The law reports – October 2020

October 1st, 2020
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August [2020] 3 All South African Law Reports (pp 305 – 632)

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
GJ: Gauteng Local Division, Johannesburg
GP: Gauteng Division, Pretoria
MM: Mpumalanga Division, Mbombela
SCA: Supreme Court of Appeal
WCC: Western Cape Division, Cape Town

 

Civil procedure

Amendment of plea and counterclaim: In Ergo Mining (Pty) Limited v Ekurhuleni Metropolitan Municipality and Another [2020] 3 All SA 445 (GJ) the respondent municipality had sued the applicant (Ergo) for payment of close to R 73,5 million plus interest in respect of charges for electricity, which it alleged it had been supplying to Ergo since the end of November 2014. Ergo disputed the claim and raised a number of defences, which included a denial that the municipality had been supplying it with electricity. Ergo maintained that it received its supply of electricity from Eskom and had been paying the municipality only the amount it claimed it was liable for in terms of Eskom’s applicable tariff rates. The municipality’s claim, therefore, was for the difference between the Eskom tariff and what it had been charging Ergo.

Ergo also instituted a claim in reconvention for an amount of just under R 89,5 million. That represented the difference between the amount it had in fact paid the municipality between the period December 2008 to November 2014 and the amount, which the municipality was liable to pay over to Eskom. The municipality raised a special plea of prescription on the grounds that the amount claimed was a debt within the meaning of the Prescription Act 68 of 1969. It also pleaded over on the merits. In June 2018, Ergo gave notice under r 28(1), of its intention to amend the plea and counterclaim.

An amendment will generally be granted to enable the real issues between the parties to be properly ventilated. Thus, a pleading, which does not disclose a cause of action or defence, will not qualify. An amendment will also not be granted if it results in prejudice that cannot be cured by an award of costs or a postponement. Provided that the substance of the matter claimed in an amendment, as opposed to its precise legal characterisation, is set out in the original claim then it will remain the same ‘debt’ for purposes of avoiding prescription.

The court, per Spilg J, examined each of the grounds for objecting to the amendments and found none to have any merit. The application for leave to amend was granted.

 

Company law

Business rescue proceedings: In Matshazi v Mezepoli Melrose Arch (Pty) Ltd and Another and Related Matters [2020] 3 All SA 499 (GJ), four applications were before the court, where orders were sought placing the first respondent in each application under supervision and commencing business rescue proceedings under s 131(4)(a) of the Companies Act 71 of 2008. The applicants were each employed as managers of the respondent companies.

The defences raised by the respondent companies were that as a result of the national lockdown, force majeure presented, excusing the respondent companies from their obligations to their employees and their other creditors, who therefore, had no locus standi to bring the applications. It was also contended that the companies (other than one of them) were not financially distressed.

The respondents appeared to be raising force majeure only in respect of their employment contracts. The defence was not raised when payment was demanded by other creditors. If provision is not made contractually by way of a force majeure clause, a party will only be able to rely on the very stringent provisions of the common law doctrine of supervening impossibility of performance, for which objective impossibility is a requirement. Such impossibility was not proven in this case.

The court, per Weiner J, found that the respondent companies had failed to pay over an amount in terms of their obligation under the employment contracts, and that they were shown to be financially distressed.

The directors appeared to move funds between all the entities, which they controlled and a trust, without disclosing a complete financial picture, notwithstanding that they were all separate companies that were all financially distressed. Placing the respondent companies under business rescue would allow the business rescue practitioner to attain a clear and complete understanding of the financial positions of the respondent companies, so that an attempt can be made to rescue them or, if that is not possible, wind them up. The court was satisfied that there was a reasonable possibility that the companies could be rescued. The applications accordingly succeeded.

