Case CCT 189/22; CCT191/22
[2024] ZACC 25
Ordered Date: 16 November 2023
Judgement Date: 19 November 2024
Post Judgment Media Summary
The following explanatory note is provided to assist the media in reporting this case and is not binding on the Constitutional Court or any member of the Court.
On 19 November 2024, the Constitutional Court handed down judgment in an application for leave to appeal against a judgment of the Supreme Court of Appeal. The application concerned the constitutionality and validity of transfer embargo provisions in section 76 of the Govan Mbeki Spatial Planning and Land Use Management By-Law 2016 (GM By-Law) and section 86 of the Emalahleni Municipal By-Law on Spatial Planning and Land Use Management 2016 (EM-By Law).
The applicants are Govan Mbeki Local Municipality (Govan Mbeki) and Emalahleni Local Municipality (Emalahleni). The respondents are Glencore Operations South Africa (Pty) Limited, Duiker Mining (Pty) Limited, Tavistock Collieries (Pty) Limited, Umcebo Properties (Pty) Limited and Izimbiwa Coal (Pty) Limited. Except for Umcebo Properties, which is a property holding company, the other four are mining companies.
At the heart of this dispute is a challenge against the municipal planning by-laws containing transfer embargoes that are intended to enforce compliance with municipal planning requirements of the applicants. They do so by requiring all property owners who want to apply to the Registrar for a transfer of their land to first obtain a certificate from the municipality. The planning certificate confirms that all spatial planning, land use management and building regulation requirements and payments applying to the land unit in question have been complied with. The respondents who challenge the by-laws all intend to transfer immovable properties in the jurisdictional areas of the municipalities.
Before the High Court, the property owners argued that the impugned provisions were unconstitutional and invalid for a number of reasons. First, the property owners alleged that the impugned by-laws were inconsistent with section 25 of the Constitution, as their application led to an arbitrary deprivation of property. Second, they submitted that the impugned by-laws extended beyond the scope of powers assigned to local government in terms of section 156 read with Part B of Schedule 4 and Part B of Schedule 5 to the Constitution. Third, they contended that the impugned by-laws were invalid because they were inconsistent with section 118 of the Systems Act. The property owners also sought a wide range of administrative review and interdictory relief in the alternative to their primary constitutional relief.
The High Court held that the impugned by-laws constituted a deprivation of property in terms of section 25(1) of the Constitution and concluded that this deprivation was arbitrary. The High Court also held that the impugned by-laws were inconsistent with section 118 of the Systems Act because they created additional requirements before transfer applications could be processed at the office of the Registrar of Deeds. The High Court also considered whether the by-laws were covered by the municipalities’ legislative competence over “municipal planning” under section 156(1)(a) read with Part B of Schedule 4 to the Constitution and concluded that the municipal planning competence under Part B of Schedule 4 did not extend to matters concerning the registration and transfer of properties. Accordingly, the High Court concluded that there was no enabling authority for the municipalities to make the impugned by-laws and that the by-laws were inconsistent with the constitutional principle of legality and declared the impugned by-laws to be unconstitutional and invalid. For reasons that are not clear from the judgment, the High Court limited the orders of invalidity to circumstances covered by the provisions of paragraphs (a) and (c) of subsection (2) of the impugned by-laws in relation to the property owners’ mining properties. This qualification of the High Court order (“the qualification”) was inconsistent with its judgment, because the by-laws by which the order was qualified were relevant only to the property challenge and not to the legality challenge. The High Court also suspended the declaration of invalidity.
The municipalities then appealed the decision to the Supreme Court of Appeal and the property owners cross-appealed the High Court’s qualification and suspension of the orders of invalidity. The Supreme Court of Appeal similarly found that there was no enabling authority for the impugned by-laws. Moreover, it upheld the High Court’s conclusion that the provisions were inconsistent with the Systems Act and went beyond the law-making powers conferred by section 32(1) of Spatial Planning and Land Use Management Act (SPLUMA) and that section 156 of the Constitution provides scant support for the argument advanced by the municipalities. The Supreme Court of Appeal also upheld the cross-appeal, reasoning that the High Court failed to provide reasons for suspending the declaration of invalidity. Accordingly, it upheld the cross-appeals of the property owners with costs and set aside the suspension of the declaration of invalidity of the by-laws. Apparently due to an oversight, the Supreme Court of Appeal did not remove the qualification from the High Court order.
Before this Court, the municipalities challenged the Supreme Court of Appeal’s decision while the property owners sought leave to cross-appeal against the failure of the Supreme Court of Appeal to remove the qualification in the High Court orders that limited the orders of invalidity.
The primary argument raised by the municipalities was that section 156(2) of the Constitution empowered them to promulgate the impugned by-laws and that this power fell within their original constitutional powers as a reasonable mechanism chosen to enforce municipal planning and building regulation requirements.
