Post Office Retirement Fund v South African Post Office SOC Ltd and Others (1134/2020) [2021] ZASCA 186; [2022] 2 All SA 71 (SCA) (30 December 2021)

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[2021] ZASCA 186
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Post Office Retirement Fund v South African Post Office SOC Ltd and Others (1134/2020) [2021] ZASCA 186; [2022] 2 All SA 71 (SCA) (30 December 2021)

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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case no.
1134/2020
Reportable
In the matter
between:
POST OFFICE
RETIREMENT FUND

Appellant
and
SOUTH AFRICAN
POST OFFICE SOC LTD
First Respondent
MINISTER OF
COMMUNICATIONS AND
DIGITAL
TECHNOLOGIES

Second Respondent
SOUTH AFRICAN
POSTAL WORKERS UNION
Third Respondent
COMMUNICATION
WORKERS UNION
Fourth Respondent
DEMOCRATIC POSTAL
AND
COMMUNICATIONS
UNION

Fifth Respondent
Neutral
citation:
Post
Office Retirement Fund v South African Post Office SOC Ltd and Others
(Case no. 1134/2020)
[2021] ZASCA 186
(30 December 2021)
Coram:
Petse AP, Makgoka and Plasket JJA and
Molefe and Unterhalter AJJA
Heard:
11 November 2021
Delivered:
This judgment was
handed down electronically by circulation to the parties’
representative via email, publication on the Supreme
Court of Appeal
website and release to SAFLII. The date and time of hand-down is
deemed to be 10:00 am on 30 December 2021.
Summary:
Posts and
Telecommunications-Related Matters Act 44 of 1958 – rules of Post
Office Retirement Fund (the Fund) – rule 3 requires
the South
African Post Office (SAPO) to pay to the Fund pension contributions,
including employees’ contributions, on a monthly
basis – SAPO
stopped paying contributions – rule 3 places an obligation on SAPO
to pay contributions – the obligation to pay
has not been
extinguished or deferred by intervening impossibility of performance
– the obligation to pay may not be avoided by
SAPO deciding not to
pay the Fund, but to pay other creditors instead.
ORDER
On
appeal from:
Gauteng
Division of the High Court, Pretoria (Kubushi J sitting as court of
first instance):
1
The appeal is upheld with costs, including the costs of two counsel.
2
The order of the court below is set aside and replaced with the
following order:
‘
1
It is declared that the South African Post Office:
1.1
is obliged and
required, in terms of rule 3 of the Post Office Retirement Fund’s
rules, to pay contributions, as defined therein,
to the Post Office
Retirement Fund on a monthly basis, in arrear, by not later than the
first working day of each month; and
1.2
is in breach of this
obligation in that it has not made the required payments since May
2020.
2
It is declared that the
South African Post Office’s obligations in terms of rule 3 of the
rules have not been extinguished or deferred
by intervening
impossibility of performance.
3
The South African Post
Office is directed to pay the costs of the Post Office Retirement
Fund, including the costs of two counsel.’
JUDGMENT
Plasket JA (Petse
AP, Makgoka JA and Molefe and Unterhalter AJJA concurring)
[1]
The South African Post Office SOC Ltd (SAPO) – the first respondent
in this appeal
– is an organ of state that has provided postal
services to the South African public for many years. Its juristic
form has varied
over the years
[1]
but it now takes the form of a state-owned company, its continued
existence in this form having been provided for by s 3 of the South
African Post Office SOC Ltd Act 22 of 2011 (the SAPO Act). In terms
of s 3(3), the ‘powers and duties of the State as a member
and
shareholder of the Post Office must be exercised and performed’ by
the Minister of Communications and Digital Technologies,
the second
respondent in this appeal.
[2]
Section 4(1) of the SAPO Act spells out SAPO’s duties. It provides:
‘
Subject to
the Postal Services Act and the licence issued to the Post Office in
terms of the said Act, the Post Office must take reasonable
measures,
within its available resources, to achieve the progressive
realisation of the following duties:
(a)
Ensure the universal and affordable provision of postal services;
(b)
ensure the provision of a wide range of affordable
postal services in the interest of the economic growth and
development of the Republic;
(c)
be innovative in the provision of postal services;
(d)
develop postal services that are
responsive to the needs of users and consumers;
(e)
ensure the achievement of universal access to
postal services by providing an acceptable level of effective,
reliable and regular
postal services to all areas, including rural
areas and small towns where post offices are not sustainable;
(f)
ensure greater equity in respect of the
distribution of services, particularly within the areas of the
historically disadvantaged
communities, including rural areas;
(g)
ensure that the needs of disabled persons are
taken into account in the provision of postal services;
(h)
ensure the development of human resources and
capacity-building within the postal industry, especially amongst
historically disadvantaged
groups;
(i)
act in the best interest of postal users and other clients;
(j)
maintain an effective and efficient system of
collecting, sorting and delivering mail nationwide in a manner
responsive to the needs
of all categories of mail users;
(k)
actively provide and develop a
citizens' post office that contributes to community and rural
development and education, thereby serving
as an interface between
government and the community; and
(l)
ensure compliance with international commitments
relevant to the postal industry.’
[3]
In terms of s 5, SAPO may, without derogating from its powers in
terms of the
Companies Act 71 of 2008
and subject to the
Public
Finance Management Act 1 of 1999
, engage in a wide range of
activities, such as purchasing immovable property,
[2]
erecting buildings, installations and plants,
[3]
acquiring and holding movable property
[4]
and letting its services or otherwise making them available.
[5]
One such service is the paying of social grants. It is paid to do so
by the South African Social Security Agency (SASSA) and acts
as its
agent in so doing.
[4]
The Post Office Retirement Fund (the Fund) – the appellant in this
matter – was
established, along with the Telecommunications Pension
Fund, by s 9 of the Posts and Telecommunications-Related Matters Act
44 of
1958 (formerly known as the Post Office Act). Section 10 makes
provision for rules, which it calls statutes, for both funds. Section
10(1) states that the control and management of these funds, the
conditions for admission to them and termination of membership,
the
amount and nature of contributions and other payments to them by
members and employers, the benefits due to members and beneficiaries
and the manner in which they may be amended are governed by the
statutes of each fund. Section 10(4) states that the statutes of
the
funds ‘shall be binding on each fund as well as the postal employer
and the telecommunications employer, as the case may be,
and on the
members and beneficiaries of each fund’.
[5]
By notice of motion dated 31 July 2020, the Fund applied on an urgent
basis to the Gauteng
Division of the High Court, Pretoria for the
following substantive relief:
‘
2.
That the South African Post Office SOC Ltd (“SAPO”) be declared
to be in breach of
Rule 3.3 of the South African Post Office
Retirement Fund Rules (the “Rules”).
3.
That SAPO be directed to remit to the Fund, within five (5) days of
this order,
all outstanding arrear contributions (i.e. employer and
employee contributions) in respect of the periods May 2020 and June
2020,
inclusive of interest at 9.75% per annum.
4.
That going forward, SAPO be directed to continue to timeously pay
contributions
to the Fund as they fall due, in accordance with the
Rules.’
None of the
respondents other than SAPO took part in the proceedings in the high
court or on appeal. The application was dismissed
with costs by
Kubushi J. She subsequently granted the Fund leave to appeal to this
court.
[6]
The material facts upon which the Fund’s case is founded are not
complicated and are
largely common cause. Rule 3.3 of the rules of
the Post Office Retirement Fund (the rules) provides that
contributions paid by SAPO,
which include members’ contributions,
are payable to the Fund monthly. SAPO failed to pay any contributions
to the Fund for the
months of May and June 2020.
[7]
SAPO raised three defences. The first was that the Fund’s rules did
not oblige it
to pay contributions to the Fund. The second was that,
if it was obliged by the rules to pay contributions, it had a power
to decide
not to pay the Fund in the prioritization of payments to
creditors. The third was that its parlous financial state rendered it
impossible
to pay the Fund with the effect that its obligation was
either extinguished or deferred.
