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[2019] ZASCA 101
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Rehau Polymer (Pty) Ltd v Brunettes Electrical (Pty) Ltd and Others (641/2018) [2019] ZASCA 101 (25 July 2019)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Not
Reportable
Case
No: 641/2018
In
the matter between:
REHAU
POLYMER (PTY)
LTD APPELLANT
and
BRUNETTES ELECTRICAL
(PTY) LTD FIRST
RESPONDENT
SCHNEIDER ELECTRIC SA
SECOND
RESPONDENT
EASTERN
SWITCHGEAR THIRD
RESPONDENT
M & M FIRE
PROTECTION
CC FOURTH
RESPONDENT
RICHARD NZUZA &
ASSOCIATES
CONSULTING ENGINEERS
CC FIFTH
RESPONDENT
COEGA DEVELOPMENT
CORPORATION SIXTH
RESPONDENT
Neutral
citation:
Rehau Polymer (Pty) Ltd v
Brunettes Electrical & others
(641/2018)
[2019] ZASCA 101
(25 July 2019)
Coram:
Ponnan, Swain, Mocumie, Makgoka JJA and
Eksteen AJA
Heard:
24 May 2019
Delivered:
25 July 2019
Summary
:
Claim for damages – breach of contract – interpretation
of document – whether breach of warranties established.
ORDER
On
appeal from:
Eastern Cape Division of
the High Court, Port Elizabeth (Alkema J sitting as court of first
instance):
The
appeal is dismissed with costs of two counsel.
JUDGMENT
Eksteen
AJA (Ponnan and Swain
JJA
concurring):
[1]
The appellant (Rehau) is the sub-lessee of factory premises situated
in Uitenhage, Port Elizabeth, which it leases from the
sixth
respondent, Coega Development Corporation (CDC), the sub-lessor. On 6
February 2010 a fire broke out in the low voltage room
(LV room) of
the factory causing extensive damage. Rehau issued summons claiming
damages in the sum of R13 407 025.38,
from the respondents,
jointly and severally, based on various causes of action. The fourth
and fifth respondents were held liable
in delict to Rehau in respect
of the damage. Thereafter, Rehau’s claim against CDC, which is
based solely on contract, was
separated from the remaining issues in
the matter. On 26 June 2014 it was dismissed in the High Court, Port
Elizabeth. The appeal
is against the dismissal of this claim, and is
with the leave of the court
a quo.
The
first to fifth respondents abide by the decision of this court and
have taken no part in the appeal.
[2]
Rehau carries on business in East London and Uitenhage as a
manufacturer of Polymer based automotive components. In August 2008
Rehau entered into a written agreement of sublease with CDC (the
agreement). In terms of the agreement CDC undertook to construct
and
lease to Rehau a factory in Uitenhage. I shall revert to the terms of
the agreement later. Suffice it for present purposes
to record that
Rehau gave certain warranties in respect of the premises to be
constructed as recorded in the agreement.
[3]
Pursuant to the agreement CDC caused the factory to be erected on the
premises. Prior to completion of the construction, the
fire
department of the Nelson Mandela Bay Municipality (the municipality)
instructed that a gas fire suppression system had to
be installed in
the LV room. CDC accordingly procured the design and installation of
a FM200 gas fire suppression system in the
factory.
[4]
Rehau, however, wished to take occupation of the premises and it was
eager to put the facility into operation. It could not
do so before
the issue of a certificate of occupancy by the municipality in terms
of the National Building Regulation and Standards
Act 103 of 1977
(the Act).
[5]
On 18 September 2009 an inspection of the works was carried out and
the fire suppression system, duly installed, was tested
by one
Grobler, the authorised official on the fire safety division of the
municipality, in order to procure the issue of the certificate
of
occupancy. A number of tests were carried out which satisfied Grobler
of the functional capacity of the fire suppression system.
He
accordingly signed off on the certificate of occupancy on behalf of
the fire safety division. Grobler was, however, under the
apprehension that the fire suppression system would be fully
activated and operational after the test. A certificate of occupancy
was issued on 22 September 2009 and Rehau commenced full production
in its factory. It is common cause that the gas fire suppression
system required both electricity and gas to operate. At the time when
the fire occurred the gas cylinders were not connected to
the fire
suppression system and therefore the system did not function. Had the
system been functional much of the damage caused
would have been
averted.
[6]
When the delictual claims against the fourth and fifth respondents
were adjudicated, the parties agreed on a statement of facts.
A trial
ensued (the first litigation), evidence was led and further factual
findings were made. An appeal to the full bench in
the Eastern Cape
followed. For purposes of the present appeal, the parties agreed that
the statement of facts and the factual findings
made in the first
litigation remain binding on the parties. The agreed statement of
facts records:
‘
(a)
The Sixth Defendant is the owner of the building situated at Nelson
Mandela Bay Logistics Park, Jagt Vlakte, Industrial Area,
Uitenhage
(‘the Premises’).
(b) The Plaintiff, at all
material times occupied the Premises in terms of a lease concluded
with the Sixth Defendant.
(c) The Fire Department
of the Nelson Mandela Bay Municipality required a fire suppression
system to be installed in the Low Voltage
room at the premises.
(d) A fire suppressions
system was accordingly designed and installed by the Fourth
Defendant, as per quotes to the Fifth Defendant.
(e) The fire suppression
system utilises a gas suppression process to suppress and extinguish
fires, which system requires both
electrical power to the system
itself and the arming of the gas cylinders which form part thereof,
in order to be fully operational
and effective.
