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[2021] ZAKZDHC 15
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Duma Khumalo Stainbank Holdings (Pty) Ltd v Ethekwini Metropolitan Municipality (D5571/2018) [2021] ZAKZDHC 15 (14 April 2021)
IN THE HIGH COURT OF
SOUTH AFRICA
KWAZULU-NATAL LOCAL
DIVISION, DURBAN
Case No: D5571/2018
In the matter between:
DUMA KHUMALO STAINBANK
HOLDINGS (PTY) LTD
APPLICANT
and
ETHEKWINI METROPOLITAN
MUNICIPALITY
RESPONDENT
JUDGMENT
Chetty J:
[1]
The applicant initiated motion proceedings
claiming payment of R1 692
000 from the respondent, together with interest from 19 May 2017 to
date of final payment. The application
has its genesis in a tender
for which the applicant successfully competed to perform construction
work on the upgrading of the
Umlazi Glebelands Hostels. The value of
the contract award was in the amount of R18 240 000. As part of the
contractual obligations,
the applicant was required to put up a
surety bond or a construction guarantee to the value of the sum of
the contract. In December
2005 the applicant executed a deed of
indemnity (‘the indemnity’) in terms of which it
undertook to indemnify Constantia
Insurance Company Limited
(hereinafter referred to a ‘Constantia’) against any
amounts that it was called upon to pay
in terms of a surety bond. As
a consequence, Constantia issued the surety bond for the due and
complete performance by the applicant
of all its obligations under
the contract with the respondent. The total liability for which the
bond was issued was in the sum
of R1 824 000.
[2]
On 28 November 2017 the Head of Housing for
the respondent wrote to
the applicant giving immediate notice of the termination of the
contract. In accordance with the terms
of the contract, the
respondent withheld or retained an amount of R800 000 being in
respect of amounts certified for works performed.
This is what is
referred to herein as the ‘retention fee’. As a
consequence of the termination of the contract, the
respondent in
July 2008 made a demand on Constantia of the amount of R1 824 000 in
terms of the surety bond. Constantia honoured
its payment obligation
and paid the respondent the said sum in August 2008.
[3]
In light of Constantia honouring the surety
bond, it issued summons
in October 2008 against the applicant and its sureties for the amount
which it (Constantia) paid to the
respondent. The action was
unopposed by the applicant, and default judgment was granted in
favour of Constantia on 5 February 2009
by the Gauteng High Court
(known then as the Witwatersrand Local Division) in the amount of R1
824 000 together with interest.
[4]
Insofar as
the applicant and its sureties were concerned, the contract was
cancelled without valid reason. As a result, the applicant
contends
to have suffered a
loss in the
sum of the retention fee, being R800 000 as well as R1 840 000
[1]
which it was obliged to pay to Constantia in terms of the indemnity.
When attempts at negotiations with the respondent failed to
achieve
any settlement, the applicant issued
a summons
against the respondent for the amounts of R800 000 and R1 824 000
respectively. What followed thereafter were a series
of attempts by
the applicant to have the matter resolved, this time invoking the
assistance of the respondent’s Municipal
Manager and the Office
of the Ombudsperson located within the municipality. Eventually a
report was issued in October 2012 from
the Office of the Ombudsperson
with
a
recommendation
that
the
Housing
Department
of
the
respondent comply with a resolution of the Executive Council taken on
2 October 2007
and release
R1 824 000 plus interest in respect of the surety bond and R800 000
in respect of the retention fee. The recommendation
was endorsed by
the respondent’s
Head of
Legal Services.
[5]
According
to Mr Khumalo, the deponent to the applicant’s founding
affidavit, he
pursued the
matter for approximately two years during which time he engaged
various
officials
ranging from the Mayor to the Head of Human Settlements within the
structures
of the respondent. According to him he was persuaded in July 2014 to
withdraw the action instituted against the respondent
on the basis
that the latter’s Public Accounts Committee was unable to
negotiate a settlement while litigation was pending.
This is denied
by the respondent in its reply. Shortly thereafter the respondent’s
Integrity and Investigations Unit entered
the fray and they too
recommended that the respondent should release the guarantee of R1
824 000 and the retention fee of R800
000 to the applicant.
