Swazi MTN Limited v Swaziland Posts and Telecommunications and Another (19/11) [2011] SZSC 6 (31 May 2011);

 

IN THE SUPREME COURT OF SWAZILAND

 

 

HELD AT MBABANE                                                CIVIL APPEAL CASE

 NO. 19/2011

 

In the matter between:

 

Swazi MTN Limited                                                1^st Appellant       

MTN International (Pty) Ltd                          2^nd Appellant

Mobile Telephone Networks                           3^rd Appellant

Swazi Empowerment Limited                                4^th Appellant

 

and

 

SwazilandPosts & Telecommunication

Corporation                                                    1^st Respondent

Elijah Zwane                                                   2^nd Respondent

 

Coram                     :                                       J.G. Foxcroft

                                                                        A.M. Ebrahim

                                                                        S. A. Moore

                                                       

For The Appellants                                        J.J. Gauntlett SC

                                                                        F.B. Pelser

 

For The Respondents                                    W. Klevansky SC

                                                                        P.E. Flynn

 

Heard                      :                                       20^th May 2011

Delivered                :                                       31^st May 2011

 

 

 

 

SUMMARY

 

 

 

 

Application for interim relief – Application withdrawn following agreement which was made an Order of Court – Whether Court considered application before it – Government of Swaziland not a contracting party – Matters in dispute still unresolved – Outstanding disputes to be resolved by Arbitration in terms of Joint Venture Agreement – Respondents acting in defiance of Court Order – Costs awarded on Attorney-and-Client scale.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

JUDGMENT

__________________________________________________________________

MOOREJA

OPENING

[1]    This matter is regarded as urgent by all parties concerned.  It reached the roll for the month of May 2011 by way of an order of the Honourable Chief Justice Ramodibedi dated 4^th May 2011 under which it was directed by consent that the appeal be enrolled for hearing on the 20^th May 2011.  There was no order as to costs.

 

        BACKGROUND

 

[2]    In an urgent application instituted on the 20^th May 2010 under Case Number 1896/2010 (“the first application”) the Appellants sought an interim order interdicting the First Respondent herein from providing or rolling out any fixed wireless and/or mobile network services using its Next Generation Network (“NGN”) and/or Fixed Wireless Solution in competition with the First Appellant (Swazi MTN) pending the resolution of Arbitration proceedings to be instituted by Swazi MTN.  Those proceedings were withdrawn under the terms of the Agreement which was made an Order of Court dated 4^th June 2010.

 

THE PARTIES

 

[3]    The parties to the controversy before us have been described in the affidavit of Ambrose Dlamini The Chief Executive Officer of the 1^st Appellant. It should be observed that the Government of Swaziland was not a party to the Joint Venture Agreement nor was it a party to the Appeal.

 

THE APPEAL

 

 

[4]    The grounds of appeal were fully set out in the Notice of Appeal.  They are that the learned Judge:

 

1. Erred in not granting the Application to Compel the Respondents to comply with the Agreement of Settlement which was made an Order of the Court a quo on 4 June 2010 (the Consent Order).

 

1. Erred by dismissing the Application directing the Respondents to comply with the Consent Order.

 

3.Misdirected himself and committed an irregularity by deciding another Application that was not before him for decision and had been withdrawn by the Appellants and the withdrawal made an Order of Court, in the course of deciding the Application to Compel compliance with the Consent Order.

 

1. By deciding an Application that was not before him took into account irrelevant considerations not germane to the issues before him.

 

1. Erred in not holding that the matter before him concerned the interpretation of the Settlement Agreement and the Consent Order dated 4 June 2010, namely whether the Respondents were violating the undertakings in the Settlement Agreement which was made an Order of Court.

 

1. Erred in not holding that on a proper interpretation of the Consent order and having regard to the rights of the parties under the Joint Venture Agreement and the surrounding circumstances, the Respondents were violating the undertakings made in the Settlement Agreement.

 

1. Erred by finding that there were no longer any arbitrable issue between the parties as the 1^st Respondent is no longer a Controlling Shareholder in the 1^st Appellant and a Regulator of the Telecommunications in Swaziland.

