Yellow Star Properties 1020 (Pty) Limited v MEC: Department of Development Planning and Local Government (Gauteng)

Yellow Star Properties (the applicant) purchased property at public auction in June 2000 for R452,900 from what was represented to be the Gauteng Provincial Government. The applicant paid the deposit and provided a bank guarantee. However, transfer could not be effected because the property actually vested in the National Government, not the Provincial Government. An Item 28(1) certificate under Schedule 6 of the Constitution was required to transfer the property between spheres of government. The property had been significantly undervalued (worth several million rand, not R300,000 as valued). The Minister of Public Works, who had administration of the property, refused to allow transfer at the significantly undervalued price. The applicant brought proceedings in case 15278/01 seeking to compel transfer, which resulted in an order by Van Der Walt J authorizing transfer upon receipt of the certificate. When transfer still did not occur, the applicant brought further proceedings in case 4578/2002. In those proceedings, Smit J found that only the State President (who had assigned the power to the Minister of Public Works under the State Land Disposal Act 38 of 1961) had authority to sell national land, and that the sale was therefore ultra vires and void ab initio. The applicant did not appeal that decision. Instead, in August 2004, the applicant's attorney sent a letter cancelling the agreement and demanding damages of over R6.8 million. When payment was refused, the applicant instituted action for damages based on breach of contract, alternatively on delict (negligence/bad faith in selling property the respondent was not authorized to sell).

• Whether the applicant was precluded by res judicata or issue estoppel from claiming damages for breach of a contract previously found to be void ab initio
• Whether the earlier judgment of Van Der Walt J had determined the validity of the sale such that it was res judicata in the proceedings before Smit J
• Whether the delictual claim for damages had prescribed under section 11 of the Prescription Act 68 of 1969
• Whether prescription was interrupted by the institution of earlier proceedings in cases 15278/2001 and 4578/2002
• When prescription began to run under section 12(3) of the Prescription Act

The application for leave to appeal was dismissed with costs, including the costs of two counsel. The court declined to order repayment of the deposit as that issue was not properly raised in the stated case or notice of appeal.

1. For issue estoppel to succeed, both the requirement of idem actor (same parties) and eadem quaestio (same issue) must be fulfilled. Different ministers exercising distinct constitutional powers assigned under section 91(2) of the Constitution are not the same party and cannot bind each other in litigation. 2. The issue that is res judicata must be one that was actually raised and determined by the court in the earlier proceedings, not one that was merely assumed. 3. A party cannot claim damages for breach of a contract that has been finally determined by a court to be void ab initio and ultra vires where that finding has not been appealed. 4. For purposes of prescription under section 12(3) of the Prescription Act, a creditor is deemed to have knowledge of facts if they could have acquired such knowledge by exercising reasonable care. Failure to appreciate the legal consequences of known facts does not delay the commencement of prescription. 5. Prescription is only interrupted under section 15(1) of the Prescription Act by service of process whereby the creditor claims payment of the debt. Proceedings seeking different relief (such as specific performance) do not interrupt prescription in respect of a claim for damages.

Leach AJA expressed grave reservations (without finally deciding the point) about whether it is permissible to rely on res judicata or issue estoppel to enforce a contract that is legally invalid, citing City of Tshwane Metropolitan Municipality v RPM Bricks (Pty) Ltd 2008 (3) SA 1 (SCA). The court also noted that the phrase 'issue estoppel' is merely a phrase of convenience adopted from English law, but the principles of English law on this topic have not been subsumed into South African law - the defence remains one of res judicata under South African law.

This case is significant for clarifying the requirements for res judicata and issue estoppel in South African law, particularly: (1) that different ministers with distinct constitutional powers and functions cannot be treated as interchangeable parties representing 'the state' for purposes of res judicata; (2) that for issue estoppel to apply, the specific issue must have been raised and determined in the earlier proceedings, not merely assumed; (3) that an unchallenged judgment finding a contract void ab initio precludes subsequent claims for damages for breach of that contract; and (4) regarding prescription, that a creditor is deemed to know facts that could have been acquired by exercising reasonable care, and failure to appreciate legal consequences does not delay prescription. The case also illustrates the constitutional principle that ministerial powers must be clearly sourced in law and that ministers can only exercise powers individually assigned to them.