The law reports – August 2012

August 1st, 2012
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David Matlala BProc (University of the North) LLB (Wits) LLM (UCT) LLM (Harvard) HDip Tax Law (Wits) is an adjunct professor of law at the University of Fort Hare.

June 2012 (3) The South African Law Reports (pp 325 – 644); [2012] 2 The All South African Law Reports May no 1 (pp 237 – 344) and no 2 (pp 345 – 451)

Abbreviations:

GNP: North Gauteng High Court

SCA: Supreme Court of Appeal

Advocates – SC status

Conferring status of senior counsel on practising advocates: Section 84(1) of the Constitution provides that the President has the powers entrusted by the Constitution and legislation, including those necessary to perform the functions of head of state and head of the national executive. Subsection (2)(k) provides that the President is responsible for conferring honours. There is no reference to ‘senior counsel’ in the above provisions. In Mansingh v President of the RSA and Others [2012] 2 All SA 295 (GNP) the applicant, Mansingh, a practising advocate and a member of the Johannesburg Society of Advocates, applied to the GNP for an order declaring that the first respondent, the President of the Republic of South Africa, had no power in terms of s 84(2)(k) of the Constitution or otherwise to confer the status of senior counsel on practising advocates. The application was opposed by the President, the Minister of Justice and Constitutional Development, as second respondent, and the other respondent interested institutions, save for one. The order sought was granted with costs against the first and second respondents only, a costs order not having been sought against the other respondents.

Phatudi J held that the 1961 and 1983 South African constitutions expressly empowered the President, in addition to the powers the President had as head of state, to have such powers and functions possessed by Her Majesty, the Queen of England and President, by way of royal prerogatives that existed prior to commencement of those constitutions. Thus, like s 7(4) of the 1961 Constitution, s 6(4) of the 1983 Constitution provided that the President would, in addition to those as head of state, have such powers and functions as were possessed by the President by way of prerogative immediately before the commencement of that Constitution. Those prerogatives included conferring silk, that is, the status of senior counsel, on senior advocates. Against this, the present Constitution, like the interim Constitution, made a clean break with the past and eliminated any reference to prerogatives. It is trite that the President has such powers and can exercise only such functions as are conferred on him by the Constitution or any law consistent with the Constitution – but no more. The Constitution is the supreme law of the country and does not permit the exercise of public power not authorised by it or any other law. Honour is earned by serving the country exceptionally, beyond the ordinary call of duty. This is not so with practising advocates who wish to be ‘honoured’ as they apply for such honour, which could, in appropriate cases, be denied. There is no legislation, including the Admission of Advocates Act 74 of 1964, that empowers the President to institute, constitute and award the status of senior counsel to practising advocates or any legal practitioners who display ‘good quality work’ to the legal profession. As a result, the appointment of practising advocates as senior counsel is not authorised by ‘conferring honours’ within the meaning of s 84(2)(k) of the Constitution.

No general rule that costs of two counsel should be allowed in interlocutory applications: In Wanderers Club v Boyes-Moffat and Another 2012 (3) SA 641 (GSJ) the plaintiff, Wanderers Club, sought separation of the issues of merit and quantum, which were to be determined in separate trials due to convenience and expedience. The second defendant opposed the request and, as a result, a formal application for separation of issues was made in terms of r 33(4) of the Uniform Rules of Court. The application was granted with costs. Counsel for the plaintiff sought costs of two counsel; however, the court awarded costs of only one.

Van Oosten J held that the general principle regarding the award of costs was well settled. It was a matter in the discretion of the court, which was to be exercised judicially on a consideration of the facts of each case; it being in essence a matter of fairness to both sides. The general rule of thumb, as stated by Van Wyk J in Davis v Caledon Municipality and Another 1960 (4) SA 885 (C) at 887H – to the effect that if the main action justified the costs of two counsel, then the costs of the two should be allowed in all interlocutory applications – detracted from the wide discretion with regard to costs and was therefore unacceptable. The instant interlocutory application revealed nothing out of the ordinary nor any factual complexity. Furthermore, it was not argued, nor could it be said, that the employment of two counsel was a wise and reasonable precaution. The costs of two counsel were therefore not justified and could not be allowed.

