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[2015] ZAECELLC 17
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Mercedes Benz South Africa v Buffalo City Municipality (EL1123/2011, ECD1956/2011) [2015] ZAECELLC 17 (11 December 2015)
NOT REPORTABLE
IN THE HIGH COURT OF
SOUTH AFRICA
(EAST LONDON
CIRCUIT LOCAL DIVISION)
Case no: EL1123/2011
ECD1956/2011
Date heard: 9-13 March;
7 December 2015
Date delivered: 11 December 2015
In the matter between
MERCEDES BENZ
SOUTH
AFRICA
Plaintiff
vs
BUFFALO CITY
MUNICIPALITY
Defendant
JUDGMENT
PICKERING J
:
[1] On
9 December 1999 plaintiff, a motor vehicle manufacturer, and the
defendant, the Buffalo City Municipality, concluded a contract,
Exhibit “A”, in terms whereof defendant undertook to
supply plaintiff with a bulk supply of electricity to plaintiff’s
factory in East London on certain conditions.
[2]
Plaintiff alleges that on 26 September 2009 and at its factory
premises, a voltage fluctuation occurred which fell outside the
parameters of the agreed supply of electricity and in consequence
whereof,
inter alia
,
its machinery and equipment was damaged beyond repair and had to be
replaced and its production was interrupted for a period of
three
days. Plaintiff accordingly instituted action against
defendant, pleading a breach of the aforesaid agreement, for
damages
in the sum of R2 300 243,82. In the alternative, a
claim founded in delict is pleaded. This alternative
claim has,
however , been abandoned by plaintiff.
[3]
Certain preliminary issues arose for decision in consequence of
defendant’s plea. These related to a claim for
rectification of the agreement as well as to the interpretation of
clause 5.3 thereof encompassing a so-called indemnity clause,
which,
so defendant contended, exempted it from liability against
plaintiff’s claim based on a breach of contract and precluded
plaintiff from claiming damages arising out of the breach of the
agreement.
[4]
These issues were eventually determined by the Full Bench of this
Division which dismissed both the claim for rectification
and the
defence founded on clause 5.3.
[5] The
issues of liability had earlier been separated from all other issues
and the matter eventually came before me for trial
only on the
separated issues of liability.
[6] In
the agreement, “Annexure A”, defendant undertook, with
effect from 4 January 2000, to provide the plaintiff with
“
a
new bulk supply of electricity
”
from a substation at West Bank, East London, in replacement of the
existing supply from other points of supply. The
new supply
would be governed by the terms of the agreement.
[7] It
was further agreed that plaintiff was obliged to purchase all of its
required electricity from defendant and that plaintiff
would effect
payment of a “
connection fee
”
in the sum of R2,5 million.
[8] In terms
of clause 12.2 of the voltage at the point of supply was stipulated
at 11000 volts. The further relevant clauses
of the agreement
provide as follows:
“
4.1
The Council shall provide the Consumer with a reliable and continuous
supply of Electricity equal to
or exceeding the minimum quality of
supply laid down in Standard NRS 048-2:1996 as applied by the
National Electricity Regulator.
For the above purposes the West
Bank Substation supply point shall be classified as a “
Category
2 Site”
for measurement purposes
in terms of clause 4.2 of NRS 048-3:1998.
The
Consumer shall take adequate measures to protect its own equipment
and plant. This shall include measures to protect the
Consumer’s motors and/or equipment against damage that may
arise under low voltage conditions or from single-phasing, and
also
measures to protect itself where its plant is of such a nature that
damage may be caused to it by an outage, voltage dip or
voltage
surge.
4.2
Electricity shall be supplied as three-phased alternating current at
a nominal frequency
of fifty Hertz. It shall be noted that, as
the Council obtains the bulk electricity supply from Eskom, frequency
of supply
is dependent upon the frequency of Eskom’s supply of
the Council. It is a specifically agreed condition of supply
that
the maximum percentage by which the supply voltage may differ
from the declared voltage for a period longer than ten consecutive
minutes shall be 7,5% (seven comma five per centum) above or below
the declared voltage.
4.3
The Council shall use its best endeavours to obtain a commitment and
work together with
their supplier to reduce the percentage rate
referred to in 4.2 from 7,5% (seven comma five per centum) to 5%
(five per centum.)
[9] The
background to the conclusion of this agreement appears from the
evidence of Mr. Barry Canning, a mechanical engineer in
the employ of
defendant for thirty years and presently the Senior Divisional
Manager for Production Planning and Plant New Model
Introduction.
He testified that in 1999 when the contract between the parties was
concluded he was Project Manager for the
introduction of the new W203
model car.
[10] He
stated that prior to 1999 the plaintiff’s factory was
predominantly a so-called CKD factory, building cars out of
kits for
the South African market.
[11]
During 1999 a programme was started for the export of cars from the
East London plant which required that the production process
be
stepped up to a “
part by part
”
plant. This entailed an increase in production volume from
thirty cars a day to two hundred a day and required a change
in the
production process to a much more technologically advanced plant,
including a change from manual operations to robot operations.
This in turn required a more electronically advanced system in order
to control the robotic processes.
[12] In
the light of these changes plaintiff required a more controlled and
sophisticated system to supply the factory with clean,
quality
electrical power. Negotiations were accordingly entered into
with defendant and it was agreed that defendant would
build a
substation, known as the West Bank substation, outside the
plaintiff’s boundary wall and supply power to the substation
in
order to supply a stable supply of electricity to the plaintiff’s
plant.
[13]
Mr. Canning stated that plaintiff was part of the global distribution
network for Daimler which had its central head office
in Stuttgart.
The world-wide standard of Daimler required that the maximum
percentage by which the supply voltage could differ
from the declared
voltage be no more than 5% above or below the declared voltage.
Defendant, however, requested that such
percentage be 7,5% because it
would be difficult for it to adhere to the 5% limit.
Eventually, after discussions with its
head office, plaintiff agreed
thereto. In explaining the necessity for the limitation on the
percentage increase/decrease
Mr Canning stated that prior to agreeing
there to the equipment parameters were looked at and discussions were
held with Daimler’s
technical and professional team in
Germany. He stated that “generally the parameters that
were on the equipment
is that they can go up to 10% for a very
short period of time before they expect a failure, but that is really
going to the limit”.
