Summary of Judgment

1. Introduction

The proceedings were an appeal to the Supreme Court of Appeal from an order of the KwaZulu-Natal Local Division of the High Court, Durban (Gyanda J), which had set aside a summons and declared the underlying action a nullity, with a costs order against the Department: Transport, Province of KwaZulu-Natal.

The appellant was the Department: Transport, Province of KwaZulu-Natal (the department). The respondents were nine employees of the department who had been cited as defendants in the action instituted by the department, although the appeal ultimately concerned the first, third, fourth, sixth and eighth respondents in relation to costs.

Procedurally, the matter arose after the department issued a combined summons (signed by private attorneys) seeking recovery of alleged losses. Certain respondents served a Uniform Rule 7 notice challenging the authority of the attorneys to act and, after receiving no response, launched an application to have the summons and action set aside as a nullity. Gyanda J issued a case-management type order allowing the department time to regularise its position by filing amendments and/or affidavits. The department filed further affidavits late and without condonation, after which Gyanda J ultimately granted the respondents’ nullity relief. The department then appealed with leave.

The subject-matter of the dispute in the appeal, as decided, was not the alleged fraud claim itself but the procedural consequence of the respondents’ abandonment of the High Court judgment during the appeal, and the proper approach to costs following an abandonment in terms of Uniform Rule 41(2).

2. Material Facts

A combined summons was issued on 25 November 2014 out of the High Court, KwaZulu-Natal Local Division, Durban. The department, as plaintiff, sued nine employees as defendants, alleging they participated in a fraudulent scheme that caused the department loss in the sum of R7 123 704.91, which the department sought to recover.

On 3 March 2015, certain defendants delivered a notice in terms of Uniform Rule 7, asserting (with reference to item 12.7.2 of the Treasury Regulations 2005 under the Public Finance Management Act 1 of 1999) that the department might not be authorised to instruct private attorneys, and that the attorneys were required to satisfy the court that they were authorised to act. It was common cause in the appeal record that no response to the Rule 7 notice was received by the respondents.

On 22 June 2015, the first, third, fourth, sixth and eighth respondents launched an application seeking an order that the summons and action be set aside and declared a nullity, and for costs (either against the department or, alternatively, against the attorneys de bonis propriis). The department opposed that application.

On 4 December 2015, Gyanda J ordered that the department be given 30 days from 4 December 2015 to file “any amendment and/or affidavit” explaining or rectifying the circumstances surrounding the power of attorney and the instruction to prosecute the claim. The respondents applied for leave to appeal that order. The department took the view that the leave application suspended the operation of the order and did not comply within the 30-day period. On 15 March 2016, the parties were advised that the 30-day period ran from 4 December 2015.

On 29 March 2016, the department filed further affidavits contemplated in the order, but they were out of time and not accompanied by an application for condonation. On 31 March 2016, the matter was struck from the roll and the department was ordered to pay the costs of that hearing. The department then sought an order extending the 30-day period to 76 days.

On 16 November 2016, Gyanda J delivered judgment refusing condonation for the late filing of affidavits and granted an order setting aside the summons and declaring it a nullity, with costs against the department (as plaintiff in the action).

During the pendency of the appeal, on 6 August 2018, the respondents’ attorney delivered a notice to the registrar of the Supreme Court of Appeal abandoning the judgment of Gyanda J in terms of Uniform Rule 41(2), save for the order of costs.

The material dispute before the Supreme Court of Appeal concerned the legal effect of this abandonment on the appeal and the proper costs consequences, including whether the department was entitled to persist in the appeal to secure costs and the extent of any costs entitlement.

3. Legal Issues

The central legal questions were procedural and concerned the effect of abandonment of a judgment by the successful party in the court below.

The issues included whether, once the respondents abandoned the High Court judgment in terms of Uniform Rule 41(2) (save for costs), the lis between the parties on the merits of the appeal remained extant, and whether the appeal should proceed in order to obtain substantive relief or for any other purpose.

A further issue was whether, absent a tender of costs in the notice of abandonment, the department had to continue with the appeal to obtain costs, or whether the Uniform Rules provide an alternative mechanism for obtaining an appropriate costs order.

These questions were primarily questions of law and procedure, involving the application of procedural rules to undisputed procedural events, and a determination of the correct procedural remedy and costs consequences.

4. Court’s Reasoning

The Supreme Court of Appeal treated the respondents’ notice as an abandonment under Uniform Rule 41(2). It rejected the department’s contention that abandonment did not “extinguish” the judgment. The court reasoned that abandonment by the party in whose favour judgment was granted has the effect of removing the lis between the parties in relation to the substantive order appealed against and amounts to a concession of the relief that the appellant would otherwise be entitled to seek on appeal.

The court declined the department’s invitation to pronounce on the merits of the nullity issues. It emphasised that an appeal lies against the substantive order and not against the reasons for judgment. The court therefore considered it inappropriate to determine or pronounce upon the correctness of the High Court’s reasoning once the operative order had been abandoned and the substantive controversy had fallen away.

