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[2021] ZASCA 96
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Ethekwini Municipality v Crimson Clover Trading 17 (Pty) Ltd t/a Island Hotel (280/2020) [2021] ZASCA 96 (1 July 2021)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Not
Reportable
Case
no: 280/2020
In
the matter between:
ETHEKWINI
MUNICIPALITY
APPELLANT
and
CRIMSON
CLOVER TRADING 17 (PTY) LTD
t/a
ISLAND HOTEL
RESPONDENT
Neutral
citation:
Ethekwini
Municipality v Crimson Clover Trading 17 (Pty) Ltd t/a Island Hotel
(Case
no 280/2020)
[2021] ZASCA 96
(1 July 2021)
Coram:
DAMBUZA, MAKGOKA and
MBATHA JJA, GOOSEN and UNTERHALTER AJJA
Heard
:
7 May 2021
Delivered
:
This judgment was handed down electronically by circulation to
the
parties’ legal representatives by email, publication on the
Supreme Court of Appeal website and release to SAFLII. The
date and
time for hand-down is deemed to be 09h45 on 1 July 2021
Summary:
Civil
procedure – appeal against an order granting condonation for
failure to serve notice in terms of
s 3(2)
of the
Institution of
Legal Proceedings Against Certain Organs of State Act 40 of 2002
–
failure to show good cause for delay – order set aside
ORDER
On
appeal from:
KwaZulu-Natal
Division of the High Court, Durban (D Pillay J, sitting as court of
first instance):
1
The appeal is upheld with costs including costs of two counsel.
2
The order of the high court is set aside and replaced with the
following:
‘
The
application for condonation is dismissed with costs, including costs
of two counsel, where so employed.’
JUDGMENT
Mbatha
JA (Dambuza and Makgoka JJA and Goosen and Unterhalter AJJA
concurring)
[1]
The pertinent issue in this appeal is whether condonation ought to
have been granted to the respondent,
Crimson Clover Trading 17 (Pty)
Ltd t/a Island Hotel, for its failure to serve on the appellant,
Ethekwini Municipality, a notice
in terms of s 3(2) of the
Institution of Legal Proceedings Against Certain Organs of State Act
40 of 2002 (the Act). The notice
serves to notify the appellant,
within six months of the debt becoming due, of the facts giving rise
to the debt and such further
particulars of the debt as are in the
respondent’s knowledge.
[2]
On 8 May 2016, the Island Hotel, owned by the respondent and situated
on a spur of land bordered by
the Isipingo Estuary and the Isipingo
Riverfront, was flooded and extensively damaged. Santam Limited
(Santam), the insurer of
the respondent, instructed loss adjustors to
determine the cause of the incident. On 24 May 2016, the loss
adjustors advised Santam
that there was a possible recovery action,
but they were not certain against whom the action lay. During
September 2016, the respondent
instructed its attorneys to pursue a
claim for damages, who in turn, instructed consulting engineers to
investigate the cause of
the flooding. By 4 October 2016, the
respondent had formed a prima facie view that the flooding was caused
by the height of the
sand berm at the mouth of the Isipingo River,
which prevented the storm water from entering the sea. As will appear
below, the
respondent formed the view that a claim was to be
instituted against the appellant.
[3]
On 14 December 2016, the respondent submitted to the appellant a
request in terms of the Promotion of
Access to Information Act 2 of
2000 (the PAIA), seeking documentation relating to the management
and/or maintenance of the Isipingo
River and the Isipingo River Mouth
and estuary. The appellant furnished the requested information by 24
April 2017.
[4]
On 19 July 2017, the respondent served on the appellant a notice in
terms of s 3(2). By then it had
ascertained that the cause of the
flooding was attributable to the Isipingo River mouth being blocked
by the said sand bar. The
respondent held a view that the appellant
was responsible for excavation of the sand bar. The appellant advised
the respondent
that estuarine management, including the breaching of
berms or sand bars in estuaries for the protection of the riparian
property
owners against flooding, were functions falling exclusively
within the purview of the provincial government in terms of part A of
Schedule 4 of the Constitution. In support of this stance, the
appellant furnished the respondent with a copy of the judgment of
this Court in
Abbott v Overstrand Municipality and Others
[2016] ZASCA 68.
[5]
On 12 September 2018, the respondent launched its application for
condonation for failure to serve the
appellant with the s 3(2)
notice within the prescribed period of six months. The appellant
opposed the application on the
basis that the respondent had failed
to give an explanation for the delay, and to show good cause. The
appellant also complained
that the respondent’s cause of action
had changed over time. In support of that complaint, the appellant
pointed out that
in the s 3(2) notice the respondent had relied on
the failure by the appellant to excavate the sand bar at the Isipingo
Estuary
mouth, whereas in the condonation application, the respondent
relied on the failure by the appellant to ensure that the storm water
management system was functioning as it was designed to.
