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[2019] ZAFSHC 213
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Campbell NO and Another v Fourie and Another (860/2019) [2019] ZAFSHC 213 (7 November 2019)
IN
THE HIGH COURT OF SOUTH AFRICA,
FREE STATE DIVISION, BLOEMFONTEIN
Reportable:
NO
Of
Interest to other Judges: NO
Circulate
to Magistrates: NO
Case No:
860/2019
In the
matter between:
MALCOM
NEIL CAMPBELL
NO
1
st
Plaintiff
VRYSTAAT
MUNISIPALE PENSIOENFONDS
2
nd
Plaintiff
and
FRITZ FOURIE
1
st
Defendant
JADE
STEENKAMP
2
nd
Defendant
JUDGMENT
CORAM:
NAIDOO J
HEARD
ON:
7 NOVEMBER
2019
DELIVERED
ON:
7 NOVEMBER
2019
INTRODUCTION
[1] The first defendant (applicant in
this matter), comes before me in terms of Uniform Rule 41(1)(c),
after
the plaintiffs withdrew the action instituted against him and
the second defendant, without tendering his costs. He seeks costs
on
the party and party scale. The plaintiffs opposed the application.
Adv Con Joubert SC represented the plaintiffs and Adv GS
Janse Van
Rensburg represented the first defendant.
BACKGROUND
[2] The 1
st
plaintiff
is the duly appointed curator of the 2
nd
plaintiff, while
the 1st defendant was, at all times material to this action, a member
of the Board of Trustees, as well as the
Principal Officer of the 2
nd
plaintiff. He was also a member of the Executive Committee of the 2
nd
plaintiff. The 2
nd
defendant was at the material times,
the son-in-law of the 1
st
defendant. The 1
st
defendant had extensive powers in the aforementioned capacities,
which placed him in a positon of trust vis-á-vis the affairs
of the 2
nd
plaintiff. These powers and positions also
attracted and imposed upon the 1
st
defendant, numerous
statutory duties and obligations in respect of the 2
nd
plaintiff. After his appointment as curator, the 1
st
plaintiff instituted extensive investigations into the financial
affairs of the 2
nd
plaintiff.
[3] After what the 1
st
plaintiff describes as a “thorough investigation”
involving a large number of documents, covering a period of
approximately
15 years, he and his forensic audit team and his
attorneys uncovered certain irregularities and irregular payments,
which prompted
the institution of several legal actions against the
1
st
defendant and others, the current matter being one
such action. These were all actions for the recovery of monies which
constituted
irregular expenditure. The facts in this matter are,
briefly, that the 1
st
defendant was found to have awarded
a contract for the supply of water, during the water crisis in
Kroonstad during 2016, to the
premises of the 2
nd
plaintiff, without disclosing to the Board of Trustees or the
Executive Committee of the 2
nd
plaintiff that the second
defendant was his son-in-law.
[4] In addition invoices
rendered by the 2
nd
defendant did not reflect the
quantities of water supplied, which made monitoring of expenditure
difficult. It is alleged that
even after the water supply to
Kroonstad was restored in 2017, the 1
st
plaintiff
instructed that the 2
nd
plaintiff was to
continue purchasing water from the 2
nd
defendant, which
turned out to be more expensive that purchasing water from the
municipality. This ultimately led to the institution
of this action
in which the plaintiffs claimed from the defendants, jointly and
severally, the one paying the other to be absolved,
the payment of
the amount of R483 991.33 (Four Hundred and Eighty Three
Thousand Nine Hundred and Ninety One Rand and Thirty
Three Cents),
together with interest thereon, and costs of suit. The claim against
the 1
st
defendant was based on the damages arising from
the breach of his legal duty and various statutory duties of care,
diligence and
good faith in respect of the 2
nd
plaintiff.
The claim against the 2
nd
defendant was based on unjust
enrichment.
[5] Both defendants filed
notices to defend the action, the 1
st
defendant having
done so on 14 March 2019 and the 2
nd
defendant on 18 March
2019. Shortly thereafter and before any further pleadings fell due,
the second defendant made certain representations
to the plaintiffs,
which resulted in a settlement agreement being subsequently entered
into between the plaintiffs and second defendant.
