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[2008] ZAFSHC 81
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Mpambani v Sekununu Construction and Trading CC and Others (3959/2008) [2008] ZAFSHC 81 (14 August 2008)
IN THE HIGH COURT
OF SOUTH AFRICA
(ORANGE FREE STATE
PROVINCIAL DIVISION)
Case No.: 3959/2008
In the case between:
IGNATIUS
MPAMBANI
Applicant
and
SEKUNUNU
CONSTRUCTION AND TRADING CC
1
st
Respondent
(Registration
No.: 2002/03546/23)
SAMUEL
SELIKOE
2
nd
Respondent
TSWELOPELE
MUNICIPALITY
3
rd
Respondent
ABSA
BANK LTD
4
th
Respondent
STANDARD
BANK LTD
5
th
Respondent
______________________________________________________
JUDGMENT:
VAN DER MERWE, J
HEARD
ON:
31 JULY 2008
______________________________________________________
DELIVERED ON:
14 AUGUST 2008
[1] This is one of those
cases, encountered all too often in my experience, where a contract
following on a tender involving public
funds or public services is
awarded to one party (here the 1
st
respondent), but by private or secret arrangement the contract is in
actual fact performed for the financial gain of another party
(here
the applicant). As is often the case in these circumstances,
disputes arose between these parties, resulting in delay and
prejudice to the public that the contract was intended to benefit.
[2] On 14 June 2008 the
applicant obtained a
rule
nisi
with partial interim effect on semi urgent basis but after service of
the papers on the 1
st
and 2
nd
respondents. On the extended return date of the
rule
nisi
the applicant moves for confirmation thereof. The matter is opposed
only by the 1
st
respondent and the 2
nd
respondent. The 2
nd
respondent is the sole member of the 1
st
respondent. Unless indicated otherwise, a reference herein to the
respondents must be read as referring to the 1
st
respondent and the 2
nd
respondent. The 3
rd
respondent is the local municipality within which the areas of
Tikwana and Hoopstad fall. The 4
th
and 5
th
respondents are registered banks where the accounts mentioned below,
are held.
[3] On 14 March 2007 the
applicant and the 1
st
respondent entered into a written agreement (“the contract”).
In terms of the contract the 1
st
respondent granted to the applicant “… the right of
first refusal” to manage any project awarded to the 1
st
respondent during the duration of the contract. The contract further
provides that when the applicant elected to manage any such
project,
all capital needed for the project shall be provided by the applicant
and the applicant shall be entitled to all profit
and bear all losses
from such project subject to the payment by the applicant to the 1
st
respondent of a commission equivalent to 4,5% of the net profit in
respect of the project or R500 000,00, whichever is the greater.
Clauses 5.1.1 to 5.1.3 of the contract provide for a procedure to be
followed for accounting after completion of a project and
calculation
of the net profit for purposes of determination of the commission
payable to the 1
st
respondent. Clause 5.1.1 of the contract provides that the project
shall be deemed to be completed when the 1
st
respondent receives notification of completion of the project from
the person who awarded the contract to the 1
st
respondent. Clause 5.1.2 then provides that within 30 days
thereafter the applicant shall cause an income and expenditure
statement
to be prepared by auditors, in terms whereof the total net
profit derived from a project will be reflected and on the basis of
which the commission due and payable to the 1
st
respondent shall be determined. In terms of clause 5.1.3 the
outstanding commission due and payable to the 1
st
respondent shall be paid within 14 days after completion of the
aforesaid income and expenditure statement, after deduction of
all
drawings made against such commission. In terms of clause 6, the 1
st
respondent shall operate its current account held at the 5
th
respondent for every project managed by the applicant and the
applicant shall have signing rights in respect of that account.
The
clause further provides that all expenses in respect of a project
shall be paid from this account and all income derived from
a project
shall be deposited into this account. It is common cause that the
account referred to is the account held at the 5
th
respondent with number 040177793. In terms of clause 17 of the
contract any party thereto has the right to cancel the contract
in
case of breach of the contract and failure to remedy such breach
within 7 days after having been required to do so by written
notice.
[4] During April 2007 and
as a result of the acceptance of the 1
st
respondent’s tender, the 3
rd
respondent and the 1
st
respondent entered into contract number NS29/2007 for the
construction of a sewerage network for 1145 erven in Tikwana near
Hoopstad
and the construction of two wastewater pumpstations (“the
project”). It is common cause between the applicant and the
respondents that the project was managed by the applicant in terms of
the contract. It is also common cause that the project is
not yet
completed. It is admitted by the respondents that monies received
from the 3
rd
respondent in respect of the project after March 2008 have not been
paid into the aforesaid account with the 5
th
respondent. These are amounts of R539 367,34, R703 813.45 and R158
753,34. It is not disputed that these amounts were paid into
the 1
st
respondent’s account with the 4
th
respondent with number 4068885278. In its notice of motion in this
regard the applicant however referred only to the amount R698
120.68,
that is the aforesaid amounts of R158 753,34 and R539 367,34. The
applicant and the respondents are further agreed that
further amounts
are payable by the third respondent in respect of the project and
will be payable upon completion of the project.
