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[2014] ZASCA 93
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Vhembe District Municipality v Stewarts And Lloyds Trading (booysens) (Pty) Limited and Another (397/13) [2014] ZASCA 93; [2014] 3 All SA 675 (SCA) (26 June 2014)
THE SUPREME COURT
OF APPEAL OF SOUTH AFRICA
JUDGMENT
REPORTABLE
Case
No: 397/13
DATE:
26 JUNE 2014
In the matter
between:
VHEMBE DISTRICT
MUNICIPALITY
….................................................................................
Appellant
And
STEWARTS &
LLOYDS TRADING (BOOYSENS) (PTY) LIMITED
........................
First
Respondent
SHERIFF OF
THOHOYANDOU, RALIPHASWA
TG
..............................................
Second
Respondent
Neutral Citation:
Vhembe District Municipality v Stewarts & Lloyds (397/2013)
[2014] ZASCA 93
(26 June 2014).
Coram: Ponnan,
Leach and Theron JJA, Van Zyl and Swain AJJA
Heard: 19 May
2014
Delivered: 26
June 2014
Summary
:
Practice – judgments and orders – default judgment –
rescission of – Uniform rule 31(2) (b) – applicant
failing to give reasonable explanation for default and show existence
of bona fide defence – defence to be disclosed with
sufficient
particularity – claim not a ‘debt’ as defined in
Institution of Legal Proceedings Against Certain Organs of State Act
40 of 2002
– ‘debt’ confined to a claim for
damages.
ORDER
On appeal from: The
Limpopo High Court, Thohoyandou (Ebersohn AJ sitting as court of
first instance):
The following order
is made:
The appeal is
dismissed with costs.
JUDGMENT
Van Zyl AJA
(Ponnan, Leach and Theron JJA and Swain AJA concurring)
[1] This is an
appeal against the dismissal of an application to rescind a default
judgment granted in terms of rule 31(2) of the
Uniform Rules of
Court. The judgment was granted by the Limpopo High Court in an
action instituted by the first respondent, Stewarts
and Lloyds
Trading (Booysens) (Pty) Ltd, in November 2010 in which it sued the
appellant, the Vhembe District Municipality (the
municipality), for
payment of R698 885 together with interest and costs. The return of
service reflects service of the combined
summons to have been
effected by the Sheriff of Thohoyandou, the second respondent, on a
Mrs Ramukhotheli at the address of the
municipality as reflected in
the summons.
[2] When the
appellant failed to enter an appearance to defend the action within
the prescribed time period, the first respondent
applied for and was
granted judgment by default. It thereafter obtained a writ of
execution which the Sheriff served on the appellant
by leaving a copy
thereof with a Mr Mulaudzi, the legal advisor of the municipality.
Service of the writ was effected at the same
address where the
Sheriff had earlier served the summons. The return of service
rendered by the Sheriff also reflects that when
the appellant failed
to satisfy the writ, he proceeded to place certain of the appellant’s
moveable assets under attachment.
[3] The attachment
prompted the appellant to file an application with the Limpopo High
Court, Thohoyandou for the rescission of
the default judgment. That
court (Ebersohn AJ) dismissed the application and refused the
appellant leave to appeal. This appeal
is with the leave of this
court.
[4] Rule 31(2)(b)
provides that: ‘A defendant may within twenty days after he or
she has knowledge of such judgment apply
to court upon notice to the
plaintiff to set aside such judgment and the court may, upon good
cause shown, set aside the default
judgment on such terms as to it
seems meet’. In order to succeed an applicant for rescission of
a default judgment must show
good cause. As it was put in Colyn v
Tiger Food Industries Ltd t/a Meadow Feed Mills (Cape)
2003 (6) SA 1
(SCA) para 11, the courts generally expect an applicant to show good
cause: (a) by giving a reasonable explanation for the default;
(b) by
showing that the application is made bona fide; and (c) by showing a
bona fide defence to the plaintiff's claim which prima
facie has some
prospect of success.
