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[2002] ZAWCHC 61
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Western Cape Housing Development Board and Another v Parker and Another (12829/99) [2002] ZAWCHC 61; 2003 (3) SA 168 (C) (18 November 2002)
IN THE HIGH COURT OF SOUTH AFRICA
Reportable
(CAPE
OF GOOD HOPE PROVINCIAL DIVISION)
CASE
NO:
12829/99
DATE:
18-11-2002
In
the matter between:
THE
WESTERN CAPE HOUSING DEVELOPMENT BOARD
First
Plaintiff
JOHN
WILLIAMS AFRICA N.O.
Second
Plaintiff
and
ASHRAF ABDULRAHIMAN PARKER
First
Defendant
MOHAMMED
ESSACK MOHAMMED
Second
Defendant
J U D G M E N T
COMRIE,
J:
1.This
is an opposed application by the defendants for a stay of
proceedings, alternatively for a postponement of the trial which
was
due to commence on Wednesday 13 November, 2002. During the morning
of that day the case stood down so that further affidavits
could be
filed. The argument began after lunch and continued until the close
of business the next afternoon.
2.The
general background to the matter is that the defendants, a
partnership of attorneys, were appointed to act in terms of a housing
subsidy scheme. In this role they were paid substantial sums of
money by the plaintiffs' predecessors, which, so the plaintiffs
claim, the defendants misappropriated or misused. In 1998 the
predecessors instituted sequestration proceedings against the
defendants,
which proceedings were opposed. Certain issues were
referred for oral evidence. At that hearing both sides were
represented by
senior counsel. After listening to evidence for
several days,
Davis,
J
on 8 December 1998 refused the application for provisional
sequestration with costs. Those costs were duly taxed by agreement
in
the amount of R346 000,00. They have not been paid. The date of
the
allocatur
was 23 November 1999.
3.In
December 1999 the present (successor) plaintiffs instituted fresh
proceedings against the defendants by way of action. They
claimed:
(a)payment
of the sum of R3 487 114,00;
(b)payment
of the sum of R200 220,80;
(c)interest
and costs.
They
also claimed an order declaring that the indebtedness comprised by
the taxed costs had been extinguished by set-off against the
claims
set out in the particulars of claim. The action was defended and
various defences were raised, one of them being, in part,
res
iudicata
.
4.As
the trial approached and on 6 November 2002, the defendants'
attorney, Mr S Levitan, withdrew for want of financial cover. He
asked his clients for R300 000,00 which, they state, they were and
are unable at present to raise. The defendants have managed in
the
meantime to secure the services of an alternative attorney, Mr S
Zakon, and of Advocate
Crowe
.
I understand that they are not instructed as on trial. Mr
Crowe
told me from the Bar that if the trial were to be postponed to the
second term of next year, his clients would be able to raise the
finances needed to fund the litigation, even I were to refuse the
stay. It is clear to me that Mr
Crowe
and Mr Zakon could not adequately have prepared themselves to fight
the trial in the limited time available to them; nor do I think
it
reasonable to expect them to do so now if (as suggested by Mr
Louw
for the plaintiffs) the trial were to stand down for a couple of
days.
5.The
application for a stay is until the plaintiffs have paid the taxed
costs referred to earlier, with interest. Interest was not
questioned by the plaintiffs in their answering affidavit or by their
counsel in argument. The defendants state that they were previously
led to believe that in the light of
section 3
of the
State Liability
Act 20 of 1957
, there was nothing which they could do about those
costs. They have now been advised, however, that they are entitled
to apply for
a stay of proceedings pending payment of the costs,
which is timely advice given their current financial circumstances.
6.The
law is discussed by Herbstein & Van Winsen:
Civil
Practice
4th ed from page 254. It appears from what the learned authors state
and from the cases cited that a Court will be slow to exclude
a
litigant from proceedings because the costs of previous litigation
remain unpaid. Some element of vexatiousness is usually required
though not, it would seem, invariably (
Western
Assurance Co v Caldwell's Trustee
1918 AD 262
;
Strydom
v Griffin Engineering Co
1927 AD 552
;
Potechefstroom
Town Council v Botes
1929 TPD 4
at 6;
Hurter
v Hough en 'n Ander
1989(3) SA 545 (C)). In the last-cited case
Conradie,
J
(as he then was) said at 553A:
"Dit
bring my by die beweerde kwelsugtigheid van die aansoek. In hierdie
verband het mnr Van Schalkwyk daarop gewys dat Hurter
se koste van
die vorige aansoek om skrapping asook die Wetsgenootskap se koste van
toetrede tot daardie aansoek nog nie betaal is
nie. Dit, betoog hy,
tesame met die instelling van die huidige aansoek op wesenlik
dieselfde gronde as vantevore, regverdig 'n bevinding
van
kwelsugtigheid. Dit is egter nie nodig om 'n litigant se optrede as
kwelsugtig aan te merk voordat die Hof sy diskresie met
betrekking
tot die opskorting van latere verrigtinge uitoefen nie. Indien die
partye maar by die meerdere gedinge dieselfde is en
die geskilpunte
wesenlik dieselfde is, is dit die eise van regverdigheid wat die
deurslag gee.
