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[2014] ZAGPPHC 357
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Riverside Chuene Construction CC v MEC, Department of Education Limpopo Province (70284/2013) [2014] ZAGPPHC 357 (12 June 2014)
IN
THE GAUTENG DIVISION HIGH COURT, PRETORIA
(REPUBLIC
OF SOUTH AFRICA)
Case
Number: 70284/2013
DATE:
12/6/2014
NOT
REPORTABLE
NOT
OF INTEREST TO OTHER JUDGES
In
the matter between:
RIVERSIDE CHUENE CONSTRUCTION CC
…........................................................
APPLICANT
(Registration
No 2005/117988/23)
and
THE
MEC, DEPARTMENT OF
EDUCATION
..........................................................
RESPONDENT
LIMPOPO
PROVINCE
JUDGMENT
MOLEFE, J:
[1] The applicant
claims payment from the respondent in the amount of R1 704 196, 51
together with interest thereon at the rate
of 160% of the prime rate
of interest, compounded monthly from 20 March 2013 to date of
payment. The indebtedness arises from services
rendered by the
applicant to the respondent at the respondent’s special
instance and request. The respondent opposes the
application.
Factual
Background
[2] The applicant
was, during November 2010, awarded a tender by the respondent to
construct certain classrooms in the Sekhukhuni
District. A
written principal building agreement contract that would govern the
relationship between the parties was concluded.
In terms of
clause 31.9 of the principal building agreement (“JBCC”)
prepared by the Joint Building Contracts Committee
Incorporated,
Series 2000, the employer shall pay to the contractor the amount
certified in an interim certificate within 7 calendar
days of the
date for issue of payment certificate.
Clause 31.11 of the
JBCC provides that where the contractor has not received payment of
the amount due within 7 days from date of
issue of the interim
payment certificate, the employer shall be liable for default
interest on the amount without prejudice to
any other rights the
contractor may have. Such interest amount shall be compounded
monthly from the due date for payment
up to and including the date on
which the contractor is to receive payment and included in the
recovery statement. The principal
agent shall calculate such
default interest at the rate of 160% (one hundred and sixty percent)
of the interest.
[3] The respondent
appointed IDNIL Professional Consultants CC (“IDNIL”) as
the Quantity Surveyor for the project.
IDNIL was the principal
agent and described in clause 1.0 of the JBCC as “
the party
named in the contract data and\or appointed by the employer with full
authority and obligation to act in terms of the
agreement”.
IDNIL’s role would
inter alia
include the
preparation of recovery statements and monthly payment certificates
certifying the amount due and payable by the employer
to the
contractor or vice versa in terms of the JBCC payment certificate
form. IDNIL was, later substituted by Wepenar Dikgale
Quantity
Surveyors (“Wepener”).
[4] The applicant
claims payment of the value of the interim payment certificates,
together with interest, running from 20 March
2013, said date being 7
days after the date of issue of the payment certificate as
contemplated in clause 31.9 of the JBCC.
Respondent’s
Point in Limine
[5] The respondent’s
counsel
[1]
takes a preliminary
point
in
limine
that the application is premature, seeing as the applicant was
enjoined by virtue of the JBCC, to deal with the dispute through
the
alternative dispute resolution mechanisms contained in the JBCC, by
referring the dispute to adjudication or, failing adjudication,
to
arbitration.
Respondent’s
counsel relies on clause 40.1 of the JBCC under heading “
Settlement
of Dispute
” which provides that:
“
40.1
should any dispute arise between the employer, including his
principal agent or agents, and the contractor arising out of or
concerning
this agreement or its termination, either party may give
notice to the other party to resolve such disagreement”.
[6] Clause 40.2 of
the JBCC provides that:
“
40.2
Where such disagreement is not resolved within 10 (ten) working days
of receipt of such notice, it shall be deemed to be a
dispute and
shall be referred by the party which gave such notice to
either:
40.2.1
adjudication where the adjudication shall be conducted in terms of
the addition of the JBCC rules for adjudication current
at the time
when the dispute was declared, or
40.2.2
arbitration where the arbitrator is to be appointed by the body
selected by the parties whose rules shall apply”.
[7] Respondent’s
counsel argues that the letter furnished by the applicant to the
respondent dated 1 July 2013 constitutes
a notice to resolve a
disagreement as contemplated in clause 40.1 of the JBCC. On the
respondent’s argument, and seeing
as no response to this letter
was forthcoming from the respondent within ten working days, the
non-resolution of the disagreement
created a dispute as contemplated
in clause 40.2 of the JBCC. The applicant was therefore
enjoined to refer the dispute to
either adjudication, failing
adjudication to arbitration, instead of making the application before
the Court, prematurely.
