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[2012] ZAKZDHC 30
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Oppex Consultants CC v University of Kwazulu-Natal (1053/08) [2012] ZAKZDHC 30 (1 June 2012)
IN THE KWAZULU-NATAL HIGH COURT,
DURBAN
REPUBLIC OF SOUTH AFRICA
Case No: 1053/08
In the matter between:
OPPEX CONSULTANTS CC
….......................................................................................
Plaintiff
and
THE UNIVERSITY OF KWAZULU - NATAL
…...........................................................
Defendant
JUDGMENT
Delivered
on: 01June 2012
MNGUNI J
[1] The plaintiff is a close
corporation duly incorporated in terms of the close corporation laws
of the Republic of South Africa
which, at all times material hereto
and in particular on 21 November 2006, carried on business at Bell
house, Bell Crescent, Westlake,
Cape Town.
[2] The plaintiff operates a business
of analysing the electricity consumption and costs on its clients’
utility accounts
and then advises them of possible savings. It
achieves this by determining and applying the most cost effective
billing structure
suitable to a client’s consumption profile.
The implementation of the plaintiff’s recommendation could
result in a
tariff change on a billing structure aimed at achieving
future savings. This is but one of the components in the plaintiff’s
business profile. The other component focuses on the identification
of any computational errors which the municipality could have
made on
the utility account that could result in a refund to a client. The
plaintiff applies a principle of ‘no cure no pay’
basis
and earns its fees by participating in a saving or refund achieved
for a client. The determination which I have to make concerns
a
refund achieved by the plaintiff from the municipality for the
defendant.
[3] As part of its marketing and sales
strategy, the plaintiff would identify a potential client which it
could interest in its
business. The defendant was identified through
the same marketing and sales strategy. On 21 November 2006 at
Westville, Durban,
the plaintiff and the defendant entered into a
consultancy agreement in the following terms: (‘the client’
refers to
the defendant).
“
1.
The client hereby authorises Oppex, to perform an analysis of the
client’s electricity consumption and costs. The client
agrees
that Oppex will perform an analysis of its electricity consumption
and costs at no charge to the client and advise the client
on
possible savings and/or refunds that can be obtained.
2.
The Client agrees to co-operate in such analysis and to furnish Oppex
with the necessary information required for the analysis
to be
completed successfully.
3.
On completion of the analysis, Oppex will submit a written report
containing its recommendations on how cost savings and/or refunds
can
be obtained, if the possibility for such savings and/or refunds
exists.
4.
Should the client choose to implement Oppex’s recommendations,
the Client agrees to pay Oppex, 50% plus VAT, of total savings
and/or
refunds achieved for a period of thirty six (36) months, commencing
from the first month in which such savings are achieved.
Payment
invoices showing calculation of savings and / or refunds as mentioned
above will be made upon presentation, but no later
than seven (7)
days from the date of invoicing.
5.
Oppex will only participate in savings and/or refunds achieved as a
result of its recommendations.
6.
Oppex agrees to keep all information furnished by the client strictly
confidential. The client agrees to keep all information
related to
the service provide by Oppex strictly confidential.
7.
Should it become impossible to achieve savings as a result of a
legislative change, Oppex will not be entitled to participate
in
savings as discussed above.
8.
The client agrees to furnish Oppex with copies of it’s monthly
electricity bills when and if required by Oppex.
9.
For the duration of this agreement Oppex agrees to liase with the
relevant authorities in respect of matters pertaining to this
agreement on behalf of the client, to continuously monitor and
analyse consumption in respect of utility and to provide the client
with recommendation on how to best to optimise such consumption with
the aim of minimizing costs
10.
By signing this agreement the client agrees to all terms and
conditions as contained in this agreement.’
