Kwane Capital (PTY) LTD v Mahikeng Local Municipality and Another (UM128/2018) [2018] ZANWHC 39 (20 September 2018)

“IN THE HIGH COURT OF SOUTH AFRICA”

NORTH WEST DIVISION, MAHIKENG

CASE NUMBER: UM128/2018

In the matter between:-

KWANE CAPITAL (PTY) LTD

Applicant

And

MAHIKENG LOCAL MUNICIPALITY

First Respondent

THE SHERIFF OF THE HIGH COURT, MAFIKENG

Second Respondent

________________________________________________________________________

JUDGMENT

GUTTA J.

A. INTRODUCTION

[1] The applicant launched an urgent application, in terms of which it sought the following relief:-

1.1 Confirmation that the rental agreements between the applicant and the first respondent dated 15 December 2015 and 18 February 2016 have been cancelled with immediate effect, alternatively as at 31 July 2018;

1.2 That the first respondent immediately makes available to the second respondent for attachment all of the assets recorded in annexures “A” and “B” to the Court Order dated 13 June 2018 (“the assets”) alternatively discloses the whereabouts of each asset to the second respondent; and

1.3 That the second respondent is compelled and/or authorised to recover from the first respondent the assets listed in schedules “A” and “B” to the court order dated 13 June 2018, annexed to the founding affidavit as “FA5” and deliver same to a storage facility identified by the applicant.

[2] The second respondent does not oppose the relief sought by the applicant.

B. HISTORY

[3] The applicant and the first respondent entered into two separate rental agreements in terms of which the applicant rented heavy plant and equipment and light motor vehicles to the first respondent (“the assets”). On or about 29 May 2018 the applicant launched an urgent an application to repossess the assets after the first respondent failed to make payment for several months of the rentals due in terms of the aforesaid rental agreements. The first respondent was indebted to the applicant in the amount of R37 891 266.96.

[4] The first respondent failed to remedy its default with the result that the applicant launched an urgent application on 6 June 2018 wherein it sought an order that the respondents be directed to immediately return the vehicles listed in the schedules marked ‘A’ and the plant and equipment listed in the schedule marked ‘B’.

[5] On 13 June 2018, the applicant and the first respondent appeared before Kgoele J. The parties settled the dispute and their agreement was made an order of Court. The order made by Kgoele J is repeated herein below as it is relevant to the present application. The order reads inter alia that:

“2 THAT: Pending the payment of an amount of R37 891 266.96 by the Respondent to SARS on behalf of the Applicant, which payment is to be made on or before the 15th day of JULY 2018, the Respondent is hereby:

2.1 THAT: Interdicted from using the machinery, equipment and vehicles referred to in the schedule attached marked “A”

(“the goods”);

2.2 THAT: ordered to immediately deliver and store the goods in a place for safekeeping within the respondent’s control;

2.3 THAT: ordered to allow the applicant or any of its agents/representatives access to the goods in order for the goods to be inspected and maintained.

3. THAT: Payment of the above mentioned amount shall be paid to SARS unless otherwise advised by SARS.

4. THAT: The Respondent is entitled to use the machinery, equipment and vehicles referred to in the schedule attached marked “B” (“part of the yellow fleet”); once it has been insured to the satisfaction of the applicant.

5.THAT: Should the Respondent default in its undertaking to pay the amount

referred to in paragraph 2 above, the respondent shall immediately return to the applicant the goods listed in schedule marked “A” and “B” to this Draft Order.

6. THAT: The lease agreements are hereby reinstated on the same terms and conditions provided that in the event of a default on any instalment due in terms of either lease agreement both agreements shall be terminated with immediate effect and the goods referred to in schedule "A" and “B” shall be returned forthwith to the applicant.”

[6] The applicant invoiced the first respondent for an amount of R9 174 346.05, which was owing in July 2018. The first respondent failed to pay the July instalment. On 3 August 2018, the applicant gave notice of termination of the rental agreements and instructed the first respondent to return the assets forthwith.

[7] The applicant attempted to repossess its assets on 7 and 8 August 2018 which led to an altercation between the applicant and the first respondent’s employees. At some stage it is alleged that there was a threat by a manager of first respondent to set fire to the applicant’s assets and the applicants employees were warned to leave Mahikeng under the threat of physical violence. Pursuant thereto the applicant launched its application for urgent relief.