The facts
[8]
The contributions paid by SAPO to the Fund prior to May 2020
comprised of members’
contributions of 7.5 percent of each
employee’s pensionable monthly salary, employer contributions of
13.55 percent of each employee’s
pensionable monthly salary and an
additional voluntary contribution. It is not in dispute that SAPO did
not pay these contributions
to the Fund at the end of May and June
2020. It ought to have paid a total contribution of R40 million in
respect of each month.
It would appear that SAPO has not paid any
further contributions to the Fund since.
[9]
When SAPO had not paid the May 2020 contribution by the due date of
the first working
day of June 2020, Mr Michael Faasen, the Fund’s
principal officer, wrote to Mr Ivumile Nongogo, SAPO’s acting group
chief executive
officer. He pointed out that the payment of
contributions is a statutory obligation and that a failure on the
part of SAPO to pay
placed the Fund in a difficult position. He
understood that SAPO’s cash flow would improve within a few days
and said that ‘it
will be much appreciated if this payment will
receive your favourable consideration’.
[10]
Nongogo responded two days later. He said:
‘
Indeed
SAPO’s financial situation is dire and each month we are having to
make a call on payments. Last month we paid the pension
fund but
did not pay Medipos, this month we will commence
payments with Medipos and then the fund. We are cognizant that both
parties have
statutory requirements in this regard but we are trying
not to be unfair to any one party.’
(Medipos is SAPO’s
in-house medical aid scheme.)
[11]
Faasen wrote back to Nongogo to ask for clarity. He wanted to know
whether his understanding was correct
that SAPO would pay
contributions a month after the due date for payment, with the effect
that ‘SAPO’s arrears will grow exponentially
until the financial
position of SAPO normalises’. In his response, Nongogo said:
‘
Ideally
this should not be the case, we are hopeful that as we open for
business and start to receive normal revenues we can cover
all
statutory payments and not create a backlog, otherwise as you point
out we will have an exponential growth in that backlog that
will
become unmanageable. We are prioritizing these payments and as the
cash comes in we will attempt to bring any arrears to zero.’
[12]
The Fund’s board of trustees decided that a formal letter, copied
to the Minister, should be sent to
SAPO to spell out the Fund’s
position. Prior to that letter being sent, however, Faasen wrote to
Nongogo to inform him of the board’s
decision. He also raised a
further concern – that SAPO had also not paid premiums in respect
of a temporary disability policy for
employees and that death and
permanent disability benefits of SAPO employees were at risk as well.
Nongogo replied to say that he
appreciated the ‘serious impact that
is [being] caused by SAPO’s non-payment’. He assured Faasen that
‘everything is being
done to resolve the financial issues’ but he
was unable to indicate when a solution to the problem would be found.
[13]
The board’s formal letter followed. It is dated 11 June 2020 and
was written by Mr Ashwin Trikamjee,
the chairperson of the Fund’s
board. After stating that one of the board’s responsibilities was
to ensure that both employer
and employee contributions were paid
timeously to the Fund and that SAPO’s contributions for May 2020
had not been paid, he said:
‘
We are
therefore concerned that members will suffer prejudice due to the
non-payment and/or delay by the Company in paying the required
contributions. This specifically relates to death and disability
benefits not being funded as well as exit benefits being underfunded.
Of special concern is the deduction of member contributions from
salaries but not being paid to the Fund, which could have further
legal implications for the Company.’
[14]
Trikamjee requested that SAPO investigate the failure to pay the Fund
and furnish the board with ‘detailed
feedback’. He demanded an
undertaking from SAPO that the outstanding contributions, plus
interest, would be paid within 21 days
of the date of his letter. He
asked for an ‘unequivocal commitment’ from SAPO that, in future,
contributions would be paid in
accordance with the rules. He
expressed the board’s willingness to discuss ‘any challenges that
the Company might be experiencing
during these times of upheaval
caused by the Covid-19 outbreak that might negatively impact the
Company’s legal obligations towards
the Fund as well as possible
relief measures within the ambit of the law’.
[15]
Nongogo replied about two weeks later. He apologized for SAPO having
been ‘unable to remit the pension
contributions as required on a
monthly basis’. He said that SAPO’s financial position had
deteriorated dramatically and that
this had accelerated as a result
of ‘the Covid-19 induced lockdowns’, with a negative impact for
all of its creditors including
the Fund.
[16]
Nongogo informed the board that SAPO had approached the Department of
Communications and Digital Technologies
for financial assistance but
the earliest any assistance could be expected was October 2020. In
the meantime, he said, ‘the situation
remains extremely dire’. He
expressed his appreciation that the board was willing to discuss
temporary relief measures. He identified
two possible options for
discussion. They were a ‘contributions holiday’ of six months,
and a ‘once-off capped withdrawal by
pension fund members who are
still employees to cushion them from decisions that SAPO will need to
make that may impact on their
earnings’. Finally, he said that SAPO
was ‘fully cognizant of the legal implications that arise from
non-remittance and the financial
consequences that will impact on
employees’, but it looked forward to ‘an engagement with the Fund
as to ways that could be pursued
to mitigate the situation’.
[17]
Trikamjee responded on 6 July 2020, by which time SAPO’s June 2020
payment to the Fund was overdue.
He informed Nongogo that the Fund’s
board had discussed the two proposals that he had made. Both were
impractical for various reasons
and could not be pursued without a
change to the rules, in the case of the first proposal, and the
amendment of an Act, in the case
of the second. He said that the
board had resolved to request SAPO ‘to pay the contributions in
respect of risk benefits and fund
expenses for May and June 2020 as a
matter of extreme urgency to ensure that members of the Fund are
covered in respect of death
and disability benefits’ and that
‘Additional Voluntary Contributions which have already been
deducted from employees’ salaries
at the end of May 2020 and June
2020 also need to be paid over to the Fund’. The board, he said,
would appreciate the opportunity
to meet Nongogo and his senior staff
in order to discuss payment of the outstanding contributions after
the board had ‘considered
all the legal options available to them
to accommodate SAPO in its present dire financial position’.
[18]
On 21 July 2020, however, Faasen sent an email to Nongogo in which he
informed him that when the board
had sought legal advice, it had been
told that the type of engagements it had thus far had with SAPO fell
short of compliance with
its fiduciary duties to the Fund and its
members. He informed Nongogo that the Fund would shortly be launching
an urgent application
against SAPO ‘with a view to receiving
payment of outstanding contributions and ensuring that the Post
Office pays such future
contributions as may arise’. He then said
that the Fund would ‘at the same time, consider a Rule Amendment in
order to provide
possible relief for all the parties, and this would
likely require further engagements with the employer’.
[19]
On the following day, Nongogo replied as follows:
‘
This is
well noted and the stance is well understood. We remain cognizant of
the outstanding contributions to the fund and we are
doing all things
necessary to bring SAPO to a position where it can honour these
payments. In the meantime your consideration of
possible actions to
offer relief [is] greatly appreciated.’
[20]
The Fund’s attorneys then drafted the founding papers in the urgent
application. The notice of motion
was dated 31 July 2020, as payment
of the July contributions was about to fall due. The papers were
issued on the same day.
[21]
In SAPO’s answering affidavit, deposed to by Ms Nondumiso Ngonyama,
a non-executive member of its board,
the application was categorized
as not being ‘a simple claim by a creditor against a debtor’, but
rather a matter that raises
‘a multitude of contractual, statutory,
constitutional and public policy issues’. She stated that it was
unclear what the Fund
was trying to achieve:
‘
It seeks
payment of over R80 million and an order that SAPO must continue
timeously to pay R40 million a month. However, it does so
while
readily conceding that SAPO’s financial position is dire and that
each month SAPO has to prioritise its most critical financial
obligations. In fact, the Fund purports to found its claim for urgent
payment on the basis that SAPO cannot pay the amount in question.
This is a non-sequitur.
[22]
She explained that as a result of the ‘current economic environment
and the impact of COVID-19’,
SAPO chose to pay medical aid
contributions rather than pension fund contributions. It had reasoned
that it was ‘more important
to pay its employees’ salaries
(rather than any fringe benefits) so that those employees may
continue to provide for themselves
and their families whilst the
COVID-19 pandemic ravages South Africa’s health and wealth’.
