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2024
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[2024] ZAFSHC 14
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Lequbu Specialised Services (Pty) Ltd v Matjhabeng Local Municipality (3328/2021) [2024] ZAFSHC 14 (18 January 2024)
IN THE HIGH COURT
OF SOUTH AFRICA
FREE STATE
DIVISION, BLOEMFONTEIN
Case No:
3328/2021
Reportable: YES/NO
Of
Interest to other Judges: YES/NO
Circulate
to Magistrates: YES/NO
In
the matter between:
LEQUBU
SPECIALISED SERVICES (PTY) LTD
Applicant
and
MATJHABENG
LOCAL MUNICIPALITY
Respondent
CORAM:
HEFER AJ
HEARD
ON
:
30 NOVEMBER 2023
DELIVERED
ON:
18 JANUARY
2024
[1]
During July 2021 the Applicant launched an application for payment of
outstanding fees for services rendered
to Respondent. During November
2021 Naidoo J, made an order in terms of which
inter alia
:
“
The
dispute regarding the quantum claimed by the applicant for work done
in terms of appointment letter dated 14 October 2021 is
referred to
mediation in terms of clause 27 of the General Conditions of Contract
issued by National Treasury, as well as Uniform
Rule 41A.”
[2]
During July 2022, the mediator, Mr L Laubscher from Thuso Development
Consultants, concluded that the Applicant
is entitled to receive a
sum of R413,176.60 in respect of the approximately R15,000,000.00
claimed by the Applicant from the Respondent.
[3] The
order of Naidoo J further provided as follows:
“
In
the event of any of the parties being dissatisfied with the outcome
of the certification, either party may proceed with litigation
limited to the issue of quantification only.”
[4]
Because the Applicant was dissatisfied with the mediation outcome,
the Applicant signified its intention to
continue with legal
proceedings to determine the quantum of its claim.
[5] The
quantum dispute was finally settled when, on 23 December 2022, the
parties entered into a settlement agreement
in terms of which the
Municipality undertook to pay the Applicant R4,000,000.00 in full and
final settlement of its claim.
[6]
Regrettably, the Respondent refuses to make payment in terms of the
settlement agreement. The aim of the present
application, which is
brought in terms of Rule 41(4), is to obtain judgment against the
Municipality in terms of the settlement
agreement.
Background
facts
:
[7]
During October 2020 the Respondent appointed the Applicant to
undertake an emergency investigation into the
Respondent’s
problematic sewer lines, provide a report and to supervise any
necessary civil construction work to resolve
any issues that required
immediate attention.
[8] The
Respondent informed Applicant that its appointment fell within the
ambit of emergency procurement as contemplated
by the Municipal
Finance Management Act 56 of 2003, the applicable emergency
provisions in the regulations made under that Act
and the
Municipality’s Supply Chain Management Policy. The Applicant
accepted the appointment on that basis.
[9]
During January 2021 the Respondent, represented by its director of
infrastructure, Mr Ben Toabela, broadened
the scope of the
Applicant’s appointment to include a project feasibility study
of the Thabong Waste Water Treatment Works
as well as a high-levelled
conditional assessment of the Matjhabeng’s waste water
treatment works. Mr Toabela informed the
Applicant that the
Respondent required this assessment report to apply for funding to
the Department of Water and Sanitation.
[10] The Applicant
performed the emergency investigation and provided the Municipality
with its report, conducted a project
feasibility study of the Thabong
Waste Water Treatment Works and performed a high level conditional
assessment of the Matjhabeng’s
waste water treatment works. It
submitted a total of seven fee claims to the Respondent for the
professional services that it rendered.
The Respondent only paid two
of these fee claims (apparently only the first two fee claims),
leaving the remaining five claims
unpaid. The total of such claims
amounts to approximately R15 million.
[11] The Respondent
terminated the Applicant’s appointment during April 2021. The
Applicant’s fees were left unpaid
and the Applicant brought an
application seeking payment of these fees.
[12] The Respondent
initially opposed the application but later capitulated to the extent
that it acknowledged the Applicant’s
appointment and the
services that it rendered. The true dispute was of the quantum of
what was due to the Applicant. The Respondent
then consented to an
order that the quantum of the fees payable to the Applicant be
referred to mediation. This led to the order
of Naidoo J referred to.
As stated, subsequent to the Applicant being dissatisfied with the
outcome of the mediation process, the
quantum dispute was then
finally laid to rest when the parties entered into a written
settlement agreement during which the Respondent
was represented by
the then Acting Municipal Manager.
