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[2020] ZASCA 157
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Madibeng Local Municipality v Public Investment Corporation Ltd (955/2019) [2020] ZASCA 157 (30 November 2020)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
no: 955/2019
In
the matter between:
MADIBENG
LOCAL
MUNICIPALITY Appellant
and
PUBLIC
INVESTMENT CORPORATION
LTD Respondent
Neutral
citation:
Madibeng
Local Municipality v Public Investment Corporation Ltd
(955/2019)
[2020] ZASCA 157
(30 November 2020)
Coram:
Ponnan, Saldulker and
Plasket JJA and Ledwaba and Weiner AJJA
Heard:
19 November 2020
Delivered:
This judgment was handed
down electronically by circulation to the parties’ legal
representatives by email, publication on
the Supreme Court of Appeal
website and release to SAFLII. The date and time for hand-down is
deemed to be 09h45 on 30 November
2020.
Summary:
Claims
for payments of debts – quantum admitted or deemed to be
admitted on the pleadings –
Prescription Act 68 of 1969
–
s 11
(b)
– the Public Investment Corporation Ltd not 'the State' for
purposes of the running of prescription – 15 year prescription
period not applicable –
s 14
– partial payments of debts
and request for balance owing amounting to tacit acknowledgments of
liability interrupting prescription
– mora interest –
running from date on which debts due.
ORDER
On
appeal from:
Gauteng
Division of the High Court, Pretoria (Sardiwalla J sitting as court
of first instance):
1 Save to the extent set
out in paragraph 2, the appeal is dismissed with costs, including the
costs of two counsel. The costs in
relation to the preparation,
perusal and copying of the record are limited to ten percent of the
costs incurred in these tasks.
2 Paragraph 2 of the
order of the court below is amended to read:
‘
The
defendant is ordered to pay the plaintiff the sum of R162 639
962.00 together with interest thereon at the rate of 10%
per annum
with effect from 30 June 2003 in the case of certificate BR25 and
with effect from 30 November 2003 in the case of certificates
BR20
and BR26.’
3 The Registrar is
requested to deliver a copy of this judgment to the administrator of
the Madibeng Local Municipality, the MEC
for Cooperative Governance
and Traditional Affairs of the North West Province and the Minister
of Cooperative Governance and Traditional
Affairs in the national
government.
JUDGMENT
Plasket
JA (Ponnan and Saldulker JJA and Ledwaba and Weiner AJJA concurring)
[1]
This appeal has a long and unfortunate history. This is the second
foray by the appellant, the Madibeng Local Municipality (Madibeng),
to this court in relation to the same proceedings, instituted against
it by the Public Investment Corporation Ltd (the PIC) to
recover
three debts of substantial proportions. In the previous appeal,
Madibeng was unsuccessful in its attack on a finding, on
a separated
issue, that the debts were unenforceable for want of the consent of
the Administrator of the Transvaal to the borrower,
its predecessor
in title, the Brits Transitional Local Council (Brits).
[1]
Madibeng now appeals against the order of Sardiwalla J in the Gauteng
Division of the High Court, Pretoria dismissing a special
plea of
prescription and granting judgment in favour of the PIC in the amount
of R162 639 962, plus interest. It does so with
his leave.
Background
[2]
[2]
During
the late 1980s and early 1990s, Brits raised a number of short-term
loans from a variety of institutions. It planned to invest
the
borrowed funds in the hope that the returns would outperform the cost
of the loans. The profits could then be used for future
capital
projects.
[3]
Matters did not turn out as planned. By 1993, Brits found itself in
financial trouble. Urgent remedial action was required to
deal with
the looming fiscal crisis as well as a breakdown in accountable
administration in Brits’ treasury.
[4]
To address the fiscal problem, it became necessary to re-schedule a
number of loans, as the loans were of a short-term nature
while the
underlying investments matured at later dates. Brits borrowed a large
amount of money from the PIC in order to pay its
existing short-term
loans. On 11 January 1994, in order to repay the loans it had taken
from the PIC, Brits issued to the PIC a
series of zero coupon stock
certificates – essentially promissory notes. It also pledged a
number of insurance policies to
the PIC.
[5]
When Madibeng, which by now had succeeded Brits, failed to repay the
loans when they fell due, the PIC first exercised its rights
in terms
of the pledged policies. They were insufficient to cover the full
extent of Madibeng’s indebtedness. The PIC then
proceeded to
institute proceedings against Madibeng on the strength of the zero
coupon stock certificates.
[6]
Three zero coupon stock certificates are in issue in this case. The
first, BR 25, is in respect of a loan of R29 306 987.70.
It
had a face value on maturity of R93 million. The second, BR20, is in
respect of a loan of R10 219 836.60. It had a
face value on
maturity of R37 million. The third, BR26, is in respect of a loan of
R26 072 786.40. It had a face value
on maturity of R87
million.
[7]
Madibeng pleaded that when Bits made the loans, it required the prior
authorization of the Administrator of the former province
of the
Transvaal, in terms of s 52 of the Local Government Ordinance 17 of
1939 of the Transvaal. It also pleaded that the PIC’s
claims
against it had been extinguished by prescription. The first issue was
separated and was decided against Madibeng. In the
first appeal, this
court upheld the finding of the court below. It concluded:
[3]
‘
The point can be disposed of
easily. The facts establish that the loans that Brits raised were for
the purpose of paying back other
loans. They are loans contemplated
by s 52(1)(
a
).
