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[2015] ZANCHC 35
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Corporate Finance Solutions (Pty) Ltd v Laerskool Hartswater (508/2012) [2015] ZANCHC 35 (3 November 2015)
IN
THE HIGH COURT OF SOUTH AFRICA
(NORTHERN
CAPE DIVISION, KIMBERLEY)
Case
No: 508/2012
Heard
on: 16/09/2015
Delivered
on 03/11/2015
In
the matter between
CORPORATE
FINANCE SOLUTIONS
Plaintiff
(PTY)
LTD
And
LAERSKOOL
HARTSWATER
Defendant
JUDGMENT
PAKATI
J
[1]
The plaintiff, Corporate Finance Solutions (Pty) Ltd (CFS Ltd), sues
the defendant, Laerskool Hartswater, a public school as
contemplated
in
s 15
of the
South African Schools Act, 84 of 1996
, for outstanding
rental payments of R39 824-42 (Claim A) and R660 543-14
(Claim B) plus interest at the prime rate of
9% plus 5% per annum
from the date of summons to date of final payment in respect of each
claim. The claims arise from a written
Master Rental Agreement (“the
agreement”) concluded between the parties on 13 October 2005
(Claim A) and 17 November
2004 (Claim B). Initially CFS Ltd
also sought an order for the return of the equipment. It has now
become common cause that
the equipment was returned on or about July
2010. No viva voce evidence was led by either party.
BACKGROUND
FACTS
[2]
Corporate Finance Solutions purchased from Gestetner, Kimberley, the
equipment as requisitioned by Laerskool Hartswater and
at its special
request, and rented it to Laerskool Hartswater. Consequently on 17
November 2004 the parties entered into a written
agreement number
739315 (Claim B). In terms of this agreement CFS Ltd rented the
following equipment to Laerskool Hartswater:
2.1
One Gestetner 9002 Digital Copier with serial number J040900005;
2.2
One Gestetner DSM745 Digital Copier with serial number K9463501205;
2.3
One Gestetner 6123CP Copy Printer with serial number F3140970181; and
2.4
One Gestetner DSM415 MFP with serial number K2149304281.
The
rental period was sixty months. Laerskool Hartswater had to pay an
initial amount of R9 200-00 plus VAT and thereafter
59 monthly
premiums of R9 200-00, subject to an annual escalation at the
rate of 15%.
[3]
On 13 October 2005 CFS Ltd entered into another agreement number
785580 (Claim A) in terms of which it leased to Laerskool Hartswater
a Sony Projector VPLC – with serial number 5000720 and an Acer
Extenza 5220 Laptop with serial number 9882 each for a period
of 36
months at the premium rate of R1200-00 plus VAT per month, subject to
an annual escalation at the rate of 15%.
[4]
Laerskool Hartswater was accused to have breached the agreement in
that it started with monthly payments as agreed upon by the
parties
from the effective dates of 28 October 2008 and 17 November 2008, but
stopped payments during November 2009. Despite demand
it has failed
to make good the payments.
[5]
CFS Ltd based its claim on Clause 17 of the agreement which states:
“
17
BREACH OF AGREEMENT
17.1
Should the user:
17.1.1 Fail to
make any payment due in terms of its obligations in terms of this
agreement on due date thereof; or
17.1.2 Commit any
other breach of its obligations in terms of this agreement (which
breach shall be deemed to be a material breach);
or
17.2 Should the
User in terms of 17.1 breach any of the provisions of this agreement,
the owner shall be entitled forthwith without
prejudice to any other
rights which it might have against the User -
17.2.1 To demand
payment of the total outstanding balance of the rentals plus VAT for
the entire minimum period plus the notice
periods as referred to in
paragraph 4.3 and any other amount payable by the User in terms
hereof, whether due for payment or not,
upon payment of which amount
the User shall be entitled to the use, possession and enjoyment of
the equipment until the expiry
of the notice period; provided,
however, that if the User fails to make immediate payment as provided
herein the rights of the
Owner shall not be exhausted and the Owner
shall notwithstanding the election to claim immediate payment in
terms of the sub-clause,
be entitled to claim and recover the relief
in 17.2.2, 17.2.3 and 17.2.4; or
17.2.2 To cancel
this agreement; and
17.2.3 To take
possession of the equipment; and
17.2.4 To recover
from the User –
17.2.4.1 The
total of all amounts which but for such cancellation would have been
payable from the date of cancellation of the agreement
until the date
upon which this agreement would otherwise have terminated by
effluxion of time, that is, the last day of the notice
period;
17.3 The
provision of paragraph 17.2 above shall not be construed as
precluding the Owner from enforcing performance by the User
under the
terms and conditions of this agreement.”
