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[2014] ZASCA 77
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Local Municipality of Madibeng v Paphiri Business Enterprise CC (134/2013) [2014] ZASCA 77 (29 May 2014)
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THE
SUPREME COURT OF APPEAL
OF
SOUTH AFRICA
JUDGMENT
NOT
REPORTABLE
Case
No:
134/2013
In
the matter between:
THE
LOCAL MUNICIPALITY OF
MADIBENG
.........................................................
APPELLANT
and
PAPHIRI
BUSINESS ENTERPRISE
CC
....................................................................
RESPONDENT
Neutral
citation:
The Local Municipality of
Madibeng v Paphiri Business Enterprise
(134/2013)
[2014] ZASCA 77
(29 May 2014)
Coram:
Lewis and Leach JJA and Hancke, Swain
and Mathopo AJJA
Heard:
20 May 2014
Delivered:
29 May 2014
Summary:
Contract – terms thereof common
cause – amounts municipality to pay thereunder proved on the
probabilities.
ORDER
On
appeal from:
North Gauteng High Court,
Pretoria (Kollapen and Webster JJ sitting as court of first
instance):
The appeal is
dismissed with costs.
JUDGMENT
Leach
JA
(Lewis JA and Hancke, Swain and
Mathopo AJJA concurring)
[1]
This is a case about garbage or, more precisely, about the amount the
appellant, a local municipality, owes the respondent for
rendering
refuse and waste removal services under a contract concluded pursuant
to a tender process. A claim by the respondent
for payment of an
amount it alleged was due and owing was dismissed in a magistrate’s
court but upheld on appeal to the North
Gauteng High Court. This
further appeal is with this court’s leave. For convenience I
intend to refer to the appellant
as ‘the municipality’
and the respondent as ‘Paphiri’.
[2]
Chaos and confusion have bedevilled the matter from the outset, a
position helped neither by the pleadings nor the haphazard
presentation of the evidence in the trial court. Sifting the wheat
from the chaff, it appears that in February 2003, Paphiri
was
awarded a contract by the municipality in respect of a tender
(S18/2002) to provide waste and refuse removal services
in an area
situated to the south of the Hartbeespoort Dam. The municipality
subsequently informed Paphiri that in fact its services
were required
not for the area to the south of the dam but to the east. The matter
is made all the more confusing by the fact that,
in December 2002,
under another tender (S22/2002) the municipality had called for
tenders for the rendering of waste and refuse
removal services on the
western side of the dam although, again, this was a mistake as it too
was intended to relate to the area
to the east of the dam.
[3]
In any event, Paphiri submitted a bid in respect of tender 22/2002
that added to the confusion. The tender document, in itself
somewhat
confusing, required an itemised tender in relation to monthly charges
for specific items of service, namely; a weekly
house-to-house
collection, the removal of illegally dumped refuse, ‘continuous
litter picking and sweeping’, ‘waste
transfer station
operations’, and the disposal of waste collected at a landfill.
In its tender, however, Paphiri quoted a
monthly charge of R36.35
per house in respect of ‘house-to-house collection once a week’
and R110 000 as the
‘total cost to render the service per
month’, but no specific amounts in respect of the other
itemised services.
Quite what all of this was intended to convey is
by no means clear. Fortunately, whatever Paphiri’s intention in
tendering
in these terms may or was understood to have been, is
unnecessary to decide.
[4]
At a meeting of the municipality’s Mayoral Committee held on 10
May 2003, the ‘rectifications of tender S18/2002
─
rendering of refuse removal at the southern side of the Hartbeespoort
Dam’ was discussed together with Paphiri’s
tender. The
committee resolved as follows (its resolution was recorded as MC
1300):
‘
1.
That cognisance be taken that:
1.1
The Mayoral Committee has, per item MC. 1194 of February 2003
appointed Paphiri Business Enterprise CC to render refuse removal
at
the Southern side of Hartbeespoort Dam at the calculated tender
amount of R74 722.60;
1.2 the area
allocated for Paphiri Business Enterprise is in fact in the
Eastern side of Hartbeespoort Dam and
not in the Southern or Western
side of Hartbeespoort Dam;
1.3
Paphiri Business Enterpise CC has already started rendering service
from 01 April 2003 in the Eastern side of Hartbeespoort
Dam;
1.4
The price ranges between:
1.4.1
R17.00 - R34.23 per house per month (VAT excluded)
1.4.2
R44.00 - R80.17 per business per month (VAT excluded)
1.4.3
R100.00 - R217.65 per service of a 5,5 m
3
container
1.4.4
(VAT excluded);
.
. . .
2. That the
all-inclusive tender amount of R110 000-00 of Paphiri Business
Enterprise be accepted.
3. That after the
approval of the Mayoral Committee an appointment letter be served to
Paphiri Business Enterprise with an adjusted
tender amount.
4.
That the Municipality enter into a contract with the service
provider.’
[5]
Following this resolution the municipality addressed a letter to
Paphiri on 12 May 2003. Referred to as the ‘acceptance
letter’
it was shown both to a witness and to the magistrate and its contents
were referred to in evidence, but it was not
handed in as an exhibit
and forms no part of the record. Be that as it may, it
purported to ‘adjust the previous appointment
letter which
quoted for only household waste removal, street cleaning and removal
of illegal waste’ and recorded a five year
contract effective
from 1 April 2003.
