The law reports

October 24th, 2016
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Heinrich Schulze BLC LLB (UP) LLD (Unisa) is a professor of law at Unisa.

Heinrich Schulze BLC LLB (UP) LLD (Unisa) is a professor of law at Unisa.

September 2016 (5) South African Law Reports (pp 1 – 332); [2016] 2 All South African Law Reports June (pp 633 – 932); [2016] 3 All South African Law Reports August (pp 345 – 667)

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

CC: Constitutional Court

ECG: Eastern Cape Division, Grahamstown

GJ: Gauteng Local Division, Johannesburg

GP: Gauteng Division, Pretoria

KZD: KwaZulu-Natal Local Division, Durban

NCK: Northern Cape Division, Kimberley

SCA: Supreme Court of Appeal

Administrative law

Legality of policy: The decision in E.tv (Pty) Ltd and Others v Minister of Communications and Others [2016] 3 All SA 362 (SCA) turned on the question whether a unilateral amendment of a previously approved policy document by the Minister of Communications (the Minister) was valid.

At the heart of the present matter was the Broadcasting Digital Migration Policy (the policy), which was first published in 2008. The policy aimed to facilitate South Africa’s shift from analogue terrestrial television to digital terrestrial television. Local television viewers who did not own digital television sets would require set top boxes (STBs) to watch television in the digital terrestrial environment. The poorest television viewers would not have been able to afford STBs, which would have cost approximately R 600 each. The government proposed to subsidise the procurement of STBs required by five million households.

The first respondent, the Minister, unilaterally amended the policy. The amendment precluded free-to-air broadcasters (including the appellant, e.tv) from encrypting their television signals as the amended policy provided that the subsidised STBs would not have encryption capability. An STB that is equipped with encryption technology can decrypt signals that are encrypted. This is the technology used by pay television broadcasters.

Early in 2015 the Minister published the encryption amendment, which precludes subsidised STBs from having encryption technology. She did this without consulting interested persons, including the two relevant regulatory bodies, namely, the Independent Communications Authority of South Africa (ICASA) and the Universal Service and Access Agency of South Africa (USAASA).

E.tv brought an urgent application for an order reviewing and setting aside the encryption amendment on the basis that that there had been no consultation and that the amendment was inherently irrational.

On appeal Lewis JA held that the amendment was a fundamental departure from the previous policy. In terms of s 3(5) of the Electronic Communications Act 36 of 2005 the Minister was required to consult ICASA, USAASA and broadcasters before changing the policy, and she had not done so. The amendment was thus made unlawfully.

The amendment was irrational as it sought, first, to preclude government from paying for the encryption of the subsidised STBs; and secondly, to compel free-to-air broadcasters (such as e.tv) to pay for encryption.

The Minister had accordingly exceeded her powers. The amendment was declared unlawful and the appeal was allowed with costs.

Arbitration

Matrimonial matters (calculation of accrual): The facts in AB v JB 2016 (5) SA 211 (SCA) were as follows: Mr AB (the husband) and Mrs JB (the wife) were married out of community of property, but subject to the accrual system. The marriage did not survive and in terms of a settlement agreement the husband was ordered to pay the wife an amount of R 8 million in respect of her portion of the accrual.

However, two months after the settlement agreement, it became public knowledge that the husband’s substantial number of shares in the Patula Group of companies, were actually worth much more than was estimated at the time of the settlement agreement. The wife got wind of this information. In a subsequent ex parte application it was shown that the husband’s estate had shown a substantial accrual in excess of R 167 million, instead of the approximate R 20 million that was believed to be the case at the time of the settlement. The wife then instituted a delictual claim against the husband because she alleged that he knew at the time of the settlement that his shares were worth much more than R 20 million. For reasons irrelevant to the present discussion, the dispute between the parties was instead referred to arbitration. In the arbitration proceedings before a retired judge of appeal, the wife’s claim was dismissed because misrepresentation by the husband was not proved. The wife lodged an appeal to an appeal tribunal before three retired judges of appeal who found that the elements for a delict had been established and ruled in favour of the wife.

The husband launched an application in the GJ against the appeal award. His two principal arguments were the following:

  • First, the dispute referred to arbitration was incidental to the matrimonial cause and was accordingly prohibited for referral to arbitration in terms of s 2 of the Arbitration Act 42 of 1965 (the Act).
  • Secondly, the appeal tribunal misconceived the nature of the enquiry by assessing the accrual as at the date of divorce rather than at litis contestatio, which had the effect that the calculation of the value of the accrual was incorrect.

