Uitenhage Transitional Local Council v South African Revenue Service (011/2003) [2003] ZASCA 76; [2003] 4 All SA 37 (SCA) (5 September 2003)

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[2003] ZASCA 76
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Uitenhage Transitional Local Council v South African Revenue Service (011/2003) [2003] ZASCA 76; [2003] 4 All SA 37 (SCA); 2004 (1) SA 292 (SCA); 66 SATC 265 (5 September 2003)

IN THE SUPREME COURT OF APPEAL OF
SOUTH AFRICA
REPORTABLE
Case no:
11/2003
In
the matter between
UITENHAGE TRANSITIONAL LOCAL COUNCIL APPELLANT
and
THE
SOUTH AFRICAN REVENUE SERVICE RESPONDENT
Coram:
ZULMAN, NUGENT and HEHER JJA
Heard:
21
AUGUST 2003
Delivered: 5 SEPTEMBER
2003
Summary: SCA Rules 8
and 12 – failure to lodge record timeously – condonation –
factors affecting.
Contract –
interpretation – agreement to co-operate in pursuit of the claims
of the respective parties – meaning.
_____________________________________________________________________
JUDGMENT
__________________________________________________________________
HEHER
JA
HEHER JA:
[1]
The
appellant was granted leave to appeal to this Court by Ludorf J
sitting in the South Eastern Cape Local Division. The learned
Judge
had dismissed a claim by the appellant for payment of R2 863 097,70
and ancillary relief arising out of a written contract
concluded
between the parties on 15 May 1996.
[2]
In
terms of Rule 8(1)(c) of the Rules of this Court the appellant was
required to lodge the record of proceedings in the Court
a quo
with the Registrar by 19 January 2002. At the instance of the
appellant the respondent granted various extensions in terms of Rule
8(2)(a) for that purpose the last of which expired on 14 October
2002. Thereafter the appellant made a direct approach to the
Registrar
for a further extension. On 17 October the Registrar
addressed a letter to the appellant’s Bloemfontein attorneys
extending the
time until 14 November 2002. The record was not lodged
timeously. The appeal lapsed and an application was required to
revive it:
Court v Standard Bank of SA Ltd
;
Court v Bester
NO and Others
[1995] ZASCA 39
;
1995 (3) SA 123
(A) at 139F-H.
[3]
On
16 January 2003 the record was lodged. An application for
condonation and reinstatement was filed on the same day. The
respondent
gave notice of its intention to oppose on 9 June but did
not file an answering affidavit until 29 July when it too applied for
condonation
for its failure to comply with Rule 12(2). The appellant
thereupon filed a replying affidavit in which it also opposed the
grant
of that indulgence.
[4]
When the matter
was called we heard counsel on the condonation applications. The
appellant did not persist in its opposition. We
indicated that we
would reserve our judgment on the question of whether the appeal
should be reinstated.
[5]
In his affidavit in support of
condonation, attested on 19 December 2002, the appellant’s
attorney, Mr Le Roux, deposed as follows:
‘
4. U
applikant het reeds gedurende Desember 2001 pogings aangewend om
skikkingsonderhandelinge aan te knoop met die Respondent, aangesien
beide partye staatsinstansies is en die koste van die voorbereiding
van die Oorkonde vermy wou word.
5. Sneller
Opnames, Port Elizabeth, het probleme ondervind om die oorkonde te
tik en gevolglik het u Applikant se regsverteenwoordigers
uitstel by
die teenkant bekom ten einde die Oorkonde te liasseer op 19 Februarie
2002.
6. U
Applikant se pogings om die Oorkonde tydig te finaliseer is intussen
verder bemoeilik deur die feit dat die hoflêer verlore
geraak
het. Gevolglik moes daar pogings aangewend word om die hoflêer
op te spoor wat onsuksesvol was. Die rekenaartoerusting
van Sneller
Opnames is ook in die tussentyd gesteel en alle data daarmee saam.
Gevolglik is daar ‘n aantal uitstelle deur Respondent
verleen vir
die finalisering van die Oorkonde en die her-samestelling van die
pleitstukke wat tydens die verhoor verskeie kere mondelings
gewysig
is.