[13] The relevant
terms of the settlement agreement are as follows:
(i)
The Municipality agrees and acknowledges
that Lequbu has rendered professional consulting engineering services
to the Municipality;
(ii)
The Municipality shall pay the settlement
amount of R4,000,000.00 in five instalments as follows:
(a)
R1,000,000.00 on or before 31 March 2023;
(b)
R500,000.00 on or before 30 April 2023;
(c)
R500,000.00 on or before 31 March 2023;
(d)
R500,000.00 on or before 30 June 2023;
(e)
The full outstanding balance on or before
31 July 2023.
(iii)
Should the Municipality fail to make any of
the payments when they become due, such amount shall accrue interest
at the rate of
10.5% per annum, calculated from 23 December 2022 to
date of payment.
[14] Because the
Respondent failed to make payment of the first R1,000,000.00
instalment, this propelled the Applicant to
seek an order from the
Court to make the settlement agreement an order of court, during June
2023.
[15] After having
heard arguments by counsel on behalf of the parties, Musi JP, however
at that stage, found that there was
no proper application before
Court because the Applicant’s application was not supported by
a founding affidavit. As a result,
Musi JP removed the matter from
the roll and ordered each party to pay its own costs.
[16] It needs to be
mentioned at this stage that in opposing the application at that
stage, the Respondent has filed an opposing
affidavit which has also
been placed before me in the present application. I will refer to the
relevant portions of the June 2023
opposing affidavit as far as it
may be relevant and necessary.
Respondent’s
opposition in the present application
:
[17] In its present
opposing affidavit dated 20 September 2023, the Respondent firstly
raises a point
in limine
namely the existence of a dispute of
fact. According to the Respondent, given the court orders by Naidoo J
and Musi JP, the Applicant
should not have persisted with the present
application but rather followed the action procedure.
[18] In this regard
the Respondent refers to the contents of the order of Naidoo J which
contains
inter alia
the following:
“
4.
Applicant will, upon request by the mediator, provide whatever as
supplementation and/or explanation
required regarding its itemized
FEE CLAIMS.
5.
The mediator may do whatever is necessary to satisfy him or herself
of the amount or item
claimed, including but not limited to
conducting an inspection in loco.
6.
The mediator certified the amount owed and the amounts as certified
shall be the amount owing
by respondent to applicant in respect of
the FEE CLAIMS.”
[19] During the
mediation the mediator requested further documentation which
according to the Respondent were not forthcoming.
For that reason the
mediator has made his finding to the effect that the Applicant is
entitled to receive the sum of approximately
R400,000.00 already
referred to.
[20] It is the
Respondent’s contention that the Applicant was, alternatively
should reasonably have been aware of the
status of the matter. The
only logical inference according to the Respondent to be derived from
the Applicant’s conduct is
that it is not in a position to
substantiate its claim. Against this background, according to the
Respondent, it is clear that
oral evidence will have to be presented
to establish the true nature of the settlement agreement which was
subsequently concluded
during December 2022.
[21] The Respondent
then provides certain information regarding the signing of the
agreement. According to the Respondent,
the agreement was signed by
the then Acting Municipal Manager, Dr Vuyo Adonis (“
Adonis”
),
after being informed by the legal team of the Respondent. According
to the Respondent “
it bears mentioning that Adonis only
acted as Municipal Manager for a month, which makes the timing of the
signing of the settlement
agreement extremely suspicious
”.
[22] According to
the Respondent, Adonis signed the agreement acting on the strength of
advice received by Mr V Mtutuzeli
and Mr B Maritz, believing he was
acting in the best interest of the Respondent. Furthermore, according
to the Respondent, Adonis
signed the agreement in order to resolve
four other pending cases pertaining to the then sewerage problem
within the Municipality.
The agreement was also signed to avoid any
further delays in fixing the problems and to avoid further fruitless
and wasteful expenditure.
[23] It is the
Respondent’s case that the settlement agreement “
once
signed immediately became a contract and the defences available to
the agreement is also available to the Respondent. Defences
the
Respondent indeed intend raising should the Applicant issue summons
on the strength of the agreement or the matter being referred
for
oral evidence
”. Furthermore, the Municipality also intends
seeking judicial review of its decisions “
which informed
this or other claims”
.
[24] The Respondent
then proceeds as follows in its opposing affidavit:
“
34.
I wish to state as follows:
34.1
The procurement processes of municipalities have until recently been
categorised by substantial irregularities
which require that a proper
application be brought to seek the invalidation of various awards and
contracts (contracts such as
these) concluded which formed the basis
of the orders obtained by contractors against municipalities.
