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09 Jun 2020
BY Aslam Moosajee AND Joshua Davis

SCA: a reminder that court orders must be construed in context

A recent South African Supreme Court of Appeal (“SCA”) case concerning the correct interpretation of a court order is a helpful reminder that, as with all legal documents, a court order cannot be understood apart from its context. Instead, the reasoning of a judgment, and a judge’s stated purposes in granting an order, will contribute to how the order is properly construed.

Background

In Umgungundlovu District Municipality v Amaraka Investments 37 (Pty) Ltd, Amaraka concluded a contract with the Umgungundlovu District Municipality, and tendered services in terms of that contract. However, the municipality successfully applied to have the contract declared invalid on the basis that the proper procurement process had not been followed. Nkosi J granted the following order:

  1. “The contract . . . [is] declared constitutionally invalid.
  2. The order of constitutional invalidity in paragraph (a) is suspended pending [the Municipality] complying with the requirements of sections 76 and 78 of the Municipal Systems Act 32 of 2000 and subjecting the provision of the service to a competitive procurement process.
  3. From the date of this order [11 April 2018] and pending compliance alluded to in paragraph (b) the first respondent may continue to provide the service and bear the costs thereof itself.
  4. The respondents’ counter-application is dismissed.
  5. The applicant must pay the respondents’ costs . . . .”

On the basis of this order, and after the municipality had failed to pay Amaraka the amounts due in terms of the contract, Amaraka successfully applied for summary judgment. The court that heard the summary judgment application held that the declaration of invalidity had been retrospectively suspended by the order of Nkosi J. The court therefore held that the municipality was liable for payment covering the entire period from the date the contract was concluded until the date the contract was declared invalid.

The municipality appealed this order to the SCA, arguing that Nkosi J’s order did not expressly suspend the declaration of invalidity retrospectively, and that it was therefore impermissible at the subsequent hearing to read this implication into Nkosi J’s order. The municipality argued further that, properly interpreted, Nkosi J’s order “went no further than permitting the respondent to go on providing the service, but that the right to be reimbursed would be removed until the suspension came to an end”.

The SCA dismissed the municipality’s application. The SCA held that the context in which the order was granted, being the reasoning in Nkosi J’s judgment, indicated that the declaration of invalidity had been retrospectively suspended. The SCA explained that although Amaraka’s counter-application to have the contract declared valid had been dismissed, this itself was not indicative that Nkosi J intended to divest Amaraka of all of its contractual rights through the order of invalidity.

The SCA stated that Nkosi J had held that thedeclaration of invalidity must not have the effect of divesting the respondent of rights to which – but for the declaration of invalidity – it might be entitled to”. The SCA also recorded that if the suspension of the declaration of invalidity only had prospective effect, the order would have vested Amaraka with no other right than to participate in the future procurement process. In other words, contrary to Nkosi J’s express statement, Amaraka would have been divested of rights to which, but for the declaration of invalidity, it was entitled to.

 

Aslam Moosajee

Executive | Dispute Resolution

amoosajee@ensafrica.com

+27 82 461 5917

 

Joshua Davis

Candidate Attorney | Dispute Resolution

jdavis@ensafrica.com

+27 72 608 6733