THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

NOT REPORTABLE
Case No: 134/2013

In the matter between:

THE LOCAL MUNICIPALITY OF MADIBENG
APPELLANT

and

PAPHIRI BUSINESS ENTERPRISE CC
RESPONDENT

Neutral citation: The Local Municipality of Madibeng v Paphiri Business
Enterprise (134/2013) [2014] ZASCA 77 (29 May 2014)

Coram:
Lewis and Leach JJA and Hancke, Swain and Mathopo AJJA

Heard:
20 May 2014

Delivered: 29 May 2014

Summary: Contract – terms thereof common cause – amounts municipality to pay

thereunder proved on the probabilities.

___________________________________________________________________

ORDER
___________________________________________________________________

On appeal from: North Gauteng High Court, Pretoria (Kollapen and Webster JJ
sitting as court of first instance):
The appeal is dismissed with costs.
___________________________________________________________________
JUDGMENT
__________________________________________________________________

Leach JA (Lewis JA and Hancke, Swain and Mathopo AJJA concurring)

[1] This is a case about garbage or, more precisely, about the amount the
appellant, a local municipality, owes the respondent for rendering refuse and waste
removal services under a contract concluded pursuant to a tender process. A claim
by the respondent for payment of an amount it alleged was due and owing was
dismissed in a magistrate’s court but upheld on appeal to the North Gauteng High
Court.  This further appeal is with this court’s leave. For convenience I intend to
refer to the appellant as ‘the municipality’ and the respondent as ‘Paphiri’.

[2]   Chaos and confusion have bedevilled the matter from the outset, a position
helped neither by the pleadings nor the haphazard presentation of the evidence in
the trial court. Sifting the wheat from the chaff, it appears that in February 2003,
Paphiri  was awarded a contract by the municipality  in respect of a tender
(S18/2002) to provide waste and refuse removal services in an area situated to the
south of the Hartbeespoort Dam. The municipality subsequently informed Paphiri
that in fact its services were required not for the area to the south of the dam but to

the east. The matter is made all the more confusing by the fact that, in December
2002, under another tender (S22/2002) the municipality had called for tenders for
the rendering of waste and refuse removal services on the western side of the dam
although, again, this was a mistake as it too was intended to relate to the area to the
east of the dam.

[3]    In any event, Paphiri submitted a bid in respect of tender 22/2002 that added to
the confusion. The tender document, in itself somewhat confusing, required an
itemised tender in relation to monthly charges for specific items of service, namely;
a weekly house-to-house collection, the removal of illegally dumped refuse,
‘continuous litter picking and sweeping’, ‘waste transfer station operations’, and the
disposal of waste collected at a landfill. In its tender, however, Paphiri quoted a
monthly charge of  R36.35 per house in respect of ‘house-to-house collection once a
week’ and R110 000 as the ‘total cost to render the service per month’,  but no
specific amounts in respect of the other itemised services. Quite what all of this was
intended to convey is by no means clear. Fortunately, whatever Paphiri’s intention
in tendering in these terms may or was understood to have been, is unnecessary to
decide.

[4]   At a meeting of the municipality’s Mayoral Committee held on 10 May 2003,
the ‘rectifications of tender S18/2002 ─ rendering of refuse removal at the southern
side of the Hartbeespoort Dam’ was discussed together with Paphiri’s tender. The
committee resolved as follows (its resolution was recorded as MC 1300):
‘1.
That cognisance be taken that:

1.1
The Mayoral Committee has, per item MC. 1194 of February 2003 appointed

Paphiri Business Enterprise CC to render refuse removal at the Southern side

of Hartbeespoort Dam at the calculated tender amount of R74 722.60;
1.2
the area allocated for Paphiri Business Enterprise is in fact in the  Eastern side of
Hartbeespoort Dam and not in the Southern or Western side of Hartbeespoort Dam;

1.3
Paphiri Business Enterpise CC has already started rendering service from 01 April

2003 in the Eastern side of Hartbeespoort Dam;

1.4
The price ranges between:

1.4.1 R17.00 - R34.23 per house per month (VAT excluded)

1.4.2 R44.00 - R80.17 per business per month (VAT excluded)

1.4.3 R100.00 - R217.65 per service of a 5,5 m3 container

1.4.4 (VAT excluded);

. . . .
2.
That the all-inclusive tender amount of R110 000-00 of Paphiri Business Enterprise

be accepted.
3.
That after the approval of the Mayoral Committee an appointment letter be served

to Paphiri Business Enterprise with an adjusted tender amount.
4.
That the Municipality enter into a contract with the service provider.’

