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[2022] ZAMPMBHC 45
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Avenir Holding (Pty) Ltd v Department of Public Works, Roads and Transport, Mpumalanga Provincial Government (4359/2021) [2022] ZAMPMBHC 45 (10 June 2022)
THE
HIGH COURT OF SOUTH AFRICA
MPUMALANGA
DIVISION, MBOMBELA MAIN SEAT
CASE
NO: 4359 / 2021
REPORTABLE:
NO
OF
INTEREST TO OTHER JUDGES: NO
REVISED.
10
June 2022
In
the matter between:
AVENIR
HOLDING (PTY)
LTD APPLICANT
(Registration
No. 2014/0-59543/07)
and
DEPARTMENT
OF PUBLIC WORKS,
1
ST
RESPONDENT
ROADS
AND TRANSPORT,
MPUMALANGA
PROVINCIAL GOVERNMENT
MEC
FOR THE DEPARTMENT OF PUBLIC
2
ND
RESPONDENT
WORKS,
ROADS AND TRANSPORT,
MPUMALANGA
PROVINCIAL GOVERNMENT
NTSANGALALA
HOLDING (PTY) LTD
3
RD
RESPONDENT
(Registration
No. 2012/053841/07)
Delivered:
This
judgment was handed down electronically by circulation to the
parties' representatives by email. The date and time for hand-down
is
deemed to be 10H00 on 10 June 2022.
JUDGMENT
RATSHIBVUMO
J:
[1]
In this application,
the Applicant seeks condonation over its failure to issue a notice of
its intention to institute legal proceedings
against the First and
the Second Respondents (the Respondents), as stipulated in section
3(1)(a) and 3(2) of the Institution of
Legal Proceedings Against
Certain Organs of State Act, No. 40 of 2002 (the Act). The
application is opposed by the Respondents.
According to the
Applicant, the cause of action against the respondents emanates from
a cession agreement entered into between
the Applicant and the Third
Respondent which came into force on 03 December 2018.
[2]
The background
leading to a cession agreement is that in 2018, the First Respondent
and the Third Respondent had entered into a
contract to repair the
flood damaged bridge or Road D2968 between Numbi and Makoko in
Enhlazeni Region. When the Third Respondent
encountered difficulties
in honouring its obligations, it entered into cession agreement with
the Applicant in terms of which the
Applicant would do the work and
the payments from the First Responded were ceded to it. There is
dispute as to the duration of
this cessation or when it lapsed.
However, the Applicant claims to have performed the work over the
period during which it is disputed
if the cession was still intact or
it had lapsed. Payments from the First Respondent during the
undisputed cession period were
honoured. It is the payments during
the period in disputed which the First Respondent claims to have paid
directly to the Third
Respondent which gave rise to the cause of
action.
[3]
The facts surrounding
the cession agreement, its extension and/or its termination are
relevant regarding the prospects of success
of the claim against the
Respondents. This has to be considered for purposes of condonation
application. It is therefore apposite
to unpack the factual matrix
before determining the issues in dispute.
[4]
According to the
applicant, the Third Respondent approached the First Respondent to
acquire consent to have the contract ceded to
it. When this was
acceded to, the Applicant entered into a cession agreement with the
Third Respondent and the First Respondent
on 27 November 2018. To
this extent, the Applicant attached a document marked as MM2 which it
referred to as the cession agreement.
The cession came into operation
on 03 December 2018. The Applicant commenced with the work on 12
December 2018. According to the
Applicant, all the parties agreed to
extend the cession agreement on 08 April 2019.
[5]
On 07 December 2019,
the Applicant received a letter from the Third Respondent informing
it that its services will no longer be
required at the site. This
letter was interpreted by the Applicant as an attempt to terminate
the cession agreement. The Applicant’s
attorneys wrote back to
the Third Respondent questioning the lawfulness of its termination of
the cession. On 22 January 2020,
another letter was sent to the First
Respondent by the Applicant’s attorneys in which they demanded
from it payment of R379 232.82
for work performed but not yet
paid for, R6 330 791.46 in damages and R3 159 620.47
for loss of profit. For
this reason, that the Applicant asserts that
the cause of action arose on 22 January 2020 and that it should have
sent a notice
of the intention to institute legal proceedings in
terms of the Act, within six months from this date. From 22 January
2020 to
the date on which this application was launched is about 21
months, which by far exceeds the six months stipulated in terms of
the Act.
