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[2024] ZAECMHC 60
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Khulula Security Services CC v Coega Development Corporation (Pty) Ltd (4421/2022) [2024] ZAECMHC 60 (2 July 2024)
IN
THE HIGH COURT OF SOUTH AFRICA
EASTERN
CAPE DIVISION: MTHATHA
CASE
NO: 4421/2022
In
the matter between:
KHULULA
SECURITY SERVICES CC
Applicant
and
COEGA DEVELOPMENT
CORPORATION (PTY) LTD
Respondent
JUDGMENT
CORAM:
PITT AJ
Introduction.
[1]
The applicant, Khulula Security Services Close Corporation
(“Khulula”), applied for a tender from the respondent,
Coega Development Corporation (Pty) Ltd (“Coega”) to
build a library in Mount Frere in the Eastern Cape, and was appointed
as a contractor by letter on 12 January 2i011.
[2]
According to Khulula, it completed the building of the library in
terms of the appointment on 8 September 2021. This application
is for
the specific performance by Coega of signing the final payment
certificate to Khulula and to make payment of R 461 902.09
to Khulula within 21 days thereof.
Salient
facts to the application
[3]
It is common cause between the parties that the contractual
relationship relating to the project would be governed by the terms
and conditions of the JBCC Principal Agreement, edition 4.1 March
2000.
[4]
Khulula contends that it duly performed in terms of its appointment
and brought the project to final completion on 8 September
2021.
Khulula was issued with the final account for approval on 26 April
2022, and Khulula approved and accepted the final account
on 28 April
2022.
[5]
In terms of the final account, the sum of R 461 902.09 is
due, owing and payable to Khulula by Coega, for which the
applicant
has reached completion of the works as per the agreement. Khulula is
awaiting receipt of the final payment certificate
and payment of the
undisputed amount. The final payment certificate was due to be issued
and signed by Coega by 5 May 2022. Coega
has failed, alternatively
neglected to issue the final payment certificate by 5 May 2022 and to
pay Khulula the amount due as per
the final account. Coega submitted
that Coega is in breach of the agreement. Khulula also submitted that
the respondent is bound
by the final account as it stands, given that
it has been signed by Coega’s own principal agent, Ikamva
Architects (“Ikamva”)
and appointed quantity surveyor.
Khulula has tendered to issue a tax invoice in accordance with the
requirements of clause 34.10
of the agreement immediately upon
receipt of Coega’s final payment certificate.
[6]
Coega filed its answering affidavit some 12 days later than it should
have and deemed it appropriate to ask the court for condonation
thereof. Khulula did not oppose the condonation application and
submitted that it would abide by the court’s decision on
this
aspect. Coega explained that due to staff who had personal knowledge
of the subject matter of this case having left the employment
of
Coega, the officials of Coega struggled to find documents relating to
the matter. It also took a long time to source all the
relevant
documents relating to the agreement. The period of 12 days does not
seem inordinately long in the circumstances. Khulula
has not alleged
any prejudice by the late filing of the answering affidavit, and
Coega has provided a reasonable explanation for
its lateness. In the
circumstances, I am satisfied that Coega should be granted
condonation for the late filing of the answering
affidavit
in hoc
casu
.
[7]
Two points
in limine
were raised on behalf of Coega: 1. that
the High Court does not have jurisdiction and, 2. that the
application is premature because
the dispute is not ripe yet. Khulula
argued that the High Court does not have jurisdiction to entertain
this application because
the agreement provides for the settlement of
any disputes arising from the agreement to be referred to an
arbitrator for resolution
through adjudication. Coega also contended
that even if Khulula is owed a sum of money by Coega, which is
denied, the debt is not
due yet because there was no compliance with
the terms of the agreement. Coega alleged that Khulula had not
provided Coega with
an invoice, and therefore the dispute is not ripe
yet as Khulula has not complied with the requirements of the
agreement. In response
to this allegation, Khulula submitted that it
can not issue an invoice as long as the final payment certificate is
issued. It would
be premature for Khulula to issue an invoice as it
would have nothing to invoice against, the final payment certificate.
The
parties’ respective versions, the law and discussion.
[8]
Coega also alleged that the project goes back to 2011 and that the
relevant cycles during which the project was budgeted have
long
passed, and if it were found that Khulula is owed the money, the
relevant department will need to make a special allocation
of this
kind of financial liability. Coega also alleged that the invoice is
necessary to enable the department to investigate the
merits of the
liability if needed and allocate the necessary funds to Coega to pay
where it is satisfied.
[9]
In addition to the points
in limine
referred to above, Coega
also alleged that Khulula started the construction of the library in
terms of the agreement and abandoned
the unfinished project in 2012.
Coega also alleged that Khulula was fully paid for the project in
terms of the contract, and that
Khulula abandoned the site and
reappeared in 2021 to fix poor workmanship identified in the project.
