THE HIGH COURT OF SOUTH AFRICA
GAUTENG DIVISION, PRETORIA
CASE NO.: 2024-099436
(1) REPORTABLE : NO
(2) OF INTEREST TO OTHER JUDGES: NO
(3) REVISED
In the matter betwee :
KIPP CONSUL TING ENGINEERS (PTY) LTD
and
THE CITY OF TSHWANE MUNICIPALITY
JUDGMENT
ELSAJ
Applicant
Respondent
[1] The main issue that has to be determined in this matter is whether or not a
full and final settlement amount includes or excludes VAT, in circumstances where
it is common cause that the relevant amount is for services rendered and the
Settlement Agreement is silent on the issue of VAT.
(2] The applicant ("Kipp") and the respondent ("the Tshwane Municipality ")
previously concluded three separate Service Level Agreements ("SLA's") in terms
of which the Tshwane Municipality undertook to effect a total payment to Kipp in the
amount of R37,260,000.00 for consulting engineering services.
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[3] In arbitration proceedings, instituted by Kipp, it claimed payment of a total
amount of R19;410,808.11 from the Tshwane Municipality based on three
outstanding invoices. Each of th1e invoices was in respect of each of the three SLA's.
In each of the three invoices VAT was included. The total amount claimed
(R19,410,808.11) thus included VAT. In its statement of defence, the Tshwane
Municipality disputed any entitlement of Kipp to claim payment of any of the
invoices. In a counterclaim instituted by the Tshwane Municipality, it claimed an
amount of R119,591,864.84 from Kipp.
[4] On 2 February 2024, during the arbitration proceedings, the parties
concluded a written Settlement Agreement. In clause 4 of the Settlement
Agreement , the following is reflEicted:
"4. The parties confirm the following:
4. 1 the respondent shall pay the claimant the sum of
R10,598,9'13.53 by no later than 30 (thirty) days from date
of signature hereof in full and final settlement of all claims
forming the subject matter of the claimant's claim in this
arbitration,:
4.2 the respondent's counter-claim will be postponed sine die;
4.3 each party shall pay its own costs."
[5] Pursuant to a request fr,om the Tshwane Municipality, Kipp issued a VAT
invoice dated 15 February 2024. In terms of this invoice the amount claimed from
the Tshwane Municipality was set out as follows:
"Net amount no payable
15% VAT now payable
Total now payable
R9, 216,446. 55
Rt,382,466.98
R10,598,913.53"
[6] In the aforesaid invoice dated 15 February 2024 it was indicated by ~ipp that
the account number for the invoice was "Final Settlemenf' . The issued invoice was
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in accmdance with the view of the Tshwane Municipality i.e. that the sHttlement
amounlt of R10,598,913.53 included VAT.
[7] On 27 February 2024 Kipp's attorneys addressed an e-mail to the attorneys
represeinting the Tshwane Municipality. In this e-mail reference was made to a new
VAT invoice where 15% VAT was added to the amount of R10,598,913.52L On the
same dlay an e-mail exchange took place between the respective attorneys. First,
the attorney representing the Tshwane Municipality stated the following:
"You would recall that the Settlement Agreement stipulated that the
city would pay R10,598,913.53 as the full and final settlement. There
was no provision for VAT and as such same cannot be included at this
stage."
[8] In response to the aforesaid e-mail, the attorney representing Kipp stated the
following:
"We agree that no provision for VAT was made however, this w,as an
omission, however our client is VAT registered and entitled to charge
for VAT and your client if VAT registered will claim it back."
[9] In a further letter dated 15 March 2024, the attorney representing Kipp stated
the following:
"7. There are also two further issues:
7. 1 interest a tempore mora at the rate of 11.25% per annum
on the sum of R10 598 913.53 as from 2 March 2024 to
date of payment;
7. 2 the agreement inadvertently did not refer to VAT, which was
simply a pure omission, but is of necessity implied as your
client is obliged to pay the VAT and to claim such back Our
client is obliged to pay over the VAT which it will do and if
required furnish proof thereof.
8. We accordingly intend to approach the Learned Arbitrator to
insert the words (plus VAT) and for her to sign her award."
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(10] The view expressed by Kipp made it clear that, according to Kipp, the failure
to mention the issue of VAT in the settlement was an omission .
[11) It is common cause between the parties that the Tshwane Municipality
proceeded to effect payment to Kipp, on 18 March 2024 , in the amount of
R10,598,913.53. On 25 March 2024 the attorney representing Kipp said the
following in an e-mail addressed to the attorney representing the Tshwane
Municipality :
"Further, we kindly would like to find out whether your client will be
paying our client the VAT for the sum of R10 598 913.53 which is the
sum of R1 589 837.02.
Should your client not pay our client the VAT by close of business
31 March 2024, we hold instructions to make the arbitration settlement
an order of court and proceed as per our letter dated 15 March 2024
to request the High Court to order that your client pays our client the
sum of R1 589 837.02 and costs."
[12] According to Kipp, the Tshwane Municipality is liable to pay VAT on the
amount of R10,598,913.53 (in the amount of R1 ,589,837.02) based on the following :
[12.1] The written SLA's concluded between the parties contain the following
provision:
"9.3 All amounts and other sums payable in terms of this Agreement
and Schedules hereto will be stipulated exclusive of VAT,
unless expressly stated otherwise."