[6]
The Respondents
dispute much of the factual disposition by the Applicant. An
affidavit was deposed by a Chief Director working for
the First
Respondent in opposing this application, on behalf of the
Respondents. From this affidavit it is apparent that the document
referred to in the founding affidavit as the cession agreement, is
actually an internal memo within the Department of Public Works,
Roads and Transport. The Applicant is not even a signatory in this
memo. According to the Respondents, the contract between the
First
Respondent and the Third Respondent was entered into in 2016 and not
2018 as alleged by the Applicant.
[7]
At
the Third Respondent’s behest, the First Respondent acceded to
the request to cede the contractual rights and obligations
to the
Applicant. This was after the Third Respondent ran into cash flow
problems. A cession agreement signed by the Applicant,
the First and
the Third Respondent was attached to the affidavit deposed to on
behalf of the Respondents.
[1]
According to it, the Third Respondent ceded only a portion of the
work the monetary value of was R3 884 046.70. This
value is
also reflected in a sub-contract entered into between the Applicant
and the Third Respondent.
[2]
Then Respondents aver that the cession ceased to exist when the scope
of work was completed by the Applicant and payment was made
by the
First Respondent. A total of R5 158 587.71 was paid to the
Applicant. The reason why more money than what was
agreed in the
cession agreement was paid is that the Applicant performed further
work at the request of the Third Respondent, and
the latter consented
that direct payment, be made to the Applicant for the extra work
performed, that fell outside the cession
agreement.
[8]
It is the version by
the Respondents that once work was done and the payment was honoured,
the cession was extinguished all the
rights that the Applicant had
against the First Respondent reverted back to the Third Respondent.
For that reason, the First Respondent
continued to pay the Third
Respondent directly, once it received the payment certificate from
the Consulting Engineer. The Respondents
aver therefore that they
have no financial obligations towards the Applicant. They aver
further that the Applicant lacks
locus
standi
to
institute legal proceedings against them.
[9]
The law
Relevant
parts of section 3 of the Act are quoted hereunder.
3
(1) No legal proceedings for the
recovery of a debt may be instituted against an organ of
state
unless-
(a)
the creditor has given the organ of state in question notice in
writing of his or her or its intention to institute the legal
proceedings in question; or
(b)
the organ of state in question has consented in writing to the
institution of that legal proceedings-
…
(2)
A notice must-
(a)
within six months from the date on which the debt became due, be
served on the organ of state in accordance with section 4(1);
and
…
(4)
(a) If an organ of state relies on a creditor’s
failure to serve a notice in terms of subsection (2)(a),
the creditor
may apply to a court having jurisdiction for condonation of such
failure.
(b)
The court may grant an application referred to in paragraph (a) if it
is satisfied that-
(i)
the debt has not been
extinguished by prescription;
(ii)
good cause exists for the
failure by the creditor; and
(iii)
the organ of state was not
unreasonably prejudiced by the failure.
[10]
In
the heads of arguments filed for the Applicant, the court was
referred to the judgment of
Minister
of Public Works v Roux Properties
[3]
where the Supreme Court of Appeal (the SCA) said the following,
“
T
he
second requirement of 'good cause' involves an examination of 'all
those factors which bear on the fairness of granting the relief
as
between the parties and as affecting the proper administration of
justice', and may include, depending on the circumstances,
'prospects
of success in the proposed action, the reasons for the delay, the
sufficiency of the explanation offered, the bona fides
of the
applicant, and any contribution by other persons or parties to the
delay and the applicant's responsibility therefor.'”
[11]
In
this judgment, the SCA quoted with approval from its earlier decision
of
Madinda
v Minister of Safety and Security
[4]
where
it held,
“
The
second requirement is a variant of one well known in cases
of procedural non-compliance. See
Torwood
Properties (Pty) Ltd v South African Reserve Bank
1996
(1) SA 215
(W)
at
227I - 228F and the cases there cited. 'Good cause' looks at all
those factors which bear on the fairness of granting the relief
as
between the parties and as affecting the proper administration of
justice. In any given factual complex it may be that only
some of
many such possible factors become relevant. These may include
prospects of success in the proposed action, the reasons
for the
delay, the sufficiency of the explanation offered, the bona fides of
the applicant, and any contribution by other persons
or parties to
the delay and the applicant's responsibility therefor.”
[12]
In an attempt to show
good cause over the delay, the Applicant explains that the debt
became due on 22 January 2020. The country
was placed under Level
five lockdown under the
Disaster Management Act, No. 57 of 2002
on 26
March 2020, due to Covid-19 pandemic. The Applicant stopped operating
until August 2020 when the country was placed under
Level three
lockdown. By the end of 2020, the Applicant terminated its attorneys
mandate due to lack of finances. In March 2021,
the Applicant
instructed the debt collectors to recover this debt, with no success.
