The law reports – May 2020

May 1st, 2020
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March 2020 (2) South African Law Reports (pp 1 – 323); March 2020 (1) South African Criminal Law Reports (pp 227 – 338)

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

ECG: Eastern Cape Division, Grahamstown

GJ: Gauteng Local Division, Johannesburg

GP: Gauteng Division, Pretoria

MN: Mpumalanga Division, Nelspruit

SCA: Supreme Court of Appeal

Company law 

Arbitration – finality of an award and the rule against ‘hybrid orders’: Termico (Pty) Ltd (Termico) and SPX Technologies (Pty) Ltd (SPXT) were shareholders in the company DBT Technologies (Pty) Ltd (DBT). Clause 19 of the shareholders’ agreement governing Termico and SPXT’s relationship granted Termico the right to sell to SPXT its shares, after the expiry of the requisite ‘lock-in period’. This option to sell was subject to certain terms and conditions, which included the following: Subsequent to the notice to sell having been given, and the ‘put price’ calculated in accordance with the formula set out in the agreement, the parties had to meet to conclude the put option (clause 19.3). Further, the put price was first to be applied in repayment of the loan that had previously been given by SPXT to Termico, and then the balance paid over (clause 19.4). When Termico eventually sought to exercise its put option by delivering the required notice, SPXT’s response, for various purported reasons, was to reject the notice as being ineffective, to refute Termico’s calculations as to price, and to claim that no valid put option had been exercised. The matter went to arbitration.

The arbitral panel decided in favour of Termico, finding, inter alia, that the put option had been validly exercised, and that the put price was an amount of
R 287 337 807. Importantly for present purposes, it did not grant a judgment in money, considering itself precluded from doing so given that those events required in terms of the shareholders’ agreement to take place prior to payment, namely the meeting envisioned by clause 19.3 and the set-off of the loan in terms of clause 19.4, had not yet taken place. Consequently, SPXT sued in the GJ for the review and setting-aside of the award. Termico brought a counter-application seeking an order making the arbitration award an order of court in terms of s 31(1) of the Arbitration Act 42 of 1965, as well as – and crucially for present purposes – a money judgment in the sum of R 250 million, being the put price less the balance owing to SPXT on the loan. The court granted the review application, and refused the counterclaim, finding that, in failing to grant a monetary judgment, the arbitral panel had not delivered a final award, in breach of s 33(1)(b) of the Arbitration Act. It added that, to grant the relief sought would fall foul of the prohibition in law against so-called ‘hybrid orders’, namely, partially the findings of a court and partially those of an arbitrator.

In the case of Termico (Pty) Ltd v SPX Technologies (Pty) Ltd and Others 2020 (2) SA 295 (SCA) an appeal was brought to the SCA by Termico with regard to the correctness of the High Court’s reasoning.

The SCA, per Ponnan JA (Leach JA, Swain JA, Molemela JA and Mbatha JA concurring), held that the rule requiring finality of arbitration awards was to the effect that all issues submitted had to be determined. In other words, an award might not necessarily result in a final resolution of a dispute between parties. The SCA further stressed that the rule against hybrid orders covered determinations by a court in respect of matters, which were still the subject of an arbitration that had not finally run its course. Here, the court held, all issues that had actually been submitted to the arbitrators for decision had been decided by them; and the court was not being asked to deal with ‘live’ issues in a pending arbitration. In this regard, the court stated that the question of the granting of the money judgment could not be dealt with by the arbitral panel, as the events necessary for its determination had not yet occurred, namely, the meeting and the calculation of the loan, both of which were not issues before it. The SCA accordingly concluded that the arbitral award had met the requirement of finality, and that there had been no contravention of any rule against hybrid orders. It held that Termico’s counter-application ought to have succeeded, and that it was, on the facts, entitled to the money judgment claimed. The SCA accordingly upheld the appeal.

