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[2013] ZAGPPHC 234
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Holm, Jordaan & Partners CC v City of Tshwane Metropolitan Municipality (32796/08) [2013] ZAGPPHC 234 (5 August 2013)
NOT
REPORTABLE
IN
THE NORTH GAUTENG HIGH COURT. PRETORIA REPUBLIC OF SOUTH AFRICA
CASE
NO: 32796/08
DATE:05/08/2013
In
the matter between:
HOLM,
JORDAAN & PARTNERS
CC
......................................................................
Plaintiff
and
CITY
OF TSHWANE METROPOLITAN
MUNICIPALITY
…....................................
Defendant
JUDGMENT
J
W LOUW, J
[1]
On the night of 3 March 1997, the greater part of the west block of
the municipal headquarters of the City Council of Pretoria,
known as
Munitoria, was destroyed by fire and the south block seriously
damaged. This resulted in a huge disruption of personnel
and the
functions of the City Council. With the assistance of the public and
private sector, the personnel of the various departments
were
re-established in alternative accommodation. The west block was
subsequently demolished and the south block renovated and
upgraded.
[2]
During November 1998, the City Council launched a design competition,
which was called Project Phoenix, for the building of
a new municipal
headquarters on the Munitoria site. Architects firms practicing in
Pretoria were invited to participate. The competition
brief provided
that the final floor area had to be 46 000 m2, with a permissible
variance of 5 000 m2 either way. The total cost
was not to exceed
R160 million. The competition was conducted in two stages. For the
first stage, the entrants had to communicate
the key concepts of
their proposed design for the new complex as a whole. Detailed
planning was not required. Each of the stage
one finalists would
receive an amount of R10 000.00 to defray costs incurred in the
submission of a second stage entry. Finalists
in the second stage had
to produce, inter alia, full design concept (sketch) plans of all
levels and sections. The winner of the
competition would be announced
at an awards ceremony at the end of the second stage.
[3]
Clause 2.16 of the competition rules and conditions provided the
following:
"Subject
to his/her compliance with the conditions contained herein, the
finalist of the scheme placed first shall be commissioned
as
architect for the project, which commission shall constitute the
first prize. The Promotor
1
shall enter into an agreement with the winner, the terms of which
shall be the standard terms of agreement between the City Council
of
Pretoria and architects for a service including design, contract
documentation, contract administration and inspection of the
works.
The RI0 000,00 award made to the winner as a stage one finalist shall
form part of the design concept (sketch plan) fee.
Should the project
not be proceeded with after the adjudication of the second stage, the
winner will be paid the design concept
(sketch plan) fee.
While
it is the intention of the Promotor to proceed with the final design
and documentation and with the construction of the new
complex should
the go-ahead be obtained from the City Council, the promoter is under
no obligation to do so."
[4]
The plaintiff was, and still is, an incorporated firm of architects
which practices in Pretoria. It entered the competition
and was one
of the finalists of stage one. It thereafter produced the work which
was required for stage two. During July 1999,
the City Council of
Pretoria announced that the plaintiff was the winner of the
competition.
The plaintiff became aware of the City Council's decision and on 30
August 1999 it wrote the following in a letter
to the City Council
under the heading "Phoenix Project":
"With
reference to competition brief rules and conditions for the above
architectural design competition, we hereby confirm
our appointment
in terms of clause 2.16 of the above document
We
also confirm that our appointment will be in terms of the Standard
Terms of Agreement between the City Council of Pretoria for
architectural services."
[5]
The plaintiff was informed by the defendant in writing on 13
September 1999 that its entry had been adjudged the winning entry.
On
26 October 1999, the plaintiff confirmed in writing that its
appointment as architect for the project would only follow once
the
City Council of Pretoria had taken a decision to proceed with the
project.
[6]
On 27 September 2000, before any decision was taken by the City
Council of Pretoria, the defendant became the successor in law
of the
City Council of Pretoria in terms of the provisions of the
Local
Government: Municipal Structures Act, 117 of 1998
. The defendant also
became the successor in law of twelve other municipalities. As a
result, the need for accommodation escalated
dramatically. In 2001 or
early 2002, the defendant approached the plaintiff to assist it with
a new needs assessment which had
to be carried out, to which the
plaintiff referred as a bulking exercise. The plaintiff obliged. On
14 April 2003, the plaintiff
wrote the following in a letter to the
defendant's executive mayor:
"Further
to our meeting and presentation on 10 April 2003 with yourself,
Amanda Kruger and members of the Executive Committee,
we hereby
confirm the following:
1.
