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[2022] ZANCHC 14
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Sol Plaatje Municipality v Technofin (Pty) Ltd (2230/2014;34/2020) [2022] ZANCHC 14 (18 March 2022)
IN
THE HIGH COURT OF SOUTH AFRICA
(NORTHERN
CAPE DIVISION, KIMBERLEY)
COURT
A QUO
CASE NO:
2230/2014
APPEAL
CASE NO:
34/2020
DATE
OF HEARING :
17 JANUARY 2022
DATE
DELIVERED:
18 MARCH 2022
In
the application of:
SOL
PLAATJE
MUNICIPALITY
Appellant/Defendant
And
TECHNOFIN
(PTY)
LTD
Respondent/Plaintiff
Coram
:
Mamosebo J
et
Lever J
et
Nxumalo J
JUDGMENT
NXUMALO
J:
INTRODUCTION
[1]
The
appellant in these proceedings is Sol Plaatje Municipality,
established in terms of section 12 of the Local Government: Municipal
Structures Act, 117 of 1998 (“the Structures Act)
.
[1]
The respondent is Technofin, a company with limited liability,
incorporated in terms of the laws of the Republic.
[2]
The appeal, with the leave of the Court
a
quo,
is
against the whole of the judgment of that Court (
per
Stanton AJ) only with regard to the quantum of the respondent’s
second claim of enrichment.
BRIEF
STATEMENT OF THE RELEVANT FACTUAL BACKGROUND
[2]
It is common cause that the parties on 23 April 2009, purportedly
entered
into a written lease agreement, in terms whereof the
appellant leased certain equipment from the respondent which had to
be installed
at the appellant’s premises. The said agreement
provided amongst other things that the appellant would lease the said
equipment
from the respondent for a period of 54 months and that the
appellant would pay an amount of R25 850.10, including
value-added
tax (VAT)
per
month as a rental to the respondent.
[3]
It is also
common cause that the then municipal manager of the appellant signed
the said lease agreement and all the necessary documentation
pertaining thereto. The respondent thereafter delivered all the said
equipment and same was installed on the premises of the appellant.
[3]
The appellant acknowledged
that it had inspected and received the equipment and that the
respondent remained the owner of the equipment
at all material times.
[4]
The
foregoing notwithstanding, the appellant subsequently failed to make
any payment for the equipment. The matter was referred
to arbitration
and the arbitrator ultimately found that the said lease agreement was
null and void
ab
initio
,
for failure to follow certain legislative prescripts relating to the
procurement of goods by an organ of state in the local sphere
of
government.
[4]
This arbitration
award was made on 15 July 2013.
[5]
[5]
Following
the said award, the respondent demanded the return of all the
equipment from the appellant. The appellant only returned
some of the
equipment. The respondent thereupon issued summons out of the Court a
quo
,
on 17 December 2014, claiming
inter-alia
;
the return of the balance of the equipment and certain monetary
damages based on enrichment against the appellant.
[6]
The merits of the respondent’s claim were thereafter
adjudicated by the Court
a
quo
,
vide
Matlapeng AJ, whose judgment was handed down on 10 February 2017.
[7]
ISSUE
FOR DETERMINATION
[6]
The appeal impugns the Court
a quo’s
conclusion that in
respect of the second claim, the appellant was to pay the respondent
an amount of R1,682,715.70, with interest,
from the date of summons
until the date of payment, calculated at
mora
rate. Of
significance in this regard is what the Court
a quo
, stated in
paragraph 45 of the impugned judgment; to
wit
:
“
I take
cognisance of the judgment in Lobo Properties (Pty) Ltd and agree
that the crux in the Mangaung judgment was whether the
respondent was
entitled to payment on the basis of unjust enrichment and that the
quantum of the enrichment was therefore not in
dispute.
However,
in view of the Mangaung judgment, I am persuaded that what accrued to
the Defendant [Appellant] was the rendering of the
services in the
amount as agreed to in the invalid agreement, and that the
impoverishment of the Plaintiff [Respondent] and the
enrichment of
the Defendant [Appellant] are on equal terms, being the amount of
R1,731 956.70 (inclusive of VAT).
Mr
MMW van Zyl conceded that the amount was awarded in claim 1 should be
deducted from the amount awarded in respect of claim 2.”
[8]
[7]
The issue for determination is thus whether in awarding the damages
in
the amount of R1,682,715.70 to the respondent the trial court was
correct in its finding that the impoverishment of the respondent
and
the concomitant enrichment of the appellant are on equal terms.
BRIEF
OVERVIEW OF THE EVIDENCE IN THE COURT
A QUO
[8]
The impugned judgment correctly summarised the salient aspects of the
evidence presented by both parties during the trial. For purposes of
this appeal however, this Court will only refer to the relevant
aspects thereof. The Court
a quo
found the following facts
which pertain to the second claim to be common cause between the
parties.
