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[2022] ZALMPPHC 28
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Lephalale Local Municipality v Nanza Amamiya Ndlovu Joint Venture (HCAA02/2022) [2022] ZALMPPHC 28 (26 May 2022)
REPUBLIC OF SOUTH AFRICA
IN THE HIGH COURT OF
SOUTH AFRICA
(LIMPOPO DIVISION,
POLOKWANE)
Case no: HCAA02/2022
REPORTABLE: YES/NO
OF INTEREST TO THE
JUDGES: YES/NO
REVISED.
In the matter between:
LEPHALALE LOCAL
MUNICIPALITY
APPELLANT
And
NANZA AMAMIYA NDLOVU
JOINT VENTURE
RESPONDENT
JUDGMENT
MULLER:
[1] This an appeal
against the judgment of Semenya DJP with leave to the Full Court
having been granted. This case commenced as
an urgent
ex parte
application before MG Phatudi J who granted an order in the following
terms on 30 March 2021:
“
2.
Pending the hearing and final determination of all issues in PART B
of the application.
2.1 The
purported cancellation of the agreement between the applicant and
respondent dated 8 March 2021 is declared
null and void and
accordingly set aside.
2.2 The
respondent is interdicted, prevented and prohibited from negotiating,
entering into and/or appointing any consultants
or other service
provider in respect of the contract for the professional planning,
designs, drawings and supervision of the waste
transfer station in
respect of GA-SELEKA AREA that includes KAULETSE and MOONG VILLAGES.
2.3
Paragraph 2.1 and 2.2 above, shall operate as interim interdict and
relief immediately and forthwith.
2.4 The
sheriff of this Court is directed to serve this interim order on the
respondent.
Parties may supplement
their papers as necessary for hearing of PART B on the 13 th of May
2021.
2.6
Costs reserved.”
[2] It is also necessary
to refer to the relief in PART B in light of the arguments presented
to which I will revert presently.
Part B states:
“
3.
Directing the respondent to attend to, consider, and approve the
variation order number 1 (Moong) in
the amount of R5 269 219.29 (
Five
Million Two Hundred And Sixty Nine, Two Hundred And Nineteen Rand,
Twenty Nine Cents
) to increase the
contract amount to R10 538 438.59 (
Ten
Million Five Hundred and Thirty Eight Four Hundred And Thirty eight
Rand, Fifty Nine Cents.
)
4.
Directing the respondent to pay the sum of R478 128. 60 (Four Hundred
and Seventy Eight Thousand, One
Hundred and Twenty Eight Rand, Sixty
Cents) in respect of professional services rendered and to honour
reasonable invoices and
claims for payment by Applicant, including
for those expenses reasonably incurred and incidental to the contract
in the reasonable
execution of the tender.
5.
Costs of the application on an attorney and client scale.”
[3] The appellant
applied, also on an urgent basis, for reconsideration of the order
granted by MG Phatudi J in terms of Rule 6(12)(c)
to set aside the
order and to dismiss the application with costs. The application came
before Semenya DJP who dismissed it, with
costs. The Deputy Judge
President held that:
“
I
regard the respondent’s application for reconsideration of the
order granted on the 30 March 2021 in the urgent court as
simply an
abuse of court process. More so that it could not categorically deny
that the SLA and other tender documents are not
specific about the
fact that the work was to be done on two projects. It is not
sufficient to state that whatever was agreed upon
was not compliant
with the law. The applicant is entitled to have the remaining issues
determined on the normal roll instead of
in the urgent court. The
issues raised in the answering affidavit are those which could be
dealt with in the normal roll and could
have waited until the return
date of the interim order. The applicant is entitled to costs on this
basis.”
[4] The court,
accordingly, confirmed the order granted by MG Phatudi J and issued a
rule
nisi
returnable on 14 March 2022.
[5] I have considerable
difficulty to understand the reasoning why the reconsideration
application was considered to be an abuse
of process when an order
was granted in the absence of the respondent.
[6]
The respondent argued before us that the interim order is not final
in effect and as a result not appealable. In
Metlika
Trading Ltd and Others v Commissioner South African Revenue
Service
[1]
the Supreme Court of Appeal has held that an interim interdict is
appealable if it is final in effect and not susceptible to variation
by the court which has granted the order. It was emphasised that in
determining whether the order is final in effect, that not
only must
the form of the order be considered but predominantly what the effect
of the order is.
[7] The effect of the
interim order is that the contract which has been cancelled by the
respondent on 8 March 2021 was revived.
