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[2018] ZAECMHC 62
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Maqhawe Construction CC v O.R Tambo District Municipality (1946/09) [2018] ZAECMHC 62 (20 November 2018)
IN
THE HIGH COURT OF SOUTH AFRICA
[EASTERN
CAPE LOCAL DIVISION, MTHATHA]
[Not
reportable]
CASE
NO: 1946/09
Delivered
on: 20/11/18
In
the matter between:
MAQHAWE
CONSTRUCTION CC
Plaintiff
and
O.
R.TAMBO DISTRICT MUNICIPALITY
Defendant
JUDGMENT
ON SPECIAL PLEA
NHLANGULELA
DJP
[1]
The issue for decision in this matter is whether a special plea of
lack of
locus standi
should succeed so that, it if does
succeed, the plaintiff’s claim is dismissed without a need of a
trial action for contractual
damages that the plaintiff has
instituted against the defendant.
[2]
Although the
onus
of proof of
locus standi
rests with
the plaintiff –
Kommisaris van Binnelandse Inkomste v Van
der Heever
1999 (3) SA 1051
(SCA) at 1057 G-H, it was on the
election of both parties that the defendant led evidence first.
Mr Thandwefika Watson Mgidlana
and Mr Hendrik Pretorius testified on
behalf of the defendant.
[3]
Mr Mgidlana was a Director in the Municipal Legal Services department
of O.R.Tambo District
Municipality, attached to the headquarters of
the defendant in Mthatha.
[4]
Mr Pretorius is a professional civil engineer who is in the employ of
Thuso Development
Consultant (Thuso), a firm of civil engineers.
[5]
The evidence adduced on behalf of the defendant is, to a large
extent, common cause.
Both witnesses for the defendant
testified that on 19 June 2006 Maqhawe Construction CC and Kwakhiwe
Construction CC, as a Joint
Venture (the JV) was awarded a tender
contract by the defendant for the construction of Nkonzo/Mhlumba Bulk
Water Supply under
contract No. 1217C, Flagstaff at a tender amount
of R6 334 601,70. Mr Pretorius served as a site
engineer.
Mr Mgidlana was the legal adviser for the defendant,
and playing an oversight role over the tender project. Mr
Victor Moyisi
Matsheke and Mr Vuyisa Kwakhiwe are the representative
members of the JV charged with the task of constructing air valve
manholes,
scower manholes, normal gate valve, supply and laying of
pipes as well as works associated therewith. Mr Matsheke and Mr
Kwakhiwe were also members of the two JV partners respectively.
[6]
Mr Mgidlana stated that the tender contract did not permit of any
alterations without the
defendant and the JV having agreed to it in
writing. Neither does the tender contract permitted any of the
JV partners abandoning
the contractual obligations without
termination of the entire contract and a fresh tender being
advertised for a new and a suitably
qualified party being engaged.
On payments for work done and the certificates having been issued
thereon by Thuso, he testified
that the contract permitted payments
by the defendant to the JV, not to any one of the members thereof.
When a third person
has to be allocated a payment on the request of
the JV, a deed of cession would, without exception, have to be made
to authorise
a payment. This arrangement is inclusive of a
payment to the CCs which were for all intents and purposes together,
collectively
and inseparably the JV entity. He testified about the
internal arrangement of the JV that Maqhawe Construction CC (Maqhawe
CC)
would perform 75% portion of the tender and Kwakhiwe Construction
CC (Kwakhiwe CC) to perform 25% of the remaining tender.
This
he said was permissible in terms of the tender contract in that the
obligations of the tender had to be discharged by the
JV partners
irrespective of the extent of the individual’s participation in
the performance of work and as long as both partners
remained in the
JV.
[7]
Mr Mgidlana testified that although he was not the direct supervisor
of the works on the
site, the duty of Thuso as the Agent of the
defendant, he had knowledge of the fact that the problems ensued
between the JV partners
well before the commencement of
implementation of the tender in January 2007 so much so that on 03
April 2007 Mr Matsheke addressed
a letter to the defendant asking
that Maqhawe CC be permitted to take over the tender contract of the
JV. On 26 June 2006
the defendant replied by refusing the
request on the basis that the separation of the JV partners would
have the effect of terminating
the JV itself without the tender being
advertised. That attitude was again conveyed to the JV on 30
October 2006. The
refusal came up consequent upon a series of
meetings having been held. A written response was given at a
time when Kwakhiwe
CC had already left the site in December 2006.