[9]
That the
parties agreed on a price based on the equipment that was later
removed and replaced by the equipment that formed the subject
matter
of the impugned lease agreement. That the appellant had the advantage
of the use of equipment whilst in possession thereof,
at all material
times thereto.
[9]
And that the
monthly instalments calculated in annexure CB1,
[10]
corresponds with the monthly rental amount agreed upon in the
impugned lease agreement.
[11]
The
appellant’s evidence
[10]
The summary of the evidence that was brought before the Court
a
quo
on behalf of the appellant may be gathered from paragraphs 11
to 13 of the impugned judgment as follows.
[11]
Mr Thomas
who testified for the appellant confirmed that the accurate value of
the equipment is of importance in transactions similar
to the
impugned lease agreement.
[12]
His evidence regarding the value of the equipment is however
exclusively premised on the contents of a quotation received from
one
Mustek Limited, that was provided on 24 May 2018 and that of one Mr
Snyman, who also testified on behalf of the appellant in
this
regard.
[13]
[12]
Mr Thomas, conceded that he never had access to the original price
that Baitsanape, the
respondent’s supplier, paid for the
equipment and could not dispute that the margin applied by the
respondent was fair under
the circumstances. Since the appellant did
not adduce any evidence regarding the calculation and determination
of the impugned
monthly instalments, the respondent submitted that
the Court a
quo
correctly accepted the evidence of Booysen in
that regard.
[13]
Snyman’s
evidence was
inter-alia
as follows. The current market value of the equipment, at the time it
was returned to the respondent, ranged between zero and twenty
percent of its original purchase price. The camera’s prices he
provided to Thomas were merely estimates without any factual
foundation or documentary support. He conceded that he only relied on
the figures provided in the said quotation to do his calculations
and
did not do any comparative study beforehand.
[14]
In the premise, the Court
a
quo
found
it could not rely on or accept the figures as supplied by Snyman. It
was granted that his calculations meant nothing and accordingly
fell
away.
[15]
The
respondent’s evidence
[14]
Ms Booysen
testified on behalf of the respondent. According to the respondent,
the relevant evidence for purposes of this appeal
relates to the
value of the services it provided to the appellant and the enrichment
that accrued to the latter therefrom. The
most important aspect that
Ms Booysen referred to was the method of calculation in determining
the monthly instalments in terms
of the impugned lease agreement. She
testified that in determining the monthly rental, it is customary in
the industry to make
use of factoring sheets.
[16]
[15]
Whilst she
conceded that she never personally compared the purchase price of the
equipment with similar products in the market,
she nevertheless
testified that the pricing thereof was on par with that of other
municipalities.
[17]
She also
attested that the factors that the respondent applied in determining
the monthly rental in the impugned lease agreement,
were reasonable
and equal to the norm in the industry.
[18]
[16]
She
concluded that based on the agreed monthly instalments, multiplied by
the number of months that the appellant had the equipment
in its
possession, the total monthly rentals, payable calculated as from
April 2009 to November 2014, amounted to R1,731 956.70
(including VAT) and R1,519 260.26 (excluding VAT).
[19]
In the premise, the respondent would have made a profit of
R49 241.00, from the impugned lease agreement.
[20]
[17]
Regard being had to the foregoing, the Court
a quo
then
proceeded to summarise the respondent’s evidence on quantum in
paragraphs 8 to 9 of its judgment
inter alia
, as follows. The
fair and reasonable return on investment on finance agreements such
as the master rental agreement, is calculated
by applying the costs
of the equipment as well as the reasonable finance charges at 18. 5%,
added to the then prime interest rate
of 15.5%. Other factors
considered in determining the monthly instalments in terms of the
said lease,
inter-alia
included, the purchase price of the
equipment; the terms of the lease; the interest rate; and the value
of the goods to the client.
BRIEF
OVERVIEW OF THE PARTIES’ MAIN ARGUMENTS
The
appellant’s argument
[18]
Counsel for
the appellant,
Mr
Knoetze SC
,
submitted that the Court
a
quo
erred in granting the impugned order on
inter-alia
,
the following grounds. In
Mangaung
Metropolitan Municipality v Maluti Plant Hire
[21]
(
Mangaung
),
it was not held without more, that the quantum of the enrichment was
equal to the amount agreed to in the unenforceable contract.
[19]
The appellant contended that whilst the rates charged by the
respondent in
Mangaung
, were in line with those set out in the
CPHA, which were the recommended tariffs in the construction
industry, there was no reason
under such circumstances, why the
amount agreed upon in that contract should not have been regarded as
reflecting the value of
the services, which were rendered. In this
case, there was no such.
