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[2020] ZASCA 119
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Minister of Public Works v Roux Property Fund (Pty) Ltd (779/2019) [2020] ZASCA 119 (1 October 2020)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Not
Reportable
Case
No: 779/2019
In the matter between:
MINISTER
OF PUBLIC
WORKS
APPELLANT
and
ROUX PROPERTY FUND (PTY) LTD
RESPONDENT
Neutral
citation:
Minister of
Public Works v Roux Property Fund (Pty) Ltd (779/2019)
[2020] ZASCA
119
(1 October 2020)
Coram: WALLIS, MOCUMIE, MOLEMELA and
NICHOLLS JJA and MATOJANE JJA
Heard: 7 September 2020
Delivered:
This judgment was handed
down electronically by circulation to the parties' representatives
via email, publication on the Supreme
Court of Appeal website and
release to SAFLII. The date and time for hand-down is deemed to be
9.45 am on 1 October 2020.
Summary:
Civil procedure –
non–compliance with s 3(1) the Institution of Legal Proceedings
against Certain Organs of State Act
40 of 2002 – application
for condonation in terms of s 3(4) – whether s 3(4) permits
condonation for non–compliance
with the provisions of ss 3(1)
and 3(2)(
b
)
– whether the respondent's non–compliance with s 3(1)
ought to be condoned in terms of s 3(4) – whether the
court a
quo misdirected itself in relation to requirements of s 3(4)(
b
)
– whether condonation should have been granted.
ORDER
On
appeal from Gauteng Local Division, Pretoria (Neukircher J sitting as
court of first instance):
The
appeal is upheld with costs including those attendant on the
employment of two counsel.
The
order of the high court is set aside and the following order
substituted for it:
'1 The application is dismissed with
costs including the costs of two counsel.
2 The plaintiff’s claim is
dismissed with costs, including the costs of two counsel where two
counsel were employed.'
JUDGMENT
Matojane
AJA (Wallis, Mocumie, Molemela and Nicholls JJA)
Introduction
[1]
The issue in this appeal is whether the failure by the respondent to
have timeously given notice to the appellant in terms of
s 3(2) of
the Legal Proceedings Against Certain Organs of State Act 40 of 2002
("the Act")
ought to
have been condoned by the court a quo in terms of s 3(4) of the Act.
[2]
The notice was given in respect of an action instituted by the
respondent against the Minister in which respondent claimed damages
in the amount of R340 million arising from the alleged breach by
the National Department of Public Works ("DPW")
of a
written lease agreement concluded between the respondent and the DPW.
[3]
The Minister of Public Works (the Minister) acts in his capacity as a
member of the Executive of the Government of the Republic
of South
Africa, and the Minister responsible for the National Department of
Public Works. Mr Ngwane Roux Shabangu, the deponent
to the founding
affidavit, is the sole director of the respondent.
[4]
The notice under the Act was dated 28 August 2014, the same day as
that on which the action was instituted. In October 2014
the Minister
filed a special plea asking for the claim to be dismissed on the
grounds that notice had not been given timeously
and there had been
no application for condonation. The respondent did nothing about this
until it launched the present application
on 24 April 2017.
Condonation was granted by Neukircher J. This appeal is with her
leave.
[5]
The appellant contended that the power of condonation in terms of s
3(4) of the Act is only available in respect of non-compliance
with
the provisions of s 3(2)(a) and does not extend to non-compliance
with s 3(1). The appellant argued further that the application
for
condonation did not satisfy the requirements of s 3(4)(
b
) and
that the court in the exercise of its discretion ought to have
refused condonation due to the delay by the respondent in bringing
the application.
Background
facts
[6]
On 20 July 2010, the respondent as lessor entered into a written
lease agreement with the DPW, as lessee. In terms of the lease
agreement, the DPW agreed to lease premises from the respondent for
the use of the South African Police Service for 9 years 11
months
commencing on 1 November 2010 and terminating on 30 September 2020.