[4] The plaintiff was represented by
Anton Maine (“Maine”) and the defendant by Rajesh Dhuni
(“Dhuni”) when
the agreement was concluded. Pursuant to
the agreement, by July 2007 the plaintiff had performed an analysis
of the defendant’s
electricity consumption and costs. In
compliance with its obligation as set out in clause 3 of the
agreement, the plaintiff produced
a written report setting out the
findings on its analysis and its recommendations for savings and the
refunds which the defendant
could make on its electricity consumption
and costs. The plaintiff, thereafter, submitted annexure “OC2”
to the defendant
in compliance with clause 3 of the agreement.
[5] The plaintiff’s analysis
revealed,
inter alia
, that the eThekwini Municipality
(Municipality) had overcharged the defendant for electricity
consumption as a result of an incorrect
meter reading taken on
account number 16110228917 in the estimated amount of R1 043 000 (Vat
inclusive). Consequently, defendant
was entitled to a refund. The
plaintiff recommended that the correct meter reading on account
16110228917 be applied and that the
municipality refund the
difference to the defendant with immediate effect.
[6] The defendant implemented the
recommendation and, in August 2007 requested a refund of R 921 316.85
(excluding vat) from the
municipality. The municipality acknowledged
the error and overcharge and eventually refunded the amount to the
defendant. On 17
October 2007 the plaintiff invoiced the defendant in
the amount of R 525 150.60 (excluding vat) being 50% of the refund on
the
overcharge to which it was entitled, in terms of clause 4 of
annexure “OC1” (the agreement).
[7] It is against the background of
this synopsis of facts that on 24 January 2008 the plaintiff
instituted the present action claiming
the sum of R 525 150.60
(excluding vat) from the defendant. The defendant denied liability
and specifically denied that Dhuni who
signed the agreement on its
behalf, had the necessary authority to conclude and bind it to a
contract with the plaintiff. Confronted
with the denial of authority,
the plaintiff replicated to the defendant’s plea adopting a two
pronged approach in advancing
its case. In the main, it persisted
with its allegations that Dhuni represented the defendant in
concluding the agreement and averred
that Dhuni was duly authorised
to do so on behalf of the defendant. In the alternative, the
plaintiff contended that in the event
of the Court finding that Dhuni
was not duly authorised to conclude the agreement on behalf of the
defendant, the defendant was
estopped from denying Dhuni’s
authority to conclude the agreement and set out the factual basis on
which it relied on in
support of this contention.
[8] Though it was initially denied,
when the trial commenced, counsel informed me that the terms of the
agreement and the fact that
the plaintiff had performed its
obligations in terms thereof, was no longer in issue and was regarded
as common cause between the
parties. Maine and Johan Pierre Smit
testified in support of the plaintiff’s claim. The defendant
adduced the evidence of
Yagambaran Pillay, Gregory Diana and Jane
Julia Meyerowitz. Counsel also handed up a bundle of documents which
contained the documentary
evidence upon which the parties relied on
during the trial.
[9] It is trite that in order to act
on behalf of another so as to affect that other’s
relationships, the necessary authority,
either actual or ostensible,
to do so must be present. Actual authority may be express or implied.
In
Hely-Hutchinson v Brayhead Ltd and Another
[1968] 1 QB 549
(CA) at 583A - G
[1967] 3 All ER 98
at 102A – E (referred to
with approval in
NBS Bank Ltd v Cape Produce Co. (Pty) Ltd and
Others
2002 (1) SA 396
(SCA) para 24) Lord Denning MR expressed
himself as follows:
‘
(A)ctual
authority may be express or implied. It is
express
when it is given by express words, such as when a board of directors
pass a resolution which authorises two of their number to
sign
cheques. It is
implied
when it is inferred from the conduct of the parties and the
circumstances of the case, such as when the board of directors
appoint
one of their members to be managing director. They thereby
impliedly authorise him to do all such things as fall within the
usual
scope of that office. Actual authority, express implied, is
binding as between the company and the agent, and also as between the
company and others, whether they are within the company or outside
it.’