That the explanation of the concept and the intent of the competition
was in principle acceptable to the meeting.
2.
At the meeting it was confirmed that the 46 000 m2 bruto (sic) floor
area could increase to 76 000 - 80 000 m2. ”
[7]
The letter proceeds to refer to the fact that the plaintiff was asked
at the meeting whether it would be prepared to work in
a joint
venture with a BEE company and that the plaintiff had indicated that
it would be prepared to do so in view of the increase
in the scope of
the project.
[8]
Ten days later, on 24 April 2003, a report by the defendant's then
acting municipal manager, Mr. E R du Toit, served before
the
defendant's council in which it was proposed that certain resolutions
be
adopted. The relevant resolutions which were adopted, were the
following:
1.
That the building of a new Municipal Headquarters for the City of
Tshwane Metropolitan Municipality on the Munitoria site, be
approved.
2.That
the winning firm of the competition, Messrs Horn (sic) Jordaan &
Partners, be commissioned to render the architectural
services
required for the building of a new Municipal Headquarters on
condition that such services are rendered through a joint
venture
partnership with a BEE appointed by Council on its (Council) own
terms and condition (sic).
3
4...
5.
That the various funding options for the rebuilding of a Municipal
Headquarters be investigated by the Municipal Manager in consultation
with the Chief Financial Officer.
6......
7.
That funds for professional fees payable for consultants for work
done in the pre-implementation phase be approved .... in the
CTMM's
2003/2004 operating
budget......................................................................
"
[9]
On 24 March 2003, before the abovementioned resolutions were adopted,
the plaintiff rendered an interim account to the defendant
which
was based on an escalated construction cost of R222 192 960.00. The
needs analysis subsequently, in August
2003,
indicated that the defendant required a building of 114 031 m2. Ms.
Kruger, an employee of the defendant, estimated that the
construction
cost thereof would be Rl,231 billion.
[10]
By letter dated 14 May 2003, the defendant informed the plaintiff of
its council's resolution confirming the plaintiff's appointment
as
architect for the project. The letter further quotes the resolution
requiring that the services be rendered through a joint
venture
partnership with a BEE firm appointed by council on its own terms and
conditions. The letter then proceeds to state the
following:
"Further
meetings with the Municipality and yourself regarding the above
requirement for the appointment will be held regarding
the selection
and details of the BEE component in this contract.
The
final terms and conditions regarding the appointment, brief and
remuneration details of this contract will follow after agreement
of
the above details by all parties concerned."
[11]
On 4 June 2003, the plaintiff responded by letter in which it
confirmed its acceptance of the appointment and also that it
was
prepared to accept the condition of BEE involvement. Steps were
thereafter taken, in which the plaintiff took part, with a
view to
the appointment of a BEE partner for the plaintiff. It is common
cause that such appointment was never made and that no
agreement was
concluded in that regard. The reason for this is to be found in a
letter which the defendant wrote to the plaintiff
on 15 October 2003
in which the plaintiff was requested not to proceed with any further
work on the project until further instruction.
The reason given in
the letter was that the plaintiff was considering various options to
finance the project, that tenders had
been invited for a financial
consultant to advise the Council on this matter and that a decision
would be taken once the consultant's
report had been considered.
[12]
The appointed consultant concluded that the Phoenix project was
unaffordable to the defendant. The defendant then, in October
2003,
initiated a new study into the feasibility of a so-called Public
Private Partnership ("PPP") model and concluded
that a PPP
model, which would mobilise private sector capital at private sector
risk while providing a stable and predictable accommodation
cost
environment over a long period, was the only viable option for
completing the project
2
.
[13]
On 25 January 2007, the defendant wrote a letter to the plaintiff,
the relevant part of which reads as follows:
"RE:
NEW MUNICIPAL HEADQUARTERS PROJECT:
TERMINATION
OF THE PHOENIX PROJECT
1.
We refer to the above matter and to various correspondences (sic)
between yourselves and City of Tshwane Metropolitan Municipality
("CTMM") in which inter alia the possible termination of
the Project Phoenix as well as your purported appointment to
serve as
Architect thereto were discussed.
2.
As outlined in the correspondence referred to above, CTMM has
undertook (sic) an analysis of its options including a Public private
partnership ("PPP") framework with a view to selecting the
most feasible means of obtaining accommodation and associated
service
delivery requirements iro the New Municipal HQ Project.
