September 2022 (5) South African Law Reports (pp 1 – 321); September 2022 (2) South African Criminal Law Reports (pp 233 – 347)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
ECGq: Eastern Cape High Court, Gqeberha
GJ: Gauteng Local Division, Johannesburg
GP: Gauteng Division, Pretoria
SCA: Supreme Court of Appeal
WCC: Western Cape Division, Cape Town
The need for courts to have regard to interests of existing children of commissioning parents and surrogate in applications for confirmation of surrogate motherhood agreement: In Ex parte JCR and Others 2022 (5) SA 202 (GP) the court (per Neukircher J) dealt with an application for the confirmation of a surrogate motherhood agreement under s 295 of the Children’s Act 38 of 2005.
The first and second applicants, a married couple, were the commissioning parents. The third and fourth applicants, also a married couple, were the surrogate parents. Both the commissioning parents and the surrogate parents already had children: A 10-month-old in the case of the commissioning parents and a 10-year-old and a 7-year-old in the case of the surrogate parents. This gave the GP cause for concern. From the perspective of the children of the commissioning parents, what impact would a new family member have on their life and their well-being? And how would the children of the surrogate parents be affected by observing their mother being pregnant for nine months, going to hospital to deliver the baby, and then to return home without it?
The GP held that a court, when confronted with deciding an application under s 295 in which the commissioning parents or surrogate parents already had children, was obliged by the best-interests-of-the-child principle encapsulated in s 28 of the Constitution, and as upper guardian of all children, to first consider whether there would be any harmful impact on such children. The GP requested information from the applicants to put itself in a position to answer such question. It ultimately held that there would be no harmful impact. The GP did, however, find it appropriate to set out guidelines to assist courts confronted with s 295 applications in similar circumstances, in particular, the GP held that applicants under s 295 should place before the court information to the effect that a clinical psychologist had consulted with any child(ren) of the commissioning parents and surrogate parents in order to –
What was also of concern to the GP was the fact that the surrogate in this case, the third applicant, had already acted as surrogate on several previous occasions and had undergone several pregnancies, one of which had resulted in a miscarriage, and some of which had resulted in caesarean sections. Were there health risks to the third applicant were she to act as surrogate again? The GP initially found the experts’ reports inadequate for the purpose of determining this question. However, after seeking and obtaining further information from the applicants, the GP satisfied itself that there was no risk of harm. Once again, however, in this regard, the GP deemed it appropriate to add to the guidelines referred to above. The GP held that applicants in s 295 applications should present to court a full medical assessment of the surrogate, including information on her previous pregnancies, previous caesarean sections, whether any complications arose during any of her pregnancies, and, if so, what and whether any of her pregnancies resulted in the child not being born alive or whether she miscarried.
The GP concluded by confirming the surrogate motherhood agreement.
The ambit of company directors’ duty of disclosure under s 75 of the Companies Act 71 of 2008: Our law has historically recognised the principle that a contract between a company and one of its directors, or with an entity in which that director has an interest, is voidable at the instance of the aggrieved company unless its shareholders approve it. This principle is currently codified by s 75 of the Companies Act 71 of 2008, which sets out the procedures and rules of disclosure that apply when company directors, or people or entities related to them, have personal financial interests that conflict with those of the company. Section 75(3) specifically prohibits directors from entering into agreements in which they or a related person has a ‘personal financial interest’ (a concept defined in s 1 of the Act), unless the agreement was subsequently ratified by shareholders following disclosure or declared valid by a court under s 75(8).
The ambit of s 75 was recently discussed in Atlas Park Holdings (Pty) Ltd v Tailifts South Africa (Pty) Ltd 2022 (5) SA 127 (GJ).
The facts were that Atlas Park had applied for an order validating a lease concluded between itself and Tailifts despite the fact that one Van Breda, a director of both companies, had failed to make disclosures required by s 75.