Alternatively, it was argued that the impugned by-laws fall within original municipal powers over municipal planning and building regulations in terms of section 156(5) of the Constitution. It was also argued that section 32(1) of SPLUMA independently authorises the making of by-laws and that the by-laws are not inconsistent with section 118(1) of the Systems Act as there is no conflict between the by-laws and section 118(1). Finally, it was argued that if the transfer embargoes amounted to a deprivation of property, the deprivation was not arbitrary and does not violate section 25(1) of the Constitution.
The property owners, for their part, stand by the findings of the High Court and the Supreme Court of Appeal. They adopted the reasoning of the Supreme Court of Appeal and argued that the by-laws extensively and arbitrarily deprived them of the right to property. Moreover, it was averred that the impugned by-laws were unlawful as they go beyond the municipalities’ constitutional competence over “municipal planning” or “building regulations”. In sustaining this argument, it was suggested that the transfer embargoes were neither necessary for nor incidental to the local government competences related to section 156(5) of the Constitution. The property owners also alleged that the by-laws extended beyond the enabling provision – section 32(1) of SPLUMA – and that the impugned provisions were inconsistent with section 118(1) of the Systems Act.
The first judgment, which hold majority, was authored by Chaskalson AJ (Mathopo J, Mhlantla J,Schippers AJ and Tshiqi J concurring). It held that the Court’s constitutional jurisdiction is engaged as the case concerned the constitutional powers of local government and the fundamental right to property. A decision on these constitutional issues of substance was in the interests of justice.
On the merits, the first judgment embarked on an analysis of the powers afforded to local government to make the by-laws. In doing so, it focused on the legality issue and considered four features relevant of the scheme of local governments’ legislative competence under the Constitution. First it looked at the change in status of local government with the advent of the interim Constitution, highlighting that now municipalities are seen as an entrenched sphere of government with original powers that derive directly from the Constitution.
Second, it looked at the specific nature of the legislative powers conferred on municipalities by section 156 of the Constitution. On this point, it noted that the original legislative powers vested in municipalities are narrower than those conferred on Parliament and the provincial legislatures and are conferred only in relation to, and in aid of, the executive powers of the municipalities.
Third, the first judgment considered the interplay between the powers allocated to different spheres of government and acknowledged that there is a measure of overlap between these powers as they do not exist in hermetically sealed compartments.
The fourth and final feature analysed the scheme of co-operative government under the Constitution. The judgment stressed that section 156 of the Constitution must be interpreted within the broader context of how powers are distributed.
Taking into account these features and analysing the relevant provisions, the first judgment found that there is no enabling authority in the Constitution for the impugned by-laws. In particular, the first judgment held that a municipality has no legislative authority under section 156 of the Constitution to make by-laws that enforce its by-laws on local government matters by creating embargoes that operate within the fields of competence of national government or provincial government.
The first judgment held that section 32(1) of SPLUMA was also not a source for legal authority as the by-laws went beyond the bounds of this provision. Therefore, the first judgment concluded that the legality challenge to the by-laws succeeded and that they were unconstitutional and invalid.
Having found that the legality challenge was good in law, the first judgment dismissed the appeal and upheld the cross appeal so as to remove the qualification to the High Court order of invalidity.
The second judgment, written by Dodson AJ (Kollapen J concurring), agreed with the first judgment that the matters engaged this Court’s jurisdiction and that it is in the interests of justice to hear them. However, unlike the first judgment, it found that the transfer embargoes in the by-laws are within the municipalities’ legislative competence, and it therefore must consider the property owners’ other challenges to the by-laws and their implementation. In doing so, the second judgment considered the components of the by-laws’ transfer embargoes separately.
On the Systems Act conflict challenge, it found that component (a), which requires a conveyancer’s certificate confirming payment of funds due by the transferor in respect of land, conflicts with section 118(1) of the Systems Act. This is because it renders meaningless the limitation in section 118(1), whereby the transfer embargo applies only to amounts that fell due in respect of the property during the preceding two years. It found that the remaining components of the transfer embargoes survived the conflict challenge as they have distinct purposes and are thus capable of co-existing with section 118(1), provided that the phrase “in terms of any law” in the opening paragraph of the transfer embargoes is struck down.
On whether the remaining components of the transfer embargoes contravened section 25(1) of the Constitution by resulting in arbitrary deprivations of property, the second judgment found that the transfer embargoes gave rise to a deprivation of property because they limited the right to alienate property. The question was whether the deprivation is arbitrary. As regards the (b) and (c) components of the transfer embargoes– which require proof of payment of any contravention penalty and proof of compliance with any directive under the compliance and enforcement chapter of the by-laws, along with proof that the land use and buildings comply with the land use scheme – the second judgment found there to be a rational relationship between the purpose of each deprivation and the person whose property is affected. By contrast, the (d) to (e) components of the EM By-Law, and (d) to (f) components of the GM By Law – which aim to ensure compliance with the requirements imposed when a land development application was approved – do not have a rational relationship between the purpose of the deprivation and the person whose property is affected. This is because their effect was to saddle subsequent owners of the properties with the obligations of the developer. The second judgment found that these components’ arbitrary deprivations of property could not be justified through a limitations analysis, nor could they be read down to apply only to an owner who is also a developer, as the third judgment found.
