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[2012] ZASCA 28
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Prinsloo NO and Others v Goldex 15 (Pty) Ltd and Another (243/11) [2012] ZASCA 28; 2014 (5) SA 297 (SCA) (28 March 2012)
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THE SUPREME COURT OF APPEAL OF
SOUTH AFRICA
JUDGMENT
REPORTABLE
Case No: 243/11
In the matter between:
NICOLAAS MARTHINUS PRINSLOO NO
…................................
FIRST
APPELLANT
JOHANNA JACOBA DE BRUIN NO
…....................................
SECOND
APPELLANT
NICOLAAS MARTHINUS PRINSLOO
…......................................
THIRD
APPELLANT
v
GOLDEX 15 (PTY) LTD
….........................................................
FIRST
RESPONDENT
JACOBUS WYNAND SCHEEPERS
….................................
SECOND RESPONDENT
Neutral citation:
Prinsloo
NO v Goldex 15
(243/11)
[2012] ZASCA 28
(28 March 2012).
Coram:
Brand JA, Cachalia
JA, Mhlantla JA, Wallis JA
et
Boruchowitz AJA
Heard:
14 March 2011
Delivered: 28 March 2011
Summary: Plea of
exceptio rei
iudicata
in the form of issue estoppel ─ not allowed where
prospect that it would deprive defendant of fair hearing in
subsequent proceedings.
________________________________________________________________
ORDER
________________________________________________________________
On appeal from:
North Gauteng
High Court, Pretoria (Pretorius J sitting as court of first instance)
it is ordered that:
(a) The appeal is upheld with costs.
(b) The order of the court a quo is
set aside and replaced with the following:
‘
The
defendants’ plea of
res
iudicata
in the form of issue estoppel is dismissed with costs.’
________________________________________________________________
JUDGMENT
________________________________________________________________
BRAND JA
(
CACHALIA JA,
MHLANTLA JA, WALLIS JA
ET
BORUCHOWITZ AJA
CONCURRING)
:
[1] The respondents instituted an
action against the appellants in the North Gauteng High Court for
damages allegedly resulting
from a fraudulent misrepresentation made
in connection with the sale of a farm. The appellants denied the
allegations of fraud
on which the respondents rested their claim. The
respondents thereupon raised a plea of
res iudicata
in the
form of what has become known as issue estoppel. When the matter came
before Pretorius J in the court a quo, the parties
sought and
obtained an order from her that the special defence of
res
iudicata
should be dealt with at the outset and before the
hearing of any evidence. At the end of these preliminary proceedings,
Pretorius
J upheld the plea of
res iudicata
with costs. The
present appeal against that judgment is with the leave of the court a
quo.
[2] The appeal therefore turns on the
question whether, in the light of the facts and circumstances of this
case, the plea of
res iudicata
was rightly upheld. For present
purposes those facts and circumstances are not in dispute. Shorn of
unnecessary detail, they are
as follows. The first two appellants, Mr
N M Prinsloo and Ms J J de Bruin NNO, appear in their representative
capacities as trustees
of the NM Prinsloo trust. The third appellant
is the same Mr Prinsloo, this time in his personal capacity. The
first respondent,
Goldex 15 (Pty) Ltd, is a company of which the
second respondent, Mr J W Scheepers, is the sole director and
shareholder. For the
sake of convenience, I shall refer to the trust
represented by the first two appellants as ‘the trust’;
to the third
appellant as ‘Prinsloo’; to the appellants
jointly as ‘the appellants’; to the first respondent as
‘Goldex’;
to the second respondent as ‘Scheepers’;
and to the respondents jointly as ‘the respondents’.
[3] Pursuant to a written deed of sale
entered into on 4 October 2004, the trust sold the farm Rykdom in the
Limpopo province to
Goldex for R2,6 million. During the negotiations
preceding the sale, the trust was represented by Prinsloo and Goldex
by Scheepers.
During February 2005 Scheepers purported to cancel the
sale on behalf of Goldex, essentially on the basis of fraudulent
representations
allegedly made by Prinsloo on behalf of the trust
during the negotiations preceding the sale.
