The law reports 

November 2014 (6) South African Law Reports (pp 1 – 312); [2014] 4 All South African Law Reports October no 1 (pp 1 – 146); and no 2 (pp 147 – 278); and [2013] 3 All South African Law Reports no 2 (pp 135)

Heinrich Schulze BLC LLB (UP) LLD (Unisa) is a professor of law at Unisa.

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: 

ECP: Eastern Cape Local Division, Port Elizabeth
GJ: Gauteng Local Division, Johannesburg
GP: Gauteng Division, Pretoria
LP: Limpopo Division, Polokwane
SCA: Supreme Court of Appeal 

Class action

Requirement of a ‘triable issue’: In Pretorius and Another v Transnet Second Defined Benefit Fund and Others 2014 (6) SA 77 (GP) the applicant, Pretorius, sought leave to institute a class action pursuant to the provisions of s 38(c) of the Constitution.

Pretorius was a representative of the members of the Transnet Second Defined Benefit Fund and the Transport Pension Fund (the funds). Pretorius sought in the proposed class action to compel the fourth respondent, Transnet, and the fifth and sixth respondents, the state, to pay a ‘legacy debt’ of R80 billion dating from the establishment of Transnet, to the funds in accordance with their obligations. Pretorius contended that these amounts were assets of the funds, the object of which was to provide benefits to pensioners, special pensioners and beneficiaries and the failure to redeem the debt had materially and adversely affected their rights and those of the members of the class.

The issue for determination was whether, on the evidence or facts and/or legal submissions set out in Pretorius’s founding papers and the draft particulars of claim, Pretorius has made out a case for the certification of a class action against any one or more of the respondents, including the question whether it was in the interest of justice to certify such a class action.

The court held that a class action is available where a constitutional or non-constitutional right is involved. Section 38(c) of the Constitution provides that ‘anyone … has the right to approach a ... court … [including someone] 
(c) anyone acting as a member of or in the interest of a group or class of persons’.

The court held that s 38(c) of the Constitution must be interpreted generously and expansively. In Children’s Resource Centre Trust and Others v Pioneer Food (Pty) Ltd 2013 (2) SA 213 (SCA) the court held further that a court faced with the application for certification of a class action must satisfy itself of a number of factors, including the existence of a class that is identifiable by objective criteria; and a cause of action ‘raising a triable issue’. With regard to the requirement of a triable issue, the court held that the applicant must show a cause of action with a basis in law and proof before the court. The claim must be legally tenable and evidence of a prima facie case needs to be submitted.

The court held that the situation in the present case was pattern-made for class proceedings. The class which Pretorius represents is drawn from the poorest within our society (that is, elderly pensioners) who are in need of statutory social assistance. As individuals they are unable to finance a legal action. What they have in common is that they are victims of alleged official excess and bureaucratic misdirection and administration.

With regard to the requirement of a ‘triable issue’ the funds argued that Pretorius had failed to establish any cause of action and that the court should find that there existed no triable issue between Pretorius and the funds.

The funds’ main defence was that the concept of ‘reasonable pension benefit expectation’ only applied to procedural requirements for fair administrative action and did not create substantive rights.

The court held that South African case law does not prohibit an extension of the doctrine of ‘substantive reasonable pension benefit expectation’ to also cover the substantive protection of a legitimate expectation. The defence raised by the funds regarding the concept of ‘reasonable pension benefit expectation’ would be better argued or deliberated on more fully at the trial of the action contemplated by Pretorius.

The court accordingly held that there was indeed a ‘triable issue’ between Pretorius and the funds and Pretorius was granted leave to institute a class action against the funds and Transnet.

It needs to be emphasised that the court merely ruled that Pretorius has provided prima facie proof of a ‘triable issue’. Should it later appear that the proposed class action does not disclose a cause of action, the funds and Transnet are at liberty to file an exception at the appropriate time.

Company law

Business rescue: In Copper Sunset Trading 220 (Pty) Ltd v Spar Group Ltd and Another 2014 (6) SA 214 (LP) the business rescue practitioner of the applicant company had launched a s 153(1)(a)(ii) application pursuant to the first respondent (Spar), a secured creditor, and the second respondent (NF, a concurrent creditor), voting against the adoption of the applicant’s revised business rescue plan. In issue was whether the applicant had made out a proper case that their votes were inappropriate within the meaning of s 153(1)(a)(ii) read with s 153(7) of the Companies Act 71 of 2008. 

