Heinrich Schulze BLC LLB (UP) LLD (Unisa) is a professor of law at Unisa.
January 2017 (1) South African Law Reports (pp 1 – 322); [2016] 4 All South African Law Reports October (pp 1 – 297); [2016] 4 All South African Law Reports December (pp 665 – 980); 2016 (10) Butterworths Constitutional Law Reports – October (pp 1253 – 1388); 2017 (2) Butterworths Constitutional Law Reports – February (pp 131 – 266)
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
GJ: Gauteng Local Division, Johannesburg
GP: Gauteng Division, Pretoria
KZP: KwaZulu-Natal Division, Pietermaritzburg
SCA: Supreme Court of Appeal
Administrative law: Application of PAJA
Review of decision by state entity: In State Information Technology Agency Soc Ltd v Gijima Holdings (Pty) Ltd [2016] 4 All SA 842 (SCA) the appellant, the State Information Technology Agency (SITA), was a state entity, which had contracted over many years with the respondent, Gijima. One such agreement was one in terms of which Gijima was to provide IT services to the South African Police Service (the SAPS agreement).
In January 2012, SITA unlawfully terminated the SAPS agreement as a result of which Gijima stood to suffer R 20 million in lost revenue. That prompted Gijima to institute urgent proceedings to protect its rights under the SAPS agreement. Following negotiations between the parties, SITA suggested that Gijima abandon its claim arising from the termination of the SAPS agreement in return for which it would receive a new service contract to offset its potential losses. Gijima was concerned about SITA’s competence to conclude such contract without having gone through a competitive bidding process and raised those reservations with SITA. SITA assured Gijima that it had the authority to conclude the contract. Relying on that assurance, Gijima agreed to settle the dispute on the basis proposed by SITA. The new contractual arrangement was embodied in a settlement agreement.
A payment dispute developed between the parties. The dispute was referred to arbitration for resolution. SITA then informed Gijima of its intention not to extend the agreement any further. Gijima submitted its statement of claim to the arbitrator in the payment dispute in which it claimed R 9,5 million for services rendered under the agreement. In response, SITA pleaded that the agreement was concluded in contravention of the procurement system contemplated in s 217 of the Constitution and was, therefore, invalid and unenforceable against it. Faced with a constitutional challenge to the main agreement, the arbitrator ruled that he had no jurisdiction to determine the issue, and SITA launched the present proceedings in the court a quo seeking a declaration that its contract with Gijima was unenforceable for want of compliance with the public procurement requirements of s 217 of the Constitution. The court a quo dismissed the application because SITA had relied directly on the constitutional principle of legality, instead of instituting review proceedings under s 6 of the Promotion of Administrative Justice Act 3 of 2000 (PAJA). It had also not applied under s 9(1)(b) to condone its failure to institute such proceedings within 180 days of the contract having been concluded.
On appeal, Cachalia JA rejected the first submission raised by SITA, namely that PAJA does not apply at all when an organ of state seeks to set aside its own decisions. It held that a decision by a state entity to award a contract for services constitutes an administrative action in terms of s 1 of the PAJA, and there is no good reason for excluding administrative decisions taken by the state from review under the PAJA.
The next question was whether the 180-day delay rule in s 7 was applicable to SITA, who contended that the provision did not apply. The court held that the 180-day rule does apply to organs of state, and to the SITA decision at issue in this case. Nevertheless, SITA maintained that it was entitled to avoid instituting review proceedings under the PAJA – and the procedural requirement under s 7 to institute its proceedings within 180 days – by relying directly on the constitutional principle of legality to obtain declaratory relief against Gijima. The court rejected the notion that the principle of legality may not be used to side-step the PAJA. It reasoned that the proper place for the principle of legality in our law is to act as a safety-net or a measure of last resort when the law allows no other avenues to challenge the unlawful exercise of public power.
The appeal was thus dismissed with costs.
Constitutional law
Limitations on right to protest: In Hotz and Others v University of Cape Town [2016] 4 All SA 733 (SCA) the court was asked to pronounce on the right to protest. The facts which led to the present appeal occurred in February 2016 when the appellants, who were students of the respondent university, University of Cape Town (UCT), caused extensive damage to the latter’s property.
