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[2010] ZASCA 58
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MEC for Economic Affairs, Environment & Tourism: Eastern Cape v Kruizenga and Another (169/09) [2010] ZASCA 58; 2010 (4) SA 122 (SCA) ; [2010] 4 All SA 23 (SCA) (1 April 2010)
Links to summary
THE
SUPREME COURT OF APPEAL
OF SOUTH AFRICA
JUDGMENT
Case No: 169/09
In
the matter between:
MEC FOR ECONOMIC AFFAIRS,
ENVIRONMENT APPELLANT
& TOURISM: EASTERN CAPE
v
KLAAS
KRUIZENGA
FIRST RESPONDENT
HENQUE 2189 CC t/a WIMRIE BOERDERY
SECOND RESPONDENT
Neutral citation:
MEC
for Economic Affairs, Environment & Tourism v Kruizenga
(169/2009)
[2010] ZASCA 58
(1 April
2010).
Coram:
Harms
DP; Nugent, Cachalia, Leach JJA et Seriti AJA
Heard: 9 March 2010
Delivered: 1 April 2010
Summary:
An attorney has ostensible (apparent) authority to bind the client
at a pre-trial conference convened in terms of rule 37 of
the Uniform
Rules even if the effect of the agreement is to settle an opposing
party’s claim.
________________________________________________________________
ORDER
________________________________________________________________
On appeal from:
Eastern Cape High Court (Bhisho) (Van Zyl J sitting as court of first
instance).
The following order is made:
‘
The appeal is dismissed with
costs, including the costs of two counsel.’
________________________________________________________________
JUDGMENT
________________________________________________________________
CACHALIA JA
(Harms
DP, Nugent, Leach JJA and Seriti AJA concurring):
[1] This appeal deals with the
question of an attorney’s ostensible (apparent) authority to
reach agreement at a pre-trial
conference convened in terms of rule
37 of the Uniform Rules even if the effect of the agreement is to
settle an opposing party’s
claim. The Eastern Cape High Court,
Bhisho (Van Zyl J)
1
held that by instructing the State Attorney to defend the action and
to brief counsel to conduct his defence, the appellant represented
to
the outside world that his legal representatives had ‘the usual
authority that applies to their office’. And by
not informing
the respondents that their authority was limited, he ‘must
reasonably have expected that persons who dealt
with his agents would
believe that they had the authority to compromise the claims’.
So, the court concluded, he was estopped
(prohibited) from denying
the authority of his legal representatives to agree to the
settlement.
2
The learned judge thus held that the appellant was not entitled to
escape the consequences of the agreement which his legal
representatives
had made. He also refused the appellant leave to
appeal but this court granted the necessary leave.
[2] The dispute forms part of the
litigation in a trial action in which the two respondents claim
damages from the appellant in
his representative capacity arising
from an alleged negligent failure of the provincial government’s
employees to take preventative
measures to contain a fire. The fire
started on provincial government property under the appellant’s
control and spread to
the respondents’ adjoining properties
causing extensive damage to their vegetation and infrastructure.
[3] The factual background and
chronology of the present dispute is set out in the high court’s
reported judgment and need
not be repeated in detail.
3
In essence the dispute concerns whether the agreements, which the
State Attorney reached with the respondents at two rule 37 pre-trial
conferences without the appellant’s authority, are binding. The
minute of the first conference, which was signed by the parties’
attorneys some six months later, records that the appellant had
conceded ‘the merits of the plaintiff’s case and the
only
aspect that remains in dispute between the parties and which remains
to be resolved is that of quantum’. The second
conference was
held, almost 18 months later, after the trial judge, on the morning
before the trial commenced, enquired from the
parties’ legal
representatives whether any attempt had been made to settle the
dispute over quantum. The matter then stood
down for the parties to
consider settlement proposals. They met the following day. The minute
of this meeting, which was signed
by attorneys and counsel for the
parties, records the appellant to have admitted liability for some
heads of the damages claimed
whilst the dispute over the remaining
heads would proceed to trial. This minute, which incorporated the
earlier agreement, was
placed before the judge. The appellant then
sought a postponement of the whole case, which the judge refused in
the light of the
admissions made. He accordingly made an order based
on the admitted liability and postponed the hearing concerning the
outstanding
issues.
