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[2017] ZAKZDHC 19
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DSD Trading t/a Eveready Brick and Block v eThekwini Municipality (4502/2013) [2017] ZAKZDHC 19 (26 April 2017)
IN
THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL
LOCAL DIVISION, DURBAN
CASE
NO: 4502/2013
In
the matter between:
DSD
TRADING t/a EVEREADY BRICK & BLOCK
Plaintiff
and
ETHEKWINI
MUNICIPALITY
Defendant
JUDGMENT
CHETTY,
J
[1]
The plaintiff instituted action against the defendant for payment of
R217 405.90 in circumstances where it contends that
an entity
known as Siyathembana Trading 264 (Pty) Ltd had ceded its book debts
to the plaintiff, and that the defendant was obliged
to pay all
monies owed to Siyathembana, to the plaintiff. The defendant failed
to do so, despite having received notification of
the cession of
debts. Consequently, the plaintiff contends that the defendant is
liable for all those amounts paid between 1 to
13 November 2012,
together with interest and costs.
[2]
At the outset the defendant’s attorney, Mr
Mboto
informed me that the defendant had terminated the mandate of its
counsel, Advocate
Gunase
,
on the morning of the trial. The matter had been referred to
the expedited trial role and a notice of set down had been
filed on
13 December 2016. A pre-trial conference had taken place on 22
February 2017 which was attended by counsel and the
attorneys for
both parties. In terms of reaching agreement for the efficient
hearing of the matter, the parties agreed that neither
intended
bringing any interlocutory motions.
[3]
Mr
Mboto
requested a postponement of the matter on the basis that the
defendant intended joining Siyathembana as a party to the proceedings
as it considered Siyathembana to have a pivotal role in the matter.
In addition, in light of the termination of the mandate of
counsel,
the defendant’s attorney was not in a position to acquaint
himself with the pleadings and documents pertaining to
the matter,
and as such he would be at a disadvantage if he were compelled to
proceed under those circumstances. The defendant
tended the wasted
costs which would be occasioned by the postponement of the matter.
[4]
The application for a postponement was opposed by Mr
Singh
SC
, who
appeared for the plaintiff. Counsel brought to the court’s
attention that at the time of the holding of the pre-trial
conference
the attorneys and counsel for both parties were
ad
idem
that there were no interlocutory applications which would impede the
commencement of the trial. No indication was given of the
possibility
of an application to join Siyathembana. Moreover counsel who had been
briefed by the defendant was present at court
and gave no indication
that he was unprepared or that he was unable to proceed with the
trial. On the issue of joinder, Mr
Singh
submitted that the involvement of Siyathembana is not a recent
occurrence. When the plaintiff instituted application proceedings
under case number 11484/2012, Siyathembana and the defendant were
cited as co-respondents and the plaintiff clearly spelt out the
basis
on which Siyathembana was liable to it for goods sold and delivered,
and monies advanced. In those proceedings, the plaintiff
essentially
sought an order freezing the accounts of Siyathembana. Ultimately, an
order was granted in December 2012 preventing
Siyathembana from
collecting on its book debts. Accordingly, it was submitted that the
defendant had sufficient opportunity to
bring an application to join
Siyathembana in these proceedings, if it genuinely believed that it
had a substantive and material
interest in the matter.
[5]
One of the aspects which weighs heavily against the defendant is that
the court has not been fully, or at all, informed of the
interest
that Siyathembana has in order to be joined as a party to these
proceedings. The onus rests on the defendant to show that
Siyathembana has a direct and substantial interest in the issues
involved and the order which the court might make. See
United
Watch & Diamond Co (Pty) Ltd v Disa Hotels Ltd & another
1972
(4) SA 409
(C) at 415E-F. In
Henri
Viljoen (Pty) Ltd v Awerbuch Brothers
1953 (2) SA 151
(O) it was held that direct and substantial interest
suggests an interest in the right which is the subject-matter of the
litigation
and not merely a financial interest which is only an
indirect interest in such litigation.
