Naylor and Another v Jansen

• Jurisdiction: South Africa
• Judge: Cloete JA, Theron AJA and Cachalia AJA
• Judgment Date: 31 August 2006
• Citation: 2007 (1) SA 16 (SCA)
• Docket Number: 508/05
• Hearing Date: 15 August 2006
• Counsel: R M Robinson for the appellant. S F Burger SC (with J E Joyner) for the respondent.
• Court: Supreme Court of Appeal

Cloete JA:

[1] The plaintiff in the Court a quo, Mr Jansen, was a manager employed by Atomaer (RSA) (Pty) Ltd, the second defendant C in the Court a quo; and he was the local person in charge of the South African operations of the group of which Atomaer formed a part. The first defendant in the Court a quo was Mr Naylor, the CEO of Atomaer's holding company and all subsidiary companies in the group. It would be convenient to refer to the parties by name, and to Naylor and Atomaer jointly as 'the defendants'. D

[2] In September 2002 Naylor came to South Africa and discovered that Jansen had breached his service contract in various respects. Naylor confronted Jansen, who was less than frank about what he had done. Jansen was suspended. Also in September, Naylor attended a meeting with a number of employees of Iscor which was presided over by E Iscor's engineering manager at Vanderbijlpark, Mr Bezuidenhout. Jansen had, from late 2000, been involved in negotiations with Iscor in connection with the joint development of technology by Atomaer and Iscor, and he enjoyed a good relationship with its management. His absence from the meeting obviously required an explanation, which F Naylor gave in the following terms (as recorded in Iscor's minutes of the meeting):

'Mr Naylor informed the meeting that Mr Jansen of the South African local office had been suspended from his position because he had misappropriated Atomaer funds to a company of which he holds a directorship.'

This announcement had a profound effect on those present at the G meeting, and Bezuidenhout subsequently telephoned Jansen to ask him: 'Hoekom het jy gesteel?' and to inform him that he was persona non grata at Iscor.

[3] In October 2002 Jansen took an ex parte order against Naylor to confirm the jurisdiction of the Johannesburg High Court. As envisaged in the order, Naylor put up security. The High H Court subsequently ordered Jansen to pay the costs of those proceedings.

[4] Early the following month Jansen issued summons against Naylor and Atomaer in which he claimed damages in an amount of R250 000 for defamation. In his particulars of claim Jansen alleged, inter alia: I

'As a result of the publication of the aforesaid defamatory statement, the plaintiff has been damaged in his reputation, generally and within the industry within which he operates, and has suffered damages in the sum of R250 000.'

The action was defended. In their plea the defendants repeatedly denied that Naylor had uttered the words appearing in Iscor's minutes of the J

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meeting. As one of several alternative defences, the defendants pleaded that, if the words had been uttered, they were A true and that their publication was in the public interest.

[5] Shortly before the trial commenced before Willis J in the Johannesburg High Court the defendants made a without-prejudice offer in terms of Uniform Rules of Court 34(1) and B (5) [1] to settle the plaintiff's claim for R15 500 and to pay the plaintiff's costs in the event of the tender's being accepted. The offer stated, as envisaged by Rule 34(5)(a), that it was made 'without prejudice as an offer of settlement'; and it went on to say that it was also made 'without any admission of liability on the part of the defendants'. C

[6] The trial proceeded for five days in the Johannesburg High Court. The trial Judge found in favour of the plaintiff and ordered the defendants to pay damages in an amount of R30 000, together with costs, or to apologise in specified terms to Jansen and to pay attorney-and-client costs. (The defendants never exercised the D apology option and the propriety of the alternative order need not be considered further.) [2] The defendants appealed with the leave of the trial Judge, who also gave leave to Jansen to appeal against the costs order made against him in respect of the application to arrest Naylor to confirm the jurisdiction of the Court. E

[7] Jansen successfully prosecuted the costs appeal in which he was the appellant, [3] but abided the decision of this Court and did not appear in the defamation appeal in which he was the respondent. Several of the defences raised at the trial by Naylor and Atomaer were abandoned on appeal. In particular, it was no F longer in issue that the words reflected in the Iscor minutes of the meeting had been uttered by Naylor; and the

