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[2008] ZASCA 104
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Sandton Civic Precinct (Pty) Ltd v City of Johannesburg and Another (458/2007) [2008] ZASCA 104; 2009 (1) SA 317 (SCA) ; [2009] 1 All SA 291 (SCA) (22 September 2008)
Links to summary
THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
Case number: 458/2007
In the matter between:
SANDTON CIVIC PRECINCT (PTY) LTD
Appellant
and
CITY OF JOHANNESBURG
First respondent
BOMBELA CONSORTIUM
Second respondent
Neutral citation:
Sandton Civic
Precinct (Pty) Ltd v City of Johannesburg
(458/2007)
[2008] ZASCA 104
(22 September 2008)
BEFORE : Farlam, Cameron, Jafta, Mlambo and Cachalia
JJA
HEARD : Monday 1 September 2008
DELIVERED : Monday 22 September 2008
SUMMARY
: Legal standing –
contract claimed to be awarded to consortium – consortium
consisting of individuals and corporate
members, with stated
proportions – consortium not before court – instead,
applicant company seeking to enforce rights
of consortium –
applicant company representing only two of four members of consortium
– others not before court –
member of applicant company
claiming to hold others’ shares ‘in trust’ –
no basis for claim – applicant
company lacking legal standing
______________________________________________
ORDER
______________________________________________
On
appeal from
the High Court, Johannesburg (Fevrier AJ sitting as a
judge of first instance).
1. The
application for leave to appeal is granted.
2. The
appeal succeeds only to the following extent:
(a) The costs order in the court below is set aside.
(b) In its place there is substituted
‘There is no order as to costs.’
Save
for this, the appeal is dismissed.
There
is no order as to costs.
______________________________________________
JUDGMENT
______________________________________________
CAMERON JA
(FARLAM, JAFTA, MLAMBO and CACHALIA JJA CONCURRING):
This is an application for leave to appeal. At issue is a proposal
to develop a ten-acre publicly-owned piece of land in the
heart of
Sandton. The applicant company claims it acquired rights to
undertake the development. The City of Johannesburg (first
respondent), which owns the property, disputes this. The applicant
joined the second respondent, the Bombela Consortium (a joint
venture comprising South African, United Kingdom and French
companies responsible for the Gautrain project), because the City
expressed an intention to develop the property in conjunction with
it; but Bombela has not joined the fray and abides the outcome
of
the litigation.
In the High Court in Johannesburg, Fevrier AJ dismissed the
application with costs, including the costs of two counsel, and
refused leave to appeal. The judges of this Court who considered
the ensuing application for leave to appeal referred it for
oral
argument (including argument on the merits).
1
The applicant’s case rests on a resolution the City’s
predecessor, the Eastern Metropolitan Local Council (whose
acts the
City accepts as its own), adopted on 14 November 2000. In this the
council ‘resolved to recommend’ that
(subject to
statutory notice) the property ‘be alienated to Sandton Civic
Precinct Consortium at a selling price of R81.25
million’,
with provision for escalation and subject to further specified
conditions to be included in the envisaged deed
of sale.
Although by November 2001 a draft agreement of sale had been
prepared, no final agreement was ever concluded. Instead, the City
set up its own property-owning and development company. In time,
this entity broke off negotiations with the Sandton Civic Precinct
Consortium, since (it urged) the sale was ‘not in the best
interest of the City’: the property company itself ‘was
established with the same objectives as that of the [Sandton Civic
Precinct] Consortium, being to rezone, develop and lease the
site’.
It therefore recommended that the City rescind the November 2000
resolution. Eventually the City acted on this
advice. On 22
September 2005, the council resolved by a majority that subject to
legal advice the City ‘does not proceed’
with the
alienation of the property to the Sandton Civic Precinct Consortium,
but that instead it ‘approve that the development
potential
and alienation of the property be re-investigated and be reported
back to the Council’.
It is this decision that the applicant attacks. It instituted these
proceedings in April 2006, contending that it had acquired
rights
through the November 2000 resolution, which the City was not
entitled to rescind. It sought a declarator that the first
resolution was binding on the City, and an order reviewing and
setting aside the second, and scrapping the negotiations with
Bombela. It also sought an order that the City ‘take all
necessary and appropriate steps to implement the terms’
of the
resolution, and ‘use its best endeavours to seek the practical
achievement of what the resolution provides’.
In response, the City did not file affidavits disputing the
applicant’s exposition of the history of the two resolutions.
Instead, it lodged a challenge under the rules of court
2
raising only questions of law. In essence, these put in issue (a)
whether the applicant had, through proof of the requisite
cessions,
shown its title to assert whatever rights may have accrued to the
‘Sandton Civic Precinct Consortium’,
and (b) whether any
such rights had arisen at all. In response to (a), the applicant
filed supplementary papers.