[5] Following this resolution the municipality addressed a letter to Paphiri on 12
May 2003. Referred to as the ‘acceptance letter’ it was shown both to a witness and
to the magistrate and its contents were referred to in evidence, but it was not handed
in as an exhibit and forms no part of the record.  Be that as it may, it purported to
‘adjust the previous appointment letter which quoted for only household waste
removal, street cleaning and removal of illegal waste’ and recorded a five year
contract effective from 1 April 2003.

[6] Subsequent to this haphazard and confused process, the parties concluded a
written memorandum of agreement. Signed by Paphiri on 6 August 2003 and by the
municipality ten days later, it incorporated the terms set out in the letter of
acceptance of 12 May 2003 and appointed Paphiri for a period of five years to
render a complete refuse removal service on the eastern side of the Hartbeespoort
Dam. No mention was made of the all-inclusive fee of R110 000 per month
accepted by way of resolution MC 1300 on 10 May 2003. Instead, clause 2 thereof
recorded that the monthly service fee payable for rendering of the service would be
R36.35 per house, R45 per business and R120 for every 5,5 cubic meter container

used. The amount in respect of the house service was slightly higher than the upper
limit of the range of fees set out in MC 1300 whilst the other amounts fell within the
range approved in that resolution. How that came about one does not know and the
municipality led no evidence to explain it. But notwithstanding whatever the
Mayoral Committee’s original intention may have been, both sides ultimately did
not agree to Paphiri being paid for its services by way of an all-inclusive monthly
fee.

[7]   Two further terms of the written agreement should be mentioned. First, it was
agreed that the service fees payable to Paphiri would escalate annually in
accordance with the consumer price index. Second, clause 2.2 provided:
‘Counts shall be performed every six months during the contract period by the Manager,
Department of Land, Housing, Environment, Solid Waste, Parks, Streets & Cemeteries after
which the fee paid to Paphiri for rendering the different refuse removal services may be adapted.’

[8]   Flowing from these negotiations, and effectively from 1 April 2003, Paphiri
carried out the refuse and waste removal services it had undertaken to perform and
for which the municipality paid it monthly. But the confusion continued. As I have
mentioned, the all-inclusive fee of R110 000 per month recommended by the
Mayoral Committee in resolution MC 1300 in May 2003 formed no part of the
written agreement concluded in August 2003. Despite this, instead of paying a sum
determined with reference to the number of houses, businesses and containers being
serviced as set out in the written agreement, the municipality paid R110 000 per
month throughout the period to which Paphiri’s claim relates.

[9] Although the municipality persisted in paying the all-inclusive fee on the one
hand, it appears from correspondence that, on the other, it also accepted being
obliged to have regard to the number of houses, businesses and containers being
serviced under the written agreement. Unfortunately, notwithstanding the provisions

of clause 2.2 of that agreement, it failed to perform a count every six months as it
had undertaken to do and it is common cause that it was agreed consequently that
Paphiri would carry out those counts.

[10] Consequently, on 13 November 2003, Paphiri wrote to the municipal
manager stating that it had counted the houses, businesses and containers it was
servicing and giving the numbers as at the end of October 2003. This count showed
an increase in the numbers over those that had been agreed when the contract
commenced. Every six months thereafter Paphiri submitted similar letters to the
municipality giving updated numbers. These letters were attached to its summons
marked as annexures C1 to C7.

