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[2016] ZASCA 71
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Hibiscus Coast Municipality v Hume Housing (638/15) [2016] ZASCA 71 (23 May 2016)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case
No: 638/15
Not
Reportable
In
the matter between:
HIBISCUS
COAST MUNICIPALITY
APPELLANT
and
HUME
HOUSING
RESPONDENT
Neutral
citation:
Hibiscus
Coast Municipality v Hume Housing
(638/15)
[2016] ZASCA 71
(23 May 2016)
Coram
:
Majiedt, Seriti and Zondi
JJA and Victor and Kathree-Setiloane AJJA
Heard:
6 May 2016
Delivered:
23 May 2016
Summary:
Res judicata –
appeal against decision of full court dismissed – full court
correct in upholding appeal against decision
of court of first
instance which had wrongly found matter to be res judicata.
ORDER
On
appeal from:
KwaZulu-Natal
Division, Pietermaritzburg (Kruger, Madondo and Chili JJ, sitting as
court of appeal):
1
The appeal is dismissed
with costs.
JUDGMENT
Majiedt
JA ( Seriti and Zondi JJA and Victor and Kathree-Setiloane AJJA
concurring):
[1]
The appellant, the Hibiscus Coast Municipality (the municipality),
succeeded in the KwaZulu-Natal Local Division, Durban, before
Steyn J
with a plea of res judicata. The respondent, Hume Housing (Hume),
however, successfully appealed against that finding to
the full court
of that division in Pietermaritzburg (per Chili J, Kruger and Madondo
JJ concurring). This appeal is with the special
leave of this court.
[2]
The central issue is whether the action in the court of first
instance before Steyn J is the same cause of action relied upon
by
Hume in an earlier application to have an agreement between the
parties to be bound by a valuation undertaken by an agreed expert,
made an order of court. That application had been heard by Koen J.
[3]
The material facts are as follows. The parties had been engaged in
protracted litigation concerning compensation payable in
respect of
properties acquired by the municipality from Hume (which is a
property developer). A number of illegal invaders had
unlawfully
occupied Hume’s properties in the Gamalakhe township, situated
within the municipality’s jurisdiction. Hume
launched an
eviction application in the KwaZulu-Natal Local Division and joined
the municipality on the basis that it had aided
or, at least,
permitted the illegal invaders to occupy Hume’s land. Hume
sought an order, in the alternative and in the event
that it was not
able to get the invaders ejected, that the municipality be directed
to acquire the properties, alternatively to
pay constitutional
damages to Hume. The parties settled the matter and Vahed AJ recorded
that settlement, inter alia, as follows
in a court order:
‘
That
the 1
st
Respondent [the municipality] will acquire the properties referred to
in the application, which are owned by the Applicant [Hume],
once
compensation determined as set out below has been paid. The 1
st
Respondent shall be entitled to effect transfer into its own name or
into the name of its nominee(s).
That
the compensation will be determined in accordance with section 12(1),
12(2) and 12(3) of the Expropriation Act 63 of 1975.
That
the applicant will deliver a summons and particulars of claim within
10 days. The 1
st
respondent will deliver a plea and counterclaim, if any within 10
days thereafter, and the applicant a plea in reconvention and
replication, if any, within a further 10 days.’
[4]
Thereafter Hume, as required in terms of the order of Vahed AJ,
instituted action to have the amount of compensation determined.
The
parties reached an agreement on the appointment of the property
valuers, Mills Fitchet (Natal) (Pty) Ltd (Mills Fitchet) to
act as
the expert valuer. They agreed further that the Mills Fitchet
valuation would be binding upon the parties and that either
party
could apply to have it made an order of court. The agreement was
reached in an exchange of letters between the parties’
respective attorneys, Mr Donovan Avenant for Hume, and Mr Mfuniselwa
Elijah Nkosi for the municipality. Mills Fitchet duly prepared
a
valuation report in respect of the properties, which concluded that
the total value of compensation payable is the amount of
R6 045 000
together with VAT and interest thereon. That amount comprised a
valuation of R2 200 000 for the
land, R3 790 000
in respect of improvements on the properties and R55 000 for
solatium.
[5]
The municipality’s failure to pay the compensation resulted in
Hume approaching the court again by way of application
for an order
in the following terms (amongst others):
‘
1.
That the valuation report compiled by Mills Fitchet . . . be made an
order of court.
2.
That judgment be granted in favour of [Hume] in the sum of R6 045 000
(six million and forty five thousand rand).’
[6]
The municipality opposed the application on the basis that the
valuation was not in accordance with the court order. Koen J
dismissed the application with costs. The learned judge held that,
absent any consensus between the parties concerning what would
be
valued to determine the compensation payable, the valuation by Mills
Fitchet cannot stand as an agreed final and binding valuation.