[20]
According to the appellant,
Mangaung
should be distinguished
from the present matter on the following grounds. The reasonableness
of the impugned charges was in dispute
in the Court a
quo
. The
appellant therefore argued that the Court
a quo
should not
have followed the decision in
Mangaung
.
[21]
According
to the appellant,
Mangaung
is also no authority for the impugned finding of the Court
a
quo
,
because Tsatsi AJ, never found that the quantum of the enrichment
was, without more, equal to the amount agreed in the unenforceable
contract. The Learned Judge, on the contrary, held that the measure
of enrichment is the value of the service, which by necessary
implication, stood to be determined. The Court
a
quo
also ignored the fact that in
Mangaung
,
whilst reliance was placed on,
inter-alia
Hitchins
v Breslin
1913 TPD 677
,
it was held that a plaintiff cannot include profit when calculating
his impoverishment.
[22]
[22]
Counsel for
the appellant therefore contended that to the extent that according
to normal enrichment principles in our law, the
measure of enrichment
is the value of services rendered, the contract price cannot be the
benchmark of determining to which extent
the appellant has been
enriched.
[23]
To
the contrary, so he submitted, in
Mangaung
,
it was correctly held that the measure of enrichment is the value of
the service, which by necessary implication, stood to be
determined.
[23]
It was also
contended for the appellant by Mr Knoetze SC, that by finding that
the impoverishment of the respondent and the enrichment
of the
appellant are on equal terms, the court
a
quo
erred, since by making that finding, it in effect added the profits
that the respondent built into its rental agreement to the
amount
that the respondent was awarded as enrichment, which it should not
have done. Counsel for the appellant maintained that
it is so since
it is trite in our law, that a party in a claim for enrichment,
cannot include profit when calculating its impoverishment.
[24]
[24]
According to the appellant, the court
a quo
erred by failing
to take cognisance of the evidence that was presented on behalf of
the appellant regarding the value of the impugned
equipment and based
on the said value, what the reasonable market-related rental of the
said equipment should have been, regard
being had to what was stated
in
Lobo Properties v Express Lift Company
1961 (1) SA 704
(CPD) at 710A-B - 711A; to
wit
:
“
I have pointed
out above that in the first type of situation our Courts in the
absence of circumstances justifying a different inference,
favour a
construction whereby the lessee is liable for a fair reasonable
amount as rental. In assessing that amount the Court seeks
to arrive
as nearly as possible at the rental value of the property in the open
market. Under the condiction which lies in the
second type of
situation, the basis of assessment is (save for a possible
qualification to be mentioned later) exactly the same.
The
would-be lessee is liable to pay the ‘owner a reasonable sum
for the use and occupation which he enjoyed’: and as
is
apparent inter-alia from the above passage cited from van den Heever,
the rental value of the property in the open market would
again be
the criterion for assessment of this reasonable sum. It is true that
the purpose of the condiction is to prevent undue
enrichment of the
putative lessee at the expense of the owner.
And
it may well be that for this reason an enquiry under the condiction
ought to be permitted to extend into the wider sphere of
the question
whether in the particular circumstances of the specific case the
putative lessee was in truth enriched at all and
if so, whether to
the full extent of the rental value.
In
the large generality of cases the putative tenant would be enriched
to the extent of the rental value of the property
(vide van den Heever, supra): it would be in somewhat unusual or
exceptional circumstances that would not obtain.”
[25]
[25]
According to the appellant, both Messrs Thomas and Snyman, who were
expert witnesses, testified
to the effect that the rental of all the
equipment in the open market during the material period would,
per
force, depend on the true value thereof and not on the value paid
therefore by the respondent to Boitsanape, which purchase price
was
not necessarily also the reasonable price thereof in the open market.
[26]
Regard
being had to the expert evidence tendered on behalf of the appellant,
based on the true value or price of all the equipment,
the reasonable
rental for same would have been R2 648.41 per month.
[26]
Based on the foregoing, the appellant’s enrichment for the
period in question was R180 091.88, being sixty-eight (68)
months at R2 648.41, per month.
[27]
In the premise, so the argument went, the appellant’s
enrichment was in fact less
than the total amount of the rental
payable in terms of the invalid agreement and the Court
a quo
failed to apply the principle that the quantum of the enrichment is
the lesser of either the amount by which the appellant had
been
enriched or the amount by which the respondent had been impoverished.
[28]
Mr Knoetze further submitted that by making the impugned finding, the
Court a
quo
failed to apply the guidelines set out in
Lobo
Properties
at 710A-B and 710E;
inter-alia
referring
to
the following:
28.1 The fact that
the parties agreed to a certain rental
vide
the invalid
agreement does not necessarily mean that same corresponded with the
rental value in the open market.
28.2 On the
contrary, the appellant evinced that the rental agreed to was not
market-related.
