About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Supreme Court of Appeal
SAFLII
>>
Databases
>>
South Africa: Supreme Court of Appeal
>>
2011
>>
[2011] ZASCA 217
|
|
G. Liviero & Son Building (Pty) Ltd v Sundowner Property Development (Pty) Ltd (49/11) [2011] ZASCA 217; [2012] 2 All SA 43 (SCA) (29 November 2011)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case No: 49/11
In the matter between:
G. LIVIERO & SON
BUILDING (PTY) LTD
…...............................................
APPELLANT
and
SUNDOWNER PROPERTY
DEVELOPMENT (PTY) LTD
…....................
RESPONDENT
Neutral citation
:
Liviero v Sundowner Property Development
(49/11)
[2011] ZASCA
217
(29 November 2011)
Coram:
CLOETE,
HEHER, CACHALIA, SHONGWE JJA and PLASKET AJA
Heard:
8 November
2011
Delivered:
29
November 2011
Updated:
Summary:
Res
judicata
– issue estoppel – no commonality of issues
between those necessary to decide present proceedings and those part
of
ratio decidendi
of judgment in earlier proceedings.
____________________________________________________________________________________
ORDER
On appeal from:
South Gauteng High Court
(Johannesburg) (Hellens AJ sitting as court of first instance):
1. The appeal succeeds in
part.
2. The respondent is to
pay the costs of the appeal.
3. The order of the court
a quo is set aside and replaced with the following:
‘
1.
The defendant’s special plea to the plaintiff’s
particulars of claim is dismissed.
2.
The defendant is to pay the wasted costs occasioned by its reliance
on the special plea.
3.
The plaintiff’s special plea to the defendant’s
conditional counterclaim is dismissed save to the extent that its
special plea to prayer 2 is upheld and the relief claimed in that
prayer is dismissed.
4.
The plaintiff is to pay the costs wasted by its reliance on the
special plea to the counterclaim.’
_______________________________________________________________________
JUDGMENT
_____________________________________________________________________
HEHER JA (CLOETE,
CACHALIA, SHONGWE JJA AND PLASKET AJA concurring):
[1] This is an appeal
from a judgment of Hellens AJ sitting in the South Gauteng High
Court. The learned judge:
1. dismissed the
defendant’s special plea to the plaintiff’s particulars
of claim with costs;
2. upheld paragraphs 1 to
12 of the plaintiff’s special plea to the defendant’s
conditional counterclaim and dismissed
that counterclaim with costs.
The appeal is before us
with leave granted by the court a quo.
[2] The
defendant, now the appellant (Liviero), is a building contractor. The
plaintiff, now the respondent (Sundowner), is a property
developer.
In September 2004 the parties entered into a written contract (The
Principal Building Agreement, JBCC
1
Series 2000, Fourth Edition, hereinafter referred to as
‘the agreement’). Liviero undertook to construct 231
sectional
title units in phases on the property of Sundowner, as
employer, being Erven 992 and 993 Sundowner Ext 37, Gauteng, for a
contract
price of R52 268 174.42 inclusive of VAT. Phuhlisa
Development Solutions (Pty) Ltd carries on business as a building
project manager
and its director, Mr F Grobler, was nominated in the
agreement as the principal agent.
[3] On 14 September 2004
the building site was handed over to Liviero, which duly commenced
the construction of the works.
[4] A series of variation
orders was issued under the agreement which had the effect of
extending the agreed practical completion
dates. The last date for
such completion was 28 February 2006 (in relation to Blocks G to L of
the development). In the application
proceedings to which I shall
shortly refer it was common cause that Liviero failed to achieve
practical completion by the extended
completion date.
[5] On 26
September 2006 Liviero purported to cancel the agreement, relying on
clause 38 thereof, due to Sundowner’s failure
to pay an amount
of R474 487.18 which had been certified for payment by Grobler.
[6] Sundowner paid the
said amount to Liviero on 27 September 2006. It regarded Liviero’s
purported cancellation as a repudiation
of the agreement because
Liviero was at the time in breach of its obligation to achieve
timeous practical completion. After taking
legal advice it
communicated an election to accept the repudiation and terminate the
agreement.