Fevrier AJ dealt only with (b). He upheld the City’s
contention that the first resolution had not created enforceable
rights capable of cession. He considered that the second resolution
was in any event not administrative action subject to review,
since
the council was not implementing any law or legislation: it was
rather a determination and formulation of policy. He held,
finally,
that even if the second resolution was administrative action, it was
immune to attack because in adopting it the council
had acted
carefully and fairly.
These findings made it unnecessary for Fevrier AJ to consider
whether the applicant company had legal standing or any interest
in
the claims it sought to assert. On appeal, the applicant in
carefully-considered submissions attacked Fevrier AJ’s
conclusions regarding the two resolutions. Mr Kennedy urged us to
find that the proposal process that the City initiated in
1998, and
which culminated in the first resolution, was akin to a tender
award, involving a similar exercise of public power,
a similar
invocation of statutory and constitutional authority, and a similar
duty to observe the public and administrative law
requirements of
fair dealing and rationality.
Tempting as it may be to decide the matter by starting with these
large and important issues, I think the invitation must be
declined.
We must first establish whether the corporate entity before us has
legal standing to assert the rights it says the
resolution afforded.
Only then would it be expedient to decide the difficult and
interesting question of what rights, if any,
did arise; for if the
wrong entity is before us, our characterisation of that issue will
be indecisive of the case.
I turn then to the applicant’s legal standing. It is a
private company incorporated in 2003. It has two shareholders:
Mr
Bart Dorrestein and JHI Development Management (Pty) Ltd (JHI).
There are no other members. Dorrestein is the former chief
executive of a group of companies, ‘the Stocks Group’.
In February 2000 Stocks & Stocks Ltd (a subsidiary of
which
submitted the original bid) ceded ‘its rights, interests and
obligations’ in the development to him. In addition,
he is
the sole shareholder in one of the corporate participants in the
original consortium.
What interest has the applicant shown itself to have in the subject
matter of the litigation? In its founding affidavit, it
claims that
the November 2000 resolution ‘resolved to alienate’ the
property ‘to the applicant’. But
this is plainly wrong.
The resolution resolved to alienate the property to the ‘Sandton
Civic Precinct Consortium’.
That was not the corporate
applicant before us, which did not then exist, but an unincorporated
entity that consisted, according
to the applicant, of the following
bodies:
a company wholly owned by Dorrestein which under an agreement
between Dorrestein and the Stocks Group on 8 June 1999 assumed
the
latter’s development rights and obligations in the consortium
(Dorrestein explains that this agreement was superseded
by the
February 2000 agreement in which the Stocks Group ceded its
interests in the development to himself) (50%);
Thebe Properties (Pty) Ltd, which later changed its name to JHI
(25%);
Ndodana Becker & Associates, whose sole proprietor was Mr
Webster Ndodana (Ndodana) (17%);
‘Sithembele (Pty) Ltd/Domestic Workers Association Investment
Company (Pty) Ltd’ (DWA) (8%).
Neither (c) nor (d) are party to the litigation, whether as
applicants or as respondents. Of Ndodana, the supplementary
affidavit
says that its sole proprietor ‘has been compelled to
forego his rights in the Consortium as he now works for [Bombela]
and he has a conflict of interest’. Dorrestein claims that
Ndodana’s shares ‘are therefore being held in trust
by
myself pending the acquisition of such interest by a suitable black
economic empowerment substitute’.
Of the remaining participant, DWA, Dorrestein says that neither
‘Sithembele (Pty) Ltd’ nor ‘Domestic Workers
Association Investment Company (Pty) Ltd’ was ever formed:
‘
After November 2000 the DWA ceased participating
in the Consortium … and all efforts to involve the DWA in the
Consortium
have failed’.
He claims however that the ‘DWA’s 8% interest in the
Consortium is held in trust by myself pending the acquisition
of a
suitable black economic empowerment substitute’. Dorrestein
thus concludes that ‘the current shareholders in
the applicant
company are myself and [JHI]’,
‘
with 25% to be allocated to a suitable black
economic empowerment substitute or substitutes subject to the
reasonable approval of
the first respondent’.
The applicant’s difficulty is this. On its own case the
development was awarded not to individual entities, in separable
portions, but to a consortium, in proportions allocated between its
constituent members. Counsel urged us to find that we can
enforce
Dorrestein’s and JHI’s rights arising from the
resolution proportionately (pro tanto). But that cannot be.
The
resolution permits of no interpretation other than that the council
resolved to alienate the property to a consortium, and
not to any
one or more of its separate constituents. The resolution does not
even mention the members and their proportions.
The consortium,
which it does mention, is not before us; and the applicant does not
allege – indeed, cannot allege –
that the consortium has
empowered it to act for it in the litigation. All we have instead
is a corporate applicant whose two
members hold the rights of or
represent two out of the four constituents in the consortium. The
remaining two entities are nowhere
in sight.
Authority to represent them, or the consortium, could derive from a
cession (transferring any rights acquired to the applicant
or its
members); or from direct authority evidenced by individual affidavit
or corporate resolution. But counsel was obliged
to concede,
rightly, that no cession of rights to the applicant, nor any other
authority, has been alleged or proved.