The German agents eventually agreed
to the percentage limit of 7,5% but requested that it be reduced when
a new contract was negotiated.
[14] In
paragraph 5 of its particulars of claim plaintiff alleged as follows:
“
At all material times defendant was
aware, that in the event its supply of electricity to plaintiff was
not maintained within the
parameters stipulated by the agreement,
plaintiff’s machinery and equipment would be damaged requiring
replacement and production
in plaintiff’s factory would be lost
and required to be made up at an additional cost so as to meet
its obligations
of supply. The agreement, annexure A, was
concluded on the basis thereof”.
These allegations were denied by defendant.
[15]
Plaintiff further alleged that defendant had breached the terms of
the agreement in that it:
“
6.1
Failed to regulate the supply of electricity to plaintiff and to
ensure that the supply fell within
the parameters stipulated;
6.2 Failed to ensure that any
variation beyond 7,5% of the required voltage of electricity supplied
did not continue for a period in excess of 10 minutes;
6.3 Failed to properly
maintain and set its plant and equipment in the West Bank
Sub-station.
6.4 Failed to carry out
on-load tap change tests simultaneously and to correctly set the
out-of-step
timer so as to avoid an out-of-step sequence in the
supply of electricity.
6.5
Failed to ensure that an out-of-step alarm was in proper working
order alternatively failed
to monitor and observe the activation of
the out-of-step alarm which indicated a voltage fluctuation outside
the parameters of
the agreed supply.
”
[16]
Plaintiff alleged further as follows:
“
7.
In consequence of Defendant’s breach of the agreement, and on
26 September 2009
and at Plaintiff’s premises, a voltage
fluctuation occurred which fell outside of the parameters of the
agreed supply of
electricity, more particularly in that at 14h27 a
power dip occurred with a low value of 9,624 volts that was followed
by an over
voltage over a period of approximately 6 hours which
peaked at 12,274 volts and which constituted a low deviation of
12,51% and
high deviation of 11,58%.
”
[17] In
response to both these paragraphs defendant merely pleaded that the
allegations were not admitted and put plaintiff to the
proof thereof.
[18] It
became common cause that the voltage fluctuation referred to in
paragraph 7 of the particulars of claim did in fact occur.
The
circumstances giving rise thereto were also not seriously disputed
and appear chiefly from the evidence of Mr. Ansell, an
electro-mechanical engineer in the employ of a firm of consulting
electrical mechanical engineers, namely, Clinkscales Maugham Brown,
as well as from the evidence of Mr. Quinton Knight, an electrical
engineering technologist in the employ of plaintiff and involved
with
electrical infrastructural planning. It is apposite to mention
at this stage that Mr Ansell confirmed the evidence of
Mr Canning to
the effect that the reason for the 7.5% limitation was to do with the
prevention of damage to plaintiff’s equipment
because, so he
stated, “in general the customer cannot do much about
controlling the voltage, they are just receiving it”.
[19]
Defendant had installed in the West Bank substation two transformers,
the function of which was to transform the 132000 volt
supply it
received from Eskom to the 11000 volt supply it had contracted to
deliver to the plaintiff. Each of these transformers
was fitted
with a mechanical device known as an automatic tap changer whose
function it was to adjust the transformers, as and
when required, in
order to maintain the output of electricity to plaintiff’s
substation at a constant 11000 volts.
The tap changer moves
within the transformer and selects the different “
winding
ratios”
built into the
transformer in order to ensure a constant, stable supply at the
nominal voltage on the output side. As stated
by Mr. Knight,
the tap changers regulated the voltage coming out based on what is
coming in. If, for example, the voltage
on the defendant’s
side changed from 11000 to 12500 volts the tap changers would adjust
themselves accordingly to keep the
voltage supply to plaintiff’s
plant at 11000. Mr. Knight reiterated that they protected the
load side from what was
coming in. As Mr. Ansell put it, the
defendant’s transformers convert the 132000 volts received from
Eskom to 11000
volts, at a fixed ratio. The tap changers allow
the ratio to be adjusted so that, should the 132000 volts increase or
decrease,
the 11000 volts would remain close to 11000.
[20]
Reverting to the events of 26 September 2009, Mr. Ansell explained
that there was a regional fluctuation in the voltage supplied
to
defendant by Eskom which initially resulted in low voltages.
This caused the tap changers in the defendant’s West
Bank
substation to adjust the transformers to compensate for the reduction
in supply. Eskom responded by bringing on-line
a generating
station on the West Bank to make up the shortfall. This
increased the voltage of the incoming supply and the
tap changers
then operated in the opposite direction in order to maintain a
consistent voltage on the outgoing supply. In
the process,
however, they fell out of step and were no longer synchronised.
This in turn activated an out of step alarm
on the system which
automatically stopped the operation of the tap changers. The
output from the transformers in defendant’s
West Bank
substation was therefore not regulated as the Eskom supply returned
to normal and this resulted in the over voltage in
the supply of
electricity to the plaintiff’s substation, an over voltage
which was only corrected after approximately six
hours.
[21] In
this regard defendant’s expert witness, Mr. David Duncan, an
engineer with very extensive experience as a specialist
in the
protection engineering field, testified that after he had been
approached by defendant for advice he had inspected parts
of
plaintiff’s plant as well as defendant’s West Bank
substation. He stated that he was specifically looking
for
information related to the incident because, he said, “
there
is a normal requirement that any operator doing any work in a
substation will recall all the incidents that were created while
working at that substation and unfortunately we could not find such a
document at the substation at the time.
”
[22] He
stated further that he requested information from those of
defendant’s employees who might have been involved in the
incident and who could therefore shed light on what had caused the
malfunction of the tap changers but his efforts in this regard
were
fruitless.
[23] He
confirmed, however, that the two tap changers had gone out of
synchronisation and had then gone into a lockout position.
Mr.
Duncan stated that in consequence of the lockout a warning light
would be displayed on the tap change central room at the West
Bank
substation which, however, was not manned “
24/7
”.
