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Picture: 123RF
Picture: 123RF

A law firm wants almost R4m from a financial services company after providing legal services for municipal debt collection. It applied to the Johannesburg high court to claim this amount, but, on Tuesday, the court ordered the dispute should go to trial because there were disputes of facts only resolvable with trial procedures.

In 2018, Mincap, a Johannesburg financial services company, signed an agreement with law firm Poswa Incorporated to collect debts for the Buffalo City Metropolitan Municipality.

Poswa was tasked with drafting the relevant legal notices and summonses and institute necessary legal proceedings in court. By the time the agreement with Mincap was terminated, Poswa had prepared and issued 1,000 letters and summonses to debtors.

Debt collected by Poswa was put into a trust account managed by Mincap, which would then pay the municipality. Mincap had to provide Poswa with a report of all the payments into and out of the trust account. Poswa was paid by issuing invoices to Mincap.

As acting judge Elmien du Plessis noted, Mincap “did pay some of the invoices but later defaulted” with “excuses” Poswa did not accept. After Poswa sent a letter of demand for payment, it cancelled the agreement with Mincap.

Poswa argued Mincap failed to pay after Poswa rendered its services properly, according to the signed agreement. Mincap, however, says Poswa overcharged and, in fact, had been double paid, worked on duplicate accounts and worked on accounts that were on hold. Mincap says Poswa should have known from which debt accounts to collect, because it had access to its system database.

Poswa denies all this, including the claim it had access to any database. Poswa also says it was not provided with relevant documentation to see what the municipality has paid Mincap for the debt collection services.

Mincap argued the matter should have been brought on trial procedure, not one that required the court to only consider affidavits (an application procedure). This is because there is a serious dispute of fact, which requires oral testimony involving witnesses and cross-examination. Mincap said while it did initially pay Poswa, it discovered alleged irregularities down the line and the conflict resulting in the court hearing.

Poswa persisted in its claim that it is owed about R4m for its work.

Du Plessis agreed with Mincap that the matter should be referred to trial.

The parties were ordered to place the matter before a trial court in the coming days. The legal costs would be determined at that time too.

moosat@businesslive.co.za

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