Strydom
v Griffin Engineering Co
1927 AD 552.
"
7.Technically,
the applicants in the sequestration proceedings differ from the
present plaintiffs, but it is admitted that as predecessors
and
successors, they are substantially the same. The relief claimed also
differs. Sequestration was sought in the prior proceedings
whereas
now the plaintiffs pray for judgment for the payment of sums of
money. Nothing was really made in argument of the difference
in
relief, presumably because sequestration and action represent (at
least in this instance) two ways of achieving the same objective,
namely recovering monies believed to be owing. The element of
vexatiousness in this case is said to arise from the identity of and
close connection between the causes of action. The test is
formulated by Herbstein & Van Winsen,
supra
,
at 255, as:
"That
the issues between the parties were substantially the same, or that
the issues were closely connected in the sense that
they arose out of
what passed between the parties in relation to the subject matter
claimed in both actions."
And
at 256:
"Substantial
identity of the causes of action is essential, and mere connection in
respect of the subject or the evidence not
producing substantial
identity in the actions does not suffice to bring into operation the
rule that the second action should
prima
facie
be stayed.
The
court will not order a stay pending the payment of costs when the
causes of action, although arising out of the same facts, are
different, because no inference of vexatiousness or abuse of the
court's process is to be drawn from the institution of a second
action in such circumstances and there is no mere repetition. The
court is not, however, astute to find technical points of difference
when in substance the controversy bears on the same transaction or
event."
8.I
think these passages accurately state the law. It should be borne in
mind, however, that varying expressions are to be found
in the
decided cases, such as causes of action, grounds, issues and relief.
9.The
bulk of the plaintiff's claim (the approximately R3.5 million) is
itemised
in paragraphs 13.1 to 13.7 of the particulars of claim. Here seven
specific transactions are listed, the aggregate amounting
to
R3
487 114,00. In respect of all seven transactions the plaintiffs
allege that the first defendant, in breach of the governing
agreement,
committed acts of theft; alternatively, that in breach of
the agreement, he acted negligently. Clause 3.4 of the agreement
entitles
the plaintiff to recover from the defendants loss or damage
resulting from payments negligently made. It is these self-same
seven
transactions which featured in the sequestration proceedings
and which were the subject matter of oral evidence before
Davis,
J
.
The transactions were presented to him primarily as thefts. The
learned judge held that the predecessors had, in respect of each
of
the transactions, failed to establish a
prima
facie
liquidated claim, as that expression is understood in the law of
insolvency. I should mention that the
gravamen
of the judgment was not that the amounts were unliquidated, but that
the alleged thefts were not proved. The case law is clear that
in a
stay application such as this, the judgment of
Davis,
J
is presumed to be correct. The judgment went further (typed page
17):
"Mr
Louw
,
perhaps sensing the difficulty in making out a
prima
facie
case of theft, sought to construct another basis on which to justify
a liquidated claim, namely a rescission of the contract by applicants
pursuant to the theft by respondents when they used the applicants'
money,
inter
alia
,
to settle third party debts (the payments of which were not subject
to the liquidated claim enquiry because respondents have repaid
those
amounts on 16 October 1997). To this end, Mr
Louw
referred to a letter of the State Attorney addressed to second
respondent, dated 29 January 1998 in which the latter was informed
that the Provincial Housing Board either accepted repudiation or,
failing which, cancelled the contract."
10.The
learned judge elaborated on this contention, including the supposed
consequence of restitution, considered it and rejected
it. He added:
"It
may well be that applicants have an excellent case in respect of
breach of contract, but there is a tried and tested procedure
to
obtain relief in such a case."
11.Before
examining the differences, it is as well to focus on what is
substantially the same or identical. At the forefront of the
plaintiffs' particulars of claim and in respect of the major amount
claimed, are the allegations of theft, elaborately pleaded in
respect
of the seven transactions. Indeed, paragraph 14.4 expressly alleges:
"14.4First
defendant accordingly committed acts of theft in respect of the said
amounts."