Section 153(1)(a)(ii) provides that if at a meeting to consider a business rescue plan, the holders of voting interests or shareholders votes to reject it, the appointed business rescue practitioner may ‘advise the meeting that the company will apply to a court to set aside the result of the vote … on the grounds that it was inappropriate’.

Section 153(7) provides that in the case of a s 153(1)(a)(ii) application the court may order that the vote on a business rescue plan be set aside if it is satisfied that it is reasonable and just to do so, having regard to the following three aspects. First, the interests represented by the person or persons who voted against the proposed business rescue plan. Secondly, the provision, if any, made in the proposed business rescue plan with respect to the interests of that person or those persons. Thirdly, a fair and reasonable estimate of the return to that person, or those persons, if the company were to be liquidated.

Makgoba J held that as a secured creditor Spar would probably be the only creditor standing to gain from a liquidation, and this rendered its opposition to business rescue self-serving and unreasonable. Spar would in any event gain at the most a R 0,45 dividend. NF’s opposition to the business rescue, in turn, was held to be irrational since absent such a plan it would receive nothing. Accordingly their conduct in rejecting the applicant’s revised business rescue plan was inappropriate.

The court ordered the proposed rescue plan to be properly adopted. The costs of the present application were reserved.

Constitutional law

Constitutional damages: In Minister of Police v Mboweni and Another 2014 (6) SA 256 (SCA); Minister of Police v Mboweni and Another [2014] 4 All SA 452 (SCA) one Mboweni (the deceased) was detained by the police and locked up in a police cell with other detainees. The deceased was assaulted by the other detainees and as a result he died. The respondents, the plaintiffs, were mothers who each had a daughter with the deceased. The plaintiffs sued the appellant, the Minister, and claimed damages on behalf of their daughters for infringement of their right to parental care in s 28(1)(b) of the Constitution. The High Court found the Minister liable to pay damages for loss of support and referred the quantum of damages to trial. It also found, on a stated case, that a child whose parent had died because of unlawful conduct of a third party, could claim constitutional damages for infringement of the right to parental care. It found the Minister liable for such damages.

In an appeal to the SCA Wallis AJ overturned the High Court’s decision. In doing so the SCA held that the High Court had made a number of crucial errors in allowing the claim. First, it failed to properly analyse the constitutional right to parental care. In this regard it held that the fact that s 28(1)(b) expressed the right it embodies in three alternatives, demanded that in the first instance there be a proper analysis of the different elements of the right and, in particular, the relationship between the right to family care and the right to parental care. The word ‘parent’ may encompass a biological, adoptive or foster parent or a parent who has become such by virtue of a surrogacy agreement. The High Court’s conclusion that parental care necessarily means care by a custodial parent is unduly restrictive.

Secondly, the SCA pointed out that facts proving loss of parental care were not placed before the High Court. This was owing to a misapplication of r 33. Faced with a special case inadequately stating the facts, the judge ought to have refused to hear it. None of the facts the High Court identified as important to the determination of whether there had been a loss of parental care had been alleged or admitted. As a result, so the SCA reasoned, the High Court was not in a position to assess whether there had in fact been any loss of parental care.

Thirdly, it failed to consider s 8(2) of the Constitution in deciding whether the right at stake applied to the policemen. It also failed to consider whether they owed a legal duty to his children to prevent an infringement of the right.

Fourthly, it did not consider whether damages for loss of support was, on its own, an adequate remedy.

Finally, the parties with an interest in the decision, especially those organs of state that discharge their responsibilities from public funds, were not given an opportunity to intervene and make submissions that would have enabled the High Court to arrive at a just conclusion.

The SCA accordingly upheld the appeal and referred the matter to the High Court for trial. 

Contract law

Termination by reasonable notice: In Plaaskem (Pty) Ltd v Nippon Africa Chemicals (Pty) Ltd [2014] 4 All SA 12 (SCA) the facts were as follows. In February 2005, the parties entered into a written agreement involving the local distribution authority, in respect of imported agricultural chemicals. The appellant (the defendant in the High Court, Plaaskem) argued that the contract contained a tacit term to the effect that it was terminable by either party on reasonable notice.