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defence of justification was not persisted in. The defences which were persisted in were A rejected by this Court, although the amount of damages ordered by the Court a quo was reduced from R30 000 to R15 000. [4] The reasoning adopted by this Court in making the reduction may be summarised as follows: although Jansen had not been guilty of stealing money from Atomaer and diverting it to a company in which he had an interest (the sense in which this Court B held the Iscor employees would have understood the words uttered by Naylor), Jansen had breached the duty of good faith he owed to Atomaer; that conduct, like theft, involved dishonesty; there was a direct link between the making of the defamatory statement and Jansen's conduct; and the trial Court should have taken this conduct into account in assessing the damages awarded. On the question of costs, Scott JA said C the following: [5]

'To sum up, none of the defences raised by the defendants can be sustained and, to this extent, the appeal must fail. The limited success achieved on appeal, namely by the reduction of the amount of R30 000 to R15 000, does not, in my view, justify an order of costs in favour of the defendants. Jansen, it will be recalled, abided D the judgment of this Court.'

No order was made in regard to the costs of the appeal.

[8] The costs orders made by Willis J and this Court were made in ignorance of the defendants' without-prejudice tender which preceded the trial. [6] Rule 34(12) provides: E

'If the Court has given judgment on the question of costs in ignorance of the offer or tender and it is brought to the notice of the Registrar, in writing, within five days after the date of judgment, the question of costs shall be considered afresh in the light of the offer or tender: Provided that nothing in this subrule contained shall affect the Court's discretion as to an award of costs.' F

The defendants duly gave notice of the order to the Registrars of the Johannesburg High Court and this Court, and requested both reconsideration of the order for costs made by the High Court, and an order for costs in their favour by this Court in respect of the previous appeal.

[9] The matter was argued before Willis J who, for reasons I shall deal with presently, did not alter the costs order he had made in G favour of Jansen. Scott JA, who had presided over the appeal in this Court, initially directed that, if the parties did not reach agreement on the question of costs, each party was to submit a draft of the order it contended should be made, together with submissions in support thereof; and that the draft and submissions were to be served on the H other party, who, if he wished,

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might file a reply. [7] Once Willis J granted leave to the defendants to appeal against his refusal to alter the costs order A made at the end of the trial, the previous direction was substituted with a direction that the issue of the costs of the earlier appeal would be considered at the same time as the appeal from the judgment of Willis J.

[10] It would be convenient, at this stage, to dispose of the defendants' argument that the appeal should be dismissed because B of the provisions of s 21A of the Supreme Court Act 59 of 1959. That section provides, to the extent relevant for present purposes:

'(1) When at the hearing of any civil appeal to the Appellate Division or any Provincial or Local Division of the Supreme Court the C issues are of such a nature that the judgment or order sought will have no practical effect or result, the appeal may be dismissed on this ground alone.

. . .

(3) Save under exceptional circumstances, the question whether the judgment or order would have no practical effect or result, is to be determined without reference to consideration of costs.' D

I had occasion in Logistic Technologies (Pty) Ltd v Coetzee and Others [8] to express the view that a failure to exercise a judicial discretion would (at least, usually) constitute an exceptional circumstance. I still adhere to that view - for, if the position were otherwise, a litigant adversely affected by a costs order would not be able to escape the E consequences of even the most egregious misdirection which resulted in the order simply because an appeal would be concerned only with costs; and that, obviously, cannot be the effect of the section. Indeed, I understood senior counsel representing Jansen on appeal, who was not responsible for the heads of argument in which the point was taken, effectively to concede the point. F

[11] In view of the attack launched by the defendants on the judgment of the trial Court, it is necessary to set out the law in regard to the nature and proper exercise of the discretion vested in a trial Judge when it comes to the making of an appropriate order as to G costs and the circumstances under which an appeal Court can interfere with the exercise of that discretion.

[12] Where a plaintiff in an action sounding in money has not succeeded in obtaining an award that exceeds an offer made without prejudice, there are two important considerations to be borne in mind by the Judge exercising the discretion. The first is the purpose behind H the Rule. The second is that the Rule in no way fetters the judicial exercise of the discretion.

[13] The purpose behind the Rule is clear. It is designed to enable a defendant to avoid further litigation, and failing that to I avoid liability for

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the...