Southern Palace Investments 44 (Pty) Ltd and Another v Smalle and Another (63453/2013) [2015] ZAGPPHC 673 (25 September 2015)

REPUBLIC OF SOUTH AFRICA

IN THE GAUTENG DIVISION OF THE HIGH COURT, PRETORIA

CASE NO: 63453/2013

DATE: 25/9/2015

NOT REPORTABLE

NOT OF INTEREST TO OTHER JUDGES

REVISED

In the matter between:

SOUTHERN PALACE INVESTMENTS

44 (PTY) LTD

First Plaintiff

SØREN BURKAL NIELSEN

Second Plaintiff

and

JACQUES SMALLE

First Defendant

HEIDI LEE SMITH

Second Defendant

JUDGMENT

J W LOUW, J

[1] The first plaintiff, Southern Palace 440 (Pty) Ltd, to which I shall refer as SPI, is a trading company which is involved in property development in the Hoedspruit area. The second plaintiff, to whom I shall refer as Nielsen, is one of three directors of SPI. On 24 May 2013, the first defendant, who was at the time the Provincial leader of the Democratic Alliance in Limpopo, issued a press release concerning SPI and Nielsen. On 31 May 2013, the second defendant, who is the proprietor, editor and publisher of the local Hoedspruit newspaper Kruger2Canyon, published an article also concerning SPI and Nielsen. SPI and Nielsen allege that the press release and newspaper article are defamatory of them and claim damages from the defendants.

[2] It is necessary to firstly refer to the press release. It reads as follow:

“It has been discovered that Southern Palace 440, contracted by the Lepelle Northern Water Board (LPW) to render water services, is allegedly hawking water to Hoedspruit farmers at glossily (sic) escalated prices.

It is alleged that Southern Palace 440 director, Soren Nielsen from Denmark entered into a bulk water supply agreement with the water board on 22 May 2012. On that agreement, the board agreed that the company be permitted to sell 10 million cubic metres a year of its water for 30 years out of the Blyde River Dam.

According to the reports, Southern Palace is not a water service provider and the tender process was not followed. Farmers in that area need additional water in order to expand their farms, create jobs and secure their livelihoods.

Southern Palace was also planning to farm 1172 Ha with irrigation farming but they are in a stalemate resulting from Southern Palace waiting for a clear decision from the Department of water affairs.

We must applaud the Blue Scorpions with their quick investigation into this saga and we are expecting to see the law to take its cause (sic). We also expect Cooperative Governance MEC to investigate how a water board could illegally sub-contracted (sic) services illegally (sic) to a third party when it should have been providing this service to the public themselves.

Our concern is that in a province where water is scarce the price of corruption to communities needing this basic service is very high. Corrupt contractors and authorities who don’t respect the value of water end up causing unnecessary hardship for families and loss of income for businesses.

The DA calls for decisive action to be taken against both the LNW and Southern Palace.

Media enquiries:

Jacques Smalle (MP)”

[3] The newspaper article is in the same terms, except for the following:

· It bears the heading “Estate developer allegedly involved in water corruption” in bold print.

· The first paragraph thereof reads as follows:

“HOEDSPRUIT – In a press release on May 24, the DA announced the discovery that Southern Palace 440, contracted by the Lepelle Northern Water Board (LPW) to render water services, is allegedly hawking water to Hoedspruit farmers at grossly escalated prices.”

· The second paragraph thereof, which corresponds with the first paragraph of the press release, commences with the words “According to Jacque Smalle, the DA Limpopo Provincial Leader”. At the end of the paragraph, the following words are added : “Soren Nielsen is also the developer of Blyde Wildlife Estate.”

· The third paragraph, which corresponds with the second and third paragraphs of the press release, commences with the words “The DA states”.

· The fourth paragraph, which corresponds with the fourth paragraph of the press release, commences with the words “The DA also applauded”.

· The first sentence of the sixth paragraph of the press release does not appear in the newspaper article.

[4] It was agreed between the parties that the issues to be decided were whether the statements contained in the press release and in the article were defamatory of the plaintiffs and, if so whether they were wrongful and made with the intention to defame the plaintiffs. The defendants denied that the statements were defamatory. In the event of it being found that they were, a presumption of intent (animus iniuriandi) and wrongfulness arises, the onus of rebuttal being on the defendants.[1] The defendants rely on two grounds of justification to rebut an inference of wrongfulness: truth and public interest, and fair

comment.

Were the statements defamatory of the plaintiffs?