[2]
[6]
The report
and recommendation of the Integrity Unit then meandered its way
through the various structures of the respondent, culminating
in the
City Manager recommending payment of R800 000 (excluding VAT) plus R1
600 000 (excluding VAT) to the applicant.
[3]
The recommendation of the City Manager was then tabled for
consideration
by the respondent’s Executive Committee on 15 September 2015,
resulting in the Executive Committee resolving
to pay the amounts
proposed. The aforementioned resolution again served before the
Executive Committee on 30 September 2015 for
reasons which are not
clearly apparent. The decision to pay the
applicant
the amounts of R800 000 and R1 600 000, both exclusive of Value Added
Tax, was reaffirmed. On that basis, the applicant
contends that as at
30 September 2015 the respondent became ‘indebted’ to the
applicant for the total amount of R2
400
000
together with interest.
[4]
[7]
Although the applicant was initially represented by an attorney
in
Durban, Mr Khumalo subsequently liaised with Constantia’s
attorney, Mr Lewis, informing him of the resolution passed by
the
respondent. It is not clear from the founding affidavit why or what
interest the applicant had in the affairs of Constantia
that caused
Mr Khumalo to contact Mr Lewis to inform him of the resolution, other
than that Constantia had already obtained judgment
against the
applicant under case number 36588/2008 in the Gauteng Local Division
for the amount of R1 840 000 arising from the
surety bond issued on
behalf of the applicant. Mr Lewis, as Constantia’s attorney,
then issued a writ of execution seeking
to attach the respondent’s
property to satisfy the payment of a debt owing by the respondent to
the applicant ‘now
or in the future’, in the amount of R1
840 000.
[8]
I should point out that the attorney acting for Constantia
against
the respondent subsequently came to act for the applicant, which I
found not to be entirely proper. Although it does not
amount to
unprofessional conduct, I find the notion of an attorney acting for
one party, and then another, against a common adversary
based on
similar facts but different causes of action, to be problematic,
particularly as it pertains to the issue of costs charged
by the
attorney in the event of him or her being successful. Situations like
the present allow for the cross-pollination of resources
and
information from one matter to another. This is apparent from what
appears below. These concerns are borne out in the founding
affidavit
where the deponent confirms that Mr Lewis (the attorney) was
subsequently engaged to act for the applicant ‘because
of his
already acquired knowledge of the overlap between this application
and Constantia’s application’. The deponent
appears to
contend that this would be a cost saving exercise, but nonetheless
pursues a costs order against the respondent on an
attorney and
client scale, including costs for attorneys both in Johannesburg and
Durban.
[9]
In response
to the writ issued on behalf of Constantia, Mr Mfingwana, writing
under the title of Head of Legal Services of the respondent,
informed
Constantia’s attorney on 29 October 2015 that ‘there are
no monies due or owing to DKS Holdings
[the
applicant] by the Municipality [the respondent]’.
It bears
noting that this statement
from the
Head of Legal Services comes on the heels of the Executive Committee
barely a month earlier on 30 September 2015 having
adopted a
resolution that the respondent was to pay to the applicant the sum of
R2 400 000. Even more curious is
a statement
in the letter from Mr Mfingwana that ‘the Council resolution of
30
September
2015 relating to DKS Holdings Pty Ltd was rescinded on 28 October
2015’.
[5]
[10]
The background to the rescission of the Executive Committee’s
decision
on 28 October 2015, which Mr
Harcourt SC
, who
appeared on behalf of the applicant, submits is invalid and of no
force and effect, is to be found in the Council’s
decision of
30 October 2015, the relevant extract of which reads as follows:
‘
The
relevant department had failed to implement the Exco decision to
waive penalties imposed on DKS Holdings to enable the company
to
complete work. It had been established that the new service provider
appointed to complete work was paid more than the penalties
and,
according to the Department, this was due to poor workmanship by DKS
Holdings. It then concluded that there is no legal basis
for the
municipality to make any payment to DKS Holdings.
Meanwhile,
Constantia after learning that the municipality had taken a decision
to pay DKS Holdings, it had to serve the municipality
with a writ of
attachment of whatever payments the municipality would make to DKS
Holdings. This attachment is based on a judgment
taken against DKS
Holdings for R1 824 000.00 plus interest at 15.5%. According to the
writ, DKS Holdings is liable to pay the insurance
company an amount
of R3 680 000.00 (three million six hundred and eighty rand).