[4] Thereafter, with a view to
reopening the provincial government’s case on the merits, the
appellant launched an application
to rescind and set aside the court
order and to withdraw the admissions his legal representatives had
made as recorded in the pre-trial
minutes. He grounded his
application on an allegation of the existence of a general practice
or instruction – but unbeknown
to the respondents or their
legal representatives – to the effect that the State Attorney
needed his or the head of department’s
express authority to
settle or compromise a claim and concomitantly on the State
Attorney’s failure to obtain his specific
authority to concede
the merits of the action or to settle certain heads of damage. (There
is no suggestion that counsel, who was
instructed to appear for the
state, was aware that the State Attorney lacked authority and for
present purposes only the latter’s
authority is in issue.)
Although there was a factual dispute concerning the existence of the
general practice the high court approached
the matter on the basis
that there was such a practice. And I will likewise do so.
[5] The appellant’s application
for rescission was brought under the common law and not in terms of
Uniform rules 31 or 42.
Mr Buchanan, who appears for the appellant,
contends that the appointment of attorney and counsel, in itself,
does not give rise
to a representation that they have full authority,
not only to conduct the litigation, but to compromise a claim or to
consent
to judgment against the client. The law, he submits, requires
express – not merely apparent authority – for this
purpose.
And so he contends, because the State Attorney agreed to
compromise the claim in conflict with general practice – and
that
judgment was granted pursuant thereto – this entitles the
appellant to the relief claimed.
[6] It is important to reiterate what
was said at the outset – the issue in this matter is whether
the appellant may resile
from agreements made by his attorney,
without his knowledge, at a rule 37 conference. The judgment does not
deal with agreements
reached outside of the context of conducting a
trial in the normal course of events. The rule was introduced to
shorten the length
of trials, to facilitate settlements between the
parties, narrow the issues and to curb costs.
4
One of the methods the parties use to achieve these objectives is to
make admissions concerning the number of issues which the
pleadings
raise.
5
Admissions of fact made at a rule 37 conference, constitute
sufficient proof of those facts.
6
The minutes of a pre-trial conference may be signed either by a party
or his or her representative.
7
Rule 37 is thus of critical importance in the litigation process.
This is why this court has held that in the absence of any special
circumstances a party is not entitled to resile from an agreement
deliberately reached at a rule 37 conference.
8
And when, as in this case, the agreements are confirmed by counsel in
open court, and are then made a judgment or order of a court,
the
principle applies with even more force.
[7] It is settled law that a client’s
instruction to an attorney to sue or to defend a claim does not
generally include the
authority to settle or compromise a claim or
defence without the client’s approval.
9
The rule has been applied to a judgment consented to by an attorney
without his client’s authority
10
and also when the attorney did so in the mistaken belief that his
client had authorised him to do so.
11
This principle accords with the rule in the law of agency that where
an agent exceeds the express or implied authority in transacting,
the
principal is not bound by the transaction.
12
[8] But there appears to be some
uncertainty in the way this principle has been applied. Midgley
observes that our courts, under
the influence of English law, have
distinguished between settlements made outside of and those made
during the course of litigation
– and appear to have accepted
that the power to settle a claim is one of the usual and customary
powers afforded a legal
representative in the latter instance.
13
So, in
Mfaswe v Miller
,
14
an attorney’s clerk
compromised a claim on the day of the trial before the client had
arrived at court. He did so fearing
that if the client did not arrive
in good time default judgment may be given against him. Thereafter
the client sued his attorney
for the full amount of the original
claim. The court said that the clerk had accepted the compromise ‘in
the exercise of
the discretion vested in an attorney’.
15
And because he had acted in good faith, and was not negligent, the
court held that the attorney was not liable to the client in
damages.
Alexander v Klitzke
16
provides an interesting
example of an attorney’s general authority. The defendant had
alleged that his attorney’s general
authority did not empower
him to accept the plaintiff’s tender of settlement, but the
court disagreed, saying:
‘
The
authority of a power of attorney which is filed by the client, to
carry his case to final end and determination, does include
authority
to make a
bona
fide
compromise
in the interests of his client, and at any rate, if a client wishes
to repudiate such a compromise made on his behalf,
then I certainly
think that the repudiation should be a timeous one.’
