The law reports – August 2020

August 1st, 2020
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June [2020] All South African Law Reports (pp 637 – 940)

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

ECP: Eastern Cape Local Division, Port Elizabeth
GP: Gauteng Division, Pretoria
SCA: Supreme Court of Appeal
WCC: Western Cape Division, Cape Town

 

Civil procedure

Running of interest and VAT in court orders: In Rand West City Local Municipality v Quill Associates (Pty) Ltd and Another [2020] 2 All SA 921 (GP), the municipality in question made payment to Quill after a court order against it, but not the interest and value-added tax (VAT) portions of the order. Quill then requested the Registrar to issue a writ of execution, in terms of r 45(1) of the Uniform Rules of Court for a further amount and the Deputy Sheriff executed the writ by attaching that amount in the municipality’s bank account.

The municipality sought an order reviewing and setting aside the decision of the Registrar. The review application was brought in terms of the provisions of the Promotion of Administrative Justice Act 3 of 2000 (PAJA). In the alternative, it was sought to have the writ and the notice of attachment set aside.

The municipality argued that the Registrar should have realised that a dispute existed regarding the interest and should have notified the applicant of the application for the writ of execution.

The GP, per Botes AJ, held that one of the issues to be addressed related to the addition of VAT by the court to the amounts ordered to be due and payable. The amounts awarded were for the infringement of copyright. The starting point in determining liability for VAT is s 7(1)(a) of the Value-Added Tax Act 89 of 1991, which provides that VAT is levied on the supply by any vendor of goods or services in the course or furtherance of any enterprise carried on by him. The term ‘services’ is defined in s 1 of the Act as ‘anything done or to be done, including the granting, assignment, cession or surrender of any right or the making available of any facility or advantage’. The court held that Quill’s contractual rights were surrendered and replaced by the award, which occurred in the course of the furtherance of Quill’s enterprise or normal business activities. There was, therefore, no basis on which to conclude that Quill would not be liable for VAT on the amount awarded by the court.

The finding that VAT was payable by Quill, led to the questions of whether the court’s award should have mentioned VAT, and the effect of the court’s award not mentioning anything in that regard. The conclusion was, therefore, that VAT was payable by the applicant on the amount that was awarded by the court in its judgment.

The next question was whether Quill was entitled to claim interest on the amounts awarded by the court a tempore morae, namely, from the date on which the summonses were served. A ‘tempore morae’ effectively meant ‘for the period of default’. Quill was reimbursed or compensated as from the date on which the summonses were served, and if everything went according to plan, would have earned the royalties and monthly licence payments per month. Its calculation of interest from the date the summonses were served was correct.

A related question was whether Quill was entitled to claim compound interest (interest on interest). It was accepted that Quill suffered further damage by the applicant failing to effect payment of the royalties and the monthly licence fee since the date on which the combined summonses were served. Mora interest remains a specie of damages which Quill was entitled to recover from the applicant. It was thus entitled to claim compound interest.

Was the Registrar’s decision to issue the writ susceptible to review in terms of PAJA? Not all acts by state entities are administrative acts that fall within the ambit of PAJA and are reviewable under the Act. The court accepted that when a Registrar does not apply his mind or makes another mistake in respect of which grounds for review are present, the decision to issue the writ must be reviewed and set-aside. However, in this case, the Registrar did not err in issuing the writ. The application for review was thus refused.

 

Constitutional and administrative law

Right to religious practices – COVID-19: In response to COVID-19, a state of disaster was declared and a national lockdown put into effect, with regulations that people were confined to their place of residence and they were prohibited from moving around, unless to perform certain essential functions. All gatherings were strictly prohibited, and places at which people congregated were expressly required to remain closed.

