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[2017] ZAGPJHC 333
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Gainsford NO and Others v Sasol Chemical Industries (Pty) Limited (24803/2015) [2017] ZAGPJHC 333 (5 August 2017)
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
Case
No: 24803/2015
In
the matter between:
GAVIN
CECIL GAINSFORD
N.O.
First
Plaintiff
TSHEPO
HARRY NONYANE
N.O.
Second
Plaintiff
EBRAHIM
ASVAT
N.O.
Third
Plaintiff
STAINLESS
FABRICATORS (PTY) LIMITED (in
liquidation)
Fourth
Plaintiff
and
SASOL
CHEMICAL INDUSTRIES (PTY)
LIMITED
Defendant/Excipient
Case
Summary: Practice – Pleadings – Exception –
On grounds that the particulars of claim lack averments
necessary to
sustain a cause of action and are vague and embarrassing –
Excipiable on both grounds.
JUDGMENT
MEYER,
J
[1]
The defendant/excipient, Sasol Chemical Industries (Pty) Limited
(SASOL), raises an exception to the summons of the three joint
liquidators, Messrs GC Gainsford, TH Nonyane and E Asvat NNO (the
liquidators), of the fourth plaintiff, Stainless Fabricators
(Pty)
Limited (in liquidation) (Stainless Fabricators), asserting that the
particulars of claim lack averments necessary to sustain
a cause of
action and are vague and embarrassing.
[2]
To succeed with its exception that the pleading lacks averments
necessary to sustain a cause of action, SASOL must show that
the
liquidators’ ‘claim is (not may be) bad in law’
(
Trustees, Bus Industry Restructuring Fund v Break Through
Investments CC & others
2008 (1) SA 67
(SCA) para 11) and
with its exception that it is vague and embarrassing, ‘both
vagueness amounting to embarrassment and embarrassment
amounting to
prejudice’ (
Venter v Barrat; Venter v Wolfsburg Arch
Investments (2) (Pty) Ltd
2008 (4) SA 639
(C), para 17). By
the nature of exception proceedings, the correctness of the facts
averred in the particulars of claim must
be assumed (see for example
Trustees, Two Oceans Aquarium Trust v Kantey & Templer
(Pty) Ltd
2006 (3) SA 138
(SCA) paras 3-10;
Stewart & another
v Botha & another
[2008] ZASCA 84
;
2008 (6) SA 310
(SCA) para 4).
[3]
The liquidators claim ‘damages’ in the amount of R18 361
477.32, interest and costs from SASOL, arising from a contract
of
locatio conductio operis
concluded between Steel Fabricators
and SASOL in terms of which contract Steel Fabricators manufactured
and supplied components
to SASOL that were used in the construction
of the expansion of its hard wax production facility in Sasolburg,
which facility converts
natural gas into waxes. The expansion
project is part of a R14 billion project known as the ‘SASOL
Expansion Program’.
[4]
According to para 6.7 of the particulars of claim ‘[t]he
contractual relationship between the parties was governed by
the
terms and conditions in the purchase orders, a master agreement and
agreement reached in respect of specified issues at the
kick-off
meeting’ (the contract). The ‘kick-off’
meeting was held on 7 July 2010 and its purpose ‘was
to ensure
the complete understanding of the technical requirements,
documentation approval and approval cycles, testing and verification
requirements, etc.’ SASOL placed ‘purchase orders’
with Stainless Fabricators during the period June to
July 2010.
The purchase orders were subject to the terms and conditions of
SASOL’s ‘master agreement’.
They ‘provided
for the quality of the goods, exceptions, confirmation and additions
to the master agreement’.
The descriptions provided in
the purchase orders ‘relate in general to the design, supply of
materials and the scope of supply
of the respective orders.’
‘The pricing of the purchase orders was based on the designs,
materials and services
relating to the goods as they appeared in the
orders.’ It is also averred that ‘[t]he purchase
price reflected
in the purchase orders was based on a basic design;
in the event that design changes, modifications and amendments took
place in
the manufacturing and selling process it would have an
effect on the pricing of the goods and Stainless Fabricators’
additional
costs and loss.’ It is averred that ‘[d]esign
changes, modifications and a change in the scope of work would result
in “standing time” in Stainless Fabricators’
manufacturing process causing it loss and damages.’
