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1987
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[1987] ZASCA 59
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Amalgamated Construction Company (Pty) Ltd v City Council of City of Durban (61/87) [1987] ZASCA 59 (27 May 1987)
IN THE SUPREME COURT OF SOUTH AFRICA
(
APPELLATE DIVISION)
1987-05- 29 In the matter between:
AMALGAMATED CONSTRUCTION COMPANY
(PROPRIETARY) LIMITED
appellant
and
THE CITY COUNCIL OF THE
CITY OF DURBAN
respondent
Coram
: Corbett, Hoexter, Grosskopf, JJA, Nicholas
et
Boshoff
AJJA.
Date of appeal
: 18 May 1987
Date of judgment
: 27 May 1987
JUDGMENT CORBETT
JA:
During the period April 1979 to February 198l
/
appellant,
2
appellant, Amalgamated Construction Company (Pty) Ltd
("Amalgamated"), entered into a series of eight building contracts with the
respondent, the City Council of the City of Durban ("the Council"). In terms of
each of these contracts Amalgamated undertook to
construct a specified number of
dwelling units on land provided by the Council. The contract in each case
comprised a number of documents,
including one called "General Conditions of
Contract" and another named "Special Conditions of Con-tract". At a certain
stage in
the execution of these contracts a dispute arose between the parties in
regard to the proper interpretation to be placed upon the
pro-visions in the
Special Conditions of Contract relating to the payment of liquidated damages by
the contractor (Amalgamated) for
delay in the completion of the con-tract work.
Amalgamated accordingly launched an appli-cation on notice of motion in the
Durban
and Coast
/ Local
3
Local Division for a declaratory order setting forth its (i.e.
Amalgamated's) interpretation of the relevant pro-visions of the eight
contracts. The application was opposed by the Council and in an opposing
affidavit by the City Engineer, filed by the Council, the
latter's
interpretation is set forth. The matter came before WILSON J who held that the
Council's interpretation was the correct
one and dismissed the application with
costs. WILSON J thereafter granted Amalgamated leave to appeal to this Court
against the whole
of his judg-ment and order. That appeal is now before us.
Since the relevant contractual provisions are the same in all eight
contracts, the appropriate contract documents relating to only
one contract
(numbered B.5778) were put before the Court a
quo
. The parties accept-ed
that an interpretation placed on these documents would hold good for the other
seven contracts as well.
/Contract
4
Contract B.5778 provides for the construction of 352 dwelling
units. The dispute hinges on clauses 1 and 2 of the Special Conditions
of
Contract. I quote these in full;-
"1. (a)
TIME FOR COMPLETION
:
Time is the essence of this contract and the Contractor will be required
tocomplete the buildings and site works and hand over to
the Corpora-tion
progressively in batches.
For this purpose the 352 dwellings comprising this contract will be subdivided
as follows:-
12 (twelve) batches of 21 dwelling units each.
5 (five) batches of 20 dwelling units.
Whilst the Engineer reserves the right to change and direct where such batches
shall be erected in various periods of the Contract,
the following shall be
adhered to:-
(i) The first batch comprising a total of 21
dwellings shall be handed over complete
/ within
5
within 45 (forty-five) weeks from a date which shall be specified in a letter
from the City Engineer in-structing the Contractor to
take over the site on such
specified date.
(ii) The remaining 16 (sixteen)
batches comprising 331 dwellings shall be handed over at a rate of one batch
per week from the due date for comple-tion of the first
batch.
(iii) The total of 352 dwellings
is then handed over complete within 61 (sixty-one) weeks.
Extension of this time will not be permitted by virtue of any holidays other
than Building Industry Holidays whether statutory or
recognised generally as
customary in the industry, which intervene between the date specified in the
letter and the due date for
completion.
(b)
MAINTENANCE
PERIOD
The period for which the Contractor shall be responsible for maintaining the
works after practical completion in terms of Clause
10 of the General Conditions
of Contract shall be
six months
after the completion certificate has been
issued except
/ that
6
that in the case of electrical work
the period shall be
twelve months
from the date of
completion.
2.