[5] It appears from the
papers that the 3
rd
respondent is in the process of extending contract number NS29/2007
by the addition of further work to be performed, namely the
upgrading
of the Hoopstad wastewater treatment works and associated works at an
estimated costs R6,84 million. The initial contract
price in respect
of the project was approximately R8,765 million. The applicant
claims that the aforesaid extension is or should
also be regulated by
the provisions of the contract. I disagree. Clause 3 of the
contract provides that the contract commence
on the signing thereof
and shall continue and endure for a period of 12 months terminable by
either party giving the other party
3 calendar months written notice.
The parties before me are agreed, correctly so in my view, that this
clause must be interpreted
to mean that the provision in respect of 3
months written notice only applies during the period of 12 months and
not thereafter.
I think that it is plain that the contract cannot
apply to contractual rights obtained by the 1
st
respondent only after the expiry of the period of 12 months
aforesaid. On the evidence of the respondents which must be accepted
for purposes of decision of this application, the 1
st
respondent obtained no contractual rights in respect of extension of
contract number NS29/2007 before 13 March 2008.
[6] The applicant in
essence now moves for a final interdict. Therefore, on the
principles applicable to the establishment of facts
in application
proceedings, the onus is on the applicant to show on a balance of
probabilities that he has a clear right, that
infringement of that
right is taking place or is reasonably apprehended and that he has no
other suitable remedy to protect the
right. The case for the
applicant is essentially that the contract remains applicable to the
uncompleted project, that the respondents
fail to adhere to the
provisions of the contract in respect of the project to the prejudice
of the applicant and that normal civil
action for enforcement of
contractual rights and/or damages would not provide an adequate
remedy in the circumstances.
[7] The case for the
respondents in the first place is that the contract came to a
complete end upon expiry of the period of 12
months after 14 March
2007. This cannot be correct. The parties to the contract did
contemplate the situation of an uncompleted
project managed by the
applicant at the time of the expiry of the aforesaid period of 12
months and in clause 5.1.4 specifically
agreed in this regard. If
follows in my view that the period mentioned in clause 3 of the
contract is the period during which
the applicant has the right to
elect to manage a project awarded to the 1
st
respondent.
[8] Clause 5.1.4 of the
contract provides as follows:
“
If this Agreement is terminated
or cancelled for any reason whatsoever before completion of the
PROJECT paragraph 5.1, 5.1.1, 5.1.2
and 5.1.3 shall mutatis mutandis
apply, provided that all damages suffered by Mpambani due to the
termination or cancellation and/or
all expenses payable to third
parties to complete the commission payable to Sekununu Construction
And trading. Deductions made
in terms hereof shall in no way affect
any claim which Mpambani may have against Sekununu Construction and
Trading for damages
suffered as a result the termination of this
Agreement.”
[9] The wording of the
first part of clause 5.1.4 of the contract, that is before the
proviso
thereto, is clear in my view. It provides that if the contract is
terminated of cancelled for any reason whatsoever before completion
of a project managed by the applicant in terms of the contract,
clauses 5.1 including 5.1.1 and 5.1.3 shall apply
mutatis
mutandis
,
that is, with the necessary changes. This necessarily means that the
applicant must complete the project. The 1
st
respondent is then entitled to payment of its commission mentioned in
clause 5.1, calculated in terms of clauses 5.1.1 to 5.1.3.
I do not
find it possible in these proceedings however to give any meaning to
the
proviso
to clause 5.1.4 nor to the last sentence thereof. It appears that
some wording was lost in the process of drafting of the contract.
What can be established with reasonable certainty however (see
PATTINSON
& ANOTHER v FELL AND ANOTHER
1963 (3) SA 277
(D) at 280 B) is that the said
proviso
and last sentence deal with damages suffered by the applicant for
which the 1
st
respondent is liable. Clearly however, the applicant can have no
claim for damages against the 1
st
respondent as a result of the termination of the agreement by
effluxion of time in terms of clause 3 thereof nor as a result of
the
cancellation of the contract by the 1
st
respondent in terms of clause 17 thereof following on breach of
contract by the applicant. It is therefore established with
reasonable
accuracy that whatever the exact meaning thereof, the
proviso
and the last sentence can only apply in the event of cancellation of
the contract by the applicant as a result of breach of contract
by
the 1
st
respondent. Seen thus the
proviso
and the last sentence do not detract from the application of the
first part of clause 5.1.4 where, as is the case here, the contract
is terminated by effluxion of time. I am satisfied therefore that
clauses 5.1.1, 5.1.2 and 5.1.3 of the contract remain applicable
to
the project until after completion thereof.
