January 2025 (1) South African Law Reports (pp 1–343); January 2025 (1) South African Criminal Law Reports (pp 1–116)
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
WCC: Western Cape Division, Cape Town
The nature and effect of a cross-undertaking in damages: Regarded in South Africa as an incident of the court’s inherent jurisdiction to protect its own process, the Anton Piller order has, along with the Mareva injunction, been described as one of the civil law’s two nuclear weapons. An Anton Piller application is an interlocutory proceeding which permits the applicant, on an ex parte basis, to conduct a search of the respondent’s premises and to seize evidence to prevent its destruction pre-trial. Our courts have repeatedly emphasised that the purpose of an Anton Piller order was the conservation of evidence and that it was not intended as a kind of private search warrant to enable the applicant to formulate a case against the respondent.
In view of the potential for grave harm to respondents, courts seized with Anton Piller applications often require, as a precondition for its granting, a cross-undertaking by the applicant to compensate the respondent for damages suffered by reason of the order should it be subsequently set aside. It is settled law that the undertaking is given to and imposed by the court, that its enforcement is in the court’s discretion, and that it does not give rise to an independent action in substantive law. It is also settled that the question whether the undertaking should be enforced is separate from the question whether the Anton Piller order should be discharged or continued. The issues of causation and scope of damages arising from an undertaking are not yet settled law in South Africa.
Such was the legal background to the decision in Pathways Holdings (Pty) Ltd and Another v Ribeiro and Another 2025 (1) SA 298 (GJ), a matter decided on exception against a claim in terms of a cross-undertaking in damages. The exception raised fundamental issues about the nature, scope and enforcement of cross-undertakings where the Anton Piller order was found to have been wrongly granted and set aside.
The facts were that Ribeiro had obtained an Anton Piller order against Pathways containing the standard cross-undertaking to compensate Pathways for damages caused by the execution of the order. The order was subsequently set aside by the GJ and the rule nisi discharged. The issue of the undertaking was, however, neither raised by the parties nor considered by the court. In its judgment, the GJ (per Mbongwe J) gave as reason for the setting-aside of the order that Ribeiro had misconceived its purpose and sought it for the sole aim of scouting for a cause of action. It appeared from the Mbongwe’s judgment that the question of the damages in terms of the undertaking was not raised before him by the parties and that he did not consider it.
When Pathways, in the wake of the dismissal judgment, sued Ribeiro out of the GJ for (non-patrimonial) breach-of-privacy damages in terms of the undertaking, Ribeiro raised two exceptions. The first exception was that, since the undertaking did not found an independent cause of action, the court was functus officio also with respect to damages when it set aside the order. The second exception was that claims for non-patrimonial damages were in any event not permitted under such undertakings.
The GJ (per Stein AJ) emphasised that courts would, in view of an Anton Piller order’s extraordinary potential for harm, almost always enforce an undertaking where the order had been wrongly obtained. The undertaking was a serious and onerous one, presumed to be offered in good faith, and where the order was subsequently set aside, the party that offered it should not readily be let off the hook.
Stein AJ ruled, in dismissing the first exception, that it was crucial to separate the court discretion to set aside the order from its discretion to enforce the damages undertaking. The premise of the exception was wrong, for it could not be said that Mbongwe J had exercised his discretion in respect of the undertaking when he was neither asked to consider its enforcement nor to determine damages. This discretion was a generic one, and Mbongwe J’s failure to exercise it did not preclude another court from doing so at a later stage. Stein AJ emphasised that both parties bore a responsibility to raise the issue of enforcement of the undertaking with the court seized with the dismissal application, so that it could decide whether to enforce it or to defer the decision for determination by the trial court.
Stein AJ also dismissed the second exception, pointing out that, since the scope of the damages claim arising from an undertaking was not yet settled law, it was not appropriate for the court to determine it on exception. In closing, Stein AJ expressed the hope that the courts would in future develop the principles applicable to the determination of the proper scope of the damages claimable under a cross-undertaking for damages in an Anton Piller application.
