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[2014] ZAFSHC 59
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Haw & Inglis Civil Engineering (Pty) Ltd v MEC: Free State Provincial Government: Department Of Police, Roads And Transport (4646/2014) [2014] ZAFSHC 59 (8 April 2014)
IN THE HIGH COURT OF
SOUTH AFRICA
FREE
STATE DIVISION, BLOEMFONTEIN
CASE
NO. : 4646/2014
In
the matter between:-
HAW
& INGLIS CIVIL ENGINEERING (PTY)
LTD
Applicant
and
THE
MEC: FREE STATE
PROVINCIAL
Respondent
GOVERNMENT: DEPARTMENT
OF POLICE,
ROADS
AND TRANSPORT
HEARD
ON:
17
APRIL 2014
JUDGMENT
BY:
RAMPAI, AJP
DELIVERED
ON:
8 MAY 2014
[1]
The matter came to court by way of motion proceedings. The
applicant initially sought the relief whereby the respondent
was
ordered to pay the sum of R22 749 819.65, interest thereon
and costs. The application was launched on 13 November
2013.
The respondent opposed the application.
[2] In
its founding affidavit the applicant alleged that the respondent owed
it the aforesaid sum of money for services that the
applicant had
rendered to the respondent for the rehabilitation of the provincial
road known as P9/30. The road in question
links together
Heilbron in the north and PetrusSteyn in the south.
[3]
The applicant is a construction company based in Cape Town. It
specialises in road construction and road rehabilitation
works.
It primarily focuses on major national and provincial arterial roads
and urban highways.
[4]
During October 2009 the respondent department invited tenders for the
provision of services relating to the rehabilitation of
the aforesaid
road. The tender was styled Contract No PR+T 04/2009. On
29 June 2010 the respondent formally instructed
the applicant to
establish itself on the construction site and to proceed with the
rehabilitation works. On 22 July 2010
the respondent formally
accepted the offer of the applicant. A written agreement was
then concluded between the parties.
[5]
The salient terms of the written agreement, as identified by the
applicant, were
inter alia
that:
“
11.9.3
The respondent would effect payment to the applicant of
the amount
agreed upon for the services rendered, to the total value of the
tendered amount of
R300 000 000,00.
11.9.4
The works had to commence on
2 July 2010
and be completed by
22 July 2013
.
The initial contract period was accordingly 36,5 months. This
period was later on extended by agreement to 38,27 months.
11.9.5
Payments for work would be effected by means of
Haw
& Inglis
submitting completion and
payment certificates to the Department as the work progressed under
the project.
11.9.6
These payment certificates would be independently
certified by
the
Department’s
agent and consulting
engineer on the project (I shall revert on this aspect below) and
once so certified, the payment certificate
would be submitted to
the
Department
for payment.
11.9.7
All certificates were to be paid no later than 28
calendar days after
the date upon which any such specific certificate was submitted to
the Department
.
11.9.8
Haw & Inglis
would be entitled to the payment of interest on any and all overdue
amounts, at the prime overdraft rate of the Contractor’s
bankers, calculated from the 1
st
day of
mora
until date of final payment. Certificates could be submitted
for interest payments due, once again certified by the consulting
engineer.
11.11
The Department had appointed
Vela VKE
Consulting Engineers (Pty) Ltd
as agent
and consulting engineer on the project.
Vela
VKE
is part of the
SMEC
Group
of consulting engineers. I
will henceforth refer to this entity simply as “
SMEC”
.
11.12
The role of the consulting engineers was to independently
certify the
payments claimed as the works progress, to certify that the works had
been done satisfactorily and that the amount
claimed in the payment
certificate was in actual fact due and payable. When
SMEC
would then so certify that the works claimed have been completed, and
the amount is due and owing, the primary obligation
would fall
to the Department to effect payment – as I have said –
within 28 days of receipt of the payment certificate.”
[6]
The applicant started with the rehabilitation works. Since the
applicant started with the execution of the contract, it
submitted
several certificates to the respondent from time to time for payment.
[7]
The applicant’s claim was twofold. In the first place,
the applicant’s case was that most, but not all, of
the
certificates in respect of the capital claim have been paid by the
respondent. The applicant alleged that the unpaid
capital
claims concerned the following four capital certificates:
7.1
Certificate no.
26
and to the amount of
R909 303,23
.
This certificate was allegedly submitted to the respondent on
27
September 2012
and remains unpaid.
