given that was simple, immediate and compelling. It would be read by members of the public and alert them to the operation of the boom. As stated, there was no warning sign when the plaintiff was struck by the boom in December 2015. [27] For these reasons, the defendant’s reliance on the Australian case of Livsey,6 was misplaced. In that case it was held that although the risk of contact with a boom gate was foreseeable, it was difficult to identify a significant risk of harm where the boom gate ascended upon contact. Moreover, there was no evidence that the boom gate descended with such force as to cause injury.7 As was said in Kruger v Coetzee:8 ‘Whether a diligens paterfamilias in the position of the person concerned would take any guarding steps at all and, if so, what steps would be reasonable, must always depend upon the particular circumstances of each case. No hard and fast basis can be laid down. Hence the futility, in general, of seeking guidance from the facts and results of other cases.’ 6 Livsey v Australian National Car Parks Pty Ltd [2014] NSWDC 232. 7 Livsey fn 6 para 31. 8 Footnote 1 at 430. [28] The high court was correct to hold that in the particular circumstances, the defendant’s conduct fell short of the standard of the reasonable person. In the result the appeal is dismissed with costs. __________________ A SCHIPPERS JUDGE OF APPEAL APPEARANCES For appellant: A J Boulle Instructed by: Barkers Attorneys, La Lucia Matsepes Inc, Bloemfontein For respondent: J Marais SC Instructed by: Mooney Ford Attorneys, Durban Honey Attorneys, Bloemfontein

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 29 September 2021 Status: Immediate The following summary is for the benefit of the media in the reporting of this case and does not form part of the judgments of the Supreme Court of Appeal Pick ’n Pay Retailers (Pty) Ltd v Pillay (900/2020) [2021] ZASCA 125 (29 September 2021) ___________________________________________________________________________ On 10 December 2015 the respondent, Ms S Pillay (the plaintiff), sustained an axial impact type injury to her head when she and her colleague were struck by a descending automated boom gate (the boom) in the parking area of the hypermarket in Durban North, operated by the appellant, Pick ’n Pay Retailers (Pty) Ltd (the defendant). The plaintiff’s colleague suffered an injury around her eye, which caused bleeding. The plaintiff instituted an action for damages in the Durban Magistrate’s Court and claimed that the defendant was negligent in that the boom was positioned directly adjacent to a popular pedestrian walkway and the defendant failed to take steps to guard against the danger of the boom descending and striking pedestrians. The magistrate dismissed the defendant’s claim, holding that the plaintiff had not proved that she had been injured by the boom or that the defendant was negligent. The defendant successfully appealed to the KwaZulu-Natal Division of the High Court, Pietermaritzburg (the high court). It held that the risk of the boom descending unexpectedly causing injury to shoppers was reasonably foreseeable, since shoppers usually walked in the road right next to the boom. The court found that the plaintiff failed to observe or pay proper attention to the boom and could have avoided it. The plaintiff was thus contributorily negligent. The high court set aside the magistrate’s order and replaced it with an order directing the defendant to pay 60% of the plaintiff’s proved or agreed damages, and costs. The Supreme Court of Appeal (SCA) granted the defendant leave to appeal. Today the SCA dismissed the defendant’s appeal with costs. It was conceded on behalf of the defendant that the risk of the boom descending and striking a person was reasonably foreseeable, but it was argued that the risk of injury was negligible. The SCA rejected this argument. The path taken by the plaintiff was the route of choice for shoppers to get to their vehicles. A boom weighing 2.4 kg coming from its raised to its lowered position over a distance of some three metres in two seconds, which strikes a pedestrian without warning, was likely to cause injury. Moreover, in September 2015 the boom had unexpectedly struck a pedestrian, breaking the frame of his glasses. The only step taken by the defendant after that incident was to order and wait for a four-sided warning sign which stated ‘caution, boom overhead’. That warning sign had not been erected in December 2015 when the plaintiff was struck by the boom. Since there was a person operating the boom for entry to the parking area, reasonable steps to avoid the risk of injury would at least have required that a person operate the boom at the exit. The high court was thus correct to hold that the defendant had been negligent.

2813

non-electoral

2012

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA JUDGMENT Reportable Case no: 590/2011 CROOKES BROTHERS LIMITED Appellant and REGIONAL LAND CLAIMS COMMISSION FOR THE PROVINCE OF MPUMALANGA First Respondent THE NATIONAL DEPARTMENT OF LAND AFFAIRS Second Respondent THE GOVERNMENT OF THE REPUBLIC OF SOUTH AFRICA Third Respondent Neutral citation: Crookes Brothers Ltd v Regional Land Claims Commission for the Province of Mpumalanga & others (590/2011) [2012] ZASCA 128 (21 September 2012) BENCH: CLOETE, PONNAN, CACHALIA, WALLIS JJA and SOUTHWOOD AJA HEARD: 24 AUGUST 2012 DELIVERED: 21 SEPTEMBER 2012 CORRECTED: SUMMARY: Contract – interpretation of - sale of immovable properties – claim for mora interest on purchase price. ___________________________________________________________________ ORDER ___________________________________________________________________ On appeal from: North Gauteng High Court (Pretoria) (Sapire AJ sitting as court of first instance). (a) The appeal succeeds with costs to be paid jointly and severally by the respondents. (b) The order of the court below is set aside to be replaced with: ‘The respondents are ordered jointly and severally to pay to the applicant: (i) the sum of R22 761 643,85; (ii) interest on the sum of R22 761 643,85 at the rate of 15.5% per annum from 6 July 2010 to date of payment; (iii) costs of suit including those of two counsel where employed.' ___________________________________________________________________ JUDGMENT ___________________________________________________________________ PONNAN JA (CLOETE, CACHALIA, WALLIS JJA and SOUTHWOOD AJA concurring): [1] Interest, which Centlivres CJ described as ‘the life-blood of finance' (Linton v Corser (1952 (3) SA 685 (A) at 695G), is what this appeal is about. The appellant, Crookes Brothers Limited, a public company, seeks payment of mora interest on the purchase price of certain immovable properties sold by it to the third respondent, the Government of the Republic of South Africa as represented by the first respondent, the Regional Land Claims Commission for the Province of Mpumalanga and the second respondent, the National Department of Land Affairs. [2] The appellant was the owner of a number of farms situated in the Province of Mpumalanga, which formed the subject matter of land claims by various communities in terms of the Restitution of Land Rights Act 22 of 1994. Whilst the litigation was pending before the Land Claims Court and those who held legitimate claims to those properties were yet to be determined, negotiations occurred over an extended period between representatives of the appellant, on the one hand, and the respondents, on the other, which culminated on 8 April 2009 in the conclusion of a written agreement of sale in respect of some 15 properties for the aggregate purchase price of R200 million. [3] Material terms of the agreement were: '3.2 The purchase price shall be paid into the Designated Account by electronic funds transfer during normal banking hours by no later than the 10th (tenth) succeeding day after the Transfer Date. ... 4.1 Within 14 (fourteen) days of written request by the Conveyancers, which request shall only be made when the documents required for the transfer of the Properties are ready to be lodged with the Deeds Registry, office of the Mpumalanga Province, the Purchaser shall furnish to the Conveyancers a written undertaking from the Chief Land Claims Commissioner in the form of an undertaking contained in Annexure A in terms of which the Purchaser undertakes to pay the purchase price into the Designated Account by no later than the 10th (tenth) succeeding day after the Transfer Date. ... 6. MORA INTEREST Should any part of the purchase price not be paid by the Purchaser to the Seller on the date on which it is due in terms of this Agreement, the Purchaser shall be liable for payment of interest to the Seller on such amount outstanding at the rate of interest (presently 15.5% per annum) prescribed from time to time in terms of the Prescribed Rate of Interest Act, No 55 of 1975 (as amended), which will be calculated from date of default to date of payment. Such interest shall be in addition to, and not in substitution for, the rights accorded to the Seller elsewhere in this Agreement. ... 