17
In
Klopper
v Van Rensburg
,
18
in an
ex parte
application
for a temporary interdict to restrain the sale of usufructuary
property, and in answer to a question from the court,
counsel stated
that if security were given by the respondent for the value of the
property sold, that would meet the case. When
the respondent
thereafter tendered security, and the applicant rejected it
contending that counsel had no authority to agree to
a tender of
security, the court held that he was bound by his counsel’s
offer as the latter ‘was only doing his plain
duty (to) his
client. He was making an offer in his client’s best interests,
and an offer which . . . he had every right
to make’.
19
[9] However, recently, in
Hawkes
v Hawkes
20
the court seemed to adopt a
different approach by placing emphasis on whether the agreement
concluded was in the client’s
best interests, rather than on
the discretion exercised by the client’s legal representative.
It held that where an advocate
gave an undertaking to the court on
behalf of his client without having a mandate to that effect in the
attorney’s absence
and contrary to his client’s best
interests and also in conflict with his mandate to oppose an
interdict sought against his
client the client was not bound thereby.
This approach resonates with the view adopted in
Bikitsha
v Eastern Cape Development Board & another
,
21
where an attorney, before summons had been issued, without having his
client’s consent, advised his opponent that his client
was
prepared to waive the ‘prescriptive period’. In holding
the client not bound by his attorney’s waiver, the
court noted
that ‘for acts of great prejudice an attorney needs a special
mandate’
22
and ‘[a] general mandate does not authorise an attorney to act
in a manner adverse to his client’s interests’.
23
[10] The courts have also
distinguished the ambit of the authority of attorneys in private
practice from that accorded to the State
Attorney holding that the
latter has wider general authority because such authority is derived
from statute.
24
It has thus been held that the fact that a senior government official
is unaware of and has not expressly approved of a settlement
concluded by counsel on the Deputy State Attorney’s
instructions does not entitle the government to resile from the
settlement.
25
Moult v Minister of
Agriculture and Forestry, Transkei
26
provides a clearer example
of the breadth of the State Attorney’s authority. The plaintiff
sued the government for damages
arising out of a motor-vehicle
collision – but out of the twelve-month statutory expiry
period. The State Attorney, as in
Bikitsha
,
27
had previously waived
strict compliance with this requirement. The government alleged that
it was not bound by the waiver. Beck CJ,
however, distinguished
those cases involving private attorneys, such as
Bikitsha
,
and held that the waiver ‘was of a kind which Government
ordinarily leaves to the Government attorney to decide’.
He
found that the State Attorney’s authority derives from ‘the
particular capacity in which the agent has been employed
by the
principal and from the usual and customary powers that are found to
pertain to such an agent as belonging to a particular
category of
agents’.
28
[11] To summarise it would appear that
our courts have dealt with questions relating to the
actual
authority of an attorney to
transact on a client’s behalf in the following manner:
Attorneys generally do not have implied
authority to settle or
compromise a claim without the consent of the client. However, the
instruction to an attorney to sue or
defend a claim may include the
implied authority to do so provided the attorney acts in good faith.
And the courts have said that
they will set aside a settlement or
compromise that does not have the client’s authority where,
objectively viewed, it appears
that the agreement is unjust and not
in the client’s best interests. The office of the State
Attorney, by virtue of its statutory
authority as a representative of
the government, has a broader discretion to bind the government to an
agreement than that ordinarily
possessed by private practitioners,
though it is not clear just how broad the ambit of this authority
is.
29
[12] My discussion thus far has been
concerned with the limits of an attorney’s actual authority to
bind a client without
the latter’s consent. The question arises
in this case is whether a client may be estopped from denying the
authority of
his attorney to settle or compromise a claim.
30
[13] The issue arose in this court in
Hlobo v Multilateral Motor
Vehicle Accidents Fund
.
