The Law Reports

January 27th, 2016
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December 2015 (6) South African Law Reports (pp 317 – 643); [2015] 4 All South African Law Reports October no 1 (pp 1 – 129) and no 2 (pp 131 – 254); November no 1 (pp 255 – 399) and no 2 (pp 401 – 542); 2015 (11) Butterworths Constitutional Law Reports – November (pp 1265 – 1405)

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

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

 

 

 

 

 

 

 

 

 

 

 

This column discusses judgments as and when they are published in the South African Law Reports, the All South African Law Reports and the South African Criminal Law Reports. Readers should note that some reported judgments may have been overruled or overturned on appeal or have an appeal pending against them: Readers should not rely on a judgment discussed here without checking on that possibility – Editor.

Abbreviations

FB: Free State Division, Bloemfontein

CC: Constitutional Court ­

GP: Gauteng Division, Pretoria

GJ: Gauteng Local Division, Johannesburg

SCA: Supreme Court of Appeal

WCC: Western Cape Division, Cape Town

Company law

Provision of security for costs by plaintiff/applicant company: In Hennie Lambrechts Architects v Bombenero Investments (Pty) Ltd 2015 (6) SA 375 (FB) the appellant, Hennie Lambrechts (as defendant in the main action) made an application in terms of r 47 of the Uniform Rules of Court for the furnishing of security for costs by the respondent, Bombenero (the plaintiff in the main action) notwithstanding the fact that unlike the Companies Act 61 of 1973 (the old Act), the Companies Act 71 of 2008 (the new Act) does not have provisions requiring security for costs to be furnished. The application was dismissed, hence the present appeal to the full Bench. The appeal was upheld with costs. The respondent was ordered to furnish security in the amount to be determined by the Registrar of the court. The appellant was granted leave to apply for dismissal of the respondent’s main claim if the required security was not provided within ten days of the Registrar’s determination.

Mocumie J (Lekale J concurring while Moloi J dissented) held that the instant case presented a typical situation in which the common law had to be developed beyond existing precedent. That was particularly so as the courts have always had the discretion, depending on the circumstances of each case, and in line with the grounds set out in s 13 of the old Act and those pronounced on by the courts, to determine whether to order the respondent to furnish security. A finding, as a general rule, that an incola company, regardless of the particular facts which warranted the furnishing of security, was not bound to provide security would be incongruent with the spirit, purport and objects of a Constitution designed to ensure equality of all before the law. Such a finding would mean that a party, who would be gravely prejudiced by another’s refusal to furnish security because of the unfortunate absence of the equivalent of s 13 of the old Act, would be without remedy and thus left to suffer the considerable financial consequences of such an absence, which eventually would in turn offend against the principles of equality and of ‘just and equitable decisions’. The approach to an application in terms of r 47 should be that in the case of an incola company, unlike a natural person, the respondent should adduce all the evidence which would convince the court that it had sufficient funds to pay costs in the event of an adverse costs order. Courts should insist on more details and not the say-so of the incola company.

Note:

  • Although only reported now, the above judgment was in fact delivered in February 2014. Since then a few other judgments have been delivered on the issue.
  • As Moloi J indicated in the dissenting judgment, it would appear that continuing to apply the repealed s 13 of the old Act, which does not find an equivalent in the new Act, under the guise of development of the common law, may not be the correct approach.

Suspension of a director and conflict of interest: In Mthimunye-Bakoro v Petroleum and Oil Corporation of South Africa (Soc) Ltd and Another 2015 (6) SA 338 (WCC) the applicant, Mthimunye-Bakoro, was an executive director and chief financial officer of the first respondent PetroSA, a state owned corporation.
After the first respondent suffered an estimated R 15 billion loss, the applicant was accused of poor performance and financial irregularities. As a result a meeting of the board of directors was convened to discuss the suspension of the applicant and the group chief executive officer (GCEO). Neither the applicant nor the GCEO was given notice of the meeting, which was duly held and the two, in their absence, were put on precautionary suspension with full pay. The purpose of the suspension was to investigate the two with a view to disciplinary action. The suspension was confirmed at a second board meeting, which both the applicant and the GCEO were notified of and attended, but were excused from participating in the deliberations. As a result the applicant approached the High Court for an order declaring the two board meetings unlawful and setting aside her suspension. The application was dismissed with costs.

