Infrastructure Finance Corporation Ltd t/a INCA v Department of Transport, Roads, Community Safety (928/2011) [2011] ZANWHC 98 (20 October 2011)

NORTH WEST HIGH COURT, MAFIKENG

CASE NO. 928/2011

In the matter between:

INFRASTRUCTURE FINANCE CORPORATION LIMITED

t/a INCA ......................................................................................................PLAINTIFF

and

DEPARTMENT OF TRANSPORT, ROADS & COMMUNITY

SAFETY .....................................................................................................DEFENDANT

____________________________________________________________________________

JUDGMENT

GUTTA J.

A. INTRODUCTION

[1] The plaintiff applied for summary judgment against the defendant for:

1.1. payment of arrear rental as at 31 October 2010 in the sum of R910 404.00;

1.2. payment of arrear rental as at 30 June 2011 in the amount of R2 670 438.40;

1.3. payment of interest on the amounts in 1.1 and 1.2 above, at the rate of 13.5% a tempore morae until date of payment;

1.4 costs of suit on the scale as between attorney and own client.

[2] The plaintiff’s claim arises out of a master rental agreement concluded on 02 April 2008, in terms of which the defendant leased multifunctional equipment from Bastian Financial Services (Pty) Ltd (“BFS”).

B. THE MASTER RENTAL AGREEMENT

[3] The agreement was for an initial period of 36 months, commencing on 01 April 2008, with the expiry date being 31 October 2010. The monthly rental was R220 000.00, plus VAT with a 10% annual escalation.

[4] Ownership in and to the equipment at all times vested in BFS.

[5] In terms of the agreement, the parties agreed that BFS shall be entitled to cede and transfer all or some of its rights in terms of the rental agreement, including the right of ownership.

[6] The agreement also provided that the agreement shall continue after the expiry of the initial period, for successive periods of twelve months each, unless terminated at the end of the initial period and/or successive rental periods, by the other party giving the other party three months written notice of termination prior to the expiry of the initial rental period or successive rental period.

[7] An event of default shall occur if the defendant, inter alia:

7.1. fails to make punctual payment of any of the rentals; or

7.2. breached any terms of this agreement or any other agreement between the parties.

[8] The plaintiff alleged that on or about 23 April 2008, BFS ceded all its right, title and interest in and to the agreement to the plaintiff.

[9] Counsel for the plaintiff, Adv Maree, submitted that neither the plaintiff nor the defendant terminated the agreement at the end of the initial period, which resulted in the agreement continuing for a further period of 12 months with effect from 01 November 2010.

[10] He submitted that the defendant breached the agreement, in that:

10.1. the defendant failed to pay the monthly rental for the last three months of the initial period, in the amount of R910 404.00;

10.2. the defendant failed to make any further payments in respect of the successive periods from 01 November 2010 until 30 June 2011, in the amount of R2 670 438.40.

C. FIRST CLAIM

[11] Counsel for the defendant, Adv Masilo, submitted that in respect of the initial rental period, the defendant paid the rental for August 2010 and conceded that it was indebted to the plaintiff for the months of September and October 2010. He submitted that the defendant had not received the invoices for the months September and October 2010, and could only pay the rental on receipt of an original invoice from the plaintiff. The defendant tendered in the opposing affidavit to pay the rentals for September and October 2010.

[12] Adv Maree conceded that the payment for August 2010 had been paid and submitted that in respect of the payment for September and October 2010, the defendant has not raised a bona fide defence and is entitled to judgment with costs.

[13] The master rental agreement does not provide that the plaintiff will receive payment after submission of an invoice. The defendant

breached the agreement by neglecting to pay the instalment for September and October 2010. In my view, the defendant has not raised

a bona fide defence in respect of claim one.

D. SECOND CLAIM

[14] The defendant’s defence in so far as the second claim is concerned is somewhat confusing, particularly as regards the dates when the events occurred, but I have endeavoured to put the pieces of the puzzle together as follows:

14.1. The defendant, during 2003, awarded a tender to Mosiamise Business Solutions CC (“Mosiamise”) for the supply of a debt collection system for vehicle registration licences. The contract referred to as the DOT one contract was for a period of 36 months commencing on 01 April 2005. The equipment is the same equipment that was leased by Mosiamise to the defendant as referred to in Annexure A1 and A2 of the plaintiff’s particulars of claim.

