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[2011] ZAECMHC 14
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Azcon Projects CC/BHS Construction Joint Venture v OR Tambo District Municipality and Another (1822/10) [2011] ZAECMHC 14 (26 August 2011)
IN THE HIGH COURT OF SOUTH AFRICA
EASTERN CAPE HIGH COURT: MTHATHA
CASE NO: 1822/10
Heard on: 12/08/11
Delivered on: 26/08/11
In the matter between:
AZCON PROJECTS CC/BHS
CONSTRUCTION JOINT VENTURE
….................................................
Applicant
and
O.R. TAMBO DISTRICT MUNICIPALITY
…................................
1
st
Respondent
CHIEF EXECUTIVE OFFICER:O.R. TAMBO
DISTRICT MUNICIPALITY
…......................................................
2
nd
Respondent
_____________________________________________________________
JUDGMENT
____________________________________________________________
NHLANGULELA J:
[1] This judgment concerns the rights of the parties in
terms of clauses 25, 27 and 28 of the Conditions of Contract (PW677)
to
the tender agreement, Tender No. 1323 which was concluded between
the parties in 2004 for the construction of the O.R. Tambo Arts
and
Craft Centre at Port St Johns.
[2] The provisions of clauses 25, 27 and 28 as aforesaid
read as follows:
“25 (1) Any dislocation or delay in the execution of the Works
caused by the Director-General or his Representative/Agent
or for
which he can be held liable in respect of his or their duties under
this Contract or any delay caused as a result of an
order by the
Director-General to stop the work, or a part thereof, shall not
vitiate or affect the Contract, or any party thereof,
but if the
Contractor intends holding the Director-General liable for any loss
or damage caused by such dislocation or delay he
shall immediately
but in any event not later than forty-eight hours (excluding
weekends, statutory and building industry holidays)
after the
commencement of such dislocation or delay with the
Representative/Agent of such dislocation or delay and the Contractor
shall within twenty-one days of the dislocation or delay ceasing
notify the Representative/Agent of any claim for extra time and/or
extra payment claimed, if any. If the Contractor does not comply with
the foregoing he shall forfeit his right to claim for such
dislocation or delay. In addition, failure on the part of the
Contractor to give the Representative/Agent timely warning in writing
of an impending dislocation or delay where such dislocation or delay
could reasonably have been foreseen will debar him from claiming
under this clause.
26 …
27 (1) Should any dispute or difference arise between the
Representative/Agent or the Director-General and the Contractor as to
any matter relating to the meaning of or arising out of the Contract
the Director-General shall have the option of dealing with
the claim
directly to determine such dispute or difference by a written
decision given to the Contractor. The said decision shall
be final
and binding on the parties unless the Contractor within twenty-one
days of the receipt thereof by written notice to the
Director-General
rejects the same.
27 (2) Should the Contractor not accept the decision of the
Director-General the Contractor shall be entitled to have recourse
to
the courts of law of the Republic of South Africa provided that any
action to be instituted under this clause shall be commenced
and
process served within six months of the date of the aforesaid
decision.
28. The Director-General shall be entitled at any time to terminate
or cancel the Contract or any part thereof unilaterally and
in such
case shall be obliged to pay the Contractor as damages and/or loss of
profit an amount not exceeding 10% of the Contract
Sum or 10% of the
value of incomplete work or his actual damage or loss as determined
by the Director-General after receipt by
him of evidence
substantiating any such damage and/or loss suffered by the
Contractor, whichever is the lesser. Save for the above
the
Contractor shall not be entitled to claim any other amounts
whatsoever in respect of such termination or cancellation of the
Contract.”
[3] The main relief sought by the applicant is the
following terms:
“That second respondent advise the applicant, within 30
(thirty) days of the date of this order:
(a) of his decision on a claim submitted by the applicant for damages
caused by a delay in handing over to the applicant the site
for the
construction of the O.R. Tambo Arts and Craft Centre at Port St
Johns, in terms of clause 25 of the conditions of contract
(PW677)
forming part of an agreement concluded between the applicant and the
first respondent; and
(b) whether he has elected to cancel the said contract pursuant to
clause 28 of the conditions of contract (PW677) incorporated
in the
contract referred to in paragraph (a) above.
[4] The determination of the relief sought depends on
the resolution of two issues, firstly, whether the parties concluded
a legally
binding contract and, secondly, whether the applicant’s
claims comply with the provisions of clauses 25 and 28.
[5] I must examine both the factual and legal based
which are relevant to the granting or otherwise of the relief sought.
