Cash Paymaster Services (Eastern Cape) (Pty) Ltd v Member of the Executive Council Responsible for Social Development and Another (336/06) [2007] ZAECHC 70 (1 October 2007)

FORM A

FILING SHEET FOR EASTERN CAPE JUDGMENT

PARTIES:

CASH PAYMASTER SERVICES

(EASTERN CAPE) (PTY) LTD Appellant

and

MEMBER OF THE EXECUTIVE COUNCIL

RESPONSIBLE FOR SOCIAL DEVELOPMENT First Respondent

SUPERINTENDENT-GENERAL OF THE

EASTERN CAPE DEPARTMENT OF

SOCIAL DEVELOPMENT Second Respondent

Case Number: 336/06

High Court: TRANSKEI DIVISION

HEARD:

DATE DELIVERED:

JUDGE(S): JANSEN J, PETSE J, NYANGIWE AJ

LEGAL REPRESENTATIVES -

Appearances

Appellant(s):

respondent(s):

Instructing attorneys:

Appellant(s):

Respondent(s):

CASE INFORMATION -

Nature of proceedings :

IN THE HIGH COURT OF SOUTH AFRICA

(TRANSKEI DIVISION)

Case No.: 336/06

CA&R No.: 169/06

Date delivered:

In the matter between:

JUDGMENT

JANSEN J:

On 6 April 2006 Miller, J in the Court a quo granted an order directing the appellant to repay to certain beneficiaries all the monies deducted from the beneficiaries’ social grants between 1 and 6 January 2006 on or before 31 May 2006. This order was granted in favour of the respondents with costs, which costs include those consequent upon the employment of two counsel. It is against this order that the appellant now appeals, with leave granted by the Court a quo.

Leave to Appeal was granted on 22 June 2006. The appellant’s Notice of Appeal dated 19 July 2006 was delivered on 20 July 2006. Rule 49(6)(a) of the Rules of this Court requires an appellant to make written application to the Registrar within 60 days after delivery of its Notice of Appeal for a date of the hearing of the appeal. The appellant failed to apply for such a date. An application by the respondents for a date of hearing saved the appellant’s appeal. Had it not been for such an application by the respondents, the appeal would have been deemed to have lapsed. The appellant further did not comply with Rule 49(7)(a) which requires an appellant to file with the Registrar three copies of the record on appeal and to furnish the respondents with two copies thereof. Once again the respondents, with the filing of copies of the record on appeal with the Registrar, kept the appellant’s appeal alive. No explanation on behalf of the appellant was forthcoming as to the appellant’s failure to comply with the aforesaid rules.

Rule 49(15) requires the appellant to deliver not later than fifteen days before the appeal is heard Heads of Argument. The appellant’s Heads of Argument was undated. It was however delivered on 15 February 2007 together with an Application for Condonation for the late filing of the Heads of Argument. The Heads of Argument were filed one week late. It appears from affidavits filed to support the Application for Condonation that the late delivery of the Heads of Argument can only be ascribed to the unavailability of counsel. When the appellant’s instructing attorney was advised that counsel who appeared at the application was not available, due to an acting appointment to the Eastern Cape Bench of the High Court, steps were immediately taken to brief another senior counsel, Mr Bhana SC, who had previously been involved in this matter. It is clear that the respondents did not suffer any prejudice, as Heads of Argument on behalf of the respondents were filed timeously. Although some inconvenience was caused to the members of this Bench, we have decided to deal with the matter, as it is of some importance to various people and in particular to the beneficiaries involved. We have therefore decided to condone the appellant’s non-compliance with the rules. Eventually Mr Pretorius SC argued the appeal. He filed supplementary heads of argument, approaching the matter from a slightly different angle.

The Constitution of the Republic of South Africa gives everyone the right to have access to social security, including appropriate social assistance. In terms of s 27(2) of the Constitution, the State must take reasonable legislative and other measures within its available resources to achieve the progressive realisation of the rights to social security and social assistance. In the Eastern Cape Province the payment of social grants to deserving persons is governed by the provisions of the Social Assistance Act, No. 59 of 1992. The first respondent is the member of the Eastern Cape Province Executive Council responsible for social development in the province. The first respondent was cited in her representative capacity as the political head of the Department of Social Development in the Province of the Eastern Cape.

