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[2017] ZASCA 110
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Big Five Duty Free (Pty) Limited v Airports Company South Africa Limited and Others (1064/2016) [2017] ZASCA 110; [2017] 4 All SA 295 (SCA) (15 September 2017)
Links to summary
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
No: 1064/2016
In
the matter between:
BIG
FIVE DUTY FREE (PTY) LIMITED
APPELLANT
and
AIRPORTS
COMPANY SOUTH AFRICA LIMITED FIRST
RESPONDENT
DFS
FLEMINGO SA (PTY) LIMITED
SECOND RESPONDENT
TOURVEST
HODINGS (PTY) LIMITED
THIRD RESPONDENT
Neutral
citation:
Big
Five Duty Free v ACSA
(1064/2016)
[2017] ZASCA 110
(15 September 2017)
Coram:
Lewis,
Ponnan and Mathopo JJA and Lamont an
d
Mbatha AJJA
Heard:
21
August 2017
Delivered:
15
September 2017
Summary:
Interpretation
of an agreement of settlement made an order of full court on appeal
to it: agreement is binding on all the parties
to the litigation,
including one who has not participated but has chosen to abide the
outcome of the appeal
ORDER
On
appeal from:
Gauteng
Division of the High Court, Pretoria (Hughes J sitting as court of
first instance):
1
The appeal is upheld with costs, including those of two counsel.
2
The order of the Gauteng Division of the High Court is set aside and
replaced with the following order:
‘
(a)
It is declared that Airports Company South Africa Ltd (ACSA) is bound
by its decision taken on 26 August 2009 to award to Big
Five Duty
Free (Pty) Ltd (Big Five) the right to operate Core Duty and VAT Free
stores in the international departures and arrivals
airside terminals
at O R Tambo International Airport, Cape Town International Airport
and King Shaka International Airport in terms
of Bid Reference No
CDF08.05/2009 on 26 August 2009.
(b)
ACSA is directed to sign and implement the written agreement of lease
with Big Five, in terms of the decision, within 30 days
of this
court’s order.
(c)
ACSA is ordered to pay Big Five’s costs, including the costs of
two counsel.’
JUDGMENT
Lewis
JA (
Ponnan
and Mathopo JJA and Lamont and Mbatha AJJA
concurring)
[1]
On 26 August 2009, the first respondent, Airports Company South
Africa Ltd (ACSA), pursuant to an invitation to tender issued
on 29
May 2009, awarded a contract to operate duty-free shops for a
ten-year period, in three of its international airports, to
the
appellant, Big Five Duty Free (Pty) Ltd (Big Five). The second
respondent, DSF Flemingo SA (Pty) Ltd (Flemingo), an unsuccessful
bidder, applied to the North Gauteng High Court, Pretoria, first for
an urgent interdict precluding ACSA from implementing the
terms of
the lease, and secondly for the review and setting aside of the
award. The interdict was granted. Big Five and ACSA opposed
the
review application. However, Phatudi J upheld the review and set
aside the award on the basis that it was unlawful because
in the
tender process ACSA had taken into account an irrelevant
consideration, and the process was not transparent or fair. This
court gave leave to appeal against that decision to the full court of
the Gauteng High Court.
[2]
ACSA abided the decision of the full court and did not participate in
the appeal proceedings. Nor did Tourvest Holdings (Pty)
Ltd
(Tourvest), the third respondent, also an unsuccessful bidder, oppose
the appeal. The appeal was fully argued by Big Five and
Flemingo
before a full court and judgment was reserved. However, before
judgment was handed down, Big Five and Flemingo settled
their
dispute. Flemingo abandoned the Phatudi J judgment in its favour, and
Big Five withdrew the review application. At the request
of the
parties, the full court made their settlement agreement an order of
court. The terms of the settlement agreement and their
interpretation
lie at the heart of this appeal. The question that must be determined
is whether the award in Big Five’s favour
stands and is
binding, or is ACSA free to start the tender process anew, and is
Tourvest entitled to bid again?