Davis J held that in the instant case there was a manifest conflict of interest. It could not be contended that when the decision of the board concerned the preliminary suspension of an employee, who happened to be a director, such a director did not have a conflict of interest in the deliberations, which had to be undertaken by the board. Given the breadth of the definition of personal financial interest and the existing common-law principle regarding conflict of interest, as well as the applicant’s own version regarding reputational damage and the possible implications for her employment with the first respondent, she could not, by virtue of the provisions of the Act, or alternatively the common law, be permitted to participate in meetings regarding her suspension. In addition, the first respondent’s articles of association expressly precluded the applicant from participating in any decisions in respect of her contract, such as her contract of employment. There could be no rational basis for suggesting that a person who faced suspension had no conflict of interest and could deal with the matter impartially, without taking her own interest into account and only taking account of the company’s interest.

Costs

No taxation of legal fees and disbursements after payment: The facts in Werkmans Incorporated v Praxley Corporate Solutions (Pty) Ltd [2015] 4 All SA 525 (GJ) were that the applicant, Werkmans Inc, a law firm, rendered legal services to the respondent, Praxley, in respect of arbitration proceedings which the respondent had against a third party, ODM. From time to time the applicant would issue an invoice for work done, which was duly honoured. Eventually arbitration proceedings were scheduled for five days of hearing and to that end the applicant briefed counsel. However, the arbitration proceedings did not take place as scheduled but were instead stood down for three days, during which the parties waited for the outcome of an application for appointment of a business rescue practitioner for ODM. That appointment, if made, would have suspended or stayed arbitration proceedings. Counsel for the applicant submitted an invoice for the days of standing down the matter, as he was on brief during that time and could not do other work, in an amount which after offers and counter-offers, was agreed as some R 122 000.
The respondent refused to pay the amount contending that it, together with the attorney’s fees and disbursements that had long been paid, should be taxed by the Taxing Master. The respondent rejected the offer to have counsel’s fees only submitted to taxation, insisting that both such fees, together with attorney’s fees and disbursements, which had already been paid as indicated, should be submitted to taxation. That being the case the applicant, after giving a warning about this, applied for winding-up of the respondent on the ground that it was unable to pay the debt. The respondent filed a counter-claim alleging that the winding-up application was an abuse of the winding-up process and accordingly sought a declaration to that effect in terms of s 347(1A) of the Companies Act 61 of 1973. If the declaration was granted, it would have entitled the respondent to claim damages suffered as a result of the vexatious, frivolous or abusive winding-up proceedings.

Makume J granted with costs an order requiring the respondent to pay counsels’ fees as sought by the applicant and dismissed the respondent’s counter-claim for declaration of the winding-up application as abusive. The court held that there was no reason for the respondent not to pay counsel’s fees for the days when the matter stood down on the respondent’s instructions. The respondent was not saying that the fees charged by counsel were not fair and reasonable. Instead it was saying that the fees charged by its attorneys, the applicant, were not fair and reasonable and accordingly demanded that they be submitted to taxation. The applicant’s argument that it should not be compelled to tax bills that had already been paid was correct. As the respondent received the accounts, scrutinised them, was satisfied and proceeded to pay without asking for taxation, it could not thereafter demand that the bills be taxed.

The court was also not persuaded that in launching liquidation proceedings the applicant acted maliciously or vexatiously as it had established a debt that was due and payable but which the respondent resisted on unreasonable grounds under circumstances, which raised a suspicion that it was unable to pay its debts. Accordingly, it could not be held that there was an abuse of the winding-up process.

Divorce

Motion proceedings are not permissible in matrimonial matters: In BR and Another v TM; In re: LR [2015] 4 All SA 280 (GJ) the second applicant (wife) and the respondent, TM (husband), were married in terms of customary law. A child (LR) was born of the marriage. A few years later the relationship between the two ended, as a result of which they parted ways to start a new life separately. Each found a new partner and married initially in terms of customary law but later according to civil law. It was at that stage that the parties were advised of the need to formally terminate their customary marriage. To solve the problem the respondent instituted a divorce action against the second applicant. Because of the resemblance between the first applicant and the minor child LR, it appeared that he was the minor’s biological father, something which paternity tests confirmed. For that reason, and while the divorce action was pending, the first applicant and second applicant launched motion proceedings for an order declaring that the –

  • first applicant was the minor’s biological father;
  • first and second applicants be accorded full parental rights and responsibilities in respect of the minor; and
  • first and second applicants were sole holders of parental responsibility of maintenance in respect of the minor.

