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[2010] ZAGPPHC 90
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NASASA Cellular (Pty) Limited v South African Post Office Limited (57471/07) [2010] ZAGPPHC 90 (23 August 2010)

IN
THE HIGH COURT OF SOUTH AFRICA
(NORTH
GAUTENG HIGH COURT, PRETORIA)
CASE NO: 57471/07
DATE: 23/08/2010
In
the matter between:
NASASA
CELLULAR (PTY) LIMITED
Plaintiff
and
SOUTH
AFRICAN POST OFFICE LIMITED
Defendant
________________________________________________________________
JUDGMENT
________________________________________________________________
MURPHY J
1. The plaintiff, NASASA Cellular
(Pty) Ltd, (“NASASA”) has instituted action against the
defendant, the South African
Post Office Limited (“SAPO”)
for damages in an amount of approximately R1,3 billion for breach of
contract.
2. On 31 March 2010 NASASA launched an
application seeking separation of a
res
judicata
defence raised in
its replication to be determined first and before the other issues in
this matter. It later amended the notice
of motion seeking in the
alternative to have the merits separated from
quantum
.
SAPO opposes the separation application on the basis that neither
separation is convenient or appropriate.
3. In addition, SAPO by way of notice
of motion dated 16 July 2010 has made an interlocutory application to
amend its rejoinder
filed in answer to NASASA’s replication.
It wishes to add matter to the rejoinder to the replication of
res
judicata
, the issue NASASA
wants to separate. The amendment seeks to amplify and develop the
denial of the estoppel raised by NASASA.
4. This judgment deals with both
applications. Given the issues it is necessary to deal with the
background and the history of
the dispute between the parties in some
detail.
The Contract
5. The contract between the parties is
annexed as Annexure A to the particulars of claim. The agreement was
signed in Pretoria
on 13 September 2004. It was executed on behalf
of NASASA by Mr Sothomela Ndukwana, the chairman of its board of
directors, and
on behalf of SAPO by its then Chief Executive
Officer, Mr Maanda Manyatshe.
6. The objective of the agreement was
for NASASA to supply certain products to SAPO for sale on its behalf
to customers and for
SAPO to collect payments in respect of such
sales for and on behalf of NASASA. The products in question are
telecommunications
and cellular products, services and solutions,
including: cellular contracts, cellphone handsets, starter packs,
prepaid airtime
and accessories. The envisaged scheme was one in
which NASASA would supply the products to various SAPO outlets (there
are approximately
1250 post offices nationwide) as and when required,
from where they would be sold by SAPO employees to the public. SAPO
undertook
that its employees would, in the course of discharging
their ordinary duties, sell the products from its various branches
and would
accept only cash payments from customers for products sold.
NASASA in turn agreed to manage the stock levels of the products in

the outlets, to advertise and market the products, to appoint staff
to support SAPO in its handling of the products, train SAPO
staff and
to utilise the SAPO distribution network for the distribution of the
products to the various outlets. In terms of clause
14.1, the
stock-in trade in any outlet was to be at the sole risk and
responsibility of NASASA, and SAPO was not to be responsible
for any
loss of or damage to the stock, unless such loss or damage was caused
intentionally or negligently by SAPO or any of its
employees, agents
or representatives. As compensation for allowing NASASA to market
the products out of SAPO branches, SAPO would
receive a stipulated
commission on all products sold and in addition one third of NASASA’s
net profits after tax. In terms
of clause 8.5, NASASA guaranteed
that SAPO would receive an annual collection fee and profit of not
less than R4 million as a consideration
for the take over of the
existing lines, being Vodacom, MTN, Telkom and Cell C virtual and
physical pre-paid vouchers, starter
packs and cellphones sold prior
to the agreement by SAPO for and on behalf of the service provider of
such existing lines.
7. The agreement was to endure for an
initial period of not less than 5 years after which SAPO had an
election to renew for a further
period of not less than 2 years.
8. NASASA has submitted that it is
clear from the language of the agreement that the contract imposed no
financial obligations on
SAPO (the significance of which will become
apparent in due course). SAPO gave NASASA no indemnities, while, in
terms of clause
6, NASASA indemnified SAPO against any claims that
may be instituted by a third party arising from the services rendered
by SAPO
on behalf of NASASA, or as a result of a contravention of any
law, policy or regulation, or the product or the purchase, or an act

or omission by NASASA. Clause 6.1.2 provides a further indemnity
against any damage or losses that may be suffered in any way
by SAPO,
a third party or the customer arising from SAPO’s performance
in terms of the agreement, provided such damage or
loss is not caused
directly by SAPO. As I understand the position, the only financial
obligations upon SAPO would be to supply
staff and retail space, as
well as to insure against risk (clause 6.2) for any negligent or
intentional loss caused by its employees
or agents.
The
background and the main application
9. Prior to the institution of the
action by summons on 11 December 2007, the agreement formed the basis
of litigation between the
parties before Sapire AJ in the guise of an
application for declaratory relief and specific performance initiated
on 23 January
2007 in respect of which judgment was delivered on 19
September 2007. That application has been referred to in these
proceedings
as “the main application”. I will stick with
that nomenclature to distinguish it from the separation application
and
the amendment application.
10. The founding affidavit in the main
application sets out the background to the conclusion of the
agreement. That evidence was
not contradicted or contested by SAPO
in its answering affidavit in that proceeding. The following can
therefore be taken to be
common cause. NASASA is the vehicle for the
implementation of a joint venture between GloCell (Pty) Ltd
(“GloCell”)
and NASASA Relations Company (Pty) Ltd
(“NASASA Relations”). The latter is a company which
designs and delivers financial
and other benefits for members of the
National Stokvels Association of South Africa. Its members are
community based savings and
self assurance clubs known as stokvels
and burial societies. GloCell is one of the largest suppliers of
cellular products and
services in South Africa. It is also the
second largest direct response TV marketing company in South Africa.
It distributes
to 1000 retail outlets throughout the country,
including to a number of its own company-owned stores and to
franchise stores in
most major retail chains. It is a company with
significant marketing experience and has a wide-reaching advertising
network.
In certain respects GloCell is a distributor for the main
cellular networks’ service providers. It competes through one
of its subsidiaries as a service provider with Vodacom and other
independent service providers for the other networks. It also

competes with certain retail chain store distributors of cellphone
products. It has approximately 550 franchise style retail stores

which are referred to as “stores within stores”, where
its products are not physically separated from other products
in the
stores. They are displayed in the stores of the franchisees along
with other products of the franchisees. The staff employed
by the
franchisees to sell other products, are also trained by GloCell at
its expense to sell its products. It has responsibility
for training
the sales staff, marketing and advertising. GloCell holds 50% of the
shares in NASASA. Its business model forms
the substratum of the
agreement between NASASA and SAPO.
11. Prior to the negotiation of the
agreement with NASASA, SAPO had been marketing a limited range of
cellphone products in its
various outlets on a loss-making basis. It
acquired the products it sold in a straight purchase and was
accordingly responsible
to pay suppliers for the products whether or
not the product was sold. Included in its stock were airtime
vouchers. These items
expire if not sold after a prescribed period
of time, resulting in capital losses. There is evidence on record
showing that during
2005 SAPO lost an amount of more than R5 million
through stock obsolescence. The aim of the agreement between NASASA
and SAPO
was, in part, to address some of the issues. Also, given the
fact that SAPO has outlets in remote rural areas, the opportunity
exists to advance the social good by providing cellular access and
connections to marginalised communities. Many of NASASA’s

individual stokvel members are resident in remote rural areas.
NASASA believed that it could benefit its members by marketing

GloCell products through SAPO outlets. Therefore it promoted the
agreement to SAPO as a means of converting its previously loss-making