[4] In reaction to Goldex’s
purported cancellation of the sale, the trust brought an urgent
application in the North Gauteng
High Court for an order compelling
Goldex to take transfer of Rykdom against payment of the agreed
purchase price. The answering
affidavit on behalf of Goldex was
deposed to by Scheepers. In broad outline, the alleged fraudulent
misrepresentation he relied
upon for cancellation of the sale
amounted to the following. Prior to the sale, so Scheepers said, he
made it clear to Prinsloo
that he would not be interested in buying
the farm if any claim had been lodged against it in terms of the
Restitution of Land Rights Act, 22 of 1994
, referred to for the sake
of brevity, simply as ‘land claims’. Prinsloo thereupon
gave him the assurance that he was
not aware of any such claim. So
important was this representation, Scheepers contended, that the
parties specifically stipulated
in clause 18 of the deed of sale,
that the seller was not aware of any land claim against the property.
Contrary to these assurances,
so Scheepers said, it transpired after
the sale that a land claim had indeed been lodged in respect of
Rykdom by the Mapela community.
Moreover, so Scheepers contended, the
circumstances were such that Prinsloo must have been aware of this
claim at the time and
that his misrepresentation was therefore
fraudulently made.
[5] In the replying affidavit by
Prinsloo on behalf of the trust, he admitted that he gave Scheepers
the assurance that there was
no land claim against Rykdom and that
this assurance subsequently proved to be erroneous. He denied,
however, that he was aware
of the land claim which had indeed been
lodged against Rykdom when he gave Scheepers the assurance to the
contrary. In the absence
of fraud, so Prinsloo contended, Goldex was
bound by an express provision in the deed of sale, not to rely on any
representation
by the seller with regard to the property sold which
turned out to be untrue.
[6] In the event, the urgent
application was dismissed by Webster J. In the course of his
judgement he formulated the dispute for
determination, as he saw it,
thus:
‘
The
issue between the parties is whether [Prinsloo] is guilty of having
made a material fraudulent misrepresentation to the director
of
[Goldex] that no valid land claim had been made or was pending in
relation to the property, when the agreement of sale was entered
into
by the parties.’
[7] In determining that issue, Webster
J subjected the affidavits before him to a detailed analysis. This
led him to the following
finding:
‘
It
is my considered view that [Prinsloo], when he entered into a written
agreement of sale of the farm did so in the full knowledge
that the
farm was the subject of a land claim and that he deliberately
withheld this information from Scheepers, the representative
of
[Goldex].’
[8] Following upon the dismissal of
its urgent application, the trust unsuccessfully sought leave from
Webster J to appeal against
his judgment. A subsequent application by
the trust to this court for leave to appeal, met with the same fate.
This marked the
end of the trust’s endeavour to compel specific
performance of the sale. However, as it turned out, it did not mark
the end
of litigation resulting from the sale. What then followed was
the action by the respondents against the appellants for damages
which eventually gave rise to this appeal.
[9] As I have indicated by way of
introduction, the action by the respondents against the appellants,
jointly and severally, was
for delictual damages allegedly suffered
by both Goldex and Scheepers as a result of Prinsloo’s
fraudulent misrepresentation
on behalf of the trust. In their
particulars of claim the appellants again relied on the allegation
that, during the course of
negotiations preceding the sale, Prinsloo
represented to Scheepers that he was unaware of any land claim in
respect of Rykdom,
which representation turned out to be false in
that, at the time, Prinsloo was indeed aware of the existence of such
claim. These
allegations were denied by the respondents in their
plea. This gave rise to a replication by the respondents that, in the
light
of the earlier judgment by Webster J, the appellants were
estopped from denying these allegations by the
exceptio rei
iudicata.
This contention, as we now know, was upheld by
Pretorius J in the court a quo. Hence the crisp issue on appeal is
confined to whether
that decision should be endorsed by this court.
[10] The expression ‘
res
iudicata
’ literally means that the matter has already been
decided. The gist of the plea is that the matter or question raised
by
the other side had been finally adjudicated upon in proceedings
between the parties and that it therefore cannot be raised again.
According to Voet 42.1.1, the
exceptio
was available at common
law if it were shown that the judgment in the earlier case was given
in a dispute between the same parties,
for the same relief on the
same ground or on the same cause (
idem actor, idem res et
eadem causa petendi
(see eg
National Sorghum Breweries Ltd
(t/a Vivo African Breweries) v International Liquor Distributors
(Pty) Ltd
[2000] ZASCA 159
;
2001 (2) SA 232
(SCA) at 239F-H and the cases there
cited). In time, the requirements were, however, relaxed in
situations which give rise to what
became known as issue estoppel.
This is explained as follows by Scott JA in
Smith v Porritt
2008 (6) SA 303
(SCA) para 10:
‘
Following
the decision in
Boshoff
v Union Government
1932
TPD 345
the ambit of the
exceptio
res iudicata
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
iudicata
is
raised in the absence of a communality 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, 667J-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
iudicata
.
