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1989
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[1989] ZASCA 7
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CMGM (Pty) Ltd v City Council of Johannesburg (524/87) [1989] ZASCA 7 (14 March 1989)
Case No 524/87
(NOW KNOWN AS GROUP FIVE
CIVILS LIMITED) APPELLANT
and
CITY COUNCIL OF JOHANNESBURG RESPONDENT
J J F HEFER JA
IN THE SUPREME COURT OF SOUTH AFRICA
APPELLATE DIVISION
In the matter between
C M G M (PTY) LIMITED APPELLANT
(NOW KNOWN AS GROUP FIVE CIVILS LIMITED)
and
CITY COUNCIL OF JOHANNESBURG RESPONDENT
CORAM : JOUBERT, VAN HEERDEN, HEFER, STEYN, JJA et F H GROSSKOPF, AJA.
HEARD : 28 FEBRUARY 1989.
DELIVERED : 14 MARCH 1989.
JUDGEMENT HEFER JA:
In terms of a written agreement entered into during
.../2
2. 1983 between the parties to this appeal the appellant
undertook to construct a sewerage tunnel for the re-spondent. Clause 55 of
the
agreement provided that all constructional plant and materials owned by the
appellant would, upon being brought on to the construc-tion
site, be deemed to
become the property of the re-spondent and could not be removed therefrom
without the consent of the city engineer.
During November 1985,after the
purported termi-nation of the agreement by the appellant and a threat to remove
the plant from the
site, the respondent brought an urgent application on notice
of motion to the Witwaters-rand Local Division for an order in the following
terms:
.../3
3.
"2. (a) Interdicting the resppndent (i e the present
appellant) from removing from the site specified in Contract No 3823 between
the
applicant and the respon-dent for the construction of the Bush-koppie Outfall
Sewer - Phase II, any constructional plant or materials
which exist on the
site.
(b)
Ordering the respondent to
restore to the said site any constructional plant or materials removed therefrcm
by the respondent without
the written consent of the Engineer, as specified in
clause 55 of the said contract,and in particular the items set out in an-nexure
'R' to the founding affidavit.
(c)
Ordering
the respondent to pay the costs of this
application."
The appellant opposed the application
and filed
a counter-application for an order -
"permitting Respondent to remove all equipment
.../4
4.
materials and constructional plant belong-ing to Respondent
from the site specified in Contract No. 3823 concluded between Ap-plicant
and
Respondent on 14 January 1983 in respect of the construction of the Bush-koppie
Outfall Sewer - Phase II, which as at the date
of the hearing of this
counter-application are still on the aforementioned site;"
The matter came before KRIEGLER J who dismissed the
application and granted the counter- application.
KRIEGLER J's order was, however, reversed in an appeal to the Full Bench of
the Transvaal Provincial Division where the counter-application
was dismissed
and prayers 2(a), (b) and (c) of the notice of motion were granted. This is the
order at which the present appeal is
directed. The dispute relates entirely to
the appellant's right
.../5
5. to remove its plant and materials from the
constructional site. Respondent's case is that the appellant has no right to do
so in
view of the provisions of clause 55 of the agreement. The appeliant, on
the other hand, con-tends that it has lawfully terminated
the agreement and i s
no longer affected by clause 55. The facts giving rise to these rival
contentions are largely common cause
and are briefly as follows:
It is common
knowledge that the second half of 1985 was marked by civil unrest in certain
parts of the coun-try which eventually led
to the declaration of a state of
emergency. In the prevailing conditions the safety of appellant's personnel on
the site where the
tunnel was
.../6
6.
under construction could not be maintained. This led
to a spate of letters and a number of meetings between
the appellant's directors and members of the city engi-
neers staff. Save to the extent that I will do so, it
is unnecessary to deal with the contents of the letters
and the discussions at the meetings. What should be
mentioned at this
stage, is that there is a provision
in the agreement which was specifically designed for
the situation in which the parties found themselves af-
ter the declaration of the state of emergency. It is
clause 68(4) which reads as follows:
"(4) If the supply of labour or materials is disrupted for a continuous
period of at least 30 (thirty) days during the currency of
the Contract by the
following circumstances outside the control
.../7
7.
of the Contractor:
(a) a state of emergency declared by the Govern-ment or riot, civil commotion
or disorder; or
(b) a disruption in the supply of petroleum-based products or limitation of
supply thereof, due to action by the Government,
the Council may agree to an adjustment of the amount of the Contract Price
which, in the opinion of the Engineer, is reasonable (regard
being had to all
material and relevant factors directly consequent upon, or directly affected by,
the events referred to, including
factors related to the Preliminary and General
Items priced by the Contractor in the Schedule of Quantities). If the Council
does
not agree to such adjustment, the Contractor shall be entitled to determine
the Contract. The decision as to whether a riot, civil
commotion or disorder
outside the control of the Contractor has occurred will be made by the
Engineer."