There was no Supervisory Central and Data Acquisition system in place
and no means of communicating the lockout position
to defendant’s
staff. This effectively meant that the lockout situation of the
tap changers would only come to the
notice of defendant’s
employees when they next visited the substation or when they were
alerted to the problem by plaintiff’s
employees.
[24]
Mr. Duncan stated that the drop in supply from Eskom was a drastic
and extraordinary event.
[25]
With that as background I turn to the evidence relating to the events
of 26 September 2009.
[26]
Mr. Heindre Kritzinger, an electrical specialist in the employ of
plaintiff testified that during September 2009 he was an
Electrical
Specialist specifically in relation to the maintenance of plaintiff’s
paint shop.
[27] On
Saturday, 26 September 2009, he was on standby duty when, at 14h30,
he was called by plaintiff’s Central Control Room
and informed
that a power dip had been detected. He stated that although the
plant was in “
after hours mode
”
for the weekend, there were certain areas in the paint shop that had
to function at all hours, including the paint circulation
systems.
This was confirmed by the aforementioned Mr. Canning who stated that
every Friday evening there was a controlled
shut down of the plant,
whereby it was put into a sleep or standby mode. Only the
essential equipment such as circulating
pumps would remain running.
Mr. Canning stated that a constant power supply was critical and that
if the plant was shut down
completely extreme damage would be caused
to plaintiff’s factory equipment. It would also affect
the restart procedure
whereby the approximately fifty robots which
were in sleep mode and which accordingly kept their memory, would, in
the event of
a complete shutdown, lose that memory and have to be
re-taught how to weld a car.
[28]
Mr. Kritzinger stated that on arrival at the factory he inspected the
overall status of the paint shop and found that most
of the systems
were in fault states and were not functioning. According to him
the normal procedure in such a case was to
start up the compressed
air. There were two large compressors which ran during
production hours and a standby compressor
which was left on over a
weekend. He could not, however, get the standby compressor
working because the circulating pump
kept tripping.
[29] He
then successfully started up one of the large compressors whereafter
he reset and cleared all the faults in the critical
areas of the
paint shop. Whilst he was still in the paint shop ensuring that
everything was up and running another fault
was experienced with the
electricity. He went back to check on the compressors and
discovered that the large compressor had
tripped as a result of an
overload on the circulating pump. He explained that “
overload
”
was a protection mechanism designed to prevent the motor from
“
pulling too many amps
”.
An ampere is the base unit of electrical current. He stated
that he measured the amperes drawn by the motor
and found that it was
way above its normal specification, resulting in the circulating pump
tripping. He then telephoned
his manager, Mr. Johan
Greyvenstein, for advice.
[30]
Mr. Greyvenstein instructed him to measure the voltages supplied to
the circulating pumps. He did so and found that the
voltage
measured over the pump was out of its tolerance, the voltage on
single-phase being 260 volts whereas it should have been
approximately 230 volts, a difference of 13%; and the voltage on the
three-phase side being 465 volts whereas it should have been
400
volts, a difference of 16,2%. Single-phasing is a fault
condition on a three-phase supply when one or two of the phases
is
interrupted and the end user is supplied only on the remaining one or
two phases.
[31]
Mr. Greyvenstein then came into the factory. He conducted a
check of the plant’s substation to which Mr. Kritzinger
was not
allowed access. Mr. Greyvenstein measured the incoming voltage
at 12,5KVA where it should have been 11KVA a difference
of 13,63%.
[32]
The defendant’s standby electricians were then phoned.
They arrived approximately thirty minutes later and checked
the
substation on their side. They thereafter reported that one of
their “
step down transformers
”
was faulty and had got stuck in a position where it could not
regulate the 11KVA on their side. They rectified the
fault and
restored the correct incoming supply whereafter Mr. Kritzinger
switched on the main supply to the paint shop, cleared
all the
faults, and restored everything to working order.
[33]
Mr. Greyvenstein, who is a qualified electrical technician, heavy
currents, has been employed by plaintiff since 2003.
[34] He
confirmed that there are certain critical processes in the paint shop
that are required to run for twenty four hours a day,
seven days a
week. The systems are monitored by the Central Control Room
which reacts to any alarms which are triggered if
any of the
equipment should go into a faulty state, whereafter the electrical
specialist is called in.
[35]
Mr. Greyvenstein stated that at approximately 6pm he received a call
from Mr. Kritzinger who reported to him what was happening.
Mr.
Kritzinger advised him that he was unable to restore operation of the
compressor number one cooling pump, because the cooling
pump was
tripping on overload. In other words, it was drawing more
current than the full load capacity of the motor, and
was tripping in
order to protect the motor.
[36] On
being informed by Mr. Kritzinger of the voltage measurements he
proceeded to the factory because the next step to be taken
was “
to
check the high tension side of the system and Kritzinger had no
authority to enter the high voltage substation.
”
[37] On
his arrival Greyvenstein proceeded directly to the paint shop
substation where he checked the voltage supply on the analogue
voltage meters situated on the incoming supply. The analogue
voltage meters indicated a voltage of approximately 12500 volts,
which was the highest voltage that he had seen since the
commissioning of the system.
[38] He
then, as he put it, worked his way upstream and checked the next
substation, which is the main substation feeding all the
different
plants on plaintiff’s side. Those voltage meters also
indicated a voltage of approximately 12500 volts.
At that point
he realised that this was not an electrical system problem on
plaintiff’s side but that it was the voltage
supply coming in
from the defendant’s substation that was too high. He
himself, however, had no authority to access
defendant’s
substation, which was situated outside the plaintiff’s boundary
wall adjacent to plaintiff’s substation.
[39] He
accordingly contacted defendant’s after hours emergency
electrical supply officials. After approximately half
an hour
the standby officials arrived. In the meantime he had taken the
precaution of switching off the two main feeds from
the main
substation to the paint shop main substation.
[40]
The defendant’s employees corrected the fault whereafter the
voltage meter in plaintiff’s main substation measured
approximately 11200 volts. After that Greyvenstein switched on
the two feeds to the paint shop, thereby restoring the electrical
supply to it.
[41] He
stated that the system is equipped with a so-called Vectograph,
situated in the plaintiff’s main substation.