7. U
Applikant het weereens gedurende Julie 2002 pogings aangewend om die
aangeleentheid te skik en voorbereiding van die Oorkonde
is agterweë
gehou om nie onnodige kostes aan te gaan nie. Verteenwoordigers van
die partye het vergader en formele skikkingsvoorstelle
is gemaak op
aanvraag van die Respondent.
8 Die
skikkingsonderhandelinge was onsuksesvol en gedurende Oktober 2002 is
daar ten volle voortgegaan met die finalisering van die
Oorkonde.
Die Griffier van hierdie Agbare Hof het ‘n uitstel aan u Applikant
verleen om die oorkonde te liasseer teen 13 Desember
2002.
9. Die
Oorkonde, soos verder voorberei deur Sneller Opnames, Bloemfontein,
het 14 Volumes beslaan. Die Respondent het aangedring
dat die partye
se onderskeie bundels gebruik tydens die hof
a quo
verrigtinge
beide deel sou vorm van die Oorkonde. Daar was egter oorvleuelings
in die bundels en oorbodige dokumente en daar is besluit
om ‘n
kernbundel saam te stel om die Oorkonde te verklein en dit te laat
voldoen aan die Reëls van hierdie Agbare Hof.
10. Die
finalisering van die Oorkonde is verder vertraag deur die
rekonstruksie van die hoflêer aangesien daar wysigings gemaak
is tydens die verrigtinge in die Hof
a quo
en die
regsverteenwoordigers van die partye nie ooreenkoms kon bereik oor
die samestelling van die Pleitstukke nie.
11. Die
besluit om ‘n kernbundel saam te stel het daartoe bygedra dat die
Oorkonde langer geneem het om te finaliseer, maar in die
proses is
die Oorkonde verklein na vier volumes met ‘n kernbundel van vier
volumes. Omdat daar nie rekenaar data van die Oorkonde
beskikbaar
was nie, vanweë die diefstal, moes alle wysigings met die hand
gedoen word.
12. U
Applikant plaas op rekord dat weens die onvermoë om die
Appèlrekord tydig te liasseer, die Appèl intussen
verval het.
13. U
Applikant doen met eerbied aan die hand dat die versuim om die
Appèlrekord betyds te liasseer uitsluitlik veroorsaak
is deur
omstandighede buite U Applikant se beheer, asook die onvermoë
van die partye om die aangeleentheid te skik.’
[6]
One would have hoped that the many
admonitions concerning what is required of an applicant in a
condonation application would be
trite knowledge among practitioners
who are entrusted with the preparation of appeals to this Court:
condonation is not to be had
merely for the asking; a full, detailed
and accurate account of the causes of the delay and their effects
must be furnished so as
to enable the Court to understand clearly the
reasons and to assess the responsibility. It must be obvious that if
the non-compliance
is time-related then the date, duration and extent
of any obstacle on which reliance is placed must be spelled out.
[7]
The appellant’s
affidavit consists of a number of generalized causes without any
attempt to relate them to the time-frame of its
default or to
enlighten the Court as to the materiality and effectiveness of any
steps taken by the appellant’s legal representatives
to achieve
compliance with the Rules at the earliest reasonable opportunity.
[8]
The
shortcomings in the application were aggravated by the undisputed
content of the respondent’s answering affidavit from which
it
appeared that:
(i) on 7 August 2002
the deponent to the appellant’s affidavit had written to the
respondent’s attorneys requesting a final extension
of two months
from 12 August and undertaking to finalise the appeal record during
that period should the negotiations then in prospect
not result in a
settlement;
(ii) as
a result, the respondent agreed to the lodging of the record by not
later than 14 October 2002 and the parties jointly notified
the
Registrar to that effect on 8 August;
(iii) despite
their unequivocal undertaking, on 11 October the appellant’s
attorneys wrote to the respondent’s attorneys requesting
yet
another extension of a month without offering an explanation for
their failure to comply;
(iv) on
14 October the respondent’s attorneys asked their colleagues for an
explanation as to ‘why it has taken such an inordinately
long time
to file the record’. Before a reply was forthcoming they received
from the Registrar a copy of a notification to the
appellant’s
Bloemfontein attorneys that an extension in terms of Rule 8(2)(b)
until 14 November had been granted ‘whereafter
the appeal shall
lapse’.
