The law reports – May 2018

May 1st, 2018
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Heinrich Schulze BLC LLB (UP) LLD (Unisa) is a professor of law at Unisa.

March 2018 (2) South African Law Reports (pp 1 – 325); October [2017] 4 All South African Law Reports (pp 1 – 294); February [2018] 1 All South African Law Reports (pp 317 – 619); March [2018] 1 All South African Law Reports (pp 621 – 880); 2018 (4) Butterworths Constitutional Law Reports – April (pp 387 – 526)

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

FB: Free State Division, Bloemfontein

GJ: Gauteng Local Division, Johannesburg

GP: Gauteng Division, Pretoria

SCA: Supreme Court of Appeal

WCC: Western Cape Division, Cape Town

Animals

Actio de feris – defence of provocation: The facts, which led to the claim in Van der Westhuizen v Burger 2018 (2) SA 87 (SCA), were simple. The respondent plaintiff, Burger, visited the defendant appellant, Van der Westhuizen, on the latter’s farm. One of the defendant’s ostriches chased the plaintiff. The plaintiff alleged that in an attempt to escape from the ostrich he tripped over a piece of wood, tore his Achilles tendon and as a result, suffered damage in the amount of R 6,75 million.

The cause of action pleaded by the plaintiff was the actio de feris in terms of which the bringing of wild or dangerous animals on or into a public place, or a place to which members of the public have access, was prohibited. The cause of action is based on ownership and strict liability is imposed on the owner of the animal, for the consequences of the animal’s behaviour. The victim is accordingly absolved from alleging and proving negligence on the part of the owner, which is presumed.

In the High Court the parties agreed to separate the issues of merit and quantum. The High Court dismissed the defendant’s defence of provocation. He argued that the plaintiff teased and provoked the ostrich, inter alia, by grabbing it at the neck and throwing a stone at it.

On appeal to the SCA, the court was asked to decide the following three questions. First, whether provocation should be recognised as a defence to the actio de feris? Secondly, whether the plaintiff had provoked the ostrich into chasing him? Thirdly, whether the pursuit was the cause of the injury?

Swain JA held that provocation is indeed a defence and that the plaintiff had provoked the animal: He had thrown a stone at it. Finally, the court held that the pursuit was not the cause of the action. The plaintiff’s flight had been interrupted by his falling to the ground. After the plaintiff had fallen and was at the mercy of the ostrich, it did not attack him. The ostrich merely stood looking at him while he was lying on the ground and when he stood up to run into the house he stepped awkwardly, and injured his tendon.

The appeal was thus allowed with costs.

In a concurring minority judgment Ponnan JA noted that there was uncertainty as to whether the actio de feris was part of South African law; and endorsed the academic view, that it might be time for a statute to be passed, to govern this area of law.

Civil procedure

Condonation of non-compliance with statutory notice: In HL v MEC for Heatlh of the Free State Provincial Government [2018] 1 All SA 522 (FB) the court was asked to pronounce on the question whether a court may grant condonation of the non-compliance with the statutory notice, which a creditor must serve on the state before the later may institute an action to recover a debt from an organ of state. Section 3(2)(a) of the Institution of Legal Proceedings against Certain Organs of State Act 40 of 2002 (the Act) requires such creditor to serve on such organ of state a notice of its intention to do so within six months from the date on which the debt became due. Section 3(4)(a) of the Act gives a creditor the right to apply to court to have its non-compliance with s 3(2)(a) condoned.

The applicant (in the present proceedings for condonation) alleges that her son suffered permanent severe brain damage, because of her alleged prolonged labour, and as a result of the alleged negligence of the respondent’s employees in a state hospital in Harrismith. The applicant, in her capacity as the mother and natural guardian of her minor son, had instituted action against the respondent.

In its plea, the respondent averred that the applicant failed to comply with the requirements of the Act. The Act provides that condonation had to be sought as soon as one becomes aware of the need for it, the present application was filed more than two years late – and only a month before the trial was due to start.