He explained
that the Vectograph measured the incoming voltage and indicated
abnormalities such as power spikes or dips.
He was not aware of
any over-voltage protection system anywhere in the high tension
circuit nor was he aware of any preventative
measures which had been
installed in order to protect plaintiff’s equipment against the
consequences of any over-voltage.
There was, in particular, no
so-called UPS or Uninterruptible Power Supply system installed in
order to protect the equipment in
the paint shop.
[42] He
stated that at the plant certain equipment known as “
power
factor correction capacitor banks
” was installed.
Exhibit
‘B’, a schematic diagram of plaintiff’s internal
reticulation system, depicts the position of these capacitor
banks
throughout the plaintiff’s plant. Although Mr Duncan
initially took issue with the evidence as to the situation
of
the capacitor banks averring that they were installed in a position
that would influence the reading on the Vectograph, he then
agreed
that exhibit B was in fact a correct depiction thereof and that such
influence would not therefore occur because the capacitor
banks were
in fact “downstream” from the Vectograph. Mr
Greyvenstein stated that the function thereof was to
correct the
power factor of a load by improving the efficiency of the electric
current, thereby reducing the costs of electricity
to the consumer.
He was not aware whether the capacitor banks were on or off at the
time the incident occurred.
[43] It is
common cause that plaintiff’s own transformers convert the
11000 volts they receive from defendant to usable voltage
of 400
volts nominal in three phase or 230 volts in single phase.
Mr
Greyvenstein confirmed that the transformers of plaintiff’s
plant which received the electricity supply from defendant’s
substation were not set at the so-called “nominal value”
of 400 volts but at 420 volts. I should mention that
400 volts
is the three phase equivalent of 230 volts, the latter being the
standard voltage of a domestic plug. It is common
cause that
the nominal value is a ratio setting which would normally be 11000
volts to 400 volts. The ratio was set higher
at 420 volts
because, as the demand for electricity in the plant increased at the
point of use, so the normal supply of voltage
throughout the system
would decrease. This was because the different types of equipment
that received electricity from the transformers
were not all located
in the immediate vicinity of the transformer but were located at
various points in the plant, varying from
a couple of metres to
approximately 100 metres. Because there are losses of
electricity over that distance as it is conveyed
through the cables,
a higher setting of 420 volts at the transformer would ensure that at
the point of consumption the voltage
would not be below 400 volts.
[44]
The aforementioned Mr Knight confirmed that a Vectograph was
installed on the incoming supply of electricity supplied by defendant
to plaintiff. This was situated at the “
point
of common couplings
”, that is, as
close as possible to the connection with the defendant’s
cables. He explained that a Vectograph
is essentially a power
quality meter which samples the incoming power at high frequency.
[45] On
the Monday, following the weekend of 26 September, he downloaded the
information from the Vectograph for 26 September and
produced various
graphs which were admitted in evidence as Exhibit “A”.
[46] He
explained that, in order to translate graphically the terms of the
agreement, he had drawn on the graph A8 a horizontal
green line
representing the agreed voltage supply of 11000 volts. He also
drew two horizontal red lines, one above and one
below the green
line, these lines representing the maximum percentages by which the
voltage could differ in terms of the agreement
from the declared
voltage for a period longer than ten consecutive minutes, namely 7.5
% above and 7.5 % below the declared voltage.
[47]
According to the Vectograph record of Saturday, 26 September 2009,
plaintiff’s plant experienced a power dip at approximately
14h27 followed by an over voltage in supply over an extended period
of approximately six hours. The graph depicted on A3
begins at
13:32:01 with a steady line reflected at 11000 volts. This is
followed at some time after 14h00 by a sudden and
substantial dip at
to 9624 volts, thus indicating a variation of -12.51 %. The
line then rises and crosses the +7.5 % line,
at approximately 15h45,
remaining above it for a substantial period of time and reaching a
peak value of 12274 volts or +11.5 %
at 21:28:19. Mr. Knight
stated that it was normal for voltage to fluctuate but that such
normal fluctuations were very short,
usually lasting milliseconds,
and one would not be able to plot them on a graph of this scale.
The present Vectograph, however,
indicated that there was something
very wrong on the supply side.
[48] He
stated that there were no protection systems installed to protect
against over voltage. There was no reason, so he
said, for
plaintiff to have anticipated that there might be a problem with over
voltage. He was referred under cross-examination
by Mr. Smuts
S.C.,who with Mr Louw appeared for the defendant, to the provisions
of clause 9.2 of the agreement. Those provisions
read as
follows:
“
The
Consumer shall ascertain from the Council the nature of the
protection provided on the supply and the Consumer shall take
adequate
measures to protect its own equipment and apparatus.
This shall include measures to protect the Consumer’s equipment
and apparatus against damage that may arise under low voltage
conditions or from single-phasing.”
[49]
With reference thereto Mr. Knight stated that he “
deduced
”
from what he encountered on plaintiff’s side by way of
protective measures that plaintiff had ascertained from defendant
the
nature of the protection provided by defendant on the supply.
He conceded that this was an assumption on his part.
If
plaintiff had ascertained anything from defendant it would have been
whilst he was in a junior position with plaintiff.
[50] He
conceded that if a proper risk analysis had been undertaken, over
voltage would have been assessed as a real risk to plaintiff’s
equipment. However, the equipment to ensure that the correct
voltage was supplied was installed on defendant’s side
of the
boundary. It was therefore not necessary in his view for
plaintiff to have installed its own protection equipment.
It
was only at the point of common coupling that the plaintiff took
responsibility.
[51] He
explained that the UPS system referred to above was generally only
installed for sensitive electronic equipment, such as
computers and
other IT equipment, where it was necessary to protect data.
Asked what steps could have been taken to protect
against the dangers
of over voltage he stated that because the power consumption of the
factory was so high, in excess of 12 megawatts,
it would not be
economical to install a UPS of that size. An affordable
protection system, such as a trip switch, would trip
the main
breakers and switch the plant off, causing wholesale damage.
Such affordable option was therefore also not viable.
[52] He
stated that capacitor banks were installed where there was a high
inductive load, where a lot of copper was used.