It was the argument of the respondent’s
counsel that the applicant did not exhaust the internal remedies
prior to approaching
the Court.
[8] Counsel for the
applicant
[2]
submits that the
letter dated 1 July 2013 constitutes a letter of demand for payment
by the respondent. There is nowhere
in the letter that
reference is made to any disagreement between the parties and nowhere
is a request made by the applicant for
the dispute to be resolved
within the 10 days from date of the letter as contemplated in clause
40.2 of the JBCC.
Applicant’s
counsel further argues that alternative dispute resolution, in the
form of either adjudication or arbitration,
is directory as opposed
to compulsory.
[9] I find the
respondent’s counsel argument on the point in
limine
without
merit. The letter dated 1 July 2013 is clearly a demand for
payment from the respondent and the respondent failed
to respond to
this demand within ten days. I could not find an aired dispute
nor disagreement in the letter which could create
the basis for
alternative dispute resolution. Furthermore, even if a dispute
was created by the letter by virtue of the express
wording of clause
40.1 of the JBCC, “
either party
may
(my
emphasis) give notice to the other party to resolve such
disagreement”.
The referral of disputes to
adjudication/arbitration is not peremptory and each party has a
choice to either invoke the alternative
dispute resolution mechanism,
or not to. Accordingly, the respondent’s point in
limine
fails and is dismissed.
[10] The applicant
in its founding affidavit, states that the originally appointed
principal agent on the project was IDNIL and
that IDNIL was later
substituted by Wepener. The respondent’s opposition to
the claim for payment is the denial of
the appointment and, as a
corollary thereto, the authority of the principal agent who signed
the interim payment certificates.
Mzwandile Matthews
(“Matthews”), the deponent to the respondent’s
answering affidavit, and the Administrator
of the Department of
Education: Limpopo Province, denies the appointment of the principal
agent, Wepener and this denial extends
to an all-out denial of any
knowledge of the existence of Wepener.
[11] Respondent’s
Counsel submitted that the appointment of a project manager such as
was the case with IDNIL, is an elaborate
process that is subject to
the supply chain management (SCM) processes of the respondent.
The resignation of IDNIL from the
project, posed, according to the
respondent’s counsel, a dilemma for the applicant as there
would be no principal agent to
issue applicant’s interim
payment certificates. Counsel contends that the respondent has
not appointed any other principal
agent in the stead of IDNIL as no
new tender has been issued to appoint another principal agent.
[12] The applicant,
in its replying affidavit, produces evidence of the involvement and
participation of Wepener in the project
dating back to 2011.
The applicant relies,
inter alia
, on a letter under heading of
the respondent and signed by the respondent’s Senior Manager:
Infrastructure, N.P. Ngubane,
wherein Wepener is expressly appointed
given the departure of IDNIL from the project. Wepener
furthermore produced a report
on the project, at the behest of the
respondent, wherein the department is informed of the total payment
amount due to the applicant
subsequent to Wepener’s
investigation as ordered by the respondent.
[13] Respondent’s
counsel submits that in the event that the letter is indeed written
by N.P. Ngubane, Ngubane had no authority
to provide the letter of
the appointment of Wepener and that Ngubane acted
ultra vires.
Counsel for the respondent argues that if indeed Wepener was
appointed as a temporary replacement, no proper process was
followed
as there is no provision in the SCM process for interim appointment
and on that basis, there has been no appointment at
all. The
respondent has thereby refused to pay applicant any monies claimed on
the strength of the payment certificates issued
by Wepener.
Counsel further submits that the respondent does not
per se
refuse to pay the applicant and contends that it will do so in due
course after the appointment of the principal agent, who will
assess
the work completed by the applicant and on the payment certificates
he issues.
[14] Ngubane’s
letter to Wepener dated 28 February 2013
inter alia
states
that:
“
The
Department of Education has been informed that Wepener Dikgale was
appointed as an independent Quantity Surveyor to assist
with
quantification of the revised scope of work for the Sekhukhune Grade
R projects in 2011.
Due to recent
developments around the withdrawal from the projects by the
appointed Quantity Surveyor we request that you assist
the Department
of Education by providing your professional services to assist with
the interim payment of the Contractor while
in the process of
procuring a replacement professional service provider”.
I do not agree with
the argument by the respondent’s counsel that Ngubane had no
authority to provide “
the letter of the appointment of
Wepener”
and that Ngubane acted
ultra vires.