Therefore, in order to get the municipality out
of this attachment in
terms of the written report in possession by the Head: Legal and
Compliance, it is recommended that the two
decisions taken in 2007
and 2015 respectively on this matter should be rescinded on the basis
that the municipality is not required
to pay DKS Holdings.
The
report presented by the Head: Legal and Compliance comprising a
recommendation to rescind the decisions taken by Exco and Council
on
this matter was unanimously supported. Accordingly, given the legal
opinion received confirming the right of the municipality
not to pay
any money to DKS Holdings (Pty) Ltd,
COMMITTEE
RECOMMENDS
That
the resolution adopted by the executive committee on 2007-10-02 to
waive penalties imposed on DKS Holdings, be rescinded.
That
the decision taken by counsel on 2015-09-30 to pay DKS Holdings (Pty)
Ltd retention money to the value of R800 000 (eight hundred
thousand
rands) and release surety to the value of R1 600 000 (one million six
hundred thousand) plus VAT, in respect of contract
1H- 809 for the
construction of housing accommodation at Umlazi Glebelands Community
Residential Unit, be rescinded.’
[11]
It would be a reasonable assumption to make that the Head: Legal and
Compliance referred
to in the minutes of the Executive Committee
above is the same Mr Mfingwana who responded to the writ on behalf of
the respondent
and who is the deponent to the respondent’s
answering affidavit, save that he is described as the Chief Legal
Advisor: Litigation
for the respondent.
[12]
Frustrated by the respondent’s decision to rescind its
resolution of 30 September
2015, Constantia’s attorney filed an
application in the Gauteng High Court in October 2016 requiring the
Mayor, City Manager
and the Head of the Integrity and Investigation
Unit of the respondent to show cause why it should not be ordered to
pay Constantia
such amounts as were deemed owing to the applicant in
accordance with the decision of the Executive Committee on 30
September 2015,
and to pay interest on that amount.
[13]
In the same application Constantia also sought an order that the
applicant pay it
the sum of R3 780 000 together with interest from
October 2015 to date of payment. This amount comprised reimbursement
of the R1
824 000 paid by Constantia to the respondent under the
surety bond. The remainder comprised interest. The crux of that
application,
as contended by Constantia, is that the respondent
laboured under the mistaken belief that its rescission of the
resolution to
pay the applicant absolved it of its obligation as a
garnishee under Uniform rule 45 to pay over monies owed to the
applicant,
in circumstances where Constantia already had a money
judgment against the applicant. Despite the filing of a notice to
oppose,
judgment was granted against the respondent in favour of
Constantia on 18 January 2017 for payment of the sum of R3 780 000
together
with interest. In addition, Constantia was granted leave to
execute against the respondent to recover the amounts granted in its
favour. On 19 May 2017 the respondent paid Constantia the sum of R4
362 851.51.
[14]
According to Constantia, prior to the above payment by the
respondent, the total
amount owing to it was R5 472 000. After
payment on 19 May 2017 by the respondent, according to Constantia,
the amount still due
to the applicant by the respondent was R1 692
000. I must point out that these figures are based on the assertions
as set out in
the founding affidavit and although Mr
Harcourt
repeatedly submitted that these are simply a matter of
arithmetical calculation, I do not necessarily share the same view.
As will
appear from what follows, the amount eventually claimed
varies from the amount specified in the notice of motion which was R1
692
000. It is equally of concern to me why Constantia would have had
locus standi to claim that amount from the respondent,
notwithstanding
that the applicant has demanded payment of the same
amount in its own name. It is also not clear to me how this amount is
calculated
as the applicant’s claim against the respondent has
been based on payment of the R800 000 being the retention fee and R1
600 000 in terms of the surety bond issued by Constantia.
[15]
The essence of the opposition to the applicant’s claim is that
the applicant
is attempting to snatch a bargain by claiming more than
it is entitled to in terms of the contract which was cancelled
between
the parties. Ms
Mahabeer SC
for the respondent
submitted that the maximum amount that could be claimed by the
applicant is R1 325 185.39 on the basis that following
the
cancellation of the construction contract, the respondent became
liable for that amount as reimbursement for the retention
fee which
was withheld by the respondent, together with interest. The
contention of the respondent is that notwithstanding that
Constantia
obtained judgment against the applicant for the amount of R1 840 000
in the Gauteng High Court, that amount excluded
the interest on the
capital amount of the surety bond which was paid to the respondent as
an indemnity on behalf of the applicant.