I
mention
en
passant
that it was this set of allegations which drew the interesting plea
of
res
iudicata
.
These causes of action, namely the thefts, appear to be identical to
the causes of action before
Davis,
J
,
whether or not the former were based on breach of contract. If not
identical, they are substantially the same. Theft is theft,
whether
it takes
place
in breach of contract or otherwise. On the authorities it is
prima
facie
vexatious to bring the defendants before the Court a second time on
the same or substantially the came causes of action, without
paying
the costs of the prior litigation.
12.It
is true that the particulars of claim contain an alternative, namely
negligence (i.e. payments negligently made); see paragraph
14.5. As
far as counsel told me and as far as I have been able to glean from
the judgment of
Davis,
J
,
negligence was not an issue in the sequestration proceedings. It
seems to me that the addition of this new cause of action in the
alternative does not avoid the vexation for so long as the
allegations of theft stand as part of the plaintiffs' case. They
have
not been abandoned. Furthermore, in this particular case, it
appears likely that the evidence in relation to negligence will
traverse
much the same ground as before and thus may be open to the
"closely
connected"
objection.
13.Mr
Louw
addressed a full argument to me which I understood in summary to be
as follows. That the plaintiffs have no need to rely on theft
or
negligence. They allege a cancellation of the contract (paragraph
16) which is admittedly disputed by the defendants. The allegation
reads:
"16.Insofar
as may be necessary plaintiffs aver that the agreement was duly
cancelled."
If
one reads certain answers given by the first defendant during
viva
voce
evidence, together with the trial particulars (or want of them), then
there is every reason to accept that the termination of the
contract
was justified. The plaintiffs are accordingly entitled to claim
restitution.
Again
reading the first defendant's
viva
voce
answers and the trial particulars it is plain that he and his partner
have no defence to a claim based on restitution. In short,
therefore, Mr
Louw
submitted that the plaintiffs enjoy excellent prospects of success in
the action, regardless of whether they prove theft or negligence
and
that such prospects should be accorded heavy weight in the exercise
of the Court's discretion.
14,I
am not able to say whether this is the same argument as Mr
Louw
advanced before
Davis,
J
,
to which I referred earlier, or a variant thereof. Having read the
prior judgment and having heard no evidence myself, I think
it would
be premature for me to accept that the position is as simple and
straightforward as Mr
Louw
contends. At all events the allegations of theft remain.
15.Counsel
for the plaintiffs placed no reliance on the claim for
R200
220,80 which, I was told, represents a kind of calculated shortfall.
This additional claim does not remove the aforegoing vexation.
16.I
turn to consider the question of set-off
ex
tunc
.
Before set-off can operate the reciprocal debts must be liquidated.
That is settled law: Christie:
Law
of Contract
4th ed at 554. Mr
Louw
accepted that in the present case there would be no practical
difference between liquidated for the purposes of set-off and
liquidated
for the purposes of section 10 of the Insolvency Act.
Davis,
J
accepted that were the thefts proved then the amounts involved would
probably constitute liquidated claims. As I have said earlier,
the
case before him failed for want of sufficient proof of theft. I too
accept that if the plaintiffs can prove the alleged thefts
and
surmount
res
iudicata
,
then the seven amounts making up R3 487 114,00 may well be liquidated
ex
tunc
.
That conclusion is less apparent if the plaintiffs in this action
were to succeed on the basis of negligence or restitution. Here
it
may be noted that clause 3.4 of the agreement refers to liability
"for
any loss or damage suffered"
as a result of negligent payments. This raises the spectre in
relation to set-off of proof of damages and the possible absence,
when summons was issued, of a liquidated debt. The same may be true,
depending on the circumstances, if the plaintiff succeeds on
the
basis of restitution.
17.I
must nonetheless allow for the prospect that plaintiffs overcome the
plea of
res
iudicata
and prove the facts, as to which the judgment of
Davis,
J
is presumed, in this application, to be correct. I must also allow
for the prospect that the plaintiffs succeed on the basis of
negligence or restitution and in a way which produces a liquidated
debt or debts, prior to summons, sufficient to match or exceed
the
taxed costs. If I grant a stay that would deprive the plaintiffs of
their possible set-off, though not necessarily of ultimate
payment.
That at least must go into the scale in the plaintiffs' favour when
it comes to the exercise of a discretion.
Mr
Louw
,
however, advanced a further argument in this regard.