The relevant term
of the settlement agreement in this regard states that:
“
The
Second Defendant shall pay to the plaintiffs the total capital of
R420 000.00 (
FOUR HUNDRED AND TWENTY
THOUSAND RAND
) in full and final settlement
of all claims arising under the above case number”
It
is common cause that the 1
st
defendant was not a party to the settlement agreement, and although
the 1
st
plaintiff
alleges that he assumed there was communication in this regard
between the 1
st
and 2
nd
defendants, the 1
st
defendant denies this and asserts that he was never informed of the
settlement, nor did the plaintiffs discuss the payment of costs
with
him.
THE
LAW
[6] As correctly pointed
out by both counsel in this matter, it is well established in our law
that
the general rule regarding costs is that the unsuccessful party
pays the costs of the successful party on the party and party scale.
The determination of an appropriate costs order is in the discretion
of the court, which discretion is usually informed by a number
of
factors in order that such discretion be exercised judicially.
Erasmus in Superior Court Practice, D5-6,
states it succinctly as follows: “
In
leaving the court a discretion, the law contemplates that it should
take into consideration the circumstances of each case, carefully
weighing the issues in the case, the conduct of the parties and any
other circumstance which may have a bearing on the issue of
costs and
then make such order as to costs as would be fair and just between
the parties
.”
This is particularly so if the court intends on
departing from the general rule.
[7] The provisions of Rule
41(1)(c) are not in dispute nor the 1
st
defendants
entitlement to seek an order for costs in terms thereof, given that
the action was withdrawn against him. The plaintiffs
aver that this
is a case where the court should depart from the general rule. In
this regard, Mr Joubert referred to an extract
from
Erasmus
which
appears at
D1-551:
“
The
general principle is that the party withdrawing is liable, as an
unsuccessful litigant, to pay the costs of the proceedings. The
court, however, retains a discretion to deprive the successful party
of his costs. In the exercise of its discretion the court
should
have due regard to the question whether, objectively viewed, the
applicant acted reasonably in launching the main proceedings
but was
subsequently driven to withdraw it in order to save costs because of
facts emerging for the first time from, for instance,
the
respondent’s answering affidavit in the main proceedings or
because the relief was no longer necessary or obtainable
because of
developments taking place after to the launching of the main
proceedings.”
EVALUATION
[8] The plaintiffs’
argument is that the matter was settled, with the 2
nd
defendant paying a substantial amount of the claim, meaning that the
plaintiffs were substantially successful. On this basis, this
was not
a matter where the plaintiffs were obliged to withdraw the action due
to a realisation that their case did not have prospects
of success.
Where a matter is withdrawn for reasons that are unclear, it is
indeed so that the withdrawing party will be liable
for the costs of
the other parties. The 1
st
defendant’s argument in
essence is that the action against him was withdrawn, without a
tender for payment of his costs,
hence he is entitled to have brought
this application and to an order for payment of his costs. I pause to
remark that I find this
this rather strange behaviour on the part of
the plaintiffs, as one would expect the plaintiffs to have informed
the 1
st
defendant of the representations of the 2
nd
defendant. It was expected of the plaintiffs to at least have
canvassed the question of costs with the 1
st
defendant.
[9] In assessing the case put
forward by each party, the court is required to examine the
circumstances
of the matter. Here the 1
st
plaintiff is
under a statutory duty to protect the rights of the 2
nd
plaintiff, which is essentially a public body, dealing with public
funds. There appears to be no serious dispute that he conducted
an
extensive investigation into the financial affairs of the 2
nd
plaintiff, which uncovered the irregular expenditure of large sums of
money. This in turn resulted in 5 actions against the 1
st
defendant and others. I accept that the 1
st
plaintiff‘s
conduct in instituting this action was not unreasonable, frivolous or
vexatious. He was acting in terms of his
statutory duty to recover
the money of the 2
nd
plaintiff, which was irregularly
spent. The prompt consideration of the 2
nd
defendant’s
representations, culminating in his agreement to settle the matter on
behalf of the 2
nd
plaintiff is, in my view, indicative of
his consciousness of his duty to ensure that legal costs were not
unnecessarily incurred,
to the detriment of the 2
nd
plaintiff.
