September 2020 (5) South African Law Reports (pp 1 – 325); September 2020 (2) South African Criminal Law Reports (pp 229 – 341)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.
CA: Court of Appeal (England)
CC: Constitutional Court
ECM: Eastern Cape Division, Mthatha
FSB: Free State Division, Bloemfontein
GJ: Gauteng Local Division, Johannesburg
GP: Gauteng Division, Pretoria
SCA: Supreme Court of Appeal
WCC: Western Cape Division, Cape Town
The appropriate sanction for a spouse in a husband and wife partnership who delays in reporting the other spouse’s misappropriation of funds: In Hewetson v Law Society of the Free State 2020 (5) SA 86 (SCA), the appellant and her husband were attorneys and directors of a company through which they practised. The appellant became aware that her husband had misappropriated trust account money, and she reported the matter to the provincial law society concerned. It appeared that the appellant had been away from the practice when the alleged theft had occurred and that her husband controlled and excluded her from the firm’s finances. The law society proceeded to investigate and uncovered irregular activities by the husband. It then obtained an interdict prohibiting the appellant or her husband from operating the firm’s trust account, and for the appointment of a curator. Thereafter, the law society applied in the FSB to strike both the appellant and her husband from the attorneys’ roll. The law society was successful in this.
In an appeal the SCA, per Nicholls JA (Cachalia JA and Hughes AJA concurring), held that the FSB had materially misdirected itself in finding the appellant had made certain loans to herself, and that the SCA could, therefore, make the decision whether the appellant should be struck from the roll or suspended. This involved an inquiry as to whether the facts supported suspension or striking off, and this turned on the appellant’s honesty (or dishonesty) in her explanation of when she became aware of her husband’s theft.
The SCA, pointed out that though the appellant had failed in the joint duty of directors to keep proper books, there was inadequate evidence to justify striking off, absent an answer to the question of the appellant’s first knowledge of the theft. In this regard, the SCA expressed sympathy to a spouse who delayed reporting her partner’s wrongdoing when the consequences extended beyond her professional life (the appellant had instituted divorce proceedings at the time of reporting the matter to the law society). But the SCA qualified this by holding that it would be difficult to exonerate her, had she in fact been aware of her husband’s conduct over a period of months or years. Given the lack of evidence about the appellant’s knowledge, and the need to make a decision to strike off or suspend, it would be in the interests of justice for there to be a further hearing on the issue by the FSB, before it made the decision.
The SCA accordingly upheld the appeal and set aside the FSB’s order insofar as it applied to the appellant, and that the application for striking off be referred to the Full Bench of the FSB for determination afresh, after a hearing on the issue. The appellant would be suspended pending this determination.
In the minority judgment, Leach JA stated that the appellant ought to be struck from the roll and the appeal be dismissed. According to Leach JA the evidence showed that she had long been aware that her husband was using trust money for personal benefit, which evidence was backed up by that of an attorney employed by the firm as a professional assistant. In his view she was not a young and inexperienced attorney ‘who . . . possibly did not fully appreciate . . . her duties in regard to trust funds’, and her excuse that she entrusted administration of the funds to her husband ‘held no water’, given the evidence: it was the duty of every attorney in a partnership to ensure proper administration of the funds. This by itself justified striking off, but other factors militated for it as well, namely –
Role of fairness, reasonableness, good faith and ubuntu: Beadica 231 CC and Others v Trustees, Oregon Trust and Others 2020 (5) SA 247 (CC) clarified the public policy grounds on which a court may refuse to enforce contractual terms, and the proper role of fairness, reasonableness, good faith and ubuntu in such inquiry.
The appellants were four close corporations (the franchisees), which owned and operated franchises under a franchise agreement for a 10-year period. Its members were historically disadvantaged former employees of the franchisor and they had obtained the funding to own and operate the franchises by way of loans made by the National Empowerment Fund (the Fund) under a cooperation agreement between it and the franchisor, as part of a black economic empowerment initiative. The franchisees argued that enforcement would be inimical to the right to equality contained in s 9(2) of the Constitution, in that it would collapse their businesses and lead to the failure of the black economic empowerment initiative financed by the Fund.
The CC confirmed that Barkhuizen v Napier 2007 (5) SA 323 (CC) remained the leading authority in South African law on the role of equity in contract, as part of public policy considerations, namely that good faith was ‘not a self-standing rule, but an underlying value that [was] given expression through existing rules of law’. The CC also provided a conspectus of its decisions post Barkhuizen, including the much-invoked Everfresh Market (Virginia) (Pty) Ltd v Shoprite Checkers (Pty) Ltd 2012 (1) 256 (CC), in which the majority refused to impose an obligation to negotiate in good faith, but left the door to doing so in the future open.
