The Law Reports – October 2021

October 1st, 2021
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August [2021] 3 All South African Law Reports (pp 299 – 645) August 2021 (8) Butterworths Constitutional Law Reports (pp 807 – 928)

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:

CC: Constitutional Court

GP: Gauteng Division, Pretoria

SCA: Supreme Court of Appeal

WCC: Western Cape Division, Cape Town

Arbitration

Initiation of arbitration proceedings: In Samancor Holdings (Pty) Ltd and Others v Samancor Chrome Holdings (Pty) Ltd and Another [2021] 3 All SA 342 (SCA), the terms of a sale of shares agreement the first respondent, Samancor Chrome Holdings (Pty) Ltd (SCH) acquired a chrome business from the second respondent, Samancor Chrome Ltd (Samancor Chrome) by buying the shares in Samancor Chrome from the first appellant, Samancor Holdings (Pty) Ltd (Samancor Holdings). The second and third appellants BHP Biliton SA Ltd (BHP) and Ango South Africa Capital (Pty) Ltd (ASAC) were Samancor Holdings’ shareholders.

The defined effective date of the agreement was 1 June 2005. In terms of the agreement, that was the date on which the parties implemented their agreement economically. It was not possible, however, for the restructuring and transfer of shares to SCH to be completed by that date. The agreement contained an indemnity clause in respect of Samancor Chrome’s income tax up to a stipulated date. In terms of a time-bar clause, proceedings in respect of the income tax indemnity had to be issued before the sixth anniversary of the effective date of 1 June 2005. The six-year time-bar expired on 1 June 2011. On 16 August 2011, the South African Revenue Service began an investigation into Samancor Chrome’s tax affairs, including its 2005 tax year. That resulted in an additional assessment, which increased the original assessment of taxable income. SCH and Samancor Chrome (the claimants) initiated arbitration proceedings against Samancor Holdings, to recover the amount paid as additional tax.

The effect of the arbitration ruling (on appeal) was that the claimants were required to have the period for initiating the arbitration proceedings extended in terms of s 8 of the Arbitration Act 42 of 1965. The claimants’ application to the High Court for such extension was granted, leading to the present appeal.

The court, per Rogers AJA (Mbatha, Navsa, Saldulker JJA and Ledwaba AJA concurring) held that s 8 allows for the extension sought by the claimants where a court is of the opinion that in the circumstances of the case, undue hardship would otherwise be caused. The hardship, which the section contemplates, is hardship to the claimant because its claim is time-barred. To be regarded as undue, the hardship must be unwarranted or inappropriate because it is excessive or disproportionate.

It could not be found that the High Court was guilty of any legal or factual misdirection in assessing the claimants’ delay in launching their s 8 application. In exercising its discretion, that court considered factors, which had a material bearing on the question of the claimants’ delay. The appeal was dismissed with costs.

Civil procedure

Application for decision on lawfulness of arrest and confiscation of property pending criminal proceedings: The applicant in Gigaba (born Mngoma) v Minister of Police and Others [2021] 3 All SA 495 (GP) was married to a former national Minister (Mr Malusi Gigaba). In July 2020, the fourth and fifth respondents, being police officials and members of the Hawks, arrived at the Gigaba home to investigate two alleged offences. The first was malicious damage to property in respect of a Mercedes Benz G-Wagon, and the second related to crimen injuria in respect of a WhatsApp message, which had been sent from the applicant’s cellular phone to an associate of Mr Gigaba. Two days after the first visit, the police officers returned and demanded all the applicant’s electronic communication devices in connection with the crimen injuria complaint. A week later, they arrested the applicant.

In the present application, the applicant challenged the lawfulness and constitutionality of her arrest and prosecution, and of the confiscation of the electronic communications equipment.

The respondents raised two points in limine regarding urgency and the court’s jurisdiction to grant the relief sought and opposed the application on the merits.

Rule 6(12) of the Uniform Rules of Court sets out the principles for establishing urgency. One of the requirements is an explanation for the applicant’s belief that substantive redress in due course was unattainable. Based on the respondents’ conduct, the court was satisfied that the applicant would not obtain redress in due course as she would be subjected to continuous violations to her dignity, restrictions of movement, invasion of privacy and abuse of power.