(f) When armed and fully
operational, the system designed and installed by the Fourth
Defendant, would have suppressed and extinguished
a fire in the low
voltage room at the Premises with limited damage, which in any event
would have been confined to the panels,
alternatively to the low
voltage room.
(g) The fire suppression
system, including the gas cylinders, was successfully tested during a
presentation to the Fire Department
of the Municipality on/or about
18 September 2009, whereafter an occupation certificate was dully
issued by the Municipality.
(h) At the time of the
fire which occurred in the low voltage room on 6 February 2010 the
fire suppression system in that room was
connected to electrical
power but the gas cylinders were not armed.
(i) If the gas cylinders
had been armed, then the damage to the Premises and its contents,
caused by the fire, would have been limited
as set out above.
(j) On
or before 6 February 2010 the Plaintiff activated the low voltage
capacitors contained in the power factor correction panels
and
related equipment within the low voltage room.’
[7]
Rehau’s claim against CDC is founded upon the alleged breach of
the warranties contained in the agreement. Two warranties
were relied
upon in the pleadings and in argument. The material portion thereof
records:
‘
WARRANTIES
9.1 The sub-lessor
warrants that:
9.1.1 The Lease Premises
Structures (save for such items which are installed by the
sub-lessee, its agents, contractors, or employees
outside the scope
of this agreement) to be erected on the Property will be fit for the
purpose for which it is let to the sub-lessee
in terms of this Lease
and will be erected substantially in accordance with (and without any
material deviation from) the Building
Document.
. . .
9.1.8 [T]he Lease
Premises Structures will comply with all the laws, legislation,
regulations, rules and by-laws of all competent
authorities relating
to Fire and Health Safety;
.
. .’
[8]
Rehau’s case, as pleaded, is that:
‘
In
breach of the warranties aforesaid, the Sixth Defendant’s
agent, the Fifth and the Fourth Defendant designed commissioned
and
installed a gas fire suppression system which was not activated and
neither the Fifth Defendant nor the Fourth Defendant, both
being
aware of the (fact) that the gas fire suppression system had not been
activated, failed to inform the Plaintiff (care of
its maintenance
manager or any other responsible representative) that the gas fires
suppression system had not been activated.’
[9]
There was some debate during the argument before us as to whether the
fourth and the fifth defendants acted as agents of CDC
in failing to
activate the system or to inform Rehau of the failure. By virtue of
the conclusion I have reached on the interpretation
of the warranties
it is not necessary to consider the question of agency. Rehau does
not contend that the gas suppression system
was inappropriately
designed, commissioned or installed. On the contrary, the statement
of agreed facts acknowledges that the system
which was designed,
commissioned and installed would have suppressed and extinguished a
fire in the LV room had it been armed and
fully operational. In their
heads of argument in this court, counsel on behalf of Rehau
acknowledged that the construction and
completion of the building was
in terms of the local authority requirements. They argued, however,
that the unarmed status of the
fire suppression system was not. The
central issue in the appeal is therefore whether the failure to
activate the gas fire suppression
system constituted a breach of the
warranties which have been set out earlier. The answer requires an
interpretation of the agreement.
[10]
The agreement is a substantial document incorporating numerous
annexures. A number of terms arising from the agreement are
material
to the obligation of CDC which is in issue in the present
proceedings. The agreement defines the ‘Lease Premises
Structures’, as referred to in the warranties as, ‘those
buildings and other structures, whether movable or immovable
which
exist or will be erected on the Lease Premises by the sub-lessor in
accordance with the Building Documents’. The Building
Documents, in turn, are defined as being the ‘plans and
specifications attached’ to the agreement. There is no
reference
in the Building Documents to the gas fire suppression
system as it was not envisaged at the time of the conclusion of the
agreement.
It only arose when the fire department of the municipality
insisted on its installation a year after signature of the agreement.
[11]
Clause 3 of the ‘General Terms and Conditions of Sub-Lease’,
which is the first annexure to the agreement, sets
out the obligation
of CDC in respect of the construction of the Lease Premises. In
clause 3.2 it places an obligation on CDC to
ensure ‘that the
construction of the Lease Premises Structures in accordance with the
Building Documents is done through
to completion in accordance with
the Terms and Conditions of the Development’. The ‘Terms
and Conditions of Development’
is also defined in the
agreement. It is annexed thereto and sets out the conditions upon
which the CDC is obliged to erect or procure
the construction of the
Lease Premises Structures. It records:
‘
5.1
the sub-lessor shall:
5.1.1
ensure that all such consents, permits and approvals as are necessary
for the construction of the Lease Premises Structures
on the Property
would have been obtained from the relevant authorities;
5.1.2
procure that the Lease Premises Structures is constructed in a good,
proper and workmanlike-manner and in accordance with
the plans;
. . .
5.1.7
ensure that the Lease Premises Structures are constructed and
completed in a manner that conforms entirely to all statutory,
local
authority and other requirements concerning such construction and
completion and in particular to the zoning specifications
and rights
granted to the Property’.
[12]
It is in the context of these provisions that the warranties were
included in the agreement. The warranties relate to the condition
of
the Lease Premises Structures when complete. Those are the structures
which CDC was required to construct as set out in the
Building
Documents. As recorded earlier, at the time when the agreement was
concluded the Building Documents did not contemplate
the installation
of the gas fire suppression system. Clause 5.1.7 of the ‘Terms
and Conditions of Development’ did
however require of CDC to
construct and complete the buildings contemplated in the Building
Documents in a manner which conforms
with all the local authority
requirements. The installation of the gas fire suppression system was
a requirement of the local authority
and CDC was accordingly
obligated to install such a system, which it did.
