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[2019] ZASCA 36
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Sizazonke Electrical CC and Others v Eskom Holdings SOC Limited (222/2018) [2019] ZASCA 36 (29 March 2019)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Not Reportable
Case
No: 222/2018
In
the matter between:
SIZAZONKE
ELECTRICAL
CC FIRST
APPELLANT
ROSHELLA
KISHUN SECOND
RESPONDENT
GERT
ABRAHAM CORNELIUS VAN WYK THIRD
RESPONDENT
and
ESKOM HOLDINGS SOC
LIMITED RESPONDENT
Neutral
citation:
Sizazonke Electrical CC v
Eskom Holdings
(222/2018) ZASCA 36 (29
March 2019)
Coram:
Tshiqi, Mbha and Zondi JJA and Davis
and Carelse AJJA
Heard:
15 March 2019
Delivered:
29 March 2019
Summary:
Contract – damages for loss of profits – what
constitutes repudiation – respondent lawfully cancelled
contracts
due to misconduct committed by first appellant – no
repudiation proven – appeal dismissed and decision of court a
quo
dismissing appellants’ claim upheld.
ORDER
On
appeal from:
Gauteng Division of the
High Court, Pretoria (Mothle J sitting as court of first instance):
1
The appeal is dismissed with costs.
2
The appellant is liable to pay the costs of the postponement of the
trial in October 2016, including the costs of two counsel.
JUDGMENT
Mbha
JA (Tshiqi and Zondi JJA and Davis and Carelse AJJA concurring):
[1]
This appeal is against the order of the Gauteng Division of the High
Court, Pretoria, (Mothle J), which dismissed the appellants’
claim for damages for loss of profits based on an alleged repudiation
of various agreements between the first appellant (Sizazonke)
and the
respondent (Eskom). The claim for loss of profits is founded on
contract, alternatively in delict. In dismissing the claim,
the court
a quo found that Eskom was justified in suspending Sizazonke from
participating as a service provider for a period of
5 years, which
resulted in the lawful cancellation of contracts that were in
existence at the time of the suspension. This appeal
is with leave of
this court.
[2]
The background facts are largely common cause. There was a
contractual relationship between Sizazonke and Eskom. The second
and
third appellants (Ms Kishun and Mr Van Wyk respectively) are members
of Sizazonke. Sizazonke was listed on Eskom’s database
as a
service provider, together with other entities for allocation of work
from time to time. In this instance, work would be allocated
from
bulk contracts in terms whereof a service provider would be
apportioned work from the main contract. Sizazonke also procured
other work from Eskom through specific contracts where it had
successfully tendered for such work.
[3]
Over and above the aforementioned bulk and specific contracts, the
relationship between both parties was also governed by the
following
instruments which formed part of the contracts between them, namely
(a) the NEC 3 Engineering and Construction Contract;
(b) Eskom’s
Business Conduct Policy and Guidelines; (c) Eskom’s Procurement
and Supply Chain Management Procedure;
(d) Eskom’s Vehicle and
Driver Safety Management Procedure; and (e) Eskom’s Health and
Safety Standards.
[4]
Clause 2.2.10 of Eskom’s Vehicle Driver Safety Management
Procedure required all drivers and passengers to wear seat belts
where fitted whilst travelling in a motor vehicle. Clause 2.2.12
provided that the employer shall ensure that no employee, including
contractor employees or any other person, when performing work for
Eskom, will be allowed to be transported in the back of open
vehicles. In addition, no person could be transported in the back of
a vehicle closed by means of canopies, unless provided with
proper
seating and safety belts.
[5]
Clause 2.7 of Eskom’s Vehicle and Driver Safety Management
Procedure stated:
‘
2.7
Disciplinary process
2.7.1
Misconduct
Eskom
takes a ZERO TOLERANCE stance on health – and safety –
related at-risk behaviour. Eskom will thereof view any
lack of
adherence to the following rules, regarding but not limited to,
at-risk behaviour, in a very serious light
.
. .
.
. .
c)
All drivers, including contractors and contractor employees, when
performing work for Eskom, must ensure that they and their
passengers
are seated and wearing seatbelts at all times
d)
No employee may be transported in the back of any open vehicle, where
this is not allowed
.
. .
2.7.2
If any driver does not adhere to the rules for the identified risk
areas/ at-risk behaviour, this will result in a disciplinary
process
and if it is found that a breach of rules did occur, it could result
in a severe penalty (including but not limited to
dismissal).’
[6]
The events giving rise to this matter occurred on 9 July 2010 when
Sizazonke transported fourteen of its employees to the Eskom
worksite
by means of one vehicle. However, that vehicle was designed to carry
only a maximum of five employees, including the driver
at a time.
