June [2022] 2 All South African Law Reports (pp 607–924); June 2022 (6) Butterworths Constitutional Law Reports (pp 661–785)This column discusses judgments as and when they are published in the South African Law Reports, the All South African Law Reports, the South African Criminal Law Reports and the Butterworths Constitutional 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.
CC: Constitutional Court
SCA: Supreme Court of Appeal
WCC: Western Cape Division, Cape Town
Remedy in review proceedings: The Strategic Fuel Fund Association NPC (SFF) is a wholly owned subsidiary of the Central Energy Fund SOC Limited (CEF). Its facilitation of the rotation of South Africa’s strategic stock of some 10 million barrels of crude oil, and transactions that followed led to a review application. The impugned transactions involved the sale by SFF, acting through its then CEO, Mr Gamede, of the strategic stock to various of the first to eighth respondents. The SFF brought the review application under the doctrine of legality, and the CEF applied for review in terms of the Promotion of Administrative Justice Act 3 of 2000.
Despite finding that the appellants had delayed unreasonably in bringing the review application, the High Court condoned the delay and declared the impugned decisions invalid based on their clear and indisputable illegality. It held the SFF to be culpable, rejecting the submission that Mr Gamede was solely to blame. As the fourth, sixth and seventh respondents were innocent parties, the High Court set aside their contracts subject to payment of compensation for out-of-pocket expenses.
The question on appeal in Central Energy Fund SOC Ltd and Another v Venus Rays Trade (Pty) Ltd and Others [2022] 2 All SA 626 (SCA) was whether the relief granted by the High Court was just and equitable.
A court in review proceedings has a wide discretion to craft an appropriate remedy based on what is just and equitable in the circumstances. The remedy must be fair to all those affected by it, and yet effectively vindicate the rights violated.
Courts must be guided firstly by the corrective principle, that neither contracting party should unduly benefit from what has been performed under a contract that no longer exists. The second guiding principle is the ‘no-profit-no-loss’ principle. While innocent parties are not entitled to benefit from an unlawful contract, they are not required to suffer any loss because of the invalidation of a contract. The court’s remedial discretion may only be interfered with on appeal if at odds with the law.
The court rejected the appellants’ contention that a claimant for compensation must initiate its own proceedings, confirming that application proceedings were appropriate in this case. The appellants’ attempt to challenge the cost order against them was unsuccessful.
Company law – approval of scheme of arrangement by shareholders: The first respondent (Distell) in Sand Grove Opportunities Master Fund Ltd and Others v Distell Group Holdings Ltd and Others [2022] 2 All SA 855 (WCC) proposed a scheme of arrangement to its shareholders, entailing restructuring of its business. The eventual outcome of the scheme of arrangement was that Distell would delist and the second respondent (Heineken) would hold a minimum of 65% of its issued share capital. The scheme required approval by the Takeover Regulation Panel established in terms of s 196 of the Companies Act 71 of 2008.
At a meeting convened to vote on the scheme, the scheme was approved by a majority of Distell shareholders. Section 115(3)(b) of the Act provides that a company may not proceed to implement a resolution without the approval of a court where any person who voted against the resolution obtains leave to apply to court for review of the transaction.
The applicants, who claimed to be the beneficial owners of 3,72% of the issued ordinary shares in Distell that were votable, sought leave in terms of s 115(3)(b) to apply for review of the shareholders’ resolution accepting the scheme of arrangement. The applicants (referred to collectively as Sand Grove) were investment funds. The respondents disputed Sand Grove’s standing to bring the application, stating that only registered shareholders have voting rights for the purpose of any resolution required in terms of s 115 and only registered shareholders who voted against the proposed transaction are entitled to bring proceedings for the review of a shareholders’ decision to approve the transaction.