28.3 By accepting
the impugned rental as the amount of the quantum pertaining to the
enrichment claim without comparing same
to the rental the appellant’s
expert witnesses testified of, the Court a
quo
failed to
consider the reasonableness thereof, which it should have done.
[29]
The Court
a quo
erred when it lost sight of the fact that the
respondent was not entitled to the profit component of the agreed
rental. It failed
to apply the trite principle in our law of
enrichment that the quantum of the enrichment is always the lesser of
either the amount
by which the appellant had been enriched or the
amount by which the respondent had been impoverished, which should
not include
the profit. Perforce, the said amounts cannot be equal.
[30]
It was further submitted for the appellant that awarding the
respondent the total of the
rental amount as per the invalid lease
agreement, the Court a
quo
went far beyond the parameters of
the wide discretion it has in the assessment of the equitable relief
to which the respondent
is entitled. It is so since the said
discretion does not entitle the Court a
quo
to ignore the
guidelines enunciated in
Lobo Properties
.
[31]
It is
against this backdrop that
Mr
Knoetze
submitted that the Court
a
quo
erred in finding that what accrued to the appellant was the rendering
of services in the amount agreed by the invalid lease agreement.
That
the
Mangaung
Metropolitan Municipality v Maluti Plant Hire
[27]
,
is
authority for the finding that what accrued to the appellant, was a
rendering of the services in the impugned amount, as agreed
to in the
invalid agreement. That the impoverishment of the respondent and the
attendant enrichment of the appellant are on equal
terms.
[32]
I am
constrained to agree with the appellant because it is trite in our
law of enrichment, that the contract price is not the benchmark.
[28]
It should not play any part in determining the plaintiff’s
impoverishment or the defendant’s enrichment because, logically
it would include a profit for the contractor.
[33]
It is so in
our law that if a person is enriched as a consequence of services
performed by another, the measure of enrichment is
the value of the
service and nothing more. The fact that profits were earned as a
consequence of the service is causally irrelevant.
These profits
cannot be added to the enrichment claim.
[29]
In the premise, a plaintiff cannot include profit when calculating
his impoverishment in a
condictio
sine causa
claim.
[30]
The
respondent’s argument
[34]
The respondent, for its own part, sought an order that the appeal be
dismissed with costs,
for lack of merit.
Mr van Zyl SC
, for
the respondent, maintained that the Court a
quo
correctly
relied on the applicable case law regarding the
onus
in the
event of payment made or goods delivered, without cause. He
maintained that the Court
a quo
correctly found that the
quantum of enrichment is the lesser of either of the amounts by which
the party benefitting has been enriched
or the amount by which the
other party has been impoverished.
[35]
According
to the respondent, what is of great importance in this appeal is a
reference in the impugned judgment to
Rubin
v Botha
1911 AD 568
at p 58,
to
the effect that the civil law recognised “
a
very wide judicial discretion in the assessment of equitable relief
in these matters”.
[31]
Mr Van Zyl
accordingly submitted that, regard being had to the said
dictum
,
our courts are clearly empowered with a wide discretion to determine
and assess the most equitable relief in the circumstances
of cases
such as in
casu
and that the powers of a court of appeal to interfere with the
exercise of such discretion, is limited. He also recognised that
it
is trite law that the exercise of a discretion can only be set aside
on appeal if it was not exercised judicially, in other
words, if the
court below had exercised it on the basis of incorrect facts or
incorrect legal principles –
Valor
IT v Premier North West Province & Others
2021 (1) SA 42
(SCA) at
p 51, par [26].
[36]
It was further submitted on behalf of the respondent that the Court
a
quo
correctly found that what accrued to the appellant was the
rendering of the services in the amount as agreed to in the invalid
agreement and that the impoverishment of the respondent and the
enrichment of the appellant are on equal terms, being the amount
of
R1,731,956.70 (inclusive of VAT). The respondent furthermore
submitted that the
dictum
in
Lobo Properties at 710 A –
711 A
, referred to by the Court a
quo
, in the impugned
judgment is a correct summary of the approach to be adopted in
matters of this nature and therefore there is no
legal basis to
interfere therewith.
[37]
In my view, the approach of the Court
a quo
was “not on
all fours” with
Lobo Properties,
as contended for the
respondent
.
Whilst it is true that the purpose of condiction
is to prevent undue enrichment of the putative lessee at the expense
of the owner,
it is also true that the would-be lessee is only liable
to pay the “owner a reasonable sum for the use and occupation
which
he enjoyed”. And as is apparent
inter-alia
, from
the above passage recited from van den Heever, the rental value of
the property in the open market would again be the criterion
for
assessing a reasonable sum.