 

1. Erred by not finding that the 1^st Respondent’s contention that it is no longer a Shareholder of the 1^st Appellant is disputed by the Appellants, having regard to the fact the 1^st Respondent can only exit as a Shareholder in terms of the Joint Venture Agreement.

 

1. Erred by not holding that since the parties had agreed that by resolving the conflict of interest arising from the 1^st Respondent’s shareholding in the 1^st Appellant and its position as Regulator of telecommunications, it was necessary that the parties agree to the terms of the 1^st Respondent’s exit as a Shareholder and the delegation of its Regulatory Authority as part of the dispute resolution process and not to unilaterally declare the dispute resolved as the 1^st Respondent did.

 

1. Erred by holding that the dispute between the parties has been resolved when as a matter of fact there still existed a dispute regarding the 1^st Respondent’s shareholding in the 1^st Appellant and the terms and conditions of the delegation of the 1^st Respondent’s Regulatory Powers.

 

1. Erred by holding that since the dispute has been resolved, “the basis of the Court Order, being interim in nature has fallen away”, and that as a result there is no basis for holding as the Appellants pray, that the Respondents are acting in breach of the Joint Venture Agreement and the Court Order.

 

1. Erred by not finding that the parties had not resolved the dispute between them, hence theAppellants’ Application for an Order to Compel the Respondents to comply with the Consent Order.

 

1. Erred in deciding matters that are not within his jurisdiction such as the issue of ownership of the 1^st Respondent’s shares in the 1^st Appellant which is a matter that may only be decided by an Arbitrator appointed in terms of the Arbitration Clause 27 of the Joint Venture Agreement.

 

1. Erred in not finding that he only had jurisdiction to grant interim relief pending resolution of matters in dispute by alternative dispute resolution procedures in terms of Clause 27 of the Joint Venture Agreement, and not to decide the merits of the dispute.

 

1. Erred by holding that the Government is a beneficial owner of the 1^st Respondent’s shares in the 1^st Appellant and that the 1^st Respondent was merely a nominee holding the shares on behalf of the Government, despite evidence by the Appellants that they contracted with the 1^st Respondent as principal and not as agent and dealt with it as such throughout their relationship.

 

1. Erred by holding that the disposal of shares in the 1^st Appellant could be dealt with in any manner other than as set out in Clause 11 of the Joint Venture Agreement.

 

1. Erred in not finding that a company in law only recognises its registered Shareholders.

 

1. Erred in not finding that there was not admissible evidence to support the allegation that the Government was a beneficial shareholder and the 1^st Respondent merely a nominee holding the shares on behalf of Government.

 

1. Erred in not finding that the terms of a written contract cannot be contradicted by extrinsic evidence outside the contract and that the legal notices purporting to declare the 1^st Respondent an agent of Government had no legal effect and could not vary the Joint Venture Agreement which is the exclusive memorial of the Agreement between the Appellants and the 1^st Respondent.

 

1. Erred in not finding that the relationship between the Appellants and the Respondents is governed by the Joint Venture Agreement and that a Court of Law may only interpret and enforce the terms of the Agreement and may not contradict its terms by other evidence other than what is contained in the Agreement.

 

[5]    The grounds of the appeal were reinforced by written Heads of Argument and oral submissions.  As is their right, the Respondents also produced written Heads of Argument supported by an ample oral presentation in Court.

 

[6]    It is common cause that an application instituted by the Appellant on the 20^th May 2010 under Case No. 1896/2010, the first application, was withdrawn and settled in terms of an agreement to be made an Court Order on the 4 June 2010 the Agreement of Settlement.  The parties undertook, somewhat optimistically, to endeavour to resolve the dispute within a period of two (2) weeks “from the date this Agreement is made an Order of Court.”  The First Respondent in both applications undertook that, pending finalization of arbitration proceedings to be submitted in terms of the JOINT VENTURE AGREEMENT, it shall:

 

• “cease marketing and advertising the Fixed Wireless component of its NGN Network;
• refrain from connecting new customers to its Fixed Wireless component of its NGN Network;

3.2      The Respondent further undertakes to provide to the Applicants an auditable system which will ensure that there are no additional connections from date of this Agreement.”