Tailifts, seeking to escape from the lease, claimed that Van Breda had manufactured it for his own benefit while wearing two directors’ hats, one for Atlas Park and one for Tailifts. Tailifts argued that Van Breda was conflicted because he had secretly secured mezzanine financing to purchase the leased property and that his failure to disclose this meant that Tailifts was prevented from using the financing to acquire the property for itself.
Atlas Park in turn argued that the lease was valid because, to the extent that Van Breda had failed to make any disclosures, this had been only in relation to indirect interest, which was excluded by s 75. Atlas Park, while conceding that there was some noncompliance with s 75, argued that it was a simple de jure failure and that, de facto, the disclosure requirements of the Act were complied with.
In its judgment the GJ pointed out that Atlas Park’s view that s 75(1) involved asking the court for a simple indulgence to bring a so-called de facto situation into line with certain purely formal legislative requirements, was incorrect. However, attractive to Atlas Park, such an interpretation would minimise the mischief which the section was intended to address and reduce the purpose of the legislation to one requiring a simple ticking of boxes. Moreover, the Act’s definition of ‘personal financial interest’ indicated that any shareholding (other than through a unit trust or collective investment scheme) by a director in another company which had an interest in the transaction under consideration would amount to a ‘direct’ personal financial interest requiring disclosure and recusal. Where a director engaged in a transaction by which he effectively usurped a corporate opportunity for personal financial advantage by extracting dividend income or other economic benefits via another company, the requirement of a direct ‘personal financial interest’ (as defined) was satisfied.
The GJ pointed out that the intention of s 75(3) was clear: A director was obliged to make disclosure if there were conflicted, and an offending transaction was ipso facto void unless a court declared it valid. Section 75(3) had to be interpreted as being composed of two parts: The imposition of the underlying common-law duty not to misappropriate a corporate opportunity, which determined when a disclosure had to be made, and the trigger that would void the transaction if disclosure was not made. It required an actual financial benefit which the director, or a related party to the director’s knowledge, had obtained through his or her failure to disclose. Any other reading of the provision would result in the absurdity that a wilful act directed against a company’s financial interests or well-being would not result in the nullity of the tainted transaction.
The GJ ruled that Atlas Park failed to show that Tailifts, had it been properly informed of the availability of the mezzanine finance, would not have taken up the corporate opportunity to acquire the property. Instead, Van Breda had usurped it for his own financial benefit.
The GJ, taking into account Van Breda’s material and wilful non-disclosure, his abuse of his position as director vis-à-vis the clear interests of Tailifts, and the real and substantial direct economic benefit he had gained, dismissed Atlas Park’s application to validate the lease under s 75(8) with costs.
Who may apply for the conversion of business rescue into liquidation? Commissioner, South African Revenue Service v Louis Pasteur Investments (Pty) Ltd (in provisional liquidation) and Others 2022 (5) SA 179 (GP) concerned an application by the Commissioner for the final liquidation of the respondent (LPI). The Commissioner had earlier obtained an order converting LPI’s business rescue into liquidation proceedings under s 132(2)(a)(ii) of the Companies Act 71 of 2008 and placing it in provisional liquidation.
The application was opposed by, inter alia, LPI and the business rescue practitioner. They contended that s 132(2)(a)(ii), properly construed, could only be invoked if there were first an application by the practitioner in terms of s 141(2)(a)(ii) ‘for an order discontinuing the business rescue proceedings and placing the company in liquidation’. This meant, so they argued, that only the business rescue practitioner – not a creditor like Sars – could apply for the conversion of business rescue into liquidation.
The GP (per Millar J), having considered the nature of a conversion application and its relationship with moratorium on legal proceedings, held that it was apparent from the plain meaning of the section that the enforcement of debt was separate and distinct from a conversion application; the latter was not a proceeding for the enforcement of any debt but offered a distinct way in which business rescue may be terminated. The court further held the argument that only practitioners and not creditors may apply for conversion, also ignored that the moratorium on legal proceedings against a company under business rescue (s 133(1)) may be lifted.
