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2024
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[2024] ZAECQBHC 68
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Calculus Engineering and Project Management (Pty) Ltd v WBHO Construction (Pty) Ltd and Others (3396/2022) [2024] ZAECQBHC 68 (17 October 2024)
IN
THE HIGH COURT OF SOUTH AFRICA
(EASTERN
CAPE DIVISION, GQEBERHA)
Reportable
CASE
NO: 3396/2022
Matters heard on: 19
September 2024
Judgment delivered on:
17 October 2024
In
the matter between:
CALCULUS
ENGINEERING AND PROJECT
Applicant
MANAGEMENT
(PTY) LTD
and
WBHO
CONSTRUCTION (PTY) LTD
First Respondent
THE
COEGA DEVELOPMENT CORPORATION
Second Respondent
(PTY)
LTD
INGA
VANQA CONSORTIUM
Third Respondent
SERAPHIM
PHOTOVOLTAICS SOUTH AFRICA
Fourth Respondent
(PTY)
LTD
INGA
VANQA QUANTITY SURVEYORS AND
Fifth Respondent
PROJECT MANAGEMENT
(PTY) LTD
JUDGMENT
BRODY
AJ:
[1]
On the 21
st
of September 2023 a judgment was handed down
by my sister, Collett (acting) in case number 3396/2022 and the
portion of the judgment,
which is relevant to this application for
rescission is clauses 2, 3 and 4, which reads as follows:
“
2.
The First Third Party is ordered to pay the respondent:
2.1
The sum of R16 171 003.33;
2.2
Compound interest at the prescribed legal rate from 16 February 2022
to date of final payment
on the amount of R15 261 410.25;
2.3
Compound interest at the prescribed legal rate from 17 February 2022
to date of final payment
on the sum of R909 593.08;
3.
The Second Third Party is jointly and severally liable with the First
Third Party
to the respondent in respect of the amount set out in
paragraph 2 above but only up to the sum of R12 681 333.30
together
with compound interest thereon at the prescribed legal rate
from 18 May 2022 to date of final payment.
4.
The First and Second Third Party are jointly and severally liable for
the respondent’s
cost in the application.”
[2]
The pleading heading of that judgment reads as follows:
“
WBHO CONSTRUCTION
(PTY) LTD
Applicant
and
THE COUGA DEVELOPMENT
CORPORATION (PTY)
LTD
Respondent”
[3]
The main disputes between the parties WBHO Construction (Pty) Ltd
(“WBHO”)
and the Coega Development Corporation (Pty) Ltd
(“Coega”) arose from a written agreement, construction
work, and various
payment certificates.
[4]
I don’t intend repeating all the facts in the judgment of
Collett AJ, however,
what is relevant to the present application is a
third-party notice.
[5]
Coega issued a Third Party Notice in terms of rule 13(1)(b) of the
uniform rules of
court to Inga Vanqa Consortium (“Inga”)
(first third party) and Seraphim Photovoltaics South African (Pty)
Ltd (“Seraphim”)
(second third party). Collett AJ found
that the Third Party Notices, and the set down was served on both
parties during January
2023 and neither party filed a notice of
opposition thereto.
[6]
It is clear therefore that the judgment of Collett AJ was given in
the absence of
Vanqa and Seraphim.
[7]
In the first third party notice, Coega sought to join the Consortium
to the main application.
[8]
The Consortium, however, comprised of three contractors, namely,
Inga, Seraphim, and
Calculus Engineering and Project Management (Pty)
Ltd (“Calculus”).
[9]
The main application related to a tender and procurement initiated by
Coega, and where
WBHO was appointed as the successful tenderer for
the construction of the Akacia Medical Facility in Coega Zone 3 (“the
Akacia
project”). On completion of the project, Akacia, a
medical and healthcare group, was to occupy the facility.
[10]
The main agreement is essentially between Coega and WBHO. In early
October 2017, the WBHO and Coega
entered into a service level
agreement. A “fee split” was concluded between the
various parties.
[11]
The project commenced during 2018, and shortly thereafter, Akacia
resiled from the agreement, which
resulted in the project being
suspended.
[12]
In 2019 Seraphim concluded an agreement with Coega in terms of which
Seraphim would occupy the premises,
which was to be built in terms of
the Akacia project.
[13]
Seraphim, however, required its own modifications and variations to
the project to meet its specific
requirements, which were not
envisaged in the initial scope of work. These modifications and
variations comprised of the building
of a wastewater treatment
facility, special waste room and a gas room for the treatment of
effluent water prior to its discharge
into the sewage system. This
necessitated a variation in the scope of works, which required
approval in accordance with the various
amended agreements.