Simply put, so
he said, its purpose was to correct things that go wrong where large
motors are involved. He stated that with
an inductive load
there is resistance to change in the flow of electrons and the
current therefore lags behind the voltage.
Where there was a
lag between the current and the voltage the capacitor would bring the
current back into line with the voltage.
Its purpose was to
make the system more efficient and cost-effective.
[53] It
was put to him that when capacitors were used in an electrical system
of an inductive nature, such as in plaintiff’s
plant, the
capacitors would create an increase in voltage at the load point.
He stated that this was possible although it
was not his area of
expertise.
[54]
With regard to his evidence that a trip switch was not a viable
option he explained that once the production process was running
one
needed to shut the plant and equipment down properly. This
would require a period of time so that if an over voltage
had
occurred it would need a very quick response. The ten minutes
referred to in clause 4.2 would not be sufficient time
to shut the
plant down. If the plant was merely switched off the effect
would be loss of production and loss of all the components
that were
at that time in the system. This was confirmed by Mr Canning
who stated that a trip switch would cause “extensive
damage”.
[55] It is
not in dispute that plaintiff did in fact suffer damage to its
machinery and equipment nor that such damage was to some
extent
caused by or resulted from an over voltage supply. This
concession by the defendant was perforce made in light of
the
evidence of Mr Knight, Mr Canning and Mr Ansell as follows:
Mr Knight
stated that he was only aware of one piece of equipment in the body
shop, known as a
Yaskawa
drive, that was damaged by the over
voltage. He stated that its components “were burnt”
and that it appeared
that they were covered by something “like
black carbon”.
Mr
Canning stated that on Monday morning after the incident it was found
that certain equipment could not be restarted “because
the
drives were burnt” in consequence of the over voltage. A
number of parts had to be replaced. Mr Ansell, with
reference
to certain photographs which, although not handed in to Court, were
admitted by defendant, stated that they depicted
“some burnt
out equipment” caused as a result of the over voltage. Asked
what the most probable cause of the damage
was Mr Duncan, as
well, stated that he “currently concurred with the fact that
the plaintiff has said the damage with
so many drives failing would
have been caused by the over voltage that was received on that
Saturday afternoon, an over voltage
is the cause of the failure”.
[56] Mr
Smuts submitted, however, that, firstly, the plaintiff had failed to
discharge the onus upon it of proving that the voltage
of the supply
received by it from defendant during the alleged six hour period, was
above the 7,5% limit referred to in the agreement.
His second
submission allied to this, was that plaintiff had adduced no evidence
as to the period over which or the time at which
the damage occurred
and had thus failed to exclude the possibility that such damage was
incurred within the ten minute period stipulated.
[57] In
developing his argument in respect of the first issue Mr Smuts
submitted that the Vectograph readings, reflecting the over
voltage,
could not be equated to proof that such over voltage supply was
occasioned by defendant. In this regard he submitted
that the
issue as to whether or not the capacitor banks were in operation at
the time was crucial in the light of the fact that,
according to Mr
Duncan, they had the effect, when in operation, of increasing the
voltage by 2%, this being the so called
Ferranti-effect.
[58] Mr
Smuts submitted further, with reference ,
inter
alia,
to
S
v Essack and Another
1974(1) SA
1(AD), concerning the necessity carefully to distinguish inference
from conjecture or speculation, that plaintiff had
adduced no direct
evidence in this regard nor any evidence on the circumstances under
which the capacitor banks might from time
to time be in operation or
not. There was, for example, no evidence as to whether it was
the practice of the plaintiff to
switch the capacitor banks off over
weekends or whether they automatically switched off at certain
times. He submitted that
in the circumstances whatever evidence
had been adduced by plaintiff amounted to no more than speculation.
[59] It
is necessary therefore to have close regard to this evidence.
[60] Mr
Kritzinger could not say whether the capacitors were on or off.
Mr
Greyvenstein was also not aware of their state at the time. He
added, however, that “the majority of the paint shop
load was
not on, because we only had the critical equipment and processing
running so the majority of your inductive loads would
be basically at
a stand still, so the power factor would not be much needed at that
point”.
[61] Mr
Ansell testified that there was “good reason” to believe
that the capacitors were “not on line”
by which he meant
that they were “not connected”. He stated that the
reason for his belief was that the capacitors
are “quite large”
and “ are only connected to the system when required”
His further uncontradicted
evidence was that the capacitor banks “are
automatic and they only switch on when required”. His
evidence was
further to the effect that the capacitors have a control
system whereby the inductive load is measured and that it was only
when
they were required that “another bank was brought in
automatically”.
[62] He
stated that under normal work day conditions, as the plant picked up
production and more motors came on, the inductive load
would
increase. It was in these circumstances that the power factor
correction was necessary in order to cancel the effect
of the
inductive load. With the plant in standby mode on the weekend,
however, such correction was not necessary. In
Mr Ansell’s
opinion therefore, the overwhelming probability was that the
capacitors were not in operation at the time.
[63] Mr
Duncan, when confronted under cross-examination with Mr Ansell’s
opinion, conceded that “this is a possibility”.
He
added, however, that in the absence of any direct evidence “we
can only assume that there is a possibility that it was
not the way
Mr Ansell understands it” Pressed on this issue he
replied that “I have done many substation and
many protection
things and we have come across problems on those substations and also
overwhelmingly we find that mistakes are
made by people that put it
in and also damage is done to capacitor banks because of the
incorrect application of protection, so
overwhelmingly, another way
is also a possibility.”
[64]
The reference to the “incorrect application of protection”
would appear to be a reference to Mr Duncan’s
earlier evidence
that the capacitors have built into them a protective mechanism which
will cause them to switch off if the voltage
is too high. With
respect to Mr Duncan his reply fails entirely to address the reasons
advanced by Mr Ansell as to why it
was probable that the capacitors
were not in operation. In any event, his evidence runs counter
to that of Mr Ansell who
stated unequivocally that had the capacitors
malfunctioned this would have been apparent to Mr Knight because it
would have given
rise to “strange readings”.