In terms of s 52(2), such loans do not require the prior written
approval of the Administrator. There is, accordingly, no merit
in the
point. This means that in respect of the separated issue, Jansen J
arrived at the correct conclusion.’
All
that then remained for determination was the special plea that the
PIC’s claims against Madibeng had prescribed, the merits
and
the PIC’s claim for mora interest.
[8]
It appears from the judgment of the court below that Sardiwalla J
laboured under the misapprehension that he was only required
to
decide the special plea. As a result, his order was restricted to a
dismissal of the special plea. The PIC’s attorneys
wrote to him
to remind him that there had been no separation of issues and that
all of the outstanding issues had been dealt with
in the trial. He
recalled his order and replaced it with an order dismissing the
special plea and declaring that the PIC had ‘proved
its claim
of R162 639 962.00 together with interest thereon at the
rate of 10% per annum with effect from 30 June 2003’.
It is
that order that is appealed against.
The
pleadings
[9]
The uniform rules provide that every pleading is required to contain
‘a clear and concise statement of the material facts
upon which
the pleader relies for his claim, defence or answer to any pleading .
. . with sufficient particularity to enable the
opposite party to
reply thereto’.
[4]
They
also provide that when a party denies an allegation of fact, he or
she ‘shall not do so evasively, but shall answer
the point of
substance’.
[5]
[10]
Rule 22 of the uniform rules deals with the plea. Rule 22(2) provides
that a defendant ‘shall in his plea either admit
or deny or
confess and avoid all the material facts alleged in the combined
summons or declaration or state which of the said facts
are not
admitted and to what extent, and shall clearly and concisely state
all material facts upon which he relies’. Eksteen
JA, in
FPS
Ltd v Trident Construction (Pty)
Ltd,
[6]
held that rule 22(2) required a defendant in his or her plea to ‘give
a fair and clear answer to every point of substance
raised by a
plaintiff in his declaration or particulars of claim, by frankly
admitting or explicitly denying every material matter
alleged against
him’.
[11]
Rule 22(3) provides that ‘[e]very allegation of fact in the
combined summons or declaration which is not stated in the
plea to be
denied or to be admitted, shall be deemed to be admitted’ and
that any explanation or qualification of a denial
that is necessary
must also be stated in the plea. Davis AJA, in
Gordon
v Tarnow
,
[7]
held that the effect of an admission, whether express or, as in that
case, deemed, is that it renders it ‘unnecessary for
the other
party to adduce evidence to prove the admitted fact, and incompetent
for the party making it to adduce evidence to contradict
it’.
[12]
I turn now to the pleadings themselves in respect of both the debts
alleged to be due and the interest that is claimed on them.
Each of
the claims was pleaded in precisely the same way in the particulars
of claim but answered in progressively more cryptic
terms in the
plea. In paragraphs 4.1 and 4.2 of the amended particulars of claim,
the PIC pleaded that BR25 fell due for payment
on 30 June 2003 and
that Madibeng failed to make full payment, but paid R10 million on 1
July 2003. The outstanding amount due
was thus R83 million. These
facts were expressly admitted by Madibeng in its plea but it pleaded
that the claim had been extinguished
by prescription. Then, in
paragraph 4.3 of the particulars of claim, the PIC pleaded that
Madibeng subsequently made a number of
further payments, both before
and after the service of the summons. Madibeng expressly admitted the
allegations made in paragraph
4.3 of the particulars of claim. It
pleaded, however, that it ‘was not in law obliged to make the
payments due to the fact
that the issuing of the zero coupon stock
certificates was not authorized by law’.
[13]
In paragraphs 5.1 and 5.2 of the particulars of claim, the PIC
pleaded that when BR20 fell due on 30 November 2003, Madibeng
failed
to pay with the result that, on that day, payment to it of R37
million was due. In paragraph 5.3, the PIC pleaded that while
Madibeng had not paid the debt in full, it made partial payments on a
number of occasions, both before and after the service of
the
summons. Madibeng pleaded to paragraph 5.1 to 5.3 as follows:
’
13 The
defendant admits that it did not make payment to the plaintiff.
14 The defendant denies that it is
indebted to the plaintiff in the amount of R37 000 000.00
referred to in paragraph
5.2.
15 Insofar as the
amount of R37 000 000.00 became due on 30 November 2003,
the plaintiff’s claim in relation to
that amount has been
extinguished by prescription as stated in the special plea.’
[14]
In paragraph 6.1 and 6.2 of the particulars of claim, the PIC pleaded
that when BR26 fell due on 30 November 2003, Madibeng
failed to pay,
and that the payment of R87 million was due on that date. It pleaded
in paragraph 6.3 that Madibeng made partial
payments both before and
after the service of the summons. Madibeng’s plea was the
following:
’
16 The
defendant admits that it did not pay the plaintiff the amount of
R87 000 000.00 when it allegedly became due on
30 November
2003.
