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[2015] ZAGPJHC 295
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Nurcha Development Finance (Pty) Limited v Randfontain Municipality (14209/2014) [2015] ZAGPJHC 295 (11 March 2015)
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REPUBLIC OF SOUTH
AFRICA
IN THE HIGH COURT OF
SOUTH AFRICA
GAUTENG LOCAL DIVISION,
JOHANNESBURG
CASE NO: 14209/2014
DATE: 11 MARCH 2015
In the matter between:
NURCHA DEVELOPMENT FINANCE (PTY)
LIMITED
..................................................
Applicant
And
RANDFONTEIN
MUNICIPALITY
.....................................................................................
Respondent
J U D G M E N T
MAKUME, J:
INTRODUCTION
[1] In this matter the applicant is
suing the respondent for payment of an amount of R2 597 915,85.
[2] The applicant alleges that it has
suffered damages as a result of breach of an agreement between the
respondent and an entity
known as Mkwanazi Construction (Pty) Ltd
(hereinafter referred to as the principal debtor).
FACTS
[3] During or about July 2011 the
respondent awarded a tender for bulk water supply in the area of
Droogheuwel and Middelvlei to
the principal debtor (Mkwanazi
Construction (Pty) Ltd).
[4] Subsequent to the tender having
been awarded the principal debtor needed bridging finance to enable
it to carry out the work
awarded and approached the applicant. A loan
agreement was entered into between the principal debtor and the
applicant in terms
of which the applicant advanced money to the
principal debtor.
[5] The loan agreement is attached to
the founding affidavit and is marked Annexure “A”. The
principal debtor signed
on the 26th August 2011 whilst the applicant
signed on the 10th September 2011. I need to state that the
respondent is not a party
to that agreement.
[6] On the 19th August 2011 the
principal debtor addressed a letter titled “Irrevocable Payment
Instruction” to the
respondent in which letter the principal
debtor directed the respondent to pay all and any payments due to it
arising from the
tender contract into a specified bank account held
in the name of the principal debtor at First National Bank.
[7] I deem it necessary to quote
paragraph 2 of this irrevocable payment instruction in full as it is
at the heart of the dispute
between the parties. It reads thus:
“As the contractor has entered
into a loan agreement with Nurcha Development Finance (Proprietary)
Limited (‘Nurcha’)
and provided security in terms of
which Nurcha has agreed to advance bridging finance to the contractor
in respect of the above
named project and whereas the contractor has
appointed Tusk Construction Support Services (Pty) Ltd (Registration
Number 99/001303/07)
to amongst other things provide financial
administration and construction support services to the contractor in
respect of the
above named project, you are hereby advised that this
irrevocable instruction to the employer and bank account may only be
changed
with the written consent of Tusk Construction Support
Services (Pty) Ltd.”
[8] The instruction letter is signed by
one John Reginald Stopforth a director of the principal debtor and
below the signature appears
the following note:
“Noted and accepted by employer.
The employer hereby confirming that all terms of this instruction
shall be complied with
fully.”
The note is signed on the 7th September
2011 by a Mr Linda Philemon Ivan Mashego the Chief Financial Officer
of the respondent.
[9] All seems to have been going well
and according to plan until during May 2012 when the principal debtor
addressed a letter to
the respondent. That letter is attached to the
answering affidavit as Annexure “RM1”. It is dated the
10th May 2012
and reads as follows:
“This serves to advise you that
Mkwanazi Construction (Pty) Ltd has changed its operating bank
account to:
Standard Bank, Delmas with account
number [4………] and branch number [0………].
Please make
all future payments due to Mkwanazi Construction (Pty)
Ltd to this account.”
The letter is signed by Mr J R
Stopforth.
[10] On the 14th February 2013 at the
instance of Absa Bank Ltd as an applicant against the principal
debtor as first respondent
and the applicant as the third respondent
an order was granted perfecting the general notarial bond registered
in favour of Absa
Bank in respect of the principal debtor’s
movable property and effects.
[11] In that matter emanating out of
the North Gauteng High Court under case number 70872/12 the principal
debtor was ordered to
pay the applicant an amount of R2 925 124,54.
[12] Although it does not appear from
the papers I was informed by counsel for the applicant that the
principal debtor was placed
in provisional liquidation on the 14th
May 2013 and finally liquidated on the 3rd September 2013.
[13] In paragraph 7.15 of the founding
affidavit the applicant says that it obtained judgment for payment
of the sum of R2 925
124,54 against the principal debtor and refers
to Annexure “F” being a copy of the judgment order.