Testing the surviving (b) and (c) components of the transfer embargoes against the legislative competence challenge, unlike the first judgment, the second judgment found that the substance, purpose and effect of the by-laws was municipal planning, not the national legislative competence of deeds registration and that, even if this were not so, under section 156(5) of the Constitution the transfer embargo provisions were reasonably incidental to municipal planning, and so survive the legislative competence challenge. Because of this, and SPLUMA’s inability to usurp municipalities’ legislative competence, the SPLUMA challenge failed against the (b) and (c) components.
On Glencore’s alternative review of the municipalities’ implementation of the transfer embargoes, the second judgment would have ordered that the municipalities may not require the production of any document or information relevant to the paragraphs declared to be invalid, including an occupancy certificate under the National Building Regulations and Building Standards Act and the affidavit confirming payment of all development charges. Due to its findings on the constitutional and review challenges, the second judgment would not grant the mandatory relief compelling consideration of applications for transfer certificates, nor the relief against the Registrar of Deeds, Mpumalanga.
The second judgment found that the High Court’s suspension of the constitutional invalidity order was inappropriate as the surviving (b) and (c) components of the transfer embargoes, read with section 118 of the Systems Act, sufficiently protect the interests of the municipalities and public. Despite the municipalities’ substantial success, the second judgment found that Biowatch shielded Glencore from paying their costs, and that Glencore’s success in its cross-appeal entitled it to its costs therein, including the costs of two counsel.
The third judgment, authored by Rogers J, agreed with the second judgement’s analysis and conclusions, save in one respect. The third judgement disagreed with the second judgment’s interpretation of paragraphs (d) to (f) of section 76(2) of the GM By-Law and paragraphs (d) and (e) of section 86(2) of the EM By-Law. According to the third judgment, the obligations imposed by those paragraphs should be interpreted as applying only to the developer on whom the relevant obligations rest, and not to the individual buyers of resultant land units. This interpretation, the third judgment finds, would prevent individual buyers from being burdened with obligations that ordinarily ought to be placed on developers. According to the third judgment, this interpretation is in line with the legislative intent, avoids unreasonable results and renders the provisions consistent with section 25 of the Constitution.
The Full judgment here
Case CCT 184/22
[2024] ZACC 24
Ordered Date: 09 May 2024
Judgement Date: 25 October 2024
Post Judgment Media Summary
The following explanatory note is provided to assist the media in reporting this case and is not binding on the Constitutional Court or any member of the Court.
On 25 October 2024, at 10h00, the Constitutional Court handed down judgment in an application for leave to appeal against the judgment and order of the Supreme Court of Appeal (SCA). The SCA upheld the decision of the High Court, Eastern Cape Division, Gqeberha (High Court), which dismissed a special plea of prescription concerning a claim for damages resulting from the cancellation of a written sale agreement (sale agreement).
The matter produced two judgments. The first judgment was penned by Mathopo J (Bilchitz AJ concurring), and the second, majority, judgment was penned by Majiedt J (Zondo CJ, Madlanga ADCJ, Gamble AJ, Mhlantla J and Theron J concurring).
The application was brought by Mr Dion Rademeyer (Mr Rademeyer), a businessman who resides in Gqeberha, and opposed by Mr Thomas Ferreira (Mr Ferreira), the respondent and retired businessman also residing in Gqeberha.
The central issue revolved around the interpretation of the Prescription Act 68 of 1969 and whether the legal steps taken by Mr Ferreira interrupted the prescription period of his damages claim.
The dispute originated from a property transaction involving Mr Ferreira's property, which he was subdividing for the development of an upmarket residential estate in Gqeberha, called Heatherbank Manor. Mr Rademeyer entered into a sale agreement with Mr Ferreira on 27 August 2008 to purchase one of the subdivided properties. However, Mr Rademeyer failed to fulfil several obligations under the agreement, leading to legal action initiated by Mr Ferreira in the High Court.
In the legal dispute between the parties, Mr Ferreira initially sought a declaratory order for specific performance, compelling Mr Rademeyer to fulfil his obligations under the sale agreement. On 7 August 2012, Pickering J ordered Mr Rademeyer to sign all transfer documents required to effect registration of transfer of the property (Pickering J order). The court ordered Mr Rademeyer to comply with his obligations in terms of the sale agreement within five days of the order, failing which Mr Ferreira would be entitled to cancel the sale agreement and claim damages. Mr Rademeyer failed to comply with the Pickering J order. In July 2015, Mr Ferreira elected to cancel the sale agreement and served a notice of such cancelation on Mr Rademeyer. During 2016, under the same case number of the Pickering J order, Mr Ferreira launched action proceedings claiming damages as a result of Mr Rademeyer’s failure to comply with that order. In response, Mr Rademeyer filed a Rule 30 notice alleging irregular proceedings and contended that the Pickering J order was a final order which had disposed of all the relief set out in the first application. Further, that the subsequent action proceedings filed by Mr Ferreira were distinct from the initial application and ought to have been brought under a new case number as opposed to a continuation of the former proceedings. Pursuant to the Rule 30 application, Mr Ferreira withdrew his action, and instituted action proceedings under a new case number in which he sought damages pursuant to the cancellation of the sale agreement as a result of Mr Rademeyer’s non-compliance with the Pickering J order.