Ultimately, Koen J held that Hume had not succeeded in discharging
the onus of proving that the parties had agreed to be bound
by the
Mills Fitchet valuation, whatever its final conclusions.
[7]
The appellant thereafter pursued action proceedings for payment of
the said sum. Steyn J upheld with costs the municipality’s
special plea of res judicata. The learned judge held that Koen J had
not only applied his mind to the calculation of the compensation
which was payable but had also, in the course of his underlying
reasoning, pertinently dealt with s 12(5) of the Expropriation
Act 63
of 1975 (the Act), and had found that the properties had been used
for unlawful purposes and that the improvements on the
properties
consequently had to be disregarded in the valuation. The latter part
of that finding, held Steyn J, was not obiter dictum,
but part and
parcel of the
ratio
decidendi
. The
learned judge thus upheld the special plea of res judicata.
[8]
On appeal, the full court reversed this finding and held that Koen J
had only been seized with the issue of whether there had
been
consensus between the parties regarding the appointment of Mills
Fitchet. The full court also held that ‘upholding the
plea
rei
judicata
in the
present action would be tantamount to denying [Hume] the opportunity
to prove compensation [in the] amount as claimed’.
For the
reasons that follow I agree with the full court’s findings.
[9]
Central to a proper determination of the appeal, is to discern
precisely what the essential issue before Koen J was, and what
his
finding on that issue is. It bears repetition that what Hume had in
essence sought before Koen J was the judicial enforcement
of the
Mills Fitchet valuation, and a concomitant judgment for payment of
the amount reflected as being due and payable in terms
of that
valuation. And Hume’s case was premised on that basis in its
papers as I will presently demonstrate. Hume did not,
and had no
reason to, engage in an interpretation of what the order of Vahed AJ
meant insofar as the compensation payable was concerned.
The
municipality’s contention that Koen J had decided not only the
question of whether there had been consensus between the
parties
concerning the Mills Fitchet valuation, but also what was meant by
Vahed AJ in his order, is without merit. It is necessary
to refer
fairly extensively to the papers in this regard. It bears
emphasis that what Koen J had before him was an interlocutory
application. When that application was launched, summons had already
been issued by Hume for payment of the compensation.
[10]
Hume’s short founding affidavit was deposed to by Mr Avenant of
the firm of attorneys representing Hume. Mr Avenant set
out very
briefly the history of the dispute, the parties’ exchange of
correspondence which culminated in an agreement to
appoint Mills
Fitchet as valuer, to accept its valuation as binding and to have it
made an order of court. Lastly, Mr Avenant alluded
to the conclusions
in the completed valuation report and to the municipality’s
failure to pay.
[11]
In answer the municipality’s attorney, Mr Nkosi, admitted the
agreement on Mills Fitchet’s appointment, but disputed
that
compensation was payable for improvements on the properties. This
denial must be understood in its proper context, as it is
the primary
bone of contention. The denial did not create a second justiciable
issue (ie over and above the issue of whether the
parties were fully
ad idem in relation to the appointment and the terms of the mandate
of Mills Fitchet) before Koen J. It was
made to amplify and motivate
the municipality’s contention that the parties had lacked
consensus on precisely what Mills
Fitchet had to value. Thus Mr Nkosi
stated as follows in the answering affidavit:
’
14.
.
. . For the reasons given above, I always understood that the only
compensation which the applicant [Hume] claimed, the only
compensation to which it was entitled to, and what the applicant
meant in annexure “A2” [ its letter to the municipality
proposing the appointment of Mills Fitchet] was compensation for
vacant, unimproved land.
15.
The applicant and its attorneys must reasonably have been aware of my
understanding, and could not reasonably have believed
that I agreed,
on behalf of the respondent [the municipality], to compensation being
paid for structures or improvements which
were not made by the
applicant, and in respect of which compensation had not previously
been claimed.
16.
Accordingly, what the respondent agreed to in annexure “A3”
[the municipality’s response to Hume’s letter,
annexure
A2] was that Mills Fitchet value unimproved land, excluding top
structures or improvements (which were not effected by
the
applicant), and determine compensation according to the value of the
unimproved land.
’
[12]
In the replying affidavit, Mr Avenant contested this alleged
misunderstanding advanced by Mr Nkosi. Mr Avenant alluded to the
‘trite legal principle’ that an immovable property
includes structures of a permanent nature which ex lege accede to
that land (
superficies solo cedit
). In contending that there
could not have been any misunderstanding on exactly what Mills
Fitchet’s mandate was, Mr Avenant
said, inter alia, the
following:
‘
4.6.
The order also provides for the land to be valued in accordance with
particular sections of the Expropriation Act, ie sections
12(1),
12(2) and 12(3) . . .