31
The case concerned a
claimant’s claim for compensation on behalf of her minor
daughter, who had been injured in a motor vehicle
accident. A
settlement agreement, which had been preceded by months of
negotiation during litigation, was concluded by Messrs Lowe
and De la
Harpe, who respectively acted as attorneys for the claimant and the
Fund. De la Harpe submitted proposals for the final
form of the
agreement to the Fund. As in this case, the proposals were recorded
in a rule 37 minute. A letter from the Fund’s
claims-handler,
confirmed its acceptance of the proposals. And acting on this
confirmation De La Harpe settled the claim. The Fund
then sought to
have the agreement set aside on the ground that the agreement
concluded between the parties’ attorneys had
been reached on
the strength of a communication from the claims-handler who had no
power to authorise the settlement. The court
rejected the Fund’s
defence. In the course of its judgment it said the following:
‘
What
all this shows is that in his dealings with Mr De la Harpe, Mr Lowe
would have had no reason to question his (De la Harpe's)
authority.
He in fact did not do so. From Mr Lowe's point of view De la
Harpe had at least ostensible authority to conclude
the settlement.
All the requirements which must be satisfied before reliance upon
ostensible authority can succeed were satisfied.
Respondent had
appointed Mr De la Harpe as its attorney. It was known to it that he
was conducting settlement negotiations on its
behalf. It allowed him
to do so and in so doing clothed him with apparent authority to
settle on its behalf. The appellant, through
her attorney, relied
upon the apparent existence of authority and compromised the claim on
the strength of its existence. Absent
any other defence, the
settlement is binding upon the respondent. In fact, of course, he had
express authority which it is now
sought to repudiate.’
32
[14] The facts in
Hlobo
differ from the present one
because there the attorney, De La Harpe, was found to have had actual
authority to conclude the agreement
– a point which Mr Buchanan
pressed in argument in an effort to distinguish it. The passage cited
above dealing with De la
Harpe’s apparent authority in the
judgment is, I accept, obiter.
But, as I will show below,
this does not detract from its persuasive quality. I turn to the
present matter.
[15] To establish apparent authority
on the provincial government’s part, the respondents aver that
by appointing the State
Attorney to defend the action which
necessarily entailed participating in various pre-trial processes,
including pre-trial conferences,
it represented that he had authority
to settle the claims.
[16] It is well-established that to
hold a principal liable on the basis of the agent’s apparent
authority the representation
must be rooted in the words or conduct
of the principal, and not merely that of his agent.
33
Conduct may be express or inferred from the ‘particular
capacity in which an agent has been employed by the principal and
from the usual and customary powers that are found to pertain to such
an agent as belonging to a particular category of agents’.
34
It may also be inferred from the ‘aura of authority’
associated with a position which a person occupies, at the
principal’s
instance, within an institution.
35
[17] Properly understood the
representation from the principal in this case relates only to the
appointment of the State Attorney
to defend the claim and to instruct
counsel in this regard. The further conduct relied on is not that of
the principal but of the
agent himself and cannot in and of itself
bind the principal. The respondents’ true case is that by
appointing the State
Attorney to defend the claim, the appellant
represented to them, and they reasonably believed, that the State
Attorney had the
usual and customary powers associated with the
appointment.
36
These included instructing counsel to defend the claim, to draft the
plea and to attend all pre-trial procedures, including rule
37
conferences. In other words the appellant represented to the
respondents and the outside world that the State Attorney had the
authority not only to conduct the trial but also to make concessions
at the conferences and to conclude the settlement agreement
from
which he now wishes to resile.
[18] During argument before us Mr
Buchanan did not contend that the State Attorney had no authority to
attend the pre-trial conferences.
He could hardly have done so
because such attendance by an attorney, as I have mentioned earlier,
is envisaged in the rule and
clearly falls within the usual or
customary functions of an attorney in the litigation process. Instead
his argument was that the
State Attorney’s authority was
confined to attending the conference and making certain admissions
that may, in his judgment,
have been necessary. But, as I understand
the submission, once he agreed to settle the claim, first by
conceding the merits and
later by agreeing that his client was liable
for certain heads of the damages claimed, he not only exceeded his
actual authority
but also his usual functions.
[19] Unsurprisingly Mr Buchanan had
insurmountable difficulty attempting to defend this assertion. In
particular he was not able
to draw the line between what the State
Attorney had the authority to agree on and what not. To test the
assertion, suppose the
attorney agreed on making certain factual
admissions without conceding liability in order to curtail the
proceedings, which in
hindsight proved to have been a mistake.
