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[2011] ZAFSHC 186
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Digoeregoere Business Projects CC v Maluti-A-Phofung Local Municipality (4400/2004) [2011] ZAFSHC 186 (18 November 2011)
FREE STATE HIGH COURT,
BLOEMFONTEIN
REPUBLIC OF SOUTH
AFRICA
Case no.:4400/2004
In
the matter between:
DIGOEREGOERE BUSINESS PROJECTS CC
…..................
Applicant/Defendant
And
MALUTI-A-PHOFUNG MUNICIPALITY
…...............................
Respondent/Plaintiff
CORAM:
C.
J. MUSI, J
HEARD ON:
22 SEPTEMBER 2011
_____________________________________________________
JUDGMENT BY:
C.J
.
MUSI, J
DELIVERED ON
:
18 NOVEMBER 2011
[1] This is an
application for condonation. The applicant seeks the following
relief:
“
1. Condoning
the applicant’s non-compliance with the
provisions of the Institution of Legal
Proceedings Against
Certain Organs of the State Act, 2002.
Ordering the Respondent to pay the
costs of this application.
Granting such further and/or
alternative relief as this Court deems meet.”
[2] I shall, for the sake
of convenience, refer to the applicant as the defendant and to the
respondent as the plaintiff.
[3] On 9 July 2004 the
defendant was awarded a tender, by the plaintiff (an organ of State),
to provide health and hygiene training
to 56 000 households falling
within the plaintiff’s boundaries at R300-00 per household. In
the appointment letter it is
stated that the tender shall be
conditional upon sufficient funds being made available by the
Department of Water Affairs and Forestry
on an annual basis.
[4] After rendering part
of the service the defendant invoiced the plaintiff for R304 106. 40
on 10 August 2004. The plaintiff paid
the said amount on 31 August
2004. On 9 September 2004 the plaintiff paid another R304 106. 40
into the defendant’s bank
account. The plaintiff discovered its
mistake and informed the defendant on 20 October 2004 about the
double payment.
[5] On 29 October 2004
the defendant admitted the double payment and requested twenty
working days from 1 November 2004 to refund
the money.
[6] On 2 September 2004
the Phofung Project Consultants (Pty) Ltd, who were the plaintiff’s
agents, informed the defendant
that due to a 38% reduction in the
budget allocation no further training should be embarked upon until
additional funding for social
facilitation health and hygiene
training has been allocated. The services of the defendant were
suspended. The defendant was aggrieved
by the suspension and was of
the view that it was being prevented from performing in terms of the
agreement. It also alleged that
the plaintiff owes it money for
services rendered.
[7] When the plaintiff
did not receive the refund, as promised, it issued summons on 20
December 2004, claiming R304 106. 40 plus
15.5% interest thereon,
arising from the duplicate payment. The parties were then engaged in
extensive negotiations for a period
of approximately two years in an
endeavour to resolve the issues in dispute.
[8] On 11 February 2005
the defendant’s attorney wrote a letter to the plaintiff
wherein the following was stated:
“
1. The
Maluti-A-Phofung Municipality suspended our clients’
(sic) contracts (sic) through no fault
of their own, for
unsubstantiated budgeting (sic)
reasons. This matter is still to be resolved.
Our clients (sic) are not convinced
that there was any budgetary reasons for suspending their (sic)
contract, as the suspension
happened in the middle of a financial
year, and at the beginning of the same financial year the
Municipality had sufficient budget
(sic) for 1 full year. Our
instructions are to claim penalties for the unlawful suspension…
As a gesture of our client’s
goodwill we propose that we meet to discuss possible settlement of
all the issues outstanding
including withdrawing your claim against
our client. We believe that this would be in the interest of all
parties including the
Municipality in the light of possible bad
publicity that it matter could attract…”
[9] On 12 May 2005 the
plaintiff’s attorneys placed on record, in a letter to the
defendants, that it will calculate what
is due to the defendant, if
any, and what the defendant owes it after taking into consideration
the double payment which was made
to the Defendant. The plaintiff’s
attorney further recorded the following:
“
2.4 That if
no settlement can be reached after the Defendant has been furnished
with the said calculation, then the matter will
proceed to litigation
and the Defendant must then file its plea.
That all pleadings will be held in
abeyance pending the
outcome of a possible settlement
between the parties…
Should no agreement be reached
between the parties and
the matter proceeds, then you will
have to
file your Plea and Counterclaim herein
…”
(My underlining).
[10] On 18 January 2006
the defendant wrote a letter to the plaintiff wherein it
inter
alia
stated:
“
Your client
had unilaterally terminated our client’s contracts (sic) and
our client is lodging a counterclaim for damages
for breach of
contract in the sum of the balance of the contract. With regard to a
further meeting, we would be available during
the first and second
week of February. We propose that such meeting will (sic) be held in
Johannesburg.”