[7] Liviero remained in
possession of the site pending payment or the issue of a certificate
of practical completion, purporting
to do so on the strength of a
contractual lien.
[8] In
November 2006 Sundowner applied urgently to the South Gauteng High
Court for orders ejecting Liviero from occupation of the
property and
declaring that Liviero’s purported cancellation of the
agreement on 26 September 2006 was invalid.
2
[9] Sundowner relied in
the ejectment proceedings both on its ownership of the property and
its cancellation of the agreement pursuant
to the acceptance of
Liviero’s alleged repudiation. The facts that I have set out
earlier in this judgment were common cause
in the application.
[10] Liviero opposed the
relief claimed by Sundowner. It raised as a point in limine an
arbitration clause in the agreement that,
so it contended, obliged
Sundowner to refer the disputes between the parties to arbitration.
[11] Liviero justified
its continued occupation of the property by reliance on clause 24.7
of the agreement, contending that Sundowner
was only entitled to
possession of the works upon issue by the agent of a certificate of
practical completion, that by the date
of its cancellation of the
agreement it had achieved practical completion and was due an amount
of R7 411 960.38 for work done
under the agreement and was entitled
to retain possession until paid in full. It maintained its original
position that the cancellation
was lawful because Sundowner had
failed to pay timeously on certificates issued by Grobler.
[12] The application was
heard by Louw AJ. He delivered judgment on 23 March 2007, concluding
with the following orders:
‘
1.
The first respondent is to be ejected from the property known as Erf
1276 Sundowner Extension 37, situated on the corner of Meteor
and
Northumberland Roads, Sundowner.
2.
It is declared that the purported cancellation on 26 September 2006
by the first respondent of the written contract, annexure
‘FA3’
to the applicant’s founding affidavit, was invalid.’
Liviero was ordered to
pay the costs of the application.
[13] Liviero applied for
leave to appeal. Louw AJ delivered a reasoned judgment dismissing
that application with costs on 1 October
2007.
[14] In November 2008
Sundowner instituted action against Liviero claiming:
1. Contractual penalties
for delay in performance – R4 947 600.00;
2. Damages for the cost
of completing incomplete work under the agreement –
R178 454.70;
3. Damages for defective
performance – R5 144 922.15; and
4. Damages in the form of
interest paid because of late transfer of units –
R1 706 852.88.
[15] Liviero filed a
special plea in bar based on the arbitration clause in the agreement
and pleaded over on the merits denying
liability. It also filed a
counterclaim conditional on the court refusing to stay the
proceedings as sought in the special plea.
[16] Sundowner replied to
Liviero’s special plea and pleaded to its conditional
counterclaim seeking its dismissal with costs.
[17] In a supplementary
pre-trial minute dated 1 March 2010 the parties agreed to separate
the following issues for preliminary
adjudication by the trial court:
‘
2.2.1
The Defendant’s special plea of arbitration as pleaded in
paragraphs 1 to 3 of the Defendant’s special plea to
the
Plaintiff’s particulars of claim;
2.2.2
The Plaintiff’s replication of
res
judicata
as set out
in paragraphs 1 to 5 of the Plaintiff’s replication to such
special plea; and
2.2.3
The Plaintiff’s special plea of
res
judicata
to the
Defendant’s counterclaim as set out in paragraphs 1 to 12 of
the Plaintiff’s special plea to the Defendant’s
counterclaim.’
[18] The trial came
before Hellens AJ. Neither party elected to adduce evidence in
support of the separated issues. The file in
the application
proceedings, the judgment of Louw AJ, the application for leave to
appeal and the judgment refusing that application
were placed before
the learned judge by consent. After hearing argument he made the
orders I have referred to in the first paragraph
of this judgment and
against which the present appeal is directed.
[19] In order properly to
understand the issues in the appeal it will be necessary to quote,
first, the relevant paragraphs of Liviero’s
special plea to
Sundowner’s particulars of claim and Sundowner’s
replication to the special plea, and, second, Sundowner’s
special plea to Liviero’s conditional counterclaim.
Liviero’s
special plea
[20] Liviero’s
special plea reads as follows:
‘
1.
