THE City of uMhlathuze has heeded warnings of the serious financial implications of prolonged and risky litigation, by approving recommendations for the out of court settlement of a number of cases instituted by and against Council.
At Exco this week, it was recommended by the legal department, that Council settles six matters, including litigation against Cosmic Gold based on contractual damages regarding the Empangeni Tennis Club and a claim by the Zululand Chamber of Business (ZCBF), based on unlawful levying of municipal rates.
Cosmic Gold concluded a deed of sale with Council for two properties, after successfully tendering for a proposed medium density housing development at the present Tennis Club site.
The deed contained a number of suspensive conditions with which the purchaser had to comply.
The company subsequently requested extensions of time to commence development due to the drastic economic down spiral.
When another extension was requested, council refused and cancelled the agreement.
Cosmic Gold then issued summons for costs incurred to relocate the Empangeni Tennis Club according to the suspensive conditions and cancellation damages based on the plaintiff’s liability to pay professional fees related to the development.
The matter was defended.
Council’s attorneys scrutinised the agreement and concluded that council was obliged to pay the relocation costs whether the suspensive conditions were fulfilled or the agreement cancelled.
They also found the historical contract was badly drafted in favour of the Plaintiff.
The professional fees are however disputed because the Plaintiff undertook the development at own risk.
Council was advised to be settled out of court based on the fact that success in litigation cannot be guaranteed.
The total costs incurred up to date has been R61 950, but the projected costs, including the claim was R876 746.
Council was accordingly advised to offer payment of the relocation costs in the sum of R585 927.
ZCBF claim
The Zululand Chamber of Business Foundation claimed repayment of R304 349 charged by council for municipal property rates from October 2010.
The ZCBF said they paid the rates under a reasonable but mistaken belief that they were obliged to do so in terms of the lease agreement, while they were in fact not obliged to do so.
The ZCBF is also seeking an order to declare a council decision to increase the rental as unlawful, as well as charging municipal rates.
Council was advised to tender the ZCBF its costs as it was a contractual matter and the municipality had no right to unilaterally levy rates or increase rental.
‘I fully agree with Council’s resolution to resolve the matter out of court, because there will be no winners if litigation is continued,’ said former City Councillor Louis van Zyl, also a past President of Zululand Tennis and former CEO of the ZCBF.
‘Both the Empangeni Tennis Club and the ZCBF are non-profit organisations and the management of these boards should have no vested interest.
‘Council should continue to strive to assist such organisation to sustain themselves.’