Three employees, including the driver were sitting at the front cab
of the truck, in a place designed for only two persons
with provision
for only two safety belts. It is obvious one of the three was not
wearing any seat belt. The truck was designed
to carry a maximum of
three passengers on the back part sitting under a canopy. In this
regard it had three seats fitted with safety
belts at the back cab
under the canopy. However, there were eleven, instead of three
passengers at the back of the truck. Only
one of them sat in the
designated seat in the back of the cab under the canopy without
wearing a seat belt. The other ten were
sitting in the open truck
where there was no provision for seats and seat belts.
[7]
Clearly, Sizazonke transported its employees in a manner that was
contrary and in breach of Eskom’s Driver Safety Management
Procedure and Eskom’s Health and Safety Standards. Sizazonke
conceded that this constituted a breach of the legal instruments
governing the contractual relationship between the parties.
[8]
On the way to the site, the truck overturned. Two employees died and
several others sustained injuries. On being informed of
the accident,
Eskom issued a work stoppage order to Sizazonke halting all works.
The primary purpose of the work stoppage order
was to ensure that the
immediate work surroundings were safe so that no further incidents
occurred.
[9]
On 13 July 2010 Mr Van Wyk and Ms Kishun attended a preliminary
meeting chaired by Mr Roland Dedekind, Eskom’s network
services
manager in KZN. The purpose thereof was to establish the root cause
of the accident. It had nothing to do with whether
or not any
contract held by Sizazonke should be cancelled. Other than this
investigation, Eskom was still going to conduct a further
investigation that would have a bearing on the contractual
relationship between Eskom and Sizazonke at the time. This latter
investigation
is a process distinct from the preliminary
investigation, a fact known to Sizazonke from the start. Indeed a day
after the conduct
of the preliminary investigation, Mr Kishore Asaram
of Eskom’s Contractor Risk Management, sent Ms Kishun
correspondence
stating that a corporate investigation would ensue in
due course. At the trial, Mr Van Wyk, who had contractually
previously worked
at Eskom, confirmed that the two stage procedure as
aforementioned was the norm after the occurrence of similar
incidents.
[10]
On 16 July 2010, after the preliminary investigation, the work
stoppage order was uplifted and Sizazonke was permitted to continue
with the work. A formal enquiry was conducted on 1 November 2010
where Sizazonke was charged with the contravention of Eskom’s
code of conduct as per Eskom’s Procurement and Supply Chain
Management procedure. Both Ms Kishun and Mr Van Wyk were in
attendance and conceded that Sizazonke had breached Eskom’s
policy. This enquiry was followed by another meeting on 19 November
2010 where the chairperson of the aforementioned enquiry, Mr Ernest
Makua recommended that Sizazonke be suspended from Eskom’s
database for a period of 5 years, having found it guilty of
contravening Eskom’s policy.
[11]
The outcome of this meeting was that all current work conducted by
Sizazonke was terminated and risk associated with current
projects
was henceforth to be managed by Eskom’s Programme Manager.
Effectively all contracts Sizazonke had with Eskom were
cancelled.
Sizazonke was, due to its conduct namely, the breach of its
contractual obligations, instructed to immediately withdraw
its
services from all Eskom’s sites.
[12]
Sizazonke challenged its suspension by lodging an application for
review. On 20 October 2011 the North Gauteng High Court,
Pretoria
(per Claassen J) reviewed and set aside Sizazonke’s suspension
from Eskom’s database, holding that
‘
.
. . Eskom acted totally within its rights to institute its
disciplinary hearing and went about it procedurally as prescribed by
the contract. . . .’
Claassen
J’s basis for setting aside the suspension was that it was
harsh. Significantly, the prayer for reinstatement of
the contracts
was abandoned by Sizazonke and therefore no order for reinstatement
of contracts was made.
[13]
The primary issue for determination in this appeal is whether Eskom
repudiated any contract held by Sizazonke on 19 November
2010, when
Sizazonke was suspended for 5 years from Eskom’s database. The
court a quo found that Eskom did not repudiate
the contracts and that
Sizazonke did not discharge the onus of proving any repudiation on
the part of Eskom. In this regard, it
found that Sizazonke’s
evidence did not support the allegations that Eskom repudiated the
contracts.
[14]
The law relating to a repudiatory breach of contract is well
established. This court has explained the position as follows:
‘
As
such a repudiatory breach may be typified as an intimation by or on
behalf of the repudiating party, by word or conduct and without
lawful excuse, that all or some of the obligations arising from the
agreement will not be performed according to their true tenor.
