JFE Electronic Engineering (Pty) Ltd t/a JFE Security v Buildcost Quantity Surveyors and Another (4320/2020) [2021] ZALMPPHC 73 (19 October 2021)

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[2021] ZALMPPHC 73
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JFE Electronic Engineering (Pty) Ltd t/a JFE Security v Buildcost Quantity Surveyors and Another (4320/2020) [2021] ZALMPPHC 73 (19 October 2021)

REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
LIMPOPO
DIVISION, POLOKWANE
CASE NO:
4320/2020
In the matter
between:
JFE ELECTRONIC
ENGINEERING (PTY)
LTD
t/a JFE SECURITY
PLAINTIFF
And
BUILDCOST
QUANTITY SURVEYORS
FIRST DEFENDANT
GERRIT
CHRISTIAAN NAUTA
SECOND DEFENDANT
JUDGEMENT
KGANYAGO J
[1]
The plaintiff has issued summons against the defendant for payment of
R13 941 339.00, for work done
and material supplied in connection
with a construction project at the Tzaneen Correctional Centre. Keren
Kula Construction (KKC)
was appointed by the Department of Public
Works (DPW) as the principal contractor on the project for the
development and construction
of a prison facility at Tzaneen
Correctional Centre. Both KKC and DPW have concluded a written
agreement (principal building agreement).
KKC in turn appointed the
plaintiff as a selected subcontractor to carry out certain security
installation works on the project.
Seyffert Steenkamp and Nauta (now
known as Buildcost Quantity Surveyors CC, the first defendant) were
appointed as professional quantity
surveyor on the project by DPW.
Mashilo Lambrechts Architects and Ichtus Studio Architects were
appointed as principal agents of
the project. The second defendant is
a member of the first defendant.
[2]
As the project was progressing, KKC experienced financial
difficulties and on 10
th
December 2013, a triparte
agreement was concluded between DPW, KKC and the plaintiff to the
effect that KKC ceded the contract to
the plaintiff, in terms of
which the plaintiff took over the remainder of project in order to
complete it. The defendants were not
parties to the cession
agreement. The involvement of the defendants in the project was that
of a quantity surveyor, an agent of the
DPW, who would survey the
works on a monthly basis, and recommend an amount to be certified for
payment by the principal agent.
[3]
After entering an appearance to defend the plaintiff’s action, the
defendants served the plaintiff
with a Rule 30A notice complaining
that the plaintiff’s particulars of claim did comply with the
provisions of Rule 18 of the Uniform
Rules of Court (Rules). That led
to the plaintiff amending its particulars of claim. On receipt of the
plaintiff’s amended particulars
of claim, the defendants served the
plaintiff with a Rule 23(1) notice in which it gave the plaintiff
notice to remove the cause
of complaint. In that notice the
defendants were alleging that the plaintiff’s amended particulars
of claim were vague and embarrassing,
alternatively did not disclose
a cause of action.
[4]
The first complaint was that there was no contractual nexus between
the plaintiff and defendant
entitling it to payment, in that the
plaintiff has failed to plead the relevant terms of the principal
building contract which would,
in terms of the cession, entitle the
plaintiff to payment. The second complaint was that there was no
breach of contract, in that
the cession agreement did not create
obligations, but only ceded and transferred rights from KKC to the
plaintiff, which arose from
the principal building agreement. Further
that without an allegation that the defendants owed KKC an obligation
to certify an amount
for payment, the amendment are unsustainable to
find a contractual claim. The third complaint was that there was no
delictual claim,
in that the plaintiff was attempting to support a
delictual claim for pure economic loss, but failed to plead facts
from which a
legal duty to prevent economic harm from befalling can
be inferred.
[5]
With regard to the first complaint, the defendants had submitted that
in law only rights may be
ceded, and that the only right that could
legally have been ceded to the plaintiff, was KKC’s right to
receive payment from the
DPW for the execution of subcontract works.