On 22 August 2002 the Department and the appellant entered into a written agreement in terms whereof the Department outsourced the payment of social grants to beneficiaries to the appellant in exchange for payment by the Department to the appellant. Payment of social grants occurs once a month during a payment cycle. Payment is made to beneficiaries inter alia by cash payments at pay points. This matter relates to cash payments to beneficiaries at pay points.

As a result of certain information conveyed to the respondents an Urgent Application was launched in the Transkei High Court on 15 March 2005 for an Interdict against the appellant. That matter was settled between the parties with an agreement signed on 29 March 2005. The relevant part of that agreement reads as follows:

“The parties have agreed that:

1. the first Respondent be interdicted and restrained from:

1.1 using or allowing the pay-points of the Eastern Cape Department of Social Development at districts comprising the former Transkei (excluding llinge and Ezibeleni) to be used by money-lenders or other vendors, including the Second Respondent; and

1.2 deducting amounts of money from beneficiaries’ social grant payments at the pay-point(s) aforesaid,”.

It was further agreed upon that the agreement be made an Order of the Court. That was done on 31 March 2005.

It is common cause that subsequent to 31 March 2005, for the rest of that year, the appellant did not make any further deductions from beneficiaries’ grants.

It is common cause that between 1 and 6 January 2006, the appellant deducted certain amounts of money ranging between R300,00 and R500,00 per beneficiary from their grants. It was conceded by the appellant that a total of 7323 beneficiaries were involved. These deductions gave rise to a further application by the respondents and the order granted by Miller, J against the appellant and, subsequently, to this appeal.

It was firstly argued on behalf of the appellant that the respondents did not have locus standi to have brought the application on behalf of the beneficiaries in the Court a quo. It was submitted that no basis had been set out why the more than seven thousand beneficiaries could not have brought the application in their own names. It was further submitted that no reason had been set out as to why it was impracticable to join all the affected beneficiaries in one claim. Reference was made to the fact that from the papers it does not appear that the beneficiaries affected gave authority to the respondents to act on their behalf. Reference was further made to the fact that the attitude of the beneficiaries affected was not established. It was submitted that “for all intents and purposes the respondents simply acted entirely of their own accord in bringing the application”.

In coming to his conclusion that the respondents did have locus standi to bring the application on behalf of the beneficiaries, Miller, J inter alia relied on the provisions of s 38(b) read with s 27 of the Constitution of the Republic of South Africa, Act No. 108 of 1996. S 38 provides that anyone listed in that section has the right to approach a competent Court, alleging that a right in the Bill of Rights has been infringed or threatened and the Court may grant appropriate relief. The persons who may approach a Court are inter alia, anyone acting on behalf of another person who cannot act in his/her own name (38(b)) and anyone acting in the public interest (38(d)). S 27 provides that everyone has a right to have access to social security, including, if they are unable to support themselves and their dependants, appropriate social assistance. In the context of this matter, in my view, a liberal interpretation should be given to the relevant sections. (Compare: Ferreira v Levin NO and Others; Vryenhoek and Others v Powell and Others 1996(1) SA 984 CC). It is not in dispute that the beneficiaries had the right to social assistance. It is the respondents’ case that the appellant had infringed that right. Common sense dictates that it would be highly impracticable and a futile exercise to get more than seven thousand individuals from all over the Transkei, most of whom are beneficiaries of old age grants, to be joined in one action to claim the relief. It would take years to finalise such an action. It would incur unnecessary exorbitant costs out of proportion to the individual amounts claimed. The beneficiaries most probably do not know about the Court Order interdicting and restraining the appellant from deducting amounts of monies from their grants. The impracticality of the beneficiaries to act in their own name justifies a finding that they are effectively unable to act in their own names and that the respondents therefore qualify to act on their behalf. The appellant can not be prejudiced as it knows exactly who the beneficiaries involved are. (Compare: Ngxusa & Others v Permanent Secretary Department of Welfare, Eastern Cape, and Another 2001 (2) SA 609 ECD, at p 623A).

It is further, in my view, also in the public interest that the political head of the department responsible for the social welfare of the poor and the people in need act on their behalf when their right to social assistance has been infringed.