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 (supra)
at
67E-F). Relevant considerations will include questions of equity and
fairness, not only to the parties themselves but also to
others. . .
. ‘
[11] In this case it is clear that the
relief claimed by the trust in its urgent application was different
from the relief claimed
by the respondents in the action under
consideration. In a sense, the one can be said to be the converse of
the other. While the
application by the trust presupposed the
validity of the sale, the present action is based on the supposition
that the sale no
longer existed. Yet, the pertinent issue decided by
Webster J is virtually the same as in this action, namely: did
Prinsloo know
there was a land claim against Rykdom when he gave
Scheepers the assurance to the contrary? As I see it, this gives rise
to a classic
case of potential issue estoppel in the same mould as in
Boshoff v Union Government (supra)
where the concept of issue
estoppel was introduced by that name into our case law for the first
time. What Greenberg J held in that
case was essentially that the
plaintiff’s claim for damages arising from the alleged wrongful
cancellation of a lease was
precluded by an earlier finding in a
successful application by the defendant for the plaintiff’s
ejectment, that the lease
had been validly cancelled.
[12] The appellants’ argument as
to why the plea of
res iudicata
in the form of issue estoppel
was wrongly upheld in this case, was essentially twofold. First, they
contended that the ‘same
persons’ requirement had not
been met in that neither Prinsloo nor Scheepers were parties in the
urgent application proceedings.
Secondly, they relied on the
proposition that it was unnecessary and inappropriate for Webster J
to make findings of fraud on the
basis of disputed allegations in
motion proceedings, in order to dispose of the application. In the
circumstances, so the appellants
contended, it would be unjust and
unfair to hold them bound by these unnecessary and inappropriate
findings in the present case.
I propose to deal with these two
arguments in turn.
[13] As to the first argument, it
appears that even at common law, the ‘same persons’
requirement was not taken literally
to mean only the identical
individuals concerned in both proceedings. As pointed out by this
court in
Amalgamated Engineering Union v Minister of Labour
1949
(3) SA 637
(A) at 654:
‘
.
. . Voet (44.2.5) . . . gives a list of parties who are regarded in
law as being the same for the purpose of the rule that
res
iudicata
can
be pleaded only when the parties to the previous suit have been the
same as in the present one. He mentions, inter alios, a
deceased and
his heir, principal and agent, a person under curatorship and his
curator, a pupil and his tutor . . . ‘
(See also Joubert (ed)
the Law of
South Africa
Vol 9 2ed para 637 and the cases there cited.)
[14] Based on these authorities it was
held in
Man Truck & Bus SA (Pty) Ltd v Dusbus Leasing CC
2004
(1) SA 454
(W) para 39 that the sole member and controlling mind of a
close corporation is bound by a decision in earlier proceedings
against
the close corporation. Relying on
Mann Truck & Bus SA
,
in turn, the court a quo held Prinsloo bound to Webster J’s
decision against the trust. The appellants’ argument that
the
court a quo had erred in doing so rested mainly on the proposition
that persons litigating in their personal capacity are not
bound by
earlier decisions against them when they were acting as
representatives of another.
[15] The general proposition relied
upon by the appellants appears to be supported by authority (see eg
Shokkos v Lampert
1963 (3) SA 421
(W) at 426 (A);
LAWSA
,
op cit
para 639; Spencer Bower and Handley
Res Iudicata
4ed
para 9.22). But, in my view, these authorities do not contemplate the
situation that arose in this case. In this case Prinsloo
not only
represented the trust, he was the controlling mind of that entity. It
would therefore surprise me if the controlling mind
were not bound by
an earlier decision that he committed fraud, while the mindless body
of the trust was held bound by that finding.
But, be that as it may.
In the view that I hold on the appellants’ further argument
based on fairness and equity, I find
it unnecessary to decide this
issue which, in any event, relates to Prinsloo only. I therefore
proceed on the assumption that Prinsloo’s
position with regard
to the application of issue estoppel is no different from that of the
trust.
[16] The appellants’ argument
that the application of issue estoppel in these proceedings would
result in unfairness and inequity
derives from two hypotheses. First,
that it was not necessary for Webster J to arrive at any final
decision as to whether or not
Prinsloo committed fraud in order to
dismiss the trust’s application to compel specific performance.