[5] The publication of words or behavior that, in the opinion of the reasonable person of ordinary intelligence and development, has the tendency to undermine, subvert or impair a person’s good name, reputation, regard or the esteem in which he is held by the community, is defamatory of and prima facie wrongful as regards that person. That is a question for the court to decide by interpreting the words in question and the manner in which the statement or article in question was compiled.[2]

[6] In my view, there can be no doubt that the press release and the newspaper article contain statements which would be considered by the reasonable person of ordinary intelligence and development as defamatory in the above sense of both plaintiffs. It is alleged in both -

· that it has been discovered that SPI had been contracted by the Lepelle Northern Water Board (LNW) to render water services and that SPI was hawking water to Hoedspruit farmers at grossly exaggerated prices. This implies that SPI, in contravention of its contract with LNW, was not rendering water services but was illegally selling the water, and then at grossly escalated prices, which in turn implies fraud.

· that Nielsen is a director of SPI and has entered into a bulk water supply agreement with LNW in terms whereof SPI was permitted to sell a vast amount of water for a period of 30 years out of the Blyde River dam, but that, according to reports (which are not

disclosed) SPI was not a water service provider and a tender process was not followed. These allegations suggest some corrupt

collusion between LPW and SPI represented by Nielsen.

· that the saga was being investigated by the Blue Scorpions, which implies some criminal conduct on the part of the plaintiffs and LPW.

· that corrupt contractors and authorities who don’t respect the value of water end up causing unnecessary hardship for families and loss of income for businesses. In the context of the manner in which the press release and the newspaper article was compiled, the reference to corrupt contractors must include a reference to at least SPI.

· The newspaper article, in addition, bears the heading “Estate developer allegedly involved in water corruption”.

[7] It was submitted by Adv. De Waal, who appeared for the defendants, that the only statement by the first defendant concerning SPI which could be considered defamatory was that it was “allegedly hawking water to Hoedspruit farmers at grossly escalated prices.” The submission is not correct if regard is had to what is set out above.

[8] It was further submitted that this allegation was not defamatory as it merely states that there are allegations of wrongdoing and that a public representative, such as the first defendant, must be allowed to convey such an allegation to the public and call for action if wrongdoing is found. No authority was referred to in support of the submission and in my view it is wrong. On the contrary, more weight will normally be attached to utterances by public officials and they therefore need to be extra careful when making statements which may be defamatory of other persons. It is important to remember that the defamatory statements made by the first defendant were not made in a private conversation with someone, but were contained in a written press release with the obvious intention that it should be published by the media. Such publication is potentially much wider than publication by a local newspaper.

Truth and public interest

[9] The defendants did not testify, and relied on the evidence of Nielsen and on discovered documents. They were entitled to do this as the question whether the publication of a defamatory statement was made wrongfully is an objective inquiry and, as mentioned above, is a matter for the court to decide.

[10] The evidence of Nielsen can be summarised as follows: During 2011, he commenced negotiations on behalf of SPI with LNW in regard to the conclusion of a bulk water supply contract between LNW and SPI. The agreement was concluded on 22 May 2012. The agreement was drafted by LNW’s legal team. SPI was represented by Mr Robert Ndawana, a water consultant who was very experienced. On 13 August 2012, Nielsen wrote a letter on behalf of SPI to the chief director of the Limpopo region of the Department of Water Affairs (DWA) in which he inquired whether LNW, as the holder of the water use license, had a license to supply water to SPI. On 14 August 2012 the chief director replied as follows:

“LNW has a license for 64 million m³ water for Phalaborwa, according to the latest figure they use about 47 million m³ per year, and therefor at (sic) 17 million m³ is available, and the volume referred to in annexure A in your letter can be accommodated.

The Water use License held by LNW is broad enough to include any farming and no further licenses need to be obtained from DWA.

Southern Palace has the full support of DWA to expand the farming sector of the Blyde irrigation area, mainly on farms Liverpool, Portsmouth and Essex.

DWA endorse the arrangement with MBB managing the Blyde pipeline to meter the water supplied by LNW to Southern Palace through the Blyde pipeline, and for the pumps on the Blyde River to be metered by LNW.”

On 22 August 2012, LNW wrote a letter to SPI in which they referred to SPI’s query in its letter of 13 August 2012 regarding the water licence and stated that the response from the DWA gave “precise clarity to the point regarding the use of the license”. Nielsen was as a result satisfied that the correct procedure had been followed and that he had confirmation from the relevant stakeholders.

[11] In regard to the allegation in the press release and in the article that the Blue Scorpions were investigating the saga, Nielsen

testified that it was untrue as, as far as he knew, there had never been any investigation and he had never been investigated by the Blue Scorpions. He was also never approached by the first or second defendants before the publication of the press release or the article. The first time he became aware of any publication, was when a friend, Mr Malan, who later testified, phoned him and told him that there was a nasty article in the Kruger2Canyon newspaper.