The remainder of the amount
comprised interest, calculated from 26 October 2017. I am in
agreement with the respondent that the
judgment obtained by
Constantia had no application to the recovery of the retention fee in
the amount of R800 000. It also appears
from the correspondence and
minutes of the Executive Committee meetings of the respondent that it
operated under the misapprehension
that when it paid Constantia, it
was ‘settling a debt in full and final settlement’. The
only basis for Constantia
to demand payment from the respondent was
in the form of a garnishee order. There was no debt, in the strict
sense of the word,
owed by the respondent to Constantia.
[16]
Accordingly, the respondent submits that the only amount for which it
remains liable
in terms of the cancellation of its construction
contract with the applicant, is the amount of R800 000 plus interest,
payable
to the applicant. It concedes that this amount became payable
on December 2012, from which date interest would accrue. According
to
the respondent’s calculations, the capital amount of R800 000
would have attracted an amount of interest calculated at
the legal
rate, as at 31 August 2018, in the sum of
R525 185.39, resulting in a total liability
to
the applicant of R1 325 185.39. This is where the dispute
between the parties arises.
[17]
In contrast to the respondent’s calculations, the applicant
contends that it
is owed an amount of R1 692 000 plus interest from
19 May 2017, being the date when the respondent settled its
indebtedness to
Constantia. This amount appears to have been arrived
at, according to the respondent, based on the total claim by the
applicant,
that is the amount of R1 824 000 plus R800 000 plus
interest, less the total amount paid to Constantia. According to the
respondent
the applicant has erred in calculating its claim as it has
failed to isolate the debt owed by the respondent as being R800 000.
The respondent’s complaint is that instead of the applicant
restricting its claim to the repayment of the retention fee,
it is
impermissibly attempting to claim interest on an amount claimed by
Constantia. According to the respondent, the ‘debt’
due
to Constantia was been settled in full and the applicant has no claim
to any interest arising from any ‘debt’ due
to
Constantia. As a consequence, the respondent contends that the
applicant’s claim has been artificially inflated beyond
the R1
325 185.39 due to it as at 31 August 2018. As will be seen from what
appears later in this judgment, by the time the matter
was argued,
the respondent had made a payment of R1 325 184.39 to the applicant,
which it contends settled the matter. The applicant
however persists
in its claim, contending that a further R892 053.13 remains due.
[18]
Regarding the recommendation of the City Manager to the Executive
Committee to pay
the applicant the amount of R800 000 plus the amount
of R1 600 000 in respect of the surety bond, Mr Mfingwana states that
this
recommendation was made mistakenly and arose from an error of
law as to which of the two entities, Constantia or the applicant,
was
to be refunded in respect of the cancellation of the contract. The
Executive Committee subsequently acted on the mistaken advice
and
resolved to approve of the City Manager’s recommendation. The
point emphasised by the deponent is that the amount of
the surety
bond had been repaid to Constantia in full, together with interest.
That payment discharged the respondent’s indebtedness
in full
to Constantia. The deponent to the applicant’s replying
affidavit accepts this to be a correct assessment of the
position. As
such, according to the respondent, there is no liability by the
respondent to the applicant in respect of the surety
bond, which the
respondent has already settled. The respondent is therefore liable,
in its submission, only for repayment of the
retention fee of R800
000 plus interest. The issue for determination is therefore whether
the respondent is liable for anything
beyond the amount of R1 325
185.39.
[19]
In reply, the applicant bases its claim on the respondent’s
acknowledgment
of liability and undertaking to pay, taken on 30
September 2015, notwithstanding that this same acknowledgment was
rescinded within
a month upon the Executive Committee receiving a
further opinion from the Head of Legal Services. It begs the question
whether
the City Manager correctly applied his mind to the matter
before recommending to the Executive Committee on 30 August 2015 that
it pay to the applicant the sum of R2 400 000. Of that amount, R1 824
000 had already been repaid to Constantia together with interest.