Vide
“anx
fa5”.
7.2
Certificate no.
31
and in the amount of
R871794,94
.
This certificate was allegedly submitted to the respondent on
28
February 2013
and remains unpaid.
Vide
“anx
fa6”.
7.3
Certificate no.
37
in the amount of
R11 461 790,32
.
This certificate was allegedly submitted to the respondent on
30 August 2013
and remains unpaid.
Vide
“anx fa10”.
7.4
Certificate no.
38
an amount of
R80 436 484,04
.
This certificate was allegedly submitted to the respondent on
1
October 2013
and remains unpaid.
Vide
“anx
fa12”.
The
total of R21 242 888,49 represented the alleged outstanding
capital component of the applicant’s claim.
[8] In
the second place, the applicant’s case was that certain
certificates in respect of the interest component of the claim
remained unpaid by the respondent notwithstanding lawful demand.
The applicant alleged that the unpaid interest claims concerned
the
following five interest certificates:
8.1
Certificate no.
33(a)
in the amount of
R393 626,89
.
This certificate was allegedly submitted to the respondent on
6
May 2013
and remains unpaid.
Vide
“anx fa7”.
8.2
Certificate no.
35(a)
in the amount of
R486 857,25
.
This certificate was allegedly submitted to the respondent on
27
June 2013
and remains unpaid.
Vide
“anx
fa8”.
8.3
Certificate no.
36(a)
in the amount of
R116 114,83
.
This certificate was allegedly submitted to the respondent on
6
August 2013
and remains unpaid.
Vide
“anx
fa9”.
8.4
Certificate no.
37(a)
in the amount of
R20 536,32
.
This certificate was allegedly submitted to the respondent on
30
August 2013
and remains unpaid.
Vide
“anx
fa11”.
8.5
Certificate no.
38
an amount of
R8 436 484,04
.
This certificate was allegedly submitted to the respondent on
1
October 2013
and remains unpaid.
Vide
“anx
fa12”.
The
total of R1 070 447,12 represented the alleged outstanding
interest component of the applicant’s claim.
[9] On
21 October 2013 the applicant caused a notice to be given to the
respondent under clause 58.6.1 of the general conditions
of the
contract. The applicant forewarned the respondent that unless
the outstanding amounts, inclusive of those specified
as per
certificates numbered 38 and 38(a), were paid by 29 October 2013,
court proceedings would be instituted. According
to the
applicant the outstanding balance then was R30 632 901,79.
Included in that total sum was an amount of R9 006 454,48
claimed as per certificate numbered 36. That amount had become
due and payable on 3 September 2013. The respondent
had already
paid the capital certificate in question on 4 October 2013 – 25
days before the applicant dispatched the said
notice in terms of
clause 58.6.1.
[10]
From the aforesaid allegations the applicant concluded:
10.1
That the respondent was still indebted to the applicant for the
services rendered under the agreement concluded in the
amount
mentioned in the notice of motion.
10.2
That the amounts claimed and the work done have been certified to be
correct by the respondent’s agent.
10.3
That all the amounts under the certificates have been payable for
some time but that, in material breach of the agreement
between the
parties, the respondent had failed to effect payment to the
applicant.
10.4
That the applicant was entitled to
mora
interest on the certificates issued, by virtue of the relevant
provisions of the
Prescribed Rate of Interest Act, 55 of 1975
.”
That
then was the applicant’s case.
[11]
The notice of the respondent’s intention to oppose was filed on
20 January 2014. The answering affidavit was filed
on 7
February 2014. In the answering affidavit the respondent did
not deny numerous averments made by the applicant.
Among
others, the respondent admitted that the parties had entered into a
written agreement; that the salient terms of the agreement
were
correctly extrapolated by the applicant; that the applicant duly
executed the contract and that payment certificates were
issued by
the respondent’s appointed agent Vela VKE Consulting Engineers
(Pty) Limited.
[12]
The aforesaid admissions, notwithstanding the respondent pertinently
pleaded that it was no longer indebted to the applicant
in the sum of
R22 749 819,65 or any other amount whatsoever arising from
the contract for the rehabilitation of the provincial
road in
question. That then was the gravamen of the respondent’s
substantive defence.