The High Court found that the contract did not have a tacit or implied term that the agreement was terminable on a reasonable notice. The purported notice of cancellation of the agreement by Plaaskem with effect from 30 June 2010, was thus held to have been invalid and of no effect. Plaaskem was held to be obliged to render a statement and debatement of account to the respondent (the plaintiff in the High Court case) in respect of all sales it made in keeping with the agreement, for a stipulated period.

Hancke AJA pointed out that it has been stated by the courts that the law regarding a contract of unspecified duration is a matter of construction of the agreement according to the ordinary principles of construction. In this regard the court referred with approval to the earlier decision in Trident Sales (Pty) Ltd v AH Pillman & Son (Pty) Ltd 1984 (1) SA 433 (W).

In the present case, having regard to the wording of the contract it was clear that there was no indication that the parties intended to be bound in perpetuity. The next inquiry concerned the intention of the parties, having regard to the nature of the relationship between the parties, as well as the surrounding circumstances. The court held that the contract required the parties to form and maintain a close working relationship with regular contact and interaction between them. It also covered a wide range of existing and new products. It was, therefore, assumed that the nature of the relationship might change over time.

The practical reality strongly suggested an intention by the parties not to be and remain bound in perpetuity. Taking the surrounding circumstances into account and in view of the fact that the contract was silent as to its duration, it was necessary that a tacit term be imported. That term was that the contract could be terminated by either party by giving reasonable written notice to the other party.

The appeal was, accordingly, upheld with costs.

Education

Standards: In Dean of the Law Faculty, University of the North West and Others v Masisi 2014 (6) SA 61 (SCA) the respondent (Masisi) was registered for a LLB degree at the appellant university (UNW). Masisi wanted full credit for the courses and modules he had completed at the University of the North. However, the NWU refused to give him more than 50% credit, arguing that it was constrained to do so by its own rules and those of the Joint Statute of South African Universities, a document approved by the Minister of Education under the Universities Act 61 of 1955.

Masisi approached the Equality Court with a complaint of unfair discrimination. The Equality Court struck down the relevant provisions of the university’s rules and of the Joint Statute.

In an appeal to the SCA, the court, in a joint judgment, held that the issue of giving credit by one university to modules passed at another university, was of vital importance to tertiary education in South Africa. It further held that the Equality Court should have given the Minister of Education, other universities and their collective voice, Higher Education South Africa (which appeared as amicus curiae in the present appeal), the opportunity to deal with the issues raised by Masisi’s complaint, including the question of the Equality Court’s competence to make an order setting aside legislation.

The SCA accordingly ordered that the matter be remitted to the Equality Court with the instruction that all interested parties be informed of the relief being sought against them. The costs of the proceedings in the Equality Court and in the SCA court shall be costs in the cause.

Insolvency law

Effect on property of solvent spouse: In Motala and Another NNO v Moller and Others 2014 (6) SA 223 (GJ) the court was asked to pronounce on the legal effect of the sequestration of one spouse’s estate, on the estate of the solvent spouse.

The crisp facts were as follows. Ms Stein was the owner of an immovable property. She was married to one Mr Segal. After a time Segal was sequestrated and thereafter Stein sold and transferred her property to Moller. Moller was unaware that Segal had been sequestrated and acted in good faith, paying the fair market price. Segal’s trustees then applied for an order declaring the transfer void. The trustees based their application on s 21(1) of the Insolvency Act 24 of 1936 (the Act).

Section 21 of the Act provides that the alienation of property by a solvent spouse whose spouse’s estate has been sequestrated, remains effective and valid unless and until it is assailed and set aside by the trustee of the insolvent spouse’s estate.  

Section 25 of the Act provides that if an insolvent person unlawfully disposes of immovable property or a right to immovable property, which forms part of his insolvent estate, the trustee may recover the value of the property or right so disposed of from the insolvent; or from any person who, knowing such property or right to be part of the insolvent estate, acquired such property or right from the insolvent without giving sufficient value in return.

