LF Birch and Sons v Pumeza Bono Inc, In Re: Ngcongca and Others v Minister of Rural Development and Land Reform NO (4086/2009) [2010] ZAECGHC 63 (5 August 2010)

Not Reportable

IN THE HIGH COURT OF SOUTH AFRICA

(EASTERN CAPE DIVISION – GRAHAMSTOWN)

Case No: 4086/2009

Date Heard: 13/5/10

Date Delivered: 05/08/10

In the matter between

LF BIRCH & SON Applicant

and

PUMEZA BONO INCORPORATED Respondent

In Re:

VUKILIE JOHN NGCONGCA First Applicant

LOUISE MARLENE JANEAN BUYS Second Applicant

FEZEKILE XALI Third Applicant

JOHANE BUYS Fourth Applicant

JOHN BUYS Fifth Applicant

MANDISA MAFANA Sixth Applicant

SINTHEMBA NGCONGCA Seventh Applicant

SOSIWE SYLVIA NGCONGCA Eight Applicant

TOERIE TRUDY BUYS Ninth Applicant

VIRGINIA BUYS Tenth Applicant

JOHN F BUYS Eleventh Applicant

THE MINISTER OF RURAL DEVELOPMENT

AND LAND REFORM N.O. Respondent

JUDGMENT

REVELAS J

[1] In this application, the applicant (LF Birch and Son, or “LF Birch”) seeks a punitive costs order against the attorney of record (“Bono”), who represented the eleven applicants in a previous application (“the main application”). The costs were incurred when six trustees of the Middleton Worker’s Trust (“the Trust”), as a result of the aforesaid main application not having been served on LF Birch or the Trust, were compelled to bring an application to intervene in the main application and the latter application was withdrawn at a very late stage.

[2] The applicants in the main application were eleven farm workers, formerly employed by LF Birch. They, together with approximately 89 other former employees of LF Birch,

were beneficiaries of the Trust. In their application, these eleven applicants sought monthly payments to each one of them of what was termed “distributions” from a government grant issued for their benefit, but payable to the Trust. The payments were to be made until such time as the respondent in the main application (the Minister of Rural Development and Land Reform or “the Minister”), the Trust, LF Birch and the eleven applicants had resolved their “issues”. These amounts were almost equal or similar to their previous salaries earned while they worked for LF Birch. LF Birch and the Trust were not cited as respondents in the main application and as said, that application was also not served on them.

[3] The main application was brought on an urgent basis in the December 2009 recess, and was set down for hearing on 18 December 2009. The recess duty Judge properly declined to hear the matter in the absence of service of the application on LF Birch and the Trust, who were patently interested parties. The main application was also brought after an unsuccessful urgent application in the Labour Court, brought by the same eleven applicants, in November 2009 seeking their reinstatement in the employ of LF Birch and their salaries. They were also represented the Labour Court by Bono, against whom the cost order is sought in the present application.

[4] The facts which gave rise to the three applications in question are the following:

The eleven applicants and the other (approximately 89) beneficiaries of the Trust, were in the employ of Sidney Bonnen Birch (SB Birch) who conducts a farming business under the name of LF Birch and Son, (the present applicant, or LF Birch) on several farms owned by LF Birch in the Somerset East and Grahamstown areas, collectively known as the Middleton Farms.

[5] On 6 October 2008, the current beneficiaries of the Trust (including the eleven applicants in the main application), Edward Sidney Birch (as settlor), SB Birch (as first trustee), and Johane Buys, the fourth applicant (as second trustee), entered into an agreement to register the Trust for the beneficiaries. The purpose of setting up the Trust was to enable the beneficiaries to acquire farm land through and with the financial assistance of the Department of Rural Development and Land Reform. (“The Department”).

[6] The aforesaid financial assistance was in the form of grants. The last grant was for approximately R20 million and about R1.6 million was left of it when the main application was brought. In essence, what was sought by the applicants in the main application, was access to what remained of this Land Reform and Distribution Grant (LRDG) which was approved for the beneficiaries of the Trust, which included them. The main application was also not served on the other 89 beneficiaries of the Trust.

[7] In December 2008, a mortgage bond was registered against three properties, which the Department assisted in purchasing from the Birch Family Trust. LF Birch also entered into a fifteen year lease agreement with the Trust in respect of these farms.