Realising the error he then attempts to withdraw these admissions,
but the other side
refuses to allow him to do so. And faced with the
prospect of continuing the litigation at a disadvantage he agrees to
a settlement.
It could hardly be asserted that the admissions fell
within his usual authority but the settlement, which amounts to a
string of
admissions, not. To test the assertion further, would the
admissions stand if the ‘merits’, were conceded but not
causation?
And further, what if causation was conceded but not the
quantum of damages? What these intractable difficulties show
ineluctably
is that it is impossible to draw any line between an
attorney’s apparent authority to attend and represent his
client at
a pre-trial conference and his apparent authority to
conclude agreements or make concessions there.
[20] I accept that, in this matter, by
agreeing to the settlement the State Attorney not only exceeded his
actual authority, but
did so against the express instructions of his
principal. As opprobrious as this conduct was, I cannot see how this
has any bearing
on the respondents’ estoppel defence. The
proper approach is to consider whether the conduct of the party who
is trying to
resile from the agreement has led the other party to
reasonably believe that he was binding himself.
37
Viewed in this way it matters not whether the attorney acting for the
principal exceeds his actual authority, or does so against
his
client’s express instructions. The consequence for the other
party, who is unaware of any limitation of authority, and
has no
reasonable basis to question the attorney’s authority, is the
same.
38
That party is entitled to assume, as the respondents’ did, that
the attorney who is attending the conference clothed with
an ‘aura
of authority’ has the necessary authority to do what attorney’s
usually do at a rule 37 conference –
they make admissions,
concessions and often agree on compromises and settlements. In the
respondents’ eyes the State Attorney
quite clearly had apparent
authority.
39
[21] Mr Buchanan submitted further
that to allow the estoppel defence where an attorney exceeds his or
her authority could lead
to grave injustices and that for policy
reasons the estoppel defence should not be allowed in these
circumstances. There are two
answers to this submission. First,
Plewman JA specifically recognized the competence of the defence in
the passage quoted above
in
Hlobo
,
albeit in an obiter dictum.
And this court will not
lightly depart from a view it has previously expressed, even if only
obiter.
40
Secondly, because estoppel is a rule of justice and equity, it is
open to a court to disallow the defence on this ground.
41
It was not suggested that it would be either unjust or inequitable to
allow the defence in the circumstances of this case. Indeed,
the
contrary is true. The prejudice to the respondents if the defence is
not upheld is evident – even with the appellant’s
tender
to pay the respondents’ wasted costs.
The respondents and
their counsel prepared for trial on the basis of the concessions and
on the issues which remained in dispute
– not on the merits or
on the heads of damages which were agreed upon. Moreover the
appellants have after all this time not
even established a defence.
To allow the appellant to resile from these agreements, made over a
period spanning 18 months, would
defeat the purpose of rule 37, which
encourages settlements, and severely hamper the conduct of civil
trials. It would mean practically
that attorneys can no longer assume
that their colleagues are authorised to make important decisions in
the course of litigation
without the principal’s independent
confirmation. This cannot be countenanced.
[22] In the result I conclude that the
high court was correct to hold that the appellant is estopped from
denying the authority
of the State Attorney to enter into the
agreements in question.
42
It follows that the appeal must fail. The order I make is that the
appeal is dismissed with costs, including the costs of two counsel.
________________
A CACHALIA
JUDGE OF APPEAL
APPEARANCES
APPELLANTS: R G Buchanan SC
Instructed by Wesley Pretorius and
Associates, East London
State Attorney; Bloemfontein
RESPONDENT: H J van der Linde SC
(with him P E Jooste)
Instructed by Jordaan & Pretorius
Attorneys, Plettenberg Bay
Rosendorff Reitz Barry, Bloemfontein
1
MEC for Economic Affairs,
Environment and Tourism v Kruisenga
2008 (6) SA 264
(CkHC).
2
Para 69.
3
Paras 1-8.
4
LTC Harms
Civil Procedure
in the Supreme Court
Issue
39 para B37.2.
5
Rule 37(6)(e).
6
Price NO v Allied-JBS
Building Society
1980 (3)
SA 874
(A) 882D-H.