Kathree-Setiloane J declined the request for the order sought, making no order as to costs, and instead referred the issue to the divorce court for determination in the pending divorce action. It was held that all the issues raised by the order sought were also at stake in the pending divorce action and were central to its finalisation. A court would not grant a decree of divorce until it was satisfied that all issues relating to a minor or dependant children, who were born of the marriage, were resolved in their best interests. The best interests of the child standard, as prescribed in s 28(2) of the Constitution, determined the outcome of all legal proceedings concerning a child. The courts have consistently held, on grounds of public policy, that motion proceedings were not permissible in matrimonial causes since it was undesirable for a court to grant a divorce action without hearing oral evidence of the parties, first because not only was the status of the parties themselves involved, but also those of the children, and second because of the interests of the state in the preservation of the
binding nature of marriage. A court rarely granted a divorce without having had the opportunity to hear evidence of at least one of the parties in a divorce action, particularly if there were minor or dependent children involved.

It was essential that the parties to a contested divorce action be given the opportunity to testify and put evidence before the divorce court on issues that were raised for determination. Where the paternity and parental rights and responsibilities of a husband were in dispute in divorce proceedings, it was important that he be given the opportunity to present evidence in the divorce action for consideration and evaluation by the court presiding therein. It was not appropriate for a party to attempt to circumvent a pending divorce action by applying to have matters, whether disputed or not, which were raised in the divorce action, determined by a court in motion proceedings. Any attempt to pre-empt the findings of a divorce court by instituting motion proceedings to deal with matters that were in issue in the divorce action and concerned the parties to the divorce would
effectively fetter the discretion of the judge presiding in the divorce action to hear oral evidence, consider and evaluate it, something which was undesirable.

Revenue

Conservancy and anti-dissipation order: In Krok and Another v Commissioner, South African Revenue Service 2015 (6) SA 317 (SCA); [2015] 4 All SA 131 (SCA) the Australian Tax Office (ATO), acting in terms of a double taxation agreement (DTA) concluded between Australia and South Africa, and doing so on behalf of the Australian Commissioner of Taxation, requested the respondent Commissioner, South African Revenue Service (Sars) to obtain a preservation and anti-dissipation order against the assets of the first appellant, Krok. The order was duly granted by the GP per Fabricius J in terms of the Tax Administration Act 28 of 2011 (the Act) and a curator bonis was appointed to take care of the property. The first appellant appealed against the High Court order on the ground that as the amendment to the DTA, which made provision for request for recovery of a tax debt in South Africa by ATO through Sars, came into
effect on 1 July 2010 whereas the tax debt sought to be recovered arose between 2003 and 2010, the tax claimed by the ATO fell outside the scope of DTA. The second appellant, Jucool Inc, contended that as the assets generating income and/or the income thus generated had been sold by the first appellant to it, they could not be preserved for a debt due by the latter. The appeal against that order was dismissed with costs by the SCA.

Maya JA (Mhlantla, Wallis JJ, Dambuza and Meyer AJJA concurring) held that it was open to the parties to the DTA to apply the provision on assistance in the collection of taxes to revenue claims arising before that agreement came into force and that the question was whether it was their intention that the agreement should have that effect. In the instant case all indications were that such was the intention. The effect of the amendment to the agreement was plainly prospective as it could only be invoked when the parties so agreed and its provisions came into effect. Tax claims that arose in the past in respect of which assistance was sought would also be covered. It was a firmly established principle of the law that a statute was not retrospective merely because a part of the prerequisites for its action was drawn from time antecedent to its passing. When the amendment came into effect on 1 July 2010, it applied to a revenue claim, that is, an amount owed in respect of taxes of every kind and description. Therefore, the first appellant’s jurisdictional challenge to the preservation order had to fail.

Turning to the second appellant’s contention it was held that the assets and income still belonged to the first appellant, and not the second appellant, as there had been no transfer in the deeds office, in the case of immovable, delivery in the case of movables and cession in the case of incorporeal assets.

Jurisdiction of the tax court in tax matters: In Ackermans Ltd v Commissioner, South Africa Revenue Service 2015 (6) SA 364 (GP) the respondent Commissioner raised additional assessment in the amount of some R 185 million on tax to be paid by the applicant taxpayer, Ackermans Ltd. The respondent alleged that the applicant had engaged in a series of transactions including a loan agreement, subscription agreement, sale of shares agreement and swap agreement, all of which were simulated transactions intended to evade tax by claiming purported interest deductions. It was alleged that having regard to the true nature and substance of the transactions, which had been misrepresented or were not disclosed, the applicant ought not to have claimed interest deductions as it did.

