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[2022] ZALMPPHC 50
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KPMM Roads & Earthworks Projects (Pty) Ltd v Polokwane Local Municipality (2849/2020) [2022] ZALMPPHC 50 (11 August 2022)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
(LIMPOPO
DIVISION, POLOKWANE)
CASE
NO: 2849/2020
REPORTABLE: YES/NO
OF INTEREST TO THE
JUDGES: YES/NO
REVISED.
In
the matter between:
KPMM
ROADS & EARTHWORKS PROJECTS PTY) LTD
PLAINTIFF
And
POLOKWANE
LOCAL MUNICIPALITY
DEFENDANT
JUDGMENT
MULLER
J:
[1]
The plaintiff instituted action for a declaratory order that a
purported notice of cancellation
of a contract entered into between
the parties is invalid and that the contract is in full force and
effect. The defendant pleaded
and instituted five counter-claims for
the recovery of damages.
[2]
The plaintiff served an exception against counter-claims 2, 3, 4 and
5. The parties will be referred
to as the plaintiff and the
defendant.
[3]
The defendant
inter alia
pleaded that the contract was validly
cancelled. It is common cause that the parties entered into a
contract subsequent to a bidding
process for the upgrading of the
Nelson Mandela IRPTS Trunk Route and the construction of civil works
for the Depot station and
day time layover facility. A service level
agreement was entered into between the parties.
[4]
In respect of the counter-claims the defendant pleaded (in paragraph
27) that the contract was
entered into on the basis of the following
facts:
“
27.1
The Agreement between the parties forms part of the Defendant’s
project to establish a Rapid Bus Transport Service in
the city of
Polokwane (“the Project”).
27.2 Apart from the
Plaintiff the Defendant entered into construction contracts with
inter alia
the following other contractors to carry out the
Project.
27.2.1
NJR Projects have been contracted to construct the superstructure of
the
Depot.
27.2.2
Matakanye Construction have been contracted to construct a
superstructure of the
CBD Station.
27.3
The plaintiff had to perform the civil works in respect of the
Depot,
Stations and the Daytime Layover Facility in respect of the Nelson
Mandela IRPTS trunk route.
27.4 The aforesaid civil
works had to be completed before the other contractors, NJR Projects
and Matakanye Construction, could
commence with the construction of
the superstructures of the Depot and the CBD Station which
construction had to commence on 1
July 2019.
27.5 The Project was to
be funded from the Public Transport Network Grant received by the
Defendant from the National Department
of Transport. Money allocated
to the defendant in terms of the aforesaid Grant and not being spent
during the applicable financial
year is forfeited by the defendant.
27.6 Should the plaintiff
fail to complete the aforementioned civil works by the agreed
termination date of 30 June 2019 the Defendant
would not be able to
spend the full amount allocated in terms of the aforesaid G2019 and
would as a result forfeit part of the
Grant to it during the
financial year 2018/2019 and would as a result forfeit part of the
Grant in an amount equal to the amount
it could not spend.”
[5]
The defendant proceeded to plead that the plaintiff breached the
agreement by assigning parts
of the contract to other contractors;
abandoning the site by stopping all work on the site from 10 October
2019 until 10 February
2020; suspending the progress of works for
more than fourteen days; failing to proceed with the works in
accordance with the approved
programme; failing to complete by the
agreed extended date of 30 June 2019; failing to carry out the works
in accordance with the
contract; failing to submit acceptable
performance security in respect of the works despite a request for
such security.
[6]
In counter-claim 2, the defendant pleaded that due to the failure to
complete the civil works
by 30 June 2019 a delay was caused in the
implementation of the contract for the construction of the Depot by
NJR Projects and
the construction of the CDB Station by Matakanye
Construction from 1 July 2019 to 1 July 2020. As a result of the
delay, extra
time related costs were incurred in the amount of R4081
731.79 and R1 650151.65 respectively. As a further result of the
delay
the contract price for the construction of the Depot and the
contract price in respect of the CBD Station escalated with 4,6% in
the amount of R1 045 781.25 in respect of the Depot and R1 136 617.54
in respect of the CBD Station.
[7]
In counter-claim 4 it is alleged that the failure caused by the delay
resulted in incurring costs
in retaining professional supervisory
services of the engineer who supervised the execution of the contract
for the period 1 July
2019 to 3 March 2020 in the amount of R1 514
300.00 and in counter–claim 5 the defendant alleged that as a
result of the
failure to complete the works on 30 June 2019 the
defendant was unable to spend the full amount allocated to it in
terms of the
Grant received from the National Department of Transport
during the financial year 2018/2019. The defendant has failed to
spend
R55 984 733.13 on the Project.