cellphone business into a significant profit centre at no risk to
SAPO with social benefits for poorer communities. It packaged
the
deal as “a no risk marketing tool with a guaranteed profit”.
12. NASASA alleges that SAPO has
wrongfully breached the contract by wholly failing to perform its
obligations under the agreement.
It maintains that from signature of
the agreement it attempted to engage with SAPO in an effort to launch
its products in SAPO
outlets without success. Various negotiations
to implement the agreement have proven fruitless. The relationship
between SAPO
and the service providers of the existing lines may have
been a complicating factor.
13. On 5 November 2004, about 6 weeks
after the agreement was signed, the then recently appointed Acting
CEO of SAPO, MS Motsoanetsi
Lefoka, addressed a letter to one
NASASA’s directors which reads:-
“
This is to advise
that I have been appointed Acting Chief Executive Officer of the
South African Post Office with effect from 16
October 2004.
I am privy to a contract
that was signed on 13 September 2004 between the SAPO and NASASA
Cellular. I note that Mr Maanda Manyatshe
signed the agreement on
behalf of the SAPO.
As I have just been
appointed Acting CEO, I am in the process of reviewing the contents
of the above agreement. As the SAPO is
in charge of public assets
some of which it has a monopoly over, onerous legal obligations have
been placed on it by various laws
and regulations. I am assessing
the agreement with these obligations and nuances in mind. It thus
follows that whilst this process
is taking place, SAPO will not be
able to act further on this agreement.
In addition, kindly also
note that our failure to deal with any of the myriad issues that have
been raised in the past by various
parties should not be taken as
conceding to any of those points. In this regard, please note that
our rights are specifically
reserved.”
14. In the following months the
parties engaged in discussions regarding the agreement. On 5
February 2005, Ms Lefoka addressed
a further letter to NASASA which
reads:-
“
I refer to our
various communications in the above matter, and more specifically,
our meeting held on 20 January 2005.
In order to move the
process forward, I advise that SAPO needs clarification and
information on certain aspects of the transaction.
More
specifically, SAPO requires additional information on the following:
1. The structural
relationship of NASASA, NASASA Cellular, GloCell, and other related
parties and companies;
2. The detailed business
model of NASASA Cellular. This should include more than just
annexures ‘A’ and ‘B’
of the above agreement.
In addition, without purporting to exhaust the list of relevant
considerations under this head SAPO would
like to see the projections
on products to be sold, customer traffic, planned average rate per
user, etc.
3. The marketing and
sales plan relating to the products to be sold;
4. Information Technology
integration and clarity on who is expected to ‘own’ the
customer during the implementation
of the agreement;
5. Details on the revenue
sharing model;
I further advise that, as
previously drawn to your attention, SAPO’s participation in
this (and other) joint ventures is subject
to its legislative and
policy framework. On the legislation front, I advise,
inter
alia
,
of the provisions of the Public Finance and Management Act. On the
policy frame work, I further advise that there will not be
any
exclusivity on the use of retail infrastructure.
I will be glad to receive
the requested information by close of business on 10 February 2005…”
15. It is in this letter that the
spectre of possible statutory illegality was raised for the first
time.
16. NASASA construed the stance taken
by SAPO at this stage as a repudiation of the contract but initially
did not accept the repudiation.
It furnished additional information
to SAPO and engaged in further discussions. Eventually after
numerous meetings and correspondence
over a period of almost 2 years,
NASASA initiated the main application in which it sought an order
declaring the agreement valid
and binding and a decree of specific
performance. Prayers 1-3 of the notice of motion read:
“
1. Declaring that
the written agreement (“the agreement”) between the
Applicant and the Respondent dated 13 September
2004, a copy of which
is attached as Annexure FA2 to the founding affidavit, is a valid and
binding agreement.
2. Declaring that the
Respondent is in breach of its obligations under the agreement.
3. Ordering the
Respondent to fulfill its obligations under the agreement and to
assist the Applicant in the performance of its
obligations under the
agreement in so far as the Respondent is required to do so pursuant
to the provisions of the agreement.”
Prayers 4 and 5 respectively define
the obligations referred to in prayer 3 and seek an order declaring
that the five year period
of the agreement shall commence to run from
the commencement of the roll out and implementation rather than the
date of signature.
17. In the founding affidavit NASASA
stated that it had at all times been willing and able to perform its
obligations and tendered
to do so. It alleged that SAPO was in
breach, and preferred instead of damages to seek an order of specific
performance. Accordingly,
it is clear that it did not accept the
alleged repudiation, elected to hold SAPO to the contract and sought
specific performance.
18. In its brief answering affidavit,
SAPO contended that NASASA was not entitled to the relief sought in
the notice of motion because
NASASA itself had repudiated the
agreement, which repudiation it accepted and opted to cancel the
agreement. In its view NASASA’s
attempt to read in a tacit
term extending the five year period where the roll-out was delayed as
a consequence of one party’s
default, or factors beyond the
control of the parties, amounted to a repudiation of the agreement
entitling SAPO to resile from
it. No reference is made in the
answering affidavit to the possibility that the agreement, in the
view of SAPO, might be tainted
by illegality. In reply NASASA denied
that it had exhibited a deliberate and unequivocal intention no
longer to be bound by the
agreement merely by postulating the tacit
term regarding the extension of the period of the agreement.
19. In his judgment delivered on 19
September 2007, Sapire AJ declined to exercise his discretion in
favour of granting an order
of specific performance. Although he did
not analyse the evidence in any detail, he did not mince his words in
finding that SAPO
had repudiated a valid and existing contract. At
page 4-5 of the judgment, he found:
“…
.but it
soon became apparent that the respondent was not negotiating in good
faith and from a very early date has not had any intention
of
honouring its obligations under the agreement.
The respondent’s
counsel, when invited to do so was not able to dispel the strong
perception that the respondent’s behaviour
was reprehensible
and not in accordance with commercial morality. The respondent’s
conduct is a clear repudiation of the
agreement. This gives the
applicant a right to remedies in law …… It is quite
clear that there was an agreement
and that the respondent is in
breach thereof.”
The learned acting judge justified his
refusal to grant specific performance on grounds of the difficulty
posed by the delay in
execution; the polycentric consequences for
third parties who had contracted with SAPO in good faith; and the
likely absence of
a co-operative relationship of trust between the
parties, which would be a requisite for proper performance and
implementation
of the contract. He concluded, alluding to the
defence raised by SAPO, as follows:
“
In this case, far
from repudiating the agreement, the applicant has sought to enforce
it and although it has asked more than it
was entitled to this in
itself is not a repudiation of the agreement. I find that there has
been no repudiation of the agreement
and that it exists. The
argument advanced by the respondent is not an obstacle to making a
declaration in terms of prayer 1 to
the notice of motion.”
20. The finding of Sapire AJ in
respect of the costs of the main application has assumed some
significance. He held as follows:
“
The last question
which I have to address is the question of costs. Counsel for the
applicant asked that the costs be awarded on
an attorney and client
basis. The applicant, as it will be seen, will have succeeded in as
far as prayers 1 and 2 are concerned.
While the relief sought in
prayers 2, 4 and 5 did take up a lot of the time and it could be said
that the applicant has not succeeded
in its application
because
the relief in prayers 1 and 2 was strictly not necessary
at the time that the application was initiated. I have come to the
conclusion, however, that the applicant is entitled to its
costs and
that these costs should be paid on the scale as between attorney and
client. If the respondent had not opposed the granting
of the relief
in terms of prayers 1 and 2 the position may have been different but
by arguing the point, to which I have just referred,
it has clearly
come to court on the basis that the agreement was repudiated by the
applicant and the applicant is entitled to a
ruling on that matter.
The question of the scale on which the costs are to be paid is
another matter which has to be given consideration.
The respondent’s
behaviour in relation to the agreement and its disdainful repudiation
and refusal to carry out its obligations
is conduct lacking in
commercial morality. In short, if you enter into a contract you
ought to observe its terms not come to court
and be unable to justify
your conduct in any way, an order for attorney and client scale is
justified in this matter.” (emphasis
supplied)
21. In the result, Sapire AJ granted
an order in terms of prayers 1 and 2 of the notice of motion and
costs on the attorney and
client scale.
The
pleadings in the action proceedings
22. As mentioned, the summons and
particulars of claim in the action proceedings were served on SAPO on
11 December 2007. In paragraphs
5, 6 and 7 of the particulars of
claim NASASA sets out the various alleged breaches of the contract.
In paragraphs 8 and 9 it
sets out the particulars of the main
application. In paragraph 11 it avers that on or about 29 October
2007, and as a consequence
of SAPO’s repudiations and breaches
of the agreement, it elected to cancel the agreement and had notified
SAPO of that election
to cancel by a letter dated 29 October 2007
annexed to the particulars of claim as Annexure E. In short, having
failed to obtain
specific performance, NASASA opted to accept the
alleged repudiation, cancelled the agreement and sued for damages.
23. NASASA’s claim for damages,
as set out in paragraphs 12 and 13 of the particulars of claim, and
amplified in Annexure
F thereto, comprises four distinct components.
The first is an amount of R496 569 951, being the net profit before
tax that it
would have earned, after payment of SAPO’s one
third share, for the first five years of the agreement had it been
implemented.
The second amount is the sum of R114 million in respect
of administration and management fees (set at R22,8 million per year)
contractually incurred by NASASA over the five year period,
notwithstanding that the agreement was not implemented. In paragraph

103 of its particulars for trial NASASA explained that this liability
arises to its shareholders pursuant to the shareholders’