Two addenda to the lease agreement were subsequently
entered into in
December 2010 and January 2011 respectively. The first addendum on 1
December 2010 increased the area and rent
payable and the second one
on 5 January 2011 altered the period of the lease from 1 April 2011
to 28 February 2021.
[7]
The DPW did not take occupation of the leased premises on the
commencement date of 1 April 2011, or at any time thereafter,
nor did
it ever pay any rent for them. It denied the validity of the lease on
the grounds of the lack of authority of the DPW officials
who
concluded the lease. It also contended that various statutory
requirements pertaining to procurement of goods and services
for an
organ of state were not complied with.
[8]
On 11 April 2011, the respondent defaulted on its mortgage bond
repayment to Nedbank, the bondholder and on 21 April 2011 Nedbank
instituted action against respondent for the accelerated outstanding
balance of the mortgage bond.
[9]
On 13 September 2011, the appellant instituted motion proceedings
against the respondent in the Gauteng High Court to declare
the lease
agreement void a
b
initio.
The respondent regarded this Act as a repudiation of the lease
agreement.
[10]
On 7 November 2011, Nedbank obtained a judgment against the
respondent in the foreclosure action for payment of the sum of
R248,
589, 308.49 plus interest. Leave to execute was also granted. On 14
August 2013, the property was sold by the sheriff at
a sale in
execution and was bought by Nedbank.
[11]
On 28 August 2014, the respondent issued and served a summons on the
appellant claiming damages arising from the breach and
repudiation.
The damages claimed represented an amount in respect of the value of
the lost ownership of the property and the future
benefit of the
respondent being the owner of the property at the end of the lease
without the property being encumbered by a mortgage
bond or any
liability.
Condonation
[12]
The legal requirements for giving notice of the intention to
institute proceedings before issuing summons against an organ
of
state to recover a debt, are fully set out in s 3 of the Act which
specifies that:
‘
(1)
No legal proceedings for the recovery of a debt may be instituted
against an organ of state unless-
1.
(a) 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
2.
(b)
the organ of state in question has consented in writing to the
institution of that legal proceeding(s)-
(i) without such notice;
or
(ii) upon receipt of a notice which does not comply with all
the requirements set out in subs (2).
(2)
A notice must-
1.
(a) within six months from the date on which the debt became
due, be served on the organ of state in accordance with s
4 (1); and
2.
(b) briefly set out-
(i)
the facts giving rise to the debt; and
(ii)
such particulars of such debt as are within the knowledge of
the creditor’.
[13]
In terms of s 3(4)(
a
)
of the Act, i
f
an organ of state relies on a creditor’s failure to serve a
notice in terms of
subsec
(2)
(a),
the
creditor may apply to a court having jurisdiction for condonation of
such failure.
Section 3(4)(
b
)
determines that a court may grant an application for condonation 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."
These
three requirements are conjunctive, and the court must be satisfied
that the requirements have been met before it can exercise
its
discretion and condone non-compliance with the Act.
[1]
[14]
Counsel for the applicant submitted that the power of condonation in
terms of s 3(4) is limited to failure to give timeous
notice and that
a court cannot condone the failure by the creditor to give notice.
This court in
Minister of
Safety and Security v De Witt
[2]
considered and rejected this interpretation of s 3(4) and held:
‘
In
Legal
Aid Board
Theron
J concluded that because s 3(1
)
is
couched in peremptory terms, a court has no power to condone a
failure to serve a notice prior to the creditor's institution
of
action. Her finding that ‘The court does not have the power to
condone the institution of legal proceedings in circumstances
where
the provisions of s 3(1) have not been complied with"
is in my view incorrect. It fails to take into account
the purpose of
condonation which is to forgive non-compliance or faulty compliance
provided that the criteria in s 3(4)(b) are
met, and does
not accord with an earlier statement in the judgment that s
3(4)(a) 'confers upon the creditor the right
to apply for
condonation of the failure to comply with the provisions of s
3(1).’