Further that those rights accrued to KKC in terms of the principal
agreement, and not
in terms of the subcontract agreement because in
terms of the subcontract agreement, KKC was obliged to pay plaintiff,
and the plaintiff
was obliged to execute the subcontract work. The
defendant further submitted that the subcontract came to an end when
the cession
was effected. Further that nobody can transfer to another
more rights than he or she has, that KKC could not transfer or cede
to
the plaintiff more rights that it itself had in terms of the
principal contract.
[6]
With regard to the second complaint, the defendants had submitted
that the plaintiff had pleaded
that the defendants had breached their
obligation under the cession agreement. It is the defendants’
contention that the said statement
is, in law unsustainable because
the cession agreement did not create obligations, but only ceded and
transferred rights from KKC
to the plaintiff, which arose from the
principal building agreement. Further that the plaintiff has failed
to allege that any of
the defendants was a party to the principal
agreement.
[7]
Regarding the third complaint, the defendants have submitted that it
was not only incumbent on the
plaintiff to allege a duty to take
care, but it must also allege that the duty was wrongly and
negligently breached. Further that
it was incumbent on the plaintiff
to allege facts which, if proved, would justify the inference that
such duty existed, and that
that duty was wrongly and negligently
breached.
[8]
The defendants have raised a further ground of complaint, that it is
not clear whether the plaintiff’s
claim is for delictual or
contractual damages. It is the defendant’s contention that
plaintiff’s particulars of claim as amended
are vague and
embarrassing, alternatively disclose no cause of action against the
defendants, and that they should be struck out.
[9]
The plaintiff with regard to the first ground of complaint has
submitted that the agreement did
not entail a mere cession of rights,
but that it entailed the cession, assignment and transfer of rights
and obligations, and the
creation of rights and obligations. That the
defendants’ exception on the basis that, because it was termed or
named a “cession”
agreement, it could effect not more than a
cession of rights under the principal agreement, is premised upon
failure to have a proper
regard to the terms and import of the
agreement and the aforesaid allegations in the plaintiff’s
particulars of claim. That the
mere fact the defendants were not
parties or signatories to the agreement does not mean that they could
not be appointed to the project.
[10]
Regarding the second complaint, the plaintiff has submitted that the
exception was premised on the assumption
that because the agreement
was headed or termed “cession” agreement it did not assign,
transfer or create obligations. It is
the plaintiff’s contention
that its case does not rest only on a cession of rights under the
principal building agreement, but
that it also rest on the rights and
obligations ceded/assigned/transferred and created under the new
agreement and in particular,
the obligations which the plaintiff
avers the defendants have incurred thereunder, alternatively tacitly
undertook.
[11]
Regarding the third complaint, the plaintiff submitted that it had
pleaded in its particulars of claim,
that the first defendant was
appointed as the professional quantity surveyor on the project under
the principal building agreement,
and that indeed the defendants have
performed the role of quantity surveyor. That in their capacity as
quantity surveyor, they bear
a duty to the plaintiff to carry out
their function with reasonable skill and care and independently,
exercising reasonable professional
judgment.
[12]
With regard to the fourth complaint, the plaintiff has submitted that
it had pleaded the damages as being
the difference between the amount
certified by the defendants and that to which the plaintiff would
have been entitled had the defendant
performed their contractual
obligations. Further that the distinction between contractual and
delictual damages is clearly and separately
made and pleaded.
[13]
The defendants have delivered an exception to the plaintiff’s
amended particulars of claim on the grounds
that they are vague and
embarrassing alternatively, lacks averments necessary to sustain the
cause of action. What this entails is
that the plaintiff had failed
to plead material facts in its particulars of claim on which it
relied on for a particular averment,
and therefore the defendant was
embarrassed by the vagueness or insufficiency of the facts averred.
An exception that a pleading
is vague and embarrassing strikes at the
formulation of the cause of action and not its legal validity. (See
Trope
and
Others
v South African Reserve Bank
[1]
).