[13]
It is not in dispute that CDC obtained all the consents, permits and
approvals which were necessary for the construction of
the Lease
Premises Structures (clause 5.1.), including the certificate of
occupancy. Neither is it contended that the Lease Premises
Structures
were not constructed in a good, proper and workmanlike manner in
accordance with the plans (clause 5.1.2). The thrust
of the argument
on behalf of Rehau is that CDC had breached the warranty recorded in
clause 9.1.8. The Lease Premises Structures,
so it is argued, did not
comply with all the laws, legislation, regulations, rules and by-laws
of all competent authorities relating
to Fire and Health Safety.
This, it is contended, is so, because Grobler assumed when he signed
off on the certificate of occupancy
that the system would be
activated at that stage.
[14]
Grobler testified that in order to test the unit the cylinders need
not be activated. He proceeded to state, however, that
‘
under
normal procedures after the test has been conducted they take off the
units, and they activate the system.’ For this
reason, he said,
when he signed the document he left the premises with peace of mind
that everything was operational. Later he
testified that it would
constitute a serious transgression not to activate the system after
it had been tested and he said that
if he had known that the system
would not be activated he would have taken back the occupancy
certificate, ‘because the building
is not compliant with the
National Building Regulations’. He did not suggest which
regulations would be contravened.
[15]
In argument, counsel on behalf of Rehau suggested that it would
contravene ss 14(1) and (2A) of the Act. For this argument,
reliance
is placed on the evidence of Grobler that he would have rescinded the
certificate of occupancy had he known that the gas
fire suppression
system would not be activated.
[16]
I revert to the warranty set out in clause 9.1.8. It requires the
Lease Premise Structures to comply with all legal prescripts.
These
structures had been duly erected in accordance with the ‘Terms
and Conditions of Development’ and the Building
Documents
contained in the agreement. The requirement of the municipality that
a gas fire suppression system should be installed
was complied with.
Section 14 of the National Building Standards Act requires of a local
authority to issue a certificate of occupancy
in respect of a
building ‘if it is of the opinion that such building has been
erected in accordance with the provisions of
this Act and the
conditions on which approval was granted in terms of s 7’.
Section 7 of the Act relates to the approval
by local authorities in
respect of the erection of buildings. It has not been suggested that
any condition imposed in terms of
s 7 of the Act was contravened.
What s 14(1) requires is for the local authority to be satisfied that
the building has been ‘erected’
in accordance with the
provisions of the Act and the approval granted. It is not concerned
with operational issues which occur
after occupancy. Once it has been
satisfied that the building has been erected in accordance with the
provisions of the Act the
fire suppression system could be activated
or deactivated according to operational requirements. This does not
affect the certificate
of occupancy.
[17]
Counsel also sought refuge in s 14(2A) of the Act which provides:
‘
Upon
completion of the erection or installation of;
(a)
the structural systems; or
(b)
the fire protection system; or
(c)
the fire installation system,
of any building the
person appointed to design such system and to inspect the erection or
installation, shall submit a certificate
to the local authority
indicating that such system has been designed and erected or
installed in accordance with the application
in respect to which
approval was granted in terms of s 7’.
The
section is concerned with the verification of the design, erection
and installation of the system, not the operation thereof
after
installation has been properly verified. As recorded earlier, it was
not suggested that the design, erection or installation
was in any
way defective.
[18]
When challenged on this aspect, counsel on behalf of Rehau submitted
that the evidence of Grobler in this regard was unchallenged
and that
the evidence therefore established that the system was non-compliant.
The difficulty with this argument is that the interpretation
of a
statute is a matter of law and not of fact and, accordingly, the
interpretation thereof is a matter for the court and not
for
witnesses.
[1]
On
a consideration of the provisions of s 14(1) and 14 (2A) of the Act,
I consider that Grobler’s interpretation of the section,
if it
is what he had in mind, was wrong. No other breach of any
legislation, regulation, rules or by-law of any competent authority
was suggested. In the result I am driven to conclude that no breach
of the warranty set out in clause 9.1.8 has been established.
[19]
I turn to clause 9.1.1 which requires that the Lease Premises
Structures erected on the property would be fit for the purpose
for
which it was let. As recorded earlier, it is not in dispute that the
system was well designed and properly commissioned and
installed.
There was nothing intrinsically wrong with the system and it was not
as a result of any intrinsic defect or malfunction
that it was not
operational at the time of the fire. The damage was caused by the
negligent omission on the part of the fourth
and fifth respondents to
advise Rehau and CDC that the gas cylinders were not armed. On this
basis they were held liable in delict.
Such a failure is not however,
covered by the warranty. In the result, in my view, no breach of the
warranty set out in clause
9.1.1 was established.
[20]
Reference was made during argument to clause 9.1.3 whereby CDC
warranted that it was not in breach of any obligation it had
in
respect of the property. Notably this warranty is couched in the
present tense at the time of the signature of the agreement.
In this
sense it is in contrast to the remaining warranties set out in clause
9.1, all of which were couched in the future tense
thereby referring
to the completion of the building. The warranty in clause 9.1.3 does
not relate to the “Lease Premises
Structures” but to the
property. The property is defined in the agreement as the immovable
property identified in the schedule
to the agreement. It finds no
application to the fire suppression system.