Business rescue: Can a business rescue plan be set aside on the common-law ground of fraud? Limbouris and Others v Du Toit NO and Others 2025 (1) SA 247 (WCC) concerned the interpretation of s 152(4) of the Companies Act 71 of 2008. It provides that a business rescue plan adopted at a meeting of creditors is binding on all creditors, even if a creditor did not vote in support of the plan. The question for the WCC was whether its binding nature that it could not be set aside on the common-law ground of fraud? The third respondent company, Cambridge Services (Pty) Ltd, had been placed in business rescue in terms of a resolution by its sole director, the fifth respondent. A business rescue plan, published by the Cambridge’s business rescue practitioner, the first respondent (the BRP), was adopted by creditors, among which included the first to fourth applicants, on Limbouris and three others. They came to believe that the BRP had, with the aid of the fifth respondent, fraudulently misrepresented the company’s financial prospects in the plan, and claimed that they had voted on the strength of such misrepresentation. They accordingly proposed to launch an action for the review and setting-aside of the plan on the common-law ground of fraud. However, Limbouris concerned the interim application brought to the WCC, pending the determination of the review, for an interdict restraining the BRP from filing, in terms of s 132(2)(c)(ii) of the Companies Act, a notice of substantial implementation of the plan. The key issue was whether the applicants had established the prima facie right they relied on, namely they were prima facie entitled to the relief sought in the proposed action.
A preliminary issue was whether the applicants required leave of the court in terms of s 133(1)(b) of the Act to launch the application and/or the proposed action against the company in business rescue. The WCC (per Kantor AJ) held that they did not. In doing so, it clarified the guiding principle: where the relief related to aspects of the ordinary affairs, business or assets of a company in business rescue, leave was required; where it related to the business rescue itself or aspects thereof, it was not.
The WCC rejected the respondents’ assertion that the Companies Act did not permit reliance on the common law as a basis to set aside a business rescue plan. The WCC ruled that s 152(4) could not be interpreted to exclude such remedies. A business rescue plan may indeed be set aside on the basis that it was actuated by fraud. The WCC further ruled that the applicants’ claim based on fraudulent misrepresentation was actionable on a prima facie basis because the BRP had incorporated into the rescue plan projections as to the earnings and profitability of the company that he did not honestly believe were achievable. In view of this, the WCC granted the interdict sought.
Rape: Defence of unreasonable belief in consent declared unconstitutional: In Embrace Project NPC and Others v Minister of Justice and Correctional Services and Others 2025 (1) SACR 36 (GP) the first applicant, a non-profit company dedicated to combating gender-based violence and femicide, and the second applicant, the victim of rape in a regional court case in which the accused was acquitted, challenged the constitutional validity of ss 3, 4, 5, 6,7, 8, 9 and 11A, read with s 1(2) of Criminal Law (Sexual Offences and Related Matters) Amendment Act 32 of 2007. These provisions permitted the acquittal of an accused where the perpetrator had wrongly and unreasonably believed that the complainant had consented. Baqwa J for the GP found that they violated the constitutional rights of the victims of rape and declared them unconstitutional. The declaration was, however, suspended for a specified period to allow the constitutional defects to be remedied by Parliament. In the interim a provision was to be read into the Act to the effect that it was a not a valid defence for an accused person to rely on his subjective belief unless he took objectively reasonable steps to ascertain that the complainant had consented to the sexual conduct in question.
Extradition: declaration of unconstitutionality of s 5(1)(a) of the Extradition Act operates prospectively: The CC had, in a judgment reported as Smit v Minister of Justice and Correctional Services and Others 2021 (1) SACR 482 (CC), declared s 5(1)(a) of Extradition Act 67 of 1962 invalid. Although the default position in declarations of constitutional validity was retrospectivity, this declaration was ordered, without reasons, ‘to take effect from the date of this order’. Then, in a judgment reported as Britton v Minister of Justice and Correctional Services and Others 2025 (1) SACR 95 (SCA), the SCA was called on to decide whether the declaration in Smit applied to the arrest of the appellant in circumstances where, although her arrest under the provision had taken place three years prior to the declaration of invalidity, the extradition was still pending. The WCC found the order prospective in effect and dismissed her application to have her warrant of arrest and notice of extradition set aside. In an appeal against that decision, the SCA (per Nicholls JA) confirmed that the declaration of invalidity was prospective in effect: He was of the view that the order itself was explicit, and it was not open to the SCA to speculate as to some implicit reservation of retrospectivity that the CC might have left unexpressed in Smit. The WCC, therefore, declared the appellant’s warrant of arrest issued under s 5(1)(a) valid and dismissed the appeal.
