Ethekwini Municipality v Crimson Clover Trading 17 (Pty) Ltd t/a Island Hotel

The Island Hotel, owned by the respondent, was flooded and extensively damaged on 8 May 2016. The hotel was situated on land bordered by the Isipingo Estuary and Isipingo Riverfront. The respondent's insurer instructed loss adjustors to determine the cause of the flood. By 4 October 2016, the respondent formed the view that the flooding was caused by the height of the sand berm at the mouth of the Isipingo River which prevented storm water from entering the sea, and that this was the fault of the appellant municipality. On 14 December 2016, the respondent submitted a PAIA request to the appellant seeking documents relating to the management and maintenance of the Isipingo River and estuary. The appellant provided the information by 24 April 2017. On 19 July 2017, the respondent served a notice in terms of section 3(2) of the Institution of Legal Proceedings Against Certain Organs of State Act 40 of 2002 (the Act) on the appellant - over a year after the flooding. The required notice period under the Act is six months from when the debt became due. The appellant advised that estuarine management fell within provincial, not municipal, competence. On 12 September 2018, the respondent launched an application for condonation for failure to serve the section 3(2) notice within the prescribed six-month period. The appellant opposed the application on the basis that the respondent failed to explain the delay and show good cause. The high court (D Pillay J) granted condonation, finding that it was in the public interest as the appellant had to fix the storm water problem. The appellant appealed.

• Whether the respondent showed good cause for the failure to serve the section 3(2) notice within the prescribed six-month period
• Whether condonation should be granted for late service of the notice in terms of section 3(4) of the Institution of Legal Proceedings Against Certain Organs of State Act 40 of 2002
• What factors must be considered when deciding whether to grant condonation for late service of a section 3(2) notice
• Whether the high court erred in relying on public interest considerations when determining the condonation application
• Whether the respondent provided an adequate explanation for the delay in serving the notice

The appeal was upheld with costs including costs of two counsel. The order of the high court was set aside and replaced with an order dismissing the application for condonation with costs, including costs of two counsel where so employed.

The binding legal principle is that when applying for condonation under section 3(4) of the Institution of Legal Proceedings Against Certain Organs of State Act 40 of 2002, an applicant must show good cause for the failure to serve a timeous notice in terms of section 3(2). This requires a full, detailed and accurate account of the causes of delay and their effects. The factors in section 3(4)(b) - that the debt has not prescribed, good cause exists for the failure, and the organ of state was not unreasonably prejudiced - must be read conjunctively. The time period for serving the notice begins when the creditor has knowledge (or could reasonably have acquired such knowledge by exercising reasonable care) of the identity of the organ of state and the facts giving rise to the debt. It is not necessary to have complete knowledge of all particulars before serving the notice. Unexplained periods of inactivity and delay will weigh against granting condonation. A court determining a condonation application must confine itself to the issues pleaded before it and may not introduce considerations outside the pleadings, such as public interest factors in a purely private law dispute.

The Court made several non-binding observations: (1) The concept of 'dialogical constitutionalism' relied upon by the high court has only been referred to in four cases, all by the same judge, and it is unclear what the concept entails. It may relate to the principle of cooperative governance under section 41 of the Constitution, but if so, it only applies in the public law sphere involving spheres of government, not to private delictual claims against municipalities. (2) A court may not ordinarily formulate its own dispute resolution procedure outside of the rules of court or practice directives. (3) Section 3(3)(a) provides latitude to creditors to determine when they have deemed knowledge of the cause of action and debtor. Nothing precludes a creditor from explaining that during the prescribed six-month period they were not yet in a position to identify the facts with reasonable certainty or to identify the debtor - though this argument was not pleaded in this case. (4) The administration of justice requires that matters under the Act be dealt with expeditiously and efficiently. (5) The change in the respondent's cause of action meant that the appellant did not know the case it had to respond to, which was prejudicial.

This case provides important guidance on the requirements for obtaining condonation for late service of notices under section 3(2) of the Institution of Legal Proceedings Against Certain Organs of State Act 40 of 2002. It clarifies that: (1) The factors in section 3(4)(b) must be read conjunctively and applicants must provide full, detailed and accurate explanations for delays. (2) The time period for serving the notice begins to run once the creditor has knowledge (or could reasonably have acquired knowledge) of the identity of the organ of state and the facts giving rise to the debt - not when full particulars are known. (3) Creditors should serve notices as a cautionary measure while investigations continue, rather than waiting for complete certainty. (4) Courts should not introduce considerations outside the pleadings, such as public interest factors, when determining condonation applications in private law matters. (5) Prospects of success must be properly assessed as part of the condonation inquiry. The case reinforces the importance of acting expeditiously when pursuing claims against organs of state and demonstrates the courts' unwillingness to condone unexplained delays and lackadaisical conduct by litigants.