Saffy N.O. and Others v Minister of Public Works and Others (1227/2018) [2019] ZANCHC 46 (30 August 2019)

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[2019] ZANCHC 46
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Saffy N.O. and Others v Minister of Public Works and Others (1227/2018) [2019] ZANCHC 46 (30 August 2019)

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IN
THE HIGH COURT OF SOUTH AFRICA
(NORTHERN
CAPE HIGH COURT, KIMBERLEY)
Case
No: 1227/2018
Heard
on: 08/03/2019
Delivered on:
30/08/2019
In
the matter between
LUKE
BERNARD SAFFY N.O.

1
st
Applicant
DONOVAN
THEODORE MAJIEDT N.O.

2
nd
Applicant
SHAVONNE
BADENHORST ST CLAIR COOPER N.O.
3
rd
Applicant
(In
her capacity as appointed liquidators of
VISTA
PARK DEVELOPMENT (PTY) LTD
And
THE
MINISTER OF PUBLIC WORKS

1
st
Respondent
THE
MEC: NORTHERN CAPE PROVINCIAL

2
nd
Respondent
GOVERNMENT:
DEPARTMENT OF PUBLIC WORKS
THE
HOD: NORTHERN CAPE PROVINCIAL

3
rd
Respondent
GOVERNMENT:
DEPARTMENT OF PUBLIC WORKS
JOH-ARCH
INVESTMENTS (PTY) LTD

4
th
Respondent
JUDGMENT
PAKATI
J
[1]
The applicants, Luke Bernard Saffy N.O., Donovan Theodore Majiedt
N.O. and Chavonne Badenhorst St Clair Cooper
N.O., the first to third
applicants respectively (the applicants), in their capacity as
appointed liquidators of Vista Park Development
(Pty) Ltd (Vista
Park), seek an order in the following terms:
‘
1.
The settlement agreement concluded between the Applicants and the
First to Third Respondents is enforced.
2.
The Second Respondent is ordered to pay to the Applicants the amount
of R25 million.
3.
The Second Respondent is ordered to pay interest on this amount
calculated at 10, 25% per year
a
tempora morae
as follows:
3.1
On the first tranche payment that was due on 31 October 2017 in the
amount of R15 million – from 1 November 2017 until
31 November
2017;
3.2
On the balance outstanding of the first tranche payment totalling R5
million, from 1 December 2017 until date of final payment;
3.3
On the second tranche payment that was due on 31 January 2018, from 1
February 2018 until date of final payment;
3.4
On the third tranche payment that was due on 30 April 2018, from 1
May 2018 until date of final payment.
4.
The Second Respondent is ordered to pay the costs of the application.
Alternatively and should any of the other Respondents oppose,
then
and in that case such Respondents be ordered to pay the costs of the
application together with the Second Respondent, payment
by one the
other to be absolved.
5.
Further and/or alternative relief.’
[2]
The Minister of Public Works cited herein as nominal respondent (the
Minister), the Member of the Executive
Council: Northern Cape
Provincial Government: Department of Public Works (the MEC) and the
Head of the same Department: Northern
Cape Provincial Government (the
HoD), are first to third respondents respectively. The Minister, MEC
and the HoD (the Department)
filed a notice of opposition on 16 July
2018.
[3]
Joh-Arch Investments (Joh-Arch Investments), a company duly
registered and incorporated in terms of the relevant
statute of the
Republic of South Africa, with its main place of business situated at
3326 Bhekuzulu Street, PO Mankuruane, Vergenoeg,
Kimberley, is cited
in this matter as the fourth respondent.
[4]
On 25 October 2018 the Department filed a third party notice joining
Joh-Arch in the proceedings in terms
of Rule 13 of the Uniform Rules
of Court
[1]
. The HoD alleges
that the relief sought against the applicants is also equally
applicable to the third party jointly and severally,
the one paying
the other to be absolved.
APPLICATION
FOR CONDONATION
[5]
The Department applies for condonation of the late filing of the
answering affidavit. The HoD explained that
service of the
application was not effected on him in his official capacity. It was
served on the State Attorney on 28 June 2018,
who in turn forwarded
it under cover of a letter dated 08 July 2018 to the Department’s
attorneys on 09 July 2018. The notice
of motion gave ten days’
notice to file the notice of opposition instead of fifteen days as
provided for by the Rules of
Court. Due to the defective manner of
service the Department was only aware of the application on 08 July
2018 and the notice of
opposition was expected to be served on 29
July 2018 but was filed on 16 July 2018. The answering affidavit had
to be filed by
06 August 2018, fifteen court days thereafter. On 16
July 2018 junior counsel from Bloemfontein was instructed.
Consultation with
him was scheduled to take place on 01 August 2018
in Kimberley. That week there was unrest in Kimberley which made it
impossible
for consultation to take place. I take judicial notice of
the said unrest during that period.
[6]
On 31 July 2018 when counsel tried to make arrangements for
consultation to be held on 02 August 2018 he was
informed that it
would be safer for him to drive to Kimberley on 07 August 2018, hence
the consultation was rescheduled for 07
August 2018. During this
meeting it was considered that senior counsel from the Johannesburg
Bar should be engaged due to the complexity
of the matter. Mr Maru
Maphalla, the Director General for Legal Services, made available all
documentation to counsel.
[7]
In the meantime Mr Katlego Baloyi, the respondents’ attorney of
record, searched for the court files
relating to the litigation
between the parties including the action. He found some documents
from the action file. He was advised
that the members of the Hawks
had attached some of the files and enquiries to them did not yield
any results. Another consultation
with counsel was arranged for 21
August 2018 but the HoD could not attend due to an urgent government
business. Counsel was able
to consult with the Department in the
presence of Mr Baloyi but it transpired that further consultation was
essential. The said
consultation took place on 27 August 2018 and was
attended by senior officials from the Department. Written legal
advice prepared
by counsel was delivered on 01 September 2018 to the
Department.
[8]
The said document reached the Department on 14 September 2018 because
the MEC and HoD were abroad for the
period between 02 and 12
September 2018. Summons was served on the Department on 03 September
2018 in order to attend an enquiry
in terms of sections 417 and 418
of the Companies Act, 61 of 1973, in Bloemfontein on 18 to 21
September 2018. The Department thought
it prudent to finalise the
said proceedings before completing the answering affidavit. The
enquiry was finalised on 19 September
2019. On 20 September 2018 a
detailed consultation was conducted with Mr FJ Borman, the Legal
Administration Officer, Roads and
Public Works, with the purpose of
preparing the answering affidavit.
[9]
Prior to preparing the said answering affidavit counsel had to first
prepare advice concerning the liquidation
and distribution account
which he provided on 11 October 2018 with the draft answering
affidavit and the accompanying pleadings.
After Mr Baloyi received
the draft and pleadings he forwarded same to Mr Maphalla to peruse
and advise the Department accordingly.
[10]  A week later
Mr Baloyi went on passionate leave. Upon his return he continued with
the preparation of the answering affidavit
and confirmatory
affidavits. From 15 to 19 October 2018 the HoD and the MEC had to
prepare for the Budget Lekgotla meeting in Upington.
[11]  On 22
October 2018 the HoD perused the draft answering affidavit and other
documents and effected amendments. Other deponents
also considered
same satisfying themselves with its correctness. On 23 October 2018
Mr Maphalla also attended to the draft answering
affidavit and
forwarded same to counsel for finalisation.
[12]  In my view,
the Department gave a full explanation for the delay as required by
VAN
WYK v UNITAS HOSPITAL
[2]
.
It is also in the interests of justice that I grant condonation in
this matter as the applicants and the third party would suffer
no
prejudice if the application is granted. The failure by the
respondents to timeously file their answering affidavit is hereby

condoned.
FACTUAL
BACKGROUND
[13]  It is common
cause that Vista Park and Joh-Arch, a Joint Venture, represented by
Mr Andrew George Scholtz, successfully
tendered and entered into a
procurement agreement covered by section 217 of the Constitution
[3]
for the construction of the psychiatric hospital in Kimberley with
the Department. The tender documents constituted the agreement