It was held that, as the applicants had beneficial ownership of the shares, but none of the funds was the registered holder of such shares, the first issue to be determined related to their standing to bring the proceedings in terms of s 115 of the Act. The court referred to the principle of company law that a company concerns itself only with the registered holders of its shares and agreed with the respondents that the Sand Grove funds, as holders of beneficial rights in shares registered in another party’s name, were not persons entitled to exercise voting rights at the meeting. They therefore lacked standing to bring the application.
The problem regarding standing gave rise to an application by the nominee companies who were the registered holders of the shares, for leave to intervene in the proceedings as co-applicants. However, s 115(3)(b) prescribes a ten-business-daytime limit for the nominee companies to challenge the resolution. That period had elapsed before they lodged their applications for leave to intervene. The court held that it had no power to condone the non-compliance with the time limit, and the application for leave to intervene was dismissed.
Sand Grove also applied for leave to amend their notice of motion by the insertion of a claim for orders declaring that the meeting at which the resolution was adopted was not properly constituted and, therefore, invalid and void, and that the resolution purportedly adopted at it was accordingly also void. The court rejected the submission that where different classes of securities were affected by a proposed scheme, separate meetings had to be convened of the holders of each class of security.
Even if the applicants did have standing, the court would not have found that they had made out a case for review based on their submissions.
The application for leave in terms of s 115(6) to apply for a review of the scheme of arrangement was refused.
Right of appeal against mistakes of law: In Director of Public Prosecutions, Free State v Mokati [2022] 2 All SA 646 (SCA), the respondent was found to have forcibly had sexual intercourse with a 21-year-old female, and robbery. The victim was prescribed antibiotics and anti-retrovirals after she reported the rape but died a few weeks later. The respondent was convicted of rape and robbery with aggravating circumstances. The Director of Public Prosecutions appealed against the sentence of 10 years’ imprisonment for the rape count. It also reserved certain questions of law in terms of s 319 of the Criminal Procedure Act 51 of 1977 (CPA), in respect of the acquittal of the respondent on the murder count and contended that a competent verdict would have been culpable homicide. The respondent cross-appealed against his conviction and sentence in respect of the rape and robbery counts.
The majority held in considering the appeal against conviction on the rape and robbery counts, that in the absence of material misdirection by the trial court, its findings of fact are taken by the appeal court to be correct and will only be disturbed if they are clearly wrong. The trial court’s conviction of the respondent on the two counts was confirmed as correct and the respondent’s cross-appeal failed.
The court then turned to the appeal by the state on the questions of law reserved in terms of s 319 of the CPA. The state has a right of appeal only against a trial court’s mistakes of law, not its mistakes of fact. Section 319(1) provides that the question of law must arise on the trial in a superior court; and the reservation may be made by the court of its own motion or at the request of the prosecutor or the accused, in which event the court should state the question reserved and direct that it be entered in the record.
The trial court’s conclusion that the state had failed to discharge the onus of proof was based on a finding that the deceased’s use of different medication could have caused clotting to cause her death. It reasoned that the respondent could not have foreseen the chain of events that ultimately led to the deceased’s death. That was not a conclusion of law. The remaining reserved questions relating to the evaluation of expert evidence and to the state’s complaint that the trial court failed to consider its concession, and submission, on the proven facts, that the respondent was guilty of culpable homicide, not murder. Those were also not questions of law, and the trial court erroneously granted leave in that regard.
In the appeal against sentence, the state submitted that the ten-year prison sentence for rape was shockingly lenient and thus inappropriate. That was the prescribed minimum sentence in terms of s 51(2)(b) of the Criminal Law Amendment Act 105 of 1997. The court agreed that the sentence was lenient and explaining its discretion to impose a sentence above the minimum prescribed one, held that for the sentence on the rape count the sentence be increased to 18 years’ imprisonment. A cross-appeal by the respondent was dismissed.
In the minority judgment, the point of departure was the substituted sentence and the reasoning underpinning it.