Annexure “F”
did not form part of the papers however I
accept that the judgment order does exist seeing that it is the
applicant that says
so.
THE APPLICANT’S CASE ON THE
PAPERS
[14] The basis of the applicant’s
claim as gleaned from the founding affidavit is to be found in
paragraphs 7.14, 7.15 and
7.16 which read as follows:
“7.14 As a result of the
respondent’s breach the applicant has suffered damages in the
sum of R2 597 915,85 being the
balance of the amount due and owing to
the applicant in terms of the loan agreement.
7.15 Notwithstanding a judgment order
for the payment of the sum of R2 925 124,54 against the principal
debtor in favour of the
applicant the applicant is unable to recover
the aforesaid amount from the principal debtor. A copy of the
judgment order is attached
hereto marked ‘F’.
7.16 Following a single payment by the
principal debtor the sum of R2 597 915,85 together with interest
thereon at the prime rate
of 2.5% from 16th May 2013 remains
outstanding.”
[15] What appears in the paragraph is
the initial basis of the claim which is based on breach. When the
principal debtor defaulted
in payments on the loan agreement the
applicant obtained default judgment for the full amount against the
principal debtor and
then the principal debtor made a single payment
leaving the balance owing of R2 597 915,85. It is this amount that
the applicant
now claims from the respondent. The applicant says
because the principal debtor has failed to pay that amount despite a
judgment
it now turns onto the respondent to pay the amount.
[16] The applicant says the respondent
breached the agreement by not paying money due to the principal
debtor into the account stated
as Annexure “B” namely the
irrevocable instructions document.
[17] When the applicant read the
respondent’s answering affidavit in which the respondent
disavows liability based on the
irrevocable instructions and raised a
number of points in limine the applicant in its replying affidavit
raises a new ground and
basis for its claim based on the stipulatio
alteri.
[18] The applicant contends that the
irrevocable instruction document between the principal debtor and the
respondent was to its
benefit and hence the respondent is bound by
the terms thereof.
THE RESPONDENT’S CASE
[19] The respondent has raised a number
of points in limine which I will deal with later. Besides the points
in limine the respondent
denies that it is a party to the so-called
irrevocable payment instructions, secondly that it has paid in full
its obligations
arising from the tender awarded to the principal
debtor and lastly that the applicant’s founding and replying
affidavits
failed to disclose any cause of action and stands to be
dismissed with costs.
WHAT IS IN ISSUE
[20] There are two issues before me.
They are the following:
First issue
Whether the irrevocable payment
instructions document was an agreement between the applicant and the
respondent.
Second issue
If the answer to the first issue is in
the positive then I have to determine whether the respondent breached
such agreement so as
to entitle the applicant to claim or sue the
respondent for damages arising therefrom.
THE LEGAL PRINCIPLES
[21] It is common cause that the
respondent was not a party to the loan agreement. I say this despite
the fact that the loan agreement
refers in its definition clause to
the “irrevocable payment instruction” (see clause 1.20).
[22] The applicant argues that the loan
agreement should be read together with the “irrevocable payment
instruction”
for a proper understanding and conclusion that a
contract for the benefit of a third party the so-called stipulatio
alteri came
into effect.
[23] It is trite law that in a
stipulatio alteri the stipulator does not contract in the name of the
third person but intends to
bind the other party to himself or
herself and to confer a right on the third person which the latter
can accept or reject. Acceptance
of the benefits is crucial as was
held by F S Steyn J in the matter of Avondale Trust (Pty) Ltd v Wouda
1975 (2) SA 444
(TPD) at page 445H wherein the following was said:
“It is common cause between the
parties and abundantly clear from the evidence of Mr Brink and
documents handed in that the
plaintiff company was not a party to the
settlement of 16 September 1967. Consequently the plaintiff could
only become entitled
to the benefits conferred upon it by agreement
if it subsequently adopted the agreement and accepted the benefits
and obligations
and advised the party obliged to render the benefit
the defendant in this case of the ratification of the agreement.”
[24] In the present matter the
applicant is not a party to the irrevocable payment instruction and
never informed the respondent
that it accepts the benefits. This is
demonstrated by the fact that when the principal debtor breached the
loan agreement the
applicant proceeded with a claim against the
principal debtor and obtained judgment for the full amount without
reference to the
respondent.
[25] The irrevocable payment
instruction itself does not direct the respondent to make payment to
the applicant it directs that
payment be made to the principal
debtor. This instruction is in line with the agreement between the
principal debtor and the respondent
as per the tender that the
principal debtor will perform certain specific works for and on
behalf of the respondent for which the
respondent shall remunerate
the principal debtor into a nominated bank account.
