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2022
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[2022] ZAFSHC 346
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Phethogo Consulting (Pty) Ltd and Others v MEC: Free State Provincial Government: Department of Public Works and Infrastructure (5009/2021) [2022] ZAFSHC 346 (7 December 2022)
IN
THE HIGH COURT OF SOUTH AFRICA
FREE
STATE
DIVISION, BLOEMFONTEIN
Case
No.: 5009/2021
Reportable:
YES/NO
Of
Interest to other Judges: YES/NO
Circulate
to Magistrates: YES/NO
In
the matter between:
PHETHOGO
CONSULTING (PTY) LTD
First
Applicant
DIKOPO
CONSTRUCTION (PTY) LTD
Second
Applicant
RAZZMATAZZ
CIVIL (PTY) LTD
Third
Applicant
SVP
QUANTITY SURVEYORS AND
PROJECTS
MANAGERS (PTY) LTD
Fourth
Applicant
CONSTRUCTION
SAFETY SEVICES CC
Fifth
Applicant
and
THE
MEC: FREE STATE PROVINCIAL GOVERNMENT:
DEPARTMENT
OF PUBLIC
WORKS
AND
INFRASTRUCTURE
Respondent
CORAM:
VAN
RHYN, J
HEARD
ON: 13
OCTOBER 2022
DELIVERED
ON: 7
DECEMBER 2022
[1]
The applicants claim payment of an amount of R 7 442 219
.82 and interest
on the said amount based on an interim payment
certificate issued in terms of a construction contract. The
respondent acknowledges
its indebtedness to the applicant, however
disputes the correctness of the amount claimed and furthermore
contends that the parties
are in the process of resolving the matter
which renders the application premature.
[2]
The first to fifth applicants are known as Dikopo JV (“Dikopo
JV”), a
joint venture consortium that came into being pursuant
to a written agreement concluded between them on 13 August 2014 and
amended
on 22 April 2016. The respondent is the Member of the
Executive Council: Free State Provincial Government: Department of
Public Works and Infrastructure.
[3]
Dikopo JV operates in the construction industry and specializes in
all forms of civil
and building construction. During 2015 the
respondent invited tenders for the development and construction on a
new school, the
G M Polori Primary School, at Hoopstad. On 14 January
2016 Dikopo JV was awarded the tender. The employment letter and the
conditions
of contract as contained in the tender documents,
submitted by Dikopo JV, formed the basis of the agreement between the
respondent
and Dikopo JV. The agreement between the parties was
further governed by the JBCC Series 2000 Principle Building
Agreement.
[4]
The terms of the agreement, whether express, implied or tacit were
the following:
4.1
The contract price was determined at R52 990 555.96 (Fifty
Two Million Nine Hundred and Ninety Thousand
Five Hundred and Fifty
Five Rand and Ninety Six Cent), inclusive of Value Added Tax together
with any adjustments using the contract
price adjustment provisions
(“CPAP”). CPAP is used for the adjustment of fluctuations
in the cost of labour, plant,
materials and goods as stated in the
schedule.
4.2
The anticipated completion of the works was cast at 18 months, thus
at 15 August 2017 but an extension of
the time was approved until 25
September 2019.
4.3
The works set out in the Bill of Quantities were the estimated
quantities of the works and therefore not to
be taken as the actual
and final quantities of work to be completed.
4.4
In terms of the provisions of Clause 31.1 of the principal building
agreement, the principal agent shall issue
an interim payment
certificate every month until the issue of the final payment
certificate. For purposes of payment, the respondent’s
appointed quantity surveyor and agent would ascertain and determine
the value of the works after Dikopo JV had measured the work
executed
each month and the material on site together with supporting
statements.
4.5
The principal agent shall issue each interim payment certificate by
not later than an agreed date of the month.
The interim payment
certificate shall be issued to the contractor, Dikopo JV with a copy
to the employer, being the respondent.
The value certified in an
interim payment certificate shall,
inter alia,
include the
following: a reasonable estimate of the value of the work executed, a
reasonable estimate of the value of the materials
and goods and shall
separately include the CPAP adjustment.
4.6
In terms of the provisions of clause 31.9 the respondent shall pay
Dikopo JV the amount certified in the interim
payment certificate
within twenty- one (21) calendar days of the date of issue of
the payment certificate.
[5]
The respondent appointed the first applicant, Phetogo Consulting
(PTY) LTD as its
appointed principal agent. On 7 February 2017 Dikopo
JV started with the construction work. Since February 2017 Dikopo JV
continued
to submit interim payment certificates on a monthly basis
to the principal agent. After measuring the work and determining the
value, the principal agent would issue interim payment certificates
supplemented by tax invoices which would be presented to the
respondent for payment.