LIQUIDATED DAMAGES FOR
DELAY:
(a) If the Contractor fails to proceed with and complete the Works in the manner
required by the contract within the period fixed
by Clause 1 (a) (or within any
extended time granted in terms of Clause 9 of the General Conditions of
Contract) the Council shall
be entitled to require payment from the Contractor
of the amounts shown in Clause (c) below as liquidated damages for each and
every
day by which the completion of the Works is delayed beyond the date fixed
as aforesaid, and such damages may be deducted by the Council
from any monies
due to the Contractor; provided that nothing contained in the Clause shall
prevent the Council from exercising against
the Contractor any other reme-dies
which may be available to it either in terms of this contract or at common law,
or from electing
to recover from the Contractor any damage or loss sustained by
it in consequence of any breach of contract in lieu of enforcing its
rights to
liquidated damages in terms of this Clause.
/ (b)
If
7
(b) If before the completion of the
whole of the Works, any part of
the
Works has been certified by
the Engineer as completed in terms
of Clause 10 of the General Conditions of Contract and occupied or used by
the Council, the liquidated damages for delay shall for
any period of delay
after such certification be reduced in the proportion which the value of the
part so certified bears to the value
of the whole of the Works.
(c) The following are the amounts of
liquidated damages applicable:-
(i) In the case of the Terraced House Type T5 R2,22 per Dwelling Unit per
day
(ii) In the case of the Terraced House Type T5A Rl,82 per Dwelling Unit per
day
(iii) In the case of the Terraced House Type T6A R2,56 per Dwelling Unit per
day
(iv) In the case of the Semi-Detached House Type SD4A Rl,45 per Dwelling Unit
per day
(v) In the case of the Semi-Detached House Type SD5B Rl,85 per Dwelling Unit
per day
/(vi) In
8
(vi) In the case of the Semi-Detached House Type SD5D Rl,60 per Dwelling Unit
per day (vii) In the case of the Duplex Housing Unit
Type DP4A Rl,38 per
Dwelling Unit per day
(viii) In the case of the Duplex Housing Unit Type DP5A1 Rl,65 per Dwelling
Unit per day
(ix) In the case of the Flats
Type F3A R0,88 per Dwelling Unitper day
(x) In the case of the Flats
Type F3C R0,86 per Dwelling Unit per day
(xi) In the case of the Flats
Type F4A Rl,05 per Dwelling Unit per day
(xii) In the case of the Flats
Type F4B Rl,21 per Dwelling Unit per day
For each day on which the building remains incomplete after its stipu-lated
date of completion:
R25,96 in addition for each day on which the whole of the Works remains
incomplete after the stipu-lated date of completion."
/The
9
The declaratory order asked for by Amalgamated, as set forth in
the notice of motion, reads:
"It is hereby declared that upon a proper construction of the contracts
concluded between the parties hereto and numbered B.5767,
B.5778, B.5948,
B.5949, B6065, B6066, B6070, B5766 liquidated damages are payable in terms of
clause 2 of the Special Conditions
of Contract only if the completion of the
total number of dwelling units included in the contract is delayed beyond the
due date
for the completion of the works, as defined in the contract, and the
quantum of such liquidated damages must be calcu-lated in the
prescribed manner
from that date."
The Council's viewpoint is summed up in the following
paragraph in the affidavit of the City Engineer:
"It is the Respondent's contention that, on a proper construction of Clauses 1
and 2 of the Special Condi-
tions of Contract (read in their
/
context)
10
context), the Respondent is entitled to deduct penalties in respect of failure
by the Applicant to complete any speci-fic batch of
dwellings by the date
stipulated therefor under Clause
l(a)."
In my opinion the Court a
quo
correctly rejected the
interpretation contained in the declaratory
order
and correctly accepted the contrary interpretation
put forward by
the Council. My reasons for reaching
this conclusion are the following:
A reading of clauses 1 and 2 of the
Special
Conditions of Contract reveals certain
prominent fea-
tures of the contract. The first is that time is of
the
essence of the contract: this is expressly stated
in the opening words of
clause 1; and what is obviously
referred to is the time of completion by the
contractor
of the building work. The second feature is the
sanction
imposed where the contractor delays and fails
to complete the work in the
stipulated time, viz.
liquidated damages. And the third prominent feature
/ is
11
is the fact that, in terms of clause 1, the contractor
is
required to complete the buildings and site works
and hand over to the
Council "progressively in batches".
