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[2012] ZAGPPHC 308
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Nurcha Finance Company (Pty) Ltd v Mahlaku Mosebo Contractors CC and Another (A174/12) [2012] ZAGPPHC 308 (29 November 2012)
NOT
REPORTABLE
IN
THE NORTH GAUTENG HIGH COURT, PRETORIA
REPUBLIC
OF SOUTH AFRICA
CASE
NO: A174/12
DATE:29/11/2012
In
the matter between:
NURCHA
FINANCE COMPANY (PTY) LIMITED
.........................
Appellant
and
MAHLAKU
MOSEBO CONTRACTORS CC
…...........................
FIRST RESPONDENT
MOKGADI
REGINA
CHABA
............................................................
SECOND
RESPONDENT
JUDGMENT
Tuchten
J:
1.The
appellant sued the respondents in a magistrates court for payment of
money lent to the first respondent with interest, for
which the
second respondent stood surety.
2.
The appellant’s cause of action was based on a written loan
agreement. The loan agreement provided for the appointment
of an
entity called the Paymaster. In terms of clause 11 of the loan
agreement, it was agreed that the Paymaster would cause the
loan to
be repaid to the appellant in accordance with a prescribed regime.
However under clause 9.3 it was agreed that notwithstanding
anything
to the contrary in the loan agreement, the capital advanced and all
interest would become due in one lump sum on a date
described in the
loan agreement as the fixed repayment date.
3.
In its plea, the first defendant did not place in issue that the
amount claimed by the plaintiff was due. It pleaded in an amended
plea that it denied being indebted because
...
its agent namely the paymaster disbursed funds from the project
account not in accordance with the actual costs breakdown, and
thus
caused the First Defendant to suffer financial loss ....
4.
Before the trial began, the legal representatives of the parties
agreed to hold what they called a telephonic pre-trial conference.
The appellant submitted a written pre-trial agenda to the
respondents, in which it stated that it wished to deal with certain
specified issues at the pre-trial conference. Arising from the
conference, the attorneys for the parties signed a pre-trial minute
in which certain admissions were made and contentions advanced.
5.
Paragraph 14 of the minute reads as follows:
14.1
The Defendants contended that the only issue in dispute was whether
the Plaintiff advanced funds to be paid out of the actual
costs
breakdown Schedule and whether the exemptions as invisaged in Clause
3.3 of the Loan agreement being Annexure A to the particulars
of
claim avails the defendant.
14.2
The plaintiff accepted this formulation of the issue between it and
the first defendant with one proviso, whether the aforegoing
“defence” constituted a defence at all.
6.
The actual costs breakdown schedule is referred to in the loan
agreement but, for reasons which will emerge later, I need not
explain further what it entailed because the representatives of the
respective parties were agreed before the trial was called
that the
issue included the following question: When the Paymaster made a
payment, was it acting as the agent of the appellant?
The first
defendant’s contention in this regard was that because the
Paymaster was the appellant’s agent for making
payment, if the
Paymaster disbursed funds which ought to have reached the appellant,
but did not, then the first defendant could
not be held liable for
such irregular payments; or, to put it another way, because the
Paymaster was the appellant’s agent
to deal with the funds
under the Paymaster’s control, any amount so irregularly
disbursed by the Paymaster had to be equated
to payment to the
appellant by the first defendant.
7.
As far as the second respondent was concerned, the parties agreed
further in the pre-trial minute that the only issue in dispute
between the appellant and the second respondent was, in accordance
with and amended plea delivered by the second defendant, whether
the
suretyship itself was valid, in which event the second respondent
would be jointly and severally liable with the first respondent.
8.
When the trial was called, the appellant applied for the two issues
which remained for determination to be disposed of separately
and as
matters of law under magistrates courts rule 29(6).
9.