between the parties when the tender was awarded.
[14]  The Joint
Venture started with the construction and proceeded considerably
until the contract was cancelled by the then
acting HoD in writing on
07 December 2009. The applicants allege that the Department was not
entitled to cancel the tender unilaterally.
The validity of the
cancellation was a major dispute between the Department and the Joint
Venture. The erstwhile MEC brought an
application under Case Number
1522/2010 to have the procurement agreement declared validly
cancelled. An order dated 23 September
2011 confirmed the
cancellation of the procurement agreement with effect from 07
December 2009. The Department alleges that taxed
costs to the amount
of R443 113-03 were payable to the Department by the Joint Venture in
that case as it can also be gleaned from
the purported settlement
agreement.   On 10 June 2010 Vista Park was placed in
liquidation with Master’s Reference Number
B219/2010. On 03
March 2011 the applicants were appointed by the Master of the High
Court as liquidators of Vista Park. This was
confirmed by Mr
Frederick Senekal, the attorney of Matsepes Incorporated on behalf of
the applicants.
[15]  On 07
December 2012 the Joint Venture instituted action against the HoD
claiming damages based on the alleged unilateral
cancellation of the
construction agreement. They relied on the interpretation of Clauses
24 and 28 of the procurement agreement
which does not form part of
these papers.
[16]  The
Department filed a plea dated 02 July 2013 and raised special pleas
inter
alia,
(a) that the Head of Department had no
locus
standi
as defendant or respondent either nominal or otherwise and no order
could be made against him as he was not the executive authority
of
the Department and for that assertion relied on sections 1 and 2 of
the State Liability Act
[4]
; (b)
That prior notice in terms of the Institution of Legal Proceedings
Against Certain Organs of State Act
[5]
had not been given to the Department within six months.
[17]  On 30 April
2014, ten months later, the Joint Venture applied for condonation for
failure to give prior notice in terms
of the Institution of Legal
Proceedings against Certain Organs of State Act. The Minister and the
MEC were then cited as the first
and second respondents although both
had not been parties to the action and no application for joinder had
been made at any time.
The HoD was also cited as the third
respondent. The Department argues that any claim against the MEC or
the HoD as his substitute
would have prescribed on 03 March 2014. The
Joint Venture did not file their replying affidavit on time and no
application for
condonation was filed. The respondents set the matter
down for hearing on 26 August 2016. The Joint Venture filed an
application
for postponement and they ultimately filed their replying
affidavit but did not set the matter down for hearing of the
condonation
application.
[18]  The
applicants contend that the citation of the Minister and his joinder
has no impact in the outcome of this matter.
[19]  Sections 1
and 2 of the State Liability Act provide:
“
1
Claims
against the State cognizable in any competent court
Any
claim against the State which would, if that claim had arisen against
a person, be the ground of an action in any competent
court, shall be
cognizable by such court, whether the claim arises out of any
contract lawfully entered into on behalf of the State
or out of any
wrong committed by any servant of the State acting in his capacity
and within the scope of his authority as such
servant.
2
Proceedings
to be taken against executive authority of department concerned
(1)
In
any action or other proceedings instituted against a department, the
executive authority of the department concerned
must
be cited as nominal defendant or respondent.” My emphasis
[20]
The word ‘must’ is imperative in that in a case against
the State the executive authority of that particular
department must
be cited as the respondent and not the HoD. The Department contends
that the plaintiff could be able to cite the
right defendant if the
claim had not prescribed.
In casu
the summons was issued after
the Act had been amended after 30 August 2011. The executive
authority had to be cited as nominal
defendant. That means that the
HoD of Roads and Public Works was not the executive authority. It
confirms that in citing the HoD
there was non-compliance with section
2 of the State Liability Act, the argument goes.
[21]  The Supreme
Court of Appeal remarked thus in
DISTCOR EXPORT PARTNERS AND
ANOTHER v THE DIRECTOR GENERAL OF THE DEPARTMENT OF TRADE AND
INDUSTRY
:
“
5.
There is no statutory provision on how the State may initiate
proceedings. There is one, however, providing how the State may
be
brought before the courts. It appears in s[ection] 2 of the
State
Liability Act 20 of 1957
which provides in s[ubsection] (1) that
‘…the Minister of the department concerned may be cited
as nominal defendant
or respondent.’ The subsection does not
oblige a litigant to sue a minister. It was intended to facilitate
actions against
the State by making it possible to sue the political
head of a department instead of the State in its own name. It did not
introduce
an inviolable rule. A plaintiff may still choose to sue the
government of the Republic of South Africa and this has since 1957
often occurred.”
[6]
[22]  The
Department alleges that on 30 April 2014 Vista and Joh-Arch filed an
application citing not only the HoD but also
the Minister and the MEC
seeking condonation for the late filing of their notice in terms of
Act 40 of 2002. Mr Frederick Senekal
deposed to the founding
affidavit dated 30 April 2014 and stated the following in paragraphs
30.9 and 30.10:
“
30.9 I have been
advised that prescription will only start running against the
liquidators from the date of the first meeting of
creditors and the
final appointment of the liquidators, which occurred on the 3
rd
of March 2011.
30.10 I have therefore
been advised that the first applicant’s claim against the third
respondent [HoD] will only become prescribed
on the 3
rd
of
March 2014”
This shows that the MEC
was never joined in the main action, the argument goes.
[23]  The
Department alleges that Mr Scholtz persistently sought payment from
the Department on behalf of the Joint Venture
since 2017 before the
meeting in Port Nolloth was held. He repeatedly made calls to Mr
Nogwili, the HoD and deponent to the answering
affidavit, to implore
him to make payment. He also called the Premier of the Northern Cape
and allegedly sought to influence other
officials at senior level in
the Provincial Government to exert payment. He further called Mr
Borman, the Department’s in-house
legal adviser, on numerous
occasions. He further made contact with the MEC until the MEC
prohibited contact with him. He contacted
Mr Mjila, the respondents’
attorney of record, but Mr Mjila did not entertain him. He also
contacted Volksblad and Diamond
Field Advertiser Newspapers for
assistance in his crusade. The pressure he exerted was relentless,
the argument goes. Mr Nogwili
refers to him as “
a thorn in
the Northern Cape Provincial government’s flesh.”
[24]  The
Department alleges further that on various occasions Mr Nogwili
requested Mr Scholtz to prove that he had a right
to compensation
which he failed to do.
All he said was that whether or not the
construction agreement was validly cancelled once it had been
unilaterally cancelled the
Joint Venture was entitled to 10% of the
total building costs which in this case amounted to R36 million.
Mr Scholtz continued to pressurise the Provincial Government although
other contractors who replaced it proceeded with the construction

slowly but at enormous costs. My emphasis
[25]  During
September 2017 Mr Nogwili arranged for a meeting of the Department’s
executives and senior officials to
consider collectively the approach
to adopt in dealing with Mr Scholtz’s persistence to get
payment despite pending legal
proceedings. On 12 September 2017 Mr
Borman and other senior official of the Department held a meeting and
the topic for discussion
was the Joint Venture litigation claim
regarding the first contract dealing with construction of the
Kimberley Mental Health Facility
for the Department of health. He
prepared the minutes, Annexure “KSN1”, which record:
“
The
meeting was convened to discuss the summons and litigation of the
Vista Park matter. [The] HOD, Nogwili, explained the reason
for
calling the meeting and informed those present that he requires
approval and guidance in regard to the litigation matter which
has
been dragging on for four years now and is costing the Department in
legal costs and fees to the attorneys. The plaintiff in
the matter
had approached the department to push for a settlement of the
litigation as he too was struggling to cope with the high
costs of
legal fees.
Ms
Gill gave a brief overview of the matter and the details of who Mr
Andrew Scholtz was and his role in the constitution of the
Kimberley
Mental Health Facility from the period 2005 to 2009. The project had
been extended numerous times and the result was
that the contract sum
increased from approximately R250 million to approximately R360
million. He had been terminated due to non-performance
as per the
evaluations done by the professional staff.
Mr
Borman gave an overview of the litigation. He explained briefly that
the cause of action was based on damages that Mr Scholtz
is claiming
on behalf of his company. It was further indicated that the company
and indirectly Mr Scholtz had gone into liquidation
soon after the
termination of the contract. The plaintiff claimed that this was as a
result of the termination which the Department
has denied. The
plaintiff was seeking damages claim in the amount of approximately
R57 million. Of that claim approximately R36
million was for damages
as calculated at 10% of the contract sum. Approximately R4.7 million
was for work done but not paid for
and the rest of the claim was made
up of the R10 million retention money.
The
plaintiff was relying on clause 28 of the contract signed with the
Government at the time.
The
Head of Department indicated here that none of the current
participants around the table had been the decision makers at the

time of the inception of the contract.
The contract had been awarded by the then Provincial Tender Board.
The contract had been drafted by consultants not the Department

itself.
Mr
Borman indicated that [C]lause 28 stipulated that where the
Director-General terminated the contract unilaterally the contractor