17 Insofar as the
aforesaid amount became due on 30 November 2003, the plaintiff’s
claim in relation to that amount has been
extinguished by
prescription.’
[15]
In paragraphs 7, 8 and 9 of the particulars of claim, the PIC
quantified the three claims. This was an arithmetical exercise
of
deducting what had been paid from the amounts due on the face of the
zero coupon bonds. As a result, it claimed R65 086 208.30
in respect of BR25, R28 993 449.70 in respect of BR20 and
R68 560 304.24 in respect of BR26. In response to
paragraph
7 Madibeng denied that it was indebted to the PIC ‘in the
amount claimed’ and it then set out in great detail
its defence
of lack of authority. In respect of paragraphs 8 and 9 of the
particulars of claim, it simply said that the ‘contents
of
these paragraphs are denied’, but one must infer that the bald
denial of liability was also premised on the alleged lack
of
authority.
[16]
In respect of all three debts, the PIC pleaded its claims to interest
in precisely the same terms. It pleaded that interest
on the amount
claimed in each instance ‘began to run at the
mora
rate of 15.5%
per
annum
from midnight’ on the due date ‘to and including payment
thereof’ but that the PIC had waived its entitlement
to
interest of 15.5 percent and had ‘charged interest at the
reduced rate of 10%
per
annum
’.
Madibeng never pleaded to these allegations at all.
[17]
The effect of Madibeng’s plea is that, in respect of BR25, BR20
and BR26, it either admitted or is deemed to have admitted
that the
debts were due on 30 June 2003, 30 November 2003 and 30 November 2003
respectively, as well as the amounts due on those
dates, subject to
the defences of lack of authority and prescription. It also admitted
or is deemed to have admitted that it paid
the amounts listed in the
particulars of claim towards the reduction of its debts, and that it
did so on the dates specified. The
only basis for its denial of the
quantum of the claims is the alleged lack of authority, a defence
that has been found to be without
merit. In respect of interest, the
facts alleged by the PIC are deemed to have been admitted.
The
issues
[18]
Three issues arise for determination. They are whether the PIC’s
claims have prescribed; if not, whether it has made
out a case on the
merits for the amounts claimed; and whether it is entitled to
interest from the date the debts were due. I shall
deal with these
issues in that order.
Prescription
[19]
Two points were raised by the PIC to Madibeng’s special plea of
prescription. They are that the prescription period in
this instance
is 15 years and not three years, and the second is that the running
of prescription was interrupted by a number of
admissions of
liability by Madibeng.
[20]
As a general rule, prescription begins to run when a debt is due.
[8]
Section 11
of the
Prescription Act 68 of 1969
provides for periods of
prescription in respect of different types of debts. It states:
‘
The periods
of prescription of debts shall be the following:
(a) thirty years in respect of-
(i)
any debt secured by mortgage bond;
(ii)
any judgment debt;
(iii)
any debt in respect of any taxation imposed or levied by or under any
law;
(iv) any debt owed to the State in
respect of any share of the profits, royalties or any similar
consideration payable in respect
of the right to mine minerals or
other substances;
(b) fifteen years in respect of any
debt owed to the State and arising out of an advance or loan of money
or a sale or lease of
land by the State to the debtor, unless a
longer period applies in respect of the debt in question in terms of
paragraph (a);
(c) six years in respect of a debt
arising from a bill of exchange or other negotiable instrument or
from a notarial contract, unless
a longer period applies in respect
of the debt in question in terms of paragraph (a) or (b);
(d) save where an
Act of Parliament provides otherwise, three years in respect of any
other debt.’
[21]
The most usual way in which the running of prescription is
interrupted is by the service on a debtor of a legal process, such
as
a summons, in which payment of the debt is claimed.
[9]
There are, however, other ways in which prescription may be
interrupted.
Section 14
of the Act provides one such way. It states:
‘
(1) The
running of prescription shall be interrupted by an express or tacit
acknowledgement of liability by the debtor.
(2) If the running
of prescription is interrupted as contemplated in subsection (1),
prescription shall commence to run afresh from
the day on which the
interruption takes place or, if at the time of the interruption or at
any time thereafter the parties postpone
the due date of the debt
from the date upon which the debt again becomes due.’
[22]
It is common cause that the debts in this case fell due on 30 June
2003, 30 November 2003 and 30 November 2003 respectively.
It is also
common cause that the summons was served on Madibeng on 3 March 2010.
I shall first consider whether the prescription
period is, as the PIC
pleaded in the alternative in its replication, 15 years, rather than
three years. I shall then consider whether
the running of
prescription was interrupted from time to time by admissions of
liability.
[23]
Section 11
(b)
of the Act provides for a prescription period of 15 years in respect
of any debt owed to the State and arising out of an advance
or loan
of money. This provision can only avail the PIC if it is ‘the
State’ for purposes of the Act. This issue was
dealt with by
this court in
Holeni
v Land and Agricultural Development Bank of South Africa
.
[10]
The Land and Agricultural Development Bank of South Africa (the bank)
is an organ of state as defined in s 239 of the Constitution.
It had
extended two loans to Holeni, who, it claimed had fallen in arrears,
thus accelerating payment of the full amounts. It issued
summons for
the recovery of the debts more than three years after they were due.