[5] The appellant’s
application for rescission was in all some 12 pages. It consisted of:
the notice of motion; an affidavit
by the municipal manager of the
municipality, which spanned all of four pages; two annexures in the
form of the writ of execution
and the notice of attachment; and a one
page confirmatory affidavit by the appellant’s attorney. The
municipal manager contended:
first, that there had not been proper
service of the summons on the appellant in terms of the uniform rules
of court inasmuch as
the ‘Combined Summons and Particulars of
Claim were not brought to my office for attention’; second,
that there was
non-compliance with the provisions of
s 115(3)
of the
Local Government: Municipal Systems Act 32 of 2000
; and third, the
appellant had a bona fide defence to the first respondent’s
claim. None of those contentions found favour
with the high court.
For the reasons that follow the high court’s conclusion on each
of those grounds cannot be faulted.
[6] As the
appellant’s first two contentions cover common ground, it will
be convenient to consider them jointly. According
to the municipal
manager, the judgment only came to his knowledge when the Sheriff
attached the appellant’s property in March
2012. He stated that
Mrs Ramukhotheli, on whom the Sheriff served a copy of the summons,
is unknown to him, and that a person by
that name does not appear on
the list of persons employed by the appellant. He further stated that
the sheriff knew the identity
of the person upon whom legal process
had to be served, and that Mrs Ramukhotheli was not that person.
[7] The sufficiency
of the appellant’s explanation for its default is to be
assessed in the light of two facts, namely the
admission by the
municipal manager that the summons reflected the appellant’s
‘official receipt date stamp’ dated
3 February 2011 (the
date when the summons was served by the Sheriff) acknowledging
receipt of the summons, and secondly, that
the summons was served at
the same address where the writ was subsequently served being where
the municipal manager is based, and
which, in his own words, is ‘the
proper address’ of the appellant for the service of legal
process.
[8] In its
opposition to the application for rescission the first respondent
challenged the appellant to disclose its list of employees
to support
its contention that Mrs Ramukhotheli was not one of its employees.
The deponent to the opposing affidavit added ‘it
is highly
unlikely and improbable that an impostor would be occupying a desk at
the Applicant’s principal place of business
and receiving legal
documents on behalf of the Applicant’. Those allegations did
not elicit a response from the appellant.
The appellant’s
apparent lack of candour was exacerbated by its failure to disclose
the identity of the person who was authorised
to accept service of
legal process on behalf of the appellant or who was entrusted with
the ‘official receipt date stamp’
of the appellant, as
well as any detail with regard to what systems it had in place to
ensure that important correspondence, in
particular court processes,
were brought to the attention of the appropriate person within the
establishment of the appellant.
[9]
Section 115(3)
of the
Local Government: Municipal Systems Act provides
that: ‘Any
legal process is effectively and sufficiently served on a
municipality when it is delivered to the municipal manager
or a
person in attendance at the municipal manager’s office’.
The high court found that on the evidence service of
the summons as
contemplated both by the Uniform rules of court and by
s 115(3)
did
in fact take place. It correctly found that, on the municipal
manager’s own version, the address at which the summons
was
served on Mrs Ramukhotheli is where he was ‘based’. And,
absent any evidence to the contrary (of which there was
none), Mrs
Ramukhotheli who affixed the official stamp of the appellant to the
summons was plainly a person in attendance at the
municipal manager’s
office. That is also the same address where the municipal manager had
said proper service of the writ
was effected. Ebersohn AJ’s
conclusion therefore that there had been proper service on the
appellant cannot be faulted.
[10] That brings me
to the appellant’s third contention, namely, that the first
respondent should have been non-suited on
account of its alleged
failure to comply with the provisions of the Institution of Legal
Proceedings Against Certain Organs of
State Act 40 of 2002 (the Act).
The appellant is an organ of state as contemplated in the Act.
Accordingly, so the contention went,
the first respondent had to
comply with the provisions of s 3 of the Act before instituting
proceedings against it. Section 3(1)
reads:
‘No legal
proceedings for the recovery of a debt may be instituted against an
organ of state unless –
(a) the creditor has
given the organ of state in question notice in writing of his or her
or its intention to institute the legal
proceedings in question; or
(b) the organ of
state in question has consented in writing to the institution of that
legal proceedings-
(i) without such
notice; or
(ii) upon receipt of
a notice which does not comply with all the requirements set out in
subsection (2).’