[10] It is common cause that the settlement
agreement makes no provision for the payment of costs, and Mr
Joubert’s
explanation that the parties intended for each to pay
his own costs is not unreasonable in the circumstances. It is true
that in
terms of the Rules of Court, the 1
st
defendant is entitled to payment of his costs upon withdrawal of the
action against him. However, in exercising its discretion
regarding
an award of costs, the court has to take into consideration a number
of factors. The summons contains serious allegations
against the 1
st
defendant of breaches of his statutory duties in respect of the
various positions of trust that he held in the 2
nd
plaintiff, of irregularly awarding contracts to his son-in-law,
without the requisite disclosure and making a large number of
irregular payments (from the funds of the 2
nd
plaintiff) in this regard. The 2
nd
defendant is alleged in the summons to have been unjustly enriched,
at the expense of the 2
nd
plaintiff, as a result of the actions of the 1
st
defendant
[11] The second defendant’s
representations were clearly aimed at settling the matter, and his
agreement to pay
approximately 87% of the amount claimed by the
plaintiffs is, in my view, an acknowledgement that he was indeed
unjustly enriched
at the expense of the 2
nd
plaintiff. As
I indicated, the conduct of the 1
st
defendant is the
reason that the 2
nd
defendant was unjustly enriched. With
regard to the issue of costs, such would have been minimal at the
time of withdrawal of the
action, and Mr Janse Van Rensburg conceded
as much, asserting that the costs of this application will in all
probability be far
in excess of the costs that the 1
st
defendant is claiming. The prayer in the summons was for an order
against both defendants jointly and severally, the one paying
the
other to be absolved. The first defendant was therefore absolved from
payment of the plaintiffs’ claim. The plaintiffs
were in the
position that it was not necessary to proceed against the 1
st
defendant any longer, and even if they did, they would in all
probability not have obtained judgment against him. Therefore, in
my
view, the withdrawal of the action against the first defendant was on
good grounds and not done in a manner that caused prejudice
to the
first defendant.
[12] It is so that there has not been judicial
certainty regarding the issue of whether exceptional circumstances,
or good
grounds should exist for a court to depart from the general
rule of granting costs to the party against whom an action is
withdrawn.
As I have indicated, the plaintiffs were substantially
successful in this matter, and would have been entitled to their
costs.
The agreement seems to have been that each party would pay its
own costs. When the 1
st
defendant learned of the
settlement agreement and its terms, it would surely have occurred to
him that he had escaped a large liability.
Even if he sought legal
advice, he should have been advised that costs at that stage were
minimal and it was unwise to pursue this
application. Instead, he
chose to pursue this application, escalating costs unnecessarily.
[13] There are cases where in exercising its
discretion, the court, after considering all the circumstances of the
matter,
must make an equitable costs order, even if that means
depriving a party of his costs, where he is entitled in terms of the
Rules
of Court to those costs. In my view, this is one such case.
Although the 1
st
defendant complains that he was not given
an opportunity to plead to the summons, it is eminently clear that
the settlement agreement
absolved him from paying the claim and costs
of the plaintiffs. It would have been common sense and prudent for
him, at that stage,
to have simply settled his minimal costs incurred
up to that time and walked away from the matter. I gained the
impression from
Mr Janse Van Rensburg’s reference to the
personality of the 1
st
respondent, that the relationship
between the 1
st
plaintiff and the 1
st
defendant
was less than cordial and harmonious. If this was the motivation for
the 1
st
defendant to have proceeded with application, then
that is unfortunate and indicative of someone who is not concerned
about the
escalation of costs which a public institution is expected
to pay. I find no claim that the 1
st
plaintiff should be
held personally responsible for costs.
[14] The plaintiffs submit that the 1
st
defendant’s pursuit of this application is unreasonable and
should attract a punitive order for costs on the attorney and
client
scale. The 1
st
defendant was entitled to proceed with this
application, inadvisable as it may have been. I cannot, however, find
that his pursuit
of this application is frivolous, vexatious or so
prejudicial to the plaintiffs that it warrants a punitive costs order
[15]
In the circumstances, I make the following order:
15.1
The application is dismissed
15.2
Each party is to pay its own costs
S. NAIDOO, J
On
behalf of Plaintiff:
Adv. Con Joubert SC
Instructed
by:
Werksmans
c/o Symington & De Kok
166 Nelson Mandela Drive
Bloemfontein
(Ref: Jess Donnelly/FMF0027)
On
behalf of the 1
st
Defendant:
Adv. GS Janse Van Rensburgl
Instructed
by:
EG Coppers Majiedt
77 Kellner Street
Bloemfontein