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[2019] ZAKZPHC 14
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Ubunzima Trading Enterprises CC v Uthukela District Municipaliti (11082/2015) [2019] ZAKZPHC 14 (12 March 2019)

IN THE IDGH COURT OF
SOUTH AFRICA
KWAZULU-NATAL
DIVISION, PIETERMARITZBURG
Case No: 11082/2015
12 /3/2019
In
the matter between:
UBUNZIMA
TRADING ENTERPRISES CC
PLAINTIFF
and
UTHUKELA
DISTRICT MUNICIPALITY
DEFENDANT
ORDER
(i)
The defendant is ordered to pay
the plaintiff the sum of R 1 039 355.53, plus interest at the legal
rate from 10 September 2014
to date of payment;
(ii)
The defendant is ordered to pay
the plaintiff the sum ofR604 394.92 plus interest at the legal rate
from 29 December 2013 to date
of payment; Costs of suite, such costs
to include costs consequent upon the employment of senior counsel.
JUDGMENT
Poyo Dlwati J:
[1]
The question to be answered in
this matter is whether the deed of cession, which the plaintiff is
relying upon in its claim against
the defendant, is valid and can be
interpreted in any other way than the way the plaintiff suggests it
be interpreted.
[2]
The plaintiff, a close
corporation duly incorporated in terms of the
Close Corporations Act
69 of 1984
, launched an action against the defendant, a municipality
structured in terms of the Local Government : Municipal Structures
Act
117 of 1998 ('the municipality'), for payment of retention moneys
held by the municipality against the plaintiffs payments. These

payments constituted two claims, claim A and B. As the facts and
principles to these claims were similar, I will deal with them

simultaneously. In support of its claims, the plaintiff called four
(4) witnesses, whilst the municipality did not call any witness.
[3]
The evidence of Sabeliwe Mkhize
('Mrs Mkhize') was key to this matter, and provided the necessary
background. Even though she was
called by the plaintiff, she was the
manager of the Project Management Unit ('PMU') at the municipality
from 2008 to 2011. From
time to time she also acted as the head of
the Technical Infrastructure Unit at the municipality under which the
PMU fell. Because
of her position, she was in charge of various new
infrastructure projects within the municipality.
[4]
During 2009, Lashes Investments
CC / Kuyizikhindi Contractors CC Joint Venture ('Lashes') was awarded
two contracts by the municipality.
The first was the Inkanyezi
Community Water Supply Scheme Project with contract number 04/2008
('Inkanyezi Project'). The second
was the Bergville Bulk Water Scheme
with contract number 05/2008 ('Bergville Project'). Lashes was not
performing to the satisfaction
of the municipality, and Willcocks,
Reed and Kotze (Pty) Ltd ('the engineers'), who were appointed as
engineers by the municipality
to manage the projects on its behalf.
It was common cause that this was due to the financial difficulties
that Lashes had. According
to Mrs Mkhize, two options were available
to the municipality in order to ensure the completion of the
projects. The first was
to terminate Lashes' contracts, and the
second was to get someone who could be able to assist Lashes with its
financial needs.
[5]
According to Mrs Mkhize, the
termination of the contracts would delay the timeous completion of
the projects and this would have
had a negative impact on service
delivery. She then had discussions with Mr Thokozani Dladla ('Mr
Dladla') who represented Lashes
on how the situation could be
resolved. It became evident that Lashes required someone with the
necessary financial muscle to assist
it in its situation. Mr Dladla
then introduced the plaintiff as the entity that would bail out
Lashes in that situation. According
to Mrs Mkhize, arrangements of
this nature were common occurrence and the municipality knew about
them. She then prepared the deeds
of cession for the parties.
[1]
These are the documents that are the subject of this matter.