[5]
It is also necessary to refer to certain of the presently relevant
provisions of the master agreement. ‘PURCHASE
ORDER’
is in terms of clause 1.4 thereof defined as-
‘
the
agreement entered into by and between PURCHASER and SELLER for the
execution of the work as described in the PURCHASE ORDER,
as well as
all documents to which reference may properly be made in the PURCHASE
ORDER to ascertain the rights and obligations
of the PARTIES under
the said agreement.’
And
clause 44.1 further provides that-
‘
[t]he PURCHASE ORDER sets forth
the entire agreement between the PARTIES and supersedes all previous
communications, agreements
and commitments, whether written or oral,
pertaining to the work in the PURCHASE ORDER. The provisions of
the PURCHASE ORDER
may only be changed in writing, executed by both
PARTIES, and all notices in terms of the PURCHASE ORDER shall be in
writing, except
where expressly provided otherwise in writing.’
[6]
Clause 7.4.1 provides as follows:
‘
7.4 Price Extras and Allowances
7.4.1 In the event of a price change
due to revisions in the scope of supply by PURCHASER [SASOL], SELLER
[STAINLESS FABRICATORS]
shall submit to PURCHASER an itemised price
breakdown for each change. PURCHASER reserves the right to
refuse payment of
such cost incurred without PURCHASER’S prior
written approval.’
[7]
Clause 19 provides as follows:
’
19 CHANGE OF SCOPE OR
PROVISIONS OF PURCHASE ORDER
19.1 No change to any of the
provision of the PURCHASE ORDER shall be considered valid unless
covered by a PURCHASE ORDER Amendment
issued by PURCHASER.
Invoices for amounts not stipulated in the PURCHASE ORDER or its
Amendment shall not be paid by PURCHASER.
19.2 No change to any aspect of
the scope of supply or the terms and conditions of PURCHASE ORDER
shall be valid unless covered
by a change to PURCHASE ORDER issued by
the PURCHASER.’
[8]
Clause 3.2 of the master agreement deals with concessions. It
reads:
‘
3.2.1 SELLER declares himself
fully conversant with the requirements of the PURCHASE ORDER and has
full understanding thereof.
It is agreed that PURCHASER will
grant no concessions in respect of any requirement which forms part
of the PURCHASE ORDER or which
has been communicated to the SELLER in
writing.
3.2.2 Should circumstances arise
during execution of the PURCHASE ORDER, which makes it necessary for
SELLER to require a concession,
the following shall apply:
- A written request in the prescribed
PURCHASER format for a concession duly signed by SELLER must be
addressed to PURCHASER’S
Commercial Department.
- Reasons for the concession must be
clearly outlined and any possible schedule impact.
- PURCHASER will evaluate at its sole
discretion the request for a concession in PURCHASE ORDER to
determine acceptability of such
a request.
- Notification of the PURCHASER
decision will be submitted to SELLER in writing, which decision will
be final.
3.2.3 Should PURCHASER decide to grant
a concession, SELLER will be required to compensate PURCHASER by an
amount to be determined
by PURCHASER, with a minimum of (R3 500.00
Currency conversion required for overseas PURCHASE ORDER’s) per
concession taking
into consideration the following:-
- Time spent to evaluate concession.
- Time schedule impact.
- Costs to be saved by SELLER due to
each concession.
- Costs incurred by PURCHASER due to
the granting of the concession.’
[9]
Clause 35 of the master agreement deals with consequential losses.
Clause 35.1 reads as follows:
‘
neither of the PARTIES shall be
responsible for or held liable for consequential damages, including
without limitation, liability
for loss of use of the work, loss of
profits, loss of product or business interruption however the same be
caused, including the
fault or negligence of the party concerned.’
[10]
And, finally, clause 28 of the master agreement deals with force
majeure. Clause 28.1 provides that neither party ‘shall
be liable for failure to perform any obligation hereunder (except any
obligation to pay monies) in the event and to the extent
that such
failure is caused by a condition of force majeure.’
Clause 28.2 defines a condition of force majeure.
Clause 8.3
sets out the procedure to be followed by a party claiming force
majeure, failing which ‘may cause denial of any
relief for the
force majeure event, at the affected PARTY’s discretion’.