[6] Pursuant to the adjudication of a number of tenders
filed by the interested members of the public, including the
applicant,
the agent for the first respondent, Mazwana Maqethula
Person Associates (MMPA), addressed a letter to the applicant dated
04 October
2004. It reads:
“Duly instructed by our client, and acting on their behalf we
are pleased to inform you that your tender for the above project
in
the amount of R14 586 876.84 (FOURTEEN MILLION FIVE HUNDRED AND
EIGHTY SIX THOUSAND, EIGHT HUNDRED AND SEVENTY SIX RAND, EIGHTY
FOUR
CENTS) for a contract period as stipulated in the tender document is
hereby accepted subject to the following conditions being
complied
with, within a period of 14 days from the date of receiving this
letter:
You are to enter into a Departmental Contract Published by National
Public Works incorporated in the Bills of Quantities.
Prior to the signing of the contract you are to furnish us with a
fully priced copy of the original Bills of Quantities which
shall be
checked and verified by us.
You are to provide us with a guarantee or deed of suretyship as
required in our tender documents to a value of R1 458 687.68.
You are to provide us with proof in the form of a written statement
from the Insurance Company concerned that the insurances
required by
the contract have been effected all in accordance with 13 (
sic
)
of the agreement and Schedule of Conditions of this Contract to the
value of contract amount 10%.
Public liability R2 million
Replacement is made of the contract sum + 10%
You are to provide a signatory authorization as indicated in the
tender documents approved by both parties for signing of documents.
You are to prepare for our consideration and records a detailed
programme for the purpose of the works and demonstrate there
your
ability to complete the contract timeously.
You will be advised in due course of the proposed date for the
handover of the site once you have fulfilled the above requests.
Should you require any further information, please do not hesitate to
contact us.”
[7] On 29 October 2004 the applicant duly complied with
the prescribed requirements, except that a departmental contract was
not
concluded and submitted to MMPA and the Bills of Quantities were
submitted after 14 days. On 05 September 2005 MMPA advised the
applicant that the project had not commenced due to a dispute on site
ownership between the owner (Transnet Ltd) and the first
respondent.
It then promised that the applicant would be advised when the dispute
had been resolved and the site on which the buildings
would be
erected has been made available to the first respondent. In reply,
the applicant wrote on 20 October 2005 that in view
of the fact that
the “site hand over” had not happened and the
commencement of the project was being delayed by the
ongoing dispute
on the site a claim in terms of clause 25 (1) of the contract shall
be applied. Further, the applicant suggested
that the first
respondent should cancel the contract in terms of clause 28 and pay
the applicant the sum of R1 458 687,68 in
lieu
of such
cancellation. On 01 November 2005 MMPA asked for the applicant to
provide a detailed cost breakdown of the proposed “claim”
so that it is verified before the first respondent was advised about
it. I have put the word “claim” in parenthesis
because it
is not clear to me as to whether the claim refers to a claim in terms
of clause 25 or clause 28. On 04 November 2005
the applicant wrote to
MMPA in the following terms:
“With reference to your letter dated 1
st
November
2005, we attach a detailed breakdown as requested of our “loss
suffered” due to the non-commencement of the
above mentioned
project.
As you will note that “Clause 28” allows the clients
representative to choose the lowest cost of any one method of
calculation.
Our detailed breakdown of “loss suffered” (Ref. C)
amounts to R2 867 971.97 inclusive of VAT.
As will be noted that the option proposed in our letter dated 0/10/05
is the lesser of the two options.
Should we not receive a favourable response within 10 days, we
will then hand this matter over to our legal advisors for further
action.”
[8] To my mind the claim in the sum of R2 867 971,97
relates to clause 28, it being the higher cost than the lower claim
in the
sum of R1 458 687,68 which was indicated on 20 October 2005.
It is envisaged in clause 28 that the second respondent would pay the
contractor such lesser sum out of the three categories of claims: 10%
of the contract sum, 10% of the value of incomplete work,
and the
damages/loss as determined by the second respondent.
[9] It does not appear from correspondence exchanged
between the parties or from the affidavits filed that the applicant’s
claim under clause 28 received a favourable attention of the
respondents. The next step taken by the applicant was to repeat the
same claim made on 02 December 2005, but this time doing so through
Mohammed Moola Attorneys of Durban. This claim was founded
on an
alleged “breach of contract” by the first respondent. A
reply written by MMPA on 07 December 2005 called for
a breakdown of
cost of the claim and, simultaneously, it conveyed an intention of
the first respondent that: “Our client
is still have
(sic)
intention to proceed with the project of which your client will
be re-imbursed for delays in handing over the site.”