In Mohamed and Others v President of the Republic of South Africa and Others (United Ulama Council of South Africa and Another as Amici Curiae) [2020] 2 All SA 844 (GP) the applicants sought declaratory relief and amendment to the regulations. The applicants contended that it was obligatory, in terms of their religious beliefs, to perform the five daily prayers in congregation and at a mosque. They, therefore, argued that the Lockdown Regulations violated their constitutional rights to freedom of movement, freedom of religion, freedom of association (including religious association) and the right to dignity. The respondents’ position was that the limitations were a reasonable and justifiable limitation and constitutionally permissible under s 36 of the Constitution.

The court held, per Neukircher J, that due to the virulent nature of the pandemic, the rate of infection, and the high risk of exponential infection, social distancing measures put into place had to be enforced as far as possible. Making allowances of the nature of the relief sought, would be tantamount to opening the floodgates. The call to every citizen to make sacrifices to their fundamental rights entrenched in the Constitution was essential in stemming the tide of the insidious and relentless pandemic. It could not be found that the restrictions imposed were either unreasonable or unjustifiable. The application thus failed.

 

Review of Public Protector’s report – payments to President’s campaign fund: In President of the Republic of South Africa and Another v Public Protector and Others (Information Regulator as Amicus Curiae) [2020] 2 All SA 865 (GP) complaints were filed with the Public Protector (PP) about payments made by a company to the President’s campaign fund and his answers to a question posed in the National Assembly. The PP issued a report making three serious findings against the President. It was stated that –

  • the President had misled Parliament;
  • he failed to disclose donations to his election campaign; and
  • the PP had a prima facie suspicion of money laundering.

The President sought to have the Report reviewed and set aside.

A Full Bench, per Mlambo JP, Keightley J and Matojane J found that the PP’s reports did not amount to administrative action. As they involve an exercise of public power, and are reviewable under the rule of law. The grounds of review included arguments that the PP’s findings were based on a material error of law, and that it was tainted by irrationality and unlawfulness.

Regarding the finding that the President had misled Parliament, the court found that the PP appeared confused about the legal foundation of such finding. Her finding was based on the Executive Code, which prohibits the wilful mispleading of Parliament, not inadvertent instances. The PP applied the wrong test and was fatally flawed due to a material error of law.

The next question was whether the PP had jurisdiction to investigate the election campaign donations. Setting out the wide powers of the PP, the court found that the conduct of political party members in conformity with their party structures fell within the private domain and was beyond the sphere of competence of the PP.

The court also confirmed that the President was under no duty under the Executive Code to disclose donations made to the election campaign.

In making a finding of money laundering, the PP cited the basis of the allegation as the Prevention and Combatting of Corrupt Activities Act 12 of 2004. However, that Act does not deal with money laundering. In any event, the facts before the PP did not support the very serious finding she made.

The Report contained remedial action to be taken by the Speaker of the National Assembly and the National Director of Public Prosecutions (NDPP). The court found the remedial action to lack clarity and as regards the NDPP, to be beyond the limits of the PP’s powers.

The review application was granted, and a punitive costs order was made against the PP.

 

Delict

Unlawful arrest and detention: In the case of Mahlangu and Another v Minister of Police [2020] 2 All SA 656 (SCA) the appellants were arrested without a warrant on four counts of murder on 29 May 2005. They were brought before a magistrate’s court, for their first court appearance, on the morning of 31 May 2005. They were remanded in custody until 14 June 2005, pending the prosecutor’s request to allow for further investigation and the bail hearing. Subsequent appearances before the magistrate’s court on numerous remand dates resulted in their further detention until 10 February 2006, when they were released after the Director of Public Prosecutions had decided to withdraw the charges against them.

The trial court held that the arrest and police detention were unlawful, and awarded damages to the appellants. No damages were awarded in respect of the claims for alleged loss of income and earning capacity, nor in respect of the claim for non-patrimonial damages in respect of the plaintiffs’ judicial detention. The court held that the appellants’ unlawful detention came to an end once they were detained in terms of a court order after their first appearance in court.

On appeal, the Full Court confirmed the trial court’s refusal to award the appellants damages for the period of their judicial detention and dismissed the appeal with costs. The present appeal was against that decision.