 

Availability of business rescue proceedings to external companies registered in South Africa: Cooperativa Muratori & Cementisti, CMC Di Ravenna Società Cooperativa a Responsabilità Limitada (CMC) was a company incorporated in Italy, with branches throughout the world, operating primarily in the construction industry. It also did business in South Africa (SA), where it had been awarded a contract for the reconstruction of the port of Durban and work on toll roads. As a company incorporated outside of SA, but doing business here, CMC qualified as ‘an external company’ as defined in the Companies Act 71 of 2008 (the 2008 Act). It had further registered as such with the Companies and Intellectual Property Commission (the Commission) under s 23(1) of the Act. What gave rise to the matter in CMC di Ravenna SC and Others v Companies and Intellectual Property Commission and Others 2020 (2) SA 109 (GP), was the decision of the board of directors of CMC to pass a resolution to place the company under voluntary business rescue in SA. CMC filed the necessary documentation, gave the required notices, and appointed business recue practitioners. However, the Commission withdrew proceedings, explaining that external companies, like CMC, could not be placed under business rescue under s 129 of the 2008 Act. Consequently, CMC sought an application – supported by its two business rescue practitioners, but opposed by the Commission – for an order declaring that it was in fact validly under business rescue in accordance with s 129 of the 2008 Act.

Section 129 made business rescue proceedings available to ‘the company’. The key issue in dispute, then, was whether CMC, as an ‘external company’ registered in SA under s 23 of the 2008 Act, qualified as a ‘company’, as was submitted by the applicants. The court’s view was that it did not.

The court, per Potterill J, held when one considered the fact that the ‘company’ definition did not expressly include ‘external companies’ in circumstances in which the Companies Act 61 of 1973 (the 1973 Act) had a catch-all provision, which provided that the sections of the 1973 Act would apply to every company, including external companies, one was driven to conclude that the legislator intended to exclude external companies from the definition of ‘company’. Such an interpretation, the court added, was fortified by the fact that there was a specific legislative intent in the 2008 Act to reduce the regulation of external companies to promote investment in the South African markets. The court further rejected the argument raised by the applicants that an external company, when registered under the 2008 Act, was incorporated thereunder and, therefore, met the definition of ‘company’. Incorporation and registration, it held, had always been two distinct processes. There was simply no ‘notional’ incorporation, as was suggested by the applicants, when an external company was registered in SA. The court stressed further that s 1(a)(i) of the definition specifically excluded an external company as defined in the 2008 Act.

The court concluded that business rescue proceedings under s 129 of the 2008 Act were not available to CMC, and that it was, therefore, not validly under business rescue. The court dismissed the application.

 

Creditors’ voluntary winding-up and High Court jurisdiction: In Murray NO and Others v African Global Holdings (Pty) Ltd and Others 2020 (2) SA 93 (SCA) the SCA had to grapple with various matters arising from a creditors’ voluntary winding-up (CVW) of the African Global Group (the Group).

The Group found itself in trouble when banking facilities were withdrawn from its operational wing (Operations) following revelations at the Zondo Commission of Inquiry about the conduct of its predecessor, Bosasa.

As a result, the Group and its holding company (Holdings), acting under s 351 of the Companies Act 61 of 1973 (the 1973 Act), on 12 February 2019 resolved to place Operations and its subsidiaries in a creditors’ voluntary winding-up. But, soon thereafter, Holdings had a change of heart and sought to reverse the CVW by having it declared void in the GJ. Its case was that, since Operations and its subsidiaries were solvent when the resolutions to wind them up were taken, ss 79 and 80 of the Companies Act 71 of 2008 (the 2008 Act) should have been used for their liquidation instead of s 351 of the 1973 Act.

Therefore, argued Holdings, the resolutions to wind up and subsequent appointment of the liquidators were null and void. Holdings also argued that since the companies had their registered addresses in Johannesburg, the liquidators were wrongly appointed by the Pretoria Master, and that they, therefore, lacked locus standi.