would be entitled to either 10% of the contract sum, this being the
approximate R36 million or 10% of the work done or an amount
of the
damages proven to the Director-General. This clause, it was explained
to the members after Director-General Bekebeke asked
if the
Department was not correct in terminating; contradicts with clause 25
which allows the DG to terminate due to breach. Said
breach would be
non-performance on the part of the contractor. Even if we rely on
this [C]lause in court the possibility exists
that [C]lause 28 will
be deemed to have superseded [C]lause 25 and the Department would be
liable to pay the 10%. This would be
much better than the total R57
million but could possibly be that [that] amount, if one must take
into account that a judgment
draws interest and the interest on R36
million would be substantial. We are saved by the fact that [C]lause
28 only gives the 10%
and no other amounts can be claimed. If one
were to interpret as [neither] such that would mean that the
plaintiff does not get
the R4.7 million nor the R10 million as
claimed and would not be entitled to interest should the decision be
to accept the settlement
proposal on [C]lause 28.
Mr
Scholtz also owes the Department R437, 000-00 in legal costs for
litigation in 2011 that the Department was successful in and
has not
satisfied. If in agreement this amount would be deducted from the
settlement amount in order to settle this costs order.
Members agreed
this should be done.
The
Premier asked if we consider the settlement would it only be the R36
million. The answer was yes each party would pay their
own costs and
the litigation would be settled and the matter would be ended in
court.
[The]
Premier said we must look at the costs of legal fees and the lengthy
delays in finalising the court process. We should also
consider that
the plaintiff did not lose his company and funding and that this has
caused possible undue hardship on him hence
the desperation in
hounding the Departments. [The] Premier asked [the] MEC for Finance,
Mr Jack, [if] Treasury (provincial) would
be able to assist to pay
the money if we settle on the R36 million proposal? MEC Jack
stipulated that as per the first meeting
held between the plaintiff
and Mr Scholtz in previous months that yes Treasury would be able to
pay the R36 million but in staggered
amounts as we do not have the
full amount readily available. He indicated that [if] the plaintiff
agrees that the amounts be paid
in increments starting possibly with
R10 million. [The] members agreed that this could be proposed to the
plaintiff to consider.
Resolutions:
1.
The
proposal of R36 million be made to the plaintiff as full and final
settlement of the litigation with no interest and each party
to pay
its own legal costs;
2.
The
amount of the settlement to be paid in increments and not a lump sum
amount; [and]
3.
Mr Borman
to handle the negotiations with the assistance of the Chief State Law
Adviser Adv G Botha from the office of the Premier
to be present at
the negotiations as well.
Within the members in
agreement the meeting was ended.
Compiled by Fabian
Borman (LLB 2005) (Attorney 2008)
Legal Administration
Officer
Approved by
Mr Kholekile Nogwili
Head of Department”.
(My emphasis)
[26]  On 27
September 2017 the applicants and the Department signed the purported
settlement agreement (Annexure “AS5”)
in an attempt to
settle the dispute that existed between them. It reads:
“
1.
The Plaintiffs agree to accept payment in settlement of the 10% of
the Contract sum said amount being R36,811,539.34 in full
and final
settlement of the claim under [C]ase [N]umber 2072/2012.
2. The Plaintiffs agree
to that the payments will be made in tranches with the first payment
being made on the:
2.1 31 October 2017;
and subsequent payments to be made on:
2.2 31 January 2018;
2.3 30 April 2018;
2.4 31 July 2018.
3. The Plaintiffs and
Defendants agree that the first tranche payment will be in the amount
of R15,000,000.00 thereafter the second
payment will be in the amount
of R10,000,000.00 and third payment will be an amount of
R10,000,000.00 and the final payment will
be an amount of
R1,368,426.31.
4. The Plaintiffs agree
to pay the Defendants the amount of R443, 113.03 in payment of legal
costs under the Case Number 2106/09,
which amount will be set off
against the final tranche payment due on 31 July 2018.
5. The Plaintiffs and
Defendants agree that the terms of this settlement agreement will be
subject to non-disclosure to any third
parties and that the terms
thereof remain strictly confidential between the parties.
6. If the Defendants
fail to adhere to the terms of the settlement agreement and fail to
make any payment within thirty days of
the stipulated payment dates
under paragraph 2, the Plaintiffs
may make this settlement
agreement an order of Court.
7. This settlement
agreement is subject to approval by the liquidators of the
Plaintiffs.
Dated and signed at
Kimberley on this 27
th
day of September 2017.” My
emphasis
[27]  Mr Scholtz,
the deponent to the founding affidavit, represented the applicants
and Mr Kholekile Nogwili, the HoD and
accounting officer in terms of
section 36
of the
Public Finance Management Act, 1 of 1999
, as
amended (“PFMA”) since 01 October 2014, the Department.
[28]  The
Department made one payment in the amount of R10 million in terms of
the settlement agreement on 01 December 2017.
Thereafter no further
payments were made. On 08 March 2018 Mr Vertue advised the first
applicant (Saffy) of the settlement agreement
and forwarded a letter
dated 08 March 2018 to the Department (Annexure “AS6”).
Importantly paragraphs 4 to 7 of the
said letter record:
“
4.
The
settlement is subject to the approval of the Liquidators of Vista and
directors of Joh-Arch.
5. Joh-Arch
indicated that they are willing to accept the settlement in terms of
the above mentioned proposal.
6. If the above
mentioned proposal is accepted by the Liquidators of Vista the first
pro rata payment can be effected within 24
hours.
7.
We look forward to receive your favourable consideration in order for
us to finalize the matter.” My emphasis
From
this letter it is important to note that this was the first time that
the applicants were made aware of the settlement agreement.
[29]  Honey
Attorneys, on behalf of Saffy N.O. addressed a letter dated 26 March
2018 to Mr Vertue (“AS7”). Basically,
it was about the
details of the account into which the money was going to be deposited
and thereafter divided amongst the applicants
after the Department
had made payments in terms of the settlement agreement. Of importance
is paragraph 1.3.7 of the said letter
which reads:
“
In
the event that Joh-Arch Investments (Pty) Ltd is in agreement with
the above we will proceed to inform the State accordingly
that we
accept the settlement.”
Notably
at this stage, the Department had not been informed of the approval
of the applicants and the applicants had not been informed
of the R10
million that was deposited in Mr Scholtz’ trust account.
[30]  On 29 March
2018 Mr Vertue responded to the above letter as follows:
‘
1.
The abovementioned matter and your letter dated 26
th
instant refers:
2.
We confirm the contents of your letter to be in order.
3.
Joh-Arch also confirmed their consent to the settlement
via
Engelsman Magabane Attorneys on the 28
th
instant.
4.
Proof
of payment of the R10 000 000-00 held by us in trust is
attached hereto.
5.
We confirm that the settlement amount reached with SARS on behalf of
the joint venture will be paid out of the abovementioned
funds and
the pro rata amount of R2 750 000-00 due to Joh-Arch in terms of the
settlement will be paid into our trust account,
details as follows:
Gous
Vertue & Ass Inc Trust, Nedbank, 166234, 1662 038 917, Ref:
CV1365
6.
We confirm that an amount of R 1 000 000-00 reserved for
costs will be paid by us in trust.’ My emphasis
[31]  On 12 April
2018 Mr Vertue sent a letter to the Department reminding them of
their failure to make payments in terms
of the settlement agreement
and threatened them with a court application if they did not comply.
A response was received by the
applicants from Mr F Borman, advising
that he no longer worked for the Department and had directed the
letter to Adv Maru Maphalla
for his attention. Nothing was
forthcoming from the Department until 16 April 2018.
[32]  In response
to the applicants’ application the Department filed a
counter-application dated 23 October 2018 seeking
review and setting
aside of the decision taken at Port Nolloth on 12 September 2017 in
the following terms:
“
3.5.1
Reviewing and setting aside the decision arrived at on 12 September
2017 to settle the claims of the applicants and the fourth
respondent
as joint venture partners in the litigation instituted in this court
against the Head of Department under Case Number
2072/2012 (“the
action”);
3.5.2
Setting aside as unlawful and invalid the ensuing settlement
agreement, Annexure ‘AS5’ to the founding affidavit;
3.5.3
Claiming from the applicants and the fourth respondent jointly and
severally payment of the amount of R10 million paid to
them on 1
st
December 2017;
3.5.4
Claiming payment of the taxed costs due to the MEC Case No. 1522/2010
(Northern Cape High Court) in the amount of R443 113.03,
an
acknowledgement of the indebtedness which is recorded in the
settlement agreement;
3.5.5
Costs of suit to be paid jointly and severally by the applicants and
the fourth respondent, the one to pay the other to be
absolved.
3.5.6
Further and/or alternative relief.
”
[33]  The
Department alleges that Mr Borman’s submissions during the
meeting excluded and were not expected to include
an analysis of the
pleadings and the merits of the special pleas raised by the
respondents in the main action. The following aspects
were also not
considered when arriving at the abovementioned resolutions:
“
40.1
The action against the Head of Department was ill-conceived, a
nullity, or at least litigation which could never have resulted
in
any judgment in favour of the plaintiffs in the action with no
resultant liability accruing for the [S]tate;
40.2
The MEC, and only the MEC, ought to have been the defendant, which he
was not at any stage of the proceedings;
40.3
By 12
th
September 2017:
40.3.1
any possible claim against the MEC had as a fact become prescribed;
40.3.2
it was a matter of factual impossibility for the plaintiffs in the
action to have cured the fatal defect of having cited
the wrong
defendant;
40.4
Had the matter gone to trial (assuming for a moment the condonation
application was successful) the plaintiffs would have been
unable, as
a fact, to obtain judgment and no liability whatsoever for the State
would have arisen.
40.5 Fact was that
liability of the State was zero, and not R36 million or any other
amount.”
[34]  The
Department argues further that these factors came to light after the
meeting was held. Mr Nogwili contends that if
same were raised at the
meeting the settlement agreement would not have been concluded. The
MEC would never have been the debtor
obliged to make payment to the
Joint Venture. The payment of R10 million was
bona fide
made
in error, and at the latest from 03 March 2014, the MEC ought to have
been the defendant as the debtor but was not. He was
exonerated from
making any payment due to the fact that he was not cited timeously as
the functionary of the State from whom payment
could lawfully be
claimed, the argument continues. The Department finds it strange that
the R10 million was paid to Mr Vertue’s
account before
acceptance of the settlement agreement by the applicants was conveyed
to it.
[35]  The
Department submits further that it has no doubt that the original
award complied with the principles as provided
for in the
Constitution. It contends that the decision was arrived at without
taking into account all the facts as some were not
available at the
time. According to it the Department a settlement figure in the
amount of R36 million could not be referred to
as cost-effective in
the spirit of the Constitution pertaining to procurement.
It
denies that the Joint Venture concluded an agreement with it but did
so regarding the procurement agreement.
[36]  The
Department contends that the decision arrived at on 12 September 2017
to settle the applicants’ claims stands
to be reviewed and set
aside on the application of the doctrine of legality. It argues that
as the decision maker, it is entitled
to the relief sought in the
counter-application. That is so because the doctrine of legality
requires the State to act in accordance
with the legal principles and
rules that apply to it and its functionaries. The powers conferred on
a State functionary to make
decisions in the public interests should
be exercised properly and rationally, based on the true facts, the
argument goes. The
Department submits that it is within the power of
the MEC, as the decision-maker, to apply for review and setting aside
of a decision
based on non-compliance with the principle of legality.
[37]  The
Department denies that the settlement agreement is the agreement
entered into on 27 September 2017 because it only
contained two pages
at the time. The third page was added on 13 February 2018. Prior to
this date Mr Borman was unaware of the
existence of Mr Sibisi, the
member and director of Joh-Arch. On 13 February 2018 Mr Sibisi
approached Mr Borman in his office without
prior arrangement,
accompanied by Ms Van Wyk of Engelsman Magabane Attorneys in
Kimberley and informed him that he had just become
aware of the
settlement agreement entered into by Mr Scholtz on his behalf. Mr
Sibisi demanded to have sight of the settlement
agreement in order to
assert Joh-Arch’s right to benefit from it. Mr Borman allowed
him to sign the third page appended to
the settlement agreement.
[38]  It further
denies that Mr Scholtz represented the applicants or Joh-Arch but
that the settlement agreement preserved
rights for the applicants
subject to the applicants adopting same, which never happened. It is
disputed further that the applicants
conveyed their acceptance to the
Department. Taking into account that the offer might still be
available the Department contends
that it is withdrawn. As at the
date of launching these proceedings the applicants had not yet
conveyed their acceptance of the
agreement to the Department with the
result that the application was prematurely brought to court. The
Department contends further
that the R10 million was not due and
payable at the time due to lack of
consensus
between the
parties, hence no further payments were made.
[39]  The
Department submits that although Mr Scholtz signed the settlement
agreement on behalf of the applicants, Joh-Arch
was unaware of the
representation on its behalf when the agreement was signed on 27
September 2017.
[40]  On 31
October 2018 the applicants filed a notice of intention to oppose the
counter-application and on 09 August 2018,
the original replying
affidavit in response to both the answering affidavit and the
counter-application. The applicants and the
third party deny that Mr
Vertue was not authorised to receive payment in his trust account on
their behalf. They deny further that
the applicants had not accepted
the benefits of the settlement agreement.
[41]  The third
party filed an opposing affidavit to the third party notice and
counter-application. It raises a defence of
estoppel should the Court
find for the respondents in the counter-application. In addition, it
aligns itself with the factual and
legal averments made by the
applicants.
[42]  The essence
of the doctrine of estoppel by representation is that a person (A,
the representor) is precluded or estopped
from denying the truth of a
representation previously made to another person (B, the representee)
if B, believing in the truth
of the representation, acted on the
misrepresentation to B’s detriment.
[7]
[43]  The third
party alleges that the Department created an impression with it that
the matter had been settled. I will deal
with the case of the third
party together with the case of the applicants considering that it
aligns itself with the submissions
made by the applicants.
[44]  The
applicants contend that if the Department wishes to have its decision
reviewed and set aside it should have launched
a proper review
application in terms of Rule 53 of the Uniform Rules of Court. This
Rule provides:
“
53
Reviews
(
1)
Save where any law otherwise provides, all proceedings to bring under
review the decision or proceedings of any inferior court
and of any
tribunal, board or officer performing judicial, quasi-judicial or
administrative functions shall be by way of notice
of motion directed
and delivered by the party seeking to review such decision or
proceedings to the magistrate, presiding officer
or chairperson of
the court, tribunal or board or to the officer, as the case may be,
and to all other parties affected –
(a) calling upon such
persons to show cause why such decision or proceedings should not be
reviewed and corrected or set aside,
and
(b) calling upon the
magistrate, presiding officer, chairperson or officer, as the case
may be, to dispatch within fifteen days
after receipt of the notice
of motion, to the registrar the record of such proceedings sought to
be corrected or set aside, together
with such reasons as he or she is
by law required or desires to give or make, and to notify the
applicant that he or she has done
so.”
[45]  The
Department alleges that the MEC cannot in the performance of its
responsibilities escape its duties by entering into
a patently
irrational settlement agreement. The applicants on the other hand
argue that the MEC is not in a position to review
its own decision.
They argue that an organ of State seeking to undo what it had done
before on the basis that it was done invalidly
or unlawfully should
follow a particular process in order to obtain relief as its review
application is not in terms of Rule 53.
They deny that the Department
could do so in a counter-application. They relied on
DEMOCRATIC
ALLIANCE v PRESIDENT OF THE REPUBLIC OF SOUTH AFRICA
[8]
.
[46]  In
MEC
HEALTH, EC v KIRLAND INVESTMENTS
Cameron J (Moseneke ACJ,
Skweyiya ADCJ, Dambuza AJ, Froneman J, Mhlantla AJ and Nkabinde J
concurring) had this to say about the
procedure to be followed by
government when it seeks to disregard one of its own officials’
decisions:
“
[64]
Can a decision by a state official, communicated to the subject, and
in reliance on which it acts, be set aside by a court
even when
government has not applied (or counter-applied) for the court to do
so? Differently put, can a court exempt government
from the burdens
and duties of a proper review application, and deprive the subject of
the protections these provide, when it seeks
to disregard one of its
own officials' decisions? That is the question the judgment of Jafta
J (main judgment) answers. The answer
it gives is Yes. I disagree.
Even where the decision is defective — as the evidence
here suggests — government
should generally not be exempt from
the forms and processes of review. It should be held to the pain and
duty of proper process.
It must apply formally for a court to set
aside the defective decision, so that the court can properly consider
its effects on
those subject to it.
[65]
The reasons spring from deep within the Constitution's scrutiny of
power. The Constitution regulates all public power. Perhaps
the
most important power it controls is the power the state exercises
over its subjects. When government errs by issuing a defective

