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[2016] ZAGPPHC 158
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Makaula Zilwa Incorporated and Another v Bushbuckridge Municipality (4051A/15) [2016] ZAGPPHC 158 (1 March 2016)
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION, PRETORIA
CASE
NO: 4051A/15
DATE:
31 MARCH 2016
In
the matter between:
MAKAULA
ZILWA
INCORPORATED
First Plaintiff
MNB
CHARTERED
ACCOUNTANTS
Second
Plaintiff
And
BUSHBUCKRIDGE
MUN
I
CIPALITY
Defendant
JUDGMENT
NKOSI
AJ:
1.
These are proceedings in terms of Rule 31(5)(d) of the Uniform Rules
wherein the Defendant seeks this Honourable Court to re-consider,
in
an open court judgment granted by default by the Registrar in favour
of the plaintiffs against it.
2.
Rule 31(5)(d) of the Uniform Rules provides that:
''Any
party dissatisfied with
a
judgment
granted or
direction
given
by
the registrar
may,
within 20 days after he has acquired
knowledge
of such judgment
or direction, set the matter
down for reconsideration by the court."
3.
For the sake of convenience, in these submissions, I refer to the
parties as they are cited in the action at the time when default
judgment was granted,
inter
alia: to the applicant as the
defendant and to the first and second respondents as the plaintiffs.
4.
In these submissions, the applicant dealt with the following matters
a)
Relevant facts
b)
Bona fide defence
c)
Service
d)
Condonation
e)
Failure to give notice
RELEVANT
FACTS
5.
During August of 2013 the plaintiffs and the defendant entered
into a debt collection agreement in terms
whereof the plaintiffs were
to render services (referred to as debt collections) to the defendant
(the Municipality) for three
(3) years. For purposes of the
plaintiffs' claim, the relevant provisions of
the agreement are set
out as follows:
"1.
SCOPE OF WORK
The
BLM has appointed Debt Collectors (MAKAULA ZILWA INCORPORATED
and MNB
CHARTERED
ACCOUNTANT
INCORPORATED
Joint Venture) for a period of (3) three years with effect from 18th
May 2013, to assist in the rendering of the following
services:
•
The collection of arrear
metered services charges from active and in active customers as
identified by the BLM.
•
The collection of arrear
un-metered service charges from active and in active rate payers
as identified by the BLM.
•
The collection of arrear
sundry charges from customers from active and in-active account
holders as identified by BLM.
2…..
3.
HANDOVER OF DEBTS
3.1
Where the client requires the agent to collect any debt it shall:
3.2
Electronically or in writing hand over the dent in question to the
agent 3.3
4.
The agent is to confirm receipt of the handover list either by email
or letter with
five
(5) days from date of handover. The client will endeavour to ensure
that the list contains the correct name, telephone number,
physical
address and postal address of the debtors, as well as the correct
details of amounts outstanding
5.14
The Agent shall ensure that any work carried out shall be in
accordance with the legislative requirements applicable to the
Client
at that time ...
6…..
7….
8.
REMUNERATION
8.1
The Agent shall be entitled to a commission, which will only be
payable on capital collection on behalf
of the client, structured as
follows:
8.1.1
20% (twenty percent) of the amount
of any debt actually collected
and paid to
the client from any debtor
8.2
All fees and commission shall exclude Value Added Tax--------
8.3
The Agent shall not be entitled to any commission whatsoever, unless
otherwise
instructed, other than if money has been collected from
debtors...
8.4
The Agent shall be entitled to commission on any payment from a
debtor handed
over.
8.5
…..
9.
ADMINISTRATIVE ARRANGEMENT
9.5
The Agent undertakes to provide the client with a detailed status
report within the first
week of every calendar month of all debtors
handed over for collection. The report must be in a format that is
acceptable to the
client indicating the following:
9.5.1
Account number
9.5.2
Agents reference number
9.5.3
Debtor name
9.5.4
Date of hand over
9.5.5
Capital amount handed over, date arrangement
made
with debtor
9.5.6
Arrangement instalment ..."
6.
The plaintiffs instituted a claim for payment in the sum
of R4 517 134.66 alleged to be outstanding balance
of two (2)
invoices in respect of debt collected from Department of Public Works
("Public Works").
7.
The Defendant does not dispute the existence of the agreement but
contends that it is indebted to the plaintiffs in the amounts
claimed
or at all.
8.
On 06 March 2015, the Registrar ostensibly granted judgment by
default under the abovementioned case number in favour of the
plaintiffs for payment of debt in the sum of R4 517 134.66 with the
interest at the rate of 9% and costs.
9.