Before the trial could proceed, two issues had to be decided. The first was whether an agreement was reached (in a letter between the parties) that the respondent would not oppose the condonation application, and if so, whether the respondent was entitled to resile from its undertaking, and accordingly whether the condonation application should be heard on an unopposed basis. If the court found that the respondent was entitled to oppose the application, the second question was whether the applicant had made out a case for condonation.

First, Murray AJ held that the letter relied on by the applicant did not create an agreement from which the respondent could not resile. The respondent had thus the right to oppose the application and such opposition was not unreasonable.

Secondly, in respect of the condonation application, the court held that before a creditor can institute an action to recover a debt from an organ of state, it has to give notice to the state in terms of  s 3(2)(a) of the Act.

The court’s discretion to grant condonation is not unfettered. Section 3(4)(b) permits the court to do so only once it is satisfied that the applicant has established that the debt has not been extinguished by prescription; good cause exists for the failure by the creditor; and the organ of state was not unreasonably prejudiced by the failure. All of these factors were satisfied in the present case.

The prejudice suffered by the respondent was not so unreasonable that the applicant and her minor child should be penalised for that by depriving them of the opportunity to state their case in court. The applicant played a role in the court reaching its decision. In this regard the court referred with approval to the finding quoted by Cloete JA in Premier, Western Cape Provincial Government NO v BL [2012] 1 All SA 465 (SCA) in para 19, where the court held that ‘given the applicant’s socio-economic background and the difficulties she faced in ascertaining the facts on which her cause of action is based, her explanation for her failure to give the notice to respondent within the requisite six month period, is in my view acceptable’.

The court concluded that it was thus fair and in the interests of justice for the court to exercise its discretion to grant condonation for the applicant’s non-compliance with the statutory notice period.

Constitutional law

Powers of Public Protector: In President of the Republic of South Africa v Public Protector and Others 2018 (2) SA 100 (GP); [2018] 1 All SA 800 (GP), the former State President (the President) sought the review and setting aside of the remedial action of the former Public Protector (PP). In terms of the PP’s report the President was instructed to appoint, within 30 days, a commission of inquiry, headed by a judge appointed by the Chief Justice, into the allegations of corruption outlined in her report No 6 of 2016/17, titled ‘State of Capture’ (the Report).

The Report was the result of the PP’s investigation of complaints that the President had improperly allowed the Gupta family to be involved in the removal and appointment of cabinet ministers (including the Minister of Finance in December 2015) and directors of state-owned entities (SOEs) (including the board of Eskom). The alleged conduct by the President was contrary the provisions of the Executive Members’ Ethics Act 82 of 1998 (the Ethics Act) and the Executive Ethics Code (the Code).

In his notice of motion the President sought an order that the matter be remitted to the office of the PP for further investigation on the basis that the PP lacked the power to delegate her functions to a commission of inquiry.

The present review was directed at the lawfulness and rationality of the remedial action. In short, the question was whether the President’s constitutional power to appoint a commission of inquiry could be limited by remedial action taken by the PP.

In a joint judgment the court held that the President’s power (under s 84(2)(f) of the Constitution) to appoint a commission of inquiry was curtailed where his conduct was in conflict with his constitutional obligations and the principle of legality.

The PP’s investigative powers (under s 182(1)(c) of the Constitution) encompassed the power to direct members of the executive, including the President, to exercise powers entrusted to them under the Constitution.

In order to fulfil their constitutional mandate PPs had power, in appropriate circumstances, to direct the President to appoint commissions of inquiry and to direct the manner of their implementation. For these reasons the first ground of review, namely that it was unlawful for the PP to instruct the President to appoint a commission of inquiry, was without merit.

Nor was there anything in either the Public Protector Act 23 of 1994 or the Ethics Act to prevent the PP from instructing another organ of state to conduct a further investigation. The primary role of the PP was that of an investigator, not an adjudicator, and the fact that she made no firm findings on whether the evidence collected established wrongdoing by the President, the Gupta family or anyone else did not preclude her from taking remedial action.