[6]
Mr
Singh
,
in the absence of any facts placed before this Court to support a
claim to join Siyathembana, was left to speculate as to the
possible
reason for the joinder. One of those reasons is for the
defendant to recover monies which it paid to Siyathembana,
when it
ought not to. It was pointed out that there is however no
prospect of such recovery as the payments to Siyathembana
were made
in and during November 2012. Any attempt to institute action at this
late stage, would surely be met with a plea of prescription.
[7]
Apart from the weak position in relation to the issue of joinder, the
plaintiff took issue as to why, on the morning of a trial,
would the
defendant seek to terminate the instructions of counsel who has been
properly instructed and is available to argue the
matter. In my view,
where a litigant proceeds to terminate the services of counsel in
this matter, then it must be prepared to
proceed with the trial, with
or without another counsel in place, and in a manner that does not
disrupt the functioning of the
court. The defendant made the election
to terminate the services of its counsel, and then sought to postpone
the trial.
In my view, it does not behove the defendant
to now contend that it has not had sufficient opportunity to prepare
or to instruct
new counsel.
[8]
Applying the test set out in
Myburgh
Transport v Botha t/a SA Truck Bodies
1991
(3) SA 310 (NmS)
,
that the court has a discretion as to whether an application for a
postponement should be granted, and that the exercise of such
discretion must be done in a judicial manner, I am of the view that
the application is unsubstantiated and misconceived. Where
a party,
like the defendant, requests an indulgence of the court, it is
incumbent that a full and satisfactory explanation of the
circumstances giving rise to the application must be set out. In the
present matter there has been nothing of the sort, other than
a
reference to the joinder of Siyathembana, without any explanation
from the legal representative of the defendant why it would
be in the
interests of justice to postpone the matter to allow for such joinder
to take place.
[9]
As set out earlier, this matter has been enrolled on the expedited
trial roll and a postponement would only serve to prejudice
the right
of the plaintiff who has a substantive interest in having the matter
expeditiously disposed. It is to be noted
that the defendant
tendered the wasted costs in this matter. Apart from the
plaintiff not being persuaded by this tender,
the ratepayer
ultimately becomes liable for such costs through the public purse.
No fault is attributed to the officials
of the defendant or its legal
representatives. Neither the attorney who attended the
pre-trial conference nor any official
from the defendant was in
attendance at court, which suggests that the granting of a
postponement was there for the mere asking.
I was not satisfied
that a proper case had been made out for the granting of a
postponement. The application for postponement
was accordingly
dismissed, with costs.
[10]
Consequent upon the above ruling, Mr
Mboto
requested a further indulgence for the matter to stand down in order
to take instructions from his client, whom I pointed out above,
were
not in court. I refused the request, as I had earlier granted
him an extended period to consult with his client and
consider the
opposition of the plaintiff to the adjournment. Surely this
consultation would have included a discussion of
what the defendant
would do in the event of the application being refused. Moreover, the
granting of continuous adjournments is
disruptive to the efficiency
of the court’s functioning, particularly in this case where the
matter had been allocated a
day to proceed on the expedited trial
roll. I declined the request for the matter to stand down
further and directed that
the trial proceed. The plaintiff was
ready to commence its case and proceeded to call its first witness.
Mr
Mboto
remained
present for the duration of the proceedings.
[11]
Pregalathan Moodley (‘Moodley’), the sole member of the
plaintiff, testified that he had personal knowledge of
the cause of
action and that he represented the plaintiff in its dealings with
Siyathembana in relation to a project initiated
by the defendant for
the upgrading of low-cost housing in the suburb of Lamontville,
Durban. Moodley testified that in November
2011 a written agreement
was concluded with Siyathembana, who was represented at the time by a
Mr Makhaye, in terms of which the
plaintiff undertook to supply
building materials to contractors involved in the Lamontville
project. The plaintiff granted
Siyathembana credit facilities
up to the amount of R2.5 million. Goods were supplied to the building
contracts pursuant to an order
number issued by Siyathembana, and the
agreement between the parties was that the materials would be paid
for by Siyathembana within
30 days of receipt of the plaintiff’s
statement.