It never returned.
[8]
According to Mr Mgidlana, in March 2007 the defendant had to accept
Kwakhiwe CC’s
abandonment of the site because the JV had
not performed its duties in terms of the tender contract. The
JV itself was in
due course dismissed from the site by reason of
non-performance of its contractual obligations.
[9]
Under cross examination Mr Mgidlana denied that the defendant had
paid Maqhawe CC for work
performed under the tender contract without
a duly signed cession agreements having been made by the JV. He
also denied that
the tender agreement was novated by non-performance
of work or abandonment of the site by Kwakhiwe CC. He also
denied that
Maqhawe CC’s remaining on the site alone became a
substitution of the JV.
[10]
Mr Pretorius confirmed that Thuso was the site Agent for the
defendant and that it was responsible
for, amongst other duties, the
issuance of payment certificates to the JV. He denied that
Maqhawe CC was ever paid by the
defendant without a deed of cession.
He stated that he worked with one Mr Clement Bukako, and that both of
them were on the
site during the time when the upheavals emerged
between the JV partners. Since Mr Bukako was a trainee engineer
he was accountable
to Mr Pretorius about everything pertaining to the
implementation of the tender project, including the meetings that
Thuso was
involved in to assist the JV partners to sort out their
differences. He denied categorically that Thuso, through Mr
Bukako,
had agreed that Kwakhiwe CC should leave the JV. His
version is that Kwakhiwe CC left the site on its own accord without
having built even a single manhole.
[11]
Mr Matsheke testified on behalf of Maqhawe CC. He stated that
the JV partners took over the site
on 19 June 2006 upon it had been
awarded the tender project. Maqhawe CC and Kwakhiwe CC amended
their JV agreement to reflect
a 75% - 25% split of the work that each
was going to do. He told the Court that Maqhawe CC alone
completed 75% of the work
whilst Kwakhiwe CC did nothing; Maqhawe CC
was paid for work done through certificates issued by Thuso.
The payment that
was withheld by the defendant was for a reason that
the full scope of work tendered for had not been done. As a
result the
defendant prevailed upon Maqhawe CC to complete 25% of
work that Kwakhiwe CC was supposed to do; and to do so not as a JV,
but
as Maqhawe CC. Mr Matsheke told the Court that Maqhawe CC
indeed completed the balance of 25% work outstanding but it was
not
paid for that. He stated that at a meeting held in March 2007
Mr Bukako had permitted Maqhawe CC to amend the JV agreement
such
that Kwakhiwe CC was excluded from the tender. He said that
Kwakhiwe CC was present in that meeting. Another meeting
was
held late in March 2007 between Mr Matsheke, Mr Bukako of Thuso and
Mr Aubrey Katsana from the office of the defendant.
At that
meeting not only did Mr Katsana dismiss Kwakhiwe CC from the project
but Maqhawe CC was authorised to complete the 25%
work that Kwakhiwe
did not do. Further, Mr Katsana gave Maqhawe CC an additional
project in terms of which it would lay a
1,5m pipe line into
Mzimkhulu. However, Thuso later on stopped Maqhawe CC from
doing the additional work for a reason that
the JV had been
terminated for failure to perform its obligations. Mr Matsheke
stated that he went on to approach Mandisa
and Nduko of the office of
the defendant to intervene.
[12]
It emerged from the cross examination of Mr Matsheke that Maqhawe CC
had been paid directly for work
done with cheques that had been
accompanied by cession agreements under certificate No. 3 dated
November 206 in the sum of R940 576,77;
certificate No. 6 dated
4 April 2077 in the sum of R229 938,18; and certificate No. 7
dated 13 July 2007 in the sum of R260 877,59.
Those
payments were conceded by Mr Matsheke,
albeit
against the
backdrop of his evidence in chief that Maqhawe CC was never paid
under cover of deeds of cession.
[13]
The following undisputed facts that emerged from the oral evidence
bear repeating , namely:
(1)
the parties to the tender contract No. 1712C, Flagstaff were the
defendant, as the employer,
and the JV, as the successful tenderer.
