Maxim Programme Development CC v Municipality, Maluti-a-Phofung (746/2004) [2006] ZAFSHC 54 (7 December 2006)

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[2006] ZAFSHC 54
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Maxim Programme Development CC v Municipality, Maluti-a-Phofung (746/2004) [2006] ZAFSHC 54 (7 December 2006)

IN THE HIGH COURT
OF SOUTH AFRICA
(ORANGE FREE STATE
PROVINCIAL DIVISION)
Case No.: 746/2004
In the case between:
MAXIM
PROGRAMME DEVELOPMENT CC
Plaintiff
and
THE
MUNICIPALITY OF MALUTI-a-PHOFUNG
1st Defendant
THE
DISTRICT COUNCIL FOR THABO
2nd Defendant
MOFOTUSANYANA
MEMBER
OF THE EXECUTIVE COUNCIL FOR
3rd Defendant
LOCAL
GOVERNMENT – FREE STATE PROVINCE
PREMIER
OF THE FREE STATE PROVINCE
4th Defendant
JUDGMENT:
VAN DER MERWE, J
HEARD
ON:
5 SEPTEMBER 2006
______________________________________________________
DELIVERED ON:
7 DECEMBER 2006
[1] The
plaintiff instituted action against the defendants by combined
summons issued on 2 March 2004. A combined summons was served
on the
first defendant and the second defendant on 11 March 2004. In the
particulars of claim the plaintiff relies on a written
contract
entered into on 20 November 2001 between the plaintiff and the first
and second defendant’s (“the contract”). The
claims of the
plaintiff are for payment by the first and second defendants, jointly
and severally, of the amount of R37 129,00 in
respect of services
rendered by the plaintiff before the cancellation of the contract and
the amount of R749 223,53 in respect of
damages resulting on the
alleged breach of the contract by the defendants.
[2] The first defendant
is a local municipality and accordingly as such a legal person. The
first defendant is a local municipality
within the district
municipality of Thabo Mofutsanyana. Despite the fact that this
district municipality is a statutory legal
persona
“the
district council” was sited as the second defendant. I accept
however, as all the parties did at the hearing before me,
that the
said district municipality is duly the second defendant. It is quite
unclear why the third and fourth defendants were sited
in this
action, as no relief is claimed against them. The third and fourth
defendants however did not enter appearance to defend
and they took
no part in the proceedings before me. In the contract the first and
second defendants are correctively referred to
as “The
Municipality”. Whenever reference is made in this judgment to the
defendants, it must be understood as a reference to
the first and
second defendants.
[3] The
defendants each filed a special plea to the effect that the plaintiff
failed to institute the present action within time limits
set in the
contract and that in the result the plaintiff’s claims are
unenforceable. The second defendant also filed a special
plea, in
which it was averred, in the alternative the aforesaid special plea,
that the plaintiff failed to comply with pre-conditions
to the
institution of legal proceedings contained in the contract and that
in the result the action is barred and actually instituted
prematurely. This latter special plea was expressly abundant by
second by defendant during proceedings in terms of rule 37(4).
In
the particulars of claim the plaintiff alleged, that it duly gave
notice of its intention to institute this action in terms of
the
provisions of the institution of legal proceedings against certain
organs of State Act, nr. 40 of 2002. The plaintiff was obliged
to
give such notice as the definition of “organ of state” in Act nr.
40 of 2002 includes a municipality such as the third and
second
defendants. The defendants in paragraphs 11.2 and 12 of their
respective pleas denied the plaintiff’s averment. In the
result
and by agreement between the parties I ruled in terms of rule 33(4)
at the commencement of the proceedings that the special
pleas of the
defendants as well as the pleas contained in paragraphs 11.2 and 12
of the first and second defendant’s respective
pleas, we
adjudicated upon initially and separate from all other issues in the
action and that all such other issues stand over for
later
determination, if necessary.
[4] The
provisions of the contract relevant to the adjudication of the
special pleas, are the following:
“
18. Settlement
of Disputes
The
parties shall negotiate in good faith the view to settling any
dispute or claim arising out of or relating to this agreement and
may
not initiate any further proceedings until either party has, by
written notice to the other, indicated that such negotiations
have
failed.
19. Mediation
Any dispute or claim which cannot to
settled between the parties may be referred by the party concerned,
without legal representation,
to mediation by a single mediator. The
mediator shall be elected by agreement between the parties or,
failing such agreement shall
be nominated by the President of the Law
Society of South Africa. The cost of the mediation shall be borne
equally between the parties.