[15]
Counsel submitted that this was
obiter
as that case's facts
did not require a consideration of the power to condone
non-compliance with s 3(1). Whether that is correct
– and
it might well be said that this was an integral part of the reasoning
and therefore part of the
ratio decidendi
– it is a
fully considered view of this court not lightly departed from. None
of the grounds for departing from an earlier
decision of the court
were advanced or are present. Counsel's point must be rejected.
[16]
The respondent's non-compliance with s 3 in having failed to serve
notice within the six month period provided for in s 3(2)(
a
)
and only having served the notice on 1 September 2014 after service
of the summons on 28 at this 2014, may accordingly, subject
to the
requirements of s 3(4)(
b)
being satisfied, be condoned by a court.
[17]
This court in
Madinda v
Minister of Safety and Security
[3]
has held that t
he
test for the court being satisfied that the requirements mentioned in
s 3(4) are present involves, not proof on a balance of
probabilities
but, 'the overall impression made on a court which brings a fair mind
to the facts set up by the parties.
According
to the judgment the first of these requires 'an extant cause of
action'. Prescription is a mixed question of fact and
law. It is not
a matter of impression, unlike the questions of good cause and
prejudice in the other sub-sections. The court must
therefore be
satisfied that the claim has not prescribed in order to grant
condonation.
[18]
T
he second requirement
of 'good cause' involves an examination of 'all those factors which
bear on the fairness of granting the relief
as between the parties
and as affecting the proper administration of justice', and may
include, depending on the circumstances,
'prospects of success in the
proposed action, the reasons for the delay, the sufficiency of the
explanation offered, the bona fides
of the applicant, and any
contribution by other persons or parties to the delay and the
applicant's responsibility therefor.'
[19]
The court held that good cause for the delay is not 'simply a
mechanical matter of cause and effect' but involves the court
in
deciding 'whether the applicant has produced acceptable reasons for
nullifying, in whole, or at least substantially, any culpability
on
his or her part which attaches to the delay in serving the notice
timeously'; and in this process, strong merits may mitigate
fault; no
merits may render mitigation pointless.
[4]
[20]
As regards the third requirement it is not all and any prejudice that
precludes the grant of condonation. It is only unreasonable
prejudice. The availability of witnesses and records will be of
particular importance under this head, but other features may also
be
relevant.
Prescription
[21]
The respondent's cause of action is founded on the alleged
repudiation of the lease agreement by DPW on 13 September 2011 when
it instituted motion proceedings seeking an order declaring the lease
agreement void
ab initio.
[22]
In terms of s 12(1) of Act 68 of 1969 prescription commences running
'as soon as the debt is due'. The term ‘debt’
in the
section is wide enough to include any liability arising from or owing
under a contract. A debt only becomes due when the
creditor acquires
a complete cause of action and prescription commences to run as soon
as the debt is due
[5]
.
The respondent had knowledge of its damages claim long before the
applicant brought the application to have the lease declared
void ab
initio. In paragraph 10.4 of its particulars of claim respondent
pleaded that:
"
Had
the defendant not remained in breach of the lease agreement, had the
defendant not repudiated its obligations arising from the
lease
agreement, and had the defendant made payment of the rental which it
was obliged to pay in terms of the lease agreement,
the plaintiff
would have been in a position to avoid judgment being taken against
it by Nedbank".
[23]
According to the respondent, the damages claimed represents an amount
in respect of the value of the lost ownership of the
property and the
future benefit of its being owner of the property at the end of the
lease without the property being encumbered
by a mortgage bond or any
liability.
[24]
When Nedbank instituted action on 21 April 2011 claiming the full
outstanding balance of the loan and seeking a judgment
against
the respondent and an order declaring the property specially
executable, it was inevitable that the respondent would lose
the
ownership of the property and the future benefit of being an owner at
the end of the lease period. This followed from the fact
that the
respondent had no defence to the claim.