[8] On 30 October 2008 a joint Venture Agreement was entered into between LF Birch and the Trust. The material terms of the agreement were:

8.1 The LRDG grant in question will be ceded to the Trust and a portion thereof would be used for “input costs for the production cycle

in the raising of ostrich chicks”.

8.2 The Trust would use the portion of the grant to buy ostrich chickens from LF Birch, have them managed and reared by Birch.

8.3 The administrative aspects of the purchase farming and their subsequent attended to by Birch.

8.4 Failure by the Trust to pay “what it owes,” or any other breach of the agreement, would entitle LF Birch to cancel (“without

prejudice to his rights”) and the rights over the chicks would “ipso facto be deemed to have been ceded by the Trust to Birch”.

The agreement further made provision for a procedure to determine the prices for the chickens and also stipulated the conduct of the beneficiaries who “were to follow orders issued to them, arrive in time for work are in work at all times that they are required to be there and are not under the influence of drugs or alcohol when on duty”.

[9] The joint venture turned out to be a failure. Perhaps not surprisingly, this joint venture agreement with its prominent labour contract overtones was cancelled by LF Birch on 7 July 2009. The cancellation was embodied in a document dated 4 September 2009 bearing the title:

“Heads of Agreement by and between Sidney Bonnen Birch trading as LF Birch and Son (‘Birch’) and the Middleton Workers Trust Represented by the Trustees (‘MWT’) and All Present and Prospective Beneficiaries Who Sign This Agreement (The Beneficiaries)”.

[10] All beneficiaries of the Trust were required to sign the “agreement” and to initial each page thereof. The eleven applicants did not sign this document.

[11] This document dated 4 September 2009 was the tomb stone, not only of the joint venture, but also of all the good intentions the parties had when the Trust was initially created. It also records several accusations against the Department for failing to honour its LRAD commitments to the Trust and its beneficiaries. Several letters recording the acrimonious dispute between the Department, the Trust and LF Birch, were part of the papers in this matter. Copies thereof were sent to Bono long before this application was heard.

[12] The cancellation of the joint venture agreement on 7 July 2009, resulted in the stock on the farms being reverted to LF Birch and a loss of income for the employees and the other beneficiaries of the Trust. According to this deed of cancellation the Department “failed to pay a further invoice that is part of the LRAD funding”. R1.6 million of the remaining LRAD funding could still be accessed by the Trust but for the alleged lack of co-operation on the part of the Department. Various other accusations are also levelled against the Department. However, it is not all discernable from this document where exactly all these problems left the beneficiaries.

[13] The eleven applicants then approached Bono for legal assistance. That their first port of call was the Labour Court is understandable in the circumstances. They were after all farm workers, and have been for many years. They were also no doubt frustrated by the turn of events. While the Department and LF Birch were involved in a protracted spat over what was left of the grant (the R1.6 million), they (the beneficiaries of the Trust) were without a monthly income. Since the Labour Court dismissed their application, apparently because they could not show that they were employees, they approached the High Court with the main application.

[14] The main application was postponed to 28 January 2010. The application for leave to intervene in the main application was filed thereafter. Only on the eve of its hearing the main application, was withdrawn.

[15] Two issues arise in this application for costs. The first is whether the six trustees of the Trust were entitled to intervene and LF Birch should have been joined as a party in the main application. The second question which is whether the conduct of Bono in the main application and application to intervene, justifies an order for the bonis propriis costs sought against her.

[16] The following facts are highly relevant to this enquiry:

[17] The original Letter of Grant issued by the Department was in favour of the Trust. This very significant document was attached to the founding affidavit of the first applicant in the main application. The applicants were therefore aware that payments could not be made to them directly. The entitlement of the LRDG grants had been in any event ceded from the Trust to LF Birch.

[18] Another significant document attached to the papers was a copy of an invoice submitted by LF Birch to the Department for the outstanding balance of the grant in the amount of R1 687 542.00.

[19] The remainder of the grant had always been paid by the Department to LF Birch, by virtue of the cession and never to the applicants.

[20] In the founding affidavit the first applicant makes reference to the business affairs of the Trust and LF Birch being intimately linked.