[14]
As a result of Coega’s failure to pay on certain payment
certificates, WBHO issued the main application
in case number
3396/2022 against Coega.
[15]
In response to the main application, Coega filed answering papers and
issued the various third-party
notices, (referred to above).
[16]
Attached to the third-party notice was an affidavit which summarised
the relief sought in the main
application and although Calculus
received the third-party proceedings, Mr Peter Charles O’Kennedy
(“Mr O’Kennedy”),
on behalf of Calculus stated the
following:
“
52.
I recall receiving the third-party annexure/affidavit, however, did
not fully appreciate the legal
ramifications of the document. I had
regard to the heading which made no reference to the applicant and
failed to appreciate that
the applicant was at risk of an adverse
order. I also believed that my explanation (albeit in respect of
other complaints) had
been accepted.
53.
I was also under the impression that the lead/principal consultant,
the fifth respondent,
which was specifically named in the hearing,
would protect the Consortium’s collective interests.
Unfortunately, it did not.
54.
Accordingly, the applicant did not file an intention to oppose. My
decision was solely predicated
on my incorrect understanding, and not
on any sort of wilful default. Had I understood what was at stake, I
would have taken immediate
steps to protect the applicant’s
interests.”
[17]
As soon as the order of Collett AJ was received by Calculus, an
application for rescission was brought,
as summarised by Mr O’Kenndy:
“
55.
Upon receipt of the judgment, I immediately engaged my legal
representatives. Our first consultation
took place in that same week.
The legal ramifications were explained to me, and this was the first
time that I fully appreciated
the nature of the proceedings and the
effect thereof.
56.
Due to the importance of the matter, this application for rescission
was launched just over
two weeks after receipt of the judgment. The
matter was prioritised and no time was wasted.”
[18]
In Mr O’Kennedy’s founding affidavit he alleged that the
application for the joinder of
the Consortium, the first party, and
the second third party, was purportedly brought in terms of rule
13(1)(b).
[19]
In this regard he stated the following:
“
61.
However, under rule 13 all that can be sought against one alleged
wrongdoer against another is
an apportionment of fault in the form of
a declaratory order, not an amount sounding in money. This is an
important distinguishing
feature between rule 13 and section 2 of the
Apportionment of Damages Act, 1956, the latter allowing for a
monetary order.”
[20]
He also alleged that the order holding the first and second third
parties “jointly and severally
liable” is also
incompetent at law. In this regard he stated the following:
“
65.
The joint and several liability implies a right by the party paying
more than his share to claim
a contribution in respect of the excess
of the other party. The order appears to be consistent with the
third-party notice, but
the existence of a legal basis for such joint
and several liability as was ordered in paragraphs (3) and (4) of the
order cannot
be sustained in law. This is because the cause of action
is not one based in delict. Nor is there a contractual basis for such
liability.”
[21]
He also alleged that there was non-joinder of entities comprising the
Consortium, when he stated the
following:
“
71.
As the Consortium comprises of three individual contractors, it was
incumbent of the third party
issuing the third-party notice to have
cited all the entities comprising the Consortium, and not just the
Consortium itself.”
[22]
He emphasised the following:
“
78.
The third-party notice, although served on the applicant, did not
bear the applicant’s name
in the hearing. I did not appreciate
the risk facing the applicant.”
[23]
Coega opposed the application for a rescission and an answering
affidavit was deposed to by Mr Zuko
Mqhatu (“Mr Mqhatu”).
[24]
Mr Mqhatu stated the following in regard to the variation for orders:
“
14.
A variation order setting up the extent of the required varied works
was authorised by the second
respondent and provided to the first
respondent, and he was instructed to proceed with construction on 15
October 2020. This variation
order was the only variation order
issued in respect of the Seraphim project.”
[25]
He also alleged the following:
“
29.
As will be evident what is set out below, the third respondent failed
to obtain written instructions
in respect of a Variation Order which
was required in terms of clause 10.4 of the Service Agreement in
respect of the Unauthorised
Additional Works and accordingly, by
virtue of the provisions of clause 10.6, the Second Respondent is not
liable to pay for any
work in respect of such services.”
[26]
He further went on to say the following:
“
47.1
It is evident that the Applicant is either attempting to mislead the
Court by suggesting that the Unauthorised
Additional Works
constituted part of the Variation Order, alternatively, failed to
understand that the Unauthorised Additional
Works did not form part
of the Variation Order.”