The SCA had to decide whether the inclusion of an inadmissible confession in the docket at the first appearance factually and legally caused the appellants to be detained thereafter. Assuming in favour of the appellants, that the factual cause of their detention for the remainder of their entire judicial detention after 14 June 2005 was the inadmissible confession, the decisive inquiry was whether legal causation was proved, and whether the Minister should be held liable for the full period of their judicial detention. That inquiry raised the issue whether the appellants should have applied to be released on bail during the period of judicial detention, and what limits of liability the legal convictions of the community and legal policy determined.

The inclusion of the inadmissible confession in the docket with the intention that it be relied on, was the factual cause of the appellants’ further detention from their first appearance until they appeared in court on 14 June 2005. However, it was not the legal cause of their detention beyond 14 June 2005, on which date they could on the probabilities have applied for bail, and would have been released – that is, after a period of some two weeks’ judicial detention.

In addition to the amounts awarded by the trial court in respect of the damages suffered preceding their judicial detention, the majority of the appeal court, per Koen AJA (Cachalia JA and Dolamo AJA concurring) awarded R 100 000 as damages for the above period of two weeks’ detention. Van der Merwe JA dissented, with Petse DP agreeing, that the additional damages should have been R 400 000 each.

 

Immigration

Demand by refugees to be moved from their ordinary places of residence: In City of Cape Town v JB and Others [2020] 2 All SA 784 (WCC) the respondents were refugees occupying the streets in the City of Cape Town (the City), while waiting for compliance by the City of their demand to be moved from their ordinary places of residence in the country to another area where they would be provided with accommodation by the government, or be taken out of the country at State expense and be moved to Canada or another country in Europe. They essentially sought to be moved to another area or country in order to improve their standard of living.

Thulare AJ held that the respondents were not forced by circumstances not to return to their ordinary places of residence in South Africa (SA). They chose not to return and elected to move elsewhere. They were drawn to housing or another country because of the prospect of and a desire to escape the social and economic situation in their ordinary places of residence in SA.

The court was critical of the respondents’ demands. Their request did not engage humanitarian issues but was simply based on economics. They refused to subject themselves to the country’s laws and procedures. Their conduct had the potential to undermine the legitimate concerns of refugees, asylum seekers and migrants in the country. The court, therefore, confirmed the interim order made in favour of the City.

 

Income tax

Losses or gains caused by foreign exchange fluctuations: In Telkom SA SOC Limited v Commissioner for the South African Revenue Service [2020] 2 All SA 763 (SCA), Swain JA (with Cachalia JA, Mbha JA, Mokgohloa JA and Koen AJA concurring) heard a matter where Telkom and a subsidiary had acquired the entire share capital in a Nigerian company, Multi-Links, between 2007 and 2009. In order to make Multi-Links commercially viable, Telkom advanced the company a number of loans in US dollars until October 2011 at which point it disposed of its interest to a third party. As part of the sale, Telkom also sold its rights in respect of its loan to Multi-Links, for USD 100 in its 2012 tax year of assessment.

In its income tax return for the 2012 year of assessment, Telkom instead of reflecting the realisation of the loan as a foreign exchange gain, claimed a deduction in the amount of R 3 961 295 256 as a foreign exchange loss, in terms of s 24I of the Income Tax Act 58 of 1962. The effect was that what would have been reflected as a taxable income of R 3,12 billion, with a resultant tax liability of R 875 million, then reflected as a tax loss of R 106 billion, with the result that Telkom was due a refund of the provisional tax paid for that year, in the amount of R 822 million. The Commissioner issued an additional assessment for the 2012 tax year, disallowing the deduction of R 3 961 295 256 and assessing Telkom for tax in the amount of R 425 188 643, as a foreign exchange gain in terms of s 24I of the Act. Telkom also claimed a deduction of R 178 788 421 in respect of cash incentive bonuses paid to a company, Velociti, pertaining to the connection of initial subscriber contracts for a specific tariff plan, which Velociti made on behalf of Telkom Mobile. The Commissioner, however, only allowed a deduction of R 42 256 879.