[10] The foundation of the plaintiff’s
case on actual authority rests solely on the meeting of 21 November
2006 between Maine
and Dhuni. Maine testified that on 21 November
2006 he had a meeting with Dhuni in Westville. During that meeting he
asked Dhuni
whether he had the requisite authority to conclude the
agreement on behalf of the defendant. Dhuni answered that question in
the
affirmative. The defendant did not dispute Maine’s evidence
in this regard and did not call Dhuni to testify to contradict
this
evidence, because of his ill health. The defendant, however, adduced
the evidence of Pillay and Meyerowitz who both testified
that Dhuni
did not have the requisite authority to conclude the agreement on
behalf of the defendant and bind it contractually.
At the time when
the agreement was concluded, Pillay was employed by the defendant as
a Financial Manager in the Finance Department.
He was Dhuni’s
supervisor at the time, and Dhuni was the Head of Expenditure. Pillay
testified that the authority to conclude
the agreements on behalf of
the defendant vested with the Registrar of the defendant. Dhuni knew
this as he made payments on contracts
which the Registrar had signed.
[11] Before the merger of the
institutions which now constitutes the defendant, Dhuni handled the
utility accounts for the former
University of Durban Westville and
was required to ensure that all invoices were captured on the system,
and reconciled before
payment was made to supplier.
[12] Meyerowitz, the Registrar of the
defendant, testified that she is the custodian of the Council Minutes
and Resolutions. She
produced extracts of the relevant Council
Minutes reflected at pages 90 to 94 in the Court’s bundle of
documents. She testified
that page 90 of the bundle is an extract
from the Council Minutes of 5 May 2006 and page 91 thereof is the
signatory list that
is referred to on page 90 that was approved and
was attached to the Council Minutes of 5 May 2006. On page 92 is the
extract of
the Council Minutes of 1 September 2006 and the reverse
side of page 92 is the signatory list referred to in the Council
Minutes
of 1 September 2006. On page 93 is the extract of the Council
Minutes of 4 May 2007 and the reverse side on page 94, is the
signatory
list referred to on page 93. She referred to pages90 to 94
of the bundle. Having regard thereto, it is evident that the
signatory
list provides the names of the defendant’s officials
who are authorised to sign certain the documents on behalf of the
defendant
as well as the type of the documents they are authorised to
sign. The signatory list is revised from time to time to cater for
the changes on the defendant’s personnel. Because Annexure
“OC1” was signed on November 2006, page 92 of the bundle
and the reverse side thereof are the relevant documents as the
signatory list was approved in September 2006 and was only replaced
in May 2007.
[13] Counsel for the plaintiff argued
that Pillay’s evidence during cross examination revealed that
Dhuni made payments on
contracts which Pillay did not know whether
they (the payments) were signed by the Registrar of the defendant or
somebody else.
Because of that, so the argument went, his evidence
should be ignored as it did not assist the Court in the determination
as to
whether Dhuni had authority or not. Interestingly, he was
unable to dispute that Dhuni was not on the signatory list. He,
however,
contended that the defendant was supposed to produce
evidence proving that the resolution relevant to this contract was
adopted
in a properly constituted Council Meeting. I have carefully
considered this submission, and in my view, this argument is
untenable.
It ignores the evidence of Meyerowitz who is the
repository of the Council Minutes, who testified that Dhuni did not
have authority
to conclude contracts on behalf of the defendant and
her evidence was corroborated by Pillay and the determination.
[14] It is common cause that annexure
“OC1” is a legal document and Dhuni does not appear in
the signatory list which
was approved in September 2006. I am
therefore, inclined to conclude that Dhuni did not have any actual
authority. There is one
issue which merits consideration. The bundle
of documents reveals that on 22 August 2007, Dhuni signed a document
titled ‘Job
Description’ and the contract which is the
subject of dispute was signed on 21 November 2006. I raised with
Meyerowitz why
it was necessary for Dhuni to sign this document on 22
August 2007. Her explanation was that after the merger, the defendant
went
through all departments and sections to make sure that there was
a proper job description for each of the employees of the defendant.
Having carefully considered her explanation on the issue, I can find
no causal link between the conclusion of the agreement and
the
drawing up of job description. Nothing untoward can therefore be read
into that.