[6]
The application served before D Pillay J. The learned judge noted
that there was a considerable and
unexplained delay by the
respondent. Despite this, the court granted the respondent
condonation for the late service of its s 3(2)
notice. It found that
the appellant, as a public authority, had to ensure that there was a
functioning storm water drainage system
and that the judgment in
Macsteel
Service Centre SA (Pty) Ltd v eThekwini Municipality
,
[1]
which was relied upon by the respondent, made it clear that there was
a storm water drainage problem in Isipingo. The high court
also found
that an order in favour of the respondent was in the public interest
as the appellant had to fix the storm water problem.
The high court
found that the respondent had shown good cause and that prima facie,
there were good prospects of success on the
merits. It accepted that
there would be prejudice to the appellant due to non-availability of
witnesses, but this, the court reasoned,
would be ameliorated by the
availability of records. Aggrieved by this outcome, the appellant
appeals, with the leave of the high
court, against the judgment, on
the basis that the respondent failed to satisfy the statutory
requirements for the court to exercise
its discretion to grant
condonation in terms of s 3(2).
[7]
Condonation for the late service of the notice in terms of s 3(2) is
governed by s 3(4), which provides:
(3)
For
purposes of subsection (2)
(a)
—
(a)
a
debt
may
not
be
regarded
as
being
due
until
the
creditor
has
knowledge
of
the
identity
of
the
organ of state and of the facts giving rise to the debt, but a
creditor must be regarded as having acquired such knowledge as
soon
as he or she or it could have acquired it by exercising reasonable
care, unless the organ of state wilfully prevented him
or her or it
from acquiring such knowledge.
(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.
(c)
If an
application is granted in terms of paragraph
(b),
the court may grant leave to institute the legal proceedings
in
question,
on
such
conditions
regarding
notice
to
the
organ
of
state
as
the
court
may
deem
appropriate.
’
[8]
Section 3(4)
(b)
sets out the factors of which the court must be satisfied to decide
whether to grant condonation for the failure to serve a notice
in
accordance with the requirements set out in s 3(2). Numerous
judgments have dealt with the interpretation of these provisions,
and
found that these factors need to be read conjunctively.
[2]
[9]
In line with s 3(2)
(a)
and
the principles propounded in the various judgments, the time limit
for filing the notice in terms of s 3(2) against an organ
of state is
six months. Therefore, if the creditor is out of time, condonation
must be sought within the prescripts of s 3(4).
In
Madinda v
Minister of Safety and Security
,
[3]
this Court affirmed that:
‘
The
phrase “if [the court] is satisfied” in section 3(4)
(b)
has
long been recognised as setting a standard which is not proof on a
balance of probability. Rather it is the overall impression
made on a
court which brings a fair mind to the facts set up by the parties.’
[10]
Furthermore, the factors set out in s 3(4), must be considered in
light of the well-settled principles on condonation.
In
Mulaudzi
v Old Mutual Life Assurance Company South Africa Ltd
[4]
this Court restated the factors which need to be taken into account
when considering an application for condonation as follows:
‘
A
full, detailed and accurate account of the causes of the delay and
their effects must be furnished so as to enable the Court to
understand clearly the reasons and to assess the
responsibility.
Factors
which usually weigh with this court in considering an application for
condonation include the degree of non-compliance,
the explanation
therefor, the importance of the case, a respondent’s interest
in the finality of the judgment of the court
below, the convenience
of this court and the avoidance of unnecessary delay in the
administration of justice.’
[11]
It is not enough for an applicant to merely allege that there is good
cause for the granting of the condonation,
the applicant must show
that there is good cause.
[5]
To
decide whether an applicant has given a reasonable explanation for
its failure to timeously serve the notice in terms of s 3(2),
it is
necessary to consider when the applicant had all the necessary
information in terms of s 3(4) to enable it to formulate the
notice.
[12]
In this case the incident occurred on 8 May 2016. The notice was only
served on 19 July 2017. On the facts, it
is clear that as of 4
October 2016, the respondent had formed a view as to the cause of the
flooding, as instructions were given
to the engineers to investigate
further and identify the debtor. On 14 December 2016, the
respondent launched a PAIA application
against appellant, an
indication that the appellant had likely been able to identify the
debtor. By 24 April 2017, in terms of
the PAIA application, the
appellant had provided the respondent with all the documents relating
to the management and maintenance
of the Isipingo River mouth and
estuary. The respondent relied on the four months taken to furnish
the requested documents as the
main cause of delay, however, it was
already in possession of the information relating to the cause of
action and the identified
debtor before lodging the PAIA application.
Once the respondent had this information, the period within which the
notice had to
be served began to run. The respondent failed to
appreciate that legal consequences flowed from these known facts,
namely that
the period of prescription runs.