Telkom appealed to the Tax Court, which dismissed the appeal, the foreign exchange issue, but upheld the appeal on the cash incentive bonus issue. In the present proceedings, Telkom appealed against the Tax Court’s dismissal of its appeal on the foreign exchange issue, and the Commissioner cross-appealed against the upholding of Telkom’s appeal on the cash incentive bonus issue.

It was held that s 24I of the Act deals with gains or losses on foreign exchange transactions. The resolution of the dispute as to the deduction of R 3 961 295 256 by Telkom was to be found in s 24I, because the loan to Multi-Links in US dollars, constituted an ‘exchange item’ as defined in s 24I(1), as it was an amount in foreign currency owing and payable to Telkom.

The loan was realised in terms of the definition, when Telkom received USD 100 in the 2012 year of assessment, when the loan was settled. When the loan (the exchange item) was realised by Telkom in its sale for USD 100, Telkom was obliged to determine an ‘exchange difference’ in accordance with a proviso to s 24I(10) of the Act, in the 2012 year of assessment.

The determination of the ruling exchange rate, on the realisation date of the loan, lay at the heart of the dispute between the parties. It was held that the Tax Court correctly dismissed Telkom’s appeal against the additional assessment issued by the Commissioner, on the basis that Telkom invoked the provision involving exchange rate gains and losses in order to deduct a commercial loss, which was completely unconnected to foreign exchange currency differences. Telkom’s appeal was dismissed.

The Tax Court, however, erred in concluding that there was no basis to add back and disallow R 136 531 542 of the cash incentive bonus expenditure by the application of s 23H, in the 2012 year of assessment. The respondent’s cross-appeal was thus upheld.

 

Intellectual property

Computer programs – ownership: In Bergh and Others v Agricultural Research Council [2020] 2 All SA 637 (SCA), the Agricultural Research Council (ARC) obtained interdictory relief against the appellants in respect of breach of copyright and unlawful competition in relation to a computer program called ‘Beefpro’ that served as a cattle or herd management tool. The ARC’s complaint was the ‘misappropriation’ of BeefPro by the appellants, which it alleged the appellants were utilising for purposes of conducting a parallel system for financial benefit and consequently undermined the ARC in the performance of its statutory duties. The ARC sought relief on the basis that it owned the copyright in BeefPro. The question to be addressed was whether it discharged the onus of proving its ownership.

Navsa JA (with Schippers JA, Van der Merwe JA, Wallis JA and Mojapelo AJA concurring) held that the Copyright Act 98 of 1978 defines the author of a computer program as the person who exercised control over the making of the computer program. The onus to prove that it exercised control over the making of BeefPro rested on the ARC. The evidence established that the program had been authored by a person who worked on it independently, bringing his own skills and experience to bear, only seeking certain information from the ARC in order to ensure that the program served its purpose. He did not follow instructions from, or work under the supervision of anyone at the ARC, and also reserved ownership in the program. In the premises, the appeal was upheld.

 

Local government

Dissolution of council: In Democratic Alliance and Others v Premier for the Province of Gauteng and Others [2020] 2 All SA 793 (GP), the first applicant was a political party, the Democratic Alliance (DA), and the remaining applicants were three councillors, who were its members, serving in the City of Tshwane. They sought to review and set aside the decision to dissolve the sixth respondent which was the City of Tshwane Metropolitan Municipality (the Municipal Council).

The court, per Mlambo JP, Potterill ADJP and Ranchod J, held that it was common cause that the Municipal Council had reached a deadlock. No parties therein could win an argument or gain an advantage and no action could be taken by the Municipal Council. The council had no Mayor, Mayoral Committee or Municipal Manager. It was unable to conduct its business and could not serve its residents. The reason for the deadlock was located in the Municipal Council’s inability to convene and run council meetings to transact and take necessary decisions in line with its responsibilities. That situation existed as a direct consequence of the disruption of its meetings due to the walkout from council meetings by councillors from two political parties (the African National Congress and the Economic Freedom Fighters) thus depriving the Municipal Council of the necessary quorum. The result of the dissolution decision was that the Municipal Council was immediately dissolved, an Administrator was to take over the functions, and fresh elections throughout Tshwane would have to take place within three months.