It was only in August 2021 that the Applicant
appointed its current
attorneys.
[13]
The court is called
upon to decide if there is good cause both on terms of the
explanation regarding the failure to give the notice
to the
Respondents and also the prospects of success. In order to determine
if there is a reasonable explanation for the delay
or failure to send
out a notice, it is necessary to determine the period that lapsed
from the date the debt became due. It is difficult
to comprehend how
the Applicant concluded that the debt became due and payable on 22
January 2020. The only occurrence on that
date is that the
Applicant’s attorneys wrote a letter of demand to the First
Respondent. I do not understand how the writing
of such a letter can
be determinative of the debt being due. I am of the view that the
date the Applicant received a letter from
the Third Respondent
informing it to stop all the work and vacate the site is the date on
which the debt became due and payable.
This is because according to
the Applicant, the Third Respondent was repudiating its contractual
obligations through the contents
of the letter. That date is 07
December 2019.
[14]
From
the Applicant’s explanation, it is suggested that due to
lockdown regulations, the Applicant was closed down and not
operational and as such, could not have sent the notice to the
Respondents as envisaged in the Act. It is however common cause
that
even under Level five lockdown, various institutions were operating
virtually and through email correspondence. The Applicant
was also
writing and sending letters during the period it claims to have not
been operational.
[5]
There is no
explanation on why the said notice was not dispatched via email.
Further to this, there is no explanation as to why
the notice was not
sent from August 2020 when the Applicant resumed operations until
more than a year later when this application
was launched. With no
further explanation, I cannot find that there is a good cause for not
sending out the required notice.
[15]
The second leg
requirement on the good cause is a fatal blow to the Applicant’s
case in that there are no prospects of success
even if the
condonation was to be allowed. The Respondents exposed the
Applicant’s case as stillborn in that the affidavit
does not
disclose any cause of action as the cession agreement which forms the
backbone of its case was not attached to it. Without
a cession
agreement, the Applicant lacks the
locus
standi
to
institute any action against the Respondents as the valid contract at
the time of the cause of action was only between the Third
and First
Respondent. It is the Respondents who came up with a cession
agreement in the answering affidavit, which disproves most
of the
Applicant’s averments in that contrary to the Applicant’s
assertions, the cession agreement was limited in terms
of the scope
and value of the work.
[16]
The
Applicant also failed to attach the extension of the cession
agreement. The Respondents dispute that there was any such extension.
Realising that there was no case made out to show that there were
prospects of success, the Applicant argued that this should be
left
for the trial court to determine. In the same vein the Applicant
agrees that it has a duty to show that there were prospects
of
success before condonation can be granted. In my view, the test is
similar to the one applied when leave to institute proceedings
is
sought against a company under business rescue in terms of
section
133
of the
Companies Act, No. 71 of 2008
. As it was held in
BP
Southern Africa (Pty) Ltd v Intertrans OilSA (Pty) Ltd,
[6]
if
the prospects of success were weak, meaning, the merits of the main
relief sought were bad, the prayer for leave to institute
the legal
proceedings should be refused.
[17]
In this case, the
Applicant had no contractual agreement in force when the cause of
action arose. The only agreement that existed
is the cession
agreement which from its wording, clearly exhibits that it lapsed
with the performance of the work and the payment
of the amount
stipulated therein. If the Applicant has a case from the facts it
presented, it would be against the Third Respondent.
There is
therefore clearly no good cause shown, both in respect of the delay
and the prospects of success. For that reason, the
application stands
to be dismissed.
[18]
For these reasons set
out above, I make the following order.
[18.1]
The application is dismissed.
[18.2]
The Applicant is ordered to pay the costs of this application.
TV
RATSHIBVUMO
JUDGE
OF THE HIGH COURT
FOR
THE APPLICANT:
ADV IN KRUGER
INSTRUCTED
BY
STEGMANNS
INC
NELSPRUIT
FOR
THE RESPONDENT
ADV. T NGWENYA
INSTRUCTED
BY
STATE
ATTORNEY
MBOMBELA
DATE
HEARD
26
MAY 2022
JUDGMENT
DELIVERED
10 JUNE 2022
[1]
See p. 78-82 of the
paginated bundle.
[2]
See p.83 of the
paginated bundle.
[3]
(779/2019)
[2020] ZASCA 119
(1 October 2020) at para 18
[4]
[2008]
ZASCA 34
;
2008 (4) SA 312
(SCA) at para 8.
[5]
See letters on p. 33,
34, 35, 36 & 38 which were all penned down in June 2020 while
the Applicant claims to have resumed operation
in August 2020.
[6]
2017
(4) SA 592
(GJ) At 598I–599C.