Brief Summary

Contract — Breach of contract — Plaintiff claimed damages for breach of sale agreement regarding provision of electricity — Defendant counterclaimed for removal of encroachments — Plaintiff purchased property from defendant, who failed to ensure necessary infrastructure for electricity supply was in place, causing delays in completion of building — Court held that defendant was responsible for providing a fully serviced site, including electricity, and breached the agreement by failing to do so, entitling plaintiff to damages.

Comprehensive Summary

Summary of Judgment

1. Introduction

The proceedings were an action for contractual damages arising from an alleged breach of a written agreement of sale, coupled with a counterclaim in which the defendant sought enforcement-type relief relating to alleged encroachments and unauthorised installations at a residential unit in a complex.

The plaintiff was Nadine Orkin, a retiree and purchaser of a vacant stand in the relevant development. The defendant was Goldleaf Investments (Pty) Ltd, the developer and seller of the stand.

The matter proceeded to trial in the Gauteng Local Division, Johannesburg, before Mia J. The plaintiff claimed damages of R1 012 859.92. The defendant denied liability and pursued a counterclaim based on an alleged ceded right, seeking orders compelling the plaintiff to remove or alter certain walls and items (including an air-conditioning unit, satellite dish, aerial, and electric fence). Evidence was led by three witnesses for the plaintiff and two witnesses for the defendant.

The general subject-matter of the dispute was whether the sale agreement (together with its addendum concerning the building contractor) contained a tacit term obliging the developer to provide, or ensure the provision of, a fully serviced site, including bulk electricity supply, and whether the absence of electricity caused a delay that entitled the plaintiff to recover contractual damages. A further subject-matter was whether the defendant had locus standi to pursue the counterclaim and, if so, whether it had proven entitlement to the relief sought.

2. Material Facts

It was common cause that the plaintiff purchased a vacant stand from the defendant (as developer) in terms of an agreement concluded on 14 November 2014. Clause 4.1 contemplated that the purchaser would conclude a separate building agreement with a specified contractor to erect a dwelling. By addendum dated 12 April 2015, the original contractor was replaced with Claycon (Pty) Ltd, while the remaining contractual terms remained in force.

It was also common cause that the plaintiff paid the purchase price, took transfer on 9 May 2016, and that the building plans were approved on 22 July 2016. On the agreed timeline, completion of the building was to occur within nine months from commencement (the approval date), which meant completion was anticipated by about April 2017. The “major building structure” was completed around April 2017, but the contractor could not hand over the property because the electrical points could not be checked and tested due to the absence of electricity supply to the site.

It was further common cause that bulk electricity was connected by Eskom only in December 2017, with bulk supply becoming available from 18 January 2018 and connected to the plaintiff’s reticulation system on 25 January 2018. Eskom issued a section 82 certificate on 2 February 2018, and the City of Johannesburg issued an occupancy certificate on 22 February 2018.

The material disputed aspect concerned responsibility under the contract: the plaintiff contended that, properly construed (including by implication of a tacit term), the defendant was obliged to provide the necessary electrical (and municipal) infrastructure and ensure a fully serviced site by the time the dwelling was complete. The defendant’s position was that it was not responsible for the lack of electricity supply, attributing the delay to Eskom (and, on its version, to interference by the plaintiff), while accepting responsibility only for internal reticulation within the complex.

On the counterclaim, it was material that the defendant’s claim was advanced on a purported cession from the HOA, and that by the time of argument on the counterclaim it was conveyed to the court that the substantive issues had been resolved, leaving costs as the remaining point in contest. The plaintiff nonetheless persisted that the defendant lacked standing and that the counterclaim relief had not been established on the evidence.

3. Legal Issues

The central legal questions the court was required to determine were whether the sale agreement contained a tacit (implied) term obliging the defendant, as developer, to provide or ensure the provision of a fully serviced site, including bulk electrical supply, and whether the defendant’s failure to do so amounted to a breach that caused compensable loss.

A further set of issues concerned causation and quantification of contractual damages: which heads of damage flowed from the breach (including rental, project management costs, interest-related claims on installed items, and legal costs incurred prior to litigation), and which were too remote or insufficiently proven.

In reconvention, the court had to determine whether the defendant had locus standi to pursue the counterclaim on the basis of a cession from the HOA, and whether (in any event) the defendant had adduced sufficient evidence to justify the demolition/alteration and removal relief sought.

