Mnandi Property Development (Pty) Ltd v Ekurhuleni Local Council and Others (20018/2010) [2012] ZAGPJHC 6 (20 January 2012)

78 Reportability

Contract Law

Brief Summary

Contract — Agreement — Existence of agreement — Applicant claimed payment for external electrical and water services allegedly installed on behalf of the first respondent in Helderwyk Township — Dispute arose regarding whether an agreement was concluded between the parties for the provision of these services — Evidence presented indicated no agreement was ever reached, as negotiations did not culminate in a binding contract — Court held that the applicant's claim was not supported by any valid agreement and dismissed the application.

Comprehensive Summary

Summary of Judgment

Introduction

The proceedings took the form of a motion application in which the applicant sought payment from the first respondent municipality for the cost of certain township engineering services. The applicant, Mnandi Property Development (Pty) Ltd, claimed reimbursement primarily for external electrical services and, additionally, for water services installed in connection with the development of the Helderwyk Township (Registration IR Gauteng).

The first respondent was the Ekurhuleni Local Council (with other respondents cited, although the dispute and relief were directed materially at the first respondent). The applicant grounded its claim on section 71A of the Town Planning and Townships Ordinance 25 of 1965 and initially alleged the existence of an agreement recorded in correspondence.

The matter first came before the court on 2 December 2010, where a dispute of fact emerged from the papers. An order was then made (by agreement between the parties’ representatives) referring defined issues to oral evidence, namely whether an agreement existed that the municipality would pay for the external electrical and water services, and whether any claim under such an agreement had prescribed. The referral order also recorded that the applicant abandoned all other bases for its claim aside from the alleged agreement.

Oral evidence commenced on 7 February 2011. The evidence was not concluded then and a postponement followed. The matter returned for continuation during court recess in January 2012, at which stage the court reconsidered whether further oral evidence would serve any purpose and ultimately dismissed the application.

Material Facts

It was common cause that the applicant purchased the land on which the township was later established when it was still farmland. The township was subsequently proclaimed under section 69 of the Town Planning and Townships Ordinance 25 of 1965. During the township’s development, the applicant installed certain services connected to water and electricity provision and later sought a refund of its expenditure.

The applicant’s monetary claim was for R6 158 925 in respect of external electrical services allegedly installed on behalf of the municipality, and R425 527 for water services installed in the same township (with further claims for interest and costs). On the papers, the applicant initially relied on what it characterised as an agreement “recorded” in a letter dated 8 February 2006 from relevant municipal regional directors. The court identified that the annexed letters did not support the asserted contractual foundation: one letter was found to have no relevance to the applicant’s case, and the other recorded that installation responsibilities would lie with the developer to municipal specification, but did not constitute an agreement by the municipality to reimburse the applicant.

Following the December 2010 order, the applicant delivered further particulars stating that the agreement was oral, while also asserting that it was “reflected in several documents and correspondence.” The applicant did not allege a contract that was partly oral and partly written. The particulars concerning the identity of municipal representatives and the date(s) of conclusion were provided in general terms and described the agreement as having been concluded “over a protracted period of time from February 2006 to 2008.”

At the hearing of oral evidence, the applicant led the evidence of Mr Cronje, a consulting engineer who represented the applicant on the relevant engineering service issues. Mr Cronje’s evidence, supported by documents emanating from the applicant and confirmed by him, was that while negotiations were protracted and there were attempts to settle and agree the amounts payable, no agreement was ever reached between the parties on the issues giving rise to the claim.

A further material feature, as it emerged in the court’s assessment, was that the township had been proclaimed without an agreement having been concluded beforehand allocating responsibility for payment for the relevant services, notwithstanding ordinance provisions requiring clarity on that allocation prior to proclamation.

Legal Issues

The central legal issue was whether the applicant had proved the existence of an agreement between it and the municipality in terms of which the municipality would pay for the external electrical services and external water services installed by the applicant. This issue required a determination of fact, assessed against the contractual foundation the applicant had elected to stand on.

A secondary issue identified in the referral order was whether, if such an agreement existed, the claim had prescribed. However, the court’s resolution of the contractual issue rendered it unnecessary, on the court’s approach, to determine prescription.

A further procedural and evaluative issue arose during the oral evidence process: whether, in motion proceedings referred to oral evidence under the relevant rule, the court could properly terminate the oral evidence process and decide the matter without hearing further witnesses where continuation would not serve a useful purpose, particularly given the defined and limited scope of the referral.

