About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Free State High Court, Bloemfontein
SAFLII
>>
Databases
>>
South Africa: Free State High Court, Bloemfontein
>>
2019
>>
[2019] ZAFSHC 244
|
|
Geo Hydro Technologies OFS (Pty) Ltd v Member of the Executive Council: of Police, Road & Transport Free State Provincial Government and Others (5002/2018) [2019] ZAFSHC 244 (19 December 2019)
IN
THE HIGH COURT OF SOUTH AFRICA,
FREE
STATE DIVISION, BLOEMFONTEIN
Case
number: 5002/2018
In
the matter between:
GEO
HYDRO TECHNOLOGIES OFS (PTY)
LTD
Applicant
and
MEMBER OF THE
EXECUTIVE
COUNCIL:
1
st
Respondent
OF POLICE, ROAD &
TRANSPORT FREE STATE
PROVINCIAL GOVERNMENT
SSI & TSHEPEGA
JOINT
VENTURE
2
nd
Respondent
PEYPER
ATTORNEYS
3
rd
Respondent
JUDGMENT
BY:
MHLAMBI J,
HEARD ON:
10 October 2019
DELIVERED
ON:
19 December 2019
MHLAMBI,
J
[1]
The applicant seeks an order as against the second respondent for the
payment of the amount of R 2 247 917.44 to the
applicant,
interest
a
tempore morae,
calculated from the date that
such payment was made to the second respondent until date of final
payment and costs of the application.
[2]
The amount represents the total of:
2.1 R 165 091.81,
representing the capital portion of monies due to the applicants and;
2.2 R 2 082 925.63,
which represents “agreed compensation” (essentially
interest), that became payable to
the applicant due to late
payment
[1]
.
[3]
The application against the first respondent was not proceeded with
as the applicant filed a notice of withdrawal of application
against
the first respondent on 5 September 2019, as the amount claimed was
paid to the third respondent by the first respondent.
The third
respondent did not oppose the application.
[4]
The second respondent opposed the application and raised the
following three points in
limine
:
4.1 The applicant’s
claim related to and was founded on invoices dating from 2 November
2010 to 11 February 2013. The application
was launched on/or about 4
October 2018 based on a cause of action that arose during 2010 and
the claim had prescribed and the
applicant was barred from pursuing
same.
4.2 The applicant was not
entitled to the interest prior to 28 November 2017, being the date of
the receipt of payment by the second
respondent from the first
respondent in terms of the sub-consultancy agreement which provided
that the second respondent was obliged
to pay the applicant within 7
days after the receipt of the partial or complete payment from the
first respondent. Alternatively,
the plaintiff was only entitled to
the interest running from the 7 days after the date of the receipt of
the payment by the second
respondent. The applicant’s claim
deserved to be dismissed because the total amount claimed by the
applicant was not due
to the applicant; alternatively, that the
applicant failed to properly compute the claim for the interest.
4.3 The applicant was not
a party to the proceedings under case number 393/2012 and 4352/2013
which gave rise to the settlement
order granted on 20 June 2017,
which did not direct the second respondent to make any payment to the
applicant. The settlement
order indicated no obligation on the second
respondent to effect payment to the applicant in the amount claimed
in the application.
[5]
In its heads argument, the second respondent’s attitude is
succinctly stated as follows:
“
The applicant’s
claim is convoluted. On the one hand the claim appears to rely on a
court order (which provides no right to
the applicant). At the same
time, the claim appears to rely on contract (in which case the claim
has prescribed).”
Brief
background
[6]
The second respondent was appointed as per the first respondent’s
letter of 15 March 2010 to render services and to assist
the
department of Police, Roads and Transport, to manage the
implementation of the road repairs and rehabilitation programme for
the Free State road network. An agreement, entered into by and
between the parties, provided for the appointment of a sub-consultant
to act as an Independent Environmental Control Person (IECP) for the
Free State rehabilitation programme. On 1 October 2010 the
applicant
was, as per the communications of first and second respondent,
appointed as an IECP for the Northern Free State Region
based on the
applicant’s financial offer of R 1 962 813.34 for the
estimated project duration.