Annexure “K” to the principal building agreement,
Annexure “A” to the Plaintiff’s Particulars of
Claim, provides that:
1.1
the parties shall negotiate in good faith with a view to settling any
dispute or claim arising out of or relating to this agreement;
1.2
any dispute not resolved by the principal agent as per clause 40
shall be submitted by either party to arbitration in terms
of clause
40 and as below.
2.
The claims reflected in the Plaintiff’s Particulars of Claim
constitute a dispute or claim arising out of or relating to
the
agreement.
2.1
The Plaintiff failed to negotiate in good faith with a view to
settling the disputes contained in its Particulars of Claim prior
to
instituting this action;
2.2
The plaintiff failed to submit the disputes to arbitration in terms
of clause 40 of Annexure “A” and Annexure “K”
thereto.
3.
Pursuant to the provisions of
Section 6(1)
of the
Arbitration Act 42
of 1965
, the Defendant is entitled to a stay of these proceedings
pending determination of the disputes between the parties by
arbitration
as provide for in the agreement between them.
WHEREFORE
the Plaintiff claims that an order be issued staying these
proceedings pending a determination of the dispute in terms
of the
arbitration agreement between them.’
Sundowner’s
replication to the special plea
[21] Sundowner replicated
to Liviero’s special plea as follows:
‘
1.
On 23 March 2007 the above Honourable Court adjudicated the
Defendant’s alleged right
vis-a-vis
the
Plaintiff to insist on arbitration in terms of the Principal Building
Agreement read with annexure “K” thereto,
and dismissed
such alleged right.
2.
A copy of the above Honourable Court’s judgment is annexed
hereto marked “A”, the contents whereof the Plaintiff
prays be herein incorporated as if specifically recorded.
3.
The Defendant’s present plea of arbitration is a plea as to the
same subject matter on the same grounds against the same
party.
4.
The Plaintiff accordingly pleads that the Defendant’s present
plea of arbitration was finally adjudicated upon by a Court
of
competent jurisdiction, rendering the subject matter thereof
res
judicata
.
5.
Wherefore the Plaintiff persists in its claim and prays that the
Defendant’s special plea be dismissed with costs.’
Liviero’s
conditional counterclaim
[22] The conditional
counterclaims – apparently – combine eight separate
causes of action (which I shall summarise below).
The prayers for
relief (which are not expressly tied to any particular causes of
action) do not follow the pleading of individual
causes but are
lumped together at the end as follows:
‘
WHEREFORE
the Defendant claims:
1.
An order that the dates for the completion of the works be revised
and extended to the dates set out in Annexure “DEF2”;
2.
An order that the Defendant lawfully cancelled the agreement in terms
of clause 38 of the principal building agreement;
3.
An order that the plaintiff instructs its principal agent to issue
certificates of practical and works completion to the Defendant;
4.
Payment of the sum of R7 411 960,38
alternatively
payment of the sum of R7 233
505,68;
5.
Interest on the aforesaid amount calculated on the ruling interest
rates from the 4
th
August 2006 to date of
judgement;
6.
Interest on the aforesaid amounts at 160% of the bank rate applicable
from time to time to registered banks when borrowing money
from the
Central or Reserve Bank on the 1
st
of each month from the date of
judgement to date of payment.
7.
Alternatively to prayers 5 and 6; interest at 15,5% per annum a
tempore morae.’
This manner of pleading
is undesirable and confusing and may have misled both the counsel who
settled the plea to the counterclaim
and Hellens AJ, who set aside
the whole counterclaim, including causes not sought to be struck down
by the terms of the plea.
[23] The structure of the
counterclaim is a group of paragraphs preceded by a heading intended
to identify the subject-matter of
the cause addressed in those
paragraphs. Thus the divisions are:
1. Paras 5 to 16:
‘Revision of the dates for practical completion, a cause based
on clause 29 of the agreement.