decision, the subject affected by it is entitled to proper notice,
and to be afforded a proper hearing, on whether the decision
should
be set aside. Government should not be allowed to take
shortcuts. Generally, this means that government must apply
formally
to set aside the decision. Once the subject has relied on a decision,
government cannot, barring specific statutory authority,
simply
ignore what it has done. The decision, despite being defective, may
have consequences that make it undesirable or even impossible
to set
it aside. That demands a proper process, in which all factors
for and against are properly weighed.”
[9]
[47]
Goosen J in
NELSON
MANDELA BAY METROPOLITAN MUNICIPALITY v ERASTYLE (PTY) LTD AND
OTHERS
[10]
cited with approval
STATE
INFORMATION TECHNOLOGY AGENCY SOC LIMITED V GIJIMA HOLDINGS (PTY)
LIMITED
[11]
and held:
“
[25] In
State
Information Technology Agency Soc Limited V Gijima Holdings (Pty)
Limited
(Gijima)
the
Court held that in seeking to review its own decisions an organ of
state is entitled to rely upon the principle of legality
.
The
court added:
“
[39]
Pharmaceutical Manufacturers tells us that the principle of legality
is 'an incident of the rule of law', a founding value
of our
Constitution. In Affordable Medicines Trust the principle of legality
was referred to as a constitutional control of the
exercise of public
power. Ngcobo J put it thus:
'The exercise of public
power must therefore comply with the Constitution, which is the
supreme law, and the doctrine of legality,
which is part of that law.
The doctrine of legality, which is an incident of the rule of law, is
one of the constitutional controls
through which the exercise of
public power is regulated by the Constitution.'
[40] What we glean from
this is that the exercise of public power which is at variance with
the principle of legality is inconsistent
with the Constitution
itself. In short, it is invalid. That is a consequence of what s 2 of
the Constitution stipulates. Relating
all this to the matter before
us, the award of the DoD agreement was an exercise of public power.
The principle of legality may
thus be a vehicle for its review. The
question is: did the award conform to legal prescripts? If it did,
that is the end of the
matter. If it did not, it may be reviewed and
possibly set aside under legality review.”
[26]
The use of the
phrase ‘legality review’, in my view, implies no
specified procedure
. It refers to the substantive legal basis
upon which a court
exercises its adjudicative
function and formulates relief appropriate
to its findings as it is required to do in terms if s 172 of the
Constitution
. The exercise of this power must of course
be formerly initiated by due process so that the court adjudicating
the matter may decide,
in accordance with relevant legal principles,
whether or not to exercise its powers.”
[48]  Theron
J (Basson AJ, Dlodlo AJ, Goliath AJ, Mhlantla J and Petse AJ
concurring) in
BUFFALO
CITY METROPOLITAN MUNICIPALITY v ASLA CONSTRUCTION (PTY) LIMITED
[12]
held:
“
1.
The applicant, Buffalo City Metropolitan Municipality (Municipality),
seeks the review and setting aside of its own decision.
It seeks
leave to appeal against a decision of the Supreme Court of Appeal
that held that the Municipality had not made out a case
for
condonation in terms of section 9 of the Promotion of Administrative
Justice Act (PAJA) and, as a result, the review application
could not
be entertained. In this Court, the Municipality originally relied on
a review in terms of PAJA, but following this Court’s
decision
in
Gijima
,
the review must be dealt with in terms of the principle of legality.”
It
is clear that Rule 53 is not applicable but the legality review.
[49]  The
applicants contend that the R10 million that the Department seeks
repayment of has already been paid to the applicants.
This, according
to the applicants, translates into a situation where the liquidation
and distribution account and its confirmation
by the Master are in
law equated to a court order. Only a competent court with
jurisdiction should set it aside. The applicants
submit further that
a counter-application for repayment of what had already been paid
should be dismissed on that basis.
[50]  The
Department contends that when the R10 million was paid there was no
concluded contract between the parties. Scholtz
secured a benefit for
the applicants which they would be entitled to if they had accepted
it by conveying their approval to the
Department, which they did not
do. They instead distributed the R10 million in the fourth
liquidation and distribution account
approved by the Master in May
2018.
[51]  In
KILROE-DALEY
v BARCLAYS NATIONAL BANK LTD
[13]
the Appellate Court
held:
“ …’
[H]is
(ie the Master’s) confirmation shall have the effect of a final
judgment’ in s[ection] 408 of the Company’s
Act [Act 61
of 1973] did not give each item in the liquidation and distribution
account the quality of a judgment’ of a court,
after objections
(if any) have been dealt with, his confirmation of that account was
final and it could not be re-opened save where
a court authorises the
re-opening.”
[52]
In
casu
the confirmation of the fourth liquidation and distribution account
received from the Master on 04 May 2018 in terms of section
112 of
the Insolvency Act
[14]
stands
and can only be set aside by the court on certain circumstances. The
Master’s confirmation has the effect of a final
judgment except
as against a person whom the Court permits to re-open the account,
which can only be done before the liquidator
commences with
distribution.
[15]
That is not
the application before me. In the instant case the Department seeks
repayment of the R10 million paid to the applicants.
In my view, this
does not mean that the amount they used during the liquidation and
distribution account is the one they seek but
an amount equivalent to
it.
[53]  It is so
that the rule of law and the principle of legality is the founding
value of the Constitution. In
PHARMACEUTICAL MANUFACTURES
ASSOCIATION OF SA AND ANOTHER: IN RE EX PARTE PRESIDENT OF THE
REPUBLIC OF SOUTH AFRICA AND OTHERS
the Court held:
“
[85]
In
Fedsure
[Life
Assurance Ltd v Greater Johannesburg Metropolitan Council
[1998] ZACC
17
;
1999 (1) SA 374
(CC)] this Court held that the doctrine of
legality, an incident of the rule of law, was an implied provision of
the interim Constitution. It
stated:
'It
seems central to the conception of our constitutional order that the
Legislature and Executive in every sphere are constrained
by the
principle that they may exercise no power and perform no function
beyond that conferred upon them by law. At least
in this sense,
then, the principle of legality is implied within the terms of the
interim Constitution.'
This
was reaffirmed in
President
of the Republic of South Africa and Others v South African Rugby
Football Union and Others
(
Sarfu
3
),
where this Court outlined different ways in which the exercise of
public power is regulated by the Constitution. One of the
constitutional controls referred to is that flowing from the
doctrine of legality. Although
Fedsure
was
decided under the interim Constitution, the decision is applicable to
the exercise of public power under the 1996 Constitution,
which in
specific terms now declares that the rule of law is one of the
foundational values of the Constitution.”
[16]
[54]  The learned
Judges in Kirland
supra
added:
“
85
It
is a requirement of the rule of law that the exercise of public power
by the Executive and other functionaries should not be
arbitrary.
Decisions must be rationally related to the purpose for which the
power was given, otherwise they are in effect arbitrary
and
inconsistent with this requirement. It follows that in order to pass
constitutional scrutiny the exercise of public power by
the Executive
and other functionaries must, at least, comply with this requirement.
If it does not, it falls short of the
standards demanded by our
Constitution for such action.
[86]
The question whether a decision is rationally related to the purpose
for which the power was given calls for an objective enquiry.