[3]
ACSA took the view, after the settlement agreement was made an order
of court, that as it was not a party to it, it was not
bound. Phatudi
J’s order that the award to Big Five was unlawfully made thus
stood and could not be given effect. ACSA contended
that it was thus
entitled to start the tender process again. Big Five accordingly
sought an order from the Gauteng Division of
the High Court,
Pretoria, that ACSA was bound by the award it had made in 2009 and
that it was obliged to conclude the written
lease agreements
anticipated (a pro forma lease agreement was included in the
invitation to bid) with Big Five within 30 days of
the order.
[4]
Hughes J refused the application, holding that the order of Phatudi J
was a ‘public remedy’ and could not be set
aside by
private parties; and that even though the full court had made the
agreement between Big Five and Flemingo an order of
court, she was
not bound by that order because it was wrong, being ‘at odds
with the Constitution, the law and public policy’.
It is
against this order that Big Five appeals to this court with the leave
of Hughes J.
The
terms of the settlement agreement and the factual matrix
[5]
The full court heard argument in the appeal against Phatudi J’s
order on 4 June 2014. It reserved judgment. A month before
then, Big
Five’s attorneys advised ACSA that settlement negotiations
between it and Flemingo were ongoing and that a draft
of a settlement
agreement would be sent to ACSA for signature. They advised ACSA that
they wanted it to be a signatory to protect
Flemingo from claims that
ACSA might make for loss caused by the institution of the review
proceedings by Flemingo. Mr Haroon Jeena,
the Group Executive:
Commercial, of ACSA, responded by email congratulating Mr Chris
Harilaou, a director of Big Five, on achieving
a settlement. Jeena
followed this up on 2 June 2014 with an email stating that ‘We
are all on the same page’. Later
in the day, however, Jeena
advised Harilaou that the agreement could not be signed without Board
approval and that the Board would
not meet before the appeal hearing.
Big Five accordingly proceeded with the appeal hearing on 4 June
2014.
[6]
The settlement agreement between Big Five and Flemingo was concluded
on 13 June 2014. It was forwarded to ACSA on 17 June 2014.
Judgment
in the matter had not yet been handed down. The parties recorded in
the preamble that they had settled the litigation
in respect of the
interim interdict granted by the high court in December 2009 and the
subsequent review application in which Phatudi
J had set aside the
award in May 2012, as well as the petition to this court in 2012 and
the appeal hearing before the Gauteng
Division.
[7]
The salient terms of the agreement in so far as the review
application was concerned are clauses:
3.1
‘[Flemingo] abandons the order of Phatudi J granted on 17 May
2012 in the review application. Pursuant hereto and on signature
hereof by [Flemingo] it will serve a notice of abandonment of this
order in terms of Rule of Court 41(2). Without limiting the
generality of the term “abandons” [Flemingo] in addition
waives and abandons all right, title and interest in and to
this
order.’
.
. .
3.3
‘[Flemingo] hereby withdraws in its entirety the review
application proceedings on the basis of and having the effect
that
these proceedings were never instituted and/or proceeded with and
will serve on signature hereof a notice of withdrawal reflecting
therein that the matter is settled.’
.
. .
3.8
‘Upon signature of this agreement by the parties [Flemingo]
acknowledges that ACSA is free to and can now implement the
award of
its tender . . . to [Big Five] without limitation or
restriction and without any challenge thereto whatsoever by
[Flemingo].’
.
. .
6.4
‘Insofar as is necessary [Big Five] and Flemingo do hereby
consent to this Agreement being made an order of this Honourable
Court
.’
[8]
On 19 June 2014, Flemingo filed notices in terms of Rule 41(2)
formally abandoning the interdict and review judgments in their
entirety. The day afterwards, 20 June, at the request of Big Five and
Flemingo, the full court made the settlement agreement an
order of
court.
[9]
Some seven months later, ACSA advised Big Five that, after taking
legal advice and referring the matter to the ACSA Board, it
had
decided to start the tender proceedings afresh despite the order of
the full court. Hence the application to court by Big Five
to compel
compliance by ACSA with the tender awarded in 2009.
[10]
In the court a quo, ACSA and Tourvest resisted the application for an
order that ACSA was bound by the award of the lease of
the premises
for duty free shops to Big Five, with effect from 20 June 2014, when
the settlement agreement became an order of court,
on the basis that
they were not bound by that agreement, and that it was not open to
private parties to abandon a judgment in rem.