The dispute thus involved questions of law (the standard for implying tacit terms; cedability and standing), questions of fact (what the surrounding circumstances showed; what steps were taken; the timing of submissions and supply), and the application of law to fact (whether the tacit term was established; whether breach and causation were proven; whether damages were established on acceptable proof).

4. Court’s Reasoning

On the plaintiff’s claim, the court approached the matter as one turning on a tacit term. It applied the principle, drawn from Alfred McAlpine & Son (Pty) Ltd v Transvaal Provincial Administration, that a tacit term is an unexpressed provision inferred from the common intention of the parties as revealed by the express terms and surrounding circumstances, and that a court will not import such a term merely because it is reasonable. The judgment emphasised the requirement of necessity for business efficacy and referred to the “bystander test” associated with Reigate v Union Manufacturing Co as adopted in the cited South African authorities.

In applying that framework, the court considered that the contractual scheme contemplated purchasers occupying completed homes and paying for utilities connected to their properties, which, on the plaintiff’s case, presupposed that bulk electricity would be available to the development. In the court’s assessment, the evidence and surrounding circumstances supported the inference that a fully serviced site (including the electrical supply necessary for testing and certification) would be required to give practical effect to the overall transaction.

Significantly, evidence from the defendant’s own witness, Mr Robinson (the builder), supported the proposition that it was the developer’s responsibility to procure bulk electricity or ensure the infrastructure was in place to provide a fully serviced site. The court treated this evidence as confirming what the “bystander” would have understood the arrangement to entail in the context of a residential development, and regarded it as consistent with the practical necessities of completing electrical testing, obtaining compliance documentation, and enabling issuance of an occupancy certificate.

On breach, the court applied the general principle (again with reference to McAlpine) that where a contract does not specify a fixed time for performance, obligations are enforceable forthwith, subject to the qualification that performance cannot be demanded unreasonably in a way that defeats the contract’s object or without allowing sufficient time to comply. On the facts, the court found that although an application for bulk electricity was made in 2014, the defendant did not take adequate steps to satisfy Eskom’s requirements timeously, and only appointed an electrical engineer in 2017 after enquiries were raised.

The judgment reasoned that the defendant mistakenly believed that payment to Eskom in 2014 was sufficient and did not appreciate that additional technical documentation and coordination (including designs and specifications relevant to internal reticulation and Eskom’s connection requirements) had to be submitted to secure the installation within an appropriate timeframe. The court viewed the defendant’s attempt to attribute responsibility to Eskom as not absolving it from its own contractual obligations, particularly in circumstances where the necessary submissions were made only belatedly in 2017 and the developer did not demonstrate earlier follow-up or facilitation consistent with its responsibilities.

The court concluded that the plaintiff could not take occupation from about July 2017 (once construction was effectively complete) until February 2018 when the occupancy certificate was issued, and it attributed that delay to the defendant’s failure to ensure the site was fully serviced with electricity in time. It rejected the contention that the plaintiff caused the delay, characterising that allegation as lacking merit in light of the technical requirements that the defendant had failed to meet timeously.

On damages, the court applied established principles that contractual damages aim to place the innocent party in the position they would have occupied had proper performance occurred, subject to mitigation, causation, and remoteness. It relied on the articulation of these principles in Sandlundlu (Pty) Ltd v Shepstone and Wylie Incorporated and Holmdene Brickworks (Pty) Ltd v Roberts Construction Co Ltd. Having found breach from July 2017, the court allowed damages that it considered to flow from that breach within the proven period.

The court allowed rental damages for the relevant months, project management costs only insofar as they related to the post-breach period, and a gardening-related amount. It further allowed certain legal costs incurred before summons, treating them as flowing from steps taken to protect the plaintiff’s rights in relation to the breach and the delayed installation. However, the court disallowed a substantial claim relating to interest on “PC items” (installed items purchased by the plaintiff), holding that the plaintiff had not proved the amount claimed on the evidence presented and that a table of amounts was insufficient to discharge the burden of proof.

On the counterclaim, the court dealt first with standing. It relied on the SCA decision in Propell Speciallised Finance (Pty) Ltd v Attorneys Insurance Indemnity Fund NPC, including its reference to the earlier authority Densam (as quoted in Propell) on cedability in contexts involving delectus personae considerations. The court held that the HOA’s purported cession to the defendant was not competent insofar as it entailed transferring obligations vis-à-vis the plaintiff, and concluded that the defendant therefore lacked locus standi to pursue the counterclaim on behalf of the HOA.