[11]
SASOL’s main objection to the particulars of claim is that,
although the liquidators’ claim is one for damages,
it ‘is
not clear whether such damages arise from a breach of contract since
no such breach is alleged or from some other
cause of action which
has not been identified.’ The liquidators’ claim
has been categorised throughout the particulars
of claim as one for
damages, but no averment is made that SASOL committed a breach of
contract nor is reliance placed on any particular
provision of the
contract that it had breached.
[12]
Paragraph 40 of the particulars of claim reads as follows:
’
40 Due to the facts and
circumstances set out hereunder Stainless Fabricators suffered
damages in the amount of R18 361 477.32-
40.1 the amendments, design
changes, change of scope of purchase orders during fabrication;
40.2 the late approval and
commencement timelines in placing the purchase orders;
40.3 the failure to timeously
provide complete data packs which had to accompany the purchase
orders were in most instances,
not supplied in many cases were
supplied weeks after placement of the relevant purchase orders;
40.4 data packs provided in the
bidding and quoting process included E1 drawings, in contrast to data
packs supplied with
the purchase orders which included P1 drawings;
the difference between the said drawings being substantial;
40.5 due to the effect of the
aforegoing in the fabrication process, resources had to be provided
in the manufacturing process;
40.6 the adjustments to the
designs and drawings caused an increase in the costs and time
relating to the manufacturing and
sale of the goods;
40.7 because of the on-going
engineering changes, Foster Wheeler [an engineering contractor which
acted for and on behalf of SASOL]
failed to control the document
system timeously, which caused a bottleneck in the document control
system and due to the defect
caused by the defendant’s agent,
the contractual turn-around times were generally not met by Foster
Wheeler, which exacerbated
the delays and bottlenecks in the
manufacturing and sale process;
40.8 the scope changes also had
a negative effect on the payment milestones. Reasonable payment
milestones were based
on the original scope of work and production
time to complete the work;
40.9 as the scope of work increased,
the time taken to achieve payment milestones also increased;
40.10 because of changes to the
scope of work, the extras incurred were substantial;
40.11 due to the delay in the
timespan of the manufacturing and sales process, the majority of work
was undertaken at increased
rates and higher material costs;
40.12 due to the national strike
in the engineering sector in July 2011, the completion of the
manufacturing and sales process
was affected by some two weeks, which
the defendant ignored; and
40.13 as a result of the
amendment and changes of the contract work, Stainless Fabricators had
to order a special mill run
on the 316L high moly material from
foreign mills.’
[13]
The liquidators argue that, despite the use of breach terminology,
SASOL has misinterpreted their claim. According to
them, ‘[t]he
“damages” claimed are not based on a breach of the
contractual arrangements between the parties.’
Their
claim, so they say, ‘relates to Stainless Fabricators’
contractual entitlement to claim for price extras and
allowances, or
a concession by the defendant [SASOL], which arose as a result of
amendments made by the defendant to the purchase
orders and variances
made to the scope of the work’ and ‘SASOL’s failure
to pay for extra costs occasioned by
it through amendments, design
changes, change of scope of provisions of the purchase orders and
late timing in placing orders.’
[14]
If, as they argue, their claim is for specific performance by SASOL
of its , then they have dismally failed to allege the particular
terms of the contract which were not performed by SASOL. The
extra costs and allowances claimed by the liquidators that were
occasioned through amendments, design changes, change of scope of the
provisions of the purchase orders and late timing in placing
orders
are not alleged to be covered by purchase order amendments that were
issued by SASOL in accordance with clause 19 of the
master agreement
or concessions that were sought and granted in terms of clause 3.2 or
force majeure as envisaged in clause 35,
and SASOL appears to be, in
terms of clause 35, not liable for Stainless Fabricators’
consequential damages. Furthermore,
compliance with (or that
compliance is legally excused on some or another basis) the
contractual preconditions and requirements
for concessions (clause
3.2), price extras and allowances (clause 7.4.1), change of scope or
provisions of purchase orders (clause
19) and force majeure (clause
28) have not been pleaded. Also, non-performance by SASOL of
any specific contractual obligation,
which they seek SASOL to
perform, has not been pleaded.