Section 351 of the 1973 Act forms part of its ch 14, which is preserved, in respect of insolvent companies, under item 9(1) of sch 5 to the 2008 Act. Solvent companies, however, must be wound up under ss 79 and 80 of the 2008 Act. The Administration of Estates Act 66 of 1965, ss 2(1)(a)(ii) and 3 provide that ‘the Minister … shall, in respect of the area of jurisdiction of each High Court, appoint a Master of the High Court’ and that each Master shall have an office at the seat of the High Court ‘in respect of whose area of jurisdiction he or she has been appointed’. The 1973 Act in s 1 under ‘Master’, then provides that the Master who appoints provisional liquidators is ‘the Master having jurisdiction in the area in which the registered office of that company is situated’.

The application, though opposed by the liquidators, was granted on the solvency issue. In an appeal by the liquidators the SCA, per Wallis JA (Mokgohloa JA, Plasket JA, Nicholls JA and Gorven AJA concurring), held in respect of the appointment of the liquidators, that a 2012 amendment to the Constitution created a single High Court for SA, and in 2013 the Superior Courts Act 10 of 2013 abolished local divisions and created a High Court with nine divisions, corresponding to the nine provinces, with main seats in all of them and local seats in some. The local seats are not separate courts and it is no longer appropriate to refer to them as ‘local divisions’. The area of jurisdiction of the Masters at the main seats overlap that of the Masters at the local seats situated in their provinces. Since the area of jurisdiction of the Master in Pretoria includes the entire area of jurisdiction of the Master in Johannesburg, Holdings’ objection to the appointment of the liquidators by the Pretoria Master was without merit.

The SCA then moved to the issue of solvency, pointing out that a solvent company may be wound up only under the 2008 Act, and that, for the purposes of the 2008 Act, a solvent company is a commercially solvent company. Commercially insolvent companies are liable to be wound up only under the 1973 Act and cannot be wound up under the 2008 Act.

Assessing commercial insolvency requires an examination of the financial position of the company at present and in the immediate future to determine whether it will be able in the ordinary course to pay its debts, existing as well as contingent and prospective, and still continue trading. And when a company is prevented from accessing liquid assets, it will be unable to pay its debts as they fall due.

The SCA went on to point out that the Group’s inability to pay became imminent once the Group’s access to banking facilities was terminated. In the case of the Group the answer was clearly that it could not – substantial sums of VAT, provisional tax and pension fund contributions due primarily by Operations had fallen due for payment on 28 February 2019 and were not paid.

The commercial insolvency of the Group was also highlighted by its inability to afford the security it would have had to pay had there been a members’ voluntary winding-up or proceedings under s 80(3) of the 2008 Act, instead of the CWV.

Operations and the other companies in the Group were, therefore, commercially insolvent when the resolutions for their voluntary winding-up were taken. Since this conclusion removed the underpinnings of Holdings’ case, the High Court application should have been dismissed.

Criminal law

Man convicted of murdering wife released on bail after being granted leave to appeal: S v Rohde 2020 (1) SACR 329 (SCA) concerned the release of a convicted murderer on bail by the SCA, pending appeal to that court.

The appellant had been convicted in the High Court of murdering his wife and obstructing the administration of justice, in that he had concealed her murder to look like a suicide. A substantial sentence of 20 years’ imprisonment had been imposed. His application for leave to appeal against his conviction and sentence had been dismissed, but he was later successful on petition when the SCA granted him leave to appeal against his conviction and sentence. He had then applied in the High Court for bail pending appeal but that was refused.

In the SCA his main contentions were that since he had been granted leave to appeal there were reasonable prospects of his appeal being successful, and, since he was unlikely to abscond, bail ought to have been granted.