[6]
According to Mrs Mkhize, she
had the template of these cessions in her office as they were
commonly used by the municipality. After
preparing them, she took
Lashes and the plaintiff through the documents, and explained their
effects. According to her, the main
aim of the documents was for the
plaintiff to take over the project from Lashes, with Lashes ceding
all its rights to payments
to the plaintiff. She approved of the
cessions, on behalf of the municipality, as they would assist in the
completion of these
projects. The cessions were also approved by the
management of the municipality, as she would have presented the
cession to them
- either before or after the signing of the
agreements. Nobody in the management of the municipality took issue
with her about
these cessions.
[7]
As a result of these cessions,
the plaintiff did all the work in these two projects, and the
municipality paid the plaintiff in
accordance with the cessions.
According to Mrs Mkhize, the cessions were not limited to one invoice
but to all the invoices that
the plaintiff submitted, as long as they
attached a copy of the cession. For payment to be made, the following
steps would be followed:
the engineers would prepare their payment
certificate and forward it to the municipality, the plaintiff would
then attach its invoice
with the cession together with a nil invoice
from Lashes, and the municipality would then effect the necessary
payment to the plaintiff.
[8]
Mrs Mkhize testified that prior
to her resignation at the municipality in 2011, there was never an
issue about payments to the plaintiff
on the two projects. Had she
still been at the municipality, she would have authorised payment of
the plaintiff's invoices, once
she had been in receipt of the
certificate of completion from the engineers. She did not know, nor
understood why the municipality
was refusing to pay the plaintiff.
[9]
Under cross-examination, Mrs
Mkhize made it clear that even though there was a cession in place,
the contractual obligations were
still between Lashes and the
municipality. She denied that she had awarded, or purported to award,
the contract to the plaintiff
after it was put to her that she had no
authority to award the contract to the plaintiff. She emphasised that
the whole contract
value was ceded to the plaintiff, and not a
portion thereof as suggested by Mr Goddard SC who represented the
municipality in the
trial. Mr Goddard put to her that the word
'portion' in paragraph 3 of page 36 of the cession meant that only a
portion of Lashes'
claim was ceded to the plaintiff. This was
disputed by Mrs Mkhize. She testified that whatever was due to the
cedent (Lashes) was
to be paid to the cessionary (the plaintiff).
[10]
When it was suggested to her that 'the payment' referred to in the
cession related to a particular
invoice, her evidence was that there
was no invoice attached to the cession, as the cession related to all
the invoices that would
be submitted by the plaintiff from time to
time. According to Mrs Mkhize, it was understood between the parties
and the municipality
that it was not necessary for a new cession to
be signed for each invoice submitted. In fact, her evidence was that
'as an author
of this cession, I meant that each time a claim was
submitted, this cession must be attached.' She was adamant that
Lashes was
not contractually replaced by the plaintiff.
[11]
In any event, her view was that
as the retention moneys had been withheld from the plaintiff, they
would have had to be paid to
the plaintiff at the completion of the
project. To her knowledge, after the cession was signed, all payments
were made to the plaintiff
and not to Lashes. When it was suggested
to her that the municipality was not a party to the cession, her
response was that her
signature on the cession meant that she
acknowledged the cession on behalf of the municipality. She also
accepted that the municipality
would pay the plaintiff in accordance
with the cession. If she had not signed the cession, it would have
been null and void. All
this was done after she had spoken to the
whole management of the municipality.
[12]
Mr James Nkosinathi
Madondo ('Mr Madondo'), who was the chief financial officer at the
municipality from July 2007 to May 2013,
corroborated Mrs Mkhize's
evidence in all material respects regarding the cessions. He
confirmed that he was aware of the cessions
between the plaintiff and
Lashes, as they had been reported to the then management of the
municipality and had been approved. He
further confirmed that they
relied on those cessions for all payments made to the plaintiff. He
also reiterated that had he still
been employed by the municipality,
he would have paid the plaintiff on the basis of the cession. He
would also have paid the plaintiff,
as the retention moneys had been
withheld from the plaintiff's payments during the course of the
project.
[13]
Mr Madondo testified
that up until his departure from the municipality in 2013, nobody had
questioned him about the validity of
the cession between the
plaintiff and Lashes. The cessions were never even questioned by the
Auditor General during the yearly
audits for that matter. He
testified that once the engineers had issued the payment certificate,
he would have paid the plaintiff
when it submitted its invoice
together with the copy of the cession. When he was asked by Mr
Goddard whether he would have continued
to pay the plaintiff if it
had been discovered that the cession was invalid, his answer was that
he would have stopped paying.