[10] The second line of
defence of the respondents is that the applicant ended his
involvement with the project, as it was put,
at the end of March
2008. I assume, without deciding, that that in itself would provide
a valid defence. However, upon analysis
of the admitted and
undisputed facts before me, I believe that it is shown that although
some disputes arose, the applicant did
not terminate his involvement
with the project as alleged. In this regard I refer only to the
following. The respondents admit
that the 2
nd
respondent on 10 June 2008 attended a meeting with the applicant and
his attorney, convened by the applicant. It is undisputed
that on
this occasion the 2
nd
respondent gave reasons why the applicant was no longer in entitled
to be involved with the project. He said both that the contract
had
expired after the aforesaid period of 12 months and that the contract
had been cancelled after written notice but he did not
indicate that
the applicant ended his involvement with the project or abandoned the
project. It is common cause that during 2007
the applicant appointed
his brother-in-law, Mr. Sammy Motloung, as site manager in respect of
the project. It is not disputed
that the applicant dismissed Mr.
Motloung from this position because of what the applicant perceived
to be missing of deadlines
and exceeding of authority by Mr.
Motloung. However, the respondent’s themselves say that Mr.
Motloung was dismissed only
on 12 June 2008. I also have before me
the affidavits of Mr Ronald Sinclair and Mr Colin Enslin. Mr Sinclair
states that he is
a civil engineer and project manager and was
consulted by the applicant with regards to the project. He is in the
employ of a
company trading as Sechaba Solutions which was appointed
by the applicant as operating agent with regards to the project. Mr.
Sinclair states specifically that he was involved with the project on
behalf of the applicant in his aforesaid capacity during the
period
from April to June 2008 when he received reports that the 2
nd
respondent had instructed people on the site not to communicate with
himself. Mr. Enslin states that he is employed by Sechaba
Solutions,
and that he was involved as site foreman with regards to the project
on behalf of the applicant until 12 June 2008 when
he was informed
that the 2
nd
respondent had instructed everybody on site not to report to himself.
These affidavits were specifically put forward in answer
to the
allegation that the applicant had ended his involvement with the
project at the end of March 2008, made for the first time
in the
answering affidavit. At the hearing before me the veracity of this
evidence was not questioned nor was leave asked to reply
thereto. In
all the circumstances of this case I believe that it is justified to
rely on the correctness of the contents of the
affidavits of Mr.
Sinclair and Mr. Enslin.
[11] For these reasons I
find that the applicant has shown a clear right that the provisions
of clause 5.1., 5.1.1, 5.1.2 and 5.1.3
are applicable to the project.
It is clear that the respondents have infringed this right and will
continue to do so unless restrained.
The respondents themselves say
that only after the completion of the project and the aforesaid
extension thereof will the 1
st
respondent be in a financial position to meet any claim for damages
by the applicant. In the circumstances I am satisfied that
no
adequate alternative remedies are available to the applicant. In the
light of my finding in paragraph 5 above, the description
of the
project must be stated with greater precision than in the rule
nisi
.
Paragraph 2.3 of the rule
nisi
falls away according to the terms thereof and paragraph 2.2 thereof
must be amended accordingly. Costs should follow the result.
[12] In the result the
following orders are made:
1. The 3
rd
respondent is directed and ordered to make any payments due to the
1
st
respondent in respect of the construction of a sewerage network for
1145 erven in Tikwana and the construction of two wastewater
pump
stations, contract number NS29/2007 as entered into during April
2007, directly into the bank account of the 1
st
respondent held with the 5
th
respondent (Standard Bank) with account number 040177793.
2. The 4
th
respondent is interdicted and prohibited from allowing any
withdrawals, payments, deductions or transfers from the 1
st
respondent’s account held with 4
th
respondent under account number 4068885278 which would cause the
credit balance of the account to be reduced to less than R698
120,68
or, if the credit balance in the account is less than R698 120,68,
from reducing such credit balance, without written authorisation
of
the applicant.
3. The 4
th
respondent is directed and ordered to transfer the amount of R698
120,68, or, if the balance in the account under account number
4068885278 is less than the amount of R698 120,68, the amount therein
held, to 1
st
respondent’s account held with 5
th
respondent with account number 040177793.
4. The 2
nd
respondent is prohibited and interdicted from taking any steps to
remove the applicant as signatory of the 1
st
respondent’s account held with the 5
th
respondent with account number 040177793.
5. The 5
th
respondent is prohibited and interdicted from removing the applicant
as co-signatory on the 1
st
respondent’s account held with the 5
th
respondent under account number 040177793.
6. The 1
st
and/or 2
nd
respondents are prohibited and interdicted from withdrawing or
transferring any amount from the 1
st
respondent’s account held with the 5
th
respondent under account number 040177793 without the applicant’s
written consent.
7. The 1
st
and 2
nd
respondents are ordered to pay the costs of this application jointly
and severally.
_______________________
C.H.G. VAN DER MERWE,
J
On behalf of the
applicant: Adv. N. Snellenburg
Instructed by:
Naudes
BLOEMFONTEIN
On behalf of the 1
st
and 2
nd
Respondents Adv. P.
Greyling
Instructed by:
Mojola Attorneys
BLOEMFONTEIN
/em