[11] The parties
continued with settlement negotiations. On the 26 May 2006 the
plaintiff wrote the following to the defendant:
“
1. That the
parties were
ad
idem
that the contract was not cancelled, alternatively that it was not
the intention of any party to cancel or repudiate the contract.
2. That the parties were
ad idem
with the calculations as per your letter dated 18 January 2006.
3. That the parties were
ad idem
that retraining was not done by your clients in respect of 7 265
units.
4. That the parties were
ad idem
to remain bound to the existing agreement although it was clearly
expressed that a detailed contract should be finalised to regulate
the rights and obligations of the respective parties.
5. The parties were also
ad idem
to suspend the exchange of further pleadings in the current Supreme
Court case pending finalization of a possible settlement.”
[12] On 2 October 2006
the defendant wrote to the plaintiff to advice it that the
negotiations have broken down. It stated it thus:
“
We further
advice that our client has instructed us to terminate all
negotiations as it is quite clear to them that your client
is
dragging out the negotiations indefinitely and has no intention of
settling the matter. You will be served with our plea and
counterclaim shortly.”
[13] On 20 October 2006
the defendant filed its plea and counterclaim. In its plea the
defendant alleged that it had rendered services
to the plaintiff in
the amount of R422 400.00 which amount it had not yet invoiced at the
time of duplication of payment. It alleged
that it is entitled to set
off the amount due and payable to it against the amount paid by the
plaintiff.
[14] It confirmed, in its
counterclaim, that the contract was awarded to it. It alleged that it
rendered services to the amount
of R422 400.00 plus 14% vat in terms
of the tender agreement and that the amount of R481 536.00 was due
and payable to it.
[15] Secondly, it alleged
that the suspension of the contract was unlawful and for spurious
reasons. It further alleged that the
suspension caused undue delay
which is punishable in terms of the tender agreement. It claimed R1
050 000.00 for penalties or punitive
damages.
[16] Thirdly, it alleged
that the suspension of the contract for a period in excess of two
years and the bad faith negotiations
of the plaintiff was tentamount
to an unlawful termination. It claimed R3 600 000.00 for loss of
profit and earning. It further
claimed an amount of R153 116.26 which
it alleged was a 5% retention that was held by the plaintiff. It
alleged that due to the
unlawful cancellation of the contract the 5%
retention became due and payable.
[17] On 19 January 2007
the plaintiff filed its plea to the counterclaim. It did not plead
non-compliance with the provisions of
section 3 of the Institution of
Legal Proceedings against Certain Organs of State Act 40 of 2002 (the
Act).
[18] On 27 March 2007 the
plaintiff indicated by letter to the defendant that it is prepared to
allow it to continue with training
of 3500 households from 1 April
2007 subject to three conditions, firstly that the defendant submit
the required “happy letters”
in respect of the total
number of trained households before 1 April 2007, secondly that the
defendant sign a comprehensive agreement
regulating the rights and
obligations of the parties for the remaining part of the contract and
lastly that the claim and counterclaims
be withdrawn on the basis
that each party pay its own costs.
[19] The defendant did
not respond to the letter of 27 March 2007. It served a notice of bar
on the plaintiff. On 10 May 2007 the
plaintiff wrote to the defendant
requesting it to give a clear and unambiguous undertaking that it
will continue with the contract
under the conditions stipulated in
the letter of 27 March 2007. The undertaking was not forthcoming
[20] On 24 April 2009 the
defendant filed an amended plea and counterclaim. The counterclaim
consisted of two claims (A and B).
[21] In claim A the
defendant alleged that it rendered services to the plaintiff in the
amount of R422 400.00 plus 14% VAT and that
the plaintiff is indebted
to it in the amount of R177 429.60 which represents R481 536.00 less
R304 106.40.
[22] In claim B it
alleged that the suspension of the contract amounted to a unilateral
and unequivocal tender to perform less than
what was due in terms of
the contract and therefore a repudiation of the agreement between the
parties. It further alleged that
it accepted the repudiation and
communicated such acceptance to the plaintiff. It alleged that as a
result of the repudiation it
suffered damages to the amount of R13
735 200.00 plus 14% VAT. The amount of R15 658 128.00 being the
amount that the defendant
would have earned had the plaintiff not
repudiated the contract.
[23] It therefore claimed
for cancellation of the agreement; payment of R177 429.60 (claim A);
payment of R15 658 128.00 (claim
B); 15, 5 % per annum interest on
the aforementioned amounts from date of summons and costs of suit.
[24] On 13 July 2009 the
plaintiff filed a replication to the defendant’s amended plea
and a plea to the amended counterclaim.
In its plea to the amended
counterclaim the plaintiff pleaded for the first time, that the
defendant had failed to notify it timeously
or at all as required by
section 3 of the Act.
[25] On 20 August 2010
the plaintiff applied for an order requesting the defendant to give
security for costs. On 7 September 2010
the defendant was ordered to
furnish security for costs in respect of its counterclaim in the form
and amount as determined by
the Registrar.
