SUMMARY
The Applicant in this matter was Airports Company South Africa (“ACSA”). The Respondents, Big Five Duty Free (Pty) Ltd (“Big Five”), DFS Flemingo SA (Pty) Ltd (“Flemingo”) and Tourvest Holdings (Pty) Ltd (“Tourvest”), were bidders for a tender issued by ACSA to operate duty free shops at its international airports for a period of ten years.
Following the bidding process, ACSA awarded the tender to Big Five and the parties entered into a lease agreement. Flemingo, being an unsuccessful bidder, brought an application to the High Court for an order to review and set aside the award of the tender to ACSA. Flemingo simultaneously sought an urgent interdict to prevent the implementation of the award until the review proceedings were finalised.
Phatudi J granted the interim interdict and, in the subsequent review proceedings, found that the tender process was unlawful and, as a result, set it aside (the “Phatudi Judgement”).
Big Five appealed the Phatudi Judgement to the full bench, however, prior to judgment being handed down, Big Five and Flemingo agreed to settle the matter, the terms of which were contained in a settlement agreement signed by both parties. ACSA was unable to agree to terms of settlement without prior board approval and, as such, Big Five and Flemingo proceeded with the settlement agreement without ACSA being a party to it. The full bench then made the settlement agreement an order of court.
ASCA, having not been a party to the settlement agreement, took the view that it was not bound by the court order/settlement agreement and that it remained bound by the Phatudi Judgement. Accordingly, ACSA began a new tender process.
Big Five then approached High Court for an order that ACSA was bound by the award it had initially made and that it was obligated to enter into the lease agreements as anticipated. The High Court dismissed the application and found that the Phatudi Judgement was a “public remedy” or “judgement in rem” and could not be set aside by an agreement entered into between private parties.
Big Five appealed to the Supreme Court of Appeal (“SCA”) against the High Court order. The SCA held that the settlement agreement, made an order of court, had the effect that the review proceedings were withdrawn as if they have never transpired and, as such, ACSA was bound by its initial award.
ASCA then sought application for leave to appeal the SCA decision to the Constitutional Court.
The majority judgement upheld the appeal and indicated that a judgement in rem may not be set aside by a settlement agreement between litigants. In order for a judgement in rem to be set aside by a settlement agreement, the appeal court must make the settlement agreement an order of court after having considered the merits of the appeal, as well as after having given reasons for setting such order aside.
The Majority judgement, in interpreting the settlement agreement, held, inter alia, that the language used, specifically the reference to the word “withdraw”, was so poor that, in order for Big Five to succeed, the Constitutional Court would be required to attach meanings to words which were not consistent with the ordinary meanings.
In a dissenting judgement, Cachalia AJ found the Majority’s criticism of the SCA interpretation of the settlement agreement to be unfounded. Cachalia AJ found the SCA’s reasoning to be correct and that the review proceedings ought to have been withdrawn.
HELD
- Leave to appeal is granted;
- Appeal is upheld;
- Order made by SCA is set aside;
- The Order of High Court under case number 16829/15 is reinstated; and
- Big Five to pay the costs of the application
VALUE
In order for a judgement in rem to be set aside by a settlement agreement, the appeal court must make the settlement agreement an order of court after having considered the merits of the appeal, as well as after having given reasons for setting such order aside.
Written by Justin Howard and supervised by Shaun Piveteau, 12 November 2018
