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[2019] ZAKZPHC 72
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Icon Construction (Pty) Limited v Msunduzi Municipality (10672/2018P) [2019] ZAKZPHC 72 (18 October 2019)
IN THE HIGH COURT OF
SOUTH AFRICA
KWAZULU-NATAL DIVISION,
PIETERMARITZBURG
Case No:-
10672/2018P
In the matter between:
ICON CONSTRUCTION
(PTY) LIMITED
Applicant
and
MSUNDUZI
MUNCIPALITY
Respondent
REASONS FOR JUDGMENT
Vahed
J:
[1]
This matter
was argued before me on 14 May 2019, after which, on the
same day, I granted the relief sought in terms of the Notice of
Motion
(which I set out in more detail later) and indicated that
reasons therefor would be furnished upon request.
[2]
A Notice of
Motion, incorporating a request for such reasons, was
delivered by the respondent’s attorneys to the office of the
Registrar
on 21 May 2019. That fact was not drawn to my attention,
but instead the Registrar’s office incorrectly construed the
Notice
of Motion to incorporate an application for leave to appeal.
There the matter lay awaiting my return to the Division at the
commencement
of term on 7 October 2019. The respondent’s
attorneys were content to let the matter lay thus without enquiry and
it was
not until the applicant’s attorney enquired after the
outstanding reasons that the fact that reasons had been requested
came
to light.
[3]
These then
are the reasons for the order I made.
[4]
The applicant
operates in the construction industry. On 16 February
2016 it was awarded a tender by the respondent municipality. The
tender related
to the construction of reservoir outlets, bulk meter
installations, PRV installations with chambers and associated
ancillary works
for Vulindlela.
[5]
The award of
the tender was constituted by a series of written
document and consisted of:
a) A letter of appointment
on the letter head of the respondent’s finance business
unit
dated 18 February 2016;
b) The applicant’s
tender document;
c) The General Conditions
of Contract for Construction Works (“the GCC”),
second
edition, 2010, issued by the South African Institute of Civil
Engineering.
[6]
Those documents
then constituted the agreement between the parties
and it was not seriously in dispute or common cause that the material
terms
of that agreement included;
a) The appointment of the
applicant by the respondent as a contractor for the construction
of
the reservoir outlets, bulk metre installations, PRV installations
with chambers and associated and ciliary works for the area
of
Vulindlela;
b) That the contract price
was R12 246 791, 00 excluding value added tax and contingencies,
subject to the provisions of the GCC which allowed,
inter alia
,
for variations and measurement of the work;
c) That an engineer would
administer the contract as agent for the respondent in accordance
with the provisions of clause 3.1.1 of the GCC;
d) That the applicant would
deliver to the engineer a monthly statement for payment of
all
amounts the applicant considered to be due to it and the engineer
would, by signed payment certificate issued to the respondent
and the
applicant, certify the amount he considered to be due to the
applicant;
e) The engineer would
deliver to the applicant and the respondent the said payment
certificates
within seven days of the receipt by the engineer of the
applicant’s statement and the respondent would pay the amount
due
to the applicant within 28 days of receipt by the respondent of
the payment certificate signed by the engineer. That payment would
be
subject to the applicant submitting a tax invoice to the respondent
for the amount said to be due in terms of such payment certificate;
f) That in the event
of failure by the respondent to make payment by due date it
would pay
the applicant interest at the prime overdraft rate as charged by the
applicant’s bank on all overdue payments from
the date when
such payment ought to have been made.
[7]
It is also
common cause that initially the engineer appointed by the
respondent to supervise the contract and to assume the obligations I
described earlier was an entity known as JOAT/MAP Africa JV and that
thereafter the applicant substituted them with an entity known
as
Emzansi (Pty) Ltd. That substitution occurred on or about 26 January
2017 and was communicated by the respondent to the applicant
at a
meeting on or about the same day.
[8]
The application
concerned a claim for payment based on three
certificates issued by the engineers. Two were issued on 13 June
2017, signed by the
engineers, and certifying for payment the amounts
of R874 686,50 and R254 677,12 respectively (both certificates
including value
added tax). The third certificate was dated 19 July
2017, was signed by the engineers, and certified an amount of R1 062
232, 09
(including value added tax). All three certificates certified
payments due by the respondent to the applicant.
