January 2022 (1) South African Law Reports (pp 1 – 316); January 2022 South African Criminal Law Reports (pp 1 – 113)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
GJ: Gauteng Local Division, Johannesburg
GP: Gauteng Division, Pretoria
SCA: Supreme Court of Appeal
Provincial intervention in local government: When dissolution of a municipal council is appropriate: The case of Premier, Gauteng and Others v Democratic Alliance and Others 2022 (1) SA 16 (CC) dealt with the lawfulness of a resolution by the Gauteng Executive Council, taken under s 139(1)(c) of the Constitution, to dissolve the City of Tshwane Metropolitan Municipal Council. Section 139(1) of the Constitution empowers a province, when a municipality within its boundaries cannot or does not fulfil an executive obligation in terms of the Constitution or legislation, to intervene by taking any appropriate steps to its fulfilment and sets out examples of such steps in subparagraphs (a)–(c), namely –
What gave rise to the action taken by the Gauteng Province was a state of deadlock that had arisen in the Democratic Alliance (DA)-led municipal council, impacting on its ability to perform its public functions, because of repeated walkouts by opposition African National Congress (ANC) and Economic Freedom Fighters (EFF) councillors from meetings. They had claimed among other things to be dissatisfied with the way the speaker had dealt with motions of no confidence in the mayor. Consequent to the province’s decision, the DA approached the GP on an urgent basis with a legality review to reverse the dissolution decision. The GP quashed the Gauteng Executive Council’s decision, finding that dissolution was inappropriate because there were less intrusive measures, which the provincial executive could have taken to ensure the municipal council would fulfil its core responsibilities. The court ordered the ANC and EFF councillors to attend, and remain in, all meetings of the municipal council unless they had lawful reason to be absent. The Premier, the Gauteng Executive Council, and the Member of the Executive Council (MEC) for Co-operative Governance and Traditional Affairs, Gauteng, in a first application; and all Tshwane councillors who were members of the EFF, and the EFF, in a second application, brought direct appeals to the CC. The DA was first respondent in both. The key question to be addressed was whether the exercise of the Premier’s power to dissolve the municipal council offended the principle of legality.
Mathopo AJ wrote the majority judgment (Khampepe J, Majiedt J, Theron J and Victor AJ concurring). He characterised the leadership crisis resulting from the councillor walkouts as constituting ‘exceptional circumstances’ that had resulted in the municipal council failing to fulfil its executive obligations, as contemplated in s 139(1). However, he expressed the view that dissolution of the council was not an appropriate step for the province to take. He held that the province, before taking a decision to dissolve the municipal council, had a duty to first engage with the speaker and council, and consider all prevailing circumstances, which it did not do. Such duty arose in the light of the constitutional principle of cooperative governance and intergovernmental relations, as encapsulated in various provisions of the Constitution, including ss 40 and 41(1)(e), (f) and (h), as well as the duty imposed by the Constitution, in terms of its s 154(1), to support and strengthen the capacity of the municipal council to perform its functions. Mathopo AJ also held that the decision by a province to dissolve a municipal council may well be inappropriate where there existed less intrusive means that could resolve the issue at hand that were less invasive of government autonomy. Section 139(1)(c), he said, had to be invoked sparingly, especially given the other options of intervention available to the provincial executive. In this case, the Gauteng Executive Council had failed to explore any other avenues before taking its decision. Mathopo AJ concluded that the provincial government misconstrued its powers and failed to apply itself to the issues faced by the municipality; and that the dissolution had to be set aside, as it offended the principles of lawfulness. He held that, in the main, the appeal should be dismissed. He disagreed, however, with that part of the GP’s order that directed councillors to attend all future meetings, finding that an appropriate order would be one compelling MECs to invoke their powers in terms of item 14(4) of sch 1 of the Local Government: Municipal Systems Act 32 of 2000 by appointing a person or committee to investigate the cause of the deadlock in the Municipal Council and recommend an appropriate sanction.
