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IN THE HIGH COURT OF SOUTH AFRICA

EASTERN CAPE, MTHATHA

CASE NO: 1667/08

In the matter between:

O R TAMBO DISTRICT MUNICIPALITY Applicant

and

ZABAYISE LIVINGSTONE NYOBOLE Respondent

J U D G M E N T

SANGONI J:

1. The applicant is O R Tambo District Municipality, an organ of State within the local sphere of government established in terms of the Local Government: Municipal Structure’s Act 117 of 1998.

2. The respondent is a person resident within the area of jurisdiction of the applicant.

3. On 18 September 2008 the respondent herein then an applicant under case number 1289/08 obtained in this Court the following order:

“That is ordered:

1. That subject to paragraph 2 below, the respondents and / or their employees and / or any other persons acting at the respondents’ instance or otherwise be and are hereby restrained and / or interdicted from, in any manner whatsoever, interfering with or disconnecting the water supply to the premises of the applicant at No. 4 Nombembe Street, Northcrest, Mthatha (the premises) without compliance with the due process of law.

2. That the applicant shall make payment of the sum of R14 089.59 owing to the first respondent as and for arrears in the following manner:

2.1 R1 000.00 by 30 September 2008; and

2.2 Equal monthly instalments of R569.11 at the end of each subsequent month.

3. That in the event of the applicant defaulting to pay in the manner set out in paragraph 2 above:

3.1 the respondents shall be entitled to limit the supply of water into the premises to free water in terms of the applicable By – laws without first issuing a notice to that effect to the applicant, provided that such limitation shall be effected at the expiry of 14 days from the date of such default; and

3.2 the whole amount owing shall become due, owing and payable and the first respondent shall be entitled, in terms of the By – laws to sue the applicant for the recovery thereof.

4. That the first respondent pay costs of this application for up to and including 17 September 2008, save that each party shall pay its own costs of Friday 12 September 2008.”

4. Pursuant to that order the respondent herein had a bill of costs taxed and allowed in the sum of R34 842.13. On 17 October 2008 the applicant’s attorneys addressed a letter to the respondent’s attorneys advising that the taxed party and party costs would be settled in due course but the amount owed by the respondent in terms of the order of 18 September 2008 would be set-off against the amount owed by the respondent to the applicant. Indeed payment was made along those lines.

5. Notwithstanding the set-off the respondent proceeded to have the warrant of execution issued for attachment and removal of the applicant’s movable goods or property for the recovery of the outstanding amount in the sum of R14 063.62. Subsequently and on 20 October 2008 the respondent’s attorneys addressed a letter to the applicant’s attorneys raising that it was inappropriate to apply a set-off in this case. The reasons for that view are that if a set-off was intended the court order of 18 September 2008 would have referred to it and that the respondent complied with that order in the manner payments were made and the amount of R14 063.62 therefore was not due and payable and no set-off could operate. In any event, the letter went on, even if payment was not in accordance with the said order, the applicant would be entitled to limit the supply of water into the premises of the respondent at the expiry of 14 days from the date of default to pay in the manner set out in the order.

6. On the strength of the warrant of execution issued on 28 October 2008 the applicant’s vehicle, a white Citi Golf with registration number ORT 005 EC, was attached and removed by the sheriff.

7. Pursuant to the attachment and removal the applicant launched this application on an urgent basis seeking an order in the following terms:

“2.1 That a warrant of execution issued on 28 October 2008 be and is hereby declared unlawful and set aside;

2.2 That the attachment of the motor vehicle, a white Citi Golf registration ORT 005 EC, pursuant the execution of the warrant be stayed;

2.3 That the applicant’s assets including the said motor vehicle is protected in terms of Section 3 Act 20 of 1957 from attachment and removal.

2.4 That paragraph 2.2 shall operate as an interim interdict or mandamus pending the finalization of this application.”

8. The application is founded on two grounds. The first is that the applicant is a state organ and therefore section 3 of the State Liability Act 20, of 1957 affords protection of applicant’s goods from attachment. The second one is that the respondent is precluded from issuing a warrant of execution whereas there is no debt owed to it by the applicant because the amount it claims as owing was extinguished through set-off as shown above.

STATE LIABILITY ACT

9. In terms of this Act claims against the State are cognisable in any competent court. Section 3 provides that no execution or attachment shall be issued against the State in any such action or proceedings or against the property of the State. Section 3 reads –

“No execution, attachment or like process shall be issued against the defendant or respondent in any such action or proceedings or against any property of the State, but the amount, if any, which may be required to satisfy any judgment or order given or made against the nominal defendant or respondent in any such action or proceedings may be paid out of the National Revenue Fund or a Provincial Revenue Fund, as the case may be.”

10. It is true that in terms of section 239 of the Constitution of the Republic of South Africa Act 108 of 1996 a municipality is a state organ in the sense that it is a department or administration in the local sphere of government. In the Mateis¹ case the question raised and settled was whether the municipality was synonymous with the ‘State’ for the purposes of section 3. In that case it was held that:

“…the concept ‘State’ was an amorphous juristic-political concept. It had no fixed, general meaning in legislation. The meaning of the word ‘State’ thus depended on every specific piece of legislation in which it occurred. What was clear from ss 2 and 3 of the Act was that it was concerned with the liability of the central or provincial government. The liability of municipalities, which were indeed also a form of government, was not mentioned, neither with regard to cause of action, nor as possible defendant, nor as possible paying party, and was therefore excluded by implication. Neither did the Act provide for a source from which the liability of the judgment could be satisfied, in contrast to the central or provincial government – another clear indication that the Legislature never considered the liquidation of a municipality’s debt. The material provisions of the Act thus unquestionably indicated that it was never the Legislature’s intention to provide for the liability of municipalities to third parties as a form of State liability, nor to include a municipality in the word ‘State’ for the purposes of the Act. On the contrary, the implication of exclusion was irrebuttable.” (My underlining)

11. In light of the above passage I conclude that the applicant is not entitled to the protection afforded to the State in terms of section 3 and thus no authority to have the warrant of execution and attachment set aside. Many thanks to Ms Voyi-Nyobole who at my request filed supplementary heads of argument in regard to this issue.

SET-OFF

12. Innes C J (as he then was) gave a comprehensive description of the doctrine of set-off in Schierhout v Union Government²:

“The doctrine of set-off with us is not derived from statue and regulated by rule of court, as in England. It is a recognised principle of our common law. When two parties are mutually indebted to each other, both debts being liquidated and fully due, then the doctrine of compensation comes into operation. The one debt extinguishes the other pro tanto as effectually as if payment had been made. Should one of the creditors seek thereafter to enforce his claim, the defendant would have to set up the defence of compensatio by bringing the facts to the notice of the Court –as indeed the defence of payment would also have to be pleaded and proved. But, compensation once established, the claim would be regarded as extinguished from the moment the mutual debts were in existence together.”

13. The points taken by the respondent in this case were that the applicant should have first approached court for an order confirming that set-off can operate. The contention is that in every case where set-off applies it should be pursuant to a court order. If it takes effect from the time the compensating debts came into existence, which is conceded by Ms Voyi-Nyobole, there would be no point to first get a court order. Initially a point was raised in the letter of 20 October 2008, referred to above, that notwithstanding the amount of R14089.59 that is referred to in the court order which the respondent agreed to pay, but it still intended to verify whether the respondent owed it to the applicant or not. This line of argument was not pursued during the hearing and it has no merit anyway.

14. The other point raised by the respondent was that the said debt was not due and payable at the time the purported set-off took place for the reason that the court order of 18 September 2008 sets out the steps to be followed where there is a default of payment of the sum of R14089.59.

15. The applicant relies on the provisions of par 3 saying that in “the event of the defaulting to pay in the manner set out in paragraph 2 above”, then paragraph 3(2) will apply. It reads:

“the whole amount owing shall become due, owing and payable and the first respondent shall be entitled, in terms of the By – laws to sue the applicant for the recovery thereof.”

16. It has been established that the respondent did not make payment in terms of the order. The first instalment of R1000 was in fact paid on 2 October 2008 and not by 30 September 2008. In my view, the whole balance still unpaid became due and payable. I reject the argument that clauses 3.1 and 3.2 operate conjunctively because of the use of the epithet ‘and’ at the end of clause 3.1. It is clear from the context that they should operate separately.

17. As regards the issue relating to the applicability of section 3 of the State Liability Act I find in favour of the respondent. As regards the issue of set-off I find in favour of the applicant in that there was no authority to have a warrant of execution issued when the debt had been extinguished through set-off. Both parties have been partially successful and it is appropriate that each party should pay their own costs.

In the result the following order is made:

1. The warrant of execution issued on 28 October 2008 is declared unlawful and is set aside.

2. The attachment of the white Citi Golf with registration number ORT 005 EC is accordingly set aside.

3. Each party to pay their own costs.

C T SANGONI

JUDGE OF THE HIGH COURT

Counsel for the Applicant : Adv Msiwa

Attorneys for the Applicant : W T Mnqandi

5^th Floor

Meeg Bank Building

Mthatha

Counsel for the Respondent : Ms Voyi-Nyobole

Attorneys for the Respondent : Voyi-Nyobole Attorneys

Suite 318 & 325

Development House

York Road

Mthatha

Date heard : 24 March 2009

Date Judgment delivered : 16 April 2009

O R Tambo District Municipality and Z L Nyobole Case no 1667/08

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