[65] In
my view Mr Ansell was an excellent witness whose lucid evidence can
be unreservedly accepted. It is clear from his
evidence,
corroborated to some extent by that of Mr Knight, that the capacitors
switch on automatically as and when required, that
they are required
when the inductive load is high as production increases across the
plant; and that they are not required when
the plant is in “sleep”
or “standby” mode. In these circumstances I agree
with the submission by
Mr Ford SC who, with Mr de la Harpe, appeared
for plaintiff, that far from being speculative, Mr Ansell’s
evidence establishes
on a balance of probabilities that the
capacitors were not in operation on that fateful Saturday. I
agree also with the submission
that it is, on the contrary, the
evidence of Mr Duncan which is speculative and based on conjecture.
[66] In
the light of this finding it is not necessary to deal with the
further issue raised by Mr Duncan concerning the alleged
increase in
voltage in consequence of the Ferranti-effect.
[67] It
is convenient at this juncture to deal with the further submission by
Mr Smuts as set out above to the effect that plaintiff
had adduced no
evidence as to the period over which or the time at which the damage
to plaintiff’s equipment had been incurred.
Mr Smuts
submitted that there, although there was evidence on the Vectograph
of the peak of 12274 volts having been recorded there
was no evidence
as to the duration of such peak. He submitted further that the
damage to plaintiff’s equipment could
have been occasioned
before the expiry of the 10 minute period provided for the agreement
in which event no liability would attach
to defendant.
[68] In
my view these submissions cannot be upheld. It is so that there
is no evidence of the extent of the duration of the
peak of 12274
volts but it is clear from the Vectograph that the over voltage in
supply endured for hours. When regard is
had to exhibit A8 it
is clear that Mr Smuts’ description of the over voltage supply
as having “snaked along”
just above the 7,5% limit,
ignores the second part of the graph which illustrates an oversupply
well above such limit and well
beyond 10 minutes in duration.
[69] In
any event, the probabilities in my view are overwhelmingly to the
effect that it was the sustained period of over voltage
that caused
the damage. As set out above Mr Canning stated that most of the
equipment drives had internal protective devices
which enabled them
to withstand an increase of up to 10% for a very short period of time
and the agreement itself envisaged that
the equipment could withstand
an increase of more than 7,5% for 10 minutes. In these
circumstances it is quite improbable
that the damage occurred during
the agreed period of 10 minutes.
[70] The
evidence of Mr Ansell in my view, puts the matter beyond doubt.
He described the mechanism which would cause the
equipment to burn
out in the following terms:
“
The
higher the voltage the more power is dissipated in the equipment: the
more power that is dissipated in the equipment the hotter
the
equipment would become; and the longer it is exposed to the condition
*again the hotter it would become until such a point
that it would
melt”.
[71]
There was some debate concerning the fact that plaintiff’s
internal transformers were set at 420 volts instead of the
nominal
value of 400 volts. In this regard it became common cause, as
indeed appears from the evidence of Mr Duncan, that
because the
transformers are transforming 11000 volts to 400 volts they do not
have any effect upon the voltage in the 11000 volt
network. The
increase of 5% from 400 to 420 volts on the 400 volt network was
therefore not recorded on the Vectograph which
measures only the
11000 volt network. The volt setting did not therefore affect
the voltage supply to the plaintiff by defendant.
[72] Mr
Smuts submitted, however, if it I understood him correctly, that the
additional 5% voltage thereby created may have damaged
plaintiff’s
equipment. In my view, however, this submission cannot be
sustained. The evidence discloses clearly
that at the point of
usage, because of the losses in the system, the voltage would have
been no more than 400.
[73] In
Minister of Safety and Security v van Duivenboden
2002(6)
SA 431 (SCA), Nugent JA stated with regard to factual causation as
follows at 449 E-F:
“
A
plaintiff is not required to establish the causal link with
certainty, but only to establish that the wrongful conduct was
probably
a cause of loss, which call for a sensible retrospective
analysis of what would probably have occurred, based upon the
evidence
and what can be expected to occur in the ordinary course of
human affairs rather than an exercise in metaphysics.”
[74] In
International Shipping Co (Pty) Ltd v Bentley
1990(1)
SA 680 (AD), Corbett CJ thus at 700 F-H:
“
The
enquiry as to factual causation is generally conducted by applying
the so-called ‘but-for’ test, which is designed
to
determine whether a postulated cause can be identified as a
causa
sine qua non
of the loss in question.
In order to apply this test one must make a hypothetical enquiry as
to what probably would have happened
but for the wrongful conduct of
the defendant. This enquiry may involve the mental elimination
of the wrongful conduct and
the substitution of a hypothetical course
of lawful conduct and the posing of the question as to whether upon
such an hypothesis
plaintiff’s loss would have ensued or not.
If it would in any event have ensued, then the wrongful conduct was
not
a cause of the plaintiff’s loss; aliter, if it would not so
have ensued. If the wrongful act is shown in this way not
to be
a
causa sine qua non
of
the loss suffered, then no legal liability can arise.”
[75]
With reference to the
International
Shipping
case
supra,
Brand JA in
ZA
v Smith
2015(4) SA 574 (SCA) stated
at para [30] that “
the application
of the ‘but-for test’ is not based on mathematics, pure
science or philosophy. It is a matter
of common sense, based on
the practical way in which the minds of ordinary people work, again
the background of every-day experiences.”
[76] In
my view therefore, having regard to what is set out above, plaintiff
has established a direct and probable chain of causation
between the
breach of the agreement in allowing the supply of electricity to
exceed the parameters provided for therein and the
damage occasioned
to plaintiff’s equipment. But for the breach the damage
to plaintiff’s equipment would not
have occurred.
[77]
Once factual causation is established the next enquiry arises,
namely, “
whether the wrongful act
is linked sufficiently closely or directly to the loss for legal
liability to ensue or whether, as it is
said, the loss is too
remote. This is basically a juridical problem in the
solution of which considerations of policy
may play a part. This is sometimes
called, ‘legal causation’.”
See
International Shipping
,
supra
at
700 H-I.
[78] In this
regard plaintiff has pleaded in paragraph 10 of its particulars of
claim that as a consequence of the overload in supply:
“
(10.1)
Plaintiff’s machinery and equipment was damaged beyond repair
and required to be
replaced;
(10.2) Plaintiff’s
production was interrupted for a period of 3 days;
(10.3)
Plaintiff was obliged to make additional salary payments to its
employees in order
to make-up its loss of production.”