The judgment further stated that, even if standing were assumed, the defendant had not led sufficient evidence to justify the relief sought concerning the boundary wall and related structures, including the absence of expert evidence to identify the common property or boundary line as necessary for the demolition-type relief claimed. It also reasoned that other aspects raised were not shown to be prejudicial to other owners or to require approvals on the evidence presented. The counterclaim was dismissed.

Finally, on costs, the court exercised its discretion against the defendant. It considered the way the litigation had been conducted, the concessions made during cross-examination, and the view that a more reasonable approach by the defendant would have resolved the reconventional issues without prolonged litigation. The judgment concluded that the defendant’s conduct warranted a punitive costs order, and awarded costs on an attorney-and-client scale.

5. Outcome and Relief

The court upheld the plaintiff’s claim in part and awarded damages in the sum of R486 550.36, together with interest at the prescribed rate from 1 March 2018 to date of final payment.

The court dismissed the defendant’s claim in reconvention in its entirety.

The defendant (as defendant in convention and plaintiff in reconvention) was ordered to pay the costs of suit on the attorney-and-client scale.

Cases Cited

Alfred McAlpine & Son (Pty) Ltd v Transvaal Provincial Administration 1974 (3) SA 506 (A).

Mullin (Pty) Ltd v Benade Ltd 1952 (1) SA 211 (AD).

S. A. Mutual Aid Society v Cape Town Chamber of Commerce 1962 (1) SA 598 (AD).

Reigate v Union Manufacturing Co. 118 L.T. 479.

Sandlundlu (Pty) Ltd v Shepstone and Wylie Incorporated [2011] 3 All SA 183 (SCA).

Holmdene Brickworks (Pty) Ltd v Roberts Construction Co Ltd 1977 (3) SA 670 (A).

Propell Speciallised Finance (Pty) Ltd v Attorneys Insurance Indemnity Fund NPC 2019 (2) SA 221 (SCA).

Densam (full citation not provided in the judgment text; referenced via quotation in Propell Speciallised Finance (Pty) Ltd v Attorneys Insurance Indemnity Fund NPC 2019 (2) SA 221 (SCA)).

Legislation Cited

No legislation was cited in the judgment.

Rules of Court Cited

No rules of court were cited in the judgment.

Held

The court held that the sale agreement, interpreted in context, incorporated a tacit term that the defendant developer would provide or ensure the provision of the necessary infrastructure to deliver a fully serviced site, including bulk electricity, enabling completion-related testing and certification and ultimately occupation.

It held that the defendant breached that obligation by failing to take the steps required to secure electricity supply timeously, and that the plaintiff’s inability to occupy until February 2018 flowed from that breach. The court awarded the plaintiff proven damages that flowed from the breach from July 2017, but rejected a substantial damages component because the plaintiff did not prove the quantum claimed.

In reconvention, the court held that the defendant lacked locus standi to pursue the counterclaim on the basis of the HOA cession, and that the counterclaim also failed on the evidence. The counterclaim was dismissed, and punitive attorney-and-client costs were awarded against the defendant.

LEGAL PRINCIPLES

A tacit (implied) term may be imported into a contract only where, on a reasonable and businesslike construction of the express terms and admissible surrounding circumstances, the implication necessarily arises that the parties intended the contract to operate on that basis. The “bystander test” is applied as a practical tool to assess whether the term is so obvious and necessary for business efficacy that the parties would have assented to it as a matter of course.

Where a contract does not specify a definite time for performance, performance is generally enforceable forthwith, but performance cannot be demanded in a manner that is unreasonable or that defeats the object of the contract, and sufficient time must be allowed for compliance.

Contractual damages are aimed at placing the innocent party in the position they would have occupied had the contract been properly performed, subject to mitigation and the limiting doctrines of causation and remoteness. Only those damages that naturally and generally flow from the breach (or are within the parties’ contemplation in special circumstances) are recoverable, and the plaintiff bears the burden of proving quantum.

In relation to cession and standing, the judgment applied authority to the effect that whether rights are cedable may turn on the nature of the debtor’s obligations and whether the arrangement involves delectus personae features. On the facts as assessed, the HOA cession relied upon was held not competent to confer standing on the defendant vis-à-vis the plaintiff in the manner required for the counterclaim.

Costs are within the court’s discretion, and punitive costs on the attorney-and-client scale may be awarded where the conduct of a party in the litigation, viewed as a whole, is considered to justify such an order.

Orkin v Goldleaf Investment (Pty) Ltd (22321/2018) [2023] ZAGPJHC 356 (21 April 2023)