34.2
Currently missing and/or stolen, therefore unavailable, are vital
documents and records of the municipality
which informed the
procurement decisions awarding various tenders to the contractor and
the underlying basis for the claims against
the municipality. Several
legislative and policy prescripts, especially the provisions of the
National Archives and Record Service
of South Africa Act No 43 of
1996, are contravened by the improper management of the
municipality’s records which are relevant
to the decisions
awarding contracts and forming the basis for these impugned claims.
34.3
A special investigating unit (SIU), which is set up in terms of and
authorised by the Special Investigating
Units and Special Tribunals
Act, Act 74 of 1996, have concluded an agreement with the
municipality to investigate the procurement
irregularities. The
agreement between the municipality and the SIU was concluded only
during August 2023. Prima facie evidence
suggest that practically all
the contractors who have obtained judgments against the municipality
derive their authority to act
or been awarded the projects, through a
manifestly incorrect process.
34.4
The underlying causa of the alleged debts of the municipality to
judgment creditors will in due course be
impeached and set aside in a
proper judicial proceeding.
34.5
Irreparable harm will be occasioned by allowing the judgment
creditors to continue with the execution of
these judgments which may
subsequently be vacated. The municipality is under a constitutional
obligation to ensure that public
expenditures are valid and
consistent with applicable prescripts.
34.6
The procurement irregularities in the municipality especially in
connection with the awards which have been
made to the defendants and
forming the basis of the alleged indebtedness of the municipality to
the judgment creditors are also
under investigation by the
Directorate for Priority Crime Investigation in the South African
Police Services (the Hawks) as well
as the Auditor General.”
[25] The Respondent
then further alleges that the Municipality has a constitutional duty
to implement fair tender process
and redress the intentional breach
of section 217 of the Constitution which has resulted in illegality
of contractual arrangements.
The Respondent then states that it is
important to note that it is not only the circumstances surrounding
the signing of this particular
settlement agreement that needs to be
investigated, but also the preceding tender process.
[26] In answer to
the allegation by the Applicant that the dispute was finally settled
through the conclusion of the settlement
agreement in terms of which
the Respondent undertook to pay the Applicant R4,000,000.00 in full
and final settlement in its claim,
the Respondent answered as
follows:
“
It
goes against all logic when a decision from a mediator is made in the
amount of approximately R400,000.00, that the respondent
would then
to its detriment, proceed to settle the dispute in the amount of
R4,000,000.00.”
[27] The Respondent
then ends off by stating that:
“
The
dispute surrounding the quantum still needs to be proven by the
applicant, this was never done.”
[28] The Respondent
then asked that the application be dismissed, alternatively that the
matter be referred to oral evidence.
Discussion
:
[29] Uniform Rule
41(4) provides as follows:
“
Unless
such proceedings have been withdrawn, any party to a settlement which
has been reduced to writing and signed by the parties
or their legal
representatives, but which has not been carried out, may apply for
judgment in terms thereof on at least 5 days’
notice to all
interested parties.”
[30]
Mr
Prinsloo
who appeared on behalf of the Respondent, with reference to the
matter of
Avnet
South Africa v Lesira Manufacturing
[1]
,
argued that the order sought by the Applicant is not competent in
that parties are not at liberty to simply approach the Court
to make
an agreement an order of court where the agreement has not been
preceded by litigation.
[31] This argument
by Mr
Prinsloo
loses sight of the fact that the present
application was indeed preceded by the application which served
before Naidoo J under
the same case number as the present for payment
of the amount of approximately R15 million. This point can therefore
not be upheld.
Point
in limine
:
[32] Mr
Prinsloo
submitted that there exists a material
bona fide
dispute which
cannot be resolved on the papers. He further argued that the
Applicant is seeking payment based on agreement which
is not
competent in motion proceedings.
[33] In the first
instance, Respondent loses sight of the provisions of Rule 41(4)
which makes provision for an application
for judgment in terms of a
deed of settlement concluded between the parties.
[34] Furthermore,
it loses sight of the fact that Naidoo J indeed provided for the
event where either one of the parties might
have been dissatisfied
with the outcome of the certification by the mediator in which event
such party may proceed with litigation
pertaining to the issue of
quantification. The further significance of this part of the order,
is also that merely the quantification
in regards to the Applicant’s
claim against the Respondent were to be adjudicated upon if
necessary. It appears therefore
that the liability of the Respondent
towards the Applicant, were not at issue, although it was not ordered
nor noted as such.
[35] The most
important aspect in this regard, is the fact that the settlement
agreement itself was clearly concluded in finalization
of the
application in terms of which the Applicant claimed payment of the
stated amount from the Respondent where the preamble
thereto reads as
follows:
“
Whereas
the applicant has applied to compel respondent to pay the outstanding
amount claimed on R15,842,055.00 for professional
services rendered
to the respondent in terms of appointment letter – see Annexure
‘A’ hereto.