Mr Rademeyer, in his defence, raised a special plea of prescription. He relied on section 11(d) of the Prescription Act, arguing that the claim for damages should have been initiated within three years of his failure to comply with the court order, being 23 August 2012. He contended that Mr Ferreira only instituted action on 18 April 2016, more than three years later. Further, in the plea over, Mr Rademeyer contended that the cancellation of the sale agreement happened on 23 August 2012 by virtue of the court order and not on 1 July 2015, when Mr Ferreira elected to formlly cancel. However, Mr Ferreira argued that the service of the first application papers in 2012 interrupted prescription or, alternatively, that the court order constituted a judgment debt with a longer prescription period, namely 30 years. By agreement, the parties agreed for the matter to be determined in the High Court by way of a stated case regarding the special plea of prescription. That Court, however, rejected Mr Rademeyer's prescription defence.
On appeal to the SCA, Mr Ferreira abandoned the argument regarding a judgment debt. The SCA found the issues to be; (a) whether the service of the notice of motion in 2012 constituted “a process whereby the creditor claims payment of the debt” within the meaning of section 15(1) of the Prescription Act and, (b) whether the issuance of summons under a different case number amounted to the prosecution of “the process in question” as contemplated by section 15(4) of the Prescription Act.
The SCA held that the basis for the action for damages is the same as the application for specific performance because they emanate from the exact same facts. Further, the right to claim damages was part of the Pickering J order. According to the SCA, Mr Ferreira had merely sought to quantify the damages suffered as a consequence of Mr Rademeyer’s conduct when he failed to meet the obligations of the sale agreement. Further, the service of the application constituted a crucial “step” in enforcing a claim for payment of a debt.
As a result, held the SCA, by virtue of the proceedings before Pickering J and the resultant Pickering J order, prescription was interrupted in terms of section 15(1) of the Prescription Act in relation to the damages claim. Therefore, the appeal was dismissed with costs, affirming the rejection of Mr Rademeyer’s special plea of prescription and Mr Ferreira's right to pursue damages.
Before this Court, Mr Rademeyer asserted that there are reasonable prospects that the Court will reach a different conclusion. Mr Rademeyer emphasised that the High Court and SCA incorrectly approached the matter on the basis that essentially the same “cause of action” was being pursued in a subsequent action as had been the case in the original application. He submitted that the new action proceedings were not merely the same process under a different case number, but constituted entirely separate and new legal proceedings. He argued that the effect of the ruling is that Mr Ferreira would have had an indefinite period of time to institute the new action proceedings, which would effectively never prescribe, provided it was based upon the same cause of action and was thus fundamentally at odds with established principles relating to the law of prescription.
According to Mr Rademeyer, the SCA’s reliance on Cape Town Municipality v Allianz Insurance Co Ltd (Allianz) was misplaced because in that case, the further relief sought was based on the same “cause of action” that was instituted in the same proceedings. In this matter, the debt only arose subsequent to the judgment and order of Pickering J, specifically upon the failure of Mr Rademeyer to perform in terms of the Pickering J order, thus constituting a fresh breach of contract and basis underpinning the order for cancellation of the contract. Mr Rademeyer interpreted section 15(2) of the Prescription Act to provide for the interruption of prescription and that such interruption shall lapse, and the running of prescription shall not be deemed to have been interrupted, if the creditor does not successfully prosecute his claim under the process in question to final judgment. According to Mr Rademeyer, the issue before this Court was whether the service of the application proceedings interrupted the running of prescription as contemplated in section 15 of the Prescription Act. Mr Rademeyer submitted that Mr Ferreria’s claim had prescribed by virtue of the provisions of section 10(1) read with section 11(d) of the Prescription Act in that a period of three years had passed between the date when the debt was due and payable, subsequent to cancellation and when Mr Ferreira instituted the action proceedings seeking to recover the debt.
Mr Ferreira, on the other hand, maintained that there was an essential link between the two proceedings and the same “debt” that served before the court in motion proceedings was the same in the action for quantification of damages. He disputed Mr Rademeyer’s assertion that his cause of action was separate and distinct from the cause of action in the previous application and should have been brought under a new case number, and not as a continuation of the previous proceedings. He maintained that in the action, he sought to quantify and claim his damages, which were pleaded as a consequence of the cancellation.” Mr Ferreira contended that, although the action was issued under a new case number, it was linked to the original application of 2012 and arose from Mr Rademeyer’s non-compliance with the Pickering J order.