agreement. The third element of the damages claim is an amount of
R284 168 996 being the amount NASASA would have realised on
the sale
of the Vodacom subscriber base that NASASA would have built up had
the agreement been implemented according to its terms.
The amount is
calculated upon the projected size of the subscriber base multiplied
by the price per prepaid and contract subscriber.
The fourth claim
is for damages in the sum of R426 275 512 being the amount NASASA
alleges it would have earned between years
6 and 10 after the
termination of the contract arising from the remaining subscriber
base that it would have built up had the agreement
been implemented.
In terms of the various agreements which would have been in place
with other contracting parties and service
providers, NASASA as a
retailer would have continued to receive ongoing revenue commissions
on the sale of airtime to customers
initiated by NASASA and/or
GloCell in SAPO’s outlets. The sale of the subscriber base
would not have eliminated this source
of revenue, it would however
not have received the higher margin payable to the service provider.
The total damages claimed, as
stated earlier, thus exceeds R1,3
billion.
24. On 4 April 2008, nearly 6 months
after the
dies
had expired, and after the suit for damages had been initiated, SAPO
filed an application for condonation for the late filing of
an
application for leave to appeal against the judgment of Sapire AJ in
the main application. SAPO indicated that if it obtained
leave to
appeal it would seek to lead further evidence to demonstrate that the
agreement was void for non-compliance with sections
66 and 68 of the
Public Management Finance Act 1 of 1999 (“PFMA”); section
54(2) of the PFMA and section 3 of the Post
Office Act 44 of 1958
(“POA”). The particulars of claim in the action, in
their original and unamended form, had alluded
to the issue of
validity and the allegation that SAPO was estopped from raising the
question of illegality. In the founding affidavit
in the condonation
application Ms Lefoka stated:
“
I am advised that
if the judgment of Sapire AJ is not set aside, SAPO will be severely
prejudiced if it is unable to raise the invalidity
and non-binding
nature of the agreement ……. I am advised that the
validity of the agreement is central and dispositive
of these
proceedings (on appeal) and if decided in favour of SAPO should also
be dispositive of the action proceedings.”
(para 64-66)
25. The relevant parts of section 66
of the PFMA provide:
“
(1) An institution
to which this Act applies may not … enter into any other
transaction that binds or may bind that institution
… to any
future financial commitment, unless such borrowing, guarantee
indemnity, security or other transaction:
(a) is authorised by this
Act; and
(b) in the case of public
entities, is also authorised by other legislation not in conflict
with this Act …
(3) Public entities may
only through the following persons borrow money … or enter
into any other transaction that binds
or may bind that public entity
to any future financial commitment:
(a) a public entity
listed in schedule 2:
the accounting authority
for that schedule 2 public entity.”
Section 68 of the PFMA deals with the
consequences of unauthorised transactions. It provides:
“
If a person,
otherwise than in accordance with section 66 lends money to an
institution to which this Act applies or purports to
issue on behalf
of such an institution a guarantee, indemnity or security or …
enters into any other transaction which purports
to bind such an
institution to any future financial commitment, the State and that
institution is not bound by the lending contract
or the guarantee,
indemnity, security or other transaction.”
26. Section 54(2) of the PFMA provides
inter alia
:
“
Before a public
entity concludes any of the following transactions, the accounting
authority for the public entity must promptly
and in writing inform
the relevant treasury of the transaction and submit relevant
particulars of the transaction to its executive
authority for
approval of the transaction:
(a) ……
(b) Participation in a
significant partnership, trust, unincorporated joint venture or
similar arrangement; …..
(e) Commencement or
cessation of a significant business activity.
27. Section 3(4) of the POA provides:
“
Each successor
company ….
(b) shall in its
memorandum of association
inter
alia
provide
that the successor company and its subsidiaries -
(i) ….
(ii) shall not have the
power to perform the following acts without the approval of the
Minister granted with the concurrence of
the Minister of Finance,
namely
….
(dd) the merger of the
company with another company or the entering into of a partnership or
joint venture by the company.”
28. In the condonation application and
the application for leave to appeal SAPO sought leave to appeal on
the ground that the agreement
was invalid and not enforceable because
the agreement had been entered into without the necessary
authoritative approval required
in terms of these provisions of the
PFMA and the POA and because the signatory to the agreement
representing SAPO had not been
authorised by its board so to do. In
dismissing the application Sapire AJ observed:
“
Clearly SAPO and
its advisors were aware or should have been aware of the facts
relating to the alleged invalidity of the agreement
by reason of the
lack of authority …. when preparing its answering affidavit.
There appears to have been a deliberate decision
not to raise the
point.”
Later in the judgment the learned
acting judge went on to say:
“
The real point of
these proceedings is that SAPO cannot in the exercise of its public
functions be ordered to pay a large amount
of what is after all
public money as damages for breach of a contract entered into without
compliance with legislative provisions
on which its enforceability
depends.
This question was not
decided in the main application and remains moot. SAPO is therefore
not prevented by “issue estoppel”
or
res
judicata
from raising it in the action presently pending in which it faces a
claim for damages.
There would be no purpose
in proceeding to appeal where there has been no decision on the
issues which applicant wishes to raise
for the first time after
judgment. These issues would require new evidence to be adduced upon
which such issue could be argued.
The appeal court at best for the
applicant might be inclined to refer the matter back to the court of
first instance for a further
hearing and decision on affidavits and
possibly replying affidavits to be filed. An appeal court should not
be called upon to
entertain appeals of such a nature when the issues
can be canvassed as in this case in a court of first instance.”
He accordingly dismissed the
application for condonation and hence leave to appeal was not
granted.
29. SAPO filed its plea in the action
proceedings on 17 March 2009. In paragraph 3 it pleads that the
agreement is illegal and
null and void, alternatively not binding on
SAPO. In paragraph 3.1 it pleads that SAPO is a public entity listed
in Schedule 2
of the PFMA and that the relevant provisions of the
statute apply. Paragraphs 3.2.1 - 3.2.5 contain the averments in
relation
to non-compliance with section 54(2). They read:
“
3.2.1 The business
activities anticipated in terms of the agreement and which now forms
the basis of the plaintiff’s claim
against the defendant,
involves participation by the defendant in a significant partnership,
trust, unincorporated joint venture
or similar arrangement, as
contemplated in s54(2)(b) of the PFMA.
3.2.2 The business
activities anticipated to commence in terms of the agreement and
which now form the basis of the plaintiff’s
claim against the
defendant constitutes a significant business activity as contemplated
in s54(2)(e) of the PFMA
3.2.3 In terms of section
1 (definitions) read with section 49(2)(a) of the PFMA and the Post
Office Act, 44 of 1958, the accounting
authority of the defendant for
purposes of the PFMA is the defendant’s board of directors.
3.2.4 The board of
directors of the defendant did not inform the relevant treasury of
the transaction, whether promptly or at all,
before the agreement was
concluded.
3.2.5 The board of
directors of the defendant did not submit particulars of the
transaction to the Minister of Communications (its
executive
authority), whether promptly or at all, before the agreement was
concluded.”
30. Paragraph 3.3 of the plea relates
to section 66 and 68 and alleges that the agreement sought to create
and bind the defendant
to financial commitments. It is further
pleaded that the authority to conclude the agreement was not
delegated to Manyatshe by
SAPO’s board of directors with the
written approval of the Minister of Finance. Section 66(6) provides
that delegation of
this kind must be with the “prior written
approval of the Minister”.
31. Paragraph 3.4. of the plea relates
to the alleged contravention of the POA. Paragraphs 3.4.1-3.4.4
read:
“
3.4.1 The company
Memorandum of the defendant includes the provisions of section
3(4)(b)(ii)(dd) of the Post Office Act.
3.4.2 Despite the
provisions of clause 23 thereof, the agreement is in truth a joint
venture as contemplated in the Post Office
Act and the defendant’s
Memorandum.
3.4.3 The approval of the
Minister of Communications had not been obtained by the parties prior
to or after the conclusion of the
agreement.
3.4.4 The concurrent
approval of the Minister of Finance had not been obtained by the
parties prior to or after the conclusion of
the agreement.”
32. Paragraphs 4 to 7 of the plea
raise the defence that through its election to seek specific
performance in the main application,
NASASA waived any right it may
have had to rely on the alleged breaches or acts of repudiation as a
basis on which to cancel the
agreement. Accordingly, when NASASA
purported to cancel on 29 October 2007, such constituted a
repudiation which SAPO accepted
on 28 February 2008.
33. In paragraph 8 of the plea SAPO
denies any liability for damages on the ground that NASASA was
obliged to claim for damages
from the alleged acts of repudiation or
breaches “once and for all” during the main application
proceedings when it
sought specific performance.
34. SAPO raises two further defences
in paragraph 8, namely that because the CEO lacked authority to
commit SAPO to any agreement
for longer than 3 years, clause 19.1 of
the agreement (providing for a duration of 5 years) was invalid and
severable (in terms
of clause 17) with the result that the agreement
could be terminated by SAPO on reasonable notice. Further, clause
4.3.4 of the
agreement which requires SAPO to deal exclusively with
NASASA is in conflict with agreements with third parties giving those
third
parties similar rights to those provided to NASASA. This
clause too, it maintains, falls to be severed in terms of clause 17
of
the agreement with the significant consequence for determining
quantum
that
NASASA would not have benefited from income earned by those third
parties whose valid agreements remained in place during the
contract
period. Clause 17 provides
inter
alia
that where any
provision of the agreement is invalid or incapable of being enforced
due to a conflict with any existing agreement
with a third party that
provision shall be severed.
35. In its replication NASASA pleaded
that the judgment of Sapire AJ in the main application had finally
determined that:
i) the agreement was a valid and
binding agreement;
ii) SAPO breached its obligations
under the agreement;
iii) SAPO had by its conduct before
and after the institution of proceedings repudiated the agreement;
and
iv) NASASA was entitled to accept the
repudiation, cancel the agreement and claim damages.
And, hence, it pleaded further, SAPO
is estopped from relying on the defences pleaded in paragraphs 3, 4,
7 and 8 of the plea because
the issues were
res
judicata
. In the
alternative, it pleaded that SAPO is precluded from raising the
defences because of SAPO’s election to affirm an
admission that
the agreement was valid. In the further alternative NASASA pleaded
over and put all the factual issues in relation
to the questions of
illegality in issue. It also relies on section 36 of the Companies
Act 61 of 1973, claiming it is entitled
to enforce the agreement even
if SAPO lacked capacity or power to conclude the agreement and to
assume in good faith that all acts
of internal management necessary
to grant the CEO authority had been performed.
36. In addition SAPO has filed a
conditional counterclaim for cancellation to which there is a special
plea, a plea and a replication.
These pleadings have assumed no
relevance in the present matter and can be ignored for present
purposes.
37. SAPO’s rejoinder to the
replication is important in relation to both the separation
application and the amendment application.
In response particularly
to the plea of
res judicata
SAPO refers to the portion
of the judgment of Sapire AJ in the application for leave to appeal
in which he stated that the question
of illegality was not decided in
the main application and therefore SAPO is “not prevented by
“issue estoppel”
or
res
judicata
from raising it in
the action presently pending in which it faces a claim for damages”.
The rejoinder is silent on the import
of that finding and makes no
explicit claim that the
res
judicata
plea in respect of
legality is itself
res
judicata
or that NASASA is
estopped from raising it. The proposed amendment (which I will deal
with more fully later) amplifies on the rejoinder
by setting out
reasons why the judgment did not finally determine the issues in
dispute. In its surrejoinder NASASA denies that
the relevant passage
of the judgment is conclusive and binding upon the parties.
The separation application: the
averments and submissions of the parties
38. The notice of motion in the
separation application originally sought an order in the following
terms:
“
1. An order that
the following issues be separated from and determined prior to all
other issues in terms of the provisions of Rule
33(4):
1.1 Whether the judgment
(as pleaded in paragraphs 5-13 of the replication) and/or the
Defendant’s actions (as pleaded in
paragraphs 4 and 14 of the
replication) preclude the Defendant from relying upon the defences
pleaded in paragraphs 3, 4, 7 and/or
8 of the Defendant’s plea.
1.2 Whether the plaintiff
was entitled to: (i) accept the Defendant’s repudiation of the
agreement by letter dated 29 October
2007 as alleged in paragraph 11
of the Plaintiff’s particulars of claim; and (ii) thereafter
institute the present action
for damages.
39. During the course of the hearing
Mr
Levenberg SC
,
counsel for NASASA, informed the court that NASASA would no longer
persist with the relief sought in prayer 1.2 and significantly

