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[2020] ZAWCHC 3
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Department of Agriculture, Forestry and Fisheries and Another v B Xulu and Partners Incorporated and Others (6189/2019) [2020] ZAWCHC 3 (30 January 2020)
THE
HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION)
JUDGMENT
Case
No: 6189/2019
In
the matter between
THE
DEPARTMENT OF AGRICULTURE, FORESTRY AND FISHERIES
FIRST
APPLICANT
THE
DEPARTMENT OF ENVIRONMENTAL AFFAIRS, FORESTRY AND FISHERIES
SECOND
APPLICANT
and
B
XULU & PARTNERS INCORPORATED
FIRST
RESPONDENT
THE
SHERIFF OF THE HIGH COURT FOR PRETORIA CENTRAL, MR T F SEBOKA NO
SECOND
RESPONDENT
STANDARD
BANK OF SOUTH AFRICA
THIRD
RESPONDENT
FIRST
NATIONAL BANK OF SOUTH AFRICA
FOURTH
RESPONDENT
Coram:
Rogers J
Heard
:
12 & 13 December 2019
Delivered:
30 January 2020
JUDGMENT
Rogers
J
[1]
The first respondent, B
Xulu & Partners Inc (‘BXI’), is an incorporated firm
of attorneys, the principal member
of which is Mr Barnabas Xulu. On 6
June 2019 this court (per Steyn J) made a purported settlement
agreement concluded between BXI
and the first applicant, the
Department of Agriculture, Forestry and Fisheries (‘DAFF’),
an order of court. The purported
settlement agreement was concluded
on 12 April 2019. I shall refer to this document as the settlement
agreement though its validity
is contested.
[2]
When the DAFF failed to
make payment in accordance with settlement agreement, BXI levied
execution. This caused the DAFF on 5 August
2019 to launch an urgent
application in part A whereof it sought to have the writs and
attachments of monies suspended pending
determination of the relief
claimed in part B. As subsequently amended, the relief claimed in
part B, insofar as relevant to this
judgment, comprises orders
reviewing and setting aside a service level agreement purportedly
concluded between the DAFF and BXI
on 23 May 2017 (‘the SLA’);
reviewing and setting aside the settlement agreement; rescinding the
order of 6 June 2019;
and setting aside the writs of execution and
notices of attachment.
[3]
The second respondent is
the Sheriff of the High Court for Pretoria Central, being the sheriff
who effected the impugned attachments
(‘the sheriff’).
The third and fourth respondents are Standard Bank of South Africa
(‘Standard Bank’) and
First National Bank of South Africa
(‘FNB’) respectively. The sheriff and the banks have not
opposed the application
or participated in the proceedings.
[4]
At all material times the
DAFF’s Director-General has been Mr
Mzamo
Mlengana. He and some of his
officials had a fraught relationship with the former minister of the
department, Mr Senzeni Zokwana.
The Deputy Director-General:
Fisheries Management, Ms Siphokazi Ndudane, had Minister Zokwana’s
support. This resulted in
conflict between Mr Mlengana and Ms
Ndudane.
[5]
Following the change in
presidency in late May 2019, there was a reorganisation of portfolios
which gave rise to the establishment
of the second applicant, the
Department of Environmental Affairs, Forestry and Fisheries (‘the
DEA’). Mr Zokwana was
replaced by Ms Barbara Creecy, the
minister with responsibility for the DEA. Most of the DAFF’s
functions have been transferred
to the DEA but the DAFF continues to
exist until the transfer is complete. The DEA was joined without
objection. For convenience
I shall refer simply to the DAFF or the
applicant, a term which covers one or both applicants according to
the context.
[6]
The Marine Living
Resources Act 18 of 1998 (‘the Marine Act’) provides in
s 10 for the continued existence of a
fund called the Marine
Living Resources Fund (‘MLRF’). Section 11 states that
the MLRF shall provide for the administration
of the provisions of
the Marine Act. In terms of s 10 the MLRF is administered by the
Director-General (‘DG’) in consultation
with the Minister
in accordance with estimates of revenue and expenditure approved by
the Minister with the concurrence of the
Minister of Finance in
respect of each financial year. The DG is the MLRF’s accounting
officer. In terms of s 36(2)(
a
)
of the Public Finance Management Act 1 of 1999 (‘the Finance
Act’) the DG is also the accounting officer of the DAFF.
The
appointment of BXI
[7]
On 25 October 2016 a
memorandum of understanding (‘MoU’) was concluded between
the DAFF and
Emang
Basadi
Legal and
Forensic Services (Pty) Ltd (‘EBL’) in terms of which EBL
was engaged to provide legal advisory services.
According to the
applicant, this was part of a move by the Zokwana faction to get rid
of the State Attorney in Cape Town so as
to enable private law firms
to extract excessive fees from the department.
[8]
On 6 January 2017 EBL
wrote to BXI stating that EBL had been instructed by the DAFF to
appoint BXI as attorneys to assist in pending
litigation in which
Viking Inshore Fishing (Pty) Ltd was suing the DAFF. According to
BXI, the DAFF recommended that BXI apply
to be added to the MLRF’s
supplier database so that EBL could be dispensed with as an
intermediary.
[9]
The DAFF’s Chief
Director: Legal Services, Ms
Kanthi
Nagiah, who had no complaint with
the quality of service rendered by the State Attorney, did not
approve the latter’s sidelining.
Although Mr Mlengana (who was
appointed DG from outside the department with effect from 1 July
2016) had signed the MoU, he wrote
to EBL on 2 February 2017 to say
that proper supply chain management (‘SCM’) processes had
not been followed in EBL’s
appointment, rendering the contract
invalid. He wrote this letter after conferring with (among others) Ms
Nagiah.
[10]
BXI says that it continued
working on the Viking case because it was unaware of the termination
of EBL’s services. Mr Mlengana
complains that despite the
termination, Ms Ndudane continued to use EBL’s services and to
approve payments to it.
[11]
In the meanwhile Minister
Zokwana was promoting BXI’s engagement to assist in the DAFF’s
litigation against Arnold Bengis
and others. (Some of the history of
that matter appears from the reported judgment in
Bengis
& others v Government of South Africa & others
[2016]
ZAWCHC 14
;
[2016] 2 All SA 459
(WCC).) On 3 April 2017 Minister
Zokwana wrote to the Deputy Minister in the Department of
International Relations and Cooperation
(‘DIRCO’) to say
that the DAFF had mandated BXI, working with an Advocate N Memani, to
initiate and facilitate the
restitution of money due to the South
African government in the Bengis case. He asked DIRCO to assist BXI
in meeting with various
foreign authorities. Minister Zokwana
provided DIRCO with BXI’s contact details. According to BXI, Ms
Memani was a legal
adviser to Minister Zokwana.
[12]
On 14 April 2017 BXI was
registered on the MLRF supplier database. Although the registration
may have been irregular for lack of
a current tax clearance
certificate, no relief in respect of such registration is claimed in
the present proceedings.
[13]
Slightly more than a month
later the SLA was purportedly concluded. The preamble recorded that
the DAFF had already appointed BXI
in the Bengis case, an appointment
said to stem from a mandate Minister Zokwana had given to BXI, and
that the SLA was being concluded
to regulate the relationship between
the parties and to ensure the achievement and maintenance of high
quality performance and
standards.
[14]
The SLA defined ‘Delegated
Authority’ as meaning the Deputy Director-General of the
department, ie Ms Ndudane. The significance
of this lies in the fact
that clause 2.2 recorded that BXI had accepted appointment on the
understanding that, for purposes of
the SLA, DAFF would be
represented by the Delegated Authority, who would be the ‘first
point of interface’ in all matters
pertaining to the services.
Clauses 4.3 and 4.4 stipulated that BXI would only accept
instructions from the Delegated Authority
and was prohibited from
accepting instructions from any other DAFF officials or employees. In
terms of clause 14 disputes were
to be referred to the Delegated
Authority for resolution. So the draftsman was careful to bypass the
DG, Mr Mlengana.
[15]
Clause 10.1 stated that
because of the wide geographical spread of the ‘project’
(defined in the preamble as meaning
the Bengis project), all service
providers were required to bill the DAFF in US dollars, ‘as
this is the currency in which
restitution is being claimed.
Remarkably, this applied to BXI itself. Annexure B to the SLA set out
hourly rates in US dollars
for counsel and for attorneys of different
seniority within BXI. Payment was to be made within 30 days of
receipt of invoices.
The
attacks on the SLA
SLA
not signed on behalf of DAFF
[16]
The first ground of attack
on the SLA is that it was not duly signed on behalf of the DAFF. It
purports to have been so signed by
Mr Mlengana in Cape Town. Although
he does not dispute that the signature is his, he denies that he
knowingly signed it. According
to his diary, he was in Cape Town on
23 May 2017 and met with Minister Zokwana. He surmises that the last
page of the document
(p 19, which contained no contractual
terms) was placed before him as part of a document of a different
character.
[17]
Circumstances which lend
support to Mr Mlengana’s allegation are the following.
(a) A few months
previously, Mr Mlengana had contested the validity of EBL’s
appointment on the basis that SCM processes
had not been observed.
This was equally true of BXI’s appointment.
(b) It was Minister Zokwana
who was promoting BXI’s appointment and had already given it a
mandate.
(c) The relationship
between Mr Mlengana and the minister was frayed (shortly after the
purported execution of the agreement,
the minister placed Mr Mlengana
on suspension).
(d) Mr Mlengana’s signature
purports to have been witnessed by Ms Memani, the advocate who was a
legal adviser to the minister.
Mr Mlengana says that she was not
present when he met with the minister and could not have witnessed
his signature. He alleges
that she has orally confirmed this but
refuses to give an affidavit.
(e) Although Ms Memani’s
initials appear on each page of the agreement, including the
attachments, Mr Mlengana’s do
not.
(f) Mr Mlengana
alleges that he became aware of the SLA in late July 2018, and that
on advice he thereafter reported
his signature on the SLA to the
Hawks as a fraud.
[18]
Because Mr Xulu and his
witness were not present when Mr Mlengana signed, they cannot from
personal knowledge dispute what he says.