[26] In paragraph 7.5.2 the applicant
alleges that “Tusk Construction Support Services (Pty) Ltd”
were appointed as
the applicant’s agent to provide financial
administration of construction support services to the principal
debtor. A proper
reading of paragraph 2 of the document titled
“Irrevocable Payment Instruction” does not say that Tusk
was appointed
the applicant’s agent it says that the contractor
referring to the principal debtor has appointed Tusk to provide
financial
administration duties and construction support services to
the contractor in respect of the project. Tusk was accordingly an
agent
of the principal debtor not the applicant.
[27] There is nowhere in the
applicant’s papers where it is said that when the principal
debtor issued fresh directives in
respect of further payments to it
that Tusk did not consent thereto. The respondent did not do
anything outside what it agreed
on with the principal debtor.
[28] Paragraph 2 of the irrevocable
payment instruction reads that:
“As the contractor has entered
into a loan agreement with Nurcha Development Finance (Pty) Limited.”
The fact of the matter is that when
this document was issued and signed by the principal debtor no loan
agreement had been signed
it is therefore inconceivable that the
payment instruction should be interpreted to mean that payments
referred to payments in
terms of the loan agreement because at that
stage it was non-existent. Accordingly payment could only be
interpreted to refer to
payments in terms of the tender agreement to
which the applicant was never a party.
[29] I can accordingly not find that
the irrevocable payment document created any agreement or obligation
between the applicant
and the respondent. A more or less similar
situation arose in the matter of Country Cloud Trust v MEC Department
of Infrastructure
Development 2015 (1) SA (CC) a judgment by Khampepe
J. The matter concerned a delictual claim for pure economic loss
arising out
of the following facts as summarised by Brand J when the
same matter served before the Supreme Court of Appeal reported as
Country
Cloud v Department of Infrastructure Development
2014 (2) SA
274
(SCA).
[30] In that matter during the year
2006 the respondent awarded a tender to a construction company known
as Illima Projects (Pty)
Ltd (“Illima”). In terms of
that contract Illima undertook to complete a construction of the
partially built Zola
Clinic in Soweto at a contract price of R450
million. In order to comply with its obligation under the contract
Illima borrowed
R12 million from Country Cloud.
[31] The Department was aware that
Illima was in need of financial assistance in order to complete the
contract hence the Department
made various concessions to assist
Illima in obtaining a loan so as to facilitate the expeditious
completion of the hospital. First
the Department undertook as part of
the construction contract to pay Illima a so-called site
establishment and mobilisation fee
equal to 5% of the contract price
of R480 million that is R21,5 million within 30 days of concluding
the contract. Secondly, the
Department allowed its managing agent Tau
Pride (Pty) Ltd to give a formal undertaking to Country Cloud that
the loan of R12 million
be paid directly to it out of the site
rehabilitation and mobilisation fee of R21,5 million when Illima
became entitled to this
fee.
[32] Shortly after Country Cloud had
paid R12 million to Illima the Department cancelled the construction
agreement with Illima
even before payment of the agreed R21,5 million
site establishment fee. Illima was then liquidated. Country Cloud
instituted
action in this Division against the defendant for
delictual damages in an amount of R20,5 million.
[33] Both the High Court and the
Supreme Court of Appeal dismissed the claim albeit on different
grounds. In the Constitutional
Court Khampepe J identified the issue
for decision by that court at page 8 paragraph [19] as follows:
“[19] The sole issue is whether
the department should be held delictually liable for Country Cloud’s
loss. The answer
to this question rests on important questions
namely was the department’s conduct in cancelling the
completion contract wrongful.
The issue is not whether the
department’s conduct was wrongful in some general sense or
wrongful towards Illima. It is whether
its conduct was wrongful
vis-à-vis Country Cloud.”
[34] In dismissing the claim her
Ladyship Khampepe J writes as follows at page 16 paragraph [43]:
“[43] Country Cloud must persuade
us that the department is responsible for the loss suffered. If the
department acted permissibly
in causing Country Cloud loss it does
not matter that it did so intentionally. Nor does it matter that
there is no risk here of
indeterminate liability. Until we are
satisfied the department wronged Country Cloud its claim does not get
off the ground.
Country Cloud did not allege here as in a negligent
misstatement case, that the department made a representation to it
that the
department would honour the completion of the contract and
the terms of contract between the department and Illima cannot and do
not determine without more that the department owes a duty to Country
Cloud.”
[35] Although the issue to be decided
in the present matter is based on a breach of contract as opposed to
the delictual liability
arising out of a contract as in the Country
Cloud matter I submit that the underlying facts are mostly similar.
