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[2022] ZAECMKHC 104
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Bulk Brick Supplies Property (Pty) Ltd v South African Board for Sheriffs (3249/2021) [2022] ZAECMKHC 104 (22 November 2022)
IN THE HIGH COURT OF SOUTH AFRICA
(EASTERN CAPE DIVISION –
MAKHANDA)
CASE NO.: 3249/2021
Matter heard on: 13 October 2022
Judgment
delivered on: 22 November 2022
In the matter between: -
BULK BRICK SUPPLIES PROPERTY (PTY)
LTD
Applicant
and
THE SOUTH AFRICAN BOARD FOR
SHERIFFS
Respondent
REPORTABLE: YES
OF INTEREST TO OTHER JUDGES: YES
REVISED.
JUDGMENT
SMITH
J:
Introduction
[1] The applicant, a
duly registered and incorporated private company, seeks an order
reviewing and setting aside
the decision of the South African Board
for Sheriffs (the respondent), taken on 23 April 2021 and repudiating
its claim for compensation
in terms of s 35 (a) (
i
) of the
Sheriffs Act, 90 of 1986 (the Act), because of perceived
non-compliance with s 36 (2) (
a
) of the Act. The latter
section provides that a claim against the Fidelity Fund for Sheriffs
(the Fund) must be lodged within three
months of the claimant
becoming aware of the contingency.
[2]
Although the respondent has raised various points
in limine
in
its answering affidavit, it did not pursue any of them during
argument. This was not at all surprising since those points were
all
demonstrably without any merit.
[3]
The applicant contends that the impugned decision falls to be
reviewed and set aside on
the grounds that it is irrational, was
taken for an ulterior purpose and was based on an erroneous
understanding of the applicable
legal principles and the underlying
factual matrix.
Factual background
[4]
There has been protracted correspondence between the applicant’s
attorneys and the respondent,
both before and after the lodging of
the applicant’s claim. The contents of those letters and emails
have considerable bearing
on the determination of the issue as to
whether the applicant lodged its claim properly and timeously. I am
therefore constrained
to go into some detail regarding the history of
the correspondence, so as to provide proper context for my findings
in respect
of that issue, as well as the issue regarding the
appropriate scale of costs.
[5] The
material facts are common cause and uncomplicated. On 18 September
2013, the applicant obtained
judgment against the Bizana Local
Municipality and other defendants in the Mthatha High Court for the
capital sum of R213 158.90,
together with interest thereon and costs
of suit. The sheriff of Bizana, Dumisani Godlwana (the sheriff),
thereafter attached one
of the municipality’s vehicles in
pursuance of a writ of execution. He, however, failed to report to
the applicant or its
attorneys regarding the execution of the writ,
and all attempts by the applicant’s attorneys to get a report
from him were
unsuccessful. As a result, the applicant’s
attorneys lodged a formal complaint with the respondent on 28 January
2016.
[6]
On 17 August 2016, the applicant became aware of the fact that the
municipality had
paid the judgment debt to the sheriff to secure the
release of the motor vehicle. The applicant’s attorneys
conveyed this
fact to the respondent on 17 August 2016, together with
a request that the respondent move swiftly to investigate the matter
and
take the appropriate steps. The applicant eventually lodged
its claim with the respondent on 14 October 2016.
[7]
The respondent’s Fund administrator, one Phila Ngwane, wrote to
the applicant’s
attorneys on 26 October 2016 confirming that:
(a) it had received the applicant’s claim against the Fund; (b)
the claim had
been registered and a claim number issued; and (c) it
would consider the claim and revert to the applicant in due cause.
[8]
On 9 February 2017, the respondent informed the applicant’s
attorneys that it
required a power of attorney, together with
relevant supporting documentation. Even though the applicant was not
certain as to
what supporting documentation were required, it
supplied the respondent,
inter alia
, with: a copy of a court
order confirming the Bizana Local Municipality’s liability; the
sheriff’s notice of attachment;
and the bank statement received
from the Bizana Local Municipality confirming that the capital sum
had been paid to the sheriff.