Jafta J wrote a dissenting minority judgment (in which Mhlantla J, Tshiqi J and Mogoeng CJ (in a separate judgment) concurred). Jafta J directed his attention to the finding of the GP that the dissolution decision was inappropriate in circumstances in which there were less intrusive measures. Such a finding, he held, was misguided. Having regard to s 139(1), if dissolution was ‘an appropriate step’ that was likely to fulfil the executive obligation, and exceptional circumstances warranted such decision, the province was entitled to take such course. It mattered not that there happened to be other steps which were ‘also appropriate and [that] were less intrusive’. In the circumstances of the present case, which were exceptional, dissolution was an appropriate step to take. In fact, he held, no other form of intervention would have ensured the fulfilment of the council’s obligations. The appeal, he held, should have been upheld.
A reconciliation of the expansive approach to contractual interpretation and the parole evidence rule: In Capitec Bank Holdings Ltd and Another v Coral Lagoon Investments 194 (Pty) Ltd and Others 2022 (1) SA 100 (SCA) the first appellant (Capitec), acting in terms of a share sale agreement (the agreement), had transferred some of its shares to the first respondent (Coral). Coral later wanted to sell them to a third party under a settlement agreement that required Capitec’s consent, but Capitec refused such consent. Coral applied for an order that the refusal was unreasonable and in breach of the good faith required by the agreement, alternatively in dereliction of Capitec’s common-law duty of contractual good faith.
The GJ (per Vally J) agreed with Coral. Vally J found that Capitec had in the past granted consent to such sales, and that its failure to do so in the present instance was contrary to its common-law duties of good faith and reasonableness. The GJ, therefore, ordered Capitec to consent to the sale. The SCA subsequently granted Capitec leave to appeal the GJ’s order.
The central issue before the SCA was whether the agreement required Capitec’s consent for Coral to sell its shares, and if it did, whether Capitec had unreasonably or in bad faith refused to grant it. Coral argued that Capitec’s prior conduct of first requiring and then granting consent to Coral’s transactions was significant for the interpretation of clause 8.3 of the agreement, which governed the resale of Capitec shares by Coral. It provided that if Capitec deemed the intended purchaser to be non-Broad-Based Black Economic Empowerment-compliant, then Capitec could require Coral to repurchase an equal number of Capitec shares. Coral argued that, notwithstanding the actual text of clause 8.3, the way the parties had implemented the agreement was relevant evidence as to what the clause meant.
To determine whether Capitec’s consent was indeed a requirement, the SCA (per Unterhalter AJA (Ponnan JA, Makgoka JA, Mbatha JA and Goosen AJA concurring)) examined clause 8.3 and ruled that neither its text nor its context nor the agreement’s purpose militated for a consent requirement, and that the extra-textual evidence as to the conduct of the parties failed to displace the meaning derived from the abovementioned factors.
Unterhalter AJA pointed out that Coral’s argument, that the manner of the implementation of the agreement was relevant to the meaning of clause 8.3, gave rise to an issue that has long troubled our courts. This was the relationship between the ‘expansive’ approach adopted by the Constitutional Court – which allows the admission of extrinsic evidence to construe a contract’s words, and the parole evidence rule – which bars the admission of extrinsic evidence to contradict, add to or modify a written contract’s wording.
Unterhalter AJA conducted a survey of recent CC judgments on the topic and noted that it had given a very wide remit to the admissibility of extrinsic evidence of context and purpose, reconciling this with the strictures of the parole evidence rule by associating the latter with the ‘plain meaning’ principle: If the contract had a plain meaning and was an exclusive memorial of the agreement, then the parole evidence rule would exclude extrinsic evidence contradicting it. Unterhalter AJA noted that because contracts, and particularly commercial ones, were carefully designed and worded, their text and structure had an undeniable gravitational pull. Context and purpose, rather than providing a licence to contend for meanings unmoored in the text and its structure, could serve to elucidate the text.
In his discussion of the CC judgments, Unterhalter AJA was at pains to emphasise that none of them sanctioned the importation of meanings into a contract to make it a better contract or one that is ethically preferable. Nor did they confer open-ended permission to pursue undisciplined and self-serving interpretations. And nowhere did the CC evince scepticism that the words and terms used in contract have meaning, stressing instead that meaning is properly understood by looking at how they fit into the larger structure of the agreement and its context and purpose.