In the Country
Cloud matter as in this matter there was an
undertaking to pay the non-contracting party to the loan agreement
despite this Khampepe
J found at paragraph [43] in the last sentence
that the terms of contract between the Department and Illima cannot
and do not determine
without more that the Department owes a duty to
Country Cloud.
[36] The penultimate paragraph in the
judgment of the Constitutional Court puts to rest this issue. At
paragraph [66] the judge
says the following:
“[66] While Country Cloud had no
direct contractual relationship with the department it obtained
certain undertakings from
it including that the loan he repaid from
the remobilisation fee through Tau Pride. The agreed protection did
not extend to imposing
liability on Tau Pride which was acting as the
department’s agent for the project for any loss caused to
Country Cloud if
the department breached its contract with Illima.
This seems to me to reinforce the notion that Country Cloud should
have no claim
in delict.”
[37] The second issue for determination
by this Court is whether the respondent breached the agreement so as
to entitle the applicant
to a claim for damages arising therefrom.
[38] I have already made a finding that
the irrevocable payment instruction (Annexure “B”)
whether read alone or in
conjunction with the loan agreement created
no contractual relationship between the applicant and the respondent.
In the result
there is no agreement that the respondent breached. I
therefore need not deal with the second issue.
[39] I turn now to deal with the
various points in limine raised by the respondent.
[40] The first point in limine raised
by the respondent both in the answering affidavit and in the heads is
that Mr Sindiswa Ntusani
the deponent to the founding affidavit lacks
the necessary authority to represent the applicant in these
proceedings in that he
has failed to attach a resolution by the
directors of the company authorising him to depose to the founding
affidavit.
[41] This point in limine must fail. I
agree with the applicant that a deponent in motion proceedings need
not be authorised by
the party concerned to depose to the affidavit.
It is the institution of the proceedings and the prosecution thereof
which must
be authorised.
[42] The second and third points in
limine raised namely no cause of action as well as no causal link
need no further attention
as I hold the view that same have been
dealt with somewhere in this judgment.
[43] The fourth point in limine namely
non-joinder deserves attention. It is a principle of our law that
interested parties should
be afforded an opportunity to be heard in
matters in which they have a direct and substantial interest.
[44] The applicant’s claim is
based on two agreements in which the principal debtor is a party.
The principal debtor is accordingly
not only a necessary party to
these proceedings but has an interest in the outcome thereof. The
liquidators of the principal debtor
have an interest in the outcome
of these proceedings and should have been joined for the simple
reason that if the applicant should
succeed in the claim then payment
to the applicant may very well fall to be deal with in terms of the
Insolvency Act.
[45] In opposing this point in limine
the applicant has referred me in its heads of argument to the case of
Standard Bank of South
Africa v Swartland Municipality
2011 (5) SA
257
(SCA). That case does not support the applicant because the court
in that matter made a finding that applicant Standard Bank should
have been joined in the proceedings before the Magistrate’s
Court when the Municipality applied for a demolition order.
I
accordingly find that the non-joinder of the principal debtor and/or
the liquidators is well taken as a point in limine and the
application should have been dismissed on that point alone.
CONCLUSION
[46] In conclusion I find that the
applicant has failed to show any cause of action against the
respondent perhaps this could be
explained by the fact that the
applicant already has a judgment for the same amount against the
principal debtor all that the applicant
should now do is to follows
its claim with the liquidators of the principal debtor.
[47] The respondent argues that because
of what I have said in paragraph [46] above that applicant should be
mulcted with costs
on an attorney and client scale. I am not
persuaded that such an order is appropriate under the circumstances.
ORDER
[48]
48.1 The application is dismissed.
48.2 The applicant is ordered to pay
the taxed party and party costs.
DATED at JOHANNESBURG on this day 11th
day of MARCH 2015.
M A MAKUME
JUDGE OF THE HIGH COURT OF SOUTH
AFRICA
GAUTENG LOCAL DIVISION, JOHANNESBURG
COUNSEL FOR THE APPLICANT ADV J A
SWANEPOEL
INSTRUCTED BY JAY MOTHODI
INCORPORATED
9 Arnold Road Rosebank
Tel: (011) 268-3500
Ref: MAT44998/Mr N Georgiades/rj
COUNSEL FOR THE RESPONDENT L
MAUNATLALA
INSTRUCTED BY THAANYANE ATTORNEYS
9th Floor Anglo Vaal Building
56 Main Street
Johannesburg
Tel: (011) 832-2323
Ref: N Thaanyane/M Maraka