That was one of the
reasons for the order made by Hughes J – a judgment that
affects persons other than the litigants who
have abandoned it cannot
be set aside by that abandonment.
Was
the settlement agreement binding on ACSA and Tourvest?
[11]
On appeal, Big Five argues that it is of no consequence that the
judgment of Phatudi J made a finding that the award of the
tender was
unlawful. Only Flemingo had sought the review and setting aside of
the order. ACSA and Big Five had opposed Flemingo’s
review.
Tourvest had not participated in the review or the appeal. Only Big
Five had appealed against the decision. ACSA abided
the decision of
the full court. The full court made the agreement of settlement an
order of court. In the circumstances, Big Five
argues that all the
parties to the litigation before Phatudi J were bound by the full
court order.
Public
law judgments and judgments in rem
[12]
ACSA and Tourvest argue, on the other hand, that a judgment in a
public law matter, such as Phatudi J’s judgment on the
lawfulness of the exercise of public power (the award of a tender by
an organ of state), cannot be set aside by private agreement
between
parties. It is for a court to determine the lawfulness of
administrative action. Thus a private party cannot abandon a
review
judgment or settle matters pertaining to lawfulness where a court has
held that the award was unlawful. Phatudi J’s
judgment setting
aside the award stands until it is set aside by a court on appeal.
[13]
ACSA relies in this regard on
Department
of Transport & others v Tasima (Pty) Ltd
2017
(2) SA 622
(CC) para 147 where the Constitutional Court said that the
court is the sole arbiter of legality, and that it is not open to any
party, ‘private or public to annex this function. Our
Constitution confers on the courts the role of arbiter of legality’.
It argues that private parties cannot resuscitate an unlawful tender.
[14]
ACSA and Tourvest both contend that a judgment granted in a review
application has a public character – it is an objective
determination of the validity of an impugned administrative act –
independent of the parties who bring the action. The decision
of the
court on review operates against the public at large. It is thus
argued to be a judgment in rem which cannot be abandoned
by agreement
between the parties, just as a decree of divorce cannot be abandoned
by former spouses, or an order sequestrating
a debtor cannot be
abandoned by a creditor: third parties are affected by the orders.
See
Ex
parte Taljaard
1975 (3) SA 106
(O) at 108C-109A. I shall approach the matter, as the
parties did, on the assumption that the judgment of Phatudi J is one
in rem.
A
settlement agreement made an order of court
[15]
ACSA and Tourvest contend that Flemingo’s abandonment of
Phatudi J’s order had no legal effect as far as they are
concerned. Only the parties to the agreement are bound. They argue
that making the agreement of settlement, embodying the abandonment
of
the order and the withdrawal of the review, an order of the full
court makes no difference. Tourvest contends that when a court
makes
a settlement an order of court it is concerned with the content of
the agreement itself, and not the merits of the underlying
dispute
(
Fourie
NO v Merchant Investors (Pty) Ltd & another
2004 (3) SA 422
(C) at 424H-I). The court need do no more than
satisfy itself that the agreement relates to the litigation in
question.
[16]
The principles governing the making of an agreement of settlement an
order of court were recently restated by the Constitutional
Court in
Eke v Parsons
2016 (3) SA 37
(CC), paras 25 and 26. The court,
pointing out that not everything agreed to by parties should be
accepted by courts, said:
‘
The
order can only be one that is competent and proper. A court must thus
not be mechanical in its adoption of the terms of a settlement
agreement. For an order to be competent and proper, it must, in the
first place “relate directly or indirectly to an issue
or
lis
between the parties’”. Parties contracting outside of the
context of litigation may not approach a court and ask that
their
agreement be made an order of court. . . .
Secondly,
“the agreement must not be objectionable, that is, its terms
must be capable, both from a legal and practical point
of view, of
being included in a court order”. That means, its terms must
accord with both the Constitution and the law. Also,
they must not be
at odds with public policy. Thirdly, the agreement must “hold
some practical and legitimate advantage”.’
(Footnotes
omitted.)
[17]
The court making the agreement an order of court thus does not enter
into the merits of the litigation: it must do no more
than satisfy
itself that the agreement relates to the litigation between the
parties and that it is not contrary to policy or the
law. The full
court, in making the agreement between Group Five and Flemingo an
order of court, so ACSA and Tourvest contend, did
not make a finding
that the Phatudi J order was wrong, or that it should be set aside.