Regarding jurisdiction, the respondents argued that the criminal court in which the applicant was to be tried was the correct forum to deliberate on the constitutionality of the arrest and admissibility of evidence. The court considered the applicant’s interest in the matter, and whether the alleged illegality directly affected her rights. The complaint of confiscation of the applicant’s property without a warrant and the refusal of the right to legal representation established such interest. The court, therefore, did have jurisdiction in the matter. The application of the principle of natural justice involves striking a balance between public and private interest.

The court found compelling reasons why the issues raised by the applicant should be addressed by it. There were serious allegations of breach of the applicant’s privacy and abuse of power by the applicant’s politically affiliated husband who directed a domestic dispute to the Directorate for Priority Crime Investigation under the guise of a conspiracy to commit murder against him. The court was satisfied that it should intervene before the criminal proceedings properly commenced.

In considering the lawfulness of the arrest, the court could not find that the magistrate who issued the warrant acted mala fides. The next question was whether the police officers’ decision to arrest the applicant was lawful and whether they were responsible for the malicious prosecution of the applicant. Where a warrant of arrest is requested under the pretext that it is acquired for a legitimate purpose while in fact the intention is not to use it for that purpose, but for another unauthorised purpose such person acts mala fide and in fraudem legis. The court confirmed that the arresting officers abused their powers, presumably to avenge a complaint made by Mr Gigaba and not for any lawful purpose. The arrest was accordingly in fraudem legis. Based thereon; the confiscation of the applicant’s possessions was unlawful. As the items seized had already been returned, the respondents were directed to restore all information unlawfully removed from the applicant’s electronic equipment.

Corporate and commercial

Business rescue – effect of termination on surety’s obligations: As a prerequisite for its supplying a company Blue Chip Mining and Drilling (Pty) Ltd (BCM) with petroleum products on credit, the respondent, Auto Commodities (Pty) Ltd (Auto Commodities) required the appellant  Mr Van Zyl to bind himself as surety for BCM’s resulting liabilities, which he did in July 2014. In December 2014, BCM was placed under business rescue. After adoption of a business rescue plan, Auto Commodities received two dividends. The business rescue terminated on 31 January 2017 because of its substantial implementation. On 21 July 2017, Auto Commodities issued summons against Mr Van Zyl for an amount in excess of R 6 million, representing the shortfall regarding BCM’s original indebtedness. Its claim, based on the deed of suretyship, was upheld in the High Court.

In Van Zyl v Auto Commodities (Pty) Ltd [2021] 3 All SA 395 (SCA) on appeal, the only issue between the parties was whether Mr Van Zyl was liable under the deed of suretyship to pay the amount claimed by Auto Commodities. His contention was that, when BCM’s business rescue was terminated, s 154(2) of the Companies Act 71 of 2008 (the Act) released BCM from any further indebtedness to Auto Commodities. He submitted that that in turn released him from liability because suretyship is an accessory obligation.

The business rescue plan contemplated a compromise between the debtor and one or more of its creditors, in which case there would be an unpaid balance for which the surety would remain liable. A liquidation would be one instance of such circumstances. Even if BCM as principal debtor was released from its obligations, Auto Commodities’ rights under the suretyship were unaffected and, whether or not it supported the business rescue plan, it did not operate as an abandonment of its claim against Mr Van Zyl.

The court addressed Mr Van Zyl’s legal point as leave to appeal had been granted based on that point. The starting point for Mr Van Zyl’s argument was s 154 of the Act, which is directed at the consequences of approval and implementation of the business rescue plan for the enforcement by creditors of any debt that existed prior to the business rescue process. It provides that the creditor will not be able to enforce the debt except to the extent provided for in the business rescue plan. The section did not support Mr Van Zyl’s arguments that Auto Commodities could no longer enforce any debt, which was owing to the creditor by BCM prior to the business rescue; that as a result of the implementation of the business rescue plan, BCM did not owe anything to the creditor; and that the accessory suretyship obligation was discharged. An inability to enforce a debt is not necessarily an indication that the debt has been discharged. If the whole or a part of the debts of a company become unenforceable as a result of the adoption and implementation of a business rescue plan, the fact that some creditors may pursue the balance of their claims against sureties, who will have a right of recourse against the company, does not negate the purpose of business rescue. Section 154(2) does no more than preclude creditors from pursuing claims against the company after the business rescue plan has been implemented. It does not affect or extinguish the liability of a surety for the debt. The appeal was dismissed with costs.