And whereas the
Municipality has agreed to resolve the matter amicable out of court
in order to allow the holistic repair and upgrade
of sewerage
pipelines project to be implemented by Bloemwater as appointed by the
National Department of Water and Sanitation.”
[36] These facts,
coupled with the Respondent’s own concession that the
settlement agreement was indeed signed by the
Acting Municipal
Manager at the time, representing the Municipality, clearly show that
there cannot be any dispute of fact as raised
and argued by the
Respondent. The point
in limine
in this regard can therefore
not be upheld.
[37] The Respondent
further opposes the application on two grounds, the first being that
the settlement agreement was signed
under dubious circumstances. For
this contention the Respondent provides no facts or basis but merely
alleges that the timing of
the signing of the settlement agreement by
the Acting Municipal Manager at that stage, was “extremely
suspicious”.
No further facts have been placed before Court in
this regard.
[38] As a second
ground of opposition, the Respondent raises the spectre of
procurement irregularities. Also upon closer scrutiny,
these
allegations have no factual substance, nor do they implicate the
Applicant in any meaningful way.
[39] In respect of
the “substantial irregularities’, referred to in the
opposing affidavit by the Respondent quoted
above, the Respondent
fails to provide any details of how they are said to be linked to the
Applicant and also does not provide
any evidence to support these
allegations. In the same breath, reference to “various awards
and contracts” broadly
implicates an undefined group and does
not demonstrate any impropriety that can be laid at the Applicant’s
door.
[40] Also in
respect of the passage quoted above, as contained in the Respondent’s
opposing affidavit, the Municipality
suggest that
prima facie
evidence of procurement irregularities exist whilst it does not
provide this evidence much less how it relates to the Applicant.
[41] The Respondent
alleges a generic “underlying causa of the alleged debts”
without identifying what the
causa
or the debt are and how the
Applicant again is implicated. The Respondent also does not provide
any facts about the debts, such
as the nature, the contractual
obligations or how any of these debts implicate the Applicant.
[42] The
Respondent’s allegation that the debts will “in due
course be impeached and set aside in a proper judicial
proceeding”
is speculative. The Respondent assumes a judicial outcome without
providing an iota of evidence to support the
allegation. Of
significance in this regard is also the fact that since the signing
of the settlement agreement during December
2022, the Municipality
apparently has taken no steps in regard to such judicial review in
particular in regards to the surrounding
circumstances pertaining to
the signing of the settlement agreement.
[43] In regards to
the alleged procurement irregularities, it is not stated by the
Respondent which awards constituted such
irregularities and again how
the Applicant is implicated.
[44]
The result of the settlement agreement made an order of court is that
a party is precluded from relying on a cause of
action or defence
that could have been advanced or raised but for the settlement
order.
[2]
This applies
with equal force to settlement agreements which do not have the
imprimatur of a court order.
[3]
[45] The Respondent
is therefore similarly precluded from relying on various defences as
it now attempts to do.
[46]
As correctly argued by Mr
Van
Aswegen
,
the settlement agreement relates directly to settled litigation, it
is not objectional from a legal and practical point of view,
it is
not at odds with public policy, and it holds a practical and
legitimate advantage.
[4]
[47] The Applicant
is therefore entitled to the relief sought under Rule 41(4).
[48] As far as
costs are concerned, whereas the Respondent was unsuccessful in its
opposition to the application, the Respondent
is to pay the costs of
the application.
Order
:
Therefore, I make the
following order:
1.
Judgment is granted in terms of the
Settlement Agreement entered into between the parties on 23 December
2022 and the Respondent
is ordered to pay to the Applicant:
1.1
The sum of
R4,000,000.00
;
1.2
Tempore morae
interest
on the aforesaid amount at
10.5%
per annum calculated from
23 December
2022
to date of payment.
2.
Costs of the application in terms of Rule
41(4).
J J F HEFER, AJ
Appearances
on behalf of the Applicant:
Adv
WA van Aswegen
Instructed
by: Peyper Attorneys
Bloemfontein
On
behalf of the Respondent:
Adv
WJ Prinsloo
Instructed
by: BMH Attorneys
Vereeniging
c/o
Pieter Skein Attorneys
Bloemfontein
[1]
2019
(4) SA 541 (GJ)
[2]
E
ke
v Parsons
2016 (3) SA 37
(CC) at par. [25] – [26]
[3]
Jiyana
and Another v Absa Bank Ltd and Others (1424/2018)
[2020] ZASCA 12
(19 March 2020) at par. [17]
[4]
Eke
v
Parsons
supra
at par. [25] – [26]