2. Paras 17 to 58:
‘Payments’, divided as follows:
(i) paras 17-19 which
deal with the contract sum, the amount of Preliminaries and the
obligation to issue certificates; these paragraphs
do not embody a
separate cause of action, which may explain why there is no reference
to them in the special plea to the counterclaim;
(ii) paras 20-23:
‘Contract instructions’; this cause relates to
adjustments to the contract value in accordance with
clause 32 of the
agreement, amounting to R2 540 990,00. Here also there is
no special plea to these paragraphs, more
surprisingly;
(iii) paras 24-30:
‘Preliminaries’; this is a cause based on clause 41.5.5
of the agreement, the basis appears to be
an entitlement to a
revision of the construction period, an allegedly agreed additional
sum of R885 000,00 in respect of preliminaries
in consequence, and an
agreed revision of the contract period in respect thereof, plus a
further adjustment of the contract sum
in an amount of R2 540 990,00.
To these paragraphs also no special plea is raised;
(iv) para 31:
‘Escalation’; a cause based on clause 31.5.3 of the
agreement requiring payment of R1 080 854,75.
To this
paragraph there is no special plea raised;
(v) paras 32-34: ‘Default
interest’; this cause is founded on clause 31.11 of the
agreement and embodies a claim for
payment of R210 116,05. There is
no special plea to these paragraphs;
(vi) paras 35-40:
‘Compensatory interest’; this cause arises from alleged
practical and works completion and late payments
in respect of moneys
due for such work; such interest is said to total R7 411 960,38;
(vii) paras 41-49:
’Cancellation’. This cause, founded on clause 38.2 and
38.5 of the agreement, appears to depend on
an allegation (in para
46) that, on 26 September 2006, the contractor gave notice of
cancellation to the employer and the agent
‘as it was entitled
to do in terms of clause 38.2 of [the contract]’. An amount of
R7 411 960,38 is said to be due
in consequence;
(viii) paras 50-57:
‘Practical completion’, a cause based on clause 24.3.1 of
the agreement and a claim for payment
in the same amount as in
relation to the previous two causes;
(ix) para 58: a cause as
an alternative, based on failure to reach practical or works
completion but alleging material completion,
utilisation of the works
by the employer, and impossibility of performance caused by the
eviction of the contractor from the property;
(x) para 59: an
alternative cause based on work incomplete and defects unremedied,
impossibility of performance; and a tender to
complete such
incomplete work and rectify the defects. As no relief was claimed
based on this paragraph it seems that it was intended
to be read as
supplementary to paragraph 58.
Sundowner’s
special plea to the conditional counterclaim
[24] The special plea
reads:
‘
1.
In paragraphs 41 to 46 of its conditional counterclaim, the Defendant
alleges-
1.1
an entitlement to have cancelled the agreement because of the
Plaintiff allegedly having been in material breach thereof on
7
September 2006; and
1.2
that the Defendant accordingly on 26 September 2006 cancelled the
agreement,
and
that it is accordingly entitled to prayer 2 of the conditional
counterclaim, i.e. that the above Honourable Court should order
that
the Defendant lawfully cancelled the agreement.
2.
In paragraphs 50 to 59 of its conditional counterclaim, the Defendant
alleges-
2.1
that it substantially completed the works, obliging the principal
agent to have issued a certificate of works and practical
completion;
alternatively,
2.2
that it materially completed the works, but that the Plaintiff made
completion and/or rectification of the works impossible
in that it
evicted the Defendant from the property, entitling the Defendant to
payment by the Plaintiff of the sum of R7 411 960.38
alternatively
such sum less R178 454,70;
further
alternatively
,
2.3
that the Plaintiff made it impossible for the Defendant to execute
the work in that it evicted the Defendant from the property,
on
account whereof the Defendant tenders to complete any incomplete work
and rectify any defects,
and
that it is accordingly entitled to prayer 3 of the conditional
counterclaim, i.e. that the above Honourable Court should order
an
instruction to the principal agent to issue certificates of practical
and works completion to the Defendant, and that it is
accordingly
also entitled to prayer 4 of the conditional counterclaim, i.e. that
the above Honourable Court should order payment
of the sum of
R7 411 960,38
alternatively
R7 233 505,68 by the
Plaintiff to the Defendant.
3.