I need to digress from the facts and deal briefly with the date
judgment by default was granted. The defendant was not in possession
of the actual order granted. The stamp, seemingly endorsing the
judgment was not legible and therefore, the defendant was under
the
misapprehension that the date thereof is 19 March 2015. Upon proper
perusal of the warrant of execution, it was apparent that
default
judgment was granted on 6 March 2015 as contended by the plaintiffs.
For this reason, the defendant accepts that default
judgment was
granted on 6 March 2015.
BONA
FIDE DEFENCE
10.
The plaintiffs failed to provide the defendant with documents in
support of their claim on request as recorded in a letter addressed
to the plaintiffs by ES Ngomane ("Ngomane"), annexed to the
particulars of claims as "E" to which the plaintiffs
made
partial reference . It was submitted at the very outset that, by not
drawing the registrar's attention to the contents of
the entire
letter, the plaintiffs deliberately misled him or her.
11.
In the same letter, Ngomane recorded the dispute with regard to
payment of the plaintiffs' invoices forming a subject matter
of these
proceedings as follows:
PAYMENT
FOR
DEBT
COLLECTION
SERVICES
The
following invoices submitted by yourselves for payment have
reference.
1.
Invoice number BLM/001/2013
2.
Invoice number BLM/002/2013
3.
Invoice number BLM/003/2013
The
SLA between the Municipality and Makaula & Zilwa Attorneys
clearly details the kind of supporting documentation to be provided
by the debt collectors to substantiate their efforts and thus their
claim.
In
receipt of the above claims, what Applicant have been provided with
is a list of payments by customers as per our statements,
however it
is not possible for the Applicant to verify that these payments are
as a result of intervention by the debt collectors.
It was further
submitted that:
"The
debt collectors are aware of the legislative requirements in terms of
accounting for expenditure incurred. Hence in this
regard we have a
major challenge to do so.
One of
the debt collectors
i
nvoices have
been
paid
whilst you are given an opportunity to collate all supporting
documentation in terms of the SLA to support your claims
for payment.
This will enable the BLM to account for expenditures appropriately.
Their
attention was also drawn to the fact that debt collection effort must
be focused on debt that is doubtful. An incident like
the Department
of
Public
Works
claim
is
a
good
example
of
this".
The past trend for this account is that
they pay R19m,R18m, R21m and R23m annually for the past four years
now. However, the debt
collectors
have included these payments
in
their
i
nvoices as
payment due to them,
whereas the old debt which the BLM is
looking to recover from Public Works is still outstanding..."
12.
When granting judgment by default, it is self-evident that the
registrar was oblivious to the contents of the letter from Ngomane.
In the alternative, he or she mistakenly disregarded the significance
thereof. Either way, it is submittetd that he or she ought
to have
required that the matter be set down for hearing in open court as
contemplated in Rule 31(5)(b)(vi) of the Rules of Court.
It is
submitted that by not doing so, he or she erred.
13.
Moreover, Rule 31(5)(a) sets out the manner and circumstances under
which the registrar may grant and enter default judgment.
The Rule
provides that:
"(5)
(a)
Whenever
a
defendant is
in
default of
delivery of
notice of
intention
to defend
or of
a
plea,
the plaintiff,
if he or she wishes to obtain
judgment
by default, shall
where each of
the claims is for
a
debt
or liquidated
demand,
file
with the registrar
a
written application for judgment
against such
defendant
..."
14.
The plaintiffs' claim does not constitute a debt or liquidated claim
as contemplated in Rule 31(5). Further, it has been stated
that the
sub-rule envisaged to empower the registrar to deal with applications
for default judgment in simple and uncomplicated
cases.
15.
In view of the fact that this case involves interpretation and
enforcement of a written agreement, where calculation of the
amounts
due, if any, might be intricate, it was
submitted that this
case
could not be said to be
straightforward. Once again, the registrar
ought to have referred the
matter for hearing in an open court.
16.
The plaintiffs have argued that "...It is undisputable that the
Respondents rendered the service of municipal debt collection
services. It is not the Applicant's defence that the municipal debt
collection services have not been rendered by the Respondents.
On
this basis, the Applicant should meet judgment debt diligently
without delay". The Applicant's contention was based on
the
amount claimed for services not rendered.
17.
On the face of annexure "E", the plaintiffs are undoubtedly
mistaken by asserting that there is no dispute with regard
to the
debt collected from Public Works which forms the subject of their
claim.
18.
Apart from the afore-going fact, the plaintiffs have to date, not
attached or provided this Honourable Court with documents
supporting
their claim in accordance with the agreement. They have also not
demonstrated that these documents were given to the
registrar. For
this reason, it was submitted that the defendant has demonstrated
that it has a
bona fide
defence to the debt in respect of
Public Works.
19.