The PP’s observations in the Report, which were supported by a considerable body of corroborative evidence, constituted a prima facie case of serious misconduct and impropriety on the part of the President, the Gupta family and others. It thus constituted an appropriate basis for the PP’s remedial action, and the President’s argument that it was unlawful because the PP did not make findings of misconduct and impropriety, had to be rejected.

The court thus declared the PP’s Report to be binding and directed the President to appoint a commission of inquiry within 30 days, to be headed by a judge selected by the Chief Justice.

 

Right to freedom of expression: In South African Human Rights Commission v Qwelane 2018 (2) SA 149 (GJ); [2017] 4 All SA 234 (GJ), the proceedings dealt with two consolidated applications. In the first, the South African Human Rights Commission (SAHRC) brought proceedings in a magistrates’ court – sitting as an Equality Court – against the respondent, Qwelane, under s 10(1) of the Promotion of Equality and Prevention of Unfair Discrimination Act 4 of 2000. In the second, Qwelane applied in a High Court for a stay of the Equality Court proceedings.

Qwelane is a regular and well-known newspaper columnist. On 20 July 2008 the Sunday Sun newspaper published a column by Qwelane under the heading: ‘Call Me Names – But Gay is not Okay’. In it he called homosexuality ‘wrong’ and suggested removing from the Constitution ‘those sections which give licence to men “marrying” other men, and ditto women’ before ‘some idiot demands to “marry” an animal, and argues that this Constitution “allows” it’. The article was accompanied by a cartoon of a man and a goat kneeling before a priest, captioned ‘When human rights meet animal rights’ and ‘I now pronounce you man and goat’.

The crisp issue before the court was whether a statement that compared homosexuality with bestiality, constituted hate speech.

Moshidi J held that as an Equality Court, the court had to determine whether the complainant (the SAHRC) had made out a prima facie case of discrimination (here: Hate speech). Qwelane could show either that there was actually no such discrimination or that the conduct complained of was not based on one of the prohibited grounds.

In terms of s 16(2) of the Constitution hate speech is excluded from the scope of constitutional protection that was otherwise given to expressive conduct: It was not an absolute right. In applying s 10(1) of the Equality Act, the court had to strike the correct balance between freedom of speech, on the one hand, and dignity and equality, on the other hand. To promote hatred was to instill detestation, enmity, ill will and malevolence in another. The offending statements unacceptably equated human beings to animals, suggesting that gay and lesbian people were ‘other’ or ‘unnatural’. They showed hatred of, and were deeply hurtful and harmful to, the lesbian, gay, bisexual, transgender and intersex (LGBTI) community.

The court accordingly dismissed Qwelane’s constitutional challenges, declared the offending statements, which were published in his column to be hate speech, and ordered him to tender an unconditional apology to the LGBTI community.

 

Right to housing: The judgment in Fischer v Unlawful Occupiers and Others 2018 (2) SA 228 (WCC) concerned three applications for similar relief arising from the unlawful occupation of land owned by the first applicant in each application (Fischer, Stock and Coppermoon), and a counter-application by the unlawful occupants, the first respondent in each application. In all three instances, the applicants were the owners of private property in the City of Cape Town (the City) municipality. There were different second and third respondents in each of the three cases. In the Fischer case the second respondent was the City.

For space considerations the present discussion will focus on the Fischer case. The order by the court in respect of the other two applications was, in essence, similar to the one given in the Fischer case.

In the Fischer case a private individual had to put up with 60 000 unlawful occupiers on land used for private purposes – the local authority claimed that they could not accommodate the occupiers should they be evicted. In the other two cases, the land was used for commercial purposes.

The legislation framework when dealing with the present applications are ss 7, 25, 26 and 38 of the Constitution; s 9(3) of the Housing Act 107 of 1997; ch 13 of the Housing Code; and ch 12 of the National Housing Programme. The Housing Act sets out the functions of municipalities, which include the power to expropriate land for purpose of housing development if unable to negotiate the purchase of the land from the landowner. The Housing Code deals with housing grants that are provided to municipalities for upgrading settlements, while ch 12 of the National Housing Programme deals with housing assistance in emergency housing situations, which makes it easier for municipalities to acquire land and grants to provide for emergency housing.