[14]
Mr Dladla, who was one of the
members of Lashes, also corroborated Mrs Mkhize's evidence that after
Lashes had experienced financial
difficulties, he approached the
plaintiff for assistance. He confirmed that after discussions with
Mrs Mkhize and the plaintiff,
the cessions were signed. His
understanding of the cession was that the plaintiff would do all the
work on the two sites, and the
municipality would pay the plaintiff
as per the invoices and the payment certificates. He confirmed that
all the retention moneys
were due to the plaintiff, and nothing was
due to Lashes. When asked under cross-examination whether the
municipality was aware
that the retention moneys were not to be paid
to Lashes, Mr Dladla's response was that they ought to have been
aware as the retention
moneys had not been deducted from Lashes but
from the plaintiff.
[15]
Mr Dladla was adamant
that the plaintiff did not replace Lashes as the contractor, but it
was agreed between them that the plaintiff
would complete the
projects for Lashes, and that the plaintiff would be paid in
accordance with the cession. He confirmed that
after the cessions
were signed, the municipality paid the plaintiff directly and nothing
was owed to Lashes. At all times Lashes
would issue nil invoices and
the municipality would pay the plaintiffs invoices. He confirmed Mrs
Mkhize's evidence that no particular
invoice was attached to the
cessions at the time of signature. This was as the cessions were
relied upon for all future payments
to the plaintiff. He further
confirmed that he had never demanded payment of retention moneys from
the municipality on behalf of
Lashes, as they were never due to
Lashes in the first place. He was never asked by the municipality
whether the moneys should be
paid to the plaintiff or not.
[16]
The final witness was Mr
Denis Kotze ('Mr Kotze'), a professional engineer employed by
Willcocks, Reed & Kotze (Pty) Ltd. He
confirmed that they had
been appointed by the municipality to plan, design and supervise both
the Inkanyezi and Bergville projects.
He testified that he became
aware of the cessions when the plaintiff was introduced to him and
his team. He confirmed that the
plaintiff performed all the work, and
at various times he would issue payment certificates which were
honoured and paid by the
municipality in accordance with the cession
agreements between the plaintiff and Lashes. He confirmed that after
all the work was
completed by the plaintiff, an inspection was
carried out by his team. The representatives of the plaintiff, the
municipality and
Lashes were present. As they were all satisfied with
the work that was done, a completion certificate was issued at that
stage.
[17]
After a period of 12
months had elapsed since completion, once all the snags and defects
had been attended to, a final inspection
was held by the same team as
mentioned in paragraph 16. Everyone was happy with the completion of
the project and they signed off
on the projects. This enabled the
release of retention moneys and any bond guarantees that were in
place. It was then that the
final completion certificate was issued
and, as per the usual arrangements, he asked the plaintiff to do an
invoice equivalent
to the payment certificate. He knew that the
plaintiff would be paid by the municipality due to the cession
agreements in place
between the plaintiff and Lashes, which the
municipality knew about. In any event, the plaintiff had done the
work, and the retention
moneys were due to it anyway.
[18]
Mr Kotze testified that
the retention moneys would not have been due to anyone else if one
had regard to the payment certificates.
He confirmed that there were
no retentions for specialist services and suppliers of material. He
was adamant that the retentions
in the two payment certificates were
due to the plaintiff and no one else. He confirmed that in his email
of 13 May 2015
[2]
he advised Barbah Mkhize of the municipality that the retention
moneys could be released to the plaintiff. He did not know why
the
municipality was refusing to release the retention moneys to the
plaintiff.
[19]
Under cross-examination, he
testified that at all times the contracts were between the
municipality and Lashes. It was for this
reason that contractually
the retention moneys were due to Lashes, but the cessions had to be
taken cognisance of when payments
were made. He testified that this
was why he worded his email to the municipality in that fashion.