And there was no doubt that LPI was hopelessly insolvent and that the granting of a final winding-up order was apposite. In such circumstances, a court had a limited discretion to refuse such an order; it had the power to intervene where it was shown that business rescue practitioners had committed a material mistake in concluding that the continued implementation of the business rescue plan would result in a better return for the creditors of the company. LPI was accordingly placed in final winding-up.
Release on bail following arrest for cross-border cybercrimes: In Otubu v Director of Public Prosecutions, Western Cape 2022 (2) SACR 311 (WCC) the appellant was one of eight accused arrested in terms of art 13 of the Extradition Treaty between the United States (US) and South Africa (SA) governing extradition. They were to face charges relating to a criminal scheme to defraud romance victims via the Internet and mobile phones. One consolidated bail hearing was held in which the magistrate refused bail, and the appellant appealed the decision.
During the hearing the state alleged that the appellant was a member of the Neo Movement of Africa, also known as the ‘Black Axe’. There was no evidence that the appellant was in fact a member of the movement or that he had committed any acts of violence as purportedly regularly undertaken by that organisation, and the state conceded this. It also conceded that the appellant might not have real ties within Nigeria anymore, from whence he had come, but alleged that he was still a flight risk because of his purported association with Black Axe in SA. It appeared that the state was more concerned with the fact that, if the appellant did flee SA, there was no extradition treaty between Nigeria and the US, but it gave little or scant consideration to the use of possible restrictive bail conditions being imposed. It laid much emphasis on the fact that the appellant had left the borders of SA on two occasions to go to Nigeria to attend burial services of his parents. However, on both occasions, he had returned lawfully, and had remained in SA. The evidence also showed that although the appellant did have a successful agricultural business in Nigeria, after fleeing Nigeria in 2012 he had not returned there. There were no previous cases against the appellant, who stated in his founding affidavit that he generated approximately R 30 000 – R 45 000 per month from his housing rental business and earned some money from the selling of Nigerian food items to his community. The appellant and his wife, to whom he was married in community of property, had purchased a piece of land for an amount of R 1,5 million in September 2020. They were also building a house on another property. It was further common cause that the appellant had been arrested some six months earlier and there was no certainty as to how long it would take for the extradition inquiry and transfer of the appellant to the US.
Carter AJ found that both the investigating officer and the magistrate had based their views on the accused collectively and not individually, and that this was a misdirection. Further, that the court used a ‘bail box’ approach in denying the appellant bail, and should have considered proactive, practical, and inventive bail conditions, which would have served to balance the interests of society and those of the appellant. Earlier guidelines were restrictive and outdated as they had limited application to the cyber universe that the world had rapidly progressed into. The methods allegedly used by the appellant were, inter alia, via iCloud, cryptocurrency, Bitcoin payment, storage wallets, Google drive, block-chain devices, and mobile storage wallets. Many of the aforementioned were still being understood by the major financial institutions, and in the majority of countries not accepted as means for financial payment or transacting. Notwithstanding this, there was no excuse in the WCC’s view to safeguard the unknown to the detriment of the appellant.
The decision to refuse the appellant’s release on bail was, therefore, set aside and replaced with an order granting him bail in an amount of R 210 000, subject to various relevant conditions.
Apart from the cases dealt with above, the September SACR also contained cases dealing with –
Right to strike: Interdicting striking employees from engaging in actual or threatened unlawful conduct: In Commercial Stevedoring Agricultural and Allied Workers Union and Others v Oak Valley Estates (Pty) Ltd and Another 2022 (5) SA 18 (CC) the CC heard an unopposed appeal against a final interdict obtained in the Labour Court (LC) and upheld on appeal by the Labour Appeal Court (LAC). The interdict prohibited striking workers employed by the respondent, Oak Valley Estates, from unlawfully interfering with Oak Valley’s operations. The workers were members of the first applicant, the Commercial Stevedoring Agricultural and Allied Workers’ Union. The strike related to the alleged racist allocation of employee housing by Oak Valley and its refusal to recognise ‘seasonal’ workers as permanent employees. It was common cause that the strike triggered incidents of intimidation, damage to property, and unlawful interference with Oak Valley’s business operations and that there were numerous breaches of the picketing rules issued prior to the commencement of the strike by the Commission for Conciliation, Mediation and Arbitration.