3.
In light of this options analysis referred to above, CTMM has
determined that the establishment of a new and sustainable service
delivery environment ("required services") by way of a PPP
framework in terms of
Part 1
and Part 2 of the Municipal Finance
Management Act 56 of 2003 ("MFMA") and the regulations
thereof, represents the only
feasible option among those set out for
review by National Treasury, these options including Project Phoenix.
4.
In the circumstance, following a process of public participation and
cognizance taken by Council of representations by affected
parties,
including yourselves, Council adopted a resolution on 24 August 2006
in terms of which inter alia:
4.1
Council resolution of 24 April 2003, is rescinded;
4.2
The procurement of CTMM's required services by way of a PPP was given
in principle approval to proceed to procurement.
5.
It must be indicated that the above determination was reached based
on consideration inter alia of the following factors:
5.1
the Phoenix Project, for which scheme you were appointed, was found
to be unaffordable to the CTMM;
5.2
National Treasury; on review of the CTMM's project feasibility study,
prepared according to Treasury guidelines, recommends
that the PPP
option was affordable to the City;
5.3
In view of the fact that the PPP framework option requires transfer
much of the project risk to the private party, notably including
design risk, CTMM cannot impose either a particular design scheme or
a predetermined Architect (including your design) on bidders
for the
project; and
5.4
Your appointment to Phoenix project was subject to the condition,
amongst others, that CTMM had reserved the right not to proceed
with
the Project.
6.
In light of the aforegoing, CTMM takes the opportunity to hereby
notify Holm Jordaan and Partners of the Council's
decision
of 24 August 2006 as expressed in the resolution to rescind Phoenix
project, and that the CTMM will consequently no longer
proceed with
appointment of Holm Jordaan and Partners."
[14]
The plaintiff responded by letter on 28 March 2007 in which it is
stated that the defendant's letter of 25 January 2007 constituted
a
repudiation of the agreement between the parties, which it accepted,
and that the plaintiff intended to proceed with legal action
against
the defendant for the damage which it suffered. This is that action.
The plaintiff claims damages in the amount of R44
152 190,31 and
interest. At the commencement of the hearing and by agreement between
the parties, I ordered that the quantum of
the plaintiffs claim
against the defendant be separated and postponed sine die, and that
all other issues be adjudicated in the
present hearing.
[15]
The plaintiff's case is that it was appointed as architect for the
rebuilding of the municipal headquarters, including the
design,
contract documentation, contract administration and inspection of the
works (which are work stages 3, 4 and 5 of an architect's
appointment) in accordance with the initial competition brief, rules
and conditions and the "increased output specifications".
The increased output specifications is a reference to the increased
spatial requirements of the defendant above the original 46
000 m2.
It
was submitted by Adv. Wagener SC, who appeared for the plaintiff,
that the plaintiff's appointment in April 2003 was not for
the
original 46 000 m2, but for some larger area.
[16]
It was argued by Mr. Wagener that the appointment of an architect was
not a mandatum which could be terminated by the client
at any stage,
as in the case of other professionals such as attorneys, advocates
and doctors, but that it was contract of locatio
conductio operis.
3
In such case, it was submitted, there is no automatic right of
termination, and, unless it was agreed that the client would be
entitled to terminate the contract after the appointment of the
architect, a termination by the client would constitute a repudiation
of the agreement which would entitle the architect to claim damages
from the client.
[17]
I shall assume that an architect's appointment is usually one of
locatio conductio operis and that Mr. Wagener's submissions
in regard
to the termination thereof are correct. The defendant, however,
pleaded
4
that it was a term of the plaintiff's appointment that, even if the
City Council of Pretoria decided to proceed with the construction
of
the proposed new complex, it would be under no obligation to proceed
with the final design and documentation or with the construction
of
the new complex and that, should the project not be proceeded with,
the competition winner would be entitled to payment of only
the
design concept (sketch plan) fee. This plea is obviously based on the
contents of the last paragraph of paragraph 2.16 of the
competition
rules. It is convenient to quote it again:
"While
it is the intention of the Promotor to proceed with the final design
and documentation and with the construction of
the new complex should
the go-ahead be obtained from the City Councilthe Promotor is under
no obligation to do so."