[21]
In conclusion, on a proper interpretation of the agreement, the
activation of the gas cylinders forming part of the fire suppression
system does not fall within the scope of the warranties. It was
properly designed, constructed and installed. In the result the
appeal must fail.
[22]
Accordingly the following order is made:
The
appeal is dismissed with costs of two counsel.
_____________________
J Eksteen
Acting Judge of Appeal
Mocumie
JA dissenting
[23]
I have had the benefit of reading the judgment of my colleague
Eksteen AJA in which my other colleagues concur. However, I
find
myself in respectful disagreement with his conclusion that the
activation of the gas cylinders forming part of the fire suppression
system does not fall within the scope of the warranties.
[24]
My colleague correctly states that Rehau’s claim against CDC is
based purely in the law of contract and is founded upon
an alleged
breach of the warranties contained in the written contract. However,
for the reasons that follow, I am not persuaded
that the court a quo
was correct in dismissing the claim against CDC. The salient facts,
which for the most part are common cause
or undisputed, are set out
in the judgment of my colleague and need no repeat.
[25]
There are two crisp issues for determination in this matter. The
first is whether CDC breached the warranties pertaining to
the leased
premises’ statutory compliance with all fire and health safety
provisions ie clause 9.1 .1 and 9.1.8. In particular,
in clause 9.1.8
of the agreement (cited in para 7 of the majority judgment above),
Rehau warranted that the leased premises would
comply with ‘all
of the laws, legislation, regulations, rules and by-laws of all
competent authorities relating to fire and
health safety.’ As I
see it, clause 9.1.8 cannot be read in isolation from other clauses
in the agreement as they impact
on its interpretation. These include
clause 5.1.7 which imposes upon CDC the duty to:
‘
Ensure
that the Lease Premises Structures are constructed and completed in a
manner that conforms entirely to all statutory, local
authority and
other requirements concerning such construction and completion and in
particular to the zoning specification and
rights granted to the
property.’
[26]
Further, clause 5.1.9 of the lease agreement imposes the duty upon
CDC to:
‘
Obtain
as soon as reasonably[y] possible after the Practical Completion
Date, all necessary consents, permits and approvals required
under
[the] applicable laws and regulations from the relevant authorities
to allow the Lease Premises Structures to be occupied
by the [Rehau]
including, without limitation, an occupation certificate and the
[CDC] indemnifies the [Rehau] against all claims
of whatsoever nature
made against the [Rehau] as a result of the failure by the [CDC] to
obtain[n] any such consents, permits or
approval.’
[27]
The second issue is whether, if a breach is found, Rehau is entitled
to make a claim for contractual damages in light of the
indemnity
clause 16.1 which clause provides as follows:
‘
The
Sub-Lessee shall not, under any circumstances, have any claim or
right of action whatsoever against the Sub-lessor for damages,
loss
or otherwise that occurs on the Lease Premises or the Supplier Park
save for damages or destruction directly caused by any
act or
omission of the Sub-Lessor, its employees, servants or agents.’
[28]
The principle on the enforceability of an express warranty is stated
as follows in
Evans
& Plows v Willis & Co
:
[2]
‘
[I]n
our law if an express warranty as to the quality of the article sold
has been given by the seller and this turns out to be
untrue an
action for damages for breach of contract lies... The liability in
the… case… is independent of
mala
fides
, but depends upon what he has
expressly taken upon himself by his contract’.
[29]
As a general principle, in order to determine whether an express
warranty is binding, a court, if called upon to do so, must
consider
whether the parties intended it to be so, which can be elicited
through a process of contractual interpretation as set
out recently
by this court in several cases and need no repeat.
[3]
[30]
When the lease agreement with the accompanying appendixes thereto was
concluded, the ‘intended purpose’ for which
the premises
was leased to Rehau was at the heart of the agreement. The intended
purpose was that ‘[i]t would be a factory
building with double
storey administration block and Gatehouse, constructed on steel and
masonry with timber trusses, and with
a level of finish above average
for a typical building of that nature’, suited, for the
business of the appellant –
as manufacturer of polymer based
automotive components Petroleum is the principal raw material
polymers are derived from.
Petroleum
is ‘any liquid, solid hydrocarbon or combustible gas existing
in a natural condition in the earth's crust and includes
any such
liquid or solid hydrocarbon or combustible gas, which gas has in any
manner been returned to such natural condition, but
does not include
coal, bituminous shale or other stratified deposits from which oil
can be obtained by destructive distillation
or gas arising from a
marsh or other surface deposit.’
[4]
Science,
if not common sense, dictates that it is highly flammable.
This
means, as I will demonstrate in this judgment, that the fire and
safety compliance provisions were inextricable material terms
of the
lease agreement. That is why the parties – in particular CDC as
the owner of the lease premises – was obliged
to ensure that
the conduct of all concerned was compliant with all laws, regulations
and by-laws applicable to fire, health and
safety as prescribed by
all relevant institutions including the municipality under which
jurisdiction the lease premises resided.
To that extent the parties
deemed it necessary to revise these inherently hazardous conditions
in phases to ensure compliance from
the time of commencement of
construction of the factory until its completion.
[31]
The majority judgment is based mainly on the National Building
Regulations and Building Standards Act 103 of 1977 (the NBRBS
Act).