[12]
In terms of the agreement reached with Siyathembana, the latter
irrevocably and
in
rem suam
ceded to the plaintiff all its rights, title and interests in respect
of any claims that it had with the contractors in respect
of the
materials supplied to them. This cession of rights to the
plaintiff provided the necessary security to enable it to
continue
supplying building materials to the contractors. In addition, Mr
Makhaye signed a personal suretyship for the debts of
Siyathembana.
[13]
Moodley further testified that the defendant entered into agreements
with the individual contactors, who were small to medium
enterprises
(‘SME’s) falling within the framework of
broad-based
black economic empowerment
to
carry out the construction at the project site. In light of the
contractors not having access to capital to fund their
constructions,
Siyathembana was installed as an ‘intermediary’ to
procure the supply of building materials for the
contractors,
enabling them to complete their projects. In exchange
Siyathembana obtained cessions from each of the contractors
in
respect of any claims that they would have against the defendant, in
respect of monies owed to them for work done.
[14]
According to the plaintiff the defendant was fully aware of its
involvement in the housing project and in December 2011 it
(the
defendant) concluded an agreement with Siyathembana in terms of which
the plaintiff was confirmed as the sole supplier of
materials for the
Lamontville building project. As I understood the witness’s
evidence, materials would only be supplied
to the contractors upon
the production of an order number issued by Siyathembana. Payment was
to be effected within 30 days.
[15]
By January 2012 the amount of goods supplied to the contractors had
steadily increased and Siyathembana approached the plaintiff
with a
view to increasing its overdraft facility. The application was
granted and the necessary contracts in respect of security
and
suretyship were put in place.
[16]
In April 2012 Siyathembana approached the plaintiff requesting they
advance funds to it, to enable the contactors to pay the
wages to
their workers. These amounts were to be paid directly to the
contractors upon receipt of the requisite order number being
issued
by Siyathembana.
[17]
Despite the necessary securities being installed in order to ensure
prompt payment, Siyathembana failed to pay the amounts
owing, causing
Moodley to request a meeting with Siyathembana’s attorney in
order to work out a payment plan in respect of
the outstanding
amounts. At this stage the total amount owing to the plaintiff was
R1 894 445.97 comprising R768 645.97
for goods delivered
and R1 125 800.00 in respect of the wages paid to the
contractors. No satisfactory conclusion was
reached and despite
demand Siyathembana failed to pay either of the sums referred to
above.
[18]
During the time that the plaintiff was supplying building materials
as well as advancing sums of money to Siyathembana, Moodley
testified
that he had been authorised as an electronic signatory by
Siyathembana. As such, he had access to the banking activity
taking place in Siyathembana’s account. He noticed that while
monies were being paid into the account by the defendant,
Siyathembana was not paying anything towards the liquidation of its
indebtedness to the plaintiff. Moodley’s access to the
activity
in the bank account was subsequently withdrawn.
[19]
In light of the breach by Siyathembana in failing to pay its debts,
Moodley approached his attorneys. On 1 November 2012
an
application was launched by the plaintiff herein under case number
11484/2012 in which both Siyathembana and the defendant were
cited as
first and second respondents respectively. The relief sought in the
application was for an order freezing the bank account
of
Siyathembana and preventing it from collecting its book debts.
On 6 November 2012 the matter was adjourned to 12 November
2012 to
enable Siyathembana and the defendant herein to file their answering
affidavits. Furthermore, Siyathembana undertook that
until 12
November 2012 “
it
will not deal with any funds in the said Ned bank account under
number 1012171280, nor will the direct any funds “in an
out”
of the said account
.”
I was advised that the defendant herein was represented by its
counsel, Advocate
Gunase
,
at the time.