A special plea of prescription was taken. The
bank contended,
however, that s 11
(b)
of the Act applied, with the result that the debts were only
extinguished by prescription 15 years after they fell due. The case
raised squarely the question of what was meant by the term ‘the
State’ in s 11
(b)
.
[24]
Navsa JA observed that the term ‘the State’ does not have
one settled meaning; that its precise meaning in any
given case
depends on the context; and that courts ‘have consistently
refused to accord it any inherent characteristics and
have relied, in
any particular case, on practical considerations to determine its
scope’.
[11]
He rejected
the argument that, for purposes of the Act, an organ of state was
‘the State’. Instead, he held:
[12]
‘
The benefit
for the State provided by s 11
(b)
came about because it was thought that the treasury should be
protected. To my mind, contextually, the plain meaning of “the
State” as it appears in s 11
(b)
of the Act is that of a juristic person, capable of suing in its own
name for what is due to the treasury. It is being referred
to in its
incarnation as government, going about government business and
recovering moneys due to treasury.’
In
other words, in the Act, ‘the State’ means ‘the
State as government’.
[13]
[25]
Navsa JA found that the
Land and Agricultural Development Bank Act 15
of 2002
– the current statute regulating the functioning of an
institution that is over 100 years old – made it clear that the
bank was ‘a separate juristic person acting in its own name and
right, distinct from, although not entirely independent of,
government’.
[14]
[26]
The PIC is an organ of state created by the
Public Investment
Corporation Act 23 of 2004
. It is a company that is wholly owned by
the government
[15]
and
operates as a financial service provider in respect of government
funds.
[16]
It, like the Land
and Agricultural Development Bank, is distinct from the government.
It was held in
The
Isibaya Fund v Visser and Another
,
[17]
on the basis of these characteristics, that a fund established by the
PIC was not ‘the State’ for purposes of
s 11
(b)
.
That same conclusion must follow in relation to the PIC itself.
Section 11
(b)
of the Act does not apply to debts due to it. Instead, in terms of
s
11
(d)
of the Act, the usual three-year prescription period applies. The
special plea will be determined on that basis.
[27]
I turn now to
s 14
of the Act. The policy that underpins the rules of
prescription relate to the value of certainty. If claims are not
pursued with
reasonable expedition, doubt as to their validity may
arise, and will inevitably intensify with the passage of time.
Creditors
are thus afforded periods of time thought to be appropriate
to the nature of different types of debts within which to pursue
their
claims, failing which they will lose their right to do so. But,
if a debtor acknowledges liability for a debt, there is no
uncertainty,
and a creditor would be safe to negotiate and even give
time to the debtor to pay, without, as Lord Hoffman put it in
Bradford
& Bingley PLC v Rashid
,
[18]
‘
being
distracted by the sound of time's winged chariot behind him’.
Furthermore, he said, it was also unconscionable for a
debtor who
does not dispute his or her indebtedness to ask for time to pay and
then use that indulgence to assert that the debt
has prescribed.
[19]
[28]
In
Cape
Town Municipality v Allie NO
[20]
Marais AJ identified what he described as five self-evident aspects
of
s 14.
He said:
[21]
‘
Firstly, I do not think the
acknowledgment of liability need amount to a fresh undertaking to
discharge the debt. "I admit
I owe you R100" is manifestly
an acknowledgment of a liability to pay R100 but it is not a fresh or
new undertaking to pay
it . . .
Secondly, full weight must be given to
the Legislature's use of the word "tacit" in
s 14(1)
of the
Act. In other words, one must have regard not only to the debtor's
words, but also to his conduct, in one's quest for an
acknowledgment
of liability. That, in turn, opens the door to various possibilities.
One may have a case in which the act of the
debtor which is said to
be an acknowledgment of liability, is plain and unambiguous. His
prior conduct would then be academic.
On the other hand, one may have
a case where the particular act or conduct which is said to be an
acknowledgment of liability is
not as plain and unambiguous. In that
event, I see no reason why it should be regarded
in vacuo
and
without taking into account the conduct of the debtor which preceded
it. If the preceding conduct throws light upon the interpretation
which should be accorded to the later act or conduct which is said to
be an acknowledgment of liability, it would be wrong to insist
upon
the later act or conduct being viewed in isolation. In the end, of
course, one must also be able to say when the acknowledgment
of
liability was made, for otherwise it would not be possible to say
from what day prescription commenced to run afresh . . .
Thirdly, the test is objective. What
did the debtor's conduct convey outwardly? I think that this must be
so because the concept
of a tacit acknowledgment of liability is
irreconcilable with the debtor being permitted to negate or nullify
the impression which
his outward conduct conveyed, by claiming
ex
post facto
to have had a subjective intent which is at odds with
his outward conduct . . .
Fourthly, while silence or mere
passivity on the part of the debtor will not ordinarily amount to an
acknowledgment of liability,
this will not always be so. If the
circumstances create a duty to speak and the debtor remains silent, I
think that a tacit acknowledgment
of liability may rightly be said to
arise . . .
Fifthly, the acknowledgement must not
be of a liability which existed in the past, but of a liability which
still subsists.’