[11] It was the municipality’s persistence in paying no more than R110 000 per
month, which  Paphiri calculated was less than it was entitled to be paid, that led to
it instituting action  in the magistrate’s court. Unfortunately, in preparing the
particulars of claim, its attorney added to the confusion by claiming an amount
calculated in an itemised schedule that was riddled with errors. Amounts were
claimed for the services referred to in the resolution MC 1300 but not mentioned in
the written agreement of August 2003. More importantly, the schedule was based on
the fundamental error that Paphiri had been entitled to the maximum amount of the
various rates reflected in MC 1300 rather than the tariffs contained in the written
agreement. In addition, although the numbers of houses, businesses and containers
reflected in C1 to C7 were used in most instances, there were discrepancies, some
substantial, between the figures therein contained and those in the schedule. All of
this resulted in the amount claimed in the schedule being substantially in excess of
what Paphiri ultimately accepted it was entitled to have received.

[12] The confusion was further exacerbated when the matter came to trial.
Paphiri’s legal representatives appear not to have come to grips with the true issues

and the evidence was led haphazardly and inconsequently. Matters were not helped
by the municipality’s sole witness not having been in its employ when the contract
between the parties was concluded. The magistrate appears to have been drawn into
the confusion. Faced with the tariffs contained in resolution MC 1300 on the one
hand as opposed to those in the written agreement of August 2003 on the other, the
magistrate held that Paphiri had failed to prove that those used in preparing the
schedule to its particulars of claim were applicable, and dismissed the claim. In
doing so, the magistrate lost sight of the fact that the municipality had by then
abandoned reliance upon an all-inclusive tariff of R110 000 per month and that, on
the provisions of the written agreement upon which it then relied, had still not paid
the amount for which it had become liable.

[13] Common sense eventually prevailed when the matter came on appeal before
Kollapen and Webster JJ in the North Gauteng High Court. Counsel who appeared
for Paphiri on appeal conceded, quite correctly, that the contractual relationship
between
the
parties
was
governed
by
the
written
agreement
of
August 2003 as had been pleaded by the municipality and that the applicable tariffs
were those set out in that agreement and not in resolution MC 1300. That this was
the correct approach was accepted by both sides. By then it was also not in dispute
that the tariffs in the written agreement were to be adjusted by way of the consumer
price index upon which the parties were further agreed. Because in August 2006 the
municipality had taken its own count of the houses, businesses and containers being
serviced which, in large measure, coincided with counts undertaken by Paphiri at
that time, the high court expressed the view that the appellant’s counts reflected in
C1 to C7 would serve as a proper basis to determine the extent of the municipality’s
liability.

[14] The court therefore requested the parties to prepare a schedule based on those
figures, taking account of the tariffs in the written agreement as adjusted from time

to time by the consumer price index. This was a sensible and practical solution and
counsel for Paphiri undertook to prepare such a schedule. Once to hand, it was
forwarded to counsel for the municipality for comment together with an invitation
to make any submissions in respect thereof. No such submissions were forthcoming
and, consequently, the schedule was adopted by the high court as reflecting the
amount established on a balance of probabilities as being due. It showed that Paphiri
had been underpaid by R865 591.44 during the relevant period and the high court
ordered the municipality to pay that sum. It is against this decision that the
municipality now appeals.

[15]   The first issue raised by the municipality on appeal was that absolution from
the instance ought to have been granted as Paphiri had failed to prove the terms of
the agreement on which it sued. This was an astounding contention. The history of
the negotiations that I set out above shows conclusively that parties were bound by
the written agreement of August 2003 which contained the material terms of their
contract. As mentioned above, the municipality relied in its plea on that agreement
and specifically alleged that the tariffs contained therein in respect of the different
services had been agreed, all of which was common cause before the high court.   In
the light of this, the contention that the terms of the agreement that bound the parties
were not established is spurious and can be rejected without further ado.

[16] The second issue argued by the municipality in this court was that Paphiri had
failed to adequately prove that the municipality had paid less than it ought to have
done. On this issue, the appellant’s argument was simply this: There are differences
between the numbers of houses, businesses and containers serviced by Paphiri set
out in the schedule annexed to the particulars of claim, on the one hand, as opposed
to those reflected in C1 to C7 on which the schedule relied upon by the high court
was based; there was no adequate explanation for these differences; and there was
therefore a measure of doubt about the figures in the schedule accepted by the high

court. Thus, so it was argued, the municipality should have been absolved from the
instance in that Paphiri had failed to prove that it ought to have been paid more than
the R110 000 per month that it was paid during the period to which its claim relates.