However, the CC agreed with the SCA that abstract values could not provide a free-standing basis on which courts could interfere in contractual relationships. Instead, they performed creative, informative and controlling functions. Courts could not, therefore, refuse to enforce contractual terms on the basis that the enforcement would, in their subjective view, be unfair, unreasonable or unduly harsh. These abstract values have not been accorded autonomous, self-standing status as contractual requirements; their application was mediated through the rules of contract law, including the rule that a court may not enforce contractual terms where the term or its enforcement would be contrary to public policy. It was only where a contractual term, or its enforcement, was so unfair, unreasonable or unjust that it was contrary to public policy that a court may refuse to enforce it.
The CC also held that the enforcement of contractual terms, which resulted in the failure of black economic empowerment initiatives, did not necessarily offend constitutional rights substantive equality (s 9(2) of the Constitution) and dismissed their appeal on the basis that they failed to demonstrate good reason for failing to comply with the term.
Lawfulness of arrest and detention by police after arrest by civilian: Mtshemla and Another v Minister of Police and Others 2020 (2) SACR 254 (ECM) was an appeal against the dismissal by the regional magistrate in the Mthatha Magistrate’s Court, of the appellants’ damages claim against the respondents for unlawful arrest and detention.
In their amended particulars of claim the appellants referred to the third respondent as ‘Warrant Officer Qotoyi’. They alleged that this warrant officer and another police officer had come to their house, where they found a motor vehicle. The appellants admitted to possession but not to the commission of any offence. Qotoyi and the other police officer had then told them that they were under arrest and they were taken to the local police station where they were detained. They spent two and a half days in custody in unpleasant conditions. It was only during the evidence of the second witness for the respondents, a constable who had taken over the matter as the investigating officer and who had had nothing to do with the arrest of the appellants, that it was discovered that warrant officer Qotoyi was not in fact a police official, but an employee of Netstar Vehicle Tracking Unit.
The respondents, in their plea, alleged that the police officers who had arrested and detained the appellants had been justified in doing so, and, interestingly, accepted the onus to prove the justification for the arrest, despite the fact that the person who carried out the arrest was in fact a civilian. The case ultimately argued by the respondents, however, appeared to be that the arrest was lawful by virtue of the fact that Qotoyi was entitled to arrest under the provisions of
s 42 of the Criminal Procedure Act 51 of 1977 (the Act), which dealt with a civilian arrest.
The ECM, per Griffiths J, held that it was abundantly clear that a reasonable suspicion had to reside in the mind of the peace officer at the time of the arrest of the person concerned. Since Qotoyi was not a police officer, he was not a peace officer and the respondents ought to have failed on that basis alone. The ECM held further that even if it were to give a vast amount of leeway in that regard and consider whether or not Qotoyi had the right in terms of s 42 to arrest the appellants and that, on that basis, the police officers who detained the appellants were clothed with legality in doing so, the respondents ought to have failed on that score as well. Qotoyi had made no allegation in his statement that the appellants had committed or attempted to commit any offence in his presence, and there was no statement to the effect that he reasonably suspected the appellants of having committed an offence referred to in sch 1 of the Act. The magistrate, therefore, ought to have found that the respondents had not established that the arrest itself was lawful and, that being so, the subsequent two and a half days’ detention was also unlawful. To simply detain the appellants, apparently on the say-so of a civilian who had arrested them, was not sufficient and there had to be an interrogation of some sort to ensure that the arrest was lawful. In the circumstances the court considered an award of damages of R 90 000 for unlawful arrest and detention to be appropriate.
The determination of electricity tariffs – the National Energy Regulator of South Africa’s (NERSA’s) powers and possible interim relief for Eskom: In Eskom Holdings SOC Ltd v National Energy Regulator of South Africa 2020 (5) SA 151 (GP), Eskom sought an interim order from the GP that would direct NERSA, to authorise Eskom to increase its electricity prices over 2019 to 2022 by more than what NERSA was willing to allow. This order was to regulate matters pending Eskom’s application for the review of NERSA’s decision to limit the increases.
The main issue between the parties was how a government lifeline of R 23 billion for Eskom ought to be treated.
NERSA had calculated Eskom’s total allowable revenue by deducting the cash injection from its allowable revenue. Eskom argued that this money was intended to assist it with its debt repayments and that NERSA had, by using them to offset a high tariff increase, treated them as revenue in the hands of Eskom. A cash injection should not, said Eskom, be treated as an item that reduced its costs.
Eskom argued that it required interim relief because it was on the edge of financial collapse. Declining it, warned Eskom, would be catastrophic for it and South African economy as a whole since Eskom’s ensuing inability to repay its debt to the government could ultimately trigger a sovereign debt default.
NERSA’s view was that it was entitled to independently assess and verify Eskom’s figures and projections and apply its reasonable judgment to determine an allowable annual revenue or any component of it. NERSA argued that if the government cash injection had not been taken into account, it would have meant extra returns for Eskom. NERSA’s duty was to balance Eskom’s interests with those of the public.