This resulted in an irregularity that rendered the entire inquiry procedurally unfair. The court a quo dismissed both arguments.

On appeal to the SCA, Tsoka AJA decided the two disputes as follows: First, at the stage when the wife instituted the delictual action against the husband, the parties’ marriage had been dissolved in terms of the court order, which incorporated their settlement agreement. The effect of the settlement agreement being made an order of court was to bring finality to the lis between the parties; the lis became res judicata. It changed the terms of a settlement agreement to an enforceable court order. After the order was granted, there was no longer any matrimonial cause to speak of. The inevitable result was that the marriage and all its natural consequences came to an end, and anything relating thereto, such as proprietary consequences, became res judicata. The delictual claim that was referred to arbitration was thus not incidental to any matrimonial cause.

Secondly, it held that the time when a right came into existence was determinative in calculating its value, and s 3 of the Matrimonial Property Act 88 of 1984 (the MPA) was clear and unambigious that a spouse acquired a right to claim an accrual at the ‘dissolution of a marriage’. Earlier case law (Le Roux v Le Roux (NCK) (unreported case no 1245/2008, 30-10-2009)(Olivier J); and KS v MS 2016 (1) SA 64 (KZD)) held that the date for determination of the accrual was at litis contestatio rather than at the dissolution of the marriage, was wrongly decided.

The tribunal accordingly made no error in calculating the accrual as at the date of the divorce order. In the result, the SCA found that the date at which the accrual of the value of a spouse married in terms of the MPA is to be determined, is the date of dissolution of the marriage either by death or divorce.

The husband’s appeal was accordingly dismissed with costs.

Delict

Sexual assault: In PE v Ikwezi Municipality and Another 2016 (5) SA 114 (ECG); [2016] 2 All SA 869 (ECG) the plaintiff was an employee of the first defendant municipality. She was sexually assaulted at the workplace, during working hours. Her immediate supervisor, the second defendant, attempted to insert his tongue into her mouth. The plaintiff informed her superiors of what had happened. Disciplinary proceedings were instituted and the second defendant received a two-week suspension. In the meantime the plaintiff had, despite the efforts of municipal officials to keep them apart, run into the second defendant on several occasions, causing her additional distress. She was traumatised by these events, and resigned a year later. The plaintiff sued the municipality for R 4 million on the basis of its vicarious liability. Liability and quantum were separated and the trial proceeded on the merits. The second defendant did not defend the matter, leaving the plaintiff’s version undisputed. The municipality, however, denied that the second defendant had acted in the course and scope of his employment as was required for vicarious liability. It argued that it was hard to conceive conduct more removed from the second defendant’s duties and the business of the municipality than his sexual assault on the plaintiff.

Pickering J held that the second defendant’s conduct towards plaintiff constituted an intolerable and violent abuse of his position of authority, and the two-week suspension belied the gravity of the offence. While the municipality correctly conceded liability for its failure to sufficiently isolate the plaintiff from the second respondent after the incident, its liability for the assault itself depended on whether the common law would be developed to hold an employer vicariously liable where an employee was subjected to sexual harassment by a direct supervisor. The municipality had, by placing the second defendant in a position of trust and authority over the plaintiff, forged the required causal link between second defendant’s position and the wrongful act. The second respondent had grossly violated the plaintiff’s fundamental rights to dignity, privacy and integrity, and constitutional norms dictated that the common law should be developed to hold the municipality vicariously liable.

Further, by holding an employer vicariously liable for the wrongs of its employee may encourage the employer to take such steps to prevent such wrongs, also in the case of sexual harassment.

The claim was accordingly allowed.

Evidence (experts)

Experts evidence: In SS and Another v Road Accident Fund [2016] 3 All SA 637 (GP) the crisp facts were that the plaintiff was involved in a motor-vehicle accident while she was pregnant. The plaintiff’s child was born with cerebral palsy some seven weeks after the accident. Damages were claimed against the defendant, Road Accident Fund (RAF), in respect of both the plaintiff and her child.

The court was faced with conflicting expert opinions by two experts for the plaintiff on the one hand, and one for the RAF, on the other hand. The court had to decide on the approach in evaluating conflicting medical expert evidence.