Otherwise a decision that, viewed objectively, is in fact
irrational, might pass muster simply because the person who took
it
mistakenly and in good faith believed it to be rational. Such a
conclusion would place form above substance and undermine an

important constitutional principle.
[89]
The President's decision to bring the Act into operation in such
circumstances cannot be found to be objectively rational on
any basis
whatsoever. The fact that the President mistakenly believed that it
was appropriate to bring the Act into force,
and acted in good
faith in doing so, does not put the matter beyond the reach of the
Court's powers of review. What the Constitution
requires is that
public power vested in the Executive and other functionaries be
exercised in an objectively rational manner. This,
the President
manifestly, though through no fault of his own, failed to do.
[90]
Rationality in this sense is a minimum threshold requirement
applicable to the exercise of all public power by members of the

Executive and other functionaries. Action that fails to pass this
threshold is inconsistent with the requirements of our Constitution

and therefore unlawful. The setting of this standard does not mean
that the Courts can or should substitute their opinions as
to
what is appropriate for the opinions of those in whom the power has
been vested. As long as the purpose sought to be achieved
by the
exercise of public power is within the authority of the functionary,
and as long as the functionary's decision, viewed objectively,
is
rational, a Court cannot interfere with the decision simply because
it disagrees with it or considers that the power was
exercised
inappropriately. A decision that is objectively irrational is likely
to be made only rarely but, if this does occur,
a Court has the power
to intervene and set aside the irrational decision. This is such a
case. Indeed, no rational basis for the
decision was suggested. On
the contrary, the President himself approached the Court urgently,
with the support of the Minister
of Health and the professional
associations most directly affected by the Act, contending that
a fundamental error had been
made and that the entire regulatory
structure relating to medicines and the control of medicines had as a
result been rendered
unworkable. In such circumstances, it would be
strange indeed if a Court did not have the power to set aside a
decision that is
so clearly irrational.”
[17]
[55] The Constitutional
Court in
Fedsure Life Assurance
(
supra)
stated thus:
“
58.
It seems central to the conception of our constitutional order that
the Legislature and Executive in every sphere are constrained
by the
principle that they
may
exercise no power
and perform no function beyond that conferred upon them by law a
local government may only act within the powers lawfully conferred

upon it. There is nothing startling in this proposition – it is
a fundamental principle of the rule of law, recognised widely,
that
the exercise of public power is only legitimate where lawful. The
rule of law – to the extent at least that it expresses
this
principle of legality – is generally understood to be a
fundamental principle of constitutional law. This has been recognised

in other jurisdictions. In
The
Matter of a Reference by the Government in Council Concerning Certain
Questions Relating to the Succession of Quebec from Canada
the
Supreme Court of Canada held that:
‘
Simply put, the
constitutionalism principle requires that all government action
comply with the Constitution. The rule of law principle
requires that
all government action must comply with the law, including the
Constitution. This Court has noted on several occasions
that with the
adoption of the Charter, the Canadian system of government was
transformed to a significant extent from a system
of Parliamentary
supremacy to one of constitutional supremacy. The Constitution binds
all governments, both federal and provincial,
including the executive
branch (Operation Dismantle Inc. v The Queen,
[1985] 1 S. C. R. 441
,
at p.455). They may not transgress its provisions: indeed, their sole
claim to exercise lawful authority rests in the powers allocated
to
them under the Constitution, and can come from no other source.’”
[18]
[56]  The
principle of legality obliges functionaries to act within their
powers. It also requires the exercise of public power
to be
rationally related to a legitimate government purpose.
[19]
In
DEMOCRATIC
ALLIANCE v PRESIDENT OF SOUTH AFRICA AND OTHERS
Yacoob ADCJ (Mogoeng CJ, Cameron J, Jafta J, Khampepe J, Maya AJ,
Nkabinde J, Skweyiya J, Van Der Westhuizen J and Zondo AJ concurring)

had this to say about a rational decision:
“
[33]
The Democratic Alliance submitted that the irrationality
ground covers irrationality in process as well as on the merits.