To this end the 352 dwellings are divided
into 17
batches, 12 batches of 21 dwelling units each and 5
batches of 20
dwelling units each and a completion date
(to be calculated from a date specified by the City Engi-
neer) is
designated for each batch (see clause l(a)(i)
and (ii). In addition, a
completion date for all 352
dwellings is stated. This is within 61 weeks
of
(inferentially) the specified date, this period of 61
weeks representing
the total of the periods allocated for
the completion of each of the batches
(see clause l(a) (iii) ).
This is all perfectly clear.
Clause 2(a), which creates the obligation to pay liquidated damages for delay
is, however, less happily worded. It commences by postulating
the
contractor's
/ failure
12
failure to proceed with and complete the works "within the
period fixed by clause l(a)" and then imposes upon the contractor a liability
to
pay liquidated damages in the amounts shown in clause l(c) for every day by
which the completion is delayed "beyond the date fixed
as afore-said". The words
which 1 have quoted, particularly "period" and "date" (in the singular), would
seem to suggest that there
is only one date from which liquidated damages may
run; and it was upon the strength of this,
inter alia
, that it was argued
on behalf of Amalgamated that in terms of clause 2 liquidated damages were
payable only if the completion of
all 352 dwellings was delayed beyond the
period fixed in clause l(a)(iii) of the Spe-cial Conditions of Contract. Counsel
for Amalgamated,
Mr
Welsh
, also laid stress upon the use of the word
"Works" in clause 2(a). "Works" is defined in clause l(j) of the General
Conditions of
Contract and it is clear from the
/ opening
13
opening words of clause 1 that this definition applies
to the use of the word in all the contract documents. The first (and
relevant) portion of the definition
reads:
"The term 'Works' shall mean the works
described and shown in the
Contract
Documents and any such further Drawings,
Directions and
Explanations as may from
time to time be given to the Contractor
by the
Engineer "
Relying upon this
definition, counsel argued that where
the word "Works" is used in clause 2(a)
of the Special
Conditions of Contract it means the whole of the
works,
i.e. all 352 dwellings, and nothing less.
In my view, these arguments cannot prevail. In clause 2(a) the liquidated
damages to be paid are de-scribed by reference to clause
2(c). Clause 2(c)
clear-ly provides for two sets of liquidated damages: (1) damages in various
stipulated amounts (depending on type
of building) for each day on which an
individual dwelling
/ (or
14
(or building) remains incomplete after "its stipulated date of
completion" (my emphasis); and (2) "in addition" damages in a globular
amount
for each day on which the whole of the works remains incomplete after "the
stipulated date of completion". The stipulated
date of completion un-der (1)
above clearly refers to the date by which the batch of dwellings, of which the
individual dwelling
forms part, is required to be completed in terms of clause
l(a)(i) and (ii) - for convenience I shall call this date "the batch date";
and
the stipulated date of completion under (2) above equally clearly refers to the
completion date stipulated in clause l(a)(iii).
These are the dominant
provisions in regard to the payment of liquidated damages and they specifically
and unambiguously express
the intention of the parties in regard thereto. In my
opinion, they override whatever inconsistency there might be in the general
words used in clause 2(a). Mani-
/ festly
15
festly they contradict the interpretation which Amalgamated
seeks to place upon the contract in relation to the obli-gation to pay
liquidated damages and support the inter-pretation advanced on behalf of the
Council.
In addition, there are, in my opinion, a number of other considerations which
reinforce the view that liquidated damages were intended
to be paid in res-pect
of both delays beyond the batch date in the comple-tion of individual dwellings
and delays in the completion
of the whole of the works beyond the date fixed for
the hand over of all 352 dwellings.
It is clear from the context that the purpose of dividing the work up into
batches and of providing for the progressive hand over
of completed batches by
specified dates was to enable the Council to arrange for the allocation and
occupation of the dwellings as
the batches were completed. This appears from
the
/ express
16
express wording of clause 9 of the Special Conditions of
Contract which is headed "BATCHING SCHEDULES" and commences with the words
-
"In order to allow the Corporation to arrange for the allocation and
occu-pation of the dwellings as the batches are completed, the
Contractor will
be required, at the commencement of the Contract, to furnish a batching
schedule
in terms of Clause 1 (a) "
From this it is to be inferred that time was to be of
the essence both as
to the completion of batches and as
to the completion of the work as a whole.
