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[2008] ZAWCHC 304
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MIS Maintanance CC t/a NM Construction v Africon Infrastructure Projects (Pty) Ltd and Another (11555/2008) [2008] ZAWCHC 304 (24 November 2008)
JUDGMENT
IN
THE HIGH COURT OF SOUTH AFRICA
(CAPE
OF GOOD HOPE PROVINCIAL DIVISION)
CASE
NO
: 11555/2008
DATE
: 24
NOVEMBER 2008
In
the matter between:
MIS
MAINTENANCE CC t/a N M CONSTRUCTION
Applicant
and
AFRICON
INFRASTRUCTURE
PROJECTS
(PTY) LTD
1
st
Respondent
ABSA
BANK LIMITED 2
nd
Respondent
JUDGMENT
GAUNTLETT.
AJ
The
applicant is a building contractor, the first respondent an employer
in terms of a building contract between them and the second
respondent a registered commercial bank which has furnished a
guarantee to the first respondent in a sum of R2.498milion.
This
is the extended return day of an interim interdict granted on 18 July
2008 prohibiting second respondent from paying first
respondent the
guaranteed amount of R2,498 million. First respondent had called upon
second respondent to pay it the full amount
of the guarantee
following an arbitration award in its favour.
The
facts directly relevant to this ruling are few, and are common cause.
The agreement incorporates a standard JBCC 2000 series
principal
building contract (Edition 4.1, March 2005). First respondent gave
notice of cancellation of the main agreement on 2
April 2008, which
applicant disputed. The dispute gave rise to an arbitral reference;
the reference related only to the validity
of the cancellation. The
arbitrator in an award handed down on 16 June 2008 found the
appellant's work to have been "appalling".
His award was in
these terms as regards the orders which he made:
"1.
The cancellation of the contract was valid and lawful;
2.
The defendant has no iien or any right of continuing
possession of the site;
3. The
defendant owes the claimant an amount of R621 300 in respect of the
payment certificate number 3, issued on 17 March 2008;
4. The
defendant shall be liable for interest on the outstanding amount
calculated in accordance with clause 31.12 of the agreement,
read
with the "definition of interest."
5. The
parties are obliged to implement clause 36.5 of the agreement,
pending the preparation of a record of costs and file an
account.
6. The
defendant shall pay the claimant's party and party costs of suit on
the High Court scale;
7. The
claimant's bill of costs shall be taxable by the Arbitration Forum."
On
12 July 2008 first respondent called up the guarantee. On 18 July
2008, following fax service on first respondent the night before
the
hearing and with no service on the second respondent, an order was
granted by
Goliath,
J
calling upon the respondents to show cause on 14 August 2008 why an
order should not be made interdicting the second respondent
from
making any payment in terms of the attached guarantee, and
"1.2
Dat voormelde dien as
'n
tussentydse interdik hangende die finale beregttng van
'n
voorgenome
hersieningsaansoek teen die arbitrasie toekenning van Advokaat
Carstens, SC gedateer 18 Junie 2008 en/of
'n
voorgenome aksie teen eerste respondent aanverwant aan die voormelde
hersieningsaansoek (
sec)
1.3
Dat jndien voormelde voorgenome aansoek om aksie nie binne 30 dae na
datum van hierdie bevel ingestel word nie, dat die regshulp
soos
omskryf in paragrawe 1.1 en 1.2
ipso
facto
sal
verval.
No
review proceedings have been instituted. J was informed at the
commencement of argument that applicant had formed the view that
no
viable review grounds could on analysis, be discerned. The
alternative of an action to compel the applicant to comply with the
quantification and certification exercise contemplated by paragraph 5
of the award (as I believe the second reference to
"hersieningsaansoek"
in paragraph 1.2 of the order
contemplates) has indeed been instituted (namely on 12 August 2008).
What
arises for determination today is whether the r
ule
nisi
issued
on 18 July 2008, and afready once extended, should be confirmed (as
an order pending the final determination of the action
instituted),
or whether it should be discharged. In addition, together with its
opposing affidavits first respondent has filed
a cross-appfication,
in terms of which it seeks an order making the arbitral award an
order of court.
Embedded
in collateral skirmishing in this matter lie three issues which in my
view go to its heart. The first issue is whether,
as applicant
contends, the construction guarantee must be construed together with
the agreement, and thus with reference to it.
The second is whether,
as applicant also contends, the guarantee (so construed) requires
payment prior to quantification and certification
of losses arising
on cancellation. The third is whether in any event the effect of the
award is to oblige, qua award, first respondent
to quantify and
procure certification - in effect, first to prove its loss - before
it may call on the guarantee.
Counsel
for the applicant was invited to analyse the guarantee clause by
clause. The effect of this exercise, he thereafter correctly
conceded, is that the guarantee (perhaps unsurprisingly, given its
nature and purpose) proclaims its autonomy. It seeks at every
turn to
make its execution not dependent upon the substantive and procedural
requirements of the agreement. Thus clause 3.1 Is
inimical to the
interpretation of the guarantee by reference to the agreement, and
also emphasizes that the guarantee is not accessory
in nature.