20. Arbitration/Litigation
If either party be unwilling to agree
to mediation or be dissatisfied with the opinion expressed by the
mediator or should the mediation
fail then such party may:-
20.1 serve process instituting action
arising out of such dispute or difference in a civil court; or
20.2 with
the consent of the other party refer the dispute to arbitration by a
single arbitrator to be mutually agreed upon; or
20.3 If
the parties fail to agree on an arbitrator they will use an
arbitrator to be nominated by the President of the Law Society
of
South Africa.
20.4 The
arbitration shall be in accordance with the provisions of the
arbitration laws of South Africa and shall be conducted in
accordance
with such procedure as may be agreed between the parties; or
20.5 Failing
such agreement, in accordance with the rules for the conduct of
arbitrations published by the Association of Arbitrators
current
rules at the date the arbitrator is appointed.
20.6 Service
of process in terms of this clause or referral to arbitration under
this clause shall take place within three calendar
months of the date
of notice from either party declaring that the settlement
negotiations under paragraph have failed; or
20.7 If
mediation is agreed upon within three calendar months of the date of
the mediator’s opinion on the date on which the mediator
declares
that the mediation has failed. Claims not brought within the time
periods as set out herein will be deemed to be waived.”
[5] Put
in a nutshell, the defendants say that the plaintiff failed to serve
process in terms of clause 22.6 of the contract within
three calendar
months of the other party declaring that settlement negotiations have
failed and that therefore the plaintiff’s
claims are deemed to have
been waived in terms of clause 20.7.
[6] In its application of
the plaintiff stage that both defendants waived the right to rely on
these provisions of the contract.
The onus therefore is on the
plaintiff to prove on a balance of primer probabilities that each
defendant, with full knowledge of
its rights, evinced a clear and
unequivocal intention to abundant them. I need to say no more than
on the evidence put before me
by the plaintiff, no such finding can
be made. The plaintiff also pleaded that clause 20.6 of the
contract, (presumably read with
clause 20.7 thereof) is against
public policy and unenforceable as allegedly limits the right to
access to court contained in section
34 of the Constitution. Counsel
for the plaintiff however expressly have framed from adducing any
evidence or making any argument
in substantiation of this allegation,
__________ so in my view, in the light of the decision of
NAPIER
v BARKHUIZEN
2006 (4) SA 1
(SCA), particularly at pagina 12
para 27.
[7] It
is clear that mediation in terms of clause 19 of the contract is not
obligatory. It is also common cause that at least the
plaintiff was
unwilling to agree to mediation and refused to do so and that
therefore the introductory paragraph of clause 20 was
complied with.
All the parties before me accepted therefore, that relevant
provisions of clauses 20.1 to 20.7 of the contract are
applicable.
[8] The
special pleas in question bring two questions to the fore, namely
first, when notice declaring that the settlement negotiations
have
failed was given. Second, where the service of process in terms of
this clause took place within three calendar months of the
date of
such notice. The __________ is accepted, correctly in my view, that
clause 20.6 of the contract refers to settlement negotiations
in
terms of clause 18 thereof having failed. It seems probable that the
number 18 was by mistake omitted after the word paragraph
(“endorse
20.6”). The case for the first defendant is that such notice was
given on either 27 January 2003, 3 March 2003, 26
March 2003 or 30
April 2003. The second defendant similarly says that the date of
notice declaring that settlement negotiations
have failed is 27
January 2003. The case with the plaintiff is that the notice was
given on 6 November 2003 and that service of
process in terms of
clause 20 took place during November 2003, when notice of intention
to institute an action in terms of section
3(1) of Act 40 of 2002 was
given to the first defendant. The defendants in turn argued that
service of process in terms of clause
20 took place only on 11 March
2004, when the combined summons was served.
[9] In my judgment the
onus rests on the defendants to show that as the result of the
time-clause, the plaintiff’s claims are unenforceable.
The special
pleas are special contractual defences, in my view falling within the
second principle stated in
PILLAY v KRISHAN AND ANOTHER
1946 AD 946
at 951 to 952. Of course, if the defendants are correct
on a question of service of process, the plaintiff must fail even
though
it is correct that the said notice was only dated 6 November
2003. However, as I have clarity in my own mind in respect of both
questions, I regard it in the interest of the parties to deal with
both.
[10] Three witnesses
testified at the trial, namely the attorneys of the plaintiff, the
first defendant and the second defendant.