[20]
When the matter came before Steyn J on 12 November 2012 a rule
nisi
was
issued, returnable on 4 December 2012. The order interdicted
and restrained Siyathembana from diverging, conceding and
disguising
in anyway the funds and debts due to it, as well as instructing any
of its debtors to effect payment of money due to
it, to an account
other than that held at Nedbank, under account number 1012171280. In
addition, Siyathembana was required to provide
the applicant with a
list of all of its debtors, the amount of the indebtedness and their
further details.
[21]
Despite the defendant being informed of Siyathembana’s
indebtedness to the plaintiff in terms of the cessions referred
to
above, the defendant notwithstanding paid to Siyathembana the
following amounts, which the plaintiff contends should have been
paid
to it, in law. The amounts paid by the defendant to Siyathembana are
the following:
a.
1 November
2012
-
R35 792.18
b.
7 November
2012
-
R
59 613.72
c.
8 November
2012
-
R 30
000.00
d.
8 November
2012
-
R
30 000.00
e.
8 November
2012
-
R
32 000.00
f.
13 November
2012
-
R 30
000.00
[22]
In the result the plaintiff contends that the defendant is liable to
it in the sum of R 217 405.90 being the total amount
paid by the
defendant to Siyathembana, despite the defendant having knowledge of
the cessions, and of the application launched
under case number
11484/2012, and the contentions advanced in support of the relief
sought.
[23]
Moodley further confirmed that the plaintiff had complied with the
provisions of the Institution of Legal Proceedings against
Certain
Organs of State Act 40 of 2002 and gave necessary notice on 18
February 2013.
[24]
Mr
Mboto
was
then afforded the opportunity of cross-examining the witness. He
informed the court that he was unable to do so because of a
headache.
The court then adjourned to enable him to obtain the necessary
medication. On resumption, the court was advised that
he was still
unwell and unable to proceed. Upon being directed to proceed with his
cross-examination, Mr
Mboto
informed
the court that he had no questions for the witness. At this stage,
the court enquired from Mr
Mboto
whether he understood the implication of the witness not being
cross-examined, to which he responded in the affirmative. As pointed
out earlier, there was no official present in court that appeared to
represent the defendant. Counsel for the plaintiff thereafter
proceeded to close his case. Mr
Mboto
thereafter informed the court that he did not intend calling any
witnesses and accordingly closed the defendant’s case. That
concluded the evidence.
[25]
In argument, Mr
Singh
submitted that the evidence, which stands uncontradicted before this
court, confirms that the plaintiff supplied goods and materials
to
Siyathembana, which were intended to be used by the individual
contractors, who enjoyed a contractual relationship with the
defendant. The evidence further reveals the existence of a
cession in favour of the plaintiff by Siyathembana of any monies
owed
to it by the defendant.
[26]
A perusal of the defendant’s plea reflects that, in the main,
the plea constitutes a non-admission of the averments contained
in
the plaintiff’s particulars of claim. It does contain a denial
that the defendant was obliged to make any payment to the
plaintiff,
while at the same time admitting that it made payment to Siyathembana
of the amounts between the period 1 November 2012
and 12 November
2012. It further contends that such payment was made “
in
pursuance of its legal obligation to do so
”.
[27]
In regard to this latter ‘defence’ that the defendant was
under no obligation to pay over monies which it owed
to Siyathembana,
to the plaintiff, Mr
Singh
submitted that such contention is untenable. All that the
plaintiff is required to do in these circumstances is to give the
defendant notice of the cession of rights. In this case, the
plaintiff served a copy of the papers in case number 11484/2012
on
the defendant on 1 November 2012. In
Kubyana
v Standard Bank of South Africa Ltd
2014 (3) SA 56
(CC)
the
court made the following observations with regard to the requirement
of serving the s 129 notice (in terms of the
National Credit Act 34
of 2005
) on the consumer:
‘
[51] This argument cannot be
sustained. It is premised on the notion that a credit provider is
under an obligation to bring a
s 129
notice to the subjective
attention of the consumer, which is not the case. It fails to
appreciate that, if the purpose of consensual
dispute resolution is
to be achieved,
a consumer
must act responsibly when notified of her default - the credit
provider does not bear sole responsibility for ensuring
that the
objective underlying
s 129
is achieved
.
