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[2017] ZAGPPHC 42
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Worley Parsons RSA (Pty) Limited v Ekurhuleni Metropolitan Municipality (55864/14) [2017] ZAGPPHC 42 (14 February 2017)
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION, PRETORIA
14
February 2017
CASE
NO: 55864/14
NOT
REPORTABLE
NOT
OF INTEREST TO OTHER JUDGES
REVISED
In
the matter between:
WORLEY
PARSONS RSA (PTY)
LIMITED Plaintiff
and
EKURHULENI
METROPOLITAN
MUNICIPALITY Defendant
JUDGMENT
Tuchten
J
:
1.
The plaintiff provides civil engineering services. The defendant was
one of its clients. The defendant decided to upgrade the
water supply
to Tembisa and for that purpose engaged the plaintiff as a
consultant. This was formalised in two instructions. The
first
instruction, for a new water pressure tower and pump station, ("the
pump station instruction) was reflected in a letter
of appointment
dated 7 March 2005 and a letter of acceptance dated 9 May 2005. The
second instruction, to reline the reservoir
feed providing the water,
("the reservoir instruction") was reflected in a letter of
appointment dated January 2006 and
a letter of acceptance dated 17
February 2006.
2.
The contractor appointed by the defendant did not adhere to
the work schedule. This meant that the plaintiff had to perform
additional
services above those specifically identified in the
contracts between the parties. The plaintiff was entitled in these
circumstances
to recover additional fees from the defendant. The
plaintiff raised these additional charges under the reservoir
instruction. The
plaintiff from time to time submitted invoices to
the defendant claiming payment. The defendant did not pay anything.
It later
emerged that the defendant withheld payment because the
defendant disputed the plaintiff's entitlement to the additional fees
and
withheld payment under both instructions because the two
instructions were in practical terms linked.
3.
The defendant was an established client of the plaintiff and
the plaintiff adopted a conciliatory attitude to the defendant's
failure
to pay what the plaintiff believed was due. In about June
2011, representatives of the parties attended a meeting to settle the
matter. The defendant made a written offer of settlement. The
settlement offer acknowledged that the amount claimed by the
plaintiff
under the pump station instruction was due in full. But in
relation to the reservoir instruction, the defendant's offer ignored
completely the extra services which the plaintiff was obliged to
perform. The plaintiff responded in a letter dated 22 July 2011
rejecting the defendant's offer and making a counter-offer of
settlement. The counter-offer was for an amount excluding VAT of
R1
308 369,92 under the pump station instruction and, similarly
excluding VAT, for R1010176,88 under the reservoir instruction.
In
arriving at the latter amount, ie in respect of the reservoir
instruction, the plaintiff reduced its claim in respect of the
additional work. There was no immediate response to the plaintiff's
counter-offer.
4.
In about May or June of 2012, however, Ms Nkabinde, an
official within the defendant, contacted the plaintiff's in house
legal adviser,
Mr Galle, and the plaintiff's general manager, Mr
Karemaker, to take up the settlement negotiations again. Ms Nkabinde
suggested
that the defendant was at that stage prepared to settle on
the terms proposed by the plaintiff in its letter dated 22 July 2011.
5.
The plaintiff handed the matter over to an attorney, Mr
Verhage. In a letter dated 6 June 202, Mr Verhage wrote on behalf of
the
plaintiff to Ms Nkabinde, offering to settle if the defendant
paid R1 010 176,68
exclusive
of VAT on the reservoir
instruction and R1 608 705,14
inclusive
of VAT on the pump
station instruction. MrVerhage's letter stipulated that the amounts
would have to be paid by 20 June 1012. If
not, the letter warned, the
plaintiff would go to court to recover the "full amounts plus
interest and legal costs on both
projects".
6.
Almost a year later, in a letter dated 28 June 2013, the
acting head of department within the defendant, Mr Molemohi,
(referencing
Ms Nkabinde for enquiries) on behalf of the defendant
purported to accept the plaintiff's counter-offer in the plaintiff's
attorney's
letter dated 6 June 2012. This purported acceptance was of
course ineffectual because the offer in the plaintiff's attorney's
letter
dated 6 June 2012 had lapsed. The defendant also asked for
invoices to reflect the settled amounts.
7.