CFS
Ltd therefore claims specific performance and not damages arising
from the cancellation of the agreement. Laerskool Hartswater
opposed
the application.
[6]
Laerskool Hartswater filed a plea on 13 July 2012. On 02 June 2014
this plea was amended. There is no need to go into detail
in respect
of this amendment because it does not have any effect on the outcome
of the case. What is of particular importance is
the second amendment
filed on 14 September 2015 on an urgent basis for the postponement of
the matter to 23 – 25 November
2015 in order to further amend
its plea. The issues proposed to be dealt with raised in this plea
were:
6.1
That CFS Ltd has the necessary
locus
standi
;
6.2
The terms and conditions agreed upon by the parties as far as the
schedules are concerned;
6.3
That Annexure “A1” is operative in respect of the
schedule; and
6.4
That the equipment was indeed delivered to Laerskool Hartswater.
[7]
It is at this stage that Laerskool Hartswater raised the following
defences:
7.1
That CFS Ltd breached s 60(1) of the South African Schools Act, 84 of
1996 (“the Schools Act);
7.2
That CFS Ltd failed to mitigate its damages;
7.3
That the terms and conditions in Clause 2.1 read with Clauses 5.5 and
8.1.3 are contradictory in that Clause [2.1] states that
CFS Ltd
shall grant Laerskool Hartswater the use and enjoyment of the goods
whereas Clause 5.5 states that Laerskool Hartswater
shall not be
entitled to withhold any payments or deduct any amount from the
rental payable in terms of the agreement for any reason
whatsoever;
7.4
That Laerskool Hartswater relied on false, misleading or deceptive
representations by Mr Binneman, acting on behalf of CFS Ltd,
which
Laerskool Hartswater
bona fide
relied on to their
disadvantage; and
7.5
That Clause [17.2] of the agreement constitutes a penalty clause in
terms of the Conventional Penalties Act, 15 of 1962, in
that it
entitles CFS Ltd to demand payment of the total outstanding balance
of the rentals plus VAT which is
contra bonos mores
and
unconscionable, unreasonable, unjust and unfair. Laerskool Hartswater
filed this amended plea on Monday 14 September 2015,
the two days
before trial of this matter. The school partly conceded CFS Ltd’s
case which left the issue of s 60(1) of the
Schools Act only because
it also abandoned its defence on the Conventional Penalties Act in
the afternoon of 16 September 2015.
Laerskool Hartswater did not
tender the wasted costs occasioned by the postponement it sought.
[8]
The following facts are undisputed: (a) that the cause of action is
based on two rental agreements; and (b) that Laerskool Hartswater
defaulted in respect of both claims.
[9]
S (60)(1) of the Schools Act states:
“
The
State is liable for any damage or loss caused as a result of any act
or omission in connection with any educational activity
conducted by
a public school and for which such public school would have been
liable but for the provisions of this section.”
[10]
Prior to 31 December 2007 s 60(1) of the Schools Act imposed
liability on the State for damage or loss caused
as a result of any
act or omission in connection with any educational activity conducted
by a public school. Notably, s 60(1) of
the Schools Act was amended
by s 14 of the Basic Education Amendment Act
[1]
.
The effect of the amendment in s 60(1) is that the words ‘educational
activity’ have been replaced with the words
‘school
activity’ and read as follows:
“
60(1)
Liability of State
:
(a)
Subject to paragraph (b), the State is liable for any delictual or
contractual damage or loss caused as a result of any act
or omission
in connection with any
school activity
conducted by a public
school and for which such public school would have been liable but
for the provisions of this section.