This
statement of the meaning and import of
s 14
was cited with approval
by this court fairly recently in
Investec
Bank Ltd v Erf 436 Elandspoort (Pty) Ltd and Others
.
[22]
[29]
It is clear from the evidence of Mr Leonardo Smith, who holds the
position of general manager of fixed income at the PIC, as
well as
from the documents that form part of the record, that Madibeng’s
liability has never been denied, but, on the contrary,
has been
openly and repeatedly acknowledged not only to the PIC but to other
relevant government bodies. As early as 15 May 2003,
even before the
first debt was due, Madibeng expressly admitted owing the money when
the municipal manager wrote to the PIC to
request an extension of
time for the repayments. He said that Madibeng was unable to pay but
was seeking the assistance of the
national and provincial government
to meet its obligations. He concluded the letter by saying that ‘you
must please not see
our request as a ploy to shirk Madibeng’s
liability, but rather as a serious action to find a solution for the
whole matter’.
What is more, in addition to Madibeng having
made five payments in respect of BR25 between when it fell due and
the issue of the
summons, it also made three payments
after
the summons had been served on it. It did the same in relation to
BR20 and BR26.
[30]
This attitude, both before the debts were due and after the summons
had been served, is consistent with Smith’s evidence
that, on
an annual basis, Madibeng approached the PIC for a balance on each
loan so that it could reflect them as liabilities in
its annual
financial statements. He referred to various other documents in which
Madibeng acknowledged its liability and he concluded
that ‘I do
not recall one that disputes it’. What is more, counsel for
Madibeng could not point us to any such document.
I shall return to
the requests for balances below, but first it is necessary to say
something of the partial payments of the debts
that are alleged in
the particulars of claim and either admitted or deemed to be admitted
by Madibeng in its plea.
[31]
Smith confirmed, first in respect of BR25, that the payments of those
amounts indeed represented partial payments of the debt.
The first
payment, of R10 million, was made on 1 July 2003 from the proceeds of
the ceded policies that liquidated other debts
in full. With
reference to all three debts, he said that when Madibeng made one
globular payment to the PIC, it allocated that
payment pro rata ‘to
the three outstanding loans’. (That appears to have been the
case in respect of payments made
on 1 August 2007 and 30 November
2008.)
[32]
BR25 was the first debt to fall due – on 30 June 2003. That was
about six weeks after the municipal manager’s assurance
that
Madibeng would not try to avoid its obligations to pay. On the
following day, an amount of R10 million was paid. Thereafter,
amounts
were paid on 30 June 2006, 2 April 2007, 1 August 2007, 30 November
2007 and 22 February 2008.
[33]
BR20 fell due on 30 November 2003. Madibeng made payments towards the
reduction of this debt on 28 September 2006, 1 August
2007 and 30
November 2007. BR26 also fell due on 30 November 2003. The first
payment thereafter towards the reduction of this debt
was made on 29
December 2006. That was followed by payments on 1 August 2007, 30
November 2007 and 22 February 2008.
[34]
I turn now to the requests for balances. The first is dated 17 August
2004, an earlier request of 25 June 2004 having, apparently,
gone
unanswered. Madibeng requested the PIC to ‘PLEASE SUPPLY MY
COUNCIL WITH BALANCE CERTIFICATES FOR THE FOLLOWING LOANS
AND
INVESTMENTS’ as at 30 June 2004. The loans listed were loan
numbers 20, 25 and 26 and the letter said that the information
was
required for the compilation of Madibeng’s financial statements
for the 2003/2004 financial year. A few days later, the
PIC gave the
requested information in respect of BR20, BR25 and BR26. A similar
process occurred in following years – on
20 June 2005 and 29
June 2006, for instance – where requests in identical terms to
that of 2004 were made to the PIC. For
present purposes, it is
unnecessary to consider any more requests for balances. Suffice it to
say, that there are indications in
the documents that every year,
Madibeng reflected the loans as liabilities in favour of the PIC in
its annual financial statements.
[35]
Regard must be had to the context within which the payments listed
above were made. That context includes the statement by
Madibeng’s
municipal manager shortly before the debts fell due that Madibeng
acknowledged its liability and would not shirk
from its obligations,
and that it was experiencing difficulties in paying the debts in
full. It also includes the fact that Madibeng
has never disputed that
it owed the PIC in respect of the loans and that the payments it made
were made over a number of years
both before and after the service of
summons. Viewed within that context, the payments made prior to the
service of summons amount
to a series of unequivocal tacit
acknowledgements of liability by Madibeng to the PIC. Those payments
had the effect of interrupting
the running of prescription. The
annual requests for balances were also unequivocal tacit
acknowledgements of liability and similarly
had the effect of
interrupting the running of prescription.
[36]
In respect of BR25 and BR20, the first payment was made within three
years of the debt falling due and the payments that followed
were
within three years of the preceding payments. The last payment before
the service of the summons was effected within three
years of that
event. In other words, the payments on their own had the effect of
successfully interrupting the running of prescription
in respect of
BR25 and BR20.