The question before the court was whether the applicants’ rights in terms of s 25, and the occupiers’ rights in terms of s 26 of the Constitution were being violated by the state.

Fortuin J held that the City has a positive obligation to provide access to housing, and as such the state breached its duty in terms of ss 7(2), 25 and 26 of the Constitution, which means that the court must order appropriate relief.

If the occupiers stay, the applicants’ rights in terms of s 25 will be infringed, while the s 26 rights of the occupiers will be respected. The court, however, needs to provide relief to the applicants by ordering the state to do something, which is acceptable in the sphere of separation of powers because it balances the rights of two parties. All the court has to determine is whether the City is taking reasonable action, and what reasonable action is.

In the present case, the reasonable action would include acquiring the applicants’ properties. Even if the land is not suitable for permanent housing, in emergency situations no permanent housing is required.

The court considered the contention in President of the Republic of South Africa v Modderklip Boerdery (Pty) Ltd (Agri SA and Legal Resources Centre, amici curiae) 2004 (6) SA 40 (SCA) that ordering expropriation may violate the principle of the separation of powers. In this case the land is available for emergency housing, in which case the purchase of land is allowed if there is no alternative land. This is a duty that rests on all the spheres of government, and in light of the legislative scheme and the guidelines laid down in Modderklip, the City has a direct obligation to the occupiers.

The City has a duty to give effect to the constitutional rights of the applicants and the occupiers by using the provisions in its policies.

The court issued a lengthy and detailed declaratory order. The gist of the court’s declaration entailed that the City and the unlawful occupants infringed Fischer’s constitutional right to property in terms of s 25 of the Constitution.

The court further ordered that in order to give effect to Fischer’s rights in terms of
s 25, and the rights of the unlawful occupiers in terms of s 26 of the Constitution, the City was ordered to enter into good-faith negotiations with Fischer in order to purchase the property within one month of the court’s order. Failing agreement between Fischer and the City, the City was ordered to report back to the present court within one month of the order on the progress of these negotiations. The eviction application by Fischer was dismissed.

A costs order was given against the City.

Delict

Unlawful failure to secure pool gate: The appeal in Stedall and Another v Aspeling and Another 2018 (2) SA 75 (SCA) had its origin in a swimming-pool accident in 2004 at the appellants (the Stedalls’) home in Constantia, Cape Town.  On a visit to the Stedalls’ home with her two and a half year-old daughter C, the plaintiff in the court a quo (Aspeling) briefly left the child unattended. In that time C made her way to the pool, where some time later she was discovered floating face down. Although she did not drown, she suffered severe brain damage. The Aspelings sued the Stedalls for their and C’s damages. In a pre-trial conference the parties agreed ‘to separate the merits and the quantum’.

The High Court found the parties jointly negligent: The Stedalls, for failing to secure the pool’s gates; and Mrs Aspeling, for failing to keep C under constant watch. It ordered that the damages should be apportioned.

The Stedalls, with the High Court’s leave, appealed to the SCA. They disputed their liability for all of the claims.

The crisp issues were whether the failure to secure the gates, was, in the circumstances, wrongful. The circumstances were of a parent bringing its child to a home on a visit; being aware there was a pool on the premises; supervising the child; but becoming momentarily distracted; and during that time the child wandering off, falling into the pool, and being injured.

Leach JA held that it was not wrongful. As to the negligence of the Stedalls the court held that they were not: A reasonable person in their position would know Mrs Aspeling was a careful parent who had kept C under observation on previous visits, and who was aware the pool gate might be unlatched or open. Given this, a reasonable person would assume that on this occasion she would likewise, not leave C unattended.

The appeal was accordingly upheld. The High Court’s order was set aside and substituted with an order dismissing the Aspelings’ claims.

Education

University’s language policy: In Afriforum and Another v University of the Free State 2018 (2) SA 185 (CC); 2018 (4) BCLR 387 (CC), the crisp question was whether the University of the Free State (the University) took a valid decision in replacing its dual Afrikaans/English language policy with a new policy in terms of which the use of Afrikaans would be discontinued, leaving English as the sole primary medium of instruction. The University decided on the new policy after it found that the dual-medium policy had (unintentionally) resulted in racial segregation and tension.