In her ruling on the application, the magistrate declined to allow
the issue as to whose agent to make payment the Paymaster
was to be
decided separately because evidence was required. On the issue
whether the suretyship was valid, the magistrate ruled
there and then
that the suretyship was valid. Argument on this latter issue had been
presented as part of the argument on the separation
and the ruling on
the validity of the suretyship was not been challenged either during
the trial or before us and therefore stands.
10.
The appellant proceeded to call the evidence of Mr Lees, a program
manager in its employ. He explained that the appellant was
a
registered credit provider, established as a company not for profit
by the government of the Republic through the national department
of
housing (“the Department”). The business of the appellant
is to provide funding to contractors and developers in
relation to
subsidy housing projects.
11.
The appellant has access to finance made available by an American
institution through a revolving credit facility of $20 million
in the
form of guarantees to Rand Merchant Bank. The appellant has as well
financial arrangements with intermediaries which manage
loans on
behalf of the appellant. These are known as Paymasters. These
Paymasters, Lees explained, are not the agents of the appellant
but
manage the contracts between eg contractors and the Department for
the appellant. Paymasters are required in terms of their
contracts to
evaluate the work done by the contractors assigned to them and make
payment from time to time for work done. The appellant
has no rights
to disburse money under the control of the Paymaster.
12.
Typically, the contractor enters into a contract with the
Department. The function performed by the appellant in relation to
contractors is to provide bridging finance to contractors until they
become entitled,
under
their contracts with the Department, to payment from the Department.
13.
The second defendant gave evidence in support of the respondents’
case. She said she met a Mr Cronje who told her he was
an agent for
the appellant but worked for the entity which was ultimately
designated the Paymaster in the loan agreement and that
she then
proceeded to make the financial and contractual arrangements
necessary for her to be appointed a contractor in relation
to the
development concerned. !t was clear that the second defendant did not
understand the complexities of the financial arrangements
to which
she became a party. The loan agreement was put to her and she was
asked for her comments on various provisions.
14
None of the second respondent’s evidence was of the slightest
relevance in view of the provisions of the loan agreement
which I
shall proceed to set out and her ignorance of the actual dealings
between the appellant and the Paymaster. It is trite
that where a
contractual arrangement is reduced to writing on the basis that it is
to be the sole memorial of the consensus between
the parties, no oral
evidence is admissible to contradict its terms. That principle is
what is known as the parol evidence rule.
15.
The loan agreement itself is quite clear on the role that the
Paymaster was to play in relation to the parties. Under clause
3.2,
the Paymaster was appointed the agent of the appellant for the
specific purpose of executing any amendments to the Actual
Costs
Schedule from time to time. Under clause 3.1, it is expressly agreed
between the appellant and the first respondent that
the Paymaster is,
save for any specific authority conferred by the appellant on the
Paymaster outside the loan agreement from time
to time, not the agent
of the appellant.
16.
One of the suspensive conditions in the loan agreement, a I) of which
were fulfilled, was that the first respondent would execute
a power
of attorney in favour of the Paymaster in a specified form. The
required power was indeed executed by the first respondent.
It
conferred wide authority on the Paymaster to act as agent for the
first respondent in relation to financial matters.
17.
The loan agreement recites that the Paymaster and the appellant
entered into a written agreement, defined in the loan agreement
as
the Paymaster Agreement, to govern their relationship. The Paymaster
Agreement itself was not before the trial court but, as
recorded in
clause 3.1, the Paymaster was to act, except as specifically provided
in the loan agreement itself or recorded in writing,
as principal and
not as agent for the appellant.
18.
In her judgment, the magistrate found that because the pre-trial
conference was not held in terms of the applicable magistrates’
court rule, the court would not have regard to the pre-trial
conference and that the agreement which arose out of the parties’
telephonic pre-trial conference was not “binding”, by
which I assume the magistrate meant not binding on the parties
and
should not be implemented by the court. In coming to this conclusion
the magistrate erred.
19.
The position regarding pre-trial conferences in the magistrates’
courts is governed by
s 54
of the
Magistrates’ Courts Act, 32
of 1944
and
rule 25
of the Rules governing civil proceedings in those
courts.