Corporate and commercial

Extension of powers of liquidators: The applicant in Massyn v De Villiers NO and Others [2021] 3 All SA 578 (WCC) was one of two directors in a company, which was finally liquidated on 9 November 2020. The company had conducted business as a fund manager trading in foreign currencies. Three investors/creditors, who had invested more than R 20m, had sought the company’s liquidation when it was unable to honour their withdrawal request – made after investigations revealed that the company’s business activities were fraudulent and in contravention of financial services legislation.

As provisional liquidators of the company, the second and third respondents had obtained an order extending their powers to include establishing an inquiry into the affairs of the company in terms of s 417 of the Companies Act 61 of 1973, appointing the first respondent (Mr de Villiers) as commissioner and authorising him to summon persons to be examined at the inquiry. The inquiry was adjourned pending the outcome of the present application for rescission of the order, which established the inquiry and extended the powers of the respondents. In the alternative, the removal of Mr de Villiers as commissioner and setting aside of the subpoenas issued by him, was sought.

In support of the application, it was contended that the liquidators had failed to establish a jurisdictional requirement, namely, that the company was unable to pay its debts in the course of being wound up. A related argument was that no s 417 inquiry could be established before the company had been placed in final liquidation, it being common cause that the impugned order was made while the company was in provisional liquidation.

The court, per Bozalek J, held that to claim that the jurisdictional fact of the company’s inability to pay its debts had not been established, the applicant had to go further and at the very least assert that the company was able to pay its debts at the material time. However, at no stage prior to the granting of either the provisional or the final liquidation order was it ever asserted on behalf of the company that it was able to pay its debts. The order could, therefore, not be set aside on that basis. The applicant also averred that the liquidators had sought and been given powers without making out a case therefor. Section 386 of the Companies Act deals with the powers of liquidators and provides for a court, if it deems fit, to grant leave to a liquidator to do anything, which the court may consider necessary for winding-up the affairs of the company and distributing its assets. The court found that the provisional liquidators had established a case that all the powers they sought were necessary for them in their role as provisional liquidators, save for the power to sell movable assets and to agree to any reasonable offer of composition.

Turning to the alternative relief, the court considered the allegations of bias levelled against Mr de Villiers. It concluded that the conduct referred to could never justify a reasonable apprehension of bias on the part of the commissioner by the applicant or someone in his position.

Apart from the two minor amendments to the impugned order, the application was dismissed with costs.

Lease

Cession of rights under long-term lease: Applicant, the University of Johannesburg (UJ) and first respondent, Auckland Park Theological Seminary (ATS) in University of Johannesburg v Auckland Park Theological Seminary and Another 2021 (3) BCLR 807 (CC) concluded a co-operation agreement in 1993, which provided, inter alia, that students who registered for theological degrees, would be taught some courses by UJ and others by ATS. In December 1996, UJ and ATS also concluded a written long-term lease agreement whereby UJ leased some immovable property belonging to it to ATS on which ATS intended to establish a theological college. The lease was registered against the title deed of the property. It was to endure for a period of 30 years, renewable with six months’ written notice by ATS prior to the expiry of the period. ATS paid UJ a once-off rental of R 700 000. This all occurred with the approval of the Minister of Education. ATS did not ultimately establish a theological college on the leased premises. Instead, it ceded its rights under the lease agreement to second respondent (Wamjay) by means of a written cession. Wamjay paid ATS R 6 500 000 for the rights under the lease agreement. Wamjay’s intention was to establish a religious-based school for primary and high school education on the leased premises. This occurred without UJ, or the Minister being notified beforehand. When UJ learnt of the cession, it took the view that the rights in the lease agreement were personal to ATS and that ATS had, therefore, repudiated the lease agreement by purporting to cede to Wamjay rights that were incapable of cession. UJ thus purported to accept ATS’s repudiation and cancelled the lease agreement. ATS and Wamjay disputed UJ’s right to cancel the lease agreement. UJ applied to the High Court for orders evicting ATS and Wamjay from the leased premises and cancelling the registration of the notarial lease against the title deed.