Removal of trade mark from register: The appellant (LA Group) and first respondent (Stable) were competitors in retail clothing. The High Court’s order for the removal of 46 of the appellant’s trade mark registrations from the register of trade marks, in terms of ss 10(2)(a), (b) and (c), 10(13) and 27(1)(a) and (b) of the Trade Marks Act 194 of 1993, led to the appeal in LA Group (Pty) Ltd v Stable Brands (Pty) Ltd and Another [2022] 2 All SA 678 (SCA).
Stable had challenged LA Group’s trade mark registrations on the basis that all the registrations were entries wrongly made in terms of s 24 of the Act. The court cancelled the registrations on various grounds, including that –
The trade marks consisted of the word ‘POLO’. In terms of s 10(2)(a), a trade mark, which is not capable of distinguishing within the meaning of s 9 is liable to be removed from the register. Where a trade mark consists of words that are merely descriptive of goods or services in a particular class, that mark is not inherently capable of distinguishing the goods or services of a particular person in that class. Stable submitted that to the public, the word ‘polo’ was incapable of fulfilling the function of a trademark, and in the mind of the consumer, ‘polo’ was not exclusively associated with the appellant. The court had regard to the prior use of the trade mark, and found that the mark had been used continuously for a long time since its registration in 1976. The marks had become firmly established in South Africa. The general public would identify goods bearing the POLO trade marks as originating from the appellant. It was established that the trade marks had become distinctive through their use and were not liable to be removed from the register.
The appeal against removal in terms of s 27(1)(a) or (b) of the Act (relating to non-use for five years or longer and registration without a genuine intention to use) succeeded only in respect of some of the trade marks.
Section 10(13) provides that ‘a mark which, as a result of the manner in which it has been used, would be likely to cause deception or confusion’, is liable to be removed from the register. That led to Stable’s reference to LA Group’s use of a mark substantially similar to that of the international Ralph Lauren POLO brand. The High Court erred in its construction of s 10(13). It did not consider the appellant’s manner of use of its own trade marks. Instead, it compared the appellant’s trade marks to those of Ralph Lauren.
The majority judgment concluded that Stable had not established that 46 of the appellant’s trade marks were liable to be removed from the register.
Denial of entry of foreigner into country: In Breukel and Another v Department of Home Affairs and Another [2022] 2 All SA 787 (WCC), the second applicant (Ms Serrano) was a citizen of Venezuela who was in a permanent life partnership with a SA citizen (Ms Breukel).
Ms Serrano travelled to South Africa (SA) in December 2021. She was denied entry by immigration officials because her passport contained an extension document used by the Venezuelan government to extend the validity of the passport. The applicants adduced evidence showing that the Venezuelan government has for several years not issued new passports to replace expired passports. Instead, it renews passports by inserting an extension document into the expiring passport.
On being denied entry, Ms Serrano was detained in a holding facility. After consulting with a lawyer, she lodged an application in terms of s 8 of the Immigration Act 13 of 2002 to review the decision denying her entry into the country. The applicants applied to have Ms Serrano released from custody, and for her to be allowed into SA pending the Minister’s decision on her application. The court granted an interim order allowing Ms Serrano to reside with Ms Breukel, while she waited for the decision. That led to the respondents launching a reconsideration application. In that application, they also raised various technical points including that the applicants did not comply with the provisions of s 35 of the General Law Amendment Act 62 of 1955 by not providing the respondents with at least 72 hours’ notice of the proceedings to be instituted; and that Ethiopian Airlines was not joined as an interested party.
It was held that while s 35 of the General Law Amendment Act is peremptory, a court is given the discretion to allow a lesser period of notice depending on the circumstances. Given the urgency found to have existed, the period of notice given to the respondents was reasonable in casu. The non-joinder point was also dismissed as at the stage when the main application was launched, Ms Serrano was in the custody of the Department of Home Affairs.
On the merits, the court discussed s 35(10) of the Immigration Act 13 of 2002, which states that the person in charge of the conveyance is responsible for the detention and removal of any person who was on the conveyance but is refused admission into the Republic. However, Ethiopian Airlines ceased being responsible for Ms Serrano when immigration officials removed her to consult with her attorney and then detained her in a holding facility. From then on, the Department was the entity responsible for her.