Three issues were at stake. First, the effect of s 21(1) of the Act on a solvent spouse’s transfer of her property to a third party. Secondly, the nature of a vesting of a solvent spouse’s property in a trustee, which is effected by s 21(1) as well as its consequences. Thirdly, the relation between s 21(1) and s 25(4) of the Act, and more specifically whether a trustee may choose which of these two subsections he will proceed under.

Myburgh AJ held as to the first issue, that s 21(1) rendered such a transfer voidable at the instance of the trustee. That is, the transfer was valid until set aside by the trustee.

Regarding the second issue, the court held that s 21(1) vests the insolvent spouse’s property in the trustee ‘as if it were property of the sequestrated estate’. It followed that the trustee had the same powers in respect of the solvent spouse’s property as he had in regard to the insolvent’s property.

In respect of the third issue, the court confirmed that a trustee’s remedies regarding disposal of immovable property by an insolvent or his spouse, are confined to those in s 25(4). In such a case a trustee cannot elect to proceed by way of a general provision such as s 21(1).

Because none of s 25(4)’s requirements for relief were met, the court dismissed the application with costs.

Marriage

Property rights: The application in JA v DA 2014 (6) SA 233 (GJ) arose from the divorce of the applicant and plaintiff. The divorce was granted on 30 August 2012. The parties were married subject to the accrual system provided for in ss 3 and 4 of the Matrimonial Property Act 88 of 1984 (the Act). It was ordered that a determination of the parties’ respective estates be made by a referee. The referee’s report, in turn, would result in payment to one or other spouse of any sum due in terms of s 3(2) of the Act.

The parties were at loggerheads about the question whether the contents and values of the estates of spouses married under the accrual system were to be determined on the date that the divorce was granted or when the pleadings in the divorce proceedings closed.

Sutherland J held that the date of dissolution of the marriage was the only relevant date on which to determine the content and to calculate the value of the respective estates. 

The court rejected the argument that a distinction exists between procedure and substance that can change the moment for ‘assessment’ of the estates from the date of dissolution to the date of litis contestatio and that any transaction after this moment is to be left out of account. In this regard it remarked that litis contestatio is an archaic label for a banal event: The moment when no more pleadings may be filed. A trial or an argument is then possible.

Property rights: The decision in RP v DP and Others 2014 (6) SA 243 (ECP) concerned the question whether a court may take the value of the assets in a trust into account in determining the accrual of one of the spouses’ property where the trust was allegedly a sham.

In a counterclaim in a divorce action, the wife claimed half the net accrual of the husband’s estate in terms of s 3(1) of the Matrimonial Property Act 88 of 1984 (the Act). The husband filed a plea to the counterclaim disputing that his estate had shown a greater accrual. She then launched the present application seeking to amend her counterclaim, inter alia, to the effect that the value of the assets of a trust established during their marriage, should be taken into account in determining his accrual. She contended that he had been in de facto control of its assets since its inception and that the trust was a sham and that he had abused the trust form to acquire personal wealth and failed to keep the trust assets separate from his personal estate.

The husband, in turn, argued that the court was not permitted to exercise discretion to include the trust assets in the accrual as this offended against the wording of ss 3 and 4 of the Act, which excluded trust assets in the calculation of accrual, and would therefore render the counterclaim excipiable.

Alkema J held that if the evidence showed that the trust in question was effectively the alter ego of one of the parties, certain or all of the trust assets ought to be included in the estate for determination of the accrual. In piercing the trust veil the court was not exercising discretion under the Act, but a power under the common law. The amendment requested by the wife was accordingly granted. 

The court referred with approval to earlier case law (BC v CC and Others 2012 (5) SA 562 (ECP)) in which it was held that in cases dealing with the lifting of the trust veil it is unnecessary for a plaintiff to expressly claim or seek an order or a declarator that the trust be set aside; or that all or some of the property owned by the trustees of the trust is de facto owned by one or more of the trustees in their personal capacity; or that trust assets be transferred to the personal estate of a trustee; or be deemed to be property in the personal estate of a trustee. If it is proved that a transaction is simulated and shown in the financial records as a trust asset whereas in truth and in fact it is an asset in the personal estate of the trustee, then the court is entitled to treat such asset as an asset in the personal estate of the trustee for purposes of considering accrual.