[9]
In due course
the respondent was issued with the requisite tax
invoices by the applicant in terms of which payment was sought in
accordance with
the relevant engineer’s certificates.
[10]
When payment was not forthcoming,
this application was commenced.
[11]
The application is resisted
by the respondent on the basis that the
contract price has reached its maximum of R12 246 791,00 (excluding
value added tax and
contingencies) and that accordingly nothing more
was due to the applicant. Thus, it was contended the certificates in
question
had been erroneously issued alternatively were wrongfully
issued and not valid and binding.
[12]
To counter that contention the
applicant asserts that the contract
price stipulation of R 12 246 791, 00 was an annual figure for a
three year contract and not
confined to one year only as contended by
the respondent.
[13]
The matter thus turned upon
an interpretation of a number of
provisions in the contractual documents.
[14]
The letter awarding the contract
was introduced in the following
terms:-
“
In connection with the
above contract, I am pleased to advise you of the Msundeni
municipality’s acceptance of your tender
dated 16 July 2015, at
the terms and conditions stated therein at the total tendered price
of
R12 246 791.00
(Twelve million, two hundred and forty six thousand, seven hundred
and ninety one rands only)
excluding VAT and Contingencies.”
[15]
Later in the letter awarding
the contract the following is stated:-
“
It is noted that the
contract shall span over a period of thirty six (36) months
commencing from date of award and that the price
is subject to
escalation as based on the Contract Price Adjustment Schedule as per
the General Condition of Contract.”
[16]
In addition thereto the tender
document conditions contained clause
6.7.1, said to be relevant by the applicant:
“
No quantities have been
set out in the schedule of quantities and this shall be confirmed by
the Engineer once the Contract has
been awarded due to the nature of
the work required. It shall be noted that the schedule of quantities
in this document is envisaged
for a 1 year period. The
other
(PER ADD 1) years 2 and 3 quantities will only be confirmed in those
years using the same rates supplied for year 1 and escalation
the
pride. Additionally the total parentage after Year 1 invoicing of
fixed times P&Gs versus total invoiced value shall be
used for
all subsequent invoices from Year 2 and 3.”
[17]
In the original of the above
extract the word
other
in the
printed document has been struck out, and the words within the
brackets, have been inserted in manuscript and that alteration
has
been acknowledged by marginal initialling.
[18]
The respondent’s position
was accordingly that the contract was
subject to two constraints, firstly a monetary or budgetary
constraint of the figure of R12 246 791,00
and secondly the
time constraint of 36 months.
[19]
The applicant disputed this.
[20]
When the claim was disputed
on the basis set out, and as the founding
papers were essentially based on the three engineer’s
certificates, the replying
affidavit was employed by the applicant to
give context to the claim and to set out exactly what was understood,
according to the
applicant, between the parties.
[21]
The replying affidavit demonstrated
that:-
a) The contract period was
for 36 months;
b) The price of R12 246
791,00 was the sub total for year one of the contract only;
c) Thereafter, the contract
was said to continue in years 2 and 3, with the quantities
for those
years to be confirmed by the engineer;
d) The value of the work
required in years 2 and 3 of the contract were to be determined
with
reference to the applicant’s tendered rates and, thereafter,
appropriately escalated;
e) The total percentage
after the first year of invoicing with regard to fixed and time
related preliminary charges and general charges (as a proportion of
the total invoiced value) was to be used for the subsequent
invoices
for the charges for year 2 and year 3.
[22]
To demonstrate that position
the applicant put up with the reply the
quantities priced for year 1. As anticipated by clause 6.7.1 that
document is identified
as being the document “PER ADD 1”
and it contains the detailed charges anticipated for year 1 in
exactly the total
sum provided for. That document also contains the
appropriately escalated totals for year 2 of the contract and year 3
of the contract
in the sums of R13 471 470,00 and R14 818 617,00
respectively.
[23]
In addition, with the replying
affidavit the applicant put up
evidence of meetings which took place between the parties and the
engineers at about the time the
first year was approaching year end,
and thereafter. That demonstrated engagements amongst and between
parties inconsistent with
a termination falling into place at the end
of year one or because the stipulated contract sum had been
exhausted.
[24]
On that basis, so contended
the applicant, the respondent’s
assertion that the contract price being exhausted, the contract had
come to an end was untenable.