[23]
Ngonyama made the claim that the Fund had not made out a case as to
why it required payment of R40 million
a month, as its operational
expenses were only R1.4 million and it had reserves that would enable
it to operate for four or five
months without SAPO’s contributions.
She described the Fund’s insistence on being paid what was owed to
it as bewildering. Nonetheless,
she claimed that SAPO was trying ‘to
make as many payments as it can, in order to ensure the fulfilment of
its various duties under
section 4 of the South African Post Office
SOC Act, 2011’. It would, she undertook, pay the Fund as soon as it
was able to, but
said that it was not possible to predict with
certainty when that would be. At the time of deposing to her
affidavit, however, ‘paying
R40 million a month to the Fund is not
only financially impossible and fiscally irresponsible, but payment
of any material amount
to the Fund would likely cause SAPO’s
demise’.
[24]
Ngonyama claimed that the Covid-19 pandemic and the lockdowns put in
place to control it had a severe,
adverse effect on SAPO’s
business. Without any historical context and without any detail, she
stated that, as at 31 July 2020,
only 55 of SAPO’s 1 416 post
offices were operating profitably. In July 2020, SAPO incurred a net
loss of R97 million. This
was nearly triple the net loss of R 34
million at the corresponding time in 2019. It year to date loss at 31
July 2020 was R1.066
billion.
[25]
As a result of SAPO’s dismal financial performance, it was only
able to pay some of its creditors but
not others. It therefore
decided to prioritise which would be paid and which not. So, for
instance, it prioritised the payment of
transport costs, national
linehaul expenses, property costs including rental expenses,
information technology expenses and the cost
of security. It chose to
prioritise these expenses, Ngonyama said, ‘in order to continue to
meet its primary statutory duties’.
[26]
Ngonyama stated that as a result of SAPO’s failure to pay
creditors, critical services, including the
payment of social grants,
had been interrupted and continued ‘negatively to impact on SAPO’s
ability to recover lost revenue
and to move to financial
sustainability’. She continued to say:
‘
As a result
of the economic downturn and constraints on its business, SAPO’s
YTD loss as at 31 July 2020, was R1.066 billion. YTD
(as at 31 July
2020) staff costs are R1.2 billion . . . Staff costs constitute 61%
of total expenses . . . Despite the risks in not
paying trade
creditors, SAPO has done everything it can to continue to pay
employees’ basic salaries, even if it cannot afford
to cover all
fringe benefits, especially medium to long term ones such as pension
fund contributions. Not all creditors are being
paid, and once
critical payments have been made, SAPO has no cash left. For
instance, once the August 2020 salaries have been paid,
SAPO will
need to accumulate cash during the course of September to pay the
September salaries. The COVID-19 pandemic has had a fundamental
impact on SAPO’s business.’
From this, it was
clear that ‘at this stage SAPO does not have the R 40 million per
month, or any other amount, to pay the Fund’.
[27]
Paying the Fund was described by Ngonyama as not being ‘one of
SAPO’s primary statutory duties’.
She said that the Fund was ‘in
no worse a position than any of SAPO’s other statutory creditors’.
As at 31 July 2020, SAPO
owed its ‘statutory creditors’ R 454
million. This included R 162 million to the medical aid scheme, R 125
million to the South
African Revenue Service and R 18 million to the
Unemployment Insurance Fund.
[28]
SAPO claimed that it was simply not possible for it to pay ‘tens of
millions of Rand to the Fund on
a monthly basis simply because the
Fund has brought this application’. It averred that it would be
‘contrary to public policy
and the Constitution, and a forced
breach of the Board’s fiduciary duties for the Court to compel SAPO
to make payment to the Fund
to the detriment of the public and in
unlawful preference
vis-a-vis
all the other creditors of
SAPO’.
[29]
Finally, Ngonyama dealt with the fact that employees’
contributions, along with employer’s contributions
and voluntary
contributions were not being paid. She said that the Fund was
confused when it alleged that SAPO was deducting employees’
contributions from their salaries and then failing to pay those
amounts to the Fund. Her explanation was this:
‘
SAPO is
intended to pay both the member and employer contributions, out of
its own funds. The member does not actually place SAPO
in funds to
pay any of the contributions. The member portion of pension fund
contributions would show up as a notional “deduction”,
simply as
a matter of payroll accounting or book entry, on the employees’
payslips. No funds are being diverted from the employees,
because no
such funds exist.’
[30]
In the Fund’s replying affidavit, Faasen made the points that SAPO
did not deny its indebtedness to
the Fund or that it failed to pay
contributions to the Fund. Instead, he said, it had redirected
contributions meant for the Fund
‘to its operational expenditure
for an indeterminate period of time’. He accused the SAPO board of
acting with impunity, resorting
to self-help and attempting to avoid
judicial scrutiny.
[31]
Faasen also made the point that SAPO’s financial difficulties
pre-dated the Covid-19 pandemic and that
its governance failures were
not temporary in nature. SAPO’s version amounted to it simply being
unable to pay its debts as they
fell due which, Faasen said, ‘begs
the question whether SAPO’s Board is not continuing to trade the
company under reckless circumstances,
bordering on delinquency’.
Its explanation for not paying what it owed, when all was said and
done, was that it was insolvent.
He described SAPO’s utilization of
employees’ pensions and risk cover for the payment of operational
expenses as being fiscally
and morally irresponsible. What is more,
SAPO’s continued trading under these circumstances constituted, in
Faasen’s view, a
potentially serious dereliction of duty in terms
of the
Companies Act 71 of 2008
.
[32]
In respect of the deduction of employees’ contributions that were
not paid to the Fund, Faasen categorised
SAPO’s explanation, quoted
above, as troubling particularly because the recording of deductions
of pensionable emoluments on employee
payslips was, on SAPO’s
version, fraudulent. Furthermore, once the deductions were made from
employees’ gross salaries, the obligation
to pay them to the Fund
was triggered.
The high court’s
judgment
[33]
The high court found that as a result of the lockdown induced by the
Covid-19 pandemic, SAPO shut down
completely and that the pandemic
had a profound impact on its business. The first statement of fact is
nowhere to be found in the
papers, and the second, as I will show, is
only partially correct. It then recorded information concerning
SAPO’s financial difficulties,
some of which has been mentioned
above, and stated that it was against this background that the Fund
had brought its application.
[34]
The approach of the high court to the issues that arise for decision
were encapsulated thus in the judgment:
[6]
‘
For the
reasons that follow hereunder, I have to agree with SAPO that this
application cannot just be categorized as a simple monetary
claim of
a creditor against a debtor. It is a constitutional matter which
implicates constitutional and statutory duties of organs
of state and
indeed the protection of fundamental rights. The claim takes place
against the background sketched in the opening passages
of this
judgment. Ordinarily, SAPO would be expected to comply with the
provisions of
Rule 3.3
without much ado. These, however, are not
ordinary times. The imperatives of the time require a fresh look at
the provisions and
requirements of the Rule.’
[35]
This was so for two primary reasons. First, in terms of s 4 of the
SAPO Act, SAPO was placed under an
obligation to provide services
such a ensuring a universal and affordable postal service. Secondly,
SAPO is the agent that pays social
grants on behalf of SASSA. These
functions, according to SAPO, were critical in fulfilling
socio-economic rights like the rights
to social security and
children’s rights, and also in supporting and strengthening ‘almost
every other right in the Bill of Rights’.
The high court found that
to jeopardise SAPO’s ability to fulfil these functions would
endanger ‘key constitutional rights and
values’.
[7]
[36]
The high court accepted that SAPO had not paid its contributions to
the Fund and that it was unlikely
to be able to do so in the
immediate future. The crux of the matter, it held, was whether SAPO
should be ordered to pay the contributions
that it accepted were
owing.
[8]
It then turned to rule
3.3 of the rules. While disavowing the need to interpret rule 3.3, as
the parties had done, it accepted that
the rule required SAPO to make
monthly payments to the Fund. It held, however, that ‘the Rules
cannot be read and/or interpreted
to require payment where this is
impossible, which is the case here’.
[9]
[37]
An interpretation of rule 3.3 that meant that SAPO would be ordered
to pay what it owed would ‘fundamentally
jeopardise the ability of
SAPO to fulfil its core functions and imperil key constitutional
rights, if not the total collapse of SAPO’.
