CASE LAW UPDATE

Facts: Latari House (plaintiff) operated two establishments in central Cape Town, namely Hanks Olde Irish Pub (Hanks) and Love Thy Neighbour (LTN). The second and third plaintiffs are brothers and were co-owners. At about 23h00 on an evening in December, Mr Kalenga was on duty as a doorman at the premises. Mr Danca appeared to be inebriated and wanted to enter the premises. Mr Kalenga was unsure whether Mr Danca was of legal age to enter the premises and requested him to remove his cap and to produce his identity document to verify his age. Mr Danca became aggressive and made racial and xenophobic statements to Mr Kalenga within hearing distance of other people in proximity. The next day a group of about six persons, including Mr Logan (third defendant), entered the premises. Mr Logan began yelling words to the effect that the establishment was racist because of the incident. This was recorded on a cellphone by one of the group and ended up on various mainstream online news platforms, as well as YouTube. Mr Logan took centre stage in the videos and articles as Mr Danca’s protector and in denouncing the plaintiffs.

Claim: An application for default judgment following the institution of a defamation action. The plaintiffs seek damages against Mr Logan. The progress of the litigation between the Mr Kalenga and Mr Danca and Mr Pelser is not relevant for present purposes.

Discussion: It seems that Mr Logan and his group were not interested in the truth but their motive and conduct were to make the incident as sensational and emotionally laden as possible so that the video they were recording of the incident could go viral on social media. The result of the debacle was, unsurprisingly, a severely negative response from the public, including protests by, amongst others, members of the Economic Freedom Fighters outside the first plaintiff’s premises for an entire day soon after the event. Threats of violence were made against the plaintiffs. The cell phone video went viral on social media and there was a public outcry against the plaintiffs. The plaintiffs feared for their safety and that of their employees and patrons, and were scared, too, of damage being caused to the premises. They decided to close the businesses for a period over Xmas and New Years which was one of the busiest trading periods for the business in general.

Findings: It is clear that, as a result of the publication of the statements, the plaintiffs were severely embarrassed and publicly degraded. The plaintiffs’ demeanor in the witness box confirmed the damage done to them. They were injured in their names, reputations and standing in the community, and were (and still are) liable to be treated with severe aversion, suspicion, distrust and hostility. They have been, and will be, prejudiced in their professional and private endeavours, and it is unlikely that they will ever fully recover their respective reputations. Because of the defamatory statements and the repeated publication thereof, and the subsequent closing of Hanks and LTN, there has been a sharp decline in income. The plaintiffs both testified as to the troubles experienced in the business since the incident because of the fact that the establishment is now regarded as racist.

Order: Mr Logan shall pay: R500,000 to Latari House as special damages; R250,000 to Latari House as general damages; R250,000 to Viron Papadakis as general damages; R250,000 to John Papadakis as general damages; and interest and costs of suit on the scale as between attorney and client.

VAN ZYL AJ

Facts: This case involves various issues pertaining to the law on dismissal based on operational requirements. The most complex of those issues pertains to the standard for establishing substantive fairness in the retrenchment context. The plaintiffs were all employed in managerial positions in the defendant’s human resources (HR) department. They were dismissed, purportedly based on the defendant’s operational requirements. Ms Molokwane (defendant’s HR Executive) made a presentation at a meeting of the HR Committee regarding a proposed HR structure, based on an analysis that she had conducted. In essence, the proposal involved redesigning certain positions in the HR department to do away with various specialist roles in favour of introducing generalist roles. She met with the plaintiffs and other affected employees. During the meeting, she took them through the presentation and presented the new structure (as approved by the Board). Notices initiating a section 189 consultation process were issued to the plaintiffs. They recorded that eight employees were potentially affected.

Application: Ms Molokwane sent an e-mail to the plaintiffs attaching the job profiles for the positions, and they were advised that the period for applications for the positions will be opened for five days. None of the plaintiffs applied for the advertised positions. Notices of retrenchment were issued to the plaintiffs. The plaintiffs impugn the substantive and procedural fairness of their dismissals.

Substantive fairness: In the court’s exercise of the value judgment which considers the parties’ competing rights and interests (and the notion of proportionality), it is evident that the decision to restructure, which culminated in the plaintiffs’ dismissals, constituted a legitimate exercise of the employer’s competence to dismiss. The dismissal was not a disproportionate course in seeking to achieve the efficiencies motivating the restructuring exercise, in the sense that the efficiency gains sought to be achieved through the restructuring do not appear to be outweighed by the countervailing harm. A relevant consideration in this regard is the plaintiffs’ regrettable intransigence in not taking up the opportunity to apply for and be considered for the positions, with the defendant having sought, by way of the process to fill those posts, to make room for retrenchment-avoidance. The restructuring process was bona fide and commercially rational, dismissal was a reasonable option in the circumstances, and dismissal was a measure of last resort in the sense that there does not appear to have been a viable alternative means of achieving the defendant's operational requirements. The court finds that the plaintiffs’ dismissal was substantively fair.