Unterhalter AJA concluded this part of his judgment by noting that the evidence as to how the parties had conducted themselves after the conclusion of the agreement was indeed relevant and had to be considered in deciding on the meaning to be attributed to clause 8.3. But while the evidence was that Capitec had (initially) conducted itself as if its consent was required, it did not lend context to clause 8.3 which displaced its clear meaning that Capitec’s consent was not necessary for Coral to conclude the sale in question.
While this was sufficient for Unterhalter AJA to rule that the GJ’s orders had to be rescinded, he nevertheless went on to deal with the good faith requirement. The GJ had ruled that Capitec’s withholding of consent was in breach of its contractual and common law duties of good faith and reasonable conduct, and that justice would only be served if the agreement was taken to require Capitec’s consent to Coral’s sale of the shares.
Unterhalter AJA rejected the reasoning of the GJ. He pointed out that the principle that contracts freely and voluntarily entered had to be honoured remains central to the law of contract. He stressed that the scope and application of public policy to invalidate contractual terms should be undertaken with circumspection and that good faith cannot be invoked to determine contractual terms. There was, according to Unterhalter J, no interpretation of the agreement that established a requirement of consent. The court would not impose an agreement that the parties did not make.
Good faith, said Unterhalter J, is not a norm that could be used, as the GJ did, to decide what the parties should be taken to have agreed or how they should act. Coral’s ambitious efforts to use the concept of good faith to re-engineer the agreement to require consent and then to find Capitec wanting for withholding it, could not prevail.
In the result the SCA upheld the appeal and set aside the GJ’s order, substituting it to dismiss Coral’s application.
No different threshold of proof of consent in rape cases, regardless of whether victim was virgin or not: The case of S v Coko 2022 (1) SACR 24 (ECG) concerns an appeal by the appellant to the ECG against a conviction of the accused by the regional magistrate’s court on a charge of rape. He was sentenced to seven years’ imprisonment.
The principal issue was whether the complainant had granted consent to sexual penetration after the parties had started to engage in sexual intimacy – it was common cause that the appellant and complainant had been in a relationship, which had been terminated by the complainant shortly after the incident. The complainant insisted that she had not consented although conceding to indulging in oral sex during the incident.
In assessing the matter, ECG on appeal (per Ngcukaitobi AJ (Gqamana J concurring)) noted that the magistrate and the prosecutor had made much of the fact that the complainant had been a virgin at the time of the incident. It had been suggested to the appellant that ‘something more’ was required to demonstrate her consent and that it was not sufficient for him to rely solely on her conduct as indicative of consent. This was found to be a misdirection of law and the court emphasised that there were no different standards applicable to women or men who were virgins and those who were not. Consent meant the same thing, regardless of whether the victim was a virgin, and an unfortunate precedent would be set if the law applied a different threshold to consent in respect of persons who were not virgins.
However, this was not the only flaw in the judgment. Ngcukaitobi AJ also ruled that the magistrate had committed factual misdirection in concluding, inter alia, that the appellant had conceded that the complainant had made it plain more than once that she did not want sexual intercourse, and that this had played a crucial role in the overall assessment of the evidence and influenced the findings of the magistrate in finding the appellant guilty. The only real area of dispute in the appellant’s evidence, and this was after the commencement of intercourse, was his concession that when complainant said that his actions were hurting her, he ‘would stop and then continue’. This aspect was, however, not taken up in cross-examination, nor was it weighed in the assessment of the probabilities by the magistrate. Ultimately Ngcukaitobi AJ was unable to uphold the findings of fact of the magistrate and consequently that the state had proved that the version of the appellant, that he genuinely believed that there was at least tacit consent, was false beyond reasonable doubt. The appeal, therefore succeeded, and the conviction and sentence were set aside.
Apart from the case and material dealt with or referred to above, the material under review in the SACR also contained cases dealing with –
State’s liability for injuries at places of care under Child Care Act 74 of 1983: In BE obo JE v MEC for Social Development, Western Cape 2022 (1) SA 1 (CC) the CC considered whether the minister had a legal duty to prevent harm to children in early childhood development centres (ECD centres) and other places of care.