(v) On 21 October
2002 the appellant’s attorney replied to the letter of 14 October,
the final paragraph of their reply reading
‘
You
will note from our letter requesting the extension to file the Appeal
Record that we have experienced great difficulties in compiling
the
record as the Court file disappeared and the computers of Sneller
were stolen. We therefore require your co-operation in order
to
remove or mark faults in the record.’
No
particularity of the difficulties referred to was furnished and the
letter to the Registrar was not enclosed. It is to be remarked
on
that in para 6 of the founding affidavit the disappearance of the
file and the theft of the computers were set in the context
of
earlier extensions. The letter also records that an extension had
been granted until 13 December 2002 to file the record, contrary
to
the Registrar’s notification.
(vi) On
15 November 2002 the Registrar notified the appellant’s
Bloemfontein correspondents (with a copy to the respondent’s
attorneys)
that the appeal had lapsed due to non-compliance with the
Rules of this Court.
(vii) As
late as 3 December the appellant’s attorneys arranged a meeting
with the respondent’s attorneys during which agreement
was sought
regarding the manner of preparation of the bundles. According to the
deponent to the answering affidavit, ‘immediate
co-operation was
furnished to the Appellant’s legal representatives . . . and the
matter was disposed of without delay’.
(I
have not thought it necessary to deal with denials by the
respondent’s attorneys that agreement could not be reached on the
pleadings
or that they demanded that the bundles used in the Court
a
quo
should form part of the record. They also point out that the
record as finally compiled consisted of five volumes plus a core
bundle
of the same number and not four volumes of each as stated by
the appellant’s attorney.)
[9]
It
is apparent that not only was the affidavit in support of the
application seriously inadequate but it was also misleading in
relation
to the date on which the appeal had lapsed and the awareness
of the importance of 14 November on the part of the appellant’s
attorneys
both before and after that date.
[10]
The respondent filed a
replying affidavit which carries the matter no further save in one
respect: according to a supporting affidavit
by the appellant’s
Bloemfontein correspondent he requested an extension of two months
from the Registrar on 14 October 2002. After
receipt of the
notification of an extension until 14 November he discussed the
matter with the Registrar and was informed that the
date was a typing
error and that two months was intended. He accordingly notified the
appellant’s Uitenhage attorneys that the
extension had been granted
until 13 December. (Why he did not confirm this in writing with the
Registrar is not explained.) However
when the letter was received
from the Registrar on 15 November 2002 advising that the appeal had
lapsed he discussed the contents
with the appellant’s Uitenhage
attorneys
‘
and it was decided
that it should not be contested. Our instructions were that an
application for the reinstatement of the appeal
will be filed with
the Appeal Record simultaneously’
.
This merely aggravates the
inadequacy of the founding affidavit and raises more questions than
it answers, particularly as to why
the appellant’s attorney stated
without reservation in paragraph 8 of that affidavit that the
Registrar had granted the appellant
an extension until 13 December.
[11]
Faced thus with some
explanation for the appellant’s delay but one which lacked both
particularity and candour, we directed counsel
to argue the merits of
the appeal so as to enable the Court to weigh its assessment of the
appellant’s prospects of success with
all the other relevant
circumstances in the case:
Mbutuma v Xhosa Development
Corporation Ltd
1978 (1) SA 681
(A) at 687A;
Darries v
Sheriff, Magistrate’s Court, Wynberg and Another
1998 (3) SA 34
(SCA) at 41C-D. This is not a case where the Court should refuse the
application irrespective of the prospects of success, cf
Blumenthal
and Another v Thomson NO and Another
[1993] ZASCA 190
;
1994 (2) SA 118
(A) at 121I.