[7]
The sub-consultancy agreement was signed during January 2011 and its
salient terms were the following:
1. The applicant was
appointed at the behest of and on the instruction of the first
respondent;
2. The applicant was to
commence with the sub-consultancy service within a period of 14 days
after the date of the signing of the
agreement;
3. The payment terms of
the general conditions of the contract were amended to provide that
the applicant shall receive payment
via the second respondent, and
within 7 days after SSI Tshepega had received partial or complete
payment from the first respondent.
4. The applicant would be
entitled to monthly payments, to issue invoices to the second
respondent for individual and separate payments
by the first
respondent;
5. The total amount of
services rendered would be R 1 962 813.34.
[8]
After the conclusion of the agreements, both the applicant and the
second respondent rendered services to the Department. The
Department
then stopped the payments to the second respondent entirely after the
amount of approximately R 30 000 000.00
was paid, the last
payment having been received during November 2011. The second
respondent issued summons against the department
under case number
393/2012 for the payment of approximately R 44 700 000.00.
The department defended the action.
[9]
During 2013, the applicant sought an order against the first
respondent for the payment of the amount of R 1 967 824.75
for works done and services rendered to the first respondent
including costs. Though the second respondent was cited as a
respondent,
no substantive relief was sought against it. It was
merely used as a conduit to receive payment from the first respondent
for onward
transmission to the applicant. The second respondent was
also represented by Peyper Sesele Attorneys in the application. It
(the
second respondent) was well aware of the launching of that
application and supported it.
[2]
[10]
This application was launched after the successful “
test
application”
of
one of the sub-consultants, Terra Graphics (Pty) Ltd t/a Terra Works,
which was instituted against the first respondent in this
court. A
date for the argument of the applicant’s 2013 application was
allocated but the department brought a substantive
application for
its hearing to be stayed, pending the final determination of the
action instituted by the second respondent against
the department.
The applicant was represented by Peyper Attorneys who deposed to the
applicant’s affidavit opposing the department’s
application for the stay of the hearing. Settlement negotiations
ensued between the department and the second respondent that resulted
in the granting of the court order of 20 June 2017. It is common
cause that on 5 April 2017, the applicant received a letter from
the
second respondent in which the following was stated:
[3]
“
1. The
department conceded that SSI and Tshepega’s appointment was
valid and similarly considered the validity of the appointment
of the
sub-consultants;
2. 19 to 23 June 2017
was set aside for arguments to “deliberate the quantum of
payment due to SSI/Tshepega”
3. SSI and Tshepega is
(sic) preparing a report with supporting documentation to
substantiate the total value of their claim, including
the total
value owed to sub-consultants;
4. Geo Hydro is to
confirm in writing the “minimum value for settlement as well as
conditions associated with the settlement”;
5. SSI and Tshepega
commits (sic) to conduct all negotiations with the department to
serve the best interest of their own claim
as well as the claims of
their sub-consultants.”
[11]
On 1 December 2017, the applicant received a letter from Peyper
Attorneys,
[4]
in which the
applicant was advised of the court order granted against the first
respondent on 20 June 2017. It was stated in that
letter that it was
specifically agreed between the second respondent and the applicant
that the second respondent would make payment
of all amounts that
became payable under the provisions of the sub-consultancy agreement
within 7 days after receiving payment
from the department as recorded
in paragraph 4 of the sub-consultancy agreement, read with Schedule 4
entitled “Payments
of the sub-consultant”. An amount of R
1 733 493.34 would be transferred to the applicant’s
nominated bank
account on 5 December 2017, provided that
written acceptance of the offer was made by return of mail prior to
that date.
On 12 December 2017, Peyper Attorneys addressed another
letter to the applicant confirming that it would retain the amount of
R
3 797 170.32 in their trust account pending the final
resolution of the dispute between the applicant and the second
respondent. That office would no longer act on behalf of either the
second respondent or the applicant in the dispute as a result
of a
conflict of interest
[5]
.
The
applicant’s response to the defences raised by the second
respondent
[12]
The applicant responded as follows to the second respondent’s
preliminary points:
12.1
Section 12(1)
of the
Prescription Act, 68 of 1969
, provides that prescription shall
commence to run as soon as the debt is due. The sub-consultancy
agreement provided that the second
respondent shall not be obligated
to pay the applicant until all the parties’ invoices were
invoiced to the first respondent.