9.1 The Seller shall, subject to payment of the purchase price in full, grant to the State/Purchaser occupation and possession of the Properties on the Transfer Date, it being recorded that after the Transfer Date the Properties shall be let to CBL Agri Services (Pty) Ltd in terms of the Lease Agreement ... 9.3 The Seller shall be entitled to all operational income accrued from the Properties up to the date of full payment of the purchase price to the Seller. ... 9.5 Ownership of and all rights and obligations, together with the benefit in and risks, attaching to the Properties shall pass to the State on the Transfer Date, from when onwards the Properties shall be at the sole risk, loss or profit of the State. ... 16.2 The registration of transfer of the Properties shall take place as soon as reasonably possible after the Signature Date. ... 18. DEFAULT In the event of any Party committing a breach of this Agreement or being otherwise in default of the terms and conditions hereof, and remaining in default after being given 14 (fourteen) days notice in writing within which to rectify such default, the aggrieved Party shall be entitled to enforce the terms and conditions of this Agreement and sue for specific performance and any damages suffered, or to cancel this Agreement, in either event, any action taken by the Parties shall be without prejudice to their rights to claim damages arising from such default, or to any other rights the Parties may have under the common law, or otherwise. On cancellation of this Agreement, the Purchaser shall be obliged to forthwith restore possession of Properties to the Seller.' [4] The agreement envisaged that the properties would be purchased by the second respondent and registered in the name of the third respondent for the ultimate benefit of the various communities who in due course would have emerged as having established a valid claim to one or more of the properties. Pending that determination, the properties were to be leased to a subsidiary of the appellant, CBL Agri Services (Pty) Ltd, for the purposes of farming sugar cane and subtropical fruit. The lease, which was to commence on the date of registration of transfer, was to endure for a period of five years at an agreed rental of R2 million per annum escalating annually at 7%. [5] Pursuant to the agreement the conveyancing attorney prepared all such documents as were necessary to be lodged with the Deeds Registry, Mpumalanga, to cause transfer of the properties to be effected into the name of the respondents. On 14 August 2009 the conveyancer despatched a letter (Annexure ‘GC3’ to the applicant’s founding affidavit) to the chosen domicilium citandi et executandi of the respondents, being the Office of the Chief Land Claims Commissioner of the Department of Land Affairs, informing them that all the documents necessary to cause transfer of the properties were ready for lodgment with the Deeds Registry and they were accordingly requested to furnish the written undertaking within 14 days as contemplated by clause 4.1 of the agreement. That letter, which went on to threaten the institution of a claim for specific performance and mora interest (computed at R84 931 per day), went unanswered. On 7 September 2009 a further letter was addressed to the respondents by the conveyancing attorney. It informed the respondents that they were in breach of their obligations under the agreement and afforded them an opportunity to remedy the breach within 14 days. That letter elicited a response from the Chief Land Claims Commissioner dated 13 September 2009, which stated: '[w]e are currently facing severe funding constraints and are not in a position to make an undertaking for payment of the agreed purchase price'. On 15 October 2009, yet a further letter was despatched by the conveyancing attorney to the Chief Lands Claims Commissioner. It set out the history of the matter and in compliance with s 4 of the Institution of Legal Proceedings Against Certain Organs of State Act 40 of 2002, gave notice of the appellant's intention to institute legal proceedings against the respondents for payment of the sum of R 200 million (against a tender to transfer the properties into the name of the respondents), mora interest, damages and costs. [6] Notwithstanding having given formal notice of its intention to institute legal proceedings and it having become entitled to do so by 31 January 2010, the appellant held off until May of that year when it launched an application in the North Gauteng High Court in which it sought the following orders: '1. Directing the Respondents to provide the Applicant with an original and duly signed [letter of undertaking] within SEVEN (7) days of the date of this order. 2. Declaring that the Second and Third Respondents are liable for and indebted to the Applicant for the payment of interest at the rate of 15.5% per annum (or such other rate as may in future be prescribed under the Prescribed Rate of Interest Act 55 of 1975 corresponding from that time to such changed rate) on the amount of R200 million from 6 October 2009 to date of payment; alternatively. 3. Declaring that the Second and Third Respondents are liable and indebted to the Applicant for payment of interest at the rate mentioned in paragraph 2 above on the amount of R200 million from 5 September 2009 until the date of the provision of the guarantee mentioned in paragraph 1 above on the basis of the Respondents' breach of their obligation to provide such guarantee. . . . 5. Directing the Second and Third Respondents to pay the Applicant's costs.’ [7] That application was opposed by the respondents. However, on 15 June 2010, the Chief Land Claims Commissioner, acting on behalf of the respondents, furnished the undertakings sought by the appellant. The registration and transfer of the properties was thereafter effected and the purchase price of R200 million was paid into the trust account of the conveyancing attorney on 5 July 2010. [8] That left unresolved the relief sought in respect of interest. In support of the appellant’s entitlement to that relief, Mr Guy Stanley Clarke, its managing director, deposed to a supplementary affidavit, the material portion of which reads: ‘5. 5.1 Annexure "GC3" to the Applicant's founding affidavit is a formal demand, served on the Respondents on 17 August 2009 which placed the Respondents on terms to perform their obligations under the sale agreement within 14 days. 6. 6.1 In terms of the sale agreement (clause 1.1.6 of Annexure "GC1" to the applicant's founding affidavit), "day" means any day excluding a Saturday, Sunday or public holiday. Hence, the last day for compliance by the Respondents with Annexure "GC3" to the Applicant's founding affidavit, was Friday 4 September 2009. 7. 7.1 Assuming that the undertaking had been provided on that date, and allowing a reasonable period of 14 days for lodgment of the transfer documents and for the subsequent registration of the transfer, such transfer would have been registered by not later than 25 September 2009. Had this occurred, and bearing in mind that the Respondents had a further 10 days after registration of transfer within which to pay, the purchase price of R200 000 000,00 would have been received by not later than 9 October 2009. 8. 8.1 As a matter of fact, as a result of the Respondents' initial failure to adhere to the sale agreement and their subsequent failure to comply with the notice (Annexure "GC3") the purchase price was only paid on 5 July 2010. I wish to point out that in fact the lodgment of the transfer documents and the subsequent transfer of the property took a matter of only a few days. However I have been advised that 14 days is a reasonable period of time to allow for the process of lodgment of transfer documents and the subsequent registration of transfer. The Applicant has thus given the Respondents the benefits of the doubt by adhering, in its calculations of the dates set out above, to that 14 day period. 9. 9.1 I am advised, that, in the result, the Applicant is entitled to mora interest at 15.5% per annum calculated on the purchase price of R200-million from 10 October 2009, being the date on which payment ought to have taken place, had the Respondents complied with the notice contained in Annexure "GC3" to the founding affidavit, to 5 July 2010, when payment was in fact received. 10. 10.1 According to my calculations, the interest for the period 10 October 2009, calculated on the basis aforesaid, amounts to R22 761 643,85. 11. 