 

Delinquent directors: The first defendant (Myeni) was chairperson of the board of the second defendant (SAA) until 2017. In Organisation Undoing Tax Abuse and Another v Myeni and Others [2020] 3 All SA 578 (GP) the plaintiffs sought an order declaring Myeni a delinquent director in terms of s 162(5) of the Companies Act 71 of 2008. Where the grounds for delinquency have been established, the court has no discretion and must grant the order. The only discretion given to the court concerns the conditions that may be attached to the order. It has been stated in case law that the four grounds for delinquency under s 162(5)(c) all share the common feature that they involve serious misconduct on the part of the director who grossly abuses his position and acts in a way tantamount to recklessness. The court, per Tolmay J, considered the duties imposed on a director under the Companies Act, as amplified by the Public Finance Management Act 1 of 1999. In terms of s 50 of the latter Act, all directors of SAA were subject to heightened fiduciary duties. The said legislative instruments and SAA’s corporate policy documents formed the background against which Myeni’s conduct had to be evaluated.

Despite a range of benefits posed by the Emirates deal for SAA, Myeni thwarted the signing of the deal. She was shown to have acted dishonestly, stating false facts to support her stance, and grossly abused her powers in blocking the deal. In court, Myeni’s explanation of her actions was nonsensical and contradictory. She had no reasonable grounds for blocking the Emirates deal, and was found to have breached her fiduciary duty to act in good faith, for a proper purpose and in the best interests of SAA. The failure of the deal led to irreparable harm for SAA and the country.

The Airbus swap involved an agreement between SAA and Airbus to cancel their old agreement (involving onerous obligations for SAA) and to substitute it with a new deal for SAA. The new deal would have significant benefits for SAA. However, that deal was also thwarted by Myeni, who delayed the matter, and then undid the work already done in the deal and began to renegotiate the deal unilaterally – backtracking on the resolution to proceed and altering the terms.

The court expressed its displeasure with the conduct of Myeni in the trial. She was found to be a dishonest and unreliable witness. Her explanations for the inexplicable course of actions taken by her at SAA were unconvincing. Her conduct satisfied several grounds for delinquency.

Issuing a declaration that Myeni was a delinquent director, the court ordered that the order subsist not just for seven years, but for Myeni’s lifetime.

 

Constitutional and administrative law

Access to information: The appellant lodged a request with the respondents (the South African Reserve Bank (SARB)) under the Promotion of Access to Information Act 2 of 2000. It sought access to records obtained by the bank as part of investigations into a list of persons, relating to fraud or smuggling of precious metals. The information was sought in the process of collecting material for a book, which was to deal with Apartheid era procurement. The refusal of the request led the appellants to apply to the High Court for relief in terms of s 78(2) of the Act. The dismissal of the application led to the present appeal of South African History Archive Trust v South African Reserve Bank and Another [2020] 3 All SA 380 (SCA).

The SARB mounted opposition to the appeal on two bases:

  • The first was that two of the persons listed had not been joined in the application.
  • The second was that it was justified in its refusal to provide the records sought.

Records sought from public bodies may contain information about third parties. Such third parties would be unaware of a request for access, and their rights might be affected if access is given. For that reason, the Act has been carefully crafted to ensure that such a third party is given opportunities to be heard on the request. Section 47 of the Act deals with the required notice to third parties. All public bodies are required to have a designated information officer (IO) who deals with requests. Third parties have the right to be notified of a request, if reasonable steps taken by the IO would achieve that. They then have the right to make representations opposing disclosure or to consent thereto in writing. If consent is given, the IO has no discretion to refuse access. Even if a third party is not notified, they may make representations or so consent if they become aware of the request. Section 49(2) deals with the situation where it is not possible to inform all third parties, despite taking reasonable steps to do so – in which case a decision must still be made. The exception allowed under s 49(2) arises only if –

  • all reasonable steps were taken to notify a third party;
  • despite such steps, the third party was not informed; and
  • the third party did not make representations.