Payment to the applicant would be
made by the second respondent within 7 days after receipt of payment
from the first respondent.
As the second respondent only received
payment from the first respondent during November 2017, the
applicant’s right to claim
payment from the second respondent
only arose at that stage. Prescription commenced to run from November
2017.The applicant’s
claim would only expire three years’
later, during November 2020.
12.1.1
The applicant only became aware of the payment made by the first
respondent to the second respondent on receipt of a letter
from the
state attorney, informing the applicant of such payment. In terms of
the provisions of
sections 12(2)
and (3) of the
Prescription Act,
prescription
would only commence running from the date of receipt of
such letter
[6]
.
Section 14
(1)
of the
Prescription Act provides
that the running of prescription
shall be interrupted by an express or tacit acknowledgment of
liability by the debtor. It is common
cause that the third
respondent, acting as the attorneys of record and on the instruction
of the second respondent, made payment
to the applicant to the amount
of R 1 733 493.34 on 14 March 2018. This payment
constituted an express acknowledgement
of liability and thus
interrupted prescription. Consequently, the applicant’s claim
against the second respondent had not
prescribed.
12.2 The first
respondent paid the amount of R 5 585 321.04 plus interest
to the second respondent in respect of
“
agreed compensation”
which, in effect, was the contractually agreed upon interest. The
agreement expressly provided that the payment terms of the applicant,
as sub-consultant, should be the same as those of the consultant,
i.e. the second respondent. The amounts due to the sub-consultant
should be paid within 28 days of the sub-consultant’s invoice
as provided for in clause 5.2.1 of the agreement. The agreed
compensation for overdue payments is set out in the particular
conditions, which is prime bank rate plus 2%. The second respondent’s
allegation that interest would only commence to run 7 days after the
date of receipt of payment by the second respondent was therefore
factually wrong. The second respondent conflated two altogether
different issues. The obligation to pay occurred 7 days after receipt
of the money, whereas the agreed compensation or interest, commenced
to run if such payment did not occur within 28 days of the
date of
invoice.
12.3 The court
order specifically allocated the amount of R 11 170 642.08
to the sub-contractors and only the sub-contractors
were entitled to
share in that amount. The second respondent’s attorney
addressed a letter dated 23 January 2019 to the state
attorney
[7]
indicating that the claims of all sub-contractors were included in
the settlement amount which was reflected in the court order.
The
defence that the sub-contractors were not nominated in the court
order was without substance. The second respondent’s
attorneys
advised that the amount of R 3 797 170.32 was kept in trust
pending the final resolution of the dispute between
the applicant and
the second respondent. It followed from the attorneys’ letter
that once the dispute was resolved, payment
would have been made. The
second respondent’s defence on this point should be rejected.
[13]
The court order provided that:
“
1 The Defendant
is to pay to the Plaintiff the capital amount of R20 380 788.00 and
an additional amount of R20 380 788 which is
payable in terms of
clause 5.2.2 of the General Conditions of the Agreement.
2. The Defendant is to
pay to the Plaintiff an amount of R5 585 321.04 in respect of the sub
– consultants and an additional
amount of R5 585 321.04 which
amount is payable in terms of clause 5.2.2 of the General Conditions
of the Agreement.
3. The Defendant is to
pay to the Plaintiff an amount of R600 000.00 in respect of the
management fee of the sub-consultants and
an additional amount of
R600 000.00 payable in terms of clause 5.2.2 of the General
Conditions of the Agreement.
4. Payment of the
abovementioned amounts will be made within 90 days after date of this
order.
5. Payment shall be
made into the trust account of the Plaintiff with the following
particulars:
PEYPER ATTORNEYS
Absa Bank
Account Number
: 406 815 1700
6. The Defendant is to
pay the agreed and/or taxed costs of the plaintiff including the
costs of two counsel where employed, and
including all reserved
costs”.
[15]
In oral address, Mr Manchu, on behalf of the second respondent,
submitted that the second respondent did not refuse to pay,
but
disputed the amount of R 2 082 825.63 which represented the
agreed compensation (essentially interest) that became
payable to the
applicant due to late payment. The real enquiry, he submitted, was
the calculation of the interest payable and the
specific date on
which it should be calculated. He contended that the sub-consultancy
agreement provided that the second respondent
would, in consideration
of the applicant’s performance of its services, pay such
amounts as became payable under the provisions
of the sub-consultancy
agreement within 7 days after the receipt of the money from the
department or the first respondent.