[6]
On 22 September 2020 an interim payment certificate, Payment
Certificate No 25, was
issued by the principal agent in accordance
with the agreement and the scope of works in the amount of
R7 442 219.82
(Seven Million Four Hundred and Forty Two
Thousand Two Hundred and Nineteen Rand and Eighty Two Cent), VAT
included. The interim
payment certificate had to be paid by no later
than 14 October 2020.
[7]
Due to the respondent’s failure to make payment in terms of the
interim payment
certificate, a letter of demand was sent to the
respondent on 15 March 2021. Dikopo JV eventually launched the
present application
on 27 October 2021 after a number of interactions
in an attempt to resolve the matter, proved unsuccessful.
[8]
The application is opposed by the respondent. The matter was enrolled
for hearing
on 25 August 2022. Due to the respondent’s failure
to append certain annexures to the answering affidavit, the
application
was postponed to 13 October 2022 with leave to the
respondent to file a condonation application on or before 31 August
2022. The
parties agreed as to the dates for the filing of further
affidavits regarding the application for condonation and the
respondent
was ordered to pay the costs occasioned by the
postponement on the scale as between attorney and client.
[9]
The respondent failed to file the application for condonation as
ordered and filed
same on 9 September 2022. However, the affidavit
deposed to by the Head of the Department of the respondent failed to
address the
reasons for the delay in filing the application for
condonation. Mr Grobler SC, counsel on behalf of Dikopo JV argued
that Dikopo
JV has been deprived of a hearing of this matter on the
merits due to the failure of the respondent to abide by the order of
this
court. On behalf of Dikopo JV it was suggested that the
application on the merits should proceed and that the application for
condonation
be granted. I was satisfied to grant such condonation in
order to fully ventilate the dispute in the interest of justice.
[10]
Mr Grobler SC argued that, if issued on strength of a binding
agreement, a certificate for payment
issued by an engineer or
quantity surveyor, final or interim, is treated as a liquid document
with the result that it amounts to
an acknowledgment of debt. A
certificate of payment constitutes a separate and self-supporting
cause of action, which can only
be challenged on limited grounds. On
behalf of Dikopo JV it is submitted that the respondent has not shown
a defence to the claim
for payment in that the grounds upon which the
application is opposed contradict the written wording of the
agreement between the
parties.
[11]
In his heads of argument, Mr Khokho, counsel on behalf of the
respondent, contends that the effect
of the relief sought by Dikopo
JV would constitute condonation of an illegality which would offend
against the principle of the
separation of powers. The principle of
the separation of powers dictates that the discretionary power is
vested with the administrative
body and should be exercised by it and
not by the judiciary.
[12]
The respondent contends that the court does not have the power to
interfere with the internal
processes which includes the formulas,
methods and calculations regarding the disputed payment due to Dikopo
JV and therefore,
so the argument goes, the court has no power to
grant the order for payment of the interim certificate.
[13]
During February 2022 a meeting was held between the respondent and
the legal representatives
of Dikopo JV. The meeting was postponed to
7 March 2022. Due to the failure of the legal representatives of
Dikopo JV to attend
the postponed meeting and the subsequent
enrolment of this matter for hearing, Mr Khokho argued that the
application was brought
pre-maturely as the parties were still in the
process of discussing the issues and trying to resolve the dispute.
[14]
Mr Khokho submitted that it was incumbent upon Dikopo JV to present
its final account in order
for the respondent to reconcile previous
payments made and therefore the interim payment cannot be made while
the final invoice
is still outstanding. furthermore, the court does
not have the power to grant the application for payment on the basis
that the
amount claimed is disputed by the respondent. The
respondent’s understanding and proposal is that the base date
to be used
for the CPAP must be July 2017 on the basis that this was
the anticipated date for the completion of the project.
[15]
The award of the tender to Dikopo JV was constituted by a series of
written documents, which
also included the Principal Building
Agreement (annexure “TPM8”). In terms of clause 42.4.6 of
the Principal Building
Agreement, the contract value is to be
adjusted using CPAP indices. In terms of clause 32.13 where CPAP is
to be used, it was agreed
that the base month is August 2015. On 26
August 2020 a letter of notification was issued to the principal
agent by S Pailman,
a candidate quantity surveyor employed by the
respondent, to confirm the approval of the CPAP to the project as per
the signed
contract of the project.
[16]
Contractually and in the absence of any claim for rectification of
the agreement, the respondent
is bound by the terms of the agreement.