 

[7]    It was clearly within the parties’ contemplation that publicity was a factor capable of having an effect upon the dispute between them.  Accordingly, they undertook that “none of the parties shall be entitled to make any public announcement or statement regarding this Agreement, the dispute between them and any issue which is a subject of the Court proceedings without the prior consent of the other parties before making such public announcement or statement.” Catering for the fallibility of human nature the signatories agreed that:

 

“Should any party breach the provisions of this Agreement, all of

which are material, the aggrieved party shall in addition to any

other rights it may have in law, be entitled to enforce the provisions

of this Agreement as if it were a Judgment of the Court.”

[8]    That Agreement of Settlement was duly made an Order of Court.   As such it was clothed with the full force and effect of a Court Order which obliged the parties concerned to comply with its terms. 

 

[9]    The parties did not reach agreement as they had hoped.  They could not see eye to eye on a number of issues.  No arbitration proceedings were launched by any of the parties.  Something of a stalemate was then reached.  The Appellants again took action.  They brought a second application on the 18^th February 2011 again under Case No. 1896/2010 seeking an order in the following essential terms.

 

“3.       Directing the Respondents to comply with the Order of this Honourable Court dated 4 June, 2010, pending the resolution of the dispute between the parties or the final determination of the dispute by Arbitration.  The Respondents are ordered to forthwith cease and desist from:

 

• Marketing and advertising the Fixed Wireless Component of its NGN Network;
• Connecting new customers to the Fixed Wireless Component of its NGN Network;

 

1. In the event of the Respondents failing to comply with the Order referred to in prayer 3 above within two (2) days from the date of issue of that Order, the 2^nd Respondent be committed to gaol for a period of 60 days for Contempt of Court.

 

5.      The Respondents jointly and severally pay the costs of this Application on the Attorney and client scale;

 

1.  Granting such further and alternative relief as the Court may deem fit.”

 

[10]  Itis against the judgment on this application that the Appellants have appealed.  The Judge a quo dismissed what he called “both the main and interlocutory applications.”  The two applications to which the Judge was referring were the applications instituted by the Appellants before the Court a quo on the 20^th May 2010 – See paragraphs [1] and [75] of the judgment – and the one where “on the 2^nd of March 2011 the First Applicant instituted an urgent interlocutory application against the First and Second Respondents for an Order directing them to comply with the Order of this Court issued on the 4^th June 2010 pending the resolution of the dispute between them or the final determination of the dispute by arbitration.”  See paragraph [45] of the judgment.  There is no reference in the judgment to the application made on the 18^th February 2011.

 

THE FIRST RESPONDENT

 

[11   First Respondent, the Swaziland Posts and Telecommunications Corporation is a creature of statute having been established by the Swaziland Posts and Telecommunications Corporation Act, 1980 which commenced on the 1^st April 1986.  Section 3 (2) of the Act enables the Corporation – a body corporate with perpetual succession and a common seal – to sue and be sued in its corporate name and to acquire, hold and dispose of moveable and immovable property for the purposes of the Corporation.  The Powers and Functions of the Corporation are set out in Part III of the Act. Of importance to this case are the powers conferred by Section 13 and particularly the power given by Subsection (2) (a) of that Section “to enter into such contracts as may be necessary for the purposes of the Corporation or otherwise for carrying into effect the provisions of the Act.”

 

[12]  Section 4 provides for a Board of Directors of the Corporation and specifies its composition.  Section 5 sets out the powers of the Minister and Section 6 the powers of the Board.  The Minister may:

 

“(a)      give directions of a general nature to the Board relating to the operation of the undertaking of the Corporation and the Corporation shall comply with such directions.”

 

[13]  The phrase “directions of a general nature” is an imprecise and nebulous one:  but the corporation is nevertheless required to comply with such directions.  The Appellants submit that “Board members are clearly under a fiduciary duty to the Corporation itself.”  I agree.  The Appellant has highlighted the following Sections of the Act:

 

“(i)       Section 13 (2) (m) which authorises the Corporation “to hold shares in any other corporation and to establish or acquire any Subsidiary Corporation.”

 

1. Sections 101 and 102 which specifically provide for the vesting of assets acquired by the Corporation in the Corporation itself. 

 

 

1. Sections 13 (1) (f) and (2) (i) and Section 99 which expressly empower the Corporation, subject to Ministerial approval where required, to act as an agent.