AfriForum and the Solidarity trade union (the appellants), successfully applied in the FB for a review of the University’s new language policy. The University, in turn, successfully appealed to the SCA. The appellants sought leave to appeal to the CC. The CC had to determine four issues:

  • standing;
  • whether the University’s determination of the language issue was administrative action;
  • whether the University’s conduct was consistent with its obligations under s 29(2) of the Constitution; and
  • whether the University determined and adopted its new language policy ‘subject to’ the ministerial policy.

The majority, per Mogoeng CJ held that while AfriForum had standing because it was acting in the furtherance of its members’ right to have their children instructed in Afrikaans, the same could not be said of Solidarity, whose members had no such right.

The University’s decision was a policy decision taken in the exercise of a public power. Although the language-policy decision was not an administrative action reviewable under the Promotion of Administrative Justice Act 3 of 2000 (PAJA), it was nevertheless subject to a legality review.

As to s 29(2) of the Constitution and the meaning of ‘reasonably practicable’, the court held that it would be unreasonable to retain a language policy that had proved to be the antithesis of fairness, feasibility, inclusivity and the remedial action necessary to confront racism. Constitutional values like equality, responsiveness and non-racialism, and the constitutional obligation to make education accessible to all, ought to be central to any language policy.

Since s 29(2) demanded equity, practicability and the undoing of the damage caused by racial discrimination, inequitable access or the entrenchment or fuelling of racial disharmony would justify the withdrawal or curtailment of the right to be taught in one’s mother tongue.

Because the use of Afrikaans had unintentionally become a facilitator of dual-ethnic or cultural separation and racial tension, a revision of the language policy had become necessary. While it might be practicable to retain Afrikaans as a major medium of instruction, it was not ‘reasonably practical’ when race relations were poisoned thereby.

The new language policy was determined ‘subject to’, and consistent with, the ministerial policy and the Constitution, its adoption was thus legal and valid.

Leave to appeal was accordingly refused.

In a minority judgment, Froneman J, held that the court should have granted leave to appeal on the ground that appellants’ case had prospects of success and concerned ‘unfinished business’ under the Constitution. The majority judgment sanctioned an approach that deprived Afrikaans-speakers of the constitutional right to receive education in the language of their choice, a matter that the court had never authoritatively dealt with before.

Insolvency

Ranking of business rescue practitioner’s claim in insolvency proceedings: The facts in Diener NO v Minister of Justice and Others (South African Restructuring and Insolvency Practitioners Association (SARIPA) and Others as amici curiae) [2018] 1 All SA 317 (SCA) were as follows: The appellant, Diener, was appointed as business rescue practitioner to oversee the business rescue of a close corporation, JD Bester. On 13 June 2012, the members of JD Bester passed a resolution placing it voluntarily in business rescue, in terms of s 129(1) of the Companies Act 71 of 2008. Diener was subsequently appointed as business rescue practitioner. In August 2012, he decided that JD Bester could not be rescued and instructed attorneys to bring an application in terms of s 141(2)(a), to convert the business rescue proceedings into liquidation proceedings. A dispute arose as to how the fees and expenses of Diener and the attorneys should be dealt with. The third respondent, Murray, was one of the joint liquidators of JD Bester. Murray was of the view that Diener had failed to prove a claim in terms of s 44 of the Insolvency Act 24 of 1936 and that the attorneys were an unsecured creditor who, ultimately, was required to make a contribution in terms of s 106 of the Insolvency Act. The Master upheld the position adopted by Murray.

Diener applied unsuccessfully to the High Court for an order reviewing and setting aside the first and final liquidation, distribution and contribution account in respect of JD Bester. The dismissal of his application led to the present appeal. Murray opposed the relief sought in the High Court and also opposed the appeal.

Plasket AJA pointed out that the issues to be decided were the order of preference of the business rescue practitioner’s claim for remuneration and expenses on the liquidation of JD Bester; a determination of the date of liquidation, when business rescue proceedings are converted into liquidation proceedings; and whether the business rescue practitioner is required to prove his claim in terms of s 44 of the Insolvency Act, and the effect of Diener not having proved his claim in this case.