[8] The first respondent initially denied its indebtedness to applicant as it alleged that it had over paid the applicant which amount exceeds the amount due in terms of the July rental. Later it alleged that there was no obligation to pay the applicant because of a third party notice received from SARS. It alleged that during mid July 2018, SARS contacted the first respondent’s acting chief financial officer demanding payment of R5.2 million for the month end of July as the applicant owed SARS in excess of R90 million. On 13 August 2018 it received the third party notice. It alleged that it failed to pay the July rental as it was obliged in terms of the third party notice to pay SARS. On 4 September 2018 the first respondent paid SARS an amount of R8 722 603.43 allegedly in compliance with the third party notice.

[9] On 5 September 2018, the first respondent launched an urgent spoliation application against the applicant as the applicant was handed the keys to the assets by personnel of the first respondent. The applicant was, however, not handed the assets. The matter came before Gura J who dismissed the first respondent’s urgent spoliation application.

C. URGENCY

[12] The first respondent alleged that the applicant should have launched the application as early as 31 July 2018 when the instalments fell due and not on 17 August 2018. The first respondent further alleged that this is a case of self-created urgency. The fact that SARS may attach its assets is a flimsy reason in that SARS must first give the applicant 10 business days notice in terms of section 172(1) of the Tax Administration Act to pay an outstanding tax debt before it can attach its assets. First respondent further attached proof that it had insured the assets and denied that it had refused to allow the applicant to inspect and maintain its fleet.

[13] The applicant alleged that the matter is urgent for inter alia the following

reasons:

13.1 The applicant is entitled to have the assets returned to it forthwith as ordered by Kgoele J, upon the default by the first respondent. The first respondent admits that it defaulted. The applicant could not launch its application by 31 July 2018 as the instalment was payable on 31 July 2018 and applicant delivered a letter of cancellation and attempted to repossess its assets on 7 and 8 August 2018.

13.2 The first respondent in the spoliation application before Gura J, accepted that the hearing of this matter on Thursday, 13 September 2018 is necessary as counsel for the first respondent submitted that:

“the municipality has always been mindful that next week the matter is proceeding and there would be a final determination to that

particular matter. The outcome that will be given today M’Lord is, will actually be short lived, because it is only today until next week [indistinct].

13.3 It is opportunistic for the first respondent to contend that the determination of this matter is not urgent. Further, there is now an untenable situation, as the assets keys are in the possession of the first respondent and the applicant is entitled to have the keys in its possession since this issue has been determined by Gura J.

[14] The common cause facts are that:

14.1 In terms of prayer 6 of the order granted by Kgoele J on 13 June 2018:

“The lease agreements are hereby reinstated on the same terms and conditions provided that in the event of a default on any instalment

due in terms of either lease agreement both agreements shall be terminated with immediate effect and the goods referred to in schedule "A" and “B” shall be returned forthwith to the applicant”.

14.2 The first respondent admitted that in respect of the plant and equipment agreement that "All monthly payments that were due, except for the period of July 2018 has been paid to the applicant and/or SARS”.

14.3 The first respondent admitted that in respect of the vehicle agreement it had not paid the July 2018 rental. It said that: “Save for the July payment, the municipality has paid all the monies due to the applicant alternatively to SARS in respect of the white fleet lease”.

14.4 The applicant delivered the notice of termination of the agreement. The first respondent acknowledged that the applicant is entitled to immediate repossession of all the assets leased to the first respondent, where it defaults on any instalment due in terms of the reinstated lease agreements.

[15] Counsel for the applicant, Mr Tshikila referred the Court to the Constitutional Court case of Chief Lesapo v North West Agricultural Bank and Another[1] and submitted that the first respondent breached the rule of law and its action renders the matter urgent. In Chief Lesapo supra, Mokgoro J said:

“Respect for the rule of law is crucial for an defensible and sustainable democracy. In a modern constitutional state like ours, there is no room for legislation which, as in this case, is inimical to a fundamental principle such as that against self help. This is particularly so when the tendency for aggrieved persons to take the law into their own hands is a constant threat”.

[16] Mr Tshikila submitted that the applicant’s rights are continuously violated by the first respondent and that the assets are still in the first respondent’s possession. This is a commercial agreement and the applicant is in a dire financial position and urgently requests the assets to protect its interest.