[13]
The respondent erroneously asserted that it required full knowledge
of all the facts giving rise to the cause of
action before serving
the legal notice. It did not proffer any explanation as to why,
whilst awaiting the response from the appellant,
it could not, as a
cautionary measure, serve the notice on the respondent and other
potentially responsible State organs. Though
all the documents
requested were received by 24 April 2017, the respondent waited yet
further for an engineer’s final report,
which it received on 30
June 2017. All these documents were unnecessary for serving the
notice on the appellant, because the facts
giving rise to the debt
and such particulars of the debtor were already within the
respondent’s knowledge.
[14]
As stated already, the notice was only served on the appellant on 19
July 2017. On 27 October 2017, almost three
months after the service
of the notice, the respondent sent out letters to various State
organs, including the appellant, trying
to identify the debtor. The
appellant’s response, dated 6 November 2017, suggested that the
respondent’s identified
cause of action concerned the
competency of the provincial government, and not that of the
respondent. The undisputed facts reveal
that the respondent did
nothing about that information.
[15]
The respondent did nothing until 16 February 2018, when it sought a
response to the request for condonation embodied
in the notice served
on 19 July 2017. This was an unwarranted request as the
appellant had denied any liability. The
respondent persisted with
this request until 10 April 2018, when the appellant advised that it
would not grant condonation. It
took the respondent another five
months to bring an application for condonation. No reasons were given
for this undue delay. When
one takes into account the period from the
date of serving the legal notice, 19 July 2017, it took the
respondent over a year to
bring the application for condonation. In
Madinda
[6]
this Court emphasised that good cause is not a simple matter of cause
and effect, but involves a court deciding whether the applicant
has
produced acceptable reasons for justifying in whole or at least
substantially, any culpability on his or her part which attaches
to
the delay in serving the notice timeously. On these facts, there is
no acceptable explanation for the inordinate delay. In fact,
no
reasons had been proffered for the delays by the respondent.
[16]
Since the inception of the proceedings, the respondent had failed to
take steps to pursue its claim. The
laissez-faire
attitude of
the respondent carries consequences. The sparsely drawn and
self-accommodative founding affidavit leaves a lot to be
desired. The
respondent tried to shift the blame to the appellant, whilst failing
to explain the long periods of inactivity on
its part. The high court
erred in finding that the respondent showed good cause for the
failure to comply with the requirements
of s 3(2).
[17]
A further feature of this application is that the respondent’s
legal notice referred to a different cause
of action than that relied
upon in the application for condonation. No explanation was proffered
for this change. This meant that
the appellant did not know the case
to which it had to respond. Regarding the first cause of action, it
was pointed out by the
appellant that it was excluded as a possible
debtor. Instead of engaging with the appellant the respondent kept
quiet. It is trite
that a court must be placed in a position to make
an assessment on the merits in order to balance that factor with the
cause of
delay as explained by the appellant. The respondent
in
casu
also failed to explain the discrepancy in the two causes of
action.
[18]
In the circumstances, the high court misdirected itself when it
granted the condonation on the basis of the legal
principles advanced
by it, which fell outside the pleadings that were before the court.
The learned judge expressed the view that
there was a responsibility
on public authorities, whoever they may be, to ensure that there was
a proper storm water drainage system.
In addition, I am unable to
agree with the high court’s reliance on the public interest,
which was not before it, when there
were other more compelling
factors, like the unexplained delay, which militated against the
exercise of the high court’s
discretion in favour of granting
the condonation. The high court expressed itself as follows:
‘
You
are not here only on your behalf. I want to make that absolutely
clear. The reason you are being granted this condonation is
because
you must put up the case in the public interest. I cannot emphasise
enough that Ethekwini [Municipality] needs to defend
it. If it has a
real problem with storm water, then it must fix it. Do not defend the
indefensible because we will continue to
have more and more storm
water claims. If there are parties who are co-responsible for
anything, then join them because that is
what dialogical
constitutionalism is all about. Read Froneman J’s article on
dialogical constitutionalism please.’
This
was stated against the backdrop of a respondent that had failed to
address the court on the prospects of success and whose
case had
nothing to do with the public interest. Before the court was a
private company pursuing a subrogated claim.
[19]
The concept of ‘dialogical constitutionalism’, on which
the high court relied for its public interest
approach, has only ever
been referred to in four cases – all authored by the same judge
as in this case.
[7]
It is not
clear what the concept entails. It could well be that the learned
Judge relies on the constitutionally-entrenched principle
of
cooperative governance dictated by s 41 of the Constitution.
[8]
Whatever its merits, it is clear that the principle can only be
applicable in the sphere of public law involving one or more of
the
three spheres of government. It certainly has no application to a
case such as the present, which concerns a purely private
delictual
claim against a municipality. A court may not ordinarily formulate
its own dispute resolution procedure outside of the
rules of court or
practice directives. In this case it was engaged by the parties on a
pleaded case to adjudicate a defined dispute.