Section 54
provides:
(1)
The court may at any stage in any legal proceedings in its discretion
suo motu or upon the request in writing of either party
direct the
parties or their representatives to appear before it in chambers for
a conference to consider-
(a)
the simplification of the issues;
(b)
the necessity or desirability of amendments to the pleadings;
(c)
the possibility of obtaining admissions of fact and of documents with
a view to avoiding unnecessary proof;
(d)
the limitation of the number of expert witnesses;
(e)
such other matters as may aid in the disposal of the action in the
most expeditious and least costly manner.
(2)
The court shall make an order which recites the action taken at the
conference, the amendments allowed to the pleadings, and
the
agreements made by the parties as to any
of
the matters considered, and which limits the issues for trial to
those not disposed of by admissions or agreements of the parties
or
their representatives.
(3)
Such order shall be binding on the parties unless altered at the
trial to prevent manifest injustice.
(4)
If a party refuses or neglects to appear at the conference the court
may, without derogation from its power to punish for contempt
of
court, make such order as it considers equitable in the circumstances
and upon conclusion of the proceedings may order the party
who has so
absented himself to pay such costs as in the opinion of the court
were incurred as a result of the said absence.
(5)
The Court may make such order as to the costs of any proceedings
under this section as it deems fit
20.
Rule 25
reads as follows:
(1)
The request in writing referred to in
section 54(1)
of the Act shall
be made in duplicate to the clerk of the court requesting the court
to call a pre-trial conference and shall indicate
generally the
matters which it is desired should be considered at such conference.
(2)
The clerk of the court shall forthwith place such request before a
judicial officer who shall, if he decides to call a conference,
direct the clerk of the court to issue the necessary process.
(3)
The process for requiring the attendance of parties or their legal
representatives at a pre-trial conference shall be by letter
signed
by the clerk of the court, together with a copy of the request, if
any, referred to in sub-rule (1). Such letter shall be
delivered by
hand or registered post at least 10 days prior to the date fixed for
the said conference.
21.
It is always open to litigants in civil proceedings in the
magistrate’s court to settle issues or to agree that the
resolution
of specific identified issues would be dispositive of
their dispute. Indeed, such agreements are entirely consistent with s
34
of the Constitution which confers on all persons the right to have
any dispute that can be resolved by the application of law decided
in
a fair public hearing before a court or, where appropriate, another
independent and impartial tribunal or forum. Such agreements
are to
be encouraged: they promote speedier resolution of disputes and help
to ensure that the time of the civil courts is devoted
to hearing
evidence and argument on and determining the issues which are
genuinely in dispute.
22.
Such agreements, regardless of the label that is attached to them by
the parties, are not to be viewed through the prism of
the rules but
through the prism of the law of contract. In general, contracts
freely entered into are binding, unless vitiated
eg by duress, undue
influence, misrepresentation or conflict with boni mores or public
policy. If such a contract is concluded
at a pre-trial conference
held in terms of the magistrates’ courts rules and translated
into an order in terms of
s 54(2)
of the
Magistrates’ Courts
Act, such
an order is binding on the parties unless “altered at
the trial to prevent manifest injustice”. It is unnecessary to
consider the effect of
s 54(3)
because
no
order was made under
s 54(2).
Section 54
does not deal with the
validity or otherwise of an agreement reached at such a conference.
23.
In Filta-matix v Freudenberg and Others
1998 1 SA 606
AD at 6148- D,
the then Appellate Division held as follows:
To
allow a party, without special circumstances, to resile from an
agreement deliberately reached at a pre-trial conference would
be to
negate the object of
Rule 37
, which is to limit issues and to curtail
the scope of the litigation. ... If a party elects to limit the ambit
of his case, the
election is usually binding.
24.
The same applies, in my view, to any agreement between litigants in
relation to their pending civil proceedings reached otherwise
than at
a pre-trial conference. In the present case, moreover, neither party
sought to resile from the agreement to limit the issues.
25.
