About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Eastern Cape High Court, Port Elizabeth
SAFLII
>>
Databases
>>
South Africa: Eastern Cape High Court, Port Elizabeth
>>
2010
>>
[2010] ZAECPEHC 47
|
|
Nelson Mandela Bay Metropolitan Municipality v Hewitt-Coleman and Others (145/01) [2010] ZAECPEHC 47 (27 July 2010)
20
IN
THE HIGH COURT OF SOUTH AFRICA
(SOUTH
EASTERN CAPE LOCAL DIVISION)
CASE
NO.: 145/01
In
the matter between:
THE
NELSON MANDELA METROPOLITAN
MUNICIPALITY Plaintiff
and
NGONYAMA
OKPANUM HEWITT-COLEMAN 1
st
Defendant
HARLECH-JONES
ARCHITECTS
2
nd
Defendant
RAJ
MAHARAJ & ASSOCIATES 3
rd
Defendant
BHAM
TAYOB KHAN MATUNDA 4
th
Defendant
COTTRELL
DAVIES MAZWANA PIERSON 5
th
Defendant
SCHOOMBIE
HARTMAN 6
th
Defendant
LOUW
STRYDOM CONSULTING ENGINEERS 7
th
Defendant
SKC
& NIEMANN CC 8
th
Defendant
ELDRED
BOONZAAIER CONSULTING
ENGINEERS 9
th
Defendant
BERGMAN-INGEROP
(PTY) LTD 10
th
Defendant
MAKALIMA
JOHNSTON ASSOCIATES CC 11
th
Defendant
METROPLAN
12
th
Defendant
BOPITE
ENGINEERING GEOLOGISTS CC 13
th
Defendant
HEMSLEY
MYRDAL 14
th
Defendant
JUDGMENT
MHLANTLA,
J
[1]
The
plaintiff, the Nelson Mandela Metropolitan Municipality (the
municipality), instituted action against a group of professional
consultants (the defendants), in which it claimed payment of the sum
of R1073 818.41 alternatively an amount of R810 481.19. The
claim was
based on the
conditio
indebiti.
Background
[2]
The
municipality owns the Matthew Goniwe Hostel situated in Kwazakhele,
Port Elizabeth, which has been overcrowded and in a state
of decay
for decades. The community pressurised the municipality to address
this undesirable state of affairs. The hostel
was a costly
asset which required a lot of ongoing maintenance. In 1995 the hostel
fell under the authority of Mr Alan Zeiss, a
qualified attorney, who
was appointed by the municipality as a chief estates officer and
acting director of the housing department.
The Provincial
Housing Board, (hereafter referred to as the PHB) provided funds in
the form of housing subsidies through a programme
known as the Hostel
Redevelopment Programme. The Budget and Administration Committee
considered the 1994/1995 Operating Budget
and resolved that a report
on the future of the hostel be submitted. Mr Zeiss submitted
the said report whereafter the committee
resolved that a hostel
upgrade be conducted and that funds thereof be sourced from the
Hostel Redevelopment Programme.
[3]
During
May 1996 it was established that the municipality did not have the
necessary capacity to deal with the process relating
to the
application of funds and also be involved in the entire process of
the hostel upgrade nor would it be able to establish
a body known as
the Local Negotiating Group (hereafter referred to as the LNG), which
would provide community members and the inhabitants
of the hostel
with an opportunity to express their views on the upgrading process.
The executive committee of the council resolved
to appoint a managing
agent, the H-J Studio Trust, the second defendant in this matter. Mr
Elwyn Harlech-Jones was appointed as
the principal. Certain
professional firms consisting of architects, quantity surveyors,
consulting engineers and town-planners
were also appointed. The
appointment incorporated the upgrade of the hostel as well as the
project involving the Greenfields development
and the infill of
additional land situated at the hostel. The various consultants
representing various disciplines were required
to and did in fact
conclude joint venture agreements relevant to their involvement in
the contract. It was agreed that the managing
agent would assemble
all the parties, the LNG as well as the relevant professionals
together, source and obtain funding and co-ordinate
and manage the
implementation of the upgrading proposals. The municipality undertook
to pay the managing agent a fee therefor.
The appointment of
the managing agent was later approved by the PHB.
[4]
Mr Zeiss concluded a client consultant agreement with all
the professional consultants and signed these agreements.