narrowed the ambit of the relief in prayer 1.1 which was amended to
read:
“
1.1 Whether the
judgment (as pleaded in paragraphs 5-13 of the replication) precludes
the Defendant from relying upon the defences
pleaded in paragraph 3
of the defendant’s plea.”
The upshot of that amendment is that
the primary issue sought to be separated is simply whether the
judgment of Sapire AJ in the
main application precludes SAPO from
relying upon the illegality defences, namely that by virtue of the
provisions of sections
54, 66 and 68 of the PFMA and section 3 of the
POA, SAPO is not bound by the provisions of the agreement.
40. On 19 July 2010 NASASA effected an
amendment to the notice of motion in the separation application
consequent on a notice of
intention to amend delivered on 2 July
2010. The amendment introduces an alternative prayer in the
following terms:
“
Ordering that the
issues of
quantum
and
merits be tried separately; that is to say that the issues pleaded in
paragraphs 12 to 14 of the plaintiff’s particulars
of claim
(“the
quantum
issues”) shall be tried from all other issues in the matter
(“the issues on the merits”) and that the
quantum
issues should be tried only after resolution of the issues on the
merits.”
41. In short, NASASA wants either a
separation of the
res
judicata
replication from
all the other merits and
quantum
issues, or alternatively a separation of the merits (including the
res judicata
replication)
from the
quantum
.
Paragraphs 12 and 14 of the particulars of claim deal with the
question of causation and thus such issue would fall within the
ambit
of “
quantum
issues” as defined in the alternative prayer.
42. If the
res
judicata
issue
is resolved in favour of
NASASA it will be dispositive of the some but not all of the merits
issues, namely whether (i) the agreement
is a “future financial
commitment” as contemplated in section 66(1) of the PFMA and
void if the transaction was not
authorised by the board; (ii) the
board consented to a future financial commitment; (iii)
non-compliance with section 3 of the
POA renders the agreement
unenforceable; (iv) the agreement was indeed a joint venture as
contemplated by the POA; and (v) there
was non-compliance with
section 54 of the PFMA and the effect thereof. In other words, the
illegality defences. If
res
judicata
these issues will
not have to be decided. However, on account of the amendment to
prayer 1.1 of the notice of motion, SAPO’s
repudiation defence
in paragraph 4 and the “once and for all” defence in
paragraph 8 would still require determination.
So would the defences
that SAPO had the right to terminate on reasonable notice and the
severability of the exclusivity clause
with significant consequences
for
quantum
.
43. Rule 33(4) of the Uniform Rule
provides:
“
If, in any pending
action, it appears to the court
mero
motu
that
there is a question of law or fact which may conveniently be decided
either before any evidence is led or separately from any
other
question, the court may make an order directing the disposal of such
question in such manner as it may deem fit and may order
that all
further proceedings be stayed until such question has been disposed
of, and the court shall on the application of any
other party make
such order unless it appears that the questions cannot be
conveniently decided.”
Accordingly, where, as in this case,
the question of separation is to be determined on application of one
of the parties, the onus
is on the party opposing the separation to
demonstrate that it is inappropriate. The court is obliged to grant
the application
of a party for separation unless it appears that the
question cannot be conveniently decided separately -
Edward
L Bateman Limited v CA Brand Projects (Pty) Ltd
1995
(4) SA 128
(T) 132C-D;
Lappeman
Diamond Cutting Works (Pty) Ltd v MIB Group (Pty) Ltd (No2)
1997
(4)
SA
921
(W) 927E.
44. The word “conveniently”
within the context of the sub-rule is intended to connote the notion
of facility or ease
or expedience, as well as the notion of
appropriateness and fairness. In
Berman
and Fialkov v Lumb
2003 (2)
SA 674
(C) at para 17, Van Reenen J captured the essence of the
requirement when he said:
“
The convenience to
be considered is primarily that of the Court and the litigants ….
Convenience in the context does not
only connote facility or ease or
expedience but also appropriateness in the sense that in all the
circumstances it is fitting and
fair to the parties concerned ….
The Court’s function is to assess to the best of its ability
the nature and extent
of the advantages and disadvantages that would
result should the order that is being sought be granted … Such
an application
will normally be granted if the advantages that will
flow therefrom outweigh the disadvantages ..”
In a nutshell, the party opposing the
separation must satisfy the court that the balance of convenience
favours it and non-separation
of the issues.
45. In
Denel
(Edms) Bpk v Vorster
2004
(4) SA 481
(SCA) at 484-5 Nugent JA offered the following salutary
note of caution:
“
Rule 33(4) of the
Uniform Rules …. is aimed at facilitating the convenient and
expeditious disposal of litigation. It should
not be assumed that
the result is always achieved by separating the issues. In many
cases, once properly considered, the issues
will be found to be
inextricably linked, even though at first sight they appear to be
discrete. And, even where the issues are
discrete, the expeditious
disposal of the litigation is often best served by ventilating all
the issues at one hearing, particularly
where there is more than one
issue that might be readily dispositive of the matter. It is only
after careful thought has been
given to the anticipated course of the
litigation as a whole that it will be possible properly to determine
whether it is convenient
to try an issue separately.”
As Mr
Burger SC
, who appeared for
SAPO, put it, the enquiry is a multi-faceted one. A court normally
will not grant a separation where it is apparent
that the evidence
required to prove any of the issues in relation to the proposed
separated issue will also be required to be led
when it comes to
proving the remaining issues, be they issues of merits or
quantum
.
Horn AJ (as he then
was) also highlighted the need for caution in
Internatio
(Pty) Ltd v Lovemore Brothers Transport CC
2000
(2) SA 408
(SEC) at 412H-J when he observed:
“…
. where it
is not a straightforward matter, where the incidents of the
onus
could
be complex or burdensome, whether the question of
onus
arises
from the pleadings or from the evidence which may be required to be
led by the plaintiff or the defendant, or where the evidence
in
respect of liability and
quantum
could
quite conceivably overlap, where the matter is of such a nature that
separation would seem inappropriate, unfair or unfitting,
the court
would be slow to exercise its discretion in favour of a separation.”
46. As explained earlier, NASASA in
prayer 1 of the notice of motion as amended seeks separation in the
first instance of the issue
“whether the judgment ….
precludes the Defendant from relying upon the defences pleaded in
paragraph 3 of the Defendant’s
plea”, raising essentially
the question of whether by virtue of the provisions of section 54, 66
and 68 of the PFMA, and
section 3 of the POA, the defendant is not
bound by the terms of the agreement on grounds of illegality.
47. On 27 January 2010, NASASA’s
attorney addressed a letter to SAPO’s attorney proposing
separation of the issue (annexure
FA5) and explaining why it believed
separation would be convenient. Its reasons were:
i
) Resolution
of the issue in terms of NASASA would result in disposal of most of
the issues appertaining to the merits of the action,
obviating the
need to lead evidence and to traverse a number of issues raised on
the pleadings.
ii) If the court does not have to hear
the illegality issues by reason of a successful plea of
res
judicata
that will
significantly curtail the duration of the trial on the merits of
NASASA’s claim.
iii) Should the
res
judicata
defence not be
separated it would in any event have to be argued separately by way
of an objection to SAPO at trial introducing
any evidence in support
of the issue of statutory invalidity.
iv) Not adjudicating the
res
judicata
defence before the
illegality defences SAPO will effectively circumvent and frustrate
the earlier judgment by introducing evidence
on the issue of
invalidity before the issue of
res
judicata
has been decided.
That would deprive NASASA of the benefit of its judgment even before
the court has determined whether NASASA
is entitled to rely upon it.
48. SAPO was not prepared to agree to
the proposed separation because it did not consider it to be
convenient or likely to lead
to an expeditious curtailment of the
litigation. In paragraph 5 of her letter dated 15 February 2010
SAPO’s attorney summarised
SAPO’s position as follows:
“
Having considered
the pleadings with your client’s proposal, it seems that the
separation proposed in your letter will not
lead to an expeditious
curtailment of the litigation for at least the following reasons:
a. the issue to be
determined is not dispositive of the case in any material respect;
b. we anticipate,
irrespective of which way the Court a quo decides the matter, the
legal issues in question and the consequences
of such determination
are likely to be appealed by the unsuccessful party. The appeal
process will involve significant cost and
delay;
c. even after the issue
has been resolved on appeal, the vast majority of the available
evidence will still have to be led. As
there is a significant
overlap between the evidence in relation to: on the one hand, the
nature of the business contemplated in
the agreement and the quantum
of its alleged damages; and on the other hand, the characterization
of the transaction as a “joint
venture, future financial
commitment etc.” referred to in the relevant legislation. In
our view, save for limited time dealing
with evidence of “authority”
and Ministerial approval etc, the only real element of the trial that
would be avoided
by a preliminary round on the proposed separation,
would be legal argument.”
The letter continues in paragraph 8 as
follows:
“
The agreement at
the heart of this matter was signed in 2005. If an appeal process
was to run and an allocation to be obtained
thereafter, it is quite
likely that seven to eight years may have elapsed before this matter
is heard. Many of the personnel employed
by our client at the time
have already assumed employment elsewhere since 2005 and further, the
tenure of many current directors
and officers who were involved may
expire during that period. Any assistance or input from the
government departments relevant
to the PFMA issues will also be
reduced as time goes by, given the likely turnover of personnel in
those departments. This being
so, the preparation and presentation
of our client’s case may well be prejudiced if the “main”
trial is delayed
as anticipated above.”
49. In the founding affidavit to the
separation application, NASASA, referring to the prior
correspondence, took issue with SAPO’s
contentions on the
appropriateness of separation in some detail. It submitted that the
real reasons for refusing to agree to a
separation are an attempt to
pre-empt the
res judicata
defence, the intent to make
the trial as difficult, expensive and complicated as possible, and a
wish to cloud the real issues by
leading evidence that would
otherwise be irrelevant if the
res
judicata
issue is decided
in favour of NASASA. In regard to the concern that the litigation
will be protracted and delayed if separation
is granted, NASASA
submitted that SAPO is the cause of the earlier delays in these
proceedings and in fairness should not be allowed
to use its own
laches as an excuse for not agreeing to a separation. Moreover,
NASASA earlier advocated separation. In paragraphs
66-70 of the
founding affidavit in the condonation application Ms Lefoka
unequivocally stated that the validity of the agreement
would be
dispositive of the action proceedings. In urging for leave to appeal
to be granted she maintained “an appeal on
the crisp issue of
whether the agreement was legal and binding should determine a core
issue in the damages action”, with
the advantage that the
parties could be spared the inconvenience of a trial. NASASA
obviously agrees with this.
50. The most contentious issue between
the parties in this application is whether the illegality issues and
the
quantum
issue
overlap. The contention
arises from the claim by SAPO that the agreement constitutes a
“future financial commitment”
or a “joint venture”
as contemplated in the PFMA and POA. In a letter dated 22 March 2010
(Annexure FA 7.1) SAPO’s
attorney stated:
“
It is our client’s
position that the financial commitment required by the agreement
would emerge
inter
alia
from
the Plaintiff’s own evidence of the extent of the operations
which the Plaintiff alleges it could or would have implemented
at the
Post Office and from which it would have drawn its profits. It is
the Defendant’s position that these two issues
are inextricably
linked and a separation of these issues would not only be
inappropriate but unfair.”
51. On the face of it the assertion
amounts to an argument that the issues of illegality and
quantum
are inseparable. It does
not directly address the question of whether the
res
judicata
issue should be
decided before and separately from the other merits issues. NASASA
spelt out its response to the argument in the
founding affidavit.
Its evidence in support of
quantum
will be evidence concerning
the cost to it (not to SAPO) of maintaining and running its stores
within stores at its own risk. Therefore,
it argues, the cost to
SAPO of complying with its obligations under the agreement is
unrelated to its own costs of performing its
obligations under the
agreement. The evidence it will lead to prove its
quantum
will be evidence concerning
the operations and operating profits of GloCell (its shareholder)
which utilises the business model
contemplated in the agreement.
This evidence will be supplemented by other evidence concerning
market conditions in the cellphone
industry. NASASA says such
evidence will be different from the evidence SAPO will need to lead
concerning its own internal business
structures and dealings to
demonstrate the existence of a future financial commitment, joint
venture, significant partnership or
significant business activity.
Accordingly, NASASA submits that the issues are not intertwined and
further that SAPO cannot simply
rely upon what it extracts in the
cross-examination of NASASA’s witness to discharge its
evidentiary burden that the agreement
constitutes a “future
financial commitment”.
52. As I have just indicated, the
dispute here, when unpacked, actually relates to the broader question
of separating merits from
quantum
.
At the time the founding affidavit was commissioned, NASASA was not
seeking a separation of merits and
quantum
.
It principally wanted to separate the
res
judicata
issue from all
other issues. Nonetheless it made the point in the founding
affidavit that SAPO’s contention that not even
quantum
can be separated from
merits was unreasonable and revealed an intent to make the case
“prohibitively difficult and expensive”
for NASASA to
prosecute.
53. In its answering affidavit SAPO
reiterated the position it had taken in correspondence arguing that
it was unnecessary and undesirable
to hear the
res
judicata
issue before the
illegality issues. The defence remains on the pleadings and can be
decided at the end of the trial once the court
has heard all of the
relevant evidence, which in argument it has submitted shall be that
related to both the issues of illegality
and
quantum
which it still considers to
be intertwined.
54. SAPO submitted that a single
hearing is the best way forward and that NASASA’s stance is
revealing of its tactical approach
to the litigation, aimed at
avoiding the illegality issues that were never overtly examined or
decided in the main application.
Ventilating all of the issues at
once, it contended, will lead to a quicker resolution than if
different parts are decided before
any of the issues that will bring
finality. Dealing with the matter in a single hearing will avoid a
substantial delay brought
about if the party losing in the first
round appeals that decision before returning for the second round.
With regard to earlier
delays, SAPO submitted, no benefit can be
gained from disputing past time delays or that any negative inference
can or should be
drawn. I agree on this aspect.
55. SAPO avers that even if NASASA is
successful in the
res
judicata
defence, there
would still be significant evidence to be led by NASASA and SAPO
related to SAPO systems, structures, budgets and
infrastructures in
place during the relevant period. The averment lacks specificity
regarding the purpose of such evidence. Clearly
it would have
relevance to
quantum
.
Any relevance it might have had, if any, to the question of legality
would lose force if the
res
judicata
defence was
sustained. Its only other relevance, I surmise, would be to the
defence pleaded in paragraphs 8.2.4 and 8.2.5 of the
plea alleging
that the exclusivity clause in clause 4.3.4 of the agreement falls to
be severed from the agreement by operation
of clause 17 because of
the existing arrangements with third parties, which will impact
ultimately on the question of
quantum
if the defence is sustained
on the evidence.
56. SAPO further contended that the
true reason for NASASA seeking a separation was that it is not ready
to proceed on
quantum
,
and postulated that such does not justify a separation of the
res
judicata
defence from the
other issues on the merits; especially considering that at the time
the answering affidavit was filed NASASA had
not proposed a
separation of merits and
quantum
.
This averment no doubt contributed to the decision of NASASA to
amend the notice of motion to include the alternative separation
in
prayer 2 by its notice of amendment dated 2 July 2010.
57. SAPO’s initial position
pertaining to separation of the
res
judicata
defence was
undeniably to some extent ill founded, because it confused the
illegality issue with the
res
judicata
issue and argued
that the illegality and
quantum
issues were intertwined.
The answering affidavit however posits an inextricable link between
the illegality and the
res
judicata
issues. On the
premise that NASASA’s
res
judicata
defence is not a
strict application of the
exceptio
res judicata
but a plea of
issue estoppel, involving a discretionary relaxation of the
requirements of the
exceptio
,
SAPO argues that evidence on illegality will be necessary before the
relevant discretion can be properly exercised having regard
to
questions of equity, fairness and public policy. In exercising the
discretion whether or not to grant relaxation the court will
be
required to consider the defence that NASASA seeks to preclude from
determination and the impact such preclusion would have
on the
parties and possibly, given the peculiarities of this case, the
general public and the government of South Africa.
58. In reply NASASA notes that SAPO
had not in its rejoinder sought to rely on the court’s
discretion to relax the requirements
of the
exceptio
res judicata
or pleaded any
facts which would be relevant to a discretionary determination, and
hence it would not be entitled to lead any evidence
on the issue.
59. After the replying affidavit was
filed two further developments occurred. Firstly, and perhaps
predictably, SAPO filed a notice
to amend the rejoinder on 23 June
2010 in which it sought to allege facts in support of a discretionary
res judicata
.
The amendment has been objected to and is the subject of the
application for amendment to be determined in this judgment. The