Mr Ferreira contended that Mr Rademeyer misinterpreted “debt” as contemplated in the Prescription Act and that the judicial interruption of the debt in terms of section 15(1) of the Prescription Act occurred when the first application was instituted in 2012. He contended that the entire debt included the claim for rectification, specific performance of the agreement of sale and the alternative claim for cancellation and damages flowing from Mr Rademeyer’s non-compliance with the court order. Mr Ferreria submitted that he could not have succeeded in his damages claim without first establishing Mr Rademeyer’s liability for such damages by a declaratory order. Therefore, the action proceedings instituting in 2016 sought to quantify his claim for damages consequent upon the cancellation of the deed of sale and arising from Mr Rademeyer’s non-compliance with the Pickering J order. The service of the initial application in 2012 constituted a “step” in enforcement of the debt.
First judgment
The first judgment, penned by Mathopo J (Bilchitz AJ concurring), found that this matter raises important issues relating to the extent of the right of access to courts in the context of extinctive prescription. Prescription laws ought to be interpreted and applied in a manner that is consistent with constitutional principles, more specifically, the right of access to courts as enshrined in section 34 of the Constitution. Extinctive prescription limits the right of a party to pursue legal recourse under section 34 of the Constitution. Therefore, given the effect of extinctive prescription on the right of access to courts, this matter engaged this Court’s constitutional jurisdiction.
The first judgment found that the crux of the matter was whether the initial proceedings were a step in the enforcement of debt payment and whether prescription was considered to be interrupted at that point. Section 15(1) of the Prescription Act provides that the running of prescription is interrupted by the service on the debtor of any process whereby the creditor claims payment of a debt. There was, in the present matter, such a process in the form of Mr Ferreira’s initial application for specific performance, resulting in the Pickering J order, which required Mr Rademeyer to perform in terms of the sale agreement. The subsequent litigation which Mr Ferreira had pursued was a step in pursuit of the self-same debt. Thus, for purposes of prescription, the question whether legal proceedings were commenced which related to the same set of facts and flowed from the same legal source was to be answered in the affirmative as the initial application satisfied this requirement.
The first judgment held that Mr Ferreira’s claim for damages flowed from precisely the same breach of contract dealt with in the original application for specific performance. It thus followed that the damages were sustained as a result of a breach of the contract and not as a result of non-compliance with the Pickering J order. While a breach (that is a failure to comply with the contractual obligations after being called upon to do so) triggers damages, a court order legitimises a claim for damages. Prescription was, therefore, interrupted by the service of the original application because it was a step taken to enforce the debt owed by Mr Rademeyer in terms of the sale agreement.
As a result of prescription limiting the right of access to courts, circumstances in which individuals are deprived of access to courts should be interpreted in a restrictive manner. That, in turn, requires that the notion of “debt” be interpreted to extend to all causes of action that flow from the same legal complaint. This means recognising that any legal process that was instituted from the same legal complaint and same facts interrupted prescription.
The first judgment agreed with the SCA decision, that the cause of action for damages was the same as that of the application for specific performance, because they were both based on the same set of facts. The right to claim damages was incorporated in the initial Pickering J order in favour of Mr Ferreira, and the service of this application was an element of executing a claim for the payment of the same debt.
In conclusion, the first judgment held that the fact that Mr Ferreira sued for damages did not represent a different cause of action, but arose from the same obligation which Mr Rademeyer undertook in terms of the written agreement of sale. Mr Rademeyer’s obligations were of the same scope and nature. That he was sued for damages later in no way detracted from the basic cause of action, namely, that he was sued based on the written agreement of sale.
The effect of this was that the right sought to be enforced in the previous application was substantially the same as the one which is the subject matter of the present proceedings, in that the parties were the same, the amount claimed was the same, and the liability, therefore, arose out of the same cause of action and written agreement of sale. Thus, Mr Ferreira’s previous action in the High Court interrupted prescription and therefore the debt had not prescribed.
For these reasons, the first judgment held that the application for leave to appeal should be granted, but leave to appeal should be refused with costs, including the costs of two counsel.
Second judgment
The second, majority judgment by Majiedt J (Zondo CJ, Madlanga ADCJ, Gamble AJ, Mhlantla J and Theron J concurring) agreed that this matter engages the Court's jurisdiction. The judgment held that there are many cases that have come before this Court where it was called upon to decide whether a litigant’s claim had prescribed and this Court held that it had jurisdiction in such matters. Since the Court in the present instance was called upon to decide whether Mr Ferreira’s claim for damages had prescribed by the time he instituted the proceedings in the High Court that have led to these proceedings, this Court had jurisdiction. There were reasonable prospects of success in the matter, the legal issues raised were important and the impact of the judgment in this case would go beyond the parties before the Court, so the matter was of great importance. It was thus in the interests of justice to grant leave to appeal.