The revived contract which is
the subject matter of PART B of the notice of motion has far reaching
financial consequences for
the appellant. The relief under Part A in
terms whereof the contract was given a new life is simply a precursor
for the main relief
claimed in Part B. Part B is not, on a close
reading of the prayers, independent relief but indeed predicated upon
the validity
of the revived contract in terms of the order granted in
Part A. Put differently; the relief in PART B presupposes a valid
contract.
The revival of the contract does not have interim effect.
Once the contract is declared valid the effect thereof is final. I am
accordingly of the view that the order is appealable.
[8] Before turning to the
merits of the appeal a preliminary issue which was raised must first
be determined
.
The appellant raised the issue in the court
a
quo,
and in this court, that the respondent lacked
locus
standi.
The respondent is cited in the heading of the notice of
motion as ‘NANZA AMAMIYA JOINT VENTURE.’ The deponent to
the
founding affidavit identified himself as an adult male director
of the applicant. In paragraph 4 the deponent states that:
“
The
Applicant is a private company duly registered and incorporated as
such in accordance with the company laws of the Republic
of South
Africa and carries on business as Consultants in the Project
management and Civil and Structural Engineering Industry,
with its
principal business and registered office at…”
[9] The deponent
continued in the next paragraph to state that he, as the Managing
Director of the applicant, per the joint venture
agreement, and in
terms of resolution of the board of directors, is duly authorised to
depose to the affidavit and bring the application
on its behalf. The
resolution is attached to the papers.
The heading of the said
resolution states:
“
BOARD
RESOLUTION OF NANZA AMAIYA (PTY) LTD
Registration
Number 2018/364241/07
TO
COMMENCE LITIGATION
DULY
PASSED ON 23 MARCH 2021”
[10] The resolution
records that Nanza Amamyia (Pty) Ltd believes that it has a valid
claim against the respondent arising from
Bid no T03/2018-2019 and
that it is resolved that Nanza Amamyia (Pty) Ltd in pursuit of its
claim through court proceedings and
that the deponent is authorised
to institute action.
[11] The appellant denied
in the papers that the resolution is a resolution of the joint
venture. It was submitted before us that
there is no evidence that
the joint venture authorised the application. Counsel for the
respondent submitted that the joint venture
is partnership between
two parties and that any one of the two parties has
locus standi
to institute the proceedings.
[12] The Deputy Judge
President accepted that the respondent has been correctly described
as a private company and that the company
on the face of the
resolution authorised the institution of the proceedings. The Deputy
Judge President overlooked that the company
is only one of the
parties to the joint venture agreement.
[13]
It is common cause that a joint venture agreement exists. Apart from
the name of the joint venture in the heading of the notice
of motion,
no other reference is made to the joint venture in the papers. Apart
from a cursory statement that the deponent is the
managing director
appointed in terms of a joint venture agreement nothing else is said
about the contents of or the rights and
obligations of the parties to
the contract. What the rights and obligations are of Nanza Amamyia
(Pty) Ltd in the joint venture
are not mentioned. I am hesitant
simply to accept on the mere submission advanced by counsel for the
respondent that the
arrangement is a partnership without evidence to
support such a proposition. Certain
essentialia
need to be embodied in a joint venture agreement for the arrangement
to be a partnership.
[2]
A joint
venture which is not a partnership might be a commercial association
distinct from a partnership.
[3]
The difficulty is that since the founding affidavit is both pleadings
and evidence, and that the parties to the joint venture are
not
identified in the founding affidavit, it is impossible for the court
to determine what the nature of the arrangement is. The
proposition
that the existence of a joint venture which has a sharing of profits
as a goal is
prima
facie
evidence of a partnership, cannot be accepted. The sharing of profits
is not conclusive evidence of a partnership.
[4]
[14] Rule 14(2) provides
that:
“’
Association’
means any unincorporated body of persons, not being a partnership.
’Firm’ means a business, including
a business carried on
by a body corporate, carried on by the sole proprietor thereof under
a name other than his own.”
[15] The purpose of the
rule is to provide a procedural aid to the applicant to ameliorate
the need to join and cite each individual
member of the
unincorporated joint venture. The rule, however, cannot be of any
assistance to the respondent who has failed to
cite each member of
the joint venture. The resolution attached to the founding papers is
on a proper interpretation thereof a resolution
of a company, Nanza
Amamyia (Pty) Ltd. The resolution recorded that it is
this company who has a valid claim against
the appellant. The
deponent was granted the authority, in terms of the resolution, to
settle the claim upon recommendation of its
legal representative on
terms he deems to be in the best interests of Nanza Amamyia (Pty) Ltd
without reference to the other party
to the joint venture.