It also filed the power of attorney on
15 February 2017.
[9]
In the meantime the applicant’s attorneys and representatives
of the respondent
entered into numerous discussions regarding the
progress - or lack thereof - of the applicant’s claim. On 21
July 2017 they
wrote to the respondent outlining the applicant’s
concerns that the process has taken an inordinately long time and
requested
clarification as to what more was required of it.
[10] In
reply, the respondent stated that it had reviewed the claim and
wanted to know in what year
the Bizana Local Municipality had made
the payment to the sheriff. It also referred the applicant to the
provisions of s 37 of
the Act, namely that the claimant was required
to exhaust all available legal remedies against the sheriff prior to
instituting
action against the Fund. It furthermore drew the
applicant’s attention to the provisions of s 36 (2) (
b
)
of the Act and granted it six months from the date of the letter,
being 10 July 2017, to provide the requested information.
[11] On 31 July
2017, the applicant’s attorneys wrote to the respondent
enquiring about the outcome of the
disciplinary proceedings against
the sheriff and requested the respondent to waive the requirements of
section 37 of the Act. The
respondent’s fund administrator
replied on 1 August 2017, informing the applicant’s attorneys
that the respondent could
not waive the requirements of s 37 (2) “as
the amount is substantial.” It furthermore informed the
applicant’s
attorneys that the only information still
outstanding was the date on which the Bizana Local Municipality made
the payment to the
sheriff.
[12] The
respondent further provided the applicant’s attorneys with a
record of the disciplinary
proceedings against the sheriff. The
record indicated that the sheriff was,
inter alia
, found
guilty of failing to respond to correspondence and releasing the
attached motor vehicle without receiving an instruction
to do so and
after having received payment of an unknown sum of money.
[13] The
applicant was only able to reply to the respondent’s only
outstanding queries, namely
the date and amount of the payment,
during August 2017. It had ascertained from the Bizana Local
Municipality that it paid the
sum of R213 158.90 to the sheriff on
the 9 of May 2014. This information, together with the municipality’s
bank account statement,
were sent to the respondent under cover of a
letter dated 28 august 2017.
[14] The
applicant’s attorneys again wrote to the respondent on 16
January 2018, requesting confirmation
that the Fund would consider
its claim in the event that the money could not be recovered from the
sheriff. It furthermore informed
the respondent that in line with its
decision not to waive the requirements of section 37 (2) of the Act,
the applicant’s
attorneys have drafted a summons and
particulars of claim and were awaiting service upon the sheriff.
[15] On
23 March 2018, the applicant’s attorneys informed the
respondent that they had been
unable to effect service on the sheriff
as he no longer traded at his given address. They were eventually
able to effect service,
and obtained judgment against the sheriff on
9 May 2018 in the Mthatha Regional Court for payment of the sum of
R213 158.90,
together with interest thereon and costs of suit on
the attorney and client scale.
[16] The
respondent did not reply to that letter, and on 27 September 2018,
the applicant’s
attorneys again wrote to it confirming that
judgment had been obtained against the sheriff, that tracing agents
had been appointed
to locate him and that the tracing agent’s
report indicated that the sheriff was not in a financial possession
to satisfy
the judgment debt.
[17] The
respondent, however, required the applicants to take steps to execute
the judgment against
the sheriff before it would consider the claim.
The applicant then employed another tracing agent to locate the
sheriff, but when
his address was eventually ascertained, it was
discovered that he no longer lived there. The applicant communicated
this state
of affairs to the respondent on 1 Mach 2019. The
applicant’s attorneys confirmed that they had exhausted all
remedies against
the sheriff and reminded the respondent that its
fund was created to assist members of the public in the position of
the applicant
with their claims.