11.1 I am also advised that the Applicant is entitled to further interest on the amount of R22 761 643,85 at the mora rate of 15.5% per annum from 6 July 2010 to date of payment. 12. 12.1 I am advised that at the hearing of this matter an amended order prayed will be presented to this Honourable Court, in terms of which the Applicant will seek an order for:- 12.1.1 payment of the sum of R22 761 643,85. 12.1.2 payment of interest on the sum of R22 761 643,85 at 15.5% per annum from 6 July 2010 to date of payment; 12.1.3 costs of suit.' [9] The response that the supplementary affidavit elicited from Ms Itumeleng Sarah Seboka, the acting Regional Land Claims Commissioner for the Province of Mpumalanga, was: '42. AD PARAGRAPHS 5 AND 6 THEREOF: Save to admit demand, it is highlighted that the State was not in a position to furnish an undertaking due to a lack of funds. 43. AD PARAGRAPH 7 THEREOF: The contents of this paragraph call for legal argument that will be made during the hearing of this matter. I however wish to highlight that the issue of interest only arises in terms of clause 6 read with clause 3.2 which were duly complied with. 44. AD PARAGRAPH 8 THEREOF: Save to admit that the purchase price was paid on 05 July 2010, the rest of the contents of this paragraph call for speculation and are therefore denied. 45. AD PARAGRAPHS 9, 10 AND 11 THEREOF: The contents of these paragraphs are denied. 46. AD PARAGRAPH 12 THEREOF: I note the intended amendment to the notice of motion and wish to state that such amendment is not proper and will be opposed. The applicants should use the rules of the above Honourable Court regulating amendments.' [10] The matter came before Sapire AJ, who dismissed the application and ordered the appellant 'to pay the Respondents' costs, incurred after the Respondents complied with their contractual obligations including those attendant on the briefing of two counsel', but granted leave to the appellant to appeal to this court. In arriving at that conclusion the learned acting judge reasoned: 'Applicant's claim is really one for damages arising, from the Respondents' breach of contract in failing timeously to provide the undertaking without which transfer could not be given. The Respondents' obligation in terms of clause 4.1 of the Agreement was to furnish the written undertaking within 14 (FOURTEEN) days of being called upon to do so. The Respondents persisted in the delay until the application for specific performance was pending. The claim made by the Applicant is for interest on the purchase price calculated from the date upon which the undertaking was to have been furnished until the date it was in fact furnished. The question arises whether this is the appropriate measure of damages in the present instance. The damages to which an injured party is entitled on breach of contract is the amount required to place that party in the same financial condition as it would have been had the contract been properly and timeously performed. Where the breached obligation is to pay money on a determined or determinable date and there are no circumstances affecting the determination of damages other than the lapse of time, the interest may well be the proper measure. The agreement presently under consideration has a specific provision for the consequences of a breach by the purchaser in failing to pay the purchase price on due date, that is within 10 days of transfer. The payment of mora interest is stipulated as the appropriate and applicable penalty. This stipulation does not apply where the breach is a delay by the purchaser in furnishing the undertaking to make payment after transfer. Rightly so, for until transfer the seller remains the owner, and in possession of the property, and as such entitled to the enjoyment of the property and its fruits. It would be wrong in the present instance to ignore the circumstances in which the Agreement was entered into, especially the terms of the collateral Lease which in effect entitled the Applicant to remain in occupation not only until transfer but, through its subsidiary, for the period provided for in the Lease. Rental in terms of the lease did not become payable until transfer had been effected. Counsel for the Applicant argued that this was not a relevant circumstance because the Lessee was a different persona to the Applicant. This contention cannot be sustained. It was the Applicant which remained in possession of the Land until transfer was given and the subsidiary was only introduced as an adjectus solutionis causa, to take on the rights and obligations of the lessee. From the date of transfer rental had to be paid albeit not by the Applicant itself but by its subsidiary. The overall situation is what has to be taken into account and the consolidated position of the Applicant and its subsidiary will reflect whether or not damages were occasioned by the delay. This can only be ascertained on the basis of evidence adduced by the parties’. [11] In seeking to support the reasoning and conclusion of the court below the thrust of the respondents’ case on appeal was that, on a proper interpretation of the agreement, the purchase price was payable in terms of clause 3.2 not later than ten days after the date of transfer. That having occurred clause 6 did not find application. Accordingly, so the argument went, any claim the appellant might have had to interest derived from s 1 of the Prescribed Rate of Interest Act 55 of 1975 (the Act) and not clause 6 of the agreement. And as the appellant had failed to prove actual loss or damage (but had sought to advance a case that the fact of the delay entitled it as a matter of law to payment of interest) and having regard to the ‘special circumstances’ which the court below (apparently unwittingly) took into account in terms of s 1 of the Act (quoted below), it properly exercised its discretion not to award any interest to the appellant. [12] The first issue for consideration therefore is whether clause 6 does find application. I must confess to having some difficulty in following why clause 6 would not apply in a situation such as this. Of the many obligations imposed on the parties, two that were imposed on the respondents, are relevant for present purposes. Sequentially they were: first, to furnish a guarantee within 14 days of a written request (clause 4.1); and, second, to pay the purchase price no later than ten days after transfer (clause 3.2). The second was not an independent and self-standing obligation but was dependent for its fulfilment upon the first. The respondents’ obligation to fulfil the second could thus hardly have arisen until the first had been satisfied. The respondents breached the agreement by not furnishing the written undertaking for the payment of the purchase price within 14 days of being called upon to do so as required by clause 4.1. They failed to do so, because on their own version they then lacked the funds to pay the purchase price within ten days of transfer. That breach, until it was cured, caused a delay in effecting transfer of the properties and consequently, a commensurate delay in the payment of the purchase price. [13] That such a state of affairs had come to pass was entirely the respondents’ fault. They had contracted on the basis that they had funds at their disposal to meet their contractual obligations, when in truth, as it subsequently emerged, they did not. By not furnishing the undertaking the respondents deliberately frustrated the operation of the agreement. And in so doing they delayed the payment date. They thus rendered the 14 days envisaged in clause 4.1 illusory and meaningless. And in blatant disregard of the contractual scheme and the time frames that had been agreed upon, simply furnished the guarantee when it was convenient for them to do so. Thus despite their admitted breach, which in turn delayed payment, the respondents seek to maintain with impunity the benefit of the agreement. Respondents’ counsel was constrained to concede during argument that, had the undertaking been furnished but for some or other reason not been met, then clause 6 could have been relied on by the appellant to claim mora interest. But where, as here, there had simply been a refusal to furnish the requisite guarantee, clause 6 could not be invoked by the appellant. To my mind to treat a deliberate refusal to perform more generously than ineffective or defective performance would be strained and tortuous. It follows, in my view, that clause 6 does indeed find application. The court below reached a contrary conclusion. But even had it been justified in its conclusion on that score (which it had not), as I shall show presently, the matter did not end there. [14] Even in the absence of a contractual obligation to pay interest, where a debtor is in mora in regard to the payment of a monetary obligation under a contract, his creditor is entitled to be compensated by