With
his knowledge, the agreements were returned to the various
consultants. No reservation for qualification of fees was made.
This,
according to the consultants, had the effect of varying the initial
agreement and exposed the municipality to liability for
fees outside
the ambit approved by the PHB. The consultants had to initially
secure funding from the PHB to pay their fees in compiling
a funding
application in the manner prescribed in the Implementation Manual of
the Hostel Redevelopment Programme. They performed
and
submitted their claims to the managing agent, who had to satisfy
himself that the claims complied with the fee estimate agreed
upon.
He thereafter submitted the claims to Mr Zeiss and recommended
payment, whereupon Mr Zeiss would effect payment to the respective
consultants as the case may be.
[5]
A dispute arose between the municipality, the managing agent and
the consultants about the extent and quality of
the work.
This led to the termination of the agreement and suspension of the
Greenfields redevelopment as well as the hostel
upgrade. The
municipality discovered that the consultants had charged a rate that
was higher than that approved by the PHB and
that they had been paid
a total sum of R4 305 803.02 for the period 1996 to 1999, whilst they
were entitled to payment of R2 667
559.74. It then instituted
action against the defendants seeking repayment of the sum of R1073
818.41 alternatively R810
481.19. It contended that its cause of
action was based on the
conditio
indebiti
.
Pleadings
[
6]
The municipality pleaded in its Particulars of Claim that the
appointment of the consultants incorporated not only
the
upgrading of the hostel but also the Greenfields development and the
infill of additional land situated at the hostel.
It
further pleaded that the total fees and disbursements payable to the
consultants was restricted to such amounts as approved
by the PHB as
follows:
(a)
7.5 per cent of the total amount approved and to be made available by
the PHB in respect of the Greenfields development
and infill sites;
(b)
9.
2
per cent of the total amount approved and to be made available by
the PHB in respect of the upgrading of the existing
hostel.
[7]
The municipality further pleaded that the total amount which was
available for payment of fees and disbursements to all the
professional
consultants was thus restricted to R3 705 384.07
and this had to be divided amongst the defendants. The municipality
averred
that the payments were made in
the
bona fide
and reasonable belief that the defendants were entitled to such
payments. Having regard to the extent and nature of the actual
work undertaken and the extent of services provided by the defendants
in relation to the agreed ratios as set out in schedule
4 of
Annexure POC9, the municipality averred that the work was incomplete
and not satisfactory and that the defendants should have
been paid
the sum of R2 667 559.74 only.
[8]
The municipality pleaded in the alternative that even on the
assumption that the fees set out in Annexure 1 of the client
consultant agreement constituted the basis of the defendants’
entitlement to fees, overpayments had even then occurred.
[9]
The defendants pleaded that they had submitted 'detailed proposed
fee structures' for the additional work set out in the client
consultant agreement, and that the managing agent communicated the
acceptance of the fee structures in terms of the appointment
as
contained in the client consultant agreement. In the
alternative, the first defendant pleaded that in the event of it
being held that the PHB’s approval was required, the first
defendant was advised at a meeting held on 19 February 1998 that
such
fee structure had been approved by the PHB, that its appointment in
terms of the client consultant agreement was 'subsequently
ratified'
by Mr Zeiss’ signature on the document, the request to render
certain services, the acceptance of such services
and the payments
thereof. It further pleaded that the PHB approval was irrelevant to
the rights and obligations of the parties
to the agreement aforesaid.
[10]
The second defendant pleaded that the contractual relationship
between the parties and the fee structure to which it had been
entitled were set out in the client consultant agreement. This
defendant has since been liquidated. It played a minimal role
in
these proceedings. The trustees were advised of the trial. They
indicated that they had nothing further to add and had
no intention
to intervene on behalf of the defendant. A written document to that
effect was handed in. The third defendant also
relied on the client
consultant agreement. It raised a counterclaim but made no attempt to
pursue it. The third defendant did not
actively participate during
the trial.
[11
]
The fourth, fifth and sixth defendants raised a similar defence to
that advanced on behalf of the first defendant. They
also
pleaded an oral variation of the agreement to the effect that they
were instructed to prepare firm bills of quantities for
the entire
hostel complex as opposed to provisional bills; that this was an oral
request by the managing agent and that pursuant
to the presentation
of the firm bills, the fourth, fifth and sixth defendants’
professional fees fell to be reissued.