[3]
He testified that he believed that the cessions were valid as the
municipality had paid all the plaintiffs previous invoices in

accordance with the cession. He was also adamant that the retention
moneys had to be released to the plaintiff, as it had done
all the
work, and the money had been retained from it in the first place. He
concluded his evidence by saying that the fair and
reasonable
solution was that the person who did the work ought to be paid, hence
he told the municipality to pay the plaintiff.
That, in a nutshell
was the plaintiff's case.
[20]
As alluded to earlier,
the municipality did not call any witness and instead closed its
case. Mr Padayachee SC, counsel on behalf
of the plaintiff, argued
that as the municipality had not called any witnesses, this meant
that the plaintiffs evidence remained
unchallenged. He submitted that
the municipality had not raised any proper defences or produced
evidence to discredit the plaintiffs
case, hence I ought to find for
the plaintiff. He argued that the cessions were prepared by Mrs
!'v1khize on behalf of the municipality,
and were approved by her in
that capacity. This, according to her evidence, was to ensure that
the projects were completed timeously.
In any event, as the
municipality had paid the plaintiff for all the previous payment
certificates that had been submitted to it,
there was no reason to
withhold the retention moneys, so went the argument.
[21]
Mr Padayachee further submitted
that Lashes had transferred its rights to payments for the two
projects to the plaintiff in terms
of the cessions, which were
accepted and approved by the municipality. Therefore, as the
municipality had done previously, it had
to comply with the cessions
and pay the plaintiff. In the alternative, Mr Padayachee argued that
the municipality must be estopped
from raising technical defences as
it benefited from the work performed by the plaintiff in accordance
with the cessions. He argued
that if there was anything wrong with
the cessions, then the blame lay at the door of the municipality as
it had prepared the cession
documents. He argued that even if one had
to apply the
'ubuntu'
principle, it demanded that
the plaintiff be paid.
[22]
Mr Goddard, on the other
hand, argued that having regard to the content of the cessions, it
was impossible to determine what was
ceded. This was exacerbated by
the fact that even though the cessions stated that the right, title
and interest ceded was as per
the attached detailed invoice, there
was however no invoice attached to the cession. Furthermore, since
the cessions seemed to
only cede a portion of the claim, it was
therefore impossible to determine how much money would have to be
paid to the plaintiff,
thereby making the cession uncertain which was
impermissible. He further argued that the cessions had to be
interpreted objectively
from the language used in the documents, as
it was irrelevant to consider how the parties interpreted them. He
also argued that
because he believed that Mr Dladla testified that
Lashes had been replaced by the plaintiff (which is incorrect), yet
Mrs Mkhize
and Mr Kotze knew that Lashes had not been replaced, then
the parties were not
ad idem
as to what agreement was
actually reached.
[23]
Furthermore, as the
plaintiff had not led any evidence about the enrichment claim, then
this meant that it had abandoned that alternative
cause of action. In
any event, so went the submission, because the plaintiff was a
subcontractor to Lashes, it could not have had
an enrichment claim
against the municipality but Lashes could. In as far as the argument
and claim about estoppel was concerned,
it was submitted that it was
not clear from the evidence what representation of fact the plaintiff
relied on to make such a claim.
With regard to claim 3, it was argued
that any costs awarded against the municipality should take into
account the fact that the
municipality had overpaid the plaintiff in
that claim. For all these reasons Mr Goddard argued that the
plaintiffs claim should
be dismissed.
[24]
A 'cession has been defined as
a bilateral juristic act in terms of which a right is transferred by
agreement between the transferor
(cedent) and transferee
(cessionary). Generally, no formalities are required for the
antecedent obligatory agreement or the act
of cession. The parties
may agree on the formalities with which the cession is to comply. A
cession may thus be either express
or tacit, or may be inferred from
the conduct of the parties. While the cession does not have to be
reduced to writing, the parties
may agree that the cession will only
be valid if reduced to writing.'