18.He
pointed out that the plaintiffs have alleged the set-off of the
costs' indebtedness in their particulars of claim and prayed
for a
corresponding
declarator
.
The pleaded basis for the relief is that the plaintiffs' claims, if
proved, are liquidated amounts and that set-off would operate
ex
tunc
.
In their plea, the defendants deny liability, deny the plaintiffs'
claims are liquidated, and dispute set-off.
Litis
contestatio
has intervened. At a pre-trial conference the defendants agreed that
the issues appear from the pleadings They therefore admitted
the
obvious, namely that set-off was an issue to be decided at the trial.
Mr
Louw
submitted that if I were to grant a stay pending payment of the
costs, I would be taking one of the issues out of the trial action
and resolving it in the defendants' favour. The defendants had
elected to plead rather than to bring a timeous application for a
stay. They were bound by that election and it was not competent for
me to decide the issues otherwise than as part of the trial.
19.It
appears to me, however, that the defendants were faced by section 3
of Act 20 of 1957. They could not execute on the costs unless
perhaps
they launched some kind of contempt proceedings, which would have
been risky since they were likely to be met by the answer
of set-off
coupled with the intention of the plaintiffs to commence action. The
defendants could not apply for a stay until the
plaintiffs actually
issued summons, otherwise there would be nothing to stay. In their
particulars of claim, the plaintiffs have
appropriated the issue of
set-off by pleading it and claiming relief. As Mr
Crowe
pointed out, the defendants were obliged to plead thereto and
litis
contestatio
inevitably followed. At best for the defendants they might have
sought to defer their plea while an application for a stay was
brought
and determined. On that hypothesis, they were likely to have
been met by a similar argument to the present one. The plaintiffs
would, I suspect, have contended that the defendants were seeking to
avoid an issue which had been fairly and squarely pleaded in
the
particulars of claim. The plaintiffs would also surely have insisted
on the defendants filing their plea timeously and failure
to do so
would have invited notice of bar. It does not seem to me that a
plaintiff, simply by pleading set-off of prior costs and
eliciting a
plea, can deprive a defendant sued for a second or further time, of
his right to apply for a stay until the previous
costs have been
paid. Without suggesting any impropriety on the part of the
plaintiffs in the present case, to uphold Mr
Louw's
argument would afford litigious plaintiffs an undesirable device with
which to meet otherwise meritorious stay applications.
20.In
my view, the defendants are entitled to have their stay application
determined upon its true merits and they are not precluded
by the
fact that set-off is an issue in the trial action.
21.A
factor relevant to discretion which is occasionally mentioned in the
decided cases is the ability to pay costs (compare
Meyer
v Meyer
1945 TPD 118).
Mr
Louw
emphasised that the first plaintiff is a Housing Development Board
and that we are dealing with what he called
"public
money"
.
That may be so, but the first plaintiff deals in millions and
payment of the defendants' taxed costs would be little more than
a
drop in that ocean. I am more concerned about the defendants'
ability to pay an eventual judgment debt, if that should be ordered.
I must presume, however, that in pursuing this litigation, the
plaintiffs have assessed the position for themselves.
22.To
sum up, I am satisfied that the present action is vexatious; and
unless the plaintiffs pay the defendants' taxed costs of the
previous
proceedings, that it is unduly burdensome to the defendants for them
to be embroiled in the present litigation with its
concomitant
expense. In the exercise of my discretion I cannot find sufficient
reason to make an order other than what I conceive
to be the usual
order, namely a stay of proceedings.
23.In
this event, Mr
Louw
intimated that the trial would have to be postponed. The defendants,
having achieved success, are entitled to the costs of the stay
application. Because the application was brought at such a late
stage, Mr
Crowe
correctly accepted that the defendants should be responsible for the
wasted costs occasioned by the postponement. Given that the
plaintiffs' counsel and attorney spent part of the first day and the
whole of the second day in court arguing the stay application,
it
will be for the taxing master to determine which costs have been
wasted.
24.The
order is as follows:
1.The
present action is stayed until such time as the plaintiffs pay the
defendants' taxed costs in the sum of R346 000,00 incurred
in the
sequestration proceedings (case number 9161/98), together with
interest thereon at the rate of 15.5% from 23 November 1999
until the
date of payment.
2.The
trial is postponed
sine
die
and may not be re-enrolled until there has been compliance with
paragraph 1 of this order.
3.The
plaintiffs jointly and severally are to pay the costs of the
application for a stay.
4.The
defendants jointly and severally are to pay the wasted costs
occasioned by the postponement, including the costs of two counsel.
COMRIE,
J