Cancellation of membership for non-disclosure of material information: the appropriate test: Swanepoel NO v Profmed Medical Scheme 2025 (1) SA 33 (CC) concerned a dispute between a medical scheme – Profmed Medical Scheme – and one Ms S, that had its origin in the cancellation of Ms S’s membership due to non-disclosure. It appeared that she had filled in a ‘medical questionnaire’ that required her to disclose ‘all conditions/illnesses/symptoms, no matter how insignificant they may seem’. She was specifically required to disclose ‘any affection of the digestive system, liver, and gallbladder’. Ms S failed to mention that she had undergone a gastroscopy and colonoscopy which resulted in a diagnosis of gastritis. Profmed, relying on this omission, rejected a claim by Ms S in respect of an unrelated medical procedure and terminated her membership. Ms S raised a complaint with the Registrar of Medical Schemes, which judged the termination of her membership to have been lawful. The Council for Medical Schemes rejected an appeal by Ms S. Its Appeal Board subsequently ruled that Ms S had indeed fallen foul of the injunction against material non-disclosure of material information. Ms S then approached the WCC for an order reviewing and setting aside the Appeal Board’s decision. The single judge who initially heard the matter granted Ms S’s application, but on appeal the full court reversed his decision. After unsuccessfully seeking leave to appeal from the SCA, Ms S approached the CC. The latter granted leave to appeal.
The CC (per Majiedt J) outlined the appropriate test for determining the materiality of a non-disclosure under the Medical Schemes Act 131 of 1998. It involved asking, from the perspective of the notional reasonable and prudent person, whether the fact not disclosed was relevant to the risk and its assessment by an insurer. The insurer had to prove materiality. Not only that, it also had to prove that the non-disclosure induced it to issue the policy and assume the risk. The CC determined that the reasonable person would not have thought it necessary to disclose either the hip arthroscopy or the gastritis: the former was simply a diagnostic medical procedure; and the latter was a common, non-serious condition. The CC stressed that the list of prescribed minimum benefits was not relevant to the determination of materiality. The CC went on to hold that Profmed had in no way shown that the non-disclosures had caused it to contract with Ms S. The review before the High Court, the CC held, ought to have been upheld. The CC, therefore, upheld the appeal and set aside the full court’s decision.
Is prescription delayed where the creditor is a body corporate, and the debtor is an ordinary unit owner? The facts in Ashu and Another v Body Corporate, London Place and Others 2025 (1) SA 147 (WCC) were that the first applicant, Ashu, a part-owner of a unit in a sectional title scheme, had bought the share of his co-owner, the second applicant. Ashu wanted to take transfer of the second applicant’s share, but the body corporate refused to issue a levy clearance certificate until it was paid arrear levies that had accrued between 2011 and 2016. Ashu applied to the WCC for an order directing the body corporate to issue the certificate on the basis that the claims had prescribed and that there was consequently no ground on which the body corporate could withhold it.
The body corporate’s argument, premised on s 13(1)(e) and (i) of the Prescription Act 68 of 1969, was that prescription had been delayed: the applicants’ presence on the ‘governing body’ of the scheme constituted a so-called ‘impediment’ which delayed the completion of prescription. Section 13(1)(i) specified that in such cases prescription would only complete a year after the applicants ceased to be members of the governing body in question.