[4]
[25]
Mrs Mkhize and Mr
Dladla's evidence in this regard was that there were discussions
prior to the cessions being signed. Their evidence
was clear that it
was agreed between the parties (including the municipality) that for
all intents and purposes, Lashes would remain
the contractor. The
plaintiff would do all the work onsite, and Lashes was ceding all
payments to the plaintiff in respect of all
that work. In other
words, the municipality did not want to terminate the contract with
Lashes, as this would affect the time frame
for the completion of the
projects. That was why it was agreed that Lashes would get someone,
being the plaintiff in this case,
to complete the projects. It was on
this basis that the cessions were entered into.
[26]
In this case therefore there
was both the antecedent obligatory agreement (the agreement to cede)
as well as the act of cession.
Contrary to Mr Goddard's submission,
the deeds of cession made it quite clear what was being ceded. The
heading itself made it
abundantly clear that it was a 'Deed of
Cession for Direct Payment.' Furthermore, it was common cause that
the contract prices
were R20 385 391.65 and R11 498 121.05
respectively. This meant, according to Mrs Mkhize who prepared and
approved the cessions
on behalf of the municipality, that the
plaintiff could submit claims not exceeding the contract price.
[27]
Mrs Mkhize's evidence was
supported by paragraph 3 of the deeds of cession which read: 'And
whereas the cedent has agreed to grant
to the cessionary the cedent's
right, title and interest in and to a portion of the said claim equal
to the amount due to the cessionary
by the cedent stated here in
above.' Paragraph 1, titled cession on page 2 of the deeds of
cession, read as follows: 'In execution
of the abovementioned
contract of hire/sale/services rendered the cedent hereby cedes to
the cessionary the cedent's right, title
and interest in and as
detailed in the attached invoice from the cessionary.'
[28]
Mr Dladla and Mrs
Mkhize's evidence in this regard was that there was no invoice
attached to the cessions. What was envisaged, and
in fact agreed to,
and done for almost all the invoices, except the final ones was that
each time the engineers prepared the payment
certificates, invoices
from the plaintiff together with a copy of the cession would be
attached to the payment certificates and
payment would then
accordingly be made by the municipality. This was never questioned by
the municipality until the final payments.
Since there was no
evidence presented from the municipality, we do not !mow what caused
it not to pay the final invoices.
[29]
One can only assume that
the municipality relied on what was stated in paragraph 4(a) of their
plea namely:
'the cession relied on by
the plaintiff (annexure M) does not create any contractual nexus
between plaintiff and defendant, alternatively
does not substitute
the plaintiff as the contractor in contract 04/2008 but merely
entitled the plaintiff to be paid certain amounts
which might have
become owing by the defendant to Lashes Investments CC (Lashes) in
terms of contract 04/2008 between Lashes and
the defendant.'
[30]
However, all this was
negated by Mrs Mkhize's evidence when she testified that the
municipality had approved and consented to the
cessions. Not only did
she sign the cession acknowledging them, but she also obtained
consent and approval from the entire management
of the municipality,
including the municipal manager. Her evidence in this regard was
uncontroverted. She also confirmed that the
plaintiff was never
substituted for Lashes. Lashes contractually remained the contractor.
So, there was a contractual nexus between
the plaintiff, Lashes, and
the municipality. In any event, if one considers their evidence in
this regard, the cession was a juristic
act upon which the cession
was executed.
[31]
The puzzling issue in
this matter was that from the time that the cessions were signed, the
plaintiff was paid all its invoices
in accordance with those
cessions. Only the last invoices were not paid. There is no
explanation provided by the municipality for
this nonpayment. Even
their own engineers, in their email of 13 May 2015 to Barbah Mkhize,
advised them to pay the plaintiff. This
was because the work had been
done and completed. Everyone, including the municipality, was happy
with the work as it was done
to their satisfaction, hence the final
completion certificates being issued. It was for these reasons that
Mr Kotze believed that
perhaps the plaintiff was not paid due to
personal grudges.