Secondly, that Webster
J could not and should not have decided the
disputed issue of whether fraud was committed on motion proceedings
without the benefits
inherent in the hearing of oral evidence,
including discovery of documents, cross-examination of witnesses and
so forth.
[17] I think both these propositions
are well supported by authority. As to the first, the trite position
is that, as a general
rule and save in exceptional circumstances,
disputes of fact arising on affidavit cannot be finally determined on
the papers. The
concomitant rule is that in the event of material
factual disputes arising on affidavit in motion proceedings, the
applicant can
only succeed in those exceptional circumstances where
the respondent’s version of the disputed facts can safely be
rejected
on the papers as farfetched or untenable (see eg the oft
quoted passage in
Plascon-Evans Paints Ltd v Van Riebeeck Paints
(Pty) Ltd
1984 (3) SA 620
(A) at 634E-635C). The dispute of fact
that arose in the motion proceedings before Webster J fell outside
the ambit of the exceptional
circumstances envisaged by the
authorities. The allegations of fraud against Prinsloo which Goldex
raised in answer to the application
by the trust, could hardly be
described as so farfetched or untenable that they could be rejected
on the papers and it was not
suggested that they should. The
application for final relief by the trust was therefore doomed to
fail. On that basis and that
basis alone Webster J was bound to
dismiss the application with costs. That is obviously also why this
court refused the trust’s
application for leave to appeal.
Appeals are not aimed at the reasoning but at the order of the lower
court. Whether or not the
court of appeal agrees with the lower
court’s reasoning is therefore of no consequence, if the result
would remain the same
(see eg
Western Johannesburg Rent Board v
Ursula Mansions (Pty) Ltd
1948 (3) SA 353
(A) at 355).
[18] This brings me to the appellants’
second proposition: that it was inappropriate and unwise for Webster
J to find Prinsloo
guilty of fraud purely on the basis of allegations
against him on affidavit, which he disputed on feasible grounds. This
proposition
emanates from the same considerations as the previous
one. The appellants were also entitled to have their version
approached with
caution on the basis that it could only be rejected
if it was clearly untenable, which it was not. What rendered a final
rejection
of the appellants’ version in principle even more
unwise and inappropriate was, of course, that as the respondent’s
version could not be rejected out of hand, the application was in any
event bound to fail.
[19] I therefore agree with the
appellants’ contention that Webster J should not have made a
finding of fraud against Prinsloo
on the basis of untested
allegations against him on motion papers that were denied on grounds
that could not be described as farfetched
or untenable. The reasons
why he should not have done so, derive not only from common sense,
but from many years of collective
judicial experience. They were thus
formulated in
Sewmungal and another NNO v Regent Cinema
1977
(1) SA 814
(N) at 819A-C:
‘
In
approaching this particular type of problem [of factual disputes
arising on affidavit] it is not wrong for a court at the outset
to
have some regard to the realities of litigation. What appears to be a
good case on paper may become less impressive after the
deponents to
the affidavits have been cross-examined. Conversely, what appears to
be an improbable case on the affidavits, may
turn out to be less
improbable or even probable in relation to a particular witness after
he had been seen and heard by a court.
An incautious answer in
cross-examination may change the whole complexion of a case.’
[20] In answer to these arguments the
respondents contended that, even if Webster J was wrong, that would
not preclude them from
relying on his finding of fraud for the
purpose of
res iudicata
. In support of this answer they
referred to
African Farms and Townships Ltd v Cape Town
Municipality
1963 (2) SA 555
(A) at 564C-G where Steyn CJ said:
‘
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
iudicata
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
iudicata
notwithstanding
that the judgment is wrong.’
[21] But as I see it, the respondents’
answer misses the point of the appellants’ objection. Their
objection is not
only that Webster J was wrong in his finding of
fraud. Their crucial objection is that, because of Webster J’s
fundamentally
wrong approach to the matter before him, it would be
inequitable and unfair to preclude them from denying fraud on the
part of
Prinsloo in this case, through the application of issue
estoppel. The result of doing so, they argued, will be to deprive
them
of the opportunity to properly test the allegations of
Prinsloo’s accusers and to have the findings of fraud
reconsidered
on appeal.
