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[2013] ZAFSHC 11
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Terra Graphics (Pty) Ltd t/a Terra Works v MEC: Department of Police, Road and Transport Free State Provincial Governement and Another (3489/2012) [2013] ZAFSHC 11 (7 February 2013)
FREE STATE HIGH
COURT, BLOEMFONTEIN
REPUBLIC OF SOUTH
AFRICA
Case No.: 3489/2012
In the matter between:-
TERRA GRAPHICS
(PTY) LTD t/a TERRA WORKS
...................
Applicant
and
THE MEC: DEPARTMENT
OF POLICE, ROADS
AND TRANSPORT FREE
STATE PROVINCIAL
GOVERNMENT
....................................................................
1
st
Respondent
SSI/TSHEPEGA JOINT
VENTURE
....................................
2
nd
Respondent
_________________________________________________________
JUDGMENT BY
:
MATLAPENG, AJ
_________________________________________________________
HEARD ON:
29 NOVEMBER 2012
_________________________________________________________
DELIVERED ON
:
7 FEBRUARY 2013
_________________________________________________________
INTRODUCTION
[1] This matter came
before me by way of Notice of Motion. The applicant seeks the
following relief:
“
1.1.
The
first respondent be ordered to pay an amount of R1 540 123.54 to the
applicant, as payment for works done and services rendered
by the
applicant to the first respondent;
1.2. Alternative to prayer 1, that
the first respondent be ordered to effect payment of the above
mentioned to the second
respondent, and that the second
respondent be ordered to immediately and by no later than 7 days
after receipt thereof, effect payment
to the applicant of this
amount”.
In addition to these two
main prayers, the applicant is claiming ancillary relief of interest
and costs. It however, does not claim
the said interest and costs
from the second respondent.
BACKGROUND
[2] The factual
background of this matter is common cause between the parties. About
19 April 2010 the first and the second respondent
entered into a
written agreement in terms of which the second respondent was
appointed as a project manager (consultant) in respect
of the
rehabilitation and repairs of the Free State Road Network Programme.
[3] Insofar as it is
relevant to this matter the Agreement provided that the second
respondent would
inter alia
:
“
8.2.
establish a contract that met the first respondent’s
requirements and needs and would include mechanisms such as QA plans
and programmes to monitor and control the project, including
contracts between the first respondent and contractors appointed to
carry out the construction, alternatively, repair work on the roads
to which the second respondent was appointed as the managing
consultant;
manage the construction of the
roadworks:
8.3.1. to achieve the stipulated
quality;
8.3.2. to ensure completion within the
agreed time period and to the first respondent’s needs; and
8.3.3. to maintain cashflow to meet
the payment schedule;
8.4. manage the first respondent’s
responsibility for the safety, social and environmental aspects of
the works;
8.5. ensure a constant channel of
communication between all stakeholders; and
8.6. shall not initiate or terminate
any sub-contract for performance of all or part of the services
without the written consent
of the first respondent; and in this
regard, where the first respondent has required the second respondent
to appoint selected
consultants as the second respondent’s
sub-consultants, fees owed to those sub-consultants shall be due to
the second respondent
in addition to the second respondent’s
own fees.”
[4] Pursuant to the
agreement aforesaid, the second respondent invited tenders for
Environmental Assessment Practitioners registered
with the Interim
Certification Board to act as Independent Environmental Control
Person for the proposed upgrades and improvements
of the Free State
Road Network Programme in order to ensure that the programme met with
environmental specifications and legislative
requirements.
[5] The applicant
submitted and tendered successfully for an amount of R1 593 997.79
for the estimated duration of the project of
24 to 30 months. It is
noteworthy that the tender documents in issue displayed the first
respondent’s logo (The department
of Police, Roads and
Transport, Free State Province) and furthermore were even issued
under the direction of its head. Of even
great significance is the
fact that even though the letter of appointment of the applicant was
typed on the second respondent’s
letterhead, it makes it clear
that the applicant was appointed on behalf of the first respondent.