In the cir-
cumstances it seems very probable that the sanction
of
liquidated damages would have been intended to apply not
only to delays
in the completion of the work as a whole,
but also to delays in the
completion of batches; and
per contra
it seems unlikely that the
intention was to
confine the sanction to delays in the completion of the
work as a whole.
/ By
17
By reason of the aforegoing the reference to "period"
(singular) in clause 2(a) must be read as meaning any one of the periods fixed
by clause l(a); and similarly the word "date" in the same clause must be read as
the date.representing the terminal day of the particular
period under
consideration. Thus interpreted, these words are not inconsistent with the
construction which I have placed on clause
2 as a whole. Nor do I think that the
word "Works" in clause 2(a) presents any real problem. In terms of the
definition the word
"Works" can, in my view, be used to denote the whole of the
contract works or a specific portion thereof, such as a batch of dwellings.
And
it is of some significance that in certain clauses of both the General
Conditions of Contract (see e.g. clauses 4(a) and (10)
and the Special
Conditions of Contract (see e.g. clauses 2(b) and 2(c) ), where the whole
contract works are referred to, expressions
such as
/"all
18
"all the works", "all works", and "whole of the works" are
used.
Mr
Welsh
also placed some reliance on clause 10 of the General
Conditions of Contract, headed "Completion and Maintenance", the relevant
portion
of which reads:
"The Contractor shall deliver the works
to the Engineer in a clean state
and
complete in every particular. When the
works are practically completed
the Engi-
neer will give a Completion Certificate and
the date of such
completion certificate will
denote the commencement of the
Maintenance
Period. The Contractor shall maintain and
keep in good order
and repair all works
under the Contract for the period stipula-
ted in the
Special Conditions of Contract,
after Completion Certificates have
been
issued "
His argument was that
this clause indicates a single completion date when a completion certificate is
issued viz., when the whole
works are complete, and that, therefore, there could
be no liquidated damages payable
/ before
19
before this. This argument is partially refuted by clause 10
itself, which, as the concluding words of the quoted portion show, seems
to
contemplate the issue of more than one completion certificate. It is fully
refuted, to my mind, by the terms of clause 2(b) of
the Special Conditions of
Contract, which provides for the certification by the Engineer as complete of
"any part of the Works" in
terms of clause 10 of the General Con-ditions of
Contract (see also clause 24 of the Special Conditions of Contract, which
contemplates
a final inspec-tion by the Bngineer of the buildings in a batch or
sec-tion of the works).
Mr
Welsh
furthermore referred to two amend-ing agreements entered into
between the parties. The first of these ("the first amending agreement")
was
entered into on 4 December 1980 and it amended the Special Conditions of
Contract in relation to two of the
/ contracts
20
contracts by the substitution of a new clause l(a). The
relevant portion of the new sub-clause reads:
"Time is of the essence of this contract and the contractor will be required to
com-plete the buildings and site works and hand them
over to the Corporation
progressively in batches in accordance with a programme annexed hereto marked
"A". The said programme shall
relate to a co-ordinated progression of work under
this contract and also under contract B6065 or B6066 (as the case may be), it
being a condition of this contract that any failure on the part of the
contractor to complete the build-ings and site works and hand
over the same to
the Corporation progressively in batches in accordance with the said programme
as extended from time to time by
the Engineer in accordance with the other
provisions of this contract shall, if the Engineer in his sole discretion so
directs, be
deemed to constitute a delay in respect of this contract for the
purposes of clause 2 hereof."
The
second ("the second amending agreement") was entered into on 1 December 1982.
It,
inter alia
, varied the original agreements in the following way
—-
/ "The
21
"The respective periods stipulated in terms of Clause l(a) of the Special
Conditions of Contract read with Clause 4(a) of the General
Conditions of
Con-tract of each of the said Contracts for the completion and hand-over of the
total number of dwellings under the
said Contracts,shall, for the sole purpose
of the determination of liquidated damages in terms of Clause 2 of the Special
Conditions
of Contract of each of the said Contracts, be amended so as to expire
on the following dates,
respec-tively:"
(then follow stipulated
dates for each of the contracts).