[18]
Mr. Wagener submitted that the defendant could not rely on this
provision after it appointed the plaintiff as architect for
the
project. I disagree. The paragraph must be read in conjunction with
the previous paragraph in which it is stated that the winner
of the
competition "shall be commissioned as architect for the
project". The winner of the competition must therefore
be
appointed as the architect for the project, but his or her
appointment is subject to the promotor's right to decide not to
proceed with the project despite the City Council giving the go-ahead
for the project. The defendant was therefore entitled to decide
not
to proceed with the project for which the plaintiff was the appointed
architect. That is precisely what happened. The result
thereof is
that the plaintiff was only entitled to be paid its fees for the
design concept (sketch plan) and that it is not entitled
to claim any
damages from the defendant.
[19]
There is a further reason why the plaintiff is precluded from
claiming damages from the defendant. Clause 2.16 of the competition
rules provides that the promoter shall enter into an agreement with
the winner, the terms of which shall be the standard terms
of
agreement between the City Council of Pretoria and architects for a
service including design, contract documentation, contract
administration and inspection of works. Mr. Wagener accepted that
such standard contract was incorporated by reference into the
agreement in terms whereof the plaintiff was appointed, and that it
was not necessary for the parties to have signed such standard
agreement or even that the plaintiff should have had sight thereof.
He submitted, however, that there was no evidence before the
court of
the contents of such standard agreement.
[20]
During the cross-examination of Mr. van Aswegen, one of the members
of the plaintiff, by Mr. S 3 Maritz SC, who appeared for
the
plaintiff with Mr. A. Vorster, he was questioned about his evidence
that he never saw the defendant's standard agreement for
architects.
It was pointed out to him that it was one of the documents which had
been discovered by the plaintiff and that there
was a stamp of the
plaintiff at the top of the first page which indicated that it was
received by "Deon" on 11 July 2001
and that there was also
an inscription at the bottom of the first page which indicated that
the document had been faxed to "Deon
van Aswegen" on the
same date by the defendant. Mr. van Aswegen answered that he could
not remember the specific document,
but the probabilities are
overwhelming that he did receive it on the date indicated.
[21]
It was submitted by Mr. Wagener that the plaintiff had previously
done work for the defendant and that there may have been
different
versions of the same document. There was no evidence that the
plaintiff had done any work for the defendant after it
won the
competition for the Phoenix project. In my view, the probabilities
are overwhelming that the document discovered by the
plaintiff was
the operative document contemplated by clause 2.16 of the competition
rules.
[22]
Mr. van Aswegen was referred in cross-examination to clause 7 of the
document, which provides the following:
"SUSPENSION
OF THE PROJECT
The
Executive Director may at any time instruct the suspension of the
work on the project. The Architect shall be entitled to full
remuneration for all services rendered and disbursements up to the
date of such instruction or such fee that shall be negotiated
between
the Council and the Architect."
Mr.
van Aswegen confirmed that this clause accorded with the standard
practice in the architects' profession.
[23]
Mr. Wagener submitted that a distinction should be drawn between a
suspension of the work and the termination of an architect's
appointment, and that clause 7 of the standard agreement only dealt
with the employer's right to suspend the work. Clause 7 does
not
refer to a temporary suspension of the work. It must therefore, in my
view, be interpreted to include an indefinite or even
a permanent
suspension. And that is what the defendant did. It decided not to
proceed with Project Phoenix. In terms of clause
7 of the standard
agreement, and in terms of the standard practice of architects, the
plaintiff is then only entitled to be paid
for the work done and not
for any damage suffered.
[24]
In the result, I conclude that the plaintiff is not entitled to the
payment of any damages by the defendant. The plaintiff's
claim is
accordingly dismissed with costs, such costs to include the costs of
two counsel.
J
W LOUW
JUDGE
OF THE NORTH GAUTENG HIGH COURT
FOR
THE PLAINTIFF: ADV. S.D. WAGENER SC INSTRUCTED BY: COETZER &
PARTNERS, PRETORIA FOR THE DEFENDANT: ADV. S J. MARITZ SC,
ADV. A.
VORSTER INSTRUCTED BY: HUGO & NGWENYA ATTORNEYS
1
The
City Council of Pretoria is referred to in the competition rules as
“the Pro motor".
2
This
information appears from the report of Mr. Peter Aborn on the
defendant's feasibility study, dated i6
December
2005, annexure’T’ to the plaintiffs particulars of
claim.
3
He relied, inter alia, on the judgment in Marais v Bexuidenhout,
1999 (3) SA 988
(WLD) at 994F
4
Par.
3.3.4 of the defendant's plea.