[79]
Plaintiff has pleaded further in paragraph 11 of the particulars of
claim that in consequence of defendant’s breach of
the
agreement, it has suffered damages in the sum of R2,3 million arising
out of;
“
(11.1)
Loss of production time for a period of 3 days in Plaintiff’s
body shop, assembly
plant, paint shop and logistics department.
(11.2)
Costs of extended shifts to make-up lost production.
(11.3)
Associated costs for production on Saturday.
(11.4)
Airfreight expenses in order to obtain replacement equipment.
(11.5)
Cost of equipment for the body shop to replace damaged equipment.
(11.6)
Cost of equipment to replace damaged equipment for the paint shop.
(11.7)
Replacement of Information Technology Equipment.
[80] Mr Ford has
submitted with reference,
inter alia
,
to the well-known judgment of Corbett JA in
Holmdene
Brickworks (Pty) Ltd v Roberts Construction Co (Pty) Ltd
1977(3) SA 670(A) at 687D and
Thoroughbred
Breeders’ Association v Price Waterhouse 2001(4) SA 551(SCA,
that the damages referred to above flowed “naturally and
generally from the kind of breach of contract in question and which
the law presumes the parties contemplated as a probable result of the
breach”.
[81] Mr Canning’s
unchallenged evidence is relevant in this regard. It appears
therefrom that to the knowledge of defendant,
plaintiff was in the
process of expanding its factory from a CDK plant to a part by part
plant and that to achieve this, it required
a stable supply of
electricity within acceptable parameters. Defendant was also
well aware that the deviation allowance of
7,5% eventually agreed to
by plaintiff was a compromise by plaintiff from Daimler’s usual
standard of 5%. As usual
stated by Mr Canning, the plaintiff
manufactures vehicles to order. It is part of Daimler’s
global distribution network
which manages orders for vehicles
throughout the world. If the plant for some reason stops
production it cannot simply ignore
the orders already placed but has
to catch up on the production once it is functioning again. In
order to get the plant functioning
again plaintiff had to replace the
damaged equipment, restart the factory and return it to production.
It had to pay salaries
in the meantime as well as overtime pay as
lost production was made up.
[82] All of these losses
were, in my view, directly consequent upon the defendant’s
breach of the agreement and flowed naturally
from it. Mr Smuts,
however, submitted that having regard to the provisions of clause 4.1
and 9.2 of the agreement in particular,
those losses were not within
the contemplation of the parties at the time the agreement was
concluded.
[83] In the light of Mr
Smuts’ submissions it is necessary to have regard in particular
to clauses 4.1 and 9.2 thereof
.
The approach to
be adopted in interpreting the agreement appears from
Natal
Joint Municipal Pension Fund v Endumeni Municipality
2012(4)
SA 593 (SCA) at paragraph 18 where Wallis JA stated:
“
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 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 unsensible
or unbusinesslike results or undermines
the apparent purpose of the
document.”
[84] As
set out above, clause 9.2 provides that plaintiff “shall
ascertain” from defendant the “nature of the
protection
provided on supply” and that, for its part, plaintiff “shall
take adequate measures to protect its own equipment
and apparatus”.
[85] Mr
Smuts submitted that there was no evidence to the effect that
plaintiff had complied with its obligations to ascertain from
defendant what protective measures the latter had put in place in
order that plaintiff might for its own part, put in place effective
measures of its own and that it was not foreseeable that plaintiff
would have failed to do the necessary analysis.
[86] It
is so that plaintiff did not adduce any direct evidence in this
regard. In my view however, the criticism of plaintiff’s
failure to do so overlooks the fact that the agreement was entered
into over 15 years ago at a time when Mr Knight was still relatively
junior. Although Mr Knight was not a party to any
negotiations he stated that “
at
the time that the contract was being drawn up and the equipment was
discussed from both sides I believe, and in that manner the
understanding was there of what would be on the BCM side and what
would
be
on the Mercedes Benz Side”.
He added that he deduced from the nature of the equipment installed
on the plaintiff’s side where “
the
fault currents and the fault levels that are set up on that switch
gear correlate with that of BCM”
and
were “in alignment” with it, that plaintiff must have
discussed the matter with defendant. This evidence that there
was
indeed some discussion concerning the matter was not disputed.
It is also relevant, in my view, that defendant did not
itself adduce
any evidence to the effect that there never was any such discussion.
[87] In
my view therefore, at the best for defendant, the evidence on this
aspect is neutral in nature.
[88] Mr
Smuts, submitted further that plaintiff was required, in terms of
both clauses 4.1 and clause 9.2, to take “adequate
measures”
to protect its own equipment including measures to protect the
equipment against damage that might arise “under
low voltage
conditions or from single-phasing” and damage caused by “an
outage, voltage dip or voltage surge”.
[89] It
is common cause that the damage to plaintiff’s equipment did
not arise from “low voltage conditions, single
phasing, outage
or voltage dip”. In his evidence however, Mr Duncan
stated that the over voltage which endured for
6 hours on 26
September was in fact a “voltage surge”. This
evidence was in direct contradiction of Mr Ansell’s
evidence
that a “voltage surge” was a very short event “which
was defined in the N.R.S. regulations as being
“something that
is less than one millisecond”. Mr Ansell’s evidence
was not challenged under cross-examination
despite Mr Duncan
testifying that he had informed his counsel that it was incorrect. In
the circumstances I am satisfied that Mr
Ansell’s evidence can
be accepted.
[90] It is
apparent therefore that none of the events specifically referred to
in clauses 4.1 and 9.2 occurred on 26
September.
[91]
Mr. Ford submitted with reference to the phrase “
this
shall include measures
” in
clauses 4.1 and 9.2 that the clause could not be construed as meaning
“measures additional to” the measures
designed to protect
against the named events contained in those clauses. He
submitted that it would make no commercial or
business sense for the
defendant to have contracted with the plaintiff as a specific
condition of its supply of electricity that
“
the
maximum percentage by which the supply voltage may differ from the
declared voltage of 11000 volts for a period of longer THAN
10
consecutive minutes shall be 7,5% above or below the declared
voltage
” and “
to
use its best endeavours to reduce the percentage of variation to 5%
”
but for defendant nevertheless to be excused from any liability for a
breach of that specific condition on the basis that
the plaintiff was
obliged to protect itself against the defendant’s breach of the
condition of its supply of electricity.