second development was the issuing of a Practice Directive by the
Deputy Judge President of this division on 8 June 2010, which
deals
specifically with the question of separating merits and
quantum
in all claims for damages, leading NASASA to contend in a
supplementary affidavit that a merits and
quantum
separation should now be
automatic.
60. SAPO responded to the
supplementary affidavit and amendment seeking separation of the
merits from
quantum
in
a supplementary answering affidavit filed on 26 July 2010 to which
NASASA replied in an affidavit handed in at the commencement
of the
hearing. SAPO’s supplementary answering affidavit elaborates
more fully on the link between the illegality issues
and
quantum
.
NASASA in its reply accuses SAPO of vagueness in its pleadings and
failing to substantiate the plea of illegality in the hope
of proving
its case on illegality by cross-examining NASASA’s witnesses on
quantum
.
I will return to these arguments later when it comes to assessing
and evaluating the prudence, convenience and necessity of separating

merits from
quantum
in this case.
Separation:
res
judicata
and
illegality
61. The first question to be
determined is whether the
res
judicata
issue should be
separated from the illegality issues.
62. As mentioned, SAPO has submitted
that the ultimate determination of the applicability of the defence
of
res judicata
and/or
issue estoppel will require evidence relevant to the questions of
equity, fairness and public policy. The proposed amendment
to the
rejoinder aims at particularising the debate. In this regard the
validity of the contract may be a central consideration.
Testimony
may be necessary to explain why the defence was not raised in the
main application even though SAPO seems to have been
aware of it.
Such testimony may be relevant to whether the declarators were
necessary for the principal relief sought in the main
application and
the possibility of a waiver by SAPO.
63. In Roman Dutch law the
exceptio
res judicata
can only be
employed when an action which has been once terminated is again set
in motion by the same parties, about the same thing
(
eadem
res
) and based on the same
cause of action (
eadem
petendi causa
) -
Voet
(44.2.3); and
Boshoff
v Union Government
1932 TPD
34
at 349. In
Kommissaris
van Binnelandse Inkomste v Absa Bank Bpk
1995
(1) SA 635
(A) the Appellate Division held that the broader meaning
of the term “
petendi
causa
”, and Voet’s
statement in 44.2.3 that a claim based on the
actio
redhibitoria
may be raised
to preclude the
actio quanti
minoris
,
mean that the cause of
action need not be precisely the same in both actions, nor is it an
immutable requirement that the same thing
must be claimed. The
result is similar to the situation in relation to issue estoppel in
English law. At 669F-670C Botha JA explained
the position as
follows:
“
The true meaning
of
Boshoff
v Union Government
is
that the judgment has the effect that the strict requirements of the
common-law for a defence of
res
judicata
(in
particular,
eadem
res
and
eadem
petendi causa
)
should not be understood literally in all circumstances and applied
as inflexible rules, but there is room for adaptation and
extension,
according to the basic requirement of
eadem
quaestio
and
the
ratio
of the
defence …. The unacceptable alternative would be to cling with
literal formalism to propositions in the old authorities,
which would
be at odds with the vigorous development of the law to provide for
the demands of novel factual situations ….
Each case must be
decided according to its own facts. It is not practical to try to
formulate guidelines in abstract terms which
can be made applicable
to all situations.”
(Translation of Heher JA
in
Janse
van Rensburg NO and Others v Steenkamp and Another
2010
(1) SA 649
(SCA) at 658).
64. In
Smith
v Porritt and Others
2008
(6) SA 303
(SCA) at 307J Scott JA summarised the present state of our
law:-
“
[10] Following the
decision in
Boshoff
v Union Government
1932 TPD 345
the ambit of the
exceptio
rei judicata
has
over the years been extended by the relaxation in appropriate cases
of the common-law requirements that the relief claimed and
the cause
of action be the same (
eadem
res
and
eadem
petendi causa
)
in both the case in question and the earlier judgment. Where the
circumstances justify the relaxation of these requirements those
that
remain are that the parties must be the same (
idem
actor
)
and that the same issue
(eadem
quaestio
)
must arise. Broadly stated, the latter involves an inquiry whether
an issue of fact or law was an essential element of the judgment
on
which reliance is placed. Where the plea of
res
judicata
is
raised in the absence of a commonality of cause of action and relief
claimed it has become commonplace to adopt the terminology
of English
law and to speak of issue estoppel. But, as was stressed by Botha JA
in
Kommissaris
van Binnelandse Inkomste v Absa Bank Bpk
1995
(1) SA 653
(A) at 669D, 670J-671B, this is not to be construed as
implying an abandonment of the principles of the common law in favour
of
those of English law; the defence remains one of
res
judicata
.
The recognition of the defence in such cases will however require
careful scrutiny. Each case will depend on its own facts and
any
extension of the defence will be on a case-by-case basis.
(
Kommissaris
van Binnelandse Inkomste v Absa Bank
(supra) at 670E-F.) Relevant considerations will include questions
of equity and fairness not only to the parties themselves but
also to
others. As pointed out by De Villiers CJ as long ago as 1893 in
Bertram
v Wood
(1893)
10 SC 177
at 180, ‘unless, carefully circumscribed, [the
defence of
res
judicata
]
is capable of producing great hardship and even positive injustice to
individuals’.
65. In appropriate cases therefore the
traditional requirements of the
exceptio
res judicata
, namely (1)
the same parties (
idem
actor
), (2) the same cause
of action (
eadem petendi
causa
) (3) the same thing
demanded (
eadem res
),
can be relaxed. However, there must always be a commonality of
actors and issue. The parties must be the same (
idem
actor
) and the same issue
(
eadem quaestio
)
must arise. Where there is no commonality of cause of action and
relief claimed, we have a situation of issue estoppel involving
an
inquiry whether an issue of fact or law was an essential element of
the judgment upon which reliance is placed. Whether such
a defence
should be upheld will depend on the facts of the case taking account
of questions of equity and fairness not only to
the parties
themselves but also to others. In
Holtzhausen
and Another v Gore NO and Others
2002
(2) SA 141
(C) at 150-151 Thring J reasoned, correctly in my
respectful opinion, that in deciding whether or not, in a particular
case, strict
compliance with the requirements of
eadem
petendi
and
eadem
res
should be relaxed, a
court must exercise an equitable discretion with the overriding or
paramount consideration being overall fairness
and equity and the
avoidance of injustice.
66. The parties are in dispute about
whether the facts give rise to a true
res
judicata
or merely an issue
estoppel. NASASA says that it does not rely on issue estoppel but a
“classic”
res
judicata
. It went to court
and sought an order declaring the agreement to be valid and binding,
which it obtained. SAPO counters that
the elements of the current
action for damages are significantly different from the main
application for specific performance.
In its view there are merely
common elements in the allegations made in the two suits, but there
is no commonality in the cause
of action and the relief claimed and
hence NASASA in fact has pleaded a defence of issue estoppel. In
National Sorghum Breweries
Ltd (t/a Vivo African Breweries ) v International Liquor Distributors
(Pty) Ltd
[2000] ZASCA 159
;
2001 (2) SA 232
(SCA) the respondent had obtained the right to distribute one of the
appellant’s products for the sum of R150 000. The respondent

alleging breach of contract instituted action against the appellant
claiming repayment of the R150 000. The appellant failed to
contest
the action and the respondent was granted judgment by default. Some
months later the respondent instituted a second action
for damages.
To this the appellant filed a special plea of
res
judicata
. In holding that
the
exceptio res judicata
could not be relied on to
thwart the claim for damages, Olivier JA reasoned:
“
(3) The
fundamental question in the appeal is whether the same issue is
involved in the two actions: in other words, is the same
thing
demanded on the same ground, or, which comes to the same, is the same
relief claimed on the same cause, or, to put it more
succinctly, has
the same issue now before the Court been finally disposed of in the
first action?
(4) In my view, the
answer must be in the negative. The same thing is not claimed in the
respective suits, nor is reliance placed
on the same ground or cause
of action. What was claimed in the first suit was restitution in the
form of repayment of the purchase
price previously paid by the
claimant. Such a claim is not one for damages but is a ‘distinct
contractual remedy’
….. In the second suit damages were
claimed, which is in its very essence clearly distinguishable from
restitution. The
same thing is not claimed in the respective suits,
the issue now under consideration has not been finally laid to rest.
(5) Nor are the
respective claims based on the same grounds or same cause of action.
In the first suit, the necessary allegations
were the conclusion of
the contract, the breach thereof, the payment of the purchase price
and the cancellation of the contract.
In the second suit, the
respondent was required to plead and prove the conclusion of the
contract, the breach and the cancellation
thereof, that damage was
suffered, the causal chain between the breach and the damage and the
quantum
of
damage. The mere fact that there are common elements in the
allegations made in the two suits does not justify the
exceptio
- one
must look at the claim in its entirety and compare it with the first
claim in its entirety. If this is done in the present
case, the
differences are so wide and obvious that one simply cannot say that
the same thing was claimed in both suits or that
the claims were
brought on the same grounds”.
67. SAPO similarly draws a distinction
between a claim for specific performance and a claim for damages,
albeit in respect of the
same alleged breach. Unlike in the first
suit, NASASA in order to succeed in the second suit will have to
prove cancellation (which
the pleadings place in issue), that damage
was suffered, the causal chain and
quantum
.
Nor has the defence of illegality been laid to rest.
68. It would be inappropriate for me
at this point to pronounce upon whether NASASA’s defence raises
a plea of
res judicata
in
the full sense or an issue estoppel involving the relaxation of the
requirements. Such is properly a matter for the court called
upon to
decide that issue. Nevertheless, there is no denying that the
question is alive on the pleadings and should the court ultimately

decide that there is no commonality in cause of action and relief
claimed, it will be obliged to rule whether considerations of
equity,
fairness and public policy justify upholding a plea of issue
estoppel. Evidence will be required for that purpose. That
evidence
would include evidence pertaining to the legality of the contract.
Hence, the issue of legality and
res
judicata
are interlinked
and it may be better to examine the issue of legality before deciding
the plea of issue estoppel.
69. In his submissions, Mr
Levenberg
for NASASA
challenged this line of argument on three principal bases. Firstly,
he argued that the illegality of the contract and/or
the correctness
of the judgment of Sapire AJ would not be relevant in any decision to
uphold or reject a plea of issue estoppel.
A court adjudicating a
plea of
res judicata
should
not consider the merits of the prior decision as a factor in
determining whether or not to uphold the plea. Secondly, on
the
pleadings as they stand, so he maintained, SAPO has not pleaded any
facts that demonstrate that the issue of
res
judicata
and the merits of
the legal invalidity defence are inextricably interlinked, and the
proposed amendment does not sufficiently rectify
the deficiency.
Thirdly, it was submitted that even if this is a case of
“discretionary
res
judicata
”, involving
a plea of issue estoppel, it would be inappropriate as a matter of
policy for a court to decide the very issue
that NASASA maintains is
res judicata
in
the process of determining whether or not to sustain the plea of
res
judicata
.
70. Mr
Levenberg
referred to
African Farms and Townships
Ltd v Cape Town Municipality
1963
(2) SA 555
(A) in support of his proposition that the legality of the
agreement and the correctness of the prior judgment are not relevant.