[16]
Again, if Nanza Amamyia (Pty) Ltd is a member of an unincorporated
joint venture which has no independent existence on its
own, every
member of the joint venture should have been cited.
[5]
The failure by the respondent to adduce cogent and acceptable
evidence in this regard leads me to conclude that the respondent
has
failed to prove that it has the required
locus
standi.
[17] I
now turn to the merits of the application. It is the case of the
respondent that it was awarded a tender in June 2019 by
the appellant
as a consultant for planning, design and supervision of waste
transfer station at Lephalale (Ga-Seleka Area). Pursuant
to a letter
of appointment issued by the appellant, the parties entered into a
written service level agreement.
[6]
The respondent commenced with the work at Ga-Seleka Area. To the
respondent’s surprise it was informed that Ga-Seleka consisted
of two stations, namely, Moong and Kauletse and that two designs and
plans for the two stations must be produced. The development
was not
in accordance with the brief. The joint venture were informed by the
appellant to continue with the work but to claim as
the work
progressed. After a while they started to encounter delays in payment
of their interim claims. The respondent then by
agreement applied for
a variation order which sets out the expected costs of the inclusion
of the other station. The appellant
acknowledged the variation
request for the professional fees of the respondent in a letter dated
8 October 2020 in the amount of
R5 269 218.29 inclusive of VAT in
respect of Moong village. They were informed that any deviation from
the scope of work should
be communicated in writing to the appellant
and that it should be approved by the accounting officer before the
respondent may
commence with any work on site. They were furthermore
informed that the appellant has considered their request and that the
request
must be submitted to the department of Co-Operative
Governance Traditional Affairs and Local Government before granting
such permission
to vary the order.
[18] When the respondent
submitted a claim for R478 128.60 on 11 December 2020 the appellant
replied that the invoice is going through
a verification process and
that it will revert once the process has been completed. No payment
was made in respect of the invoice.
[19] On 15 January 2021
further invoices were submitted. Again the invoices were not paid.
This caused the respondent to write a
letter on 21 January 2021 to
the respondent in which it is stated that any further professional
services to Moong and Ga-Seleka
waste transfer project are suspended
due to non-payment of their professional fees and failure to consider
and honour the variation
orders by the appellant. The relevant
paragraph reads:
“
Nanza
Amamiya JV submitted a Variation Order for the Consultation for
Planning, Design and Supervision of the Moong Waste Transfer
Station
upon discovering that the initial appointment was solely for the
Ga-Seleka Waste Transfer Station. Due to the unapproved
variation
Orders and consequential financial strain of the addition Waste
Transfer Station to the professional team, Nanza Amamiya
JV has come
to the conclusion of suspending the contract as of Friday, 6 November
2020.”
[20] The appellant
acknowledged receipt of the letter referred to above and replied on 8
February 2021 that it had paid the respondent
for work done and
denied owning the respondent the amount claimed. The reply states:
“
In
your letter dated 21 January 2021 you have also stated that you have
suspended your professional services since the 6 the November
2020,
but have failed to communicate that to the municipality on the said
date. This has resulted in delays in completion of the
project as you
have not provided the municipality and the contractors with the
reviewed drawings that the municipality has already
paid for.”
[21] The appellant
forwarded a second letter to the respondent on 8 February 2021 in
terms whereof the respondent was requested
to provide the appellant
with the revised drawings for which they have been paid and continued
to state:
“
It
should be noted that the contractor cannot proceed on site without
the revised construction drawings. You should be aware by
now that
the contractor has likewise abandoned site and therefore the project
will not be completed on the 28
th
February 2021 as scheduled. The municipality is at risk of forfeiting
the allocated funds appropriated to the municipality with
specific
terms and conditions in accordance with the
Division of Revenue Act.
To this effect it is
brought to your attention that:
(i)
In terms of
section 8
, clause 8.1(b) of the
service level agreement you have failed to comply with the provisions
of the signed service level agreement;
(ii)
And therefore notified to rectify such
failure within a period of 14 days from date of receipt of this
letter.
You are therefore
requested to submit in writing your commitment to complete the
project within 24 hours upon receipt of this correspondence
failing
which the municipality will assume that you are no longer interested
in the project. The Municipality will be left with
no option but to
terminate your services and proceed with the implementation and
completion of outstanding works on the project.”