It
raises the concern whether both Constantia and the applicant are
being paid for the same cause of indebtedness? It cannot be
that the
respondent is obliged to refund Constantia
and
the applicant
in respect of a single surety bond, where only one single payment was
made to the respondent and that having been
done by Constantia.
[20]
At the same time, I am in agreement with the assertions of the
applicant in its replying
affidavit that the respondent appears to
have mischaracterised the nature of the respondent’s obligation
to pay Constantia.
The order secured by Constantia arose from the
termination of the construction contract awarded to the applicant.
Upon the termination
of that contract, Constantia became obliged to
pay the respondent in terms of the surety bond. Having honoured its
obligation in
respect of the surety bond, Constantia then sought (as
it was entitled) redress from the applicant for the amount paid on
its behalf
to the respondent. It issued summons in October 2008 and
eventually took judgment against the applicant for the amount of R1
840
000 together with interest and costs in February 2009. The
applicant was unable to settle any part of the judgment debt and by
2014 the interest due on the capital sum, in terms of the
in
duplum
rule, reached the capital sum. Constantia’s claim
against the applicant, arising from the indemnity, was R3 680 000 –
twice the amount of the capital sum. It was unable to obtain
satisfaction for its debt. Once Constantia’s attorney learnt
that the respondent had resolved to pay the applicant the amount of
R2 400 000 plus interest, it pursued the matter in terms of
Uniform
rule 45. The writ was returned by the Sheriff, with a notation that
the respondent did not have sufficient funds to satisfy
the garnishee
order.
[21]
Based on
the respondent’s ‘acknowledgment of indebtedness’
to the applicant
and its
resolution adopted at the Executive Committee on 30 September 2015,
Constantia brought an application in the Gauteng High
Court for an
order in terms of Uniform rule 45(12) directing the respondent to pay
to Constantia such amounts as were owed as at
30 September 2015
together with VAT and interest calculated from 12 December 2010.
Constantia obtained an order directing the respondent
to pay it the
sum of R3 780 000
[6]
together
with interest on R3 680 000 and costs. Upon the service of the order,
the respondent paid R4 326 851.51.
[22]
The applicant’s claim is founded on the premise that the
respondent adopted
a resolution which remains valid and binding that
it (the respondent) be obliged to pay the applicant the amount of R2
248 000
with effect from 2 December 2012, together with VAT and
interest at 15.5%. If I understood the applicant’s case, this
was
the amount which Constantia became entitled to attach in terms of
Uniform rule 45(12).
[23]
The question which then arises is the precise indebtedness of the
respondent to the
applicant, taking into account the amount already
paid to Constantia. Assuming that no payment had been made to
Constantia, what
would have been the extent of the respondent’s
indebtedness (if any) to the applicant? It bears noting that although
various
correspondences between the parties form annexures to the
affidavits, they are marked ‘without prejudice’.
[24]
The contents of the correspondence however do not constitute ‘without
prejudice’
correspondence in the meaning of that term. The
essence of the rule relating to correspondence being ‘without
prejudice’
has long been held to facilitate or promote the
settlement of disputes without resort to litigation. In
Naidoo v
Marine & Trade Insurance Co Ltd
1978 (3) SA 666
(A) at 674A
the court referred to a statement made by Lord Mansfield that ‘it
must be permitted to men to “buy their
peace” without
prejudice to them, if the offer did not succeed; and such offers are
made to stop litigation without regard
to the question whether
anything or what is due’. The court also held that the origin
and rationale for the without prejudice
rule was public policy. In
holding that certain correspondence was written ‘without
prejudice’ Trollip JA noted at
677B-D that:
‘
[S]uch
correspondence, once respondent objected to its being adduced in
evidence, was wholly inadmissible. The rationale of the
rule is
public policy: parties to disputes are to be encouraged to avoid
litigation and all the expenses (nowadays very high),
delays,
hostility, and inconvenience it usually entails, by resolving their
differences amicably in full and frank discussions
without the fear
that, if the negotiations fail, any admissions made by them during
such discussions will be used against them
in the ensuing
litigation.’
[25]
In the present matter, the respondent’s attorney wrote to the
applicant’s
attorney in March 2019 offering to settle the
matter on payment of R1 325 185.39 as a full and final settlement of
the applicant’s
claim. To the extent that the applicant claimed
any greater amount, the respondent’s attorney added ‘any
liability
in excess of the settlement amount will be disputed and any
claim for those excess amounts cannot proceed in application
proceedings,
and action proceedings must be launched in respect of
this claim.’