an award of interest for the loss or damage that he has suffered as a result of not having received his money on due date. Centlivres CJ made that plain in Linton v Corser supra (at 695G-696A), when he stated: 'The old authorities regarded interest a tempore morae as "poenaal ende odieus", vide Utrechtsche Consultatien, 3, 63, p. 288. Such interest is not in these modern times regarded in that light. To-day interest is the life-blood of finance, and there is no reason to distinguish between interest ex contractu and interest ex mora. Milner's case is, as far as I have been able to ascertain, the only case which applied the old authorities, and in Johnston v Harrison, 1946 N.P.D. 239 at p. 251, the Court was not slow in distinguishing that case. The question that now arises is whether we should apply the old Roman-Dutch Law to modern conditions where finance plays an entirely different role. I do not think we should. I think that we should take a more realistic view than in a matter such as this to have recourse to the old authorities.' [15] It is so that mora interest is a species of damages (Davehill (Pty) Ltd & others v Community Development Board 1988 (1) SA 290 (A) at 298I-J). But as is evident from the approach of Sapire AJ to the enquiry that confronted him, he lost from sight the following important distinction drawn by Fagan JA in Union Government v Jackson & others 1956 (2) SA 398 (AD) at 411C–412A: 'In considering this question of taking into account the time that may elapse between the date when a man is deprived of an asset and that of his being reimbursed by receiving compensation for it, we must be careful to distinguish between two different approaches that call different legal principles into play and may therefore diverge greatly in their application to particular circumstances. The one approach is to treat this lapse of time as merely an element ― one of many items ― which the Court may be urged to bring into its reckoning in computing or estimating the damage which a plaintiff has suffered and for which he should be recompensed. A set-off of interest on the capital amount awarded for the expropriation of a trading store and outbuildings against a claim for loss of rentals was applied by this Court in the case of Union Government v Maile, supra, especially at p 11. I mention this example to illustrate the point that there may be circumstances in which the interest-bearing potentialities of money play a part in the computation of damages. In Maile's case those potentialities counted in reduction of the plaintiff's claim, but there may well be cases where they will count the other way. The other approach is that of dealing with the liability to pay interest as a consequential or accessory or ancillary obligation (the three adjectives are used as interchangeable words in the judgments in West Rand Estates Ltd v New Zealand Insurance Co Ltd 1926 AD 173 at pp 177, 193), automatically attaching to some principal obligation by operation of law. The best illustration of this type is the liability for interest a tempore morae falling on a debtor who fails to pay the sum owing by him on the due date. Here the Court does not make an assessment; it does not weigh the pros and cons in order to exercise an equitable judgment as to whether, and to what extent, the interest-bearing potentialities of money are to be taken into account in computing its award. The only issue is whether the legal liability exists or not; if it does, the rest is merely a matter of mathematical calculation: the legal rate of interest on a definite sum from a definite date until date of payment. The award of interest by the Provincial Division clearly falls under the second of the two compartments of my classification.' [16] Sapire AJ appeared not to appreciate that he was dealing with an enquiry under what Fagan JA described as the second of the two compartments of his classification. It follows that he misconceived the enquiry. For our courts have come to accept without requiring special proof that a party who has been deprived of the use of his or her capital for a period of time has suffered a loss (Thoroughbred Breeders’ Association v Price Waterhouse 2001 (4) SA 551 (SCA) para 85). And that, in the normal course of events, such a party will be compensated for his loss by an award of mora interest (Bellairs v Hodnett & another 1978 (1) SA 1109 (A) at 1145 D-G). As it was put in Bellairs '... under modern conditions a debtor who is tardy in the due payment of a monetary obligation will almost invariably deprive his creditor of the productive use of the money and thereby cause him loss. It is for this loss that the award of mora interest seeks to compensate the creditor.' [17] The term mora simply means delay or default. When the contract fixes the time for performance, mora (mora ex re) arises from the contract itself and no demand (interpellatio) is necessary to place the debtor in mora. In contrast, where the contract does not contain an express or tacit stipulation in regard to the date when performance is due, a demand (interpellatio) becomes necessary to put the debtor in mora. This is referred to as mora ex persona. (See Scoin Trading (Pty) Ltd v Bernstein NO 2011 (2) SA 118 (SCA) paras 11 & 12.) The purpose of mora interest is therefore to place the creditor in the position that he or she would have been in had the debtor performed in terms of the undertaking. Here a demand (interpellatio) was necessary to place the respondents in mora. [18] It is common cause that such a demand was received by the respondents on 19 August 2009. It was not disputed that the appellant was ready and willing to pass transfer to the respondents when that letter of demand was despatched. Nor was it disputed that on receiving the required undertaking the conveyancing attorney would have taken immediate steps to lodge the necessary documents in the Deeds Registry to cause transfer of the properties sold to pass to the respondents. Accordingly on an application of common law principles the respondents were in mora and an obligation to pay interest to the appellant on the purchase price had accrued. That notwithstanding, the learned acting judge in the court below held: ‘The interest on the purchase price is in the present instance not a proper measure of damages. The Applicant may well have a claim for damages arising from the delay, but it is illiquid and will have to be proved by demonstrating an overall financial loss occasioned by the delay. This the applicant has not done, and may not do in motion proceedings.' Such an approach, which finds no support in the authorities, cannot be endorsed. It follows that the appellant ought to have succeeded in the court below. That, ordinarily at any rate, ought to dispose of the matter. But, as I shall show, even if one were to approach the matter on the basis postulated by the respondents, they still ought not to have succeeded in the court below. [19] Although there is no explicit indication in the judgment of the court below that it had s 1 of the Act in mind, it was submitted on behalf of the respondents that it approached the matter mindful of that section. And that, what it in fact embarked upon was indeed the exercise envisaged by that section. In my view even if one were to accede to the argument on behalf of the respondents that any right as the appellant may have to interest derives from s 1 of the Act and not clause 6 of the agreement, the conclusion of the court below that the appellant was not entitled to any interest whatsoever cannot be supported. [20] The relevant part of s 1 of that Act reads: ‘1(1) If a debt bears interest and the rate at which the interest is to be calculated is not governed by any other law or by an agreement or a trade custom or in any other manner, such interest shall be calculated at the rate prescribed under subsection (2) as at the time when such interest begins to run, unless a court of law, on the ground of special circumstances relating to that debt, orders otherwise. (2) The Minister of Justice may from time to time prescribe a rate of interest for the purposes of subsection (1) by notice in the Gazette.’ [21] Three submissions were urged upon us by counsel for the appellant with respect to the construction that should be placed on the section: First, the introductory words of the section ‘if a debt bears interest’ vests a court with a discretion, to be exercised on equitable grounds, only to reduce the rate of interest and not to disallow interest in its entirety. Second, the section only finds application to a situation where there is no agreement. There being an agreement in this case, the section did not find application. Third, the debtor and not the creditor bore the onus of establishing special circumstances. There may well be something to be said for each of those submissions. But it is not necessary for the purposes of this judgment to consider their validity. I accordingly do no more than merely mention them. [22] In Davehill (at 300J-301E), Smalberger JA stated: ‘Section 1(1) is couched in peremptory terms, and its application is obligatory, not discretionary (Katzenellenbogen Ltd v Mullin 1977 (4) SA 855 (A) at 885G). To give effect to the intention of the Legislature the words "shall be calculated at the rate prescribed under s (2) as at the time when such interest begins to run" must be given their ordinary and literal meaning. Such meaning is clear. The rate prescribed under ss (2) at the time when interest begins to run governs the calculation of interest. The rate is fixed at that time and remains constant. Subsection (1) does not provide for the rate to vary from time to time in accordance with adjustments made to the prescribed rate by the Minister of Justice in terms of ss (2). The fact that the Minister may from time to time prescribe different rates of interest therefore has no effect on the rate applicable to interest which has already begun to run. The plain meaning of the words in question must be adopted as they do not lead to "some absurdity, inconsistency, hardship or anomaly which from a consideration of the enactment as a whole a court of law is satisfied the Legislature could not have intended" (per Stratford JA in Bhyat v Commissioner for Immigration 1932 AD 125 at 129). The only exception to the above method of calculation is where "a court of law, on the ground of special circumstances relating to that debt, orders otherwise". "Special circumstances" are not defined in the Act. It is not necessary for the purposes of the present appeal to consider what circumstances are envisaged under that term. The existence or otherwise of special circumstances in any given case must needs depend upon the facts and circumstances of that case. What is clear is that the special circumstances must relate to a particular debt, not to debts in general.' [23] What appeared to weigh with the court below was that the appellant continued to have the benefit of the properties either as the owner until the date of transfer or for a period of five years beyond that date in terms of the lease through its subsidiary, CBL Agri Services. The conclusion that the appellant’s continued possession of the properties constituted a benefit is at odds with the evidence. Mr Clarke dealt in his replying affidavit with the assertion in Ms Seboka’s answering affidavit that the appellant had ‘unhindered and uninterrupted possession of the property [and] continued to use the property and enjoyed the fruits or proceeds of the said farm, as it always had’, thus: '13.2 While the Applicant enjoyed the fruits of the properties during the period of the delay, it is simply wrong to say that it suffered no prejudice. The Applicant in fact suffered significant prejudice due to delays caused by the State during the entire sale process. ... 13.5 Because the properties sold constituted a substantial portion of the Applicant's assets the sale agreement had to be approved by a special general meeting of the Applicant's shareholders. A second valuation of the properties was called for and carried out by the same valuer who had initially valued the properties on behalf of the State. The second valuation, dated 13 March 2009, put the value of the properties at R267.7 million, an increase of no less than R31.5 million in the value of the properties. ... 13.7 The significance of the above is that no adjustment was ever made to the price of the properties to take account of the general increase in the value of agricultural properties during the period in question and, specifically, the very substantial increase in the value of the properties as outlined above. The Applicant received no benefit from this very significant increase in the value which attached to the properties when they were finally transferred. Such benefit, had the Applicant received it, far exceeds the value of the interest now claimed. 13.8 Furthermore, as a result of the uncertainty surrounding the future of the properties which constituted a significant portion of the Applicant's assets, the Applicant was unable to devise any long-term financial and investment strategy for a financial return on these assets or the funds which stood to be realised by their sale. 13.9 In addition, the very nature of the situation, the Applicant was limited in as far as planning, development and investments in the properties were concerned.’ [24] No evidence was adduced as to the maturity of the sugar cane crops, the crushing cycle of the sugar mills or when the tropical fruit on the properties would have been ripe for harvesting. It was thus impossible to have assessed whether or not there was any real benefit for the appellant. Moreover, whilst there may well have been some kind of filial relationship between the appellant and its subsidiary CBL Agri Services, there is no evidence that the latter, a separate and distinct juristic entity, had acted as an agent for an undisclosed principal, in this case the appellant, or had transferred its rights in terms of the lease agreement to the appellant. (See Wambach v Maizecor Industries (Edms) Bpk 1993 (2) SA 669 (A) at 674H-J.) Even if it were to be accepted that CBL Agri Services had in fact acted as an agent for the appellant, the simple truth is that the appellant could have continued to enjoy the fruits of the collateral lease with the benefit of the purchase price of R200 million. Thus even were it to have been permissible for the court below to have embarked upon this enquiry, it ought, in my view, to have arrived at a contrary conclusion. It follows that even on this leg of the case the respondents ought to have failed. [25] The fact that the appellant may have had the benefit of the property is irrelevant where, as here, a default interest clause had been agreed on and the seller’s continued possession of the sold property occurred as a consequence of the purchaser’s deliberate default. Acceptance of the proposition that there should be no liability for interest in the circumstances of this case implies that a purchaser such as this can breach its payment obligations with impunity, whilst at the same time maintaining the benefit of the bargain that has been struck. That proposition merely has to be stated to be rejected. [26] Properly analysed the gist of the respondents’ case is that they were somehow excused from performing their contractual obligation because of a lack of funds. In Mokala Beleggings & another v Minister of Rural Development and Land Reform & others 2012 (4) SA 22 (SCA) para 8, this court dealt with a similar argument thus: ‘. . . In Linton v Corser supra the court held the purchaser liable for mora interest (it was a case of mora ex persona) for delaying the signing of the transfer documents and the delivery of the necessary guarantees. Mora in the present matter concerned a delay in the payment of the purchase price as a result of the department's delay in having the registration of transfer effected by its conveyancers. As stated, the fact of and the reason for the delay were common cause. The delay was deliberate, due to the department's financial constraints and resultant inability to pay the purchase price. Of course our law does not require fault on the part of a debtor for a contractual damages claim. All that is required is proof that the debtor is in mora.' Majiedt JA, however, later, remarked en passant (para 15): 'It was common cause that the appellants had suffered loss as a result of the delay. The appellants' farming enterprise was the main source of income for the Snyman family. They had sold all their cattle during April 2009 in anticipation of the transfer of the properties to the state, which they had to vacate within 48 hours of the registration. The appellants were plainly dependent on payment of the purchase price to re-establish their farming business or to establish other enterprises from which to derive income. The financial prejudice and loss flowing from the state's prevarication are self-evident.' Those considerations, as I have endeavoured to show and my learned colleague Majiedt earlier in his judgment appreciated, are irrelevant to an enquiry such as the present. [27] It remains to observe that the conduct of the officials in the employ of respondents evokes strong feelings of disquiet in one. Because of their conduct the public purse is much the poorer. As I have already pointed out for as long as the purchase price remained unpaid interest accrued at R84 931 per day. To that must be added the costs of what can only be described as ill-advised and morally unconscionable litigation. In Mokala Beleggings (Pty) Ltd, Majiedt JA observed (para16): 'It may well be