Large amounts of time and money have been expended by the parties on
the case and a substantial prize is at stake.
[12]
I proceed therefore
with a consideration of the substance of the appeal.
[13]
The facts are largely
common cause and the disputes fall within a narrow ambit. The
appellant is the successor in title to the Kwanobuhle
City Council.
During the period 1985 to 1987 that council contracted with Spirvin
Bottling Co (Pty) Ltd for the supply of tents,
water tanks, toilets
and other items necessary for the relocation of some 8000 squatter
families. After the project was completed
the council caused an
auditor, one Van der Ryst, to investigate certain irregularities in
its execution. His initial report was
to the effect that frauds had
been perpetrated on the council which warranted further
investigation. Criminal charges were preferred
against the directors
of Spirvin. The police seized all the documents involved. Mr van
der Ryst was engaged by the police to carry
out a forensic audit.
He produced an extensive report concluding that the council had been
defrauded to the extent of some R12
million.
[14]
In the meantime, in
December 1993, Spirvin was placed under a winding up order at the
instance of the respondent, who, on 13 April
1994, proved a claim in
the insolvent estate in the amount of R49 486 218,82 in respect of
income tax, sales tax, penalties and interest
during the period from
March 1985 to February 1992. It was the only proved creditor.
Sprirvin, however, was an empty shell. The
respondent, therefore,
resorted to proceedings in terms of secs 417, 418 and 423 of the
Companies Act 1973 with a view to recovering
money in satisfaction of
its claim from the former directors and officers of the company.
These were conducted by the liquidators
and funded by the respondent.
[15]
The police docket, which
included the second Van der Ryst report, had been laid before the
Attorney-General. He, eventually, declined
to prosecute. By that
time the appellant had succeeded to the rights of the council. It
obtained the police docket and the report.
The whole process was
plagued by obstructions and delays and was dragged out over a period
of years.
[16]
The appellant did not,
initially, prove a claim in the liquidation of Spirvin as it faced
the prospect of becoming a contributory
if it did so.
[17]
Spirvin was one of a
group of companies controlled by a family variously known as Jeeva or
Moosa. The proceedings initiated by the
respondent were vigorously
opposed by certain of the family members.
[18]
The appellant and the respondent were represented by the same senior
counsel. It was apparent that there would be prospective advantages
to both parties in a combination of their energies in pursuing their
claims against the company by means of proceedings against the
directors. The respondent was anxious to have insight into the
second Van der Ryst report and believed that the added pressure which
could be applied by the appellant’s participation would prove
productive in prising a settlement out of the directors or other
interested members of the family. The appellant was aware that
without the co-operation of and concessions by the respondent there
was no point whatsoever in proving a claim in the estate.
[19]
Once
the principle of the appellant’s participation was agreed upon the
matter resolved itself into the negotiation of acceptable
terms.
This was achieved on 15 May 1996 when a short written agreement was
signed by the parties.
[20]
The
material terms of the agreement were the following:
‘
2. The parties
both have substantial claims against Spirvin Bottling Company
(Proprietary) Limited (in Liquidation). The parties
have agreed to
co-operate with each other with regard to the pursuit of their
respective claims.
3. The
parties agree to share the proceeds of any amounts recovered in the
liquidation of Spirvin Bottling Company (Proprietary) Limited
(in
Liquidation) in a ratio determined by the amounts of the respective
claims of the parties in the liquidation, as accepted by
the
liquidators.
4. The Commissioner
for Inland Revenue hereby agrees to waive any preference it may enjoy
in respect of the proceeds of the liquidation
of Spirvin Bottling
Company (Proprietary) Limited (in Liquidation).
5. Each party will
be liable for its own costs incurred to date in respect of the
pursuit of its claim against Spirvin Bottling Company
(Proprietary)
Limited (in Liquidation).
6. Each party will
be responsible for its own costs, from date hereof, in respect of the
further pursuit of their respective claims
against Spirvin Bottling
Company (Proprietary) Limited (in Liquidation).’
[21]
The appellant proved a claim in the estate of Spirvin in
the amount of R11 428 849,29 which, after some resistance
by
interested members of the Jeeva family, was accepted by the
liquidators.