If Mr Xulu tried to get an
affidavit from Ms Memani, he was as unsuccessful as the DG. This
leaves the former minister as a potential
witness. On 8 November 2019
BXI filed an affidavit by Mr Zokwana in which the latter deals with
various matters but not with Mr
Mlengana’s allegations
concerning his signature on the SLA.
[19]
A criticism of Mr
Mlengana’s version is that he does not say what he thought the
document was. Unless he signed it hurriedly,
he ought to have noticed
that it purported to be the last page of a contract. Provision was
made on the same page for BXI to sign.
Nevertheless, in the absence
of contrary evidence from the two persons who would have been able to
refute Mr Mlengana’s version
if it were false,
viz
Mr Zokwana and Ms Memani, I cannot reject it.
[20]
Counsel for BXI did not
apply to have Mr Mlengana cross-examined on the basis envisaged in
Moosa Bros & Sons
(Pty) Ltd v Rajah
1975
(4) SA 87
(D) at 92F-H, ie on the basis that although the
circumstances in which Mr Mlengana signed the document were not
within BXI’s
knowledge, there were reasonable grounds to doubt
the correctness of what he claimed. (See also
Khumalo
v Director-General of Cooperation and Development & others
[1990] ZASCA 118
;
1991
(1) SA 158
(A) at 167G-168C.) I may add that the relevant facts are
not peculiarly within Mr Mlengana’s knowledge. Mr Zokwana and
Ms
Memani could provide relevant evidence. I think it may be inferred
that BXI had a better relationship with them than Mr Mlengana
did.
BXI got an affidavit from Mr Zokwana, but he did not deal with the
signing of the SLA. BXI does not say that it asked Ms Memani
to make
an affidavit.
Absence
of fair procurement process
[21]
The second ground of
attack is that BXI was not appointed pursuant to a fair public
procurement process. Authority is scarcely needed
for the obligations
imposed in this regard on public bodies pursuant to s 217 of the
Constitution. On the assumption that
there were rational grounds to
engage private attorneys to handle the Bengis and other cases, such
appointment required a competitive
bidding process. None was
followed. That is common cause.
[22]
Item 16A of the Treasury
Regulations, promulgated in terms of s 76(4)(
c
)
of the Finance Act, requires an accounting officer to develop and
implement a supply chain management system that is,
inter
alia
, fair, equitable,
transparent, competitive, cost effective and consistent with the
Preferential Procurement Policy Framework Act 5 of 2000
.
Various
requirements with which such a system must comply are set out. In
terms of item 16A.6.4, t
he
accounting officer may deviate from the system where it is
'impractical to invite competitive bids', but then the reasons must
be recorded.
[23]
Item 16A.6.4 must be read
in the light of National Treasury Instruction SCM Instruction Note 3
of 2016/17, issued in terms of ss 6(2)
and 18(2) of the Finance
Act, and which took effect on 1 May 2016. Para 8.1 thereof states
that an accounting officer must only
deviate from a competitive
bidding process ‘in cases of emergency and sole supplier
status’. The former is defined
as occurring
‘
when
there is a serious and unexpected situation that poses an immediate
risk to health, life, property or environment which calls
an agency
to action and there is insufficient time to invite competitive bids.’
‘
Sole
source procurement’ may occur
‘
when
there is evidence that only one supplier possesses the unique and
singularly available capacity to meet the requirements of
the
institution.’
Para
8.5 provides that any other deviation
‘
will
be allowed in exceptional cases subject to the prior written approval
from the relevant Treasury’.
[24]
There was no emergency
requiring BXI to be appointed. There is no evidence that BXI
possessed the ‘unique and singularly available
capacity’
to deal with the Bengis matter or any other cases on which it worked
for the DAFF. The applicant challenged BXI
to provide evidence that
it had any track record in dealing with fishery matters. BXI did not
rise to the challenge. There were
no exceptional circumstances to
justify a deviation, and no prior written approval from National
Treasury was sought or obtained.
The unlawful departure from proper
procurement procedures was every bit as blatant as that dealt with in
Department of Transport &
others v Tasima (Pty) Limited
[2016]
ZACC 39
;
2017 (2) SA 622
(CC) (see paras 22-23, 99-102 and 108 in the
minority judgment, and para 164 in majority judgment, concurring in
these respects
with the minority judgment).
[25]
BXI obviously knew that it
was appointed without a competitive process. It is ironic, in the
circumstances, that, in subsequent
work for the DAFF, BXI criticised
officials in the department for having made appointments which did
not follow proper procurement
procedures.
[26]
A refrain in BXI’s
papers is that it lay within Mr Mlengana’s power to regularise
the SLA and the mandates by a deviation
process. Mr Mlengana is
criticised for not having done so. I fail to see, however, on what
basis Mr Mlengana could lawfully have
requested a deviation, which I
take to mean a departure from a competitive bidding process on
grounds other than those falling
within the ‘emergency’
and ‘sole supplier’ exceptions. Such a deviation is only
allowed ‘in exceptional
cases’ and is subject to prior
written treasury approval. There were no exceptional circumstances
here. The ‘exceptional
cases’ basis for deviation is not
intended as an
ex post
facto
broom for
sweeping illegality under the carpet.
[27]
The DAFF’s
conclusion of the SLA was thus unlawful. Because the DAFF itself is
seeking to impugn the SLA, its public law attack
rests on the
principle of legality rather than on the Promotion of Administrative
Justice Act 3 of 2000 (
State
Information Technology Agency SOC Ltd v Gijima Holdings (Pty) Ltd
[2017] ZACC 40
;
2018
(2) SA 23
(CC)).
Mandates
from Minister Zokwana
[28]
A further objection to the
SLA is that it had its source in a mandate given to BXI by Minister
Zokwana. This mandate was meant to
be attached to the SLA as annexure
C (no copy of it appears in the record). Later written mandates given
by Minister Zokwana to
BXI in respect of other matters are dated 5
October 2017, 30 January 2018, 10 August 2018, 3 October 2018 and 3
December 2018.
The applicant’s counsel submitted that all of
these mandates were unlawful, not only because of the absence of fair
procurement
procedures, but also because it was the responsibility of
the department’s DG and accounting officer (Mr Mlengana), and
not
that of the minister as the department’s political head, to
incur departmental expenditure. In terms of ss 38(1)(
a
)(iii)
and 38(1)(
b
)
of the Finance Act, it was the DG’s responsibility to ensure
that the department had and maintained ‘an appropriate
procurement and provisioning system which is fair, equitable,
transparent, competitive and cost-effective’, and it is he
who
was responsible for the ‘effective, efficient, economical and
transparent use of the resources of the department’.
[29]
The applicant’s
counsel submitted, further, that although s 64 of the Finance Act
might have entitled Minister Zokwana to
give Mr Mlengana a written
directive to incur expenditure by appointing BXI, there was no
evidence that he had done so. To this
I would add that what s 64
envisages is that the expenditure in question will, as a matter of
form, be incurred by way of
an act performed by the accounting
officer, even though, in incurring such expenditure, the accounting
officer is giving effect
to a directive from the minister. What
happened here was that Minister Zokwana simply gave written mandates
directly to BXI, bypassing
the DG.
[30]
Although these submissions
have force, the notice of motion does not seek the review and setting
aside of mandates given by Minister
Zokwana to BXI. The current
minister has not been cited as a party. Accordingly, I cannot
determine the validity of the mandates
in the present proceedings.
Delay
and mootness
[31]
BXI alleged in its
opposing papers that the review, insofar as it is directed at the
SLA, was unduly delayed, although no submissions
in support of this
contention were made at the hearing. Since this is a legality review,
the question is whether there has been
an unreasonable delay and, if
so, whether the delay should be overlooked (
Buffalo
City Metropolitan Municipality v Asla Construction (Pty) Ltd
[2019]
ZACC 15
;
2019 (4) SA 331
(CC) paras 48-62, where the principles
governing this enquiry are set out).
[32]
In terms of
Buffalo
City
, the ‘clock
starts ticking’ (for purposes of assessing whether a delay is
unreasonable) when the organ of state becomes
aware or could
reasonably have acquired knowledge of the impugned act. For purposes
of this enquiry, I treat Mr Mlengana, the DG,
as the person whose
knowledge is relevant. On his version, which has not been properly
placed in issue, he became aware of the
existence of the SLA towards
the end of July 2018.
[33]
The review application was
launched just over a year later. Although this is quite a long delay,
its reasonableness must be assessed
in the light of the fact that on
15 August 2018, ie within a couple of weeks of his learning of the
SLA, Mr Mlengana notified BXI
that its services were terminated with
immediate effect. A few days later this was modified after Minister
Zokwana’s intervention,
but only in respect of the Bengis
matter, in relation to which relatively little work remained to be
done. DAFF, as represented
by Mr Mlengana, was placed in a very
awkward position by the fact that BXI had strong support from
Minister Zokwana, who was at
loggerheads with his DG, and who was
insistent that a settlement be reached with BXI. Despite the fact
that his position was undermined
by the minister, Mr Mlengana, and Ms
Nagiah, resisted payment to BXI unless and until they were satisfied
that the department had
received value for money. During the period
of delay, BXI could not have thought that reliance on the SLA would
be uncontested.
The DG was only freed from Minister Zokwana’s
oversight when there was a ‘changing of the guard’ in
late May
2019.
[34]
In the circumstances, I do
not consider that the delay was unreasonable. But if it was, I would
overlook it for the following reasons.
Apart from the considerations
mentioned in the preceding paragraphs, there is the nature of the
impugned action and the merits
of the case, which are relevant
factors in terms of
Buffalo
City
. Here, a service
provider was appointed in flagrant disregard of the constitutional
requirements relating to fair procurement procedures.
That is not in
dispute. The party which benefited from the appointment was well
aware that it had been appointed without proper
process. BXI must
also have been aware that it had no special attributes to justify its
appointment, particularly not in the absence
of a competitive
process. The chronology, from the time the SLA was concluded in April
2017 until the launching of the review application
in early August
2019 (including a nine-month period during which Mr Mlengana was
under suspension at the instance of Minister Zokwana),
has been
exhaustively explained in the papers.