that the department is under severe strain to meet the financial (and, it seems, the administrative) demands imposed by the land reform process. The restitution of land under the Restitution of Land Rights Act 22 of 1994, is not only a constitutional imperative but a highly emotive issue as well. Considerable circumspection, diligence and sensitivity are required on the part of all concerned, including departmental officials. Agreements to purchase land for restoration to dispossessed communities should be honoured in accordance with the terms agreed upon, lest the already demanding challenges of the process be further exacerbated.' [28] In the result: (a) The appeal succeeds with costs to be paid jointly and severally by the respondents. (b) The order of the court below is set aside to be replaced with: ‘The respondents are ordered jointly and severally to pay to the applicant: (i) the sum of R22 761 643,85; (ii) interest on the sum of R22 761 643,85 at rate of 15.5% per annum from 6 July 2010 to date of payment; (iii) costs of suit including those of two counsel where employed.' _________________ V M PONNAN JUDGE OF APPEAL APPEARANCES: For Appellant: K J Kemp SC Instructed by: Livingston Leandy Inc La Lucia Ridge McIntyre & Van Der Post Bloemfontein For 1st, 2nd and 3rd Respondents: N G D Maritz SC M Majozi Instructed by: The State Attorney Pretoria The State Attorney Bloemfontein

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL From: The Registrar, Supreme Court of Appeal Date: 21 September 2012 Status: Immediate Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal. Crookes Brothers Ltd v Regional Land Claims Commission for the Province of Mpumalanga & others (590/2011) [2012] ZASCA 128 (21 September 2012) The Supreme Court of Appeal (SCA) today held that the Regional Land Claims Commission for the Province of Mpumalanga, the National Department of Land Affairs and the Government of the Republic of South Africa (the respondents) were liable to pay interest on the purchase price of certain immovable properties to Crookes Brothers Ltd (the appellant). It accordingly upheld an appeal against an order of the North Gauteng High Court, Pretoria dismissing the appellant’s claim. The respondents had bought the properties, which formed the subject matter of land claims by various communities in terms of the Restitution of Land Rights Act 22 of 1994, from the appellant. The respondents thereafter failed to timeously provide a guarantee as they were obliged to in terms of the agreement. That resulted in a delay in effecting transfer, which in turn resulted in the late payment of the purchase price. Had the respondents complied with the agreement, the undertaking would have been provided on 4 September 2009, the transfer would have been registered by no later than 25 September 2009 and the purchase price would have been payable by no later than 9 October 2009. In terms of clause 6 of the agreement the respondents were liable to pay mora interest at the rate of 15.5% if they failed to pay any part of the purchase on the date on which it was due in terms of the agreement. Since the respondents were in breach of the agreement by failing to provide the undertaking, they were given written notice to that effect and afforded an opportunity to remedy the breach within fourteen days as required by clause 18. The response to the notice by the respondents was that they did not have the funds and could thus not furnish the requisite guarantee. They only furnished the guarantee on 15 June 2010. The registration and transfer of the property was subsequently effected and the purchase price only paid on 5 July 2010. The respondents thereafter refused to pay interest. The appellant’s claim for interest was dismissed by the high court. The high court held that clause 6, which dealt with interest, was not applicable inasmuch as the appellant remained the owner and in possession of the property and as such was entitled to the enjoyment of the properties and the fruits thereof until transfer. Before the SCA counsel for the respondents argued that since the purchase price had been paid within ten days after the date of transfer as required by clause 3.2, clause 6 was not applicable. They further argued that the appellant could only rely on section 1 of the Prescribed Rate of Interest Act 55 of 1975 (the Act). The SCA found that clause 6 was applicable. It held that the respondents’ obligation to pay the purchase price was not an independent and self-standing obligation but was dependent for its fulfilment on the obligation to provide the undertaking. It further held that the appellant would still have been entitled to interest even had there been no contractual obligation for the respondents to pay such interest. The appellant did not have to prove that it had suffered a loss as a result of the late payment. The SCA dismissed the respondents’ argument that the high court, in dismissing the application, exercised a discretion in terms of section 1 of the Act. Finally, the court criticised the tardy conduct of the employees in the employ of the respondents in dealing with the matter.

1529

non-electoral

2008

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA JUDGMENT Case no: 664/07 In the matter between: WITHOK SMALL FARMS (PTY) LTD 1ST APPELLANT BOULEIGH 113 (PTY) LTD 2ND APPELLANT AUCOR SANDTON (PTY) LTD 3RD APPELLANT and AMBER SUNRISE PROPERTIES 5 (PTY) LTD RESPONDENT Neutral citation: Withok Small Farms (Pty) Ltd v Amber Sunrise Properties Ltd (664/07) [2008] ZASCA 131 (21 November 2008) ______________________________________________________________ Coram SCOTT, LEWIS JJA et GRIESEL AJA Date of hearing : 7 NOVEMBER 2008 Date of delivery : 21 NOVEMBER 2008 Summary: Sale by public auction – 'Agreement and Conditions of Sale' signed by purchaser – seller given 7 days to 'confirm' sale – not a sale subject to a condition but an offer to purchase open for 7 days – 'Agreement and Conditions of Sale' making provision for seller to sign on date to be specified – contract coming into existence when seller signs – no need for acceptance to be communicated to purchaser. ______________________________________________________________ ORDER ______________________________________________________________ On appeal from: the High Court, Pretoria (RABIE J sitting as court of first instance): The following order is made: [A] The appeal is upheld. The respondent is to pay the costs of appeal of the first and second appellants and those of the third appellant. [B] The order of the court a quo is set aside and the following substituted in its place: '(a) The application is dismissed with costs. (b) The counter application is upheld and the following order is made: The agreement and conditions of sale, signed by the applicant on 13 June 2006 and the first and second respondents on 20 June 2006, in terms of which the applicant purchased Holdings 380, 381 and 387 Withok Estates Agricultural Holdings from the first and second respondents respectively, is declared to be of full force and effect; The applicant is ordered to furnish the first and second respondents with a bank guarantee or such other irrevocable guarantee acceptable to the first and second respondents for the balance of the purchase price within 30 (thirty) days of the granting of this order or alternatively to pay such balance to the first and second respondents' conveyancers as identified in the agreement within 30 (thirty) days of the granting of this order, such amount to be held in trust by the said conveyancers pending transfer of the properties as provided for in paragraph 3 below; The first and second respondents are ordered, through their conveyancers as appointed in the agreement, to effect transfer of the properties to the applicant upon receipt of payment from the applicant of all costs and amounts referred to in clauses 9, 10 and 12 of the agreement and the rendering of a guarantee or alternatively payment as referred to in paragraph 2 hereinabove; The applicant is ordered to pay interest a tempore morae to the first and second respondents on the amount of R3 550 010,00 at a rate of 15,5% calculated from 20 June 2006 to the date of payment and to pay any collection charges on the amounts stipulated herein and in paragraphs 2 and 3 above duly levied by the first and second respondents' conveyancers in accordance with the applicable guidelines and rules; The applicant is ordered to pay the costs of this counter application on a scale as between attorney and client.' ______________________________________________________________ JUDGMENT SCOTT JA (Lewis JA and Griesel AJA concurring): [1] The first and second appellants are the registered owners of certain immovable property situated in Gauteng ('the Withoek properties'). The third appellant is Aucor Sandton (Pty) Ltd, which carries