[38]
Against
this backdrop it was well observed that it may well be that for this
reason, an enquiry under the condiction ought to be
permitted to
extend into the wider sphere of the question whether in the
particular circumstances of a specific case the putative
lessee was
in truth enriched at all, and if so, whether the full extent is the
rental value.
[32]
It is also
against this backdrop, that
Lobo
Properties
enjoins that in assessing that amount, the Court must seek to arrive
as nearly as possible at the rental value of the property
in the open
market. It follows from the foregoing that the mere fact that the
parties agreed to a certain rental price in the invalid
agreement
does not necessarily mean that such rental corresponded with the
rental value in the open market.
[39]
The respondent also submitted that the finding of the Court
a quo
that the value of the service rendered accrued to the appellant, was
also aligned with the decision in
Allpay Consolidated Investment
Holdings (Pty) Ltd & Others v Chief Executive Officer, South
African Social Security Agency &
Others
2014 (4) SA 179
(CC),
where the Constitutional Court ordered the agreement between the
service provider and SASSA invalid, but suspended that order on
certain conditions.
[40]
The approach adopted by the Constitutional Court in that instance,
was that a just and
equitable order should be made based on the
prevailing circumstances. According to the respondent, a similar
approach was adopted
in
State Information Technology Agency SOC
Ltd v Gijima Holdings (Pty) Ltd,
2018 (2) SA 23
(CC) at p 42, par 54.
The approach adopted by the abovementioned Constitutional Court
decisions is a confirmation of the principles laid down in
Lobo
Properties (supra)
. These cases also support the principle that a
court is entrusted with a discretion to make an order that is
equitable under the
circumstances.
[41]
The approach of the appellant in relying on the decision in
Hitchins
v Breslin
at 685
,
is legally unsound and wrong, so it was
submitted for the respondent. The said decision is materially
distinguishable from this
matter for the following reasons, according
to the respondent.
41.1 First, the
matter concerned a building contract, in which the contractor (as the
plaintiff) did not fulfil his obligations
in terms of the building
contract.
41.2 Secondly, that
court found that in some contracts the profit forms a very
considerable proportion of the contract price
and it would have been
unjust to give a contractor who has failed to complete his contract,
the profit he has speculated upon.
41.3 In
casu
,
the respondent submitted, it is common cause that it fulfilled all
its obligations in terms of the tainted lease agreement and
the
appellant had the full and exclusive use and benefit of the goods
supplied, for the total period of the envisaged lease and
a short
period thereafter.
[42]
The respondent also contended that the approach adopted by the
appellant will have the
result that the Court
a quo
should
have ignored the purchase price that was paid for the equipment
delivered to the appellant in terms of the lease agreement.
It was
submitted that it is so as the evidence of Booysen to the effect that
the monthly instalments were reasonable and within
the norm of the
industry was common cause. There were no facts before the Court
a
quo
to have made a different finding and, although the relevant
lease agreement was tainted, it was the agreed price between the
parties.
There is further no evidence that the price was inflated or
the appellant was in any way misled with regard to the monthly
instalments
that would have been payable in terms of the lease
agreement.
[43]
It was also submitted on behalf of the respondent that the Court
a
quo
correctly used as a yardstick, the agreed contractual price
in the tainted agreement in order to calculate the enrichment and
impoverishment
of the parties. The finding that it was on equal
terms, is thus patently correct. According to the respondent, the
finding by the
Court
a quo
is also substantiated by the
evidence of Ms Booysen, as being the norm in the industry how prices
on leases of this nature are
determined and should therefore be
accepted as correct. That finding is also in line with the full court
decision in
Mangaung
, so the argument went
.
[44]
To the
extent that Mr Thomas, who testified on behalf of the appellant,
conceded that he did not have access to the original price
that
Baitsanape, the respondent’s supplier, paid for the equipment
and could not dispute that the margin applied was fair
in the
circumstances;
[33]
and to the
extent that it is common cause on the evidence of Mr Thomas that the
equipment, when returned to the respondent, was
outdated and not
available in the market during 2018, as the industry has moved on to
digital equipment,
[34]
the
Court correctly found that the quantum of enrichment is the lesser of
either the amount by which the party benefitting has
been enriched or
the amount by which the other party has been impoverished.
[35]
[45]
The impugned decision is in any way aligned with the decisions
in
Allpay v SASSA (supra
) or
SITA v Gijima (supra)
.
Whilst it is so that the approach adopted by the Constitutional Court
in both cases, was that a just and equitable order should
be made
based on the prevailing circumstances; the significant distinction
between the said cases and the case in
casu
is that in the
former cases, the apex Court was acting within the purview of section
172 (1) (b) of the Constitution, following
upon declarations of
constitutional invalidity. In
casu
, the Court
a quo
was
granting an order which is just and equitable in respect of a
condictio sine causa
claim.