[18]
There was no reply to that letter and the applicant’s attorneys
send further correspondence
to the respondent on 27 March 2019 and 30
April 2019. Eventually, the representative of the respondent
contacted the applicant’s
attorneys telephonically on 6 May
2019. Pursuant to that conversation, the applicant’s attorneys
provided the respondent
with a return of service dated 22 January
2019, together with a tracing report as proof that the applicant was
unable to execute
against the sheriff. The applicant’s
attorneys thereafter, at the respondent’s request, performed a
deeds office search
in respect of the sheriff and sent evidence
thereof to the respondent under cover of a letter dated 21 May 2019.
[19] The
respondent thereafter failed to reply to further letters written by
the applicant’s
attorneys to it on 20 June 2019 and 2 July
2019. It eventually only replied on 25 September 2019 stating that
the applicant’s
claim had been submitted to its board for
consideration on 9 September 2019, but had been deferred to the next
meeting. It also
said that it required a copy of the summons and
supporting documents in respect of the judgment obtained against the
sheriff within
10 days. The applicant’s attorneys duly provided
the requested documentation under cover of a letter dated 26
September 2019.
[20] On 1 November
2019, the respondent advised the applicant’s attorneys that it
had reviewed the applicant’s
claim and because ‘the fund
is a fund of last resort’, the applicant was required to excuss
against the sheriff, including
through sequestration proceedings, and
must explore alternative forms of service. It also required the
applicant to submit further
proof of attempts to excuss against the
sheriff.
[21] After the
applicant’s attorneys had advised the respondent that they have
taken all necessary steps
to excuss against the sheriff and that he
could not be located, the respondent replied on 6 December 2019,
stating that the applicant’s
claim had been repudiated on the
grounds that s 37 (2) of the Act provides that ‘the fund is a
fund of last resort’
and the applicant has not fully excussed
against the sheriff. It insisted that the sheriff must be
sequestrated and the vehicle
mentioned in the tracing agent’s
report attached. It informed the applicant that its claim had
consequently been repudiated
‘and the file is now pended, upon
the above requirements been complied with’.
[22] On 5 February 2021,
after the applicant had informed the respondent that it had obtained
legal opinion to the effect
that sequestration is not a valid form of
excussion or debt enforcement, the respondent, although stating that
it had obtained
a contrary opinion, nevertheless, requested the
following from the applicant: (a) a deed search of all provinces
showing that the
sheriff has no immovable property; (a) a warrant of
execution against immovable property and a nulla bona return; (c) a
return
of service in respect of the summons; and (d) an affidavit
reflecting attempts to arrange payments with the sheriff and
indicating
why it would not benefit the creditors to proceed with
sequestration. The letter concluded by stating that the respondent
would
consider the claim for “possible payment at the next
meeting in February 2021”.
[23] The
applicant submitted the requested documentation to the respondent
under cover of a letter
dated 11 February 2021, and eventually,
having received no response from the respondent, it instituted action
proceedings against
the respondent during April 2021.
[24]
After the summons had been issued, the respondent wrote to the
applicant’s attorneys on
23 April 2021, stating that the board
had investigated and considered the applicant’s claim and it
had decided to repudiate
the claim because of non-compliance with s
32 (2) (
a
), read with s 36 (3) of the Act, in that the claim
had not been lodged within three months of the applicant becoming
aware of the
contingency. It subsequently also relied on this defence
in its plea filed in the action proceedings.
[25] In
the light of the stance adopted by the respondent, the applicant has
brought these review
proceedings. The parties have agreed that the
action proceedings will be stayed pending the finalisation of the
review application.
The applicable statutory provisions
[26] In
terms of s 36 (2) of the Act, “subject to the provisions of
subsection (3), no person
shall have a claim against the Fund in
respect of a contingency referred to in section 35 unless –
(a)
the claimant lodges his
claim with the Board in terms of subsection (1) within three months
after he became aware of the contingency;
or
(b)
the claimant
furnishes the Board, within six months after a written demand was
sent to him by the Board, with such proof in
verification of his
claim as the board may reasonably require.’