(b)
Where a public school has taken out insurance and the school activity
is an eventuality covered by the insurance policy, the
liability of
the State is limited to the extent that the damage or loss has not
been compensated in terms of the policy.”
S
1 of the Act defines ‘school activity’ as meaning any
official educational, cultural, recreational or social activity
of
the school within or outside the school premises. S 60(2) of the
Schools Act provides that the provisions of the
State Liability Act,
20 of 1957
, apply to any claim under subsection (1).
[11]
S 2
of the
State Liability Act provides
that the plaintiff or
applicant, as the case may be, or his or her legal representative
must, within seven days after a summons
or notice instituting
proceedings and in which the executive authority of a department is
cited as nominal defendant or respondent
has been issued, serve a
copy of that summons or notice on the State Attorney. Laerskool
Hartswater pleaded therefore that CFS
Ltd failed to give such notice
to the executive authority of the Department of Education, Gauteng.
Mr PJ Cronjé, on behalf
of Laerskool Hartswater, argued that
before the amendment of
s 60(1)
the section did not make mention of
delictual or contractual liability but spoke of damages or loss. The
State would therefore
be liable if found to have been complicit. S
60(4) of the Schools Act provides:
“
Despite
the provisions of subsection (1), the State is not liable for any
damage or loss caused as a result of any act or omission
in
connection with any enterprise or business operated under the
authority of a public school for the purpose of supplementing
the
resources of the school as contemplated in section 36, including the
offering of practical educational activities relating
to that
enterprise or business.”
[12]
In
BASTIAN
FINANCIAL SERVICES (PTY) LTD v GENERAL HENDRIK SCHOEMAN PRIMARY
SCHOOL
[2]
Van
Heerden JA had to interpret s 60(1) of the Schools Act as to whether
it deals with delictual or contractual liability and held
at para 19:
“
[19]
It has long been recognised in our case law that the aim of the
statutory interpretation is to give effect to the object or
purpose
of the legislation in question. Thus in
Standard
Bank Investment Corporation Ltd v Competition Commission &
Others; Liberty Life Association of Africa Ltd v Competition
Commission & Others
[2000] ZASCA 20
;
[2000 (2) SA 797
(SCA) para 16]
,
Schutz JA, writing for the majority of this Court, stated that:-
‘
Our
Courts have, over many years, striven to give effect to the policy or
object or purpose of legislation. This is reflected in
a passage from
the judgment of Innes CJ in
Dadoo
Ltd and Others v Krugersdorp Municipal Council
1920 AD 530
at 543.
But the passage also reflects that it is not the function of a court
to do violence to the language of a statute and impose its
view of
what the policy or object of a measure should be.’”
The
learned Judge added at para 21 and 22 as follows:
“
[21]
Counsel for both parties accepted that s 60(1) does not exempt a
public school from liability to render specific performance
of
contractual obligations lawfully undertaken by the school’s
governing body on its behalf. Any claim for specific performance
by
the other party to the contract would thus have to be instituted
against the public school concerned, and not against the MEC.
Counsel
also accepted that a claim for the return of goods at the instance of
the supplier of such goods to a public school, in
terms of a contract
entered into with the school, would have to be instituted against the
school itself and not against the MEC.
In my view, both these
propositions are correct. Even the broad and general wording of s
60(1) cannot legitimately be interpreted
to render the State liable
for specific performance of contractual obligations lawfully
undertaken by a public school through the
medium of its governing
body.
[22]
The public school itself, and not the State, is therefore liable for
the fulfilment of a public school’s
contractual obligations –
the other party to the contract cannot, as it were, rely on some sort
of ‘warranty’
by the State that the school will perform
its obligations under contracts which have been lawfully concluded.
This being so, it
is difficult to understand why the Legislature
would have intended s 60(1) of the act to have the effect of imposing
upon the State
a ‘warranty’ vis à vis the other
party to a contract with a public school, to pay contractual damages
to such
other contracting party should the school breach its
contractual obligations.”