[6]
Subsequent to this haphazard and confused process, the parties
concluded a written memorandum of agreement. Signed by Paphiri
on 6
August 2003 and by the municipality ten days later, it incorporated
the terms set out in the letter of acceptance of 12 May
2003 and
appointed Paphiri for a period of five years to render a complete
refuse removal service on the eastern side of the Hartbeespoort
Dam.
No mention was made of the all-inclusive fee of R110 000 per
month accepted by way of resolution MC 1300 on 10 May 2003.
Instead,
clause 2 thereof recorded that the monthly service fee payable for
rendering of the service would be R36.35 per house,
R45 per business
and R120 for every 5,5 cubic meter container used. The amount in
respect of the house service was slightly higher
than the upper limit
of the range of fees set out in MC 1300 whilst the other amounts fell
within the range approved in that resolution.
How that came about one
does not know and the municipality led no evidence to explain it. But
notwithstanding whatever the Mayoral
Committee’s original
intention may have been, both sides ultimately did not agree to
Paphiri being paid for its services
by way of an all-inclusive
monthly fee.
[7]
Two further terms of the written agreement should be mentioned.
First, it was agreed that the service fees payable to Paphiri
would
escalate annually in accordance with the consumer price index.
Second, clause 2.2 provided:
‘
Counts
shall be performed every six months during the contract period by the
Manager, Department of Land, Housing, Environment,
Solid Waste,
Parks, Streets & Cemeteries after which the fee paid to Paphiri
for rendering the different refuse removal services
may be adapted.’
[8]
Flowing from these negotiations, and effectively from 1 April 2003,
Paphiri carried out the refuse and waste removal services
it had
undertaken to perform and for which the municipality paid it monthly.
But the confusion continued. As I have mentioned,
the all-inclusive
fee of R110 000 per month recommended by the Mayoral Committee
in resolution MC 1300 in May 2003 formed
no part of the written
agreement concluded in August 2003. Despite this, instead of paying a
sum determined with reference to the
number of houses, businesses and
containers being serviced as set out in the written agreement, the
municipality paid R110 000
per month throughout the period to
which Paphiri’s claim relates.
[9]
Although the municipality persisted in paying the all-inclusive fee
on the one hand, it appears from correspondence that, on
the other,
it also accepted being obliged to have regard to the number of
houses, businesses and containers being serviced under
the written
agreement. Unfortunately, notwithstanding the provisions of clause
2.2 of that agreement, it failed to perform a count
every six months
as it had undertaken to do and it is common cause that it was agreed
consequently that Paphiri would carry out
those counts.
[10]
Consequently, on 13 November 2003, Paphiri wrote to the municipal
manager stating that it had counted the houses, businesses
and
containers it was servicing and giving the numbers as at the end of
October 2003. This count showed an increase in the numbers
over those
that had been agreed when the contract commenced. Every six months
thereafter Paphiri submitted similar letters to the
municipality
giving updated numbers. These letters were attached to its summons
marked as annexures C1 to C7.
[11]
It was the municipality’s persistence in paying no more than
R110 000 per month, which Paphiri calculated
was less than
it was entitled to be paid, that led to it instituting action
in the magistrate’s court. Unfortunately,
in preparing the
particulars of claim, its attorney added to the confusion by claiming
an amount calculated in an itemised schedule
that was riddled with
errors. Amounts were claimed for the services referred to in the
resolution MC 1300 but not mentioned in
the written agreement of
August 2003. More importantly, the schedule was based on the
fundamental error that Paphiri had been entitled
to the maximum
amount of the various rates reflected in MC 1300 rather than the
tariffs contained in the written agreement. In
addition, although the
numbers of houses, businesses and containers reflected in C1 to C7
were used in most instances, there were
discrepancies, some
substantial, between the figures therein contained and those in the
schedule. All of this resulted in the amount
claimed in the schedule
being substantially in excess of what Paphiri ultimately accepted it
was entitled to have received.
[12]
The confusion was further exacerbated when the matter came to trial.
Paphiri’s legal representatives appear not to have
come to
grips with the true issues and the evidence was led haphazardly and
inconsequently. Matters were not helped by the municipality’s
sole witness not having been in its employ when the contract between
the parties was concluded. The magistrate appears to have
been drawn
into the confusion. Faced with the tariffs contained in resolution MC
1300 on the one hand as opposed to those in the
written agreement of
August 2003 on the other, the magistrate held that Paphiri had failed
to prove that those used in preparing
the schedule to its particulars
of claim were applicable, and dismissed the claim. In doing so, the
magistrate lost sight of the
fact that the municipality had by then
abandoned reliance upon an all-inclusive tariff of R110 000 per
month and that, on
the provisions of the written agreement upon which
it then relied, had still not paid the amount for which it had become
liable.
[13]
Common sense eventually prevailed when the matter came on appeal
before Kollapen and Webster JJ in the North Gauteng High Court.