[21] The Trust’s alleged failure to account for the claims of LF Birch, was advanced by the applicants as the reason for the Department terminating all payments to the Trust.

[22] All the abovementioned facts bear testimony to the assertion that LF Birch had a direct and substantial interest in the outcome of the main application and should have been joined as a party.

Furthermore, for the same reasons, the trustees of the Trust were entitled to bring an application to intervene in the main application.

[23] Costs De Bonis Propriis

The main application was devoid of any cause of action against the Minister and had no prospects of success. The relief sought against the Minister seems almost naïve if one could ignore the fact that the application was drafted by a practising attorney. It was clearly an abuse of process. There were also other factors which confirms the aforesaid proposition.

[24] Had the main application not been withdrawn, the application for joinder and intervention, even though opposed, would almost certainly have succeeded with a costs order against the eleven applicants, because the relief sought was in law not competent against the Minister, and in addition, the Trust and LF Birch had an indisputable interest in the matter.

[25] Only the first applicant deposed to an affidavit supporting the main application, and that was the founding affidavit. The second to eleventh applicants did not file confirmatory affidavits. That they lived in areas remote from Port Elizabeth is no excuse. Correspondents could have been instructed. Alternatively, a staff member of the respondent could have overseen the commission of the necessary confirmatory affidavits. Because there were 89 other beneficiaries who were not party to this application, it was very important that those who were applicants should be properly before court. In these circumstances, it does not lie in the mouth of their attorney to say that transport problems prevented all but one of the applicants to sign affidavits.

[26] As stated above, the main application was set down for 17 December 2009, but was postponed. Bono wrote to the Trust afterwards on 22 December 2009, advising the Trust that at the hearing of the matter “it was decided by the Court that you (the Trust) are to provide us with all relevant documentation and books pertaining the Middleton Worker’s Trust Financials”. The matter was not argued and no such ruling was made. It was simply not true.

[27] In opposing the present application for costs, Bono explained that she never meant to convey that the Court had indeed made such an order. She submitted that if she had meant to convey that, she would have said that “if the Trust fails to deliver the document or Application for Contempt of Court against it would be made”. This explanation is not convincing. The plain wording of the letter in question appears to have been intended to convey that the handing over or discovery of the relevant documentation was sanctioned by the Court after the matter was argued. On its own, the aforesaid conduct of Bono would not have persuaded me to make an adverse costs order against her, or to arrive at a finding that she deliberately misled any of the Trustees. However, that is not the only incident which is a cause for concern.

[28] Bono met with the attorney for LF Birch on 3 December 2009, according to a letter written to her by the attorney in question on 14 December, confirming such a meeting. At that time Bono did not dispute that the meeting took place. She did so only when the point was made in the application to intervene, that she did not disclose to the attorney that she intended to bring the main application the following day.

[29] Bono’s denial that she and LF Birch’s attorney met in her office was met with an affidavit by the same attorney in reply, describing the circumstances of the meeting and the appearance of Bono’s Boardroom. This attorney is from Johannesburg and had never visited her offices before. His affidavit had a distinct ring of the truth to it.

[30] In the founding affidavit attached to the application for leave to intervene, SB Birch laments the inability or unwillingness of Bono to provide the Trust or LF Birch with a copy of the main application. Bono explained that the request for such a copy was made “too late”. This answer is disingenuous because the copy was clearly requested before 13 January 2010 and the main application was postponed to 28 January 2010. Bono’s refusal is inexplicable, and was in the circumstances unprofessional.

[31] The fact that the Judge who postponed the matter did so because the Trust and LF Birch were not appraised of the main application, compounds the impression that Bono acted unprofessionally. Because the very late withdrawal of the main application frustrated the application for leave to intervene, and wasted costs were occasioned thereby, a tender of costs should have accompanied the withdrawal of the application. I did not.

[32] The eleven applicants were farm workers. Their attorney never asserted that she was acting on their strict instructions. They clearly litigated on her advice. The relief sought by them against the respondent (the Minister) was for all practical purposes the same relief sought by them earlier in November, in the Labour Court. The relief sought against the Minister was not competent in law. It was not permissible for him to pay them monthly salaries (distributions) from the grant, and neither did he have the power to direct the applicant or any third parties to employ them. Bono was clearly aware that this was the case. That the correct respondents were cited in the application in the Labour Court, supports this view. The advice given to the eleven applicants was clearly irresponsible.