[25]
Therefore, the respondent acquired a complete cause of action on 21
April 2011. On the limited facts that the respondent chose
to put up
in support of its application it must have been apparent by 21 April
2011 that the appellant was not going to occupy
the premises or pay
the rent, with the consequence that it was going to lose the
property. This was a clear repudiation of its
obligations under the
lease. It was therefore apparent by then that the respondent was
going to suffer the damages that are claimed
in this action.
[26]
The respondent knew the identity of the appellant and the facts upon
which its cause of action was based. Summons in the action
was served
on 28 August 2014 being after the expiry of the relevant three year
prescription period which ended on 20 April 2014.
The respondent did
not satisfy the court that the claim has not prescribed.
Good
cause
[27]
It is trite that as a party seeking condonation is seeking a court's
indulgence, a full explanation for non-compliance must
be given, and
the explanation must be reasonable enough to excuse the default.
[6]
The respondent's explanation for the delay in serving the notice was
that it only became aware of the claim after retaining the
services
of new attorneys in August 2014. Its erstwhile attorneys did not
advise of its damages claim and of the need to
give notice in
terms of s 3(1). The respondent does not explain the delay from
October 2014 to May 2018 after it engaged the services
of new
attorneys.
[28]
This explanation is wholly inadequate. Its erstwhile attorneys
defended the Minister's application to declare the Lease Agreement
invalid
ab initio
. The only reason for doing so was in order
to establish the lease's validity in order to pursue a claim for
damages against the
DPW. No other reason for defending the case
occurs to us and counsel was unable to suggest any other reason for
doing so. The respondent
alleged that substantial fees were paid to
its erstwhile attorneys in this regard but did not explain what the
fees were for and
what advice it received from its previous attorneys
and the extent to which the respondent itself contributed to the
delay.
[29]
By 10 October 2014 when the special plea was filed the respondent was
aware that the appellant relied upon non-compliance with
the
provisions of s 3 of the Act. One would have expected it to bring an
application for condonation immediately. Instead it delayed
for over
three years. The respondent does not explain why over three years
elapsed before it could bring the condonation application
and what
efforts it took to expedite the claim.
[30] There is no explanation of any
basis for saying that the officials who concluded the lease agreement
were authorised to do
so and that the lease agreement was valid in
law and binding on the Minister. The application to set aside the
lease set out in
detail the grounds upon which the respondent said
that the officials lacked authority but the founding affidavit did
not say on
what basis this could be rebutted. The same affidavit gave
details of the non-compliance with mandatory procurement
requirements,
but the respondent has failed to explain why the lease
agreement was not concluded in compliance with the requirement of s
217
of the Constitution, the
Preferential Procurement Policy
Framework Act 5 of 2000
,
s 38(1)(a)
(iii),
44
(1)(a), s 66 of the
Treasury Regulations and the appellant's supply chain management
policy as the lessee was an organ of state,
and the procurement
involved a considerable amount of public monies. No lawful excuse for
non-compliance was proffered.
[31]
The respondent has failed to meet the criteria established for
condonation in terms of s 3(4) as its explanation is not full
enough
to enable the court to understand how the default came about and to
assess its conduct and motives.
[7]
Nor does it set out facts that demonstrate that it has a strong case.
All that was said in the founding affidavit was that 'if
[the
allegations in the particulars of claim] are found to be correct, the
plaintiff's clam will be successful'. No facts were
advanced to
suggest that those allegations could be substantiated. Good cause was
not established.