[15] Having found that Dhuni lacked
actual authority to conclude the agreement on behalf of the defendant
does not dispose off the
matter. The next enquiry is whether the
defendant, made any representation by word or conduct, which induced
the plaintiff to act
to its detriment by concluding the agreements
with Dhuni, and is therefore estopped from repudiating liability. In
Hely-Hutchinson (supra)
Lord Denning MR pronounced on the
issue:
‘
Ostensible
or apparent authority is the authority of an agent as it
appears
to others. It often coincides with actual authority. Thus, when the
board appoint one of their number to be managing director,
they
invest him not only with implied authority, but also with ostensible
authority to do all such things as fall within the usual
scope of
that office. Other people who see him acting as managing director are
entitled to assume that he has the usual authority
of a managing
director. But sometimes ostensible authority exceeds actual
authority. For instance, when the board appoint the managing
director, they may expressly limit his authority by saying he is not
to order goods worth more than £500 without the sanction
of the
board. In that case his
actual
authority is subject to the £500 limitation, but his
ostensible
authority includes all the usual authority of a managing director.
The company is bound by his ostensible authority in his dealings
with
those who do not know of the limitation,’
[16] The question is, therefore,
whether is the defendant created any impression on outsiders that
Dhuni, who had no authority at
all, actually had the authority to
transact and bind it. In order to hold the defendant liable on the
basis of ostensible authority
the plaintiff has to prove the
following requirements formulated by
Schutz JA in NBS Bank Ltd v
Cape Produce Co (Pty) and others
2002 (1) SA 396
para 26:
‘
1.
A representation by words or conduct.
2.
Made by…[the principal] and not merely by…[the agent],
that he had the authority to act as he did.
3.
A representation in a form such that…[the principal] should
reasonably have expected that outsiders would act on the strength
of
it.
4.
Reliance by…[the third party] on the representation.
5.
The reasonableness of such reliance.
6.
Consequent prejudice to…[the third party].’
[17] In
Glofinco v Absa Bank Ltd
t/a United Bank
2002 (6) SA 470
(SCA) para 13 Nienaber JA
referring to the first two elements pronounced:
‘
[a]
representation, it was emphasized in both the
NBS
cases
supra
,
must be rooted in the words or conduct of the principal himself and
not merely in that of his agent (
NBS
Ltd v Cape Produce Co. (Pty) Ltd
(supra at 411H – I).) Assurances by an agent as to the
existence or extent of his authority are therefore of no consequence
when it comes to the representation of the principal inducing a third
party to act to his detriment.’
[18] But the law stresses that the
appearance representation, must have been created by the principal
himself. The fact that another
holds himself out as his agent cannot,
of itself, impose liability on the principal and the fact that Dhuni
held himself out as
authorised to act as he did is by the way (see
NBS Bank
supra
).
[19] Central to the plaintiff’s
assertion that the defendant is liable on the basis of ostensible
authority is, in my view,
the evidence of Maine. In November 2006
Maine worked in the Marketing and Sales Division of the plaintiff.
During the performance
of his duties, he identified the defendant as
a potential client and contacted its switchboard operator to whom he
explained the
nature of the services being offered by the plaintiff.
He then asked to be referred to a person he could speak to regarding
that.
He was put through to the Finance Department where he again, he
explained to a person in that department the nature of the services
being offered by the plaintiff and asked to be referred to a person
he could speak to about that.
[20] He was referred to Dhuni and was
told that he was in charge of the section. He spoke to Dhuni and
again explained to him the
nature of the services being offered by
the plaintiff. After discussing the matter with him, they agreed to
meet in Durban on 21
November 2006. On 21 November 2006 he flew to
Durban to meet Dhuni at the defendant’s Westville Campus. On
arrival at the
Campus, he was directed to a building in which Dhuni
was stationed. When he arrived at that building, he was informed that
Dhuni
worked from the fourth floor of the building and he took a lift
to that floor. On alighting from the lift, he immediately saw two
notice boards hanging side by side written Finance Division with the
names of persons on them. He then realised that he was in
the right
place.