[35]
BXI has alleged that the
review of the SLA is moot because the Bengis matter, which was the
cause for its conclusion, has already
been finalised. The defence of
mootness cannot succeed. BXI alleges that there are substantial
amounts owing to it pursuant to
the SLA, now read with the impugned
settlement agreement.
Events
leading up to the settlement agreement
[36]
On 21 June 2017 Minister
Zokwana placed Mr Mlengana on precautionary suspension pending
investigation into allegations of gross
misconduct. Disciplinary
charges were preferred against him in July. Mr Mlengana’s view
is that they were trumped up because
he intended taking disciplinary
action against Ms Ndudane.
[37]
In November 2017 Mr
Mlengana launched an application to have his suspension set aside on
the basis that a minister does not have
authority to suspend a DG.
This application succeeded, and on 23 April 2018 Mr Mlengana returned
to office. Disciplinary proceedings
were not pressed.
[38]
He says that during his
absence on suspension, Ms Ndudane, assisted by Ms
Nazima
Parker (the Director: SCM and
Acting Chief Director: Financial Management), approved payment of
millions of rands to BXI in legal
fees. Over the period 3 March 2017
to 12 June 2018 these totalled more than R24,5 million.
[39]
On 14 June 2018 Mr
Mlengana placed Ms Ndudane on precautionary suspension. The latter
alleges that Mr Mlengana was taking revenge
for his own suspension.
Mr Mlengana says that shortly after Ms Ndudane’s precautionary
suspension he was confronted by Minister
Zokwana who instructed him
to withdraw the suspension. Mr Mlengana refused. According to Mr
Mlengana, the minister by way of retaliation
withdrew all ministerial
delegations of authority in favour of the DG.
[40]
Ms Ndudane brought legal
proceedings to set aside her suspension. The minister intervened,
effectively supporting Ms Ndudane. The
minister engaged BXI to
represent him. Although Mr Mlengana says that Ms Ndudane’s
application was dismissed with costs,
she returned to work on 22
October 2018. Minister Zokwana then launched an application to
interdict the DAFF from pursuing disciplinary
proceedings against
her, Ms Parker and a third official. BXI again represented the
minister. The minister placed reliance on classified
documentation
and alleged that the charges against the officials were based on
evidence protected under the
Protected Disclosures Act 26 of 2000
.
[41]
BXI subsequently billed
the DAFF around R1 million for representing Minister Zokwana in Ms
Ndudane’s application. The applicant
also alleges that the
costs of the minister’s application to halt the disciplinary
proceedings, although not separately invoiced,
have been ‘buried’
in other invoices raised against the DAFF, despite the fact that the
costs were incurred by the
minister, not the department, in
litigation which the minister brought against the department as
respondent.
[42]
In the meanwhile, the then
National Director of Public Prosecutions (‘NDPP’), Mr
Shaun Abrahams, had asked Minister
Zokwana to compile a report
dealing with alleged acts of undue influence, criminality and
maladministration in the DAFF. The minister
engaged BXI to produce
the report. This document, referred to in the papers as the master
report, was submitted to the NDPP on
7 June 2018. The report
criticised Mr Mlengana. He has disputed the allegations against him,
expressing his belief that the report
was cobbled together at the
minister’s behest in order to discredit him. BXI’s
charges in respect of this mandate are
among the fees for which it
says the DAFF is liable.
[43]
On 27 July 2018, with Ms
Ndudane still on suspension, BXI wrote to the Acting Deputy
Director-General, complaining that it was owed
R6 381 650
in unpaid fees. On 8 August Ms Nagiah responded, requesting copies of
all documents in litigation handled
by BXI, copies of the mandates,
and detailed bills of cost. On 13 August BXI sought clarity as to why
these documents were being
sought, as the DAFF had been the recipient
of the services and was in possession of all the documents.
[44]
According to the
applicant, the answer to BXI’s question is that Ms Nagiah,
despite her position as the DAFF’s chief
in-house lawyer, had
been bypassed in all of BXI’s work, just as the SLA envisaged.
Ms Ndudane was BXI’s sole point
of contact, yet the documents
which Ms Nagiah requested could not be found in Ms Ndudane’s
office.
[45]
Mr Mlengana wrote to BXI
on 15 August 2018, notifying the firm that its appointment to provide
legal services was being terminated
with immediate effect. BXI was
asked to furnish all files and documents in its possession. Failure
to cooperate would leave the
DAFF with no option but to withhold all
monies due for payment to the firm. BXI’s reaction, on 18
August, was to ask for
a list of the files and documents which the
DAFF was requesting. This was followed by another letter from BXI on
21 August to say
that the firm would be consulting Minister Zokwana
about the purported termination since their mandates had come from
his office.
[46]
On 20 August Mr Mlengana
notified BXI as follows regarding the termination letter of 15 August
(emphasis in the original):
‘
You are
hereby informed that such termination does not affect the Bengis
matter which you are still handling for the department.
Therefore,
you may continue to provide legal services in respect of [the] Bengis
matter
only
.’
Mr
Mlengana says that he wrote this letter following intervention by
Minister Zokwana, who insisted that BXI’s mandate in
the Bengis
case should not be terminated as settlement was imminent and the
cheque due to the South African government had not
yet been received.
(The cheque in question, for $7 178 199, was issued in
September 2018 and received by BXI at the end
of January 2019.)
[47]
BXI subsequently notified
the DAFF that Minister Zokwana had confirmed that it should proceed
with its mandates in general, not
only in relation to the Bengis
case, and it thus did not heed the termination letter of 15 August.
BXI continued to demand payment
of fees, threatening legal action.
Its claims include fees running to many millions of rands for
services rendered after 20 August
2018 in respect of matters
additional to the Bengis case. BXI did not supply the documents
requested by Ms Nagiah. BXI subsequently
claimed that Ms Nagiah was
‘highly implicated’ by whistleblowers in leaking
information and that BXI was thus under
instructions from the
minister and law enforcement agencies not to supply her with
documents. (Ms Nagiah has comprehensively refuted
these slurs.)
[48]
On 5 October 2018 Mr
Mlengana wrote to Minister Zokwana regarding the latter’s
request that the DAFF engage private law firms.
He set out what he
saw as the advantages of using the State Attorney, saying that its
performance rivalled that of private firms
‘whose fees are
exorbitant’. Where the State Attorney briefed counsel, they
usually negotiated special rates. The Auditor-General
(‘AG’)
had made negative findings about the DAFF’s use of private law
firms. He said such use could not be justified,
and he requested the
minister to reconsider his instruction.
[49]
Minister Zokwana seems not
to have heeded this request. On the contrary, he issued a directive
that the DAFF settle BXI’s
fees. When BXI sought Ms Ndudane’s
assistance in giving effect to this directive, Mr Mlengana on 13
February 2019 notified
Ms Ndudane that, as the MLRF’s
accounting officer, he had asked the State Attorney to verify BXI’s
invoices. No payments
would be made until this was done. On 15
February BXI, assisted by a letter of 18 February from Minister
Zokwana, escalated the
matter to National Treasury and to the Public
Service Commission (‘PSC’). In his letter, the minister
said that National
Treasury’s intervention was needed to ensure
that there was ‘no systematic abuse of power’ by Mr
Mlengana as
accounting officer. He said that the DAFF’s
Fisheries Branch, as the recipient of BXI’s services, was
satisfied with
the work performed by BXI and had no reservations in
paying its invoices. (One may infer that this was a reference to Ms
Ndudane
and Ms Parker.)
[50]
The first meeting
with National Treasury officials was held on 6 March 2019. The
minister and Ms Ndudane were present but not Mr
Mlengana. The latter
did, however, attend further meetings on 19 and 20 March.
[51]
On 24 March BXI wrote to
the DAFF, apparently at the suggestion of the Acting
Accountant-General, again setting out the amount allegedly
due. This
had now escalated to R25 million, of which more than R2 million was
interest. BXI said that it had no objection to the
verification of
its invoices by a taxing master or the State Attorney, but wanted
payment in the meanwhile, on the basis that it
would refund any
excess disclosed by verification.
The
settlement agreement
[52]
The upshot was a meeting
held in Pretoria on 28 March 2018 under the auspices of National
Treasury. Mr Mlengana said that he felt
obliged by the minister’s
letter to National Treasury of 18 February to participate in the
discussions and was put under
pressure to accommodate BXI. Ms
Ndudane, who was also at the meeting, assured the attendees that BXI
had rendered the services
set out in its invoices. A National
Treasury official expressed the view that BXI should be paid R20
million because it was contrary
to the Finance Act for invoices to
remain unpaid for longer than 30 days.
[53]
It is common cause that at
this meeting the DAFF agreed to pay BXI R20 million immediately, any
balance to be settled after validating
the firm’s invoices,
such validation to be completed by 30 April. Ms Ndudane
telephonically conveyed this to BXI, which accepted
the terms. On 29
March Mr Mlengana issued a written instruction to Ms Parker that BXI
was to be paid R20 million by the MLRF while
the balance of its claim
was being validated.
[54]
According to the Acting
Accountant-General, Mr Mlengana indicated at this meeting that he
would approach the relevant National Treasury
Unit ‘for
condonation for the possible irregular expenditure that will arise
from the payment of the BXI invoices, based
on the appointment of BXI
that was through a deviation process’. There is a factual
dispute that this was discussed, but
the dispute is legally
irrelevant. BXI’s appointment was not in fact ‘through a
deviation process’, and, for
reasons I have given, there was no
legal basis on which Mr Mlengana could properly have applied to
National Treasury to regularise
BXI’s appointment.
[55]
Mr Mlengana says that he
should not have succumbed to pressure and should not have accepted Ms
Ndudane’s assurances. On 8
April he wrote to Ms Parker to say
that no payment should be made to BXI without forwarding the invoices
to him for approval. However,
BXI appears to have come into
possession of Mr Mlengana’s directive to Ms Parker, because on
10 April the firm wrote to Mr
Mlengana ‘reiterating’ its
acceptance of the settlement reached on 28 March as reflected in the
DG’s directive
of 29 March. This letter ended:
‘
7.
BXI and the relevant authority [ie Ms Ndudane] will attend to the
execution of the settlement agreement and to making same
a court
order.