Threats of further plans to damage UCT’s property led to UCT making an urgent application to the High Court for an interdict. A final interdict was ultimately handed down against the five appellants, leading to the present appeal.
Wallis JA held that an applicant for a final interdict must show –
The court further held that once the applicant had established the three requisite elements for the granting of an interdict, the scope, if any, for refusing relief was limited. There is no general discretion to refuse relief.
The court considered the factual allegations made by UCT against each of the appellants (students) and the grounds for saying that it was entitled to a final interdict against each of them. The right to protest against injustice is protected under our Constitution. But the manner in which the right is exercised is the subject of constitutional regulation. Thus, the right of freedom of speech does not extend to the advocacy of hatred that is based on race or ethnicity and that constitutes incitement to cause harm. The right of demonstration is to be exercised peacefully and unarmed. And all rights are to be exercised in a manner that respects and protects the foundational value of human dignity of other people.
The evidence in respect of each of the students disclosed that they were all engaged in the destruction, damage or defacing of UCT’s property; they all participated in unlawful conduct and encouraged others to do the same. Those actions had the effect of interfering with the acknowledged rights of UCT.
UCT was thus entitled to a final interdict. However, it was not entitled to an order in the broad terms that it sought and was granted by the High Court. The court, therefore, limited the scope of the interdict to unlawful conduct on UCT’s premises.
The parties each had to pay their own costs.
Divorce
Property rights forfeiture: In KT v MR 2017 (1) SA 97 (GP) the parties were involved in divorce proceedings. The plaintiff (wife) instituted a divorce action against the defendant (husband), to whom she had been married in terms of customary law, in community of property. The husband contended that he was entitled to an order that the wife forfeited her patrimonial benefits of the marriage.
In terms of s 9(1) of the Divorce Act 70 of 1979 (the Act) a court may make a forfeiture order if, ‘having regard to the duration of the marriage, the circumstances which gave rise to the break-down thereof and any substantial misconduct on the part of either of the parties, [it] is satisfied that, if the order for forfeiture is not made, the one party will in relation to the other be unduly benefited’.
The key issue was whether the benefit was ‘undue’, the determination of which required the court to investigate the considerations mentioned in s 9(1) of the Act. As to the circumstances giving rise to the breakdown of the marriage, the court found that both parties were at fault.
Kollapen J held that in the present case the factors relating to substantial misconduct and the circumstances giving rise to the breakdown of the marriage were not decisive in determining whether a benefit was undeserved. As a result, so the court reasoned, the consideration of a fault-neutral factor such as the duration of the marriage should be based on considerations of proportionality.
In the determination of whether a benefit was undeserved a court was more likely to make such a determination where the marriage was of short duration, as opposed to circumstances where the marriage was of a long duration. However, each case has to be decided on its own facts as the court was called on to make a value judgment in this regard.
The court concluded that here the wife would be unduly benefited if an order for forfeiture were not made. However, in the circumstances, an order of partial, rather than full, forfeiture against the wife would be appropriate.
Harassment
Nature of: In Mnyandu v Padayachi 2017 (1) SA 151 (KZP); [2016] 4 All SA 110 (KZP) the facts were as follows: The appellant, Mnyandu, sent an e-mail to the respondent, Padayachi, and several of their colleagues in which she made false accusation about Padayachi. More specifically, she falsely accused him of verbally abusing her during an earlier meeting where both of them were present. He later obtained a protection order in the magistrates’ court under the Protection from Harassment Act 17 of 2011. She appealed against the finding by the magistrate.
In issue here was whether a single act (in casu, the sending out of an e-mail containing false accusations) could constitute harassment.
Moodley J held that although the conduct of Mnyandu in sending the e-mail may have been unreasonable, as she allowed her emotions to cloud her perception, the court was not persuaded that her conduct was objectively oppressive or had the gravity to constitute harassment.
Although it is possible for a single act to constitute harassment, that was not the case here.
The appeal was upheld with costs.
Lease
Termination of: The parties in Airports Company South Africa Soc Ltd v Airports Bookshops (Pty) Ltd t/a Exclusive Books [2016] 4 All SA 665 (SCA) concluded a lease agreement. The respondent bookshop, Exclusive, rented a premises at the OR Tambo International Airport (the airport) in Johannesburg from the appellant, Airports Company South Africa (ACSA), from where it operated a bookshop. The lease was for five years and was to terminate on 31 August 2013.