The applicants (the union and 173 workers) did not deny that unlawful conduct took place but maintained that Oak Valley failed to establish that it could be attributed to the second to 174th applicants. The LAC accepted the LC’s rejection of ‘the requirement of establishing a link between the individuals who were interdicted and the impugned conduct’. It upheld the final interdict on the basis that Oak Valley ‘was able to name certain individuals who participated in what it considered to be unlawful acts together with a further group of unnamed but clearly identifiable individuals’.
The issue in the CC was whether an employer faced with unlawful conduct during a protected strike could interdict participating employees without linking each employee to the unlawful conduct. In upholding the appeal, the CC held that final interdictory relief against striking employees engaging in actual or threatened unlawful conduct was only competent if striking employees factually linked to reasonable apprehension of actual or threatened infringement of a clear right. Mere participation in a strike in which there was unlawful conduct did not suffice to establish a required link.
The CC reasoned that if this were not so, innocent participants in strike or protest action would inevitably get caught in the net of an interdict, and that being implicated in a contempt application (whether or not such application was likely to succeed) would be prejudicial to innocent bystanders and would have a chilling effect on the exercise of their constitutional rights to strike (s 23(2)(c)) and to protest (s 17). A person who lawfully exercised their right to protest, strike or assemble, but was nonetheless placed under interdict, would accordingly impermissibly be denuded of their constitutionally protected rights.
Judicial execution against a debtor’s primary residence – process if reserve price not achieved: Rule 46A of the Uniform Rules of Court, introduced in 2017, aims to protect, through a process of court oversight, indigent debtors who were in danger of losing their homes. It specified that the court had to set a reserve price before such a house could be sold in execution. Subrule 46A(9) sets out the process to be followed when the reserve price is not achieved, including reconsideration by the court in question. In Changing Tides 17 (Pty) Ltd NO v Kubheka and Others 2022 (5) SA 168 (GJ), the GJ had to decide what form this reconsideration process should take. The GJ ruled that it should be initiated by a formal interlocutory application supported by an affidavit deposed to by someone with knowledge of the relevant facts – a ‘submission’ in chambers by the creditor’s attorney would not do. The application, which had to be personally served on the debtor, had to satisfy the court, inter alia, that the auction had been properly advertised and that there was no reason other than a too-high reserve price that caused the failure of the sale. The application also had to explain any failure to hold the sale within six months of the handing-down of the foreclosure order and inform the court of any additional reliable evidence of the true value of the property.
The admissibility of affidavits commissioned remotely/digitally: In FirstRand Bank Ltd v Briedenhann 2022 (5) SA 215 (ECGq) the applicant, FirstRand Bank Ltd, applied for default judgment for payment of R 928 138,42, together with interest on that amount and costs, against the respondent, Briedenhann, consequent to the breach by the latter of the terms of the mortgage loan agreement the parties had concluded. During the hearing of this matter, the presiding judge (Goosen J) flagged an affidavit filed by the plaintiff under r 14A of the Eastern Cape Division Rules. Its commissioning and the administration of the oath took place in terms of a new process adopted by the plaintiff had adopted during the COVID-19 pandemic to limit the spread of the virus. Under it, the deponent to an affidavit and the appointed commissioner of oaths would meet remotely via Microsoft Teams. After each had accessed an electronic version of the affidavit deposed to, the deponent – in the ‘virtual presence’ of the commissioner – would take the oath, and the deponent and commissioner would in turn append their digital signatures. The question was whether this met the requirements of the applicable Regulations Governing the Administration of an Oath promulgated under the Justices of the Peace and Commissioners Oaths Act 16 of 1963, in particular r 3(1), which provided that the deponent ‘shall sign the declaration in the presence of the commissioner of oaths’. The applicant argued that the process described above met this requirement, given that ‘presence’, although ordinarily meaning proximity, may also be achieved by sight and sound.