[15]
Another objection to the particulars of claim with which SASOL
persists relates to the averments made in para 41.4 of the
particulars of claim, where it is stated:
‘
It
was agreed when the amendments were placed and delays caused by the
defendant that Stainless Fabricators would be paid for performing
the
additional work and damages incurred thereby, alternatively it was
implied that Stainless Fabricators would be paid a fair
and
reasonable remuneration caused by the changes to and delays in the
work. The amount claimed herein is fair and reasonable.’
[16]
The objection to the averments made in this paragraph seems to me to
be sound. The liquidators did not even plead whether
the
agreements that were allegedly concluded when the amendments were
placed and the delays occurred, are written or oral, who
the parties
to such agreements are, who represented them in the conclusion of the
agreements and when each agreement was actually
concluded.
Furthermore, these alleged agreements (that Stainless Fabricators
would be paid for performing the additional
work and the damages
incurred by it) are not pleaded in the alternative to the contract
(the purchase orders, master agreement
and decisions taken at the
kick-off meeting), which, according to the averments made in para 6.7
of the particulars of claim, governed
the contractual relationship
between the parties. In para 42.2 it is also averred that, on a
proper interpretation of the
contract, or as a tacit or implied term
thereof, the parties agreed and acknowledged that the additional
costs were due and payable
to Stainless Fabricators. Averments
in pleadings which are contradictory and not pleaded in the
alternative are patently
vague and embarrassing. (See:
Trope v South African Reserve Bank and another and two other cases
1992 (3) SA 208
(T), at 211D-F.)
[17]
Finally, the liquidators also argue that ‘Stainless Fabricators
executed the purchase orders and incurred extra costs
as provided in
the respective agreements. The manufacturing process has been
concluded and during this process Sasol stood
by and monitored the
expenditure being incurred. They obtained the benefit of these
expenditures caused by the late placing
of orders, amendments, and
changes and refuse to make payment therefor.’ That
SASOL stood by, monitored the expenditure
being incurred and obtained
the benefit thereof, are counsel’s contentions and not factual
averments made in the particulars
of claim.
[18]
The liquidators found authority for these contentions in
Bank v
Grusd
1939 TPD 286
at 288. There a building contract
provided that no extra work was to be done unless upon the written
order of the owner and
that no claim for extra payment should be
entertained unless supported by the written authority of the owner.
Maritz J held
thus:
‘
it seems to me, therefore that
if the defendant [builder] proves that the plaintiff [owner] agreed
that the extra work should be
done or, knowing that the defendant
regarded the work to be done as falling outside the contract, stood
by and allowed him to do
this work, well knowing that she was going
to get the benefit, she ought not to be heard when she says “I
refuse to pay because
I had given no written authority to the
defendant to supply the extras.’
[19]
There can be no doubt, as is stated in RH Christie
The Law of
Contract in South Africa
3
rd
Ed at 496-7, ‘that
a party whose conduct is “fraudulent or unconscionable, or a
manifestation of bad faith” will
not be permitted to rely on a
non-variation clause’ and that
Bank v Grusd
‘is
still good law’. (See
Grey v Waterfront Auctioneers
(Pty) Ltd and Another
1992 (2) SA 662
(WLD), at 668.) But
the liquidators need to plead fraudulent or unconscionable conduct on
the part of SASOL that legally
prevents reliance on the applicable
restriction clauses of the contract in each instance where price
extras and allowances are
claimed.
[20]
I conclude, therefore, that the liquidators’ claim as presently
formulated is bad in law and excipiable on the ground
of vagueness
and embarrassment.
[21]
In the result the following order is made:
(a) The exception is
upheld with costs, such costs to include the costs of two counsel.
(b) The plaintiffs’
particulars of claim are set aside and the plaintiffs are given
leave, if so advised, to file amended
particulars of claim within 20
days of the date of this order.
P.A.
MEYER
JUDGE
OF THE HIGH COURT
Date
of hearing: 23 May 2016
Date
of judgment: 5 August 2016
Counsel
for plaintiff: LGF Putter SC
Instructed
by: Werksmans Attornets, Sandton, Johannesburg
Counsel
for respondent: P Ellis SC (assisted by M Lekoane)
Instructed
by: Mathopo Moshimane Mulangaphuma Inc, t/a Dm5 Incorporated, Illovo,
Johannesburg