Smalle v Southern Palace Investments 440 (Pty) Limited

The first appellant, Jacques Smalle, was the provincial leader of the Democratic Alliance (DA) in Limpopo who issued a press release on 24 May 2013 regarding alleged water corruption. The second appellant, Heidi Lee Smith, published this press release in her local newspaper, Kruger2Canyon Newspaper (K2C), on 31 May 2013 under the heading "Estate developer allegedly involved in water corruption". The press release and article discussed a bulk water supply agreement between Southern Palace Investments 440 (Pty) Ltd (SPI) (first respondent) and the Lepelle Northern Water Board (LNW). The second respondent, Soren Burkal Nielsen, was a director of SPI and developer of the Blyde Wildlife Estate. The agreement appeared irregular as it arose through negotiations rather than a tender process, involved water to be drawn from Blyde River dam in Mpumalanga for use in Limpopo, and LNW typically supplies municipalities, not individual entities. Nielsen engaged in various schemes to profit from the water allocation, including selling the farm Liverpool for R21 million to the government (a R10 million profit), and attempting to sell water rights to farmers. The respondents sued for defamation based on innuendos, claiming the statements were defamatory. The High Court found in favour of the respondents, awarding R40,000 for each of three claims.

• Whether statements contained in a media release and newspaper article were defamatory of the respondents
• Whether the respondents properly pleaded innuendo by establishing special circumstances
• Whether the statements were defamatory per se or required proof of secondary meaning
• Whether the use of words like 'allegedly' negates defamatory meaning
• Whether allegation of investigation for criminal conduct is defamatory

1. The appeal is upheld with costs, including the costs of two counsel. 2. The order of the court a quo is set aside and substituted with the following: "The plaintiffs' claims are dismissed with costs".

The binding legal principles established are: (1) When a plaintiff relies on innuendo (secondary defamatory meaning), the special circumstances from which the meaning was derived must be specifically pleaded, and the plaintiff must prove that there were persons among those to whom the publication was made who were aware of those special circumstances; (2) A plaintiff cannot rely on defamatory meanings that were not pleaded; (3) Statements framed as allegations (using words such as "allegedly", "it appears", "ostensibly") are distinguishable from assertions of fact and will not ordinarily be found defamatory per se as they leave open the possibility of rebuttal; (4) Statements that a person is being investigated for criminal conduct or is under suspicion do not amount to assertions of guilt and are not defamatory per se; (5) The test for whether a statement is defamatory is objective - whether on an ordinary reading by a reasonable person of ordinary intelligence it has the effect of injuring a person's reputation; (6) A plaintiff who pleads quasi-innuendo is bound by the meanings pleaded and cannot later contend for other defamatory meanings.

The court made obiter observations that: (1) Had it been necessary to consider the defences of truth and fair comment, the respondents may have faced insurmountable obstacles given the wide interpretation by the Constitutional Court of what constitutes fair comment in relation to false information (referencing Democratic Alliance v African National Congress); (2) The court noted in detail the various irregular and dubious schemes engaged in by Nielsen regarding the water allocation, including the lease-back arrangement, the share-selling scheme, and the offers by SMS to farmers, though these observations were not strictly necessary for the determination of the appeal; (3) The court observed that Malan's evidence as to how people might have understood the article was of questionable admissibility, though nothing turned on this for the purposes of the judgment; (4) The court's detailed recitation of the background facts regarding the anomalies in the water supply agreement and Nielsen's various schemes, while providing context, went beyond what was strictly necessary for determining whether the statements were defamatory.

This case is significant in South African defamation law for clarifying the requirements for pleading innuendo in defamation claims. It establishes that: (1) When relying on innuendo (secondary meaning), plaintiffs must specifically plead the special circumstances that give rise to the defamatory meaning and cannot later rely on meanings not pleaded; (2) The use of words such as "allegedly" and similar qualifying language is significant in determining whether statements are assertions of fact or mere allegations; (3) Statements about investigations or suspicions of wrongdoing do not constitute defamatory assertions of guilt; (4) The case reinforces the objective test for defamation - whether a reasonable reader of ordinary intelligence would understand the statement as defamatory; (5) It demonstrates the court's approach to balancing freedom of expression with protection of reputation, particularly in matters of public interest such as allegations of corruption involving public resources. The judgment provides important guidance on the technical requirements of pleading defamation claims and the substantive law on what constitutes defamatory statements.