Coega admitted that Khulula
attended to the remedial work and
submitted a final statement around April / May 2022. I understand the
final statement to refer
to the final account. Coega also alleged
that it sent a list of queries relating to the remedial work to
Khulula through the principal
agent to finalise Khulula’s
account. Khulula that it was asked to submit relevant documentation
to assist Khulula to finalise
the account to justify the expenses
with vouchers and invoices on various items including the rate
build-up to justify the account
to the client concerned. Further, it
is alleged that most of the expenses incurred on the remedial work
could be attributable to
deterioration caused by Khulula’s
neglect of the project for 9 years and Coega cannot be held liable
for those expenses in
terms of the contract.
[10]
In reply, Khulula responded to the points
in limine
raised by
Coega by denying that the court does not have jurisdiction. Khulula
further submitted that a final account was issued
in accordance with
the agreement and that it simply seeks payment for the outstanding
amount recorded as being due in accordance
with that final account.
Khulula also submitted that Coega complained of a dispute between the
parties in support of the point
in limine
that the “dispute
is not ripe”, yet failed to articulate what that dispute was.
Khulula submitted that a certified amount
only has to be paid after
an invoice has been issued, which invoice could not have been issued
because the final payment certificate
had not been issued by Coega.
There is no dispute about anything relating to the agreement between
the parties, according to Khulula.
Khulula undertook in the answering
affidavit to issue the invoice upon final certification, which is
sought in this application.
Khulula reiterated that Coega is obliged
to pay the amount, which amount was certified by Coega’s
principal agent.
[11]
Khulula denied that it had abandoned the site, that this was patently
incorrect, ill-founded and made without any supporting
evidence or
documentation to justify such an allegation, and without any
confirmatory affidavit by Coega’s principal agent.
Khulula also
submitted that practical completion of the project was achieved in
2012 in terms of the completion certificate annexed
to the founding
affidavit of Khulula. There were inordinate delays with Eskom
powering the facility. Coupled with the professional
team issuing any
works completion certificates. The building was fit for purpose since
2012 when the work to the building was satisfactorily
completed.
Coega cannot ask Khulula for supporting documents as Coega’s
agent had already issued and approved the final account
in terms of
clause 34.1 of the agreement. There is no basis for Coega to call for
further information, challenge the final account,
or suggest that the
delays might result in Khulula being liable to Coega. The value of
the work for which Khulula seeks payment
has already been recorded in
the final account, which was issued by Coega’s principal agent,
and does not amount to additional
work.
[12]
It is Khulula’s version that the principal agent, Ikamva,
issued and approved the final account on 26 April 2022. As
will be
seen below, Ikamva acted on behalf of and in the stead of Coega in
respect of the contract. Therefore, when Ikamva issued
and signed the
final account / statement on behalf of Coega, it was as if Coega had
done so itself. Coega’s submission that
Khulula breached the
agreement when it abandoned the project around 2012 and re-emerged in
2021 to perform remedial work in 2021
is therefore without merit. The
final agreement was issued and signed after this in April 2022. Coega
has not denied that Ikamva
acted as its agent and is therefore bound
by all actions or inaction by Ikamva in relation to the project.
Neither does Coega say
that Ikamva acted without authorisation by
Coega when Ikamva issued and signed the final statement / account.
[13]
Coega submitted that it sent queries and requested supporting
documents from Khulula but does not specify who the person acting
on
behalf of Coega was who requested these documents. There is no
documentary evidence of the queries and requests, nor the names
of
persons to whom these requests were made, when and how they had been
made. There are also no supporting affidavits by persons
who
purportedly made the requests to Khulula and when these requests were
made. In light of the above, it is unlikely that this
version is
probable. Ikamva were the appointed principal agent of Coega, and
they would have been the ones to make such requests
on behalf of
Coega to Khulula. Khulula’s version that Ikamva had approved
and signed the final statement / account is more
probable. Khulula
provided documentary proof to this effect.
[14]
In is trite that in motion proceedings the affidavits constitute the
evidence on which the court must decide the issues between
the
parties.
[1]
The facts must
therefore be set out fully in the affidavits filed by the parties in
the particular case, supported by documents
to corroborate the
evidence in the affidavits.
[2]
Coega has not corroborated its factual allegations with any
documentary evidence
in
hoc casu
.
[15]
In considering the issue of referral of the matter to adjudication in
terms of clause 40 of the contract with regards to settlement
of
disputes, the first question that needs to be asked is whether there
is a dispute between the parties. The contract itself is
silent on
the definition of a dispute. However, it is common knowledge that a
dispute means a disagreement between two persons.
What then is the
dispute which Coega are relying on? This is not clear from the
answering affidavit of Coega. If it is the amount
of the payment to
Khulula which is said to be in dispute, then this cannot be a
dispute. The principal agent has accepted, issued
and signed the
final statement / account on behalf of Coega. There can thus not be
said to be a dispute in respect of the amount
of R 461 902.09 owed to
Khulula by Coega.
[16]
The building contract concluded between Khulula and Coega is
contained in a recognised standard form agreement prepared by
the
Joint Building Contracts Committee Incorporated and is more commonly
known as the "JBCC Series 2000. Third Edition Code
2101"
("The JBCC 2000").
The relevant JBCC
2000 makes provision,
inter
alia,
for the appointment by Coega
of a so-called "principal agent". Ikamva Architects were
the principal agent of Coega.