[10]
Its limited resources had to be applied ‘to achieving a government
developmental mandate and to maintain the infrastructure for
the
payment of social grants’. Reliance was placed on the
Constitutional Court judgment of
Soobramoney
v Minister of Health, KwaZulu-Natal
[11]
in support of the proposition that ‘there is a hierarchy of rights
– favouring the good of the many above the good of the few’;
and
that this ‘principle’ applied to the instant case in which the
‘rights of the many should trump the few’.
[12]
[38]
Having dealt thus with the meaning and effect of rule 3.3, the high
court turned to the second leg of
SAPO’s defence, namely that of
supervening impossibility of performance. It observed that ‘any
unqualified obligation to pay
this court may make, is at present not
capable of being fulfilled’; that a court ‘cannot make an order
the implementation of
which would not come to fruition’; and that
SAPO had made it clear that ‘even if it can be compelled to pay the
amounts claimed
by the Fund by a court order, it will be impossible
for it to pay’.
[13]
Having
concluded that it was impossible for SAPO to pay what it owed to the
Fund, the high court held that SAPO was ‘excused from
paying over
its employees’ retirement contributions, at least for the duration
of the impossibility’.
[14]
On this basis, the Fund’s application was dismissed.
[39]
Finally, the high court ordered the Fund to pay SAPO’s costs on an
attorney and client scale. Its reasoning
appears to have been that
both parties had asked for a punitive costs order against the other
and that, as SAPO was the successful
party, these spoils too went in
its favour.
The
interpretation of rule 3.3
[40]
The high court made a number of far-reaching findings as to the
meaning of rule 3.3 without attempting
even the most perfunctory
engagement with its terms or the most basic of interpretive
exercises. It is by now well-known that the
interpretation of written
documents, including legislative instruments, involves a
consideration of the language used, the context
in which it is used
and the purpose of the document that is the subject of
interpretation. This was explained by Wallis JA in
Natal
Joint Municipal Pension Fund v Endumeni
Municipality
[15]
as follows:
‘
Interpretation
is the process of attributing meaning to the words used in a
document, be it legislation, some other statutory instrument,
or
contract, having regard to the context provided by reading the
particular provision or provisions in the light of the document
as a
whole and the circumstances attendant upon its coming into existence.
Whatever the nature of the document, consideration must
be given to
the language used in the light of the ordinary rules of grammar and
syntax; the context in which the provision appears;
the apparent
purpose to which it is directed and the material known to those
responsible for its production. Where more than one
meaning is
possible each possibility must be weighed in the light of all these
factors. The process is objective, not subjective.
A sensible meaning
is to be preferred to one that leads to insensible or unbusinesslike
results or undermines the apparent purpose
of the document. Judges
must be alert to, and guard against, the temptation to substitute
what they regard as reasonable, sensible
or businesslike for the
words actually used. To do so in regard to a statute or statutory
instrument is to cross the divide between
interpretation and
legislation; in a contractual context it is to make a contract for
the parties other than the one they in fact
made. The “inevitable
point of departure is the language of the provision itself”, read
in context and having regard to the purpose
of the provision and the
background to the preparation and production of the document.’
[41]
Section 9 of the Post and Telecommunication-Related Matters Act
established the Fund. Its principal purpose
was to provide pensions
for employees of SAPO in order to ensure their security and dignified
living in their latter, post-retirement
lives. Section 10(1) provided
that the Fund’s control and management, the conditions for
admission to membership and the termination
thereof, and the amount
and nature of contributions by members and the contributions by SAPO
are governed by the Fund’s rules.
In terms of s 10(2), those rules,
in common with subordinate legislation generally, were required to be
published in the
Government Gazette
. In terms of s 10(4), the
rules ‘shall be binding on’ the Fund, SAPO and members and
beneficiaries of the Fund. Section 10 thus
sets out the purpose of
the rules and their context as the mechanism for running and funding
a vehicle for the eventual payment of
benefits to employees of SAPO
who retire or leave its employ, and to the beneficiaries of those who
died while in SAPO’s service.
[42]
In order to interpret rule 3.3, it is necessary to consider it in its
broader context. I shall first
detail some of the more important
provisions of the rules in order to sketch that context and the
purpose of the rules. I will then
turn to rule 3.
[43]
Rule 1.4 states that the object of the Fund is ‘to provide
retirement and ancillary benefits for the
BENEFICIARIES as described
in the RULES’. A beneficiary is rather unhelpfully defined in rule
1.1 as ‘any person who is entitled
to benefits in terms of these
RULES’. It becomes evident from the rules, however, that the
beneficiaries of the Fund are SAPO employees,
both pre- and
post-retirement, and their dependents.
[44]
Rule 2 concerns the financial structure of the Fund. Rule 2.1
provides that the Fund’s assets are to
be held in three separate
accounts. They are the share account, the pensions account and the
reserve account. For present purposes,
the share account is the most
important of the three accounts. In terms of rule 2.1(1), it is
comprised of ‘all the MEMBERS’SHARES
plus the additional
voluntary contribution account’. In respect of each member, it is
made up of a member’s opening balance;
each member’s subsequent
monthly contributions in terms of rule 3.1; SAPO’s monthly
contribution on behalf of each member in
terms of rule 3.2(1)
(a)
;
transfers of a member’s pension value from another Fund in terms of
rule 9.8(1); investment earnings; surplus bonuses; special
transfers
from the stabilization reserve in terms of rule 3.2(4); and transfers
from the data reserve. Additional contributions made
by a member in
terms of rule 3.1(3) are also reflected in the share account, but
separately in an additional voluntary contribution
account.
[45]
Rule 4 defines who is eligible for membership of the Fund. Rule 4.1
provides that ‘eligible employees’
shall become members of the
Fund. An eligible employee is defined in rule 1.1 as a permanent
employee of SAPO, including a permanent
part-time employee, who has
not attained the age of 65 years. Rule 4.1(5) stipulates that
membership of the Fund is a condition of
service of every eligible
employee.
[46]
Rule 5 is headed ‘RETIREMENT’. It provides for the payment of
pensions to SAPO employees in the event
of ‘normal retirement’,
in rule 5.1, and ‘early retirement’, in rule 5.2. It also makes
provision, in rule 5.3, for lump
sum benefits to be paid. To
illustrate the working of this rule, rule 5.1(1) provides that on
retirement, a member ‘shall receive
a PENSION vesting on the
following day secured by the balance of the MEMBER’S SHARE at that
date after the amount of any lump sum
benefit paid in terms of RULE
5.3 has been deducted’. Rule 5.3(1) provides that a member, on
retirement, may choose to be paid
a lump sum, but it may not be more
than a third of that member’s share.
[47]
Rule 6 deals with the payment of benefits to the spouse of an
employee who has died while in the service
of SAPO or after
retirement. Rule 7 concerns itself with benefits for employees who
are disabled by accidents, diseases or illness
to the extent that
they are no longer able to work.
[48]
Rule 10 deals with the management of the Fund. In terms of rule
10.2(1), the ‘management, control and
administration’ of the Fund
is vested in the board. Rule 10.5 provides for the appointment of a
principal officer and rule 10.6
requires the board to appoint an
auditor. Rule 10.8 requires the board to appoint an actuary for the
Fund.
[49]
From the above truncated and incomplete precis of the rules, it is
apparent that they create a sophisticated
vehicle to provide for the
social security of SAPO employees when they retire, of dependents of
SAPO employees who die either while
in service or after retirement
and of SAPO employees who, prior to retirement, are disabled. The
funding model for this social security
model is employee and employer
contributions, plus the fruits of the investment of these
contributions. As SAPO employs a large number
of people, the Fund, of
necessity, manages large sums of money.
[50]
With this context in mind, as well as the purpose of the rules to
provide social security for SAPO employees
and their dependents, I
now turn to rule 3. This rule is headed ‘CONTRIBUTIONS’. It
consists of three inter-locking parts.
[51]
Rule 3.1 concerns itself with members’ contributions to the Fund.