8. The
above measure is taken in order to protect BXI’s commercial
interests and to avoid further prejudicial exposure
as a result of
delayed payments by the Department.’
[56]
On 11 April the DAFF’s
Chief Director: Financial Management addressed a memorandum to Mr
Mlengana, providing feedback on its
assessment of BXI’s
invoices. The Chief Director stated that SCM processes had not been
followed in BXI’s engagement.
If BXI were paid the amount of
R20 million as per the DG’s directive of 29 March, such
expenditure would have to be declared
irregular. Any condonation for
irregular expenditure would have to be obtained from National
Treasury.
[57]
Mr Mlengana says that on
the same day he sent this memorandum to Ms Ndudane. On 16 April she
responded to the DG with a lengthy
narration of BXI’s
engagement. Absent from this letter was any indication that BXI had
been appointed pursuant to a competitive
bidding process or a valid
deviation. She said that BXI’s appointments emanated from the
DAFF’s head office through
the minister and the DG, and
deviations should have been processed through head office. National
Treasury, she said, had knowledge
of the settlement with BXI.
[58]
In fact, BXI had not
received mandates from the DG. Ms Ndudane’s letter does not
disclose circumstances which would have justified
a departure from
SCM processes. There is also no evidence that National Treasury knew
that BXI had not been lawfully appointed
or applied its mind to
whether there were exceptional circumstances justifying a deviation.
[59]
Although Ms Ndudane had on
11 April 2019 received the memorandum from the Chief Director:
Financial Management, on 12 April she
signed the impugned settlement
agreement between BXI and the DAFF, her signature being witnessed by
Ms Parker. Clause 7 purported
to record an agreement between the
parties that BXI and the ‘Relevant Authority’ (defined as
meaning Ms Ndudane) would
attend to the execution of the settlement
agreement and making same a consent order. In clause 8 the DAFF
acknowledged that R20
million was immediately due and payable to BXI.
If the DAFF failed to validate the balance of BXI’s invoices by
30 April,
BXI would issue a new statement and its remaining invoices
for immediate payment. Clause 10 provided that, upon signature, BXI
would approach the WCHC on an unopposed basis to have the settlement
agreement made a consent order. The DAFF was to be liable for
the
costs of preparing the agreement.
Attacks
on the settlement agreement
Ms Ndudane’s lack of
authority
[60]
The first challenge to the
settlement agreement is that Ms Ndudane was not authorised to
conclude it. This challenge has several
components: (a) The
signing of a contract of this kind did not fall within the scope of
Ms Ndudane’s delegated authority
and she was not given specific
authority to sign it. (b) To the extent that the oral agreement
of 28 March gave rise to a
binding agreement, it was no part of that
agreement that a written settlement would be concluded. (c) The
written agreement
contained terms which were not agreed at the
meeting of 28 March or approved by the DG.
[61]
As to (a), there is no
evidence refuting the applicant’s version regarding Ms
Ndudane’s lack of authority. Even if the
SLA were valid, her
status as the ‘Relevant Authority’ in terms of the SLA
did not authorise her to sign the settlement
agreement. The
settlement agreement was not the resolution of a dispute as
contemplated in clause 14 of the SLA, and in any event
Ms Ndudane was
not purporting to act in terms of that clause. If she thought she had
authority, it was because of the meeting of
28 March at which Mr
Mlengana approved the settlement. Any belief to this effect, however,
would have been dispelled by Mr Mlengana’s
memorandum to her of
8 April 2019 and by the memorandum of 11 April 2019 from the Chief
Director: Financial Management.
[62]
In her affidavit in the
present proceedings, Ms Ndudane says that before signing the
settlement agreement she was instructed by
Mr Mlengana on several
occasions ‘to resolve and negotiate the issue of the
non-payment of invoices for legal services rendered
by [BXI]’.
She also says that after she signed the settlement agreement, Mr
Mlengana continued to issue instructions verbally
and in writing.
Although Ms Ndudane said that she had voice recordings of the verbal
instructions, she did not give the dates or
provide transcripts
thereof. Her version does not tally with Mr Mlengana’s
memorandum to her of 8 April 2019 or with the
fact that on 11 April
2019 he forwarded to her the memorandum from the Chief Director:
Financial Management. But most crucially,
she stops short of claiming
that Mr Mlengana authorised her to negotiate and conclude a written
settlement agreement or to consent
to having such an agreement made
an order of court.
[63]
As to (b), there is no
evidence that the officials who attended the meeting of 28 March
agreed that a written settlement would be
prepared or that the DAFF
would be responsible for the cost of preparing it. Mr Mlengana’s
instruction to Ms Parker of 29
March did not foreshadow a written
settlement contract. The high watermark of BXI’s case is that
the concluding paragraphs
of its letter to Mr Mlengana of 10 April
said that BXI and Ms Ndudane would attend to executing the settlement
agreement. However,
this was a unilateral statement, not an
invitation to approve a proposal for the conclusion of a written
settlement agreement.
By this stage Mr Mlengana had already
instructed Ms Ndudane that no payments should be made to BXI without
his approval, and the
day after BXI’s letter he received advice
from his Chief Director: Financial Management that payment would
constitute irregular
expenditure.
[64]
It is noteworthy that the
draft settlement agreement was not submitted to the DAFF’s
principal in-house lawyers, Ms Nagiah
and Ms L Tsegari (the former
having responsibility for the DAFF’s legal administration as a
whole, the latter being the Senior
Legal Administration Officer in
the Fisheries sub-directorate).
[65]
As to (c), the written
settlement agreement undoubtedly contains terms which were not
discussed at the meeting of 28 March or approved
by Mr Mlengana.
First, the oral agreement of 28 March was that the payment of R20
million would be made by the MLRF, not by the
DAFF. Ms Ndudane’s
sphere of responsibility was confined to the department’s
Fisheries Branch, and BXI’s services
were solely in matters
emanating from the Fisheries Branch. She could not conceivably have
had authority to bind the department
in general. This deviation from
the oral agreement is material in view of the way BXI sought to levy
execution. The width of the
settlement agreement in this respect may
be explicable by the fact that Ms Ndudane knew that there were
insufficient funds in the
MLRF to meet an immediate payment of R20
million.
[66]
Second, the agreement
stated that the verification would apply to invoices for amounts
exceeding the initial payment of R20 million.
The discussion in
Pretoria, however, was that all of BXI’s invoices would be
verified, hence the possibility of BXI having
to refund money to the
DAFF. Third, there was no discussion at the Pretoria meeting that the
settlement would be made an order
of court. And fourth, there was no
discussion that if the DAFF breached the agreement it would be liable
to compensate BXI ‘for
any direct or indirect losses as caused
by such breach’ (which is what clause 11.3 stipulated).
[67]
In argument BXI’s
counsel said that the case raised issues of ostensible authority and
estoppel in regard to Ms Ndudane’s
authority. I was not
referred to any passages in the opposing affidavits where the
question of ostensible authority or estoppel
was pleaded. The onus
rested on BXI to allege the representations made by the DAFF which
created the reasonable impression in BXI’s
mind that Ms Ndudane
was authorised to agree to all the matters she did in the signed
settlement agreement. In his supplementary
answering affidavit of 11
November 2019 Mr Xulu said that the onus rested on the DAFF to prove
that Ms Ndudane lacked authority.
That is a reference to actual
authority. Without necessarily endorsing Mr Xulu’s submission
as to the onus, I have found
that the DAFF has discharged the onus.
In the same part of his affidavit, Mr Xulu says that clause 13 of the
settlement agreement
contained a warranty that Ms Ndudane was
authorised to execute and perform the agreement. Without necessarily
endorsing Mr Xulu’s
submission as to the ambit of clause 13, I
must note that the purported agent’s own representation of
authority is not evidence
of actual authority or of a relevant
representation for purposes of ostensible authority or estoppel (
NBS
Bank Ltd v Cape Produce Co (Pty) Ltd & others
2002
(1) SA 396
(SCA) paras 25-26;
Glofinco
v Absa Bank Ltd t/a United Bank
2002
(6) SA 470
(SCA) para 13).
[68]
Ms Ndudane’s
purported conclusion of the settlement agreement was thus invalid.
Officials who exercise public power are constrained
by the principle,
fundamental to our constitutional order and the rule of law, that
they may exercise only those powers and perform
only those functions
which are conferred upon them by law. In this respect the common law
doctrine of
ultra vires
is now underpinned by
the constitutional doctrine of legality (
Masetlha
v President of the Republic of South Africa & another
[2007] ZACC 20
;
2008
(1) SA 566
(CC) para 173). On matters with financial implications,
officials are obliged to act in accordance with the prevailing system
of
delegations (ss 45(d) read with s 44 of the Finance Act).
Invalidity
of BXI’s appointment
[69]
The second challenge flows
from the attack on BXI’s appointment. If the SLA was invalid,
this could not be regularised by
a settlement agreement which
effectively acknowledged that BXI was owed money pursuant to the SLA
(cf
Buffalo City supra,
paras 33 and 97-98).
Since I am not able in these proceedings to rule on the validity of
the mandates which Minister Zokwana gave
to BXI, I cannot conclude
that there were no valid mandates which could have been the subject
of a settlement agreement. Although
the settlement agreement records
that BXI ‘has a valid contract in place’ with the DAFF,
there is no express reference
to the SLA. In the circumstances, this
ground of attack cannot be upheld.
Oral
settlement agreement?
[70]
What I have said thus far
applies to the written settlement agreement which Ms Ndudane
purported to execute. The applicant, it seems,
does not accept that
the written settlement agreement was preceded by an oral settlement
agreement. In their heads of argument
the applicant’s counsel
submit that no settlement offer was made to BXI by Mr Mlengana in his
capacity as an accounting officer;
Ms Ndudane simply relayed to BXI
what had been discussed. BXI, on the other hand, adopts the position
that it accepted terms proposed
to it.
[71]
The notice of motion does
not seek an order reviewing and setting aside any settlement
agreement which might have been concluded
orally or by way of
correspondence. Accordingly, I refrain from making any finding as to
the existence or validity of any such
agreement. My judgment is
confined to the written settlement agreement signed by Ms Ndudane.
