Street Pole Ads Durban (Pty) Ltd v Ethekwini Municiaplity (SCA) [2008] ZASCA 33; [2008] 3 All SA 182 (SCA); 2008 (5) SA 290 (SCA) (28 March 2008)

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Street Pole Ads Durban (Pty) Ltd v Ethekwini Municiaplity (SCA) [2008] ZASCA 33; [2008] 3 All SA 182 (SCA); 2008 (5) SA 290 (SCA) (28 March 2008)

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THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
Case : 06/2007
REPORTABLE
In the appeal between:
STREET POLE ADS DURBAN (PTY) LTD ...
First appellant
UNIVERSITY OF KWAZULU-NATAL ...
Second appellant
and
ETHEKWINI MUNICIPALITY ...
Respondent
Before: Howie P, Cameron JA, Mthiyane JA, Ponnan JA and Mhlantla AJA
Heard: Tuesday 4 March 2008
Judgment: Friday 28 March 2008
Mandament van spolie – despoiled party seeking relief going
wider than despoiled property – respondent entitled to challenge
title
in counter-application – Contract law – contract not
permitting party to ‘subcontract any of its obligations’ –
meaning
of ‘subcontract’
Neutral citation: Street Pole Ads Durban v Ethekwini Municipality
(06/07)
[2008] ZASCA 33
(28 March 2008)
JUDGMENT
_______________________________________________________
CAMERON JA:
This is an appeal against an order Nicholson J granted in the High
Court in Durban in October 2006, confirming a spoliation order
the
first appellant (SPA) earlier obtained against the respondent (the
municipality), but at the same time granting the municipality
relief
it sought in a counter-application (which challenged the basis on
which SPA brought its application), and granting none
of the parties
their costs. The municipality joined the University of KwaZulu-Natal
(the university) as the second respondent to
its
counter-application, and it is now the second appellant; both it and
SPA appeal with leave granted by Nicholson J. For its
part the
municipality does not challenge the confirmation of the spoliation
order granted against it, nor Nicholson J’s refusal
to grant any
costs.
Background
The proceedings have their origin in a contract the university
concluded with the municipality
1
in May 1999 (‘the main agreement’), which launched the
university’s ‘adopt a light/adopt a pole’ fundraising project.
The agreement secured the municipality’s consent and cooperation
for public sponsors to ‘adopt’ electricity poles and street
lights for advertising on them. The university undertook to obtain
sponsors, and to pay the municipality a quarterly royalty of
90% of
the gross income received by the project. Of this royalty, the
municipality was to spend no more than 40% on maintenance,
repairs
and cost of power supply, 2% to clear graffiti, and 58% on community
development projects (mainly street lighting and electrification).
The main agreement was to last for five years, plus automatic
renewal for three further five-year periods, subject to written

notice otherwise. The agreement envisaged that the university would
conclude ‘adoption agreements’. Should notice of termination
be
given, the main agreement would continue in force for purposes of
these sub-agreements.
When the main agreement was concluded in 1999, the university’s
Centre for Innovation and Business Germination was steering the
‘adopt a light’ project, together with one Willem Vermaak (who
was named in the agreement as the university’s representative).
But the university parted ways with Vermaak, and from early 2002, to
the knowledge of at least some municipal officials, SPA became
involved in the operation; and from 1 September 2002, SPA took over
the management of the project.
In November 2002, municipal officials dealing with the project
expressed concern about resultant changes in the apportionment of
gross income. But on 4 February 2003 the university formalised its
new arrangement with SPA in an agreement (the adoption agreement).
Under this agreement, SPA hired exclusively from the university the
use of all poles and street lamps which were the subject of
the main
agreement. In return, SPA agreed to pay the university 20% of ‘gross
monthly turnover’. This the agreement defined
as the total amount
received by SPA from the display of advertisements, temporary event
posters, community or charitable messages
on the municipality’s
poles. The agreement stipulated that the amounts ‘(if any)’
which SPA charged for the display of advertisements
would ‘always
be in the sole discretion’ of SPA. The agreement was effective
from 1 September 2002 to 30 August 2005, with
a three-year renewal
option (which SPA later exercised).