14.2. The DOT one contract was extended, commencing on 01 November 2007.

14.3. The defendant alleged that during 03 December 2009 (this date may be incorrect), Mosiamise entered into a cession agreement with BFS in terms of which Mosiamise ceded its rights in respect of payment of rental and services to BFS and also ceded its obligations to render services to MBD Credit Solutions (Pty) Ltd (“MBD”). BFS ceded the rights in respect of payment to the plaintiff (“INCA”).

14.4. Pursuant to the cession between Mosiamise and BFS, BFS concluded a master rental agreement with the defendant on 01 April 2008.

14.5. The defendant alleged that the rights ceded by Mosiamise to BFS and by BFS to the plaintiff were in respect of payment for the contract period in the DOT one contract and that, it was not competent for BFS to cause the Department to sign a master rental agreement commencing 01 April 2008 as only the payment due for the contract duration were ceded and the obligation to perform services and lease out the equipment remained with MBD for the duration of the DOT one contract, which expired on 31 October 2010.

14.6. Before the expiry of the DOT one contract, the defendant negotiated with MBD to continue to perform services after 01 November 2010 as the premises, the equipment and the Delamere Debt Collection System (“the Delamere System”) belonged to MBD. MBD agreed to render the same services at the rate of R150 000.00, which is less than the initial amount.

14.7. The reason for the reduced amount is because Mosiamise had leased the premises, the equipment and the Delamere System from MBD and was charging the defendant a mark-up above its contractual obligations with MBD.

14.8. Mr Masilo submitted that there is a dispute as to the ownership of the leased equipment as the equipment and the Delamere System are the same items listed in the master rental agreement and they belong to MBD and not to the plaintiff.

14.9. He submitted further that there is a dispute as to whom payment should be effected as both the plaintiff and MBD rendered invoices for payment for the said equipment in terms of different contracts for the same tender, but only MBD rendered the service, and not the plaintiff.

[15] Initially I was persuaded by Adv Maree to look only at the master rental agreement and draw the conclusion that the fault lies solely with the defendant for concluding two different contracts, one with the plaintiff and the other with MBD, in respect of the same equipment and for the same period and find that the defendant had breached the contract with the plaintiff.

[16] The cession agreements concluded between Mosiamise and BFS, BFS and the plaintiff and Mosiamise and MBD were not attached to the papers. There is a dispute firstly as to what was ceded by Mosiamise to BFS and BFS to the plaintiff. Was it the right, title and interest as alleged by the plaintiff or only the rights in respect of rental and services as alleged by the defendant.

[17] If it is only the rights in respect of payment of rental and services that were ceded to BFS, then BFS could not cede the right, title and interest in terms of the cession agreement concluded between BFS and the plaintiff on 23 April 2008.

[18] There is also a dispute as to ownership of the equipment. If indeed ownership of the equipment vested in MBD and not BFS, could BFS conclude a master rental agreement with the defendant on 23 April 2008 in terms of which agreement, ownership in the equipment vests with BFS.

[19] There are other unanswered questions. If the agreement continues for a further period of 12 months in terms of clause 21 of the agreement, why is the plaintiff only claiming rental for a further period of eight months from 01 November 2010 until 30 June 2011.

[20] On closer study of the clauses in the rental agreement, the following is also apparent. In the event the lessee fails to make punctual payment of any of the rentals or breaches any terms of this agreement or any other agreement between the parties, then the lessor in terms of clause 9.2 of the agreement may:

“9.2 Claim immediate payment of all amount which would have been payable in terms of this agreement until expiry of the initial rental period stated in the Equipment Schedule, whether such amounts are then due for payment or not.”

[21] The above clause refers to the initial rental period and not the successive periods as provided for in clause 21.

[22] Hence the question remains whether the plaintiff is entitled to payment for the successive period in terms of clause 9.2 of the agreement.

E. THE LAW

[23] To avoid summary judgment the defendant is required, in terms of Rule 32 (3) (b) of the High Court rules, to set out in an affidavit facts, which if proved at the trial, will constitute an answer to the plaintiff's claim. The rule also requires that the defendant satisfy the court that the defence is bona fide. This means that the defendant must swear to a defence, valid in law, in a manner which is not seriously unconvincing. Finally, it is required of the defendant that he discloses fully the nature and grounds of the defence and the material facts relied upon therefore. This means that the statement of material facts must be sufficiently full to persuade the court that what the defendant has alleged, if it is proved at the trial, will constitute a defence to the plaintiff's claim. If the defence is averred in a manner which appears in all the circumstances to be needlessly bald, vague or sketchy, that will constitute material for the court to consider in relation to the requirement of bona fides. See Breitenbach v Fiat SA (Edms) Bpk 1976 (2) SA 226 (T) at 227G–227F.