[22]
The respondent proceeded with the enquiries under the Companies Act.
It admits that it received such co-operation as it requested
from
the appellant.
[23]
On 15 November 1996 the Receiver of Revenue wrote to the
liquidators requesting a reduction in its proved claim against
Spirvin to
R14 253 073,04. This was a necessary consequence of the
operation of the provisions of the Final Relief on Tax, Interest,
Penalty
and Additional Tax Act 101 of 1996 which created a tax
amnesty for persons who made the prescribed application. (We are not
told
whether this step emanated from the directors or the
liquidators, but, whatever the case, there was no dispute about its
effectiveness
in reducing Spirvin’s tax liability.)
[24]
On 27 February 1997 the liquidators notified the respondent that the
Master had effected the reduction of the claim accordingly.
In the
meantime, on 28 January 1997 an agreement had been signed between the
liquidators and Walad Properties (Pty) Ltd (a company
controlled by
the family) in which that company agreed to pay R8 million into the
estate over a period of three years secured by
the registration of
bonds. The liquidators undertook to postpone
sine die
the
proceedings under s 423 of the Companies Act and the enquiry in terms
of s 417 and not to proceed with either in the event of
Walad
complying with its obligations. It was further agreed that, in the
event of such compliance the respondent would have no further
claims
in respect of Spirvin. The appellant was not consulted about the
settlement or notified of its conclusion.
[25]
During May 1997 the appellant, having become aware of the
settlement, considered its position. Advice obtained from two senior
counsel was that it was entitled to share in the proceeds received by
the respondent from Walad in the ratio of about 12:50 being
the
proportion which the claim of the appellant bore to the unreduced
claim of the respondent. The appellant accepted that advice.
It
also resolved that no civil actions be proceeded with against the
erstwhile directors of Spirvin.
[26]
Walad
defaulted in its payments under the settlement agreement. On 25 June
1998 the liquidators obtained a judgment against the
company. On 5
November 1998 a further agreement was reached in terms of which Walad
undertook to pay R7,3 million in cash on 11
December 1998 and the
balance (with interest) and costs by 28 February 2000. Even with
this arrangement there were hiccups. By
the time that the appellant
issued summons against the respondent in June 2000 the appellant had
received only R6 433 927,43 in the
liquidation of Spirvin.
[27]
On 10 March 2000 the appellant’s attorneys wrote to the Receiver
of Revenue, Port Elizabeth demanding payment of 45,2414% of the
amount distributed to the respondent with interest thereon from 11
November 1998. The demand was rejected in its entirety.
[28]
On 1 February 2001 Walad was placed under a final winding up order
at the instance of the respondent bringing the protracted struggle,
vigorously contested throughout, to a close.
[29]
The appellant, averring that it had fulfilled its obligations,
alleged in its claim that the liquidators of Spirvin paid the
respondent
the sum of R6 433 927,43 on 16 November 1998 as the nett
proceeds of the amount recovered by them in the liquidation of that
company.
The appellant had proved a claim for R11 428 849,29 and the
respondent one for R14 253 073,04. Accordingly it claimed that the
respondent was obliged to share the amount received (and any future
recoveries) in the ratio of 44,5% for the appellant and the balance
for the respondent.
[30]
The respondent met the appellant’s allegations by pleading that
the latter’s entitlement, if any, to share in the proceeds of
any
amounts recovered was subject to certain terms ‘partly express and
partly implied, alternatively partly tacit’ which it framed
as
follows:
‘
2.1.1 The
Plaintiff’s entitlement to share in any such proceeds would arise
only upon the final completion by the liquidators of
the winding-up
of Spirvin; and
2.1.2
Both the Plaintiff and the Defendant were obliged actively to pursue
their claims in the winding-up of Spirvin by taking all
reasonable
steps to ensure that monies were recovered in such winding-up by
appropriate legal action against the former directors,
shareholders
and officers of Spirvin.’
(Reliance
on the defence set up in paragraph 2.1.1 was abandoned in counsel’s
heads of argument on appeal.)