 

[14]  Counsel for the Respondents drew attention to Section 115 of the Act which empowers the Board and the Managing Director to “delegate to any person any of the powers vested in them under this Act and may grant to any person powers of Attorney.”

 

[15]  Counsel for the Appellants stressed, and Counsel for the Respondents was unable to deny, that by Section 3, the Act created a distinct and unique legal entity – a separate juristic person as he put it – separate and apart from the Government of Swaziland, from the Minister, from the Managing Director, from the Board, from Members of the Board, and from any public officers clothed with enabling powers and duties under the Act.  Counsel for the Appellant is undoubtedly correct in his contention that Section 3 (2) created a corporation with the plenitude of powers and attributes conferred upon it by the subsection.

        LIVE DISPUTES

 

[16]  The findings of the Court a quo on the matter of disputes were encapsulated in paragraph [100] of the judgment which has been referred to in paragraph [22] infra.  In the introduction to their Heads of Argument the Appellants allege that:

 

“The Respondent (“the Corporation”) is set upon launching a rival telephony network, in breach of clear contractual obligations, in circum stances seriously prejudicial to the appellants and to the public interest, even before arbitration proceedings between the parties can be accomplished.”

 

At paragraph 6.2.3 of the Heads of Argument the Respondent’s counter:

 

“that the JVA reflects the arrangement of the parties for the specific purpose of operating a GSM Network as opposed to the alternative technology known as CDMA.”

 

Paragraphs 6.1 to 6.3.2 are devoted to elaborate but unavailing argument in support of the above contention.

 

[17]  It is common cause that no arbitration proceedings have been initiated. The Appellant’s position is that: “Given the withdrawal of the first application, it was unfortunately necessary to reinstitute proceedings by way of the second application.” This was done in order to restrain the Corporation from marketing and advertising the rival service.  The Respondents counter that “the parties are bound by the JVA and an ‘action’ or application on the merits of a dispute is replaced by the requirements to proceed by way of arbitration.”

 

[18]  Two issues were proving to be particularly thorny.  First, the Appellant’s position remained that the corporation being both regulator and commercial contractor simultaneously created a conflict of interest.  The second concerned the Appellants’ contention that the JVA required the corporation to act with the utmost good faith and not to compete against them.  The Respondent’s contention on the first issue is articulated in their Heads of Arguments in this way:

 

“It is submitted that there is no provision of the JVA which prevents the respondent from competing with the first appellant’s GSM mobile network.  The first appellant is protected in respect of GSM and not mobile networks generally.  There is therefore no conflict of interest in that the first respondent is not launching a GSM network but a CDMA/WIMAX network which is a different technology and “NGN” is on the CDMA platform.”

 

[19]  On the second issue the Respondents deny that they acted in accordance with a stratagem devised by the Attorney General and with strategic sleight of hand and in bad faith.

 

[20]  Paragraphs 8 – 10 of the Respondents’ Heads of Arguments recite:

 

8.         “The appellants have not submitted the dispute to arbitration in terms of the JVA or in terms of the Rules of Arbitration of the International Chamber of Commerce (“ICC”).  The undertaking in the agreement was made pending finalisation of arbitration proceedings which were required to be submitted in terms of the JVA.

 

“See: Record of Appeal, Vol 1, page 156 paragraph 9.24 (Rule 4)

 

9.         The first respondent alleges in its answering affidavit that the appellants are relying on arrangements made subsequent to the Court order which do not form part of the order and have the effect of varying the order.

 

10.      In that the dispute has not been submitted to arbitration, the appellants have not made out a case for interim relief pending that arbitration.”

       

THE JUDGMENT

 

[21]  The opening paragraph of the judgment of MCB Maphalala J records that “the Applicants instituted proceedings before this Court on the 27^th May 2010 on an urgent basis.”  Some seventy four pages later on 20^th April 2011 the Judge concluded that “In the circumstances, both the main and interlocutory applications are dismissed.  No order as to costs.”  The Appellants noted an appeal on the very next day against the judgment which their Counsel described in their Heads of Arguments at paragraph 5 in this way:

       

“The judgment is very lengthy, comprising substantially a paraphrase of the papers and of argument.  The actual analysis is brief, and core reasoning even briefer.  The latter comprises one paragraph.  It is this: that the whole matter had become moot, because there were no longer any issues to be arbitrated, and “the dispute has been resolved and the basis for the court order, being interim in nature, has fallen away.”    