The argument on behalf of the appellant that the beneficiaries’ rights were not infringed to bring it within the ambit of s 27 of the Constitution is misplaced. The beneficiaries had a right to social assistance. Their application for social assistance was approved. The Department of Social Development was obliged to pay the full amount approved to them. The actual payment was sourced out to the appellant. The sourcing out to the appellant did not affect the right the beneficiaries had to be paid the full amount. Any deduction from the full amount amounts to an infringement of the right of the beneficiary. In my view Miller, J was correct in his conclusion that s 38 read with s 27 confers locus standi on the respondents in this matter.

In any event, in my view, the respondents had locus standi in their own right to bring this application, albeit on behalf of the beneficiaries. I have referred above to the agreement entered into on 22 August 2002 between the Department and the appellant. This was a so-called “Service Level Agreement”. In terms of this agreement the appellant had to pay the beneficiaries the social grants on behalf of the Department. These payments had to be made in terms of the agreement. Clause 11.15 provides that no amount may be deducted from a beneficiary’s grant for any reason whatsoever, except if agreed by the Department. It is common cause that the deductions were not made for the benefit of the Department and not agreed by the Department, but only for the benefit of the erstwhile second respondent in the application, which is not a party to the present appeal. The deductions were therefore in breach of the agreement between the appellant and the Department. There can be no doubt at all that the Department had the right to institute action against the appellant for an order directing compliance with a specific term of the contract.

There is another ground upon which the respondents had locus standi to have brought the application. The appellant and respondent entered into an agreement on 29 March 2005 which agreement was made an Order of the Court on 31 March 2005. In terms of this agreement, the appellant undertook not to make any deductions from the beneficiaries’ grants. This agreement was breached by the appellant during the first week of January 2006. That breach gave locus standi to the respondents in this matter. Exactly the same issues that had been settled in the Settlement Agreement were breached with the deductions made in January 2006.

It was submitted by Mr Pretorius that the respondents, in bringing the application in the Court a quo, did not comply with the basic requirements in class action proceedings. For this submission he relied upon the judgment in Permanent Secretary Department of Welfare, Eastern Cape v Ngxuza 2001 (4) SA 1184 SCA at 1192B-C and 1198B-C. This case, in my view, does not support the appellant, but rather the respondents. In the instant case the respondents, acting on behalf of the beneficiaries, had a far greater and more direct interest in the well-being of the beneficiaries and their right to social assistance than the applicant had in the Ngxuza-case.

It was argued in limine in the Court a quo that the Transkei Division of the High Court of South Africa did not have jurisdiction to hear the respondents’ application against the appellant. Miller, J ruled against the appellant. It was contended that the Learned Judge a quo was wrong in his conclusion, although Mr Pretorius did not in particular argue this point. S 19(1)(a) of the Supreme Court Act, No. 59 of 1959 provides that a Provincial or Local Division of the High Court shall have jurisdiction over all persons residing or being in and in relation to all causes arising within its area of jurisdiction. It was not contested that the affected beneficiaries reside within the area of jurisdiction of this Court.

Furthermore, the cause of the application arose within the jurisdiction of this Court, because the deductions directly affected the beneficiaries’ right to receive full payment of social grants in the Transkei. The statement on behalf of the respondents as contained in paragraph 17 of the Founding Affidavit mentions the fact that payment of social grants to beneficiaries in the district comprising the former Transkei, all of which are located within the area of jurisdiction of this Court, was outsourced to the appellant, whilst the payment of social grants to beneficiaries in other areas was outsourced to another service provider. That fact was admitted by the appellant. It was never contended on behalf of the appellant that the beneficiaries do not reside in the former Transkei area. The jurisdictional connecting factors recognised by the common law include the conclusion or performance of a contract. Although the service level agreement was not concluded within the area of jurisdiction of the Court a quo, the performance in terms of the contract exclusively took place in the Transkei within the Court’s area of jurisdiction. S 19(1)(a) further provides that a Provincial or Local Division shall have jurisdiction over all other matters of which it may according to law take cognisance. These words confirm that the jurisdiction of the Court under this section is determined by reference to the Common Law, the inherent jurisdiction of the High Court or any relevant Statute. (See: Erasmus, Superior Court Practice, at A1-32). It was furthermore correctly pointed out by senior counsel on behalf of the respondents in his heads of argument that it defies logic for the appellant to agree to an Order in this Court restraining it from deducting amounts of monies from beneficiaries and thereafter to turn around and to contend that this Court lacked jurisdiction to direct payment of monies deducted contrary to the order granted by this Court. In my view, it was correctly decided by Miller, J that the Court a quo had jurisdiction to hear the matter.