Whether the innocent party will be entitled to resile from the
agreement will ultimately depend on the nature and the degree of
the
impending non- or malperformance.
’
[1]
[15]
From the aforegoing, it can be seen that for repudiation to occur, an
element of unlawfulness must be present. It takes place
when one
party without lawful grounds indicates to the innocent party by words
or conduct, a deliberate or unequivocal intention
that some or other
of the obligations arising from a contract will not be performed.
[16]
On the facts, there is no dispute that Sizazonke breached the
provisions of Eskom’s Vehicle Driver Safety Management
Procedure particularly clauses 2.2.10, 2.2.12, 2.4.5 and 2.7.1(c) and
2.7.1 (d).
[17]
The breach by Sizazonke was, in my view, serious and material and
resulted in two fatalities with a number of other workers
sustaining
serious injuries. It is common cause that Eskom had forewarned all
contractors, including Sizazonke, that it adopts
a zero tolerance
stance on the breach of health and safety related at-risk behaviour
and that it views any non-adherence
to the relevant rules in
serious light. It must thus be accepted that Sizazonke’s
conduct justified the invocation of the
clause relating to its
suspension from Eskom’s database.
[18]
The consequences of this breach resulted in Sizazonke being found
guilty and a sanction was imposed upon it. This was done
in terms of
the legal instruments governing the contractual relationship between
the parties. Even Mr Van Wyk conceded, when he
testified on
Sizazonke’s behalf, that Eskom acted within its powers and
correctly in accordance with the prescripts.
He
also testified that Eskom’s cancellation of the contract could
not be faulted and was justified. His only complaint being
that the
sanction imposed by Eskom was harsh and was never previously imposed
on other service providers who had committed a similar
transgression.
[19]
In light of what I have stated above, I find that the court a quo was
correct in its finding that there was no repudiation
of the contracts
by Eskom. Sizazonke was on its version, unable to sustain the
contention in its pleadings that Eskom repudiated
the contracts.
[20]
During the appeal Sizazonke’s main contention was that Eskom
had not followed the termination of contract procedure found
in
clause 90 of the NEC 3 Engineering and Construction Contract. In
brief, the submission was that as the termination took place
as a
result of a breach of a health or safety regulation, Eskom could only
terminate the contract if a project manager (from Eskom)
was notified
that a contractor had defaulted and had not remedied the default
within four weeks of the notification. In addition,
no termination
notice was issued and no final payment assessment was made in terms
of the clause. I need to mention that this point
was belatedly raised
and relied upon by Sizazonke. Neither in their particulars of claim
nor in evidence did Sizazonke give any
intimation that it was relying
on the provisions of clause 90. In fact before us it was conceded by
Sizazonke’s counsel that
the termination procedure was not
raised with any witness during cross-examination.
[21]
Sizazonke’s contention regarding clause 90 is not, in my view
sustainable. From a reading of clause 90.1, it can sensibly
only be
interpreted to require a service provider like Sizazonke to give
notice to Eskom should it wish to cancel a contract. Any
interpretation that requires Eskom to give such notice will be absurd
because it would mean Eskom must give notice and give reasons
for
cancellation to itself. This is so because the project manager
referred to in clause 90.1 to whom notice must be given is an
employee of Eskom. To require Eskom to give notice to itself would be
a patently futile exercise inconsistent with the general
principle of
law that the law does not require the performance of a futile or
useless act.
[2]
It is
patently obvious that the stipulation in this clause is one designed
for the benefit of Eskom which has the right to know
whether or not a
contractor still carries on with its project. The four weeks
notification requirement can also not apply to the
facts of this
case. It is patently obvious that this would only apply in cases
where the nature of a breach is such that it is
capable of being
remedied. In this instance there was a serious breach resulting in
two fatalities in consequence of which Eskom
opted for a two stage
investigative process as I have demonstrated above.
[22]
Upon Sizazonke’s clear act of misconduct, Eskom quite
appropriately opted to follow the suspension route provided for
in
Eskom’s Procurement and Supply Chain Management Procedure. This
instrument expressly provides that upon rejection of an
internal
appeal, which happened in this case, the presenter must ascertain
whether Eskom has a contract currently in place with
a contractor or
supplier. If this is the case, the presenter decides, together with
the applicable end user and procurement manager,
whether ‘to
terminate the contract and to suspend the supplier with immediate
effect, or to suspend the supplier from date
of contract expiry’.
[23]
In any event Sizazonke is not entitled to a claim for damages in view
of its own breach of the contract. As stated earlier,
Sizazonke
conceded to the breach. This concession was repeated by its counsel
in the course of his submissions.