The court was divided on the matter. The majority, per Van der Merwe JA (Maya P concurring), agreed with the appellant. They held that leave to appeal could only have been granted on the merits and that they, therefore, had to accept that their colleagues, who had considered the petition and specifically applied their minds to the question, had concluded that there were reasonable prospects that the conviction may be overturned on appeal. Furthermore, in circumstances where all the appellant’s emotional and financial ties were with SA, his three other passports had expired and were with the police, and the appellant had fully complied with his bail conditions – apart from one excusable occasion – there was little likelihood that he would abscond. In the result the court a quo ought to have released him on bail, subject to appropriate conditions.

In a minority judgment, Nicholls JA, emphasising the seriousness of the crimes of which the appellant had been convicted, found that he had not discharged the onus of showing that it was in the interests of justice that he be released on bail, or that there was no likelihood of him evading his trial.

The appeal was thus upheld.

Environmental law

Meaning of ‘dispute’ when referred by court to conciliation: Section 17(3) of the National Environmental Management Act 107 of 1998 provides that: ‘A court or tribunal hearing a dispute regarding the protection of the environment may order the parties to submit the dispute to a conciliator … and suspend the proceedings pending the outcome of the conciliation’.

In Long Beach Homeowners Association v MEC for Economic Development, Environmental Affairs and Tourism, Eastern Cape 2020 (2) SA 257 (ECG) the issue was whether a dispute between the appellant, the homeowners’ association, and the respondent, the MEC, over the latter’s handling of an internal appeal against the granting of an environmental authorisation, was a dispute the court was entitled to refer to conciliation under s 17(3).

The court a quo found that, as there was no dispute concerning the protection of the environment before it, s 17(3) was of no assistance to the homeowners’ association. The matter before the Full Bench of the ECG concerned the homeowners’ association’s appeal to the Full Bench.

Dismissing the appeal, the court, per Pickering J (Robertson J and Tokota J concurring) agreed with the MEC that, even accepting that s 17(3) must be given a wide and purposeful interpretation, as argued for by the homeowners’ association, the dispute between the homeowners’ association and the MEC was not a ‘dispute’ as contemplated by that provision.

Section 17(3) only empowered a court to refer a dispute regarding the protection of the environment to conciliation; it did not empower the court to do so when the dispute is one concerning the exercise by an MEC of his functions. The dispute directly concerning the protection of the environment was the one between the homeowners’ association and the internal appellants, not the one between the homeowners’ association and the MEC, which was only tangentially connected to it. Furthermore, the court’s power under s 17(3) to ‘suspend the proceedings pending the outcome of the conciliation’ meant a suspension of the actual dispute regarding the protection of the environment before the court.

The ECG pointed out that this conclusion did not mean that the homeowners’ association was remediless: It could, under s 17(2), request the MEC to appoint a facilitator for the purpose of reaching an agreement to refer the matter to conciliation.

Law of delict

Will an employee injured by fellow employees during an employment related protest have suffered an ‘occupational injury’, and so be barred claiming against their employer in delict? The case of Churchill v Premier, Mpumalanga and Another 2020 (2) SA 309 (MN) concerned an employment related protest during which protesting employees of the provincial government assaulted a senior employee. The employee was psychiatrically injured and sued the provincial government for its alleged omission – contra its alleged duty to protect its employees – to ensure the employee’s safety. The government’s defence to the delictual claim was that it was barred by the Compensation for Occupational Injuries and Diseases Act 130 of 1993 because the injury was an ‘occupational injury’.

Section 35 of the Act debars an employee from recovering damages from its employer for an ‘occupational injury’. An ‘occupational injury’ is defined as ‘a personal injury sustained as a result of an accident’ (s 1); and an ‘accident’ is defined as ‘an accident arising out of and in the course of an employee’s employment and resulting in a personal injury’ (s 1).