[26] Security for costs
was provided in May 2011. The present application was brought on 24
May 2011.
[27] The defendant argued
firstly, that the plaintiff waived its right to rely on section 3 of
the Act, secondly that it substantially
complied with the provisions
of the Act because the parties were engaged in litigation and it sent
a notice to the plaintiff, thirdly
that it made out a proper case for
condonation.
[28] The plaintiff
focussed on the condonation application and argued firstly, that the
relief sought in prayer 1 of the notice
of motion is undefined and
contrary to what the Act empowers a Court to grant, secondly that the
counterclaim has prescribed, (strangely,
the plaintiff did not plead
prescription, at all, in its plea to the counterclaim) thirdly that
no good cause for the failure to
comply with section 3 and lastly
that the plaintiff did not show the bona fides of its claim. With
regard to the allegations of
waiver and substantial compliance it
argued that the notices are deficient because they do not quantify
the defendant’s claim.
[29] The plaintiff is of
the view that the defendant was supposed to give notice in respect of
both claims. The defendant on the
other hand argued that it does not
have to give any notice in respect of claim A because it is a claim
for specific performance
and not a debt as defined in the Act.
[30] The term debt is
defined in section 1 of the Act as follows:
“’
Debt’
means any debt arising from any cause of action –
Which arises from
delictual, contractual or any other liability, including a cause of
action which relates to or arises from any
–
act performed under or
in terms of any law, or
omission to do anything
which should have been done under or in terms of any law;
and
(b) for which an organ of
State is liable for payment of damages,
Whether such debt became
due before or after the fixed date…”
[31] It is clear that
paragraphs (a) and (b) of the definition must be read in conjunction.
There is no need to depart from the
clear, plain and unambiguous
language of the definition. See
Shenkar v The Master and Another
1936 AD.136;
R v Sapreco Meats (Pty) Ltd and Another
1970 (2)
SA 530
(R;A.D).
[32] In
Director-General
v Kovac Investments
2010 (6) SA 646
(GNP) at paragraph 8 to 9 it
was correctly, in my view, stated that:
“
[8] The
enquiry does not stop in paragraph (a) of the definition of ‘debt’
in the Act. Paragraph (b) of the definition
lists, in addition to the
features mentioned in para (a), another feature that the contractual,
delictual or other claim must possess:
it must be a claim for which
an organ of state is liable for the payment of damages. There are
therefore two legs to the enquiry
whether a claim is a debt in terms
of the Act. Firstly, it must arise from a contract, a delict ‘or
any other liability’
– secondly, it must render the organ
of State liable for damages.
[9] For purposes of the second leg of
the enquiry, the claim needs to be characterised. If the claim is for
specific performance,
then the claim, while it would amount to a debt
in the context of the Prescription Act, does not qualify as a debt
for purposes
of the Act.”
[33] A claim for payment
of an amount due for services rendered in terms of a contract does
not constitute damages. It is claim
for specific performance. It does
not constitute a debt as contemplated in the Act. Claim A is
therefore not a claim for damages
and is accordingly not subject to
the provisions of the Act.
[34] It is common cause
that the provisions of the Act do apply to claim B. Section 3 of the
Act reads as follows:
“
3.
Notice
of intended legal proceedings to be given to organ of state.
– (1) No legal proceedings for the recovery of a debt may be
instituted against an organ of State unless –
the creditor has given
the organ of State in question notice in writing of his or her or
its intention to institute the legal
proceedings in question; or
the organ of State in
question has consented in writing to the institution of that legal
proceedings –
without such notice; or
upon receipt of a
notice which does not comply with all requirements set out in
subsection (2)
A notice must –
within six months from
the date on which the debt became due, be served on the organ of
State in accordance with section 4 (1);
and
briefly set out –
the facts giving rise
to the debt; and
such particulars of
such debt as are within the knowledge of the creditor.
For purposes of
subsection (2) (a) –
a debt may not be
regarded as being due until the creditor has knowledge of the
identity of the organ of State and of the facts
giving rise to the
debt, but a creditor must be regarded as having acquired such
knowledge as soon as he or she or it could
have acquired it by
exercising reasonable care, unless the organ of State wilfully
prevented him or her or it from acquiring
such knowledge; and
a debt referred to in
section 2(2)(a), must be regarded as having become due on the fixed
date.
4 (a) If an organ of
State relies on a creditor’s failure to serve a notice in terms
of subsection (2)(a), the creditor may
apply to a court having
jurisdiction for condonation of such failure.
(b) The court may grant
an application referred to in paragraph (a) if it is satisfied that –
(i) the debt has not been
extinguished by prescription;
(ii) good cause exists
for the failure by the creditor; and
(iii) the organ of State
was not unreasonably prejudiced by the failure.
If an application is
granted in terms of paragraph (b), the court may grant leave to
institute the legal proceedings in question,
on such conditions
regarding notice to the organ of State as the court may deem
appropriate.”