Rules 3.1(1), 3.1(2) and 3.1(3) provide:
‘
(1)
Each MEMBER other than a DEFINED BENEFIT MEMBER shall contribute
monthly an amount equal to
7,5% of one-twelfth of his PENSIONABLE
EMOLUMENTS to the FUND.
(2)
Contributions are deducted monthly by the EMPLOYER from the MEMBER’S
remuneration.
(3)
A MEMBER may make additional contributions to the FUND in order to
secure greater benefits
or in respect of a period of past service.
The conditions relating to the additional contributions and the
benefits payable shall
be as provided for in RULES 5.4, 6.3 and
7.3(4).’
[52]
Rule 3.2 deals with the employer’s contributions and the
quantification of those contributions. Rule
3.2(1) reads as follows:
‘
The
EMPLOYER shall contribute monthly the following amounts to the FUND:
(a)
9% of one-twelfth of each MEMBER’S PENSIONABLE EMOLUMENTS in
respect of MEMBERS other
than DEFINED BENEFIT MEMBERS towards the
provision of retirement benefits only;
(b)
4.75% of one-twelfth of each MEMBER’S PENSIONABLE EMOLUMENTS in
respect of MEMBERS
other than DEFINED BENEFIT MEMBERS to procure the
death and disability benefits described in Rules 6.1(1) and 7 and to
cover the
cost of expenses referred to in Rule 10.14 and rule 10.15;
relating to members other than defined benefit members as decided by
the
TRUSTEES in consultation with the ACTUARY;
(c)
such amounts as mutually agreed between the EMPLOYER and the TRUSTEES
acting on the
advice of the ACTUARY, as may be necessary to eliminate
a shortfall in the Stabilisation Reserve;
(d)
such amounts as determined from time to time by the TRUSTEES after
consultation with
the ACTUARY as may be necessary to eliminate any
actuarial shortfall in the Pensions Account or the Defined Benefit
Reserve in the
Reserve Account . . .
(e)
a percentage of the DEFINED BENEFIT MEMBERS’ PENSIONABLE EMOLUMENTS
as determined
from time to time by the TRUSTEES after consultation
with the ACTUARY to fund the benefits of DEFINED BENEFIT MEMBERS in
the defined
benefit reserve in the Reserve Account and to fund the
cost of expenses referred to in Rules 10.14 and 10.15 relating to
DEFINED
BENEFIT MEMBERS.’
[53]
Rule 3.2(2) allows for the increase or reduction of SAPO’s
contributions in defined circumstances.
In terms of rule 3.2(3), SAPO
may, in consultation with the Fund’s actuary, ‘from time to time
make additional contributions
to the FUND in order to increase the
balance in the Reserve Account’. In terms of rule 3.2(4), the board
may on the request of
SAPO , and after consultation with the Fund’s
actuary, ‘make special transfers of all or part of any balance in
the stabilization
reserve in the Reserve Account as contemplated in
RULE 2.2(3) to the MEMBERS’ SHARES or the defined benefit reserve
in the Reserve
Account, pro rata to the contributions due by the
EMPLOYER in terms of [rule 3.2](1)(a) or (e) above, in which case the
EMPLOYER’S
contributions will be reduced by the amount of such
transfer’.
[54]
Rule 3.3 is headed ‘PAYMENT OF CONTRIBUTIONS’. It states:
‘
Contributions
are payable to the FUND monthly, in arrears, not later than the first
working day after the end of the calendar month
to which such
contributions relate.’
[55]
Rule 3 follows a series of logical steps. The first is that SAPO’s
employees contribute a defined proportion
of their salaries to the
Fund on a monthly basis. Their contributions are deducted from their
salaries by SAPO and are then paid
to the Fund by SAPO. The second
step is that SAPO is required to contribute to the Fund, also on a
monthly basis, in respect of each
of its permanent employees. The
amounts that SAPO is required to pay, and their purpose, are set out
in rule 3.2(1)
(a)
to
(e)
. The third step determines
when SAPO is required to pay the contributions contemplated by rules
3.1 and 3.2. Rule 3.3 requires payment
to be made monthly in arrears
and immediately after the end of a month to which they relate.
[56]
Understood in this way, within the wider context of the rules as a
whole and their purpose of providing
social security to SAPO’s
employees, it is clear that SAPO has no choice: it is placed under an
obligation by the rules – a statutory
obligation – to pay the
Fund the contributions provided for in rules 3.1 and 3.2 and, in
terms of rule 3.3, to do so by ‘not
later than the first working
day after the end of the calendar month to which such contributions
relate’. SAPO, being a public
body, may only do what it is
empowered by law to do. It is not free to do what it pleases.
[16]
No provision is made in the rules for an exemption from the
obligation to pay contributions on a monthly basis and SAPO is not
authorized,
in its discretion, to decide to withhold payment. In
unqualified terms, rule 3 requires SAPO to pay contributions to the
Fund. It
had no power, in terms of the rules, to decide to withhold
payments and to prioritise other creditors over the Fund. The purpose
of the Fund would be undermined if SAPO was free to contribute if it
wanted to, and to withhold contributions at will.
[57]
It is necessary now to comment on the approach taken by the high
court to the interpretation of rule
3. First, the high court
committed an irregularity by holding that while ordinarily rule 3.3
imposed an obligation on SAPO to pay
contributions monthly to the
Fund, the extraordinary times required a different result. In so
doing it took the view that rule 3.3
could mean one thing on a
particular day and another on the following day – that
circumstances dictated its meaning. That is not
correct. The
interpretation of a written document is an objective exercise and the
starting point is the words of the document to
be interpreted.
[17]
Those words remain constant and cannot be made to mean different
things in order to suit the perceived needs of the moment. As Lord
Aitken said in
Liversidge
v Anderson
,
[18]
the laws ‘speak the same language in war as in peace’.
[58]
Secondly, the high court confused the interpretation of rule 3.3 with
the separate doctrine of impossibility
of performance when it held
that the rule should not be interpreted to include an obligation on
the part of SAPO to pay contributions
when this was impossible. In
order to make such a finding as to the meaning of the rule, the high
court had to ignore the words of
the rule, its context and purpose,
and read other, unspecified, words into it. A dictum of Kentridge AJ
on constitutional interpretation,
in
S
v Zuma and Another
,
[19]
is apposite:
‘
We must
heed Lord Wilberforce’s reminder that even a constitution is a
legal instrument, the language of which must be respected.
If the
language used by the lawgiver is ignored in favour of a general
resort to “values” the result is not interpretation but
divination.’
[59]
Thirdly, in holding that an interpretation that rule 3.3 required
SAPO to pay contributions would not
promote constitutional values,
the high court simply ignored both the plain meaning of the rule and
the fundamental rights of SAPO’s
employees to social security and
to fair labour practices. It also ignored the founding constitutional
value of the rule of law.
The purpose of the obligation was to enable
SAPO to fulfil its employees’ fundamental rights to social security
in terms of s 27(1)
(c)
of the Constitution. By misappropriating a portion of its employees’
salaries required to be paid on their behalf to the Fund,
and using
that money for other unauthorized purposes, SAPO perpetrated an
obvious unfair labour, in contravention of s 23(1) of the
Constitution, and did so on a grand and persistent scale. And the
endorsement of an arbitrary, open-ended and undefined power in
the
hands of SAPO to prefer its creditors of choice over other creditors
undermines the rule of law enshrined as a founding value
of the
Constitution in s 1
(c)
.
It is far from clear to me how this promotes constitutional values.
At best, if it does, it does so while simultaneously undermining
other fundamental rights and constitutional values. This
interpretation of the rule turns a blind eye to SAPO routinely giving
undue
preferences to some creditors at the expense of others.
[20]
[60]
Perhaps because the high court eschewed the need to interpret rule 3,
it is not at all clear how it arrived
at its conclusion that the rule
included a power in the hands of SAPO to choose which of its
creditors to pay and which to ignore.
The high court’s most
profound misdirection, it seems to me, is its complete lack of any
principled basis for its decision: it
has failed to explain how the
power it recognized can, as a matter of interpretation, to be said to
be included in rule 3. I find,
however, that rule 3’s meaning is
clear: it requires employees and SAPO to pay contributions to the
Fund and those contributions
are required to be paid monthly, on the
first working day of a month for the preceding month. The argument
that rule 3 does not impose
an obligation on SAPO to pay
contributions to the Fund is consequently without merit.