[92] He
submitted that if that were the intention then clause 4.2 would have
been conveniently expressed not as a “
specifically
agreed condition of supply
” but
as an “
endeavour
”,
as described in clause 4.3, and that, the provisions of clause 5.3 to
the effect that the defendant would not be liable
for damages caused
to plaintiff “
as a result of a
reduction or interruption in the supply or variation of voltage
frequency or any failure to supply electricity
”,
would have been framed differently to include all and any eventuality
including an extended period of over voltage in breach
of the
provisions of clause 4.2 of the agreement.
[93] He
submitted accordingly that the correct interpretation of the
provisions of clause 4.1 and clause 9.2 was that the “
adequate
measures
” which plaintiff was
required to take to protect its equipment were limited to measures to
protect against the events specifically
mentioned in clause 4.1 and
clause 9.2. Those clauses did not require plaintiff to take
measures to protect its equipment
against an extended period of over
voltage in supply consequent upon defendant’s breach of a
specific condition of its supply
of electricity to the plaintiff as
set out in clause 4.2.
[94] Mr
Smuts submitted, however, that the word “including” had
to be given a meaning and could not simply be ignored.
He
submitted that the ordinary grammatical meaning of “including”
clearly denotes that the circumstances that follow
do not constitute
an exhaustive list of circumstances or events.
[95] In
my view, attractive as Mr Ford’s submissions may be, Mr Smuts
is correct that the word “including” cannot
simply be
ignored as being superfluous. It conveys that the list of
specified events is not exhaustive. It needs, however,
to be read in
the context of the agreement in conjunction with the phrase “adequate
measures”. The intention,
in my view, was clearly that
the plaintiff would take adequate measures to protect its equipment
against events of a similar nature
to those specified in the
particulars of claim, whatever such events might be.
[96] I am
further of the view that the clauses cannot be interpreted so as to
have obliged plaintiff to take measures to protect
itself against an
event of the nature which occurred on 26 September 2009.
Plaintiff’s witnesses had never before encountered
such
exceptional over voltage. Mr Greyvenstein stated with reference
to the fact that he had measured the voltage at 12500
that this was
“the most I have seen since the commissioning of the system”
and that “I have never seen it that
high”.
Furthermore, defendant’s own witness, Mr Duncan, stated as
follows:
“
Thus
when we look at the graph we can see that BCM did exceed the 7,5% for
longer than the 10 minute agreement, but it was caused
by an abnormal
condition which was a possibility but with a very low probability of
ever occurring.
”
He
added that “
it was an abnormal
condition that occurred. Most of the people that have given
witness in this court have agreed that it’s
the only time that
they have ever seen this type of deviation”.
[97]
The question arises as to what measures plaintiff could have taken to
protect itself in such abnormal circumstances.
In this regard
Mr Ford submitted also that the entire issue of plaintiff’s
alleged failure to have taken adequate measures
was irrelevant as
defendant had not pleaded a defence reliant thereon. Whilst
there is, in my view, merit in this submission,
I would prefer to
deal pertinently with the issue.
[98]
The matter was taken up with Mr Knight. He stated, as set out
above, that the necessary equipment to ensure that the
correct
voltage was supplied was installed on defendant’s side of the
boundary and that it was therefore not necessary for
plaintiff to
have installed its own protective equipment. He explained that
it would be uneconomical to install a UPS system
in a plant of
plaintiff’s size. A trip switch, on the other hand, would
have caused “extreme damage”. Furthermore
, the
issue as to whether plaintiff should have installed its own automatic
tap changers on its transformers was but tentatively
explored in
evidence and it was never directly put to any of the plaintiff’s
witnesses that it should have been done.
[99]
The Concise Oxford English Dictionary defines “
adequate
”
as “
satisfactory or acceptable
”.
The Shorter Oxford English Dictionary defines it as “
sufficient,
suitable
”. In this regard
Mr. Ford referred further to
Allcock v
Allcock and Another
1969 (1) SA 427
(N)
where Milne J described “
adequate
”
as “
meaning something less than a
full measure
”. He submitted
accordingly that such obligation as may have been placed upon the
plaintiff to protect its own equipment
by the provisions of clauses
4.1 and 9.2 was not an absolute obligation to install a fail-safe
protective device.
[100]
I agree. In placing an obligation upon the plaintiff to protect
its own equipment it could never have been
intended, in my view, that
such protection be a complete and absolute safeguard against the
occurrence of a highly abnormal event.
As was further submitted
by Mr Ford, the installation by plaintiff of its own tap changers, in
duplication of those of defendant,
would not have been an “adequate”
but instead an “extraordinary” measure which not
contemplated in the
agreement. In all the circumstances Mr Smuts’
contention that the losses occasioned to plaintiff’s equipment
were not
within the contemplation of the parties at the time the
agreement was concluded cannot be upheld.
[101]
I am satisfied therefore that plaintiff has established that
defendant breached the conditions of its supply of
electricity to
plaintiff and that, as an overwhelming probability, the oversupply of
voltage for an extended period of time caused
the damage to
plaintiff’s equipment leading directly to the losses sustained
by plaintiff.
[102]
The following order will accordingly issue:
(a) It is declared that defendant
is liable to plaintiff for such damages as plaintiff may
in due
course prove it has suffered in consequence of the over supply of
voltage to it by defendant on 26 September 2009.
(b)
Defendant is ordered to pay the costs of the action to date, such
costs to include the qualifying
expenses of Mr Ansell and the cost of
two counsel.
_____________
J D PICKERING
JUDGE OF THE HIGH COURT
Appearances:
For the
Plaintiff: Adv EAS Ford SC and Adv DH de la Harpe, instructed
by Drake Flemmer & Orsmond Inc, East London.
For the
Defendant: Adv IJ Smuts SC and Adv SSW Louw, instructed by Niehause
McMahon, East London