It was, in the third place, argued on behalf of the appellant that the Learned Judge a quo failed to have proper regard to the facts of the case. It was emphasised on behalf of the appellant that the undisputed facts put up by the appellant were that a full grant had been given to each beneficiary, and that such beneficiary then authorised the appellant to pay over an amount therefrom to the erstwhile second respondent. I am in full agreement with the remark made by Miller, J in his judgment that the appellant was: “overly technical when denying that any deductions were made”. There was no evidence placed before the Court a quo that any of the more than seven thousand beneficiaries had given written authority to the appellant to have made the deductions during the period 1 to 6 January 2006. The contrary is true. When the appellant was confronted by the Department about the deductions, the appellant merely attributed the deductions to a computer error and inadvertence. In a letter, dated 15 January 2005, signed by one Belamant, the Chief Executive Officer of the appellant, to the Department, the following was recorded:

“I have just returned from leave today and was informed by Mrs. Anja Lewington that the Department had received notification that deductions were being effected by or on behalf of Smart Link Financial Services.

Mrs. Lewington has already requested details from the Department so that we could pinpoint the origin of these deductions. In the meantime, however, we have conducted our own investigation and have discovered that our computer banking systems reset during the cross-over to 2006 and, as a result, re-activate the loan deductions that were to be made during 2005.

We will contact individual beneficiaries who were affected in order to resolve this matter.

We apologise for the error and for any inconvenience that this may cause to the Department.”

Had there been any written authority given by the beneficiaries to the appellant to deduct the money, one would have expected the appellant’s Chief Executive Officer to have said that. In any event, the appellant would not have been entitled to make any deductions from the beneficiaries’ grant in view of the Court Order. It must be accepted that the beneficiaries granted written authority to the appellant to make deductions prior to the application launched which resulted in the Court order of 31 March 2005. The appellant complied with the Court order until December of that year. The error which reactivated the loan deductions made during 2005 could not serve as a basis for the appellant to rely on a written authority by a beneficiary which was in effect nullified by the Court order of 31 March 2005. In my view, Miller, J did not, as was suggested on behalf of the appellant, fail to take into account the relevant factual issues. He properly considered the facts and correctly came to the conclusion that the appellant acted contrary not only to the terms of clause 11.15 of the Service Level Agreement, but also in violation of the Court Order which was granted in terms of an agreement between the appellant and the respondents.

It was finally contended by the appellant, but not argued by Mr Pretorius, that because of a material dispute of fact in relation to an alleged agreement reached between the parties on 24 January 2006, the Learned Judge a quo ought to have accepted the appellant’s version of the meeting and ought not to have granted the relief. It is common cause that the appellant did not, at the hearing of the application, submit that the matter be referred for oral evidence to resolve the dispute. The so-called ‘dispute of facts’ relates to an alleged agreement reached by the parties to solve the issue concerning the deductions.

It was suggested in correspondence by the appellant that the Department had resolved that no repayments had to be made to beneficiaries to rectify the unlawful deductions. No response was forthcoming from the Department in reaction to these letters by the appellant. These letters were dated 30 January 2006 and 6 February 2006. The letters referred to a meeting held on 24 January 2006 about the Department’s so-called decision not to take further action regarding the deductions. A similar letter was written to the State Attorney, dated 13 March 2006. None of these letters were responded to. However, in letters dated 13 January, 16 January and 31 January, the Department insisted that the appellant repay the monies deducted from the beneficiaries. The State Attorney also wrote a letter dated 3 March 2006 to the appellant demanding repayment of the monies deducted. With reference to the meeting of 24 January 2006, the Department wrote a letter dated 31 January to the appellant which contains the following two paragraphs:

“The Honourable MEC expressed her displeasure about the erroneous and illegal deductions in the strongest possible terms. Your earnest apologies in that regard were noted and appreciated. At the risk of stating the obvious, this matter cannot end at that juncture. Our position of immediate repayments (within the context of a pay-cycle) still stands.