Could SAPO decide
not to pay the Fund despite the terms of rule 3?
[61]
I turn now to two related arguments advanced by SAPO that are said to
be based on the Constitution and
its values. They are to the effect
that even if rule 3 imposes an obligation on SAPO to pay the Fund, it
enjoys an unrestricted power
to decline to pay creditors of its
choosing.
[62]
As I understand the first of these arguments, it has the following
contours: SAPO’s contractual obligation
to pay social grants
implicates the fundamental rights of access to social security,
including social assistance
[21]
and, in some cases, the fundamental right of the paramountcy of a
child’s best interests;
[22]
the obligations imposed on SAPO in terms of s 4 of the SAPO Act also
impose constitutional obligations because, by requiring SAPO
to take
reasonable measures within its available resources to progressively
realise, for instance, ‘the universal and affordable
provision of
postal serves’
[23]
or the
development of postal services that ‘are responsive to the needs of
users and consumers’,
[24]
SAPO fulfils the fundamental rights of its customers to dignity,
equality and, it claims, virtually every other fundamental right;
the
fact that it is fulfilling fundamental rights in this way vests in it
a power, derived from the Constitution or its values, to
prioritise
the payment of social grants and the provision of the services it
offers at the expense of some of its creditors.
[63]
I have my doubts as to the correctness of the assertion that, by
fulfilling its mandate to provide a
postal service, SAPO is
fulfilling fundamental rights. That assertion seems to me to be a
bridge too far. Section 4 of the SAPO Act
does no more than place on
SAPO an obligation to progressively realise, within its available
resources, a number of postal services.
I shall, however, despite my
doubts, accept SAPO’s premise to be the case for purposes of the
argument advanced by it.
[64]
In my view, there is no merit in the argument for the reasons that
follow. In
Fedsure
Life Assurance Ltd v Greater Johannesburg Transitional Metropolitan
Council
[25]
Chaskalson P, Goldstone J and O’Regan J held that it was ‘central
to the conception of our constitutional order that the Legislature
and Executive in every sphere are constrained by the principle that
they may exercise no power and perform no function beyond that
conferred upon them by law’. As a public body, SAPO labours under
the same constraint, imposed by the rule of law and its principle
of
legality.
[65]
We have not been directed to any provision in the Constitution that
empowers SAPO and, presumably every
other organ of state, to decide
which of its creditors it wishes to pay, and which not, in order to
prioritise its spending. If such
an extraordinary power existed, its
effect would be to undermine the rule of law by placing organs of
state above the law in respect
of the payment of their contractual
and statutory obligations. This attempt by SAPO to dress its failure
to meet its obligations
to the Fund in the finery of the Constitution
must therefore fail.
[66]
The second argument is a variation on the same theme. SAPO places
reliance on
Soobramoney
v Minister of Health, KwaZulu-Natal
[26]
to justify its failure to pay its debts. It was argued that
Soobramoney
recognizes
that an organ of state may prioritise its activities in the context
of shortage of resources. It is necessary to consider
Soobramoney
in
detail in order to determine whether it assists SAPO in this case.
[67]
Soobramoney was terminally ill and required kidney dialysis in order
to prolong his life, it being common
cause that his illness could not
be reversed. He sought kidney dialysis from a state hospital but was
refused treatment. Because
of a shortage of resources, the hospital
was not able to provide the treatment to all who required it. It had
developed guidelines
to determine who would receive treatment and who
would not. Soobramoney was not eligible for treatment because his
renal failure
was irreversible and he was not, for various reasons,
eligible for a kidney transplant. He applied for an order directing
the hospital
to treat him. His application was dismissed but he
appealed to the Constitutional Court.
[68]
Chaskalson P found that the fundamental right in issue in the case
was the right of access to health
care in s 27(1)
(a)
of the Constitution. That right was subject to s 27(2) which provided
that the state was required to take ‘reasonable legislative
and
other measures, within its available resources, to achieve the
progressive realisation’ of this and other socio-economic rights
mentioned in s 27(1). Chaskalson P held that the obligations imposed
on the state by s 27 were dependent on the availability of resources
‘for such purposes’ and that ‘the corresponding rights
themselves are limited by reason of the lack of resources’.
[27]
Because the hospital could not treat everyone who required treatment,
the hospital administration had to develop guidelines concerning
access to dialysis treatment. Those guidelines were reasonable and
had been applied fairly and rationally in relation to Soobramoney.
[69]
Soobramoney’s
case is not authority for the proposition that an organ of state may
ignore its legal obligations in order to pursue what it considers
to
be more important goals. It is, instead, authority for a different
proposition, namely that when access to a right such as health
care
is made dependent on the availability of resources, an organ state
may put in place a program in which it prioritises how that
right
will be made available, as long as that program is reasonable.
[28]
In this case, by analogy, that means that when SAPO was faced with
its financial crisis, it could and should have formulated a plan
of
action to prioritise its s 4 duties, as they are dependent on the
availability of resources. It was not entitled to take the law
into
its own hands and simply ignore its statutory obligation to pay
contributions to the Fund. The high court also misinterpreted
Soobramoney
.
It is not authority for the proposition that there is ‘a hierarchy
of rights’ that favours ‘the good of the many over the
good of
the few’ and that the ‘rights of the many should trump the
few’.
[29]
[70]
Much was made in SAPO’s answering affidavit of its obligation to
pay social grants. It sought to create
the impression that this was a
cost that it bore. That is not so for two reasons. In the first
place, social grants are paid from
the budget of SASSA to SAPO, its
agent, which pays beneficiaries. Secondly, SAPO is paid by SASSA for
providing this service. Its
obligations in relation to beneficiaries
cannot therefore have a bearing on its failure to pay its
contributions to the Fund.
Impossibility of
performance
[71]
The final defence raised by SAPO is that its obligation to pay the
Fund was extinguished by supervening
impossibility of performance.
The event that, according to SAPO, rendered performance impossible
was the onset of the Covid-19 pandemic
and its attendant lockdowns.
In order to determine whether this defence may avail SAPO, it is
necessary first to consider the facts
relevant to this defence and
then to consider the nature of the impossibility relied upon.
[72]
In the communications between Faasen and Trikamjee, on the one hand,
and Nongogo, on the other, very
little was said by the latter about
the Covid-19 pandemic being the cause of SAPO’s failure to pay
contributions to the Fund. And
this despite Trikamjee asking for
‘detailed feedback’ on the causes of that failure. At one stage,
however, Nongogo said that
SAPO’s financial position had
deteriorated dramatically and that this trend had accelerated as a
result of the lockdown.
[73]
The evidence as to the cause of SAPO’s failure to honour its
obligations to the Fund are, at best,
ambiguous. For instance,
Ngonyama spoke of SAPO’s parlous financial position being the
result of the ‘current economic environment
and the impact of
COVID-19’. While she asserted that the Covid-19 pandemic had had a
severe impact on SAPO, she provided little
historical evidence as to
SAPO’s financial position prior to the lockdown. Even so, on the
limited evidence available, there is
merit in the Fund’s assertion
that SAPO’s financial woes pre-dated the Covid-19 pandemic and were
caused by managerial failures.
[74]
For instance, SAPO’s net loss in July 2020, a few months after the
imposition of the lockdown and at
a time when the worst of it had
been ameliorated, was R97 million. In July 2019, however, well before
the start of the Covid-19 pandemic,
SAPO’s loss was R34 million. In
other words, SAPO was a loss-making enterprise before the lockdown,
even though, as Nongogo said,
the lockdown accelerated its decline.
The year-to-date loss, as at 31 July 2020, of R1.066 billion must be
seen in that light. Strangely,
for a party seeking to establish a
defence to its failure to meet its obligations, SAPO has not taken
the court into its confidence
as to how many of the 1 361
loss-making post offices were profitable before the lockdown started.
The statement in the answering
affidavit that only 55 out of 1 416
post offices in the country were profitable as at 31 July 2020 is a
largely meaningless
statistic.