on business as auctioneers in Johannesburg. On 13 June 2006 the Withoek properties were put up for sale at a public auction held by Aucor. The auction was attended by Dr Mohamed Adam who represented the respondent. His bid for the properties, being the highest, was accepted by Aucor. At the conclusion of the auction, Adam signed the 'Agreement and Conditions of Sale' to which the auction was subject, as did Mr Paul Winterstein on behalf of Aucor. I shall refer to this document as 'the conditions of sale', as the parties have done, although strictly speaking the provisions for the most part constitute terms and not conditions. [2] Clause 1 reads as follows: 'The Properties shall be provisionally sold to the highest bidder subject to confirmation of the sale by the Seller within seven (7) days and the highest bidder shall be bound by his bid for seven (7) days from date of signature of these conditions by the Purchaser.' On the morning of 20 June 2006 (being a date within seven days of the date of the respondent's signature) Mr Marthinus van Rensburg, acting for and on behalf of the first and second appellants (to whom I shall refer as 'the sellers') completed the latter's details and confirmed the sale in writing by adding his signature, as depicted on the final page of the conditions of sale. It is common cause that the confirmation of the sale was not communicated to the respondent within the time contemplated in clause 1. It appears that the respondent did not receive notice of the confirmation until some time early in July 2006. [3] The respondent subsequently applied in the High Court, Pretoria, for an order declaring the agreement to be of no force and effect and for the repayment of the deposit of R454 290 which it had paid to Aucor, together with interest and costs. The sellers and Aucor – the latter had been cited as the third respondent – opposed the application and contended that notwithstanding the failure to communicate the confirmation of the sale to the respondent within the seven-day period, the agreement nonetheless became of full force and effect on 20 June 2006 when it was confirmed by Van Rensburg. In addition, the sellers – but not Aucor – brought a counter application for an order declaring the agreement to be of full force and effect and for an order directing the respondent to pay the balance of the purchase price and to take various steps to enable transfer to be given. The matter came before Rabie J who upheld the respondent's application and dismissed the counter application, with costs. The appeal is with the leave of the court a quo. [4] It was common cause between the parties in this court, as it was in the court below, that the only issue in dispute was whether the 'confirmation' of the sale had to be communicated to the respondent within the seven-day period. [5] I have previously quoted clause 1 of the conditions of sale. It is necessary to refer to certain other provisions. Clause 11 requires the purchaser to pay a deposit and provides further that: 'the Purchaser shall within thirty days after confirmation of these conditions by the Seller furnish the Seller with a bank guarantee . . . .' and that: 'In the event of the sale not being confirmed by the Seller, the amount paid by the Purchaser will be refunded . . . .' Clause 12 renders the purchaser liable for the auctioneer's commission and affords the auctioneer: 'the right, on confirmation, to deduct such commission (plus VAT) and costs from the deposit paid in terms hereof . . . .' Clause 16 reads: 'In the event of the Seller declining to sign these conditions of sale, he/they shall not be called upon to furnish reasons therefor.' Clause 20 reads: 'The highest bidder shall, immediately after the sale, sign these conditions and if the Purchaser purchases on behalf of a principal, he shall divulge the name of such principal upon signature hereof at the foot of this agreement. The Seller however, shall sign the conditions only upon confirmation of the sale.' [6] It was contended on behalf of the sellers and Aucor, both in this court and the court below, that the conditions of sale, signed by the respondent and Aucor at the time of the auction, constituted an agreement of sale subject to a suspensive condition, being the confirmation of the sale by the sellers, and that the condition was fulfilled immediately upon the confirmation and without the need for it to be communicated to the respondent. The contention was rejected by Rabie J who held that no agreement of sale was concluded at the time of the auction and that the only consequence of the agreement concluded at that stage was to bind the respondent to its bid for a period of seven days. The learned judge held that the reference in the conditions of sale to the 'confirmation' of the sale accordingly had to be construed as a reference to the acceptance of an offer. The judge proceeded to examine the provisions of the conditions of sale (which he construed as being an offer) to determine whether it expressly or impliedly indicated a mode of acceptance other than that required by common law, namely that it be communicated to the offeror. He found that there was insufficient to indicate that the common law rule was not to apply and, as the sellers' acceptance had not been communicated to the respondent within the seven-day period, the respondent had to succeed and the counter application be dismissed. [7] The document is poorly drafted. It is couched in language suggestive of a sale subject to a suspensive condition. Thus, clause 1 speaks of the properties being 'provisionally' sold 'subject to confirmation by the seller'. There are numerous other references to the sellers being required to 'confirm' the sale. But as pointed out by this court in Benlou Properties (Pty) Ltd v Vector Graphics (Pty) Ltd 1993 (1) SA 179 (A) at 186F-J a distinction is drawn in our law between a pure and a mixed potestative condition. The former is invalid because its fulfilment depends entirely upon the unfettered will of the promissor. A typical example, and the one given in the Benlou case, is: 'I will pay you R500 if I wish to do so'. In the present case, the conditions of sale reserved to the sellers an unlimited choice whether to sell or not. It gave rise to no obligation on their part whatsoever and accordingly no agreement of sale came into existence at the time of the auction. [8] I interpose that by reason of the provisions of s 3 of the Alienation of Land Act 68 of 1981 the sale of the properties in the present case was not required to be in writing and signed by the parties. The mere fact that the sellers were to sign at some later date would not on that account have precluded a contract of sale from coming into existence. [9] In terms of clause 1 of the conditions of sale the respondent bound itself to keep its bid open for a period of seven days. To that limited extent a binding contract came into existence. The true nature of that contract was an option granted by the respondent to the sellers to sell the properties on the terms and conditions set out in the document. I accordingly agree with the court a quo that on a proper construction the reference in the conditions of sale to the confirmation of the sale had to be construed as a reference to the acceptance of an offer. [10] I turn now to the question whether the offer was accepted within the seven-day period. It is a trite principle of the common law that, unless the contrary is established, a contract comes into being when the acceptance of the offer is brought to the notice of the offeror. It is also trite that an offeror may indicate, whether expressly or impliedly, the mode of acceptance by which a vinculum juris will be created. If there is doubt it will be presumed that the contract will be completed only when the acceptance of the offer is communicated to the offeror. See Driftwood Properties (Pty) Ltd v McLean 1971 (3) SA 591 (A) at 597C-G. This was a case in which the court was similarly concerned with an offer that was open for a limited period. The contract, which took the form of an offer to purchase, contained a clause that read: '7 That this offer is open and binding upon both parties until signature by both parties on or before the 17th May 1969, failing which it shall lapse if only signed by one party.' The unsigned offer was presented to the seller who signed it and thus became the offeror. The court concluded that although clause 7 was badly phrased it prescribed the manner in which the contract was to be concluded. It was accordingly enough that the purchaser had signed before 17 May 1969 and there was no need for that fact to be communicated to the seller. [11] In each case it will be necessary to consider the terms of the offer to determine the mode of acceptance required. Where, however, the offer takes the form of a