 

[22]  What Counsel submits is the core reasoning is contained in a modest paragraph [100] which is to the following effect.

 

“It is apparent that there are no longer any arbitration issues between the parties since the First Respondent is no longer a Controlling Shareholder in the Telecommunication Industry.  The dispute  has been resolved and the basis for the Court Order, being interim in nature, has fallen away; and there is no legal basis for holding, as the First Applicant does, that the Respondents are acting in breach of the JVA and the Court Order.”

 

THE CHRONOLOGIES

 

[23]  During the course of the hearings, this Court indicated to Counsel on both sides that a chronology of events might be of assistance in following the flow of events as they occurred sequentially.  Both Counsel readily agreed and undertook to prepare a chronology with which they both concurred.  Even in this seemingly non-contentious exercise, the parties could not reach a consensus.  As it turned out, the Respondents, having read the Appellants’ chronology added a chronology of their own which highlighted six additional matters which they considered to be of importance.  This Court is grateful for the chronologies which the parties have furnished, and would annex them to this judgment as Annex A being the Appellants chronology, and Annex B being the Respondents’ chronology. 

 

CONCLUSION

 

[24]  Counsel for the Appellants submitted that ‘the basis on which the High Court dismissed the application was untenable.  The JVA subsists between the third Appellant and the Corporation.  The Corporation is a juristic person separate from the Government, and it specifically is the contract-counterparty.  The “relocation” of shares is not what the Attorney-General advised – and in any event has no effect on the continuing contractual obligation by the Corporation.  That obligation is rooted in an express obligation of the highest good faith.  It is not susceptible to strategic sleight of hand.  And specifically, the Corporation is bound not to field another network in competition with that of the joint venture.’  This Court accepts the correctness of the foregoing submission.

       

[25]  The Court a quo fell into error by dismissing “the main and interlocutory applications,” which were not before him, and in effect, by not dealing with the application of the 18^th February 2011 which is the subject matter of this appeal.  As illustrated in the preceding paragraphs a number of live issues remain in dispute.  These were vigorously contended by Counsel for the parties both in the papers, and in oral arguments before us to such an extent, that the need for their resolution through the arbitration machinery as provided for in the Clause 27.2 of the Joint Venture Agreement became clearly obvious.

 

[26]  Counsel for the Appellant submitted a chronology and Draft Order dated 24 May 2011. A Respondent’s chronology was also filed on that same date which reflected that “The Respondents having read the Appellants’ chronology would like to add the following:” This was followed by list of matters, their dates, and references to the relevant pages of the record.  A missing reference was also attached.  There was no objection or demur to the Appellant’s proposed draft order. For that reason, and because the draft is reflective of the conclusion to which this Court has come, that draft forms the basis for the order of this Court.

 

Accordingly, having read the papers filed and heard argument presented by counsel for the parties, it is ordered that:

 

1. The judgment of the court a quo is set aside, and replaced with the following order:

 

1. The usual forms and procedures relating to the institution of the proceedings are dispensed with, and the application is permitted to be heard as a matter of urgency.

 

1. Pursuant to the Court Order dated 5 July 2010, incorporating inter alia paragraphs 3 and 4 of the Agreement of Settlement between the parties dated 4 June 2010, pending the resolution between the parties or the final determination of the dispute by arbitration pursuant to (c) below, the respondents are ordered forthwith to cease and desist from

 

1. Marketing and advertising the Fixed Wireless Component of its NGN Network; and

 

1. Connecting new customers to the Fixed Wireless Component of its NGN Network.

 

1. The appellants shall institute an arbitration, pursuant to the provisions of clause 27.2 of the Joint Venture Agreement between the parties, dated 31 July 1998, read with the Rules of conciliation and Arbitration of the International Chamber of Commerce, within 30 days of the date of this order, failing which the order in terms of (b) above shall lapse and be of no force and effect.

 

1. Directing the first respondent to pay the costs of the application.

 

1. The first respondent is ordered to pay the costs of the appeal, including the certified costs of two counsel, on the scale as between attorney and client.