The GP ultimately declined Eskom’s application for interim relief. It pointed out, however, that the process of determining electricity tariff increases was not only a matter that involved reasonable judgment and a balancing of the conflicting interests of Eskom and the public. NERSA’s discretion was not open-ended and was subject to judicial review.
The GP, per Kollapen J, ruled that Eskom had not met the requirements for interim relief. Even if it were accepted that Eskom could face financial collapse, it was not clear what the political response to an impending collapse might be. Ultimately, the financial health and survival of Eskom was a matter that fell in the remit of the political sphere of government. An appropriate tariff increase was best left to agencies with the appropriate expertise.
Scope of duty of lateral support: The court in Petropulos and Another v Dias 2020 (5) SA 63 (SCA) considered the scope of the duty to maintain lateral support between contiguous pieces of land – in particular whether it extends not only to land in its natural state but also to land with buildings on it.
The entire slope on which Mr Dias’ property was situated subsided and his property moved laterally and downwards towards an excavation on Ms Petropulos’ property. This resulted in extensive structural damage to Mr Dias’ property, which he attributed to excavations undertaken by Ms Petropulos and one Mr Venter on their respective properties. In Mr Dias’ claim for damages against both – based on strict liability for breach of the duty to provide lateral support – the trial proceeded only on separated issues. These included whether a common-law duty to provide lateral support to Mr Dias’ property was owed by Ms Petropulos and Mr Venter’s properties.
The trial court held that there was: The duty of lateral support owed not only in respect of land but also buildings constructed on the land, but not where such land has been ‘unreasonably loaded so as to place a disproportionate or unreasonable burden on the neighbouring land’. The SCA agreed with the court a quo that the duty of lateral support was not limited to land in its natural state (as in English law) but extended to buildings on the land; it, however, rejected the trial court’s qualification of this general principle as untenable. Dismissing the appeal, the SCA concluded that the excavations on Ms Petropulos’ property breached the duty to provide lateral support, and was linked sufficiently closely to the harm suffered.
Fitness to hold office – admissibility of adverse findings of other courts: The current Public Protector (PP), whose competence was again under the spotlight in Institute for Accountability in Southern Africa v Public Protector and Others 2020 (5) SA 179 (GP), has been the subject of several judgments. The applicant based this application for an order declaring the PP unfit to hold office on five of those judgments. The Economic Freedom Fighters (the EFF), entered the fray on the PP’s side as a sixth respondent, relying on the rule in Hollington v F Hewthorn & Co Ltd [1943] KB 587 (CA), argued that the findings of other courts were not admissible evidence. In Hollington death deprived a plaintiff of his only witness in a civil claim for damages, which led him to put in evidence the criminal conviction of the deceased for the same incident to establish a prima facie case of negligence against him. The CA held this evidence to be inadmissible and the plaintiff’s action failed. Lord Denning MR in Goody v Odhams Press Ltd [1966] 3 All ER 369 later called the rule a ‘strange rule of law which says that a conviction is no evidence of guilt, not even prima facie evidence’. JR Spencer in ‘The ghost of the rule in “Hollington v Hewthorn”: Exorcist required’ (2014) 73 The Cambridge Law Journal 474 wrote the ghost of this rule ‘required exorcism’.
In its judgment the GP, per Coppin J, pointed out that there was academic disagreement about the ambit of Hollington, with some arguing that it only disallowed evidence of a previous criminal conviction in civil proceedings, while others felt that it also excluded earlier findings of civil courts. The GP sided with the former view, ruling against the EFF that Hollington did not apply to exclude the negative findings in the five earlier judgments.
This, however, turned out not to be enough for the success of the application. The GP pointed out that it was the National Assembly’s duty to decide on the fitness of the PP to hold office, and that it was not for the court to prescribe to the National Assembly what it ought to conclude in the light of the findings of fact made in the five earlier judgments. The GP, therefore, refused to make the declaratory order sought by the applicant.
Spoliation of an electricity supply: The facts in Niehaus v High Meadow Grove Body Corporate 2020 (5) SA 197 (GJ) were that the applicant, Ms Niehaus, who was an owner of a unit in a sectional title scheme, fell in arrears with her levy payments, with the respondent body corporate, in response, reducing her electricity supply, citing a right to do so in the scheme rules, and an agreement of it and the applicant. This caused the applicant to apply urgently for restoring of the electricity supply.
In adjudicating the matter the GJ, per Van der Linde J, considered when quasi-possession of a right to electricity is protectable by the mandament van spolie and the relevant authorities. It ruled that the applicant’s right to electricity was an incident of her possession of the immovable property, and that the mandament, therefore, availed her. The GJ also confirmed that the mandament was available even where (as here) there was only part-deprivation of possession.
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 2020 (Nov) DR 32.