[13]
It was the respondent’s defence that by the time the applicant
served and filed the current application on 13 November
2013, the
respondent had already effected payment of all the amounts due to the
applicant in terms of the various completion and
payment certificates
issued by its appointed consulting engineers. Such payments,
the respondent alleged, included the capital
and interest components
of the claim. To this end the respondent relied on “anx
sjm7”, payment schedule and “anx
sjm8”, BAS
supplier’s report.
[14]
As regards the capital component of the claim, the respondent
alleged, that save for two amounts now claimed in terms of the
founding affidavit as unpaid, the founding affidavit did not
precisely correspond with the amounts previously claimed at the
payments
certificates. The respondent averred that there were
only two instances where the founding affidavit and the payment
certificates
tallied,
viz
capital certificates 37 and 38.
[15]
The respondent alleged that generally the respondent fully paid all
the amounts as specified in each payment certificate, except
where
there was an agreed arrangement. In those rare cases where the
respondent delayed payment or paid less than the actual
amount due,
it was by mutual agreement. In such exceptional cases, the
agreed arrangement was that the respondent would pay
the shortfall,
together with the amount of the subsequent payment certificate.
[16]
As regards the interest component of the claim, the respondent
alleged that all interest for delayed payment were included
in the
payment certificates. The respondent asserted that the
applicant’s claims and interest certificates 33(a), 35(a),
36(a), 37(a) and 38(a) were thus fully settled by the respondent as
and when each of the corresponding capital amounts were settled
at
various times prior to the institution of these proceedings.
[17] The respondent
averred that the parties had expressly agreed that to apply the rate
of interest calculated at the prime overdraft
rate as certified by
the applicant’s bankers –
vide
clause 49.7.2 “anx
fa4” – the general conditions of the contract. In
view of that clause, the respondent
contended that the applicant was
not entitled to claim
mora
interest in terms of the
Prescribed
Rate of Interest Act. Its
contention was that the parties were
bound by clause 49.7.2. In any event, the respondent further
contended that whatever
rate of interest the applicant could have
applied, would have amounted to charging interest on interest, which
was legally impermissible.
That
then concluded the respondent’s defensive plea.
[18]
In the replying affidavit the applicant admitted that indeed the
respondent did make certain payments in respect of the capital
component before the applicant launched the current application.
The acknowledged receipts concerned payment certificates
numbered 26
and 31 in the amounts of R909 303,23 and R871 174,94
respectively. It followed therefore, that, as
on 13 November
2013 when the application was filed, the outstanding capital balance
was in actual fact R1 780 478,17
less than the sum claimed
in the founding affidavit.
[19]
The applicant replied that the respondent made a further composite
payment of R19 898 274,36 on 15 November 2013,
two days
after these proceeding had been launched. The applicant
conceded that the composite payment completely settled the
capital
component of its claim against the respondent.
[20]
However, the applicant persistently denied the respondent’s
allegations that the respondent was no longer indebted to
the
applicant in any amount whatsoever. The applicant maintained
that the interest component of its claim still remained
unpaid.
It was the applicant’s case that the total sum of the interest
component of its claim still outstanding was
R1 070 447,12.
The finer details of the mathematical breakdown thereof appear from:
·
Certificate no 33(a)
“anx fa7”
p 86
·
Certificate no 35(a)
“anx fa8”
p 87
·
Certificate no 36(a)
“anx fa9”
p 88
·
Certificate no 37(a)
“anx fa11”
p 90
·
Certificate no 38(a)
“anx fa13”
p 13
[21]
It was common cause when the matter was argued that there was a great
deal of common ground, for instance, the capital component
of the
claim was no longer a live issue. The crux of the one and only
lingering dispute concerns the crisp question as to
whether or not
the applicant is entitled to claim both certified interest in terms
of the contract as well as further interest
on such certified
interest in terms of the applicable statute.
[22]
Mr Grobler, counsel for applicant, submitted that the crucial
question should be answered in the affirmative in favour of the
applicant. However, Mr Cassim, counsel for respondent,
submitted that the answer to the crucial question should be negative.
[23]
The undisputed facts of the matter showed that the respondent
instructed the applicant by means of a letter dated 29 June 2010
to
establish itself on site and to proceed with the road rehabilitation
work. A written contract was formally concluded within
a month
or so after the instructions.
[24]
It appeared necessary to have the salient terms of the agreement
condensed. The respondent had appointed Vela VKE, known
as SMEC
Consulting Engineers, to receive and certify claims submitted by the
applicant for work done as the works progressed.