[26]
This offer to pay is repeated not only in the answering
affidavit, but it assumes a pivotal role in the respondent’s
supplementary
affidavit in which it contends that it already paid the
amount of R1 325 184.39 on 10 May 2019 into the account of the
applicant’s
attorney. On that basis the respondent contends
that the matter ought not to have been set down on the opposed roll
on 13 August
2020 as it had, for all intents and purposes, been
settled. Insofar as the respondent is concerned, it waived privilege
in relation
to the offer to pay – which amount was subsequently
paid to the applicant’s attorney. The applicant’s
attorney
on the other hand arrives at the same conclusion, but for
different reasons. The applicant’s attorney had no objection to
the offer being placed before this court. To that extent, the offer
by the respondent clearly cannot be regarded as being without
prejudice. What is of importance is that the respondent is consistent
in its stance that it does not owe the applicant anything
more than
the amount tendered, and subsequently paid.
[27]
The payment by the respondent is calculated on the basis of a
refund of the retention fee of R800 000 plus interest and costs on
a
party and party scale. The point of departure with regard to the
applicant’s calculations, which are placed in dispute,
is that
the applicant contends that the payment of the retention fee should
also include VAT on the amount of R800 000 plus interest.
The
respondent adopts the view that the applicant is attempting to
extract monies from the respondent, which are not due in law.
In
light of the respondent having made payment, it contends that if the
court does not find that the matter has been settled, the
applicant
has in any event failed to show on what basis it is entitled to claim
R1 692 000 plus interest and costs.
[28]
The
applicant in its heads of argument clarified the position that
although its initial
claim
was
for
the
amount
of
R1 692 000,
after
payment
by
the
respondent
of
R1 325
284.39, a balance of R892 053.13 remains due in the principal
debt
[7]
. This is disputed by the
respondent which contends that the applicant, after receipt of the
payment from the respondent, should
have proceeded with a separate
debatement action in respect of any further amounts it believed owed.
At the same time the respondent
maintains
that
in
light
of
a
dispute
of
fact
emerging
as
to
any
further
amounts owing to the applicant, the application should be dismissed.
I am not
persuaded
by the submission while noting that in
National
Director of Public Prosecutions v Zuma
[2009] ZASCA 1
;
2009
(2) SA 277
(SCA)
Harms JA held in paragraphs 26 and 27
that
‘motion proceedings, unless concerned with interim relief, are
all about the resolution of legal issues based on common
cause
facts’.
[29]
The dismissal of the applicant’s application solely because of
the dispute
which has now arisen cannot be considered as being in the
interests of justice. It should be borne in mind that the dispute
between
the parties goes back to November 2007 when the respondent
cancelled the construction contract. Although the applicant has
repeatedly
maintained that the contract was cancelled without valid
cause, the applicant has never pursued the matter to set aside the
cancellation.
It has confined its application to a refund of the
retention fee held by the respondent. The stance of the respondent
all along,
until the late delivery of a supplementary affidavit in
which it made mention of the payment of R1 325 184.39, was that it
did
not owe the applicant anything more than this amount. Once
payment had been made, it believed the matter to be settled.
[30]
Uniform rule 6(5)(
g
) provides:
‘
Where
an application cannot properly be decided on affidavit the court may
dismiss the application or make such order as it deems
fit with a
view to ensuring a just and expeditious decision. In particular, but
without affecting the generality of the aforegoing,
it may direct
that oral evidence be heard on specified issues with a view to
resolving any dispute of fact ’.
[31]
The late introduction of the respondent’s ‘supplementary
affidavit on
settlement’ deposed to by Ms Masinga of the
respondent’s Legal Department served to jettison the initial
hearing of
this matter set down for 13 August 2020. The introduction
of this supplementary affidavit was opposed on various grounds,
including
that it was deposed to more than a year after the payment
of R1 325 184.39 was made by the respondent to the applicant. Mr
Harcourt
submitted that no valid explanation had been set out
for the delay in seeking to file a fourth affidavit. The hearing on
13 August
2020 was short lived, with the parties eventually agreeing
to the matter being adjourned to enable the applicant to respond to
the supplementary affidavit.