[8]
It is contended that the facts set out in paragraph 27 to which
reference have been made above
render the counterclaims vague and
embarrassing in that, (a) none of the facts referred to conditions in
the written agreement;
and (b) the appointment of the plaintiff was
not subject to or in conjunction with either NJR Projects or
Matakanye Construction;
(c) the contract was not subject to the
Public Transport Network Grant being spent in a specific financial
year.
[9]
Clause 26 of the service level agreement contains a provision that
the contract is the sole record
of the agreement and that no party
shall be bound by any express or implied term, representation,
warranty, promise or like, not
recorded in the said contract. The
agreement superseded and replaced all prior commitments or
representations whether oral or written
between the parties.
[10]
The allegations in paragraph 27 cannot be divorced from the
exceptions in respect of counter-claims 2, 3,
4 and 5. Save for
counter-claim 1, the remainder counter-claims are premised on the
averments made in paragraph 27.
[11] As
far as counter-claims 2 and 3 are concerned, the exceptions are that
the two counterclaims are vague and
embarrassing, alternatively lack
averments to sustain a cause of action due to the failure to set out
how the damages are calculated
and further that the damages are too
remote to result from the breach of contract.
[12]
The exception to counter-claim 4 is that the defendant was
contractually obliged to retain the professional
services of an
engineer up until the date of cancellation which was 3 March 2020.
The claim of R1 514 300.00 is for the costs in
retaining the services
of the engineer for the period 1 July 2019 to 3 March 2020 which is
at odds with the contractual terms of
the agreement between the
parties.
[13]
The exception to counter-claim 5 is that the non-use of the budgeted
amount does not result in a loss. Both
counter-claims 4 and 5 is bad
in law and lack averments to sustain a cause of action.
[14]
The defendant claims special damages in counterclaims 2 to 5 for
losses sustained as a result of breach of
contract on the basis of
the averments contained in paragraph 27. It is a fundamental rule of
our law that damages for breach of
contract, is that the sufferer
should be placed in the position he/she would have occupied had the
contract been properly performed,
as far as it can be done by the
payment of money and without undue hardship to the defaulting
party.
[1]
In
Holmdene
Brickworks
,
Corbett JA (as he was then) explained:
“
To
ensure that undue hardship is not imposed on the defaulting party the
sufferer is obliged to take reasonable steps to mitigate
his loss or
damage (
ibid
.)
and, in addition, the defaulting party’s liability is limited
in terms of broad principles of causation and remoteness
to (a) those
damages that flow naturally and generally from the kind of breach of
contract in question and which the law presumes
the parties
contemplated as a probable result of the breach, and (b) those
damages that, although caused by the breach, are ordinarily
regarded
in law as being too remote to be recoverable unless, in the special
circumstances attending the conclusion of the contract
the parties
actually or presumptively contemplated that they would probably
result from its breach…The two limbs, (a) and
(b), of the
above-stated limitation upon the defaulting party’s liability
for damages correspond closely to the well-known
two rules in the
English case of
Hadley v Baxendale,
156 ER 145..
”
[15]
I pause to also draw attention to
North
& Son (Pty) Ltd v Albertyn
[2]
where
the plaintiff claimed loss of income. Van Blerk JA stated:
“
Die
vergoeding wat hier ge-eis word is ten opsigte van skade met die oog
op die bestaan van spesiale omstandighede. ‘n Vergoedingsplig
rus op die verweerder slegs as ten tyde van die aangaan van die
ooreenkoms dit rederlikerwys gesȇ kan word dat die partye
sodanige
skade werklik in gedagte gehad het,
of dat dit rederlikerwys veronderstel
kan word dat hul dit kon verwag het as ‘n waarskynlike gevolg
van ‘n breuk van
die ooreenkoms
(
Victoria Falls and Transvaal Power Co
Ltd v Consolidated Langlaagte Mines Ltd
1915 AD 1
op bl 22, en
Lavery & Co
Ltd v Jungheinrich
1931 AD 156
op bl
169), of soos APPELREGTER WESSELS in laasgenoemde saak op bl 175 sȇ,
“
These
special damages can, however, only be recovered if it is clear that
both parties and not one party only knew of the special
circumstances
and that if it can reasonably be inferred that the contract was
entered into with a view to these special circumstances
(Pothier, sec
162)”.
Dit is derhalwe nodig dat
in die deklerasie beweer word dat verweerder kennis gedra het van die
spesiale omstandighede en dat die
ooreenkoms op grond daarvan gesluit
was.” (The emphasis is mine).