On costs, the court held that the department’s submission that it had no option but to continue with the appeal in the absence of a costs tender misconceived the rules. The court explained that, under Uniform Rule 41(2) read with Uniform Rule 41(1)(c), where a notice of abandonment does not include consent to pay costs, the other party may apply on notice for a costs order. The court relied on the approach described in Bonthuys v Visser’s Garage, identifying that the party seeking costs after abandonment has procedural routes to obtain such costs without requiring an adjudication on the merits.

In addressing the temporal scope of costs, the court accepted a concession that the department could only recover costs of the appeal up to and including the date of abandonment. It considered the approach of seeking directions or relief regarding costs as consistent with appropriate appellate procedure, including reference to SCA Rule 11(1)(b) and the decision in Afriforum v Minister of Trade & others.

Although the court expressed “grave reservations” about aspects of the High Court’s nullity order (including whether the alleged lack of authority under Treasury regulations would, without more, render a summons a nullity, and whether certain parties ought to have been joined), it expressly did not decide those questions because the abandonment rendered them unnecessary for the disposition of the appeal.

5. Outcome and Relief

The Supreme Court of Appeal dismissed the appeal, because the respondents’ abandonment of the operative High Court order removed the substantive dispute and left no basis to determine the merits of the order appealed against.

The court made a costs order that the appeal was dismissed with costs up to and including 6 August 2018 (the date of abandonment). Those costs were ordered to be paid jointly and severally by the first, third, fourth, sixth and eighth respondents.

No costs beyond the abandonment date were awarded to the department.

Cases Cited

Durban City Council v Kistan 1972 (4) SA 465 (N); [1972] 4 All SA 465 (N).

Western Johannesburg Rent Board & another v Ursula Mansions (Pty) Ltd 1948 (3) SA 353 (A).

Absa Bank Ltd v Mkhize & another, Absa Bank Ltd v Chetty, Absa Bank Ltd v Mlipha [2013] ZASCA 139; [2014] 1 All SA 1 (SCA); 2014 (5) SA 16 (SCA).

Carter v Haworth [2009] ZASCA 19; 2009 (5) SA 446 (SCA); [2009] 3 All SA 197 (SCA).

Atholl Developments (Pty) Ltd v Valuation Appeal Board for the City of Johannesburg & another [2015] ZASCA 55.

Neotel (Pty) Ltd v Telkom SA Soc Ltd & others [2017] ZASCA 47.

Administrator, Cape & another v Ntshwaqela & others 1990 (1) SA 705 (A).

SA Eagle Versekeringsmaatskappy Bpk. v Harford [1992] ZASCA 42; 1992 (2) SA 786 (A); [1992] 2 All SA 73 (A).

Bonthuys v Visser’s Garage 1950 (3) SA 130 (SWA); [1950] 2 All SA 537 (SWA).

Afriforum v Minister of Trade & others [2013] ZASCA 184.

Legislation Cited

Public Finance Management Act 1 of 1999.

Treasury Regulations 2005 (item 12.7.2), promulgated in terms of the Public Finance Management Act 1 of 1999.

Rules of Court Cited

Uniform Rules of Court, Rule 7.

Uniform Rules of Court, Rule 41(2).

Uniform Rules of Court, Rule 41(1)(a), Rule 41(1)(b), and Rule 41(1)(c).

Rules of the Supreme Court of Appeal, Rule 11(1)(b).

Held

The court held that a respondent’s abandonment of the judgment appealed against in terms of Uniform Rule 41(2) removes the substantive dispute between the parties on appeal, because the abandonment concedes the relief that the appellant would otherwise seek in relation to the operative order. The court held further that an appeal does not lie against reasons for judgment but against the substantive order, and that it was therefore not appropriate to determine the merits once the order had been abandoned.

The court held that where a notice of abandonment does not contain a tender of costs, the opposing party is not compelled to proceed with a merits appeal to secure costs; instead, Uniform Rule 41(1)(c) (read with Rule 41(2)) permits an application on notice for a costs order. It held that, on the facts, the appellant was entitled to costs of the appeal only up to and including the date of abandonment, and it made an order accordingly.

LEGAL PRINCIPLES

An appeal in South African procedure lies against the operative part of the judgment (the order) and not against the reasons; accordingly, where the operative order is no longer in issue, the appellate court does not determine the merits merely to address the correctness of the reasoning.

A party in whose favour judgment was granted may abandon that judgment in terms of Uniform Rule 41(2). The effect of such abandonment is that the judgment (to the extent abandoned) no longer governs the dispute between the parties, and the abandonment operates to remove the lis on the merits of the order appealed against.

Where a notice of abandonment (or withdrawal) does not include a consent to pay costs, the opposing party may seek costs by application on notice in terms of Uniform Rule 41(1)(c), as incorporated by Rule 41(2). In relation to appeal costs after abandonment, the recoverable costs are limited to costs incurred up to the date on which the abandonment was delivered.