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[2017] ZASCA 152
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Red Coral Investments (Pty) Ltd v Cape Peninsula University of Technology (498/2017) [2017] ZASCA 152 (22 November 2017)
THE SUPREME
COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case
No: 498/2017
Reportable
In
the matter between
RED
CORAL INVESTMENTS (PTY) LTD
APPELLANT
and
CAPE
PENINSULA UNIVERSITY OF TECHNOLOGY
RESPONDENT
Neutral
citation:
Red
Coral Investments (Pty) Ltd v Cape Peninsula University of Technology
(498/17)
[2017]
ZASCA 152
(22 November 2017)
Coram
:
Majiedt, Willis, Saldulker
and Mocumie JJA and Schippers AJA
Heard:
10 November 2017
Delivered:
22 November 2017
Summary:
Condonation
application – pleadings – exception –
National
Student Financial Aid Scheme Act 56 of 1999
precluding oral agreement
between NSFAS and service provider directly or through agent on
behalf of NSFAS – exception correctly
upheld by high court –
no prospects of success – condonation application dismissed
with costs.
ORDER
On
appeal from:
Western
Cape Division of the High Court, Cape Town (Klopper AJ, sitting as
court of first instance):
1.
The application for condonation and for the reinstatement of the
appeal is dismissed
with costs.
JUDGMENT
Majiedt
JA (Willis, Saldulker and Mocumie JJA and Schippers AJA concurring):
[1]
A claim for payment of the sum of R758 630.12, instituted by the
appellant, Red Coral Investments (Pty) Ltd (Red Coral),
in the
Western Cape Division of the High Court, Cape Town (the high court)
against the respondent, Cape Peninsula University of
Technology
(CPUT), was met by an exception to the particulars of claim. Klopper
AJ upheld the exception and set aside the particulars
of claim, but
granted leave to appeal to this Court. Although the National Student
Financial Aid Scheme (NSFAS) was sued as the
first defendant in the
high court, it played no role in the exception proceedings and does
not feature in this appeal. Red Coral
was out of time with the
lodging of the appeal record and, in terms of
rule 8(3)
of this
Court’s Rules
[1]
, the
appeal had consequently lapsed. Red Coral seeks condonation of its
non-compliance and an order for the re-instatement of the
appeal.
[2]
CPUT contended that the appeal should be struck from the roll, since
ex
facie
Red Coral’s notice of appeal it impermissibly seeks to appeal
against the high court’s reasoning and not against its
order.
[2]
While the submission
is not without merit, CPUT agreed that we consider the merits of the
appeal in order to determine whether
there are prospects of success
as one of the factors in the adjudication of a condonation
application.
[3]
The exception was based on a contention that the particulars of claim
lacked the necessary averments to sustain a cause of action.
In
essence, CPUT’s argument was that NSFAS is precluded by the
relevant legislation from entering into the type of oral agreement
which Red Coral alleged it had entered into with NSFAS’s agent,
CPUT, and on which Red Coral relied for its claim. The claim
against
CPUT was framed as an alternative to the main claim against NSFAS in
the amount mentioned above. The alternative claim
was based on delict
(
condictio
furtiva
),
alternatively on unjustified enrichment (the
condictio
sine causa
).
The claims were premised on the following factual matrix.
[3]
[4]
It was alleged that CPUT, acting as the duly appointed and authorised
agent of NSFAS, agreed to Red Coral providing rental accommodation
to
CPUT students, who it was unable to accommodate on campus. These
students were recipients of funding from NSFAS which, as its
name
depicts, makes available funding mainly from the public purse to
eligible students. It was alleged in the particulars of claim
that
Red Coral was accordingly designated as an approved service provider
of private student accommodation for NSFAS purposes.
Red Coral
alleged further that, in terms of an oral agreement between it and
CPUT (as agent for NSFAS), CPUT would pay to Red Coral
the amounts
allocated by NSFAS to students who received NSFAS accommodation
allowances and who rented private accommodation from
Red Coral.
Pursuant to the oral agreement, Red Coral leased rooms to students at
a fixed monthly rental.
[5]
Red Coral claimed the above amount from NSFAS (and another amount,
not relevant here) allegedly due and payable in terms of
the above
agreement. In the alternative, that amount was claimed from CPUT on
the two alternative bases outlined above. The delictual
claim was
based on the allegation that CPUT had knowingly, unlawfully and
intentionally appropriated the said amount without Red
Coral’s
permission. The alternative claim of unjustified enrichment was
premised on the allegation that CPUT had been unjustly
enriched at
Red Coral’s expense through the appropriation and retention,
without cause, of the funds to which Red Coral was
lawfully entitled.
[6]
In particularising its claim against CPUT, Red Coral prefaced its
claim as follows:
‘
21.
In the alternative to paragraph 20,
only
if it is found
that CPUT was not acting in the capacity as agent of NSFAS and within
the scope of its authority
when
it made the aforesaid deduction
from the payment due to Red Coral,
and
that NSFAS is for that reason alone
not liable to pay the sum of R758 630.12 to Red Coral, then and in
that event Red Coral avers that . . .’