(2)
Maqhawe Construction CC and Kwakhiwe Construction CC were the
JV partners recognized as the JV entity.
(3)
The plaintiff, Maqhawe Construction CC, was not the contracting party
in terms of the tender
contract.
(4)
Maqhawe Construction CC had only received direct payments from tender
contract No. 1712C
through cession agreements.
(5)
The defendant did not authorise Maqhawe Construction CC to take over
the obligations of
the JV.
[14]
That said, it is not proved by the evidence that a term(s) of the
tender contract was novated.
More must be said about the
concept of novation:
[15]
In
Tauber v Von Abo
1984 (4) 482 (E) at 485
C-D Van Rensburg J said the following about novation.
“
Novation can
be described as the replacing of an existing obligation by a new one,
the existing obligation being discharged by the
new obligation.
Cf Caney
The
Law of Novation
(supra
at 4 and 21
)
Voet
46.2.2;
Wessels
The
Law of Contract in South Africa
2
nd
ed vol 2 paras 2369, 2374, 2375, 2379 and 2395; De Wet and Yeats
Kontraktereg
en Handelsreg
4
th
ed at 239. However, … if the parties intended the new
contract to operate as a novation, it will only constitute a
valid
and enforceable contract if the contract which it was intended to
novate was legally valid.”
[16]
The contentions advanced on behalf of the
plaintiff, shown in paragraph 22.2 of the heads of argument, are
that
the evidence adduced proves novation of the original tender contract
and/or the original obligation of the defendant to pay
the JV for
work completed. In elucidation, it was argued that the
performance by Maqhawe CC of 25% of work that the
JV had allocated to
Kwakhiwe CC became a novation of the tender contract. On
the issue of the original obligation of
direct payments to the JV, it
was argued that payments, with or without a deed of cession, made by
the defendant to Maqhawe CC
after 13 April 2007 novated the original
obligation that payments be made only to the JV.
[17]
Since the tender contract permitted alteration of its terms in
writing only, which fact is common cause,
the plaintiff ought to have
proved novation by exhibiting to the court a legally valid written
agreement between the defendant
and the JV. That did not happen
in this case. I am alive to the principle that novation of a
term(s) in a written contract
may be novated orally. However,
in this case, a verbal alteration of a term of the tender contract is
impermissible.
Even if the court is wrong in so finding, it
still cannot be gleaned from the evidence that the defendant and JV
exhibited by conduct
an intention to novate the original tender
contract. The evidence of Mr Mgidlana shows that as early as in
March 2007 the
JV, through Mr Matsheke, asked Thuso to recommend for
the dismissal of Kwakhiwe CC from the site and/or the JV itself.
When
that request was refused Maqhawe CC approached the defendant,
through Mr Katsana, Ms Nomlala and Ms Msebi with a similar request.
Over and above that the JV wrote a letter to the defendant addressing
the same issue. With the request having been considered
by the
defendant in various meetings, the defendant declined the invitation
to dismiss Kwakhiwe CC in recognition of a binding
provision(s) of
the tender agreement that stand between the parties involved in it.
In my opinion it is not proper to conflate
the tender contract with
the JV agreement because the defendant was never a party to the JV.
In that context there was nothing
untoward in defendant insisting
that the JV partner, Maqhawe CC, was obliged to perform the 25% of
work that the JV had allocated
to Kwakhiwe CC.
[18]
It is quite discernible from the evidence adduced that the plaintiff
has an interest in the matter,
but that cannot be elevated to a
legally enforceable right to sue on the tender contract against the
defendant simply because the
defendant has a legal obligation of
performance only towards the JV. In the circumstances the
special plea of lack of
locus standi
raised by the defendant
must succeed.
[19]
The costs of the matter should be paid by the plaintiff as a losing
party.
[20]
In the result the following order shall issue:
The defendant’s
special plea is upheld with costs.
Z. M. NHLANGULELA
DEPUTY JUDGE
PRESIDENT OF THE HIGH COURT
MTHATHA
Counsel
for the plaintiff :
Adv. P.H.S. Zilwa SC
Instructed
by
: Keigthley Sigadla &
Nonkonyana Inc
MTHATHA.
Counsel the
defendant :
Adv. A.D. Schoeman SC
Instructed
by
: S.Z. Jojo
Attorneys
MTHATHA..