The
Steyn J order
[72]
On the same day as the
settlement agreement was signed, BXI issued an application to have
the settlement agreement made an order
of court. Mr Xulu’s
founding affidavit repeated the statement contained in the settlement
agreement that the parties had
agreed that BXI and Ms Ndudane would
attend to executing a settlement agreement and having it made an
order of court. Ms Ndudane
made a confirmatory affidavit.
[73]
The application came
before Goliath DJP, who requested supplementary evidence to satisfy
herself that the settlement had been duly
concluded. She required
service on the National Treasury, the State Attorney, the NDPP, the
minister and the DG. Over the period
April and May 2019 two
affidavits by the Acting Accountant-General in the National Treasury
were filed as well as a supplementary
affidavit by Ms Ndudane.
[74]
Mr Mlengana says that he
learnt of the application on 17 April 2019.
[1]
His explanation for not reacting to it is that he believed the relief
sought was unattainable because Ms Ndudane lacked authority
to
conclude the settlement agreement. He also knew that there was no
money in the MLRF bank account. He did not think BXI, which
had been
advised of this, would persist with the application as it served no
purpose. Ms Ndudane’s supplementary affidavit
in support of the
application was not brought to his attention. If it had been, ‘it
may have been the impetus spurring earlier
action’.
[75]
It is difficult to
reconcile this explanation with a letter he wrote to BXI on 26 April
2019, in which he advised that his office
had issued an instruction
to make an immediate payment of R20 million and undertook that any
remaining amount would be paid upon
verification. He also noted BXI’s
undertaking, in its letter of 24 March 2019, to refund the DAFF if
the verification disclosed
that BXI had been overpaid. Mr Mlengana
claims that he wrote this letter because he was under the impression
‘that the matter
could be resolved’ and that his
undertaking ‘was sufficient to have averted court
processes’.
[2]
[76]
On 29 April 2019 BXI wrote
to Ms Parker to complain that the R20 million had not been paid.
She replied that she had received
conflicting instructions. BXI
pursued this with Mr Mlengana, stating that his conduct was against
the spirit of the settlement
agreement. Payment was still not
forthcoming, and on 27 May BXI again wrote to Mr Mlengana, stating
that the DAFF’s failure
to make payment violated the Finance
Act and various National Treasury instructions.
[77]
In the meanwhile, BXI had
complained to the Judge-President that Goliath DJP’s
requirements went beyond what was reasonable.
Goliath DJP notified
BXI on 20 May that in view of this complaint she would no longer be
dealing with the case, which BXI could
enrol in Third Division in the
normal course.
[78]
On 6 June 2019 Steyn J
granted the order. On the same day, BXI wrote to Mr Mlengana
attaching a copy of the order and a certificate
of balance for
R29 426 054. The DAFF was warned that if payment in full
was not received by close of business, further
legal action would
follow.
[79]
Mr Mlengana was at the
airport, about to depart on holiday. He telephoned Mr Xulu. The
latter evidently recorded the conversation,
because belatedly a
transcript was attached to his affidavit of 2 December 2019. Mr
Mlengana told Mr Xulu that although the two
of them had never met, he
had got the impression that Mr Xulu was Minister Zokwana’s
fighting arm. He did not think that
they should be suing each other.
BXI should be patient because he had made a commitment to pay and
would pay. He had given his
staff instructions to find the money:
‘
[W]e have all
agreed that you must be paid R20 million based on those conditions
and there is no other person going to stop that.
We will do that
because we all agreed, what I request you, because they have been
processing their things and now I’ve got
this. Withdraw that
writ or prescription . . . because we’ve got to
defend that and create a lot of debate. If
the money is not paid by
the [MLRF] it doesn’t matter whether you want to .
. . I will just say I don’t
have money there. .
. And if you agree with me therefore withdraw all these legal stuff
you are trying to do and take
my word.’
Mr
Mlengana asked Mr Xulu whether he accepted his ‘olive branch’.
Mr Xulu said yes.
[80]
On 11 June BXI caused a
writ of execution to be issued but it was not immediately served. On
Friday 14 June, the day Mr Mlengana
returned from holiday, Mr Xulu
contacted him but was asked to wait until Monday. When Mr Mlengana
did not revert, BXI caused the
writ to be executed.
Grounds
for rescinding the Steyn J order
Invalidity
of SLA and settlement agreement
[81]
The applicant seeks the
rescission of Steyn J’s order on several grounds. The first is
that if the settlement agreement was
invalid, as I have found to be,
it could not validly be made an order of court. Related to this
proposition, and perhaps more to
the point, is that Ms Ndudane did
not have authority to represent the DAFF in confirming to the court
that the settlement agreement
could be made an order. If a court is
misled into believing that both parties have consented to the
granting of a judgment, the
judgment must be set aside (
Moraitis
Investments (Pty) Ltd & others v
Montic
Dairy (Pty) Ltd & others
[2017] ZASCA 54
;
2017
(5) SA 508
(SCA) para 17).
[82]
BXI’s counsel
submitted that the DAFF had acquiesced in Steyn J’s order.
Reference was made to Mr Mlengana’s assurance
to Mr Xulu that
the sum of R20 million would be paid. It seems to me that the only
such assurance after the making of the order
was during the telephone
conversation of 6 June 2019. Mr Mlengana was at the airport, about to
leave the country on holiday. Whether
he had actually seen the order
and settlement agreement by that time is unclear. The transcript
certainly does not reflect acquiescence
in the signed settlement
agreement or in the court order. On the contrary, he said that Mr
Xulu should ‘withdraw that writ
or prescription or whatever …
because we’ve got to defend that and create a lot of debate’.
[83]
The DAFF was not
represented in court when the consent order was taken. Ms Ndudane did
not have authority to represent the DAFF
in those proceedings. Had
Steyn J been aware of the facts mentioned in the preceding paragraph,
she would not have granted the
order. The order may thus be rescinded
in terms of rule 42(1)(
a
).
Absence
of lis
[84]
The applicant contends
that Steyn J was in any event not entitled to make the settlement
agreement an order because there was no
lis
between the parties.
The applicant’s counsel referred, in this regard, to para 25 of
Eke v Parson
2016
(3) SA 37
(CC) where Madlanga J, writing for a unanimous court, said
the following (footnotes omitted):
‘
This
in no way means that anything agreed to by the parties should be
accepted by a court and made an order of court. The order
can only be
one that is competent and proper. A court must thus not be mechanical
in its adoption of the terms of a settlement
agreement. For an order
to be competent and proper, it must, in the first place, “relate
directly or indirectly to an issue
or
lis
between the
parties”. Parties contracting outside of the context of
litigation may not approach a court and ask that their
agreement be
made an order of court.’
See
also
B
uffalo
City
,
supra
,
para 27, where this statement of the law was repeated.
[85]
Reference was made in
Eke
to the decision in
Hodd
v Hodd
;
D’Aubrey v D'Aubrey
1
942
NPD 198
, where Selke J said that the court is ‘not a mere
registry of documents or agreements’ (at 204). Selke J in turn
cited
the refusal by De Villiers CJ in
Ex
parte Robertson
(1903)
13 CTR 1003 to make an agreement between the applicant and a
municipality an order of court in circumstances where there
was no
pending litigation.
[86]
Now it is so that in
Eke
and
Buffalo
City
the court was not
dealing with settlement agreements concluded outside of the context
of pending litigation, so that strictly speaking
the passages relied
upon by the applicant are
obiter
.
Nevertheless, it would take very powerful counter-arguments to
persuade me to depart from what was stated in these cases.
[87]
BXI’s counsel said
that the requirements in
Eke
would be satisfied if,
as here, there was an ‘issue’ between the parties which
could have resulted in litigation if
the matter were not settled.
Although the expression ‘issue or
lis
’
appears in the passage I have quoted from
Eke
,
Madlanga J was at that point quoting from para 15 of the decision of
Van Zyl ADJP in
PL v YL
2013 (6) SA 28
(ECG).
The relevant sentence in para 15 of the latter judgment says that the
settlement agreement ‘must relate directly or
indirectly to an
issue or
lis
between
the parties
that is
properly before the court
. . .’ (my underlining). In
Eke
Madlanga J made the
same point in his own words by saying that parties ‘contracting
outside of the context of litigation’
may not approach a court
and ask that their agreement be made an order.
[88]
Furthermore, and
substantially for the reasons given by S Budlender AJ in
Avnet
South Africa (Pty) Limited
v
Lesira
Manufacturing
(Pty) Limited & another
[2019]
ZAGPJHC 72;
2019 (4) SA 541
(GJ), I consider that para 25 in
Eke
correctly reflects the
law and that I should follow it.
Avnet
,
like the present case, was one where there was a dispute between the
parties which was settled without the institution of proceedings
.
[89]
This challenge to Steyn
J’s order likewise falls within the scope of rule 42(1)(
a
)
since the court lacked legal competence to make the order (
Promedia
Drukkers & Uitgewers (Edms) Bpk v Kaimowitz
&
others
1996 (4) SA 411
(C) at 417H).
Execution
and subsequent events
[90]
The writ issued on 11 June
(‘the first writ’) instructed the sheriff to attach funds
in the ‘DAFF Main Account’,
account 010-149-449 held with
Standard Bank in Pretoria, with a view to realising R20 million plus
interest as from 6 June 2019.
The first writ was executed on 19 June,
the attached sum being R2 588 875,90, which was presumably
the full balance in
the account at that time. On 2 July Standard Bank
paid this amount into the sheriff’s account, who, after
deducting his costs,
transferred R2 585 374,90 to BXI’s
trust account on 5 July. On the same day BXI transferred the money
from its
trust account to its business account, and by the end of the
day most of it had been disbursed from the business account.
[91]
A further writ was issued
on 11 July instructing the sheriff to attach funds in DAFF account
011-252-871 held with Standard Bank
in Pretoria, with a view to
realising R17 411 125 plus interest from 6 June 2019. This
was the balance of R20 million
(plus interest) after deducting the
amount attached pursuant to the first writ. BXI says that this was a
reissuing of the first
writ, but for convenience I shall call it the
second writ. The DAFF account which was the subject of the second
writ is an account
known as the ‘DAFF Animal Identification
Account’.