[35] The defendant
alleged that the plaintiff waived its right to rely on section 3 of
the Act.
[36] The defendant states
the following in its founding affidavit:
“
40. The
plaintiff was represented at all relevant times and its attorneys
took measures to protect its rights and no doubt, to preserve
evidence and to ensure that a proper and full defence would be put
up.
41. The plaintiff has accordingly
suffered no prejudice by the failure to provide a notice of the type
contemplated in section 3
of the Act. Indeed, the plaintiff did not
even raise this issue when it initially filed its plea to the
counterclaim
42. I respectfully submit that this,
in itself, not only demonstrates the absence of prejudice, but is a
sufficient basis for contending
that it had waived its right to rely
upon this as a defence. The plaintiff, with full knowledge of its
right to rely upon section
3 of the Act, filed a plea in which it
failed to assert this right and, indeed, remained silent for
approximately 4 years thereafter.”
[37] The plaintiff’s
response to these paragraphs is as follows:
“
AD
PARAGRAPH 40 THEREOF:
I take note of the contents hereof.
AD PARAGRAPH 41 THEREOF:
In this regard I wish to point out
that the amount of damages which is now being claimed by the
Defendant, has been increased significantly
since the original plea
had been filed, and the basis thereof has been changed
in toto
.
Further legal argument will be advanced at the hearing in regards
with the prejudice suffered by the Plaintiff in this regard.
AD PARAGRAPH 42 AND 43 THEREOF:
I have been advised that the contents
of these paragraphs contain legal argument and that such legal
argument will be addressed
at the hearing of the matter.”
[38] In
Road
Accident Fund v Mothupi
2000 (4) SA 38
(SCA)
at paragraphs 15 to 19 the requirements for inferred waiver are set
out as follows:
“
[15] Waiver
is first and foremost a matter of intention. Whether it is the waiver
of a right or a remedy, a privilege or power,
an interest or benefit,
and whether in unilateral or bilateral form, the starting point
invariably is the will of the party said
to have waived it . The
right in question in the instant case is the statutory provision
specifically accorded to the fund to avert
claims which are out of
time. ‘It is a well-established principle of our law that a
statutory provision enacted for the special
benefit of any individual
or body may be waived by that individual or body, provided that no
public interests are involved. It
makes no difference that the
provision is concluded in peremptory terms…”
[16] The test to determine intention
to waive has been said to be objective… That means, first,
that intention to waive,
like intention generally, is adjudged by its
outward manifestations… secondly, that mental reservations,
not communicated,
are of no legal consequence… and thirdly,
that the outward manifestations of intention are adjudged from the
perspective
of the other party concerned, that is to say, from the
perspective of the latter’s notional
alter ego
, the
reasonable person standing in his shoes…
[18] The outward manifestations can
consist of words, or some other form of conduct from which the
intention to waive is inferred;
or even of inaction or silence where
a duty to act or speak exists…
[19] Because no one is presumed to
waive his rights …one, the onus is on the party alleging it
and two, clear proof is required
of an intention to do so. The
conduct from which waiver is inferred, so it has frequently been
stated, must be unequivocal, that
is to say, consistent with no other
hypothesis.”
[39] It has been said
that there is a presumption, even in some cases a strong one, against
waiver. See
R H Christie The law of Contract in South Africa 5
th
ed
at page 441. In
Xenopoulos and Another v Standard Bank
of South Africa LTD and Another
2001 (3) SA 498
(WLD) at 512 D-F
Wunsh J clarified the position as follows:
“
I do not
consider that there is a presumption. The position is that, in
weighing up the probabilities to decide whether a party
asserting a
waiver has proved it, a court takes into account that it is unusual
for persons to give up rights or property gratuitously
unless there
is a reason for their conduct…”
I
agree.
[40] Once a waiver of a
right has been communicated, by word or conduct, to the other side it
is irrevocable; the right has perished.
It is not necessary to show
that the opposite party altered its position to its detriment as a
result of the waiver. See
Glaser v Millward
1950 (4) SA 587
(WLD) at 588 A-B.
[41] In
Glaser
v Millward
supra at 590 G-H Roper J was of
the view that where an attorney withdraws a plea on behalf of a
client, even without consulting
such client, the client is
nevertheless bound by what the attorney has done. He puts it thus:
“
Her
attorneys have the conduct of the case in their hands and are under a
duty to protect her rights in the litigation which they
carry on
under a power of attorney given to them by her. They are quite
entitled to make admissions on her behalf under the power
of attorney
and when they make them their client is bound by them; and if they
made this withdrawal without consulting her, she
is nevertheless
bound by what they have done, and it would be quite idle to put her
in the witness-box or to produce an affidavit
by her to the effect
that she never knew in effect what was done and never intended to
waive her rights.”
[42] On the other hand it
has been said that a client is not bound by the actions of his/her
legal representative – attorney
or counsel – where such
legal representative has exceeded the mandate given to him/her and
he/she has achieved an object
that had not been intended by his/her
principal. See
Ras v Liquor Licensing Board;
Area no 11 Kimberley
1966 (2) SA 232
(C.P.D)
at 237 C-D.