Procedural fairness: The fundamental issue in relation to procedural fairness pertains to whether the plaintiffs were presented with a fait accompli as a result of a decision that had already been taken before the initiation of the consultation process. The key question is whether, as of when the section 189 notice was issued, the defendant’s approach was to adopt a provisional and preliminary view, which was subject to reconsideration. Although Ms Molokwane insisted that the plaintiffs were presented with a proposal at the meetings and that any inputs that the plaintiffs provided during the consultation process would be tabled with the Board for consideration, the court is troubled by the language used in the Board’s resolution, which approved “the new HR Department as presented”. The Board’s resolution does not contain language that suggests that the decision to restructure, at that stage, pertained only to the initiation of the consultation process or entailed a provisional or preliminary decision. Its formulation suggests that the restructuring exercise was to proceed, and it essentially sets out (and approves) a roadmap for the implementation of the restructuring exercise. On the available evidence, when the consultation process was initiated, the defendant had taken a decision that excluded, or at least significantly curtailed, the scope for persuasion that a restructuring process ought not to be embarked upon at all. The plaintiffs’ dismissals were substantively fair but were procedurally unfair.

Order: The defendant is ordered to pay two months’ remuneration as compensation to the first and second plaintiffs, amounting to a total of R288,288.46 for the first plaintiff and a total of R280,367.68 for the second plaintiff. The defendant is ordered to pay the third plaintiff three months’ remuneration as compensation, amounting to a total of R254,121.15.

ITZKIN AJ

Facts: The applicants are Govan Mbeki Local Municipality (Govan Mbeki) and Emalahleni Local Municipality (Emalahleni). They are both municipalities in Mpumalanga which have adopted municipal planning by-laws containing transfer embargoes that are intended to enforce compliance with municipal planning requirements. The respondents are Glencore Operations, Duiker Mining, Tavistock Collieries, Umcebo Properties and Izimbiwa Coal. Except for Umcebo Properties, which is a property holding company, the other four are mining companies. All of the respondents intend to transfer immovable properties in the jurisdictional areas of the applicants. The Govan Mbeki and Emalahleni by-laws are intended to operate within the framework of the Spatial Planning and Land Use Management Act 16 of 2013 (SPLUMA). Many of the chapters of the by-laws have introductory provisions that show that they are expressly designed to give effect to the framework provisions enacted in SPLUMA.

Appeal: The High Court and the Supreme Court of Appeal (SCA) declared the transfer embargo provisions of the municipalities’ by-laws to be inconsistent with the Constitution and invalid. At the SCA the property owners had cross-appealed against the two provisions of the High Court order that qualified the orders of invalidity. The applicant municipalities now appeal to this court against the decision of the SCA. The property owners seek leave to cross-appeal against the failure of the SCA to remove the qualification in the High Court orders that limited the orders of invalidity.

Discussion: The property owners’ constitutional challenge targets section 76 of the Govan Mbeki By-Law and section 86 of the Emalahleni By-Law. These impugned provisions deal with all property transfers and are not confined to original transfers out of new development schemes and sub-divisions of properties. Section 76 of the Govan Mbeki By-Law and section 86 of the Emalahleni By Law seek to use transfer embargoes to enforce compliance with municipal planning, land use and building regulation requirements. They do so by requiring all property owners who want to apply to the Registrar for a transfer of their land first to obtain a certificate from the municipality (a planning certificate). The property owners argue that the impugned by-laws constitute an extensive and arbitrary deprivation of property under section 25 of the Constitution. They also contend that the impugned by-laws are unlawful as they go beyond the constitutional competence over “municipal planning” or “building regulations”. They contend that the transfer embargo deals with land registration matters, not municipal planning or building regulation matters, that the impugned by-laws are not necessary or incidental to those local government competences within the meaning of section 156(5) of the Constitution (powers and functions of municipalities) and fall beyond the enabling authority of section 32(1) of SPLUMA.