The Minister and Mr Simelane did not appear fervently to embrace this
proposition but did not advance any cogent alternative submission

against it.
Chonco
, concerned
with the power of the President, as Head of State, to grant pardons
under the Constitution, elucidated the
rationality requirement
in the process of granting pardons:
'In
SARFU
,
this court, affirming
Hugo
, held that the powers s 84(2)
confers on the President as Head of State originate historically from
the royal prerogative and were
exercised by the Head of State rather
than the head of the national executive. The powers granted by s
84(2) are now clearly original
constitutional powers. Section 84(2)
(j)
is the source of the power, function and
obligation to decide upon applications for pardon. Though there is no
right
to be pardoned, the function conferred on the President to make
a decision entails a corresponding right to have a pardon application

considered and decided upon rationally, in good faith, in accordance
with the principle of legality, diligently and without delay.
That
decision rests solely with the President.' [Footnotes
omitted.]
[34]
It follows that both the process by which the decision is made and
the decision itself must be rational.
Albutt
is
authority for the same proposition. The means there were found
not to be rationally related to the purpose because
the procedure by
which the decision was taken did not provide an opportunity for
victims or their family members to be heard.
[20]
”
[57]  The
requirement of rationality will only be met where objectively
considered, there is a cogent link between the means
adopted and the
end sought to be achieved.
[21]
Section 2 of the Constitution provides that the Constitution is the
supreme law of the Republic; law or conduct inconsistent with
it is
invalid, and the obligations imposed by it must be fulfilled.
[58]  The
Department argues that the settlement agreement is not the agreement
entered into on 27 September 2017 as only two
pages existed at the
time, the third page having been added on 13 February 2018. It argues
further that by signing the settlement
agreement Mr Sibisi and the
applicants admitted liability for the costs due and payable to the
MEC in the amount of R443 113-03
jointly and severally the one
paying the other to be absolved. It claims payment of taxed costs due
to Case Number 1522/2010 held
in this Court in the amount of R443
113.03. It argues further that it would suffer prejudice if the
settlement agreement is confirmed.
[59]  In Clause 4
of the settlement agreement the applicants acknowledge their
indebtedness as recorded in the agreement thus:
“
4.
The plaintiffs agree to pay the defendants the amount of R443 113.03
in payment of legal costs under the Case Number 2106/09
which amount
will be set off against the final tranche payment due on 31 July
2018.”
This
Case Number (2106/09) appears in Clause 3.4 of Annexure “AS6”
dated 08 March 2018. It also appears in Clause 1.3.2
of the letter
sent to Mr Vertue by Honey Attorneys on behalf of LB Saffy (Annexure
“AS7” at page 32 of vol 1 of the
record). In two of these
letters the same amount of R443, 113.03 is referred to. On the other
hand Mr Nogwili who deposed to the
answering affidavit dated 23
October 2018 he refers to Case Number 1522/2010 in paragraph 3.5.4.
Scholtz, the deponent to the replying
affidavit filed on 09 November
2018 also refers to Case Number 1522/2010.
[60]  Taking into
account that both cases are not before me and there is also no paper
trail in their regard namely, the copy
of the order, I am unable to
verify which case number is the correct one. Even at the time the
matter was argued there was no
consensus
between the parties
regarding payment of this amount. The applicant stated that they
would not deal with the said payment as it
was not relevant in these
proceedings. In the circumstances I am unable to make a finding on
this issue.
[61]  The
Department contends that Mr Nogwili, the HoD, who attended the
meeting held at Port Nolloth, did not have any extended
authority on
behalf of the MEC, the executive authority, to bind the Department.
There is also no such allegation in the papers.
[62]  The
applicants and the third party deny that the claim against the HoD
had prescribed by 03 March 2014 with prescription
having started
running from 03 March 2011 which means there would be no claim
against the MEC.     The applicants
do not dispute
that the MEC was not a party to the action and was not joined at any
stage thereafter. It is therefore possible
that the claim might have
prescribed. I do not deal with prescription considering the fact that
the offer by the Department was
not accepted, in my view.
[63]  The
Department has a duty to protect the
fiscus
and act reasonably
when realising that there is a possibility of fruitless and wasteful
expenditure in the process. Treasury Regulation
9.1.1 promulgated in
terms of the
Public Finance Management Act enjoins
the Department to
exercise all reasonable care to prevent and detect unauthorised,
irregular, fruitless and wasteful expenditure,
and should implement
effective, efficient and transparent processes of financial and risk
management.
[64]  In
DEPARTMENT OF TRANSPORT AND OTHERS v TASIMA (PTY) LTD
Jafta J
(Mogoeng CJ, Bosielo AJ, as he then was, and Zondo J concurring)
held:
“
138 In his
majority judgment in Merafong, Cameron J traces the history of
pre-constitutional reactive challenges in the common law.
From that
analysis, with which I agreed and again endorse here, it emerges
that-
‘
in South African
law, the permissibility of a reactive attack on administrative action
has always been approached with a measure
of flexibility. And its
availability is not limited to those at risk of criminal conviction.’
139 The majority
judgment then proceeds to demonstrate that a flexible approach to
allowing reactive challenges is buttressed and
enhanced by the
Constitution. The state functionaries are entitled to challenge
exercises of public power, including their own,
was recognised by the
Supreme Court of Appeal in Pepcor, and endorsed by this court in
Khumalo. There it was noted that ‘state
functionaries are
enjoined to uphold and protect [the Constitution]’ and that ‘a
court should be slow to allow procedural
obstacles to prevent it from
looking into a challenge to the lawfulness of an exercise of public
power.’
140 Drawing on this
line of reasoning, the majority judgment in Merafong held that the
municipality was not disqualified from raising
a reactive challenge
merely because it is an organ of state. The same must apply here. It
is both a logical and pragmatic consequence
of the aforementioned
developments in our jurisprudence to allow state organs to challenge
the lawfulness of exercises of public
power by way of reactive
challenges in appropriate circumstances. I therefore agree with the
first judgment’s sentiment that
the Supreme Court of Appeal was
incorrect to find that the Department was barred from bringing a
reactive challenge to the extension
of the contract solely because it
is a state functionary.”
[22]
[65]  In
PEPCOR
RETIREMENT FUND AND ANOTHER v FINANCIAL SERVICES BOARD AND
ANOTHER
[23]
Cloete JA stated:
“
[47]
In my view, a material mistake of fact should be a basis upon which a
Court can review an administrative decision.
If
legislation has empowered a functionary to make a decision, in the
public interest, the decision should be made on the material