Arbitration

Non-recognition of foreign arbitration award: Section 2(1) of the Recognition and Enforcement of Foreign Arbitral Awards Act 40 of 1977 (the Act) provides that any foreign arbitration award may be made an order of court by any court. Important for present purposes is s 4(1)(a)(ii), which provides that a court may refuse to grant an application for an order of court if it is satisfied that the enforcement of the award concerned would be contrary to public policy in South Africa. In MV Cos Prosperity: Phoenix Shipping Corporation v DHL Global Forwarding SA (Pty) Ltd and Another 2012 (3) SA 381 (WCC) the applicant, Phoenix, referred a contractual dispute it had with DHL to arbitration at the London Court of International Arbitration. The arbitrator held that DHL was liable to Phoenix. Further, in terms of the same agreement, Bateman, a South African company, had agreed to indemnify DHL in respect of its liability to Phoenix. Bateman (which had taken part in the London arbitration and had objected to the jurisdiction of the arbitrator, pointing out that it was never a party to the contract) nevertheless failed to appeal against the arbitration award and did not seek its review in the English courts, as provided for in English law. When Phoenix applied to have the arbitration award made an order of court in South Africa so that it could be enforced, DHL, being a South African company, sought leave to intervene in the proceedings. DHL’s interest being that the part of the award that provided that Bateman was liable to indemnify DHL would have been made an order of court, which could then be enforced. Bateman opposed DHL’s intervention application, contending that, as it was not a party to any agreement with Phoenix or DHL and as it never concluded any agreement containing a clause submitting arbitration to the jurisdiction of the London Court, the arbitrator lacked jurisdiction to make an award against it.

Yekiso J held that both the common law and the Act recognised the importance of an arbitration agreement as a prerequisite to the enforcement of an arbitration award. In the instant case, the court could not find, as a matter of fact, both in terms of English and South African law, that there was a valid agreement between DHL and Bateman to submit disputes to arbitration. DHL had failed to allege and prove a valid agreement containing a submission to arbitration. The jurisdiction of the arbitrator was derived from a valid arbitration agreement, in the absence of which no arbitrator could claim jurisdiction to determine the dispute. Absent proof that a party had bound itself to an arbitration agreement containing a clause submitting the parties to arbitration, the arbitrator did not have jurisdiction over that party. An order for the recognition and enforcement of a foreign arbitral award, which was on the face of it invalid, would be contrary to legal order in any civilised world. An arbitration agreement was based on consensus between the parties. Any contract that did not contain consensus as an element would offend against the norms and values that characterised a civilised society. Absent the element of consensus in an alleged or purported contract, same would be invalid. The recognition and enforcement of an award derived from such alleged or purported agreement, which was invalid, would offend against public policy in this country.

Attorneys

Fidelity Fund is liable for loss by theft of ‘entrusted money’ only: Section 26(a) of the Attorneys Act 53 of 1979 (the Act) provides, among others, that the Attorneys Fidelity Fund (the fund) shall be applied for the purposes of reimbursing those who may suffer pecuniary loss as a result of theft by a practising attorney of any money or other property ‘entrusted’ by or on behalf of such persons to him in the course of his practice. The keyword is ‘entrusted’, which refers to trust money or property. In Attorneys Fidelity Fund Board of Control v Mettle Property Finance (Pty) Ltd 2012 (3) SA 611 (SCA) the respondent, Mettle, a factoring company, paid certain sums of money into the trust account of a certain attorney, one L, pursuant to three bridging finance transactions. In terms of an agreement between the respondent and the attorney, the latter undertook to make payments to the respondent and mortgagors or sellers of the properties from the proceeds of the registration of a bond and two property transfers once such proceeds were received. However, the attorney misappropriated the money, which had been deposited into his trust account. He was struck off the roll of attorneys and his estate was sequestrated. The respondent realised that it would not recover anything from the attorney’s insolvent estate and therefore instituted proceedings against the appellant fund to recover, in terms of s 26(a), the money lost. In the GNP, Tolmay J upheld the respondent’s claim; hence the present appeal to the SCA, which was upheld with costs.