And it does not account for the responsibilities of a reasonable
consumer: the Act does not allow a consumer to ignore, or
unreasonably
fail to respond to, notifications from the Post Office
and thereby stave off enforcement proceedings by a credit provider.”’
[28]
In
Lynn
& Main Inc v Brits Community Sandworks CC
[2008] ZASCA 100
;
2009
(1) SA 308
(SCA) Mpati P stated the following at para 12:
‘
It
has been held, correctly so in my view, that a cession of rights is
ineffective as against a debtor until such time as he has
knowledge
of it and that payment by him to the cedent, without knowledge of the
cession, renders him immune to a claim by the cessionary.
See
Pillay
v Harichand
1976 (2) SA 681
(D) at 684F-H.
Put
differently, for a cession to be effective as against a debtor, the
debtor must have had knowledge thereof, which would serve
to pre-empt
him from dealing with the cedent to the detriment of the cessionary.
Where the debtor pays the cedent without
knowledge of the cession and
the surety is subsequently sued for payment of the debt, the surety
would be entitled to plead that
the debt had been discharged and this
at a time when the debtor had no knowledge of the cession, a defence
which the debtor would
have been entitled to raise. But such
defence would not be grounded on absence of knowledge of the cession
on the part of
the surety, but of the debtor.’
[29] Mr
Singh
submitted that what was necessary was only for the plaintiff to have
the cession brought to the knowledge and attention of the
defendant.
This is an objective assessment. It is not disputed that the
application for the interdict was served on
the defendant on 1
November 2012 – the same day on which the defendant avers that
it paid the amount of R35 792.18 to
Siyathembana. There is
no evidence that the defendant took any steps to reverse this
transaction of payment to Siyathembana.
On the contrary, it
contends that it was acting in pursuance of a ‘legal duty’
to do so. This must be examined
in the face of what the
defendant set out in its affidavit opposing summary judgment in which
inter
alia
,
the defendant acknowledges that papers in case number 11484/2012 were
served on it on 1 November 2012. It further states
that it
“
made
payment
”
to Siyathembana on the same date. In
Volkskas
Bank Bpk v Bankorp Bpk (h/a Trust Bank) en 'n ander
[1991] ZASCA 57
;
1991 (3) SA 605
(A) the court considered at what precise moment, in
the course of its clearing process, can payment of a cheque be said
to have
been effected. In the present case, one can assume that
payment by the defendant would take the form of an electronic funds
transfer (EFT). Counsel for the plaintiff submitted that in
Volkskas
supra,
it was held that payment was a ‘bilateral juristic act’
which, barring an agreement to the contrary, could not
have taken
place without the knowledge of the respondent. See also
ABSA
Bank Ltd v Standard Bank of SA Ltd
[1997] ZASCA 71
;
1998
(1) SA 242
(SCA).
[30]
In light of the above decisions, it was contended that it is not
enough for the defendant to say that knowledge of the cessions
came
to its attention after it made payment. There is nothing before
me to suggest that the defendant made any attempt to
reverse the
transaction. In any event, once the plaintiff proves delivery,
the onus shifts to the defendant to show why despite
service of the
papers, it proceeded to make payment to the cedent. That onus
has not been discharged.
[31]
Turning to the defendant’s contention that it was ‘legally
obliged’ to pay Siyathembana at the time when
it did, Mr
Singh
submitted that this explanation is without foundation. He drew
to the Court’s attention to the following averment made
at
paragraph 15 of the affidavit opposing summary judgment:
‘
It
is significant that the Plaintiff is aware that the Cedent has acted
in
fraudem legis
when notwithstanding the alleged Cessions, the Cedent has
fraudulently obtained payment from the Defendant.’