The issue was whether the personal injury resulted from an accident ‘arising out of’ the employee’s employment. The court, per Roelofse AJ, found that it did. It based its finding on the following factors:

  • the ‘accident’ occurred at the employee’s place of work, and while she was going about her work; and
  • the employee’s role (‘design and implementation’ of the employer’s policies) and her non-participation in the protest increased the danger to the employee posed by protesting employees.

The court accordingly upheld the employer’s defence and dismissed the employee’s delictual claim.

 

Road Accident Fund claims – establishing identity of owner of insured vehicle: Section 17(1)(a) of the Road Accident Fund Act 56 of 1996 concerns claims where the identity of the owner or driver of the insured vehicle has been ‘established’; and s 17(1)(b) where it has not. Under reg 2(1)(b) of the regulations promulgated under the Act, claims falling under s 17(1)(b) are subject to a two-year prescription period.

The case of Jones v Road Accident Fund 2020 (2) SA 83 (SCA) concerned an appeal to the SCA against a High Court judgment upholding the RAF’s special plea that Mr Jones’ claim had become prescribed because it fell under s 17(1)(b) but was not lodged within the prescribed two-year period.

Mr Jones was injured when a chunk of gold ore, forming part of a load being transported from a mine to a refinery, fell from a truck that he was driving behind, penetrated the windscreen of his car and struck him on the forehead. It was not in dispute that the identity of the driver had not been established. Mr Jones, however, purported to establish the identity of the owner of the truck by contending that it was probably one of the nine owners of 23 trucks, which could have been involved in the accident.

The question was whether this sufficed to establish the identity of the owner or driver of the insured vehicle for the purposes of s 17(1). The SCA held that it did not. The identification of a series of vehicles and their owners, where one was probably involved in accident, did not amount to establishing the identity of owner as contemplated in s 17. The appeal was accordingly dismissed.

Property law: Sectional titles

Whether a special resolution increasing a unit owner’s levy will ‘adversely affect’ the owner and so require their written consent: In Body Corporate of Marine Sands v Extra Dimensions 121 (Pty) Ltd and Another 2020 (2) SA 61 (SCA), the appellant was a body corporate of a sectional scheme that was both residential and non-residential. The first respondent was an owner of non-residential units. The body corporate adopted a special resolution, and made a change to the conduct rules, with the effect that the first respondent’s levy doubled. There was no change in its participation quota.

This caused the first respondent to apply to the High Court for a declarator that the special resolution and change to the rules were invalid. It based its application on s 32(4) of the Sectional Titles Act 95 of 1986, which provides, inter alia, that: ‘Members of the body corporate may by special resolution, make rules … by which … the liability of the owner of any section to make contributions … is modified: Provided that where an owner is adversely affected by such a decision … his written consent must be obtained’.

The first respondent’s assertion was that the special resolution modifying the levy and amending the rules adversely affected it, yet it did not give its written consent thereto. Thus it did not comply with s 32(4) and was invalid.

The High Court, following provincial authority, found to the effect that a special resolution increasing a levy contribution would not ‘adversely affect’, in the manner the Act intended, an owner struck thereby. It consequently dismissed the application.

The first respondent appealed to the Full Court, and it found that the special resolution was ultra vires the Act. It came to this conclusion on a basis other than the adverse effect ground.

The body corporate then applied to the SCA for its leave to appeal. The SCA, per Ponnan JA (Mocumie JA, Tsoka AJA, Koen AJA and Weiner AJA concurring), granted it and decided, interpreting the Act, that the legislature’s intention was that a special resolution increasing a levy would adversely affect owners and require their written consent. Since there had been no such consent, the special resolution and resultant amendment of the rules were ultra vires the Act and invalid. The SCA accordingly dismissed the body corporate’s appeal.

Other cases

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

  • access to information;
  • company law;
  • constitutional law;
  • grounds for legality in a commission of inquiry;
  • immigration;
  • income tax deductions;
  • local authority;
  • motor vehicle accidents;
  • pension benefits; and
  • tax assessments.

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 2020 (May) DR 18.