[22] The respondent has
failed to communicate its commitment as requested to the appellant.
[23] On 8 March 2021 the
appellant forwarded a letter to the respondent in which the appellant
said:
“…
The municipality has
given an ample time to enable your company to collate relevant
information and respond within 14 days as per
the signed service
level agreement which lapsed on the 05 March 2021 and to date we have
not received any feedback from your company.
We are nearing the end of
the third quarter without any progress on site and expenditure on the
allocated budget and this adversely
affects the municipality’s
performance. To this effect in terms of
section 8
, clause 8.1(b) of
the service level agreement you have failed to comply with the
provisions of the signed service level agreement
and the Municipality
is therefore left with no option but to terminate the contract with
Nanza Amamiya Ndlovu Joint Venture and
proceed with the
implementation and completion of outstanding works on the project.
It should further be
noted that any additional cost that will be incurred by municipality
in this regard will be categorised as
fruitless expenditure and will
be claimed from your company.”
[24] Neither the letter
of 21 January 2021 and nor the letters dated 8 February 2021 were
attached to the
ex parte
application. The court was therefore
not placed in the position to properly consider the events and
sequence of the letters that
eventually culminated in the
cancellation of the contract. I am also firmly of the view that the
respondent nevertheless on its
own version has failed to make out a
proper case for the relief claimed in PART A. On the respondent’s
own version it has
committed a breach of the contract when the
respondent has stopped to perform professional services in terms of
the service level
agreement as from 6 November 2020.
[25] The service level
agreement in clause 9 provides that:
“
It
is a specific condition of this tender that the Service Provider is
required to perform his task to acceptable standards and
shall be
obliged to meet the deadlines as determined by the parties.
Serious default of this
contract shall include but not limited to:
. Non-compliance with
tender specifications/scope of work
. Breach of
confidentiality and/or conflict of interest;
.Inadequate valuation
results measured against monitoring;
.Non-compliance with any
relevant legislation/regulation and any other conditions referred to
in this tender.
[26] The service level
agreement provides that should a party fail to comply with any
provision of this agreement, the innocent
party shall be entitled to
notify the other party in writing of such failure in term of clause
8.1 of the service agreement to
rectify any such failure within 14
calendar days calculated from the date of postage by registered mail
or alternatively on that
date such notice was hand delivered to the
defaulting party. In the event that the failure is not rectified the
innocent party
may cancel the agreement and claim damages. As
indicated above such notice was duly communicated to the respondent.
After the respondent
has failed to rectify its breach a notice was
submitted to the joint venture that the service level agreement is
cancelled as a
result of the respondent’s repudiation of the
contract.
[27] The contract makes
provision for arbitration in respect of any dispute arising from or
in connection with or the subject matter
of the agreement. The
respondent, for reasons of its own, did not avail itself to resort to
arbitration in respect of the dispute
with regard to the variation
order.
[28]
Repudiation of a contract occurs
inter
alia
when there is a refusal to perform a contract acknowledged to be
binding, or of a declaration of inability to perform, or of other
declarations of a similar nature.
[7]
In
Datacolor
International (Pty) Ltd v Intamarket
[8]
the test to be applied in cases of repudiation was explained:
“
The
emphasis is not on the repudiating party’s state of mind, on
what he subjectively intended, but on what someone in the
position of
the innocent party would think he intended to do; repudiation is
accordingly not a matter of intention, it is a matter
of perception.
The perception is that of a reasonable person placed in the position
of the aggrieved party. The test is whether
such a notional
reasonable person would conclude that proper performance (in
accordance with a true interpretation of the agreement)
will not be
forthcoming. The inferred intention accordingly serves as the
criterion for determining the nature of the threatened
actual
breach.”
[9]
The
conduct from which the inference of impending non-or malperformance
is to be drawn must be clearcut and unequivocal, ie not
equally
consistent with any other feasible hypothesis. Repudiation, it has
often been stated, is a “serious matter”…requiring
anxious consideration and – because parties must be assumed to
be predisposed to respect rather than to disregard their contractual
commitments – not lightly to be presumed.”