[46]
Whilst I accept that courts of first instance have “
a very
wide judicial discretion in the assessment of equitable relief in
these matters”
it should also be accepted that our courts
can only do so in accordance with applicable principles of the law
.
It is so since equity follows the law. Innes CJ, put it better thus
in
Kent v Transvaalsche Bank
1917 AD 295:
“
The Court …has
again and again had occasion to point out that it does not administer
a system of equity as distinct from
a system of law…. we are
always desirous to administer equity; but we can only do so in
accordance with those principles
of Roman-Dutch law.
If
we cannot do so in accordance with those principles, we cannot do so
at all.
”
[36]
[47]
To the extent that Technofin is not suing in terms of the invalid
agreement, but
condictio sine causa
, the “amount as
agreed to in the invalid agreement” cannot without more, be the
basis for the proposition that the
impoverishment of the respondent
and the enrichment of the appellant are on equal terms. Both our law
and English cases show that
a contractor should not be allowed to
claim the contract price with all the profit that entails. A
contractor should also not be
allowed to obtain a
quantum meruit
,
where his suit is based entirely on a refusal to pay the amount
stipulated in the contract-
Hitchins v Breslin
(
supra
)
at 686.
[48]
In
Hitchins v Breslin (supra)
which concerned a contractor who
agreed to a lump sum for
inter-alia
installing electric lights
in certain houses and supplying materials thereof, it was
inter-alia
held that in an action for
quantum meruit
the plaintiff can
only claim the price of the material supplied (if any) and a charge
on the labour done. The underlying reason
being that to the extent
that a contract price as a rule includes certain profits, a party
would not be entitled to any profits
on a
quantum meruit
claim.
[49]
The
respondent’s argument is oblivious of the fact that in our law,
in a claim for enrichment, the contract price is not the
benchmark.
[37]
It is so since
the contract price usually includes profit, the latter which should
not play a part in determining the respondent’s
impoverishment
or the appellant’s enrichment. Neither the Court
a
quo
,
nor the respondent in argument seem to have cognised the fact that
the impugned award logically included the respondent’s
profit.
A fact which is evident from Ms Booysen’s testimony.
[50]
The issue is not whether or not the respondent fulfilled all its
obligations in terms of
the tainted lease agreement; nor is it
whether the price was inflated or whether the appellant was in any
way misled with regard
to the monthly instalments that would have
been payable in terms of the lease agreement. It is the irrefutable
fact that the so-called
reasonable monthly instalments were
necessarily derived from the respondent’s calculation of its
return on investment, which
logically included profit.
[51]
The approach adopted by the Court
a quo
of accepting the price
in the lease agreement as a benchmark lock, stock, and barrel or just
on the say-so of witnesses thus has
the result of factoring the
respondent’s profit through the back door.
[52]
Also in paragraphs 30 – 31, the following was held in
Mangaung
:
“
If a person is
enriched as a consequence of services performed by another, the
measure of enrichment is the value of the service.
The fact
that profits were earned as a consequence of the service is causally
irrelevant. These profits are not added to the enrichment
claim. A
plaintiff cannot include a profit when calculating his
impoverishment.
This is obvious if the plaintiff did not
forgo the opportunity of making the profit through dealings with a
party.
In
BK
Tooling (Edms) Bpk v Scope Precision Engineering (Edms) Bpk
,
the Appellant Division did not indicate the criterion for calculating
the extent of the defendant’s enrichment derived from
the
contractor’s defective performance.
It
can be inferred that the calculation is to precede according to
normal enrichment principles and that the benchmark is not the
contract price. Since the contract price will include a profit for
the contractor, it should not play a part in determining the
plaintiff’s impoverishment or the defendant’s
enrichment.”
[38]
[53]
In paragraph 37 thereof, the following is then emphasised in
Mangaung
, for the avoidance of doubt:
“
The
question of profits being included in the enrichment calculations is
clarified by the authorities quoted above.
The
measure
of enrichment is the value of the service rendered.
The
fact
that profits were earned as a consequence, profits are not
added
to the enrichment claim. A plaintiff cannot include a profit
when
calculating his impoverishment.”
[39]
[54]
The following is clear from the foregoing. The Court
a quo’s
finding does not seem to be in line with
Mangaung
. The Court
a
quo
incorrectly used as a yardstick, the agreed contractual price
in the invalid lease agreement in order to calculate the enrichment
and concomitant impoverishment of the parties. The finding that same
was on equal terms, must be incorrect simply because, the
Court
a
quo
, in calculating the respondent’s impoverishment did not
exclude the profit factor.
[55]
It follows from foregoing that the amount awarded by the Court
a
quo
could not have been the lesser of either the amount by which
the appellant had been enriched or the amount by which the respondent
had been impoverished, which should not include the profit. I
therefore find that the impoverishment of the respondent and the
enrichment of the appellant are not on equal terms.