[17] I am of the view that there is merit in Mr Tshikila submissions. It is common cause that this is the third time that the applicant is before Court to protect its assets:

(a) As stated supra, the applicant approached this Court on urgent grounds on the 29 May 2018 to recover its assets as the first respondent failed to pay its instalments in the amount of R37 891 266.96. The matter was settled by agreement between the parties. The parties agreed that the matter was urgent.

(b) On the second occasion, the first respondent launched an urgent spoliation application wherein it sought inter alia an order that:

[i] Directing the applicant to return to the first respondent all the fleet keys of the motor vehicle and

machinery that it removed from the first respondent’s premises on 3 September 2018;

[ii] Interdicting and restraining the applicant from reclaiming the assets

pending the final determination of the matter under case number UM128/2018.

The applicant opposed the urgent relief sought by the first respondent and Gura J dismissed the first respondent’s application with costs.

(c) In the application before me today, the applicant is again attempting to recover its assets on urgent grounds from the first respondent.

[18] I am persuaded that the matter is indeed urgent for the following reasons:

18.1 in terms of prayer 6 of the order granted by Kgoele J, in the event of default the agreements are terminated with immediate effect and the assets referred to in Schedule “A” and “B” shall forthwith be returned to the applicant. The first respondent breached prayer 6 of the order as it failed to pay the July instalment and failed to return the assets to the applicant;

18.2 the applicant could not have anticipated that the first respondent was going to breach the order granted by Kgoele J and fail to pay the instalment on 31 July 2018;

18.3 the applicant after cancelling the agreement initially attempted through its attorneys to amicably remove its goods and when this failed it launched the urgent application;

18.4 the first respondent had itself brought the spoliation application on an urgent basis wherein it sought the keys and the machinery which concerns the subject matter of this application;

18.5 The applicant has stressed that it is indebted to SARS and seeks return of its assets as provided in the order granted by this Court the continued possession and/or use of the assets, without the first respondent abiding by the terms of the agreements and the order, has exposed the applicant to immense financial harm;

18.6 The Court in Twentieth Century Fox Film[2] said the following:

“In my opinion the urgency of commercial interest may justify the invocation of Uniform Rule of Court 6(12) no less than any other

interests. Each case must depend upon its own circumstances. For the purpose of deciding upon the urgency of this matter I assumed, as I have to do, that the applicants’ case was a good one and that the respondent was unlawfully infringing the applicant’s

copyright in the films in question”.

18.7 The applicant is in my view entitled to protect its commercial interests by taking immediate possession of its assets and to redeploy them elsewhere, where they can generate revenue and sustain themselves[3].

[19] In the result, the point in limine on urgency is dismissed.

D. RES JUDICATA

[20] Counsel for applicant, Mr Tshikila submitted that the determination of the merits is res judicata on the basis of the judgment granted by Gura J in the urgent spoliation application. He submitted that Gura J considered the same

issues of fact as in the present case.

[21] Mr Tshikila relied on the case of Yellow Star Properties 1020 (Pty) Ltd v MEC for Department of Development Planning and Local Government, Gambling[4], where the Court said:

“where a defendant raises as a defence that the same parties are bound by a previous judgment on the same issue (viz idem actor and cadem quaestor) it has become common place to refer to it as being a matter of so-called ‘issue estoppel’. But that is merely a phrase of convenience adopted from English law, the principles of which have not been submitted into our law, and the defence remains one of res judicata. Importantly when dealing with issue estoppel, it is necessary to stress not only that the parties must be the same but that the same issue of fact or law which was an essential element of the judgment on which reliance is placed must have arisen and must be regarded as having been determined in the earlier judgment”.

[22] Counsel for the first respondent, Mr Makgate contended that the matter before Gura J did not pertain to the same facts as it was an application for spoliation where the Court only had to determine whether the first respondent was in peaceful undisturbed possession and whether he was unlawfully dispossessed. He submitted that Gura J erred by dwelling into the facts and making a determination on the issue of whether the first respondent breached the order of Kgoele J.

[23] Although the parties in the spoliation application and in the application in casu are the same, the issues of law are different. The only question to consider is whether the same issues of facts arose and were

considered in the judgment on spoliation.

[24] A transcript of the proceedings and judgment in the spoliation application was made available to this Court. Gura J agreed that the spoliation was not unlawful. He considered the order granted by Kgoele J on 13 June 2018 when he said:

“…provided that in the event of a default on any of the instalments due in terms of either this agreement, both agreements shall be terminated with immediate effect. And the goods referred to in schedule A and B shall be returned forthwith to the applicant. At that time the applicant was the present respondent”.