[27] And in terms of s 36
(3), the respondent, if it is satisfied that, having regard to the
circumstances of a claim
or the proof required by it was lodged or
furnished as soon as possible, ‘may at its discretion extend
the period mentioned
in (
a
) or (
b
) of subsection (2) as
the case may be’.
[28] The Act
also provides for the establishment of the Fund, which is funded out
of interest paid to the
sheriff’s trust accounts in terms of s
22 (4) of the Act. One of the main purposes of the fund is the
settlement of claims
admitted against the Fund or judgments,
including costs obtained against the Fund.
[29] In terms
of s 35 (1) of the Act, monies in the Fund shall be utilised to
compensate any person who
‘suffers any loss or damage as a
result of the failure of the sheriff to pay out or deliver to such
person any money or property
over which he acquired control by virtue
of his office, or the proceeds of the sale of such goods’.
Discussion
[30] The
respondent’s reliance on the applicant’s contended
non-compliance with the time
period mentioned in s 36 (2) (
a
)
of the Act is premised on its contention that the applicant had been
aware of the contingency since between March 2015 to January
2016,
but only lodged the claim on 14 October 2016, consequently outside
the prescribed time limit.
[31] In my view this
argument is not sustainable. Section 35 provides that moneys in the
Fund shall be utilised
to compensate persons who suffer loss or
damages as a result of the failure of the sheriff to pay out or
deliver to such persons
any money or property over which he acquired
control by virtue of his office, or the proceeds of such goods. The
applicant could
only have submitted a claim for compensation once it
had known the extent of the loss, namely the sum that the
municipality had
paid into the sheriff’s trust account. It is
common cause that it only became aware of the amount of money paid to
the sheriff
on 17 August 2016, when it was provided with a copy of
the municipality’s cheque account statement. It was only then
that
the applicant had acquired all the information necessary to
submit a valid claim. In my view, the suggestion that it could have
submitted a claim for compensation in respect of an unknown sum is
preposterous. As mentioned, the claim was duly lodged on 14
October
2016, thus within three months from the date on which the applicant
had become aware of the contingency.
[32] In
any event, the applicant’s attorneys had been in continuous
communication with the respondent
from the date of the lodging of its
complaint on 28 January 2016, and had made it clear that once the
facts giving rise to the
applicant’s claim were ascertained, it
would be lodged with the Fund. I have tabulated above a plethora of
letters and emails
exchanged between the parties in which the
respondent has,
inter alia
, requested the applicant to furnish
further information or documentation in support of its claim. It is
common cause that those
were furnished to the respondent within the
period of six months prescribed by s 36 (2) (
b
) of the Act.
The respondent did not raise the issue of non-compliance with s 36
(2) (
a
) at the time, but elected to provide the applicant an
opportunity to submit further information or documentation in support
of
its claim. Once it had done so, it was not at liberty to reject
the claim for non-compliance with s 36 (2) (
a
).
[33] The
respondent has also relied on s 37 (2) of the Act, requiring the
applicant to fully excuss
against the sheriff before it could
finalise the claim. The dispute between the parties at that stage was
whether or not such excussion
involved sequestration proceedings,
with no mention of the contended failure by the applicant to lodge
the claim timeously. This
was indeed the dispute that brought about
the litigation between the parties. It is thus manifest that the
applicant’s contention
that the claim was lodged out of time
was belatedly contrived by it solely for the purpose of avoiding
liability to the applicant
in respect of its established claim.