In paragraphs 5 to 16 of its conditional counterclaim, the Defendant
alleges-
3.1
that it became entitled to a revision of the dates for completion of
the building works as set out in annexure “DEF2”
thereto;
3.2
that the principal agent on 31 August 2006, despite the Defendant’s
aforesaid entitlement, did not so revise the dates
for practical
completion of the works, but only to the extent set out in annexure
“DEF3” to the conditional counterclaim,
and
that it is accordingly entitled to prayer 1 of the conditional
counterclaim, i.e. that the above Honourable Court should order
that
the dates for the completion of the works be revised and extended to
the dates set out in annexure “DEF2” thereto.
4.
In paragraphs 35 to 37 of its conditional counterclaim, the Defendant
moreover alleges-
4.1
that it executed the building works according to the contract and
brought the works to practical completion and works completion;
4.2
that the Defendant became entitled to payment of the full contract
price plus interest, less amounts paid to the Defendant,
and that
accordingly the Defendant is entitled to payment of the sum of
R7 411 960,38 as calculated in annexure “DEF4”
to the Defendant’s conditional counterclaim,
and
that it is accordingly entitled to prayer 4 of the conditional
counterclaim, i.e. that the Plaintiff should be ordered by the
above
Honourable Court to pay to the Defendant the sum of R7 411 960.38
alternatively
the sum of R7 233 505,68.
5.
None of such prayers 1 to 4 (and accordingly also none of prayers 5
to 7 being for interest on the aforesaid amounts) is competent,
inter
alia
for the reasons
which follow.
6.
On 23 March 2007 the above Honourable Court has already adjudicated
the issues now being raised by the Defendant, and pronounced
a
judicial determination of the questions of law and issues of fact
pertaining thereto.
7.
A copy of the above Honourable Court’s written judgment and
order aforesaid, is annexed hereto marked “A”,
the
contents whereof the Plaintiff prays be herein incorporated as if
specifically recorded.
8.
Particular determinations made by the above Honourable Court were-
8.1
that the Defendant did not reach practical completion of the works by
28 February 2006 as it was obliged to do in terms of the
agreement;
8.2
that the Plaintiff on 27 September 2006 did pay the sum of
R474 487,18 being in respect of the balance outstanding of
certificates which had been rendered by the principal agent;
8.3
that the principal agent, dealing on 31 August 2006 with the
Defendant’s claim for an extension of time dated 3 August
2006,
granted no extension;
8.4
that the Defendant forfeited the right to claim an extension of time
to complete the works by failing to trigger an arbitration
within the
time limit prescribed by the agreement;
8.5
that at the date the Defendant purported to cancel the agreement,
i.e. 26 September 2006, the Defendant had itself been in default
and
in material breach of the agreement, which disentitled the Defendant
to cancel the agreement as provided in clause 38 of the
agreement;
8.6
that the Defendant’s aforesaid purported cancellation of the
agreement was invalid;
8.7
that the Defendant did not have a right to continued possession of
the property after the Plaintiff’s cancellation of
the
agreement on 10 October 2006 by means of acceptance of the
Defendant’s aforesaid repudiation;
8.8
that the Defendant accordingly was to be ejected from the property by
order of Court.
9.
The Defendant’s present conditional counterclaim is based upon
the very same subject matter already determined as between
the
parties to this action, and the prior judgment of the above
Honourable Court referred to above, being annexure “A”
hereto, is a judgment in proceedings to which the principal agent was
a party.
10.
The Plaintiff accordingly pleads that the factual and legal
allegations made by the Defendant in its conditional counterclaim
cannot again be raised as the Defendant is prevented from disputing
such issues already determined by the above Honourable Court.
11.
Annexure “A” hereto, being the judgment and order of the
above Honourable Court containing findings of fact and
law,
constitutes a judicial determination concerning the same subject
matter presently pleaded by the Defendant in its conditional
counterclaim which it directed against the same party.
12.
The Plaintiff accordingly pleads that the factual and legal basis of
the Defendant’s present conditional counterclaim
was finally
adjudicated upon by a Court of competent jurisdiction, rendering the
subject matter thereof
res
judicata
,
disentitling the Defendant to once again revisit such factual and
legal issues in its conditional counterclaim.’