Because those assets never became trust assets and remained assets in the personal estate of the trustee by virtue of the simulation, it will be wrong in law and in fact to claim the transfer of ‘or to deem’ such assets as assets in the personal estate of the trustee. All that is required is to make an order as claimed by the wife, namely that the value of those assets be taken into account when determining accrual because in law and in fact they are, and always have been, assets in the personal estate of the trustee.

Each case is only concerned with the facts of the transaction under attack in that case. The court is not required to necessarily set aside the entire trust as a simulated deed. It is only required to set aside those transactions which are proven to be simulated. Therefore, the order which a plaintiff (here: the wife) seeks, namely that some or all of the assets in a particular trust be taken into account in determining the claim for accrual, will only apply to assets proven to be the subject of simulated transactions. 

Money

Nature of banknotes: The crisp facts which served before Malan JA in Master Currency (Pty) Ltd v Commissioner South African Revenue Service 2014 (6) SA 66 (SCA); Master Currency (Pty) Ltd v Commissioner for the South African Revenue Services [2013] 3 All SA 135 (SCA) were as follows. The appellant (the taxpayer) was a bureau de change operator in the duty-free area of what is now known as the Oliver Tambo International Airport. The taxpayer charged no value-added tax (VAT) on the fees and commissions it earned from currency-exchange transactions it concluded with departing non-residents.

The Johannesburg Tax Court upheld the commissioner’s ruling that the taxpayer’s assumption that no VAT was chargeable in duty-free areas was incorrect, and held that VAT at the standard rate applied.

The taxpayer appealed to the Supreme Court of Appeal. Two issues fell to be decided. The first issue concerned the proper construction of the provisions zero-rating services to non-residents in s 11(2)(l) of the Value-Added Tax Act 89 of 1991 (the Act). The taxpayer contended that the services concerned qualified for a zero rating under s 11(2)(l)(ii)(aa) as ‘movable property … exported to [non-residents]’. The Commissioner, in turn, argued that it was excluded from a zero rating by s 11(2)(l)(iii), having been rendered to a person who was ‘in the Republic at the time the services [were] rendered’.

The second issue concerned the contention (raised by the taxpayer in reply) that because currency was banknotes and therefore movable property, and because the incorporeal rights that attached to the banknotes were situated where it was issued, its services were ‘supplied directly in respect of … movable property situated in any export country at the time the services [were] rendered’, and were therefore zero-rated in terms of s 11(2)(g).

With regard to the first issue the court held that the word ‘or’ where it appeared after subpara (ii) in s 11(2)(l) could not be read disjunctively. The fact that a service may fall under subpara (ii)(aa) did not mean that it was not covered by subpara (iii). Subparagraphs (i) – (iii) were exceptions to the zero-rated services, in effect services that were standard-rated. No status was conferred on the services referred to in subpara (aa) or (bb); these helped to define the services referred to in the main body of para (ii). The taxpayer was not entitled to a zero rating by virtue of s 11(2)(l)(ii)(aa) of the Act.

With regard to the second issue the court held that banknotes used to contain a promise whereby the issuing bank undertook to pay the face value of the note to the bearer. However, these promises to pay to bearer that were contained in some banknotes could no longer be regarded as promissory notes embodying incorporeal rights against the issuing bank. Banknotes, with or without a promise to pay its face value on demand, could not be regarded as documents that embodied incorporeal rights that were situated, in the case of foreign notes, elsewhere. In any event, modern banknotes no longer contain such a promise. They nevertheless embody personal rights, which are situated in the country where they are issued, that is, the place where the issuing bank resides. The banknotes exchanged by the taxpayer are therefore ‘moveable property’ situated in ‘export countries’ at the time the services (that is, the exchange of currencies) are rendered. The taxpayer’s services rendered in the duty-free area were subject to VAT at the standard rate and were correctly assessed as being so by the commissioner.

The taxpayer’s appeal was dismissed with costs.

OTHER CASES

Apart from the cases and topics that were discussed or referred to above, the material under review also contained cases dealing with administrative law, business rescue, champerty, civil procedure, competition law, constitutional law (housing; local government), criminal procedure, damages, injury, labour law, land, legal representation, maintenance, motor-vehicle accidents, revenue, sectional titles and servitudes.