It, however, disagreed on the merits of the case, concluding that the appeal should be upheld with costs. The second judgment held that Mr Ferreira’s claim for damages had indeed prescribed. At the time of the proceedings before Pickering J, there was no enforceable claim for damages, as Mr Ferreira was seeking specific performance of the sale agreement. The second judgment emphasised well-established principles relating to remedies for breach of contract. The innocent party had an election to keep the contract alive and sue for specific performance or to cancel the contract and sue for damages. These two remedies are mutually exclusive and an innocent part cannot both approbate and reprobate. On this basis, in electing to sue for specific performance and, thus, to keep the contract alive, Mr Ferreira had not as yet suffered any damages, no claim for damages was thus in existence, and prescription could not have been interrupted by those proceedings. The claim for damages only arose when the sale agreement was cancelled due to Mr Rademeyer’s failure to comply with the order for specific performance (the Pickering J order). By that point, more than three years had passed since the date the debt became due and payable, meaning the claim for damages had prescribed.
The second judgment also clarified that the ambiguity in Pickering J's order, which combined specific performance and a conditional claim for cancellation and damages, did not assist Mr Ferreira in interrupting prescription. The second judgment distinguished the present case from prior case law, including Evins v Shield Insurance Co Ltd, Allianz, and Cadac (Pty) Ltd v Weber-Stephen Products Company, emphasising that in that instance, Mr Ferreira’s right to claim damages arose only after the cancellation of the sale agreement following non-compliance with the Pickering J order for specific performance. As such, the judicial interruption of prescription was limited to the claim for specific performance, not for damages.
The second judgment further rejected the argument that the “double-barrelled approach” could be used to preserve the damages claim, and that this approach was not applicable, as at the time of Pickering J’s order, there was no existing claim for damages. Thus, the institution of proceedings under that order could not interrupt the running of prescription for the subsequent damages claim.
As a result, the second judgment upheld Mr Rademeyer’s special plea of prescription and concluded that Mr Ferreira’s claim for damages had indeed prescribed. Leave to appeal was therefore granted and the appeal was upheld with costs.
The following order was made:
1. Leave to appeal is granted.
2. The appeal is upheld.
3. The order of the Supreme Court of Appeal is set aside and substituted with the following:
“(a) The appeal is upheld.
(b) The order of the High Court dismissing the defendant’s special plea is set aside and replaced with an order upholding the special plea.”
4. The respondent is ordered to pay the costs of the applicant in this Court, the Supreme Court of Appeal and the High Court, including the costs of two counsel, where so employed..
The Full judgment here
Case CCT 336/22
[2024] ZACC 23
Ordered Date: 14 March 2023
Judgement Date: 09 October 2024
Post Judgment Media Summary
The following explanatory note is provided to assist the media in reporting this case and is not binding on the Constitutional Court or any member of the Court.
On 9 October 2024 10h00, the Constitutional Court handed down judgment in an application for leave to appeal against the judgment and order of the Full Court of the High Court of South Africa, Western Cape Division, Cape Town (Full Court).
The original applicant was Ms Mignon Adelia Steyn. Ms Steyn passed away on 12 January 2023. Mr Carlo Swanepoel, Ms Steyn’s attorney and the executor of her estate, consequently brought a substitution application before this Court to replace Ms Steyn as the applicant following her passing. The respondent is Profmed Medical Scheme (Profmed), a medical scheme established under the Medical Schemes Act 131 of 1998 (MSA). Profmed opposed the leave to appeal application and opposed the substitution application, and argued that Ms Steyn’s death was crucial to the leave to appeal application and that continuing the proceedings would have resulted in prejudice to Profmed.
Ms Steyn had applied for medical aid insurance with Profmed in November 2015. In her application, Ms Steyn stated that she had not suffered or received treatment, advice or medication for any afflictions of the digestive system, despite having undergone a gastroscopy and colonoscopy which had resulted in a diagnosis of gastritis. Ms Steyn was subsequently accepted as a member along with her dependents from 1 January 2016. Throughout 2016, Ms Steyn and her dependants had undergone various medical procedures, collectively amounting to R400 000. The claims for these procedures were submitted to Profmed for reimbursement. In November 2016, Profmed terminated Ms Steyn’s medical aid retrospectively based on the alleged non-disclosure of specific medical conditions.
Ms Steyn lodged a complaint with the Registrar for Medical Schemes (Registrar), contesting Profmed’s termination of her membership under section 47 of the MSA for a ruling that the termination of her membership was unlawful and that Profmed be ordered to honour its commitments to her and her dependants under the policy. Profmed argued that its termination was based on Ms Steyn’s failure to disclose an MRI lumbar spine scan, breast aspiration, and a gastroscopy and colonoscopy for a gastric ulcer but with a final diagnosis of gastritis. The Registrar found in Profmed’s favour. It held that Profmed’s decision to terminate the membership was justified as any reasonable person in Ms Steyn’s position would have known to disclose these procedures. The Registrar further noted that the failure to provide this information hindered Profmed’s ability to perform a comprehensive risk assessment on Ms Steyn’s application, potentially resulting in the imposition of a waiting period had the information been properly disclosed.