However, in my view, the Nelson Mandela Bay Metropolitan Municipality
by-law relating to fire safety (2007) (the by-law)
is more relevant
and provides a better understanding of the scheme of the duty imposed
on an owner of the premises/landlord or
person in charge in the
context of the warranties provided for consciously between the
parties in the lease agreement. The by-law
was adverted to by Rehau
in its heads of argument, and this point was further argued before
us. It is this point I now turn my
attention to.
[32]
The by-law under s 21 provides as follows:
‘
21.
Testing and maintenance of fire-protection systems
(1)
A fire-protection system must be tested and
maintained on a regular basis and the owner or person in charge of
the premises must
keep a detailed record of the test and maintenance
of the system.
(2)
A person may not test a fire-protection
system before notifying the occupants of the premises concerned of
the starting and completion
times of the test and where applicable
the parties who monitor the fire protection system.
(3)
A fire-protection system designed for
detecting, fighting, controlling and extinguishing a fire must be
maintained in accordance
with the National Building Regulations (T2),
read in conjunction with a recognised national code or standard, and
in the absence
of a national code or standard, an applicable
international code or standard must be used.
(4)
A fire protection system may not be
installed, dismantled, recharged, disconnected, serviced, modified,
repaired or tested in any
area where such action would create a
danger or hazard.
(5)
The person carrying out the maintenance
of a fire protection system must inform the owner or person in charge
of the premises in
writing, of any defects discovered, maintenance
performed or still outstanding and where the person in charge has
received such
notice, he must without delay inform the owner
accordingly
.
(6)
The owner or person in charge of the
premises must immediately notify the controlling authority when the
fire protection system,
or a component thereof, is rendered
inoperable or taken out of service and must notify the controlling
authority as soon as the
system is restored.
(7)
The owner or person in charge of the
premises must take all steps deemed necessary by the controlling
authority to provide alternate
equipment to maintain the level of
safety within the premises.’
(Emphasis
added.)
[33]
Section 21, in its plain and simple language, places an obligation on
the owner of the premises or the person in charge thereof
not only to
install but also to: maintain a fire-protection system;
[5]
and
to notify the controlling authority if the fire-protection system is
rendered inoperable or taken out of service.
[6]
On
the basis of this by-law, read cumulatively with all the relevant
clauses of the agreement – clause 9.1.1 and 9.1.8 referred
to
in the main judgment, the sixth respondent as the owner of the lease
premises was obliged to discharge the aforesaid obligations.
That is
however not the end of the inquiry.
[34]
The question which begs an answer is whether the sixth respondent can
be held liable where, as the parties agreed, the sixth
respondent and
the appellant were unaware of the omission of the fourth and fifth
respondent on the day the fire broke out and
caused the damages the
appellant suffered. The subsequent argument which arose was whether
the sixth respondent can be held liable
even when it was unaware of
the omission by the fourth and fifth respondent.
[35]
The appellant pleaded agency in its particulars of claim which Rehau
disputed in its plea. However, agency was not a fact agreed
upon by
the parties in their Statement of Facts before the court a quo.
Although the issue of agency was raised in the high court,
it was
confounded by the separation of issues that required adjudication
through two judgments of Alkema J (delivered on 26 June
2014 and on
22 August 2017). In the first judgment concerning the delictual
liability of the fourth and fifth respondent, Alkema
J, in
obiter,
described the fourth and fifth respondents as agents of CDC. In this
judgment, Alkema J held that only the fourth respondent was
liable in
delict. On appeal to the full bench, the liability of the fifth
respondent was raised as a ground for appeal. The full
bench
confirmed the liability of the fourth respondent and extended
delictual liability to include the fifth respondent.
[36]
In the second judgment concerning the contractual liability of CDC,
Alkema J held that the damage was caused not by an act
or omission of
CDC as contemplated by the indemnity clause but by the negligent
omissions of ‘other parties.’ Alkema
J, does not
expressly make the finding that the fourth and fifth respondent are
agents of CDC as contemplated by the indemnity
clause. However, for
the reasons that follow, this is a finding with which I am unable to
agree.
[37]
At the outset I must state that it is evident on the papers that
Rehau relied on agency. Before us, counsel was requested to
address
the court on whether agency was a requirement to succeed in the claim
for contractual damages. After initially responding
in the negative
counsel was constrained to concede that it was in fact a requirement.
However, as I will demonstrate hereafter,
the failure to elaborate on
the course and scope of the alleged agency is not fatal to Rehau’s
case.
[38]
The case of
Chartaprops
Pty Ltd & another v Silberman
[7]
is
of relevance to answer the question posed, ie whether the fourth and
fifth respondents were the agents of CDC and flowing from
that,
whether CDC can be held liable for the omission of the fourth and
fifth respondents.
[39]
In
Chartaprops
,
Mrs Silberman was injured when she slipped and fell in a shopping
mall owned by Chartaprops which had appointed a company, Advanced
Planning, to do the cleaning of the mall. A slippery substance was
left undetected by the employees of Advanced Planning; Mrs Silberman
sustained an injury as a result and sued both companies-Advanced
Planning on the basis of negligence of its employees in failing
to
detect and remove the substance, which had been lying on the floor
for about thirty minutes. There was however evidence that
Chartaprops
was in the habit of checking on and inspecting Advanced Planning’s
activities. But Chartaprops, too, had failed
to detect the substance.
In the court a quo, both respondents were found to be liable, jointly
and severally. On appeal, Nugent
JA, in his minority judgment
disagreed with the court a quo which he said erred in holding
Chartaprops liable vicariously for the
negligence of Advanced
Planning. According to Nugent JA, liability could be found elsewhere,
not on the basis of vicarious liability.