Thereafter,
on 12 January 2006 MMPA requested the applicant to submit
a revised bill of quantities for the project in anticipation of
release
of the site by Transnet Ltd in March 2006. The applicant
complied but on 16 February 2006 MMPA objected to the revised bills
of
quantities on the basis that the price of building materials was
quoted at 15% which was more than the prevailing price in the market.
An adjustment was sought. The objection was rejected by the
applicant. On 03 March 2006, further discussions between the parties
took place, the purpose being an attempt to find each other on a
revised contract price. However, the discussions bore no fruits.
Then
on 01 August 2006 Cox Yeats, the new attorneys for the applicant,
made a proposal that if the respondents cannot accept the
increased
contract price and hand over the site the contract should be
terminated by agreement. When the proposal failed to provoke
a
consensus on the increased price, on 28 August 2006 the applicant
advised MMPA that it would not be in a position to commence
with the
contract regardless of the availability of the site. After that the
applicant resorted to bringing this application.
[10] The factual scenario which has been set out in the
preceding paragraphs is largely common cause. The second respondent
disputes
the allegation that it has refused to decide the claim under
clause 25 and to advise if it would cancel the contract and pay
damages
in terms of clause 28. It also appears that there is a
dispute with regard to the value of the increased contract price.
[11] In so far as there was no request for the
application to be referred to trial for a hearing of oral evidence to
resolve the
disputed issues the Court is bound to decide the
application on the version of the respondent. See the case of
Plascon
Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd
[1984] ZASCA 51
;
1984 (3) SA 623
(A).
[12] The version of the respondents is aptly
contexualised by
Mr Cole,
counsel who appeared on behalf of
the respondents, that the applicant was informed by the respondents
as early as on 01 November
2005 that a claim under clause 25 must be
formulated first before the respondents could respond to it; but the
applicant failed
to do so. This submission is correct. The applicant
only contented itself with formulating a claim under clause 28,
stating that
it cannot calculate financial loss incurred through
delay in the commencement of the contract because it was ongoing. In
my view
there was no confusion caused by the respondents in this
regard. The claim in the sum of R1 458 687,68 made on 20 October 2005
and the increased claim of R2 867 971,97 made on 20 November 2005
related to a claim in terms of clause 28. These claims were advanced
only in the event that the contract is cancelled by the first
respondent. An intimation that cancellation of the contract was being
considered was never followed by an acceptance of the applicants’s
proposal. The submission by
Mr Voormolen
, counsel who appeared
on behalf of the applicant, that the claim in the sum of R1 458
687,68 related to a claim in terms of clause
25 (1) is not correct.
The applicant merely stated that the claim in terms of clause 25 (1)
of the ‘Conditions of Contract’
(PW677) shall be applied.
It did not quantify this claim. In the letter of demand dated 02
December 2005 Mohammed Moola Attorneys
referred to this claim as
being the damages suffered as a result of breach, without any further
clarification. Cox Yeats then stated
on 03 March 2006 that: “Once
we receive confirmation of the intended site handover our client will
be in a position to calculate
its claim in terms of the provisions of
clause 25 (1) of the contract.”
[13] It was submitted by
Mr Voormolen
that the
respondents’ response to the claim under clause 28 is confused
by conflicting answers. On the facts of the case
confusion does not
exist. The pre-condition for a claim under clause 28 is a unilateral
cancellation of the contract by the second
respondent. He did not
cancel the contract. On 07 December 2005 MMPA advised the applicant
that the first respondent’s intention
was to proceed with the
contract. The debate between the parties was then became focused on
the revised contract price, the matter
on which the parties did not
find common ground.
[14] The respondents stated that a claim in terms of
clause 25 (1) was not competent because the delay in the commencement
of the
contract was not attributable to them. A third party was
responsible for it. This allegation was countered with an averment
that
blame or fault was not a measuring yardstick, but the fact that
the site handover was not done by the first respondent resulted
in
the respondent being liable to compensate the applicant in damages.
However,
Mr Voormolen
could not refer to a clause in the
contract which creates such an absolute/strict liability. In my view
the common cause fact that
a third party was the reason for the
contract being delayed puts the claim in terms of clause 25 (1)
beyond the reach of the applicant.
[15] The submission by
Mr Cole
that the first
respondent does not intend to cancel the contract should be
understood against the evidence that Transnet has taken
the illegal
occupiers to Court for them to be evicted. In the circumstances it
cannot be said that nothing is being done by the
first respondent to
get the contract commenced with.
[16] The claims brought by the applicant against the
first respondent are premised on the contention that the tender
agreement is
a legally binding contract. This is denied by the first
respondent.