facts which should have been available for the decision properly
to be made.
And if a decision has been made in ignorance of facts material to the
decision and which therefore should have been before the
functionary,
the decision should (subject to what is said in para [10] above) be
reviewable at the suit of,
inter
alios
,
the functionary who made it - even although the functionary may have
been guilty of negligence and even where a person who
is not
guilty of fraudulent conduct has benefited by the decision. The
doctrine of legality which was the basis of the decisions
in
Fedsure,
Sarfu
and
Pharmaceutical
Manufacturers
requires
that the power conferred on a functionary to make decisions in the
public interest, should be exercised properly,
ie on the basis of
the true facts; it should not be confined to cases where the
common law would categorize the decision as
ultra
vires
.”
My emphasis
[66]  The question
that arises is whether it is in the interests of taxpayers for a
government department to make a payment
of R37 million as a
settlement amount where the department involved did not consider all
material facts and/or that the decision
was taken unreasonably and
irrationally? This requirement will only be met where, objectively
considered, there is a cogent link
between the means adopted and the
end sought to be achieved.
[24]
When the Department realises that the decision is irrational should
it fold its arms and pay when that is inconsistent with
the principle
of legality, I do not think so. The state functionaries, no matter
how well-intentioned, may only do what the law
empowers them to
do.
[25]
In my view even if the
Department was negligent in its decision that does not entitle the
applicants to any payment from the State’s
funds.
[67]  It is
important to revisit the powers of the MEC as stipulated in the
Constitution. Sections 125(1), 132(1), 133(1) (2)
and (3):
“
125(1)
The executive authority of a province is vested in the Premier of
that province.
132(1) The Executive
Council of a province consists of the Premier, as head of the
Council, and no fewer than five and no more than
ten members
appointed by the Premier from among the members of the provincial
legislature.
133(1)
Members of the Executive Council of a province are responsible for
the functions of the executive assigned to them by the
Premier.
(2) Members of the
Executive Council of a province are accountable collectively and
individually to the legislature for the exercise
of their power and
the performance of their functions.
(3) Members of the
Executive Council of a province must-
(a)
Act in
accordance with the Constitution and, if a provincial constitution
has been passed for the province, also that constitution;
and
(b)
Provide
the legislature with full and regular reports concerning matter under
their control.”
[68]  The
Constitutional Court has mentioned the same dictum in several of its
decisions. In
AAA INVESTMENTS (PTY) LTD V MICRO FINANCE REGULATORY
COUNCIL AND ANOTHER,
the Court held:
“
Legality
[68]
This is a matter of the application of the rule of law and the
principle of legality which flows from the value of the
rule of
law enshrined in s 1 of the Constitution. This Court has held that
'[t]he exercise of all public power must comply with
the
Constitution, which is the supreme law, and the doctrine of legality,
which is part of that law' The doctrine of legality,
which
requires that power should have a source in law, is applicable
whenever public power is exercised. Private power, although
subject
to the law and, in certain circumstances, the Bill of Rights, does
not derive its authority or force from law and need
not find a source
in law. Public power, on the other hand, can be validly exercised
only if it is clearly sourced in law.”
[26]
[69]  The
Department contends that in entering into the purported settlement
agreement and paying the R10 million as the first
instalment it was
enjoined in terms of
inter alia
, section 195 of the
constitution, its democratic values and principles ensuring and
promoting efficient, economic and effective
use of resources. Section
195(1), (b), (f) and (g) deals with the basic values and principles
governing public administration as
follows:
“
195(1)
Public administration must be governed by the democratic values and
principles enshrined in the Constitution, including the
following
principles:
(c)
Efficient,
economic and effective use of resources must be promoted;
(f)
Public Administration must be accountable.
(g)
Transparency must be fostered by providing the public with timely,
accessible and accurate information.”
[70]  In
P
M OBO TM and ROAD ACCIDENT FUND
[27]
Weiner AJA (Maya P and Wallis JA concurring) held:
“
[31]
Froneman J, on behalf of the majority in
Airports
Company South Africa v Big Five Duty Free (Pty) Ltd
[2018]
ZACC 33
;
2019 (2) BCLR 165
(CC) para 13]
confirmed the principles emanating from
Eke
[Eke Parsons
[2015] ZACC 30
2016 (3) SA 37
(CC) paras 25 -28, 34]
,
and in particular that ‘a settlement agreement between
litigating parties can only be made an order of court if it conforms

to the Constitution and the law’.
[32]
Our courts have a duty to ensure that they do not grant orders that
are
contra
bonos mores
,
or that amount to an abuse of process. Section 173 of
the

Constitution specifically empowers the Court to prevent any such
abuses. In
Fagan
v Business Partners Limited
the
court held as follows:
Fagan
v Business Partners Limited
2016
JDR 0317 (GJ) paras 19 and 26.
(Emphasis added.) See also
Mzwakhe
v Road Accident Fund
[2017]
ZAGPJHC 342 paras 23-25.
‘
A
compromise, defined as a settlement of litigation or envisaged
litigation, is a substantive contract that exists independently
of
the original cause. . . .
Stipulations in
a contract which are unconscionable, illegal or
immoral will have the result that a court will refuse to give effect
thereto.
A
contract or term of a contract may be declared contrary to public
policy if it is clearly inimical to the interests of the community,

or is contrary to law or morality, or runs counter to social
or        economic expedience,
or
is plainly improper and unconscionable, or
unduly harsh or oppressive. The criteria upon which a contract
may be
declared contrary to public policy is thus not sharply defined and
changes with “the general sense of justice of the
community,
the
boni
mores
,
manifested in public opinion”.’ [emphasis added]
[33] As the full court
in this matter held,
a court cannot act as a mere rubber stamp of
the parties.
The full court referred,
inter alia
, to the
usual requirement that moneys should be paid into the Guardian’s
Fund or that a
curator bonis
should be appointed. The draft
order and settlement agreement did not contain such provisions, which
the court as upper guardian
of minors, must take into consideration.
The court also has a duty to members of the public.
Public funds
are being disbursed and the interests of the community as a whole
demand that more scrutiny be involved in the disbursement
of such
funds.
The criteria are not as simple as the appellant would have
this court believe, as is apparent from
Fagan
.18
the court’s duty extends further than considering only whether
the terms are illegal or immoral. For present purposes,
however, it
is not necessary for us to attempt to circumscribe the precise ambit
of that discretion. It is better that it is done
on a case by case
basis.
[34]
The RAF is an organ of state, established in terms of s 2 of the
Road

Accident Fund Act 56 of 1996 (the Act). It is thus bound to adhere to
the basic values 14 and principles governing the public
administration under our
Constitution.
Section 195(1) requires,
inter
alia
,
that ‘[a] high standard of professional ethics must be promoted
and maintained’; and that ‘[e]fficient, economic
and
effective use of resources must be promoted’.
[35]
In cases
involving the disbursement of public funds, judicial scrutiny may be
essential. A judge is enjoined to act in terms of
s 173 of the
Constitution to ensure that there is no abuse of process.
Judges
in all divisions have expressed concern that in many RAF cases, there
is an abuse of process. Settlements are concluded
where, for example,
the substantial damages agreed to bear no relation to the injuries
sustained. In this case the judge had a
legitimate concern that the
only reason for the settlement was the lack of preparation of the
RAF’s case and that there may,
in truth, as appeared to be the
case from the evidence she heard from a passenger in the vehicle,
have been no negligence on the
part of the insured driver and thus no
liability on the part of the RAF.
[36] Concern has been
noted that to require a Judge to scrutinize every

settlement in a RAF case would cause delays in the administration of
justice. However, it is not every case that will require this
form of
judicial scrutiny. When a Judge expresses concern over the terms of a
settlement, the court must ensure that those concerns
are addressed
by the parties to prevent an abuse of process and the unjustified
disbursements of public funds.” My emphasis
[71]  T
his
case not only raises legal questions of import, but also affords this
Court the opportunity to provide guidance to organs of
state who may
wish to bring similar applications in the future and to lower courts
dealing with these cases.
[28]
The decision taken by the Department is not immune to amongst others,
section 195 of the Constitution. The funds of the State cannot
be
used anyhow without judicial control. An obvious illegality as the
one in the instant case could not be ignored.
[29]
In
MEC FOR HEALTH, EASTERN
CAPE V KIRLAND INVESTMENTS (PTY) LTD T/A EYE AND LAZER INSTITUTE
[30]
the avoidance of a contract between the State and a private entity
was sought to be avoided. In this matter the decision to enter
into
an agreement was the exercise of a public function and importantly, I
take into consideration that the settlement agreement
was not
approved by the applicants as alluded to earlier. There is also no
evidence to that effect except for a bare denial by
the applicants
and the third party.
[72]  It is
interesting that the Joint Venture decided to lodge this application
when it is alleged that pleadings were not
closed and claim 10% of
the total building costs amounting to R36 million without citing any
authority supporting this proposition.
Proceeding with the action for
damages would have entitled them to request the Court to make the
settlement agreement an order
of Court. The applicants are at liberty
to proceed with the action as they were at the time the purported
settlement agreement
was concluded.
[73]  The question
that arises is whether concluding the agreement conformed to the
legal prescripts. The applicants allege
that “
a party
litigating cannot undo a settlement agreement on the basis the he
/she got a bad bargain. It is in the nature of a compromise
that the
result of may not be advantageous to a party as litigation might have
been
”. I do not agree.
[74]  Importantly,
only on 08 March 2018 were the applicants made aware of the
settlement agreement concluded on 27 September
2017 as per Annexure
“AS6” after an amount of R10 million had been deposited
into Vertue’s account on 01 December
2017. Paragraph 4 of this
letter states: “
The settlement is subject to the approval of
the Liquidators of Vista and directors of Joh-Arch.”
From
this paragraph one can deduce that the Department had not been
notified of the applicants’ approval because no letter
was
addressed to it at that stage. In my view, until then the applicants
were still not party to the agreement. In a letter dated
29 March
2018 (“AS8”) Mr Vertue wrote to Honey Attorneys and
confirmed that an amount of R10 million had been deposited
into his
trust account. I find it strange that the settlement agreement was
signed on 27 September 2017 and Mr Vertue received
into his trust
account payment of R10 million on 01 December 2017 and the first
report to the applicants about the money was only
made on 29 March
2018. In the letter (“AS6”) Joh-Arch indicated their
willingness to accept the settlement agreement
as proposed and that
if accepted that would be conveyed to the Department yet nothing was
forwarded to the Department. In the response
to Mr Vertue’s
letter by the applicants dated 26 March 2018 (“AS7”), the
acceptance was still not yet communicated
to the Department (see
paragraph 1.3.7 at para [29] above).
[75]  In my view, payment of
R37 million to Vista Park and Joh-Arch would definitely result in
mismanagement of public funds.
It would also be improper and
unconscionable. In para 25 of Asla
Construction
the learned Judges said:
“
[25]
There are sound reasons why a court should carefully scrutinize a
settlement agreement before making it an order of court.
Once a
settlement agreement is made an order of court, it is interpreted in
the same way as any judgment or order and affects parties’