It has been repeatedly held that it is sufficient if the defendant
makes out a
prima facie
defence in the sense of setting out
averments which, if established at the trial, would disentitle the
plaintiffs to the relief
claimed. Further that the defendant need to
deal fully with the merits of the case and produce evidence that the
probabilities
are actually in its favour. Stated somewhat
differently, all that the defendant must show is that it has a
bona
fide
defence which,
prima
facie,
carries
some prospect of success. This is an acceptable view.
Chetty
v
Law Society, Transvall
[1985] 2 All 76
(A)
at p79 Grant
v Plumbers (Pty)
Ltd
1949 (2) SA 470
(0)
at
476
-
477
20.
See also
Kavasis
v South African Bank
of
Athens Ltd 1980
(3)
394 (D)
where it was
held that if there is a
bona fide
defence against a portion of
the plaintiff's claim, the defendant is entitled to rescission of the
whole judgment.
21.
Accordingly, the plaintiff's conclusion that the defendant "fails
to raise defence(s) against the Respondents' claim and
judgment debt
except to make a sweeping statement about a dispute that exists
between the parties which the Respondents deny"
is untenable.
The dispute regarding the total amount claimed can only be resolved
on tabling the necessary proof of such debt collection
effort on the
Public Works payment claim.
22.
The plaintiffs also criticise the defendant for referring the default
judgment to open court for reconsideration as flawed as
it is
"abstract, academic and raises hypothetical questions". I
do not agree with this proposition.
23.
It has been demonstrated that there is substance in the defendant's
action. Apart from the dispute with regard to the Public
Works debt,
the law places certain obligations on the Chief Financial Officer of
the defendant, as an accounting officer to ensure
that the
expenditure of the defendant is in accordance with its vote. She is
obligated to take effective and appropriate steps
to prevent
unauthorized expenditure. The amount claimed remains questionable and
disputed as demonstrated that, the Public Works
payments were not
made out of debt collection efforts.
24.
As part of her fiduciary duties, she must exercise the duty of utmost
care to ensure reasonable protection of the assets and
records of the
defendant; act with fidelity, honesty, integrity and in the best
interests of the defendant in managing its financial
affairs and
prevent any prejudice to the financial interests of the state. Public
Finance Management Act, 1999 (Act 1 of 1999)
("PFMA")
Secions 38; 39 and 86 thereof
25.
Recognising this fact, the Constitutional Court emphatically stated
in
Khumalo
and Another
v
Member
of the
Executive
Council
for
Education: KwaZulu Natal
2014 95) SA 579
(CC) that:
"[36]
Public functionaries, as the arms of the state, are further vested
with the responsibility, in terms of section 7(2)
of the
Constitution, to "respect, protect, promote and fulfil the
rights in the Bill of Rights." As bearers of this duty,
and in
performing their functions in the public interest, public
functionaries must, where faced with an irregularity in the public
administration, in the context of employment or otherwise, seek to
redress it. This is the responsibility carried by those in the
public
sector as part of the privilege of serving the citizenry who invest
their trust and taxes in the public administration.
[38]
The MEC's actions in seeking to rectify the irregularities that were
brought to her attention must be viewed in this light
- as a bold
effort to fulfil her constitutional and statutory obligations to
ensure lawfulness, accountability and transparency
in her Department.
.."
26.
Equally, the actions of the Chief Financial Officer of the defendant
must be seen in this light it was submitted. Especially
viewed in
light of section 86(1) of PFMA which renders an accounting officer
guilty of an offence and liable on conviction to a
fine or
imprisonment to a period not exceeding five (5) years if that
accounting officer wilfully or in a grossly negligent way
fails to
comply with the provisions of section 38, 39 and 40.
27.
Accordingly, it was submitted that the defendant has shown a
bona
fide
defence and that referring default judgment for hearing in
open court was not to merely delay the proceedings, for which I
agree.
SERVICE
28.
The summons were issued on 19 January 2015 and allegedly served on
Lunia Mashego ('Mashego") on 23 January 2015.
29.
The plaintiffs contend that the return of service is
prima facie
proof of service. The defendant agrees with this assertion.
30.
Nonetheless, the plaintiffs and the sheriff have failed to explain
the reason for the absence of Mashego's signature on the
return of
service which would ordinarily indicate that she acknowledged receipt
of the process for, or on behalf of the defendant.
31.
Apart from the absence of Mashego's signature on the return of
service, it is a mystery how a letter dated 16 January 2015
instructing the sheriff to serve the process on the defendant would
enclose the original summons together with two (2) copies three
(3)
days before the combined summons were issued.
32.
In all probabilities, the registrar assumed that the defendant knew
of the action when he or she granted the judgment by default.