Clause 68(4) loomed large in the correspondence and
in the discussions. In a letter to the city engineer
dated 26 August 1985
the appellant wrote e g that
.../8
8.
"(i)t is our intention, if the present situ-ation pertains
beyond 25 September 1985 , to invoke the provisions of ciause 68(4) of
the
General Conditions of Contract unless
we are able to negotiate new conditions of contract acceptable to both
parties."
At a meeting held on 19 September 1985 it was ag-
reed that the appellant wouid submit proposals on the ad-
visability of a price adjustment on the basis that work
on the tunnel
would be carried out via three specified
points of entry. These proposals were submitted in a
letter fo the city secretary dated 3 October 1985 and
were considered by
the respondent's management committee
on 29 October 1985. On 30 October 1985 the city secre-
tary reported the outcome to the appellant in the fol-
lowing terms:
.../9
9.
" The City Engineer who, as you are
aware, is the
'Engineer' as defined in the
contract, expressed the opinion that
your
proposals were not reasonable. Consequent-
ly, the management
Committee at its meeting
on 29 October 1985 did not adopt any of
your
proposals "
The appellant was also advised in the letter that it
was considered to be
in breach of the agreemeht and was
calied upon to proceed with the work.
Appellant's reaction came on 31 October 1985 in a
letter to the city secretary which reads as follows:
"We refer to our letter of 25 October 1985,
(a)
Receipt is acknowledged of your letter reference 23.7.14 of 30 October 1985 in
which you purport to give notice that we will be
in breach of the abovementioned
contract on or about 6 November 1985
.../10
10.
unless we comply with the provisions thereof. We do not accept the con-tents
of this letter.
(b)
The Council has not agreed
to such an adjustment of the contract price as is contemplated in clause 68(4)
of the Ge-neral Conditions
of Contract which go-vern the abovementioned
contract, re-sultant upon the supply of labour or materials for the contract
having
been disrupted for a continuous period of more than 30 days due to the
state of emergency declared by Government or riot, civil commotion
or
disorder.
(c)
In the premises we hereby
determine the abovementioned contract by reason of the breach set out in
paragraph (b) hereof.
We will commence removal of our establishment,
plant and equipment from the
contract on Mon-
day 4th November 1985 "
It is this letter and
particularly the threat of
.../11
11.
the removal of the plant and equipment which led to the
application in the Wiwatersrand Local Division. The termination of the agreement
was challenged in the foun-ding affidavit deposed to by the city secretary on
the basis that, assuming that "the circumstances referred
to in clause 68(4)
have arisen", the appellant was not en-titled to terminate the agreement since
(a) the right to terminate it in
terms of clause 68(4) would only arise in the
event of the refusal by the respondent "to accept an adjustment which the
engineer
considers to be reason-able"; (b) the only adjustment proposed by the
appel-lant was the one contained in the letter of 3 October
1985 which the
engineer considered to be unreasonable;
.../12
12.
and (c) the respondent had "not been called upon to
agree
or not to agree to any amount within the scope of clause
68(4) by
which the contract price should be increased".
KRIEGLER J rejected the city secretary's contention
basically because he
did not agree with the latter's in-
terpretation of clause 68(4). In his
judgment the lear-
ned judge said:
"If the given state of affairs had existed for the requisite period in
consequence of the stated circumstances, the applicant is put
to an election. It
must agree to an adjustment of the amount of the contract price, or suffer a
determination of the contract by
the respondent. What it has to agree to is an
adjustment, not a figure. The figure is to be determined by the engi-neer. Thus
the
applicant has to take a decision in principle and the detailed
.../13
13.
financial implications are to be calculated by the engineer in due course or
even upon conclusion of the contract. That, to my mind,
is the clear meaning of
the sub-clause
as it stands
I am satisfied on what is common cause, that the
preconditional circumstances existed for the requisite period. I am also
satisfied
that upon a proper interpretation of clause 68(4) that state of
affairs obliged the appli-cant to make up its mind whether it would
ag-ree to an
adjustment of the amount of the con-tract price, which the Engineer could
calcu-late in due course, or whether it would
per-mit the respondent to withdraw
from the bar-gain. The applicant, if demand for it to make up its mind were
necessary, was called
upon unequivocally, repeatedly and over a protracted
period, so to make up its mind. It did not do so.