7
Rule 37(6).
8
Filta-Matix (Pty) Ltd v
Freudenberg & others
[1997] ZASCA 110
;
1998
(1) SA 606
(SCA) 614B-D.
9
Voet 3.3.18;
Ras v Liquor
Licensing Board, Area No. 10 Kimberley
1966
(2) SA 232
(C) 237E-F;
Goosen
v Van Zyl
1980 (1) SA 706
(O) 709F-H;
Bikitsha v
Eastern Cape Development Board & another
1988
(3) SA 522
(E) 527J-528A; 14
Lawsa
2 ed para 305.
10
Ntlabezo v MEC for
Education, Culture and Sport, Eastern Cape
2001
(2) SA 1073
(TkHC) 1080-1081.
11
De Vos v Calitz and De
Villiers
1916 CPD 465.
12
Francois du Bois et al
Wille’s
Principles of South African Law
9
ed (2007) p 998; See J.R Midley
Lawyers’
Professional Liability
(1992) p 8, who holds the view that while the courts have sometimes
used the terms ‘mandatory’ and ‘agent’
interchangeably to describe the attorney-client relationship, the
preferable view is that when engaged in litigation on a client’s
behalf the attorney is acting as an agent and not merely as a
mandatory.
13
J R Midgley ‘The Nature and Extent of a Lawyer’s
Authority’
(1994) 111
SALJ
415
p 420.
14
(1901) 18 SC 172.
15
Above p 175.
16
1918 EDL 87.
17
Above at 88.
18
1920 EDL 239.
19
Above p 242.
20
2007 (2) SA 100
(SE).
21
Cited above, n 9.
22
At 527I-J.
23
At 528A.
24
Section 3 of the State Attorney Act 56 of 1957.
25
Dlamini v Minister of Law
and Order & another
1986 (4) SA 342
(D).
26
1992 (1) SA 688
(TkGD) 692H-I.
27
Above para 9.
28
Above at 692H-I citing Botha J in
Inter-Continental
Finance and Leasing Corporation (Pty) Ltd v Stands 56 and 57
Industria Ltd & another
1979
(3) SA 740
(W) at 748D.
29
See Generally J R Midgley ‘The Nature and Extent of a Lawyer’s
Authority’
(1994) 111
SALJ
415.
30
Ras v Liquor Licensing
Board
(above) n 9 at
238G-H.
31
2001 (2) SA 59
(SCA).
32
Hlobo
at
para 11.
33
NBS Bank Ltd v Cape Produce
Co (Pty) Ltd
2002 (1) SA
396
(SCA) 412C-E;
Glofinco
v Absa Bank Ltd t/a United Bank
2002 (6) SA 470
(SCA) para 13.
34
Per Botha J in
Inter-Continental
Finance and Leasing Corporation (Pty) Ltd v Stands 56 and 57
Industria Ltd & another
1979
(3) SA 740
(W) at 748D.
35
Glofinco v Absa Bank Ltd
(above) n 34 para 1.
36
It is not the respondents’ case that by appointing the State
Attorney they believed that he had any wider or additional
powers to
an attorney in private practice.
37
Hlobo
para
12; Cf
George v Fairmead
(Pty) Ltd
1958 (2) SA 465
(A) 471A-D.
38
Cf
City of Tshwane
Metropolitan Municipality v RPM Bricks
2008
(3) SA 1
SCA para 12.
39
Cf A J Kerr
The Law of
Agency
3 ed (1991) p 149.
40
Steenkamp v South African
Broadcasting Corporation
2002
(1) SA 625
(SCA) 629F-G.
41
See generally P J Rabie and J C Sonnekus
The Law of Estoppel in South Africa
2
ed (2000) ch 7; Lord Denning in
Moorgate
Mercantile Co Ltd v Twitchings
[1975] 3 All ER 314
(CA) at 323d-g said: ‘(Estoppel) . . . is
a principle of justice and of equity. It comes to this. When a man,
by his words
or conduct, has led another to believe in a particular
state of affairs, he will not be allowed to go back on it when it
would
be unjust or inequitable for him to do so.’
42
MEC for Economic Affairs v
Kruizenga
(above) n 1 para
69.