Fabricius J confirmed that the most important duty of an expert witness is to provide independent assistance to a court by way of an objective, unbiased opinion in relation to matters within his expertise. Essentially, an expert comes to court to give the court the benefit of his or her expertise. An expert witness is also expected to state the facts or assumptions on which his or her opinion is based. He or she should not omit to consider material facts, which could detract from his or her concluded opinion.

In its assessment of the conflicting evidence, the court accepted that it was clear that the part of the child’s brain, which sustained injury, was fully formed at the time of the accident. The plaintiff’s experts, who were both highly experienced in their fields, agreed that the relevant part of the child’s brain had been injured, and that such damage could not have occurred prior to 20 weeks gestation and not after her birth. An intra-uterine traumatic event was the likely cause. The RAF’s expert was an experienced neurosurgeon, but did not remotely have the qualifications and experience of the other specialists in ante-natal radiology, imaging and diagnosis. Applying the judicial measure of proof referred to above, taking into account the particular experience and expertise of the experts, and considering where the balance of probability lay on a review of the whole of the evidence, the court found that the most natural and plausible conclusion was that the accident was the cause of the child’s present condition, as well as the injuries sustained by the first plaintiff (the mother).

The claim of both the mother and child were allowed with costs.

Housing

Right to housing: In Melani and Others v Johannesburg City and Others 2016 (5) 67 (GJ) the applicants were residents of an informal settlement south of Johannesburg. They sought an order setting aside the respondent city’s (the City) failure or refusal to seek government funding to upgrade the settlement. Alternatively, they sought an order compelling the City and its co-respondents (the mayor, the Gauteng MEC for Human Settlements, and the Minister for Human Settlements) to implement government policy and commence the upgrading process. The policy in question was the Upgrading of Informal Settlements Programme (UISP), contained in the National Housing Code of 2009. It prioritised participative in situ upgrading, with government funding being available on application to the provincial government. The City opposed the application on the basis that its 2015 decision to evict and relocate the applicants to a distant, still-to-be-built development – rather than upgrade was an executive policy decision that was not open to challenge via judicial-review procedure.

Strauss AJ held that the City had a constitutional obligation to realise the residents’ right of access to adequate housing. The court was tasked with deciding whether the City’s decision to relocate the residents was a policy decision that was not open to review. While the formulation of policy was not in principle an administrative action, its implementation in a manner that affected persons’ rights and legitimate expectations was. Even non-administrative policy decisions could be reviewed if they breached fundamental constitutional rights such as the right to housing.

The court further held that the National Housing Code (of which the UISP was part) was binding on local government and it was not open to the City to choose not to comply with it. The UISP made it clear that relocation was the exception and not the rule. The implementation of an existing policy such as the UISP was a typical administrative function that was subject to review.

The City’s failure to apply the UISP was unlawful – it had been taken outside the legislative and policy framework intended to apply to informal settlements. Further, its unilateral decision to evict and relocate the residents of the informal settlement was unreasonable and non-inclusive, and reviewable on that ground.

The application was accordingly granted and the City directed to proceed with the application for funding.

Intellectual property

Trade marks: The crisp facts in Cochrane Steel Products (Pty) Ltd v M-Systems Group (Pty) Ltd and Another [2016] 3 All SA 345 (SCA) were as follows: The appellant, Cochrane, had used the trade mark CLEARVU extensively in relation to security fencing. Although the subject of a pending trade mark application at the time, the mark was not registered. The respondent, M-Systems, sold a competing product.

Cochrane’s product was displayed among the natural or organic links displayed when CLEARVU is searched on the Google search engine. Cochrane was also displayed among the sponsored links by such a search. Sponsored links come about through payment made to Google for the use of AdWords (that is, the word CLEARVU in the present case). M-Systems paid Google for CLEARVU as an AdWord. As a result a Google search for CLEARVU displayed a linked advertisement for M-systems and its competing product.

Cochrane claimed that M-Systems’ selection and payment for CLEARVU as an AdWord constituted passing off under the common law as it amounted to making a representation that M-Systems and its competing product were connected in the course of trade with it. Further, this form of dilution of the trade mark constituted leaning on, which was argued to be a separate delict under the common law from passing off. An interdict restraining the utilisation of CLEARVU as an AdWord by M-systems was sought.

It was not possible for Cochrane to claim trade mark infringement by dilution in terms of s 34(1)(c) of the Trade Marks Act 194 of 1993 by virtue of the fact that the trade mark CLEARVU had not been registered. The trade mark application to register this mark was being opposed by M-Systems. Cochrane sought an interim interdict pending the outcome to the trade mark application.