[16]
The exception to the allegations in paragraph 27 only, is
misconceived. In the present case the defendant
understandably
pleaded the facts in paragraph 27 to overcome remoteness of loss to
be able to recover damages which the parties
actually contemplated
when the contract was concluded. Counsel for the plaintiff argued
that the words “on the basis of”
are objectionable. It
takes a too narrow view of the essential requirements for a claim for
special damages. No conclusion of law
is pleaded in paragraph 27. The
facts which both parties were actually aware of at the time the
contract was concluded, are pleaded.
Those facts are neither terms
nor conditions contained in the agreement, but are the facts outside
of the contract that the parties
were aware of when the contract was
concluded. It is not sinister for the plaintiff to have knowledge
that the civil works it is
required to perform are an integral part
of a host of other work to be performed by contractors who had been
procured by the defendant
for the completion of the project. Indeed,
it would have been surprising if the plaintiff had not been aware
that certain work
are earmarked to be done by other contractors. It
cannot be objectionable to plead those facts. The exception to
paragraph 27 should
be dismissed.
[17]
The question that arises is whether the damages claimed were within
the contemplation of the parties at the
time the contract was
concluded or were reasonably foreseen by them. A plaintiff may only
recover those damages for loss which
the plaintiff despite reasonable
precautions could not prevent. It is unfair and unequitable to hold
the plaintiff liable for special
consequences which could not have
been in the contemplation of the plaintiff when the contract was
entered into.
[3]
A plaintiff
must, therefore, plead what the nature of the damages were which they
have contemplated or have reasonably foreseen
but could not prevent.
[18]
The averments in paragraph 27, if considered in isolation, are not a
cause of action but rather a precursor
to be connected and in
conjuction with the averments in counter-claims 2, 3, 4 and 5 to
complete the causes of action for the recovery
of the special damages
claimed. In
Safer
Clothing Industries (Pty) Ltd v Worcester Textiles (Pty) Ltd
[4]
Corbett J (as he then was) referred with approval to
Beck
on Pleadings
2
nd
ed at 44, that stated:
“
When
special damages are claimed for breach of contract the question may
arise whether such damages are not too remote. This question
depends
on whether or not, at the time the contract was entered into, such
damages could fairly be said to be within the contemplation
of the
parties as a consequence of breach of contract. It is necessary in
the declaration to allege that such damages were in the
contemplation
of the parties at the time the contract was entered into and that the
failure to do so would render the declaration
excipiable. An
allegation that the defendant had knowledge of certain circumstances
is not sufficient. There must in addition be
an allegation that the
contract was entered into on the basis that the plaintiff would
suffer the damages alleged in the event
of the breach.”
[18]
No averments were made in respect of the latter requirement mentioned
above, that the parties actually contemplated
or have reasonably
foreseen at the time the contract was concluded or that the contract
was entered into on the basis that the
defendant would suffer the
damages alleged to have been suffered in the event of the breach. The
absence of these essential allegations,
in my view, render the
counter-claims vague and embarrassing. The exceptions, although
directed at each of the claims, nevertheless
affects all the causes
of action in respect of which special damages are claimed and
therefore goes to the whole of the pleading.
[5]
[19]
The exception raised against counter-claims 2, 3, 4 and 5 must
succeed on that ground.
[20] I
do believe that sufficient facts were pleaded for the plaintiff to be
able to plead in relation to the
quantum of damages claimed in
counter-claim 2 and 3.
ORDER
1.
The exception to paragraph 27 is dismissed.
2.
The exceptions to counter-claims 2, 3, 4
and 5 succeed with costs.
3.
The counter-claims of the defendant are set
aside.
4.
The defendant is granted leave to file
amended counter-claims within 15 days, if so advised.
GC MULLER
JUDGE OF THE HIGH
COURT
LIMPOPO DIVISION:
POLOKWANE
APPEARANCES
1.
For the Plaintiff
:
Adv CM Rip
2.
For the Defendant
:
Adv JAL Pretorius
3.
Date judgment reserved
:
25 July 2022
4.
Date judgment delivered
:
11 August 2022
[1]
Holmdene
Brickworks (Pty) Ltd v Roberts Construction Co Ltd
1977 (3) SA 670
(A) 687C;
Katzenellenbogen
Ltd v Mullin
1977 (4) SA 855
(A) 875;
Svorinic
and Others v Biggs
1985 (2) SA 573
(T) 577B.
[2]
1962
(2) SA 212
(A) 215A.
[3]
Victoria
Falls & Transvaal Power Co Ltd v Consolidated Langlaagte Mines
Ltd
1915 AD 1, 22.
[4]
1965
(2) SA 424
(C) 428D-E, 429D.
[5]
Jowell
v Bramwell-Jones
1998 (1) SA 836
(W) 899G;
Venter
and Others NNO v Barritt; Venter and Others v Wolfsberg Arch
Investments 2 (Pty) Ltd
2008 (4) SA 639
(C) par 10-11.