[92]
The second writ was
executed on 17 July, and R17 624 870 was attached (from
which one can infer that the Animal Identification
Account had a
credit balance exceeding the amount of the writ). On 1 August
Standard Bank paid the attached money (which, with
interest from the
date of attachment, totalled R17 660 768) to the sheriff,
who, after deducting his costs, transferred
R17 657 098 to
BXI’s trust account the next day. Over the period 2-5 August
substantially the whole amount was
transferred out of the trust
account, most of it to the business account. By 6 August there was
only around R121 000 standing
to the credit of BXI’s
business account.
[93]
A further writ was issued
on 13 July (‘the third writ’) instructing the sheriff to
attach funds in the ‘DAFF Marketing
Administration –
Trade Incentives Account’, account 013-024-175 held with
Standard Bank in Pretoria, with a view to
realising R11 468 492
plus interest from 6 June 2019, the latter amount being described in
the writ as the ‘settlement
payment in accordance with the
certificate of balance issued on 1 July 2019’. The third writ
was executed on 17 July 2019.
It appears that the bank account in
question had a credit balance exceeding the amount of the writ
because the full amount was
attached. However, the attached money has
not been transferred to the sheriff or to BXI.
[94]
Before dealing with the
attacks on the writs and notices of attachment, it is convenient to
set out further developments up to 13
December 2019.
[95]
None of the three accounts
in which monies were attached were accounts of the MLRF. Mr Mlengana
says that he learnt of the attachments
on Thursday 25 July 2019. On
Monday 29 July he consulted with the applicant’s legal team. On
Wednesday 31 July the State
Attorney, in the person of Mr N Erasmus,
wrote to BXI alleging that the process the firm had followed was
unlawful,
inter alia
because of
non-compliance with the
State Liability Act 20 of 1957
. The State
Attorney said that there was a dispute between BXI and the DAFF in
relation to payment for services rendered. The State
Attorney
proposed that money already received by BXI be retained in its trust
account pending resolution of the dispute and that
BXI undertake not
to levy further execution. The State Attorney said that it had been
instructed to expedite the verification of
BXI’s claims, and
requested supporting documents from BXI. Later that day Mr Xulu
replied, asking the basis in law for the
undertaking sought.
[96]
On the next day, Thursday
1 August, the State Attorney’s Mr Leon Manuel met with Mr Xulu.
The latter told Mr Manuel that the
money attached pursuant to the
second writ had not yet been paid to BXI. Mr Manuel reiterated the
contents of the State Attorney’s
letter of 31 July. Mr Xulu
refused to give the requested undertaking. At 16:35 on that day Mr
Manuel wrote to BXI, stating that
the undertaking was requested
inter
alia
on the basis that
BXI had failed to comply with the provisions of
ss 3(4)
–
3
(8) of the
State Liability Act.
>
[97]
On the morning of Friday 2
August Mr Manuel tried without success to contact Mr Xulu to learn
whether BXI would give the undertaking.
At 14:52 the sheriff paid
R17 657 098 to BXI’s trust account pursuant to the
second writ. At 15:13 Mr Manuel sent
an urgent email to BXI. Mr
Xulu’s assistant advised Mr Manuel that Mr Xulu was consulting
out of office but that the correspondence
would be brought to his
urgent attention. At 16:08 Mr Manuel advised BXI that he had to
assume, in the absence of a response, that
the firm refused to
provide an undertaking.
[98]
The present application
was launched on the morning of Monday 5 August for hearing at 10:00
on 6 August. It now transpires that
by the time the matter came
before me in the urgent court, most of the money attached pursuant to
the second writ had been disbursed.
By agreement the application was
postponed to 8 August with an abridged timetable and suitable
undertakings by BXI.
[99]
By 8 August
answering and replying papers had been filed in relation to part A of
the application. Among BXI’s papers was
an affidavit attaching
extracts from its trust and business accounts. Following debate in
court, I stood the matter down so that
BXI could furnish further
information about the entries appearing in the extracts, with a view
to ascertaining how much if any
of the attached funds remained under
BXI’s control. When proceedings resumed, BXI’s counsel
handed up an unsworn schedule
of explanations. After further debate I
postponed the application to 19 August on the basis that BXI would,
by close of 8 August,
furnish an affidavit confirming the information
contained in the schedule. In the light of the information which had
emerged, my
order also prohibited BXI from causing any movement of
funds held in its foreign exchange suspense account with FNB or in
the account
of a related entity called Setlacorp (Pty) Ltd
(‘Setlacorp’).
[100]
Further affidavits were
filed by BXI and the applicant in the ensuing days. When the matter
served before me on 19 August, I requested
the applicant’s
counsel to clarify what relief was being sought at that stage.
Although the applicant’s counsel appeared
to think that part B
of the application arose for adjudication (including rescission of
Steyn J’s order), this was by no
means clear to me. It was also
not clear to me that part B itself contained a proper prayer for
rescission. If only part A stood
to be adjudicated, little if
anything needed to be added to the existing orders in order to
provide interim protection.
[101]
As a result of the ensuing
debate (in which BXI’s counsel said that he had not understood
part B to be before me), the matter
stood down. Counsel thereafter
approached me in chambers to say that, because of a genuine
misunderstanding between counsel, they
would like to postpone the
application so that part B could be determined. They would present me
with a draft order in due course.
On 20 August the applicant
delivered a notice of application which formally claimed rescission
of Steyn J’s order. On 21
August an order was made by agreement
postponing the application to 29 November 2019. This order contained
a timetable for further
papers pertaining to the part B relief and
rescission. BXI was to furnish documents to the State Attorney so
that the latter could
verify BXI’s invoices, the targeted date
for finalisation of verification being 31 October.
[102]
The applicant filed
supplementary papers on 14 October 2019. Apart from supplementing its
case in respect of the matters to be argued
on 29 November, the
applicant filed notices of application to join the new department
(the DEA) as a second applicant and to join
Mr Xulu in his personal
capacity as the fifth respondent. The Acting DG of the DEA, Mr M
Abader, made an affidavit supporting and
in some respects amplifying
the DAFF’s allegations.
[103]
The verification process
was not completed by 31 October. In accordance with the agreed order
of 21 August, the State Attorney filed
a preliminary report on 1
November 2019 to explain the delay. In essence, the State Attorney
says that BXI’s documents were
not as organised as BXI had
represented when the agreed order was made; that documents had been
copied and delivered in dribs and
drabs; that there were still many
invoiced items for which no supporting documents had been supplied;
and that unless BXI could
supply the missing documents, verification
would have to proceed in the absence thereof.
[104]
BXI filed its
supplementary answering papers on 11 November 2019. Minister
Zokwana’s affidavit was among these papers. Also
included was
an affidavit by a cost consultant, Ms Susan Adonis, to which she
attached bills of costs she had prepared in the 11
matters in which
BXI had rendered service to the DAFF. The applicant’s
supplementary replying papers were filed on 18 November.
[105]
It then emerged that there
was a further misunderstanding between the parties. BXI’s
counsel had mislaid, and then forgotten
about, the rescission
application. This oversight was exacerbated when a query to the State
Attorney elicited an answer that no
further rescission application
had been delivered – Mr Manuel himself had forgotten about it.
Some days before the hearing,
counsel approached me in this regard.
BXI’s counsel said that his client would not be in a position
to file further papers
on the question of rescission in time for the
matter to proceed on 29 November. Eventually, and by agreement, an
order was made
postponing the application to 13 December with a
further timetable for a final set of affidavits.
Grounds
of attack on the writs and notices of attachment
Rescission of Steyn J’s
order
[106]
If Steyn J’s order
is rescinded on one or more of the grounds I have mentioned, it would
follow that the writs and notices
of attachment should for this
reason be set aside.
Non-compliance
with
State Liability Act
[107
]
However, there are grounds
of attack which stand independently of the rescission of Steyn J’s
order. One of these is non-compliance
with the
State Liability Act.
In
terms of
s 3(1)
, and subject to the further provisions of
s 3
of that Act, no execution or attachment for satisfaction of a final
court order sounding in money may be issued against a defendant
or
respondent in any action or legal proceedings against the State or
against any property of the State.
[108]
The requirements set out
in s 3, and the non-compliance which characterised the present case,
are as follows:
(a) Section 3(2): The
State Attorney or attorney of record for the relevant department
must, within seven days after
the court order has become final, in
writing inform the executive authority (here, Minister Creecy) and
accounting officer (here,
Mr Mlengana), and the relevant treasury, of
the order. (Because of the way in which the consent order was
obtained, the DAFF was
not represented by an attorney of record and
no such notification occurred. BXI notified Mr Mlengana and National
Treasury of the
order on 6 June and 12 June 2019 respectively. On 24
June 2019, by which time the first writ had been issued and executed,
BXI
notified Minister Creecy of the order.)
(b) Section 3(3):
A final order must be satisfied within 30 days of its becoming final
or within such other period
as the creditor and accounting officer
may agree. The payment must be charged against the appropriated
budget of the department.
(Here, the 30 days expired on 5 July 2019
without payment having been made. By that time the first writ had
been issued and executed,
and BXI had received the proceeds of the
attachment.)
(c) Section 3(4): If
the final order is not satisfied as aforesaid, the creditor may serve
the order on the executive
authority, accounting officer, the
department’s attorney and the relevant treasury, such service
to be in accordance with
the rules of court. (Here, such service
could have been effected as from 6 July 2019. No such service in
accordance with the rules
of court was effected.)
(d) Section 3(5): The
relevant treasury must, within 14 days of service as aforesaid,
ensure that the judgment is satisfied
or that acceptable arrangements
are made to have it satisfied if there are inadequate funds available
in the vote of the relevant
department. (Because no service was
effected in terms of s 3(4), this obligation of the National
Treasury was not triggered.)
(e) Section 3(6): If
the relevant treasury fails to act as required by s 3(5), the
registrar or clerk of the court
must, upon written request of the
judgment creditor, issue a writ or warrant of execution in terms of
the applicable rules of court
against movable property owned by the
State and used by the department concerned. (Because anterior
requirements were not satisfied,
BXI was not entitled to request the
registrar to issue writs of execution. There is also no evidence that
BXI lodged written requests
that writs be issued. Furthermore, if the
entity liable to BXI was the MLRF, only its movable property could be
attached.)
