In Vhembe District Municipality v Stewarts & Lloyds (397/2013) [2014] ZASCA 93, the Supreme Court of Appeal considered an appeal brought against the dismissal of an application to rescind a default judgment. An issue that arose on appeal was the correct interpretation of the Institution of Legal Proceedings Against Certain Organs of State Act 40 of 2002 (the Act).

Stewarts & Lloyds had sued the municipality for payment of R698,885. Judgment was granted by default. The municipality applied unsuccessfully for the default judgment to be rescinded. On appeal, the municipality argued that Stewart & Lloyds had failed to comply with section 3 of the Act. This prohibits the institution of legal proceedings against an organ of state for the recovery of a debt unless a creditor has given written notice of his or her intention, within six months of the date when the debt became due.

The SCA held that section 3 restricts debts to those which are a liability on the part of an organ of state to pay damages, arising from any cause of action. The evidence in damages cases was more likely to depend on the memory of people than on documents; accordingly, an organ of state should be given notice of proceedings to enable it to investigate and to obtain the necessary evidence. In contrast, a claim for payment in terms of a contract was more likely to depend on documentary evidence, with the implication that prior notice was not necessarily required.

In the circumstances, the SCA held that Stewart & Lloyds’ claim was not a damages claim. The Act did not apply. Consequently, the SCA dismissed the appeal with costs.