The university became aware soon afterwards that the municipality
was ‘apparently annoyed’ that it had ‘sub-contracted’
the
administration of the project to SPA without the municipality’s
consent, but for the next eighteen months SPA continued to
conclude
‘sub-adoption’ agreements for its clients to use the advertising
space the municipality’s poles provided. It paid
the university
20% of its gross turnover; the university in turn retained 10% of
what it received, paying the remaining 90% to
the municipality.
In March 2004, the municipality gave the university notice of
termination of the main agreement, but the university and SPA
maintained
that the adoption agreement, as renewed by SPA, continued
in force until August 2008. The dispute escalated into this
litigation.
This litigation: judgment of Nicholson J
In November 2004, the municipality started removing SPA advertising
from its poles. In response, SPA obtained interim orders in
the High
Court in Durban prohibiting this, and requiring the restoration of
advertisements already removed. The orders SPA sought
and obtained
sourced its entitlement to place the advertisements in the main
agreement and the adoption agreement. The interim
interdicts namely
directed the municipality (emphasis added) –
1.1 ‘to immediately desist from removing or causing to
be removed street pole advertisements owned by [SPA] and placed on
various
street poles in the Ethekwini metropolitan area
pursuant
to the agreements forming annexures A and B to these papers
[ie, the main agreement and the adoption agreement]’,
and
1.2 ‘to forthwith restore to the street poles upon
which they were [formerly] placed, those advertisements erected by
[SPA]
pursuant to the aforementioned
agreements
and which were removed by the
[municipality] or a third party under its direction on or about 12
th
,
13
th
and 14
th
November 2004’, and
1.3 ‘not to remove or otherwise interfere with the
aforesaid advertisements erected by [SPA]
pursuant
to the aforesaid agreements[s]
pending the
final determination of an action to be instituted by [SPA] within 20
days of the grant hereof for an order declaring the
aforesaid
agreements to be in full force and effect and that the [municipality]
is bound by the terms thereof’.
When the municipality joined issue, it retaliated with a
counter-application for an order against SPA and the university that

the adoption agreement was unenforceable against it (or, if
enforceable, that SPA was not entitled to conclude ‘sub-adoption

agreements’ direct with advertisers, but, if so, had to apply to
the municipality each time, and was then obliged to pay the

municipality 90% of the gross income received).
In an extensive judgment Nicholson J ruled essentially in the
municipality’s favour. Though he concluded that SPA had
established
its entitlement to a spoliation order (para 1.2 of its
prayers set out above), the rest of its application for relief
(paras 1.1
and 1.3, which related to future conduct, and covered all
posters on municipal poles – not only those the municipality had
already
taken down) required him to consider the merits of its
underlying possessory claim to the poles.
This took Nicholson J directly to the validity of the adoption
agreement, and thence to the main agreement. This he interpreted
with the aid of specimen adoption agreements which the municipality
attached to its affidavits. These he regarded as part of the
background circumstances that explained the genesis and purpose of
the main agreement. Those agreements reflected individual sponsors
adopting particular poles for specified time periods, at specified
amounts. In the light of this, he concluded that the adoption
agreement fell foul of the prohibition on cession in the main
agreement.
Nicholson J held that a ‘fair reading’ of the main agreement
showed that the poles were to be hired out to sponsors with 90%
of
revenue accruing to the municipality and 10% to the university –
whereas the effect of the university’s agreement with SPA
was that
80% of revenue went to SPA, while the municipality and the
university split the remaining 20%. This was ‘totally incongruous’
when the whole project and its objectives were considered. It was
never contemplated that a sponsor would receive any money from
the
project – only publicity (which would generate income). The main
agreement further did not contemplate that an entity like
SPA would
manage the contract on behalf of the university.
Nicholson J rejected the defences of waiver and estoppel. While no
one had claimed that SPA could enforce the adoption agreement
directly against the municipality, these parties’ lack of
contractual nexus did not prevent the court from granting the
municipality
relief against SPA, which was in the position of an
illegally occupying sub-tenant against whom a landlord was entitled
to obtain
direct relief.