It did no more than endorse the ending of
the lis between the
parties.
[18]
ACSA relies also on the decision of the House of Lords in
Jenkins
v Robertson
(1867) LR 1 Sc & Div 117;
(1867) 3 SLR 374
where a number of
people who had contended for a public right of way settled their
dispute and the agreement of settlement was
made an order of the
court. That matter became res judicata as between the litigants.
When, later, different people contended for
the same right of way,
the court found that the settlement did not bind them as the court,
in making the agreement an order, had
exercised no judicial function.
The court said that the application of the defence of res judicata
implied that a judicial function
had been exercised: where a court
had done no more than sanction an agreement of settlement, it merely
recorded the agreement between
the parties.
[19]
Similarly, in
Munster
v Cox
(1885) 10 AC 680
, the House of Lords held, where a third party had
supported and even funded a suit for libel, but had not been party to
the litigation
himself, an order by consent to judgment did not bind
him.
[20]
Big Five does not take issue with the principles relied upon by ACSA
and Tourvest in so far as the court’s role in making
an
agreement an order of court is concerned, nor with the propositions
in
Jenkins
and
Munster
.
It points out, however, that
Jenkins
is to be distinguished on the basis that in the second suit, the
parties claiming the right of way were not those who had been
party
to the earlier litigation and the agreement of settlement. And in
Munster
,
the third party had not himself consented to judgment and could not
thus be bound.
[21]
Big Five argues that this matter is different from those in which
third parties have not been party to a settlement agreement
in
respect of a judgment in rem and are thus not bound by it. The
parties to the litigation before Phatudi J were Flemingo, which
sought the review of the award, and Big Five and ACSA, which both
opposed the application. ACSA chose to abide the outcome of the
appeal. This meant that it was bound by the outcome. Where affected
persons choose to abide by a decision on appeal they are bound
by it:
Eden
Village (Meadowbrook) (Pty) Ltd & another v Edwards & another
1995 (4) SA 31
(A) at 48B-D and
MEC
for Health, Kwazulu-Natal v Premier of KwaZulu-Natal: in re Minister
of Health & others v Treatment Action Campaign &
others
2002 (5) 717 (CC) para 11.
[22]
ACSA argues that since Phatudi J held that the award was unlawful,
the full court order was unenforceable. It could therefore
not give
effect to the award as it would be in breach of its constitutional
duty to uphold the rule of law. However, a court order
incorporating
a settlement agreement which possibly included a constitutionally
invalid term is not necessarily rendered unlawful
by reason of that
fact alone. In
Gbenga-Oluwatoye v Reckitt Benckiser South Africa
(Pty) Ltd & another
[2016] ZACC 33
;
2016 (12) BCLR 1515
(CC)
the Constitutional Court said (para 24):
‘
The
public, and indeed our courts, have a powerful interest in enforcing
agreements of this sort. . . . When parties settle
an existing
dispute in full and final settlement, none should be lightly released
from an undertaking seriously and willingly embraced.
This is
particularly so if the agreement was, as here, for the benefit of the
party seeking to escape the consequences of his own
conduct. Even if
the clause excluding access to courts were on its own invalid and
unenforceable, the applicant must still fail.
This is because he
concluded an enforceable agreement that finally settled his dispute
with his employer.’
The
interpretation of the settlement agreement
[23]
Big Five contends that the purpose of the agreement was to settle the
dispute that had arisen before Phatudi J. The order endorsed
the
abandonment by Flemingo of the judgment and the withdrawal of the
review proceedings. Had the agreement not been made an order
of
court, binding on ACSA, the abandonment and withdrawal would not, in
themselves, have affected ACSA. Flemingo and Big Five,
having settled
the dispute, requested that it be made an order of court in order to
bind ACSA, which had abided the outcome of
the appeal. Accordingly,
the dispute regarding the lawfulness of ACSA’s award of the
tender to Big Five was put to rest by
the full court order, which had
the effect of setting aside the judgment of Phatudi J.