The decision makers within the plaintiff, who included Mr
Galle and Mr Karemaker, decided that because of the lapse of time,
the
counter-offer contained in the defendant's letter dated 28 June
2013 was inadequate. The plaintiff wanted the interest which had
accrued on its claims as well.
8.
Mr Karemaker proceeded to convey this to Mr Molemohi, Ms
Nkabinde and Mr Verhage in separate telephone conversations. Mr
Karemaker
then sent an email {the spreadsheet email) to Mr Verhage on
8 July 2013. The email read:
[The
plaintiff is] happy to accept the offer from [the defendant] provided
the interest is also paid as we discussed as follow:
9.
These words in the spreadsheet email are followed by a small
spreadsheet in relation to the two instructions, adjusting the
capital
amounts offered to include VAT. The final field in the
spreadsheet contains what Mr Karemaker called "Conditions",
which
were common to both instructions. The text in the Conditions
field read:
Accept
without prejudice to our right to claim interest. Offer only valid if
payment made in 14 days as offered and interest also
covered in
FY13/14
[1]
budget.
10.
Mr Galle explained in evidence that the plaintiff had learnt
from experience that its state organ clients such as the defendant
were often more amenable to settlement around June of a particular
year because the financial year of such organs closed on 30 June.
It
happened that around the close of its financial year, such an organ
might have unexpended funds which it could allocate towards
an unpaid
debt such as those in question. The plaintiff was therefore anxious
to take the plaintiff up on its offer as regards
the capital
immediately but was prepared to give the defendant time to pay the
interest.
11.
Mr Verhage submitted the spreadsheet email to Ms Nkabinde
under cover of an email sent on the same day, 8 July 2013 which read
as
follows:
Herewith
confirmation of the acceptance of [the defendant's] offer. As soon as
I receive the invoices it will be forwarded to you.
All my client's
rights are reserved.
12.
Ms Nkabinde sent an email to Mr Verhage with a copy to Mr
Molemohi on 9 July 2013. She wrote:
Thank
you for the response and please if your client can send an invoice to
tomorrow before end of business; it will be highly appreciated.
Thanking you in advance.
13.
Mr Verhage sent two invoices generated with date 30 June 2013
to Ms Nkabinde under cover of a letter dated 10 July 2013. This
letter
records the acceptance of the defendant's offer to pay the
capital amounts to the plaintiff. In numbered -paragraph 2 of the
letter,
it is recorded that the acceptance was subject to a
reservation of the plaintiff's right "to claim interest on both
the"
capital amounts and to payment's being made within 14 days
from the date of the letter.
14.
The defendant paid the capital amounts within the period of 14
days stipulated. It paid the capital due under the pump station
instruction
on 13 July 2013 and that due under the reservoir
instruction on 16 July 2013.
15.
By letter dated 11 October 2013, Mr Verhage wrote to Ms
Nkabinde to submit an invoice to the defendant for the interest
claimed
by the plaintiff. The letter clearly sought to distinguish
between the two instructions but, in a patent error, referred to both
instructions under a heading applicable to the reservoir instruction.
However the letter makes clear that the plaintiff was claiming
interest on the two claims on slightly different bases. In relation
to the reservoir instruction, in respect of which the plaintiff
had
abandoned part of its claim, the plaintiff sought an interest payment
calculated from 6 June 2002, the date when the capital
settlement
figure was proposed by the plaintiff. In relation to the pump station
instruction, the plaintiff sought interest from
the various due dates
of the invoices which went to make up its claim in this regard. In
both cases, interest was calculated up
to date of payment. Mr Verhage
also submitted invoices dated 27 September 2013, setting out how the
plaintiff’s interest
claims were calculated.
16.
The defendant did not respond to the letter from Mr Verhage
dated 11 October 2013. By summons dated 28 July 2014, the plaintiff
instituted action against the defendant, claiming the interest
identified in Mr Verhage’s letter.
17.
The plaintiff pleaded the initial instructions, alleging that
they contained terms entitling the plaintiff would be entitled to
levy interest on arrear amounts. The defendant admitted that the
terms of the initial instructions permitted the recovery of interest
on arrear amounts. Initially the defendant alleged that it had not
contracted at all with the plaintiff. This assertion arose because
the plaintiff changed its name. The defendant however did not persist
in its denial of privity of contract with the plaintiff.