When, by mid-August 2013, ACSA had still not started the process necessary for the renewal of the lease or the award of a new tender either to Exclusive or anyone else, negotiations commenced and ACSA and Exclusive signed an agreement that renewed the agreement on a month by month basis.
Exclusive remained in occupation of the premises and continued to trade there. When ACSA issued a request for bids in respect of the premises on 4 December 2013, Exclusive submitted a bid, seeking to remain the lessee. In June 2014, ACSA informed Exclusive that its bid had been unsuccessful and that it could request a debriefing within 21 days. Exclusive did make such a request, but before the debriefing, it was given notice to vacate the premises by 31 July 2014. It, therefore, applied for the review and setting aside of the tender award, alleging that it had been made in conflict with a number of the provisions of the Promotion of Administrative Justice Act 3 of 2000.
Despite the pending review application, ACSA brought an urgent application for the eviction of Exclusive. The court a quo held that the case ACSA made out in its founding affidavit was based on its interpretation of the contract as providing that it was entitled to give one month’s notice to terminate the lease. The court found against ACSA and decided that the extension agreement included a tacit term that neither party was entitled to terminate the lease on notice until completion of a valid and lawful tender process to identify a new tenant. It was found that Exclusive was entitled to challenge the lawfulness of the tender process by way of a collateral challenge. It was concluded that the tender had been made unlawfully, and that ACSA was thus not entitled to terminate. The dismissal of the application led to the present appeal.
On appeal, ACSA argued that the tacit term was contrary to the express terms of the extension agreement (on its version a monthly tenancy terminable on a month’s notice), and that the challenges to the lawfulness of the tender award, being made only in an attachment to the answering affidavit, cannot be sustained.
Lewis JA in a majority judgment held that a factual dispute between the parties centred on the interpretation of the letter recording the extension of the lease. As the eviction order sought was in application proceedings, the court a quo was bound to accept those facts averred by ACSA that were not disputed by Exclusive, and Exclusive’s version in so far as it was tenable and credible.
The court held that it was not necessary to consider whether there was a tacit term at all. Because ACSA did not deal at all with the challenges raised by Exclusive to the tender award, they fell to be considered on Exclusive’s version alone.
In Exclusive’s answering affidavit it was alleged that the parties contemplated that the lease would continue until the conclusion of the tender process. If that were not so, and the lease could be terminated by either party on a month’s notice, the results would be distinctly contrary to the commercial realities of which the parties were aware. It would mean that, if Exclusive were ultimately the successful bidder, it might be required to vacate on a month’s notice, only to return to the same premises after the award of the bid. That interpretation was not in any way denied by ACSA in its reply. It did not show that the interpretation of the lease for which Exclusive contended was untenable and implausible. And ACSA did not show that its interpretation – that the lease was a monthly tenancy terminable on one month’s notice – was correct. ACSA had to prove that the lease extension agreement had been validly terminated on the giving of the required notice. It had failed to do so.
The appeal was thus dismissed by the majority of the court.
National Credit Act
Surrender of goods: Notice to consumer in terms of s 127(2): In two recent cases the courts pronounced on the requirements of the s 127 Notice in terms of the National Credit Act 34 of 2005 (the NCA).
The first of these cases was Baliso v FirstRand Bank Ltd t/a Wesbank 2017 (1) SA 292 (CC); 2016 (10) BCLR 1253 (CC).
Section 127 of the NCA provides for the ‘surrender of goods’ by a consumer under an instalment agreement, secured loan or lease. After the goods have been surrendered in the manner provided for in s 127(1), the credit provider must in terms of s 127(2), within ten days give the consumer a written notice, inter alia, setting out the estimated value of the goods. Section 127(3) then affords the consumer an election to ‘unconditionally withdraw’ their surrender of the goods within ten days of receiving the s 127(2) notice.