[11] Subsection (2)
in turn reads:
‘A notice must
-
(a) within six
months from the date on which the debt became due, be served on the
organ of state in accordance with section 4(1);
and
(b) briefly set out
–
(i) the facts giving
rise to the debt; and
(ii) such
particulars of such debt as are within the knowledge of the
creditor.’
[12] The high court,
relying on the judgments in Nicor IT Consulting (Pty) Ltd v North
West Housing Corporation;
1
Director General, Department of Public Works v Kovac Investments,
2
and Thabani Zulu & Co (Pty) Ltd v Minister of Water Affairs &
another,
3
found that the first respondent’s claim was not a ‘debt’
as envisaged in the Act, and that it was accordingly
not required to
give notice as required by s 3 of the Act.
[13] A ‘debt’
as defined in the Act means any debt arising from any cause of
action:
‘(a) which
arises from delictual, contractual or any other liability, including
a cause of action which relates to or arises
from any-
(i) act performed
under or in terms of any law; or
(ii) omission to do
anything which should have been done under or in terms of any law;
and
(b) for which an
organ of state is liable for payment of damages . . . .’
[14] In Thabani
Zulu, Rall AJ stated:
‘[7] The Act
deals with legal proceedings against organs of state for the recovery
of debts. In doing so it attempts to create
uniformity on two
aspects. The first is the requirement to give notice of a proposed
action for the recovery of a debt and the
second is the prescription
of debts. Speaking generally, this is achieved by repealing the laws
dealing with notice requirements,
making a single requirement
applicable to all debts and making the Prescription Act apply to the
prescription of all debts.’
The learned judge
added:
‘[11]
Paragraph (a) of the definition is widely worded and makes it clear
that a debt is any liability whatsoever. It is,
however, followed by
para (b) and the question which arises is how the two paragraphs
relate to each other. They can be read either
disjunctively or
conjunctively. The paragraphs are linked by “and” and not
“or”. Ordinarily, paragraphs
or phrases linked by “and”
are read conjunctively and those by “or” disjunctively.
Accordingly, although
the courts have read “and” to mean
“or” and vice versa in appropriate circumstances, there
must be compelling
reasons to change the words used by the
legislature.
[12] Using the
ordinary meaning of the words in the definition therefore, the two
paragraphs must be read conjunctively. When that
is done, para (b)
qualifies or limits the generality of para (a) in two ways. First, it
restricts debts to those which constitute
a liability to pay damages
and, secondly, it restricts debts to those where an organ of state is
the debtor. On an ordinary reading
of the definition it boils down to
this. A debt is the liability of an organ of state to pay damages,
arising from any cause of
action.’
[15] In my view the
correctness of Rall AJ’s approach cannot be faulted. His
approach, moreover, is consistent with the traditional
justification
for notice provisions, which Didcott J explained in Mohlomi v
Minister of Defence
4
as follows:
‘An insistence
on notices of the kind required by s 113(1) is by no means peculiar
to the particular proceedings that it governs.
Similar conditions
precedent to the institution of actions are and have long been
familiar features of our statutory terrain, especially
the part
occupied by departments of State, provincial administrations and
local authorities once they become prospective defendants.
The
conventional explanation for demanding prior notification of any
intention to sue such an organ of government is that, with
its
extensive activities and large staff which tends to shift, it needs
the opportunity to investigate claims laid against it,
to consider
them responsibly and to decide, before getting embroiled in
litigation at public expense, whether it ought to accept,
reject or
endeavour to settle them.’
[16] As correctly
observed by Rall AJ in Thabani Zulu,
5
the evidence in damages cases is more likely to depend on the memory
of people than on documents, and it is accordingly desirable
that the
defendant be given timeous notice of the proceedings in order for it
to be able to investigate the contemplated claim,
and to secure the
necessary evidence. By contrast as Lever AJ put it in Nicor
Consulting (para 26) ‘a claim for payment in
terms of a
contract is more likely to rely on documentary evidence, such as
contracts, delivery notes and correspondence, as well
as possible
legal issues, such as whether or not the relevant functionary had the
necessary authority to enter into the contract
or not’.