He stated: ‘Where
liability arises vicariously it is because the defendant and the
wrongdoer stand in a particular relationship
to one another.’
According to him, the rules which applied in the case did not involve
the role of independent contractor.
He stated further that the
employer is not and ought not to be held responsible for the actions
of an independent contractor. The
defendant might be responsible for
its own omission, its own failure to act, or to perform its own legal
duties, taking reasonable
steps as articulated in
Kruger
v Coetzee.
[8]
He
stated that there was a duty on Chartaprops, as owner of the mall, to
ensure that its visitors were reasonably safe. It could
not shift
this responsibility to the cleaning company. Therefore liability
rested on Chartaprops as owner of the premises.
[40]
The majority judgment penned by Ponnan JA, disagreed with Nugent JA.
Ponnan JA, with reference to
Langley
Fox Building Partnership v De Valence
[9]
,
held
like Nugent JA that the principal is not liable for wrongs committed
by an independent contractor or its employees, and that
the principal
would only be liable if personally at fault. He also referred to the
classic test in
Kruger
,
but applied it differently. According to him, there was no
justification for making an exception in the case under
consideration,
in order to allow a person who is injured to recover
from a principal in addition to the normal rights which an injured
person
should enjoy against the independent contractor. He also
pointed out that there was no justification, in the fiction of the
principle
of non delegability, for shifting the economic cost of the
negligent acts of Advanced Planning, which was primarily responsible
for the damages, to Chartaprops. He held in conclusion that ‘[w]here,
as here, the duty is to take care that the premises
are safe I cannot
see how it can be discharged better than by the employment of a
competent contractor. That was done by Chartaprops
in this case, who
had by no means of knowing that the work of Advanced Planning was
defective.’
[41]
At paragraph [48] he held further,
‘
Chartaprops
was obliged to take no more than reasonable steps to guard against
foreseeable harm to the public.’
[42]
Against this background and on the principles set out in
Chartaprops
,
it is important to always take into account that whether in any
particular case the steps actually taken are to be regarded as
reasonable or not depends upon a consideration of all the facts and
the circumstances of the case.
[10]
[43]
On the question of whether the fourth and fifth respondents were
agents of CDC, there was evidence tendered on the nature of
the
relationship between the fifth respondent and CDC. Mr Moodley, an
employee of the fifth respondent, testified in detail on
the
relationship between the fifth respondent and CDC which cannot be
described otherwise than that of agency. In this court, to
underscore
this point, the appellant handed up an addendum taken from the
transcribed record which depicted several instances of
Mr Moodley’s
evidence which demonstrated that the relationship was of agency. This
is despite the misgivings that the court
a quo had with Mr Moodley’s
evidence. This relationship is further borne out by the Service
Agreement which was concluded
between CDC and the fifth respondent
prior to the construction of the lease premises. In Appendix A there
is express provision
for the appointment of the fifth respondent as
CDC’s consulting engineer to provide ‘professional
services for the
electrical and mechanical planning, design and
construction monitoring’ of the lease premise. This constituted
a mandate.
The scope and the extent of the mandate is clearly express
in the terms of this Service Agreement.
[44]
Furthermore, subsequent to the acceptance of the mandate, the
municipality imposed the requirement of a fire protection system
in
respect of the lease premises. The fifth respondent advised CDC of
this and the mandate was extended on the same terms to make
provision
for the installation of a fire protection system on the lease
premises. In the discharge of this mandate, the fifth respondent
engaged and employed the fourth respondent to install the fire
protection system. According to Kerr,
[11]
an
agent in our law is the principal’s authorised representative
in effecting the principal’s legal relationships with
third
parties. As in this case, and it is not in dispute, CDC declared its
intention to be bound by the fifth respondent’s
acts performed
within the scope of the authority in clear, direct and definitive
terms set out in the agreement and even extended
as alluded to in
paragraph 43 above.
[45]
The court a quo found albeit
obiter
that the fifth respondent
was CDC’s agent and thus liable in damages to the appellant.
The full bench on the first appeal
extended that liability to the
fourth respondent. It concluded, which conclusion I affirm:
‘
the
fifth respondent knew or ought to have known, that the gas fire
suppression system was not operational at the relevant time,
and
hence fifth respondent was causally at fault in respect of the
non-activation of the gas fire suppression system.’
These
two findings were never challenged by CDC. It is thus absolutely safe
to confirm these findings.
[46]
Taking into consideration the facts of this case, it must be taken
into account that before the by-law came into effect CDC,
as the
owner of the premises in issue, warranted under clause 9.1.8 that the
lease premises was compliant with the national and
municipal building
regulations and by-laws on fire safety legislation which required the
installation, maintenance and, by implication,
the operation of a
fire protection system. This placed the responsibility for compliance
with all the laws, legislation, regulations
and by-laws of the
competent authorities that relate to fire and health safety squarely
on CDC. As the parties agreed in their
statement of facts, from the
onset when the parties concluded the lease agreement the obligation
to comply with the by-laws was
the responsibility of CDC.