It
might not have occurred to him or her to scrutinize the return or
service, as he was duty- bound so to do, not only of the attorneys
representing the litigant but also of the registrar to examine the
return and satisfy themselves that it is in order
33.
In the result, it was submitted that there is doubt as to whether the
summons was served as alleged or not. The fact that the
Chief
Financial Officer vows that she only got to see of the summons when
the sheriff attended to their office is probable, especially
with
viewed with the plaintiff's contention that the sheriff attended to
the defendant's offices on 13 March 2015 and on 18 March
2015, a
notice of intention to defend was filed on behalf of the defendant.
This is a clear variation that the defendant had intentions
to defend
this action at all times. The issue of service is no longer an issue
in this regard.
CONDONATION
34.
It is an elementary requirement that if party delivers court process
late, and there is objection thereto, an application for
an extension
of time or condonation ought to be instituted. The defendant has not
filed such an application together with the notice
referring the
default judgment to open court for reconsideration.
35.
The Chief Financial Officer contends that she only became aware of
the judgment against the defendant when the sheriff attended
to their
offices with a writ of execution. The plaintiffs seem to argue that
the sheriff served the writ of execution on 13 March
2015.
Accordingly, the referral notice was delivered nine (9) days late.
That might be so.
36.
In
Grant
v
Plumbers
(Pty)
Ltd
(supra) it was held that a poor explanation for
the default may be compensated for by a good defence. It is a
question of exercising
a wide discretion by the court.
See
also
Creative
Car
Sound
v
Automobile Radio
Dealers
Association
1989 (Pty) Ltd
2007 (4) SA 546
(D) at 555C
-
D; Creative Car Sound v Automobile Radio Dealers
Association 1989
(Pty) Ltd
2007 (4)
SA 546
(D) at
555C -
D;
Wahl v Prinswil Belegginas (Edms) Bok
1984 (1) SA 457
(T).
37.
Admittedly, there was a few days delay in referring the default
judgment for hearing in open court. It is submitted that a nine
(9)
day delay cannot be said to be unreasonable. Nonetheless, this Court
has inherent powers to determine its own process and can
exercise
discretion to condone or overlook the delay. The Chief Financial
Officer, who clearly was appointed after the contract
between the
plaintiffs and the defendant was concluded, has good intentions.
It
is self-evident that she is striving to preserve public funds by
ensuring that expenses are authorized and guard against fruitless
and
wasteful expenditure.
38.
The plaintiffs would suffer no prejudice if the default judgment is
set aside and there is comprehensive airing of the
issues at trial.
Any resultant prejudice claimed will be cured by either costs or
interest on the capital amount.
39.
On the other hand, there would be irreparable harm to the defendant
and the public if the default judgment is permitted to stand.
This
court agrees with this view more especially that the case is not
coming to an end. The exact amount claimed has to be proven
with
regard to the debt collection process.
FAILURE
TO GIVE NOTICE
40.
The plaintiffs contends that they have given notice envisaged in
section 3 of the Institution of Legal Proceedings Against Certain
Organs of the State Act, Act 40 of 2002 ("the Act"). The
letter relied upon as notice (which is not admitted) was not
placed
before the registrar when the application for default judgment was
sought or granted. In a way, the plaintiffs concede that
they failed
to do so. Accordingly, the registrar should not have granted
judgement by default against the defendant in the absence
of this
letter.
41.
Whether or not the letter complies with the requirements of the
section of the relevant legislation is, respectfully, a matter
for
the trial court.
42.
In the premises, it was submitted that the defendant has made out a
proper case for this Honourable Court to reconsider and
set aside the
default judgment. In the circumstances it was submitted that the
defendant be granted an opportunity to defend the
action and costs of
this application be costs in the cause.
CONSIDERATION
OF ALL SUBMISSIONS
43.
Having heard both parties to the arguments the court is of the view
that there are compelling reasons not to disallow the request
for a
reconsideration of the amount due to the Plaintiff.
This
could only happen if the dispute regarding the amounts paid by the
Department of Public Works whether it was done through the
debt
collection process or not. The Plaintiff is called upon to prove that
it is so.
It
would be unfair to confirm the default judgement amount without
considering the issue raised by the BLM letter worked as annexure
"E".
This
court is also duty-bound to exercise its discretion carefully and
reasonably considering that public funds are involved. The
interests
of justice
will
be better served if the matter, and more especially the amount
claimed, be determined in an open court.
As
a consequent thereof the court orders as follows:
a)
That the default judgement is set - aside to enable a re -
consideration of the request for judgement in an
open court with all
the necessary documentation being presented to court as proof of
indebtedness.
b)
That the Defendants be ordered to pay costs of this application.
_______________________________
V.R.S
NKOSI
ACTING
JUDGE OF THE HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION, PRETORIA