Ms Steyn appealed against the Registrar’s decision to the Council for Medical Schemes (Council). She presented defences to the three termination grounds raised by Profmed and included in her affidavit her application form to Momentum Medical Scheme (Momentum Form). During argument before the Council, Profmed raised new termination grounds based on the Momentum Form, including Ms Steyn’s non-disclosure of a hip arthroscopy, heart murmur, kidney stones, and fibromyalgia. Ms Steyn submitted that she was prejudiced by Profmed’s reliance on new grounds as she had not been given the opportunity to make submissions related to the Momentum Form. The Council found in Profmed’s favour and concluded that the non-disclosures of gastritis, gastric ulcer and hip arthroscopy were material. It said that materiality of the non-disclosure lies in the fact that the scheme was denied the opportunity to make an accurate assessment and mitigate its risk by imposing a statutorily empowered condition-specific waiting period if it had been aware of a pre-existing medical condition.
Ms Steyn appealed against the Council’s decision to the Appeal Board in accordance with section 50(3) of the MSA, which upheld the decision of the Council, and held that the non-disclosure of gastritis and a hip arthroscopy were material non-disclosures. In its decision, it had noted that section 29A(2)(a) of the MSA entitles medical schemes to impose a waiting period for conditions not covered within the prescribed minimum benefits (PMBs). Thus, according to the Appeal Board, Profmed had been prevented from imposing a waiting period where it had been entitled to and non-disclosure was consequently material.
Ms Steyn brought a review application in the High Court challenging the decisions of the Registrar, Council and Appeal Board (Appeal Bodies). Ms Steyn had argued that the Appeal Bodies had erred by, firstly, relying on the new termination grounds raised by Profmed before the Council and, secondly, by deeming gastritis a material condition. The High Court found in Ms Steyn’s favour. First, it held that the Appeal Board’s decision had been procedurally unfair because Ms Steyn had been called to answer a case during the hearing of the matter which had not been pleaded, and had been confronted with a finding that had adversely affected her based on facts that had not been properly presented and ventilated before the Appeal Bodies. Second, it held that the Appeal Board had erred in deeming gastritis material as it had employed a flawed test for materiality, thereby making an error of law, and had done so without sufficient evidence. Third, having found in favour of Ms Steyn, the High Court elected not to remit the matter to the Appeal Board, because it reasoned that the matter had already been adjudicated upon in multiple forums and remitting the matter to the Appeal Board would have been of no consequence. It concluded that remittal would simply have resulted in further costs and the delay of justice. The High Court thus set aside the Appeal Board’s decision, declared Profmed’s termination of Ms Steyn’s membership unlawful, set it aside and ordered Profmed to honour the contractual commitments under Ms Steyn’s policy.
Profmed appealed to the Full Court. The Full Court found the proceedings before the Appeal Board to be procedurally fair as Ms Steyn had an opportunity to set out her argument and the grounds for her appeal, and she had manifestly failed to do so. The Full Court further found that the Appeal Board had not made an error of law and upheld its finding that the non-disclosure of gastritis was material. The Full Court further held that the High Court had failed to have due regard to the distinction between appeal and review and it had erroneously delved into the merits. The Full Court also held that there were no exceptional grounds for the High Court’s substitution of the Appeal Board’s decision. It thus upheld Profmed’s appeal and set aside the High Court’s decision.
Ms Steyn applied to the Supreme Court of Appeal for special leave to appeal against the Full Court’s decision, but her application was dismissed. She then applied for the reconsideration of this dismissal, which reconsideration was also dismissed. Ms Steyn then sought leave to appeal in this Court.
Before this Court, Ms Steyn argued that the matter engaged this Court’s constitutional jurisdiction as the case involved just administrative action. She also contended that this Court’s general jurisdiction was engaged as an arguable point of law of general public importance had been raised, namely the test for materiality of the non-disclosure of a medical condition. Ms Steyn submitted that the appeal had reasonable prospects of success as there were conflicting judgments from the lower courts and a lack of precedent on non-disclosure in the context of medical schemes. Profmed argued that the application for leave to appeal did not fall within this Court’s jurisdiction; that the application for leave to appeal concerned findings of fact by the Appeal Board, lacked a case against the Full Court for the alleged constitutional rights violation, and did not present an issue of general public importance.
On the merits, Ms Steyn submitted that the Appeal Board’s decision fell short of the requirements under the Promotion of Administrative Justice Act 3 of 2000 (PAJA) in that it had made errors of law, had considered irrelevant factors, had acted arbitrarily, and that its decision had lacked a rational connection to evidence or reasons given. As to the hip arthroscopy, Ms Steyn submitted that a hip arthroscopy is merely a diagnostic tool which an insured could not have been expected to disclose. The procedural unfairness lay in Profmed later relying on additional termination grounds without allowing Ms Steyn the opportunity to have presented evidence on this matter. As to gastritis, Ms Steyn submitted that the Appeal Board had applied the wrong test for materiality and that Profmed had presented no evidence that gastritis gives rise to a material risk.