Form of proceedings – the municipality’s challenge to the
adoption agreement
On appeal SPA urged that the high court should not have engaged with
the municipality’s counter-application. SPA had gone to
court
solely to seek spoliatory relief: the orders sought in paragraphs
1.1 and 1.3 of its notice of motion constituted merely
adjunct
relief necessary to restore SPA’s position. It did not go further
and seek an order declaring it had a right of possession.
The
references to the main agreement and the adoption agreement in its
prayers merely alluded to facts from which the relief it
claimed
stemmed. It was therefore not open to the municipality to challenge
the adoption agreement in these proceedings.
This argument invokes the principle that an offending respondent in
a spoliation application is generally not allowed to contest
the
spoliated applicant’s title to the property. That is because good
title is irrelevant: the claim to spoliatory relief arises
solely
from an unprocedural deprivation of possession. There is a
qualification, however, if the applicant goes further and claims
a
substantive right to possession, whether based on title of ownership
or on contract. In that case,
‘
the respondent may answer such
additional claim of right and may demonstrate, if he can, that
applicant does not have the right to
possession which it claims.’
2
This is because such an applicant –
‘…
in effect forces an
investigation of the issues relevant to the further relief he claims.
Once he does this, the respondent’s defence
in regard thereto has
to be considered …’
3
The qualification applies here. SPA’s application sought
classically spoliatory relief in demanding the restoration of the
posters
the municipality had despoiled (para 1.2). But, as Nicholson
J pointed out, its claim went further. It pressed for an interdict,
not directed only to the despoiled property, but in wide terms
embracing all the ‘various street poles in the Ethekwini
metropolitan
area’ covered by the disputed agreements.
4
That claim spoiled for a fight about its title to those poles, and
it was this fight in which the municipality was entitled to
and did
engage.
What is more, four days after SPA obtained the interim interdicts,
the municipality agreed to a consent order, in terms of which
the
order in paragraph 1.2 (requiring restoration of the despoiled
advertisements to the poles) was substituted with an order that
the
municipality simply return direct to SPA the advertising material in
question. This the municipality did. There was thereafter
no threat
by the municipality to despoil SPA’s posters, nor any suggestion
that it would resume doing so. It subjected its wish
to remove
further posters from its poles to establishing its right to do so in
this litigation. The fight thereafter was thus in
substance about
SPA’s claim to derive title from the adoption agreement. It would
be both unrealistic and unfair to hold otherwise.
It is true that SPA proposed to establish its title not overtly in
the motion proceedings, but in a trial action which order 1.3
envisaged would be instituted ‘within twenty days’ of the grant
of the interdicts. It would in my view be obstructively formalistic
to hold that, rather than waiting for trial, the municipality could
not join issue immediately on that dispute – as it did –
nor
join the university in the proceedings for that purpose, as it did.
The high court, which had all the relevant information
and
contentions before it, chose instead to decide the issue
immediately: a just and sensible approach.
The proper interpretation of the main agreement
The pivotal issue is thus whether the conclusion of the adoption
agreement violated the main agreement, entitling the municipality
to
the relief it sought in its counter-application. I agree with the
appellants (and respectfully differ here from Nicholson J)
that in
answering this question it is unnecessary (and indeed impermissible
in the circumstances of this case) to look beyond the
plain meaning
of the agreement itself, in its background setting, since it
contains no ambiguities or uncertainties. (The appellants
justly
objected that the specimen adoption agreements to which the Judge
had regard as background circumstances were sent out only
some years
after the main agreement was concluded; they could not therefore
have formed part of the background against which the
contract’s
meaning is to be ascertained.)
The university and SPA vigorously argued that the adoption agreement
did not fall foul of the main agreement. They pointed out
the main
agreement specified only that 90% of income
received by the
university
– not generated by the project – was due to the
municipality. Nowhere did the main agreement specify that there
could not be
only a single sponsor who hires all the municipality’s
street poles. Nor did it specify that resultant advertising had to
be
that of the sponsor in question.