[20]
The high court failed to deal with the prospects of success, save to
accept that the court in
Macsteel
[9]
made it clear that there was a storm water drainage problem in the
area of Isipingo, where the hotel is located. The high court
therefore found that ‘the prospects of success are prima facie
fair’. This was an untenable conclusion, given that
the cause
of action lacked supporting evidence. This stands in contradiction to
the
dicta
of
this Court in
Mulaudzi
,
[10]
where it held that:
‘
[T]he
court is bound to make an assessment of an applicant’s
prospects of success as one of the factors relevant to the exercise
of its discretion, unless the cumulative effect of the other relevant
factors in the case is such as to render the application
for
condonation obviously unworthy of consideration.’
[11]
[21]
Section 3(3) provides that the debt does not arise until the creditor
has knowledge of the identity of the organ
of state and the facts
giving rise to the debt. It reads further that ‘a creditor must
be regarded as having acquired such
knowledge as soon as he or she or
it could have acquired it by exercising reasonable care’. I
should highlight the provisions
of s 3(3)
(a)
that refer to the
deemed knowledge of the debtor and the cause of action. The section
determines when the creditor must lodge the
notice with the State
organ. It gives the creditor reasonable latitude to determine when
they have deemed knowledge of the cause
of action and the debtor.
Nothing precludes the creditor from explaining that during the
prescribed six-month period, they were
not yet in a position to
identify the facts with reasonable certainty or to identify the
debtor. I highlight this as it appears
in this matter that the
respondent was confused as to when they could be deemed to have
knowledge of the debtor and the cause of
action. Although this line
of argument could have been of assistance to the respondent, it was
not pleaded.
[22]
The unexplained delay in the delivery of the notice and the change in
the cause of action deprived the appellant
of the opportunity to
investigate the matter timeously, thereby prejudicing the appellant.
The administration of justice requires
that such matters be dealt
with expeditiously and efficiently.
[23]
On an assessment of all the facts, I am not satisfied that the
respondent should have been granted condonation
by the high court.
The high court having found that condonation should have been
granted, correctly determined that there should
be no order as to
costs. However, as we have found that it should not have granted the
order, costs should follow the result.
[24]
Accordingly, the following order is made:
1
The appeal is upheld with costs including costs of two counsel.
2
The order of the high court is set aside and replaced with the
following:
‘
The
application for condonation is dismissed with costs, including costs
of two counsel, where so employed.’
Y
T MBATHA
JUDGE
OF APPEAL
Appearances:
For
appellant:
A M Annandale SC (with her S Pudifin-Jones)
Instructed
by:
Livingston Leandy,
La Lucia Ridge
McIntyre van der
Post, Bloemfontein
For
respondent:
A J Troskie SC (with him J Thobela-Mkhulisi)
Instructed
by:
Norton Rose Fulbright SA Inc, La Lucia Ridge
Webbers,
Bloemfontein.
[1]
Macsteel Service Centre SA (Pty) Ltd v
eThekwini Municipality
Case no 10974/2012 (unreported).
[2]
See
Minister of Agriculture and Land Affairs v C J Rance (Pty)
Ltd
[2010] ZASCA 27
;
2010 (4) SA 109
(SCA);
[2010] 3 All SA 537
(SCA) para 11; and
Minister of Safety and Security v De Witt
[2008] ZASCA 103
;
2009 (1) SA 457
(SCA) para 13.
[3]
Madinda v Minister of Safety and Security
[2008] ZASCA
34
;
2008 (4) SA 312
(SCA);
[2008] 3 All SA 143
(SCA) para 8.
[4]
Mulaudzi v Old Mutual Life Assurance Company South Africa Ltd
[2017] ZASCA 88
;
[2017] 3 All SA 520
(SCA);
2017 (6) SA 90
(SCA)
para 26.
[5]
Silber v Ozen
Wholesalers (Pty) Ltd
1954 (2) SA (A)
345 at 352 G-H.
[6]
See fn 3 above, para 12.
[7]
Motata v Minister of Justice and Correctional
Services and Another
[2016] ZAGPPHC
1063;
[2017] 1 All SA 924
(GP);
Westwood
Insurance Brokers (Pty) Ltd v Ethekwini Municipality and Others
[2017] ZAKZDHC 29; and
Hanekom
v Zuma
[2019] ZAKZDHC 16.
[8]
Section
41 of the Constitution encourages the three spheres of government to
cooperate with one another in mutual trust and good
faith, and to
promote effective intergovernmental relations, ensure effective
communication and coordination, respect the constitutional
status,
institutions, powers and functions of government, and avoid taking
their disputes to court.
[9]
See fn 1 above.
[10]
See fn 5 above.
[11]
See fn 5 above.