The correct approach is that while the agreement reached at the
pretrial conference was binding on the parties, the conference
during
or as a result of which it was concluded did not constitute a
pre-trial conference for the purposes of the
Magistrates’
Courts Act and
the rules. The consequence of this may be that the
jurisdictional prerequisite for an order under
s 54(2)
was not
present. As the magistrate was not asked to make such an order but
merely to have
regard
to the agreement between the parties and the issues they wanted the
court to determine, I need not decide this question.
26.
Agreements between civil litigants to settle or limit issues are an
everyday occurrence in our courts, including our magistrates’
courts. They are the rule, not the exception. The logical consequence
of the magistrate’s erroneous conclusion would be that
agreements, for example, to settle quantum or to admit the pleaded
status of one of the parties were invalid unless such agreements
or
admissions were concluded at a pre-trial conference held strictly in
terms of
s 54.
The Act does not provide that agreements and
admissions agreed outside the framework of s 54 are not binding on
the parties. The
proposition which directly arises in this case, that
a magistrates’ court cannot or ought not to have regard to or
enforce
such an agreement because it was not arrived at during a
conference convened strictly in accordance with s 54 and rule 25, is
so
startling and so destructive of the proper administration of civil
justice that it could never serve the purposes of the
Magistrates’
Courts Act. There
is no justification for implying it into the
measure.
1
27.
In the result, the agreement between the parties to limit the area of
dispute between the appellant and the first respondent
to the
question whether monies were irregularly disbursed by the Paymaster
and, if so, whether it was acting as the agent of the
appellant must
be upheld and it is to that question I shall now turn.
28.
It is rather difficult to grasp what the magistrate’s reasoning
was in relation to the factual question whether the Paymaster
made
irregular payments of money under its control. She appears to have
found that it did, and that the appellant was negligent
in not
picking this up. But in view of my conclusion on the agency issue, I
need not investigate this question further.
29.
The magistrate found that the Paymaster
...
is the agent of the plaintiff as per clause 3.2 read with clause 3.1
of the [loan agreement]... .
30.
But as I have pointed out, the effect of those clauses is to
constitute the Paymaster the agent of the appellant only for the
limited purpose identified in clause 3.2, ie to effect amendments to
the Actual Costs Breakdown Schedule from time to time. I mention
in
passing that the uncontradicted evidence of Mr Lees was that no such
amendments were ever effected.
31.
The effect of these clauses is abundantly clear: the Paymaster is not
the agent of the appellant to make payments of money under
the
Paymaster’s control. There was moreover no evidence at all to
suggest that the appellant had, acting outside the loan
agreement,
constituted the Paymaster its agent for this purpose. The magistrate
therefore erred in coming to the opposite conclusion.
Whether in
making such payments, insofar as they affected the first defendant,
the Paymaster acted as principal or as agent of
the first defendant
need not be determined and I accordingly make no finding in that
regard.
32.
The appeal must therefore succeed. The parties were in agreement on
the form of the order which should issue if the appeal were
upheld.
I
make the following order:
1.
The appeal succeeds with costs to be paid by the first and second
appyhnts, jointly and severally.
2.
The order of the court below is set aside and replaced with the
following:
2.1
The court grants judgment for the plaintiff against the defendants,
jointly and severally for:
2.1.1
payment of the sum of R1 773 975.94;
2.1.2
interest on the sum of R1 773 975,94 from the date of issue of the
summons at the rates set out in paragraph 9 of the plaintiff’s
pre-trial agenda dated August 2010 (page 116 of the record on
appeal);
2.1.3
the costs of suit, to be paid by the defendants on the scale as
between attorney and client.
NB
Tuchten
Judge
of the High Court
27
November 2012
M.
Mphaga
Acting
judge of the High Court
27
November 2012
1
For
the proper approach to the interpretation of contracts and statutory
measures, see
Natal Joint Municipal Pension Fund v
Endumeni Municipality
2012 4 SA
593
SCA paras 18-26.