[13]
A plaintiff has a right to claim from the other party a performance
of his undertaking in terms of the contract. (See
FARMERS’
CO-OP SOCIETY (REG) v BERRY.
[3]
)
It
is trite that specific performance will not be granted:
16.1
When the order would be impossible;
16.2
Where it will cause undue hardship;
16.3
In contracts for personal services; and
16.4
On grounds of imprecise obligations.
In
the instant case the claim against Laerskool Hartswater is for
specific performance as alluded to earlier and not for damages
arising from the cancellation of the agreement. The State cannot
therefore be held liable for claims for contractual obligations
against it.
COSTS
[14]
Adv S Aucamp, on behalf of the plaintiff, argued that the defendant
conducted its case in a way that warrants a punitive cost
order
against it. Adv PR Cronjé, for the defendant, submitted that
the defendant was not
mala
fide
or employing delaying tactics in conducting its case. A court shall
consider whether or not it is appropriate to make a special
order as
to costs against a party or his attorney, because he or his attorney
failed, to a material degree, to promote the effective
disposal of
the litigation.
[4]
[15]
Summons was issued on 20 March 2012. The defendant amended its plea
on two occasions as alluded to earlier. On the day the
trial was
supposed to run the defendant abandoned all other defences and only
proceeded with the breach of s 60(1) of the Schools
Act. This section
was amended by the Education Law Amendment Act, 31 of 1997, and came
into operation on 31 December 2007. The
last amendment of the
defendant’s plea was served on the plaintiff’s attorney
on the day of the hearing. On the other
hand these issues could have
been avoided by the parties taking advantage of a proper pre-trial
conference. In its plea filed on
14 September 2015 Laerskool
Hartswater mentioned in para 13 of the Notice of Motion that their
counsel discovered certain provisions
in the
South African Schools
Act and
the
State Liability Act to
be applicable, hence the
amendment. No explanation regarding the delay was made. Be that as it
may, in the absence of prejudice
to the other party, leave to amend
may be granted at any stage, however careless the mistake or omission
may have been and however
late the application for amendment may
be.
[5]
No prejudice was alleged
by the plaintiff in this regard except that its witnesses had to be
flown from Johannesburg. In any event,
the matter was heard the very
day it was set down for trial and witnesses had to attend the trial.
This does not justify a punitive
cost order. In my view, a cost order
on the scale as between party and party scale is justified would be
fair.
ORDER
CLAIM
A
1.
The
defendant, Laerskool Hartswater, is ordered to pay to the plaintiff,
Corporate Finance Solutions, an amount of R39 824-42
(Thirty
Nine Thousand Eight Hundred and Twenty Four Rand and Forty Two Cents)
with interest on the said amount at the rate of 5%
per annum from
date of Summons to date of final payment (prime rate currently at
9%).
2.
The
defendant, Laerskool Hartswater, is ordered to pay costs of the
action on party and party scale.
CLAIM
B
3.
The
defendant, Laerskool Hartswater, is ordered to pay to the plaintiff,
Corporate Finance Solutions, an amount of R660 543-14
(Six
Hundred and Sixty Thousand Five Hundred and Forty Three Rand and
Fourteen Cents) with interest on the said amount at the rate
of 5%
per annum from date of Summons to date of final payment (prime rate
currently at 9%).
4.
The
defendant, Laerskool Hartswater, is ordered to pay costs of the
action on party and party scale.
_______________
BM
PAKATI
JUDGE
NORTHERN
CAPE DIVISION-KIMBERLEY
On
behalf of the Plaintiff:
ADV S AUCAMP
Instructed
by:
DUNCAN &
ROTHMAN INC.
On
behalf of the Defendant:
ADV PR CRONJE
Instructed
by:
ELLIOT MARIS
WILMANS & HAY
[1]
Act
15
of 2011.
[2]
2008
(5) SA 1 (SCA).
[3]
1912
AD 343
at 350.
[4]
Rule 37(9) (a) (ii) of the Uniform Rules of Court
at B1-273
[5]
Mabaso And Others v Minister of Police And
Another [1980] (4) SA (WLD) at 323D.