Van Heerden JA (Harms DP, Maya, Theron and Wallis JJA concurring) held that there was no ‘entrustment’ of money by the respondent to the attorney. If the money was simply handed over to an attorney by a debtor who thereby wished to discharge a debt, and the attorney had a mandate to receive the money on behalf of the creditor, it would be difficult to establish an ‘entrustment’. It followed that the respondent, in paying the initial purchase price (deposit) in each transaction to the attorney as the representative of the mortgagor or seller from whom the respondent had purchased a loan claim or a seller’s claim, was simply discharging its debt to such mortgagor or seller. The payment was unconditional and, the moment the initial purchase price was paid into the attorney’s trust account in terms of the agreement, the respondent’s debt to the mortgagor or seller was discharged. The attorney was no more than a conduit for the money. That being the case, there was no ‘entrustment’ of the money by the respondent to the attorney. Accordingly, the respondent did not have a claim against the fund in terms of s 26(a). The fund was not an insurance ‘against all ills that may befall money paid to an attorney’.

Constitutional law

Judicial scrutiny of exercise of public power: In Democratic Alliance and Others v Acting National Director of Public Prosecutions and Others 2012 (3) SA 486 (SCA), [2012] 2 All SA 345 (SCA) the first respondent, Mpshe, then acting National Director of Public Prosecutions, took a decision in April 2009 to discontinue a prosecution against the third respondent, Jacob Zuma, currently President of South Africa. The prosecution related to corruption charges in terms of which he was alleged to have provided political patronage and protection in exchange for financial reward. As a result of that decision, the first appellant, the Democratic Alliance, a registered political party and the official opposition in parliament, made an application to the GNP for an order reviewing, correcting and setting aside the decision to discontinue the prosecution. Thereafter, the first appellant requested the first and second respondents to deliver to the registrar of the court the record on which the impugned decision was based. In the second application, Young and the company of which he was the managing director, CCII Systems, sought leave to intervene in the main application. Their reason for doing so was that CCII Systems had been an unsuccessful bidder in respect of the arms procurement process out of which the corruption charges arose. Ranchod J in the GNP dismissed both the main and intervention applications; hence the present appeal to the SCA. The application for leave to intervene was dismissed with costs, while the first appellant’s appeal was upheld with costs.

The issues the SCA was called on to decide were –

  • the reviewability of the decision to discontinue the prosecution;
  • whether the first respondent was required to furnish the record of his decision;
  • the locus standi of the first appellant; and
  • the second and third appellants’ application for leave to intervene.

Navsa JA (Mpati P, Bosielo, Tshiqi JJA and Plasket AJA concurring) held that a decision to discontinue a prosecution was subject to a rule of law review. In fulfilling the constitutional duty of testing the exercise of public power against the Constitution, courts were protecting the very essence of a constitutional democracy. In the constitutional era courts were empowered to scrutinise the exercise of public power for compliance with constitutional prescripts. It could hardly be argued that a record of a decision related to the exercise of public power that could be reviewed should not be made available. Without the record, the court would not be able to perform its constitutionally entrenched review function, with the result that a litigant’s right in terms of s 34 of the Constitution to have a justiciable dispute decided in a fair public hearing before a court with all the issues being ventilated would be infringed.