In the Baliso case the consumer, Baliso, raised an exception that the particulars of claim in action against him – by the credit provider, FirstRand Bank, to collect the shortfall between the consumer’s outstanding balance under an instalment agreement and the proceeds of the sale at a public auction of the relevant surrendered goods – lacked the necessary averment that notice in terms of s 127(2) had been sent to him by registered mail. Baliso further contended that the requirement in Sebola and Another v Standard Bank of South Africa Ltd and Another 2012 (5) 142 (CC) case, that notice under s 129 be sent by registered mail, also applied to the s 127(2) notice.
The present case concerned Baliso’s application for leave to appeal to the CC, his exception having been dismissed by the High Court and leave to appeal refused. The CC delivered both a majority and a minority judgment. For space considerations I will restrict myself to the majority judgment.
Foneman J held that given the serious consequences of non-compliance with the notice required under s 127(2), there was merit in the submission that no good reason existed to differentiate materially between the method of complying with s 129(1) and s 127(2). A summons may well be excipiable if it did not meet the standard set down in the Sebola case as well as in Kubyana v Standard Bank of South Africa Ltd 2014 (3) SA 56 (CC). However, it was not necessary to make a definitive finding in this regard. The crux of the present matter was the appealability of a dismissal of an exception.
In terms of s 130(3)(a) of the NCA compliance with the notice requirements of, inter alia, s 127(2) was a prerequisite for ‘determin[ing] the matter’. When a matter was ‘determined’ depended on whether the matter was unopposed and default judgment was sought, or whether it was opposed and judgment was to follow only upon hearing evidence at a trial. In an opposed matter the consumer may give evidence to contradict the credit provider’s evidence.
The court pointed out that the guidance in Sebola was restricted to unopposed matters where default judgment was sought, and was not exhaustive of the manner in which notice could probably be brought to the attention of a reasonable consumer. For the purpose of s 127, what was required before a court may determine a matter was proof that the s 127(2) notice was probably received by, or came to the attention of, a reasonable consumer. This is an issue that in an opposed matter must be determined by way of evidence at the trial.
Leave to appeal was accordingly refused.
The second case was Edwards v FirstRand Ltd t/a Wesbank 2017 (1) SA 316 (SCA); [2016] 4 All SA 692 (SCA). In the Baliso case the CC gave clear indications in both the majority and minority decisions that there should be no distinction between the ways in which a s 129 notice and a s 127 notice is sent. In Baliso the court held that there should be evidence that it was received by the consumer to properly protect the consumer.
The facts in the Edwards case were as follows: The appellant, Edwards, and Wesbank concluded an instalment sales agreement for the purchase of a luxury motor vehicle subject to the National Credit Act 34 of 2005 (the NCA). After Edwards had fallen into arrears, the motor vehicle was attached subsequent to the cancellation of the agreement and summary judgment being granted against Edwards. The court rejected a host of fanciful and opportunistic defences raised by Edwards. Wesbank also claimed the shortfall between the amount outstanding and the selling price of the vehicle.
A notice in terms of s 127(2) of the NCA was dispatched by ordinary post to Edwards on 13 June 2012, using the address he furnished in the credit agreement as his domicilium citandi ex executandi. Edwards, however, knew that there was no street delivery of post at this address. When the case resumed for the determination of the amount of damages to be paid (the shortfall) Edwards’ only defences were that the bank had failed to comply with s 127 of the NCA and that the vehicle had not been sold for the best price possible. The court of first instance held that this conduct was unreasonable and that the non-receipt of the notices was therefore no defence.
On appeal Cachalia JA pointed out that the provisions of s 127 of the NCA was considered by the CC in the Baliso case.
The majority in the Baliso case concluded obiter, that there is much force in the argument that it is illogical to make a distinction between the manner of giving notice under s 127(2) of the NCA, and that required under s 129(1) of the NCA.
Based on the ordinary grammatical meaning of the words used in s 127(2) registered mail is not what the legislature had in mind when it used the words ‘give the consumer written notice.’ It may be advisable to send the notice in terms of s 127(2) by registered mail but that is not what the law requires.
From the evidence adduced during the trial, it is clear that the bank did send a notice in terms of s 127(5) to the address furnished by Edwards. He did not receive it, but that was due to his unreasonable conduct in providing an address where such notice would not be delivered.
The risk of non-receipt was on Edwards due to his unreasonable conduct. He has himself to blame by providing an address where he knew no street deliveries would be made.
The appeal was dismissed with costs.