[31]
While not disputing that the appellant had performed the acts relied
on in its particulars of claim, the respondent denied that
such
performance amounted to a fulfillment of the respondent’s alleged
obligation to pursue its claim actively by taking all reasonable
steps to ensure that monies were recovered in the winding-up. Having
set up particulars of a series of steps taken by the liquidators
and
the respondent which culminated in the obtaining of a judgment
against Walad and the recovery from it of the moneys which enabled
the liquidators to make the distribution to the respondent, the
respondent pleaded as follows:
‘
3.3.10 While
the Defendant funded all its own and the liquidators’ legal costs
in respect of all the aforegoing proceedings, the
Plaintiff did not
assist in, contribute or indeed play any role in any of the
aforegoing proceedings whatsoever; and
3.3.11 the
Plaintiff has taken no meaningful steps whatsoever to pursue its
claim in the winding-up of Spirvin or to ensure that monies
were
recovered in such winding-up in the manner referred to in paragraph
2.1.2 hereof and accordingly is not entitled to share in
amounts
recovered in the winding-up.’
Having
regard to the formulation of the terms of the agreement set out in
paragraph 2.1 of the plea
(supra)
the contribution which
paragraph 3.3.10 can make to the respondent’s case is unclear;
presumably it is set up as an example of
how the appellant fell short
of its obligation to engage in active pursuit of its claim.
[32]
With regard to the proportion of the appellant’s entitlement, if
any, to share in the dividend, the respondent pleaded that the
ratio
to be applied was 18.76% of recoveries for the appellant and the
balance for the respondent having regard to the following
allegations:
‘
4.2.1 at
the time of the conclusion of the agreement the defendant was a
proved creditor in the liquidation of Spirvin in an amount
of R49 486
218,02 as then accepted by the liquidators. This amount was reduced
by the Master of the High Court on 25 February 1997
to the amount of
R14 253 073,04, by virtue of the provisions of the Final Relief on
Tax, Interest, Penalty and Additional Tax Act,
101 of 1996;
4.2.2 the
aforesaid amount of R49 486 218,02 is accordingly the amount of
Plaintiff’s claim for the purposes of calculating the
ratio on
which the parties are to share in the proceeds of amounts recovered
in the liquidation of Spirvin, if the Plaintiff is so
entitled (which
is denied).’
[33]
Extensive evidence was led at the trial concerning the circumstances
surrounding the conclusion of the agreement.
[34]
In the result Ludorf J held that the onus rested on the appellant to
prove that it had fulfilled its obligations under the agreement.
He
found that the agreement was clear and unambiguous:
‘
both
parties . . . have substantial claims against the company in
liquidation . . . and . . . both parties undertake and become obliged
in terms of the agreement to pursue such claims, obviously to
fruition. The prime, and only object being to recover funds. The
parties are also obliged to co-operate with one another in pursuance
of their respective claims against Spirvin.’
[35]
The learned Judge found that the appellant had not proved that it
had pursued its claim within the meaning of the agreement and,
thereby, fulfilled its contractual obligations. Nor was there a
tender on its part to do so. The claim was therefore dismissed
with
costs. The learned Judge made no reference to the implied or tacit
terms raised in the respondent’s plea, that being unnecessary
in
view of his finding as to the plain wording of the agreement. Before
us on appeal counsel for the respondent expressly disavowed
reliance
on such terms, being content to support the reasoning of the trial
Judge and emphasising the factual matrix in which the
agreement
germinated.
[36]
The respondent’s case as pleaded was not that the appellant was in
breach of the obligation to co-operate
per se
but rather that
it was in breach of the alleged obligation to actively pursue its own
claim. Whether there was such an obligation
is the central issue in
this appeal.