(f) Section 3(7): The
sheriff must execute the writ and may attach, but must not remove,
movable property owned by the
State and used by the department
concerned, sufficient to satisfy the judgment debt. The sheriff and
the accounting officer may
in writing agree on particular movable
property that may not be attached because its removal would severely
disrupt service delivery,
threaten life or put the security of the
public at risk. (Money in bank accounts constitutes incorporeal
movable property. Because,
however, anterior requirements were
satisfied, the sheriff was not entitled to execute and attach money
in the DAFF’s bank
accounts. And because of such
non-compliance, the sheriff and Mr Mlengana as the accounting officer
did not have occasion to reach
agreement as to whether any movable
property should be excluded from attachment. The applicant says that
the attachments in the
present case significantly impeded the DAFF’s
operations.)
(g) Section 3(8): If,
following attachment as aforesaid, 30 days expire without payment,
the sheriff may remove and sell
the attached movable property in
execution of the judgment debt. (Because anterior requirements were
not satisfied, the sheriff
was not entitled to remove the DAFF’s
money from its accounts and pay it to BXI. If anterior requirements
had been satisfied,
money could not – having regard to the
various time periods specified in the section – have been
removed from DAFF’s
account and paid to BXI until around 19
August 2019 at the earliest.)
[109]
BXI’s counsel
submitted that there had been substantial compliance with the
requirements of the
State Liability Act but
understandably he did not
press the argument. None of the requirements of the Act were heeded.
The
third writ
[110]
There is an independent
attack on the third writ. That writ was issued in order to claim the
‘settlement payment’ contemplated
in clause 8.4 of the
settlement agreement. However, the amount, if any, to which BXI was
entitled in terms of that clause did not
appear from the settlement
agreement. Although BXI apparently issued a certificate of balance on
1 July 2019, the settlement agreement
did not provide for the
settlement payment to be quantified in this way. Although clause 8.5
stated that BXI would issue the DAFF
‘with a new statement and
the remaining invoices for the immediate payment’, this falls
short of an agreement that
the DAFF would be bound by such statement.
There was thus, in relation to the settlement payment, no order which
could be executed.
In the absence of agreement with the DAFF, further
proceedings were needed to quantify the obligation (cf
De
Crespigny v De Crespigny
1959
(1) SA 149
(N) at 150F-152B;
Du
Preez v Du Preez
1977
(2) SA 400
(C) at 402H-403C);
Le
Roux v
Yskor
Landgoed (Edms) Bpk &
andere
1984 (4) SA 252
(T) at 257F-G).
Relief
against BXI
[111]
The SLA and settlement
agreement will be declared invalid, reviewed and set aside. Steyn J’s
order of 6 June 2019 will be
rescinded. The writs and notices of
attachment will be declared invalid, reviewed and set aside.
[112]
In relation to the review
of the SLA, BXI’s counsel submitted that if the review
succeeded I should follow the same course
as the Constitutional Court
did in
Gijima supra
and
Buffalo City supra
in
order to preserve accrued rights, where the contracts in question
were declared invalid but not set aside. Whether this should
be done
depends on what is just and equitable within the meaning of
s 172(1)(
b
)
of the Constitution. In my view, the facts of the present matter are
very different from those in the cases cited.
[113]
In
Gijima
the applicant, a
public body (referred to in the judgment as Sita) had appointed
Gijima as a service provider. The contract was
extended on several
occasions. From the outset Gijima was anxious to be assured that Sita
had complied properly with its procurement
processes. Gijima not only
received an assurance (false, in the event); a warranty to this
effect was inserted in the contract.
Only when a payment dispute
arose a year and a half later did Sita take the point that the
contract was unlawful for non-compliance
with s 217 of the
Constitution.
[114]
In
Buffalo
City
the same senior
municipal official who had in September 2014 granted what turned out
to be an unlawful contract extension (a certain
Mr Pillay) did a
volte-face
in August 2015 by notifying the contractor that the contract was
unlawful because it had been concluded without a lawful procurement
process. There was no explanation for Mr Pillay’s conduct. Even
after August 2015 the municipality was content to allow the
contractor to continue and complete the work (the building of
low-cost houses).
[115]
There is no evidence in
the present case that BXI showed the slightest concern as to whether
or not its appointment complied with
proper procurement processes.
The SLA was carefully designed to bypass the DG and the DAFF’s
senior legal officials. On the
evidence, Mr Mlengana did not
knowingly conclude the SLA and then make a
volte-face
.
Although he did not, upon becoming aware of the SLA, immediately
contend that it was invalid, he did endeavour to put an end to
the
rendering of services by BXI. Mr Mlengana was not the person who was
overseeing the rendering of legal services by BXI. Indeed,
so
faithfully were the terms of the SLA adhered to that the DAFF could
find no documents relating to the work done by the firm,
not even in
Ms Ndudane’s office.
[116]
This does not mean that
BXI will necessarily be denied any form of recovery for services
rendered. Although Minister Zokwana’s
mandates are vulnerable
to the very same attack as the impugned SLA, the validity of those
mandates is not before me. Even if those
mandates are in due course
declared invalid and set aside, BXI might have a claim for
unjustified enrichment. BXI might also, in
terms of the law of
unjustified enrichment, have one or more valid defences to any
attempt by the DAFF to recover money already
paid.
[117]
What would be expected to
follow from the orders summarised above is that BXI must refund to
the applicant the amount of R20 242 472,90,
being the
amounts transferred into BXI’s trust account by the sheriff
pursuant to the first and second writs. BXI’s
counsel
submitted, however, that such an order would not be just and
equitable in terms of s 172(1)(
b
)
of the Constitution. An order for repayment would ruin BXI, which (so
it was submitted) has undoubtedly done work for the DAFF,
for which
it is entitled to remuneration. Any order for repayment should be
suspended pending finalisation of the applicant’s
verification
exercise of BXI’s invoices and files.
[118]
If BXI’s only
problem were non-compliance with the
State Liability Act, I
might
have been persuaded to defer repayment so as to give BXI opportunity
to follow a proper process of execution. However, I
have found that
Steyn J’s order should be rescinded and that the settlement
agreement, which formed the basis of that order,
should be reviewed
and set aside. I will also be setting aside the SLA. There is little
prospect of BXI obtaining an executable
judgment against the
applicant in the near future.
[119]
Another consideration
which weighs with me is that BXI is very much the author of its own
misfortune. The greater part of the amount
it will be obliged to
refund – R17 657 098 – is money with which BXI
parted after it had been notified that
execution was invalid due to
non-compliance with the
State Liability Act. With
this knowledge, BXI
disbursed the proceeds of execution with almost indecent haste. (I
deal with this more fully below in relation
to Mr Xulu’s
personal position.) Even in respect of the earlier amount of
R2 585 374,90, BXI – as a firm
of attorneys working
for the State – could reasonably have been expected to be
familiar with the provisions of the
State Liability Act and
thus of
the defect in the execution it had levied.
[120]
As against these
considerations, there is the fact that the mandates given to BXI by
Minister Zokwana, although contested by the
applicant, are not the
subject of any review relief claimed in the present proceedings. For
the time being, therefore, those mandates
stand, even though their
legal frailties may be self-evident. There is the further fact that
at the meeting of 28 March 2019 Mr
Mlengana – even if he
succumbed to pressure – agreed that BXI would be paid R20
million pending verification of its
invoices. He subsequently held
out to Mr Xulu that this money would be paid, including in his letter
of 26 April 2019 and during
the recorded telephone conversation of 6
June 2019. Whether there was an oral settlement agreement, and if so
whether such settlement
is valid, are not issues which have been
presented to me for decision, but there is certainly a factual
foundation for BXI to assert
the existence of a settlement agreement
independent of the written document signed by Ms Ndudane.
[121]
Also relevant is that on
28 March 2019 the DG was willing for there to be a process of
verification. This was subsequently repeated
in the order which I
made by agreement on 21 August 2019. This reflects that the applicant
is open to the possibility that BXI
has rendered services of value to
the department for which it might be fair to remunerate the firm.
[122]
I must also record that
the conduct of the DG, Mr Mlengana, has not been above reproach. Of
course, the party seeking review relief
is the DAFF, not Mr Mlengana,
and the legal merits of the review may not depend to any great extent
on what he did or failed to
do. However, in considering the relief
that would be just and equitable, I take into account that the DG has
vacillated on the
question of payment to BXI. I would also have
expected a DG, acting in the best interests of his department, to
react promptly
and decisively when BXI’s letter of 10 April
2019 foreshadowed a written settlement agreement and the making of
such agreement
an order of court. Likewise, it was totally
unacceptable for Mr Mlengana, when on 17 April 2019 he learnt of the
pending application
to have the settlement made an order of court, to
sit on his hands in the belief that the court would not grant the
order.
[123]
As a matter of practical
reality, it is unlikely that BXI will be able to refund the full
amount immediately. To order immediate
repayment would be a
brutum
fulmen
.
Balancing the various factors mentioned above, I think it would be
just and equitable to give BXI a generous period of grace,
sufficient
to allow the applicant to complete the process of verification.
[124]
It does not follow that
the applicant will be obliged to pay BXI for all work duly verified.
The usual source for such an obligation
would be a contractual
mandate, and the question whether BXI has ever had valid contractual
mandates is disputed. The applicant
may yet apply to have Minister
Zokwana’s mandates set aside. The applicant has also
foreshadowed the possibility that it
might draw a distinction between
work done before and after the termination letter of 15 August 2018.
My order will simply require
the applicant to report to BXI the
result of its verification and to state whether it tenders to pay BXI
anything more than it
has already paid. If there is such a tender,
this could be set off against BXI’s liability.
[125]
If the applicant does not
tender to pay anything to BXI following such verification, BXI will
have to refund the full amount and
pursue any claims it believes it
has against the applicant by way of separate proceedings.
[126]
In a notice of application
dated 26 November 2019, BXI requested, in prayer 1, an order staying
the execution of any order I might
make until I have considered what
ancillary order would be just and equitable in terms of
s 172(1)(
b
)
of the Constitution. The orders I propose to make regarding repayment
and verification deal with this aspect of BXI’s application.