The main issue for determination was whether there was legal justification for permitting Ms Serrano to enter the country while she persisted with her review application. The court found that a case had been made out for Ms Serrano’s release from the holding facility and her entry into SA pending the finalisation of the review.
Collective bargaining: In National Education Health and Allied Workers Union v Minister of Public Service and Administration and Others and related matters 2022 (6) BCLR 673 (CC) the applicants were trade unions with members employed in the Public Service.
In 2018, the state concluded a collective agreement with trade unions who were parties to the Public Service Co-ordinating Bargaining Council. The agreement contained three clauses which regulated wage increases for Public Service employees for the years of 2018/2019, 2019/2020 and for 2020/2021, respectively clauses 3.1, 3.2 and 3.3. The increases agreed on for 2018/2019 and 2019/2020 were implemented. In respect of the third year, however, the state asked the trade unions to agree to a revision of the agreement on the basis that the cost of implementation would be unaffordable for the state. The trade unions declined to agree. The previously agreed wage increases for that year (clause 3.3) were not implemented. A dispute was referred to the Bargaining Council. It remained unresolved at conciliation. Applicants referred the dispute to arbitration. Before the arbitration could be finalised, applicants launched an application in the Labour Court seeking an order to compel the state to comply with clause 3.3 of the collective agreement for the 2020/2021 financial year. The state launched a counterapplication seeking declaratory relief regarding the legality of the collective agreement and its enforcement. By agreement the Labour Appeal Court (LAC) was requested to hear the matter as a court of first instance in terms of s 175 of the Labour Relations Act 66 of 1995. The LAC granted that request.
The state contended that the collective agreement was invalid and unenforceable because it was concluded in contravention of the Public Service Regulations (promulgated in GN R877 GG40167/29-7-2016) read with ss 213, 215 and 216 of the Constitution. Regulation 78 empowers the executive authority to engage in negotiations and conclude collective agreements on behalf of the state. It requires, however, that in entering into such collective agreements the executive authority must ‘meet the fiscal requirements contained in regulation 79’. Regulation 79 provides that the state can enter into a collective agreement only if –
‘(a) he or she has a realistic calculation of the costs involved in both the current and the subsequent fiscal year;
(b) the agreement does not conflict with the Treasury Regulations; and
(c) he or she can cover the cost –
(i) from his or her departmental budget;
(ii) on the basis of a written commitment from the Treasury to provide additional funds; or
(iii) from the budgets of other departments or agencies with their written agreement and Treasury approval’.
It emerged that none of these requirements had been met.
Applicants had contended in the LAC that the National Treasury and the Minister of Finance were nevertheless bound because the Cabinet had approved the draft agreement, which later became the collective agreement in question. It was argued that because the Minister of Finance was the political head of the National Treasury and, as a member of the Cabinet, had participated in the relevant Cabinet decision, it had to be inferred that there had been Treasury approval for the proposal. The Cabinet, they argued, must necessarily have considered ways in which it would raise the necessary additional funding required for the implementation of the collective agreement.
The LAC found on the facts that the ‘cost of the collective agreement could not be covered solely’ from the Minister of Public Service and Administration’s budget; that the Treasury had not provided a written commitment to guarantee additional funding; and no further agreements were made by other departments or agencies in accordance with reg 79. It also found evidence (in the form of a letter written by the Minister of Finance) that showed ‘the absence of any commitment by National Treasury of the kind required expressly by regulation 79’. The LAC found that the fact that the Cabinet appeared to have sanctioned the collective agreement did not constitute compliance with the express wording of regs 78 and 79. The collective agreement had been concluded in contravention of those regulations. Clause 3.3 of the agreement (dealing with wage increases for the year 2020-2021) was unlawful for violating ss 213 and 215 of the Constitution and the impugned regulations. The LAC dismissed the application.