Amalgamated's introduction of these amending agreements as part of the record
was initially unenthu-siastic. In the founding affidavit
Mr Goodson,
Amalga-mated's managing director, stated that in his opinion they were not
relevant for the purpose of interpreting clause
2 of the Special Conditions of
Contract, but were included because he believed that the Council did not
subscribe to this view. In
his opposing affidavit the
/ City
22
City Engineer did not dispute this, but added that he
had
been informed that it was a question of law as to whether
the contents
of either amending agreement were relevant
to the interpretation of the
original contracts. In his
replying affidavit Mr Goodson was non-committal on
this
topic, but shortly before the hearing in the Court a
quo
he
deposed to a supplementary affidavit, the material
portion of which
reads:
"In paragraph 11 of the founding affi-davit I expressed the opinion that neither
the first nor the second amending agreement is relevant
for the purpose of
determining the mean-ing and effect of clause 2 of Respon-dent's Special
Conditions of Contract. I am now advised
and respectfully submit that both the
first, and more especially the second amending agreements are so relevant. At
the hearing of
this appli-cation submissions will be made to this effect on
behalf of the Applicant."
It was
submitted by Mr
Welsh
that the portion of the first amending agreement
quoted above showed that the
/ parties
23
parties placed a common interpretation on clause 2 of the
Special Conditions of Contract in the original contracts consistent with
the
construction advanced by him and that accordingly on the basis of the principle
set forth, for example, in
MTK Saagmeule (Pty) Ltd v Killyman Estates (Pty)
Ltd
1980 (3) SA 1
(A), at p 12 F-H, this fact could be used in the
interpretation of clause 2. It is clear from the authorities, including the one
just cited, that this aid to construction may be invoked only in the case of
ambiguous documents. In my view, there is no such ambiguity
in clause 2 and
consequently reference to the first amending agreement is neither necessary nor
justifiable. I might add that, in
any event, I am un-able to discern in the
quoted portion of the first amend-ing agreement any such common interpretation
as was sug-gested
by counsel.
As to the second amending agreement, Mr
Welsh
's
/ argument
24
argument, as I understood it, was that this agreement was
relied upon not in order to show a common interpretation (as in the case
of the
first amending agreement) but in order to establish that the parties amended
clause 2 of the Special Conditions of Contract
in such a way as to eliminate the
payment of any liquidated damages for delay in the completion of batches of
dwellings and to confine
the payment of such damages for delay in the completion
of the contract as a whole. This argument was advanced in the alternative
and on
the basis that Amalmated's interpretation of the original contract was
incorrect.
I do not think that it is open to Amalgamated to advance this argument. As I
have shown, it initially regarded this amending agreement
as irrelevant and only
at the eleventh hour relied upon it as being relevant "for the purpose of
determining the meaning and effect"
/ of
25
of clause 2 of the Special Conditions of Contract.
Had
Amalgamated timeously made the averment that the second
amending
agreement changed the effect of clause 2 in
the manner suggested, I have no
doubt that evidence would
have been placed before the Court a
quo
of
the circum-
stances under which the second amending agreement came to
be
entered into. And such evidence might well have been
relevant to the
interpretation of the second amending agree-
ment. In any event, I am quite
unpersuaded that the se-
cond amending agreement did alter clause 2 in the
manner
suggested. When pressed, Mr
Welsh
conceded that
the
alteration came about by way of necessary implication.
I fail to see any such implication; and furthermore it
is to be noted that in the preamble to the second amending
agreement it is stated -
"AND WHEREAS the parties have now agreed to conclude further contracts relating
to the aforesaid works, such further contracts to
incorporate all of
the
/ respective
26
respective terms and conditions of the said Contracts, mutatis mutandis save as
hereinafter
expressly
varied
."
(My emphasis.)
Por these reasons I hold that the Court a
quo
rightly dismissed the
application.
The appeal is dismissed with costs, including the costs of two counsel.
M M CORBETT
HOEXTER JA) GROSSKOPF JA) NICHOLAS AJA) CONCUR. BOSHOFF AJA)