[17]
In
Hyde
Construction CC v Blue Cloud Investments 40 (Pty) Ltd and Another
[3]
,
the court referred to the same clause 5.0 of the JBCC 2000, and held
that it requires the employer to appoint a named person as
the
principal agent under the contract:
"5.0.
Employer's Agents
5.1. The employer
shall appoint the principal agent as stated in the schedule. The
employer warrants that the principal agent has
full authority and
obligation to act in terms of the agreement, and where appropriate
the associated nominated and selected subcontract
agreements.
5.2. The employer may
appoint agents as stated in the schedule and may appoint further
agents with the contractor being notified
thereof.
5.3. The principal
agent shall be the only person who shall have the authority to bind
the employer, except where agents issue contract
instructions under
delegated authority in terms of 5.3.2. Without detracting from the
above, the principal agent shall be the only
person empowered to
5.3.1. Issue contract
instructions, except as provided in terms of 5.3.2:
5.3.2. Delegate to
the other agents authority to issue contract instructions and perform
such duties as may be required for specific
aspects of the works,
provided that the contractor is given notice of such delegation:
5.3.3. Receive
notices on behalf of the employer.
5.4. Should the
principal agent or any agent be unable to act or cease to be an
agent, the employer shall notify the contractor
of the new principal
agent to be appointed. The employer shall not appoint such principal
agent or agent against whom the contractor
makes a reasonable
objection in writing within five (5) working days of receipt of such
notice."
The
court held further that “[i]t will be observed, therefore, that
the principal agent who fulfils a variety of roles and
functions
under the JBCC contract, is an agent in every sense of the word that
our law understands that relationship.”
[18]
“One of the important functions then of the principal agent is
the preparation of the final account for submission to
the contractor
within ninety days of practical completion of the works (clause
34.1).
[4]
In the event that
there is no objection from the contractor to the final account, the
principal agent is required to issue a final
payment certificate
within seven days (clause 34.5).
[5]
In
terms of clause 34.11 the employer is obliged to pay the contractor
so-called "compensatory interest" on the net amount
certified by the principal agent in the final payment certificate.
[6]
The principal agent is charged with the function of calculating such
interest in accordance with an agreed formula.
[7]
In
the event that the contractor does not receive timeous payment of the
amount due in the final payment certificate, the employer
is liable
for so-called "default interest" which is similarly payable
in terms of an agreed formula to be calculated
by the principal agent
(clause 34.12).
[8]
This amount
is recoverable by the contractor from the employer's payment
guarantee which the contractor is entitled to request
in terms of
clause 15.4.2.”
[9]
Conclusion.
[19]
Ikamva had done everything that was required of them to perform their
functions in terms of the contract. From the facts in
the founding
and replying affidavits, Khulula had also performed its obligations
in terms of the contract. The same cannot be said
about Coega. On the
version of Khulula, Coega refuse to accept the final statement of its
own principal agent to the contract,
despite Ikamva having accepted,
issued and signed the final statement.
[20]
I am of the view that the applicant, Khulula, has made out a proper
case for the relief sought. The version of the applicant
is more
probable
in hoc casu.
[21]
The applicant has achieved substantial success of the application. I
see no reason why the costs of the application must not
follow the
cause.
Order.
Accordingly,
the court issues the following order:
1. The respondent must
issue the final payment certificate to the applicant in favour of
payment of R 461 902.09 as due to the applicant
in accordance with
the approved final statement within ten days of service of this
judgment on the respondent.
2. The applicant must
issue the respondent with a tax invoice for payment of R 461 902.09
within ten days of delivery of this judgment.
3. The respondent must
pay R 461 902.09 to the applicant within 21 days of issuance of the
final payment certificate in 1 above.
4. The respondent must
pay interest on the sum of R 461 902.09 at the rate of 7.25% per
annum, calculated from 26 May 2022 to date
of final payment.
5. The respondent must
pay the applicant’s party and party costs on High Court scale
A.
DV PITT
ACTING JUDGE OF THE
HIGH COURT
APPEARANCES:
Counsel
for the Applicant
:
D.C.
Botma
Instructed
by
Cox
Yeats Attorneys
C/O
Smith Tabata Attorneys
Mthatha
Counsel
for the Respondents
:
S.
Genukile
Instructed
by
Tshiki
& Associates Inc.
C/O
Luzipho Attorneys
Mthatha
Heard
on
:
15 February 2024
Date
judgment delivered
:
2 July 2024
[1]
See
Hart
v Pinetown Drive-In Cinema (Pty) Ltd
1972
(1) SA (D) at 469C-E.
[2]
See
Venmop
275 (Pty) Ltd v Cleveland Projects (Pty) Ltd
2016
(1) SA 78
(GJ) at 86A.
[3]
(8293/10)
[2011] ZAWCHC 304
(1 August 2011).
[4]
Hyde
supra
at
para 37.
[5]
Supra.
[6]
Hyde,
para
38.
[7]
Supra.
[8]
Hyde,
para
39.
[9]
Supra.