[32]
In every case the court should examine the alleged disputes of fact
and determine
whether there is a real issue of fact that cannot be
satisfactorily resolved without trial. Applying that test to the
present matter,
the cornerstone of the applicant’s case is the
Executive Committee’s resolution on 30 September 2015 to pay to
the
applicant the retention fee of R800 000 and the surety bond
monies of R1 600 000. The applicant submits that the resolution
constitutes
an ‘acknowledgment of debt’ and an
undertaking to pay, which is binding on the applicant. In its
supplementary heads,
the applicant relies on
Adams
v
SA
Motor
Industry
Employer’s
Association
1981 (3) SA
1189
at 1198B, where Jansen JA considered the general principles in
relation to an acknowledgment of debt, stating: ‘an
acknowledgment
of debt, provided it is coupled with an express or
implied undertaking to pay that debt, gives rise to an obligation in
terms of
that undertaking when it is accepted by the creditor’,
adding at 1198E that: ‘[t]he decisive question is whether the
acknowledgment contains an express or implied undertaking to pay, a
matter which relates to the intention of the parties.’
[33]
The resolution adopted by the Executive Committee on 30 September
2015 refers to
a decision to pay the applicant R800 000 (exclusive of
VAT) in respect of the retention fee together with R1 600 000 in
respect
of the surety bond. The issue before the court is that of the
indebtedness (if any) by the respondent to the applicant pursuant
to
its payment in May 2019 of R1 325 184,39. The argument advanced by
the respondent is that it was liable to the applicant only
in respect
of the retention fee of R800 000 plus VAT and interest. Any
suggestion that interest relative to the surety bond claim
is
misplaced as this was in terms of a contract between the applicant
and Constantia. The respondent only became embroiled in the
matter by
way of a garnishee order served on it. Counsel for the applicant is
correct to point out that there was no ‘debt’
owed by the
respondent to Constantia arising from the surety bond.
[34]
In an attempt to clarify the confusion as to how the amount of R884
869,03 is arrived
at, Mr
Harcourt
on the morning of the
re-scheduled hearing produced a summary of the applicant’s
claim, inclusive of interest and payments
after the issue of
proceedings. The respondent did not admit to the contents of the
document nor the methodology employed in arriving
at the sum due. Ms
Mahabeer SC
for the respondent, on the other hand,
pointed out that if one considers that the
total
indebtedness of the respondent was R2 400 000 plus interest,
the respondent eventually paid a total of R 5 688 037.90 – more
than twice the original ‘debt’ referred to in the
Executive Committee Resolution of 30 September 2015. For that reason,
the respondent adopts the position that it has paid all that is due
arising from the cancellation of the contract to the applicant
and no
further amounts are owing.
[35]
I have had careful regard to the submissions before me and at the end
of the day
I am unable to determine on the papers, as I am required
to do in motion proceedings, whether the applicant is entitled to
anything
further than the sum the respondent has already paid. I do
not agree with Mr
Harcourt
that the calculation of interest is
an arithmetic calculation. The court has not been placed with the
necessary facts and averments
in order to understand how the amount
of R884 869.03 has been calculated, which is necessary in order to
sustain the claim. In
the present matter, the amount of the
applicant’s claim has altered, and it is not clear to me
whether any amounts are still
due to the applicant, following the
payment of a ‘settlement’ amount by the respondent. While
the original amounts
giving rise to the claim of the applicant are
common cause, as well as the amounts claimed by Constantia from the
applicant (and
which were in turn paid by the respondent in terms of
the garnishee order) any further amounts claimed are strenuously
disputed
by the respondent.
[36]
In addition to these amounts is the final ‘settlement’
paid by the respondent,
which the applicant submits was applied as a
first payment against interest, resulting in a remaining balance of
the capital sum.
The calculation of interest (where applicable)
remains in dispute and is a matter which cannot be resolved by simple
calculation.
This is not a situation where the court can adopt ‘a
robust approach’. The respondent has raised concern regarding
the correctness of the calculations of the applicant. This can only
be resolved by witnesses testifying as to how these figures
were
arrived at, and then being subjected to cross-examination.