Prejudice
[32]
The third requirement for condonation is for the respondent to prove
that the appellant did not suffer unreasonable prejudice
due to the
delay. Heher JA in
Madinda
explained that:
[8]
'There
are two main elements at play in s 4(
b
),
viz the subject's right to have the merits of his case tried by a
court of law and the right of an organ of state not to be unduly
prejudiced by delay beyond the statutorily prescribed limit for the
giving of notice. Subparagraph (iii) calls for the court to
be
satisfied as to the latter. Logically, subparagraph (ii) is directed,
at least in part, to whether the subject should be denied
a trial on
the merits. If it were not so, consideration of prospects of success
could be entirely excluded from the equation on
the ground that
failure to satisfy the court of the existence of good cause precluded
the court from exercising its discretion
to condone. That would
require an unbalanced approach to the two elements and could hardly
favour the interests of justice. Moreover,
what can be achieved by
putting the court to the task of exercising discretion to condone if
there is no prospect of success? In
addition, that the merits are
shown to be strong or weak may colour an applicant's explanation for
conduct which bears on the delay:
an applicant with an overwhelming
case is hardly likely to be careless in pursuing his or her interest,
while one with little hope
of success can easily be understood to
drag his or her heels. As I interpret the requirement of good cause
for the delay, the prospects
of success are a relevant
consideration.'
[33]
The applicant has pointed out that key personnel who were involved in
the negotiation and conclusion of the lease agreement
are no longer
in the employ of the applicant, and the trial will require oral
evidence by everyone who was involved. It mentions
that the former
acting Director-General who deposed to the founding affidavit
supporting the appellant's application for an order
declaring the
lease invalid has, after disciplinary charges were brought against
him, deposed to an unsolicited affidavit in the
same matter changing
his version.
[34]
The applicant avers that if the application is granted, it will be
prejudiced in conducting the trial without its key witnesses
who have
since been dismissed from its employ. Undeniably, an inordinate delay
of more than three and a half years between the
time the respondent
was aware that it was required to bring the condonation application
and the time that it brought the application
is prejudicial to the
applicant. Long delays in litigation are not in the interest of
justice as memories of witnesses may fade,
documents may get lost and
changes in administration may result in a high turnover of senior
staff.
[35]
Accordingly, the respondent has failed to satisfy the court that the
applicant has not been unreasonably prejudiced by the
failure to
serve the notice timeously.
Conclusion
[36]
Because the respondent did not meet the three requirements for
condonation in terms of s 3(4)(b) no question of the court exercising
a discretion to grant condonation arose. The parties agreed that in
that event there was no purpose in the matter returning to
the high
court and that the order we grant should dismiss the action.
[37]
The following order is granted
1.
The appeal is upheld with costs
including those attendant on the employment of two counsel.
2.
The order of the high court is
set aside and the following order substituted for it:
'1 The application is dismissed with
costs including the costs of two counsel.
2 The plaintiff’s claim is
dismissed with costs, including the costs of two counsel where two
counsel were employed.'
______________________
K
MATOJANE
ACTING
JUDGE OF APPEAL
APPEARANCES
For
appellant
J Peter SC
(with him M Mokotedi)
Instructed by:
State
Attorney, Pretoria and Bloemfontein
For respondent: P T Rood SC
Instructed by:
Etienne Naude
Attorneys, Pretoria
Symington & De
Kok Attorneys, Bloemfontein
[1]
Minister of Safety and Security v
De Witt
[2008] ZASCA 103
;
2009 (1) SA 457
(SCA) para 13.
Minister
of Agriculture and Land Affairs v C J Rance (Pty) Ltd
[2010] ZASCA 27
;
2010 (4) SA 109
(SCA) para 11.
[2]
Minister of Safety and Security v
De Witt
para 17.
[3]
Madinda v Minister of Safety and
Security
[2008] ZASCA 34
;
2008 (4) SA 312
(SCA) para 8.
[4]
Madinda
para
12.
[5]
See
Haskins
& Sells Consulting (Pty) Ltd v Bowthorpe Hellerman Deutsch (Pty)
Ltd
[1990] ZASCA 136
;
1991
(1) SA 525
(A) at 532G approved in
Road
Accident Fund v Mdeyide
2011
(2) SA 26
(CC) para 13, note 16.
[6]
See
Grootboom
v National Prosecuting Authority and Another
2014 (2) SA 68
(CC) para 23.
[7]
See
Silber
v Ozen Wholesalers (Pty) Ltd
1954 (2) SA 345
(AD) at 352G,353H.
[8]
Madinda
para
10.