Ten trade unions lodged separate applications to the Constitutional Court (CC) for leave to appeal against the judgment of the LAC. They were consolidated for hearing. The Department of the Public Service and Administration and the Minister of Finance opposed the applications.
The CC unanimously granted leave to appeal but dismissed the appeal.
The CC identified the issue as whether the non-compliance with regs 78 and 79 rendered clause 3.3 of the collective agreement invalid and unenforceable. Regulations 78(2) and 79(c) created jurisdictional facts, which had to exist prior to the Minister’s exercise of power to negotiate and conclude collective agreements on behalf of the state. If those requirements were not met, the Minister, if he acted, would do so without legal authority. It was clear that in casu the jurisdictional facts were not present. The fact that there had been Cabinet approval could not have had the effect of authorising the Minister to legally conclude a collective agreement in contravention of the provisions of regs 78 and 79. Non-compliance with the requirements of regs 78 and 79 rendered the resultant collective agreement between the state and the trade unions invalid and unlawful, and thus unenforceable.
Claim for damages for sexual assault perpetrated by teacher: The plaintiffs in CS and Another v Swanepoel and Others [2022] 2 All SA 810 (WCC) claimed damages arising from the alleged sexual assault of the second plaintiff (the plaintiff) by the first defendant some ten years before. The plaintiff was at the time a 12-year-old learner at the school where first defendant was acting principal, and her class teacher.
In a counterclaim, the first defendant claimed damages from the plaintiff, on the basis that she had wrongfully and maliciously set the law in motion by laying a false charge of rape against him.
The court, as per Sher J, held that the plaintiff bore the onus of proving the alleged sexual assault on her by the first defendant, on a balance of probabilities. The court found her to have amply discharged that onus. Her testimony was compelling and was corroborated in material respects by the evidence of two independent witnesses. By contrast, the first defendant was an unimpressive witness. The court took issue with a disciplinary hearing at which the first defendant was exonerated. From an evidentiary point of view, the plaintiff’s evidence as to what the first defendant had allegedly done to her was not controverted or refuted and should have been accepted. However, from the reasons which she gave for her findings, the presiding officer did not appear to consider that the first defendant had failed to testify and had thus failed to put up any evidence to refute the plaintiff’s evidence. The court pointed to various irregularities in the proceedings leading to a failure of justice. The first defendant’s evidence was rejected, insofar as it was at odds with the evidence, which was tendered by the plaintiff.
The court found the plaintiff to have discharged the onus of proving the sexual assault, constituting a delictual act, by the first defendant. The first defendant was thus liable to her in delict for damages.
The liability of the remaining defendants was predicated on an alleged omission relating to the wrongful and negligent breach of a legal duty, which allegedly rested on them, to protect the plaintiff from harm. Where harm is caused as a result of an omission, liability does not follow automatically, as prima facie an omission is not regarded as wrongful unless there was a legal duty on the person who caused the harm to have acted in a particular manner, instead of sitting back and omitting to do so. Whether such a duty existed in a particular case is an issue which must be determined judicially, on the basis of criteria, which include public and legal policy, and constitutional norms. The state has a legal duty to protect and not to harm the children who are entrusted to its care on a daily basis, in public schools. In the context of the pleadings in this matter, that general duty includes the duty to protect (or to take reasonable steps to protect) children from exposure to sexual assault and molestation. The sexual assault committed by the first defendant was sufficiently closely linked to the educational business of his employer, and as such, fell within the ambit of vicarious liability. The Department was also found not to have vetted the first defendant before employing him. Had it followed its own protocols and done that, his criminal record, relating to sexual assault, would have been revealed. Its failure constituted negligence, as a result of which the second defendant was held liable with the first defendant for plaintiff’s damages.
Apart from the cases and material dealt with above, the material under review also contained cases dealing with –
Merilyn Rowena Kader LLB (Unisa) is a Legal Editor at LexisNexis in Durban.
This article was first published in De Rebus in 2022 (August) DR 20.