They also pleaded that
the approval of PHB was irrelevant.
[12
]
The seventh defendant essentially relied upon the client consultant
agreement and also alleged that the approval of the PHB for
its
appointment and its fee structure was irrelevant. The same
defence was raised on behalf of the eighth defendant which
also
submitted a counterclaim but did not pursue such claim.
[13
]
The ninth defendant’s defence is similar to the first
defendant’s. The tenth defendant also relied on the
client consultant agreement. It further pleaded that the services
rendered by it were in accordance with separate instructions
relating,
inter
alia
,
to emergency electrical intervention and that such work did not form
part of the fees outlined in the client consultant agreement.
The eleventh defendant similarly relied on the client consultant
agreement.
[14
]
The twelfth defendant also relied upon the client consultant
agreement and contended that the approval of the PHB was irrelevant.
It further pleaded that pursuant to an invitation by the Local
Negotiating Group, the town planning consortium submitted a written
quotation to prepare a funding application to the PHB, that the
managing agent had orally communicated to the eleventh and twelfth
defendants the acceptance of the offer to produce a funding
application. It is also alleged that the funding application
was subsequently prepared and that the plaintiff ratified and
accepted the aforesaid arrangement by paying a fee which was higher
than the original quotation. It also denied that it was
jointly and severally liable.
[15
] The
thirteenth defendant played no part in these proceedings. The
fourteenth defendant relied on the client consultant
agreement.
It further pleaded that it was entitled to additional fees by
virtue of certain additional work that
had to be undertaken and
as a result of an increase of the Surveyor-General’s fees.
It relied on an oral agreement
with the managing agent in respect
of the additional work.
[16
]
The plaintiff filed a number of replications and certain rejoinders
have been filed on behalf of the defendants.
Evidence
[17]
During the trial, Mr
Buchanan
SC assisted by Mr
Ford
SC, represented the municipality. Mr
Van
Rooyen
SC and Mr
Ronaasen
appeared for all the defendants save the second, third and thirteenth
defendants. Three witnesses testified on behalf of the municipality,
namely Mr Mzimkhulu Msiwa, who was appointed as a city engineer, Mr
Alan Zeiss and Mr Dicky Elliot, a quantity surveyor, who was
called
as an expert witness. The defendants who actually defended the
action, testified in their defence.
[18] Mr
Zeiss testified that the appointment of the defendants was subject to
the PHB approval and that all the defendants were
aware of that
condition. According to him the defendants’ representatives
dealt directly with the Department of Housing and
Local Government in
negotiating their fees. The PHB required signed client consultant
agreements in order to reflect the municipality’s
approval to
the terms and fees set out therein. He stated that he had no
authority to sign a binding agreement prior to approval
of the
relevant terms and fees by the PHB. He had signed these agreements
in 1997 prior to the PHB approval.
[19] In
regard to payment of fees, Mr Zeiss testified that as the estates
department had no expertise to deal with a building contract
of that
nature, it relied on the managing agent to verify the accounts. Mr
Zeiss and Mr Judd, another official, were not in a
position to assess
whether the fees were reasonable and in accordance with the payment
procedure. This was done by the managing
agent. The accounts
submitted and certified were merely passed to them for payment.
[20] Mr
Msiwa, testified about the history of the project. Actual PHB
approvals were established through his evidence. It was
clear that
the fees set out in Annexure ‘1’ of the client consultant
agreement were not approved and that at no stage
did the PHB approve
fees beyond the 7.5 per cent on the Greenfields development and 9.2
per cent on the hostel project.
[21] Mr
Elliot, a qualified quantity surveyor testified that he had conducted
some investigations and made his own assessment of
the work
completed. He later met the defendants in order to clarify those
areas where he had been required to make assumptions.
His further
calculations were based on what was conveyed to him. His conclusions
are set out in Exhibits ‘M’ and ‘L’
respectively. The crux of his evidence as set out in these reports
was that the defendants had been overpaid.
[22] The
defendants, save the second, third and thirteenth defendants,
testified. Mr Timothy Hewitt-Coleman testified on behalf
of the
consortium of architects. He had to prove an oral variation of the
agreement. He testified that he received the signed
agreement in
June 1997. In regard to the oral variation, the evidence established
that claims for payment of fees were duly submitted
and authorised
for payment by Messrs Zeiss and Judd. Mr Hewitt-Coleman accepted that
their appointment was subject to the PHB approval.