[14]
In order to succeed an excipient has a duty to persuade the court
that upon every interpretation which
the pleading in question can
reasonably bear, no cause of action is disclosed, failing which the
exception ought not to be upheld.
In
Living
Hands v Ditz
[2]
Makgoka J said:
“
Before
I consider the exceptions, an overview of the applicable general
principles distilled from case law is necessary:
(a)
In considering an exception that a pleading
does not sustain a cause of action, the court will accept, as true,
the allegations pleaded
by the plaintiff to assess whether they
disclose a cause of action.
(b)
The object of an exception is not to
embarrass one’s opponent or to take advantage of a technical flaw,
but to dispose of the case
or a portion thereof in an expeditious
manner, or to protect oneself against an embarrassment which is so
serious as to merit the
costs of an exception.
(c)
The purpose of an exception is to raise a
substantive question of law which may have the effect of settling the
dispute between the
parties. If the exception is not taken for that
purpose, an excipient should make out a very clear case before it
would be allowed
to succeed.
(d)
An excipient who alleges that a summons
does not disclose a cause of action must establish that, upon any
construction of the particulars
of claim, no cause of action is
disclosed.
(e)
An over-technical approach should be
avoided because it destroys the usefulness of the exception
procedure, which is to weed out cases
without legal merit.
(f)
Pleadings must be read as a whole and an
exception cannot be taken to a paragraph or part of a pleading that
is not self-contained.
(g)
Minor blemishes and unradical embarrassment
caused by a pleading can be cured by further particulars.”
[15]
The defendant’s first complaint to the plaintiff’s amended
particulars of claim is that there is
no contractual nexus between
plaintiff and defendant entitling it to payment. It is common cause
that in the beginning, the principal
building contract was between
DPW and KKC. KKC has in turn appointed the plaintiff as a
subcontractor to execute certain works of
the project. When KKC
experiences financial difficulties it ceded the remaining portion of
its work to the plaintiff for the plaintiff
to complete it. Even
though in the amended particulars of claim the plaintiff has amended
the heading of the “cession agreement”
to “the agreement” it
does not change the content of the agreement that was concluded
between KKC, plaintiff and DPW from being
a cession agreement to
another kind of an agreement.
[16]
In
Lynn
& Main Inc v Brits Community Sandworks CC
[3]
Mpati P said:
“
It
is trite that a cession is a method by which incorporeal rights are
transferred from one party to another. It is an act of transfer
from
a creditor; as cedent, to the cessionary, a right to recover a debt
from the debtor…The transfer of the right is effected
by the mere
agreement between the transferor (cedent) and the transferee
(cessionary).”
[17]
Generally the right that is being transferred to the cessionary by
the cedent, is the right to recover
a debt from the debtor. In the
case at hand at the time of the conclusion of the cession agreement,
the plaintiff was already a subcontractor
of KKC the cedent. On
conclusion of the cession agreement, the subcontract agreement ceased
to exist. In terms of clause 1 of the
cession agreement, the parties
have agreed that the cedent will cedes, assigned and transferred the
remaining portion of the Tzaneen
agreement, as described in annexure
“A”. Annexure “A” read as follows:
“
The
total value of the final account for the security installation
measured works including variations plus the total value of the
CPA
applicable to the security installation plus the P&G less the
previous certified amount, all JFE’s agreed rates:
I.E
all work that has been completed but not yet certified and/or in
accordance with terms of the contract and specifications.”
[18]   The
Tzaneen agreement referred in the cession agreement refers to the
principal building agreement which was between
DPW and KKC. In the
preamble of the cession agreement it has been specifically recorded
that that the cedent is agreeing to transfer
the remaining portions
of work as described in annexure “A” in respect of the Tzaneen
work agreement to the cessionary. Annexure
“A” refers to all work
which still need to be completed in accordance with the
terms of
the contract and project specification.
The cession agreement did
not contain the project specifications but only described the portion
of the work of the Tzaneen agreement
that has been ceded to the
plaintiff. In my view, the specifications of the project will be
contained in the principal building agreement
including the total
estimated costs of the project even though the cession agreement made
provision for price variation at JFE’s
agreed rates.