[37]
In the case of BR26, however, the first payment, after the debt fell
due on 30 November 2003, was effected on 29 December 2006,
more than
three years after the former date. On 17 August 2004, however,
Madibeng acknowledged liability when it requested a balance
in
respect of, inter alia, BR26. That had the effect of interrupting the
running of prescription on that day. The first payment
was made
within three years of 17 August 2004. Thereafter, every other payment
was effected within a three year period of the preceding
payment and
the summons was served within three years of the last payment, made
on 22 February 2008.
[38]
The effect is that the special plea of prescription was correctly
dismissed by the court below. I turn now to whether the PIC
has
established its claims.
The
merits
[39]
The pleadings are sufficient for the determination of the merits.
Once the two technical defences failed, there simply was
no defence
on the merits of the claims. The allegations of the PIC were either
admitted or deemed to have been admitted with the
result that it was
unnecessary for the PIC to adduce evidence to prove facts that were
not in dispute.
[23]
[40]
The plea to the first claim, BR25, is a good illustration, it being
the claim to which the fullest plea was made. In the particulars
of
claim, the PIC alleged that Madibeng had failed to pay the debt when
it fell due, save for one payment of R10 million on 1 July
2003, and
that as a result R83 million was due. Secondly, it alleged that eight
further payments were made by Madibeng, reducing
the amount due still
further. Madibeng, in its plea, admitted that R83 million was due but
pleaded that claim had been extinguished
by prescription. It admitted
the eight payments but pleaded that it was ‘not in law obliged
to make the payments due to the
fact that the issuing of the zero
coupon stock certificates was not authorised by law’. There was
thus no dispute, once the
authority and the prescription points
failed, that the amounts claimed were due and payable by Madibeng.
Those amounts were quantified
in paragraphs 7, 8 and 9 of the
particulars of claim and the only basis for Madibeng’s denial
of liability to pay the amounts
set out in those paragraphs was the
defence of lack of authority.
[41]
In the result, the court below correctly found in favour of the PIC
on the merits of its claims. It did not, however, formulate
its order
correctly. As these were claims sounding in money and, as I have
shown, no defence to them has been established by Madibeng,
the court
ought to have ordered Madibeng to pay the PIC the amount claimed.
This aspect of its order will be corrected below. I
turn now to the
question of interest.
Interest
[42]
In its particulars of claim, the PIC claimed mora interest from the
date the debts were due. The court below ordered Madibeng
to pay
interest on all three debts from 30 June 2003 to the date of payment.
This order is incorrect because while BR25 fell due
on that date,
BR20 and BR26 only fell due on 30 November 2003. If we accept the
PIC’s entitlement to mora interest, we shall
have to interfere
with the order of the court below to a limited extent.
[43]
The PIC’s entitlement to mora interest has been assailed by
Madibeng, despite it not having pleaded at all to those paragraphs
of
the particulars of claim dealing with interest. That interest was
claimed at a rate of 10 percent per annum, it having been
decided by
the PIC to waive its rights to higher rates of interest as a gesture
of goodwill.
[44]
Mora interest is ‘a species of damages’
[24]
which does not have to be proved in the usual way, it being presumed
that ‘a party who has been deprived of the use of his
capital
for a period of time has suffered loss’.
[25]
The liability to pay mora interest was described by Fagan JA in
Union
Government v Jackson and Others
[26]
as a ‘consequential or ancillary obligation’ that
attaches automatically to the principal obligation to pay by
operation
of law. In these circumstances, he continued, the court
‘does not weigh the pros and cons in order to exercise an
equitable
judgment as to whether, and to what extent, the interest
bearing potentialities of money are to be taken into account in
computing
its award’; instead, the ‘only issue is whether
the legal liability exists or not’ and ‘if it does, the
rest is merely a matter of mathematical calculation: the legal rate
of interest on a definite sum from a definite date until date
of
payment’.
[45]
A debtor’s obligation to pay mora interest arises either when a
time for the performance of a monetary obligation has
been stipulated
in a contract and has passed, or, where no time for performance has
been stipulated, when a demand for payment
has been made and has not
been met. As Ponnan JA explained in
Crookes
Brothers Limited v Regional Land Claims Commission for the Province
of Mpumalanga and Others
,
[27]
in such circumstances, a creditor ‘is entitled to be
compensated by an award of interest for the loss or damage that he
has suffered as a result of not having received his money on due
date’. The rationale for mora interest was explained more
fully
by this court in
Bellairs
v Hodnett and Another
[28]
as follows:
‘
It may be
accepted that the award of interest to a creditor, where his debtor
is in
mora
in regard to the payment of a monetary obligation under a contract,
is, in the absence of a contractual obligation to pay interest,
based
upon the principle that the creditor is entitled to be compensated
for the loss or damage that he has suffered as a result
of not
receiving his money on due date (
Becker
v Stusser
,
1910 CPD 289
at p. 294). This loss is assessed on the basis of
allowing interest on the capital sum owing over the period of
mora
(see
Koch
v Panovka
,
1933 NPD 776).
Admittedly, it is pointed out by Steyn,
Mora
Debitoris
,
p. 86, that there were differences of opinion among the writers on
Roman-Dutch law on the question as to whether
mora
interest was lucrative, punitive or compensatory; and that, since
interest is payable without the creditor having to prove that
he has
suffered loss and even where the debtor can show that the creditor
would not have used the capital sum owing, this question
has not lost
its significance. Nevertheless, as emphasized by CENTLIVRES, C.J., in
Linton
v Corser
,
1952
(3) SA 685
(AD) at p. 695, interest is today the "lifeblood of
finance" and under modern conditions a debtor who is tardy in
the
due payment of a monetary obligation will almost invariably
deprive his creditor of the productive use of the money and thereby
cause him loss. It is for this loss that the award of
mora
interest
seeks to compensate the creditor.’