He further
conceded that they were working at risk pending PHB approval and on
occasion had threatened to stop work as a result.
[23] The
third defendant’s representative, Mr Maharaj, stated that its
case was fundamentally the same as that of the first
defendant. He
closed its case without adducing any evidence.
[24]
M
r
Thembinkosi Matunda, testified on behalf of the fourth, fifth and
sixth defendants. They had pleaded a ratification of the contract.
However, no evidence was adduced. Mr Matunda initially contended for
an agreement relevant to an altered fee scale. He testified
that the
managing agent instructed him to prepare firm bills of quantity
instead of the provisional bills. It was later established
during
cross-examination that the quantity surveyors’ consortium had
in fact claimed and been paid for the full services
provided for in
services A and B by October 1997. It was established that there was
no agreement at all with regard to the scheduling.
[25]
Mr
Richard Boonzaair, a civil engineer, testified on behalf of the ninth
defendant. According to him, the professional team had
negotiated
with the managing agent. He conceded that their appointment and
approval of the professional fees were subject to the
PHB approval.
They had continued to work whilst awaiting PHB approval. He conceded
that they were performing at risk. This concession
was, however, not
consistent with the defendant’s plea. He testified that the
fees were fixed but not the disbursements
which included the
supervision fees of the resident engineer. These were recoverable.
He submitted claims in terms of the client
consultant agreement and
these were approved by Mr Judd.
[26]
Mr Peter Du Toit, an electrical engineer, testified on behalf of
the tenth defendant. He testified that there were two separate
projects, namely, the emergency electrical intervention and the
Greenfields and hostel upgrade. He tendered a specific amount
for
the emergency electrical intervention. His firm was not involved in
the second project. He performed in terms of the contract
and was
duly paid. He conceded that the fee structure had been submitted to
the PHB for its approval, which subsequently decided
that the
emergency intervention formed part of the overall grant.
[27]
Mr Ndabezitha Ndzombane, a townplanner and director of Metroplan,
testified on behalf of the eleventh and twelfth defendants.
His
evidence established that there was no agreement for further work and
there was no further funding application. The case pleaded
and the
evidence adduced were wholly contradictory. Mr Ndzombane was driven
to concede that there had in fact been an overpayment
in the amount
claimed of R33 737.48.
[28]
Mr Robert Hemsley, a retired land surveyor, testified on behalf of
the fourteenth defendant. He stated that he had been
given an
estimate of erven and on that bases submitted a quotation to the
managing agent. He discovered upon an actual survey
that there were
more erven. The total erven was 1311 excluding blocks. Due to the
actual conditions on the land, the scope of
his work changed and that
such change was authorised by the managing agent. The
Survey-General’s fees also increased over
the period of the
contract. He testified that the municipality had to pay the
increased fee because it was the party liable for
the payment to get
the subdivision approved. Mr Hemsley claimed the fees as
disbursements. He conceded that the funds would come
from the PHB.
The oral agreement contended for in the fourteenth defendant’s
pleadings was, however, not established in
evidence. The evidence
adduced did not establish the requirement for estoppel, which was in
any event not properly pleaded.
[2
9]
The issues to be determined are:
(a)
whether the purported agreement concluded by the managing agent and
the defendants formed part of the PHB contract (ie
parol evidence
rule);
(b) whether the
managing agent had the authority to bind the plaintiff in the alleged
agreement;
(c)
whether the defendants’ reliance on the purported client
consultant agreement was reasonable and justified; and
(d)
whether the alleged mistake (over-payment) constitutes justifiable
error. Put differently whether the payment made
in error is
excusable?
I turn
to
consider each of the issues raised.
Evaluation
[30
]
In regard to the first issue, it is common cause that the main
contract by the PHB was reduced to writing and all the parties
concerned were aware thereof and of its contents. A series of
meetings were held between the plaintiff, represented by the managing
agent and the defendants subsequent to the conclusion of the PHB
contract. The purpose of these meetings was to conclude an ancillary
agreement. The agreement was not reduced to writing and this triggers
the parol evidence rule. This rule was first stated in
Lowrey
v Steedman
1
,
where the court held:
‘
The
rule is that when a contract has once been reduced to writing no
evidence may be given of its terms except the document itself,
nor
may the contents of such document be contradicted, altered, added to
or varied by oral evidence.’