[19]
In my view, since the subcontract agreement between KKC and the
plaintiff has ceased to exists, and the
cession agreement did not
contain all the specified terms of the project, the principal
building agreement will not be treated as
if it does not exist. The
plaintiff has stepped into the shoes of KKC in relation to the
remaining portion of the Tzaneen agreement.
That relationship was
regulated by the cession agreement and the principal building
agreement since the rights of the project accrued
to KKC in terms of
the principal building agreement. The plaintiff in its particulars of
claim has stated it is not in possession
of a copy of the principal
agreement and has not attached it to its particulars of claim or
referred to any portion of it. The plaintiff
has treated the
principal building agreement as if it did not regulate its
relationship with DPW.
[20]
The plaintiff’s claim can therefore not be solely based on the
cession agreement, but it must be read
in conjunction with the
principal building agreement. Therefore, the plaintiff will have to
plead the relevant terms of the principal
building contract which
would in terms of the cession agreement entitle it to claim payment.
Without the relevant terms of the principal
agreement which will be
read in conjunction with cession agreement, the plaintiff’s
particulars of claim lack the necessary averments
to sustain its
cause of action.
[21]
The second complaint to the plaintiff’s particulars of claim is
that of no breach of contract. The
defendant has submitted that the
plaintiff has pleaded that the   defendants have breached their
obligation under the cession
agreement, whilst the cession agreement
did not create obligations, but only ceded and transferred rights
from KKC to the plaintiff,
which arose from the principal building
agreement.
[22]
It is common cause that the defendants were the agent of DPW, and
were not a party or signatory to the
cession agreement. Generally, an
agent act for the principal, and that authority to act does not
impose on an agent liability in
damages to third parties. The agent
warrant its own authority to act as an agent for the principal for
which it purports to act.
Absent any agreement between the agent and
the third that creates liability in the agent, the agent’s
liability if any, must be
sought in delict in an action based on
negligence or fraud. (See
Road
Accident Fund v Shabangu and
Another
[4]
)
.
[23]
Clause 5 of the cession agreement provides that the cessionary agrees
to submit its monthly payment claims
to the Project Quantity Surveyor
and the Employer undertakes to ensure that the claims are assessed,
certified and paid as expeditiously
as possible. Even though the
plaintiff must submit claims to the defendants for assessment, it is
DPW that undertakes to ensure that
the plaintiff’s claims are
assessed by the defendants. Should the plaintiff’s claims not be
assessed and certified as agreed
in terms of the cession agreement,
it will be DPW which will be in breach even though the actual
assessment and certification is
been done by the defendants. The mere
fact that the cession agreement provides that defendants are required
to assess and certify
does not create agent liability to third
parties without the defendants been the parties and signatories to
the cession agreement.
More will be required to create agent
liability in damages to third parties, and in my view the cession
agreement as it stand does
not create agent’s liability.
[24]
The third complaint to the plaintiff’s particulars is that of no
dilictual claim. The defendant submitted
that the plaintiff seeks to
rely on a duty of care giving rise to a claim in delict, whilst the
plaintiff’s claim is one for pure
economic loss. The plaintiff has
submitted that the defendant’s duty to certify payments was a
function which DPW will not perform,
partly due to lack of expertise,
and therefore the defendants bears a duty to the plaintiff to carry
out that function with reasonable
skill and care and independently,
exercising reasonable professional judgment.
[25]
The question is whether the act or omission which the plaintiff is
relying upon was wrongful. For that
to be determined it must be
established whether the defendants owed a legal duty to the plaintiff
for them to held liable. In
Municipality
of Cape Town
v
Bakkerud
[5]
the
court in dealing with an omission held that the existence of culpa
only becomes relevant sequentially after the situation has
been
identified as one in which the law of delict requires action. As per
the cession agreement it is the DPW which undertakes to
the plaintiff
to ensure that claims are assessed and certified. The agent
relationship which the   defendants had with DPW imposes
a duty
on the defendants to advance the interest of DPW. Therefore, it will
be DPW which will give the defendants instructions, whilst
at same
time DPW will ensure that the monthly payment claims submitted to
defendants by the plaintiff are assessed and certified.