4.7.
This did not convert this case into an expropriation matter, for the
land was never expropriated. It was simply a mechanism
to define on
what basis the properties must be valued.
’
And
later on he continued:
‘
5.1.
The question must be decided with reference to an interpretation of
the court order, and not with reference to extraneous factors
now
introduced by the
respondent . . .
20.
. . . Accordingly, particularly in the light of the fact that
the answering affidavit does not in fact disclose any legal
defence,
and that a simple interpretation of the court order is all that is
required . . . the court will . . . be requested.
. . to make
an order in terms of the notice of motion . . . .
’
[13]
In making reference to how the court order of Vahed AJ was to be
interpreted, Hume was simply seeking to counter the municipality’s
allegation of a mistaken belief on its part. In effect, what it was
attempting to do was to negate an iustus error defence on the
part of
the municipality. It is necessary, in this regard, to reiterate some
of the well-known basic principles of the law of contract.
One of the
material elements of consensus in the formation of a valid and
binding agreement is that the parties to the agreement
must agree on
the legal obligations they wish to create.
[1]
An excusable mistake (iustus error) negates consent – a typical
example is where one party labours under a mistaken belief
regarding
the contents of its performance under a contract.
[2]
Therefore, when Mr Nkosi had embarked on an extensive discussion
regarding his understanding of the meaning of the Vahed AJ order
on
what compensation would be payable, he was laying a basis for the
municipality’s contention that the error was objectively
reasonable, or excusable. Mr Avenant, in turn, had sought to counter
this in the replying affidavit by attempting to demonstrate
that
there was no objectively reasonable basis for a mistaken belief in
view of the contents of the court order. The argument therefore
that
Hume had, in reply, expanded its cause of action to include an
interpretation of the Vahed AJ order, is devoid of merit.
[14]
It is plain from the judgment of Koen J that the learned judge
understood fully that the sole issue before him was whether
there had
in fact been a meeting of the parties’ minds on the exact terms
of Mills Fitchet’s mandate. In the end he
found for the
municipality on this issue. There are numerous passages in his
judgment which demonstrate that Koen J was aware of
this sole issue,
and that that is the only issue which he had determined. First, the
learned judge commenced by referring to the
trite principle that
‘[t]he [a]pplicant [Hume] bears the onus of proving the
agreement it contends for’. Implicit in
that statement is that
Hume had to prove all the requisite elements, including consensus. He
then postulated that it appeared that
the attorneys had sought to
reach agreement so as ‘to avoid a court case to determine the
compensation which was to be paid
in terms of the order as they each
interpreted it’. In doing so, said the learned judge, the
attorneys had not been aware
that they were harbouring different
interpretations of the court order, not conveyed to each other.
Furthermore the learned judge
stated that: ’[i]t is in regard
to what was to be valued, ie raw land with enhancements or raw land
without any enhancements,
or, differently stated perhaps, “land
not illegally occupied and enhanced,” or land with enhancements
thereon, that
the attorneys (and hence the parties) were not
ad
idem.
’ He
continued : ‘. . . it cannot be said that the attorneys were
ad
idem
as to what was
meant by “properties” in the order to be valued . . .
[a]ccordingly the very appointment of Mills Fitchet
is tainted’.
All these statements point unequivocally to the fact that Koen J was
aware that the only issue he had to decide
upon was whether there was
consensus between the parties.
[15]
My finding in this regard is buttressed by the following. As stated,
in disputing the municipality’s alleged misunderstanding,
Hume
pertinently made the point that the alleged lack of consensus had to
be decided with reference to an interpretation of the
court order and
not by taking into account extraneous factors (such as the fact that
the land had been illegally occupied and that
the invaders, and not
Hume, had erected the top structures on the land) as the municipality
was seeking to do. As Koen J
stated, he could not, absent any
additional evidence, have attempted to interpret the court order.
Thus, not surprisingly, Koen
J said this:
‘
In
my prima facie view, the discussions between the parties which was
made an order of court by Vahed AJ was, with respect, ambiguous
in
the context of the allegations in the papers in that application,
probably
justifying a resort to extrinsic evidence
’
(own emphasis).
Consequently
and understandably so, Koen J did not seek to interpret the court
order.
[16]
In argument before us, the municipality emphasised the following
passage in the judgment of Koen J:
‘
Even
if I was incorrect in my above reasoning, I nevertheless believe that
the application cannot succeed also on the following
basis. The
amount of the compensation was to be determined in accordance with s
12(1), (2) and (3) of the Act. It seems clear to
me that such
compensation could not be calculated other than by taking into
account also the prescripts referred to in inter alia
the remainder
of the provisions in s 12, notably s 12(5). Section 12(5) expressly
refers to factors which need to be taken into
account “in
calculating the compensation payable in terms of the Act”.