(own
emphasis).
The
preceding facts pleaded in this regard was that the above amount had
been paid by NSFAS to CPUT as agent, but was never paid
over to Red
Coral and that CPUT was not entitled to withhold the amount. It was
contended by CPUT that, consequently, on the pleadings
the claim
against CPUT for the payment of that amount cannot exist unless the
condition in para 21 above is capable of fulfilment.
It is CPUT’s
case that the condition is not capable of fulfilment. In support of
its case, CPUT advanced two broad grounds
why the condition is
incapable of fulfilment. First, it contended that on the pleadings
NSFAS cannot in law be bound to the alleged
oral agreement relied
upon. And, second, it submitted that on the pleadings, NSFAS, as
principal, would remain liable to Red Coral
in terms of the alleged
oral agreement (assuming it is binding), notwithstanding the
unauthorised acts of its alleged agent, CPUT.
These contentions found
favour with the high court and it upheld these two grounds, which it
described as ‘the ground of
ultra vires’ and ‘the
law of agency ground’. Red Coral’s appeal is against the
ultra vires ground only.
The ultra vires ground emanates from the
provisions of the National Student Financial Aid Scheme Act 56 of
1999 (the Act).
[7]
NSFAS is a creature of statute, having been created by the Act.
[4]
As such it is constrained to act within the parameters of the statute
and can only exercise the powers conferred on it by that
empowering
statute.
[5]
All acts, in
particular for present purposes the conclusion of contracts,
performed outside the ambit of its statutory powers,
are invalid and
of no force and effect.
[6]
Moreover,
ss 66
and
68
of the
Public Finance Management Act 1 of 1999
provide that where a public institution such as NSFAS enters into a
transaction not authorized by its governing legislation, the
State
and that institution will not be bound by that transaction.
[7]
[8]
After a comprehensive examination of the relevant provisions of the
Act, the high court concluded that NSFAS was not empowered
in law to
enter into the alleged oral agreement relied upon by Red Coral. For
the reasons that follow, I am of the view that the
high court cannot
be faulted in its finding. It is plain on a close analysis of the
relevant provisions of the Act that concluding
such an oral agreement
does not fall within the ambit of NSFAS’s powers.
[9]
It is striking that, while the Act defines ‘bursar’,
‘borrower’ and a ‘designated public college
or
designated higher education institution’, it contains no
definition of a service provider. NSFAS’s functions, outlined
in s 4, are to allocate loans and bursaries to eligible students, to
develop criteria and conditions for such loans, to raise funds,
to
recover loans, and to advise the Minister of Higher Education and
Training. For present purposes I will restrict myself to references
to a designated higher education institution. It was common cause
that CPUT is such an institution.
[10]
The Act contemplates only two types of agreements. Section 19(3)
provides for a written agreement to be entered into between
NSFAS and
every borrower or bursar. In terms of s 20(2)(e) a designated higher
education institution may enter into such written
agreement with
borrowers or bursars on behalf of NSFAS in terms of the provisions of
the Act and on the terms and conditions determined
by NSFAS.
[11]
The second type of agreement contemplated by the Act is one between
NSFAS and a designated higher education institution. Section
20,
which regulates this type of agreement, reads as follows:
’
20.
Designated public college and designated higher education
institution
.
– (1) The board [of NSFAS] may enter into an agreement with a
public college or a higher education institution which agrees
to
become a designated public college or designated higher education
institution for purposes of administering loans and bursaries
to
students of that institution on behalf of the NSFAS.
(2)
The agreement referred to in subsection (1) must authorise the
institution on behalf of the NSFAS –
(a)
to administer
loans and bursaries granted to students of the institution;
(b)
to receive
loan and bursary applications from students;
(c)
to consider
and assess the applications in the light of the criteria for the
granting of loans and bursaries determined by the NSFAS;
(d)
to grant
loans and bursaries if the criteria are met, after ascertaining that
funds are available; and
(e)
to enter into
a written agreement with a borrower or bursar in accordance with the
provisions of this Act and on the terms and conditions
determined by
the NSFAS.
(3)
A designated public college or designated higher education
institution must –
(a)
at such
intervals as are agreed on by the college or institution and the
board, report to the board on the progress made by a borrower
or a
bursar with regard to the course of study followed by him or her; and
(b)
immediately
notify the board if a borrower or bursar discontinues his or her
studies.’
[12]
The following important aspects are evident in s 20:
(a)
First, the agreement is between NSFAS and a designated institution
for the purpose of administering loans and bursaries to students
of
that institution on behalf of NSFAS.
[8]
(b)
Second, there is a closed list of functions which the institution is
authorised to perform on behalf of NSFAS.
[9]
Entering into contracts with third parties is not one of them. In the
present case, this aspect is crucial – any act, power
or
function performed by CPUT, ostensibly on behalf of NSFAS, outside
the purview of s 20(2), would be invalid. Where the contravention
of
a statute by an act or contract defeats the very purpose of the
statute, the contravening act or contract will be void.