All political parties participating in parliament had an interest in ensuring that public power was exercised in accordance with constitutional and legal prescripts and that the rule of law was upheld. It was in the public interest and of direct concern to political parties participating in parliament that an institution such as the National Prosecuting Authority (NPA) acted in accordance with constitutional and legal prescripts. The question whether the NPA, in making the decision to discontinue the prosecution of the third respondent, had acted in accordance with the law or had wrongfully and unlawfully succumbed to political power and influence, as alleged by the first appellant, was a matter for decision in the review application after all the papers had been filed. It followed that the first appellant had standing to act in its own interest, as well as in the public interest, and was entitled to pursue that application to its conclusion. However, this was not the case for the second and third appellants who sought leave to intervene. In their case, it was difficult to discern with any degree of precision, or at all, the ambit of their complaint against the third respondent.

Regional structure plan is a provincial, not a municipal, planning function: In Shelfplett 47 (Pty) Ltd v MEC for Environmental Affairs and Development Planning and Another 2012 (3) SA 441 (WCC) the applicant, Shelfplett, was the owner of property situated in the area of the Bitou Municipality in the Western Cape. In terms of the regional structure plan (RSP), the property was in an area designated ‘recreation’. The applicant submitted an application to the first respondent, the member of the executive council (MEC), for amendment of the RSP so that the designation could be changed to ‘township development’, which would have enabled the applicant to develop the property into residential units. The application to amend was refused by the MEC. As a result, the applicant approached the High Court for an order reviewing and setting aside the MEC’s refusal on a number of grounds, including that the MEC had based his refusal on impermissible considerations that belonged to municipal planning functions as opposed to provincial planning functions. Thereafter, the papers were amended to challenge the validity of the RSP as having been based and informed on unconstitutional race-based apartheid planning principles of the past.

Rogers AJ held that the RSP was invalid as it was based on racially discriminatory planning principles and had to be set aside. The MEC was ordered to pay the costs, save those of an interlocutory application to strike out, which the applicant had to pay. Regarding rejection of the requested amendment, the MEC was held to have properly taken provincial – and not municipal – planning function considerations into account.

The RSP in question, which was prepared in 1983, was found to have been an instrument that violated the founding values of human dignity and non-racialism espoused in s 1 of the Constitution, as well as the fundamental rights of equality and dignity contained in ss 9 and 10 of the Constitution. As past laws sanctioning racial segregation materially influenced the content of the RSP, inconsistency with the Constitution was manifest. A duly approved RSP was a species of subordinate legislation and thus ‘law’ within the meaning of s 172 of the Constitution. On that basis too, it fell to be set aside.

The nature of the power exercised by the MEC when granting or refusing an application to amend an RSP and the considerations he could legitimately take into account were to be determined with reference to the empowering legislation. As the legislative scheme for RSPs was a provincial planning matter, all the considerations the legislation authorised the relevant authority to take into account in approving or amending an RSP were permissible provincial planning considerations. The act of approving or amending an RSP constituted the performance of a provincial planning function. There was no substance in labelling the considerations otherwise as they took their character from the function to which they related.    

Contempt of court

Disobeying an order giving rise to alleged contempt of court that is a nullity does not constitute contempt of court: Section 429 of the now repealed Companies Act 61 of 1973 (the Act) provided that, on the granting of provisional judicial management, all the property of the company vested in the Master of the High Court, who should without delay appoint a provisional judicial manager. Contrary to the section, in The Master of the High Court (North Gauteng High Court, Pretoria) v Motala NO and Others 2012 (3) SA 325 (SCA), Kruger AJ granted an order placing a company, Realeka, under provisional judicial management and appointed two judicial managers for it, one being Van Vuuren. The court order did not come to the attention of the appellant Master, who, contrary to it, appointed other persons as provisional judicial managers. Moreover, the Master could not include Van Vuuren as a provisional manager as he was not on the list of persons who could be appointed as such. Further, he had a substantial interest in the affairs of the company and was thus not independent, and was furthermore neither an attorney nor an auditor. After a flurry of applications, Van Vuuren applied for the discharge of an interdict in terms of which he had been restrained from becoming a provisional judicial manager of the company. Legodi J, apparently mero motu, raised the issue of possible contempt of court as, contrary to the order of Kruger AJ, the Master had appointed other persons as provisional judicial managers. The court held that the Master was in contempt of the court order by Kruger AJ. Punishment was postponed indefinitely.