[43] In
Bikitsha
v Eastern Cape Development Board and Another
1988
(3) SA 522
(ECD) at 528 B-C Mullins J came to the following
conclusion:
“
It seems
quite clear on authority that an attorney has no authority to waive
his client’s right unless specifically authorized
thereto.”
[44] It is clear that no
one is presumed to have waived a right and it is accepted that once a
right has been acquired it is not
easily renunciated.
The
view that for acts of great prejudice – like waiver – an
attorney needs a special mandate seems to me to be the
better view.
See
Bikitsha
supra at
527 I-J and
Ras v Liquor Licensing Board
supra.
[45] The plaintiff is
represented by the same attorneys since at least 20 December 2004,
the day on which it issued summons, to
date. After summons was issued
the parties were engaged in extensive and protracted negotiations.
There is no indication that the
plaintiff’s legal
representative/s did not have an express mandate to enter into
agreements of the nature that it did. If
that was the case, one would
in any event expect the plaintiff to say so and distance itself from
such agreement. It did not do
so. I must therefore assume that the
plaintiff’s attorneys had the required mandate.
[46] In the letter dated
12 May 2005 the plaintiff’s attorneys recorded the terms of an
agreement between them. In paragraph
4 thereof it is clearly stated
that the parties agreed that
“should no agreement be
reached between the parties and the matter proceeds then you will
have to file your client’s
Plea and Counterclaim herein.”
[47] The parties
therefore agreed on the way forward. If part of the agreement was
that a section 3 notice must first be served
before the counterclaim
is served then surely the plaintiff’s attorney would have
recorded it as such. Likewise if it was
the plaintiff’s view
that the section 3 notice must first be served then surely that would
have been part of the agreement.
It was not.
[48] When the plaintiff
filed its plea on 19 January 2007 it did not invoke section 3 of the
Act. Even after it filed its plea to
the counterclaim it wrote a
letter to the defendant on 27 March 2007 wherein it
inter ali
a
stipulated certain preconditions – which were not accepted –
for the withdrawal of the claim and counterclaim. Again
no mention
was made of section 3.
[49] It is only in its
plea to the amended counterclaim that the plaintiff decided to invoke
the provisions of section 3 of the
Act. This plea was filed on 13
July 2009. No reason is given as to why non – compliance with
section 3 was not raised on
19 January 2007, or between 19 January
2007 and 13 July 2009.
[50] As pointed out
above, the defendant, in its founding affidavit, states that the
plaintiff with full knowledge of its right
to rely on section 3 of
the Act, filed a plea in which it failed to assert its right and
indeed remained silent for approximately
two years thereafter. This
was not denied by the plaintiff. It must therefore be accepted that
the plaintiff had full knowledge
of its right and failed to assert
same.
[51] In any event the
plaintiff – a major municipality – was represented by
attorneys and counsel who, it must be assumed,
were fully aware of
the protection afforded to the plaintiff by the statutory limitation
provisions which (judging by the many
reported cases) are frequently
invoked by municipalities. See
GMF Kontrakteurs (Edms) Bpk v
Pretoria City Council
1978 (2) SA 219
(TPD) at 223 H to 224 A.
[52] In
Minister of
Safety and Security v De Witt
[2008] ZASCA 103
;
2009 (1) SA 457
(SCA) at paragraph
10 Lewis JA said:
“
If the organ
of State makes no objection to the absence of a notice, or a valid
(sic) notice, then no condonation is required. In
fact, therefore,
the objection of the organ of State is a jurisdictional fact for an
application for condonation absent which the
application would not be
competent.”
[53] The delay on the
part of the plaintiff to invoke the provisions of section 3 is also a
factor that needs consideration. No
explanation, whatsoever, is given
for the failure to invoke the provisions of section 3 prior to 13
July 2009 is proffered. It
is clear that there was a duty on the
plaintiff to speak but it remained silent. It gives no explanation
for its silence. The correspondence,
the delay in invoking section 3
and the objectives of the Act having been met, as I point out below,
shows that the invocation
of section 3 is done in bad faith.
[54] It is clear that the
plaintiff delayed between 19 January 2007 – when it first
pleaded to the counterclaim - and 13 July
2009 – when it
pleaded to the amended counterclaim - to assert its right. No reason
is given for the delay. Under the circumstances
it is clear that it
raises a “technical procedural defence” without a bona
fide or satisfactory reason why it raises
it so late. See
GMF
Kontraktuers (Edms) Bpk
supra.
[55] On the other hand
the defendant also had a duty to comply with the provisions of
section 3. It however gives a plausible and
satisfactory explanation
for its failure i.e. that the parties were entangled in negotiations
and that during the negotiations
certain agreements were reached and
further that there was substantial compliance with section 3 –
an issue which I discuss
below.