[10]
The alleged oral agreement between Red Coral and CPUT (on behalf of
NSFAS) falls within this category – it would defeat the
very
purpose of the Act. Section 2(1) provides that ‘[t]he purpose
of this Act is to establish a financial aid scheme for
students at
public colleges or at higher education institutions.’
(c)
Third, and closely related to the previous aspect, the designated
higher education institution is required to report regularly
to NSFAS
on the progress of borrowers and bursars,
[11]
and to notify NSFAS forthwith in the event of a borrower or bursar
discontinuing his or her studies.
[12]
[13]
Section 19(5) provides that ‘the amount of the loan or bursary
is paid by the NSFAS to the designated higher education
institution
concerned by way of allocations in respect of amounts payable to the
institution by the borrower or bursar’.
Thus, a bursary which
could conceivably encompass a bursar’s tuition, accommodation,
transport and study materials, is paid
by NSFAS as an allocation to
the institution. Nowhere does the Act envisage a scenario where NSFAS
itself, or through its agent
(CPUT), pays a service provider such as
Red Coral in the present instance.
[14]
The rationale behind the system of payments envisaged by the Act is
evident from its purposes: to provide financial aid to
eligible
students and for the management of the funds by public colleges and
higher education institutions. It is designed to prevent
NSFAS funds
from being used irresponsibly to incur debts for students. In order
to fulfil the objects of the Act, payments are
made only to the
institution. Thus, s 19(2) is plain and unambiguous in its purpose:
‛[a] loan or bursary is granted in respect
of a particular
course of study, which must be specified in the loan or bursary
agreement in question, and may not be used for
any other purpose’.
Understandably, in order to fulfil that purpose, the Act envisages
payment only to the institution concerned,
and to no other person or
entity. And the institution is required to report on the progress of
the bursar or borrower and to inform
NSFAS without delay of the
termination of his or her studies by the bursar or borrower. Not only
is the disbursement of funds strictly
circumscribed, but there are
also several checks and balances to protect public funds.
[15]
The Act defines a loan widely:
‘”
[L]oan”
means a loan granted to a person by the NSFAS in order to enable the
person to defray the costs connected with his
or her education at a
designated public college or designated higher education institution,
and those connected with the board
and lodging of that person for
purposes of attending the institution.’
But,
ultimately, a loan is to be understood to be strictly confined to the
‘allocations in respect of amounts payable to the
institution’
(s 19(5), above). It was contended on behalf of Red Coral that the
power to conclude a contract such as the
one relied on, is implied in
the Act. The submission is untenable. As I have attempted to
demonstrate, the Act is clear and unambiguous
regarding the payment
system.
[16]
In the premises, Red Coral’s reliance on an oral agreement
between it and CPUT, as an agent of NSFAS, is unsustainable
in law.
As a consequence, the condition postulated by Red Coral in para 21 of
its particulars of claim, is incapable of fulfilment
and the
particulars of claim lack averments to sustain a cause of action. The
high court rightly upheld the exception. Absent any
prospects of
success, no case has been made out for condonation. There is no
reason why costs should not follow the outcome.
[17]
The following order is issued:
The
application for condonation and for the reinstatement of the appeal
is dismissed with costs.
________________________
S A
MAJIEDT
JUDGE
OF APPEAL
APPEARANCES
For
Appellant:
A R Newton
Instructed
by:
Jay Reddy Attorneys, Wynberg
Phatshoane Henney
Attorneys, Bloemfontein
For
Respondents:
B L Studti
Gunstons
Attorneys, Cape Town
Bezuidenhout
Attorneys,
Bloemfontein
[1]
Rules Regulating the Conduct of the Proceedings of the Supreme Court
of Appeal of South Africa, 1998 as amended.
[2]
South African Reserve Bank
v Khumalo & another
[2010] ZASCA 53
;
2010 (5) SA 449
(SCA) para 4.
[3]
In accordance with well established principles, the facts are
outlined as averred in the particulars of claim, since they cannot
be said to be palpably untrue or so improbable that they warrant
outright rejection; see:
Stewart
& another v Botha & another
[2008]
ZASCA 84
;
2008 (6) SA 310
(SCA) para 4.
[4]
Section 3(1).
[5]
G B
Bradfield
Christie’s
The Law of Contract in South Africa
7ed at 267.
[6]
Abrahamse v Connock’s
Pension Fund
1963 (2) SA
76
(W) at 79A – C.
[7]
Panamo Properties 103 (Pty)
Ltd v Land and Agricultural Development Bank of South Africa
[2015]
ZASCA 70
;
2016 (1) SA 202
(SCA) para 22.
[8]
Section 20(1).
[9]
Section 20(2)
(a)
–
(e)
.
[10]
Standard Bank v Estate van
Rhyn
1925 AD 266
at 274;
Metro Western Cape (Pty)
Ltd v Ross
1986 (3) SA 181
(A) at 188 F-J.
[11]
Section 20(3)
(a)
.
[12]
Section 20(3)(b).