[21] Dhuni’s name was at the top
of the list and that made him conclude that he occupied a high
position in the department.
The access in and out of the department
was controlled with a door which was securely locked and fitted with
a buzzer. He hit the
buzzer and a person opened for him. He went into
the office and advised the person who opened the door that he had an
appointment
with Dhuni. That person walked him down an open plan
office to a private office occupied by Dhuni and was delivered to a
lady that
was sitting at a desk near Dhuni’s office. The lady
knocked on the door and announced his presence to Dhuni. Each time he
went to Dhuni’s office, he would report to that lady who
appeared to be a person who controlled the access to Dhuni’s
office.
[22] Dhuni told the lady that he was
still busy and would attend to him as soon as he finished. When he
finished, the lady ushered
him into his office. He introduced himself
to Dhuni. Whilst he was still busy with him, a female subordinate
employee of Dhuni
came in with some documentation. Dhuni and the
subordinate employee had a discussion around the documentation. He
signed something
and left the office. From that, an impression was
created to him that Dhuni was in charge and that the defendant’s
employees
come to him for authorization of their work. He began with
his presentation and explained to him what the plaintiff does. When
he finished, he said to Dhuni ‘in order for us to proceed, we
need your authority in the form of an agreement or somebody
who has
the necessary authority in the university to carry on.’,
because the plaintiff was going to undertake the analysis
at its own
costs.
[23] He produced annexure “OC1”,
which is a standard agreement used by the plaintiff in transactions
of this nature.
He went through annexure “OC1” with him
and explained it in its entirety to him. At that stage he did not
have any
doubts that he was at the right department and was dealing
with the right person. He specifically expressly said to Dhuni ‘who
has the authority to conclude this agreement?’ and Dhuni had an
expression of how could he doubt that he had the authority.
Dhuni
picked up the agreement and signed it on behalf of the defendant and
below his signature wrote ‘Head of Expenditure’.
That
cemented his belief that he was dealing with the right person. He, in
turn, took the agreement and signed it. After they both
signed he was
thereafter satisfied that the parties had concluded a binding
agreement which entitled the plaintiff to commence
the work.
[24] Maine’s evidence is echoed
in the reply to the defendant’s notice in terms of Rule 21(2).
At this stage, it is
apposite to state that on 20 February 2009, the
defendant’s attorneys delivered a notice in terms of Rule 21(2)
of the Uniform
Rules of Court to the plaintiff’s replication.
Among the enquiries which the defendant made in terms of the said
Rule was
the following:
‘
2.3
Who were the representatives of the Defendant to whom such an enquiry
was allegedly made?
2.4
What were the exact words used in making such enquiry?’
The plaintiff responded to the said
enquiries as follows:
‘
Ad
paragraph 2.3
7.
In a telephone call by Mayne to the main switchboard of the
defendant, Mayne explained to the switchboard operator the nature
of
the services being offered by the plaintiff and asked to be referred
to the appropriate person handling the utility accounts.
8.
Mayne was referred by the switchboard operator to the defendant’s
department of expenditure.
9.
The plaintiff has no knowledge of the identity of the switchboard
operator who referred Mayne to the defendant’s department
of
expenditure.
Ad
paragraph 2.4
10.
To the best of Mayne’s knowledge and recollection he used the
following words, or words to similar effect:
“
Hello
my name is Anton Mayne. I am calling from a company called Opex. We
look for ways to help reduce the cost of our client’s
utility
accounts, specifically the charges for electricity. We work on a
‘no-cure-no pay’ basis. I would like the opportunity
to
come and explain what we do in more
detail.
Please refer me to the person responsible for handling those
accounts.
”’
[25] The evidence of Maine as well as
the pleadings reveals that the representation was made by the
switchboard operator and a person
to whom she referred Maine’s
call. I have carefully considered the nature of the representation
allegedly made by these two
individuals and it seems to me that Maine
made a request to them to be directed to a person dealing with
utility accounts. I am
unable to find evidence in support of the
plaintiff’s argument that they had requisite authority to
represent the defendant.