I find it unnecessary to
summarise the evidence of these witnesses or to decide the conflict
in evidence between the attorney for
the plaintiff and the first
defendant. I should add only that it was in the end either common
cause or undisputed that attorneys
Balden, Vogel and Partners could
never acted for the second defendant and the notice of intention to
institute an action in terms
of section 3 of Act nr. 40 of 2002
directed to the second defendant, was actually send per registered
post on 17
November 2003 to the address of the first
defendant, namely Private Bag X805, Phuthaditjhaba. Second
defendant’s address is Private
Bag X810, Phuthaditjhaba and it did
not receive this notice. The first defendant admitted receipt of the
notice dated 14 November
2003 and send on 17 November 2003 on 27
November 2003.
[11] The
relevant part of the a letter dated 27 January 2003 directed by the
plaintiff’s attorneys to the executive mayor of both
the first
defendant and the second defendant, has the following:
“
We
refer to the above as well as contract entered into by yourself and
our client on 20 November 2001 and wish to inform that we now
act on
behalf of Maxim.
We
are in possession of a letter from our client’s previous legal
representatives directed to you dated 15 October 2002, in terms
of
which you were requested to enter into mediation procedure with our
client regarding various issues of your non-compliance with
certain
aspects of the said contract.
It
is our instructions that despite numerous efforts from our client to
resolve any of these issues you have failed to show any response.
This
is further our instructions that you are also in default of payments
due to our client and that you in a serious and deliberate
manner
contravene your obligations in terms of section 6 (six) of the said
contract.
In
light of the above our client now elects to cancel the said contract
and to institute the said contract due to your non-compliance
with
the terms and conditions of the contract.
Furthermore
our client demand payment of the full contract amount less payment
already received for damages as follows:
Contract
amount: R1,237,566,01
Less
payment received:
MA
P0002
R
51,553,29
R1,186,102,90
Payments of the above amount is
demanded within
10
days from date hereof, failure to do so
will result in further legal action without any further notice to you
in which event you
will also to be liable for all legal costs.”
[12] In my judgment this
letter does not constitute notice declaring that settlement
negotiations have failed as envisaged by the
contract. It is clear
that in terms of clause 18 of the contract the parties are obliged to
negotiate in good faith with a view
of settling any dispute or claim
buzzing out of or relating to the contract and that therefore
proceedings may not be initiated until
such negotiations have failed.
It is clear from the evidence of the attorneys for the plaintiff and
the first defendant that no
settlement negotiations took place prior
to 27 January 2003. It follows that the letter of 27 January 2003
can by no means be regarded
as a notification or a declaration that
settlement negotiations have in fact failed. Also, the alleged claim
for damages contained
in the particulars of claim could in the
circumstances of this case only arise as a result of the cancellation
of the contract.
As the plaintiff perpored to cancel the contract
only by the letter of 27 January 2003, could be no negotiation in
respect of this
claim before that date. In my view this conclusion
is borne out by a reply of the attorneys for the first defendant to
this letter,
dated 7 February 2003, where it was
inter alia
stated:
“
As
our client is not only obliged to, but also willing to negotiate in
good faith to settling any dispute of claims, we look forward
to
receive full and detailed information and alleged facts regarding
this matter in order to prepare for such negotiations. We can
then
soon thereafter arrange a date and venue for such negotiations to
take place. Should such negotiations not succeed, our client
is
willing to co-operate in mediation.”
Such
settlement negotiations in fact took place on 30 April 2003 at
Harrismith. Both the letters of the plaintiff’s attorneys
dated 3
March 2003 and 26 March 2003 to the first defendant’s attorneys,
express reference is made to a proposed conference or
meeting in
order to discuss settlement. By no stretch of imagination could
these two letters be regarded as a notification or declaration
that
settlement negotiations have failed. It is clear that such
notification must in terms of clause 18 of the contract be in
writing.
Even on the first respondent’s version of a note on which
the meeting of 30 April 2003 was concluded, it does in any way
constituted
a written notice.
[13] The letter of the
plaintiff’s attorney to the first defendant’s attorneys dated the
6
th
November 2003 merely constitutes a notice in terms of
which the plaintiff declared that settlement negotiations have
failed. As
mentioned above, this letter was directed to attorneys
acting for the first defendant only and therefore not to the second
defendant.
I do not think that that matters. Clause 18 of contract
mentions written notice by either party to the other. In terms of
the
contract the “other” party is the first and second
defendant’s collectively. The first and second defendants
collectively
acquired all rights and undertook all obligations in
terms of the contract. I do not think therefore that in terms of the
contract
is envisaged that third and second defendants would enter
into settlement negotiations separately or on different basis. In my
view
therefore, in terms of the contract, notification of the
indication or declaration that settlement negotiations have failed to
either
the first or the second defendant suffices.