[25] Hellens
AJ properly considered the law in relation to a plea of
res
judicata
. He referred to
Yellow
Star 1020 (Pty) Ltd v MEC, Department of Development Planning and
Local Government, Gauteng
2009 (3) SA 577
(SCA) at 586,
National Sorghum Breweries
Limited (t/a Vivo African Breweries) v International Liquor
Distributors (Pty) Ltd
[2000] ZASCA 159
;
2001 (2) SA 232
(SCA)
at 239-240;
African Farms and Townships Ltd v
Cape Town Municipality
1963 (2) SA 555
(A) at
562D and
Horowitz v Brock & others
1988 (2) SA 160
(A) at 179H-180A. It is unnecessary to
repeat the legal principles; in so far as I differ from the learned
judge it is only in
relation to the
ratio
decidendi
of the judgment of Louw AJ
concerning the eviction order.
[26] The learned judge
summarised the judgment of Louw AJ in relation to clause 40 (the
arbitration clause) and Annexure K to the
agreement (which deals with
the reference of a dispute to arbitration) as follows:
‘
4.1
It is not any kind of difference between the parties that may be
referred to arbitration – it is a
dispute
as
meant in clauses 40.1 to 40.3, namely, one that can arise only after
the principal agent has decided on a
disagreement
.
4.2
A
dispute
can follow only upon an
unsatisfactory decision by the principal agent on a disagreement
between the contractor and the employer.
4.3
Only the contractor has the right to request the principal agent to
determine a disagreement. It is only once the contractor
has decided
to request the determination that the principal agent is clothed with
the power to deal with a disagreement. If there
is no “disagreement”
as meant in clause 40.1, there can be no “dispute” which
can be referred to arbitration
in terms of clause 40. At the heart of
the whole arbitration process provided for in clause 40 lies a
voluntary act of the contractor:
the contractor, and the contractor
alone, can request the principal agent to decide on a disagreement
and so put into motion the
dispute resolution process which can
follow only once a disagreement has turned into a dispute. This means
that an employer cannot
trigger the process and it further means that
nothing bars an employer from approaching the High Court for relief.
4.4
Sub-clauses 40.1 to 40.3 are clear and unambiguous in their meaning
and they must be given effect to.
4.5
Annexure “K” is not a self-contained arbitral provision
that effectively supplanted clause 40. It is only a dispute
or claim
arising from the contract not resolved by the principal agent as per
clause 40 which may be submitted by either party
to arbitration. If a
proceeding is not triggered through the contractor referring a
disagreement to the principal agent, annexure
“K” can
simply not find any application.
4.6
The employer is accordingly not bound by the arbitration agreement.
The Court dealing with the urgent application in giving
judgment on
an application for leave to appeal held the following:
“
The
essence of my judgment on the arbitration point is that the
contractor, and only the contractor, had the right to trigger the
dispute resolution process that could lead to arbitration. The
employer did not have the right to trigger the process. The employer
is thus free to sue in court. It is only where the contractor
triggered dispute settlement procedures and the initial process has
failed, that ‘either part
y’
or
‘any party’ to that process could refer the dispute to
arbitration. I did not have to refer to the phrases ‘either
party’ or ‘any party’ in my judgment as those
phrases do not detract from what I clearly found to be the proper
interpretation of the contract insofar as the arbitration issues are
concerned and I do not believe that there is a reasonable
prospect
that another court may come to a conclusion different from mine on
this issue
.”’
I agree with this
summary. I also agree that the same issue of fact, ie whether the
employer can initiate arbitration in terms of
clause 40 of the
agreement, that was finally decided by Louw AJ, was essentially the
determinative issue raised by the special
plea to the particulars of
claim and the replication to the special plea. That one arose in the
context of a point
in limine
to an application involving the
relationship of parties to the building contract, while the other was
raised in the context of an
action for monetary relief by way of
penalties and damages, is not in my view sufficient to avoid the
application of the rule.
[27] In both cases the
future conduct of the proceedings required the same question to be
answered: Do the provisions of clause
40 of the agreement read with
Annexure K permit the employer to approach a court for final relief
to resolve a dispute arising
out of or concerning that agreement or
is the employer obliged to resort to arbitration? Decision of that
question requires an
interpretation of the contractual provisions, an
exercise that Louw AJ carried out and resolved conclusively in favour
of the employer.