In the result, the wording of the second
sentence of the relevant part of
the sub-clause
in question came into operation, i.e. the Coun-
cil did not
agree to such adjustment and the
contractor became entitled to determine
the
contract "
.../14
14. Although the argument in this court centred mainly on the
interpretation of clause 68(4) I find the correct interpretation of
the
provision of theoretical interest only. Appellant's counsel conceded that, even
if KRIEG-LER J's interpretation were to be upheld,
the appeal falls to be
dismissed unless we are persuaded that clause 68(4) was correctly invoked. And
it is in this regard that there
is an obstacle which appellant's counsel could
not overcome. What the obstacle is, becomes clear when the effect of the
provision
and the facts of the case are exa-mined.
The effect of clause 68(4), whichever way one inter-prets it, is plainly
that, after the lapse of the thirty
.../15
15. day period mentioned therein, the council has an
elec-tion either to agree or not to agree to an adjustment. In the absence of
a
stipulation in the agreement as to the time within which it is to be done it is
equally plain that the election must be made within
a reason-able time after the
expiry of the thirty days. The right to terminate the agreement only arises if
this does not happen.
Bearing this in mind I turn to the facts.
For purposes
of the argument I accept KRIEGLER J's finding that, what he referred to as the
"pre-conditionai circumstances" for the
operation of clause 68(4), existed
continuously for thirty days. The evidence is not clear
.../16
16.
when, as a matter of fact, the thirty day period commen-ced
but in the letter of 26 August 1985 the respondent was advised of appellant's
intention to invoke clause 68(4) "if the present situation pertains beyond 25
Sep-tember 1985". Accordingiy, had nothing further
happen-ed, the time for
respondent's election would, at the ear-liest, have arrived a reasonable time
after the last men-tioned date.
But before the arrival of that date there was
the meeting of 19 September 1985 where, as I mention-ed earlier, it was agreed
that
the appellant would submit firm proposals for respondent's consideration.
By the end of September the respondent was still awaiting
the proposals. They
were received on 3 October 1985 and
.../17
17. were only considered on 29 October. On 30 October the
appellant was advised that its proposals had not been ac-cepted and the
very
next day the appellant terminated the agreement purportedly in terms of clause
68(4).
In these circumstances there can be no doubt that the letter of
termination was written precipitately. Af-ter 19 September 1985 there
was
obviously no need for re-spondent to take the kind of decision which, on
appellant's construction of clause 68(4), was required
to keep the ag-reement
alive. The need for such a decision only arose after appellant's proposals were
rejected and thereafter a
reasonable time had to be allowed for the respondent
to make its election. This was not done. When this
.../18
18.
difficulty was put to appellant's counsel he could only
suggest that the letter of 30 October 1985 must be con-strued as an election
in
terms of clause 68(4). This is plainly not so since the letter in question deals
spe-cifically with the rejection of appellant's
proposals and did not indicate
that the respondent would not agree to an adjustment of the contract price in
terms of clause 68(4).
It follows that the court a quo rightly dismissed the
counter-application. It was also correct in grant-ing prayers 2(a) and (c) of
the notice of motion but pray-er 2(b) should not have been granted in toto since
there is a dispute of fact relating to some of the
items listed
.../19
19. in annexure "R". Respondent's counsel accordingly
asked for the amendment of prayer 2(b) which I am about to grant. (The amendment
is such a trifling one that it cannot affect the costs).
The following order is made:
1.
Prayer 2(b) of the notice of
motion is amended by deleting the words "and in particular the items set out in
annexure "R" to the affidavit".
2.
The appeal
is dismissed with costs which shall in-clude the costs of two
counsel.
J J F HEFER JA.
JOUBERT JA )
VAN HEERDEN JA )
CONCUR.
STEYN JA )
F H GROSSKOPF AJA )