Thereafter, Gura J, made the following finding:

“the applicant in today’s application has not dealt with tis [indistinct]. Now it is clear now that what should the consequences

be. The goods must be returned to the present respondents. There is no other order, Court Order which this Court can make, except to look at the effect of the June Court Order. And whether there has been non-compliance with the Court Order. Because in that very same Court Order the Court Order states itself what will be the consequences of the present applicant’s failure to comply with any of these conditions. It is clear that more than one condition of this June Court Order has not been complied with by the applicant.

It is for that reason that this Court does not [indistinct] it is in the interest of justice to come to the assistance of the applicant.

Consequently the application is dismissed with costs”.

[25] Gura J dismissed the spoliation application on the basis that the first resopondent has, as a matter of fact, not complied with Kgoele J’s order.

[26] In casu, the applicant relies on the following facts to recover its assets, namely that:

a) the first respondent breached the Court order of Kgoele J;

b) the lease agreements were terminated with immediate effect; and

c) the assets referred to in schedule “A” and “B” had to be returned forthwith to the applicant.

[27] From the aforegoing, I am in agreement with the applicant that Gura J in his judgment considered the same facts as the facts in casu and the relief sought in prayer 2 of the notice of motion for an order confirming that the rental agreements have been cancelled is res judicata.

[28] Notwithstanding my finding that the issue in respect of cancellation of the agreements is res judicata, there is one aspect that I have considered hereinbelow. The first respondent contended inter alia that:

28.1 The total value of both agreements amounts to R178 370 465.67 and the first respondent has to date paid an amount of R171 466 781.01. The balance due to applicant is an amount of R6 903 734.60. The granting of the relief sought by the applicant in the light of the payments made by the first respondent offends public policy.

28.2 In respect of the lease of the heavy plant and equipment, the machinery will become the property of the first respondent at the end of the lease.

[29] The applicant in his replying affidavit alleged that In terms of clauses 6.2 and 12 of the plant and equipment lease agreement the assets remains the property of the lessor (the applicant) unless all payments in respect of those goods have been paid to the lessor in full as and when those payments became due in terms of the agreement. The first respondent admitted that in respect of the July 2018 payment, it has failed to pay the instalments as and when it became due and payable.

[30] The argument that the cancellation of the agreement offends public interest is in my view flawed and without merit as on the first respondent’s own version it breached the court order granted by Kgoele J in that it failed to pay the July instalment and for this reason the applicant was entitled to cancel the agreement and to claim the return of the assets. Furthermore the applicant denied that the balance due is an amount of R6 903 734.60.

[31] In the light of the common cause facts and the finding of Gura J, I am of the view that the applicant is accordingly entitled to the relief sought in prayers 3, 4 and 5 of its Notice of Motion.

E. ORDER

[32] In the result,

a) The first respondent is directed to immediately make available to the second respondent for attachment all of the assets recorded in annexures “A” and “B” to the Court Order dated 13 June 2018 (“the assets”) alternatively disclose the whereabouts of each assets to the second respondent; and

b) The second respondent is compelled and/or authorised to recover from the first respondent the assets listed in schedules “A” and “B” to the court order dated 13 June 2018, annexed to the founding affidavit as “FA5” and deliver same to a storage facility identified by the applicant.

c) The first respondent is to pay the costs

____________

N. GUTTA

JUDGE OF THE HIGH COURT

APPEARANCES

DATE OF HEARING

: 13 SEPTEMBER 2018

DATE OF JUDGMENT

: 20 SEPTEMBER 2018

ADVOCATE FOR PLAINTIFF

: ADV TSHIKILA

ADVOCATE FOR DEFENDANT : ADV MAKGATE

ATTORNEYS FOR APPLICANT : MAREE & MAREE ATTORNEYS

(Instructed by: Thomson Wilks Attorneys)

ATTORNEYS FOR RESPONDENT : MOTSHABI & MODIBOA ATTORNEYS

[1] 2000(1) SA 409 (CC) para 17

[2] 1982 (3) SA 582 (W), at 586

[3] Mbatha and others v Johannesburg City and Others 2015(4) SA 591(GJ) at para [13]

[4] 2009 (3) SA 577 (SCA) at para 22