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[2013] ZASCA 169
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Hyprop Invesments Ltd v NSC Carriers and Forwarding CC and Others (935/12) [2013] ZASCA 169; [2014] 2 All SA 26 (SCA); 2014 (5) SA 406 (SCA) (27 November 2013)
THE SUPREME COURT OF APPEAL OF
SOUTH AFRICA
JUDGMENT
REPORTABLE
Case
No: 935/12
In the
matter between:
HYPROP
INVESTMENTS LIMITED
.....................................................
FIRST
APPELLANT
ABLAND
(PTY) LTD
........................................................................
SECOND
APPELLANT
FRANSIE GOUWS
...............................................................................
THIRD
APPELLANT
NICOLE
MARY GREENSTONE
......................................................
FOURTH
APPELLANT
and
NSC
CARRIERS AND FORWARDING CC
......................................
FIRST
RESPONDENT
NORBERTO
JOSE DOS SANTOS COSTA
................................
SECOND
RESPONDENT
NUEVO
LATINA RESTAURANTS CC
.............................................
THIRD
RESPONDENT
COSTA
AND PANICCO CC
.........................................................
FOURTH
RESPONDENT
Neutral
citation:
Hyprop Invesments v NSC Carriers
(935/12)
[2013]
ZASCA 169
(27 November 2013)
Coram:
Lewis, Theron, Willis JJA and Van der Merwe and Meyer
AJJA
Heard:
13 November 2013
Delivered: 27 November 2013
Summary:
The three requirements of the exceptio rei judicata will not be
relaxed so as to allow a plea of issue estoppel where that
would
result in inequity.
ORDER
On appeal from
South Gauteng High Court, Johannesburg
(Sutherland J sitting as court of first instance):
The appeal is dismissed with costs.
JUDGMENT
Lewis JA (Theron and Willis JJA and Van der Merwe and Meyer AJJA
concurring)
:
[1] Hyprop Investments Ltd (Hyprop), the first appellant, is a
property developer specializing in the construction and running
of
shopping centres. Together with the second appellant, Abland (Pty)
Ltd (I shall refer to them both as Hyprop), it entered into
two
agreements of lease with the first two respondents, NSC Carriers and
Forwarding CC (NSC), and Norberto Costa, who is also the
representative of NSC and a member of it, in respect of two shops in
a shopping centre that was not yet completed – Stoneridge
Centre, Modderfontein. The third and fourth respondents, also close
corporations connected with Costa, proposed to run an ‘upmarket’
Portuguese restaurant in the one shop, and a gift shop and
tobacconist in the second. Costa bound himself as surety in respect
of both leases.
[2] NSC took occupation of the premises in September 2008, but did
not pay the rent or other charges. It did, however, effect
improvements to the shops, fitting them as a restaurant and gift shop
respectively. A term of the leases precluded it from recovering
compensation for improvements. On 3 February 2009 Hyprop cancelled
the leases because of NSC’s failure to pay rental. On
23 March
2009 Hyprop applied to the South Gauteng High Court for an order
confirming the cancellation of the leases, ejectment
of NSC and
payment of rental in the sums of R711 208 and R88 794 for the two
shops. The high court (Mokgoatlheng J) rejected the
various defences
raised by NSC and Costa and granted the orders sought in April 2009.
It also refused leave to appeal against its
judgment. NSC and Costa
applied for leave to appeal to this court, which also refused leave,
in September 2010.
[3] In April 2011 NSC and Costa, together with the third and fourth
respondents, instituted action against Hyprop and two of its
employees (the third and fourth appellants) claiming damages for
fraudulent misrepresentation. Hyprop and the other respondents
raised
four special pleas: that the cause of action pleaded had been
adjudicated by the high court in the application for ejectment
–
a plea of res judicata; that the third and fourth respondents had not
been party to either of the lease agreements; that
the third and
fourth appellants, employees of Hyprop, had not represented it when
concluding the lease agreements and did not owe
NSC and Costa a ‘duty
of care’; and that if any of those pleas should fail, then NSC
should be barred from claiming
since it had not yet satisfied the
judgment against them.