In any event, it seems to me that the
switchboard operator and a person in the Finance Department to whom
the switchboard operator
referred Maine’s call, are lowly
ranked employees of the defendant in an elaborate administrative set
up.
[26] The second aspect of the
representation on which the plaintiff relied, was the fact that Dhuni
had an office and a private
secretary in the department in the
circumstances where the majority of the employees in the department
were in an open plan office.
This gave him the impression that Dhuni
was the head of the department and, accordingly, that he had the
necessary authority to
conclude the agreement on behalf of the
defendant. On this aspect the evidence was that four employees on the
fourth floor had
private offices and that he was a senior person in
the Finance Department. The lady whom Maine referred to as a ‘private
secretary’ was a floor receptionist.
[27] I am not persuaded by the
argument and evidence that the fact that the defendant housed Dhuni
in an office in an area where
most of the employees were in an open
plan could lead to a representation of authority at all. In my view,
if this proposition
is accepted, it will lead to an absurd conclusion
that the employees in the offices as opposed to the employees in an
open plan
office were authorised to contract for the defendant. I can
find no representation at all about authority in the manner in which
the offices were configured.
[28] Maine testified in relation to
the names on the notice boards, Dhuni’s name was on top of the
list and the plaintiff’s
counsel sought to suggest that a
representation by the defendant was made that Dhuni was a person in
charge and the person in charge
of finance. Pillay’s evidence
was that the names on the notice boards were in alphabetical order
and Dhuni was not the most
senior person in the department. The fact
that Dhuni’s name was on top of the list did not mean that he
was in charge of
the section. The lady who ushered Maine into Dhuni’s
office was the receptionist who managed the floor, flow of documents
and was responsible for answering the buzzer. He conceded that his
office would sometimes be visited by members of the public.
Pausing
here for a moment, it is to be noted that the fact that Dhuni and
three other officials of the defendant were given offices,
does not
mean they were clothed with authority to bind the defendant. In my
view, what is important is their seniority in the overall
structure
of the defendant and what ordinarily goes with the senior positions
they would have held.
[29] Importantly, in its replication,
the plaintiff stated that in large organisations such as the
defendant, contracts such as
the agreement are usually concluded with
representatives of the organisation in the department of expenditure
or its equivalent.
The evidence of Meyerowitz was that the defendant
has a staff compliment of about 5000 members with a main budget of
about R2 billion.
She testified further that the defendant has a
procurement policy which sets out conditions under which a person can
enter into
a contract with an individual without going through a
tender or quotation bid process. She also testified that any contract
which
the defendant intends entering into with any party is referred
to the defendant’s legal services to be vetted before it is
signed. To my mind the fact that Maine had never dealt with an
institution like the defendant, does not assist the plaintiff’s
case further for the reason that the representations allegedly made
by the defendant were not in a form that the defendant, would
have
reasonably been expected the outsiders to act on the strength
thereof.
[30] Based on the evidence
aforementioned, I have to conclude that the plaintiff’s
official (Maine) could not have relied
on the representations as
pleaded and alluded in his evidence, as there were no representations
made by the defendant or its officials
either in words or conduct
that he could have reasonably relied on, and acted upon.
[31] With regard to the question of
costs, plaintiff’s argued that the Court should not allow costs
occasioned by the employment
of two counsel because the matter did
not merit the employment of two counsel. I see no reason why I should
deny the defendant
the costs properly incurred to enable a proper
ventilation of the matter. In my view, the defendant has been
successful in this
matter and accordingly the costs should follow the
result.
In the result, I make the following
order:
The plaintiff’s claim is
dismissed with costs, including the costs of two counsel.
Date of Hearing : 30 August 2011
Date of Judgment : 01 June 2012
Counsel for the Applicant : Adv. S.
Miller
Instructed by : Abrahams and Gross Inc
Counsel for the Respondent : Adv. N.
Pillemer SC
Assisted by : Adv. L. Naidoo
Instructed by : Garlicke &
Bousfield Inc