On appeal to the SCA, the order of Legodi J was set aside and, as the respondents did not make an appearance, no costs order was made. Ponnan JA (Malan and Wallis JJA concurring) held that the section reserved to the Master the power to appoint a judicial manager. It was thus plainly impermissible for Kruger AJ to appoint the provisional judicial manager. It followed that whatever the Master might have done or not done could not have constituted disobedience of the order so as to found any contempt on his part. It was not competent for Kruger AJ to have issued the order that he gave. In doing so, the judge usurped a power that he did not have, which power had been expressly left to the Master by the Act. The order of Kruger AJ was therefore a nullity. It was a fundamental principle of South African law that a thing done contrary to a direct prohibition of the law was void and had no force or effect. Being a nullity, a pronouncement to that effect was unnecessary. Further, it did not first have to be set aside by a court before becoming of no force and effect.

Income tax

Commissioner may request taxpayer to furnish information regarding taxpayer of a foreign country with a double taxation agreement: Section 74A of the Income Tax Act 58 of 1962 (the Act) provides that the Commissioner of the South African Revenue Service (the commissioner) may, for the purposes of the administration of the Act in relation to any taxpayer, require such taxpayer or any other person to furnish such information as the commissioner may require. A related s 74B(1) provides that the commissioner may require the taxpayer or any other person to furnish any such information as the commissioner may require to inspect, audit, examine or obtain. For present purposes, these provisions must be read together with art 25.1 of the double taxation agreement (DTA) concluded between the governments of South Africa and Australia. The article, which deals with exchange of information, provides that the competent authorities of the two nations shall exchange such information as is foreseeably relevant for carrying out the provisions of the agreement or to the administration or enforcement of the domestic law concerning taxes.

In Commissioner, South African Revenue Service v Van Kets 2012 (3) SA 399 (WCC), [2012] 2 All SA 413 (WCC) the Australian Tax Office (ATO) requested the applicant, the commissioner, to provide it with certain information relating to the offshore activities of one S, an Australian resident, regarding a company known as RLCF. The respondent, Van Kets, a South African resident, taxpayer and director of RLCF, had the information the ATO sought. When the applicant requested the information so that it could be forwarded to the ATO, the respondent refused to divulge it, contending that it was confidential and that he was not authorised to disclose it. As a result, the applicant sought a court order declaring that ss 74A and 74B could be invoked for the purpose of obtaining information under the DTA. The order was granted with costs.

Davis J held that art 25 clearly provided that the competent authority of either state could request information from the other contracting state in order for it to impose any of the taxes to which the DTA applied, insofar as the taxation under that law was not contrary to the DTA. Once the DTA was read together with the Act, that reading would imply that the word ‘taxpayer’ had to include those taxpayers who did not fall within the scope of the Act, but fell within the scope of the DTA, which would include an Australian resident. Once the Australian resident was considered to be a taxpayer, the respondent would fall within the meaning of ss 74A and 74B because he would be classified as ‘any other person’ and would be able to furnish information regarding a taxpayer such as S in the instant case. When the DTA was read together with the Act, so as to render the one congruent with the other, the applicant was entitled to act in terms of ss 74A and 74B. Furthermore, the applicant was entitled to require another person, such as the respondent, to furnish relevant information in relation to the particular Australian taxpayer.

Labour law

Dismissal of employee for poor work performance: In Boss Logistics v Phopi and Others 2012 (3) SA 409 (LCJ) the first respondent, Phopi, was employed by the applicant, Boss Logistics, as a customer relationship manager. He indicated that he previously held a position with another company as major accounts manager for approximately three years and provided a detailed curriculum vitae (CV) setting out his qualifications and experience. At the interview he presented himself as an expert salesperson who required no training in sales as he appeared to be an expert in logistics. However, within a matter of days it turned out that he was not familiar with the work he was employed to do and, after working for the applicant for two weeks, a disciplinary hearing was held and he was dismissed for poor work performance. The decision arrived at in the internal disciplinary hearing was reversed at the Commission for Conciliation, Mediation and Arbitration (CCMA), where the commissioner held that the dismissal was unfair in that the first respondent had effectively been given ten working days in which to prove that he could perform to the required standard and that such was an unreasonably short period for any employee to prove himself. Furthermore, if the applicant was of the view that the first respondent was not meeting the required standard, processes should have been put in place to assist him, which had not been done in the instant case.