[4] By agreement between the parties the high court (Sutherland J)
ruled, pursuant to rule 33(4), that the special pleas be adjudicated
separately. The high court rejected each of these, but gave leave to
appeal against its orders to this court. I shall deal principally
with the plea of res judicata since Hyprop concedes that the orders
in respect of the second and fourth pleas are not final and
therefore
not appealable. (I shall deal with the general question of
appealability briefly later.)
[5] Sutherland J held that the plea of res judicata was in effect
issue estoppel, since in the application what had been sought
was an
order confirming cancellation, payment of arrear rental and
ejectment, defended on the basis of alleged misrepresentations
made
by the appellants, whereas the relief sought in the action was
damages for fraudulent representation. The same issues arose,
however, in the action. There is no doubt that issue estoppel as a
variant of res judicata is now firmly embedded in our law,
1
and that the court apprised of it has a discretion whether to allow
the plea to preclude the later claim. Before turning to the
principles in respect of issue estoppel, I shall deal first with the
defences raised by NSC and Costa in the application and the
basis for
granting it advanced by Mokgoatlheng J.
[6] The claims for ejectment and arrear rental and other charges were
opposed by NSC and Costa. They asserted that the leases had
been
induced by the misrepresentations of representatives of Hyprop and
that Hyprop was in breach of the leases in a number of
respects.
During discussions with them, they had represented to Costa, inter
alia, that Stoneridge would be an ‘upmarket’
shopping
centre with upmarket tenants and was almost fully let. These
representations had turned out to be false. A brochure for
Stoneridge
and plans, he said, induced NSC into signing the lease agreements.
These documents indicated that the centre would be
entirely roofed
which turned out not to be the case. The building did not reflect the
plans, which, said Costa, were deliberately
used to induce him to
sign the leases on behalf of NSC. Costa also alleged a number of
breaches of tacit terms of the leases, in
particular that Hyprop had
obtained consent for the building plans of Stoneridge and an
occupational certificate in respect of
the premises.
[7] Costa annexed the brochure and the plans as well as the report of
an architect to demonstrate that Stoneridge as built did
not live up
to the representations in the brochure and to demonstrate the
breaches of the leases of which Hyprop was guilty. He
also annexed
copies of correspondence between himself and Hyprop employees that
showed that his complaints about the building preceded
taking
occupation of the premises, and that he could not open the restaurant
because the gas supply had not been provided timeously.
[8] Costa concluded by stating that he had (through his attorneys)
cancelled the lease, that the suretyship he had signed was
accordingly also invalid and that he would be claiming damages. The
attorney’s letter, attached to Costa’s affidavit,
did
indeed state that the client, the third respondent, had elected to
cancel the lease because of Hyprop’s breaches and
misrepresentations and that it claimed damages for breach in the sum
of approximately R8.5 million in respect of ‘damages
suffered’.
It did not specify whether the damages arose from breach of contract
or as a result of the fraudulent misrepresentations
made.
[9] Hyprop denied that the defences had any legal validity. It relied
on various clauses in the leases that precluded NSC and Costa’s
claims: in particular a clause that recorded that the written
agreements constituted the entire contract and that there were no
prior representations or warranties made that induced the contracts,
and another that exempted Hyprop from liability for representations.
[10] Mokgoatlheng J confirmed the cancellation of the leases (as all
parties were agreed that they had been cancelled) and ordered
NSC to
vacate the shops. He also ordered payment of the amounts claimed by
Hyprop in respect of arrear rentals and charges. The
learned judge
found that the terms of the leases precluded reliance on the
misrepresentations alleged. And that the fraudulent
misrepresentations were ‘a patent recent fabrication . . . a
chimera, a mirage and proffered as a last refuge by the respondents
in order to salvage a lost cause’. Moreover, said the learned
judge, ‘prior representations, warranty, promises, or
the like
do not and cannot bind the applicants [Hyprop]’ being
‘extraneous the lease agreement’.