[56] I am satisfied that
the plaintiff’s conduct and outward manifestation reasonably
entitled the defendants to conclude
that the plaintiff a local
authority that was legally represented and fully aware of its right
decided not to invoke the provisions
of section 3 of the Act. It is,
in my view, clear that it must be inferred that the plaintiff waived
its right to rely on section
3 of the Act. Its conduct is
inconsistent with any other hypothesis.
[57] The defendant argued
that it substantially complied with the provisions of the Act. It
points out that in its letter dated
11 February 2005 it informed the
plaintiff that it (plaintiff) suspended the contract without a valid
reason and that it was going
to institute a claim for penalties for
the unlawful suspension of the contract (see paragraph 8 above). On
18 January 2006 it informed
the plaintiff that the plaintiff
unilaterally terminated the contract and that it was going to
institute a counterclaim for damages
for breach of contract in the
sum of balance of the contract (see paragraph 10 above).
[58] In terms of section
3(2)(a) and (b) the notice must be served within 6 (six) months from
the date on which the debt became
due and it must briefly set out the
facts giving rise to the debt and such particulars of the debt as are
within the knowledge
of the defendant.
[59] It has been said
that legislation such as the Act is aimed at providing the plaintiff
with an opportunity to investigate the
matter sooner rather than
later when such investigations might prove more difficult, so that it
can consider its position, and
if so advised, to pay or compromise
the debt before becoming embroiled in costly litigation. See
Abrahamse v East London Municipality and Another, East London
Municipality v Abrahamse
1997 (4) SA 613
(SCA) at 624D-E;
Moise
Greater Germiston TLC: Minister of Justice Intervening
[2001] ZACC 21
;
2001 (4)
SA 491
(CC) at paragraphs 10-13.
[60] In
Mohlomi v
Minister of Defence
[1996] ZACC 20
;
1997 (1) SA 124
(CC) at paragraph 11 Didcott
J elaborated on the negative impact inordinate delays have on the
effective and efficient resolution
of disputes. He said:
“
Inordinate
delay in litigating damage the interest of justice. They protract the
disputes over the rights and obligations sought
to be enforced,
prolonging the uncertainty of all concerned about their affairs. Nor
in the end is it always possible to adjudicate
satisfactorily on
cases that have gone stale. By then witnesses may no longer be
available to testify. The memories of the ones
whose testimony can
still be obtained may have faded and become unreliable. Documentary
evidence may have disappeared…”
[61] From these
authorities it is clear that the Act was promulgated for the benefit
of the plaintiff. It is designed to aid State
organs. It encourages
the resolution of legal claims within a reasonable amount of time,
because it is in the best interest of
State organs that disputes are
resolved as soon as possible.
[62] In its founding
affidavit the defendant states the following:
“
37. Over the
years the parties engaged in extensive negotiations regarding the
issues in dispute. Correspondence was exchanged between
the parties
directly and their respective legal representatives. Much of this
correspondence is privileged and is accordingly not
attached hereto.
38. This exchange culminated in the
letter of 18 January 2006 referred to above.
39. Having regard to the aforesaid, I
respectively submit that:
3.9.1. The defendant had forewarned
the plaintiff as early as February 2005 and/or January 2006 that it
intended to claim damages
for the plaintiff’s wrongful
cancellation of the agreement.
3.9.2. Since the acceptance of the
repudiation and communication thereof was contained in the
counterclaim, it was unnecessary and
indeed overly formalistic to, in
addition, provide a separate notice. Alternatively, the letter of 18
January 2006 constitutes
sufficient and substantial notice.”
[63] The response to
these allegations is quite telling. The plaintiff responded as
follows:
“
AD
PARAGRAPHS 35, 36 AND37 THEREOF
The contents hereof are admitted.
AD PARAGRAPH 38 THEREOF.
I note the contents of this paragraph.
In this regard I wish to indicate that prior to the letter dated 18
January 2006, Defendant
and its legal representatives accepted the
fact that the services of the defendant has merely been suspended and
not terminated
as stated in the letter referred to. It was indeed the
Defendant who repudiated the agreement by not agreeing to continuing
with
the services at request of the Plaintiff. In this regard I refer
to the contents of annexure “D”.”
AD PARAGRAPH 39 THEREOF
I have been advised that the contents
of this paragraph constitute legal argument and will legal argument
therefore be advanced
in this regard at the hearing of the matter.”
[64] It is apparent that
the plaintiff does not deny that it was forewarned about the
defendant’s intention to institute a
counterclaim
.
[65] The only argument
presented by the plaintiff in order to meet the defendant’s
allegations was that the letters cannot
be regarded as written
notices as envisaged in section 3 because they did not quantify the
defendant’s claim.
[66] The legal position
is that the written notice is peremptory but the content thereof is
directory. See
Van Niekerk v Verwoerd Burger
Staatraad
1989 (4) SA 244
(TPD) at 251 G-H;
Avex Air (Pty) Ltd v Borough of Vryheid
1973 (1) SA 617
(A) at 621 G-H;
Coetzee
v Minister of Law and Order and Others
1984
(4) SA 752
(EC) at 755 A-H.