[37]
The court has discretion in terms of Uniform rule 6(5)(
g
) in
the interest of ensuring a just resolution of the dispute between the
parties, in circumstances such as have arisen in this
matter, to
refer the matter to oral evidence. Although the respondent was
opposed to the matter being referred to oral evidence
and argued in
favour of a dismissal of the application, Mr
Harcourt
(although
insisting that the amount claimed was clearly identifiable and
capable of easy calculation) accepted as a fall- back position
that
the matter could be referred to oral evidence on the specific issue
of the calculation of the amount claimed by the applicant.
The
parties will however be bound to what is already contained in their
respective affidavits, including the ‘supplementary
affidavit
on settlement’ and the reply thereto.
[38]
In the result I make the following order:
1. The
matter is referred for the hearing of oral evidence on the following
issues:
a.
Whether the applicant is entitled to an amended Order that the
respondent be directed to pay the amount of
R884 869.03 with interest
at 15.5% from 11 May 2019 to date of payment;
b.
Alternatively, whether the respondent’s payment to the
applicant of the sum of R1 325 184.39 on 10 May
2019 constituted a
full and final settlement of its indebtedness to the applicant, and
if so, its implication for the costs of
the application.
2. The
provisions of Uniform rules 35, 36 and 37 will apply to this matter.
3. All
persons who have deposed to affidavits in this matter may be called
to give evidence at the hearing. In
the event that a party seeks to
call a witness who has not deposed to an affidavit in this matter
then such party shall provide
the other party with a statement of
such witness’s evidence at least 10 days before the hearing of
the matter.
4. The
costs of this application (13 August 2020 and 16 November 2020) are
reserved for determination by the Court
hearing the oral evidence.
____________________________
M R CHETTY
Appearances
For the
applicant:
Mr A W M Harcourt SC
Email:
harc@law.co.za
Instructed
by:
LM Attorneys
Lincoln House, 3rd Floor
Durban
Email:
lindo.mthembu@yahoo.com
For the
Respondent:
Ms S Mahabeer SC
Instructed
by:
Strauss Daly Inc
41 Richefond
Circle Umhlanga
Email:
Ddeeplal@straussdaly.co.za
zmtshali@straussdaly@co.za
Date of
hearings:
13 & 16 November 2020
Date of
Judgment:
14 April 2021
[1]
The respondent demanded R1 824 000 from Constantia following the
cancellation of the contract.
[2]
The conclusions of this report, dated 28 January 2015, record at
6.2.1 that ‘Payments of 95% of the total award effected
to DKS
[the applicant], this means the Council accepted the work done by
DKS. After accepting and honouring the invoices amounting
to 95% of
the project the Municipality cannot come and claim serious poor
workmanship by DKS. If indeed there was poor workmanship
by DKS, our
former officials as well as the outsourced management team were
party to fraud.’ The report continues: ‘Retention
fees
and the guarantee have not yet been released to DKS….Mochu
Civils, the second contractor was paid an amount almost
equal to the
amount paid to DKS.’ Understood in its context, this entails
that the respondent paid a second contractor
almost the same amount
as it did to the first contractor, DKS (ie,
the
applicant),
without
any indication of
poor
workmanship
by the
applicant.
It raises
the spectre once more of wasteful expenditure by organs of state and
arms of government.
[3]
These amounts are consistent with the earlier demands made by the
applicant, and with the recommendations by the respondent’s
various units, save that they have been expressed as amounts
inclusive
of VAT.
[4]
The applicant contends that interest would accrue on the total
amount of R2 400 000 excluding VAT,
at a rate
of 15.5%, compounded monthly.
[5]
At the time when the writ of execution was served on the respondent
(5 October 2015) the Executive
Committee’s
resolution of 30 September 2015 was still valid and enforceable. As
the Sheriff’s return indicates “
Mr
Mfingwana the Legal Head informed me that currently there is no
payment due as he is awaiting the minutes from the Council
Resolution to pay”
.
There was never any suggestion given that
no monies
were due to the applicant or that the resolution of 30 September
2015 was in the process of
being
rescinded.
[6]
This
amount
included the
sum
of
R100 000
as the
‘agreed’
costs of
the
application
by
Constantia
against
the applicant under case umber 2008/36588.
[7]
Counsel for the applicant contended that the payment by the
respondent was directed first at offsetting the
interest
which had accrued. Once that appropriation was made, the amount
which remains due, according to the applicant, is R893
053.13.