[37]
I consider first the ordinary meaning of the language chosen by the
parties to express their intention, without recourse to the
background facts. The obligation created by the second sentence of
clause 2 requires each to ‘co-operate’ ie to work or act
with the
other, in regard to the ‘the pursuit of their respective claims’,
ie the claim which relates to the other party. I
do not think the
language can, without doing violence to the choice of words, be
extended to include an obligation by the party obliged
in relation to
his own claim. There is no express obligation on either party to
pursue his own claim at all or to any extent. The
phrase ‘with
regard to the pursuit of their respective claims’ is purely
identificatory of the field of co-operation. It is
perhaps
indicative of the strained nature of the interpretation attached by
the respondent in paragraph 2.1.2 of the plea that it
was found
necessary to use such words and phrases as ‘actively’, ‘all
reasonable steps’, ‘to ensure that monies were recovered’,
‘by
appropriate legal action’ and ‘against the former directors,
shareholders and officers of Spirvin’ none of which is inherent
in
the plain language.
[38]
But the respondent contended otherwise. Counsel rested his
submission on the factual matrix. I have difficulty in accepting
that,
given the unequivocal intention which the language conveys and
which I have analysed, the background facts can change or supplement
the plain meaning in the absence of a claim for rectification. But cf
Investors Compensation Scheme Ltd v West Bromwich Building Society
[1997] UKHL 28
;
[1998] 1 WLR 896
(HL) at 912B-E. Nevertheless, the question not
having been debated before us, I shall give due consideration to the
facts said
to support the submission.
[39]
Those facts are the following-
1. By
September 1995 perceived police obstructiveness in relation to the
provision of information to the appellant had been overcome.
On 26
October 1995 the appellant resolved that its attorneys be instructed
to institute action against all persons considered to
be civilly
liable to it and for this purpose to instruct senior and junior
counsel. The second Van der Ryst report was available
to the
appellant and the extent of the fraud had been calculated at about
R12 million. The appellant’s attorneys prepared a memorandum
for
the Attorney-General of the Cape Province on 22 November 1995 stating
that the final report of Mr Van der Ryst conclusively confirmed
civil
liability.
2. A
meeting was held on 1 February 1996 attended by Hodes SC (as senior
counsel for the appellant) and Buchanan SC (as junior counsel
for the
appellant and senior counsel for the respondent), appellant’s
attorney, Van der Ryst and the appellant’s acting town
clerk. The
transcript of the proceedings reveals that-
(1) the appellant’s
attorneys confirmed that they were authorized to brief counsel to
pursue civil proceedings to reclaim the appellant’s
losses;
(2) the
acting town clerk said that his council would persist in its
instructions to its attorneys;
(3) it
was made clear to the acting town clerk that the appellant would not
recover money without incurring substantial costs and
that the Jeevas
would not pay at the drop of a hat;
(4) it
was emphasized that
(i) there were no
assets in Spirvin;
(ii) the appellant
had an action directly against the former directors of Spirvin
separate from that of the respondent;
the
said directors were personally liable and were possessed of
substantial assets;
the
appellant would have a full opportunity of fighting the case ‘very
far up front’ (which I take to mean both early and prominently)
by
employing the procedures of the Companies Act;
it
would be unconscionable for the appellant not to pursue its claim
based on the fraud;
that
one of the companies in the Jeeva group, Walad Properties (Pty) Ltd
was worth millions of Rands, and the group itself consisted
of many
companies;
that
the directors would do anything to stay out of the witness box but
would pay if the prospect was inevitable;
that
there were at least six distinct avenues of attack open to the
appellant for the purpose of recovering the moneys due to it;
the
appellant did not mind paying but wanted to see results.
Subsequent
to the meeting referred to the previous sub-paragraph a further
recommendation was submitted to the appellant council
in favour of
civil action against the directors.
To
the knowledge of the appellant the appellant was, at the time the
agreement was concluded, engaged in a wide range of legal activities
designed to prise money out of the directors, the family or the
group companies to which end it had already disbursed more than
R500
000,00 in legal fees. It was anticipated that in collaborating with
the respondent the appellant would go a long way to proving
its own
claim.
[40]
The respondent’s submission, on the strength of the matters set
out above, is that the necessary inference is that in concluding
the
agreement both parties regarded the pursuit by the appellant of its
claims in the liquidation as a legally binding obligation.