The High Court found in favour of UJ, holding that the lease was delectus personae. An appeal to the Full Court by ATS and Wamjay failed. ATS and Wamjay appealed the finding of the Full Court to the SCA, which upheld their appeal and replaced the order of the High Court with an order dismissing UJ’s claim. The SCA, held that all contractual rights can be transmitted unless their nature involves a delectus personae or the contract shows that the rights were not intended to be ceded. The restriction on cession imposed by the delectus personae concept was simply a manifestation of the general principle that a cession should not disadvantage the debtor. In a long lease the lessor does not expect that the obligations of the lease will be carried out personally by the lessee throughout the whole term and that there is, therefore, no delectus personae. A lessee could therefore cede its rights under a lease without the consent of a landlord, unless the terms of the lease forbade it from doing so. It held that in this case there was nothing in the lease itself that indicated that ATS’s rights were not intended to be ceded. UJ had sought to meet that difficulty by adducing oral evidence, but such evidence was plainly inadmissible on the basis of the parole evidence rule. UJ’s introduction of that evidence, the SCA found, was done under the guise that it was adduced in respect of the context in which the lease had been concluded. However, properly construed, such evidence was introduced in order to add to, vary or contradict the general words of the lease. The parole evidence rule applied. The evidence should not have been allowed by the High Court. The SCA held that as the basis of UJ’s claim could not be supported, the High Court’s judgment could not be sustained.

UJ approached the CC seeking leave to appeal against the judgment of the SCA.

The CC in a unanimous judgment per Khampepe J (Mogoeng CJ, Jafta, Madlanga, Mhlantla, Theron Tshiqi JJ and Mathopo AJ concurring) granted leave to appeal and upheld the appeal.

The court considered the principles surrounding the concept of delectus personae, together with the general principles of contractual interpretation. The court confirmed that a court interpreting a contract has to, from the outset, consider the contract’s factual matrix, its purpose, the circumstances leading up to its conclusion, and the knowledge at the time of those who negotiated and produced the contract. Although this does not mean that extrinsic evidence is always admissible, there will be times where contextual evidence will be necessary for interpretive purposes. To the extent that the SCA purported to revert to a position where contextual evidence may be adduced only when a contract or its terms are ambiguous, it erred. Context must be considered when interpreting any contractual provision and it must be considered from the outset as part of the unitary exercise of interpretation. The position is no different when the interpretive exercise involves a delectus personae inquiry. Contextual evidence ought to have been admitted in this case to determine whether the rights in question were personal to ATS. Contextual evidence in that sense is not precluded by the parol evidence rule because it does not seek to add to, vary, modify or contradict the terms of the agreement. Rather, that evidence gave context and background to the lease agreement, which could be used by a court in its interpretation of that agreement. It assisted in seeking to ascertain whether the circumstances gave rise to an intention of the parties (at the time of the conclusion of the agreement) that the rights were personal to ATS.

The CC found that in adopting such an interpretive approach the High Court’s finding could not be faulted. The rights were clearly personal to ATS. Given the nature of the rights, ATS’s cession of those rights to Wamjay effectively rendered the contract inoperative. UJ could thus reasonably conclude that ATS had repudiated the lease agreement. UJ was accordingly entitled to cancel the agreement.