The issue before the WCC was whether a sectional title unit owner who was not a trustee qualified as a ‘member of the governing body’ of the scheme as intended in s 13(1)(e). The WCC (per Cloete J) ruled, on interpretation of the Sectional Title Schemes Management Act 8 of 2011 and case law, that the ‘governing body’ of a sectional title scheme consisted of its trustees and that s 13(1)(e) of the Prescription Act was of no avail to the body corporate. Accordingly, prescription had not been delayed, with the result that the body corporate’s claims had prescribed, leaving it no ground on which to withhold the certificate.
Deemed destruction of a section: may a body corporate resolve, or a court declare, that a section of a building is deemed destroyed? In Harbour Terrace Body Corporate v Minister of Public Works and Others 2025 (1) SA 191 (WCC), a company SD, had established a sectional title scheme and retained ownership of one of its sections, section 57. Ownership was reflected in the Registrar of Deed’s records. SD’s intention was that when the scheme was complete, it would transfer the section to the scheme’s body corporate so that it would become part of the common property. But in January 2008, before SD was able to transfer section 57 to the body corporate, it was deregistered. SD nonetheless continued to be reflected as owner of section 57 in the Registry of Deed’s records.
At an annual general meeting, held in September 2015, the body corporate moved for a unanimous resolution under s 48(1) of the Sectional Titles Act 95 of 1986 deeming section 57 destroyed and authorising the body corporate to approach the WCC for an order effecting the resolution.
Section 48, which dealt with destruction or damage to buildings, stipulated that a building comprising a scheme would be deemed destroyed on –
Section 48 was repealed with effect from 7 October 2016 by the Sectional Titles Schemes Management Act 8 of 2011, s 17 of which is substantially identical.
But a unanimous resolution could not be obtained either at the annual general meeting or at a later special general meeting. The body corporate then resolved to approach the WCC for orders under s 48(1). The body corporate asked the WCC for three declarators:
The WCC (per Sher AJ) ruled that s 48(1) did not empower either the body corporate or the court to deem an individual section like section 57 destroyed. It dealt with whole buildings. And s 48(3), which set out mechanisms for the rebuilding and reinstatement of buildings, did not allow for the deemed destruction of a section within a building. Section 48, read as a whole, therefore, did not afford a body corporate the right to resolve, or give a court a power, to declare a section within a building to be deemed to be destroyed.
Although the restoration of SD to the register would restore its rights of ownership and exclusive use regarding section 57, it would cause severe prejudice to third parties. The only avenue open to the body corporate was to obtain a court order for the restoration of SD to the register of companies and then to negotiate the transfer of section 57 to it. The WCC accordingly dismissed the application.
Dissipation of assets to avoid tax liability and the admissibility of evidence obtained at a tax inquiry: Wiese and Others v Commissioner, South African Revenue Service 2025 (1) SA 127 (SCA) concerned an appeal relating to the dissipation of assets to avoid tax liability that the WCC had decided in favour of South African Revenue Service (SARS).
The alleged dissipation occurred in April 2013, when the taxpayer transferred its sole asset, a loan account, as a dividend in specie to its holding company. This was after SARS had delivered a notice to the taxpayer that it intended making certain adjustments to the taxpayer’s 2007 income tax assessment to include capital gains tax (CGT) on the disposal of a subsidiary, and secondary tax on companies (STC). Approximately four months after the dissipation, SARS announced that it had finalised its audit and issued an additional assessment for CGT, STC and understatement penalties. When SARS was informed shortly afterwards that the taxpayer, a company, was dormant, it launched an inquiry in terms of s 50 of the Tax Administration Act 28 of 2011 (the TAA).
The inquiry was subsequently conducted and the appellants testified. On 25 October 2016, notices of personal liability were sent by SARS to the appellants in terms of s 183 of the TAA, which provides that, ‘[i]f a person knowingly assists in dissipating a taxpayer’s assets in order to obstruct the collection of a tax debt of the taxpayer, the person is jointly and severally liable with the taxpayer for the tax debt to the extent that the person’s assistance reduces the assets available to pay the taxpayer’s tax debt’. SARS wished to rely on the evidence obtained during this inquiry at the trial. The appellants maintained that, because the dissipation of the taxpayer’s assets occurred prior to the raising of the STC and the CGT assessments, there existed no tax debt as defined in the TAA at the time.