[32]
It was also surprising that the
municipality had never enquired nor consulted with Mrs Mkhize and Mr
Madondo in preparation for
its defence against the plaintiff's
claims. It was common cause that the claims were for retention
moneys. It was also not disputed
that these would have been moneys
which were withheld from all the plaintiff's invoices previously
submitted and which would be
equal to 10 per cent of the total
contract price. In essence, the money belonged to the plaintiff as it
was withheld from its payments.
Mrs
money belonged to the
plaintiff as it was withheld from its payments. Mrs Mkhize, Mr Kotze
and Mr Dladla testified that much. They
further confirmed that Lashes
had no claim over those retention moneys nor had it ever claimed or
tried to claim them. Mr Dladla
testified that the money was due to
the plaintiff and it ought to be paid to it.
[33]
There was therefore no
confusion or misunderstanding between the plaintiff and Lashes, and
the municipality for that matter, of
what was ceded and how much was
to be ceded. It was therefore not open to the municipality to try and
create some confusion about
the contents of the cessions. Having
taken into account the cession documents and the evidence of Mrs
Mkhize, Mr Madondo and Mr
Dladla, I am satisfied that Lashes ceded
its rights to payments on contracts 04 and 05 of 2008 to the
plaintiff, in accordance
with invoices and payments certificates that
would be submitted by the plaintiff from time to time to the
municipality. This was
the contract that the parties entered into,
and to interpret it otherwise would be making a new contract for the
parties.
[5]
[34]
The municipality is therefore
estopped from denying the truth about the contents of the deeds of
cession, and the purposes for which
they were entered into. The
representation made by Mrs Mkhize to the plaintiff and Lashes was
that the plaintiff would be paid
directly by the municipality, once
the plaintiff performed the remaining work on the Inkanyezi and
Bergville projects, and once
the municipality had received the
necessary invoices and the payment certificates. Accordingly, the
plaintiffs claims must succeed.
Because of this finding, I do not
have to deal with the alternative claim of unjust enrichment. With
regard to claim 'C' in the
plaintiff's particulars of claim, no
evidence was presented by either of the parties relating to this
claim. In fact, at the commencement
of the trial, it was submitted
that the claim had been settled between the parties. I will therefore
not say any further with regard
to it.
[35]
Finally, there was an
issue about when interest ought to start running if I found for the
plaintiff. The plaintiff pleaded, and
it was submitted that much, for
the interest to start running from the date when the payment
certificates were issued, being 10
September 2014 and 29 December
2013 respectively. Mr Goddard submitted that interest should start
running from the date that the
summons was issued, being 21 August
2015. There was no reason furnished by the municipality as to why the
plaintiff was not paid
when the payment certificates were received by
it. I have no reason not to order that interest should run from the
date that the
payment certificates were issued.
Order
[36]
Accordingly, I make the
following order:
(i)
The defendant is ordered
to pay the plaintiff the sum of R 1 039 355.53 plus interest at the
applicable legal rate from 10 September
2014 to date of payment;
(ii)
The defendant is ordered
to pay the plaintiff the sum ofR604 394.92 plus interest at the
applicable legal rate from 29 December
2013 to date of payment;
(iii)
Costs of suite, such
costs to include costs consequent upon the employment of senior
counsel.
POYO-DLWATI
J
APPEARANCES
Date
of Hearing
:
20
February 2019
Date
of Judgment
:
12
March 2019
Counsel
for Applicant        :
Adv
Padayachee SC
Instructed
by

:           Carlos
Miranda Attorneys
Respondent

:           Adv
Goddard SC
Instructed
by

:
Shepstone & Wylie Attorneys
[1]
Exhibit A36-39 and A39-41
[2]
Exhibit 'A' at 10.
[3]
Exhibit 'A' at 94 and 119-121.
[4]
Brayton Cariwald (Pty) Ltd and Another v Brews
2017(5) SA 498
(SCA) para 9; see also
LTA Engineering Co Ltd v Seacat
Investments (Pty) Ltd
1974(1) SA 747 (A) at 762A.
[5]
Natal faint Municipal Pension Fund v Endumeni Municipality
2012
(4) SA 593
(SCA) para 18