[67] In as far as the
defendant relied on the fact that the counterclaim itself is a notice
in terms of section 3 that submission
is misplaced and clearly wrong.
The notice must precede the institution of proceedings. A
counterclaim does not embody an intention
to institute proceedings it
is a form of instituting legal proceedings.
[68] It has been said
that the achievement or otherwise in any particular case of the
object of a provision such as section 3 is
of importance in deciding
whether there was substantial compliance with the requirements of the
particular provision. See
Avex Air (Pty) Ltd v
Borough of Vryheid
supra at 622 A-B. In
Commercial Union Assurance Co of South Africa
Ltd v Clarke
1972 (3) SA 508
(A) at 516 C and
517 D Holmes JA said the following:
“
As to that,
legislative provisions requiring a claimant to give due notice prior
to the institution of proceedings have more that
once engaged the
attention of this Court; and the Court has adopted a robust and
practical approach as distinct from a legalistic
one… Each
case must be dealt with in the light of its own language, scope and
object and the consequences in relation to
justice and convenience of
adopting one view rather than the other.”
In deciding whether the
objects of a particular statute that limits the rights of a claimant
have been satisfied, the provisions
of the statute must be
restrictively construed and not extended beyond its express limits.
See
Avex Air (Pty) Ltd v Borough of Vryheid
supra at 621 F-G;
Mbali
v Minister of Police
1984 (2) SA 596
(TK) at
598D.
[69] Substantial
compliance with the Act means actual compliance in respect to the
substance essential to the achievement of the
objectives of the Act.
It must be clear that the purpose for which the limitation was
enacted has been met. I must be satisfied
that the provisions of the
Act have been followed sufficiently so as to meet the intent for
which it was adopted. The defendant
bears the onus of proving that it
has substantially complied with the provisions of the Act. Each case
must be decided on its own
special facts. An important question to
consider is whether any purpose would be served by a further but
procedurally correct notice.
[70] On 11 February 2005
the plaintiff was informed that the defendant intends to claim
penalties for the unlawful suspension of
the contract. The contract
was still extant. The parties were still locked in negotiations.
[71] When the
negotiations deadlocked the defendant informed the plaintiff that it
(plaintiff) had unilaterally terminated the contract.
It further
informed the plaintiff that it accepted the repudiation and that it
elected to claim damages for breach of contract
in the sum of the
balance of the contract.
[72] It is clear that the
letter of 11 February 2005 only related to a claim for penalties in
terms of the contract, which was claim
two of the original
counterclaim. The letter dated 18 January 2006 related to a different
cause of action viz the repudiation of
the contract. The debt only
became due when the repudiation was accepted and the acceptance
communicated to the plaintiff. See
Christie supra
at 487;
HMBMP Properties (Pty) Limited v King
1981 (1) SA 906
(N) at
910 A-F.
[73] The letter of 11
February 2005 is no longer relevant because in the amended
counterclaim the claim for penalties was jettisoned.
[74] The letter of 18
January 2006 clearly states that the debt arose out of a breach of
the contract between the parties. The plaintiff
was aware of the
contract. The letter also clearly states that damages will be claimed
for the balance of the contract. This letter
is understandably short
on detail. The detail required in the notice is also linked to the
purpose of the Act. It is to help in
facilitating the investigations,
by making it easier. The more detail the easier it is to investigate.
The detail contained in
the notice will depend on the facts of each
case. Where the parties were involved in extensive negotiations and
they both know
what the litigation is all about there is no need for
a detailed account of all the facts.
[75] Mr Claassen SC, on
behalf of the plaintiff, is correct that the letter of 18 January
2006 does not state the quantum of the
claim. Section 3 of the Act
does not require that the quantum be specified in the notice.
[76] In Avex
Air (Pty)
Ltd v Borough of Vryheid
supra at 621 F-G Botha JA said:
“
Hampering as
it does the ordinary rights of an aggrieved person to seek the
assistance of the courts, section 254 (2) must be restrictively
construed and not extended beyond its express limits… no
particulars not expressly prescribed by the section, such as the
legal basis of the local authority’s alleged liability, or the
amount claimed in a money claim need therefore be set forth
in a
notice under section 254 (2).”
[77] I agree. There is
also no express provision in section 3 that the quantum of the
damages must be specified in the notice. There
is therefore no need
to do so.
[78] There was compliance
with the substance essential to meet every objective of the Act. The
plaintiff had ample opportunity to
investigate this matter. It
actually investigated it. It agreed with the defendant that after
their negotiations deadlocked the
defendant may institute its
counterclaim. It knew exactly which contract was at issue. All
investigations necessary were exhausted.
