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[2016] ZAGPPHC 700
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Makaula Zilwa Incorporate and Another v Bushbuckridge Municipality (4051A/15) [2016] ZAGPPHC 700 (31 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
INCORPORATE
.............................................................................
First
Plaintiff
MNB CHARTERED
ACCOUNTANTS
.......................................................................
Second
Plaintiff
And
BUSHBUCKRIDGE
MUNICIPALITY
.................................................................................
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 inactive customers as
identified by the BLM.
•
The collection of arrear
un-metered service charges from active and inactive 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.
Z
.
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.
....
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...
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.
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 invoices have been
paid
whilst vou are given an opportunity to collate all supporting
documentation in terms of the SLA
to support vour 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 invoices 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
(O) 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 plaintiffs claim, the defendant is
entitled to rescission of the whole judgment.
21.
Accordingly, the plaintiffs 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 judge
ment is set
- aside to enable a
re - consideration of the
request for ju
dgement in an open court with al
l
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.N NKOSI
ACTING JUDGE OF
THE HIGH COURT OF SOUTH AFRICA
GAUTENG DIVISION,
PRETORIA