[14] The question then is
whether “service of processing in terms of this clause” in terms
of clause 20.6 of the contract took
place within three calendar
months from 6 November 2003. It will be remembered that in this
regard the plaintiff relies on the service
of the plaintiff’s
intention to institute the legal proceedings in question in terms of
section 3 of Act nr. 40 of 2002. The plaintiff
argues that such
notice is a first necessary step in litigation and in this regard it
particularly relies on the judgment in
IGI INSURANCE CO LTD v
MADASA
1995 (1) SA 144
(T, AD).
[15] It is trite that in
interpreting a contractual provision, the words used must be ascribed
there ordinary grammatical meaning
within the context in which they
were used or unless the context indicates otherwise. The context
includes not only the wording
or the whole of the contract but also
the background facts in respect of the contract, such as the genesis
and purpose of the contract.
See for instance
BLACKSHAWS (PTY)
LTD v CONSTANTIA INSURANCE CO LTD
1983 (1) SA 120
(AD) at 127
A – C and
SUN PACKAGING (PTY) LTD v VREULINK
[1996] ZASCA 73
;
1996
(4) SA 176
(AD) at 184 A – D. In my judgment there is no reason to
deviate from the normal grammatical meaning of the words used in the
provisions
under consideration. In context the phrase “service of
process in terms of this clause” in clause 20.6, refers to clause
20.1.
Clause 20.1 provides for service of process instituting action
in a civil court even according to its widest meaning “action”
or
the narrowly in notes legal proceedings initiated by summons or
notice of motion to enforce a claim for a declaration of rights
or
payment of money or an order compelling the defendant or respondent
to do or reframe from doing something. See
INRY PENNINGTON
HEALTH COMMITTEE
1984 SA 243
(N) at 247 A – B. Moreover,
the word “processed”, also according to its widest meaning at
least in the first two document
employed in a process of litigation,
such as a pleading or notice of amendment. The word is defined in
the new shorter Oxford Dictionary,
1993 edition as (The proceedings
in) an action at law, spec. a mandate, summons or rut by which a
person or thing is brought to court
for litigation.” See also
MIAS
DE KLERK BOERDERY (EMDS) BPK v COLE
1986 (2) SA 284
(N) at
286 D – 287 B. Section 3(1) of Act nr. 40 of 2002 in turn provides
that 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
intention to institute the legal proceedings in question or unless
the organ of state consented in writing to the institution
of that
legal proceedings without such notice or despite defective notice.
[16] In summary, in my
judgment and notice in terms of section 3 of Act nr. 40 of 2002 does
not constitute “process” and certainly
does not constitute
process instituting action in a civil court. In
IGI INSURANCE
CO LTD v MADASA
,
supra
the question was whether in
terms of a time-clause in an insurance contract, an action or suit
was commenced within the stated period.
The court held that the
action or sued had been commenced by an application for leave to sue
the insurance company, a company outside
the Transkei, by edictal
citation. It is held that unlike an application to sue
in forma
pauperies,
the application for edictal citation was a necessary
step in the proceedings provided by the Rules and the Practice Court
for the
commencement of proceedings and not an ancillary to the
commencement of an action. In my judgment this reasoning is not
applicable
to a statutory notice of intention to instituted legal
proceedings which may incidentally, may as a result of settlement or
otherwise
never be instituted. Put differently. Action on sued is
not commenced by a notice in terms of section 3(1) of the Act.
[17] I
have therefore reached the conclusion that the service of process
required by the contract did not take place within three
calendar
months of the date of notice declaring that the settlement
negotiations have failed and accordingly that the defendants
have
proved that the plaintiff’s claims have been rendered unenforceable
as they are deemed to have been waived in terms of clause
20.7 of the
contract.
[18] In
the result it is not necessary to enquire whether there was in any
event service of process on the second defendant nor is
it necessary
to determine whether the plaintiff complied or is entitled to
condonation in terms of the provisions of section 3 of
Act nr. 40 of
2002.
[19] In
the result, the following orders are made:
1. The special pleas of
the first defendant and the second defendant are upheld.
2. The
plaintiff’s claims are dismissed.
3. The
plaintiff is ordered to pay the costs of sued.
________________________
C.H.G. VAN DER MERWE,
J
On
behalf of the plaintiff: Adv. F. du Toit SC
with him
Adv. G. Jacobs
Instructed by:
Andries Spangenberg Inc.
BLOEMFONTEIN
On
behalf of the first defendant: Adv. B. Knoetze SC
Instructed by:
Symington & De Kok
BLOEMFONTEIN
On
behalf of the second defendant: Adv. C. Ploos van Amstel SC
Instructed by:
Honey Attorneys
BLOEMFONTEIN
/em