The dissolution decision was taken in terms of s 139 of the Constitution. The jurisdictional fact necessary to invoke that provision was either the inability to fulfil an executive obligation or the failure of the Municipal Council to fulfil an executive obligation. Section 139(1)(c) has an additional jurisdictional fact in that it provides that dissolution can only be resorted to should there be exceptional circumstances warranting it. A court can interfere with the dissolution decision if objectively the jurisdictional facts were not present at the time the decision was made, thus a review based on the principle of legality. That meant that there must be a direct correlation between the exercise of the power, namely, the decision to dissolve the Municipal Council, and the objective sought to be achieved namely, the fulfilment of the stated executive obligation. For a court to decide whether an executive obligation was breached the executive obligation must be identified. It was found that the decision was not linked to fulfilment of any recognised executive function. The court also found merit in the DA’s submission that less restrictive means should have been resorted to instead of the drastic measure of dissolving the Council.

The decision was reviewed and set aside, and ancillary relief was granted.

 

Property

Expropriation of servitudes: The issue in the appeal of Staufen Investments (Pty) Ltd v Minister of Public Works and Others [2020] 2 All SA 738 (SCA), was whether the Minister’s decision of 30 September 2016, to expropriate certain servitudes over the appellant’s farm in favour of Eskom, was lawful. The appellant unsuccessfully sought to review the decision in the High Court and then appealed again.

In 1997, the then owner of the farm concluded a notarial deed of servitude with Eskom, granting Eskom and its successors in title and assigns, the perpetual right to a right of way (6m wide) over the farm; the perpetual right to a portion not to exceed 1 240 square meters, for the purpose of erecting an electrical substation; and an exclusive perpetual right to lead electricity over the land. The farm was sold several times before being sold to the appellant. In each title deed giving effect to the successive transfers, only the 6m right of way servitude was carried forward as a title condition.

By the time the appellant purchased the farm in 2014, Eskom’s substation had existed thereon for some 17 years. The substation had, however, expanded beyond the area originally provided for in the notarial deed. A challenge to Eskom’s rights led to the discovery that such rights were personal in nature and enforceable only against the owner with whom Eskom had contracted in 1997. The parties, therefore, agreed that the substation and the overhead power cables across the farm were erected unlawfully. In August 2014, the appellant demanded that Eskom cease its unlawful occupation. It eventually launched an application to evict Eskom. Eskom responded by launching an application for expropriation. The latter application was approved by the Minister.

The issue in the present appeal concerned the lawfulness of the Minister’s decision. Koen AJA (with Cachalia JA, Nicholls JA, Swain JA and Ledwaba AJA concurring) found that the first question was whether the expropriation decision was taken for an improper or unlawful purpose. The expropriation had as its purpose, the regularising of Eskom’s unlawful use of part of the farm. The court rejected the proposition that an expropriation could not occur, if there was a pre-existing unlawful use and occupation of the land. The application to expropriate was clearly for a public purpose or in the public interest, viz the provision of electricity. Expropriation was correctly contemplated as a remedy to regularise the situation.

The court confirmed that what was to be expropriated was adequately described. It also rejected various allegations of procedural irregularity, and concluded that the Minister’s decision was lawful.

 

Other cases

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

  • copyright and trademark infringement in the confectionery industry;
  • review and environmental factors in authorization of a logistics park; and
  • trademark infringement and trade mark use by a competitor.

Merilyn Rowena Kader LLB (Unisa) is a Legal Editor at LexisNexis in Durban.
This article was first published in De Rebus in 2020 (Aug) DR 26.