In my view the contractor was in the proceedings
under appeal bound by that finding. This was a clear instance of an
issue estoppel.
To hold otherwise would make nonsense of a considered
and binding judgment on an issue that is raised for a second time in
direct
contradiction of that judgment.
[28] I therefore agree
with Hellens AJ that the special plea of arbitration was not well
taken and that the replication to the special
plea had to be upheld.
[29] Turning
to the
res judicata
relied
on in the plea to the counterclaim, the first task in any exercise of
this nature is to determine what was finally decided
by the court
whose decision is said to have created the bar. In this regard
whether the court was right or wrong in its decision
is beside the
point. Leave to appeal this order was refused and its effect was
final.
[30] Louw AJ was faced
with a notice of motion in which the relief claimed by the employer
was twofold:
1. An order for the
ejectment of the contractor; and
2. A declaration that the
purported cancellation of the building contract by the contractor on
26 September 2006 was invalid.
[31] The learned judge
fixed the field of his enquiry in these words:
‘
There
are two main issues in this application. The first concerns the
correct construction of an arbitration clause. . . The second
is
whether the contractor is entitled to exercise a builder’s lien
over the property of [the employer].’
[32] As to the ejectment
claim the learned judge proceeded as follows:
‘
I
must highlight that the employer’s cause of action is
essentially a
rei
vindicatio
.
Ownership being admitted, the contractor is burdened to prove that it
has a right of possession through the lien. In so far as
the
contractor relies on a lien as answer to the employer’s
rei
vindicatio
,
the onus rests on the contractor to prove the right to exercise a
lien on a balance of probabilities. This includes having to
prove
that the contractor had the right to cancel the agreement and that
the contractor cancelled it, as this is the substratum
of its lien
claim.’
[33] The learned judge,
in determining the proven facts, found that
a) Liviero had breached
the building contract by failing to attain practical completion by
the agreed (extended) date of 28 February
2006;
b) as at the date of its
purported cancellation of the agreement on 26 September 2006 the
breach had not been overcome (or remedied)
by a successful
application for extension of the date for practical completion the
agent having considered but not granted such
an application on 31
August 2006;
c) clause 38.6 of the
agreement set ‘a fixed and undisputable yardstick: if the
contractor is in default on the day that the
contractor wants to
cancel, the contractor simply cannot cancel. Leaving materiality
aside the provision allows for no interpretation
to the effect that
although the contractor might technically be in breach, in fact it is
not in breach if it is in a process of
attempting to rectify the
breach’.
[34] Having concluded,
further, that failure to reach timeous practical completion was a
breach of a material term, the learned
judge found that ‘on a
conspectus of all the facts, the contractor has not satisfied the
burden of proof which rests on it’.
He accordingly granted
orders for ejectment and the declaration sought by the employer.
[35] It may be noted that
the learned judge referred to a variety of other matters in his
judgment, but given the parameters that
he had set and the terms of
his conclusion it cannot be said that any of these was necessary for
his decision. They include the
following:
1. By the end of
September 2006 practical completion had not yet been reached.
2. The purported
cancellation was a repudiation which Sundowner accepted, resulting in
the cancellation of the contract.
3. It had to
be deemed that the agent had refused Liviero’s claim for more
time on 31 August 2006. (The learned judge also
held that, in terms
of clause 29.6 the contractor then had 20 days within which to
trigger an arbitration and failed to do so.
However, in his judgment
refusing leave to appeal, he made it clear that this was a remark
made
per incuriam
not
bearing on the ratio of his judgment, which ratio he identified as
being the ‘undisputable yardstick’ passage quoted
above.
Counsel for Sundowner conceded in argument before us that the remark
was indeed
obiter
.)
[36] The second task is
to take the identified essential findings of the first judgment and
to decide whether any is also an essential
element of the impugned
claim or defence.