[6] Following upon the
acceptance of the appointment by the applicant, the second respondent
concluded a sub-consultancy agreement
with the applicant. Pursuant to
this sub-consultancy agreement the applicant performed its
obligations and submitted its invoices
through the second respondent.
Although there is still some outstanding balance it is not in dispute
that some of the invoices
were duly paid.
[7] The applicant has now
issued a Notice of Motion claiming the outstanding balance due and
owing. The second respondent is not
before this court. Instead it has
issued a separate summons against the first respondent in this court.
That matter is still pending.
In this matter, although the applicant
has joined the second respondent, it contends that in terms of the
agreement it still retains
the right to claim the money for the work
done directly from the first respondent even though the work was done
under the management
of the second respondent.
DEFENCES BY THE
FIRST RESPONDENT
[8] The first respondent
denies liability based on the following:
1. The application is
premature as the agreement provides for arbitration and none was
held.
2. There was no
compliance with the provisions of the Institution of Legal
Proceedings against certain Organs of the State Act 40
of 2002.
3. There is no privity of
contract between the applicant and the first respondent.
4. The agreement does not
comply with peremptory statutory obligations.
5. The main agreement is
invalid and unenforceable therefore the other agreements flowing
therefrom are also invalid.
[9] The first respondent
abandoned the first two grounds of its of defence. I therefore
proceed to deal with the three remaining
grounds.
LACK OF PRIVITY
BETWEEN THE APPLICATION AND THE FIRST RESPONDENT
[10] Essentially the
first respondent submits that the sub-consultancy agreement was
between the applicant and the second respondent.
It contends further
that as it was not part of this agreement, there can be no privity
between itself and the applicant. As against
this contention, the
applicant submits that if proper regard is had to the to the manner
of the appointment of the applicant, and
the circumstances
surrounding the execution of the project, the appointment was in fact
intended to be on behalf of the first and
not the second respondent.
[11] It is trite that the
test to determine whether there was privity of agreement or not is a
factual one. This requires a careful
consideration of the factual
matrix. The following facts are therefore relevant:
[11.1] After the awarding
of the tender, the first respondent appointed the second respondent
as “
programme manager to manage the rehabilitation and
repair of Free State Road Network
”. Furthermore the second
respondent was appointed to render the following professional
services:
“
(a)
Assist
the Department of Police, Roads and Transport, to manage the
implementation of the Road Repairs and Rehabilitation Programme
for
the Free State Road Network.
(b)
Your appointment is limited to
Road 12 to Road 23 as per the department’s priority list.”
[12] In terms of one of
the appendices to the agreement entered into by the two respondents
the scope of the services to be rendered
by the second respondent is
described as follows:
“
General
The SSI/Tshepega Joint Venture as
programme manager, will ensure that the Department of Police, Roads
and Transport’s Programme
for the Rehabilitation and Repair of
the Free State Road Network and its individual project components are
initiated, planned,
executed, monitored, controlled and closed-out
according to International Standard for Programme Management (PM) a
well as the
South African Council for Project and Construction
Management Professional (SACPCMP) standards and guidelines.
............... The Programme
Managers will also be responsible for setting up and managing the
Programme Management Office (PMO)
and its resources (as per
Organogram) for the duration of the Roads Programme”.
[13] Furthermore under
heading called Project Deliverables the following are set out as some
of the responsibilities of the second
respondent:
“
(a)
Project
manage the construction of the roadworks such as the maintain
cashflow to meet the payment schedule.
(b)
Project manage the client’s
responsibility for the safety, social and environmental aspects of
the work.”
[14] It is abundantly
clear from the above that the second respondent was appointed by the
first respondent to be its manager. As
such the first respondent was
not involved in the physical building and repair of roads
qua
a contractor. The second respondent was required and did in fact act
as a representative/agent of the first respondent in the execution
of
the project.