written contract signed by the offeror, the inference will more readily arise in the absence of any indication to the contrary that the mode of acceptance required is no more than the offeree's signature. This is particularly so where provision is made in the written contract for the offeree to specify the date on which he or she signs the contract. In Reid v Jeffreys Bay Property Holdings (Pty) Ltd 1976 (3) SA 134 (C) at 137D-G E M Grosskopf AJ (as he then was) said the following (my translation): 'However, even when writing is not a formal requirement, written contracts are an everyday occurrence in the commercial world. The object of reducing a contract to writing (whether voluntarily or required by statute) is normally to achieve certainty and to facilitate proof (cf, eg, Woods v Walters, 1921 AD 303, Van Wyk v Rottcher's Saw Mills (Pty) Ltd 1948 (1) SA 983 (A)). It is presumably for the same reason that the date and place of signature is normally specified in written contracts. The signing of a written contract is the usual manner in which parties indicate their agreement to its terms and certainty as to the place and date of the conclusion of the contract can be equally as important for the parties to the contract as certainty as to its content. Consequently it is inherently improbable that any of the parties to such a contract would intend that the time and place of the conclusion of the contract would be determined not from the document itself but by way of evidence aliunde.' I readily endorse the views expressed by the learned judge which accord with common sense and commercial practicalities. Indeed, if the position were otherwise, the consequence would be to defeat the very object of reducing the contract to writing. Quite apart from certainty as to the terms of the contract, that object in a case such as the present would be to avoid disputes as to the date upon which the offer was accepted. [12] I return to the facts of the present case. When Adam signed the conditions of sale, the final page of that document (which had not yet been completed and signed by the sellers) would have read: 'I/we ___________________________________________________________________ in my/our capacity as the Seller: HEREBY CONFIRM THIS SALE ON THE CONDITIONS AS HEREIN SET OUT DATED AT ____________________________ ON THIS ______________ DAY OF _________________ 2006 AS WITNESSES: 1.______________________ 2. ______________________ ___________________ SELLER SELLERS TELEPHONE NUMBER: _______________________________ SELLERS FAX NUMBER ______________________________________ ' Once completed and signed by the sellers, the document would have served as a recordal of the date and place of the 'confirmation'. This to my mind constitutes the clearest indication that the mode of acceptance was to be the signature of the sellers. [13] Some reliance was placed on the second sentence in clause 20 (quoted in para 5 above) in support of a contrary construction. It reads: 'The Seller, however, shall sign the conditions only upon confirmation of the sale.' Commenting on the clause, Rabie J said: 'In my view, the proper interpretation of this last sentence of the clause is that it allows for confirmation of the sale in another manner than by signing the agreement. In other words that the seller can confirm the sale but once he has done that, he must sign the agreement.' Based on this construction of clause 20 the learned judge reasoned that the sellers' signature could not be equated with the acceptance of the offer; that the agreement was silent on the manner in which the sellers were to accept the offer and accordingly the ordinary common law rule that requires the offeror to be notified of the acceptance had to be applied. [14] With respect to the judge, I think he reads into the clause what is not there. The second sentence in clause 20 must be read in context. The first sentence provides for when the bidder is to sign the conditions of sale, namely 'immediately after the sale'. The second sentence provides for when the seller is to sign. It says in effect that he will sign only when he confirms the sale (ie accepts the offer), not before. The implication is clear: the sale will be confirmed when he signs. Anyone reading the contract would see that it was 'confirmed' on 20 June 2006 and that is how the parties would have known the contract would be understood. It is also of some significance that clause 16 deals with the consequences of the seller 'declining to sign these conditions'. The implication is that failing to sign is the equivalent of failing to confirm. [15] It was not in dispute that Van Rensburg signed the conditions of sale on the morning of 20 June 2006, ie within the seven-day period referred to in clause 1. It follows that in my view a valid sale came into existence on that date and that the appeal must succeed. [16] The following order is made: [A] The appeal is upheld. The respondent is to pay the costs of appeal of the first and second appellants and those of the third appellant. [B] The order of the court a quo is set aside and the following substituted in its place: '(a) The application is dismissed with costs. (b) The counter application is upheld and the following order is made: The agreement and conditions of sale, signed by the applicant on 13 June 2006 and the first and second respondents on 20 June 2006, in terms of which the applicant purchased Holdings 380, 381 and 387 Withok Estates Agricultural Holdings from the first and second respondents respectively, is declared to be of full force and effect; The applicant is ordered to furnish the first and second respondents with a bank guarantee or such other irrevocable guarantee acceptable to the first and second respondents for the balance of the purchase price within 30 (thirty) days of the granting of this order or alternatively to pay such balance to the first and second respondents' conveyancers as identified in the agreement within 30 (thirty) days of the granting of this order, such amount to be held in trust by the said conveyancers pending transfer of the properties as provided for in paragraph 3 below; The first and second respondents are ordered, through their conveyancers as appointed in the agreement, to effect transfer of the properties to the applicant upon receipt of payment from the applicant of all costs and amounts referred to in clauses 9, 10 and 12 of the agreement and the rendering of a guarantee or alternatively payment as referred to in paragraph 2 hereinabove; The applicant be ordered to pay interest a tempore morae to the first and second respondents on the amount of R3 550 010,00 at a rate of 15,5% calculated from 20 June 2006 to the date of payment and to pay any collection charges on the amounts stipulated herein and in paragraphs 2 and 3 above duly levied by the first and second respondents' conveyancers in accordance with the applicable guidelines and rules; The applicant be ordered to pay the costs of this counter application on a scale as between attorney and client.' _________ D G SCOTT JUDGE OF APPEAL Appearances: For First and Second Appellant: JC Uys For Third Appellant: KW Lüderitz Instructed by: For 1st and 2nd Appellant: Van Rensburg Schoon & Cronjé Inc, Pretoria Naudes, Bloemfontein For 3rd Appellant: Cyril Ziman Attorneys c/o Jacobson & Levy, Pretoria E G Cooper & Sons Inc, Bloemfontein For Respondent: F H Terblanche SC H R Fourie Instructed by: Solomon Nicolson Attorneys, Pretoria Hill McHardy & Herbst Inc, Bloemfontein

THE SUPREME COURT OF APPEAL REPUBLIC OF SOUTH AFRICA MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL Case no: 664/07 In the matter between: WITHOK SMALL FARMS (PTY) LTD 1ST APPELLANT BOULEIGH 113 (PTY) LTD 2ND APPELLANT AUCOR SANDTON (PTY) LTD 3RD APPELLANT and AMBER SUNRISE PROPERTIES 5 (PTY) LTD RESPONDENT From : The Registrar, Supreme Court of Appeal Date: 21 November 2008 Status: Immediate Please note that the media summary is for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal Property owned by the first and second appellants was sold at a public auction to the respondent. In terms of the conditions of sale the appellants, being the sellers, had seven days to confirm the sale. The High Court, Pretoria, held that no agreement of sale was concluded on the date of the auction; all that happened was that the respondent bound itself to keep its offer open for seen days. The SCA agreed with the High Court on this issue. The SCA, however, overruled the High Court's decision that a sale would only come into existence when the sellers' confirmation of the sale was communicated to the respondent. The SCA held that having regard to the terms of the conditions of sale it was clear that the sale was confirmed, ie a sale came into existence, the moment the Sellers signed the conditions of sale. - - - ends - - -