The SARB was found not to have taken all reasonable steps to inform the relevant persons of the request. It was, therefore, not empowered to make any decision under s 49(2), and its refusal of access to the documents lacked a valid legal basis.

The court, per Gorven AJA (Cachalia JA, Mbha JA, Schippers JA and Mojapelo AJA concurring) went on to consider the remaining provisions of the Act in respect of which the SARB claimed to have refused the request. It concluded that none of the records sought satisfied the requirements of any of the named sections of the Act. The appeal was thus upheld with costs.

 

Cancellation of contracts with existing service providers: In FourieFismer Incorporated and Others v Road Accident Fund and Others and Related Matters [2020] 3 All SA 460 (GP) attorneys (panel attorneys) had been selected by the Road Accident Fund (RAF) after a tender procurement process. The selected attorneys formed part of a panel contracted to the RAF for a period of five-years, and the RAF from time to time would select an attorney from the panel to provide specialist litigation services in the various courts. As a result of ongoing severe financial constraints experienced by the RAF, it was decided that legal services be sourced internally and no longer outsourced. That led to the decision to cancel the panel attorney tender.

The panel attorneys in the three applications sought the review, setting aside and declaration as constitutionally invalid, the RAF’s decisions to require the panel attorneys to hand over their files, which were not finalised; to cancel the tender; and to dispense with the services of the panel attorneys.

The court, per Hughes J, held that the RAF was a social security scheme, acting on behalf of the state to protect the freedom and security of persons and is obliged to afford an appropriate remedy to victims of motor vehicle accidents. Recognising that the contract between the parties was governed by administrative characteristics, the court rejected the RAF’s contention that it was exercising its contractual rights in a private law relationship. The administrative characteristic still remained as it performed its social duty for the state and was bound to exercise its contractual rights in a procedurally fair and lawful manner. The fact that the contractual rights arose from a tender was irrelevant. The unilateral prescription by the RAF of the terms of the addendum was found to be an abuse of its power in performing a public duty. The RAF’s power to procure the services of the panel attorneys derived from s 217 of the Constitution, and insofar as the second addendum would have been imposed on the panel attorneys in contravention of s 217, it was invalid and unlawful. The court concluded that the notices to cancel and the cancellation of the contract were reviewed and set aside on the ground of invalidity. The RAF was ordered to fulfil all of its obligations to the panel attorneys in terms of the existing service agreement, and the said order was to operate for six months from date of issue.

See also:

 

Procurement and unlawfulness of contract: Following the termination of the contractual relationship by the provincial government in Valor IT v Premier, North West Province and Others [2020] 3 All SA 397 (SCA), the appellant Valor IT (VIT) applied for a declaratory order that the termination was unlawful and that it was entitled to payment of a further amount of R 146 473 747,49 as damages. In 2011, VIT submitted an apparently unsolicited proposal to the Department concerning an enterprise content management system, to manage its records. A few months later, the Department directed a request for quotations for the rendering of services on a ‘Records Management Solution’ to entities that were accredited. One of them was VIT. In August 2011, VIT was informed of its successful bid. VIT and the Department signed an agreement that they called a service delivery agreement (SDA). The fee that VIT would be entitled to for the work was R 498 000. However, the contract price escalated over about three years from that to R 41 729 647.

The court, per Plasket JA (Mokgohloa JA, Molemela JA, Wallis JA and Koen AJA concurring) held that the provincial government’s prospects of success on the merits were strong. The scheme in terms of which VIT purported to provide services, and for which it was handsomely remunerated, was unlawful from start to finish. Section 217 of the Constitution requires organs of state, such as the Department, when it procures goods and services, to do so in terms of a system that is fair, equitable, transparent, competitive and cost-effective. In this case, no public tendering process was ever held in respect of the SDA or any of the agreements that followed it. The SDA was awarded to VIT after it and two other firms had responded to a closed request for quotations. The subsequent entering into of a settlement agreement by the parties was unlawful. The settlement agreement sought to give effect to the unlawful arrangement, and was correctly rescinded by the court below. The appeal was dismissed with costs.

