Government of the Province of the Eastern Cape v Frontier Safaris (Pty) Ltd

• Jurisdiction: South Africa
• Judge: Plewman JA, Smalberger JA, F H Grosskopf JA, Harms JA, Streicher AJA
• Judgment Date: 29 September 1997
• Citation: 1998 (2) SA 19 (SCA)
• Docket Number: 96/96
• Hearing Date: 11 September 1997
• Counsel: GD Van Schalkwyk (with him JW Eksteen) for the appellant DA Gordon for the respondent
• Court: Supreme Court of Appeal

Plewman JA:

This is an appeal brought with the leave of this Court against an order of the General Division of the Supreme Court of the Ciskei dismissing a special plea. The appellant is the successor to the former Government of the Republic of the Ciskei. (I will for convenience refer to the appellant as 'the government'.) B

In 1987 the government enacted the Nature Conservation Act 10 of 1987 ('the Act') to consolidate the laws relating to conservation and the management and protection of fauna and flora within its domain. In terms of the Act it established certain national reserves. Three C reserves are relevant to the appeal, namely Tsolwana Game Reserve, Double Drift (formerly Lennox Sebe) Game Reserve and Mpofu Game Reserve (though the latter had not been proclaimed at the time of the events giving rise to the litigation under consideration). These reserves were established over a large number of farms in certain areas of the Ciskei and also D covered portions of land known as the Hinana Tribal Resource area. In November 1989 the government, in its wisdom, entered into a written contract with one Frederick Barry Burchell, acting as the nominee for a company to be formed, in terms whereof it purported to lease the reserves to the company for a period of 40 years. The respondent is the company which was incorporated to assume the rights and duties under the contract, which it duly adopted and ratified. E

It seems clear that the reserves were not at the time fully developed. The government negotiated a loan from the Development Bank of Southern Africa in order to develop them. The terms of the loan agreement (an annexure to the contract in issue) are specific as to how F the funds are to be spent and a 'Project Description', part of the agreement, allocates funds to the provision of basic infrastructure (that is fencing and roads) for each reserve. It is also apparent that the government did not have trained personnel immediately capable of managing the reserves. The government's long-term object was the development of the reserves with a G view largely to the promotion of tourism and it intended that the management of the reserves ultimately be undertaken by Ciskei citizens. There are terms in the contract which reflect these aims. The contract, which will be considered in more detail presently, gave rise to an intricate inter-relationship between the parties in which provision was made for the development of the H reserves to be financed by the development loan and by the allocation to the company of responsibility for the administration of the reserves.

On 26 March 1993 the Minister of Finance, representing the government, wrote to the respondent asserting that the contract was void (on grounds not now in issue) and further claiming, in any event, the right to cancel the contract. Obviously the government had rethought I matters. The letter was viewed by respondent as a repudiation of the contract and it, for its part, seemed content to accept the repudiation. It then cancelled the contract on the ground that it had been repudiated by the government. In due course it served a summons on the government and claimed damages. The claim for damages has been framed under a number of heads covering expenditure of various sorts and includes a J

Plewman JA

substantial claim for future loss of profits. In the main claim some R62 million is sought and in A the alternative claim R9 million. Happily little of this has any bearing on the appeal. What is in issue is a special plea (one of nine special pleas initially raised by the defendant). By an B order in terms of Rule 33(4), the plea was adjudicated on by the Court a quo as an issue to be decided separately from and before the other issues arising on the pleadings were considered.

The relevant portion of the plea reads:

'In the alternative to para 2.2--2.12 above the defendant pleads as follows:

2.13

Section 25(1) of the Ciskei Nature Conservation Act 10 of 1987, as amended, provides as C follows:

'"The control, maintenance, development and management of a national nature reserve shall vest in the Department (of Agriculture, Forestry and Rural Development) which shall be competent to exercise all or any of the powers mentioned in ss (2) of this section or which are D otherwise necessary for the attainment of the objects described in s 24."

2.14

The written agreement, annexure A to the plaintiff's particulars of claim, purports to divest the said Department of the control, maintenance, development and management of the three national nature reserves mentioned therein.