Court’s Reasoning

The court approached the matter on the basis that, by agreement recorded in the referral order, the applicant had confined its case to a single foundation: the existence of a specific agreement obliging the municipality to reimburse the applicant for the relevant external services. The court treated this procedural narrowing as decisive in framing what had to be proved for the application to succeed.

On the evidence, the court found that the documents initially relied upon as evidencing an agreement did not, on their terms, establish any undertaking by the municipality to pay the applicant. In particular, the letter relied upon in relation to electricity recorded that installation of external and internal services would be the developer’s responsibility to municipal specification; it did not amount to a reimbursement agreement.

The court placed substantial weight on the oral evidence of Mr Cronje, described as a critical witness for the applicant’s case. That evidence, corroborated by the applicant’s own documentation, was understood as establishing that the parties had engaged in negotiations and attempts to reach a settlement, but that no agreement was concluded. The court reasoned that ongoing negotiations and attempts to agree a figure did not constitute an agreement, and that a court could not convert an “attempt at reaching an agreement” into a concluded contract.

In addressing whether to hear further oral evidence, the court relied on the principle that a referral to oral evidence in motion proceedings is intended to be limited to defined disputes of fact, and is not a mechanism to convert the matter into a full trial. The court referred to the explanation in Herbstein and Van Winsen (as quoted in the judgment) concerning the restrictive purpose of the rule governing oral evidence in applications. On authority, the court accepted that it is open to a court to conclude that it is unnecessary to hear oral evidence and to decide the matter on the papers, and considered it equally appropriate, after hearing the evidence of a witness central to the applicant’s case, to decide that no useful purpose would be served by continuing.

The court also took into account that the proposed further witness, Mr Brown, was the deponent to the founding affidavit and that the documentary foundation in that affidavit had already been identified as defective in demonstrating a concluded agreement. The court further noted that any evidence Mr Brown might give asserting that an agreement existed would be contradicted by Mr Cronje’s evidence to the contrary, and it treated Mr Cronje’s evidence as dispositive of whether a contract had been concluded.

On this basis, the court exercised its procedural control to halt the oral evidence proceedings and to determine the application at that stage. Given the applicant’s abandonment of alternative causes of action and the absence of a proved agreement, the court concluded that the application could not succeed and should be dismissed.

Outcome and Relief

The application was dismissed.

The court ordered the applicant to pay the costs of the application, including the costs of two counsel. The costs order also included all reserved costs to date and the costs of the necessary attendance of Mr Smith.

Cases Cited

Wallach v Lew Geffen Estates CC [1993] ZASCA 39; 1993 (3) SA 258 (A).

Combrinck v Rautenbach 1951 (4) SA 357 (T).

Legislation Cited

Town Planning and Townships Ordinance 25 of 1965 (sections 69 and 71A).

Rules of Court Cited

Rule 16(5)(g) (as referenced in the judgment in relation to the referral to oral evidence).

Rule 6(5)(g) (as referenced in the judgment in relation to oral evidence in motion proceedings).

Held

The court held that the applicant failed to establish the existence of any agreement with the first respondent municipality obliging the municipality to reimburse the applicant for external electrical and water services installed in the development of Helderwyk Township.

Given that the applicant had, by agreement recorded in the referral order, abandoned any basis for relief other than the alleged agreement, the absence of a concluded agreement was fatal to the application. The court further held that it was procedurally appropriate to terminate the oral evidence proceedings once the evidence of the applicant’s critical witness demonstrated that no agreement had been reached, and that continuing with further witnesses would not serve a useful purpose.

LEGAL PRINCIPLES

A referral to oral evidence in motion proceedings is intended to be limited in scope to defined disputes of fact, and does not entitle parties to expand the proceedings into a full trial; the inquiry must remain confined to the issues specified by the court in the referral.

Even where oral evidence is permitted in application proceedings, the matter remains motion proceedings and does not become a trial action; accordingly, the court retains control to prevent the process from becoming a “roving commission” beyond the defined disputes.

A court may conclude, in appropriate circumstances, that it is unnecessary to hear oral evidence and may decide the matter on the papers; and, having heard evidence on the defined issues, it may also determine that no useful purpose would be served by continuing to hear further witnesses where the decisive issue has been resolved on the evidence already led.

Negotiations, attempts to settle, or efforts to reach agreement do not constitute a concluded agreement; the existence of a contractual obligation depends on proof that consensus was achieved, and the absence of consensus is fatal where the claim depends exclusively on contract.