[47]
I take the precaution laid bare in the majority judgment in
Chartaprops
that the application of non delegability is
undesirable and I do not intend to deviate from this precedent
setting judgment. But
I also take heed of what Nugent JA stated in
his minority judgment of the same judgment at paragraph [14] that:
‘
There
will be no doubt be cases – particularly where skill is
required for precautions to be taken – where no more is
required of a reasonable person but to appoint a competent person to
guard against the harm. As Van Wyk J said in
Rhodes
Fruit Farms Ltd v Cape Town City Council
[12]
in
a passage that was cited with approval in
Langley
Fox
:
“
It
is the duty of the employer to take such precautions as a reasonable
person would take in the circumstances. I do not, however,
consider
Dukes’ case as an authority for the proposition that the
employment of a skilled independent contractor, where the
extent of
the danger and the reasonably practical measures to minimise it can
only be determined by such skilled person, cannot
in any
circumstances constitute a discharge of the employer’s
aforesaid duty. … There may well be situations in which
a
reasonable person would rely solely on an independent skilled
contractor to take all reasonable precautions to eliminate or
minimize damage to another, and in such circumstances it could not be
said that he was negligent if such contractor fails to act
reasonably. In my opinion, therefore, the duty to take care where the
work undertaken is per se dangerous could in some cases be
discharged
by delegating its performance to an expert.”’
[48]
He further added that:
‘
But
there are other cases, as I hope I have made clear, in which a
reasonable person in the position of the defendant is expected
to
ensure that reasonable precautions are taken to avoid harm. The
defendant is free in those cases to appoint someone else to
take
those precautions but that by itself will not discharge the
defendant’s duty. As pointed out in the passages from
Langley
Fox
and
Kruger
v Coetzee
to which I referred earlier
that the standard of care that is required of the defendant will be
determined by the circumstances
of the particular case.’
[49]
In my mind the relationship between the appellant and CDC was which
Nugent JA referred to as ‘a relationship of special
dependence
or vulnerability’ when a person:
‘
is
specially vulnerable to danger if reasonable precautions are not
taken in relation to what is done on the premises. He or she
is
specially dependent upon the person in control of the premises to
ensure that such reasonable precautions are in fact taken.
Commonly,
he or she will have neither the right nor the opportunity to exercise
control over, or even foreknowledge of, what is
done or allowed by
the other party within the premises.’
It
indeed calls for a higher standard of care.
[50]
Reverting to the facts of this case, as at the time the agreement was
concluded the parties were conscious of the purpose for
the
construction of the factory for the manufacture of polymer for
automotive components which by its very nature – use of
highly
flammable material – created hazardous conditions. They were
aware that CDC had to comply with all the applicable
legislations,
regulations and by-laws of the municipality under which the lease
premises was located on – importantly the
fire and health
safety by-laws. That is why the fifth respondent upon seeking advice
from the local municipality, was made aware
of the fire system
compliance provisions and it in turn made CDC aware and its mandate
on the installation and maintenance of the
fire system was extended.
[51]
At the time the fire broke out and caused damages, the suppression
system was deactivated through the omission of the fourth
and fifth
respondent. CDC through its agents – the fourth and fifth
respondent – failed to notify the controlling authority
that
the system was rendered inoperable because the gas cylinders were not
fitted which would result in the fire-protection system
not being
activated. In the circumstances, CDC was not in compliance with the
by-laws. In this sense the warranties were breached.
It is of no
consequence that the fourth or fifth respondents did not inform CDC
that the system was deactivated after the installation.
What is clear
is that CDC failed to ensure that reasonable precautions were taken
and is liable for the consequent damages.
[52]
What solidifies the case of the appellant and distinguishes this case
from
Chartaprops
is that in addition to all the legislation, regulations and by-laws
which imposed a duty on CDC to ensure that the lease premises
is safe
for the purpose for which it was leased, CDC warranted its safety in
respect of inter alia fire. A warranty is a contractual
term by which
a party to a contract assumes absolute or strict liability for proper
performance, to the extent that he cannot rely
on impossibility of
performance or absence of knowledge of fault to escape liability.
[13]
Put
differently, the warranties were an additional guarantee to the terms
of the agreement between the parties ie apart from the
legislative
provisions referred to above. The warranties were therefore binding
on CDC as arising from the agreement. CDC, cannot
therefore escape
liability.
[53]
In my view, CDC must make good on the warranties it provided not only
upon handing over of the lease premises but, as it must
follow
axiomatically, throughout the entire period of the lease because, as
the court stated in
Bell
v Ramsay
,
[14]
almost
a century ago which is still good law today: ‘it makes no
difference whether it is stated in so many words to constitute
warranties or not, so long as it was intended to convey to the mind
of the [lessee] that the [lessor] intended the affirmation
to
constitute a promise.’ CDC must be held bound to such
affirmations because they led Rehau to conclude the agreement.
[54]
In the light of what I have stated above, I am ineluctably led to
conclude that the activation of the gas cylinders forming
part of the
fire suppression system falls within the scope of the express
warranties – in particular clause 9.1.8. In my
view, therefore,
the court a quo erred in holding otherwise.
[55]
Even the indemnity clause CDC attempted to rely on which makes
provision for the limitation of CDC’s liability in a claim
for
damages, cannot – on the findings I have made – assist
CDC. Rehau has also succeeded in locating the breach of
the
warranties within the four corners of the indemnity clause.
Accordingly, CDC is liable to Rehau in contract for the damages
caused by the fourth and fifth respondent as its agents.
[56]
In the result I would set aside the finding of the court a quo and
substitute same with the following:
‘
1
The sixth respondent is liable in contract for any and all damages
suffered by the appellant arising out of the fire in the low
voltage
room on 6 February 2010.