The court held that, contrary to the applicant’s view rule 3(1) required the deponent to append his signature to the declaration in the physical presence or proximity of the commissioner. It did not cover a deposition like the present one that takes place in the ‘virtual presence’ of a commissioner. In doing so, the ECGq acknowledged that the concept of what it meant to be in ‘the presence’ of others had undergone dramatic changes brought about by technological innovation, itself accelerated by the global pandemic. Further, there was no doubt of the potential benefits to the justice system of innovative technologies such as those involving Internet communication and the like. However, the wording of the rules in question simply did not support the interpretation favoured by the plaintiff. In line with the well-known principle of interpretation, judges had to guard against the temptation to substitute what they regarded as reasonable, sensible or business like for the words actually used. Because to do so in regard to statutes would be to cross the divide between interpretation and legislating.
Despite the above, the ECGq elected to admit the affidavit in question, in line with the discretion available to it to condone non-compliance with regulated formalities, in the case of ‘substantial compliance’. In the circumstances of the present case, the purpose of r 3(1) had been met – that is, to provide assurance to a court receiving an affidavit that the deponent, properly identified as the signatory, had taken the oath. Here, there was no doubt that the deponent did take the prescribed oath and affirmed doing so. It would serve no purpose other than to delay finalisation of the matter and increase costs, and would not be in the interests of justice, to refuse the affidavit, and demand that the plaintiff seeks afresh default judgment on an affidavit properly commissioned. As to the merits, the ECGq found that default judgment could be granted.
Is a tax judgment in terms of s 172 of the Tax Administration Act 28 of 2011, susceptible of rescission? Under s 172 read with s 174 of the Tax Administration Act 28 of 2011 (TAA) a certified statement by the South African Revenue Service (Sars) will, if filed with in court, serve as a civil judgment for a liquid debt against the taxpayer.
The facts in Barnard Labuschagne Inc v Commissioner, South African Revenue Service and Another 2022 (5) SA 1 (CC) (Rogers AJ) were that Sars had filed in the WCC such a statement in respect of tax allegedly due by attorneys firm Barnard Labuschagne Inc (BLI). The statement recorded that BLI owed Sars R 804 747.
BLI approached the WCC for an order rescinding this ‘tax judgment’, arguing that the statement – which had arisen from BLI’s self-assessments for VAT, employees’ tax, unemployment insurance fund contributions and skills development levies – was wrong because BLI had made payments, which Sars failed to appropriate to the relevant assessed taxes. The WCC, however, refused BLI’s application on the ground that the tax judgment against it was, according to precedent, not susceptible of rescission. When both the WCC and the SCA refused BLI leave to appeal, it approached the CC.
The CC ruled the question of the rescindability of these tax judgments raised an arguable point of law of public importance because several recent High Court judgments, one of which the WCC’s judgment in the present matter, appeared to have failed to apply binding precedent, an omission which clothed the CC with jurisdiction in this matter. The CC proceeded to discuss the precedents in question – including some of its own decisions – in which tax judgments made under similar earlier provisions were held to be capable of rescission. Yet the WCC chose to ignore them in favour of recent High Court decisions that in themselves had failed to address binding authority. The CC chastised the WCC’s disregard of binding precedent (of which it was aware) as unacceptable. The CC stressed that the earlier decisions would have been distinguishable only if ss 172(1) and 174 had brought about substantive changes bearing on the question of rescindability, which they did not.
The CC concluded that the position was still that a tax judgment under the TAA could be rescinded under s 36(1)(a) of the Magistrates’ Courts Act 32 of 1944, or in the High Court, under its common-law power to rescind default judgments.
The CC accordingly upheld BLI’s appeal, set aside the WCC’s decision, and remitted BLI’s application for rescission to the WCC for hearing before a different judge to determine the merits of the application.
Apart from the cases and material dealt with above, the September SALR 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 (Nov) DR 24.