Ngubane’s letter is clearly not for the appointment of
Wepener but it is a request to Wepener to assist in providing
services
with the interim payment of the Contractor. By the
time Ngubane sent the letter to Wepener, he (Wepener) had been
appointed
already. The respondent’s argument has therefore no
merit at all.
[15] An architect
certificate given under the usual form of building contract, is a
liquid document which will found a claim for
provisional sentence if
the architect, in issuing the certificate, acted as agent on behalf
of the owner
[3]
.
The respondent in
casu
denies the appointment and, as a corollary thereto, the
authority of the principal agent who signed the interim payment
certificates.
The denial extends to an all-out denial of any
knowledge of the existence of Wepener. This is despite the fact
that Wepener’s
involvement and participation in the project
dated back to as early as 2011 and furthermore that the respondent’s
Senior
Manager: Infrastructure confirms his appointment and requests
his services.
[16] It is also
interesting to note that Matthews in the answering affidavit states
that a proper procedure does “
not appear”
to have
been followed in the appointment of Wepener. I am of the view
that this allegation cannot be determinant as to the
validity of the
appointment Wepener.
Ex facie
the answering affidavit,
Matthews draws superficial inferences without having properly availed
himself of the correct position.
Matthews does not give
evidence that for a fact, Wepener was not appointed as a principal
agent nor if appointed, no process was
followed by the respondent in
Wepener’s appointment.
[17] Principal
agents on projects of this nature are enjoined to facilitate
verification of works and payments to contractors through
the issuing
of interim payment certificates. The respondent’s
projects remained active after IDNIL’s departure
and
contractors continued with filing claims for payment pursuant to
completion of these projects. Under the JBCC, interim
payment
certificates must be issued monthly, as these payments are essential
to keep contractors in funds so as to enable them
to continue with
their work. It is evident from the evidence before me that, on
Matthew’s version, more than a year
and a half later, the
respondent has still not appointed a principal agent despite the fact
that the contractors are still allowed
to continue with their work.
Due to the reasons above-mentioned, I am of the view that Matthews’
version is implausible
and warrants a rejection.
[18] In
Oudekraal
Estates (Pty) Ltd v City of Cape Town and Others
2004 (6) SA 222
,
the court held that until invalid
administrative action is set aside by court in proceedings for
judicial review, it exists in
fact and it has legal consequences that
cannot simply be overlooked. I am taking my cue from this case
and am satisfied that
in the event that a proper procedure on the
appointment of Wepener was not followed by the respondent, the legal
consequences which
in
casu
is the payment of the applicant
cannot be ignored nor overlooked.
[19] It is
significant that the respondent does not deny that the applicant did
the work on the project, nor does the respondent
deny the value of
the work done by the applicant. It is of importance to me to
put on record that at every stage of the contracting
process, from
the negotiations through to the performance of the obligations
undertaken in the contract, parties are required to
behave in a
manner consistent with good faith
[4]
.
My observation in
casu
is that the respondent is not behaving in a manner consistent with
good faith.
[20] In terms of
section 31.11 of the JBCC, where the contractor does not receive
payment of the amount due by the due date, the
employer shall be
liable for default interest on the amount. The principal agent
shall calculate such default interest at
the rate of one hundred and
sixty (160%) of the interest (160 basis points or 1,6%).
[21] In the
premises, I make the following order:
i) Payment by
the respondent to the applicant in the amount of R1 704 196,51
(One Million Seven Hundred and Four Thousand,
One Hundred and Ninety
Six Rand and Fifty One Cents);
ii) Interest on
the aforesaid amount at the rate of 1.6% multiplied by the prime
rate from time to time, up to date of payment;
iii) Costs of
the application.
______________________
D
S MOLEFE
JUDGE
OF THE HIGH COURT
APPEARANCES:
Counsel
on behalf of Applicants :
Adv. S G
Gouws
Instructed
by : Verveen Attorneys
Counsel
on behalf of Respondent :
Adv. T S
Madima SC
Instructed
by: State Attorneys
Date Heard : 3
June 2014
Date
Delivered: 12 June 2014
[1]
Adv.
T S Madima SC
[2]
Adv.
S G Gouws
[3]
Joobjoob
Investments (Pty) Ltd v Stocks Mavundla Zek Joint Venture
2009 (5)
SA 1
[4]
Meskin
NO v Anglo-American Corporation of SA Ltd and Another
1968 (4) SA
793
(W) at 804 D