2 The sixth respondent to
pay the appellant’s costs, including costs consequent upon
employing two counsel.’
________________________
B C Mocumie
Judge of Appeal
Makgoka
JA dissenting
[57]
I have had the benefit of reading the judgments of my colleagues
Eksteen AJA and Mocumie JA. Eksteen AJA concludes that once
the
municipality had satisfied itself that the building had been erected
in accordance with the provisions of the National Building
Regulations and Building Standards Act 103 of 1977 the fire
suppression system could be activated or deactivated according to
operational requirements. Thus, he concludes, this does not affect
the certificate of occupancy.
[58]
In my view, this conclusion does not sufficiently take into account
the context of the warranties. It is now settled that when
interpreting a contractual provision, the context in which the
provision appears, and the apparent purpose to which is directed
are
among the factors to be considered.
[15]
In
the present case, the context is this. The nature of the lease
premises – a factory building constructed of steel and masonry
with timber trusses – required fire and safety compliance.
Thus, the municipality required the installation of a gas fire
suppression system, to render the lease premises compliant. Even
though the agreement initially did not contemplate the installation
of the gas fire suppression system, clause 9.1.8 of the warranties
did require the lease premises to comply with fire and health
safety.
[59]
When the municipality required the installation of the system, that
requirement was suffused into the agreement. Accordingly,
CDC’s
responsibility did not start and end with the installation of the
system. It had the obligation to ensure that the
system achieved the
purpose for which it was installed. Otherwise, the purpose of the
warranty would be undermined. Seen in this
light, CDM’s
obligation in respect of the gas fire suppression system was not a
once-off event. It was ongoing, and continuous
for the entire
duration of the lease agreement.
[60]
From the evidence, it is clear that had the municipality been aware
that the fire suppression system was not activated at the
time of
inspection, the certificate of occupancy would not have been issued.
And because the fire suppression system was a continuous
safety
consideration, if at any time the municipality became aware that the
installed fire suppression system would not perform
the function for
which it was installed, it would have withdrawn the certificate of
occupancy. In both instances CDM would have
been required to take
steps to ensure that the system was fit for purpose. Otherwise, the
occupancy certificate would have been
withheld for non-compliance,
and the agreement between the parties would have been impossible to
implement. This is how central
a functioning gas fire suppression
system was to the agreement.
[61]
It follows that CDM cannot escape liability merely on the basis that
it had installed a fire suppression system, without ensuring
that it
was fit for purpose. For these reasons I agree with the conclusion
reached by Mocumie JA.
__________________
T M Makgoka
Judge of Appeal
APPEARANCES:
For
Appellant: RG Buchanan SC, with him BC Dyke SC
Instructed
by: Pagdens Attorneys, Port Elizabeth
Claude
Reid Attorneys, Bloemfontein
For
Sixth Respondent: BJ Pienaar SC, with him M Pango
Instructed
by: Smith Tabata Inc, Cape Town
Webbers,
Bloemfontein
[1]
KPMG
Chartered Accountants (SA) v Securefin Limited
& another
[2009] ZASCA 7
;
2009 (4) SA 399
(SCA) para 39.
[2]
Evans
& Plows v Willis & Co.
1923 CPD 496
at 502.
[3]
Natal
Joint Municipality Fund v Endumeni Municipality
[2012]
ZASCA 13
;
2012 (4) SA 593
(SCA) para 18. See also
Novartis
v Maphil
[2015]
ZASCA 111
;
2016 (1) SA 518
(SCA);
[2015] 4 All SA 417
(SCA) paras
26-28 and 31.
[4]
As defined in the South African
Mineral and Petroleum Resources
Development Act 28 of 2002
.
[5]
Section
21(3)
By-law relating to fire safety (2007).
[6]
Section
21(6)
By-law relating to fire safety (2007).
[7]
Chartaprops
Pty Ltd & another v Silberman
[2008] ZASCA 115
;
2009
(1) SA 265
(SCA);
[2009] 1 All SA 197
(SCA); (2009) 30 ILJ 497
(SCA); [2008] ZASCA 170; [2008] ZASCA 115.
[8]
Kruger
v Coetzee
1966 (2) SA 428
(A) 430E-H.
[9]
Langley
Fox Building Partnership (Pty) Ltd v De Valence
1991
(1) SA 1
(A) 8F-H.
[10]
Pretoria
City Council v De Jager
1997
(2) SA 46
(A) at 55H-56C.
[11]
A J Kerr ‘Mandataries and Conductores Operis’ (1979) 96
SALJ
at 323.
[12]
Rhodes
Fruit Farms Ltd v Cape Town City Council
1968
(3) SA 514
(C) at 519.
[13]
See
Van der Merwe SWJ et al
Contract
General Principles
4 ed (2012) at 256.
[14]
Bell
v Ramsay
1929
50 NPD 265
at 272 with reference to
Naude
v Harrison
1925
CPD 84
at 90 and other cases cited therein.
[15]
Natal
Joint Municipality Fund v Endumeni Municipality
[2012]
ZASCA 13
;
2012 (4) SA 593
(SCA) para 18;
Bothma-Batho
Transport (Edms) Bpk v S Bothma & Seun Transport (Edms) Bpk
[2013] ZASCA 176
;
2014 (2) SA 494
(SCA) para 13;
Airports
Company South Africa v Big Five Duty Free (Pty) Ltd
[2018] ZACC 33
;
2019 (2) BCLR 165
(CC) para 29.