Findings: There is no scope for additional incidental legislative powers to be conferred on municipalities directly by section 156(5) of the Constitution. That reads: “A municipality has the right to exercise any power concerning a matter reasonably necessary for, or incidental to, the effective performance of its functions.” The embargoes purport to apply to all transfers of property after such original registrations. In so doing, they purport to regulate deeds registration and transfer in a manner that goes beyond not only section 53 of SPLUMA but also section 118 of the Local Government: Municipal Systems Act 32 of 2000. Embargoes that encroach in this way on the national competence over land transfer and deeds registration are not obviously contemplated by SPLUMA. There is no constitutional or legislative source for the power of the municipalities to make by-laws imposing transfer embargoes as enforcement mechanisms for their town planning schemes and building approval matters. The impugned by-laws are inconsistent with the Constitution, unlawful and invalid.

Order: The appeal against the order of the SCA is dismissed. The cross-appeal against the order of the SCA is upheld and the order is varied by the substitution of para 3 of the order such that: section 76 of the Govan Mbeki Spatial Planning and Land Use Management By Law 2016 is declared to be inconsistent with the Constitution and invalid. Section 86 of the Emalahleni Municipal By Law on Spatial Planning and Land Use Management 2016 is declared to be inconsistent with the Constitution and invalid.

CHASKALSON AJ (majority) at [1]-[98]

DODSON AJ (dissenting) at [99]-[288]

ROGERS J (dissenting) at [289]-[305]

Facts: Diageo is a public company incorporated in South Africa. Diageo manufactures a range of liqueurs which are also marketed as "Cape Velvet" products. This matter concerns the classification of only one of those liqueurs, namely, Cape Velvet Cream Original. The commissioner is tasked with the implementation of the Customs and Excise Act 91 of 1964 and is empowered to determine the classification of all imported and manufactured products, including alcoholic beverages, such as liqueurs, for the purpose of levying excise duties. Regarding Cape Velvet Cream Original, the commissioner determined that the product is a spiritous beverage containing wine spirits to which other "alcoholic ingredients" have been added. The alcoholic ingredient is the vanilla that is added to and mixed separately with other ingredients to create the flavouring, which is then added to the wine spirit base to create Cape Velvet Cream Original. The vanilla on its own has an alcohol content by volume (ABV) of 0,6%. After all its ingredients, including the vanilla, were mixed, the flavouring itself has a lower volume of 0,002%.

Appeal: The classification of the product by the appellant, the Commissioner for SARS, was taken on appeal by the respondent, Diageo, to the High Court. The High Court dismissed Diageo’s appeal and upheld the commissioner’s classification of the product. That decision then was taken on appeal by Diageo to the full court. The full court reversed the decision of the High Court. It set aside the commissioner’s determination and effectively found in favour of a classification contended for by Diageo. This appeal concerns the dispute about the correct classification of the liqueur product for purposes of excise duty payable under the Customs and Excise Act 91 of 1964.

Discussion: Diageo argued that the actual flavouring, which includes the vanilla, and has a significantly lower volume of 0,002%, is the ingredient added to the wine spirit base. While the full court mentioned the applicable legal principles, it (unfortunately) did not apply them. It seemingly set out to purposively interpret Additional Note 4(b). But it concentrated solely on its conception of the note’s secondary purpose and background, instead of considering its text, the context and the primary purpose (which was to explain and clarify to which liqueurs certain subheadings, specifically mentioned in that note, would be applicable) together. The full court considered the nature and characteristics of Cape Velvet Cream Original, either before its interpretation, or as part of its interpretation process, and conflated the stages because it interpreted Additional Note 4(b) with reference to the contribution of the vanilla or the flavouring, to the total alcohol content of the final product. It found effectively because that contribution to the alcohol content of the final product was little or small, that the vanilla or flavouring as an ingredient added to the wine base, was "non-alcoholic".

Findings: There is a limited difference between the parties concerning the appropriate Tariff Heading under which the product must be classified. The final determination also depends on the interpretation of Additional Note 4(b). On a proper construction of that note, both the flavouring and the vanilla are components of the product and, therefore, are ingredients that are added to the wine base of the product. That is so even though the vanilla is technically a secondary component of the product and is a primary component of the flavouring. It is not disputed that the vanilla itself is alcoholic. But, in any event, the flavouring itself is also not free of alcohol and is alcoholic. Therefore, the classification contended for by Diageo is not appropriate, and the correct classification of the product is under Tariff Subheading 2208.70.22 (and Item Heading 104.23.22), as contended for by the commissioner, and confirmed by the High Court. Consequently, the appeal to this court must succeed, and the full court's order must be set aside and replaced with one dismissing Diageo's appeal to that court.

Order: The special appeal is upheld with costs. The order of the full court is set aside and is replaced with one dismissing the appeal with costs.

COPPIN AJA (MOCUMIE JA, SCHIPPERS JA, SMITH JA and MANTAME AJA concurring)