[12 .2] No VAT was payable on the settlement amount, but, because a VAT invoice
was requested by the Tshwane Municipality, it triggered the obligation to
pay VAT on the settlement amount; and
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[12.3] Kipp relies, in addition to the aforesaid, on section 31 (2) of the Arbitration
Act, 42 of 1965 ("the Arbitration Act") for the relief claimed in the notice of
motion .
(13] In terms of clause 9.4 of the SLA's, it was the obligation of Kipp to submit
valid tax invoices to the Tshwane Municipality. The statement of claim instituted by
Kipp in the arbitration proceedings, was annexed to the answering affidavit of the
Tshwane Municipality's answering affidavit. It is clear from the statement of claim
that Kipp claimed payment of the three separate invoices in the amounts of
R1 ,802,981.90, RS,016,426 .73 and R9,591,399.48. Each of the VAT invoices in
support of the aforesaid amounts were annexed to the statement of claim. It is clear
from these VAT invoices that the amount claimed by Kipp was a VAT inclusive
amount.
[14] In my view, what is contained in clause 9.3 of the SLA does not mean that
VAT is somehow automatically excluded when the parties conclude a "full and final
settlement" .
[15] In the heads of argument, delivered on behalf of Kipp, the following was said
in support of the submission that VAT became payable when the Tshwane
Municipality requested a VAT invoice:
"16. 5 On 15 February 2024, the respondent 's legal representative
addressed an e-mail to the applicant's legal representative ,
amending the terms of the Settlement Agreement and making
the rendering of a VAT invoice by the applicant a prerequisite
to payment.
24. Accordingly, it was clearly not an express term of the
Settlement Agreement that VAT was to be paid. This
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requirement (the payment of VAT) was, however, self
imposed post facto by the respondent by making the issuing
of a VAT invoice on the part of the applicant a sine qua non
for payment.
25. The fact that the respondent's attorney on 15 February 2024
requested a VAT invoice could only mean that:
25. 1 VAT became payable whereas previously it was not in
terms of the Settlement Agreement;
25. 2 VAT was now required to be added to the settlement
amount claimed by the applicant in terms of a VAT
invoice;
25.3
25.4 it is the respondent that created an obligation to pay
VAT by making the issue of a VAT invoice as a
prerequisite to the applicant being paid;
25. 5 the Settlement Agreement thus on the respondent 's
version did not and could not of itself create a causa for
payment by the respondent;
27. This request for a VAT invoice in effect constituted an:
amendment to the Settlement Agreement. Once a VAT invoice
was requested VAT became payable and the only question left
to be answered was by whom."
[16] These submissions were made, notwithstanding the following statement in
paragraph 61 of the founding affidavit:
"That VAT was payable cannot be contentious."
[17] Whether or not VAT is payable depends on the provisions of the Value-Added
Tax Act, 89 of 1991 ("the VAT Act"), not on what the parties decide upon.
[18] In terms of section 20 of the VAT Act a registered vendor, making a taxable
supply "must within 21 days of the date of that supply issue a tax invoice ... ".
(19] In paragraphs 49 and 50 of the founding affidavit, the following was stated:
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"49. The Settlement Agreement as drafted by the parties respective
legal representatives did not expressly deal with the question of
VAT at all, neither does it state that the settlement amount is
inclusive of VAT.
50. It is totally silent in regard to the question of VAT and
accordingly in terms of clause 9.3 of the SLA the settlement
amount is deemed to be exclusive of VAT."
[20] In my view, the first issue to decide on is the proper interpretation of the
Settlement Agreement. More in particular , the question is whether or not the full and
final settlement amount includes or excludes VAT, where it is clear that Kipp claimed
payment of invoices on which VAT was payable. If parties agree on a settlement
amount (in respect of services rendered by a VAT vendor) which is reflected as a
full and final settlement amount , it includes VAT, unless it is expressly stated
otherwise by the parties . This is further confirmed by section 64( 1) of the VAT Act
that provides as follows :
"64(1) Any price charged by any vendor in respect of any taxable
supply of goods or services shall for the purposes of this Act
be deemed to include any tax payable in terms of section
7(1 )(a) in respect of such supply, whether or not the vendor
has included tax in such price ."
[21] Section 31(2) of the Arbitration Act reads as follows :
"31 (2) The court to which application is so made, may, before making
the award an order of court, correct in the award any clerical
mistake or any patent error arising from any accidental slip or
omission ."
[22] In my view the failure to include the payment of VAT in a full and final
Settlement Agreement is not at all a clerical mistake or patent error that arise from
any accidental slip or omission . In my view Kipp attempts, in this application, to
recover an amount from the Tshwane Municipality in addition to the amount already
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agreed upon in the full and final Settlement Agreement. It follows, in my view, that
Kipp is not entitled to the relief claimed.
[23) In the premises the application is dismissed with costs, including the cost of
counsel on scale C.
LS
HE HIGH COURT
DELIVERED : This judgment is handed down electronically by uploading it to the
electronic file of this matter on Caselines .
For the applicants:
Instructed by:
For the respondent:
Instructed by:
Date of hearing:
Date of judgment:
RA Solomon SC
M Gumbi
Michael Raphela Attorneys
F Kabini
Mahumani Incorporated
5 August 2025
31 March 2026