[33] The question of ordering costs de bonis propriis against an attorney was considered in South African Liquor Traders Association & Others v Chairperson, Gauteng Liquor Board and Others 2009 (1) SA 565 (CC) it was (at par 54) that:

“An order of costs de bonis propriis is made against attorneys where a court is satisfied that there has been negligence in a serious degree which warrants an order of costs being made as a mark of the court’s displeasure. An attorney is an officer of the court and owes a court an appropriate level of professionalism and courtesy. Filing correspondence from the Constitutional Court without first reading it constitutes negligence of a severe degree. Nothing more need be added to the sorry tale already related to establish that this is an appropriate case for an order of costs de bonis propriis on the scale as between attorney and client”.

[34] See also: Khunou and Others v M Fihrer and Son (Pty) Ltd and Others 1982 (3) SA 353 (W).

[35] In the matter of Penelope January v Standard Bank of South Africa, an unreported decision dated 28 January 2010, in case no 2235/2008, Eastern Cape, Grahamstown, the following observation was made by Goosen AJ, at paragraphs [78] and [79] of his judgment, after referring to several decisions in which similar costs orders were

made:

[78] “A litigant who engages the services of an attorney and counsel is entitled to expect that such professionals will prosecute his or her cause with due diligence and with due regard to the rules applicable to the conduct of proceedings. Litigants are also entitled to expect that every effort will be taken to ensure that their cases are properly prepared and presented. That is the duty that legal representatives owe their clients.

[79] Where, in drafting and preparation of pleadings or Court process, a reasonable standard of workmanship is not maintained, this amounts to a breach of such duty. If in consequence of such breach a litigant’s cause fails, the failure is attributable to the negligence of the practitioner. In such circumstances it would be unfair to mulct the unsuccessful litigant in the costs of the failed action or application. This is such a case and an appropriate costs order would be to order the Applicant’s legal representatives to pay the costs of this application de bonis propriis on a scale between attorney and client”.

[36] In the present application, the applicants’ attorney of record attempted the direct payment of the grant to the applicants (through her firm’s business or trust account) without notice to those who were legally entitled to payment of the grant to them (LF Birch and the Trust), knowing full well that there was an ongoing dispute between them and the Department. The application was doomed to fail. Yet the eleven applicants were it would seem, placed in a most unenviable position for which the present applicant might just have to answer in some way to them. However, that possibility is no justification for bringing a baseless application. The applicants’ interests would have been best served if the services of counsel were engaged by their attorney of record and not by adopting a shotgun approach in different applications.

[37] One way in which a Court can ensure that attorneys act in accordance with the norms and standards set by their profession to protect their clients and other litigants, is by making punitive costs orders against them when they act improperly. This was such a case.

[38] Accordingly I make the following order:

The respondent, Pumeza Bono Incorporated is ordered to pay the applicant’s wasted costs de bonis propriis on a scale between attorney and client in respect of the applicant’s application for leave to intervene in the main application in case number 4086/2009.

________________

E REVELAS

Judge of the High Court

Adv Dugmore: Instructed by NN Dullabh & Co

Adv Mzizi: Instructed by Pumeza Bono Attorneys

FORM A

FILING SHEET FOR SOUTH EASTERN CAPE LOCAL DIVISION JUDGMENT

PARTIES: LF BIRCH & SON vs PUMEZA BONO INCORPORATED

In Re: VUKILIE JOHN NGCONGCA and 10 OTHERS

vs

THE MINISTER OF RURAL DEVELOPMENT AND LAND REFORM N.O.

Case Number: 4086/2009

High Court: Eastern Cape – Grahamstown

Date Heard: 13 May 2010

Date Delivered: 05 August 2010

JUDGE(S): Revelas J

LEGAL REPRESENTATIVES –

Appearances:

for the Applicant(s): Adv Dugmore

for the Respondent(s): Adv Mzizi

Instructing attorneys:

Applicant(s): NN Dulllabh & Co

Respondent(s): Pumeza Bono Attorneys

CASE INFORMATION –

Nature of proceedings:

Key Words: