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Special Investigation Unit v Schmahl and Others (LP/01/2020) [2021] ZAST 10 (9 August 2021)

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IN THE SPECIAL TRIBUNAL ESTABLISHED IN TERMS OF SECTION 2 (1) OF THE SPECIAL INVESTIGATIONS UNIT AND SPECIAL TRIBUNALS ACT

74 OF 1996

 

(REPUBLIC OF SOUTH AFRICA)

 

CASE NUMBER: LP/01/2020

In the amendment application between:

SPECIAL INVESTIGATING UNIT                                                       APPLICANT

and

 

CAREL SCHMAHL                                                                                 FIRST RESPONDENT

                         

JOHANN CHRISTIAAN KILIAN                                                        SECOND RESPONDENT

 

In the matter between:


SPECIAL INVESTIGATING UNIT                                                       PLAINTIFF

 

and

 

PHINEAS KGAHLISO LEGODI                                                            FIRST DEFENDANT

CAREL SCHMAHL                                                                                  SECOND DEFENDANT

JOHANN CHRISTIAAN KILIAN                                                          THIRD DEFENDANT

 

 

JUDGMENT

MODIBA J:

INTRODUCTION

[1]  The SIU applies for an amendment to its particulars of claim filed in an action against the former Acting Chief Executive Officer of the Lepelle Northern Water Board (LNWB), Phineas Kgahliso Legodi (Legodi), the LNWB General Manager: Operations, Carel Schmalh (Schmalh) and the LNWB Chief Financial Officer, Johann Christian Kilian (Kilian).

 

[2]  The SIU instituted the action on 6 October 2020. It seeks to hold the defendants liable for damages in the amount of R1,9 billion, allegedly suffered by the LNWB and/ or the Department of Water and Sanitation (the Department), for the alleged breach of various constitutional, statutory and regulatory provisions when they awarded the pleaded contracts to LTE Consulting. The contracts relate to various water and waste water treatment works in the Giyane area, Limpopo Province.

 

[3]  Legodi is the first defendant, Schmalh the second, and Kilian the third. All three defendants are defending the action. Whenever reference is made to the main action, it is convenient to refer to the defendants jointly as such, and individually by their last names.

 

[4]  On 4 January 2021, Schmalh and Kilian filed a notice of exception. This led the SIU to file a notice of intention to amend its particulars of claim in February 2021, to address Schmalh and Kilian’s grounds of exception. They filed their notice of objection to the proposed amendments on 19 February 2021.

 

[5]  The SIU failed to bring an amendment application within the prescribed 5 days of delivery of the notice of objection. This period expired on 26 February 2021. It only brought the application on 13 April 2021. Only Schmalh and Killian are opposing the amendment application. Therefore, it is equally convenient to refer to these respondents jointly as such, and individually by their last names whenever reference is made to the amendment application.

 

[6]  The amendment application was enrolled for hearing on 28 July 2021. Following argument, judgment was reserved. The parties have filed heads of argument from which I derived great assistance when preparing for the hearing and writing this judgment. I am grateful to the parties’ legal representative for their assistance. 

 

CONDONATION APPLICATION

 

[7]  The SIU seeks condonation for the late filing of the amendment application. It blames the delay in bringing the amendment application on its engagement in the proceedings before the Tribunal relating to the preservation of Legodi’s pension fund. This is not disputed by the respondents.  The respondents contend that this does not constitute good cause for the delay in bringing the amendment application. They also contend that the SIU has failed to establish prospects of success. It is for these reasons that they move for a dismissal of the condonation application.  

 

 

[8]  The respondents’ call for the dismissal of the condonation application is misconceived. In their notice of objection, they have least objected to the SIU’s proposed amendments. Rather, they have raised objections that go beyond the proposed amendments, complaining that the particulars of claim contain vague averments and fail to disclose a cause of action, to their prejudice.

 

[9]  It is pertinently clear from the papers filed in the amendment application that the parties are in dispute regarding both the proposed amendments and the respondents’ objections. An adjudication of this dispute will allow a proper ventilation of the issues in the pleadings. Refusing the condonation application will at worst, result in the respondents being left to plead to the particulars of claim as they are; or lead to the filing of an exception, where the respondents essentially raise the same issues that they have raised in the objection. The latter step will only escalate legal costs and result in a further delay in the filing of further pleadings. 

 

[10]       Given the huge public interest in the recovery to the state of the losses it has incurred as a result of alleged procurement irregularities, it is in the interests of justice that condonation is granted.[i]

 

 



 

 

 

 

APPLICABLE LEGAL PRINCIPLES

 

[11]       When adjudicating the dispute between the parties, I am guided by the following legal principles, set out in Moolman v Estate Moolman[ii] and confirmed in various subsequent decisions, including Affordable Medicines Trust and Others v Minister of Health and Others[iii]:

 

11.1          it is trite that a litigant may amend his or her pleadings at any stage of the proceedings before judgment;

 

11.2          a court hearing an application for an amendment has a discretion to grant it.  Such a discretion must be exercised judiciously;

 

11.3          the general approach to amendments is that they should be allowed, unless the amendment application is made in bad faith and would cause an injustice which cannot be compensated with a costs order;

 

11.4          an amendment that would render the particulars of claim excipiable is impermissible.

 

 



PROPOSED AMENDMENTS

 

[12]       The respondents primarily object to the proposed amendments on the basis that the SIU has failed to disclose a cause of action based on the directive issued by Minister Mokonyane on 14 August 2014. They complain that this omission is prejudicial to them. No wrongdoing should be attributed to them because they were simply executing Minister Mokonyane’s directive. They also allege that given that Minister Mokonyane’s directive led to the awarding of the contracts, a conflict of interest has arisen against the SIU in that it investigated the events that led to the awarding of the contracts and decided not to formulate a cause of action based on Minister Mokonyane’s directive. 

 

[13]       For the reasons that follow, these complaints have no bearing on the amendments proposed by the SIU. Therefore, the objections related to these complaints stand to be dismissed.

 

[14]       It is not open to the respondents to prescribe to the SIU how to formulate its cause of action. In the event that the respondents are of the view that Minister Mokonyane, the Task Team or any of its members, for any reason, ought to be joined to the action, whether as interested parties, or because they seek recourse against these role players, the Tribunal Rules, failing which, the Uniform Rules of Court are replete with provisions that enable the respondents to secure the participation of these role players in these proceedings.

 

[15]          The complaint relating to the SIU’s alleged conflict of interest may affect the SIU’s standing in these proceedings. It is unclear how refusing the proposed amendment will cure it. Therefore, the complaint would best be raised in a special plea.

 

[16]       Notably, the respondents have not raised any complaint relating to the Plaintiff’s cause of action as pleaded in paragraphs 6 to 9 of the particulars of claim.  The complaint they raise in relation to paragraph 10 of the particulars of claim does not go to the root of the SIU’s cause of action as pleaded.

 

Ad paragraph 2.1 of the particulars of claim

[17]       The SIU seeks to substitute the word ‘Serola’ with the word ‘Serala’. The respondents do not oppose this uncontroversial amendment, clearly intended to correct a typographical error. Serala is the area in Polokwane, Limpopo, where Legodi allegedly resides. It is incorrectly spelt in the particulars of claim. The respondents take no issue with the proposed amendment. It stands to be granted.

 

Ad paragraph 4.2 of the particulars of claim

[18]       In this paragraph, the SIU has pleaded that on 15 August 2014, the Task Team conducted a site visit the outcome of which was the allocation of the Giyani Water Waste Treatment Works (“WWTW”) to LTE Consulting and the allocation of the Giyani Water Works and Associated Infrastructure (“the WWAI”) to HWA. It seeks to replace the paragraph with a new paragraph were the words “a site visit was conducted in Giyane by the Task Team” with the words “the first task team meeting was held in Giyani” (sic).  It also seeks to properly describe the entity “HWA”. This is another uncontroversial amendment.  The respondents do not object to it. It stands to be granted.  

[19]       In paragraph 1.1 of the notice of objection, the respondents raise a different complaint. They object to the proposed amendment on the basis that the particulars of claim fail to articulate the link between Minister Mokonyane’s visit as set out in paragraph 4.1 and the site visit by the Task Team as pleaded in paragraph 4.2.  

 

[20]       The respondents also complain about the SIU’s failure to plead the Minister’s powers to resolve water challenges in Giyane, resolutions taken during Minister Mokonyane’s visit, whether the Minister was represented on the Task Team and if so by whom and the Task Team’s terms of reference, where the Task Team derived its authority to allocate works as pleaded, and the relationship between Minister Mokonyane and the entities that were awarded contracts.

 

[21]       The relevance of these issues to the plaintiff’s cause of action as pleaded, is not apparent. The respondents should plead to this paragraph.

 

[22]       The complaint raised in paragraph 1.2 of the notice of objection is conditional upon the questions raised in paragraph 1.1 of the notice of objection being answered in the affirmative. It follows that this complaint also falls to be rejected.

 

Ad paragraphs 4.3, 4.4, 4.5, 4.6, 4.9, 4.11 and 5.1 of the particulars of claim

[23]       Of these paragraphs, the SIU only seeks to effect various amendments to paragraphs 4.4, 4.6 and 4.9. The proposed amendments are not restated here to avoid prolixity. The respondents’ objections thereto are addressed serially below.

 

 

[24]       Firstly, the respondents have raised a general objection in relation to the manner in which these paragraphs are articulated. They complain that in these paragraphs, reference is made to “resolutions, submissions, approvals, directions, appointments and written contracts without reference to parties or persons involved therein, the capacity in which they were involved, if it was done verbally, in which case the terms thereof are to be alleged, or if in writing, the copies thereof to be attached.”

 

[25]       The objection stands to be upheld in relation to paragraphs 4.3, 4.4, 4.5 and 4.6.  The manner in which these paragraphs are pleaded, offends Uniform Rule 18(4) in that the relevant averments fail to clearly and concisely state with sufficient particularity, the material facts on which the SIU relies, to enable the respondents to plead thereto. As contended by the respondents, if their objection is not addressed, these defects would render the particulars of claim excipiable for being vague and embarrassing.

 

[26]       Secondly, the respondents object that the extended contract referred to in paragraph 4.9 of the particulars of claim, dated 25 September 2014 is not attached to the particulars of claim. Paragraph 4.9 clearly specifies that the contract referenced in that paragraph is a written contract. Contrary to the respondents’ objection, no reference to the word “extended contract” is extant in paragraph 4.9. Therefore, the objection stands to be rejected.  

 

[27]       The respondents object to paragraphs 4.3, 4.4, 4.5, 4.6, 4.9 4.11 and 5.1 of the particulars of claim on the basis that these paragraphs reference “the first and second contract” and the “first and second project”. However:

 

27.1 each contract and project is not described or defined;

 

27.2 the terms of the contracts and projects are generally pleaded, and will, if the amendment is granted, render the particulars of claim excipiable for being vague and embarrassing. The respondents contend that the terms of these contracts and projects must be separately pleaded.

 

27.3 the extended contract referenced in paragraph 4.9 is not attached to the particulars of claim. So is the emergency contract referenced in paragraph 5.1.1.

 

[28]       The manner in which the contracts and projects are pleaded also offends Uniform Rule 18(6) and (10). The latter rule requires that were the plaintiff relies on a contract, the contract should be attached to the particulars of claim. This the SIU clearly failed to do. Therefore, the objection stands to be upheld.

 

Ad paragraph 4.6

[29]       The SIU seeks to substitute the figure “R100m” in this paragraph with the figure “R100 million”. The respondents do not oppose this superfluous amendment. No ambiguity or controversy arises from it. Nonetheless, there is no detriment in granting it. 

 

 

 

[30]       In paragraph 5 of the notice of objection, the respondents raise five objections in relation to the plaintiff’s reliance on section 41 (1) (ii) of the Water Services Act. However, they fail to state the paragraphs to which these objections relate. They only reference paragraph 1 of the notice of objection which deals with paragraph 4.1 and 4.2 of the particulars of claim. The only paragraph in which the above provision is referenced is paragraph 4.6. of the particulars of claim. The objection may also be relevant to paragraph 4.7 of the particulars of claim where the approval of the LNWB as the implementing agent for the Department is referenced.

 

[31]       The objection in paragraph 5.1 of the notice of objection, that section 41 (1) (ii) does not exist, is noted.

 

[32]       In terms of section 41 (1) (a), the Minister may undertake an activity at her own cost if the activity is financially viable, or against full or partial payment as directed by the Minister.  The respondents’ have raised a conditional complaint in the event that the SIU intended referencing section 41 (1) (a) (ii). It if did, they contend that the SIU ought to have stated whether or not the LNWB would implement the first project against full or partial payment by the LNWB as provided for in section 41 (1) (a). The objection has merit. It stands to be upheld.

 

[33]       The respondents’ complaint about lack of particularity regarding the function, responsibility, authority, terms of reference and obligations in respect of the LNWB as the Department’s implementing agent as pleaded in paragraph 4.6 of the particulars of claim, has merit. The manner in which the paragraph is pleaded offends Uniform Rule 18 (4). The respondents’ objection stands to be upheld.

 

[34]       The objection about whether there was an agreement between the Minister and the LNWB regarding the latter’s role as the implementing agent lacks merit. The plaintiff has pleaded that the Minister issued a directive, appointing the NLWB in that capacity. In this context, the question of an agreement does not arise. The respondents’ objection about the omission to plead the terms of the Minister’s directive has been granted. This objection is addressed in paragraph 19 and 20 of this judgment. Therefore, the objection in 5.5 of the notice of objection stands to be dismissed.

 

Ad paragraph 4.7 of the particulars of claim

[35]       The SIU seeks to insert the word “by” after the word “appointment”. The respondents to not oppose this uncontroversial amendment. It stands to be granted.

 

 

Ad paragraph 4.8 and 4.10

[36]       The SIU seeks to substitute the words in paragraph 4.8 “The duration of the first contract was 4 years and 13 weeks in respect of the WWTWs and the WWAI” with the following words “In terms of the directive issued by the Minister of Water and Sanitation on 25 August 2014, the project was supposed to be concluded on or before 30 September 2014”. The respondents take no issue with this amendment. It stands to be granted. However, the respondents raise a different complaint.

 

 

[37]       The respondents complain that the particulars of claim fail to specify the capacity in which the NLWB concluded the contracts with LTE Consulting in paragraph 4.8 of the particulars of claim.  It is indeed unclear whether the LNWB concluded these contracts in its own right or as the Minister’s implementing agent. Therefore, the objection stands to be upheld.

 

[38]       Further, it appears that the SIU omitted to replace the word “second” with the word “extended” in paragraph 4.10 to ensure consistent referencing of the pleaded contracts. It is appropriate that the SIU is directed to address this omission when amending the relevant paragraph.

 

 

 

[39]       In respect of the contract referenced in 4.10, the particulars of claim, the respondents complain that the SIU has failed to specify the representatives who represented NLW and LTE Consulting when the contracts were concluded and the respective capacities in which they did so. This manner of pleading violates Uniform Rule 18(6). Therefore, the respondents’ objection has merit. It stands to be upheld.

 

Ad paragraph 4.9 of the particulars of claim

[40]       The SIU seeks to delete this paragraph as pleaded and replace it with the following:

 

On 25 September 2014 in Pretoria LNW Board represented by the First Defendant, in his capacity as the acting Chief Executive Officer of LNW Board and LTE Consulting, represented by Thulani Majola, in his capacity as the Group Chief Executive Officer of LTE Consulting, concluded a written contract for the refurbishment and repair of the Giyani Water and Wastewater Schemes (“the extension of the project) for a total amount of R2, 211,425,000 bn (two billion two hundred and eleven million four hundred and twenty-five thousand) Vat exclusive. The appointment was for a period of five years.”

 

 

[41]       The respondents take no issue with this proposed amendment. It stands to be granted.

 

Ad paragraph 5.1.2

[42]       The respondents complain that the amount pleaded in this paragraph, “R2,211,425.00 bn” lacks numerical sense. The amount as pleaded is in millions and not billions as represented by the letters “bn”. The objection has merit. It stands to be upheld.

 

Ad paragraph 5.1.1 of the particulars of claim

 

[43]       This paragraph is currently pleaded as follows:

 

.

LTE Consulting will promptly design and implement water and waste water interventions in the entire MDM on a turnkey basis;” 

 

 

[44]       The SIU seeks to amend this paragraph to read as follows:

LTE Consulting will promptly repair and refurbish the WWTWs on an emergency for a period of 2 months ending 30 September 2014. The emergency contract was valued at R950 000.00 (Nine Hundred and Fifty Thousand Rand)”.

 

[45]       The respondents complain that in this paragraph, the SIU refers to the value of an emergency contract being R950 000.00 (Nine Hundred and Fifty Thousand Rand). It is unclear if the SIU intends to refer to the first contract as the emergency contract. Furthermore, in paragraph 10.1.1, the SIU alleges breach of fiduciary duty in contracting with LTE Consulting on 18 September 2014 in the amount of R90 950 000.00 (Ninety Million Nine Hundred and Fifty Thousand Rand). It is also not clear if the SIU is still referring to the contract referenced in paragraph 5.1.1. Therefore, if the proposed amendment is granted, it will be unclear, whether the alleged loss is R950 000.00 or R90,950 000.00.