In any event the plaintiff
did not proffer any argument against the defendant’s argument
in relation to substantial compliance
other than to argue that the
notice did not quantify the claim. No purpose would be served by a
further notice that specifically
states that it is a notice in terms
of section 3 of the Act. There was substantial, if not actual,
compliance with the provisions
of section 3 of the Act.
[79] My findings in
relation to waiver and substantial compliance render it unnecessary
to consider the issue of condonation.
[80] The notice of motion
does not contain a prayer for declaratory relief to the effect that
the plaintiff waived its right to
rely on section 3 alternatively
that the defendant substantially complied with the provisions of
section 3. (See paragraph 1 of
this judgment).
[81] There is a prayer,
for what it’s worth, for further and/or alternative relief. In
Johannesburg
City Council v Bruma Thirty-Two (Pty) Ltd
1984
(4) SA 87
(T) at 93 E-F Coetzee J said:
“
The prayer
for alternative relief is to my mind, in modern practice, redundant
and mere verbiage. Whatever the court can validly
be asked to order
on papers as framed, can still be asked without its presence.”
[82] In
Tsosane and
Others v Minister of Prison
1982 (2) SA 55
(c) at 63 E-G it was
said that:
“
In any event
and insofar as the relief sought may not have been appropriate or
even legally competent, I would have been prepared
to grant an
appropriate order directed at the decision of the second respondent
(assuming the merits of the matter justified this)
under the prayer
for further or alternative relief. Relief may be granted under this
prayer where what is sought is not inconsistent
with the substantive
relief claimed and where further the basis for such relief has been
laid in the supporting papers and dealt
with in the answer of the
respondent (see
Queenland
Insurance Co Ltd v Banque Commerciale Africaine
1946 AD 272
at 286;
Rooibokoord
Sitrus (Edms) Bpk v Louw’s Creek Sitrus Koöperatiewe
Maatskappy Bpk
1964
(3) SA 601
(T) at 608.”
The sentiments expressed
in
Tsosane
supra were endorsed albeit in slightly different
terms in
Port Nollorth Municipality v Xhalisa and Others; Luwalala
and Others v Port Nollorth Municipality
1991 (3) SA 98
(C) at 112
C- F.
[83] The legal position
can be summarised as follows. An order in terms other than those set
out in the notice of motion may be
granted provided that it is
foreshadowed in the founding affidavit and dealt with in the
answering affidavit. There must be satisfactory
and sufficient
evidence on the papers to justify such an order. The applicant should
not be penalised for an oversight in the formulation
of his/her/its
prayers in the notice of motion. The relief granted must not be
inconsistent with the substantive relief claimed.
If no proper basis
for the alternative relief is laid or if it is inconsistent with the
substantive relief claimed it should not
be granted. The absence of a
prayer for further or alternative relief is no bar against granting
such relief.
[84] The issues relating
to waiver and substantial compliance were expressly and fully dealt
with in the founding affidavit. The
plaintiff responded thereto.
Those issues where argued during the hearing of the application. A
proper basis was laid for the order
I intend to make. The defendant,
in its founding affidavit, states that it brought the application for
condonation
ex abundante
cautela.
It is still of the
view that there was waiver and substantial compliance. There is
sufficient evidence on the papers to justify
such an order.
[85] After the plaintiff
invoked section 3 the defendant could have requested the plaintiff to
consent in writing to the institution
of these proceedings without a
notice or with a defective notice. It did not do so. On the other
hand the plaintiff, taking into
consideration the unique facts of
this case, should not have invoked section 3 at that late stage and
secondly it should not have
opposed this application. The opposition
was unreasonable and vexatious.
[86] The defendant seeks
an indulgence. The general rule is that it should pay the plaintiff’s
costs of opposition if reasonably
incurred.
[87] The opposition in
this matter was unreasonable, vexatious and unnecessary as a result
of which the costs of this application
was increased by such
opposition. The plaintiff relied on section 3 contrary to the purpose
for which it was enacted. It did not
do so in order to meet the
objectives of the Act or in the interest of justice. It abused the
statutory regime that was enacted
for its benefit and protection. In
my view the plaintiff should be ordered to pay the defendant’s
costs in consequence of
the opposition. See
Makings v Makings
1958 (1) SA 338
(AD) at 342 A-C.
[88] I accordingly make
the following order:
a) The
plaintiff/respondent waived its right to rely on the provisions of
section 3 (1) of Act 40 of 2002.
b) The
defendant/applicant must pay such costs of the application as would
have been incurred had there been no opposition.
c) The costs incurred by
the defendant/applicant in consequence of the opposition must be paid
by the plaintiff/respondent.
_____________
C.J. MUSI, J
On behalf of the
Applicant: Adv G. I. Hulley
Instructed by: C/O
Symington & De Kok
169 B Nelson Mandela
Drive
Bloemfontein
On behalf of the
Respondent: Adv J. Y. Classen SC
Assisted by: Adv J. J. F.
Hefer
Instructed by: McIntyre &
Van der Post
12 Barnes Street
Bloemfontein
/ar