Mr Cole
contends that the failure by the applicant
to sign a departmental contract and submit bills of quantities within
14 days from 04
October 2004 rendered the intended contract to be
non-existent.
Mr Voormolen
submitted that the applicant did
conclude a binding agreement with the first respondent
notwithstanding the deficiencies as alleged
by the respondent. He
contended that since a tender agreement is governed by the provisions
of the Prefential Procurement Policy
Framework Act No. 5 of 2000 (the
PPPF Act) and Regulation 1 (e) of the Regulations promulgated in
terms of the PPPF Act a contract
is defined to mean “the
agreement that results from the acceptance of a tender by an organ of
State. The acceptance of the
applicant’s tender by MMPA on
behalf of the first respondent by means of a letter dated 04 October
2004 resulted in a tender
which is valid and enforceable in law. In
this regard Counsel referred to the case of
Jicama 17 (Pty) Ltd v
West Coast District Municipality
2006 (1) SA 116
(C) at 120B.
Counsel then contended that the “conditions” referred to
in the letter of acceptance was a misnomer; and
moreso in that the
signing of a departmental contract and the late submission of the
bills of quantities were caused by the revelation
that there would be
no site handover due to occupation of the land by illegal squatters.
These submissions were not gainsaid as
MMPA has stated in various
correspondences that the respondents were not prepared to cancel the
contract and pay damages. I agree
with
Mr Voormolen
that the
tender contract exists and that it is valid and enforceable in law.
[17]
Mr Cole
contended that even if the tender
contract was enforceable, to hold the first respondent liable for any
loss in terms of clause
25 (1) the applicant should have notified the
respondents within 48 hours of the delay, and thereafter formulate
its claim within
21 days. Counsel contended that these requirements
were never met by the applicant because although the delay was
recorded on 05
September 2004, the applicant instituted the claim on
03 March 2006. To this
Mr Voormolen
submitted that the time to
make a claim only expires within 21 days of the delay ceasing. Since
the delay commenced on 05 September
2004, and it has not stopped, the
time of “ceasing” as envisaged in clause 25 (1) has not
yet been reached. On the
facts it is common cause that as at the date
of hearing of this matter the respondents could still not make a site
handover, which
it intends to make, because the dispute between
Transnet Ltd and the illegal occupiers has not yet been concluded. In
my view the
respondents have failed to prove that the applicant did
not comply with clause 25 (1). However, the issue of formulation of
loss
sustained due to delay and the lodgment of a claim has not yet
been done by the applicant. In my view a claim in terms of clause
25
(2) cannot arise because the applicant has not yet brought a claim
under clause 25 (1).
[18] It was also submitted by
Mr Cole
that any
claim brought in terms of clause 25 (1) would have become prescribed
after three years, calculated from 05 December 2005
to 05 December
2008. The provisions of
Sections 11
and
12
(3) of the
Prescription
Act No. 69 of 1969
are implicated in this submission. The issue of
prescription has been answered through my judgment that a clause 25
(1) claim has
not been brought. The same may be said about the claim
for payment of R1 458 687,68 or R2 867 971,97 which was made under
clause
28. Since the first respondent had conveyed a decision that
the tender contract will not be cancelled prescription of this claim
does not arise.
[19] It seems to me that a remedy for reviewing a
decision of the first respondent as provided for in clause 27 is not
available
to the applicant because a claim under clause 25 (1) cannot
arise in a situation where the delay in the execution of works has
not ceased. By parity of reasoning, a decision on the claim based on
clause 28 cannot be made without the tender contract having
been
cancelled by the second respondent. The question whether a decision
to refuse to cancel the contract is a decision of a kind
that can be
dealt with in terms of clause 27 will not be answered because the
Court has not been asked to do so.
Mr Voormolen’s
submission
that the applicant’s claim under clause 25 (1) has not become
prescribed is not an invitation to deal with claims
for refusal to
cancel a tender contract. Significantly, counsel conceded that no
claim for damages or loss of profits can be made
by the applicant
because the second respondent did not agree to cancel the contract.
[20] In the circumstances the applicant has not been
successful. It should pay the costs of the application.
[21] In the result the following order shall issue:
The application be and is hereby dismissed with costs.
______________________________
Z.M.
NHLANGULELA
JUDGE
OF THE HIGH COURT
Counsel for the applicants : Adv. A.V. Voormolen
Instructed by : Cox Yeats Attorney & Co
c/o HUGHES CHISHOLM & AIREY INC
MTHATHA
Counsel for the 1
st
and 2
nd
respondents:
Adv. S.H. Cole
Instructed by : W.T. Mnqandi & Associates
MTHATHA