In
Union
Government v Vianini Ferro-Concrete Pipes (Pty) Ltd
2
,
Watermeyer JA said:
‘
Now
this court has accepted the rule that when a contract has been
reduced to writing, the writing is, in general, regarded as the
exclusive memorial of the transaction and in a suit between the
parties no evidence to prove its terms may be given save the document
or secondary evidence of its contents, nor may the contents of such
document be contradicted, altered, added to or varied by parol
evidence.’
In
Johnston
v Leal
3
,
Corbett JA, stated the following:
‘
[I]
t
is clear to me that the aim and effect of this rule is to prevent a
party to a contract which has been integrated into a single
and
complete written memorial from seeking to contradict, add to or
modify the writing by reference to extrinsic evidence and in
that way
to redefine the terms of the contract…. To sum up, therefore,
the integration rule prevents a party from altering,
by the
production of extrinsic evidence, the recorded terms of an integrated
contract in order to rely upon the contract as altered.’
[3
1]
The question to be asked is whether the oral agreement which appears
to have the effect of varying the restricted
amount set out in the
PHB contract is consistent with the PHB contract and whether the
defendants should be allowed to adduce extrinsic
evidence to prove
the oral contract. In my view and having regard to the
evidence, the defendants attempted to adduce
evidence to prove the
existence of an oral agreement which was inconsistent with the PHB
contracts. This is prohibited in terms
of interpretation of
contracts.
[
32]
In regard to the question whether the managing agent had authority to
bind the plaintiff in the alleged agreement,
the defendants have to
prove the following in order to establish the agent’s
authority:
(a) a representation was
made by the plaintiff and not merely by the managing agent that he
had authority to act;
(b) a representation in
a firm that the plaintiff should reasonably have expected that
outsiders would act on the strength of it;
(c)
reliance by the defendant on the representation;
(d)
the reasonableness of such reliance; and
(e)
consequent prejudice to the defendants.
[33
]
The defendants averred that they had relied on the authority
displayed by the managing agent and believed that he had authority
to
contract with them. There is no allegation whether the authority
displayed was actual or ostensible. The question to be asked
is
whether the plaintiff had made certain representation which led them
to conclude that the managing agent had authority to change
the PHB
contract. If not, whether it was reasonable for the defendants to
believe that the managing agent had authority to enter
into an
agreement which is inconsistent with the PHB.
[
34]
It is trite that the representation of a principal to be derived from
the agent's position is limited to the fact
that the agent had the
usual authority possessed by a person in that position. In
Russo-Chinese
Bank v Li Yau Sam
4
,
Lord Atkinson said:
'It is
undoubted that a person who deals with an agent, whose authority he
knows to be limited,
as the plaintiff knew in this case, does so at his peril, in this
sense, that should the agent be found to have exceeded his authority
his principal cannot be made responsible.'
[
35]
It is evident that the defendants knew that the managing agent’s
authority was limited by the PHB contract
and that it had no
authority to contract outside the parameters of the PHB contract.
[
36]
In order for the principle of 'holding out' to apply in any given
case of agency, the act done by the agent, and
relied upon to bind
the principal, must be an act of that particular class of acts which
the agent is held out as having a general
authority on behalf of his
principal to do; and, of course the party prejudiced must have
believed in the existence of that general
authority and thereby been
misled. See
Grant
v Norway
[1851] EngR 186
;
(1851)
10 CB 665
,
138 ER 263
;
Ruben
v Great Fingall Consolidated
[1906] AC 439.
[37
]
There is no evidence indicating that the representation by the
plaintiff suggested that the managing agent had authority
to change
the restricted amount reflected in the PHB contract. The defendants
did not adduce any evidence to show representation.
It is well
established that if the agent had been held out as having only a
limited authority to do on behalf of his principal
acts of a
particular class, then the principal is not bound by an act done
outside that authority, even though it be an act of
that particular
class, because, the authority being represented to be limited, the
party prejudiced has notice, and should ascertain
whether the act is
authorised or not. In this case the managing agent's authority was
limited to employing consultants for the
project and ensure that the
fees did not exceed the restricted amount as reflected in the PHB
contract.