Payment
Fraud – extinguishing debt: The infamous and fraudulent Brusson scam has recently been pronounced on by the CC in ABSA Bank Ltd v Moore and Another 2017 (1) SA 255 (CC); 2017 (2) BCLR 131 (CC). In the Moore case the appellant, Absa and the two respondents, Mr and Mrs Moore (the Moores) were victims of the Brusson scam. Brusson preyed on over-indebted consumers who owned fixed properties by offering them a way out of their debt. The scheme consisted of Brusson offering to lend the consumers an amount of money against the security of their home, but the underlying documents signed by the consumers was not for a loan, but a sales contract for the sale of their home against payment of the money loaned. Brusson and a so-called investor would then obtain a mortgage bond loan from a bank against security of the property so bought. That loan would then be used to pay the consumers’ indebtedness to the bank and the rest of the funds they could use for their own purposes.
In the meantime, the property would be transferred to the investor and the consumer’s old bond would be cancelled. The first notice of the fraud the unsuspecting consumer would receive would be when the bank applied for their ejection and the sale of the property on auction as the investor invariably failed to make payments on the new bond.
Numerous cases were reported dealing with this scam. Most held that the scheme was fraudulent and that the contracts were either void or voidable. In the Moore case the court of first instance held that the agreements were void and that the transfer of ownership was void. The Moores never had the intention to transfer ownership as they believed the transaction involved only a loan. It ordered that the property be retransferred to the Moores, but against reregistration of the original bond.
The SCA held that the agreements were void but that the condition imposed by the High Court was not competent and that the property must be restored to the Moores free of the bond.
In the CC, Absa argued that because all the agreements were void due to the fraud, the cancellation of its bond was also void and had to be undone, alternatively that the Moores were unjustifiably enriched at its expense by having the bond cancelled without having repaid the bond. At the time of the fraud the Moores owed the bank
R 145 000, but after the scam they owed the bank nothing.
Cameron J held that Absa, in opposing the application by the Moores, provided very little information about all the transactions involved. As a result it was not certain that the Moores’ bond had been discharged.
The payment of the Moores’ indebtedness and the cancellation of their bond were not invalid as both the payor and the creditor agreed to the payment and its effects. There is long-standing authority that a debt can effectively be paid by a third party.
The court further held that even a deposit into an account of a fraudster is effectual to transfer ownership in the money. The victim is left with only a personal claim against the fraudster – and a concurrent claim against the fraudster’s curators in the case of a sequestration. In this regard the court referred with approval to the recent case of Trustees, Estate Whitehead v Dumas and Another 2013 (3) SA 331 (SCA).
In Absa Bank Ltd v Lombard Insurance Company Ltd 2012 (6) SA 569 (SCA) the court held that a thief who pays her own debts with stolen funds extinguishes those debts, provided the creditor who receives and accepts payment is innocent. Thus, provided the payee/creditor is innocent, payment of another’s debt, even by a thief, with stolen funds, operates to extinguish the debt.
The payment of the Moores’ debt by Brusson was thus effective in discharging their debt, even if the ‘investor’ did so fraudulently with funds provided by Absa.
The court further held that a person who was induced to contract by the fraudulent representations of another may either stand by the contract or claim its rescission. The agreement was voidable, not void. Unless the Moores chose to rescind the agreement because of the fraud, Brusson remained bound by it.
The Moores’ main obligation, namely the loan owed to Absa, was thus validly cancelled, and so was the accessory obligation, the mortgage agreement. Neither the third party investor nor Brusson would be entitled to claim anything from the Moores as any claim could be met with the par delictum defence.
Finally, on the facts, the court rejected Absa’s contention that an enrichment claim should be developed to restore it to the security it previously enjoyed over the Moores’ property. However, it held that in different circumstances and facts, such contention may succeed.
The court accordingly refused Absa’s appeal with costs.
See:
Revenue
Theft of VAT monies: In Grayston Technology Investments (Pty) Ltd and Another v S [2016] 4 All SA 908 (GJ) the court was asked to consider the legal nature of the relationship between the South Africa Revenue Services (Sars) on the one hand, and a Value Added Tax (VAT) vendor, on the other hand. It was further asked to consider the nature of the offence where the vendor failed to pay output VAT to Sars.