18.
The plaintiff went on to plead that the spreadsheet email and
the email response of Ms Nkabinde sent on 9 July 2013 constituted a
settlement agreement. The defendant accepted that the two emails
constituted a settlement agreement. The only defence persisted
in by
the defendant at the trial was that the settlement agreement,
properly interpreted, did not oblige the defendant to pay the
interest as calculated by the plaintiff. The computation of the
interest, should the plaintiff succeed in establishing its
interpretation,
was not placed in issue during the trial.
19.
The interpretation of the interest provision advanced by the
plaintiff was that the parties had excluded from the settlement the
interest due to the plaintiff under the initial instructions. The
settlement agreement, thus the plaintiff,
preserved
the
plaintiff’s rights to interest as they existed at the date of
conclusion of the settlement agreement. The date from which
the
plaintiff claimed interest under the reservoir instruction was, the
plaintiff conceded, arbitrarily selected by the plaintiff
but this
was to the benefit of the defendant because its obligation to pay
interest in fact arose at an earlier date, in each case
some 60 days
after submission of the plaintiffs invoice in respect of the work
there identified. In relation to the pump house
instruction, where
there was no dispute at all, the due date was in each case 60 days
after invoice.
20.
The
quantum of interest for which the plaintiff contended at the trial,
15,5% per annum, was that calculated under s 1 of the Prescribed
Rate
of Interest Act.
[2]
The
applicability of the figure of 15,5% was not placed in issue by the
defendant. The undisputed evidence of Mr Karemaker was
that failure
to pay the amounts owed under the instructions carried interest at 2%
per month in accordance with the agreements
between the parties. The
rate of interest claimed by the plaintiff is therefore lower than
that to which it was entitled.
21.
On behalf of the defendant, it was submitted that the
reference to interest in the spreadsheet email which formed the offer
to settle
should be interpreted to render the defendant liable for
interest only if the defendant failed to pay the capital amounts as
there
stipulated. In its plea, the defendant asserted that it was not
the intention of the parties to the settlement agreement that if
the
defendant paid the capital amounts, invoices rendered prior to the
settlement agreement would accumulate interest.
22.
I
must thus interpret the settlement agreement. The modern approach to
the interpretation of documents, including statutory provisions,
has
been authoritatively set out in a number of cases decided in the
Supreme Court of Appeal. In
Natal
Joint Municipal Pension Fund v Endumeni Municipality
2012
4 SA 593
SCA paras 18 and 25-26, the SCA set out how a court should
interpret documents, whether contractual or statutory or
otherwise:
[3]
18
The present state of the law can be expressed as follows:
Interpretation is the process of attributing meaning to the words
used in a document, be it legislation, some other statutory
instrument, or contract, having regard to the context provided by
reading
the particular provision or provisions in the light of the
document as a whole and the circumstances attendant upon its coming
into existence. Whatever the nature of the document, consideration
must be given to the language used in the light of the ordinary
rules
of grammar and syntax; the context in which the provision appears;
the apparent purpose to which it is directed and the material
known
to those responsible for its production. Where more than one meaning
is possible each possibility must be weighed in the
light of all
these factors. The process is objective, not subjective. A sensible
meaning is to be preferred to one that leads to
insensible or
unbusinesslike results or undermines the apparent purpose of the
document. Judges must be alert to, and guard against,
the temptation
to substitute what they regard as reasonable, sensible or
businesslike for the words actually used. To do so in
regard to a
statute or statutory instrument is to cross the divide between
interpretation and legislation; in a contractual context
it is to
make a contract for the parties other than the one they in fact made.
The 'inevitable point of departure is the language
of the provision
itself, read in context and having regard to the purpose of the
provision and the background to the preparation
and production of the
document.
…
[25]
Which of the interpretational factors I have mentioned will
predominate in any given situation varies. Sometimes the language
of
the provision, when read in its particular context, seems clear and
admits of little if any ambiguity. Courts say in such cases
that they
adhere to the ordinary grammatical meaning of the words used.