To facilitate the process of repayments, we are even prepared to assist you with physical repayments to the affected beneficiaries (as we stated in the meeting). The alternative would be to load the unduly deducted monies into the respective beneficiaries’ grants. We hope to get a clear word on this issue not later than the 06th February 2006. The MEC regards this issue as non-negotiable and we fully reserve our rights in this regard.”

On 16 February 2006, an e-mail was sent on behalf of the Department to the appellant. Reference is made in this letter to the two day workshop (where the so-called agreement was reached), with a statement that it had been agreed inter alia that repayments on the beneficiaries’ grants should be “loaded” and that the appellant has “actually undertaken, pending a formalisation by our principals (Dr Belamant and Mr Mabentsela) to proceed with the repayments as soon as it is practically possible”. This e-mail was followed by another one on 22 February 2006, where the Department advised the appellant that they were still awaiting delivery of the Workshop Minutes. Specific reference is made to the implementation of the repayments of the illegal deductions. It is mentioned that if there is no clear response in this regard that the Department would reinstate the plan to have a Contempt of Court Application. In a letter dated 24 February 2006 the appellant again mentioned a resolution allegedly taken at the meeting of 24 January 2006 that no further action should be taken. The correspondence referred to justified the robust common sense approach adopted by Miller, J in the Court a quo. It further justifies the finding made by the Learned Judge that it is improbable that a decision was taken on 24 January 2006 not to take any further action. In my view, Miller, J was correct in his decision to accept the respondents’ version of the meeting and in his ultimate conclusion to grant the relief sought.

In addition to the original points raised on behalf of the appellant, Mr Pretorius raised some other points which need attention. He referred to s 10 of the Constitution and submitted that the respondents did not allege sufficient facts to support the allegation that the right to human dignity of the beneficiaries had been infringed. That may be so, but the question of human dignity is not relevant in this matter. Mr Pretorius further referred to s 25(1) of the Constitution and submitted that the respondents relied on a right of the beneficiaries not to be deprived of property, except by a law of general application. This fact was only mentioned in passing by the respondents. It was not a basis upon which Miller, J granted the order against the appellant in the Court a quo. It was correctly pointed out by counsel on behalf of the appellant that at issue was not a Constitutional property right itself, but the alleged right against the appellant not to make deductions contrary to an agreement incorporated in a Court Order.

It was further submitted on behalf of the appellant that if the monies deducted were ordered to be repaid, the beneficiaries would not be in a better position than they are now. It was submitted that the debts which were defrayed by the deductions would be revived and the interest in terms of the loan agreements would also be revived. Therefore the patrimony of the beneficiaries would therefore not be significantly increased and the beneficiaries would once again be burdened with a debt more than a year after the debt had been settled. That may be so, but that was not the crux of the matter. The fact of the matter is that the appellant, contrary to the terms of the Service Level Agreement, and contrary to the agreement between the parties which was subsequently made an order of Court, effected deductions on behalf of a third party. The appellant had no right to do that. The contractual obligations between the beneficiaries and the erstwhile second respondent should not be allowed to interfere with the obligations of the appellant which are specified contractually between the appellant and the department.

It was further pointed out by Mr Pretorius that s 11(1) of the Social Assistance Act provides for the interference by the Minister in the event of a right to an amount payable in terms of the Act be transferred, or ceded, or pledged. He submitted, relying on an unreported judgment of Tip Top Business Consultants and Others v Cash Paymaster Services and Others, in the Durban and Coast Local Division of the High Court, that the deductions from the grants are not totally forbidden. S 11(1) of the Act is not in issue in the instant matter. The Tip Top-case is also clearly distinguishable. The deductions in this case were made, as repeatedly said above, in contravention of the two agreements. The fact that s 11.15 of the Service Level Agreement allowed for deductions to be made if the department agrees to that, and the fact that deductions are also permitted by s 20 of the new Social Assistance Act, No. 13 of 2004 with the written permission of the Minister is also, in my view, not relevant in the present matter for reasons already stated.

The appeal cannot succeed. The appeal is dismissed with costs. The appellant is granted time until 30 April 2007 to comply with the Order of the Court a quo.

__________________

J C H JANSEN

JUDGE OF THE HIGH COURT

PETSE, J

I agree.

X M PETSE

JUDGE OF THE HIGH COURT

NYANGIWE, AJ

X NYANGIWE

ACTING JUDGE OF THE HIGH COURT