Having regard to Ch 6 of the Companies Act, the court held that a business rescue practitioner’s claim for remuneration ranked after the costs of liquidation, but before those of post-commencement claims for wages by employees and secured and unsecured post-commencement finance, and was payable from the free residue of the insolvent estate. On the second question, the court held that the effective date of liquidation was the date on which an application for liquidation was filed. Finally, any creditor who wishes to share in the distribution of an insolvent estate is required to prove his claim.

The appeal was accordingly dismissed with costs.

Lease

No obligation to renew lease: In Roazer CC v The Falls Supermarket CC [2018] 1 All SA 438 (SCA) the respondent, Falls Supermarket, was a retailer that leased the premises on which it operated from the appellant, Roazar. Apart from the lease agreement, there were two other agreements between the parties. In terms of those agreements, Falls Supermarket had agreed to pay additional money in cash and off the record to the individual members of Roazar. These additional agreements were void due to illegality as they had an illegal purpose, namely to avoid income tax.

The lease agreement made provision for the renewal of the lease by Falls Supermarket for an additional period of five years to be negotiated by the parties before the expiration of the original lease. The agreement made no provision for a deadlock-breaking mechanism if the parties could not reach agreement.

Roazar refused to negotiate the new lease unless the amounts in terms of the additional (illegal) agreements were paid by Falls Supermarket.

Tshiqi JA held that non-performance under the additional agreements was no bar to the exercise by Falls Supermarket of its entitlement to renew the main lease agreement as these agreements were illegal and, therefore, void and unenforceable.

The real issue in Roazer was whether an agreement to negotiate in good faith is enforceable in the absence of a deadlock-breaking mechanism. It is trite that negotiations are enforceable if the agreement provides for an effective deadlock-breaking mechanism.

The court reasoned that a sensible interpretation of the agreement was that Falls Supermarket had to notify Roazar at least one month before the expiry of the current lease period that it wished to exercise its right of renewal. It did not have to do so in writing. In that event the lease agreement would continue on a month to month basis, subject to one month’s notice by either party, until an agreement was reached or negotiations failed and notice was given by one of the parties. If Falls Supermarket elected not to exercise its right to renew the lease at least one month before the expiry of the lease period, the lease would terminate on 29 February 2016. If an agreement was reached to renew the lease, that agreement had to be in writing.

Roazar chose to invoke the terms of the agreement and terminated the contract by giving one month’s notice. That should have been the end of the matter, but Falls Supermarket contended that the contract could not be terminated until good faith negotiations had taken place. For that reason it contended that the notice of termination and the application for eviction were premature.

The court pointed out that the parties consciously bound themselves to a contract that provided that each party could terminate it on one month’s notice in the event that there was no agreement on the renewal terms. There was no obligation on Roazar to renew the agreement. It was not competent for the court to import a term not intended by parties simply on the basis of the principle of ‘ubuntu’.

The appeal was upheld with costs.

Prescription

Abandonment of special plea of prescription: The facts in Groep v Golden Arrow Bus Services (Pty) Ltd and a related matter [2018] 1 All SA 508 (WCC) were as follows: On 2 September 2002, the plaintiff, Groep, took a bus to work as he usually did. While attempting to board a bus operated by the defendant, Golden Arrow, Groep was injured when the bus pulled away before he had fully embarked. He suffered extensive orthopaedic injuries and he sought to claim damages for it. The particulars of claim stated that Groep had been conveyed as a fare-paying passenger on a Golden Arrow bus, that his statutory claim against the Road Accident Fund (the RAF) was limited to R 25 000, that he had received that amount from the RAF and that Golden Arrow was, therefore, liable to Groep for damages in the sum of R 855 000. The claim comprised general damages in the sum of R 500 000 with the balance claimed in respect of special damages (past and future medical expenses, and past and future loss of income).