However, that too is a misnomer. It is a product of a time
when
language was viewed differently and regarded as likely to have a
fixed and definite meaning; a view that the experience of
lawyers
down the years, as well as the study of linguistics, has shown to be
mistaken. Most words can bear several different meanings
or shades of
meaning and to try to ascertain their meaning in the abstract,
divorced from the broad context of their use, is an
unhelpful
exercise. The expression can mean no more than that, when the
provision is read in context, that is the appropriate meaning
to give
to the language used. At the other extreme, where the context makes
it plain that adhering to the meaning suggested by
apparently plain
language would lead to glaring absurdity, the court will ascribe a
meaning to the language that avoids the absurdity.
This is said to
involve a departure from the plain meaning of the words used. More
accurately H is either a restriction or extension
of the language
used by the adoption of a narrow or broad meaning of the words, the
selection of a less immediately apparent meaning
or sometimes the
correction of an apparent error in the language in order to avoid the
identified absurdity.
[26]
In between these two extremes, in most cases the court is faced with
two or more possible meanings that are to a greater or
lesser degree
available on the language used. Here it is usually said that the
language is ambiguous, although the only ambiguity
lies in selecting
the proper meaning {on which views may legitimately differ). In
resolving the problem, the apparent purpose of
the provision and the
context in which it occurs will be important guides to the correct
interpretation. An interpretation will
not be given that leads to
impractical, unbusinesslike or oppressive consequences or that will
stultify the broader operation of
the legislation or contract under
consideration.
23.
In
Dexgroup (Pty) Ltd v Trostco Group International (pty)
Ltd and Others
2013 6 SA 520
SCA para 16, the court held:
Chartered
Accountants (SA) v Securefin Ltd and Another
and
Natal Joint
Municipal Pension Fund v Endumeni Municipality
...
make it clear that in interpreting any document the starting point is
inevitably the language of the document but it falls to
be construed
in the light of its context, the apparent purpose to which it is
directed and the material known to those responsible
for its
production. Context, the purpose of the provision under consideration
and the background to the preparation and production
of the document
in question are not secondary matters introduced to resolve
linguistic uncertainty but are fundamental to the process
of
interpretation from the outset.
24.
In
Bothma-Batho Transport (Edms) Bpkv S Bothma
&
Seun Transport (Edms) Bpk2014
2 SA494 SCA para 12, the court
held in relation to the interpretation of a provision in a contract:
Whilst
the starting point remains the words of the document, which are the
only relevant medium through which the parties have expressed
their
contractual intentions, the process of interpretation does not stop
at a perceived literal meaning of those words, but considers
them in
the light of all relevant and admissible context, including the
circumstances in which the document came into being. The
former
distinction between permissible background and surrounding
circumstances, never very clear, has fallen away. Interpretation
is
no longer a process that occurs in stages but is 'essentially one
unitary exercise'.
25.
In
Commissioner, South African Revenue Service v Bosch and
Another2015
2 SA 174
SCA para 9, the court held in relation to
the interpretation of a provision in an income tax statute:
The
words of the section provide the starting point and are considered in
the light of their context, the apparent purpose of the
provision and
any relevant background material. There may be rare cases where words
used in a statute or contract are only capable
of bearing a single
meaning, but outside of that situation it is pointless to speak of a
statutory provision or a clause in a contract
as having a plain
meaning. One meaning may strike the reader as syntactically and
grammatically more plausible than another, but,
as soon as more than
one possible meaning is available, the determination of the
provision's proper meaning will depend as much
on context, purpose
and background as on dictionary definitions....
26.
I think that in this
case it will be useful to identify the purpose for which the interest
provision was included in the settlement
agreement. Only two possible
purposes come to my mind and no other was suggested by counsel during
argument. The first possible
purpose (which I shall call the narrow
purpose) is, as relied upon by counsel for the defendant, to cater
for the eventuality that
the defendant did not pay the capital sums
as stipulated. The second possible purpose (which I shall call the
wide purpose), as
relied upon by counsel for the plaintiff, is to
provide for the calculation of the interest due to the plaintiff
pursuant to the
failure of the defendant to pay on their due dates
the amounts owed under the two instructions which preceded the
settlement agreement.
27.
I
think the language of the spreadsheet email, which constitutes the
(counter-) offer to settle, points to the wide purpose. If
all the
parties sought to achieve were the narrow purpose, then it would not
have been necessary to deal with interest at all.
This is because
interest is generally due by operation of law if a payment is not
made by due date.