The applicant approached the High Court for an order reviewing and setting aside the additional assessment on the ground that, as administrative action, it should have been done within a reasonable time as required by the Promotion of Administrative Justice Act 3 of 2000 (PAJA). That was so as instead of raising the additional assessment within three years as required by s 79 of the Income Tax Act 58 of 1962 the respondent did do only after some six years, which was very late. Moreover, in terms of s 237 of the Constitution all constitutional obligations are required to be performed diligently without delay. The respondent raised the point in limine that as raising additional assessment was a tax issue, objection against it should have been taken to the tax court and not the High Court. Moreover, as there was misrepresentation or non-disclosure of material facts on the part of the applicant, the three-year period of limitation did not apply.

Mothle J held that because the review application under PAJA raised the issue of fundamental right in terms of the Constitution, which empowered the High Court to decide on any constitutional matter, the High Court had jurisdiction to hear the application. For that reason the point in limine had to fail. However, as the respondent contended that there was misrepresentation or non-disclosure of material facts while the applicant argued that such was not the case, there was a dispute of fact that was relevant to deciding whether, apart from other explanations, the delay in raising additional assessment fell or did not fall within the three-year period of limitation as provided for in s 79. If it was to be concluded, on the resolution of the disputed facts, that there was misrepresentation or non-disclosure on the part of the applicant, the delay by the respondent in raising additional assessment would be covered by s 79 and would as a result be reasonable. If, on the other hand, it was to be found that there was no misrepresentation or non-disclosure of material facts the delay, which occurred before additional assessment was raised, would be unreasonable and hit by the three-year period of limitation. That being the position the disputed facts and issues raised in the application required the expertise of a tax court, and not the High Court, to adjudicate. Accordingly, the court dismissed the review application, ordering each party to pay own costs. As the court did not deal with the merits of the case it was indicated that the applicant could proceed to the tax court by way of appeal against the additional assessment raised by the respondent.

Sentencing

Interests of young children when sentencing their primary caregiver: In NDV v S [2015] 4 All SA 268 (SCA) the appellant NDV pleaded guilty to 31 counts of fraud and one of contravening s 4(b)(i) of the Prevention of Organised Crime Act 121 of 1998 (the Act). That was after she, as a paralegal, stole trust money amounting to some R 1,4 million from her employer, an attorney. She was 28 years of age, a mother of two children aged eight and ten years, and in the process of divorce. The death of her father when she was nine years old had seriously affected her. At the age of 14 years she started using marijuana, after finishing school, she experimented with heroin and cocaine. Her husband, a hardened drug addict, was not able to assist her or her minor children. Her father-in-law was an unrehabilitated insolvent while her mother was a senior citizen (66 years of age), had very little income which could not support the minor children, was ill, had psychological problems and abused prescription medication (sleeping pills). Moreover, the appellant made two suicide attempts on her life. Because of the plea of guilty the only issue left was sentencing. By that time she had repaid the money, which benefited her personally, while the assets bought with the proceeds of her crime had been forfeited to the state in terms of the Act. The regional magistrate sentenced her to eight years of imprisonment, three of which were suspended on the usual terms. An appeal to the GJ was dismissed with costs by Tshabalala and Monama JJ.

A further appeal to the SCA was upheld. Her sentence was reduced to three years’ imprisonment from which she was eligible for placement under correctional supervision (house arrest) in the discretion of the Correctional Services Commissioner or a parole board. Lewis JA (Mhlantla, Leach, Majiedt and Petse JJA concurring) held that the courts were guilty of grave misdirections. For example, the regional court failed to have regard to any of the expert reports and material evidence before it and did not, as it should have done, consider the interests of the children. The evidence and reports were those of a social worker who was also a probation officer, a clinical psychologist and general physician.

The children’s rights were paramount and more important than anything else but that did not mean that everything else was unimportant. When a custodial sentence of a primary caregiver was in issue the court had four responsibilities, namely to –

  • establish whether there would be an impact on the children;
  • consider independently the children’s best interests;
  • attach appropriate weight to those interests; and
  • ensure that the children would be taken care of if the primary caregiver was sent to prison.