Similarly clause 12, provides for the guarantee to serve as a liquid
document, and thus underscores its functional autonomy.
Clause 5 (as
clauses 8 and 12 thereafter confirm) is an alternative to clause 4
thus while clause 4 provides for a certification
process, clause 5 -
and marked an obvious contrast - does not.
In
the present case, first respondent has clearly invoked clause 5 which
provides for payment of the "guaranteed sum or the
full
outstanding balance" simply on provision of notice of
cancellation. I accordingly hold that the concession was correctly
made, and that the guarantee is not to be interpreted by reference to
the agreement.
The
second issue, as I have indicated, is whether the guarantee is
capable of being read in terms such as to require prior
quantification
and certification before first respondent may call it
up. Of course if the first postulate I have outlined fails, then
properly
speaking so should this. I would however add that it is
striking that clause 14.4.5 of the JBCC standard contract itself
provides
that where an employer has a claim in terms of clause 33 -
which the applicant suggested in its argument is the case here -"the
employer may issue a written demand in terms of the fixed
construction guarantee ...
The
third issue is whether in any event the award requires first
respondent to quantify and certify any claim before invoking the
guarantee. This was ultimately the main focus of the argument for the
applicant. J have to say at the outset in this regard that
the
jurisdiction of the arbitrator to make his orders in terms of
paragraphs 2 to 5 of the award is not entirely clear to me. The
arbitration agreement identifies the validity of the cancellation as
the only dispute. It may be that an argument arises that the
further
provisions of the orders made by the arbitrator were by necessary
implication authorised by the general terms of that reference.
However it may be noted that in paragraph 23 of the award the
arbitrator acknowledges that the matter dealt with in prayer 2 was
by
express mention in the award not even pleaded. The applicant at the
outset, on a question from me to its counsel, however withdrew
its
opposition to the award being made an order of court in terms of the
cross-application as sought, and further acknowledged
(again
correctly in my view) that this would of course carry in principle
the costs of the cross-application. This stance makes
it accordingly
not necessary to consider that aspect any further, as the situation
which has now arisen before me in relation to
the cross application
is that by consent of both parties I am asked to make an order in
terms of the award as an entirety, and
there is no residual aspect of
legal policy which militates against that happening.
What
is clear in relation, then, to the residual issue of the effect of
paragraph 5 of the arbitral award on the matter is that
the present
issue - namely the enforceability of the construction guarantee - did
not form part of the arbitration (to which, it
may be noted, the
second respondent was not even a party, as clearly it would have had
to be). The orders in the award do not in
their terms state or
necessarily Imply that they are an exclusive enumeration of all
rights and obligations of the parties arising
on cancellation - least
of all in the uncertain circumstances in which these orders appear to
have been added by the arbitrator.
Once the first concession is
made - that the guarantee stands alone, as a source of its rights,
and certainly in relation to
the interpretation of its terms - the
suggestion that first respondent may not now invoke the guarantee by
arbitral
award
without first quantifying and certifying is demonstrably fallacious.
It represents an attempt without justification to read into
the
arbitral award an intention by the arbitrator to constrain the rights
of the parties, in respects which not only
prima
facie
appear
to have been beyond the terms of reference, but which the award
itself indicates is highly unlikely to have been his intention.
(It
may be noted that first respondent has in fact, on the papers,
quantified claims exceeding R9million, with no attempt at factual
rebuttal in reply by the applicant, other than its repeated assertion
that, as a matter of law, prior certification is required.
At its
peril the applicant has either chosen or failed to address these
pertinent allegation sin the opposing papers).
For
these reasons, the
rule
nisi
must
be discharged. I hold in this respect that the applicant has not
established a
prima
facie rate
even
on the
Webster
v Mitchell
test.
Counsel
for the first respondent seeks an attorney and client costs order.
In relation to the principal application itself, there
is certainly
conduct to be criticised: non-compliance, repetitively, with the
rules, a wholly ill-founded central premise for the
interim
interdict, founded upon what was asserted to be an error, or a
failure to apply the mind of the arbitrator, neither of
which
constitute a review ground under the Arbitration Act; the procuring
of an interim order which does not requirements of Section
33(2) and
38 of the Arbitration Act; and other aspects which it is not
necessary to deal with. Not without hesitation, however,
I do not
think it appropriate in my discretion in the circumstances of the
matter to make a punitive order of costs in relation
to what I have
described is the main application.
As
regards however the application for condonation,
1
hold
a different view. It was made excusably late, it comprises
essentiatly a farrago of legal argument; the court find itself has
been left with partially unpaginated papers and which are generally
in a slovenly state.
I
believe the complexity of the issues and what was at issue in this
matter make the engagement by first respondent of two counsel
a
reasonable step to have taken.
The
order I accordingly make is as follows:
1. The
Rule
Nisi
is
discharged and the application is dismissed, including the costs of
two counsel.
2. The
cross application is upheld, with costs, including the costs of two
counsel.
3. The
application for condonation is dismissed with costs, including the
costs of two counsel, on the scale between attorney and
client
GAUNTLETT,
A J