[4]
And if the
parties had wanted to provide specifically for this possible purpose,
then no more would have been needed than that
the defendant would be
liable to pay interest on the capital sums if they were not paid by
due date.
28.
The reference to payment of interest to be made from the
defendant's budget for the following year suggests that a substantial
sum
of interest was contemplated. There was no reason to believe that
the defendant would not be in a position to pay the capital sums
as
stipulated. But there
was
reason to believe that the defendant
would, at the time the settlement agreement was concluded, not have
money on hand to pay the
plaintiffs substantial interest claim. The
defendant had re-engaged in settlement negotiations precisely because
it
was
in a position to make speedy payment of the capital. If
all that the settlement agreement contemplated was interest on the
late
payment of the capital, then no reference to the following
financial year would have been needed.
29.
Finally,
on the topic of language, the first sentence of the spreadsheet email
is against the narrow purpose. It recites that the
plaintiff was
happy to accept the offer
provided
the
interest
is
also
paid as
we
discussed.
[5]
This
language suggests, strongly, that interest
would
be
(not
might
be)
paid. And interest
would
only
be paid if the obligation to pay it arose whether or not the
defendant paid the capital as stipulated.
30.
The evidence that the interest was to be paid
as we
discussed
was given by Mr Karemaker, the author of the
spreadsheet email. Very shortly before the conclusion of the
settlement agreement,
Mr Karemaker had discussions with Mr Molemohi,
Ms Nkabinde and Mr Verhage explaining the basis on which Mr Karemaker
required interest
to be paid. This conclusion is reinforced by the
conjunction "and" in the Conditions field of the
spreadsheet email.
If the payment of interest was only to be
contingent on the failure to pay the capital, it would be unnecessary
to make payment
of interest a condition,
together with
the
condition relating to the due date for payment of the capital, for
the validity of the (counter-)offer.
31.
As I see it, then, I may safely conclude that the interest provision
in the settlement agreement was not designed to achieve
the narrow
purpose. It therefore follows as a matter of logic that the provision
was included in the settlement agreement to achieve
the wide purpose.
32.
I am fortified in this conclusion by two considerations.
Firstly, by the terms of Mr Verhage's letter to Ms Nkabinde dated 10
July
2013, the day after the conclusion of the settlement agreement
in which he reserved the plaintiff’s right to claim interest.
This language is consistent with the wide purpose, which was to
exclude the plaintiff’s right to interest from the ambit
of the
settlement. If the narrow purpose had been contemplated, no
reservation of rights would have been needed. And secondly,
the fact
that the defendant did not dispute the reliance by the plaintiff on
the wide purpose until the plaintiff applied for summary
judgment. If
Ms Nkabinde or Mr Molemohi had regarded the narrow purpose as being
the correct one, they would have said so when
Mr Verhage wrote to
claim the interest on 11 October 2013..
33.
The reliance by the plaintiff on the wide purpose was not an
opportunistic afterthought. In paragraph 13 of the particulars
of
claim prepared by counsel, the plaintiff pleaded that the defendant
was in breach of its obligations arising from both its appointment
of
the plaintiff and the settlement agreement
34.
The plaintiff has therefore made out its case for the payment of
interest. The computation of that interest was not placed in
issue.
The plaintiff seeks a punitive costs order on the ground that the
defendant advanced patently unmeritorious defences in
its plea and
discovered no documents and called no witnesses in support of its
contentions. In my view, however, the defence in
which the defendant
did persist and with which I have dealt in this judgment does not
fall into this category. The conduct of the
defendant and its legal
representatives in the trial itself before me cannot be and was not
criticised. I do not think that a punitive
costs order is warranted.
35.
I make the following order:
1
The defendant must pay the plaintiff the sums of R608 752,07
and R173 7436,55.
2
The defendant must pay interest on the sums in 1 above at the
rate of 15.5% per annum from 21 October 2013 to date of payment.
3
The defendant must pay the plaintiffs costs of suit.
_________________
NB
Tuchten
Judge
of the High Court
13
February 2017
[1]
FY13/14
means the 2013-2014 financial year.
[2]
55 of 1975.
[3]
In
the quotations which follow, I have omitted references to footnotes.
[4]
Crookes
Brothers Umited v Regional Land Claims Commission, Mpumalanga
2013
2
SA 259
SCA para 14
[5]
My emphasis.