National Stadium South Africa (Pty) Ltd and Others v FirstRand Bank Ltd

• Jurisdiction: South Africa
• Judge: Harms DP, Maya JA and Bertelsmann AJA
• Judgment Date: 01 December 2010
• Citation: 2011 (2) SA 157 (SCA)
• Docket Number: 670/10
• Hearing Date: 23 November 2010
• Counsel: SJ du Plessis SC (with T van der Walt) for the first and second appellants. SL Joseph SC (with M Smit) for the third appellant. PF Louw SC (with GW Amm) for the respondent.
• Court: Supreme Court of Appeal

Harms DP (Maya JA and Bertelsmann AJA concurring):

Introduction

[1] One of the iconic stadiums used for the 2010 FIFA Football World F Cup was known for the duration of the competition as 'Soccer City'. The original stadium on the site in Soweto was financed by First National Bank, which is now a division of the respondent Bank (FirstRand Bank Ltd), and was built in about 1988. It was since then called the 'FNB Stadium'. During the period 2007 to 2010 the stadium, financed by the central government and the local authority, was virtually rebuilt for G purposes of the World Cup. The Bank, relying on a naming right, holds the view that the name of the stadium has to revert to 'FNB Stadium'.

[2] The local authority and third appellant, the City of Johannesburg, as tenant of the stadium, and its appointed stadium manager, National Stadium SA (Pty) Ltd, the first appellant, together with an associated H company, Stadium Management SA (Pty) Ltd, the second appellant, assert that the right to name the stadium no longer vests in the Bank, and that they, instead, are entitled to 'name' the stadium or sell the naming rights to third parties. (For the sake of convenience I do not intend to draw any distinction between the first and second appellants, and will simply refer to them as the managers.) I

[3] When the Bank became aware of attempts by the managers to market the naming rights, it launched an urgent application for an interdict (in general terms) to prevent them from marketing the stadium by any other name than FNB Stadium. It joined the owner of the stadium, which is Government, as respondent, without seeking any relief against it, and J

Harms DP (Maya JA and Bertelsmann AJA concurring

A Government consequently did not take part in the proceedings. The City, as head tenant and on whose behalf the managers manage the stadium, sought and obtained leave to intervene, and joined in opposing the relief sought.

[4] The court below (Victor J) found in favour of the Bank and issued an B order against the managers and the City in more expansive terms than originally sought. The order has two parts. The first is an interdict restraining the managers and the City from 'referring' to the stadium by any other name than 'FNB Stadium', or from disposing of the naming rights to the stadium. The second part is a declaratory order declaring C that the Bank has the sole right to name the stadium and, accordingly, that the managers and the City do not have naming rights. There is a time limit attached to these orders.

[5] The court below granted the necessary leave to appeal to this court and the matter was heard at the request of the parties as a matter of D urgency. It is necessary for an understanding of the issues to set out the history of the football stadium with reference to a number of events beginning in 1988.

The loan facility agreement of 20 October 1988

E [6] The Bank is rather proud of the fact that it was prepared as early as 1988 to finance the erection of a football stadium in Soweto. The terms and conditions of the provision of this facility were set out in an agreement of 20 October 1988. There were four parties to the agreement: (a) the future owner of the land (a trust), that intended to purchase the property to establish a soccer complex (including a F stadium) to be known as Soccer City thereon; (b) a company, also named Soccer City, that was to lease the property from the trust and that undertook to erect the complex; (c) the National Soccer League, the body that controlled the sport; and (d) the Bank as lender.

[7] The Bank undertook to provide a funding facility of R15 million for G the erection of particularly a stadium on the property. It is not necessary to detail the funding arrangements save to refer to clause 7.1, which is the origin of the Bank's naming rights. It provided as follows:

'As additional consideration for First National providing the Facility, the main stadium at Soccer City shall be known as First National H Bank Stadium or by such other name as may be chosen by First National from time to time. The Trust and the Company shall take all steps and do all things necessary to ensure and procure that First National acquires and retains such right in perpetuity or for such lesser period as First National may determine.'

I [8] The other parties to the agreement undertook to comply with a number of obligations towards FNB such as to host at least 50 soccer matches per annum and to utilise part of the ticket sales to reduce the debt. FNB was also entitled to receive maximum positive publicity in respect of its involvement in Soccer City and to erect a number of signboards in the best possible places on or around Soccer City, for J which it had to pay R5 million upfront as advertising revenue.