The Labour Court held that no reasonable commissioner could have concluded that the first respondent’s dismissal was procedurally or substantively unfair and accordingly reviewed and set aside the CCMA arbitration award with costs, referring the matter to a fresh hearing before a different commissioner. De Swart AJ held that the period required to evaluate an employee’s performance depended on the circumstances of each case and there was no hard-and-fast rule in that regard. Generally speaking, the standard of performance would be dependent on, among others, the nature of the job and the complexity thereof, the volume or ambit of the work that had to be mastered, the nature and complexity of the employee’s operations, the qualifications and experience of the employee, the level of stress inherent in the position, the extent to which the employee was required to exercise initiative, as well as the extent of the training and induction that would be required. In the final analysis, the employer was pre-eminently the person who had to decide in each case what period was reasonably required to evaluate the employee’s performance. In the absence of clear indications that the employer had acted in bad faith or in a manner otherwise unfair to the employee, the court or a commissioner ought not to second-guess the employer in this respect. In the instant case, the first respondent’s performance clearly failed to impress the employer. Objectively speaking, the first respondent failed to provide any meaningful contribution to the employer despite his impressive CV and his professed expertise.

If the applicant for a position misrepresented his experience and/or qualifications, and was appointed to a position on the basis of such a misrepresentation, there was no duty on the employer to provide such employee with counselling, training or assistance. Such employee was dishonest and was not entitled to be appointed to the position in the first place. Furthermore, the ordinary requirement that an employer was required to instruct, guide and counsel an employee whose performance was poor did not apply to a manager or senior employee whose knowledge and experience qualified him to judge whether he was meeting the required standard set by the employer.

Trusts

Decision by majority of trustees: In Pascoal and Another v Wurdeman and Others 2012 (3) SA 422 (GSJ) the second applicant and the first two respondents, Wurdeman and another, were trustees of the Vaal Property Trust, the trust deed of which provided that all decisions were to be taken by a majority vote of the trustees. Alleging that the first two respondents, who were in the majority, had misappropriated trust funds, the second applicant instituted motion proceedings to recover such funds. A dispute of fact having arisen, the matter was referred to trial by agreement between the parties. In the meantime, the second applicant sought an interim interdict in terms of a draft order to the effect that decisions of the trustees of the trust were to be taken on the basis of unanimity and not by majority vote. The court declined the request and reserved the question of costs for determination at the trial hearing.

Coetzee AJ held that, while the general rule of trust law was that trustees had to act jointly, a trust deed could validly provide differently, as in the instant case. The fact that the trustees could not cooperate did not give the court the power to modify the trust deed. The intention of the creator and drafter of the trust deed as set out therein had to be respected.

Other cases

Apart from the cases referred to above, the material under review also contained cases dealing with amendment of pleadings opening litis contestatio, arrest of associated ship, business rescue plan, declaration of over-indebtedness, deposing to affidavit, dispute of fact in motion proceedings, duty to process temporary residence permit speedily, finality of income tax assessment, imposition of municipal assessment rates, interpretation of pension fund rules, large consumer credit agreement, liability for failure to prevent tuberculosis infection in prison, liability for omission, liquidation of medical scheme, payment of adjusted pension fund contribution by employer, procedure for publication of bylaws, proof of rape, protection of tenants against unfair practice, recusal of arbitrator on basis of apprehension of bias, termination of debt review, unreasonable delay in holding criminal trial and wrongful removal of child by parent.

This article was first published in De Rebus in 2012 (Aug) DR 44.