6
I accordingly hold, as the high court did, that as the first
respondent’s claim is not a damages claim the Act does not
apply to it. It was therefore unnecessary for the first respondent to
have complied with s 3 of the Act.
[17] That leaves the
appellant’s final contention, namely, that it had a bona fide
defence to the first respondent’s
claim. The first respondent
sued on a written agreement of cession in terms whereof a close
corporation known as Blue Nightingale
472 Trading and Shuttering
(trading as Faiaud Transport Services) ceded and assigned to the
former its right, title and interest
in and to all moneys due to it
by the appellant under a contract for the installation of a water
reticulation system at Mashamba
in the Limpopo Province.
[18] In its founding
affidavit the appellant set out its defence as follows:
‘10.1 I aver
that the Applicant does not owe the 1st Respondent an amount of R698
885-00 as indicated in the Writ of Execution
and therefore intend to
defend the action if any against the Applicant;
10.2 I aver further
that the only amount brought to the attention of the Applicant for
payment was an invoice of R215,259.04 which
was duly paid under
certificate no. 14 prepared on the 28th May 2009;
10.3 The Applicant
is not formally informed of any other deliveries of materials to the
site by the 1st Respondent which the Applicant
is liable to pay as
required under conditions of direct payment item 4 and 6 on the
cession form.’
[19] The high court
found that this response to the allegations in the particulars of
claim lacked candour and amounted to nothing
more than a bare denial
that the amount claimed was owing. This finding cannot be faulted.
In its answering affidavit the first
respondent placed the
appellant’s allegations in dispute, more particularly that it
had made payment of the amount of R215
259.04 in May 2009. In reply
this was met by a response which amounted to a mere repetition of
what was stated in the founding
affidavit coupled with an averment
that it is not necessary in rescission proceedings to fully deal with
the merits of the case,
or to prove the defence raised, and that ‘it
is sufficient to set out facts, which if established at the trial,
would constitute
a good defence’. But what had been set out by
the municipal manager in his affidavit were not facts. They were bald
averments.
Nowhere in his affidavit does he state that he has
personal knowledge of the contract in question or details of the
reticulation
project foundational to the contract. Nor, in the
absence of personal knowledge, does he divulge the source of his
knowledge. No
confirmatory affidavit is filed by him in support of
those bald averments. The unsubstantiated averments in the municipal
manager’s
affidavit were thus wholly inadequate to support the
appellant’s assertion that it had a bona fide defence to the
first respondent’s
claim.
[20] For these
reasons the appeal must fail. In regard to the costs of the appeal,
the first respondent asked that it be awarded
costs on an attorney
and client scale. In all the circumstances, however, I am not
persuaded that such shortcomings as there may
have been in the
appellant’s conduct are such as to warrant it being mulcted
with a punitive order of costs by this court.
[21] In the result
the appeal is dismissed with costs.
D VAN ZYL
ACTING JUDGE OF
APPEAL
APPEARANCES
For Appellant: A
D Ramagalela
Instructed by:
Tshiredo Attorneys, Thohoyandou
Matsepes Inc, Bloemfontein
For first
Respondent: D B Suttner
Instructed by:
Cliffe Dekker Hofmeyer Inc, Sandown
Phatshoane Henney Attorneys, Bloemfontein
1
Nicor
IT Consulting (Pty) Ltd v North West Housing Corporation
2010
(3) SA 90
(NWM).
2
Director
General, Department of Public Works v Kovac Investments
2010
(6) SA 646
(GNP).
3
Thabani
Zulu & Co (Pty) Ltd v Minister of Water Affairs & another
2012
(4) SA 91
(KZD).
4
Mohlomi
v Minister of Defence
[1996] ZACC 20
;
1997
(1) SA 124
(CC) para 9.
5
Para
17.
6
Lever
AJ in
Nicor
Consulting
para
26.