Airports Company SA v Big Five Duty Free (Pty) Ltd
Contractual and statutory interpretation endorsed by Constitutional Court after various approaches applied in the past and it seems that ‘text and context’ are all important but at last it seems that the correct approach is the one adopted by Malcolm Wallis JA in the SCA and followed up in March 2020 with a further concise statement by Wallis JA (see below).
Essence
Contractual interpretation endorsed as advocated by justice of appeal Malcolm Wallis in the SCA some years ago which seems to boil down to ‘text and context’.
Decision
(CCT257/17) [2018] ZACC 33; 2019 (2) BCLR 165 (CC); 2019 (5) SA 1 (CC) (27 September 2018)
Order:
Application for leave to appeal from the Supreme Court of Appeal (hearing an appeal from the High Court of South Africa, Gauteng Division, Pretoria):
1. Leave to appeal is granted.
2. The appeal is upheld.
3. The order made by the Supreme Court of Appeal is set aside.
4. The order in the High Court under case number 16829/15, dismissing the application of Big Five Duty Free (Pty) Limited with costs, including the costs of two counsel, is reinstated.
5. The first respondent is to pay the costs of the application in this Court and Supreme Court of Appeal, including the costs of two counsel.
Judges
Coram: Cachalia AJ, Dlodlo AJ, Froneman J, Goliath AJ, Jafta J, Khampepe J, Madlanga J, Petse AJ and Theron J
Judgments: Froneman J (majority): [1] to [64]
Jafta J (concurring): [65] to [83] and Cachalia AJ (dissenting): [84] to [111]
Heard on: 22 May 2018 – Decided on: 27 September 2018
Overview
“There is no dispute about the principles of interpretation. The correct approach to the interpretation of documents was summarised by the Supreme Court of Appeal in Endumeni Municipality:
“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.”[1] (Footnotes omitted.) [para 29]
[1] Natal Joint Municipal Pension Fund v Endumeni Municipality [2012] ZASCA 13; 2012 (4) SA 593 (SCA) (Endumeni Municipality) at para 18. Approach to interpretation cited with approval in the judgment of Cameron J in National Credit Regulator v Opperman [2012] ZACC 29; 2013 (2) SA 1 (CC); 2013 (2) BCLR 170 (CC) at fn 105 and see also see para 93-94. Later cited with approval and discussed in the majority judgment of Cameron J in AMCU v Chamber of Mines of South Africa [2017] ZACC 3; 2017 (3) SA 242 (CC); 2017 (6) BCLR 700 (CC) at fn 28.
“A less literal interpretation also gives rise to difficulty. We could interpret “withdrawal” from proceedings to include abandonment – the analogue of withdrawal where proceedings have already concluded. On that interpretation, clause 3.3 captures Flemingo’s promise to withdraw from the proceedings before the Full Court and to abandon the Phatudi J order. But, as both parties agreed before this Court, the abandonment of a judgment in rem does not have the effect of setting it aside. That must be right. By abandoning a judgment, a party gives up any rights it had by virtue of that judgment – for example, the right to be paid by another party. A party cannot unilaterally affect the rights of others or change an objective fact – like whether or not an administrative act was unlawful – by giving up their own rights. Moreover, abandonment appears to be covered by clause 3.1 of the settlement agreement in which Flemingo explicitly states that it abandons the Phatudi J order.” [para 38]
Later SCA judgment
C:SARS v United Manganese of Kalahari (Pty) Ltd (264/2019) ZASCA 16 (25 March 2020) para 8 per Wallis JA
“[8] It is unnecessary to rehearse the established approach to the interpretation of statutes set out in Endumeni and approved by the
Constitutional Court in Big Five Duty Free. It is an objective unitary process where 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. The approach is as applicable to taxing statutes as to any other statute.8 The inevitable point of departure is the language used in the provision under consideration.”
Judgment
Note: Footnotes omitted and emphasis added
Introduction
[1] This judgment makes clear two legal propositions. The first is that a judgment in rem may not be set aside by only a settlement agreement between the litigating parties in an appeal against that judgment. For a judgment in rem to be set aside by a settlement agreement, the court hearing the appeal must give its sanction to the agreement being made an order of court on the basis that the setting aside is justified by the merits of the appeal. The second is that the court sanctioning the settlement agreement should give its reasons for doing so.
[2] A judgment in rem determines the objective status of a person or thing. This Court has adopted an objective theory of invalidity regarding the exercise of public power. A judgment that declares a tender invalid, because it is unlawful in contravention of section 217 of the Constitution, is an objective pronouncement on the constitutional validity of an administrative act. That kind of judgment has a public character that transcends the interests of only the litigating parties. It is a specific kind or example of a judgment in rem.
[3] Our law already recognises that judgments in rem are not subject to mere settlement on appeal. In the context of intellectual property law the Supreme Court of Appeal held, in Marine 3 Technologies, that the judgment appealed against was “one in rem in that it [affected] a public register, . . . notwithstanding the settlement of the matter, [Marine 3 was] constrained to proceed with the appeal”. The implication is clear: unless the appeal court determines that the merits of the appeal accords with the outcome of the settlement agreement it cannot make the settlement agreement an order of court. And a court must give reasons for its decisions, especially when it gives its approval to a settlement agreement on appeal that sets aside a trial court’s judgment in rem.
[4] This is an application of what this Court held in Eke to be one of the requirements for a settlement agreement to be made an order of court, namely that “its terms must accord with both the Constitution and the law [and] must not be at odds with public policy”.
[5] The dispute in this case revolves around the meaning and effect of a settlement agreement and the import of sanctioning it as an order of court.
. . . . .
The proper interpretation of the settlement agreement
[29] There is no dispute about the principles of interpretation. The correct approach to the interpretation of documents was summarised by the Supreme Court of Appeal in Endumeni Municipality:
“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.” (Footnotes omitted.)
. . . . .
[38] A less literal interpretation also gives rise to difficulty. We could interpret “withdrawal” from proceedings to include abandonment – the analogue of withdrawal where proceedings have already concluded. On that interpretation, clause 3.3 captures Flemingo’s promise to withdraw from the proceedings before the Full Court and to abandon the Phatudi J order. But, as both parties agreed before this Court, the abandonment of a judgment in rem does not have the effect of setting it aside. That must be right. By abandoning a judgment, a party gives up any rights it had by virtue of that judgment – for example, the right to be paid by another party. A party cannot unilaterally affect the rights of others or change an objective fact – like whether or not an administrative act was unlawful – by giving up their own rights. Moreover, abandonment appears to be covered by clause 3.1 of the settlement agreement in which Flemingo explicitly states that it abandons the Phatudi J order.
Summary
Interpretation of contracts — Judgments in rem — When can settlement agreements be made an order of court
Agreements between private parties — setting aside a court order — Section 217 of the Constitution