[11] This finding is of course erroneous. A misrepresentation by its
nature is extraneous to the contract that it induces. Unless
incorporated as a term of the contract (a warranty) it does not
become a part of the contract. That does not mean that it is not
actionable as a misrepresentation. And since NSC and Costa alleged
fraudulent misrepresentation the terms of the contract could
not
exempt the maker of the fraudulent misrepresentations from liability.
The principle, explained many decades ago by Innes CJ
in
Wells v
South African Alumenite Company
,
2
is that, in the absence of fraud, exemptions from liability for
misrepresentations are binding. Misrepresentations made fraudulently
are actionable in delict. The learned Chief Justice said:
‘
On grounds of public
policy the law will not recognise an undertaking by which one of the
contracting parties binds himself to condone
and submit to the
fraudulent conduct of the other. The Courts will not lend themselves
to the enforcement of such a stipulation;
for to do so would be to
protect and encourage fraud.’
[12] The high court did not consider the disputes of fact that arose
on the papers. It assumed that the averments made by NSC and
Costa
were groundless. Nonetheless the orders that it made for ejectment
and payment of arrear rentals were not incorrect: NSC
and Costa
claimed themselves to have cancelled the leases, and were thus not
able to defend the claims for ejectment nor for arrear
rentals and
charges. And that, no doubt, is why this court refused the
application for leave to appeal against the judgment of
Mokgoatlheng J.
[13] The trial court in the action for damages characterized the
first special plea of Hyprop as ‘issue estoppel’ and
the
parties do not question that, although of course Hyprop maintains
that it operates to preclude the action for damages whereas
NSC and
Costa argue that it does not. This court has most recently confirmed
the application of issue estoppel in
Prinsloo NO & others v
Goldex 15 (Pty) Ltd & another
.
3
[14] Brand JA pointed out that the plea of res judicata – that
the matter has already been decided – was available
where the
dispute was between the same parties, for the same relief or on the
same cause (in Voet’s
4
words
idem actor, idem res et eadem causa petendi
). The
requirements have been relaxed over the years and where there is not
an absolute identity of the relief and the cause of
action, the
attenuated defence has become known as issue estoppel –
borrowing the term from English law. The relaxation and
the
application of issue estoppel effectively started in the
Boshoff
matter where Greenberg J referred to Spencer-Bower’s work on
Res Judicata
.
5
In
Smith v Porritt
6
Scott JA explained the evolution of the defence as follows:
‘
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. . . . Relevant
considerations will include questions of equity and
fairness not only
to the parties themselves but also to others . . . .’
[15] The facts in
Prinsloo
are instructive for this matter is
largely similar. In October 2004, a trust, represented inter alios by
Prinsloo, sold a farm
in the Limpopo province for R2.6 million to
Goldex, represented by one Scheepers. In February 2005 Goldex
cancelled the sale on
the basis that Prinsloo had fraudulently
represented to Scheepers that there had been no claims for the
restitution of land in
terms of the
Restitution of Land Rights Act 22
of 1994
in respect of the farm. This was a matter of considerable
importance to Goldex and had actually been recorded in the deed of
sale,
a clause of which stipulated that the seller was not aware of
any claim in respect of the farm. There had in fact been a claim made
by a community and Goldex maintained that Prinsloo must have been
aware of this.
[16] The trust brought an application for an order compelling Goldex
to pay the purchase price and take transfer of the farm. Scheepers,
in his answering affidavit filed on behalf of Goldex, stated that
Goldex was entitled to cancel the sale because he had told Prinsloo
prior to concluding the contract that he would not be interested in
buying the farm if a land claim in respect of the farm had
been
lodged. Prinsloo had assured him that he was not aware of any claim.
In reply, Prinsloo admitted that there had indeed been
a claim lodged
but asserted that he had not been aware of it.