Those
engineers acted as agent(s) of the respondent at all times. The
respondent’s allegations to the contrary were
legally
baseless. Any claim certified and submitted by the appointed
agent to the respondent became due and payable within
28 calendar
days after the submission of the payment certificate.
[25]
It was of no moment whether the applicant erroneously submitted the
payment certificate directly to respondent or to the respondent’s
appointed engineer. What really mattered was the fact that
those payment certificates were verified and certified as correct
by
the respondent’s appointed engineer. The respondent’s
preliminary contention, that the applicant’s claim
be dismissed
on procedural grounds, was a thin argument.
[26]
The agreement also provided that the applicant would be entitled to
claim from the respondent payment of interest on any overdue
amount,
such interest would be calculated at the prime overdraft rate of
interest as determined by the applicant’s bankers.
It
would be calculated from the 29
th
day of the calendar, being the first day of the respondent’s
mora
or
default, until the date of final payment.
[27]
The consulting engineer had to issue interest payment certificates
for such accrued interest. That was termed contract
interest.
The respondent admitted that payment of certain capital
certificates were, by mutual arrangement, delayed.
Whenever
payment was delayed for a period longer than 28 calendar days,
interest accrued.
[28]
The essence of the respondent’s defence was that it had paid
all payment certificates by 12 November 2013. The
applicant
admitted that capital payments were made on 12 November 2013 and
shortly prior to that date, but averred that a substantial
portion of
the capital component, almost R20 million, was paid on 15 November
2013. The payment concerned certificates 37
(“anx fa10”)
and 38 (“anx fa12”). The certified interest
component which remained unpaid was R1 070 447,12
which
represented the composite sum of five interest certificates –
33(a), 35(a), 36(a), 37(a) and 38(a).
[29]
The respondent’s allegation that it had paid all the
certificates, including interest certificates, failed to impress
me.
The applicant did not by virtue of any mutual agreement waive its
right to claim contract interest. The respondent
has advanced
no sound reason as to why the applicant should be denied such
interest. The respondent has not argued that the
agreement does
not make provision for such interest. The respondent has given
no precise details of the alleged timeous payment
of the aforesaid
interest certificates upon which the applicant relies.
Moreover, the respondent has not argued that its
agent did not, could
not, or should not have certified the interest component of the
applicant’s claim.
[30]
Mr Grobler persuasively demonstrated to me that the payments received
from the respondent did not include any interest component
of the
applicant’s claim. It seemed to me that there was no real
dispute as to the applicant’s entitlement to
contract
interest. As regards payment certificate number 37 and 38, in
other words, par 2.6 and 2.8 notice of motion, the
applicant is
entitled to contract interest, but only until 15 November 2013, being
the date of the final payment.
[31] I
would, therefore, uphold the applicant claim in respect of the
contract interest. The proven figure of such accrued
contract
interest is R1 070 447,12. It is my considered view
that the respondent is liable for the payment of that
amount in
favour of the applicant.
[32]
The applicant also claimed statutory or
mora
interest on the contract interest itself. The applicant claimed
mora
interest at the rate of 15,5% per annum on the contract interest of
R1 070 447,12. The applicant’s contention
was
that it was entitled to do so because there was no specific clause in
the agreement as regards the rate of interest on interest.
[33]
The respondent’s contentions in that regard was that interest
cannot be lawfully charged on interest as a matter of substantive
law. A similar argument was raised in
The
Land and Agricultural Development Bank of South Africa v Rayton
Estates (Pty) Ltd
[460/12]
(2013)
ZASCA 105
(13.09.2013) par [18] – [20]. The court
confirmed that unpaid interest attracts further interest.
Therefore,
the respondent’s contention was untenable. See
also
Crookes Brothers Ltd v Regional
Land Claims Commission, Mpulanga &Others
2013 (2) SA 259
(SCA).
[34]
The respondent’s alternative contention was that the parties
had agreed on a specific rate of interest for any outstanding
amount. The applicant, the respondent argued, did not apply the
prime overdraft rate of interest as determined by its bankers,
as the
applicant was obliged to do in terms of clause 49.7.2 of the general
conditions of the contract. That being the case,
the respondent
contended that the applicant was not entitled to charge interest at
the
mora
rate
of 15,5% per annum on the interest component of its claim.
[35]
The applicant contended that there was in actual fact no specific
clause in the agreement as regards any rate of further interest
on
the interest component. Accordingly, so the applicant
submitted, the normal rate of interest had to apply.