[37] Save for the cause
embodied in paras 41 to 49 (‘Cancellation’) the basis for
the counterclaims seems to be this:
after the last date for practical
completion had passed the agreement remained alive and was given
effect to by Liviero in the
various respects set out in the
counterclaim; Liviero was, for the reasons specified therein,
entitled to extensions of time for
performance and adjustments to the
basis of payment, all of which the agent had been or was obliged to
grant and in consequence
of which Liviero became entitled to payment
in terms of the various provisions of the agreement on which it
relies in the counterclaim.
The foundation of the special plea to the
counterclaim in regard to these causes is first that reliance on them
involves the pursuit
of contractual remedies which are barred to the
contractor because Louw AJ had decided that the contract came to an
end on 27 September
2006 when the employer accepted the repudiation
by the contractor. As I have explained earlier the learned judge made
no such finding
as part of the ratio of his judgment, nor did the
relief that he granted to the employer carry with it such an implied
finding.
Second, as earlier noted, Louw AJ did not reach a definitive
conclusion that Liviero had forfeited the right to claim an extension
of time for practical completion.
[38] That being so, there
can be no question of applying the principles of
res judicata
to
the conditional counterclaim on the ground that it was no longer open
to Liviero to enforce its contractual rights, as Liviero’s
counsel would have us find. This is because none of the issues raised
by the counterclaim is an issue which has been adjudicated
upon (to
adopt the language of
Horowitz v Brock
at 179A-H).
[39] Paragraphs 41-49 of
the conditional claim fall into a different category. Louw AJ decided
finally, unambiguously and pertinently
(in relation to the claim for
a declaratory order) that the contractor had not lawfully cancelled
the contract on 26 September
2006. The allegation in para 46 that the
contractor had cancelled ‘as it was entitled to do in terms of
clause 38.2’
is a direct challenge to that finding which flies
in the face of the rule. Only the quoted words give offence in that
sense. It
is those words on which prayer 2 to the counterclaim is
reliant for its justification. The appropriate order, in the
circumstances,
would be to treat the special plea to paragraphs 41 to
49 as a special plea to that prayer and to uphold it accordingly.
[40] In the result the
appellant has been successful in maintaining the substantial
integrity of its conditional counterclaim and
hence its ability to
fight another day on the grounds set out in it. The respondent has
achieved success to the extent that it
has succeeding in defending
the judgment in its favour that eliminated reliance on the
arbitration bar (although that success might
prove to be a poisoned
chalice when it comes to fight the merits of the building dispute
before the High Court) and in disposing
of the cause set up in
clauses 41 to 49 of the counterclaim.
[41] In my view Liviero’s
measure of success on appeal is substantial for the simple reason
that preservation of the counterclaim
offers, potentially, a complete
counter to the reliance by Sundowner on its claim for penalties. By
comparison, the merits can
hardly be impacted by the exclusion of
paras 41 to 49 and the shutting out of arbitration is in essence a
victory of procedure.
I therefore consider it fair that Liviero
should have its costs of appeal.
[42] As to the
appropriate costs order in the court below I think a division of
costs according to the result would meet the case.
Both parties were
partially successful in relation to the objections arising from the
pleadings.
[43] The following order
is made:
1. The appeal succeeds in
part.
2. The respondent is to
pay the costs of the appeal.
3. The order of the court
a quo is set aside and replaced with the following:
‘
1.
The defendant’s special plea to the plaintiff’s
particulars of claim is dismissed.
2.
The defendant is to pay the wasted costs occasioned by its reliance
on the special plea.
3.
The plaintiff’s special plea to the defendant’s
conditional counterclaim is dismissed save to the extent that its
special plea to prayer 2 is upheld and the relief claimed in that
prayer is dismissed.
4.
The plaintiff is to pay the costs wasted by its reliance on the
special plea to the counterclaim.’
____________________
J A Heher
Judge of Appeal
APPEARANCES
APPELLANT: J J Reyneke SC
Eversheds, Johannesburg
McIntyre & Van der
Post, Bloemfontein
RESPONDENT: S J Van
Niekerk
Smit Sewgoolam Inc,
Johannesburg
Webbers, Bloemfontein
1
Joint
Building Contracts Committee
2
Phuhlisa
Development Solutions was joined as a nominal second respondent.