[34] Mr
Groenewald
,
who appeared for the respondent, submitted that even if the decision
of 23 April 2021 were set aside, the decision taken by the
respondent
on 6 December 2019 remains extant for as long as it has not been set
aside. The applicant is not seeking to review that
decision and such
an application would on any event be doomed to fail due to the long
delay. The April 2021 decision was not a
substitution or revocation
of the December 2019 decision, but rather constituted additional
reasons for the repudiation of the
claim on 6 December 2019, or so
the argument went.
[35] In
my view this argument is also untenable. It is clear from the
correspondence between
the parties that the decision taken in
December 2019 was not final and that the claim had been “pended”
subject to
further compliance with the respondent’s
requirements. In the event, the email of 5 February 2021
unambiguously indicated
that the respondent considered the claim to
be extant, and requested further information in order to “better
assess”,
it. The respondent furthermore stated that it ‘await
same urgently and confirm that the matter will be considered for
possible
payment at the next committee meeting after February 2021’.
It was thus manifest that insofar as the respondent was concerned,
the decision taken during December 2919 did not amount to a final
repudiation of the claim.
[36] I
am accordingly satisfied that the applicant has made out a case for
the impugned decision to
be reviewed and set aside. There appears to
me to be sufficient evidence supporting the applicant’s
contention that the decision
was taken for an ulterior purpose, as
envisaged by
s 6
(2) of the
Promotion of Administrative Justice Act,
3 of 2000
, namely to frustrate and obstruct its claim and to gain an
unfair advantage in litigation. The respondent has also failed to
take
into account relevant considerations, namely,
inter alia
,
the date when the applicant had become aware that a specific sum of
money had been paid to the municipality.
[37] The
decision was also irrational, based on an erroneous understanding of
the law and the material
facts. The respondent has failed to have
regard to the fact that it had elected to act in terms of
s 36
(2)
(
b
) of the Act by requesting the applicant to submit further
documentation in support of its claim. Its election to do so clearly
took the matter out of the ambit of s 36 (2) (
a
) of the Act.
It was thus precluded from rejecting the applicant’s claim on
the basis of non-compliance with the latter provision.
The appropriate scale of costs
[38] The
applicant has, in my view, been justifiably displeased with the
manner in which the respondent
has dealt with its claim and conducted
the litigation. Mr
Smuts
SC, who together with Mr
Miller
appeared for the applicant, has correctly submitted that it
appears that the respondent’s functionaries were of the
unfortunate
and erroneous view that their statutory function is to
avoid payment of claims at all costs. They clearly appear to have
been annoyed
by the applicant’s persistent attempts to enforce
its rights and seem to have been oblivious of the purpose behind the
establishment
of the Fund. This much is evident from some of the
truculent statements in its answering affidavit. By way of example;
it refers
to attempts by the applicant to convince it that
sequestration is not a form of excussion, as ‘correspondence
ad
nauseam’
, and terms the applicant’s reliance on the
fact that it did not have knowledge of the exact amount paid to the
sheriff until
August 2016, an ‘excuse’ and ‘afterthought’
in order to bring its claim within the parameters of the act.
[39]
Sheriffs are appointed by the Minister of Justice in terms of section
2 of the Act and are responsible
for the execution of all sentences,
judgments, writs, summonses and processes of both the lower and
higher courts. They therefore
play an important and indispensable
role in the administration of justice. Without them court orders
would be meaningless. It is
equally important that litigants who
entrust the execution of successful litigation to sheriffs must do so
with the comforting
knowledge that they will be fully indemnified for
losses or damages suffered as a result of wrongful conduct by the
responsible
sheriff. It is in recognition of this vital role and
responsibility assumed by sheriffs that the Act,
inter alia
,
provides for: the establishment of a South African Board of Sheriffs
(ss 7 – 21); sheriffs to operate trust accounts (ss
22 - 25);
the establishment and control of the Fund (ss 26 - 29); and the
issuing of fidelity fund certificates to compliant sheriffs
(s 32).
As mentioned, one of the main purposes of the Fund is to compensate
persons who suffer loss or damages as a result of the
wrongful
conduct of a sheriff.