JE had suffered severe traumatic head and brain injuries, leaving her severely and permanently disabled, when the top beam of a wooden swing structure she was playing on collapsed on her at her playschool, a community organisation and ‘place of care’ under the Child Care Act 74 of 1983 (the Act). BE, her father, on her behalf instituted a delictual claim against the playschool and the Provincial Minister: Western Cape Department of Social Development (the MEC). The action against the playschool was settled and proceeded only against the MEC. The High Court held that delictual liability had been established, and that the MEC was liable for damages flowing from the accident. The SCA upheld the minister’s appeal against the High Court’s decision, on the basis that wrongfulness had not been proven.
The CC, dismissing CB’s appeal against the SCA’s decision, held that the alleged statutory duties were regulatory and did not translate into a private-law duty to prevent harm to children at places of care; and that public policy did not favour the imposition of such duty.
A revisiting of bound and free co-ownership and the actio communi dividundo: In Municipal Employees Pension Fund and Others v Chrisal Investments (Pty) Ltd and Others 2022 (1) SA 137 (SCA) three companies (the first to third respondents) that owned a business operating three shopping centres had agreed to sell a 55% share in that business to the first appellant pension fund (the Municipal Employees Pension Fund (MEPF)) for a total price of R 550 million. The assets of the business consisted of the immovable properties on which the shopping centres were situated and the leases with tenants that provided the revenue stream of the business (without the leases the shopping centres would have been white elephants with little commercial value). Under this agreement of sale, then, the MEPF did not merely purchase certain immovable properties but acquired an interest in the business of operating the three shopping centres.
The fourth respondent (Adamax Property Projects Menlyn (Pty) Ltd (Adamax)), the holding company of first to third respondents, concluded a separate agreement governing the co-ownership of the business. This co-ownership agreement encompassed –
It was linked to the sale agreement by way of a condition precedent that made the sale agreement dependent on the conclusion of the co-ownership agreement.
The day after the sale agreement, however, Adamax invoked the actio communi dividundo to demand the dissolution of the co-ownership of the business and the sale of the properties on which the shopping centres stood. Adamax claimed that it was open to it to invoke the actio – for any reason – immediately after the conclusion and implementation of the sale agreement and the co-ownership agreement or at any time thereafter. It was clear from the facts that allowing Adamax to invoke the actio would have the effect of destroying the very basis on which the MEPF had entered into the arrangement, namely, to secure a stable stream of income to meet its obligations to pensioners.
The MEPF resisted Adamax’s demand on the ground that the application was an endeavour to subvert the provisions of the co-ownership agreement, which they said regulated all incidents of its operation and constituted the complete record of the parties’ agreement. Its primary case was that the relationship between the parties was governed by the contracts and nothing else. The actio was accordingly unavailable to Adamax.
Adamax then approached the GP, which ruled in its favour on the premise that the actio was available even where a contractual relationship governed co-ownership of property. The SCA granted the MEPF’s application for leave to appeal.
The SCA (per Wallis JA (Cachalia JA, Mbha JA, Eksteen AJA and Weiner AJA concurring)) reversed the GP’s order. In his reasons Wallis JA stressed in the first place that the GP’s entire approach to the case was flawed because it erroneously assumed that the availability of the actio was one of the naturalia of any agreement giving rise to co-ownership.
Wallis JA pointed out that there were two forms of co-ownership: free and bound. In the former, the co-ownership was the sole legal relationship between the parties, while in the latter, the co-ownership arose from another legal relationship (for example, marriage in community of property or a partnership agreement). Under free co-ownership each owner had a right at any time to dissolve the ownership relationship, while in the case of bound co-ownership, dissolution was governed by the legal arrangement creating the co-ownership. There was no closed list of instances of bound co-ownership, and whether a particular relationship was bound or free was determined by the terms under which it was created.
According to Wallis JA the co-ownership of the properties arose from the co-ownership agreement business, and that co-ownership was bound rather than free: the terms of the contractual bond between the parties made it sufficiently similar to a partnership or joint venture for it to constitute bound co-ownership. Accordingly, the operation of the actio was excluded, with any dissolution of co-ownership being governed by the ownership agreement.
The SCA, therefore, upheld the appeal and set aside the order of the GP, substituting it with an order dismissing Adamax’s application.