Although the properties were not actually being
expropriated, by
fixing of a “date of expropriation” in paragraph 8 of the
order, and by prescribing that the compensation
was to be determined
in accordance with
inter
alia
s 12(1), (2) and (3) of the Act, provisions such as s 12(5) which
would normally apply to a determination of the amount of
compensation, particularly subsection (c) thereof, were clearly
intended to apply.
’
It
was submitted, on behalf of the municipality, that this formed part
of the court’s ratio decidendi and that Koen J had
added this
as a second reason for dismissing Hume’s interlocutory
application. If that submission is sound, it is correct
that this
ratio decidendi would, absent any appeal, be binding upon Hume and
would, as Steyn J found, mean that the matter was
indeed res
judicata. Where a court furnishes more than one basis for its
determination of an issue, each such basis being dispositive,
the
second and further bases remain ratio decidendi and do not become
obiter dictum merely because the first basis is dispositive
of the
case.
[3]
But, as I see it,
the passage cited above does not signify a second separate and
selfstanding basis for the learned judge’s
decision. It is
merely part of his reasoning for his finding that there was no
consensus between the parties concerning what precisely
was to be
valued by Mills Fitchet. Koen J was discussing how compensation would
have had to be determined, not in the context of
an interpretation of
the court order, but as further motivation for his finding that there
had in fact been no consensus. At best
for the municipality, if the
statements cited were in fact meant to express a view on what the
court order means (which, as I have
shown, is not the case), then
they are merely obiter dictum and not binding.
[4]
The municipality’s reliance on the passage is therefore
misplaced.
[17]
There is one final aspect which requires consideration. It was
submitted on behalf of Hume that this is really a matter of
issue
estoppel and not res judicata. After some debate, counsel correctly
conceded that it does not really matter in this case
what appellation
one accords to the legal principle we are dealing with. While that is
an issue which may arise in further proceedings
(and then more so for
the municipality than for Hume), given the outcome in this case, it
has no bearing on the result. It would
suffice to point out that it
is well established in this court’s dicta that issue estoppel
is not a separately recognised
defence in our law; the defence
remains one of res judicata,
[5]
of which issue estoppel is one species.
[6]
However, issue estoppel may have an effect on the question of
prejudice that Hume may suffer
[7]
.
I, therefore, agree with the full court’s observation that
upholding the special plea of res judicata may lead to unfair
consequences for Hume. I choose to say nothing further on this
aspect, since the matter has to be remitted for trial.
[18]
To conclude: The full court was correct in upholding the appeal
against the judgment of Steyn J, who had held that the matter
was res
judicata as Koen J had already decided the issue of how the order of
Vahed AJ, concerning compensation payable, was to
be interpreted. The
appeal therefore lacks merit.
[19]
I issue the following order:
The
appeal is dismissed with costs.
________________________
S A
MAJIEDT
JUDGE
OF APPEAL
APPEARANCES
For
Appellant:
G D Goddard SC
Instructed
by:
Shepstone & Wylie Attorneys, Umhlanga Rocks
Matsepes
Inc, , Bloemfontein
For
Respondent:
A Stokes SC
Instructed
by:
Eversheds, Durban
Phatshoane
Henny, Bloemfontein
[1]
Africa
Solar (Pty) Ltd v Divwatt (Pty) Ltd
[2002]
ZASCA 25
;
2002 (4) SA 681
(SCA) at 699B.
[2]
National
and Overseas Distributors Corporation (Pty) Ltd v Potato Board
1958
(2) SA 473
(A) at 479G-H.
[3]
T
urnbull-Jackson
v
Hibiscus Coast Municipality
[2014] ZACC 24
;
2014 (6) SA 592
(CC) para 62.
[4]
Ibid para
61.
[5]
A full
description of this defence is
exceptio
rei judicatae vel litis finitae
.
[6]
See:
Kommissaris
van Binnelandse Inkomste v Absa Bank Bpk
[1994] ZASCA 144
;
1995 (1) SA 653
(A) at 676C-D;
Smith
v Porritt
& others
[2007] ZASCA 19
,
2008 (6) SA 303
(SCA) para 10;
Yellow
Star Properties 1020 (Pty) Ltd v MEC, Department of Development
Planning and Local Government, Gauteng
[2009] ZASCA 25
;
2009 (3) SA 577
(SCA) para 22.
Prinsloo
NO and others v Goldex 15 (Pty) Ltd and another
[2012]
ZASCA 28
,
2014 (5) SA 297
(SCA) para 10.
[7]
Prinsloo
NO and other v Goldex 15 (Pty) Ltd and another
,
supra, para 26.