[10]
[29]
The facts are that the respondent suspended the rendering of
professional services to the appellant in November 2020 in terms
of
the service level agreement coupled with the failure to make use of
the dispute resolution mechanism provided by the arbitration
clause
in the contract. The respondent only communicated to the appellant in
January 2021 that it has suspended further performance
of work. It
is, in my view, clear evidence that the respondent was no longer
interested in performance of its obligations in accordance
with the
provisions of the contract. Their sustained and persistent failure to
commence with the work, despite being put on terms
by the appellant,
would have allowed the notional reasonable person to conclude that
the respondent no longer considered itself
bound by the provisions of
the service agreement and that proper performance will not be
forthcoming. The court in
Van
Rooyen v Minister van Openbare Werke en Gemeenskapsbou
[11]
explained
what conduct can be described as repudiation of a contract:
“
Om
‘n ooreenkoms te repudieer, hoef daar nie, soos in die
aangehaalde woorde uit
Freeth
v Burr
te kenne gegee word, ‘n subjektiewe bedoeling te wees om ‘n
einde aan die ooreenkoms te maak nie. Waar ‘n party,
bv, weier
om ‘n belangrike bepaling van die kontrak na te kom, sou sy
optrede regtens op ‘n repudiëring van die
ooreenkoms kon
neerkom, al sou hy ook meen dat hy sy verpligtinge behoorlik nakom.
(Kyk De Wet en Yeats
Kontraktereg
en Handelsreg
3de uitg op 117.)
[12]
[30] The respondent
averred in the papers that the appellant did not pursue the correct
process in their purported cancellation
of the agreement and that
same is null and void and falls to be set aside. The aspect was dealt
with a bald unsubstantiated allegation
in the founding affidavit
that:
“
Respondent
did not pursue the correct process in their purported cancellation of
the agreement and same is unlawful, null and void
and falls to be
declared so and set aside.”
[31]
The respondent contended in the court
a
quo
that
since the letter of termination was not served by registered post,
the cancellation was therefore ineffective. It was common
cause that
the respondent received the notice of cancellation of the contract.
The appellant was not obliged to give the required
notice period of
14 days in terms of the forfeiture clause (8.1) under circumstances
where the respondent repudiated the contract.
[13]
[32] The evidence
convincingly demonstrates that the contract was properly cancelled as
a result of the respondent’s unilateral
decision not to
continue to render performance in terms of the service level
agreement. No grounds have been shown to exist in
terms whereof the
contract, which has been properly cancelled, can be restored.
[33] The appeal falls to
be upheld for the reasons set out above.
ORDER
1. The appeal is upheld
with costs.
2. The order of the court
a quo
is set aside and replaced by the following order.
2.1
The application in terms of
Rule 6(12)(c)
succeeds with costs.
2.2
The order dated 30 March 2021 is set aside.
___________________
GC
MULLER
JUDGE OF THE HIGH
COURT LIMPOPO
DIVISION:
POLOKWANE
____________________
EM
MAKGOBA
JUDGE PRESIDENT OF THE
HIGH COURT LIMPOPO
DIVISION: POLOKWANE
_________________
M
NAUDE
ACTING JUDGE OF THE
HIGH COURT LIMPOPO
\DIVISION: POLOKWANE
APPERANCES
1. For the
Appellant
: SG Gouws
2. For the
Respondent
: A Njeza
3. Date of the
hearing
: 13 May 2022
4. Date judgment
delivered
: 26 May 2022
[1]
2005
(3) SA 1
(SCA).
[2]
Bester
v Van Niekerk
1960
(2) SA 779
(A) 783H-784A.
[3]
R
v Bowen NO and Others
1967 (3) SA 236
(R) 239G-H.
[4]
Bale
& Greene v Bennett
1907 NLR 361, 381.
[5]
EX-TRTC
United Workers Front and Others v Eastern Cape Province
2010 (2) SA 114
(ECB) par 13-14.
[6]
Hereinafter
called “the SLA”.
[7]
Kerr
AJ
The
Principles of Law of Contract
4
th
ed (1989) 425.
[8]
[2000] ZASCA 82
;
2001
(2) SA 284
(SCA);
B
Braun Medical (Pty) v Ambasaam
CC
2015 (3) SA 22
(SCA) 10.
[9]
294F-G.
[10]
Para
18.
[11]
1978
(2) SA 835 (A)
[12]
845H-846A;
Nash
v Golden Dumps (Pty) Ltd
1985 (3) SA 1
(A) 22D-F.
[13]
Edengeorge
Ltd v Chamomu Property Investments
1981(3) SA 460 (T) 471D-E.
Taggart
v Green
1991(4) SA 121 (W) 125H-126E.