[27]
Mr Mqhatu also alleged that certain correspondence was not placed
before this court and in regard to
paragraph 3 of the order he stated
the following:
“
65.2
To the extent that paragraph 3 of the Order should read that the
Second Third Party is liable for the sum of R12 681 333.30
together with compound interest thereon at the prescribed legal rate
from 18 May 2022 to date of final payment in respect of the
principal
debt, this is noted. However, this aspect in no way prejudices the
applicant and at best for the applicant, such a variation
to
paragraph 3 should be ordered.”
[28]
This was a concession made by Mr Mqhatu which was later dealt with in
argument by Coega’s legal
representative, Mr Williams.
[29]
Mr O’Kennedy replied to the answering affidavit and referred to
annexure “POK5” to
his founding affidavit, and alleged
that this was a written confirmation of the variation by Mr Lunga
Tungugu on 7 September 2020.
[30]
In regard to the citation of the parties in the third-party
proceedings, O’Kennedy stated the
following:
“
22.1
The Second Respondent incorrectly cited the Consortium only, which
has no locus standi in its own right.
22.2
The individual entities comprising their consortium are not named in
the heading, and I did not appreciate
the legal ramifications facing
the applicant.
22.3
It was only upon legal advice as explained in my founding affidavit,
that I understood that the applicant
was at risk.
22.4
In any event, I believed the Fifth Respondent (as it was cited) would
take steps to protect the interests
of the Consortium. For reasons
unbeknown to me, this was not done.”
[31]
This matter initially came before Eksteen J on the 1
st
of
August 2024, and thereafter removed from the roll. It then came
before my sister Watt (acting) on the 20
th
of August 2024
and an order was granted for leave to deliver supplementary founding
affidavits and supplementary answering affidavits,
where necessary.
[32]
When this matter came before this court, there were multiple
paginated bundles of documents, and it
was clear from all the
bundles, that the third-party notice and affidavit, complained of by
Calculus, was not in the court file.
[33]
With the assistance of counsel, the third-party notice and the
affidavit was handed in.
[34]
The third-party notice in terms, refers to Coega as the respondent,
Vanqa, as the first third party
and Seraphim as the second third
party. The affidavit, attached to the third-party notice, also has a
pleading heading in those
terms.
[35]
Mr Beyleveld SC acted on behalf of Calculus and Mr Williams acted on
behalf of Coega.
[36]
Mr Beyleveld’s first argument was that under the Apportionment
of Damages Act, a wrongdoer sued
in an action can seek relief from a
wrongdoer not so sued in the form of a judgment for the payment of an
amount of money determined
by the court
[1]
,
however, under Rule 13 all that can be sought and ultimately granted
by the court is an apportionment of fault in the form of
a
declaratory order. He further argued that paragraphs 2 to 4 of the
order constituted judgments sounding in money against the
Consortium
and which went beyond the ambit of Rule 13. As a result, the order
was incompetent and stood to be rescinded on this
ground alone.
[37]
He also argued that there was non-joinder as Calculus was not cited
in the third-party notices. As
the Consortium was not a separate
legal entity, they cannot sue and be sued in its own name, and
therefore it had no
locus standi
. Calculus should have been
cited in its own name as a member of the Consortium.
[38]
Mr Beyleveld SC further argued that the order had a direct bearing on
Calculus and should not have
been granted in the absence of the court
being properly satisfied that effective notice had been given to all
the parties.
[2]
He further
argued that the effect of the order would be highly prejudicial to
Calculus.
[3]
[39]
Mr Beyleveld SC confirmed that the application for rescission was in
terms of rule 42 and/or the common
law and the order granted was
erroneously sought, or erroneously granted in the absence of
Calculus. His argument was further that
a reasonable explanation for
the default must be given together with a
bona
fide
defence
against the claim, which has reasonable prospects of success.
[4]
Mr Beyleveld SC also took issue with the “joint and several”
part of the order, where he argued that this usually flows
from
delict and only in limited circumstances can it be applicable in a
contractual setting, such as deeds of suretyship. He advised
that the
claim against Calculus was based on breach of contract whilst the
claim against Seraphim was based on a breach of an undertaking.
These
were dissimilar and did not relate to the same contract.
[40]
Mr Beyleveld SC’s further argument was that the orders were
essentially damages, and such orders
could not be granted without the
hearing of evidence.
[41]
Mr Williams referred to all the relevant authorities relating to
rescissions and contended that Calculus
was in wilful default as it
did indeed receive the third-party notice and annexures. He also
referred to an email sent by Coega’s
erstwhile attorney to
Calculus, attaching a notice of set down, on 8 June 2023.
[42]
He argued that Calculus had knowledge of the third-party notice,
deliberately refrained from entering
the proceedings, and was
“unconcerned” of the consequences of the default.