[3
8]
In my view, the defendants at all times were aware of the
restrictions placed by the PHB. At no stage did they allege
that the
plaintiff or the managing agent had represented to them that the
managing agent had authority to change the amount.
[39
]
Regarding the issue whether the defendants' reliance on the purported
client consultant agreement was reasonable,
it must be borne in mind
that the conduct complained of must be of such a nature that could
reasonably have been expected by the
person responsible for it to
mislead. See
Monzali
v Smith
1929 AD 382
at 386 and
Poort
Sugar Planters (Pty) Ltd v Ministers of Lands
1963 (3) SA 352
(A) at 364A-B.
[
40]
It is not enough that an impression was created as a result of the
representation; the defendants should have acted
reasonably in
forming that impression. The defendants in this case, were
unreasonable in assuming that the managing agent had authority.
At no
stage did the defendants in their pleadings provide concrete evidence
that the client consultant agreement was ever approved
by the
municipality or by the PHB.
[41
] Some
of the defendants admitted that they had signed the client consultant
agreement well knowing that no agreement was thereby
brought into
existence and that it remained subject to the PHB approval. Most
witnesses who testified on behalf of the defendants
conceded that in
most cases, the work had already been completed whilst the PHB
approval was pending. They further conceded that
they were at all
times working at risk. None of the witnesses stated that they would
have stopped work had they been aware of
the PHB’s non-approval
of fees and none contended for any prejudice.
[42] The
evidence adduced clearly indicated that the defendants were appointed
subject to the PHB approval both in respect of the
terms of
appointment as well as the fee structures and fees to be paid to the
defendants. The actual approval granted by the PHB
was 7.5 per cent
in respect of the Greenfields development and 9.2 per cent for the
hostel upgrade. This included everything from
inception including
the preliminary planning, funding applications, emergency electrical
intervention and disbursements. It follows
therefore that the
defendants’ reliance on the purported client consultant
agreement is misplaced. Their defence has no
merit and is
accordingly rejected.
[43] I
turn to deal with the final issue, that is, whether the alleged
mistake by the officials when they made the payments constitutes
a
justifiable error. It is settled law that money paid in error can
be recovered by an action of
conditio
indebiti.
See
Nkosi
v Totalizator Agency Board (Transvaal)
1980
(1) SA 122
(T). The critical factor for the recovery of the amount is
that it must have been paid as a result of a bona fide mistake. It is
not every payment made under a mistake of fact that is recoverable.
There must be a
solutio
indebiti
(payment
of money not owing) and
j
ustus
error (excusable mistake). Payment made in the belief that it was due
is not recoverable if the mistake is one of law or gross
negligence
or recklessness.
5
[
44]
Regarding the meaning of excusable mistake, the court in
Willis
Fabel Enthoven (Pty) Ltd v Receiver of Revenue
6
said:
'It is
not possible nor would it be prudent to define the circumstances in
which an error of law can be said to be excusable or,
conversely, to
supply a compendium of instances where it is not. All that need be
said is that, if the player’s conduct is
so slack that he does
not in the
Court’s
view deserve the protection of the law, he should, as a matter of
policy, not receive it. There can obviously be no
rules of thumb;
conduct regarded as inexcusably slack in one case need not
necessarily be so regarded in others, and vice versa.
Much will
depend on the relationship between the parties; on the conduct of the
defendant who may or may not have been aware that
there was no
debitum
and whose conduct may or may not have contributed to the plaintiff’s
decision to pay; and on the plaintiff’s state
of mind and the
culpability of his ignorance in making the payment.’
[4
5]
In
Rane
Finance (Pty) Ltd v Queenstown Municipality,
7
Ultrasonic
Applications & Equipment (Pty) Ltd
,
(Ultrasonic), supplied certain equipment to the value of R7051.21 on
credit to the Queenstown Municipality (the defendant). It
subsequently ceded all its book debts to the plaintiff. The
plaintiff’s attorney advised the defendant of this fact and
demanded payment of the sum of R7051.21. In its letter, the plaintiff
stated that ‘any payment to Ultrasonic would not in
law be
regarded as a payment in discharge of the defendant’s
obligations’. The town treasurer ignored the letter and
paid
money to Ultrasonic’s subsequent cessionary, a third party.
Ultrasonic was thereafter liquidated. The plaintiff instituted
action
against the defendant for payment of the debt. The court held that
the town treasurer had the means of knowledge and the
opportunity to
ascertain the facts but failed to do so; that he had been grossly
negligent and the municipality was bound by such
conduct. The court
dismissed the claim by the municipality under the
conditio
indebiti
for
repayment of the amounts paid to the third parties. The defendant was
ordered to pay the plaintiff the sum of R7051.21.
[46]
In
Affirmative
Portfolios CC v Transnet Ltd t/a Metrorail supra,
the appellant was a labour broker. It submitted a tender to the
respondent for the supply of access controllers to be deployed
on
station platforms. It charged an hourly rate of R15 for a maximum of
104 hours per month per controller plus an administration
fee of 15%
(making a total of R17.25). The appellant had already been providing
these services since September 1999. The parties
concluded a written
agreement for the supply of 200 access controllers for a period of 36
months from 1 April 2000 at a monthly
rate of R358 800 plus VAT.
[47] The
appellant subsequently increased the charge to R17.25 per hour plus
the administration fee of 15 per cent with effect form
1 April 2000.
Mr Xaba, the sole member of the appellant, contended that the
regional manager of the respondent had agreed to the
increased fee.
Later Mr Xaba was confronted about this and ordered to revert to the
original fee. He reluctantly agreed to this
but reserved the
appellant’s right in regard thereto.
[48] The
respondent purported to cancel the agreement whereafter the appellant
instituted action for damages. The respondent counterclaimed
and
sought by means of the
conditio
indebiti
to recover payment from the appellant of the amounts that were
overpaid.
[49] The
high court found
that although the defendant’s conduct was incompetent and
negligent, it could not be characterised as inexcusable as to be
unworthy of the protection of the court. It upheld the counterclaim.
On appeal, the Supreme Court of Appeal (SCA) held that the
nature of
the mistake perpetrated by the respondent when each payment was made
was clear but not the reason and that the respondent
had failed to
explain why the mistake occurred and why it occurred repeatedly over
a seven month period. The written agreement
was readily accessible
to the respondent’s officials. The failure by its officials to
deduct the unauthorised increase and
to check the rates stipulated in
the appellant’s invoices with the written agreement could only
be attributed to extreme
slackness or negligence on their part.
8
The SCA thus held that the respondent’s conduct was culpable
to a degree rendering same inexcusable. It accordingly dismissed
the
counterclaim.
[50]
A plaintiff must prove the following elements in order to succeed:
(a)
the defendant must be enriched;
(b)
the plaintiff must be impoverished;
(c)
the defendant's enrichment must be at the expense of the plaintiff;
(d)
the enrichment must be unjustified or
sine
causa.
See
McCarthy
Retail Ltd v Shortdistance Carriers CC
[2001] (3) All SA 236
;
2001 (3) SA 482
(SCA).
The
burden of proof in respect of these elements is on the plaintiff.
Once transfer
indebiti
has
been established, the onus shifts to the defendant to prove that the
transfer did not in fact enrich it.
[51
]
In this case, the counsel for the municipality submitted that the
overpayment was made in error and that the municipality had
relied on
its managing agent to audit the work done by the other defendants
and satisfy itself that the work was necessary. The
agent had a duty
to verify the defendants’ accounts and ensure that these
complied with the PHB tariff and that their fees
were reasonable
before payment was effected. In the end, the amount paid exceeded
the amount approved by the PHB.
[52] It
is common cause that the municipality, through its officials,
authorised payments to the defendants over the period of the
contract. The official entrusted with the plaintiff’s finances
was also responsible for payment of invoices. It is apparent
that
the said official did not ascertain that payments did not exceed the
limit set by the PHB. The official was negligent. The
municipality
will not succeed in its claim if gross negligence on the part of its
officials is proved.
[53] Most
of the payment authorisations (in fact 45) were signed by Mr Judd.
Mr Zeiss signed three claims and eight claims were
signed by an
unidentified official. Of these claims, 22 were accompanied by
statements that the claims were made in terms of the
client
consultant agreements. This occurred after the PHB had conveyed its
decision to the municipality. Some formed part of the
preliminary
expenditure and others were claimed in terms of the managing agent’s
instruction. The officials were on different
occasions told
unequivocally that the claims were not made in terms of the tariff
approved by the PHB. Mr Judd and to a certain
extent, Mr Zeiss and
the unidentified official paid repeatedly, five months after they
became aware that the PHB had only granted
7.5 per cent and 9.2 per
cent for the projects and not fees based on the client consultant
agreement contended by the defendants.