It was therefore wrong to assume (they argued) that the main
agreement obliged the university to contract only with sponsors who
were themselves ‘end users’ of advertising (and not sponsors on
behalf of other business advertisers). All the adoption agreement
did was to commit the university to receiving a single hire charge
from a single sponsor, calculated at the rate of 20% of what
SPA
earned from letting the street poles to its advertisers. The
municipality’s complaints about income were misconceived, since
the main agreement never promised it any minimum income. The
municipality’s actual income from the project was therefore
contractually
irrelevant.
This argument is beguiling. But it cannot prevail. It runs aground
on the provisions of the agreement which envisaged that the
university would itself continue to be an active partner in its
execution. Those provisions make plain that the university would
have a continuing role in the execution and furtherance of the
project, and in securing sponsors and relaying income derived from
them to the municipality.
The agreement locates the university’s power ‘to undertake’
the project in its private Act
5
(clause 1.5) and expressly envisages that it ‘has developed and
will from time to time continue developing’ ‘know-how’
to
implement the programme (clause 1.6.1). In its main operative
provision, clause 2.1, the parties agree that the university ‘will
undertake the project’ on the terms and conditions set out. It is
true, as the appellants emphasised, that the agreement does
not
expressly require the sponsors to number more than one (though
plurals are used throughout in referring to ‘sponsors’ and
‘adoption agreements’); but the agreement incontestably provides
for, and requires, the continuing participation of the university
itself.
To this end, clause 5, ‘Duties of [the university]’, records
that the university ‘agrees and undertakes’ at its cost ‘to
carry out the project’, ‘to operate the project from its
premises’, ‘to provide the manpower, infrastructure, resources
and other facilities necessary to fulfil its obligations’, ‘to
endeavour to obtain sponsors to adopt poles’ and ‘to use
its
best endeavours to collect all project income’.
Clause 10, ‘General Duties of [the university]’, continues in
this vein. This provision requires the university to ensure that
its
‘representative and senior management devote sufficient time and
attention to the project’, that ‘the advertising content
of
sponsors is legal and conforms to the specifications from time to
time’, and that ‘the conduct of the programme [is] to
the
greatest benefit of the project’.
None of this is compatible with the adoption agreement, which grants
SPA exclusive use of the poles (clause 2.2) for it to hire
out and
to use, and vests in it the power ‘to do anything in relation to
the advertisements and their display’ that is lawful
(clause 5.2),
and permits SPA to enforce, in the university’s name but at SPA’s
expense, ‘all or any of the rights’ accruing
to the university
under the main agreement (clause 8.1.3). Conversely, the agreement
disbars the university from enforcing ‘any
of the terms’ of the
main agreement without SPA’s prior written consent (clause 8.1.4).
The university is required to permit
SPA to represent the university
‘in all negotiations and discussions’ with the municipality
(clause 8.1.6), and is prohibited
from itself negotiating – or
even discussing – the main agreement with the municipality ‘unless
requested to do so in writing’
by SPA (clause 8.1.7). The
university could not agree to any amendment of the main agreement,
unless negotiated by SPA, nor waive
‘any of its rights’ under
that agreement, without SPA’s prior written consent (clause 8.1.9
and 8.1.10).
It is plain from these provisions that the adoption agreement
entailed the university’s wholesale abdication from the role the
main agreement envisaged for it. In its stead, SPA obtained the
rights, and undertook the duties, which previously fell to it.
The
university retained certain limited rights and duties. It was still
obliged to pay the municipality 90% of what it received
from SPA.
And the agreement does not divest it of title to sue the
municipality to perform its obligations (ie, to make the poles
available for hire to sponsors). For this reason, the adoption
agreement did not in my view amount to a cession, since if the

effect of a transaction is not to divest the right-transferring
party of its power to sue for what is owed to it, the transaction
is
not a cession.