 

 

[46]       If upheld, the proposed amendment will render paragraphs 5.1.1 and 10.1.1 vague and embarrassing. Therefore, the objection stands to be upheld.

 

Ad paragraph 5.1.7 of the particulars of claim

 

[47]       This paragraph is currently pleaded as follows:

 

the second contract shall, notwithstanding the date of signature thereof, come into force on 18 August 2014 and was to come to an end after a period of 5 years” (Emphasis added)

 

 

[48]       The SIU seeks to substitute the word “second” with the word “extended”.  The objections dealt with in paragraph 26, 27 and 38 above, apply to this proposed amendment. The SIU is directed to reference all contracts consistently throughout the amended particulars of claim.  

 

Ad paragraph 5.1.14 of the particulars of claim

 

[49]       This paragraph is currently pleaded as follows:

 

LTE Consulting shall employ and provide qualified and experienced personnel in the execution of its contractual obligations”

 

 

[50]       The SIU seeks to delete the words “in the execution of its contractual obligations”.

 

[51]       The respondents take no issue with this objection. It stands to be granted.

 

 

Ad paragraph 13 of the particulars of claim

 

[52]       The SIU seeks to replace the figure “R 0000.00” in this paragraph with “R 1.9 bn”. (sic) The respondents take no issue with this proposed amendment. Therefore, it stands to be granted.

 

[53]       The respondents have raised a different complaint. They complain that it is not clear from which contract does the alleged loss emanate.  The manner in which the loss is pleaded offends Rule 18(10). Therefore, the objection stands to be upheld.

 

COSTS

 

 

[54]       The respondents seek costs on the punitive scale. They contend that the SIU should have avoided the costs of the application by amending its particulars of claim to address the objections raised in the notice of objection and should not have brought the application.

 



[55]       The respondents complain that the SIU has escalated costs is trifling when considered against their conduct. They have raised a host of new complaints in their notice of objection, which they could have raised once and for all in their notice of exception, but failed to. Notably, the SIU addressed the issues they have excepted to in its notice of amendment. The respondents’ objections least arise from the proposed amendments. They mainly arise from the particulars of claim as originally pleaded. Under these circumstances, the parties are equally to blame for the long time it has taken to get the particulars of claim in a state where the respondents can plead to. Therefore, justice will not be served by mulcting the SIU with punitive cost.

 

[56]       The respondents stand to be awarded costs on the basis of the trite principle that a party who seeks leave to amend its pleadings, seeks an indulgence and that such a party, bears the related costs. 

 

 

 

[57]       In the premises, the following order is made:

 

ORDER

 

1.    The plaintiff is granted leave to amend paragraphs 2.1, 4.2, 4.6, 4.7, 4.8, 4.9, 5.1.14, 13 of its particulars of claim as proposed in its notice of amendment dated February 2021.

 

2.    The plaintiff shall file its amended pages within 15 days of the date of delivery of this judgment.

 

3.    The respondents’ objections in respect of paragraphs 4.3, 4.4, 4.5, 4.6, 4.8, 4.9, 4.10, 4.11 and 5.1, 5.1.1, 5.1.2, 5.1.7, 11, 13 are upheld.

 

4.    The respondents’ objections in respect of paragraph 4.2, 4.9, 5.5 are dismissed.

 

5.    The proposed amendment in respect of paragraph 5.1.7 is rejected.

 

6.    The SIU is directed to reference all contracts consistently throughout the amended particulars of claim.  See in this regard, paragraphs 28, 29 and 39 of the judgment.  

 

7.    The SIU as applicant, shall pay the costs of the application.

 

 



     JUDGE L. T. MODIBA

                                MEMBER OF THE SPECIAL TRIBUNAL


APPEARENCES

Counsel for the Plaintiff:                                       Adv. P Loselo                      

Attorney for the Plaintiff:                                     Ms. S Zondi, Office of the State Attorney, Pretoria 

 

Attorney the 1st and 2nd Respondents:                Mr IJ Croukamp, Izak Croukamp Attorneys

           

Date of hearing:                                                     28 July 2021

Date of Judgment:                                                  9 September 2021

Revised:                                                                 27 September 2021

 

Mode of delivery: this judgment is handed down by sending it by email to the parties’ legal representatives and loading on Caselines. The date and time for delivery is deemed to be 10:00 am on 9 September 2021.

 

 






[i] Ferris v FristRand Bank Ltd 2014 (3) SA 39 (CC) at 43G-44A

[ii] 1927 CPD 27 at page 29