If they knew there was no
approval or there was a limit, they should have advised the
defendants accordingly and rejected the
claims which fell outside the
ambit of the approved tariff.
[54]
Mr Judd who authorised most of the claims as well as the other
unknown official did not testify to explain why they had ignored
the
express statements and why they had paid otherwise than in terms of
the PHB approval. At no stage when payments were claimed
in terms of
the client consultant agreement was it ever suggested that the
agreements were not valid and that payment would be
in terms of the
PHB tariff.
[55
] Mr
Zeiss, the only witness in this regard, did not explain why the
mistakes occurred and why they occurred repeatedly over the
duration
of the contract, save to state that there was often uncertainty about
the actual PHB approvals and that they relied on
the managing agent
to verify the claims.
[56] The
municipality as plaintiff bore the onus to establish that the
mistakes were not made negligently and were
excusable.
In my view, it has failed to do so. Nothing precluded the officials
from ensuring that the payments did not exceed
the restricted amount.
The Provincial Housing Board document is a public document. The
municipality cannot argue that the officials
responsible for payment
were not aware thereof. They could have perused the document and
ascertained the actual approvals. The
officials’ conduct was
grossly negligent and such negligence is attributable to that of the
employer (the plaintiff). In
my view, the explanation provided is
insufficient and the degree of negligence is so gross that it cannot
be excused. The plaintiff
has accordingly failed to discharge the
onus of proof. It cannot succeed on the action based upon the
conditio
indebiti
.
It follows that the plaintiff’s claim falls to be dismissed.
[57]
In the result the following order is made:-
The
plaintiff’s claim is dismissed with costs, including those
attendant upon the employment of two counsel.
____________
N.
MHLANTLA
JUDGE OF THE HIGH COURT
For
the Plaintiff : Adv R Buchanan SC; Adv B Ford SC
Instructed
by : Rushmere Noach Inc
5
Ascott Office Park
Greenacres
PORT
ELIZABETH
For
the Defendants : Adv R Van Rooyen SC; Adv O
Ronaasen
Instructed by : Pagdens
Attorneys
Castle Hill
PORT ELIZABETH
FORM A
FILING SHEET FOR EASTERN CAPE
JUDGMENT
ECJ no
PARTIES:
THE
NELSON MANDELA METROPOLITAN MUNICIPALITY
AND
NGONYAMA
OKPANUM HEWITT-COLEMAN & OTHERS
Registrar
CASE NO: 145/01
Magistrate:
HIGH COURT, PORT ELIZABETH-
EASTERN
CAPE LOCAL DIVISION
Supreme
Court of Appeal/Constitutional Court:
DATE
HEARD:
DATE
DELIVERED: 27 JULY 2010
JUDGE(S):
MHLANTLA, J
LEGAL
REPRESENTATIVES -
Appearances:
for
the State/
Plaintiff(
s)/Applicant(s)/Appellant(s):
ADV R BUCHANAN &
ADV
B FORD SC
for
the accused/
defendant
(s)/respondent(s): ADV
R VAN ROOYEN SC
&
ADV O RONAASEN
Instructing
attorneys:
Plaintiff(s)/Applicant(s)/Appellant(s):RUSHMERE
NOACH INC,
PORT
ELIZABETH
Respondent(s)/Defendant(s):PAGDENS
ATTORNEYS, PORT ELIZABETH
CASE
INFORMATION -
Nature
of proceedings
:
CIVIL MATTER
Topic
:
DAMAGES
1
1914 AD 532
at
543.
2
1941 AD 43
at 47.
3
1980 (3) SA
927
(A) at 943B-F.
4
[1910] AC
174
at 184.
5
Affirmative
Portfolios CC v Transnet Ltd t/a Metrorail
[2008] ZASCA 127
;
2009 (1) SA 196
(SCA).
6
[1991] ZASCA 163
;
1992 (4) SA
202(A)
at 224 E-F.
7
1988
(4)
193 (E).
8
Paras
34-37.