[17] Again, this is an issue which may be dealt with swiftly. The municipality’s
case is, essentially, that Paphiri failed to prove on a balance of probabilities that the
numbers reflected in C1 to C7 were correct. However the numbers reflected in those
annexures were confirmed by Mr Molebatsi, a member of Paphiri, who had been
responsible for the counting process and for collating the numbers of the houses,
businesses and containers being serviced from time to time and who confirmed that
the figures set out in C1 to C7 were accurate. Those figures were not challenged
when submitted to the municipality. Indeed in a letter the municipality addressed to
Paphiri on 29 September 2006, the numbers it provided were not dissimilar from
those Paphiri had submitted. Moreover, the municipality failed to allege or prove
what the numbers were from time to time, presumably as it had no information in
that regard other than that which had been forthcoming from Paphiri itself. And, as I
have already mentioned, when the schedule relied upon by the high court was
prepared, the municipality’s legal representatives failed to make any representations
in regard to its correctness or otherwise.  The fact that certain of the numbers in
annexures C1 to C7 differ from the schedule attached to the particulars of claim is,
in my view, neither here nor there. That schedule was riddled with errors and
inconsistencies, and certain of the discrepancies may well have been the product of
an incorrect transcription from documents used in its preparation.

[18]  The simple fact remains that C1 to C7 provide the best contemporaneous
record of the numbers of houses, businesses and containers being serviced by
Paphiri at the relevant times and their contents have not been challenged by any
evidence led on behalf of the municipality. In all these circumstances I am satisfied

that the numbers therein contained, used to prepare the schedule relied upon by the
high court, can be accepted as being probably correct.

[19] Counsel for the municipality did not dispute the arithmetic set out in that
schedule, and conceded that if the figures relating to housing, businesses and
containers recorded therein were found to be acceptable, the appeal must fail.

[20] The appeal is dismissed, with costs.

L E Leach
Judge of Appeal

Appearances:

For the Appellant:

R P A Ramawele (with him K F Magano)

Instructed by:

Malatji Mohosh & Pooe Attorneys, Pretoria

Horn & Van Rensburg Attorneys, Bloemfontein

For the Respondent:

B Pieters SC

Instructed by:

Ehlers Fakude Incorporated, Pretoria

Hanno Bekker Attorneys, Bloemfontein

THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA

MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF
APPEAL

From:  The Registrar, Supreme Court of Appeal
Date:  29 May 2014
Status:  Immediate

Please note that the media summary is intended for the benefit of the media and does not
form part of the judgment of the Supreme Court of Appeal

Neutral citation:
The Local Municipality of Madibeng v Paphiri Business Enterprise
(134/2013) [2014] ZASCA 77 (29 May 2014)

In a case about garbage, the Supreme Court of Appeal held that the local municipality of
Madibeng was liable to the respondent for services rendered under a refuse and waste
removal contract relating to an area to the east of the Hartbeespoort Dam.

As set out in the judgment, the conclusion of the contract and the litigation in the
magistrate’s court which flowed therefrom was a litany of chaos and confusion. Ultimately
common sense prevailed when the matter came before the high court which calculated an
amount due by the municipality taking into account the best available evidence. It was
against this judgment that the municipality appealed to the Supreme Court of Appeal.

The first ground of appeal relied upon was that the respondent had not proved the terms of
the agreement upon which it sued. In the light of the fact that it had been common cause in
the high court that the contract had been in the terms alleged by the municipality in its
pleadings, the Supreme Court of Appeal dismissed this argument as spurious.

The second issue argued by the municipality was that the respondent had failed to prove the
relevant numbers of houses, businesses and containers it had serviced from time to time. The
municipality, however, had no evidence in regard to those particulars and relied upon the
differences between the records kept by the respondent and allegations in the particulars of
claim drawn by the respondent’s attorney. The court held that the claim had been riddled
with errors and inconsistencies which may have been the product of an incorrect transcription
from documents used in its preparation. The records of the respondent were the best evidence
and the information they contained could be accepted. Those records showed that the
municipality was indebted to the respondent.

The appeal was therefore dismissed.

---ends---