At issue in that case,
inter
alia
, was the question
whether the appellant should have been afforded the opportunity by
way of the second suit of proving that certain
evidence upon which
the judgment in the first suit was predicated was wrong. Steyn CJ
(at 564C-D) held the following:
“
Accordingly to
Dig.
50.17.207,
res
judicata
is
accepted as the truth. Because of the authority with which in the
public interest, judicial decisions are invested, effect must
be
given to a final judgment, even if it is erroneous. In regard to
res
judicata
the
enquiry is not whether the judgment is right or wrong, but simply
whether there is a judgment …… It is quite clear,

therefore, that a defendant is entitled to rely upon
res
judicata
notwithstanding
that the judgment is wrong.”
These
dicta
are founded on an earlier
pronouncement of De Villiers CJ in
Bertram
v Wood
10 SC 177
at 180 where he held:
“
The meaning of the
rule is that the authority of
res
judicata
induces
a presumption that the judgment upon any claim submitted to a
competent court is correct and this presumption being
juris
et jure
,
excluded every proof to the contrary. The presumption is founded on
public policy which requires that litigation should not be
endless
and upon the requirements of good faith which as said by
Gaius
(Dig.
50.17.207) does not permit of the same thing being demanded more than
once.”
71. Both these decisions were decided
some time before Botha JA in
Kommissaris
van Binnelandse Inkomste v Absa Bank Bpk
(
supra
)
cautioned against clinging with “literal formalism to
propositions in the old authorities, which would be at odds with the

vigorous development of the law to provide for the demands of novel
factual situations …” That, perhaps, accounts
for the
more nuanced approach of Thring J in
Holtzhausen
and Another v Gore N.O. and others
(
supra
)
when faced with a similar proposition to the one made by counsel in
this case. In
Holtzhausen
the applicant purchased a
farm from the respondent at a public auction. When the applicant
failed to furnish a guarantee despite
demand, the respondent
cancelled the sale and arranged for a second auction. The applicant
launched an application for an urgent
interim interdict restraining
the respondent from proceeding with the second auction pending an
action for specific performance.
Pincus AJ dismissed the application
on the ground that the applicant had failed to furnish the seller
with a guarantee when required
to do so and thus had not established
a
prima facie
right
to transfer. Nothing came of the auction. The respondent however
sold the farm to a third party. The applicant launched
fresh
proceedings to interdict the transfer. Thring J was of the opinion
that Pincus AJ in the first application had been wrong
in finding
that the condition of sale had fixed a time for the furnishing of the
guarantee. Counsel, relying on
African
Farms and Townships Ltd v Cape Town Municipality
(
supra
),
submitted that even if the decision of Pincus AJ was wrong, that
would not preclude the respondents from relying on it for the
purpose
of
res judicata
.
Thring J held (at 156A-D):
“
This is, with
respect, undoubtedly correct where all the requirements for the
defence for
res
judicata
have
been strictly and fully met. However, on my findings as expressed
above that is not the case here: in my view requirements
(ii) (
eadum
petendi causa
)
and (iii) (
eadem
res
)
have not been strictly met; indeed I am asked … to relax
strict compliance with them insofar as may be necessary and to
uphold
the defence despite the absence of strict compliance.
It seems to me, however,
that if I were to do that and non-suit the applicants I would be
enabling the … respondents to shelter,
so to speak, behind a
decision of this Court which I regard as wrong and unsupportable.
That weighs very heavily with me in the
exercise of my discretion in
deciding whether or not I should relax the requirements. To me it
seems clear that overall fairness
and equity demand, in these
circumstances, that I should exercise my discretion against the ….
respondents and decline to
relax the requirements, or I may be in
danger of facilitating a “palpable reality of injustice”…”
72. Counsel has submitted that this
finding is manifestly wrong in that it is contrary to the underlying
principles and public policy
of the doctrine of
res
judicata
. I am unable to
agree. The policy that there should be an end to litigation and that
litigants should not be vexed twice by the
same cause of action, as
the learned judge intimated, applies where the requirements of
res
judicata
have been strictly
and fully met. Issue estoppel is another matter. Considering its
potential to cause injustice, it involves
the exercise of an
equitable discretion structured upon principles of fairness taking
into account a basket of legitimate considerations
including the
correctness of the prior judgment, and perhaps, as SAPO contends, the
undesirability of enforcing a contract which
is legally invalid. The
policy underlying the legal principle pronounced in
Bertram
v Wood
, and in
African
Farms and Townships Ltd v Cape Town Municipality
,
remains undisturbed. It is qualified merely by the proposition that
equity may demand departure from the principle in cases where
the
defence of
res judicata
in
truth seeks to advance the broader defence of issue estoppel.
73. Support can be found for the
thinking of Thring J in the recent decision of the Supreme Court of
Appeal in
Yellow Star
Properties 1020 (Pty) Ltd v MEC, Department of Development Planning
and Local Government, Gauteng
2009
(3) SA 577
(SCA) at 587E where Leach AJA (as he then was) stated:
“…
while the
law indeed allows a party to rely upon such a defence even if the
original judgment was incorrect, I have grave reservations
about
whether it is permissible to do so if the effect will be to enforce a
contract which is legally invalid.”
Similar development of the law has
occurred in English law. In
Kok
Hoong v Leong Cheong Kweng Mines Ltd
[1964]
AC 993
(PC) the Privy Council held that a
res
judicata
estoppel would not
normally sanction the breach of a statute. Our own law regarding
whether estoppel may be raised against a statutory
body is equally
instructive. Estoppel may be relied on when the defence raised is
that the relevant internal arrangements or formalities
were not
complied with. But where the failure by the statutory body relates
to compliance with provisions which the legislature
has prescribed
for the validity of a specified transaction, such failure cannot be
remedied by estoppel because that would give
validity to a
transaction which is unlawful. A state of affairs prohibited by law
in the public interest cannot be perpetuated
by reliance upon the
doctrine of estoppel -
City
of Tshwane Municipality v RPM Bricks
2008
(3) SA 1
(SCA).
74. None of these issues falls to be
decided by me in this matter. The questions of whether the defence
is one of
res judicata
in
the strict sense or one of issue estoppel, whether or not the
judgment of Sapire AJ is correct, whether the agreement is legal
or
not, and if illegal whether it should be enforced indirectly through
issue estoppel, are questions for the court determining
the
res
judicata
issue.
Nevertheless, I am persuaded by the arguments advanced on behalf of
SAPO that much of the evidence led with the aim of resisting
the plea
of issue estoppel will have to be reproduced in order to address the
merits of the defence of statutory illegality. Convenience
and cost
dictate that the issues be explored simultaneously.
75. I therefore do not agree with Mr
Levenberg
that it will be
inappropriate, as a matter of policy, for a court to decide the very
issue (legality) that NASASA maintains is
res
judicata
in the process of
determining whether to sustain the plea of
res
judicata
. If NASASA
establishes a strict
res
judicata
the court will not
need to decide the question of illegality, despite having examined
it, or it may prefer to do so in the alternative
lest it be mistaken,
and thereby it will ventilate all the issues in a manner advantageous
to the appeal court in the likely event
of an appeal. Moreover, a
separate and prior adjudication of the
res
judicata
or issue estoppel
defence would not be dispositive of the merits. The other defences
of severability, the right to terminate by
reasonable notice and the
alleged repudiation by NASASA would still have to be adjudicated upon
even if the court determines that
SAPO is precluded from denying
validity. I will deal more fully with the alleged lack of
particularity on the question of illegality
when discussing the
amendment. Suffice it to say, in the context of the separation
application, if the issues of legality and
issue estoppel cannot be
conveniently separated, as is the case, then cognisant of the
possibility that an amendment can cure any
deficiency, separation
should not be ordered on grounds of lack of particularity.
76. In the result, therefore, I am
satisfied that the question of
res
judicata
cannot
conveniently be decided separately from the other questions
pertaining to the merits of the action and accordingly that the

relief sought in prayer 1 of the notice of motion should be refused.
Separation:
Merits and
quantum
77. I turn now to the arguments in
relation to the proposed separation of merits and
quantum
.
As explained above, in its letter of 15 February 2010 SAPO’s
main argument against separation was that the issues of illegality

and
quantum
overlapped and were inseparable. This did not address NASASA’s
request for separation of the
res
judicata
issue from all
other issues. Nevertheless, it prompted NASASA to address in its
founding affidavit the question of whether illegality
and
quantum
were indeed inseparable.
It disputed whether evidence that the agreement constitutes a “future
financial commitment”
or a “significant joint venture”
etc, or evidence concerning the cost of making staff and
infrastructure available,
would have any relation to or bearing upon
the
quantum
of NASASA’s damages.
78. In paragraphs 79-83 of the
founding affidavit NASASA set out the broad scope of the evidence it
proposes to lead to prove
quantum
.
It intends to provide evidence concerning the operations and
operating profits of its shareholder GloCell and its business model.