[12] With regard to the statement in the press release and in the article that in the bulk water supply agreement LNW had agreed that SPI be permitted to sell 10 million cubic litres a year of LNW’s water for 30 years out of the Blyde River dam, Nielsen testified that it was the intention to shell shares in SPI and that the shareholders would be entitled to use of the water for 30 years pro rata to their shareholding. SPI would itself farm on the last portion of the farm Liverpool and would also use the water. The aim of selling the shares was to generate funds to enable SPI to plant approximately 300 hectares of citrus on the farm. It was never the intention of SPI to sell water.

[13] On 24 September 2012, Nielsen wrote an e-mail to a Mr Francois van der Merwe, who was employed at the national licensing department of the DWA, in which he requested “feedback on the situation, regarding the lawfulness of supply of water from Lepelle Northern Water to Southern Palace”. Van der Merwe replied on 26 September 2012 that “the feedback that I received is that the investigation on the lawfulness of the transfer of water to be used for irrigation is still in an early stage and I have so far not received any further information”. It appears that the investigation was the result of a letter which was written by the Blyde River Water User Association on 28 August 2012 to its members in which it questioned the validity of the bulk water supply agreement. Nielsen’s evidence was that he understood the investigation to be about LNW’s rights to supply water to SPI. He testified that he wasn’t aware of anything which he had done illegally.

[14] In cross-examination, Nielsen was referred to an undated letter which he had written to the Blyde River Water Utility Company (BRWUC) in which he advised them that SPI was in the process of obtaining 13 million cubic metres of water per annum from LNW which was unutilised by LNW. BRWUC is a transporter of water by pipeline from the Blyde River dam to its clients. He inquired whether BRWUC had the capacity to convey this amount of water to SPI’s properties and proposed a price to be paid to BRWUC for the conveyance of the water. The letter goes on to state that “Should by any way Southern Palace not utilize all the water, we consider leasing out the water to other irrigation farmers in the Blyde Irrigation Scheme on a long term agreement”. When asked what this meant, he said that SPI was looking at various options at the time, of which leasing was one, but that after obtaining legal advice that it would be problematical, the option of selling shares was decided on.

[15] Nielsen was asked whether he had applied for a water use license. He said that he had applied to the DWA at Roodeplaat, but that in negotiations with NLW he was informed that they received the water from the DWA and that they had a water use license.

[16] He was referred to clause 5.1 of the bulk water supply contract which provides that the contract shall be reviewable annually at the beginning of every financial year and was asked whether such review had been done. He answered that no review had been done because they were waiting for the DWA to come back with a clear message regarding the legality of the agreement. He said that if SPI was not sure that the water could be used legally, it was not prepared to make a big investment. The contract was supposed to be implemented in January 2013. He later testified that it has not been implemented to date. The deposits which had been paid by other farmers in respect of the sale of shares had been returned to them.

[17] It is clear from Nielsen’s evidence that he devised a scheme whereby, instead of SPI selling so much of the water which it would not require for its own purposes to other farmers, the shareholders of SPI (Nielsen, his wife and one other) would sell some of their shares to other famers which would then entitle those other farmers to a share of the water pro rata to their shareholding. The capital so generated would then enable SPI to develop the 300 hectares of citrus on the farm Liverpool. The farm had been sold to a local Communal Property Association, but the intention was to lease it back from the CPA in order to do the planned development.

[18] The cross-examination of Nielsen was directed at showing that, although clothed as a sale of shares, what SPI was in fact doing was selling water illegally to other farmers. Even if it was SPI’s intention to sell water to other farmers, there was no evidence of sales of shares being concluded. Nielsen denied that any such sales had been concluded. The evidence showed that he negotiated with certain farmers with a view to them purchasing SPI shares and that deposits were paid by at least one of them. But there was no evidence of any actual sales. Nielsen’s evidence was that the deposits were returned when the project came to a halt.

[19] But even if SPI shares had been sold and even if such sales constituted an illegal sale of water, the defamatory statements and their innuendos, set out in paragraph [6] above, go further than that and are, to that extent, untrue. It was, however, submitted by Mr de Waal that the allegations were substantially true and that the truth does not have to be proved in every detail. He submitted, with reference to Modiri v Minister of Safety and Security and Others[3], that what the defendants have to prove is that the gravamen or sting of the statement was true. He submitted that the sting was the heading of the newspaper article and the allegation that SPI was illegally selling water at grossly escalated prices pursuant to a water right conferred to it by an organ of state, and that the remaining allegations in the press release and in the article need not be considered as they did not add to the sting or were comment.

[20] I disagree with the submission. The allegation that SPI was illegally selling water at grossly escalated prices was not the only allegation with a sting. The further defamatory allegations and their innuendos, which are set out in paragraph [6] above, were not immaterial detail or comments and have a sting of their own. The allegation of corruption is, in my view, more serious than the allegation of the illegal sale of water. Corruption has not been proved by the defendants.

[21] I find, therefore, that the defendants have failed to prove the truth of the defamatory statements in the press release and the article. Their defence of truth and public benefit can therefore not succeed.