[32]
It was submitted that if such allegation is true, no explanation is
tendered as to why the defendant went ahead and made payments
to
Siyathembana not only on 1 November 2012, but on five successive
occasions thereafter. Nowhere in its plea or in the opposing
affidavit is there any indication of when the defendant says it
acquired knowledge of the cession.
[33]
I was satisfied that the evidence of Moodley was satisfactory in all
material respects in order to prove the plaintiff’s
claim.
His evidence was consistent with the allegations set out in the
particulars of claim and with the contents of his
founding affidavit
in case number 11484/2012. The defendant on the other
hand, led no evidence and elected not to cross-examine
the
plaintiff’s witness.
[34]
Counsel for the plaintiff sought interest on the amount of
R217 405.90 at 15,5% per annum, from 30 November 2012, on the
basis that the various sums due to the plaintiff would have been due
and payable by this date.
[35]
I turn to the issue of costs, where the plaintiff’s counsel
submitted that in light of the defendant’s conduct
in not being
able to advance a defence, either on the papers and at trial, is
reason enough that the defendant be ordered to pay
costs on an
attorney client scale.
[36]
In light of the defendant withdrawing the instructions to counsel on
the morning of the trial, by its own conduct, it was left
defenceless
despite the attorney remaining in court for the duration of the
trial. He put no questions to the plaintiff’s
witness and
made no submission to me on the merits of the matter. Equally,
any costs order granted against the defendant
has no salutary impact
on its officials who were responsible for the instructions that the
action be defended, and for the particular
defence raised, albeit
obliquely. Matters such as that before me only result in the
unnecessary incursion of legal costs.
It is the ratepayer who
ultimately bears liability for this ineptitude.
[37]
In a recent judgment of
Westwood
Insurance Brokers (Pty) Ltd v Ethekwini Local Municipality and others
[2016]
ZAKZDHC 46 the Court ordered the municipal officials to personally
pay a portion of the costs incurred in a dispute related
to the
appointment of a service provider for water insurance, in
circumstances where the entity ought never to have been appointed.
In
Member
of the Executive Council for Health, Gauteng v Lushaba
2016 (8) BCLR 1069
(CC);
2017 (1) SA 106
(CC) the Constitutional
Court considered the issue of public officials being held liable for
costs, but set aside the decision
of the High Court which ordered the
officials to be personally liable for costs. The Court
considered that the officials
concerned were not afforded the
opportunity to make representations nor where they joined as parties
in the action.
[38]
I am
also mindful that the defendant, as an organ of state, may still yet
investigate this matter – particularly in light
of the
instructions given to defend the action, and thereafter the decision
to terminate the instructions of the counsel.
These decisions
may have caused the municipality to incur “wasteful
expenditure”. However, the defendant has
an obligation to
be accountable in terms of section 152 of the Constitution to
communities on how its budgetary resources are allocated
and spent.
The Court, in my view, must be cautious not to usurp the role of a
sphere of government. Accordingly, whether
the defendant
conducts any enquiry into this matter or holds anyone liable, is
outside the scope of the dispute before me.
[37]
I therefor make the following order:
1.
Judgment is
granted in favour of the plaintiff for payment of the amount of
R217 405.90.
2.
Interest on
the said sum at the rate of 15,5%
a
tempore more
,
as from 30 November 2012 to date of final payment.
3.
Costs of
suit on an attorney client scale.
_________________
M
R CHETTY
Appearances
Counsel
for the Applicant – N Singh SC &
I J Patel
Instructed
by –
Sham & Co incorporated
67 Mathews Meyiwa Road
Durban
Tel:
031 309 5615
Ref: MR RAMNARAIN / HC
/H303
Attorney
for second respondent Mr Mboto
Gcolotela & Peter
Incorporated
294/296 Mathews Meyiwa
Road
Morningside
Ref: Mr Peter/vp/ETH120
Date
of Hearing :
6 March 2017
Date
of Judgment:
26 April 2017