[43]
Mr Williams further contended that there was no
bona fide
defence to Coega’s claims in that Calculus did not have the
necessary authority for the additional works. He contended that
the
application for rescission should be dismissed, with costs.
[44]
Mr Williams did, however, contend that paragraphs 3 and 4 of the
order was an error and
mero motu
and applied for an amendment
of those orders to remove reference to “jointly and severally”
in the orders.
[45]
Mr Williams also conceded that this court had a wide discretion in
regard to the rescission and further
contended that the amounts
ordered were “liquidated” and therefore there was no need
to lead evidence, as suggested
by Mr Beyleveld SC.
[46]
Mr Williams requested that the application be dismissed with costs,
such costs to be on scale B, in
terms of rule 69(7) and also that the
applicant was to pay for the wasted costs of the 1
st
of
August 2024.
[47]
It is trite that a third-party notice is issued when a party wishes
to involve another party who may
be liable for part, or all, of the
applicant’s claim. It is further trite that a third-party
notice should include the following:
[47.1] A pleading
heading which reflects:
[47.1.1]
the case number and court;
[47.1.2]
the parties’ names, applicant and respondent, and the
third
party;
[47.2] A brief
description stating that the party referring, is serving a
third-party notice to join the third party to the
proceedings;
[47.3] An
explanation for the basis on which the third party is being joined.
This typically involves outlining how the third
party may be liable
to the other party, based on contract, delict, or any other legal
basis;
[47.4] A clear and
concise summary of the claim that is relevant between the parties;
[47.5] A summary of
the allegations made by the parties, detailing the legal and factual
basis on which a party believes the
third party is liable;
[47.6] A statement
of the relief the referring party seeks from the third party such as
a contribution to damages, indemnity,
or any other relief a court may
deem appropriate;
[47.7] Reference to
the relevant rule namely rule 13, which governs third-party joinder
in all civil matters; and
[47.8] A statement
that the third-party may file a notice of intention to oppose, within
the applicable period.
[48]
It is also trite that once the third party is joined, in terms of
rule 13, the pleading heading is
amended to reflect the joined third
party to the proceedings. I am in agreement with Mr Beyleveld SC that
a Consortium is not a
separate legal entity that can sue, and be
sued, in its own name. It has no
locus standi
and there can be
no doubt that the members of the Consortium should have been cited
individually in the third-party notice and
in the annexure attached
thereto.
[49]
In fact, the final order that was granted in the matter did not
reflect the third parties at all.
[50]
I am also satisfied that the reasons given by Calculus for not
opposing the matter indicate that Calculus
was not in wilful default,
especially having regard to the third-party notice and annexure
issued by WBHO prior to the order being
granted.
[51]
Calculus has relied on uniform rule 42(1)(a) and/or the common law
and on the basis that the default
order was “erroneously sought
or erroneously granted in the absence of any party affected thereby.”
[52]
This application falls squarely under rule 42, whose purpose, this
court has held, is “to correct
expeditiously and obviously a
wrong judgment or order.”
[5]
[53]
The Supreme Court of Appeal has held, the phrase “erroneously
granted” in rule 42(1)(a)
“relates to the procedure
followed to obtain the judgment in the absence of another party and
not the existence of a defence
to the claim”
[6]
.
Thus, “a judgment to which a party was procedurally entitled
cannot be said to have been erroneously granted in the absence
of
another party” but a judgment to which a party was
not
procedurally entitled
would fall to be summarily set aside under rule 42
[7]
.
Without any consideration of the merits
[8]
.
[54]
In Lodhi 2 Properties Investments CC vs Bonde Redevelopments 2007(6)
SA87 (SCA) at paragraphs 26 –
27, the Supreme Court of Appeal
stated:
“
[26]
Nepgen J [in Stander and another vs Absa Bank 1997(4) SA 873(e)]
found support for his conclusion in
Theron NO vs United Democratic
Front (Western Cape Region) and Others 1984(2) SA 532(c). In that
case an order being granted against
Theron in his absence after short
notice of the application and although no papers of any kind had been
filed and no papers had
been served on him. The order was
nevertheless granted on the basis of an assumption on the part of the
Judge that Theron had been
given sufficient notice and that he had
deliberately decided not to appear at the hearing of that
application. In the application
Vivier J found, on the facts placed
before him, that these assumptions were wrong and that the order had
for that reason been granted
erroneously. In my view the judgment
cannot be faulted. Regard was had to evidence external to the record
of proceedings as it
existed at the time the order was granted in
order to determine whether proper notice had been given. Whether
Theron wanted to
appear at the hearing was a relevant consideration
in determining whether sufficient notice had been given. Nepgen J
found that
proper notice had not been given. As a result, the UDF was
were procedurally not entitled to the order sought when it was
granted.