Fair comment

[22] The defendants’ case was that this defence relates to the passage in the press release and in the article that “corrupt contractors and authorities who don’t respect the value of water end up causing unnecessary hardship for families and loss of income for businesses” and that “decisive action should be taken against both the LNW and Southern Palace”. It was submitted that this was an opinion which was expressed with reference to the preceding facts.

[23] Although denied by the defendants, I have found that the allegation of corruption in this passage does relate to SPI. I disagree that the allegation that SPI is corrupt is merely an opinion or comment in the context of the press release and article. It is in my view a defamatory allegation as much as the allegation of the illegal sale of water.

[24] On the assumption that the allegation was only an opinion or comment, the defendants inter alia had to establish that the facts on which the comments were based, were true.[4] I have found that it has not been proved that SPI shares were actually sold. Neither was it proved that the Blue Scorpions were investigating the ‘saga’. The defence of fair comment therefore also fails.

Conclusion

[25] For the reasons set out above, I conclude that the plaintiffs are entitled to be compensated for the damage caused to their reputation by the defamatory statements made by the defendants. There are three claims in the plaintiffs’ particulars of claim. Claim 1 is a claim by the first plaintiff against the first defendant which relates to the press release. Claim 2 is a claim by the first plaintiff against the second defendant relating to the newspaper article. Claim 3 is a claim by the second plaintiff against the second defendant relating to the newspaper article.

[26] In regard to the amount of damages to be awarded, I take into account the nature and seriousness of the defamatory statements. I also take into account the reputation and esteem of the plaintiffs. In this regard, Nielsen testified that he was a property developer and that he had developed the Blyde Wildlife Estate where not only sold erven but also did construction of houses on the estate. As a result of the publications, he has had to close down his building business as he believed that people would not use his services if he was in serious trouble with the law. Mr Jacobus Francois Malan, who has been a game farmer in the area and who has known the Nielsen for a long time, testified that he was a person of good standing in the Hoedspruit community. He bought a property in

the estate from Nielsen on which Nielsen built a house for him. When he heard about the publication in the newspaper, he immediately

contacted the Nielsen and informed him about it. When referred to the allegation of corruption in the article, he said that

developers always retain a connection with their developments and that people would ask themselves whether they should invest in or buy property from a corrupt developer. The contents of the article scared him as he believed that it might affect the value of his property.

[27] A further relevant factor was that the DA, according to Nielsen’s evidence, which was not disputed, was not prepared to enter into a meaningful discussion with him. As far as the second defendant is concerned, the plaintiffs’ attorney wrote a letter to the Owner/Editor of the Kruger2Canyon newspaper a few days after the publication of the article in which he recorded that neither the newspaper nor the first defendant had taken the trouble to consult or inquire from the plaintiffs in order to establish the correct facts. The attorney demanded that an apology and retraction of the allegations be published in the following edition of the newspaper and that such be in the same format as the original article and must cover the same portion of page 3 where the article was published. The defendants discovered an e-mail from the Media Ombudsman in which the second defendant was advised that she should have obtained the plaintiffs’ comments before publishing the article and that she should apologise for not doing so. What the second defendant did was to publish an extract of the letter of the plaintiffs’ attorney and in small print an apology for not contacting the plaintiffs. Such apology could not have had any mitigating effect.

[28] In all the circumstances, an amount of R40 000.00 in respect of each of the claims will, in my view, be a fair compensation for the defamation. In the result, I make the following order:

(a) In respect of claim 1, the first defendant is ordered to pay the sum of R40 000.00 to the first plaintiff.

(b) In respect of claim 2, the second defendant is ordered to pay the sum of R40 000.00 to the first plaintiff.

(c) In respect of claim 3, the second defendant is ordered to pay the sum of R40 000.00 to the second plaintiff.

(d) The first and second defendants are ordered to each pay half of the first plaintiff’s costs of the action.

(e) The second defendant is ordered to pay the second plaintiff’s costs of the action.

Counsel for plaintiffs: Adv. PSAJ Jacobsz

Instructed by: Steyn & Clarke Attorneys c/o Ross & Jacobsz Inc

Counsel for defendants: Adv. HJ de Waal

Instructed by: Minde Schapiro & Smith c/o Edelstein Bosman Inc

[1] National Media Ltd and Others v Bogoshi 1998 (4) SA 1198 (SCA) 1202G-H

[2] S.A. Associated Newspapers Ltd v Schoeman 1962 (2) SA 613 (A) 616E-H; South African Associated Newspapers Ltd and Another v Yutar 1969 (2) SA 442 (A) 451A-B

[3] 2011 (6) SA 370 (SCA) para [13]

[4] See The Citizen 1978 (Pty) Ltd v McBride (Johnstone and Others, Amici Curiae) 2011 (4) SA 191 (CC) para [80]