[22] The respondents’ objection
must be evaluated with reference to the principles that govern the
defence of
res iudicata
in general and issue estoppel in
particular. I have already referred to some of these principles. They
have in any event been discussed
extensively in a number of reported
decisions (see eg
Kommissaris van Binnelandse Inkomste v Absa Bank
Bpk
1995 (1) SA 653
(A);
Bafokeng Tribe v Impala Platinum Ltd
1999 (3) SA 517
(BHC);
Holtzhausen v Gore NO
2002 (2) SA
141
(C);
Smith v Porritt
2008 (6) SA 303
(SCA)). Repetition of
the discussion will serve little, if any, purpose. Suffice it
therefore to distil from these authorities
those principles that I
find of pertinent application in this case.
[23] In our common law the
requirements for
res iudicata
are threefold: (a) same
parties, (b) same cause of action, (c) same relief. The recognition
of what has become known as issue
estoppel did not dispense with this
threefold requirement. But our courts have come to realise that rigid
adherence to the requirements
referred to in (b) and (c) may result
in defeating the whole purpose of
res iudicata
. That purpose,
so it has been stated, is to prevent the repetition of law suits
between the same parties, the harassment of a defendant
by a
multiplicity of actions and the possibility of conflicting decisions
by different courts on the same issue (see eg
Evins v Shield
Insurance Co Ltd
1980 (2) SA 815
(A) at 835G). Issue estoppel
therefore allows a court to dispense with the two requirements of
same cause of action and same relief,
where the same issue has been
finally decided in previous litigation between the same parties.
[24] At the same time, however, our
courts have realised that relaxation of the strict requirements of
res iudicata
in issue estoppel situations creates the
potential of causing inequity and unfairness that would not arise
upon application of
all three requirements. That potential is
explained by Lord Reid in
Carl-Zeiss-Stiftung v Rayner and Keeler
Ltd
(No 2)
[1966] 2 All ER 536
(HL) at 554G-H when he said:
‘
The
difficulty which I see about issue estoppel is a practical one.
Suppose the first case is one of trifling importance but it
involves
for one party proof of facts which would be expensive and
troublesome; and that party can see the possibility that the
same
point may arise if his opponent later raises a much more important
claim. What is he to do? The second case may never be brought.
Must
he go to great trouble and expense to forestall a possible plea of
issue estoppel if the second case is brought?’
[25] One can also imagine a situation
where a purchaser seeks confirmation of his or her purported
cancellation of the sale in motion
proceedings. The seller may decide
that the expensive and time consuming game is not worth the candle
and thus decide not to oppose.
But if the purchaser were then to sue
for substantial damages the application of issue estoppel in the
second case may cause clear
inequity. The same situation will not
arise in the case where all the requirements of
res iudicata
are satisfied. In that event the relief sought in both cases will be
the same. The seller will have to decide whether to speak
up in the
first case or hold his or her peace in the second.
[26] Hence, our courts have been at
pains to point out the potential inequity of the application of issue
estoppel in particular
circumstances. But the circumstances in which
issue estoppel may conceivably arise are so varied that its
application cannot be
governed by fixed principles or even by
guidelines. All this court could therefore do was to repeatedly sound
the warning that
the application of 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 (see eg
Kommissaris van Binnelandse
Inkomste v Absa Bank Bpk
1995 (1) SA 653
(A) at 676B-E;
Smith
v Porritt
supra
2008 (6) SA 303
(SCA) para 10. That, I believe,
is also consistent with the guarantee of a fair hearing in
s 34
of
our Constitution.
[27] In this light I agree with the
appellants’ contention that the court a quo erred in allowing
the plea of
res iudicata
in the form of issue estoppel in this
case. In the proceedings before Webster J the allegations of fraud
against Prinsloo were
clearly not properly investigated.
Consequently, his finding of fraud on motion papers was clearly
inappropriate. But, because
of the rules pertaining to motion
proceedings, he happened to be right in dismissing the application
before him. In the result
his inappropriate findings of fraud had not
been tested on appeal. In these circumstances I believe it would be
patently inequitable
and unfair to hold the appellants bound to those
inappropriate findings in the present proceedings.
[28] In the result:
(a) The appeal is upheld with costs.
(b) The order of the court a quo is
set aside and replaced with the following:
‘
The
defendants’ plea of
res
iudicata
in the form of issue estoppel is dismissed with costs.’
_____________________
F D J BRAND
JUDGE OF APPEAL
Appearances:
For Appellant: H F Oosthuizen
Instructed by:
Bernhard van der Hoven, Pretoria
Rosendorff Reitz Barry, Bloemfontein
For Respondent: A B Rossouw SC (with
him J H A Saunders)
Instructed by:
Van Zyl Le Roux Inc, Pretoria
Honey Attorneys, Bloemfontein