6
On this, I respectfully differ from the approach of Nicholson J, but
not from his conclusion that the adoption agreement violated
the
critical no-transfer provision of the main agreement, clause 23.5:
‘
No party may cede any of its
rights or delegate or assign or subcontract any of its obligations in
terms of this agreement without
the prior written consent of the
other parties. Provided that the [municipality] may subcontract any
of its maintenance obligations
in terms of clause 4.1.3 [to keep the
poles in good order and condition] without the consent of [the
university].’
While there was no cession, the main agreement also prohibited the
university from subcontracting ‘any of its obligations’
without
prior written consent. The adoption agreement plainly farmed out the
great bulk of the university’s obligations to SPA,
and with them
its rights under the main agreement. That was a subcontracting. A
subcontractor is one who agrees with the contractor
to perform any
part of the work that the contractor previously agreed to perform
for another; it is one who takes a portion of
a contract from the
principal contractor (or from another subcontractor).
7
The object of clause 23.5 was plainly to give the municipality a say
in determining to whom the university could pass on any of
these
rights and obligations. Yet the adoption agreement summarily
subcontracted the greatest share of these.
In the absence of written consent, and there was none, the
conclusion of the adoption agreement violated the main agreement.
For
similar absence of writing, the defences of waiver and estoppel
(sourced in the two years during which the municipality continued
to
implement the project despite SPA’s overt involvement) were
rightly not pressed much in argument before us. The representation
the appellants rely on to found the estoppel – the municipality’s
conduct in representing that it consented to the conclusion
of the
adoption agreement – runs aground on clause 23.5 itself, which to
SPA’s knowledge required just such consent to be in
writing. In
addition, the main agreement contains the usual only-in-writing
waiver provision (clause 23.4), which puts paid to
waiver.
The municipality was thus entitled to relief. Even though we were
informed from the bar that it has not cancelled the main agreement
in reliance on the breach, none of the parties disputed that on the
conclusion reached it was entitled to the declarator Nicholson
J
granted, namely that the adoption agreement was not enforceable
against it. Counsel for the municipality recorded that the
municipality
regarded itself as bound, in removing illegal
advertising, by a decision of the Full Court that requires it first
to approach a
court in all situations save where the public interest
requires immediate removal.
8
For these reasons, I conclude that Nicholson J was correct in his
approach to the relief the respective parties sought. His costs
award was not vitiated by any demonstrable misdirection, and must
also stand.
The appeal is dismissed with costs, including the costs of two
counsel.
E CAMERON
JUDGE OF APPEAL
CONCUR:
HOWIE P
MTHIYANE JA
PONNAN JA
MHLANTLA AJA
1
The
predecessors of the current parties were then the Durban
Transitional Metropolitan Council and the University of Natal; but
their changes in form and title have no bearing on the proceedings.
2
Stocks
Housing (Cape) (Pty) Ltd v Chief Executive Director, Department of
Education and Culture Services
1996 (4) SA 231
(C)
244C-E, per Rose Innes J.
3
Minister
of Agriculture and Agricultural Development v Segopolo
1992 (3) SA 967
(T) 971B, per Goldstein J.
4
Contrast
a case like
Engler Earthworks (Pty) Ltd
v Marais
1998 (2) SA 450
(SE) 457-458, where the fact
that the despoiled party sought for expressly limited purposes to
assert title to the despoiled property
itself, in conjunction with
the claim for spoliatory relief, was held insufficient to allow the
respondent to challenge the title
by counter-application.
5
University
of Natal (Private) Act 7 of 1960, s 2 of which provides subject to
the Act’s provisions that the university is capable
‘of entering
into all other contracts, and of doing or performing such other acts
and things as bodies corporate may by law do
or perform’.
6
See
RH Christie,
The Law
of Contract in South Africa
(5 ed,
2006), p 464, citing
Purchase v De
Huizemark Alberton (Pty) Ltd
1994 (1) SA 281
(W) 285-286,
per Mahomed J.
7
See
William Statsky,
West’s
Legal Thesaurus/Dictionary
(1985).
8
African
Billboard Advertising (Pty) Ltd v North and South Central Local
Councils, Durban
2004 (3) SA 223
(N) 229C-D per Levinsohn
J (Skweyiya and Swain JJ concurring).