Two questions arose for decision by the SCA. The first was whether the term ‘tax debt’ in s 183 contemplated an existing liability for tax, though not yet assessed, at the time that the dissipation occurred, and the second was whether the transcript of a tax inquiry held in terms of
s 50 of the TAA was admissible in proceedings under s 183 of the TAA.
In dismissing the appeal, the SCA (per Goosen JA and Tolmay AJA) held that a tax debt existed with or without an assessment; an assessment merely determined it and rendered it recoverable in accordance with the recovery mechanisms provided by the TAA. The term ‘tax debt’ in
s 183 also encompassed the amount of tax a taxpayer was liable to pay to SARS. If a taxpayer was chargeable to tax, the taxpayer was indebted notwithstanding that the amount of the indebtedness had not yet been determined.
And, as to the second separated issue, that considering the text of the relevant sections of the TAA and the approach to comparable provisions in the Companies Act 61 of 1973 and the Insolvency Act 24 of 1936, the transcript of the evidence given at the s 50 inquiry was admissible in the litigation between the parties. As to the purposes for which such evidence could be used, the SCA further held that the WCC correctly found that the trial court was best placed to determine this and the probative value and weight that should be given to the evidence, if any.
Liability for capital gains tax and the conduit principle: The issue before the CC in Thistle Trust v Commissioner, South African Revenue Service 2025 (1) SA 70 (CC) was liability for capital gains tax distributed to beneficiaries through multiple trusts in a multitiered structure.
The Thistle Trust, a registered inter vivos discretionary trust, was a beneficiary of a tier of vesting trusts (the Zenprop Group), a property developer and owner. In the 2014–2016 tax periods the Zenprop Group disposed of certain capital assets and in the same tax periods distributed the capital gains realised to, inter alia, the Thistle Trust, which distributed it to its beneficiaries. Thistle did not declare the amounts received, acting on advice that relevant amounts were capital gains which, in terms of the common-law conduit principle and the relevant provisions of the Income Tax Act 58 of 1962 (the ITA), were taxable in the hands of its beneficiaries. The conduit principle treats a trust as a conduit for the transfer of taxable amounts into the hands of beneficiaries, so that amounts distributed from a trust to its beneficiaries are ordinarily taxed in the hands of the true beneficial owner.
The distributions in question were made before the 2020 amendment to s 25B of the ITA, which expressly limited the deeming provision in s 25B by making it clear that it did not apply to capital gains. Section 25B was introduced by a 1992 amendment to ITA. Before this amendment, s 25B(1) – enacted before the introduction of capital gains tax – provided that ‘any amount received by or accrued to or in favour of any person … in his or her capacity as the trustee of a trust, shall … to the extent to which that amount has been derived for the immediate or future benefit of any ascertained beneficiary who has a vested right to that amount during that year, be deemed to be an amount which has accrued to that beneficiary’.
Thistle’s objections to the additional assessment (and understatement penalties imposed) were upheld by the tax court on the basis that ‘any amount’ referred to in s 25B included capital gains, and that the conduit principle applied. The SCA upheld SARS’s subsequent appeal on the primary liability of Thistle for capital gains tax but dismissed SARS’s claim for understatement penalties.
The CC (per Chaskalson AJ) held, in dismissing the appeal, that para 80(2) of sch 8 was applicable, not s 25B as it read at the relevant time or the conduit principle. The wording of para 80(2) showed that the provision applied the conduit principle only to the first beneficiary trust in a multitiered trust structure. Therefore, when it referred to ‘the trust’, this could only be the trust that disposed of the asset, namely, the Zenprop Group, and not the Thistle Trust. The legislative history of para 80(2) confirmed that para 80(2) was amended into its present form for the purpose of preventing the conduit principle operating through multiple discretionary trusts in a tiered trust structure, and para 80(2) must be interpreted accordingly.
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 2025 (March) DR 35.