Generally
speaking, it is not the function of the agent to protect the interest
of a third party by doing, or refraining from doing
something that
might injure that party. Something more is required. (See
Road
Accident Fund v Shabangu
above).
In my view, the defendants did not owe any legal duty to the
plaintiff whilst carrying out the instructions of DPW.
[26]
The fourth complaint to the plaintiff’s particulars of claim is
that of contractual or delictual damages.
The defendant in their
exception has stated that it is not clear whether the amount which
the plaintiff is claiming constitute positive
or negative interest.
The plaintiff in its particulars of claim in the main prayer, is
claiming the difference between the amount
certified by the
defendants, and that to which the plaintiff would have been entitled
had the defendants performed their contractual
obligations. In the
alternative, the plaintiff is claiming the alleged loss which would
not have arisen had the defendants not been
in breach of their duty.
In my view, that is sufficient to make a distinction between
contractual and delictual damages. The plaintiff
has also set out the
amount it would have been paid had the defendants allegedly performed
their duty properly, and has set out the
alleged loss arising out of
the alleged delict by the defendants.
[27]
In my view, on the first, second and third complaint, the plaintiff’s
particulars of claim as amended
discloses no cause of action against
defendants, whilst there is no merit on the fourth complaint. The
defendants’ is seeking that
the plaintiff’s particulars of claim
be struck out. In
Group
Five Building LTD v Government of the
RSA
[6]
Corbett CJ said:
“
An
order dismissing an action puts an end to the proceedings and means
that if the plaintiff wishes to pursue his claim on a different
pleading he must start de novo. This may have drastic consequences
for the plaintiff, particularly where it results in the prescription
of the claim. In my opinion, it would be contrary to the general
policy of the law to attach such drastic consequences to a finding
that the plaintiff’s pleading discloses no cause of action. Here
the analogy of a defective summons springs to mind. And the cases
of
Trans-African Insurance Co Ltd v
Maluleka
1956 (2) SA 273
(A)
and
Prudential Assurance Co Ltd v Crombie
1957 (4) SA 699
(C)
illustrate the
reluctance of the Courts to deny the plaintiff the opportunity to
amend his summons, even if fatally defective by
reason of its failure
to state a cause of action.”
[28]
In my view, the proper order will be to uphold the exception on the
defendant’s three complaints, set
aside the plaintiff’s
particulars of claim, and the plaintiff be given leave to amend.
[29]
In the result I make the following order:
29.1
The defendants’ exception on the three complaints is upheld with
costs, which shall include the costs of a senior counsel.
29.2
The plaintiff’s particulars of claim are set aside.
29.3
The plaintiff is given leave, if so advised, to file amended
particulars of claim within fifteen days of this order.
KGANYAGO J
JUDGE
OF THE HIGH COURT OF SOUTH
AFRICA,
LIMPOPO DIVISION,
POLOKWANE
APPEARANCES:
Counsel
for the plaintiff
:
Adv IC Bremridge SC
Instructed
by
: C&F Friedlander
attorneys
Counsel
for the defendant
: Adv P Ellis SC
Instructed
by
: Joubert & May attorneys
Date
heard
: 13
th
September 2021
Electronically
delivered on
:
19
th
October 2021
[1]
[1993] ZASCA 54
;
1993
(3) SA 264
(A) at 269I
[2]
2013
(2) SA 368
(GSJ) at para 15
[3]
[2008] ZASCA 100
;
2009
(1) SA 308
(SCA) at 311C-D
[4]
[2004]
ZASCA 23
(30 March 2004) at para 9
[5]
[2000]
ZASCA 174
(29 May 2000) at par 9
[6]
[1993] ZASCA 4
;
1993
(2) SA 593
(A) at 602J-603B