The court a quo ruled that the use of Google’s AdWords to market a competitive product did not constitute passing off under common law.

Ponnan JA pointed out that passing-off is a species of wrongful competition in trade or business and involves a representation by one person that his business (or goods) is that of another, or is associated with that of another. In order to determine whether a representation amounts to a passing-off, the question is whether there is a reasonable likelihood that members of the public may be confused into believing that the business of the one is, or is connected with, that of another. Whether there is a reasonable likelihood of such confusion arising is a question of fact, which will have to be determined in the light of the circumstances of each case. The critical question was whether the advertisement gives rise to the likelihood of confusion; and not whether or not the bidding by one competitor on the trade mark of another is itself unlawful. Cochrane was unable to adduce any evidence of actual confusion and, in the absence of satisfactory evidence as to actual confusion, its likelihood was not established.

Cochrane’s primary contention was based on the general principles of unlawful competition. It argued that M-Systems’ use of the appellant’s trade name as a Google keyword offended against the boni mores because it amounted to unlawful competition. Generally, every person is entitled freely to carry on his or her trade or business in competition with his or her rivals, but the competition must remain within lawful bounds. If it is carried on wrongfully, 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.

Cochrane’s complaint was essentially that M-Systems had appropriated its trade name for a particular purpose (keyword bidding) and for their own benefit. The court held that the use by one trader of the unregistered trade mark or trade name of another is not unlawful under the common law except to the extent that that use gives rise to passing off.

The court concluded that the attempt by Cochrane to ground a cause of action based on unlawful competition in the circumstances was ill-conceived.

The appeal was accordingly dismissed with costs.

Prescription

Extinctive prescription: The dispute between the parties in Standard Bank of SA Ltd v Miracle Mile Investments 67 (Pty) Ltd and Another [2016] 3 All SA 487 (SCA) arose from a credit facility extended to Mr Papachrysostomou (Mr P) by Standard Bank (the bank) in 2005 for which the respondent, Miracle Mile, and another company stood surety. The companies also registered mortgage bonds in favour of the bank over certain immovable properties to cover their obligations. In the GJ it was held that the principal debt had prescribed and the sureties were accordingly also no longer liable.

In terms of the provisions of the credit facility the principal debt was payable over a period of 240 months. It also contained an acceleration clause in terms of which the bank could convert the instalment obligations into an obligation to pay on demand if Mr P failed to pay any instalment and failed to rectify such default within seven days of a written notice by the bank. The bank was also entitled to cancel the agreement and claim immediate payment of the full outstanding amount in such eventuality.

Mr P defaulted on the facility and the bank sent a notice in terms of s 129 of the National Credit Act 34 of 2005 advising him of his default. The notice did not contain any indication that the bank would be exercising its right to accelerate the claim if the default was not cured within the stipulated period. Mr P made no further payments after 21 October 2008 and his estate was sequestrated on 27 August 2013.

During June 2013 Miracle Mile applied for an order directing the bank to consent to the cancellation of the mortgage bonds, arguing that as Mr P made no further payments after 21 October 2008, the debt had prescribed on 21 October 2011. The bank argued that its notice of 12 August 2008 did not constitute an election to accelerate the payment of the debt, but merely called on Mr P to cure the default.

The court of first instance held that the debt had prescribed as prescription started to run from the date that the bank was entitled to accelerate the debt and claim the full amount.

On appeal to the SCA Mbha JA pointed out that the court a quo recognised that, whether or not the debt incurred by Mr P – in terms of the facility had prescribed – depended on when the debt had become ‘due’, within the meaning of that word in s 12(1) of the Prescription Act 68 of 1969 (the 1969 Prescription Act).

The authority on which the court of first instance relied dealt with the provisions of the previous Prescription Act 18 of 1943 and which was differently worded. In terms of the current Act, prescription only starts running when the debt is ‘due’ and not when it first ‘accrued’. The approach equating the two positions was endorsed by several High Court decisions.

Where an acceleration clause affords the creditor the right of election to enforce the clause on default by the debtor, the debt in terms of the acceleration clause only becomes due when the creditor has elected to enforce the clause. Before an election by the creditor, prescription does not begin to run.