Profmed submitted that the Full Court was correct to find that the Appeal Board made no reviewable irregularity. The core issue for the Appeal Board to determine was whether the non-disclosure was related to material information. It was apparent from the detail required in the application form that the information regarding the gastric condition was “reasonably relevant to the risk and its assessment by an insurer”. A reasonable person would have considered a “gastric condition” relevant to their risk of assessment especially when considering the facts surrounding Ms Steyn’s condition (i.e. the suspicion of a gastric ulcer, the hospital visit, and the gastroscopy). Further, Ms Steyn had admitted that she had not disclosed that she suffered from gastritis.
In a unanimous judgment penned by Majiedt J (Zondo CJ; Madlanga ADCJ; Bilchitz AJ; Chaskalson AJ; Dodson AJ; Mathopo J; Theron J; and Tshiqi J concurring), this Court first granted the substitution application brought by Mr Swanepoel. The Court held that Ms Steyn’s personal claim was transmissible to her deceased estate as the estate had a financial interest in the outcome of the review. Further, the decision of the Appeal Board constituted just administrative action as, in terms of the definition of administrative action in PAJA, the Appeal Board’s decision constituted one made by an organ of state which exercised public powers and performed public functions under legislation.
This Court further held that its jurisdiction was engaged by virtue of the finding that the review claim was transmissible from Ms Steyn to the deceased estate. The issue relating to standing bore on section 38 of the Constitution and that of judicial review implicated section 33 of the Constitution. The procedural unfairness component of the review also raised a constitutional issue. The question whether the materiality of a non-disclosure on the objective common law test constituted an adequate ground for a medical aid to terminate membership also raised an arguable point of law of general public importance, because it would govern all cases where a medical aid sought to terminate membership on grounds of non-disclosure. It was furthermore in the interests of justice that leave to appeal be granted, so that clarity could be provided regarding the issue of the materiality of the non-disclosure of medical conditions in respect of membership of medical aids which provide a gateway for many in South Africa to have access to health care services.
On the merits, the Court found that the proceedings before the Appeal Board were procedurally unfair. Profmed had initially raised, then abandoned, the issue of Ms Steyn’s alleged non-disclosure of her hip arthroscopy, but had later reintroduced it during oral argument without admissible and properly adduced evidence. Ms Steyn had thus been denied the opportunity to present evidence in response. This had violated the right to a fair hearing under PAJA.
The Court also found that Profmed had failed to prove that Ms Steyn’s non-disclosures were material to the insurance contract. Specifically, the hip arthroscopy was a diagnostic procedure, not a material condition which had required disclosure. The prejudice that Ms Steyn suffered was manifest – not only had Ms Steyn faced an unpleaded case, but she had been denied her express request to be granted an opportunity to adduce evidence to meet the new unpleaded averments regarding her alleged non-disclosure of hip problems.
Similarly, the gastritis had been misclassified as a serious condition when it was not. Profmed had no evidence that these issues had posed a significant risk or had justified a claim of non-disclosure. Profmed bore the onus of proving not only the materiality of non-disclosure, but also that it had been induced to conclude the agreement. In this instance, Profmed’s rules that referred to material non-disclosure as a ground for the cancellation of membership did not outline the standard to be applied in determining whether information was material. However, Profmed’s application form did define material information as relating to disclosure of medical conditions. This Court agreed with the applicant that a mere diagnostic medical procedure which had not resulted in a material diagnosis of a condition could not be classified as a material non-disclosure, and subsequently a prudent and reasonable person would not have regarded it as such. A reasonable person in Ms Steyn’s position could not have considered that gastritis should have been disclosed and this Court thus found that its non-disclosure was immaterial.
With regard to remedy, in considering what was just and equitable, this Court took the view that this was one of those exceptional cases where this Court would not usurp the functions of the decision maker, the Appeal Board, and that substitution was warranted. A remittal would only run up costs unnecessarily for the deceased estate and would cause further delay. The matter had already been before the three Appeal Bodies, and this was the fourth court that had been seized with the case (including the Supreme Court of Appeal).
The Constitutional Court thus held that the substitution application should succeed; leave to appeal ought to be granted; the appeal must be upheld with costs; and the costs of two counsel was warranted.
The Court made the following order:
1. The late filing of the application for leave to appeal is condoned.
2. The application for substitution is granted and the executor of the deceased estate, Mr Carlo Swanepoel, is substituted for Ms Mignon Adelia Steyn as applicant.
3. Leave to appeal is granted.
4. The appeal is upheld.
5. The order of the Full Court is set aside and substituted with the following: “The appeal is dismissed with costs, including costs of two counsel where so employed."
6. The respondent must pay the costs, including costs of two counsel.
The Full judgment here