As discussed earlier, GloCell has approximately 550 franchise style
retail stores and supplies approximately 100 other dealers.
The
franchise retail stores are stores within stores and operate in the
manner contemplated in the agreement between NASASA and
SAPO. The
evidence in support of
quantum
will be evidence concerning
the cost to NASASA of maintaining and running its stores within
stores at its risk, and would be supplemented
by evidence regarding
market conditions and profitability. This, it argued, bore no
relation to any evidence SAPO would have to
lead to establish
illegality. In the light of that, the refusal to agree to a
separation of merits and
quantum
was unreasonable. In answer
to this, SAPO pointed out that NASASA had not proposed such a
formulation for separation. In its view
good reasons exist why such
a separation would be inconvenient and inappropriate. The answering
affidavit was accordingly in the
main confined to the question of
separating
res judicata
from
the illegality issues. It reiterated nonetheless that a separation of
merits and
quantum
will
not be convenient because “compliance with the relevant
statutory provisions are influenced by the extent of the
quantum
”.
79. SAPO’s concerns are set out
in paragraph 35.3 of the answering affidavit as follows:
“
35.3 SAPO believes
that the underlying reason for the plaintiff’s approach in this
separation application is a tactical one:
35.3.1 As there was no
roll-out of any operations under the disputed agreement; the damages
claim pursued by the plaintiff in the
action will need to be premised
on assumptions of size, scope and extent of the operations it
intended to roll out.
35.3.2 It appears from
the founding affidavit that the plaintiff has not yet determined how
it is going to prove the
quantum
and what the financial model is expected to look like.
35.3.3 This has recently
been confirmed by the plaintiff in its first discovery affidavit
(attached marked
ST2
)
and in its reply to SAPO’s request for further particulars for
trial (attached marked
ST3
)
which was delivered while this affidavit was being finalised. These
documents make it clear that the plaintiff has not begun
preparation
on the evidential aspects of its case, especially the
quantum
.
35.3.4 Plaintiff wishes
to resolve the statutory defences without having to reveal the size
and the scope of the operations which
it assumes, or will assume, in
its
quantum
model. The size and the scope of the project that the plaintiff
contends would have been rolled out pursuant to the agreement
will
not only inform the
quantum
of the claim that is made but will resonate distinctly when statutory
concepts such as,
inter
alia
,
“future financial commitment”, “joint venture”
and the SAPO budgets are debated and decided.
35.3.5 The content of
paragraph 26.1 when read with paragraphs 86 - 90 of the founding
affidavit, evidence an attempt by NASASA
to “keep its powder
dry” on the size and scope of the intended project until the
issue of
quantum
arises.
35.4 SAPO believes it is
NASASA’s intention, by adopting such an approach, to remain
vague and uncommitted on the size and
scope of intended operations
when the issues of statutory compliance, “future financial
commitment”, etc are decided
and then to motivate a large scope
and roll out when its
quantum
is to
be decided. Such a tactical approach would be severely prejudicial
to SAPO, the public interest and the interest of justice.
35.5 The plaintiff’s
refusal to make proper discovery and to provide the particularity
requested by SAPO, following its late
application for separation,
constitutes a blatant attempt to engineer a separation through its
own default. Argument will be addressed
that the approach adopted by
the plaintiff should not be allowed to engineer a separation through
its unilateral disregard for
the Rules.”
80. In paragraph 36.2 of the answering
affidavit SAPO added that the evidence of the size and scope of the
intended roll out and
operation will be relevant in resolving the
issue of
res judicata
.
By that I understand it to mean that the court determining the
res
judicata
issue, if it
concludes that such determination involves an issue estoppel and
discretionary relaxation of the
eadem
petendi causa
and
eadem
res
requirements, would
need to be apprised of this evidence and information for the purpose
of deciding whether fairness, equity and
public policy justify
upholding a plea of issue estoppel. In other words, the evidence on
quantum
is
intertwined not only with the evidence on illegality, according to
SAPO, but also with the evidence on issue estoppel which,
as I have
found, is itself intertwined with that of illegality.
81. The new approach taken by SAPO in
its answering affidavit, compared to its stance in earlier
correspondence, and its refusal
to be drawn on a clear separation of
merits and
quantum
irked
NASASA somewhat, causing it to complain that SAPO had not answered
the allegations in the founding affidavit
ad
seriatim
and sufficiently.
I disagree. NASASA had not at that stage requested a separation of
merits and
quantum
,
and, in any event, SAPO set out its position quite clearly in
paragraph 35.3 of the answering affidavit. NASASA’s reply
to
paragraph 35.3 is concise. It disputed that it is uncertain about
how it is going to prove
quantum
and maintained that its particulars of claim contain significant
details reflecting the computation of
quantum
.
Yet, in paragraph 29.9 of the replying affidavit it seems to
acknowledge that it is indeed not ready to proceed on
quantum
.
There it states that demonstrating the actual amount of
quantum
involves locating and determining the appropriateness of source
documents within GloCell. Experts will also have to be engaged
to
formulate expert summaries, and it is concerned, understandably I
might add, that the related costs will be wasted if it is

unsuccessful on the merits. The reply does however not comment
directly on the point made in paragraph 36.2 of the answering
affidavit that NASASA’s evidence regarding the size and scope
of the intended roll out and operations will be relevant as
well in
deciding the discretionary issues in relation to the plea of
res
judicata
and issue
estoppel.
82. Two additional points are made in
reply, to which I have already alluded. The first is that the cost
to SAPO of complying with
its obligation, and thus the incurring of a
future financial commitment, is unrelated to the cost of NASASA
performing its obligations.
That may be true, but the evidence of
both cost structures may be needed to supplement the evidentiary
basis upon which the discretion
to relax the
res
judicata
requirements may
be exercised. Secondly, it was alleged that no facts were pleaded by
SAPO that would justify the refusal of issue
estoppel on fairness or
policy grounds. The proposed amendment seeks to cure that defect and
I leave consideration of the point
to my discussion of that
application.
83. A fuller case for separation of
merits and
quantum
is
made out in the three supplementary affidavits filed after NASASA
filed its amendment to the notice of motion to include the

alternative prayer. The founding supplementary affidavit, with
reference to the changed stance of SAPO and the alleged failure
of
SAPO to make out a proper case against separation, repeats the
assertion that there is no basis for refusing separation and
draws
attention to two further developments. The first is the practice
directive of the Deputy Judge President. The second is
that NASASA
has made headway in responding to SAPO’s request for
particulars and has made appropriate discovery appertaining
to the
issue of
quantum
.
84. The issue of
quantum
will undoubtedly be
difficult and complex requiring a considerable amount of evidence for
its resolution, and necessitating analysis
of thousands of pages of
documentary evidence and a parade of experts. The trial on
quantum
will be longer than the
trial on merits and if NASASA is unsuccessful on the merits,
quantum
could be avoided. Success
on separated merits could possibly have the advantage that
quantum
might be resolved through
negotiation and settlement, though, in my opinion, considering the
stance taken by SAPO thus far, such
an eventuality is unlikely. A
complex trial on
quantum
will inevitably follow.
That consideration is a significant factor militating against
separation especially when the merits, as
in this case, will not
involve much evidentiary complexity beyond the applicability to the
merits of the financial aspects normally
reserved when considering
quantum
.
85. SAPO contends that a trial on the
merits without clear particulars of the extent of the operations
would be unfair because there
exists the danger, apparent from the
pleadings and discovery, that the court will be faced with the
prospect of evaluating the
merits of the defences on a hypothetical
financial model of the operation roll out and (if the defences are
unsuccessful) determining
the
quantum
of the case on a different
model. Because there will be a significant correlation between
increasing sales and the increasing costs
of making those sales, the
scale of the operation could well be relevant to the application of
the statutory provisions. There
needs to be evidence about the
location of the outlets, the products to be sold at each location and
the
quantum
of
sales at each outlet. This evidence will feed into the determination
of materiality in relation to the existence of a future
financial
commitment, a significant business undertaking and a joint venture,
which might lead, if not to invalidity, to the contract
being
voidable at the instance of SAPO.
86. In annexure F to the particulars
of claim NASASA reflects that the
quantum
of its damages is based on
the assumption that an equal number of products would be sold in each
outlet. In its response to the
request for further particulars it
changes this assumption and alleges that sales predictions were done
on an average sales per
store basis and that average sales per store
for pre-paid products were assumed to be the same as the average
sales achieved by
GloCell stores during the same period. SAPO claims
the assumptions are wrong and take no account of the difference
between the
Post Office infrastructure and personnel and that of
GloCell and hence the likely sales volume in each outlet. NASASA
will probably
have to amend its quantity schedule to take account of
those differences. Hence, SAPO argues, the debates about legality,
voidability,
fairness and policy will best be served only once all
the evidence about the cost and scale of, and the variances in, the
operational
roll out are on record.
87. I agree with SAPO. The extent of
the damages claimed (R1,3 billion), the parties involved, the status
of the Post Office as
a public entity and the issues of public policy
and fairness that are infused in the defences of
res
judicata
, illegality and
unenforceability militate in favour of observing caution. This is
especially the case when the possibility exists
that the plaintiff
might gain an undue tactical advantage in putting its version. The
assessment of fairness and public policy
will be difficult, even
untenable, without a full appreciation of the business model upon
which the roll out would have occurred
across the different outlets.
NASASA should be expected to commit to a model and a particular
quantity schedule for the dual purpose
of assessing the arguments on
the merits and
quantum
.
Separation poses a risk of variance in the versions put forward at
the two different stages. Considering that SAPO may have
the duty to
begin in a separated trial on the merits of the defence, NASASA will
have the tactical advantage of delaying the formulation
of its
quantum
model
with a view to adapting it to the evidence elicited in the merits
hearing. Such a scenario undoubtedly will detract from
the ability
of the trial judge to do justice on the merits of the defences.
88. As regards the Practice Directive,
it is not correct, as SAPO has submitted, that it will apply only to
matters involving the
Road Accident Fund. The Directive specifically
states that it is applicable to “all claims for damages,
whether delictual
or contractual, and all matters where expert
notices and summonses must be delivered”. The laudable purpose
of the Directive
is to compel meaningful negotiations to settle
matters and delineate issues by appropriate pre-trial processes, in
the hope of
reducing the number of cases enrolled for trial. In
terms of paragraph 5.3 of the Directive where a first pre-trial
conference
does not settle the merits, “there will be an
automatic separation of merits and
quantum
in accordance with Rule
33(4) unless the parties agree that there will be no separation”.
I do not read this provision to
mean that except in those cases
where the parties agree not to separate merits and
quantum
,
a compulsory separation will be foist upon the party resisting
separation. There is no such thing as an automatic separation in