2.15

The defendant avers that the Government of the Republic of Ciskei was in law not competent E to conclude a contract in such terms and that the aforesaid agreement is accordingly void, ab initio, and unenforceable in law.

2.16

In the premises, the defendant is in law not liable for damages flowing from any alleged F breach of the said agreement. Wherefore defendant prays that plaintiff's claim be dismissed and that judgment be entered in the defendant's favour with costs.'

(There are additional paragraphs to the plea but these form the basis for a yet further special defence which is not presently relevant.) G

The Court a quo dismissed the special plea. [*] What arises is the validity of the government's central contention namely that the contract purports to divest it (that is the government) of powers and duties entrusted to it for public purposes by the Act and is for that reason void.

Appellant's argument in the Court a quo was founded on the proposition that in law the State H cannot be bound by a contract which would fetter the future exercise by it of statutory powers. This led the parties, and also to some extent the Court, into an examination of certain English authority which seems to be the genesis of this concept. Much of this authority is I coloured by the existence of royal prerogatives - a subject also touched upon in certain decisions of this country. In this Court, however, appellant's counsel disavowed reliance on any defence other than the contention that the contract was contrary to the Act. Put

Plewman JA

another way, counsel's submission was that the only enquiry was whether the contract was, A within the four corners of the Act, competent.

For this reason it is unnecessary to examine the proposition relied upon in the Court a quo or to consider the decisions, both English and South African, in which principles relevant to the proposition then relied upon are discussed. It is also unnecessary to debate the question of B what jurisdictional niche such concept fits in present-day South African law. This notwithstanding, it is perhaps desirable that I refer briefly to what seems to me the logical starting point in a debate relating to the effect of a contract made by the State. In addition certain of the English cases nicely illustrate the essential considerations which distinguish the C enforceable contracts from the unenforceable.

The starting point, in my view, is s 1 of the State Liability Act 20 of 1957. This Act, insofar as the relevant provision is concerned, is a re-enactment of s 1 of the Crown Liabilities Act 1 of 1910. The 1957 Act was in force in the Ciskei by reason of the Status of Ciskei Act 110 of 1981. Section 1 (of the State Liability Act) provides: D

'Any claim against the State which would, if that claim had arisen against a person, be the ground of an action in any competent court, shall be cognizable by such court, whether the claim arises out of any contract lawfully entered into on behalf of the State or out of any wrong committed by any servant of the State acting in his capacity and within the scope of his authority as such servant.'

The Crown Liabilities Act, which was in the same terms, abolished at least to the stated extent, E any prerogative which may have existed and which could have barred liability by the State in contract. South African Railways and Harbours v Smith's Coasters (Pty) Ltd 1931 AD 113 and Sachs v Donges NO 1950 (2) SA 265 (A) at 279 and 288.

The State Liabilities Act seems to have had a somewhat chequered history in the Ciskei. F Counsel's research (undertaken after the hearing at the Court's request) shows that it was one of a multitude of Acts repealed by the Repeal of Laws Act 22 of 1985 (Ck). It was later re-enacted in the form of the State Liability Decree 21 of 1990 (Ck) which was brought into force on 31 August 1990. It seems thus that there was legislation in those terms well before G 1993 when the government repudiated the contract. What the position was in the interregnum is not clear but it is to be doubted that the relevant royal prerogatives could have been revived. But clearly for the purposes of this appeal because of the terms of the special plea the government's position in relation to contractual liability had been equated to that of the ordinary H citizen. This question need not be further pursued.

What must now be examined is the Act (that is the Nature Conservation Act) and the nature and purport of the contract. First the Act. The object of the establishment of national reserves is defined in s 24 and can for present purposes be summarised as being the protection, I preservation, reproduction or propagation in their natural state of wild animals and indigenous plants and the preservation and enhancement of the natural beauty of areas concerned.

The provisions relating to administration of the Act are in s 2. What this provides is that the Department of Agriculture, Forestry and Rural Development ('the department') is responsible for the administration of J

Plewman JA

the Act and that any authorisation enabling any person to do anything for which authorisation is A required under the Act must be performed under the 'licence, permit or...