[46]
In this matter, BR25, BR20 and BR26 stipulated a due date for payment
by Madibeng – 30 June 2003 in the case of the former
and 30
November 2003 in the case of the last two. A right to be paid mora
interest arose by operation of law on those dates when
Madibeng
failed to pay, and continues to run until payment in full is made.
The rate of interest is 10 percent per annum, rather
than the higher
rates of interest that were waived by the PIC as a gesture of
goodwill. This being so, it is necessary to amend
the order of the
court below to reflect the correct commencement dates for the running
of mora interest in respect of BR20 and
BR26.
The
conduct of the parties
[47]
It is necessary to say something of the conduct of Madibeng in this
entire matter and of the legal representatives of both
Madibeng and
the PIC in relation to the record.
Madibeng
[48]
In
Madibeng (1)
, I had occasion to criticize Madibeng’s
conduct of the matter. I said:
‘
[29] In turning to consider the
propriety of Jansen J’s costs order it is, unfortunately,
necessary to say something about
the way in which Madibeng conducted
its case. It took the money on offer from the PIC in order to avert a
crisis of Madibeng’s
own making. It agreed to a means of
repayment. When its debts fell due, it made certain payments. Then,
after it had reneged and
summons was issued against it, it raised the
unenforceability of the loans as a defence.
[30] The conduct of Madibeng was
beyond the pale. As an organ of state, it is required to act
ethically, and has failed dismally
to do so in this matter.
Litigation, said Harms DP in
Cadac
(Pty) Ltd v Weber-Stephen Products Co & others
,
“is not a game”; organs of state should act as role
models of propriety; and they may not behave in an unconscionable
manner.’
[49]
My admonition, which was rather gentle given Madibeng’s
unconscionable conduct, appears to have fallen on deaf ears.
Despite
the PIC’s best efforts to warn Madibeng that it remained beyond
the pale in defending the claims against it in the
trial, and, later,
that its appeal was once again frivolous, it has persisted. It would
have been plain that the prescription point
had absolutely no
prospect of succeeding in the light of the payments that Madibeng
admitted having made and the other admissions
of liability, spread
over a number of years. With the exception of BR26, which required
one piece of evidence in addition to the
admitted payments, the
prescription point was dead in the water on the pleadings alone.
[50]
When that is seen in the context I outlined above, particularly the
statement of the municipal manager that Madibeng acknowledged
that it
owed the money and would not avoid its obligations to pay what it
owed, Madibeng’s defence in the trial and its subsequent
appeal
are inexplicable and all the more reprehensible. It conducted both
proceedings in the knowledge that it had no defence on
the merits and
that its remaining technical defence could not succeed.
[51]
Madibeng, an organ of local government, has reached that extreme
point of disfunction that has brought about the intervention
of the
provincial government in placing it under administration. Yet it has
spent what must be large amounts of public funds to
pursue an
ethically bankrupt and unwinnable case. Counsel for Madibeng was
unable to point to any document in which Madibeng disputed
that it
owed the money or, indeed, that it disputed the amount that it owed.
But before the court below, its counsel cross-examined
the PIC’s
witness at length about a supposed defence that was never pleaded,
and closed its case without calling a single
witness. I venture to
suggest that it probably was unable to find anyone who was prepared
to say on oath that Madibeng did not
owe the money or disputed the
amounts claimed.
[52]
I would have been minded to order Madibeng to once again pay costs on
an attorney and client scale, in respect of this appeal,
which I
consider to have been a frivolous appeal. The only reason I have not
done so is because the PIC has not asked for such
an order. I intend
to request the Registrar to deliver a copy of this judgment to the
administrator of Madibeng, the MEC for Traditional
Affairs and Local
Government in the North West Province and the Minister of Cooperative
Governance and Traditional Affairs in the
national government.
The
record
[53]
The record in this appeal comprises nine volumes that run to 1 371
pages. Most of the record was irrelevant for the determination
of the
appeal.
[54]
Rule 8(8)
(a)
of this court’s rules provides that whenever an appeal ‘is
likely to hinge exclusively on a specific issue or issues
of law
and/or fact the appellant shall, within 10 days of the noting of the
appeal, request the respondent’s counsel to submit
such issue
or issues to the Court, failing which the respondent shall within 10
days thereafter make a similar request to the appellant’.
The
parties are, in terms of
rule 8(8)
(b)
,
required to agree on this issue or furnish their reasons for not
doing so. If an agreement is reached,
rule 8(8)
(e)
provides that ‘only those parts of the record of the
proceedings in the court a quo as may be agreed upon shall be
contained
in the record lodged with the registrar’.