[24]
To award Sizazonke damages claimed would amount to rewarding it for
its own wrong ie its breach of contract. There is authority
to the
effect that a party to a contract should not by its own unlawful
conduct be allowed to obtain an advantage for itself, to
the
disadvantage of the counterpart.
[3]
[25]
Sizazonke contends that on 16 July 2010 Eskom made an election not to
cancel the existing contracts, because Peter Craig, Eskom’s
then project manager, gave instructions to Sizazonke to resume its
works after it had been given a work stoppage order. In the
alternative, it is claimed that Eskom waived its right to cancel the
contracts on 19 November 2010.
[26]
It is trite that the question whether a party has made an election
not to cancel a contract is a question of fact to be decided
on
evidence. Any inference to be drawn must be based on and be
consistent with the proved facts.
[4]
[27]
Sizazonke’s contention on this aspect was, in my view,
correctly rejected by the court a quo as being unfounded and not
supported by the evidence. It rightly found that Sizazonke’s
contention in the first instance ignored the difference between
the
first preliminary investigation and its purpose and the second
commercial investigation which resulted in the suspension and
lawful
termination of the contracts.
[28]
The court a quo’s finding in this regard must be upheld based
on the following. Firstly, Mr Van Wyk, testifying on Sizazonke’s
behalf stated it was a normal procedure that immediately after an
accident of this nature had occurred, a work stoppage order must
be
issued. He testified that such work stoppage related to the temporary
suspension of work to ensure a safe environment and had
nothing to do
with the cancellation of any contract. Secondly, Mr Van Wyk testified
that, at the meeting on 13 July 2010 it was
specified that the said
meeting was a preliminary one and that a further meeting relating to
a commercial contract would be held.
Thirdly, Sizazonke was aware
that another investigation relating to the commercial contract was
still going to be conducted.
[29]
Mr Dedekind’s unchallenged testimony was that, whenever an
incident such as the present one occurred, which resulted
in serious
injuries or fatalities, a preliminary investigation would always be
conducted. This was followed afterwards by a second
investigation
which relates to the commercial contracts. Clearly, these procedures
are distinct and they serve different purposes
as the court a quo
correctly found.
[30]
In view of the fact that Sizazonke was aware that a commercial
investigation was still going to be conducted, no inference
may be
drawn that Eskom elected not to cancel the contract or that it waived
its right to cancel. In light of what I have found,
this appeal must
fail. There is accordingly no need to deal with the issue of damages.
[31]
Lastly, Sizazonke contends that it is entitled to be awarded the
wasted costs for the postponement of the trial during October
2016
which was at Sizazonke’s behest whilst its expert witness, Mr
Jacques Habig was being cross-examined. It is contended
that Eskom
was unreasonable at the time by not consenting to the correctness of
the financial statements and for cross-examining
him on the relevant
source documents.
[32]
The purpose of the postponement was to enable Mr Habig to consult the
source documents, which in my view was something he ought
to have
done and came prepared for when he first testified. It is established
and accepted practice that no respondent can be forced
to assist an
applicant to prove his or her case. It follows accordingly, that
Sizazonke was responsible for the postponement and
must accordingly
bear the wasted costs for that postponement.
[33]
I accordingly make the following order:
1 The appeal is dismissed with costs.
2 The appellant is liable to pay the
costs of the postponement of the trial in October 2016, including the
costs of two counsel.
_______________
B H Mbha
Judge of Appeal
APPEARANCES:
For
Appellant: R Du Plessis SC (with him R Grundlingh)
Instructed
by: Nothnagel Attorneys, Waterkloof
c/o
Blair Attorneys, Bloemfontein
For
Respondent: M Gwala
Instructed
by: Ngeno and Mteto Attorneys, Pretoria
c/o
Kramer Weihman and Joubert, Bloemfontein
[1]
Datacolor
International (Pty) Ltd v Intamarket (Pty) Ltd
[2000] ZASCA 82
;
2001 (2) SA 284
(SCA) at 294H-I.
[2]
Comwezi Security Services
(Pty) Ltd & another v Cape Empowerment Trust Ltd
[2014] ZASCA 22
para 12.
[3]
Food & Allied Workers
Union v Ngcobo NO & another
[2013] ZASCA 45
;
[2013] 3 ALL SA 351
(SCA);
2013 (5) SA 378
(SCA)
para 50.
[4]
Bates & Lloyd Aviation
(Pty) Ltd & another v Aviation Insurance Co; Bates & Lloyd
Aviation (Pty) Ltd v Aviation Insurance
Co
1985 (3) SA 916
(A) at 939-940; G B Bradfield
Christie’s
The Law of Contract in
South Africa
7 ed (2016)
at 639-640.