[40] The
overly technical approach adopted by the respondent when processing
the applicant’s
claim and the belligerent manner in which it
conducted the litigation is all the more surprising because it is
hard to conceive
of a more deserving claim than that of the
applicant. It is common cause that the money claimed by the applicant
was paid to the
sheriff by the municipality and that he has failed to
account to the applicant in respect thereof. The respondent has
independently
verified all those facts and successfully instituted
disciplinary proceedings against the sheriff as a result. One would
thus have
expected the respondent, even if the claim had been lodged
out of time, to exercise its discretion in terms of s 36 (3) in
favour
of the applicant. Our courts have repeatedly said that organs
of state have a duty to litigate honourably and to make decisions
that are reasonable, rational and fair. In
Mlatsheni v Road
Accident Fund
2009 (2) SA 401
(E), at para 17, Plasket J (as he
then was) said the following regarding the statutory obligations of
the Road Accident Fund:
“
It
is expected of organs of state that they behave honourably –
that they treat the members of the public with whom they deal
with
dignity, honestly, openly and fairly. This is particularly so in the
case of the defendant: it is mandated to compensate with
public funds
those who have suffered violations of their fundamental rights to
dignity, freedom and security of the person, and
bodily integrity as
a result of road accidents. The very mission of the defendant is to
rectify those violations, to the extent
that monetary compensation
and compensation in kind is able to. That places the defendant in a
position of great responsibility:
its control of the purse-strings
places it in a position of immense power in relation to the victims
of road accidents, many of
whom, it is well-known, are poor and
‘lacking in protective and assertive armour.”
[41]
Even though the respondent bears a statutory responsibility properly
to verify claims and ensure
that monies are only paid out to
deserving claimants, in my view, it also has an obligation to assist
claimants by providing guidance
in respect of the procedures for
lodgement and the supporting documents that it may require for
consideration of claims. It is
also required to act fairly and
reasonably when assessing claims and not to rely on inconsequential
technicalities to avoid payment
of deserving and duly established
claims. This much is also evident from the fact that even though s 36
(2) prescribes time periods
within which claims have to be lodged, in
terms s 36 (3), the respondent is allowed wide discretion to condone
non-compliance with
that section in deserving cases. It is manifest
that the respondent was oblivious of this obligation. This much is
evident from
its view that ‘it cannot be expected from the
respondent to educate the applicant’s attorneys in the lodging
of a claim
with the fidelity fund when the provisions of the Act are
clear’.
[42]
While the respondent has correctly insisted upon excussion against
the sheriff, its conduct,
after it had been demonstrated by the
applicant that sequestration was not a form of excussion or
execution, was not
bona fide
. Its reliance on s 36 (2) (
a
)
of the Act after civil action had been instituted, was therefore
clearly contrived and an impermissible strategy to avoid its
statutory obligations to compensate the applicant in respect of a
loss which had been conclusively established. In my view this
unacceptable conduct warrants a punitive costs order.
Order
[43] In
the result the following order issues:
1)
The respondent’s
decision to repudiate the applicant’s claim on the basis of
non-compliance with section 36 (2) (
a
),
read with section 36 (3) of the Sheriffs Act, 90 of 1986, as
communicated to the applicant by letter dated 23 April 2021, is
reviewed and set aside.
2)
The respondent is ordered
to pay the costs of this application on the scale as between attorney
and client, with such costs to include
the costs of two counsel,
where so employed.
JE
SMITH
JUDGE
OF THE HIGH COURT
Appearances:
Counsel
for the Applicant
:
Adv. IJ Smuts SC
with Adv. TS Miller
:
Whitesides Attorneys
Street
MAKHANDA
(Ref.: Mr Barrow)
Counsel
for the Respondent
:
Adv. JH
Groenewald
:
Netteltons Attorneys
High Street
MAKHANDA
(Ref.: Ms Pienaar)