 

Delict

Malicious prosecution: The respondent (Lincoln) was charged in the regional court on 47 charges, including numerous counts of fraud. He was convicted on 17 counts, 15 of which related to fraud, and he was sentenced to nine years’ imprisonment. However, on appeal, the High Court set aside the convictions and sentence. Lincoln then sued the appellant (the minister) for damages arising from an alleged malicious prosecution. Although the trial court dismissed the action, the Full Court upheld an appeal in respect of all but two of the charges brought against him. That resulted in the appeal, reported as Minister of Safety and Security v Lincoln [2020] 3 All SA 341 (SCA).

Lincoln worked for the South African Police Service as a director and his reports on allegations of corruption led to the establishment of the Presidential Investigative Task Unit (PITU) with Lincoln as the commander. In an investigation an officer (Smith) later made serious incriminating allegations against Lincoln and the PITU. Another director, Knipe, enlisted the assistance of Superintendent Rossouw, an experienced investigator, to conduct the investigation and Lincoln was charged.

The court, per Eksteen AJA (Cachalia JA, Dlodlo JA, Saldulker JA and Van der Merwe JA concurring) held that the issue was whether the employees of the minister instigated the prosecution of Lincoln, and whether they had reasonable and probable cause to do so.

The cause of action relied on was the actio iniuriarum. In order to succeed in a claim for malicious prosecution a plaintiff must establish that the defendant –

  • set the law in motion (instituted or instigated the proceedings);
  • acted without reasonable and probable cause;
  • acted with malice (or animo injuriandi); and
  • that the prosecution failed.

The defendant must have been actively instrumental in the prosecution of the charge. The test is whether the informer did more than tell the police the facts and leave the police to act on their own judgment. The court found that Lincoln had not prima facie established the absence of reasonable and probable cause. Consequently, the minister ought to have been absolved from the instance.

The thrust of Lincoln’s case related to the conduct of Knipe and Rossouw, as set out in the particulars for trial, and was aimed at establishing that they acted with animus injuriandi without an honest belief in Lincoln’s guilt. He failed to establish the alleged conduct attributed to Knipe and Rossouw in his pleadings.

In the premises, the appeal was upheld.

 

Legal practice

Provincial Councils (PCs) – race and gender composition: In an attempt to facilitate transformation of the legal profession, the Legal Practice Act 28 of 2014 (the LPA) was brought into effect. The applicant (the Cape Bar) in Cape Bar v Minister of Justice and Correctional Services and Others (National Bar Council of South Africa and Others as Amici Curiae) [2020] 3 All SA 413 (WCC) challenged the constitutionality of the Regulations and Rules published under the LPA, and in particular, the provisions relating to the composition of the PCs provided for. It brought the challenge of unfair discrimination in the Equality Court under the Promotion of Equality and Prevention of Unfair Discrimination Act 4 of 2000, and simultaneously a review under the Promotion of Administrative Justice Act 3 of 2000 (PAJA), alternatively in terms of the doctrine of legality. The applications were consolidated.

Regulations 4(3) and 4(4) of the Regulations and r 16.15.3 of the Rules were specifically challenged by the Cape Bar. The Regulations require 50% of the PC to be male and 50% to be female and it is specified how composition of PCs will be structured in each province. Essentially, the provisions create six seats for attorneys (eight in Gauteng) and four seats for advocates in each PC. The four seats for advocates must be composed of one white male, one white female, one black male and one black female. The Cape Bar submitted that those provisions comprise a formula, which was rigid and, while ostensibly aimed at affirming black and female representation in order to rectify past and present discrimination, it capped such representation, which was inimical to the objective. The contention was that the provisions thus lent themselves to irrationality, arbitrariness and unreasonableness.