[17] The high court before which the application served found as a
fact on the papers that Prinsloo had had full knowledge of the
land
claim, and had thus acted fraudulently. The application was
accordingly dismissed. Leave to appeal against that judgment was
refused by the high court and also by this court. Goldex subsequently
sued the trust for damages suffered as a result of the fraudulent
conduct of Prinsloo. The trust raised as a defence the lack of
knowledge on the part of Prinsloo of the land claim. Goldex raised
the exceptio rei judicata in a replication. The defence was
adjudicated by the high court determining the action proceedings. It
upheld the defence, and the trust, again represented by Prinsloo,
appealed against that judgment.
[18] Brand JA, on appeal to this court, considered that the matter
turned on issue estoppel. The application had presupposed the
validity of the sale whereas the action was based on the supposition
that the sale no longer existed. Yet the issue was the same:
did
Prinsloo know there was a land claim in respect of the farm when he
gave Scheepers an assurance to the contrary? Thus, said
the learned
judge, ‘this gives rise to a classic case of potential issue
estoppel in the same mould as in
Boshoff v Union Government .
. .
’.
7
[19] Prinsloo argued in that matter that the application of issue
estoppel would result in unfairness for two reasons: it was not
necessary for the high court to determine the question of fraud in
order to dismiss the application, and, secondly, that the disputed
fraud should not have been determined in motion proceedings without
the benefit of cross-examination and the discovery of documents.
Brand JA considered both reasons to be sound. In essence he found
that it was inappropriate to determine the question of fraud
against
Prinsloo on the basis of untested allegations on paper.
[20] This court in
Prinsloo
decided that where relaxation of
the three requirements of res judicata would lead to inequity, issue
estoppel should not preclude
a later claim that arises from the same
issues. Brand JA concluded that the high court in that matter had
erred in allowing issue
estoppel to preclude Goldex’s action
for damages. He did warn, however, that each case is fact-specific:
‘its application
cannot be governed by fixed principles or even
by guidelines’. Thus issue estoppel ‘should be considered
on a case-by-case
basis’ and that ‘deviation from the
threefold requirements of
res iudicata
should not be allowed
when it is likely to give rise to potentially unfair consequences in
the subsequent proceedings’.
8
[21] In the court a quo in this matter Sutherland J considered that
Mokgoatlheng J in the application proceedings had made a finding
of
fact on the fraud alleged by NSC and Costa, and that he was unable to
conclude that it was wrong. He did not accept the argument
raised by
Hyprop that that judgment was confirmed when this court refused leave
to appeal against it. That view is correct. The
mere fact that an
appeal court does not grant leave to appeal to it does not mean that
it necessarily confirms the correctness
of the judgment in the court
below. The court that refuses leave has not heard debate on the
issues and does not give a fully reasoned
judgment as to why there
are no real prospects of success on appeal.
9
Moreover, the appeal lies against the order and not against the
reasoning.
[22] In
Prinsloo
, on the other hand, Brand JA did regard the
finding of the court on the allegation of fraud as incorrectly made.
Although Sutherland
J in this case considered that there were no
disputes of fact and the case made for fraudulent misrepresentation
was not made out,
the prospect of unsuiting NSC and Costa on the
papers alone, where a trial might yield a different result, was a
substantial factor
to be taken into account in deciding not to relax
the requirements of the plea of res judicata. The learned judge
considered that
he had to exercise a discretion in this regard and
that the fact that the question of fraud had been determined on the
papers alone
was sufficient to justify the dismissal of the special
plea. He added, however, that he was not laying down a general
principle
that whenever a trial action follows upon an application a
res judicata plea would fail.
[23] In my view, Sutherland J exercised his discretion not to apply
issue estoppel judicially. Mokgoatlheng J not only made a finding
on
the absence of fraud where the evidence had not been properly tested:
he also considered that reliance on fraudulent misrepresentations
was
precluded by the terms of the contract. If that were to bind NSC and
Costa, and prevent them from suing for loss suffered as
a result of
the misrepresentations, issue estoppel would operate most
inequitably. The statement that the allegations of fraud
were an
afterthought and not supported by any evidence is not supported by
what Sutherland J referred to as the ‘mountain
of paper’
that NSC and Costa produced in support of their allegations of
fraudulent misrepresentations. And the fact that
they elected to
abide by the lease agreements had no bearing on whether they were
entitled to sue for damages in delict. Hyprop
could not, as I have
said, exempt itself from liability for fraud. It would be
inequitable, in my view, if NSC and Costa were not
entitled to have
their claims in delict adjudicated in terms of the correct principles
of law. As Brand JA said in
Prinsloo
‘it would be
patently inequitable and unfair to hold the appellants bound to’
inappropriate findings in another forum.