[75]
A second factual strand concerning impossibility of performance is
apparent. Nongogo, in his exchanges
with Faasen, explained that SAPO
was paying its creditors in turns: one month it planned to pay
medical aid contributions but not
pension fund contributions, and the
following month it planned to do the reverse. This plan does not,
however, appear to have been
put into effect.
[76]
In the answering affidavit, Ngonyama explained that SAPO had decided
to pay medical aid contributions
rather than pension fund
contributions. She said that SAPO was trying to pay as many of its
creditors as it could, and she undertook
to pay the Fund as soon as
it could. At the time she deposed to her affidavit, it was not
possible, she said, to pay the Fund what
was due to it.
[77]
Although the legal principles relating to impossibility of
performance are most closely associated with
the law of contract,
[30]
they have a wider application and are based on the notion that the
law does not require people to do the impossible –
lex
non cogit ad impossibilia
.
[31]
These principles also apply in respect of the non-performance of
statutory obligations. For example, in
Montsisi
v Minister van Polisie
,
[32]
a special plea of prescription was dismissed on appeal because it had
been impossible for Montsisi to give the required statutory
notice
timeously of his intention to institute proceedings against the
Minister for damages arising from an assault on him by policemen.
It
had been impossible for him to have complied while he was being
detained without trial, with no access to the outside world, in
terms
of s 6 of the Terrorism Act 83 of 1967.
[78]
The operation of the principles, in a contractual setting, was
explained thus by Scott JA in
MV
Snow Crystal
:
[33]
‘
As a
general rule impossibility of performance brought about by
vis
major
or
casus
fortuitus
will excuse performance of a
contract. But it will not always do so. In each case it is necessary
to “look to the nature of the
contract, the relation of the
parties, the circumstances of the case, and the nature of the
impossibility invoked by the defendant,
to see whether the general
rule ought, in the particular circumstances of the case, to be
applied”. The rule will not avail a defendant
if the impossibility
is self-created; nor will it avail the defendant if the impossibility
is due to his or her fault.’
[79]
It is evident from the dictum cited above that it is not every
instance of impossibility that would allow
a defendant to escape the
consequences of their bargain. In
Peters,
Flamman and Co
,
[34]
Solomon ACJ held that it was only if ‘a person is prevented from
performing his contract by
vis
major
or
casus
fortuitus
’
that ‘he is discharged from liability’. These terms, taken
together, mean ‘any happening, whether due to natural causes
or
human agency, that is unforeseeable with reasonable foresight and
unavoidable with reasonable care’.
[35]
[80]
In order to establish impossibility of performance, whether initial
or supervening,
[36]
four
requirements must be met by the party relying on this defence. They
have been set out by Bradfield as follows:
[37]
‘
First, the
impossibility must be absolute as opposed to probable. The mere
likelihood that performance will prove impossible is not
sufficient
to destroy the contract. Second, the impossibility must be absolute
as opposed to relative. If I promise to do something
which, in
general, can be done, but which I cannot do, I am liable on the
contract. Third, the impossibility must not be the fault
of either
party. A party who has caused the impossibility cannot take advantage
of it and so will be liable on the contract. Fourth,
the principle
must give way to the contrary common intention of the parties. This
intention may be expressed, as when, for example,
a seller expressly
represents or guarantees that the goods sold exist.’
[81]
There are three fundamental problems that arise in relation to SAPO’s
invocation of supervening impossibility
of performance. The first is
that the evidence, such as it is, does not establish that the
impossibility of performance that is alleged
arose as a result of
vis
major
or
casus
fortuitus
.
At best for SAPO, its financial misfortunes preceded the Covid-19
pandemic and were only made worse by it. In July 2019, for instance,
more than six months before the onset of the Covid-19 pandemic, it
incurred a loss of R34 million. To this extent, its financial
difficulties were foreseeable and avoidable, with the fault lying
squarely with the management of SAPO. As Meer J said in
Quinella
Trading (Pty) Ltd v Minister of Rural Development and Land
Reform
,
[38]
‘[s]elf-created impossibility does not discharge the obligations’
of a party to a contract.
[82]
The second problem is that impossibility of performance was not
established. The evidence, boiled down
to its basics, establishes
that SAPO chose to pay certain of its creditors and not others
because it did not have sufficient funds
to pay all of its debts when
they fell due. It decided that it would not pay the Fund. It could
have decided not to pay another creditor
and, instead, to pay the
Fund. Performance was thus not objectively impossible.
[83]
The third problem concerns whether the impossibility relied on by
SAPO is absolute or relative. In
Unibank
Savings and Loans Ltd (formerly Community Bank) v ABSA Bank Ltd
,
[39]
the court held that ‘[i]mpossibility is furthermore not implicit in
a change of financial strength or in commercial circumstances
which
cause compliance with the contractual obligations to be difficult,
expensive or unaffordable’ because ‘[d]eteriorations
of that
nature are foreseeable in the business world at the time when the
contract is concluded’. Bradfield says of the requirement
of
absolute impossibility that if a person promises to do something
which, generally speaking, can be done, but which the person
concerned is unable to do, they are liable on the contract.
[40]
In
Scoin
Trading (Pty) Ltd v Bernstein NO
[41]
it was held by this court that the law ‘does not regard mere
personal incapacity to perform as constituting impossibility’.
[84]
The position, when a debtor is unable to pay a debt, was set out by
Meyer J in
Unlocked
Properties 4 (Pty) Ltd v A Commercial Properties CC
.
[42]
He held that when the impossibility on which a seller relied was
‘peculiar to itself because of its personal financial situation
and
incapability of securing payment of the full debt owed to the bank’,
it was not absolute and so the seller’s ‘incapability
does not
render the contract void’ on account of impossibility of
performance.
[85]
The authorities I have cited apply foursquare to SAPO’s position.
It chose not to pay the Fund when
it could have done so; its
financial distress pre-dated the Covid-19 pandemic, was foreseeable
and avoidable, and so was not the
result of
vis major
or
casus
fortuitus
; and the impossibility it relied upon was, in any
event, relative as opposed to absolute. The result is that SAPO’s
defence of
impossibility of performance fails, and it is bound to
perform its obligations in terms of rule 3 of the Fund’s rules.
Conclusion
[86]
Each of the three defences raised by SAPO lacks merit. Its conduct in
this case is worthy of censure.
Instead of facing up to its financial
challenges, as it initially did, and dealing with the Fund openly and
honestly, it changed
tack and sought to vilify the Fund for seeking
to protect the rights of its members, as its board was duty-bound to
do. Not only
was SAPO’s approach to this matter opportunistic, but
it was also cynical: while claiming to be concerned about the
fundamental
rights of social grant beneficiaries and its customers,
it infringed the rights of its employees and sought, through
transparent
legal sophistry, to place itself above the law. An organ
of state ought not to act in this way. SAPO, like any other debtor,
cannot
choose which debts to pay. If it is trading in insolvent
circumstances, its board’s obligation is to place it in
liquidation, not
to pick and choose which of its debts to honour.
[87]
SAPO’s approach was cynical in another respect as well. It
attempted to use the scare tactic of predicting
its collapse if the
relief sought by the Fund was granted. And that it did without a
tenable legal defence. Its apparent purpose
was to divert the court
from applying the law – that when a statutory instrument places an
obligation on a party to pay contributions
to another, it must do so.
Courts of law exist to determine disputes through the application of
legal principles, not to attempt
to find expedient, non-legal, ad hoc
solutions for one of the parties at the expense of the other. If the
consequence of the law
taking its course is the demise of SAPO, that
is a factor that cannot influence us when the law is clear: SAPO is
under a statutory
obligation to pay its employees’ contributions
and its own contributions to the Fund every month, and it is in
breach of that obligation.
[88]
On appeal, the Fund, perhaps influenced by its symbiotic relationship
with SAPO, informed us that it
only sought declarators to the effect
that SAPO was in breach of its obligations in terms of rule 3 and
that supervening impossibility
of performance has not extinguished or
deferred its obligations. While it also sought a remittal of the
matter to the high court,
with a view to seeking further remedial
relief, I do not believe that that is appropriate. If, despite the
declaratory relief, SAPO
continues to breach its obligations the Fund
can in that event take whatever steps it considers to be appropriate.