The court, per Mabindla-Boqwana J and Papier J, held that the case turned on the determination of the objectives of the electoral scheme. The LPA provides that when the composition of Council is considered, the racial and gender composition of South Africa is a factor to be considered.

When a measure is challenged for violating an equality provision, its defender may meet the challenge by showing it as that which is contemplated in s 9(2) of the Constitution, in that it promotes the achievement of equality and is designed to protect and advance persons disadvantaged by unfair discrimination. The test to determine whether a measure falls within s 9(2) is threefold –

  • whether the measure targets persons or categories of persons who have been disadvantaged by unfair discrimination;
  • whether the measure is designed to protect or advance such persons; and
  • whether the measure promotes the achievement of equality. The court found that test to have been fulfilled in this case.

The court went on to address the Cape Bar’s contention that the Minister’s decision to promulgate the impugned Regulations, the decision to issue the impugned Rules, and the Council’s application of the impugned Rules, all constituted administrative action, which was subject to review under PAJA. However, the court held that regs 4(3) and 4(4), which related to the composition of the representative advocates to be elected to the PCs did not appear to be dealing with matters that were administrative in nature. The Rules were closely related to the impugned Regulations. As such, PAJA would not be applicable.

The Cape Bar also contended that the Minister acted ultra vires his powers, which were said to be limited to establishing the PCs, but not the election procedure. That was shown not to be correct as the relevant powers and functions of the Minister were enabled by ss 94 to 97 of the LPA.

Arguments by the Cape Bar based on arbitrariness, rationality and reasonableness were all found to be unsustainable. In the premises, the applications were dismissed.

See also:

 

Prevention of organised crime

Restraint order and pension fund: In the wake of two white rhinos being killed and maimed for their horns in a national park, the defendant in National Director of Public Prosecutions v Gumede [2020] 3 All SA 554 (MM) was found with two fresh white rhino horns, as well as equipment usually associated with rhino poaching, in his vehicle. He was arrested and charged with rhino poaching. As rhino poaching constitutes organised crime, the Prevention of Organised Crime Act 121 of 1998 applied. The applicant, the National Director of Public Prosecutions (NDPP), in terms of the provisions of the Act, approached the court on an urgent basis and without notice to the defendant, for an order restraining the defendant’s pension fund (it being stated that that was the only realisable property of the defendant).

The court ordered that the defendant’s pension benefit be kept in the fund and that no money could be paid from the fund to any person pending final judgment in the matter. Section 26 of the Act provides for the restraint of realisable property held by a person against whom the restraint order is made. In terms of r  6(12) of the Uniform Rules of Court, an applicant in an urgent application must establish urgency and the urgency must be to such a degree that the court is prepared to allow for a relaxation in respect of the normal requirements that are listed in sub-r 6(12). Section 26(1) permits the NDPP to apply to court for a restraint order on an ex parte basis. Although the NDPP was entitled to immediately on the defendant’s arrest, approach the court in terms of s 26(1), it delayed and only approached the court more than a year later and only when the defendant wanted to withdraw his pension benefit from the pension fund. The court, per Roelofse AJ, found that it was, therefore, not justified in bringing the application on an urgent basis. As the application lacked urgency, it was struck from the roll. In any event, having regard to s 37A(1) of the Pensions Fund Act 24 of 1956, the defendant’s pension fund was not susceptible to a restraint order in terms of s 26 of the Prevention of Organised Crime Act.

 

Other cases

Apart from the cases and material dealt with or referred to above, the material under review also contained cases dealing with –

  • company law and debarment of representative of financial service provider;
  • criminal procedure and combining of separate charges;
  • neighbour law and duty of lateral support;
  • restitution of land rights and meaning of ‘community’; and
  • review of the Auditor-General’s findings and retrospectivity.

Merilyn Rowena Kader LLB (Unisa) is a Legal Editor at LexisNexis in Durban.

This article was first published in De Rebus in 2020 (Oct) DR 28.