The amount claimed by Dipkoko JV is founded upon the respondent’s
own calculations
and its application of the CPAP date. An email dated
21 September 2020 from the said S Pailman addressed to Wally Botha,
an expert
appointed by the Department of Public Works, confirms that
the CPAP was “checked”. On 26 October 2020, as is
evident from a further email appended to the replying affidavit, L
Moeketsi of the respondent informed Dipkoko JV that:
“…
the
submission was approved and payment received, however Education send
us a communique to say all contractual payments need to
be 20% of the
original contract amount and if more than that is required Provincial
Treasury should approve. Mr Tokwe is engaging
Treasury in this regard
and I will provide your feedback as soon as the reply is received”.
[17]
What is apparent from the contents hereof is that neither the
application of the CPAP date nor
the calculation of the amount
claimed was disputed by the respondent during October 2020. A
certificate of payment issued by an
engineer or agent, final or
interim, is treated as a liquid document with the result that it
amounts to an acknowledgement of debt
signed by the employer in
favour of the contractor. In
Joob
Joob Investments (Pty) Ltd v Stocks Mavundla Zek Joint Venture
[1]
the
court held as follows:
"[27]
Gorven AJ
pointed out, with reference to Randcon (Natal) (Pty) Ltd v Florida
Twin Estates (Pty) Ltd
1973 (4) SA 181
(D) at 183H - 184H that a
final payment certificate is treated as a liquid document since it is
issued by the employer's agent,
with the consequence that the
employer is in the same position it would have been in if it had
itself signed an acknowledgment
of debt in favour of the contractor.
Relying further on the Randcon case (at 186G - 188G). the learned
judge held that similar
reasoning applied to interim certificates.
The certificate thus embodies an obligation on the part of the
employer to pay the amount
contained therein and gives rise to a new
cause of action subject to the terms of the contract. It is regarded
as the equivalent
of cash. The certificates in question all fall
within this ambit."
[18]
Counsel for the respondent sought to persuade me that the application
is replete with dispute
of facts which goes to the root of Dipkoko
JV’s case. From the answering affidavit it appears as if the
only issue in dispute
is the calculation of the amount claimed on the
basis that the CPAP used should be varied to read July 2017 and not
August 2015.
[19]
The express words of clause 42. 4.6 make it abundantly clear that the
contract value is to be adjusted using CPAP and where
CPAP is to be
used, the base month is August 2015. The founding papers were
perfectly and validly based upon a claim for payment
in terms of the
duly issued interim payment certificate.
[20]
A certificate of payment, which in the matter at hand was clearly
certified as correct, due and
payable, could only be avoided if the
engineer exceeded his authority and/or allegations of fraud,
collusion or undue influence
were made by the respondent.
[2]
Clause 31.1 of the Principle Building Agreement makes provision
for the rendering of interim payment certificates supported
by a tax
invoice for the amount due. Mr Khokho’s argument that payment
of the amount claimed in terms of the interim payment
certificate
would amount to unjust enrichment is without substance.
[21]
The respondent’s further argument that payment of the interim
payment certificate may not
be ordered by the court in circumstances
where the final invoice has not yet been submitted, is in conflict
with the terms of the
agreement between the parties. I furthermore
agree with the argument on behalf of the applicant that the
respondent’s budgetary
issues as reflected in the email
regarding the need to obtain approval from the Free State Provincial
Treasury, is of no concern
to Dokopo JV and does not amount to a
defence against the claim for payment. The meeting scheduled for 7
March 2022 was agreed
to with the view of settling the dispute. The
said meeting was arranged subsequent to the issue of this application
and therefore,
the contention that the application is premature, is
irrational.
[22]
The respondent failed to advance any of the limited grounds upon
which the liquidity of an interim
payment certificate may be
attacked.
ORDER:
[23]
In the result the following order is granted:
1.
The respondent shall pay to the applicants the amount of R 7442
219.82 (Seven Million Four
Hundred and Forty Two Thousand Two Hundred
and Nineteen Rand and Eighty Two Cent).
2.
The respondent shall pay default interest on
the amount of R 7442 219.82 (Seven Million Four Hundred
and Forty Two
Thousand Two Hundred and Nineteen Rand and Eighty Two Cent), at the
rate of 7% per annum calculated from 14 October
2020 until date of
final payment.
3.
The respondent shall pay the applicants’ costs of the
application.
VAN
RHYN, J
On
behalf of the Applicants:
ADV. S
GROBLER SC
Instructed
by:
GRAHAM ATTORNEYS
BLOEMFONTEIN
On
behalf of the Respondent:
ADV. N D
KHOKHO
Instructed
by:
STATE ATTORNEYS
BLOEMFONTEIN
[1]
2009 (5) SA 1
(SCA) at [27].
[2]
Smith v Mouton
1977 (3) SA 9
(W); Hoffman Meyer
1956 (2) SA 752
(C).