Vesting of exclusive use areas when last unit owned by developer in scheme validly sold but by mistake not transferred: In Diaz Hotel and Resort (Pty) Ltd v Vista Bonita Sectional Titles Scheme Body Corporate and Another 2022 (1) SA 175 (WCC) a developer (SDC) had sold its last unit in a sectional title development to the applicant (Diaz Hotel), together with three exclusive areas. Registration of transfer of the unit was completed but not of the exclusive areas, three parking bays. These were not transferred because the notary executed deeds of cession thereof was not registered, allegedly as a result or a deeds office mistake. Unable to get the body corporate (Vista BC) to cooperate with it to obtain transfer of the exclusive use areas, Diaz Hotel brought an application to compel Vista BC to do so, together with certain declaratory relief.
Under s 2 of the Sectional Title Schemes Management Act 8 of 2011, a developer ceases to be a member of a body corporate when they no longer have a share in the common property. In turn, s 27(1)(c) of the Sectional Titles Act 95 of 1986 (the STA) provides that when a developer eases to be a member of a body corporate, ‘any right to an exclusive use area still registered in his or her name vests in the body corporate free from any mortgage bond’. One of the opposing grounds was that by operation of s 27(1)(c) the parking bays now vested in Vista BC, so that SDC, no longer being the holder of any rights in and to the exclusive use areas, could not give transfer thereof to Diaz Hotel. This raised the legal issues of the scope of s 27(1)(c), that is, whether it applied in these circumstances to vest the exclusive use areas in Vista BC; and in view of the relief sought, what the nature of such rights were, more particularly whether such vesting amounted ownership as contemplated in s 33 of the Deeds Registries Act 47 of 1937 (the DRA) so that it could be utilised to effect ‘[r]egistration of title by other than the ordinary procedure’.
The WCC (per Dolamo J and Sher J (Ndita J concurring)) ruled that the steps taken by SDC to effect transfer of the exclusive use areas evinced an animus transferendi domini – the subjective element required for the passing of ownership – and resulted in Diaz Hotel acquiring personal rights, which preceded the entitlement of Vista BC to have the rights to the exclusive use areas vest in it in terms of s 27(1)(c). That transfer of these exclusive use areas did not happen was an error which ought to be rectified to reflect the correct legal position.
The WCC pointed out that acquisition by a body corporate of and exclusive use rights in terms of s 27(1)(c) did not cover instances where a developer expressly, and in a binding agreement, intended its rights to be transferred to a purchaser but where through a mistake, negligent or otherwise, these were not so transferred at the time when the last unit owned by the developer in the scheme was transferred. The only rights, which vested in a body corporate once the last unit which the developer owned was transferred, were rights of exclusive use, and not rights of ownership. In the circumstances the Vista BC could not and did not obtain better rights over the exclusive use areas than those which SDC had, as these bays collectively belonged to all the owners of units in the scheme, as part of its common property. To hold that ss 27(1)(c) and 27(4)(b) had the effect of vesting ownership rights in respect of the parking bays in the body corporate would amount to an unlawful and arbitrary expropriation of the property rights of all the owners in the scheme in respect of the bays, in violation of s 25 of the Constitution.
In closing the WCC held that when exclusive use rights in respect of common property vested in a body corporate in terms of ss 27(1)(c) or 27(4)(b), it did not have the right to do with them as it pleased but had to deal with them in the interests of and for the benefit of all owners in the scheme. An expansive interpretation of s 33 of the DRA to equate the holder of an exclusive use right in a sectional title scheme with the holder of ownership rights in immovable property was not justified. Section 2(e) of the STA expressly authorised the Registrar of Deeds to register a title deed conferring ownership (or other real right) in a section or undivided share or common property of the scheme. This was the operative provision for the transfer of exclusive use rights in sectional title schemes generally, and in circumstances of this case, not s 33(1) of the DRA. Diaz Hotel was therefore entitled to an order which would allow for the transfer to it of the exclusive use rights to the parking bays which were still registered in the name of SDC.
Apart from the cases and material dealt with or referred to above, the material under review also contained cases dealing with –
Gideon Pienaar BA LLB (Stell) is a Senior Editor, Joshua Mendelsohn BA LLB (UCT) LLM (Cornell), Johan Botha BA LLB (Stell) and Simon Pietersen BBusSc LLB (UCT) are editors at Juta and Company in Cape Town.
This article was first published in De Rebus in 2022 (March) DR 21.