 

[27]  The order in 2 above has been made for the following reasons.  Some time after the hearing of the instant appeal on the 20^th May 2011, it came to the attention of the members of this Court as presently constituted, that Ramodibedi C.J. had heard an application involving these parties on the 6^th May 2011 and had delivered his judgment on the 19^th May 2011, which was a day before the hearing of this appeal on the 20^th May 2011. 

 

[28]  A perusal of that judgment revealed that the Honourable Chief Justice had found that, notwithstanding the noting of an appeal by the Appellants herein on the very next day following delivery of the judgment of M.C.B Maphalala J on the 20^th April 2011, and in violation of the well established rule in this Kingdom that the noting of an appeal operates as an automatic stay of execution, the Respondents had continued to roll out their Mobile Network and to advertise same after the appeal against the judgment of Maphalala J – delivered on the 20^th April 2011 – had been noted on the 21^st April 2011.

 

[29]  This flagrant disregard of the law and practice in Swaziland is based upon the crass, avaricious, brazen and disingenuous contention that, as the deponent swore in his answering affidavit:

 

“It is in the public interest that the 1^st Respondent should continue to offer its products as well as the call rates are cheaper and this will lead to more choice for the consumer.”

                                               

The above reasoning appears to be based upon a cynical and grasping calculation that the premature rolling out of their Mobile Network was worth risking. They were evidently enticed by the revenue and advertising advantages to be gained by this unsavoury bit of sharp commercial practice.  The learned Chief Justice described this series of applications as cut-throat litigation.  The conduct of the Appellants is an example of cut-throat competition. 

 

[30]  The situation before us represents business practice at its worst where contractual obligation and legal principle were callously sacrificed upon the alter of unfair commercial advantage over a competitor, and of the profits to be gained by jumping the gun and cornering the market before the continuing legal processes had been properly concluded.  The advertisements which had already penetrated the consciousness of consumers cannot now be recalled. 

 

[31]  In Swaziland Building Society v Sibongiseni Fundzile Xaba Civil Appeal Case No. 45/2010, this Court, at paragraph [21], restated the basic principle that vexations, unscrupulous, dilatory or mendacious conduct (this list is not exhaustive) on the part of an unsuccessful litigant may render it unfair for his harassed opponent to be out of pocket in the matter of his own attorney and client costs.  The findings of the Court a quo that the Appellant in that case was guilty of grave misconduct in the transaction under inquiry, and that its conduct was highly reprehensibe, wrongful and unjust was endorsed by this Court as warranting the award of costs upon the attorney-and-client scale.

 

[32]  The 5^th Edition of Herbstein and Van Winsen The Civil Practice of the High Courts of South Africa cites a number of examples of conduct warranting the award of costs on the attorney-and-client scale. These include cases in which special circumstances or considerations justify the granting of such an order.  No exhaustive list exists. But some examples will suffice. 

 

1. That the party has been guilty of dishonesty or fraud or had vexatious, reckless and malicious, or frivolous motives, or committed grave misconduct either in the transaction under enquiry or in the conduct of the case.
2. Where an attempt was made to trifle with the Court.
3. Where there has been an abuse of the processes of the Court.
4. Where there has been unworthy, reprehensible or blameworthy conduct.
5. Where there has been an attitude toward the Court that is deplorable and highly contemptuous of the Court.
6. Where there has been conduct warranting the Court’s disapproval and which the Court should frown upon.

 

[33]  In casu the Respondents have, as the Learned Chief Justice observed, flagrantly disregarded not only their contractual obligations, but the orders of the Superior Courts of this Kingdom. That conduct has led to a continuation of unnecessary litigation and represents a threat to the Rule of Law itself.  For no litigant, however well heeled financially, or however prominent in the business and commercial community, can be allowed as the Respondents have done in this case, to disregard Orders of competent Courts with impunity. This case therefore is one where the egregious conduct of the Respondents warrants the award of costs upon the attorney-and-client scale.

 

 

_______________________

                                                S. A. Moore

                                                Justice of Appeal

 

 

 

I agree                                      ______________________________

                                                A. M. Ebrahim

                                                Justice of Appeal

 

 

 

I agree                                      ______________________________

                                                J. G. Foxcroft

                                                Justice of Appeal

 

 

Delivered in the open Court on this 31^st day of May 2011.