Harms DP (Maya JA and Bertelsmann AJA concurring

The waiver agreement of 24 March 2003 A

[9] It would appear that the trust and the Soccer City company were unable to service their obligations towards the Bank or to pay the building contractor in full with the available finances. This led to the conclusion of the waiver agreement of 24 March 2003. The building contractor, Grinaker-LTA Ltd, waived payment of a substantial amount B subject to, inter alia, the right to execute future construction work on the stadium complex.

[10] The Bank, in turn, agreed to waive its rights to payment of the outstanding amounts under the loan facility agreement. This waiver was subject to a number of conditions. They were (a) that the naming rights C referred to in the loan facility agreement would endure for ten years; (b) that the Bank had an option to extend this right for a further two years upon payment of R10 million; and (c) that the Bank had a renewal right for a further ten years for which it had to pay a market-related price. The effect of this was that the Bank lost its right to repayment of the loan facility but retained a diluted naming right: it was no longer in perpetuity D and the Bank had to pay for the right during any extended period.

The servitude agreement of 31 January 2007

[11] Because of the anticipated FIFA World Cup event, which had been E scheduled for 2010, it became necessary to rearrange the relationship between the parties with an interest in the stadium. The stadium had to be 'reconstructed'. This required substantial funding from both Government and the City. And to enable FIFA to enjoy the exclusive merchandising rights for the event, FNB had to relinquish its naming rights in favour of FIFA for a period preceding and during the event. F

[12] The servitude agreement (which was probably one of a series covering the World Cup) was concluded between the parties to the loan facility agreement and Government. Government was to become owner of the property by taking transfer from the trust. It undertook to honour and be bound by the FNB naming rights as set out above, and to secure G them by means of a personal servitude in favour of the Bank. These rights were, however, to last for only ten years as from 7 July 2004, but FNB had a right of renewal for another two years, subject to payment of a fair market value for those rights, meaning that if the right of renewal were to be exercised, the naming rights would terminate on 6 July 2016 instead of on 6 July 2014. FNB, importantly, agreed to forgo its H naming right for the duration of the World Cup in favour of FIFA.

[13] The exact terms of the relevant provisions are these:

'4.2

For the sake of clarity, the State, the Trust and Soccer City hereby grant to FNB the exclusive right to name the Stadium "First I National Stadium, or FNB Stadium, or by any other such name as may be chosen by FNB from time to time. The State, the Trust and Soccer City shall take steps and do all things necessary to ensure and procure that FNB acquires and retains such rights for the period set out above.

4.4.2

In keeping with the FNB Rights, the name FNB Stadium shall be prominently displayed at all outer perimeter J

Harms DP (Maya JA and Bertelsmann AJA concurring

A entrances and exits of the Stadium and on not less than four prime skyboard sites in the Stadium. FNB accepts that during periods of reconstruction of the Stadium the skyboards may not be able to be displayed and that any re-design may require the skyboards to be relocated. In the latter event, FNB shall be granted a preferent right to choose the sites for B its relocated skyboards. The Parties agree that any relocation of the said skyboards shall take place in consultation with FNB in an effort to facilitate the placement of the skyboards within the Stadium so as to afford to FNB similar exposure as previously provided to FNB prior to any relocation of the skyboards.

7.2

C FNB shall be entitled, simultaneously with the cancellation with the FNB Bond and the transfer of the Property to The State, to register a personal servitude against the Property in respect of FNB's rights under this Agreement in a form reasonably required by FNB's attorneys and that is acceptable to the Registrar of Deeds at Johannesburg. All costs of registration of these rights shall be D borne and paid by FNB.

7.3

The State, the Trust and Soccer City agree that the registration of the personal servitude referred to in clause 7.2 shall be binding on any successors in title to the Property and shall, to the extent required, disclose the details of such personal servitude to any successor in title to the Property.'

E [14] The 'reconstruction' of the stadium to which the agreement referred commenced during 2007 and, according to the appellants, the original stadium was for all intents and purposes demolished and replaced by a new stadium.

The servitude F

[15] The property was transferred to Government on 17 April 2008, and on 29 April Government registered a personal...