[15] In order for the
first respondent to achieve its goals of rehabilitating the roads it
was required to ensure compliance with
the relevant legislation
relating to the environment. The first respondent had outsourced this
task through a tender process. As
a responsible project manager, the
second respondent was required to supervise the tendering process.
[16] Of importance in the
resolution of this dispute is the letter of appointment of the
applicant written by the second respondent
wherein it stated clearly
that the applicant is appointed “
on behalf of the Free State
Department of Police, Roads and Transport
” being the first
respondent. It is furthermore noteworthy that the invitation calling
for tenders has the first respondent
`s logo prominently displayed.
This letter although written by second respondent has a clear
qualification that it is written “
under the direction of the
head of the department, Police, Road and Transport”
. In
addition even the tender documents state that the second respondent
was inviting tenders “
on behalf of the Free State Department
of Police, Road and Transport
”.
[17] The first respondent
being an organ of the state was obliged to comply with the statutory
requirements set out in the
Preferential Procurement Policy Framework
Act 5 of 2000
, as the court in
Viking Pony African Pumps (Pty)
Ltd t/a Tricom Africa v Hidro-Tech Systems (Pty) Ltd and Another
2011 (2) BCLR 207
at paragraph 26 categorically stated. The
second respondent, who is not an organ of the state is ordinarily not
obliged to comply
with these requirements. However, as the second
respondent was in terms of the agreement acting for and on behalf of
the first
respondent as its project manager, it had to comply with
the statutory requirements which pertain to the first respondent. To
my
mind, this is sufficient evidence that the applicant was appointed
on behalf of the first respondent.
[18] According to the
agreement, payment due to the applicant had to be made by first
respondent to the second respondent. This
would then enable the
second respondent to pay the applicant. The intention was to avoid an
untenable situation where all the parties
involved in the project
would all individually claim from the first respondent. To avoid a
possible administrative nightmare, the
second respondent as a manager
was conveniently used as a conduit. Based on the peculiar facts of
this matter any reliance by first
respondent on the matter of
Minister of Public Works and Land Affairs v Group Five Building
Ltd
[1999] 3 all SA 467 (SCA) at 471b-e is misplaced.
[19] Having given this
matter careful consideration, I am satisfied that the applicant has
proved that there was privity between
itself and the first respondent
and not the second respondent who for all intends and purposes was a
project manager.
NON COMPLIANCE WITH
THE PEREMPTORY STATUTORY OBLIGATIONS AND INVALIDITY AND
UNENFORCEABILITY OF THE MAIN AGREEMENT.
[20] The first respondent
attacks the validity of the main agreement on the grounds that
because of its failure to comply with the
peremptory provisions of
sections 66
of 68 of
Public Finance Management Act, no 1 of 1999
and
further that no budgetary allocation had been made by the Free State
Provisional Government in respect of the main agreement
that such an
agreement was
void ab initio
and could not satisfy a cause of
action. This issue is the subject matter of a pending case in this
court under case number 393/2012.
As a result I find it improper to
pre-empt the decision of another court.
[21] In the circumstances
I make the following order:
1. The first respondent
is ordered to pay an amount of R1 540 123,54 to the applicant
representing payment for work done and services
rendered by the
applicant to the first respondent.
2. Alternatively the
first respondent is ordered to effect payment of the amount mentioned
in 1 above to the second respondent and
that the second respondent is
ordered to immediately and by no later than seven days after receipt
of the said amount to effect
payment to the plaintiff of the said
amount.
3. The first respondent
is ordered to pay interest on the amount mentioned in 1 above at the
rate of 15,5% per annum
a tempore morae
calculated from the
date of issuing this application until the date of first payment.
4. The first respondent
is ordered to pay the costs of this application.
___________________
D. I. MATLAPENG, AJ
On behalf of the
applicant: Adv. S. Grobler
Instructed by:
Peyper Sesele Inc.
BLOEMFONTEIN
On behalf of the first
respondent: Adv. L. T. Sibeko SC
Instructed by:
Office of the State
Attorney
BLOEMFONTEIN
/eb