[24] When the defence is based upon facts, in the sense that material facts alleged by the plaintiff in his summons are disputed or new facts are alleged constituting a defence, the Court does not attempt to decide these issues or to determine whether or not there is a balance of probabilities in favour of the one party or the other. See Maharaj v Barclays National Bank Ltd 1976 (1) SA 418 (A) at 426.

[25] The defendant is not at this stage required to persuade the Court of the correctness of the facts stated by him or her or whether if the facts are disputed, that there is a preponderance of probabilities in his favour, nor does the Court at this stage endeavour to weigh or decide disputed factual issues or to determine whether or not there is a balance of probabilities in favour of the one party or another. See Arend v Astra Furnishers (Pty) Ltd 1974 (1) SA 298 (C) at 303 – 4; Maharaj v Barclays National Bank Ltd supra at 426.

[26] Hence what Rule 32 requires is that the defendant set out in his affidavit facts, which if proved at the trial, constitute an answer to the plaintiff’s claim. See Marsh v Standard Bank of SA Ltd 2000 (4) SA 947 (W) at 949.

[27] The Court will grant summary judgment only where the plaintiff has an unanswered case. If it has the slightest doubt, the Court will not grant summary judgment. The Court’s discretion should not be exercised on the basis of conjecture or speculation, but on the basis of the material before it. If it appears to the Court that an injustice might result if summary judgment is granted, the Court should exercise its discretion against the plaintiff. See First National Bank of SA Ltd v Myburgh & Another 2002 (4) at paras [9] and [10] at 180D/E–E/F and 184G/H–I; Gillinsky & Another v Superb Launderes and Dry Cleaners (Pty) Ltd 1978 (3) SA 807 (C) at 810; and Vitamax (Pty) Ltd v Executive Catering Equipment CC 1993 (2) SA 556 (W).

[28] At this stage, the enquiry is whether there is a reasonable possibility that the defendant’s defence may be good. See

Mnweba v Maharaj [2001] ALL SA (C) at 272c–e.

[29] The defence raised by the defendant, albeit flimsy and to some extent sketchy, is not seriously unconvincing and if the facts are proved at trial, they may constitute an answer to the plaintiff’s claim. There is a reasonable possibility that the defendant’s defence may be good. Accordingly, the relief sought in prayer two of the particulars of claim should proceed to trial so that the facts can be properly ventilated.

F. COSTS

[30] In terms of Rule 32(9) of the Uniform Rules of Court, the Court may, at the hearing of such application, make such order as to costs as it may deem appropriate.

[31] The plaintiff was successful on the first claim and there is no reason why he should be deprived of the costs in so far as the first claim is concerned.

[32] In so far as the costs in respect of claim 2 are concerned, the question as to whether the plaintiff should be ordered to pay the defendant’s costs of the opposition depends upon whether the defendant was reasonable in opposing the application. See Purchase v De Huizemark Alberton (Pty) Ltd t/a Bop Percival Estates 1994 (1) SA 281 (W) at 287E–L.

[33] I am mindful of the fact that the provisions of Rule 32(9)(b) may be invoked, should the defence raised by the defendant prove to be unreasonable. See District Bank Ltd v Hoosain & Others 1984 (4) SA 544 (C) 547G; and Webb v Shell Zimbabwe (PVT) 1982 (2) SA 763 (25) at 767F–G.

[34] For reasons stated supra, I accordingly exercise my discretion and hereby invoke the provisions of Rule 32(9)(b) in respect of the second claim.

G. ORDER

[35] I accordingly grant the following order:

Claim 1

a) Summary judgment is granted against the defendant for payment of arrear rental for September and October 2010 in the sum of R606 936.00.

b) Payment of interest on the above amount, at the rate of 13.5% a tempore morae until date of payment.

c) Cost of suit.

Claim 2

a) Summary judgment in respect of claim 2 is refused and the defendant is given leave to defend.

b) Costs relating to this claim are to stand over for determination by the trial Court.

_________________

N. GUTTA

JUDGE OF THE HIGH COURT

APPEARANCES

DATE OF HEARING : 29 SEPTEMBER 2011

DATE OF JUDGMENT : 20 OCTOBER 2011

COUNSEL FOR PLAINTIFF : ADV MAREE

COUNSEL FOR DEFENDANT : ADV M.H. MASILO

ATTORNEYS FOR PLAINTIFF : SMIT STANTON INC.

(Instructed by LOCKETTS ATTORNEYS)

ATTORNEYS FOR DEFENDANT : THE STATE ATTORNEY