In a number of decisions where a woman (as primary caregiver) had been convicted of theft or fraud, sentences were set aside on appeal and reduced or remitted to the trial court to consider sentence afresh, taking into account properly the interests of minor children.

In the instant case the fraud committed by the appellant against her employer, when she was in a position of trust, was such that a custodial sentence was required. Society had to be assured that persons who abused positions of trust for their gain would not be allowed to walk free. At the same time, taking into account the best interests of the appellant’s very young children, the period of imprisonment should not be lengthy and should take into account the period for which she was incarcerated after her appeal to the full Bench failed and before she was again released on bail. Also, she had to be given an opportunity to make arrangements for her minor children’s care and support before her incarceration.

Telecommunication

Statutory right of network operator to use municipal infrastructure to install network: Section 22 of the Electronic Communications Act 36 of 2005 (the Act) provides among others that: ‘An electronic communications network service licensee may –

(a) enter upon any land … ;

(b) construct and maintain an electronic communications network or electronic communications facilities…; and

(c) alter or remove its electronic network or communications facilities.’

In doing so the licensee is required to have due regard to the applicable law and environmental policy of the country. To carry out any of the above activities the licensee is required, in terms of
s 24, to give the local authority or person owning or responsible for the care and maintenance of any street, road or footpath where the work is to be done, a 30-day written notice period. The section further grants the local authority or person the right, at all times while the work is in progress, to supervise the work and receive payment of reasonable expenses incurred in connection with any alterations caused or supervision of the work involved.

In Tshwane City v Link Africa and Others 2015 (6) SA 440 (CC); 2015 (11) BCLR 1265 (CC) the respondent Link
Africa, which was an electronic communications network service licensee, gave the applicant City of Tshwane Metropolitan Municipality (Pretoria) (hereinafter referred to as the City) the required 30-day written notice that it was going to install telecommunication network infrastructure in the form of fibre-optic cables and subsequently started doing so, completing the first phase thereof. The City approached the High Court for an interdict restraining the respondent from continuing with its network installation as well as for removal of cables already installed. It was the City’s contention that the licensee was required to seek its consent before installing the cables and that doing so without such consent amounted to arbitrary deprivation of property. The constitutionality of both ss 22 and 24 was also challenged. The GP per Avvakoumides AJ dismissed the application and denied leave to appeal. That leave was also denied by the SCA, hence an approach to the CC, which granted leave to appeal but dismissed the appeal itself with costs.

Reading the majority decision Cameron and Froneman JJ (Khampepe, Madlanga JJ, Molemela and Theron AJJ concurring) held that ss 22 and 24 of the Act were not constitutionally invalid, nor did the Act permit an arbitrary deprivation of property, as the minority judgment of Jafta J and Tshiqi AJ (Moseneke DCJ and Nkabinde J concurring) found. The majority agreed with the minority that a licensee did not need the consent of the City before installing network infrastructure. Both private and public law recognised that the law could grant to one person a right in the property of another, entitling the former to use and enjoy the other person’s property or to prevent the latter from exercising certain entitlements flowing from the usual right of ownership. However, where the law imposed that obligation on landowners it required fair procedures and equitable compensation in appropriate circumstances. In the present case s 24 did just that. First, the licensee was required to provide 30 days prior written notice of its intention to construct, maintain or alter electronic communications facilities. Second, the notice had to specify the manner in which the infrastructure was to be constructed and maintained. Third, the notice could provide for compensation for all reasonable expenses incurred or any supervision of work relating to such alteration, where applicable. Because of the landowner’s multiple safeguards, both substantive and procedural, the deprivation of property was entirely reasonable and was not arbitrary.

Other cases

Apart from the cases and material dealt with or referred to above the material under review also contained cases dealing with business rescue, claim by sub-contractor for payment for services rendered, correction of incorrectly recorded servitude, declaration of portion of national road as toll road, defamation of public official, discretion of court to allow new matter to remain in replying affidavit, duty of property owners to protect visiting children from injury or harm on their property, extradition, identification of headmen, leave to intervene in proceedings, no obligation on Legal Aid South Africa to fund legal representation before commission of inquiry, obligation of Department of Education to provide education to youth at child care and youth care centres, onus of proof, relief aimed at giving proper effect to court order already granted, service of summons on company after liquidation and supplementing written agreement by oral agreement and e-mails and usage of cellular telephone communication as evidence.

 

This article was first published in De Rebus in 2016 (Jan/Feb) DR 43.