[24]
ACSA argues, however, that an examination of the agreement does not
have the effect contended for by Big Five. First, it does
not
expressly state that the order of Phatudi J is set aside. It simply
states that Flemingo abandons the order and waives and
abandons all
rights in the order; and that it withdraws the review proceedings in
their entirety as if never instituted. Moreover,
it is contended, the
fact that the parties recorded that ACSA could implement the award,
was no more than the expression of a point
of view. The merits of the
judgment and order of Phatudi J were not considered by the full court
that made the order. ACSA contended,
therefore, that the judgment and
order stood – it was not set aside on appeal. The full court
intended to do no more than
make a settlement an order of court. And
that ACSA had agreed only to abide the outcome of the appeal, and not
to abide by the
terms of a settlement agreement.
[25]
In my view, the agreement must be construed in the light of the
circumstances attendant upon it – the factual matrix
or
context. This is now settled law and I do not propose to repeat the
recent authorities that state that an agreement must be
construed in
context. The context here was that Flemingo and Big Five, amongst
others, had made bids for the lease of the duty
free shops at three
international airports on the terms set out in ACSA’s
invitation to tender. ACSA awarded the tender to
Big Five. One of the
unsuccessful bidders, Flemingo, took the award on review. It argued
that the award was unlawful. Phatudi J
found that it was unlawful for
reasons that may or may not be good. Big Five appealed against the
order with the leave of this
court. Before the appeal was heard,
Flemingo and Big Five agreed that the appeal would not be prosecuted
to finality but that Flemingo
would abandon the order and withdraw
the review proceedings – as if they had never happened.
[26]
What was the purpose of the withdrawal and abandonment, coupled with
the agreement of settlement, if not to set aside the order
of Phatudi
J? It could be none other than to agree that the award to Big Five by
ACSA was to stand. There is no other purpose that
the parties could
have intended to achieve.
[27]
The argument that the full court did not, independently of the
parties, intend to set aside the Phatudi J order cannot be accepted.
The court order was made to give effect to the agreement between Big
Five and Flemingo. Any distinction between the parties’
intention and that of the full court is thus obviously false. If one
asks what the parties intended to achieve in context –
the
facts known to them, the reasons for the agreement, the clear
statement of Flemingo that it withdrew the review application
in its
entirety and abandoned any right in the order – the only answer
could be that the parties did not intend the Phatudi
J order to
stand. It was a necessary implication of what they expressly stated.
There is no other sensible construction of the
agreement.
[28]
It is not necessary to determine whether Hughes J in the court a quo
was entitled to decide that the full court had erred in
making the
agreement of settlement an order of court. In my view it was not open
to her to do so. She was bound by the doctrine
of res judicata and
her finding in relation to the doctrine of precedent was misplaced.
[29]
Accordingly the appeal must be upheld. The following order is made:
1
The appeal is upheld with the costs, including those of two counsel.
2
The order of the Gauteng Division of the High Court is set aside and
replaced with the following order:
‘
(a)
It is declared that Airports Company South Africa Ltd (ACSA) is bound
by its decision taken on 26 August 2009 to award to Big
Five Duty
Free (Pty) Ltd (Big Five) the right to operate Core Duty and VAT Free
stores in the international departures and arrivals
airside terminals
at O R Tambo International Airport, Cape Town International Airport
and King Shaka International Airport in terms
of Bid Reference No
CDF08.05/2009 on 26 August 2009.
(b)
ACSA is directed to sign and implement the written agreement of lease
with Big Five, in terms of the decision, within 30 days
of this
court’s order.
(c)
ACSA is ordered to pay Big Five’s costs, including the costs of
two counsel.’
C
H Lewis
Judge
of Appeal
APPEARANCES
For Appellant:
W Trengove SC
(with him S Budlender and A Msimang)
Instructed
by:
BKM Attorneys, Rosebank
Claude
Reid Attorneys, Bloemfontein
For
First Respondent: G
Marcus SC (with him B Morris)
Instructed by:
Mkhabela Huntley Adekeye
Inc, Pretoria
McIntyre & Van der
Post, Bloemfontein
For
Third Respondent: B Swart SC
(with him T Phehan-Rametse)
Instructed by:
Macrobert Inc, Pretoria
Symington & De Kok,
Bloemfontein