[127]
In prayer 2 of the said
application, BXI asks that the applicant be ordered to attend to the
taxation of BXI’s bills of costs
(ie those prepared by Ms
Adonis) on the attorney/client scale. Such an order presupposes that
a valid contractual relationship
exists between the applicant and BXI
in regard to the performance of the work set out in the 11 bills of
costs. Since I will be
setting aside the SLA, and since the validity
of Minister Zokwana’s mandates is contested, I decline to make
the requested
order.
[128]
BXI sought an order for
the joinder of Mr Mlengana with a view to a personal costs order
against him. Since I will not be making
any costs order in favour of
BXI, there is no need to consider Mr Mlengana’s joinder.
The
Viking Fishing costs order
[129]
In addition to repayment
of the aforesaid amounts, the applicant belatedly claimed a further
R1 million. This claim was based on
a disclosure by Mr Xulu, in BXI’s
supplementary opposing papers filed on 11 November 2019, that BXI had
successfully recovered
costs in the Viking litigation of R1 million,
and on material contained in the DAFF’s supplementary replying
papers, filed
on 18 November 2019, to the effect that although
Viking’s attorneys had paid this money to DAFF on 2 November
2018, BXI had
not accounted to the DAFF in respect thereof.
[130]
An amended notice for
relief, incorporating a claim for R1 million, was served on BXI on 25
November 2019. On 2 December 2019 BXI
filed its supplementary
affidavit on the question of rescission. Mr Xulu did not deal with
the part of Mr Manuel’s affidavit
dealing with the Viking costs
recovery.
[131]
Since this claim was
raised at a very late stage in the proceedings, and since there is no
urgency in the matter, I do not think
it would be just to adjudicate
it in the present proceedings. I cannot be confident that BXI has had
a full opportunity to consider
and respond to the claim.
Joinder
of Mr Xulu
[132]
The applicant seeks Mr
Xulu’s joinder with a view to making him jointly and severally
liable with BXI for repayment of R20 242 472,90.
The
applicant relies on piercing the corporate veil at common law and in
terms of
s 20(9)
of the
Companies Act 71 of 2008
.
[133]
I reject the applicant’s
reliance on piercing the corporate veil. I accept that Mr Xulu is
BXI’s controlling mind, but
this of itself does not show that
there has been any unconscionable abuse of BXI’s corporate
personality. Mr Xulu chose to
conduct an incorporated legal practice,
as permitted by law. The legal services provided by his firm were
rendered by BXI, not
by Mr Xulu personally. It was to BXI that
Minister Zokwana issued his mandates, and it was with BXI that the
DAFF purported to
conclude the SLA. The arrangement arrived at by the
officials at the meeting of 28 March 2019 was that money would be
paid to BXI,
not to Mr Xulu personally. If there were legal remedies
for unpaid fees, these vested in BXI, not in Mr Xulu personally.
[134]
The applicant’s
counsel made reference to
s 19(3)
of the
Companies Act. In
terms
of that section, the directors of a ‘personal liability
company’ (BXI is such a company) are personally liable
for
liabilities and debts ‘contracted’ during their period of
office. In
Fundstrust
(Pty) Ltd (in liquidation) v Van Deventer
1997
(1) SA 710
(A) it was held that the similar language of
s 53(
b
)
of the Companies Act 61 of 1973 was confined to consensual debts.
Obligations arising from delict and unjustified enrichment were
not
encompassed by the word ‘contracted’. The lawmaker must
be presumed to have been aware of this interpretation when
using the
same language in s 19(3) of the 2008 Act (
Boschpoort
Ondernemings (Pty
)
Ltd v Absa Bank Ltd
[2013]
ZASCA 173
;
2014 (2) SA 518
(SCA) para 18).
[135]
The applicant may have a
delictual claim against Mr Xulu. In the absence of deliberate
wrongdoing, his liability would require an
investigation as to
whether, in his individual capacity, he owed a legal duty to the DAFF
to exercise care in BXI’s levying
of execution (ie
wrongfulness) and, if so, whether he was negligent. Since he is an
attorney, it may not require much to show that
he was negligent,
since he could reasonably be expected to have been aware of the
provisions of the
State Liability Act. The
question of wrongfulness
is not straightforward, and I do not feel that it was sufficiently
canvassed in argument.
[136]
If Mr Xulu knowingly
caused BXI to act unlawfully in pursuing execution, ie if there was
dolus
,
wrongfulness in his personal capacity would cease to be problematic.
In that regard the following facts appear to be relevant.
On
Wednesday 31 July 2019 the State Attorney notified BXI explicitly
that the writs and attachments were invalid,
inter
alia
by virtue of
non-compliance with the
State Liability Act. We
know from Mr Xulu’s
reply, sent at 15:26 on the same day, that he received the letter.
[137]
Mr Manuel has stated under
oath that he repeated these assertions at a meeting with Mr Xulu on
Thursday 1 August. And later that
afternoon Mr Manuel sent Mr Xulu an
email confirming that the basis on which the DAFF was seeking an
undertaking was BXI’s
failure to comply with
ss 3(4)
-(8)
of the
State Liability Act. In
that email Mr Xulu was referred to the
Constitutional Court’s decision in
Provincial
Government: North West Province & another v Tsoga Developers CC &
others
[2016] ZACC 9
;
2016 (5) BCLR 687
(CC) paras 28-29 and 44-45, where the provisions of
the
State Liability Act in
relation to the principle of legality were
discussed.
[138]
The sheriff paid the
amount of R17 657 098 – the proceeds from execution
of the second writ – into BXI’s
trust account on Friday 2
August. It was thereafter that Mr Xulu caused substantially the whole
amount to be transferred to his
business account, from which it was
disbursed. By 5 August 2019 only R203 515,97 remained in the
trust account and by 6 August
only R117 200,25 remained in the
business account (though R3,4 million is available in the frozen
forex account).
[139]
It is difficult to
avoid the conclusion, in relation to the amount of R17 657 098,
that Mr Xulu caused BXI to part with
the money despite knowing that
the writ and attachment pursuant to which that money had been
received were invalid. If he did not
bother to look at the
State
Liability Act, he
would seem to have acted in reckless disregard of
the legality of BXI’s actions, ie at least with
dolus
eventualis
.
[140]
In oral argument, BXI’s
counsel, who also represented Mr Xulu in the joinder application,
contended that if he were joined
with a view to imposing personal
liability on him, he should be given an opportunity to answer the
case against him. I think the
fairest course would thus be to join Mr
Xulu and issue a rule nisi calling on him to show cause why he should
not be jointly and
severally liable for the amounts refundable by
BXI.
Conclusion
and order
[141]
It is a matter of concern
that writs were issued in this case without an enquiry into
compliance with the
State Liability Act. I
consulted with the court’s
chief registrar. It seems that the registrars in this division may
not be alert to the provisions
of the Act. There is no standard form
for the written request contemplated in s 3(6) of the Act. Attorneys
who seek writs against
national or provincial government departments
must not make such requests unless there has been compliance with the
Act, and registrars
should not issue writs unless so satisfied. In
practice, this seems to me to require the attorney, in the written
request, to state
(a) when the period contemplated in s 3(3) expired;
(b) that after expiry of that period, due service was effected
on each
of the persons contemplated in s 3(4), and the dates of
such service; and (c) that 14 days have expired from such
service
without payment having been effected and without acceptable
arrangements for satisfaction of the debt having been reached.
[142]
It also appears that the
sheriff in this case did not pay proper heed to the provisions of
ss 3(7) and (8). Had the sheriff
observed the 30-day holding
period specified in s 3(8), the loss of the DAFF’s money
might have been avoided.
[143]
The applicant has asked
for the costs of three counsel. In my view the case was not so
complex and vast as to justify such an order.
[144]
I make the following
order:
(a) The service level
agreement, purportedly concluded between the applicant and the first
respondent (‘BXI’)
on 23 May 2017, is declared invalid
and is reviewed and set aside.
(b) The settlement
agreement, purportedly concluded between the applicant and BXI on 12
April 2019, is declared invalid
and is reviewed and set aside.
(c) The order granted
on 6 June 2019 by Steyn J under the present case number is rescinded.
(d) All writs of
execution and notices of attachment issued and effected pursuant to
the said order of 6 June 2019 are
declared invalid and are reviewed
and set aside.
(e) BXI is ordered to
pay to the applicants, by Thursday 30 April 2020, the amount of
R20 242 472,90 which
it received pursuant to the invalid
writs of execution and notices of attachment, subject to any set-off
arising from para (g)
below.
(f) The applicants are
directed to proceed with the verification of BXI’s invoices and
to report the results of
such verification to BXI in writing by
Thursday 9 April 2020.
(g) The said written
report shall also specify the amount, if any, which the applicants
tender to pay BXI for services
rendered in addition to the payments
BXI has already received.
(h) BXI is ordered to
pay the applicant’s costs, including those attendant on the
employment of two counsel.
(i) Mr Barnabas Xulu
(‘Mr Xulu’) is joined as the fifth respondent.
(j) A rule nisi is
issued calling on Mr Xulu to show cause, on Thursday 12 March 2020,
why he should not be ordered to
pay the said amount of R20 242 472,90
jointly and severally with BXI.
(k) If Mr Xulu intends
to oppose the making of such an order on the return day, he must:
(i) deliver a notice
of opposition by Friday 7 February 2020;
(ii) deliver his
opposing affidavits by Friday 28 February 2020.
(l) If Mr Xulu files
opposing papers as aforesaid, the court on 12 March 2020 will
determine a timetable for the further
conduct of the claim against
him.
______________________
O L
Rogers
Judge
of the High Court
Western
Cape Division
APPEARANCES
For
Applicants
N
Bawa SC (with her B Joseph SC and J Williams)
Instructed
by
State
Attorney
4
th
Floor, 22 Long street
Cape
Town
For
First Respondent
M
J M Bridgman (with him C Smart)
Instructed
by
Millar
Reardon Attorneys, Durban
c/o
B Xulu & Partners Inc
9
th
Floor, 113 Loop Street
Cape
Town
[1]
Para 10 record 1114.
[2]
Para 11 record 1114.