[36]
At paragraph 12.3 founding affidavit, the applicant stated through
its deponent, Mr A.A. Robinson:
“
For
purposes of the applicant’s interest claim, as is evident from
the notice of motion, interest is claimed from the
29
th
day
after the date upon which the
certificates had been submitted to the Department. The claims
under certificates
33(a), 35(a), 36(a),
37(a)
and
38(a)
are for interest calculated in terms of the agreement between the
parties, and as at
4 November 2013
.
The applicant claims
mora
interest
on the amount outstanding after this date.”
[37]
The applicable clause 49.7.2 reads:
“
In
the event of failure by the Employer (respondent) to make the payment
on its due date, he shall pay to the Contractor (applicant)
interest
at the prime overdraft rate certified by the Contractor’s
bankers, upon all overdue payments from the date on which
the same
should have been made without limiting any other right which the
Contractor may have by reason of such failure to make
due payment.”
The
bracketed words are my own addition.
[38]
The applicant contention was very tenuous in my view. Although
there was no mention of the phrase “interest on
interest”
in clause 49.7.2, the words “… upon all overdue
payments…” were generously used to mean
that the prime
overdraft interest rate certified by the contractor’s bankers
would apply to all outstanding amounts without
any exception of
whatever nature.
[39]
Upon careful perusal of the clause, I discovered that the words:
“outstanding amount”, “balance”, “capital”,
“interest”, “debt”, “claim”,
“interest on interest” or “further interest”
– were not explicitly mentioned. In my view the chosen
expression “all overdue payment” was generically
inclusive of all those words. It was implicitly so intended.
The applicant now seeks
payment of
interest
on the contract interest at
the rate of 15,5% per year
a tempore
morae
. The agreed rate of
interest applies to “…
all
overdue payments
.”
Accordingly, the prime overdraft interest rate, and not
mora
interest rate, was applicable to the
applicant’s claim for further interest.
[40] I
am of the view that “all overdue payments” necessarily
included further interest. It follows, therefore,
that the
applicant failed to comply with clause 49.7.2. No reason was
given for its failure to obtain the requisite banker’s
certificate. The applicant’s contention that there was no
clause in the agreement which expressly specified a distinct
and
separate rate of interest on interest was misplaced. It did not
bolster the applicant’s case to argue that those
allegations
were not attacked at all. The fact of the matter was that they
were during argument before me. I am persuaded
by the
respondent’s contention. The applicant was not, in those
circumstances, entitled to charge ex contractu
mora
interest.
[41] I
deem it unnecessary to deal with certain preliminary points taken by
the respondent. In the first place, the respondent
abandoned
the argument that the applicant did not comply with the peremptory
provisions of the statute with the title “Institution
of Legal
Proceedings Against Certain Organs of State”.
[42]
In the second place, the respondent persisted with a few points.
Among others, the respondent argued
in
limine
that the appointment of Vela VKE
Consulting Engineers i.e. SMEC was tainted by irregularity; that the
respondent had fully paid
all the payment certificates submitted by
Vela VKE Consulting Engineers until 12 November 2013; that there was
a foreseeably irresolvable
dispute of fact in these motion
proceedings which rendered such procedure unsuitable or
inappropriate; that the interest component
of the applicant’s
claim had been paid together with the capital component thereof prior
to the institution of these motion
proceedings. All of those
points were fragile issues. I considered them, but I could find
no substance in any of them.
Those points raised
in
limine
were not well taken.
[43]
Now the costs. These proceedings were moved on 12 November
2013. The bulk of the capital component of the claim
was paid
three days afterwards. The entire interest component of the
claim still remains unpaid. In the light of
those
two factors the applicant was entitled to approach the
court. The applicant emerged victorious. The fruit must
follow success.
[44] Accordingly I make
the following order:
44.1
The respondent is ordered to pay the sum of R1 070 447,12
to the applicant.
44.2 The respondent
is ordered to pay the costs of the application.
_________________
M.
H. RAMPAI, AJP
On
behalf of applicant:
Adv S. Grobler
Instructed
by:
Peyper
Attorneys
BLOEMFONTEIN
On
behalf of respondent: Adv N. Cassim SC
with
him:
Adv C.
Georgiades
Instructed
by:
Lebea
& Associates
JOHANNESBURG
c/o
Phatshoane Henney Attorneys
BLOEMFONTEIN
/spieterse