COSTS
[56]
The appellant prays this Court to allow the appeal with costs,
including cost of the application
for leave to appeal and to
substitute the following for paragraphs 3,4 and 5 of the order of the
Court
a quo
:
“
3.
In respect of claim 2 – payment of the amount of R180 091.88;
4.
Interest on the amount of R180 091.88, from the date of summons
until the date of payment,
calculated at mora rate; and
5.
the defendant [appellant] is ordered to pay the costs of plaintiff
[respondent] until 31
May 2018, on a scale of the Regional Court.”
[57]
The respondent for its own part contended that should this Court find
in favour of the
appellant, costs following the event should
nevertheless remain on a high court scale. This is because it
maintains that there
was no abuse of process on its part to have
approached the high court instead of the magistrates’ court
since at all material
times hereto the
bona fide
amount
claimed fell within the jurisdiction of the latter and not the
former. The foregoing is emboldened by the finding of the
Court
a
quo
. In our view this submission is correct and the relevant
costs order will be made on this basis.
Appellant’s
offer to settle in terms of rules 34 (1) and (5)
[58]
Though initially subject to some confusion on the date of hearing of
this appeal, it is
now common cause that the appellant on 31 May
2018, delivered an offer,
without prejudice
, to settle in
terms of rule 34 (1) and (5) of the Uniform Rules. In terms of the
said offer, the appellant tendered, without prejudice
of rights, to
settle all of the respondent’s claims against it as set out in
the particulars of claim, in full and final
settlement by payment of:
(1) the amount of R500 000.00, which is inclusive of any
interest claimed by the respondent in respect
of the said action; and
(2) the respondent’s taxed costs as on a party and party scale
up and until date of service of the
offer, together with the costs of
recovering the said costs and qualifying costs, as determined by the
Taxing Master regarding
the expert witnesses of the respondent.
[59]
The said offer was disclosed to this Court by the appellant during
virtual oral argument
of this appeal on 17 January 2022. A copy of
same was then transmitted to this Court
vide
the Registrar of
this Court under cover of a letter from the appellant’s
attorney on 19 January 2022.
[60]
The foregoing implicates rule 34 (10) and (11). These rules provide
as follows, respectively:
“
(10) No
offer or tender in terms of this rule made
without
prejudice
shall be disclosed to the court at any time
before judgment has been given. No reference to such an offer or
tender shall appear
on any file in the office of the registrar
containing the papers in the said case.
(11) The
fact that an offer or tender referred to in this rule has been made
may be brought to the notice of the court
after judgment has been
given as being relevant to the question of costs.”
[40]
[61]
It is clear
from the record of appeal and impugned judgment that the said offer
was never brought to the notice of the Court
a
quo
.
The foregoing notwithstanding, the appellant has requested this Court
to take cognisance of the said offer as being relevant to
the
question of costs in this appeal. It has been well said that offers
of settlement and tenders to perform made under rule 34,
must comply
with the requirements thereof.
[41]
Thus whilst the court has a discretion in a proper case to condone a
breach of the provisions of the rule, the provisions of the
sub-rule
are so imperative, both in form and substance such that a court
cannot willy-nilly grant dispensation in advance from
its
requirements.
[42]
[62]
The idea
underlying rule 34 (10) is that the court should approach a question
of damages unaffected by the knowledge of an offer
made by the
defendant, thus avoiding the possibility of the court being
influenced by such knowledge to award something more than
the amount
paid in or tendered, in order that the judgment should carry costs.
But the question whether or not an offer or tender
in terms of the
rule should be disclosed to a court of appeal was left open in
Bruwer
v Joubert
1966 (3) SA 334
(A) at 339C.
[43]
[63]
This notwithstanding, I am of the opinion that the injunction in the
rule applies with
equal force on courts of appeal, especially where
such offers have not been disclosed to a Court
a quo
, after
judgment. In
casu
the disclosure was prompted by the denial of
the respondent’s instructing attorneys to having received the
notice for the
offer on 31 May 2018 in terms of Rule 34 (1) and (5)
to settle the claim. That is why in the e-mail correspondence the
writer,
Thomas Minnie Attorneys, wrote: “
I have perused my
file and can confirm that the attached notice was definitely received
by our office and that you may inform the
Honourable Court
accordingly. Writer further confirms that the date stamps also match
the Notice which is in our file. Please accept
my apology for not
remembering that we received the notice. It was simply a case of not
having recollection of receiving it.”
I therefore find that
whilst the disclosure of the offer to settle came to the appeal Court
before this judgment, the reasons thereto
were for the appeal court
to consider an appropriate costs order.