[89]
Before making the order, it is necessary to comment on the high
court’s costs order. It decided that
costs should follow the result
and that the Fund should pay SAPO’s costs on an attorney and client
scale because both parties asked
for such a costs order against the
other. In this it misdirected itself. Even if the judgment was
otherwise correct, I can see no
possible justifiable basis for an
attorney and client costs order being made against the Fund. As the
appeal will succeed and the
high court’s order, including the costs
order, will be set aside, the costs of the proceedings in the high
court and on appeal
will have to be paid by SAPO. Given my comments
on its conduct in this matter, it can consider itself fortunate that
those costs
will only be on a party and party scale.
[90]
I make the following order.
1
The appeal is upheld with costs, including the costs of two counsel.
2
The order of the high court is set aside and replaced with the
following order.
‘
1
It is declared that the South African Post Office:
1.1
is obliged and
required, in terms of rule 3 of the Post Office Retirement Fund’s
rules, to pay contributions, as defined therein,
to the Post Office
Retirement Fund on a monthly basis, in arrear, by not later than the
first working day of each month; and
1.2
is in breach of this
obligation in that it has not made the required payments since May
2020.
2
It is declared that the
South African Post Office’s obligations in terms of rule 3 of the
rules have not been extinguished or deferred
by intervening
impossibility of performance.
3
The South African Post
Office is directed to pay the costs of the Post Office Retirement
Fund, including the costs of two counsel.’
C Plasket
Judge
of Appeal
APPEARANCES
For the
appellant:
T Motau SC (with him R Tshetlo)
Instructed
by:
Norton Rose Fulbright SA Inc, Johannesburg
Webbers
Attorneys, Bloemfontein
For the first
respondent:
J P V McNally
SC
Instructed by:

Webber Wentzel, Johannesburg
Symington
& De Kok, Bloemfontein
[1]
Lawrence
Baxter
Administrative
Law
(1984) at 115; E Van Eeden ‘Postal Services’
LAWSA
(3 ed) Vol 33 para 72.
[2]
Section
5
(a)
.
[3]
Section
5
(b)
.
[4]
Section
5
(d)
.
[5]
Section
5
(e)
.
[6]
Para
40.
[7]
Para
47.
[8]
Para
49.
[9]
Para
52.
[10]
Para
54.
[11]
Soobramoney
v Minister of Health, KwaZulu-Natal
[1997]
ZACC 17; 1998 (1) SA 765 (CC); 1997 (12) BCLR 1696 (CC).
[12]
Para
56.
[13]
Para
58.
[14]
Para
61.
[15]
Natal
Joint Municipal Pension Fund v Endumeni Municipality
[2012]
ZASCA 13
;
2012 (4) SA 593
(SCA) para 18. See too
Bothma-Batho
Transport (Edms) Bpk v S Bothma & Seun (Edms) Bpk
[2013] ZASCA 176
;
2014 (2) SA 494
(SCA) paras 10-12;
Capitec
Bank Holdings Limited and Another v Coral Lagoon Investments 194
(Pty) Ltd and Others
[2021] ZASCA 99
;
[2021] 3 All SA 647
(SCA) para 25.
[16]
Compcare
Wellness Medical Scheme v Registrar of Medical Schemes and Others
[2021]
ZASCA 91
;
2021 (1) SA 15
(SCA) paras 21-23 and 30-32. See too Cora
Hoexter and Glenn Penfold
Administrative
Law in South Africa
(3 ed) (2021) at 357-358.
[17]
Natal
Joint Municipal Pension Fund v Endumeni Municipality
(note
15) para 18.
[18]
Liversidge
v Anderson
[1941] UKHL 1
;
1942
AC 206
(HL) at 244. See too
Esau
and Others v Minister of Co-operative Governance and Traditional
Affairs and Others
[2021] ZASCA 9
;
2021 (3) SA 593
(SCA) para 4.
[19]
S v
Zuma and Another
[1995]
ZACC 1
;
1995 (2) SA 642
(CC);
1995 (6) BCLR 665
(CC) para 18.
[20]
Insolvency
Act 24 of 1936
,
s 30.
[21]
Constitution,
s 27(1)
(c)
.
[22]
Constitution,
s 28(2).
[23]
Section
4
(a)
.
[24]
Section
4
(d)
.
[25]
Fedsure Life Assurance
Ltd v Greater Johannesburg Transitional Metropolitan Council
[1998] ZACC 17
;
1999 (1) SA 374
(CC);
1998 (12) BCLR 1458
(CC)
para
58.
[26]
Note
11.
[27]
Para
11.
[28]
See
too
Government
of the Republic of South Africa and Others v Grootboom and Others
[2000] ZACC 19; 2001 (1) SA 46 (CC); 2000 (11) BCLR 1169 (CC).
[29]
Para
56.
[30]
See
for example
Peters,
Flamman and Co v Kokstad Municipality
1919 AD 427
at 434-435;
MacDuff
& Co Ltd (In Liquidation) v Johannesburg Consolidated Investment
Co Ltd
1924 AD 573
at 600-601;
MV
Snow Crystal: Transnet Ltd t/a National Ports Authority v Owner of
MV Snow Crystal
[2008] ZASCA 27
;
2008 (4) SA 111
(SCA) para 28.
[31]
R v
Hargovan and Another
1948
(1) SA 764
(A) at 769-770;
Montsisi
v Minister van Polisie
1984 (1) SA 619
(A) at 634H-636H;
Gassner
NO v Minister of Law and Order and Others
1995 (1) SA 322
(C) at 325H-327H.
[32]
Note
31.
[33]
Note
30 para 28. See too
Bischofberger
v Vaneyk
1981 (2) SA 607
(W) at 611B.
[34]
Note
30 at 435.
[35]
G B
Bradfield
Christie’s
Law of Contract in South Africa
(7 ed) (2016) at 549.
[36]
In
Peters,
Flamman and Co v Kokstad Municipality
(note 30) at 434, Solomon ACJ held that ‘a contract is void if at
the time of its inception its performance is impossible’
and that
‘where a contract has become impossible of performance after it
has been entered into the general rule was that the
position is then
the same as if it had been impossible from the beginning’.
[37]
Bradfield
(note 35) at 109-110.
[38]
Quinella
Trading (Pty) Ltd v Minister of Rural Development and Land Reform
2010
(4) SA 308
(LC) para 28.
[39]
Unibank
Savings and Loans Ltd (formerly Community Bank) v ABSA Bank Ltd
2000
(4) SA 191
(W) para 9.3.1.
[40]
Note
35 at 110.
[41]
Scoin
Trading (Pty) Ltd v Bernstein NO
[2010]
ZASCA 160
;
2011 (4) SA 118
(SCA) para 22.
[42]
Unlocked
Properties 4 (Pty) Ltd v A Commercial Properties CC
[2016]
ZAGPJHC 373 para 13. See too
Matshazi
v Mezepoli Melrose Arch (Pty) Ltd and Another; Nyoni v Mezepoli
Nicolway (Pty) Ltd and Another; Moto v Plaka Eastgate Restaurant
and
Another; Mohsen and Another v Brand Kitchen Hospitality (Pty) Ltd
and Another
[2020] ZAGPJHC 136 para 39;
Pillay
v Personify Investments (Pty) Ltd and Others; Pillay and Another v
Huntrex 302 (Pty) Ltd and Others; Pillay v Misty Blue
Investments
(Pty) Ltd and Others; Investec Bank Ltd v Personify Investments
(Pty) Ltd; Investec Bank Ltd v Misty Blue Investments
(Pty) Ltd;
Investec Bank Ltd v Huntrex 302 (Pty) Ltd; Huntrex 302 (Pty) Ltd and
Others v Investec Bank Ltd  and Others
[2021] ZAKZDHC 41 paras 40-43;
Nedbank
Limited v Groenewald Familie Trust and Others
[2021] ZAFSHC 150
paras 16-17;
Mahomed
NO v VGZ and Others
[2020] ZAECPEHC 20 paras 28-29.