[41]
I am unable to accept the submission. There is no doubt that
both parties hoped and believed that the appellant would become
actively
involved in pursuing and cornering the Jeevas. That however
does not justify as a necessary inference that the parties intended
to convert their hopes to a legal obligation. Indeed, other facts,
not emphasized by the respondent’s counsel, are consistent
with a
contrary intention. These include the following: that the council
was known to be subject to chronic financial constraints;
that the
agreement required it to bear its own costs; that the Jeevas were
notorious for fighting inexorable rearguard actions that
involved
raising every conceivable legal obstacle and carrying the fight to
the highest court; that they possessed the means to resist
for as
long as defences were available to them; that litigation is
inherently risky. It may be added that even if either party had
understood the agreement to embody such an obligation there was no
indication to be found in the conduct of either, whether before
or
after its conclusion, until the respondent was called upon by the
appellant’s letter of demand for payment, that such an obligation
existed or was being breached.
[42]
I conclude therefore that the plain meaning of clause 2 in the
context of the agreement and with or without regard to admissible
background
facts cannot sustain the interpretation placed on it in
para 2.1 of the plea. As it was common cause that the appellant was
not
otherwise in breach of its obligations it follows that the
exceptio non adimpleti contractus
on which the defendant
relied should not have been upheld by the trial judge.
[43]
The only remaining dispute between the parties relates to the
proportion of the amount recovered by the respondent in the
liquidation
to which the appellant is entitled: Should it be based
on the respondent’s original or reduced claim?
[44]
The expression ‘in a ratio determined by the amounts of the
respective claims of the parties in the liquidation, as accepted by
the liquidators’ must, of course, be interpreted in the light of
the facts known to the parties at the date of the agreement.
The one
which mattered for present purposes was that the respondent had a
proved claim in the amount of R49 486218,82 and that the
liquidators
had accepted that claim. (The legal acceptance occurred when the
liquidators, having examined the books and documents
relating to the
estate, decided not to dispute the respondent’s claim:
ss 45(2)
and (3) of the
Insolvency Act 24 of 1936
.) There was, at the time
that their agreement was concluded, no contemplation of a change in
this position. In fact, the subsequent
reduction in the respondent’s
claim took place as a consequence of law beyond the control of the
respondent. Nor was there any
question of the liquidators having to
‘accept’ the reduced claim; they were confronted with a
fait
accompli
and such evidence as there is shows that they merely
referred it to the Master for confirmation.
[45]
The result is that the appellant should succeed in its claim in
the proportion of 18,76%. The parties are agreed that the

equivalent amount is R1 207 004,78.
[46]
The appellant’s application for condonation is saved by the
merits of the appeal. The cursory manner in which the merits of the
application were prepared and the lack of attention to matters which
obviously required explanation warrants censure. An appropriate
costs order will requite the Court’s displeasure.
[47]
The following order is made:
1. The respondent’s
application for condonation of its failure to file its answering
affidavit in the appellant’s condonation
application is granted.
The costs of the application are to be paid by the respondent.
2. The appellant’s
application for condonation of its failure to lodge the record
timeously is granted. The appeal is reinstated.
The costs of the
application are to be paid by the appellant.
3. The appeal
succeeds.
4. The
costs of the appeal incurred before 14 November 2002 are to be paid
by the respondent.
5. Each
party is to bear its own costs in the appeal incurred from 14
November 2002.
6. All
costs are to include the costs consequent upon the employment of two
counsel.
7. The
order of the Court
a quo
is set aside and replaced by the
following:
Judgment
is granted in favour of the plaintiff for payment of R1 207 004,78
with interest thereon at 15.5% per annum from 16 November
1998 to
date of payment.
It
is declared that the plaintiff is entitled to payment of 18.76% of
all further amounts recovered by it in the liquidation of
Spirvin
Bottling Co (Pty) Ltd.
The
defendant is ordered to pay the costs of the action, including the
costs of employing two counsel.
J
A HEHER
JUDGE OF APPEAL
ZULMAN
JA )Concur
NUGENT
JA )