CONCLUSION
[64]
It behoves
restatement that whilst it is so that our courts are empowered with
discretion to determine and assess the most equitable
relief in the
circumstances of each case; and whilst it is so that the powers of a
court of appeal to interfere with the exercise
of such a discretion
of a lower court, is limited, it is also trite law that the exercise
of a discretion can be set aside on appeal,
if it was not exercised
judicially or if the court below had exercised it on the basis of
incorrect facts or incorrect legal principles.
[44]
[65]
I am of the view that the Court
a quo
patently misconstrued
the import of the implicated legal principles in
Mangaung
and
therefore inevitably erred in finding that its decision was in line
with same. In view of the foregoing, I am inclined to allow
the
appeal with costs.
[66]
Accordingly, the following order is made:
(a)
The appeal is upheld with costs, including the costs of the
application for leave to appeal;
(b)
The following paragraphs are substituted for prayers 3,4, and 5, of
the Court
a quo’s
order
:
“
3.
In respect of claim 2 – payment of the amount of R180 091.88;
4.
Interest on the amount of R180 091.88, from the date of summons
until the date of payment,
calculated at mora rate; and
5.
The defendant is ordered to pay the costs of the plaintiff.”
APS
NXUMALO, J
HIGH
COURT OF SOUTH AFRICA
NORTHERN
CAPE DIVISION
KIMBERLEY
MAMOSEBO,
J and LEVER, J concurs in the judgment by Nxumalo, J
Obo
Appellant:
Adv. B. Knoetze SC
oio Van de Wall Inc.
(OCronjé/Elmarie/J08767)
Obo
Respondent:
Adv.
M.M.W. van Zyl SC
Oio Thomas Minnie
Attorneys, 462 Polaris Avenue,
Waterkloof Ridge Ext.2,
Pretoria
thomasminnie@mweb.co.za
(TMinnie/T162-2)
[1]
Defendant
in the Court
a
quo.
[2]
Plaintiff
in the Court
a
quo
.
[3]
paras
2-4, pp251-252, Vol 3 (Merits Judgment, delivered 10 February 2017,
per
Matlapeng AJ).
[4]
Section 217 of the Constitution and
The
Local Government: Municipal Finance Management Act 56 of 2003
, in
the main regulate the procurement of goods and services in the local
sphere of government.
[5]
para
3, p410, Vol 5.
[6]
para
4,
ibid
.
[7]
pp251-262,
Vol 3, Record.
[8]
p431, Vol 5, Record.
Emphasis
supplied.
[9]
Annexure A, p. 14; Judgment par 6.3, Vol 5.
[10]
p411 at par 5.2, Vol 5
[11]
Record p 298, Vol 3.
[12]
Judgment par 12.5, Vol 5.
[13]
Judgment par 12.1, Vol 5.
[14]
Ibid
,
para 13.2.
[15]
para
12.11, p417, Vol 5,
[16]
Vol. 2, pp125-128.
[17]
Judgment, para 9.1; Record: Booysen p. 137 line 5 to 8, Vol 5.
[18]
p129,
ll16-25,
ibid
.
[19]
Judgment par. 10.5, Vol 5.
[20]
Judgment, par 9.1; Vol 5.
[21]
(A19/2026)
[2017] ZAFSHC 55
(9 February 2017).
[22]
para
30,
supra
.
[23]
para
31,
Mangaung
.
[24]
Hitchins
v Breslin
1913
TPD 677
at 685.
[25]
Emphasis
supplied.
[26]
Annexure
D, p319, Vol 3.
[27]
(
A19/2016)
[2017] ZAFSHC 55.
[28]
Hitchins
v Breslin
(
supra
)
– also followed in
Mangaung
at
para
31,
supra
.
[29]
BC
v Commissioner of Taxes
1958
(1) SA 172
(SR) which was followed in
Mangaung
.
[30]
Gofinkel
v Miller
1931
CPD 251-pointing
out that profit would be recoverable only if the
parties concluded a tacit agreement to this effect.
[31]
p425,
para
35, Vol 5.
[32]
Lobo
Properties
,
(
supra
)
at p710A-C.
[33]
,
p194, l20 to p195, l24, Vol. 2
[34]
p194, ll 4-11, ibid
[35]
p 424, par 34, Vol. 5,
[36]
Emphasis
supplied.
[37]
para
31,
supra
.
[38]
Emphasis
supplied and footnotes omitted.
[39]
Emphasis
supplied.
[40]
Emphasis
supplied.
[41]
Van
der Merwe v First Rand Bank
2012
(1) SA 480
(ECG) at 483D-E.
[42]
Jacobs
v Santum
1974
(3) SA 455
(C) 462G and 464H.
[43]
See
also
HJ
Erasmus “
Restrictions
on disclosure of without prejudice offers
”2012
(January/February) De Rebus, 30 at 32.
[44]
Valor
v Premier, North West Province
2021
(1) SA 42
(SCA), at para 26.