[25]
Against that background counsel
for the applicant asserted that with
the onus being on the respondent, such onus had not been discharged.
[26]
In any event, so said counsel,
the entire contract sum had not been
exhausted, there being the figure of approximately R89 000,00 still
remaining which ought
to have been available to satisfy a portion of
the applicant’s claim.
[27]
Counsel for the applicant also
relied on the unreported judgment of
the Eastern Cape Division, Grahamstown in
Lievero Civils (Pty) Ltd
and another v Amatola Water Board
(20 November 2018; case number
2614/2018). There, on a claim similar to the one being dealt with
here, the learned Judge highlighted
the question as to why no
explanation was forthcoming for the engineer in question in that case
issuing certificates. In this case
similarly there is no explanation
as to why the engineers issued the certificates relied upon.
[28]
Turning to a simple and business
like interpretation of clause 6.7.1
counsel for the applicant also contended that it is significant that
the paragraph in question
envisaged the quantities in the document
for a one year period as opposed to stipulating that the quantities
for were stipulated
for
the
one year period. In this
regard the schedule of quantities put up as being the schedule
envisaged by the insertion of the words
PER ADD 1
become significant. That interpretation is consistent with the
mechanism for interpretation suggested in
Natal Joint Municipal
Pension Fund v Endumeni Municipality
2012 (4) SA 593
(SCA) at
paras 17 – 19.
[29]
Finally it was argued that the
certificates having being issued and
appearing regular and proper at face, they were to be accepted and
acted upon until set aside.
See in this regard
Oudekraal Estates
(Pty) Ltd v City of Cape Town
2004 (6) SA 222
(SCA).
[30]
Counsel for the respondent sought
to persuade me that the
respondent’s version was consistent with the express words of
the contract and that, in addition,
the “extension” of
the contract beyond year one was not permissible against those expess
words. I do not agree, the
express words of paragraph 6.7.1 read with
the schedule PER ADD 1 make it abundantly clear that the contract sum
was for the first
year and that the period was for 36 months.
[31]
Respondent’s counsel’s
additional argument to the effect
that in any event the applicant’s case was sought to be made in
reply has already been
touched upon. The founding papers were
perfectly and validly based on a claim for payment in terms of duly
issued certificates.
See in this regard
Thomas Construction (Pty)
Ltd (In Liquidation) v Grafton Furniture Manufacturers (Pty) Ltd
1988 (2) SA 546
(A). In that respect such certificates (which in this
case were certified as being “correct, due and payable”)
could
only be avoided if the engineers exceeded their authority
(
Smith v Mouton
1977 (3) SA 9
(W)) and/or allegations of fraud
or collusion or undue influence (
Hoffman v Meyer
1956 (2) SA
752
(C)). In any of these events, and in the absence of evidence from
those who issued the certificates (as is the case here), one would
have expected such matters to have been specifically traversed. That
is not the case here and the respondent have not resorted
to those
defences.
[32]
To my mind the applicant’s
arguments were determinative of the
questions raised in this case and for those reasons I granted an
order in the following terms:-
1)
The Respondent pay
to the Applicant:
a)
R874 686.50
b)
R254 677.12; and
c)
R1 062 232.09
2)
The Respondent pay
to the Applicant interest on the above mentioned amounts, at the rate
of 10.25% per annum, as follows:
a)
On R874 686.50,
from 1 August 2017 to date of payment;
b)
On R254 677.12
from 1 August 2017 to date of payment;
c)
On R1 062 232.09
from 1 September 2017 to date of payment.
3)
The Respondent pay
the Applicant’s costs of the Application, including the costs
consequent upon the employment of Senior
Counsel.
Vahed J
Case
Information
Date of
Hearing:
14 May 2019
Date of
Reasons:
18 October 2019
Counsel for
the Applicant:
A Troskie SC
Instructed
by:
Cox Yeats
21 Richefond Circle
Ridgeside Office Park
Umhlanga
c/o Stowell & Co.
Tel: 031 536 8500
Ref: P Feuilherade/sn/11I328023
Counsel for
the Respondent:
D
Crampton
Instructed
by:
Mdledle Inc
Shackleton House
187 Hoosen Haffejee Street
Pietermaritzburg
Tel: 033 345 4022
Ref: E Rooi/LIT256/2018PMB