accordance with Rule 33(4) in such a guise. The intention is rather
that where there is a dispute about separation the parties
must at
that stage approach the court in terms of Rule 33(4) for a
determination of whether it is convenient to separate before
the
matter will be processed further. The application will be decided in
accordance with the substantive provisions of the rule
with the party
resisting separation bearing the onus of proving the convenience of
separation. In any event, if I am wrong in
my interpretation, the
Directive, in terms of paragraph 9.2, is only applicable from 31
January 2011. The interpretation advanced
by NASASA would be
restrictive of SAPO’s rights and I accordingly hesitate to
apply it retrospectively in exercise of my
discretion to determine
separation with particular regard to the convenience of the court in
contrast to the convenience of the
parties.
89. In the result, therefore, I am not
persuaded that the issue of
quantum
can be conveniently
separated from the merits of the action. The application for
separation accordingly should be dismissed. There
is no reason why
the costs should not follow the result. Taking account of the
obvious complexity the use of two counsel was justified.
The
application for amendment
90. It remains to deal with the
application to amend the rejoinder. The application and the
amendment seek to add matter to the
rejoinder filed in answer to
NASASA’s replication of
res
judicata
and/or issue
estoppel. The amendment amplifies upon the reasons for SAPO’s
denial of the estoppel. In the rejoinder SAPO
simply denied that
Sapire AJ had decided the legality issue. The amendment identifies
further matters for ventilation at trial
and does not introduce a new
dispute. It records elements which SAPO considers to be relevant for
the determination of the
res
judicata
and issue
estoppel.
91. The amendment intends to amend the
rejoinder by adding paragraph 3.3 after paragraph 3.2 of the
rejoinder. It reads:
“
3.3 For the
following reasons the judgment by Sapire AJ did not finally determine
any of the issues now in dispute between the parties,
including those
issues listed in paragraph 12 of the plaintiff’s replication:
(a) It was unnecessary to
decide whether there was a valid and binding agreement in view of the
learned judge’s refusal of
specific performance in the
application proceedings; the validity of the agreement was
accordingly not finally disposed of in the
application.
(b) None of the issues
now raised in paragraph 3 of the plea herein were considered or
decided by Sapire AJ, as the issues in the
application were different
from the issues now arising in this action; these issues would
require new evidence to be adduced upon
which such issues could be
considered and decided.
(c) Such new evidence
will include evidence as to: whether the relationship between the
plaintiff and the defendant was a significant
partnership, trust,
unincorporated joint venture or similar arrangement as referred to in
section 54(2) of the PFMA; whether that
relationship constituted a
significant business activity as referred to in section 54(2)(e) of
the PFMA; whether the board of directors
of the defendant informed
the relevant treasury of the agreement, promptly or at all, before
the agreement was concluded; whether
the board of directors of the
defendant submitted particulars of the transaction to the Minister of
Communications (its executive
authority), promptly or at all, before
the agreement was concluded; whether the obligations arising for the
defendant under the
agreement constituted a future financial
commitment as referred to in section 66(1) of the PFMA; the need for
permission by defendant’s
accounting authority as required by
section 66(3)(a) of the PFMA; whether Maanda Manyatshe had the
necessary authority to conclude
the agreement on behalf of the
defendant; whether the agreement was in truth a joint venture as
contemplated in the Post Office
Act and defendant’s Memorandum;
whether the Minister of Communications had given approval prior to or
after the conclusion
of the agreement, and whether the concurrent
approval of the Minister of Finance had been obtained prior to or
after the conclusion
of the agreement; whether the agreement was
entered into by the defendant represented by its board of directors,
or was approved
by defendant’s board of directors; the quantum
of any damages which might be recovered by the plaintiff if the
agreement
is enforceable.
(d) Considerations of
fairness and equity, both to the parties and to the country as a
whole dictates that
res
judicata
/issue
estoppel should not operate to prevent the defendant from raising
these defences in these proceedings, especially as the
defendant is
an organ of state which is ultimately dependent on state funding, and
which is subject to strict statutory controls
before entering into
commercial ventures with third parties such as that embodied in the
agreement; the quantum of the damages
claimed by the plaintiff
exceeds R1 billion and the defendant’s resources are required
to provide public services.”
92. NASASA argues generally that the
proposed amendment is premised on the wrong assumption that NASASA is
relying upon an “issue
estoppel in order to preclude reliance
on the defence of legal invalidity”. In its view there is in
fact a commonality of
cause of action and relief claimed and hence
there is no question of relaxing the strict requirements of
res
judicata
. As I explained
when discussing the separation application, it will be for the trial
judge to determine that question. NASASA
will have to prove its
allegation of strict
res
judicata
at trial. SAPO
has placed the question in issue and the pleadings allow for the
possibility of issue estoppel. The proposed amendment
amplifies the
denial and introduces other factors which SAPO alleges are relevant.
Likewise, the evidence to be admitted in deciding
whether fairness
and policy should permit an issue estoppel is a matter for the trial
judge.
93. The primary concern in considering
the amendment is to do justice between the parties by ensuring that
the pleadings delineate
the real issues between them. The party
seeking the amendment must explain the reason for it and that it is
bona fide
.
He must also show “
prima
facie
that he has something
deserving of consideration, a triable issue; he cannot be allowed to
harass his opponent by an amendment
which has no foundation” -
Trans-Drakensberg Bank Ltd
(under judicial management) v Combined Engineering (Pty) Ltd and
Another
1967 (3) SA 632
(DCLD) at 64H-641A.
94. NASASA challenges the allegation
contained in the proposed paragraph 3.3(a) as being at variance with
the language of the judgment
itself. NASASA did not go to court on
the main application solely for the purpose of obtaining an order of
specific performance.
It also specifically claimed and obtained an
order declaring that the agreement was valid and binding.
Accordingly, NASASA argues
that this paragraph of the proposed
amendment is excipiable because it is unsustainable in the face of
the judgment, the evidence
upon which it was based and the order
granted. SAPO did not petition the Supreme Court of Appeal after
Sapire AJ refused leave
to appeal and hence the issue has been
finally decided.
95. At first glance there is
compelling logic in NASASA’s submission. However, as I read
paragraph 3.3(a) the allegation
aims at putting in issue the
necessity of the finding relative to the order refusing specific
performance and hence that the alleged
lack of essentiality precludes
reliance on
res judicata
.
The allegation relies in part on a somewhat ambivalent statement in
the judgment of Sapire AJ in the main application to the
effect that
the declaratory relief “was strictly not necessary at the time
that the application was initiated”. Despite
that view, he
concluded that the alleged repudiation by SAPO entitled NASASA to a
ruling on the question of repudiation. But instead
of making a
declarator only that repudiation had occurred he also granted an
order declaring the contract valid. Moreover, in
his judgment in the
application for leave to appeal he pronounced that the question of
statutory invalidity was not decided in
the main application and
remains moot, with the result, in his view, that SAPO is not
prevented by issue estoppel or
res
judicata
from raising it in
the action. Whatever the merits of the allegation or the
pronouncements of Sapire AJ, the allegation in my view,
at the very
least, is deserving of consideration and
prima
facie
introduces a triable
issue, namely whether the alleged lack of necessity and the issue of
validity not raised or considered preclude
the defence of
res
judicata
or issue estoppel,
in the latter instance on the grounds of unfairness or public policy.
There will therefore be no harassment
of, or prejudice to, NASASA by
allowing this amendment.
96. The allegation in the proposed
paragraph 3.3(b) is directed specifically to the fact that Sapire AJ
did not decide the statutory
invalidity issues, as he stated in the
judgment in the application for leave to appeal. These issues, it is
alleged, did not arise
in the application. The issues in the
application were different from the issues arising in the action;
these issues would require
new evidence to be adduced upon which such
issues could be considered and decided. NASASA, besides denying the
cogency of the
defence of statutory invalidity, reiterates that these
issues were alive in the main application, despite the fact that
Sapire
AJ later said they were not.
97. Indeed, it is true, the question
of legal validity appears to have been contemplated by Ms Lefoka when
she wrote the letters
of 5 November 2004 and 5 February 2005. I am
not convinced, however, that NASASA pertinently raised the issue, as
Mr
Levenberg
submitted, in its founding affidavit in the main application and that
the absence of any
seriatim
response in the answering affidavit means in consequence that its
allegations of statutory validity are deemed to be admitted and
SAPO
is prevented from now seeking to contest the allegations that the
agreements were “not hit” by PFMA or POA. During

argument I was not referred to any paragraph in the founding
affidavit where any such allegation was made, and after careful
perusal
I have been unable to find one. In paragraphs 69 and 70 the
deponent deals with Ms Lefoka’s letter of 5 February 2005 in

which she alluded to the legislation (without making any precise
claim that the contract was invalid), but there is no clear averment

made that there had been no statutory contravention or that the
contract was “not hit” by the legislation and hence

valid. The point made in paragraph 70 is rather that the letter
constituted a repudiation. Whether or not
res
judicata
or issue estoppel
will operate ultimately to prevent traversing the statutory defences
is not of immediate concern. The pleading
of the fact in the
proposed paragraph 3.3(b) that they were not traversed and would
require additional evidence will be something
deserving of
consideration and a triable issue in deciding the
res
judicata
defence.
98. Paragraphs 3.3(c) and 3.3 (d)
furnish a synopsis of the issues that would be addressed by such new
evidence precognising the
court and NASASA of what SAPO considers
relevant in determining
res
judicata
and issue
estoppel. It addresses the factors that will be relevant to the
court exercising its discretion in weighing the competing
public
policy and public interest factors that arise from the facts of this
case.
99. NASASA takes issue with these
paragraphs on the grounds that insufficient factual basis is pleaded.
The paragraphs fail to
allege specific facts or surrounding
circumstances that demonstrate the alleged illegality, and, so it
submits, the paragraph is
excipiable because it is vague and
embarrassing in its failure to set up a factual basis to support the
conclusory allegations
set forth. As Mr
Levenberg
put it, the
paragraphs are “an open sesame to almost any evidence at all
and does not assist in defining the issues for trial”.
100. As a general rule, a pleading
contains sufficient particularity if it identifies and defines the
issues in such a way that
it enables the other party to know what
they are -
Nasionale
Aartappel Koöperasie Bpk v Price Waterhouse Coopers Ing
2001 (2) SA 790
(T) at 798F-799J. The material facts pertaining to
the alleged illegality of the agreement are clearly and concisely
stated in
paragraph 3 of SAPO’s plea, in which all the
essential allegations in support of the claim of illegality are made.
Therefore,
the proposed paragraph 3.3(c) implicitly pleads the same
facts and surrounding circumstances demonstrating the alleged
illegality
and lays down the “recipe” of the evidence
that will be led in respect of the facts and conclusions already
pleaded,
which, as I have found, are intertwined with the
res
judicata
defence. There
was no exception taken to the plea and there is no need for SAPO to
plead evidence when the material facts have
already been pleaded.
The
facta probanda
are
stated concisely in the plea. Paragraph 3.3(c) of the proposed
amendment alludes to the
facta
probantia
that in the
ultimate analysis will form the evidentiary substratum upon which a
conclusion that the
facta
probanda
have or have not
been established will be based. SAPO seeks to introduce these issues
to give notice of its intention to deal with
them in the context of
res judicata
which is an issue on the pleadings and to avoid a debate whether the
pleadings provide a basis for such evidence to be led. It
is
debatable, in light of the plea, whether it is necessary to go that
far on the pleadings, but I see no basis for challenging
the
bona
fides
or legitimacy of the
pleading which patently aims to elucidate the real issues in relation
to
res judicata
.
Accordingly, there is no merit in NASASA’s objection that
these paragraphs are irregular or excipiable for failing to plead
a
sufficient factual basis.
101. The other objections raised by
NASASA to the proposed paragraphs 3.3(c) and 3.3(d) are predicated
upon its assertion that the
res
judicata
defence it raises
is one
stricto sensu
and not one of issue estoppel. As I have indicated more than once,
such is an issue falling within the remit of the court called
upon to
decide the issue of
res
judicata
, the central
inquiry there being whether there is a commonality of cause of action
and relief claimed in the main application and
the action. If not,
as NASASA contends, then issue estoppel arises on the pleadings. The
debate about what issues are relevant,
and whether a public entity on
fairness and policy grounds may be granted leniency for neglecting to
raise the defence of statutory
invalidity earlier, are matters within
the province of the trial court adjudicating
res
judicata
. They are triable
issues by virtue of the plea, replication and rejoinder. Allowing an
amplification of these issues in the manner
proposed in the amendment
adds nothing to their merits or demerits, and will bring neither
prejudice nor harassment to NASASA.
The proposed amendment has
adequate foundation in the plea and hence should be allowed.
102. While it is true
that an amendment is an indulgence, the opposition to the amendment
loses sight of the fact that it seeks
primarily an amplification of
an
issue already on the pleadings and there being no need to plead
evidence. For that reason, rather than ordering the costs of
the
amendment to be costs in the cause, in this case costs should follow
the result.
103.
For
the foregoing reasons, the following orders are issued:
i)
The application for separation of certain issues in terms of Rule
33
(4)
and in terms of the notice of motion dated
31
March
2010
as
amended is dismissed.
ii)
The defendant is granted leave to amend its rejoinder in the manner
and on the terms set out in its notice of intention to amend
dated 23
June 2010.
iii)
The plaintiff is ordered to pay the costs of both applications, such
costs to include the costs occasioned by the employment
of two
counsel.
JR
MURPHY
JUDGE
OF THE HIGH COURT
Date
Heard: 27 & 28 July 2010
For
Applicant Adv P Levenberg SC, Adv G Kairinos,Johannesburg
Instructed
By:
Werksmans
Attorneys, Johannesburg
For
the Respondent: Adv A Burger SC, Adv D Turner, Johannesburg
Instructed
By: Read Hope Phillips Thomas & Cadman Inc., Johannesburg