Golden Arrow defended the claim and raised a special plea of prescription. It said that by no later than 2 September 2002, Groep was aware of both the identity of the debtor, which had caused him to suffer damages and the facts from which that debt arose. It alleged that, in the circumstances, Groep’s debt had prescribed in terms of the Prescription Act 68 of 1969 by no later than 3 September 2005.

Groep filed a replication to the plea, stating that he only acquired knowledge of the identity of his debtor and facts giving rise to his claim against Golden Arrow on 20 June 2006.

Gamble J pointed out that the crisp question was whether Golden Arrow had undertaken to abandon the special plea of prescription. The facts showed that Golden Arrow’s undertaking not to rely on the special plea of prescription came at a relatively early stage of negotiations, all of which were classified throughout by the parties as being ‘without prejudice’. That formed the basis of Golden Arrow’s offer to settle. Consequently, the court was not persuaded that the letter relied on by Groep was admissible in evidence against Golden Arrow, and the conclusion was that the special plea of prescription has not been abandoned by Golden Arrow.

The separate matter of prescription was thus determined in favour of Golden Arrow.

Revenue

Interpretation of ‘gross sales’ in respect of an unrefined mineral resource: The facts in United Manganese of Kalahari (Pty) Ltd v Commissioner, South African Revenue Service 2018 (2) SA 275 (GP) were as follows: The applicant, United Manganese of Kalahari (UMK), was a manganese miner and an ‘extractor’ of an ‘unrefined mineral resource’ in terms of the Mineral and Petroleum Resources Royalties Act 28 of 2008 (the Act). As such, UMK was liable for the payment of a royalty on the transfer of the manganese, based on its ‘gross sales’.

In calculating its resources royalty liability in terms of the Act, UMK deducted from gross sales the cost of transport, insurance, and handling it incurred in order to bring the manganese to the condition set-out in sch 2 of the Act. Further, UMK deducted from gross sales, the cost of transport, insurance, and handling it incurred in disposing of the manganese.

A dispute arose between UMK and the South African Revenue Service (SARS) on the interpretation of s 6(3)(b) of the Act and the determination of gross sales for purposes of calculating the royalty liability. SARS argued that the cost of transport, insurance, and handling post extraction could not be deducted from gross sales.

UMK applied for a declaratory order claiming that s 6(3)(b) allows it to deduct from gross sales, the cost of transport, insurance, and handling actually incurred in order to bring the manganese in the condition as per sch 2 and to dispose of the manganese.

Meyer J held that s 6(3)(b) of the Act is clear and unambiguous. ‘Gross sales’ in respect of an unrefined mineral resource transferred is, in terms of s 6(2), ‘the amount received or accrued during the year of assessment in respect of the transfer of that mineral resource.’ Section 6(3)(b) provides that for purposes of ss (2), gross sales is determined ‘without regard to any expenditure incurred in respect of transport, insurance and handling of an unrefined mineral resource’ post the condition specified ‘or any expenditure incurred in respect of transport, insurance and handling to effect the disposal of that mineral resource.’

The interpretation by SARS of s 6(3)(b) requires that the court reads into the section an interpretation by implication. Nothing in the text of the Act justifies such implication. The court concluded that UMK was entitled to calculate its gross sales in respect of manganese transferred by it by deducting any expenditure incurred in respect of transport, insurance, and handling of the manganese after the manganese had been brought to the condition specified in sch 2 of the Act. It may further deduct any expenditure it incurred in respect of transport, insurance and handling to effect the disposal of the manganese. Such deduction will be allowed irrespective whether any such expenditure was specifically and/or consciously considered in the determination of the applicant’s gross sales and irrespective whether such transport, insurance and handling costs are of a capital nature.

The declaratory order was accordingly given with costs.

Other cases

Apart from the cases and topics that were discussed or referred to above, the material under review also contained cases dealing with: Administrative law, criminal law, sentence, demand guarantees, defence force, environmental law, fiduciary duties of directors, immigration, international law, land reform, lease, loss of support, mining and minerals, media, National Director of Prosecutions, road-accident claims and validity of legislation.

This article was first published in De Rebus in 2018 (May) DR 33.

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