rights in the same way.19 Madlanga J in
Eke
put
the matter thus:
“
The
effect of a settlement order is to change the status of the rights
and obligations between the parties. Save for litigation
that may be
consequent upon the nature of the particular order, the order brings
finality to the
lis
between
the parties; the
lis
becomes
res
judicata
(literally,
‘a matter judged’). It changes the terms of a settlement
agreement to an enforceable court order.”
(Id at para 31)
[76]  In my view,
the settlement agreement cannot stand for the reasons I have
mentioned earlier. Section 237 of the Constitution
requires that all
constitutional obligations be performed with diligence and without
delay. The decision was at odds with the principle
of legality and
should be reviewed and set aside.
COSTS
[77]  The
applicants seek an order in their favour and costs against the second
respondent, the MEC, alternatively any other
respondents who oppose
the matter, jointly and severally the one paying the other to be
absolved except the third party. On the
other hand the Department
urges me to dismiss the application due to the fact that the
applicants and the third party brought this
application while the
pleadings were not closed with costs against the applicants and the
third party jointly and severally the
one paying the other to be
absolved. It urges me further to grant the counter-application as
prayed for with costs including the
costs of two counsel. It also
requests that the applicants and the third party be ordered to pay
costs of 23 November 2018 on a
scale as between attorney and own
client jointly and severally the one paying the other to be absolved
due to their insistence
in the hearing of these proceedings contrary
to the Rules of Court
[78]  On 23
November 2018 Mr Engelbrecht, for the applicants and Mr Baloyi, on
behalf of the respondents, approached Court
and I granted the
following order by agreement:
“
1. The
Respondents shall file their replying affidavit to the applicants’
supplementary affidavit and the third party’s
answering
affidavit on or before 14 December 2018.
2. The parties file
their heads of argument and or supplementary heads of argument as
prescribed by the Rules of Court.
3. The matter is
postponed to 08 March 2019.
4. Costs will stand
over for later determination.”
[79]  The
applicants and the third party indicated that costs of 23 November
2018 should follow the result. Mr Merabe, on behalf
of the
respondents was also of the view that those costs should follow the
event. I must indicate that the issue of these costs
were not
seriously argued by the parties.
[80]  It is a
fundamental principle that a party who succeeds should be awarded
costs and this rule should not be departed
from except on good
grounds.
[31]
The award of
costs is a matter wholly within the discretion of the court, but this
is a judicial discretion and must be exercised
on grounds upon which
a reasonable person could have come to the conclusion arrived at.
[32]
[81]  As far as I
am concerned there is no reason why costs of this application should
not follow the result. I am of the view
that a sufficient case for a
punitive cost order has not been made out by the Department taking
into consideration that I have
no concrete proof that the pleadings
were not closed when this matter was brought as no file was made
available even during argument
of this matter. However, I am of the
view that this matter had complex issues that justify costs of two
counsel.
In
the circumstances I grant the following order:
1.
The
decision taken on 12 September 2017 at Port Nolloth to settle the
dispute between the applicants and the Department in Case
Number 2072
is hereby reviewed and set aside.
2.
The
settlement agreement (Annexure “AS5”) is declared null
and void
ab
initio
.
3.
The
applicants and the third party /the fourth respondent are ordered to
pay jointly and severally the one paying the other to be
absolved:
3.1 The amount of
R10 million paid on 01 December 2017 into the account of Mr Vertue
with interest at the
mora
rate from 01 December 2018 to date
of payment
3.2 The applicants
and the third party/ fourth respondent are ordered to pay the costs
of this application including the wasted
costs of 23 November 2018 as
well as costs of two counsel jointly and severally, the one paying
the other to be absolved.
BM
PAKATI
JUDGE-NORTHERN
CAPE DIVISION, KIMBERLEY
On
behalf of the Applicant:
Adv S Grobler
Instructed
by:

Engelsman Magabane
On
Behalf of the Respondents 1-3: Adv J Du Toit (SC) & Adv NJ
Merabe
Instructed
by:

Mjila Attorneys
On
Behalf of the Respondent 4:      Ms J Snyders
Instructed
by:

Engelsman Magabane
[1]
Rule 13 of the Uniform Rules of Court provides:
“Where a party in any action claims- (a) as against any other
person not
a party to the action (in this rule called a ‘third
party’) that such party is entitled, in respect of any relief
claimed against him, to a contribution or indemnification from such
third party, or (b) any question or issue in the action is

substantially the same as a question or issue which has arisen or
will arise between such party and the third party, and should
be
properly be determined not only as between any parties to the action
but also as between such parties and the third party
or between any
of them, such party may issue a notice, hereinafter referred to as a
third party notice, as near as may be in
accordance with Form 7 of
the First Schedule, which notice shall be served by the sheriff.”
[2]
[2007] ZACC 24
;
2008 (2) SA 472
(CC) at p477 paras [20] and [22]
[3]
The Constitution of the Republic of South Africa
Act,
108 of 1996. This section provides: “Where an organ of state
in the national, provincial or local sphere of government,
or any
other institution identified in national legislation, contracts for
goods or services, it must do so in accordance with
a system which
is fair, equitable, transparent, competitive and cost-effective.”
[4]
State Liability Act, 20 of 1957
[5]
Institution of Legal Proceedings
against Certain Organs of State Act, 40 of 2002.
[6]
2005 JDR 0293 (SCA) at para 5 and LAWSA Vol 25
(1) para 270
[7]
Amler’s Precedents of Pleadings 9
th
Edition by Harms at p 187; see also Aris Enterprises (Finance) (Pty)
Ltd v Protea Assurance Co Ltd [1981] 4 All SA 238 (A)
[8]
2012 (1) SA 417
(SCA) at para 37
[9]
2014 (3) SA 481
(CC) at para 64 and 65
[10]
Case No. 398/2016 ECLD delivered on 06 November 2018 at para 25 and
26
[11]
[
2017] JOL 39257
(CC) at para [37] and [40]; See
also Department of Transport and Others v Tasima (Pty) Ltd
2017 (2)
SA 622
(CC)
[12]
2019 (6) BCLR 661
(cc) at para [1]
[13]
1984 (4) 609 AD at 611D
[14]
Insolvency Act 24 of 1936
; see also Nedcor Bank Ltd v Rundle 92007]
4 All SA 1120
(SCA) at 1123 where the Court held that this (final )
account should be referred to as “a
section 408
account”.
[15]
Henochsberg on the Companies Act: service issue
33 Vol 1 p865
[16]
[2000] ZACC 1
;
2000 (2) SA 674
(CC) para 85,
[17]
At paras [85], [86], [89] & [90]
[18]
Fedsure at para 58
[19]
Pharmaceutical Manufacturers Association of South Africa supra at
para 85
[20]
2013
(1) SA 248
(CC) at paras 33 and 34; see also Albutt v Centre for the
Study of Violence and Reconciliation and Others
2010 (3)
SA
293
(CC) at 70 to 74
[21]
Albutt at para 85
[22]
2017 (2) SA 622
(CC) paras 138, 139 and 140
[23]
2003 (6) SA 38
(SCA) para 47. See also Bullock NO and Others v
Provincial Government, North West Province, and Another
2004 (5) SA
262
(SCA) where the Court held that a provincial government’s
decision to dispose of a right in land on the basis of incorrect

legal advice was set aside on review.
[24]
See Fedsure at para [46] above
[25]
Head of Department, Department of Education, Free State Province v
Welkom High School & Others
2014 (2) SA 228
(CC) ,(‘Welkom’).
[26]
[2006] ZACC 9
;
2007 (1) SA 343
(CC) at 68; See also Minister of Health NO v New
Clicks South Africa (Pty) Ltd and Others (Treatment Action Campaign
and Another
as Amici Curiae)
2006 (2) SA 311
(CC) 613; Fedsure
supra; President of the Republic of South Africa and Others v South
African Rugby Football Union and Others
1999 (10) BCLR 1059
(CC) 148
[27]
Case No. (1175/2017)
[2019] ZASCA 97
at 32 to
[28]
Asla Construction supra at para 37
[29]
Kirland para [21]
[30]
2014 (3) SA 481
(CC) the avoidance of a contract between the State
and a private entity was sought to be avoided.
[31]
South African Association of Personal Injury Lawyers v Heath
[2000] ZACC 22
;
2001
(1) SA 883
(CC) at 912; see also Union Government v Gass
1959 (4) SA
401
(A)  at 413C-F
[32]
Beinash v Wixley
[1997] ZASCA 32
;
[1997] 2 All SA 241
;
1997 (3) SA 721
(A) ; see also
Norwich Union Fire Insurance Society Ltd v Tutt
1960 (4) SA 851
(A)
at 854C-E