[55]
The issues for determination in this appeal were limited and narrow.
They could, to a large extent, be determined with reference
to the
pleadings alone. In these circumstances, the parties should have
agreed to a truncated record. Instead of doing so, and
thus limiting
the record to what was relevant, a long record containing many
irrelevant documents was placed before us. The parties
simply agreed,
without, it would appear, proper consideration, that the seven
volumes that comprised the record before us in
Madibeng (1)
,
plus a further two volumes generated subsequently, would be the
record before us this time. I can see no reason why the successful
party should be allowed the costs of the full record. In my view,
about 90 percent of what was placed before us was not necessary
or
relevant. I shall make an order to that effect below.
The
order
[56]
I make the following order:
1 Save to the extent set
out in paragraph 2, the appeal is dismissed with costs, including the
costs of two counsel. The costs in
relation to the preparation,
perusal and copying of the record are limited to ten percent of the
costs incurred in these tasks.
2 Paragraph 2 of the
order of the court below is amended to read:
‘
The
defendant is ordered to pay the plaintiff the sum of R162 639
962.00 together with interest thereon at the rate of 10%
per annum
with effect from 30 June 2003 in the case of certificate BR25 and
with effect from 30 November 2003 in the case of certificates
BR20
and BR26.’
3 The Registrar is
requested to deliver a copy of this judgment to the administrator of
the Madibeng Local Municipality, the MEC
for Cooperative Governance
and Traditional Affairs of the North West Province and the Minister
of Cooperative Governance and Traditional
Affairs in the national
government.
_____________________
C Plasket
Judge of Appeal
APPEARANCES
For
the appellant:
K Tsatsawane SC and X Mofokeng
Instructed
by:
Gildenhuys
Malatji Inc, Pretoria
Honey
Attorneys, Bloemfontein
For
the respondent:
P L Mokoena SC and P Khoza
Instructed
by:
Werksmans
Attorneys, Johannesburg
Symington
De Kok Attorneys, Bloemfontein
[1]
See
Madibeng
Local Municipality v Public Investment Corporation Ltd
[2018] ZASCA 93
;
2018 (6) SA 55
(SCA). I shall refer to this judgment
as
Madibeng
(1)
.
[2]
I have based the
factual background closely on what was set out in
Madibeng
(1)
paras 2-6.
[3]
Madibeng (1)
para 23.
[4]
Rule 18(4).
[5]
Rule 18(5).
[6]
FPS Ltd v
Trident Construction (Pty) Ltd
1989
(3) SA 537
(A) at 542B.
[7]
Gordon v Tarnow
1947 (3) SA 525
(A) at 531.
[8]
Prescription Act
68 of 1969
,
s 12(1).
[9]
Prescription Act,
s
15(1).
[10]
Holeni v Land
and Agricultural Development Bank of South Africa
[2009] ZASCA 9;
2009 (4) SA 437 (SCA).
[11]
Para 11.
[12]
Para 19.
[13]
Para 22.
[14]
Para 38.
[15]
Section 3.
Interestingly, the term ‘the State’ is defined in
s 1
of
the Act as ‘the National Government of the Republic’.
[16]
Section 4.
[17]
The Isibaya
Fund v Visser and Another
[2015]
ZASCA 183
paras 10-11.
[18]
Bradford &
Bingley PLC v Rashid
[2006]
UKHL 37.
[19]
Para 3. See too
Cape
Town Municipality v Allie NO
1981 (2) SA 1
(C) at 5G-H;
Murray
and Roberts Construction (Cape) (Pty) Ltd v Upington Municipality
1984 (1) SA 571
(A) at 578F-579B:
KLD
Residential CC v Empire Earth Investments 17 (Pty) Ltd
[2017] ZASCA 98
;
2017 (6) SA 55
(SCA) paras 13-17;
Investec
Bank Ltd v Erf 436 Elandspoort (Pty) Ltd and Others
[2020]
ZASCA 104
paras 27-28.
[20]
Note 19.
[21]
At 7B-8G. See too
Agnew
v Union and South West Africa Insurance Company Ltd
1977 (1) SA 617
(A) at 622H-623C;
Petzer
v Radford (Pty) Ltd
1953 (4) SA 314
(N) at 317H-318B;
Benson
and Another v Walters and Others
1984 (1) SA73 (A) at 86H-87B;
Standard
Bank of South Africa Ltd v Oneanate Investments (Pty) Ltd
1995 (4) SA 510
(C) at 556E-557D.
[22]
Note 19.
[23]
Gordon v Tarnow
(note 7) at 531.
[24]
Davehill (Pty)
Ltd and Others v Community Development Board
1988
(1) SA 290
(A) at 298I.
[25]
Thoroughbred
Breeders’ Association v Price Waterhouse
2001 (4) SA 551
(A) para 85.
[26]
Union
Government v Jackson and Others
1956
(2) SA 398
(A) at 411G-H.
[27]
Crookes
Brothers Limited v Regional Land Claims Commission for the Province
of Mpumalanga and Others
[2012]
ZASCA 128
;
2013 (2) SA 259
(SCA) para 14.
[28]
Bellairs v
Hodnett and Another
1978
(1) SA 1109
(A) at 1145D-G.