The facts were as follows: One Pieters was the sole shareholder of Grayston Technology Investment (Pty) Ltd (Grayston), which had, for a period of eight years, failed to pay over to Sars output VAT and pay as you earn (PAYE) it had deducted from employees’ remuneration. Grayston was in a dire financial position and the monies due to Sars were used to pay salaries, rent and similar expenses.
In 2010 Pieters sold his interest in Grayston and in September 2011, the company was placed under voluntary winding-up. Grayston and Pieters were convicted in the regional court for failing to submit tax returns, as well as for the common-law crime of theft.
On appeal the main question was whether or not the failure to pay output VAT to Sars and the failure to pay PAYE to Sars amounted to common-law theft.
Spilg J held that the relationship between a VAT vendor and Sars is that of debtor and creditor. No part of any payment received by a taxpayer on entering the taxpayer’s bank account constitutes an amount received on behalf of Sars either by reason of the Value-Added Tax Act 89 of 1991 (the VAT Act), the law of agency, or any trust relationship.
A VAT vendor is not a collecting agent for Sars. Sars has merely a personal claim for outstanding debts against a VAT vendor where the VAT vendor owes output VAT to Sars.
Theft is committed when a person fraudulently and without claim of right made in good faith takes to his use anything capable of being stolen. As the output VAT does not belong to Sars at any time before it is appropriated, a failure to pay output VAT cannot satisfy the element of unlawfulness required for common-law theft.
In contrast to VAT, PAYE is a pre-determinable and specific amount that must be calculated strictly in accordance with the tax tables on the date that the employee’s remuneration is paid or payable. Accordingly, the relationship between the employer, employee and Sars is more than that of debtor and creditor.
Where an employer fails to pay PAYE to Sars, it could amount to the theft of Sars’s money. Grayston barely had money to pay its employees. It could not be established that there was an unlawful appropriation to establish common-law theft.
Suretyship
Effect of deregistration of debtor on suretyship: The proceedings in Thomani and Another v Seboka NO and Others 2017 (1) SA 51 (GP) concerned an application for rescission of a default judgment and the setting-aside of a sale in execution of the immovable property of the first and the second applicants (the applicants). During 2004 the applicants and the fourth respondent bank, Absa, concluded a home loan and a mortgage bond was registered over the applicants’ immovable property.
The bond contained a clause which provided that: ‘The bond shall remain in force as continuing covering security for the capital amount, the interest thereon and the additional amount, notwithstanding any intermediate settlement, the bond shall be and remain of full force, virtue and effect as a continuing covering security and covering bond for each and every sum in which the mortgagor may now or hereafter become indebted to the bank from any cause whatsoever to the amount of the capital amount, interest thereon and the additional amount.’
In 2007 Absa and a company concluded a loan, and as security therefor, Absa and the applicants entered into a suretyship. In 2008 the company defaulted on its payments to Absa. The company was deregistered in 2010. In 2013 Absa summonsed the applicants. It claimed payment under the mortgage bond, of the applicant’s (possibly prescribed) debt under the suretyship. In the end nothing hinged on the possible prescription of the debt.
Default judgment was granted, and flowing from it, the applicants’ home was sold in execution. This caused the applicants to apply to rescind the judgment, and set aside the sale.
The court was asked to pronounce on the following issues. First, whether the bond covered the applicant’s debt under the suretyship; and secondly, whether the sureties (the applicants) could be sued where the principal debtor, the company, was deregistered?
Jansen J held that, first, the bond only covered amounts owing under the home loan. In this regard the court pointed out that the relevant clause of the surety agreement quoted above refers pertinently to the obligations of the principal debtor.
Secondly, the court held that the sureties could not be sued while the company was deregistered.
Default judgment was rescinded, and the sale in execution was accordingly set aside. Absa was ordered to pay the applicants’ 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: Access to courts, actions by or against the state, administrative justice, civil procedure, contract law, criminal law, criminal procedure, evidence, immigration, interpretation of statutes, land, local authorities, motor-vehicle accidents, national monuments, parliamentary proceedings, pensions, practice, prescription, provisional sentence, revenue, right to protest and shipping.
This article was first published in De Rebus in 2017 (March) DR 28.