Counsel who appeared for Paphiri on appeal conceded, quite correctly,
that the contractual relationship between the parties was
governed by
the written agreement of August 2003 as had been pleaded by the
municipality and that the applicable tariffs were those
set out in
that agreement and not in resolution MC 1300. That this was the
correct approach was accepted by both sides. By then
it was also not
in dispute that the tariffs in the written agreement were to be
adjusted by way of the consumer price index upon
which the parties
were further agreed. Because in August 2006 the municipality had
taken its own count of the houses, businesses
and containers being
serviced which, in large measure, coincided with counts undertaken by
Paphiri at that time, the high court
expressed the view that the
appellant’s counts reflected in C1 to C7 would serve as a
proper basis to determine the extent
of the municipality’s
liability.
[14]
The court therefore requested the parties to prepare a schedule based
on those figures, taking account of the tariffs in the
written
agreement as adjusted from time to time by the consumer price index.
This was a sensible and practical solution and counsel
for Paphiri
undertook to prepare such a schedule. Once to hand, it was forwarded
to counsel for the municipality for comment together
with an
invitation to make any submissions in respect thereof. No such
submissions were forthcoming and, consequently, the schedule
was
adopted by the high court as reflecting the amount established on a
balance of probabilities as being due. It showed that Paphiri
had
been underpaid by R865 591.44 during the relevant period and the
high court ordered the municipality to pay that sum.
It is against
this decision that the municipality now appeals.
[15]
The first issue raised by the municipality on appeal was that
absolution from the instance ought to have been granted as Paphiri
had failed to prove the terms of the agreement on which it sued. This
was an astounding contention. The history of the negotiations
that I
set out above shows conclusively that parties were bound by the
written agreement of August 2003 which contained the material
terms
of their contract. As mentioned above, the municipality relied in its
plea on that agreement and specifically alleged that
the tariffs
contained therein in respect of the different services had been
agreed, all of which was common cause before the high
court. In
the light of this, the contention that the terms of the agreement
that bound the parties were not established
is spurious and can be
rejected without further ado.
[16]
The second issue argued by the municipality in this court was that
Paphiri had failed to adequately prove that the municipality
had paid
less than it ought to have done. On this issue, the appellant’s
argument was simply this: There are differences
between the numbers
of houses, businesses and containers serviced by Paphiri set out in
the schedule annexed to the particulars
of claim, on the one hand, as
opposed to those reflected in C1 to C7 on which the schedule relied
upon by the high court was based;
there was no adequate explanation
for these differences; and there was therefore a measure of doubt
about the figures in the schedule
accepted by the high court. Thus,
so it was argued, the municipality should have been absolved from the
instance in that Paphiri
had failed to prove that it ought to have
been paid more than the R110 000 per month that it was paid
during the period to
which its claim relates.
[17]
Again, this is an issue which may be dealt with swiftly. The
municipality’s case is, essentially, that Paphiri failed
to
prove on a balance of probabilities that the numbers reflected in C1
to C7 were correct. However the numbers reflected in those
annexures
were confirmed by Mr Molebatsi, a member of Paphiri, who had been
responsible for the counting process and for collating
the numbers of
the houses, businesses and containers being serviced from time to
time and who confirmed that the figures set out
in C1 to C7 were
accurate. Those figures were not challenged when submitted to the
municipality. Indeed in a letter the municipality
addressed to
Paphiri on 29 September 2006, the numbers it provided were not
dissimilar from those Paphiri had submitted. Moreover,
the
municipality failed to allege or prove what the numbers were from
time to time, presumably as it had no information in that
regard
other than that which had been forthcoming from Paphiri itself. And,
as I have already mentioned, when the schedule relied
upon by the
high court was prepared, the municipality’s legal
representatives failed to make any representations in regard
to its
correctness or otherwise. The fact that certain of the numbers
in annexures C1 to C7 differ from the schedule attached
to the
particulars of claim is, in my view, neither here nor there. That
schedule was riddled with errors and inconsistencies,
and certain of
the discrepancies may well have been the product of an incorrect
transcription from documents used in its preparation.
[18]
The simple fact remains that C1 to C7 provide the best
contemporaneous record of the numbers of houses, businesses and
containers
being serviced by Paphiri at the relevant times and their
contents have not been challenged by any evidence led on behalf of
the
municipality. In all these circumstances I am satisfied that the
numbers therein contained, used to prepare the schedule relied
upon
by the high court, can be accepted as being probably correct.
[19]
Counsel for the municipality did not dispute the arithmetic set out
in that schedule, and conceded that if the figures relating
to
housing, businesses and containers recorded therein were found to be
acceptable, the appeal must fail.
[20]
The appeal is dismissed, with costs.
L
E Leach
Judge
of Appeal
Appearances:
For
the Appellant: R P A Ramawele (with him K F Magano)
Instructed
by:
Malatji
Mohosh & Pooe Attorneys, Pretoria
Horn
& Van Rensburg Attorneys, Bloemfontein
For
the Respondent: B Pieters SC
Instructed
by:
Ehlers
Fakude Incorporated, Pretoria
Hanno
Bekker Attorneys, Bloemfontein