[16]
He contended that clauses 5.2.1 and 5.2.2 of the Model Services
Agreement (which referred to the payment for services), were
not
applicable to the applicant but regulated the relationship between
the second respondent and the first respondent. These particular
provisions provided that the amounts due to the consultant, should be
paid within 28 days of the consultant’s invoice unless
otherwise stated in the particular conditions of the agreement.
Should the consultant not receive payment within the 28 days as
stipulated, it would be paid agreed compensation at the rate defined
in the particular conditions, compounded daily on the sum
overdue.
The applicant was therefore not entitled to the payment of the agreed
compensation as set out in these provisions. He
argued that the
interest payable should be on the outstanding capital amount of R
165 650 091.81 being the outstanding
capital balance,
having deducted the amount of R 733 493.34 which was paid by
Peyper Attorneys to the applicant on 14 March
2018. The interest
payable thereon should be calculated from 28 November 2017, when the
first respondent effected payment to Messrs
Peyper Attorneys who
acted on behalf of the second respondent. He conceded that the
consequences of his oral arguments nullified
or jettisoned the
defence of prescription as raised in the papers.
[17]
Paragraph 6 of the sub-consultancy agreement provides that the same
payment conditions between the client and the consultant
apply
between the client and the sub-consultant. This means that the same
payment conditions that applied between the first and
second
respondents also applied between the first respondent and the
applicant. It is evident that paragraph 2 of the court order
specifically authorised the payment in accordance with clause 5.2.2
of the general condition of the agreement and specifically
awarded
agreed compensation to the sub-consultants. It is clear that the
argument raised by the second respondent that the applicant
had no
rights in terms of the court order cannot stand and deserve to be
dismissed. Mr Acker, on behalf of the applicant, submitted
during
oral address and, in effect, prayed for the amendment of the notice
of motion in that the amount of R 2 247 917.44,
as
reflected therein, should be replaced with the amount of R
2 063 676.98 as indicated on the written calculations which
were handed into court by the consent of the parties. The latter
amount took into account two payments (R89 186.60 + R 95 053.87)
by the second respondent which had not been taken into account before
by the applicant.
[18]
Mr Manchu contended that two amounts of R25 507.92 and
R90 492.14 should be deducted from the outstanding capital
amount of R165 091.82 as these claims had not been claimed
timeously and had therefore prescribed. This argument does not
hold
water. The outstanding capital amount of R165 091.82 represented
the difference between the capital amount of R1898 585.16
less the
payment made of R1 733 493.34. The capital amount plus the
agreed compensation as per the agreement gives the
amount of R
3 797 170.32 which was held in the trust account by the
attorneys. Taking into account that prescription
only came into play
after November 2017, prescription never started to run in respect of
these two amounts. These two amounts were
included in the amount
claimed.
[19]
I am therefore satisfied that the applicant has succeeded to
prove on a balance of probabilities that it is entitled
to the relief
as contained in paragraph 5.1 of the notice of motion as amended.
[20]
In the result I make the following order:
ORDER:
1. The second respondent
is instructed and directed to pay to the applicant the amount of R
2 063 676.98 together with
interest
a
tempore
morae,
calculated from the date that such payment was made to the
second respondent and/or paid to the third respondent to be held on
its
behalf until the date of final payment.
2. Costs of the
application
_____________
MHLAMBI,
J
Counsel
for the Applicant: Adv. C Acker
Instructed
by:
Rossouws Attorneys
119
President Reitz Street
Bloemfontein
Counsel
for Respondents: Adv. T Manchu
Instructed
by:
Bokwa
Attorneys
121
President Reitz Street
Westdene
Bloemfontein
[1]
Paragraph 9 of the Founding Affidavit
[2]
Paragraph 7 of the Founding Affidavit of the 2013 Application; page
52 of the indexed papers
[3]
Paragraph 43 of the Founding Affidavit and paragraph 27 of the
Answering Affidavit.
[4]
Annexure “I” to the Founding Affidavit
[5]
Annexure
“K”on page 338
[6]
Annexure “RA1”
[7]
Annexure “RA5”