If, as Dorrestein appears to claim in his supplementary affidavit,
Ndodana and DWA have abandoned such rights as they acquired,
the
applicant must still explain by what process of law it became vested
with those rights. Counsel was unable to explain how.
The applicant does not purport to be vindicating only the rights of
Dorrestein and JHI. It seeks to assert the rights it claims
the
consortium itself acquired from the resolution. Yet its counsel was
able to point to no principle by which the applicant
can claim that
it is entitled to assert the rights of the consortium; and I can
think of none.
Dorrestein’s claim that he is holding the shares of Ndodana
and DWA ‘in trust’ for substitutable black economic
empowerment partners is incoherent. It is well-established in our
law that persons cannot by unilateral act divest themselves
of title
to their own property by constituting a trust of it.
3
Here, Dorrestein claims to have constituted unilaterally a trust
not of his own property, but of another’s. That cannot
be.
He is not a trustee in any sense known to our law and cannot invoke
standing in that capacity.
As Harms JA has pointed out,
4
while the question of legal standing is in a sense procedural, it
also bears on substance. It concerns the sufficiency and directness
of a litigant’s interest in proceedings which warrants his or
her title to prosecute the claim asserted. This case illustrates
the point. The applicant must establish the legal lineage between
itself and the rights-acquiring entity the resolution mentions.
That it has not done. While in a sense this is technical, and
procedural, it also goes to the substance of the applicant’s
entitlement to come to court. It has failed to show that it is the
rights-bearing entity, or is acting on the authority of the
entity,
or has acquired its rights.
There is no suggestion in the resolution that the council regarded
the consortium’s black economic empowerment constituents
as
substitutable at will, whether or not subject to its reasonable
approval. The consortium the resolution envisaged no longer
exists;
indeed, two of the corporate entities the applicant claims are part
of it never came into existence at all. In these
circumstances the
applicant has failed to show that it is entitled to assert the claim
it invokes.
It is therefore unnecessary to consider the nature of the rights, if
any, that arose from the resolution.
COSTS
This conclusion entails that the appeal must fail. Fevrier AJ
awarded costs against the applicant, and, in the usual course,
the
costs of the proceedings in this Court would also be awarded against
it. However, there are singular features of this case
which lead to
the conclusion that the applicant should not be mulcted in the
City’s costs.
The City’s behaviour toward the applicant was consistently
deplorable. Rightly or wrongly, the applicant believed itself
to be
the holder of valuable rights arising from an important resolution
of the council, dealing with a major public venture.
Despite the
importance of the matter, the City lost the original minutes of the
November 2000 meeting at which the resolution
was adopted, and the
applicant was obliged to reconstruct the resolution through
painstaking collection of alternative evidence.
After it had done so, the City behaved with less than courtesy, and
less than candour, in dealing with the applicant’s
claims. As
early as 2003, the City’s property-owning and development
company resolved to cease dealing with the applicant.
Yet for two
years more the applicant was kept on a string. Letters were not
answered, inquiries were ignored and information
was not supplied.
This is unacceptable behaviour for a public body, particularly one
dealing with an entity which has incurred
significant costs in
relation to a public development project in which it believed, not
unreasonably, that it was partnering
the City.
In all these circumstances this Court should as a mark of its
disapproval of the City’s conduct deprive it of its costs,
in
this Court and in the court below.
There is accordingly an order in the following terms:
1. The
application for leave to appeal is granted.
2. The
appeal succeeds only to the following extent:
(a) The costs order in the court below is set aside.
(b) In its place there is substituted
‘There is no order as to costs.’
3. Save
for this, the appeal is dismissed.
4. There
is no order as to costs.
E CAMERON
JUDGE OF APPEAL
APPEARANCES:
For
applicant: PM Kennedy SC and Heidi Barnes
Instructed
by: Strauss Scher Inc, Sandton
Webbers, Bloemfontein
For first
respondent: SJ du Plessis SC and CF van der Merwe
Instructed
by: Van der Merwe Attorneys, Pretoria
Kramer Weihmann & Joubert Inc, Bloemfontein
1
Supreme Court Act 59 of 1959, s
21(3)(c)(ii)
provides that the judges considering a petition for leave to appeal
may refer it ‘to the appellate division
for consideration,
whether upon argument or otherwise’.
2
A party opposing the grant of an order sought in
the notice of motion ‘if he intends to raise any question of
law only …
shall deliver notice of his intention to do so …
setting forth such question’: Rule 6(5)(d)(iii).
3
Ex parte Kelly
1942 OPD 265
, per Van den Heever J, applied in
Vereins-
und Westbank AG v Veren Investments and others
2002 (4) SA 421
(SCA) para 14.
4
Gross v Pentz
[1996] ZASCA 78
;
1996 (4) SA 617
(A) 632B-C, dissenting on grounds not material to
the point at issue.