10
I therefore agree with Sutherland J that the special plea of res
judicata has to fail.
[24] In so far as the remaining special plea in issue on appeal is
concerned – that the third and fourth appellants (employees
of
Hyprop) were not properly joined – that too is a question that
must be determined in favour of the respondents. The argument
of
Hyprop was that these respondents were not parties to the contract
and owed no duty of care to NSC, Costa or the other respondents.
That
plea also raised res judicata in the sense that Hyprop argued that
the issue of fraudulent misrepresentation had been adjudicated
in the
application. It too must fail for the reasons given. The other basis
for the plea – that the employees of Hyprop were
not parties to
the contracts, only representatives – also cannot be sustained
since no contractual claim was in issue as
between the parties in the
action. If NSC and Costa can prove that they acted fraudulently then
a claim against them in delict
for fraudulent misrepresentation might
well be proved.
[25] That brings me to the question of appealability. This court
raised with the parties the question whether the appeal should
be
heard given that there were issues still to be ventilated between
them, and the principle that there should not be a piecemeal
approach
to litigation. In the ordinary course the trial would have proceeded
and the decisions made there would possibly be appealed
against in
due course. The question thus is whether the hearing of this appeal
would lead to a just and reasonably prompt resolution
of the issues
between the parties.
11
[26] All parties argued at the hearing of the appeal that because the
issues decided by Sutherland J had been separated at the
commencement
of the trial and ruled upon separately, it was convenient for those
issues to be determined before the trial resumed.
In particular, if
the appeal against the plea of res judicata were to succeed, then, at
least as against Hyprop, the trial would
not proceed. The balance of
convenience thus favours an appeal, at least on the question of res
judicata, and no argument was advanced
against it by the parties. The
third special plea falls to be dealt with on the same basis and the
remaining pleas and findings
of the high court in respect of them, as
I have said, were conceded to be unappealable.
[27] Since I have determined that res judicata (issue estoppel) does
not bar the action brought by NSC and the other respondents
they may
proceed to trial.
[28] The appeal is dismissed with costs.
_________________
C H LEWIS
JUDGE OF APPEAL
APPEARANCES:
For
the Appellant: A Subel SC (with him M Nowitz)
Instructed
by:
Nowitz
Attorneys, Johannesburg
Honey
Attorneys, Bloemfontein
For the Respondent: G Kairinos
Instructed by:
E DA C Luiz Attorneys, Johannesburg
Hugo & Bruwer Attorneys, Bloemfontein
1
Boshoff
v Union Government
1932 TPD 345
and
Kommissaris van
Binnelandse Inkomste v Absa Bank Bpk
1995 (1) SA 653
(A).
2
Wells
v South African Alumenite Company
1927 AD 69
at 72 and 73.
3
Prinsloo
NO & others v Goldex 15 (Pty) Ltd & another
[2012] ZASCA
28.
See also
Caesarstone Sdot-Yam Ltd v The World of Marble and
Granite 2000 CC
[2013] ZASCA 129
paras 20-22.
4
42.1.1.
5
Now
Spencer-Bower and Handley
Res Iudicata
4 ed.
6
Smith
v Porritt
2008 (6) SA 303
(SCA) para 10, quoted also in
Prinsloo
v Goldtex
para 10.
7
Para
11.
8
Para
26.
9
See
Independent Outdoor Media & others v The City of Cape Town
[2012] ZASCA 46
paras 7 and 8.
10
Para
27.
11
Health
Professions Council v Emergency Medical Supplies and Training CC t/a
EMS
2010 (6) SA 469
(SCA) paras 15 to 22 and the cases there
cited.