Local government

Decision of council to remove member of executive committee, holding position of mayor, from office: The respondent in Ingquza Hill Local Municipality and Another v Mdingi [2021] 3 All SA 332 (SCA) was a member of the executive committee of the first appellant (the municipality) and was elected as mayor on 3 August 2016. On 23 January 2019, he was removed from his position following a resolution taken by the municipal council ostensibly acting in terms of s 53(1) of the Local Government: Municipal Structures Act 117 of 1998 (the Act). The respondent took the municipality’s decision on review to the High Court, which set aside the council’s decision on the ground of non-compliance with s 53 of the Act.

A member of the executive committee vacates office, in terms of s 47 of the Act, if, inter alia, removed from office as a member of the executive committee in terms of s 53. Section 53 requires prior notice of an intention to move a motion for the removal of a member. A mayor is –

  • elected from members of the executive committee and vacates office when he resigns;
  • removed from office as a member of the executive committee in terms of s 53; or
  • ceases to be a member of the executive committee.

The court stated that on a proper reading of s 53, prior notice is to be given to all members of the municipal council. The purpose is to afford the affected member an opportunity to be aware and to consider the motion before it is tabled for discussion. Additionally, it is to provide council members similarly with an opportunity to engage meaningfully in the ensuing debate before a resolution is taken.

The respondent’s removal from office was preceded by alleged acts of misconduct involving maladministration by the municipal manager. At a council meeting on 23 January 2019, a motion for his removal was brought by a council member. A resolution to remove the respondent from the position of mayor was taken by a majority vote. The issue of the motion regarding the respondent’s intended removal was not on the agenda for that meeting. Nobody, including those councillors who voted in favour of the motion against the respondent had the benefit of prior notice.

The High Court was correct in making the order it did, and the appeal was accordingly dismissed.

Property

Community schemes – sectional title scheme: As owners of three loft apartments in a mixed-use sectional title scheme, the applicants in Heathrow Property Holdings No 3 CC and Others v Manhattan Place Body Corporate and Others [2021] 3 All SA 527 (WCC) objected to a conduct rule adopted by the body corporate of the scheme in 2003. The rule acknowledged the right which owners had to let their units but sought to regulate the terms thereof in respect of short-term rentals for periods of less than six months. The respondents explained that the rule was adopted with a view to addressing security issues pursuant to an increase in short-term rentals of residential units in the scheme.

In 2017, other owners of loft units challenged the ambit and application of the rule by referring a dispute in this regard to the statutory Ombud, as provided for by the Community Schemes Ombud Services Act 9 of 2011. The complainants sought to set aside the rule on the basis that it was unreasonable, and sought the setting aside of penalties levied by the trustees as fines. The adjudicator found the rule to be reasonable and fair.

It was held, as per Sher J that the application had been brought on an urgent basis without any basis, therefore, being established. Secondly, the applicants did not set out any instances where they were unjustifiably refused permission to let their units on a short-term basis since February 2020. Consequently, they had no standing to bring an application in that regard.

A further issue raised by the court was that the application effectively sought to bypass the dispute resolution mechanisms, which have been established by the Community Schemes Ombud Services Act. The issues, which the applicants sought to have determined by the court fell squarely within the ambit of the Act, which provided for the determination of such disputes by an adjudicator. The legislature intended that the primary forum for adjudication of disputes in terms of the Act is to be the Ombud service and the adjudicators appointed by it, who are required to have suitable qualifications and the necessary experience (not only in relation to the adjudication of disputes, but also in relation to community scheme governance). The High Court is intended to be a secondary, supervisory forum which is to exercise review and appellate jurisdiction (ie, oversight over the discharge by the Ombud and its adjudicators of their duties and powers), and not an adjudicatory jurisdiction.

The matter was consequently struck from the roll, with costs, on the scale as between attorney and client.

Other cases

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

  • constitution drawing clear distinction between labour rights and administrative law rights;
  • duty of the State to fight corruption;
  • jurisdiction confined to constitutional matters and issues connected with decisions on constitutional matters;
  • parties signing written document containing words ‘subject to signing of agreement’;
  • rights on insolvency of pledgor; and
  • vicarious liability of Ministers.

Merilyn Rowena Kader LLB (Unisa) is a Legal Editor at LexisNexis in Durban.

This article was first published in De Rebus in 2021 (Oct) DR 26.

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