The order was, for that reason, erroneously granted. In
Stander the plaintiffs who obtained an order in their favour, unlike
the
UDF in Theron, procedurally entitled to the order when it was
granted and the fact that it subsequently transpired that the
defendants
were not in wilful default could not transform that order,
which had validly been obtained, into an erroneous order.
[27]
Similarly, in a case where a plaintiff is procedurally entitled to
judgment in the absence of
the defendant, the judgment, if granted,
cannot be said to have been granted erroneously in the light of a
subsequently disclosed
defence. A court which grants a judgment by
default like the judgments we are presently concerned with, does not
grant the judgment
on the basis that the defendant doesn’t have
a defence: He grants the judgment on the basis that the defendant has
been notified
of the plaintiff’s claim as required by the
Rules, that the defendant, not having given notice of intention to
defend, is
not defending the matter and that the plaintiff is in
terms of the rules entitled to the order sought. The existence or
non-existence
of a defence on the merits is an irrelevant
consideration and, if subsequently discouraged, transforms a validly
obtained judgment
into an erroneous judgment.”
[55]
This court finds that, in the present matter, the main applicant was
not entitled to the order sought
“in terms of the rules”
and was not “procedurally entitled to judgment in the absence
of the defendant”.
[56]
On the contrary, the pre-procedure adopted, and the third-party
notices, were irregular and contrary
to precedent in this court. In
terms of rule 42(1)(a), the order in terms of paragraphs 2, 3 and 4,
granted on 21 September 2023
should be rescinded in terms of uniform
rule 42(1)(a).
[57]
I also find, that once Calculus can point to an error in the
proceedings, it is without further ado
entitled to rescission.
[9]
[58]
Calculus should have been cited as a third party in the rule 13
proceedings as a member of the Consortium,
and I am further in
agreement with Mr Beyleveld SC that, (as correctly conceded by Mr
Williams) that a joint and several liability
order was not
appropriate, in the circumstances.
[59]
It is accordingly ordered that:
[59.1] Paragraphs
2, 3 and 4 of the order granted by this court on 21 September 2023 be
rescinded in terms of uniform rule
42(1)(a);
[59.2] The
applicant is directed to file its answering affidavit to the second
respondent’s third-party annexure and
affidavit dated, 17
December 2023, within fifteen days from date of this order;
[59.3] The
applicant is awarded the costs of the rescission application on scale
C as contemplated by rule 69(7), such costs
to include all the
reserved costs;
[59.4] The
applicant is ordered to pay the respondents wasted costs of the 1
st
of August 2024 on scale B as contemplated by rule 69(7).
B.B.
BRODY
ACTING
JUDGE OF THE HIGH COURT
APPEARANCES:
Counsel
for the Applicant
:
Adv.
Beyleveld SC
Instructed
by
: S Lungu
Attorneys
10 Market Street
North End
GQEBERHA
Counsel
for the Second Respondent:
Adv. Williams
Instructed
by
: W
Langson & Associates Inc.
Unit 3 Alexander Square
44- Second Aveue
Newton Park
GQEBERHA
(Ref.: WL/lm/WBHO/COEGA)
[1]
Shield Insurance Co Ltd vs Cervoudakis 1967(4) SA 735(E) at 739C
[2]
Morgan vs Salisbury Municipality 1935 AD167 at 171
[3]
Council for the Advancement for the SA Constitution vs Ingonyama
Trust 2022(1) SA251 (LCP) at paragraph 63
[4]
Silber vs Ozen Wholesalers 1954(2) SA 345(A) at 353
[5]
22. Bakoven Ltd vs GJ Howes (Pty) Ltd 1992(2) SA 466(E) at 4171E –
F (per Erasmus J), quoted with approval in Promedia
Drukkers and
Uitgewers (Edms) Bpk vs Kaimowitz 1996(
4) SA 411
(C) at 417B - I
[6]
Freedom Stationery (Pty) Ltd and Others vs Hassam and Others 2019(4)
SA 459 (SCA) at paragraph 18
[7]
Occupiers, Berea vs De Wet NO and Another 2017(5) SA 346(CC) at
paragraph 22, where Mojapelo AJ, writing for the court, stated:
“An
order is erroneously granted where there was no procedural
entitlement to it.”
[8]
Minnaar vs van Rooyen NO 2016(1) SA 117(SCA) at paragraphs 18 - 19
[9]
Bakhoven
supra
,
Hardroad (Pty) Ltd vs Oribi Motors (Pty) Ltd at 578F – G and
Tshabalala and Another vs Peer 1979(4) SA 27(T) at 30C –
D.