If a creditor elects not to enforce the acceleration clause, he or she is entitled to wait until all the individual instalments have fallen due before instituting action, albeit at the risk that prescription may then have taken effect in respect of earlier instalments. Depending on the terms of the contract an acceleration clause may automatically come into effect on default by the debtor, without any election by the creditor. This would be the case where the creditor has in advance made an election in terms of the contract to enforce the acceleration clause. This approach has the support of all the leading authorities on this topic.

In terms of the 1969 Prescription Act, a debt must be immediately enforceable before a claim in respect of it can arise. In the normal course of events, a debt is due when it is claimable by the creditor, and as the corollary thereof, is payable by the debtor.

In the present case, the acceleration clause in the agreement had its own procedural requirements to be satisfied before the bank could claim the full balance owing. The debt was, therefore, not due and prescription did not begin to run on the entire debt. Compliance with the jurisdictional requirements for acceleration of the outstanding balance is not simply a procedural matter but is essential in establishing a cause of action.

The appeal was upheld with costs.

Trusts (removal of trustees)

In Gowar and Another v Gowar and Others 2016 (5) SA 225 (SCA); [2016] 3 All SA 382 (SCA) the court was asked to pronounce on the scope of the common-law and statutory powers to remove a trustee from a trust. The facts in the Gowar case emanated from a long-standing family feud about the control of various family trusts. The David Gowar Trust owned seven farms. The Rietfontein Trust owned two farms, while the RD Gowar Testamentary Trust owned one farm, farming equipment and livestock. The Gowar Farm Trust owned farming equipment and livestock. These trusts were established at various times by Reginald Denver Gowar, the father of one of the applicants and one of the respondents.

Their conflict largely stemmed from the irreconcilable differences between the Gowar brothers about how the affairs of the various trusts could be best served in the interests of the beneficiaries. Despite concerted endeavours by third parties to mediate, the dispute remained unresolved.

The key issue was the circumstances in which a court may remove a trustee from office in terms of either the common law or s 20(1) of the Trust Property Control Act 57 of 1988 (the Act). One Gowar brother applied for the removal of the other as a trustee of all four trusts. The respondent brother brought a cross-application for the removal of the applicant brother as trustee from three of the trusts.

The court of first instance dismissed both the main application and the counter-application.

On appeal to the SCA Petse JA held that the trustee is the owner of the trust property for purposes of administration of the trust, but qua trustee he has no beneficial interests therein.

Where more than one trustee have been specified in the trust deed, they share a common fiduciary obligation towards the fulfilment of the objects of the trust and must act jointly.

The court pointed out that s 9(1) of the Act requires a trustee to act with the care, diligence and skill, which can reasonably be expected of a person who manages the affairs of another in the performance of his or her duties and the exercise of his or her powers. This standard is higher than the standard expected from an ordinary person when dealing with his or her own property.

Further, the court held that it is trite that the court has inherent power to remove a trustee from office at common law. This power also derives from s 20(1) of the Act which provides that: ‘A trustee may, on the application of the Master or any person having an interest in the trust property, at any time be removed from his office by the court if the court is satisfied that such removal will be in the interests of the trust and its beneficiaries.’

The general principle is that a trustee will be removed from office when continuance in office will prevent the trust being properly administered or will be detrimental to the welfare of the beneficiaries. This applies to both the common law power and the power under s 20(1) of the Act.

The court confirmed that common-law powers remain unaffected by the enactment of s 20(1). In this regard it emphasised that, firstly, the power of the court to remove a trustee must be exercised with circumspection; and secondly, neither mala fides nor misconduct is required for the removal of a trustee.

Importantly, so the court reasoned, mere friction or enmity between the trustee and the beneficiaries will not in itself be adequate reason for the removal of the trustee from office. Nor would mere conflict among the trustees themselves be a sufficient reason for the removal of a trustee at the suit of another. The removal must be in the interests of the trust and its beneficiaries.

The court concluded that on the undisputed facts as established neither the applicant brother in the main application nor the respondent brother in the counter-application made out a sufficient case for their removal as trustees from the respective trusts.

Both the appeal and counter-appeal were accordingly dismissed.

Other cases

Apart from the cases and topics that were discussed or referred to above, the material under review also contained cases dealing with: Appeals, civil procedure, company law, constitutional law, criminal procedure, elections, labour law, land reform, maritime law, medical schemes, mining and minerals, motor-vehicle accidents and pleadings.

This article was first published in De Rebus in 2016 (Nov) DR 43.