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[1999] ZASCA 36
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Minister of Public Works and Land Affairs v Group Five Building Ltd (606/96) [1999] ZASCA 36; [1999] 3 All SA 467 (A); 1999 (4) SA 12 (SCA) (28 May 1999)
Case
No 606/96
IN THE SUPREME COURT
OF APPEAL OF SOUTH AFRICA
In the
matter between
THE
MINISTER OF PUBLIC WORKS AND
LAND
AFFAIRS APPELLANT
AND
GROUP FIVE
BUILDING LIMITED RESPONDENT
BEFORE: HEFER, NIENABER, MARAIS, SCHUTZ AND PLEWMAN JJA
HEARD: 13 MAY 1999
DELIVERED: 28 MAY 1999
SCHUTZ
JA
Building
contract - nominated sub-contract works form part of works under main
contract - main contractor responsible for such works
being according
to specification - commencement of prescription of claim for
remedying defective work.
______________________________________________________
J U D G M E N T
______________________________________________________
SCHUTZ JA
:
Some
years ago the old Roeland Street gaol in Cape Town was converted into
a State archive. The main contractor was the respondent
Group Five
Building Limited (“the contractor”). The government is
represented in the appeal by the appellant, the
Minister of Public
Works and Land Affairs. I shall refer to the government as “the
employer”. Because of the use
to which the building was to be
converted it was important that a proper fire-alarm system be
installed. This work was to be done
by a specialist nominated
sub-contractor. The company ultimately nominated was KPL-ETSA (Pty)
Limited (“the sub-contractor”).
For ease of exposition I
shall refer to these three persons using pronouns appropriate to
natural persons.
Various disputes led to a trial
between the employer and the contractor. The only dispute ventilated
on appeal relates to a damages
counterclaim brought by the employer
against the contractor. It concerns the cost to the employer of
putting right defective
work done by the sub-contractor. Contrary
to the specification, the field wiring had numerous joints when it
should have been
continuous, and certain conductors had differently
coloured tracer strips. Van Zyl J in the Cape Provincial Division
held that,
although the sub-contract works formed part of the entire
works which the contractor had to deliver to the employer, the
contractor
was not liable to the employer for the defective work, in
that there was no duty upon the contractor to supply “technical
supervision” of the sub-contractor’s work, as opposed to
his acknowledged duty to co-ordinate the works and provide
general
supervision. Leave to appeal having been refused by Van Zyl J, it
was subsequently granted on petition. Both in the
trial and on
appeal questions of
quantum
were left over.
The
institution of the nominated sub-contract has long been known to our
building trade and our law. Its first essential quality
is that the
employer reserves to himself the right to nominate as sub-contractors
particular persons to perform specified parts
of the overall works.
A common reason is that he wishes to have control over the selection
of the persons who will perform specialised
and skilled work. But
another reason, becoming increasingly common because of increasing
specialisation and use of sub-contractors,
is to obtain competitive
tenders for sub-contracted works. A second essential feature is
that the contractor is obliged to
accept the nomination, subject to a
limited but nonetheless important right of challenge. A third is
that the contractor must
enter into a sub-contract with the person
nominated, usually one containing the same terms, particularly as to
performance, as
those contained in the main contract. A fourth is
that there is no privity of contract between the employer and the
sub-contractor.
From this flows a fifth, that the employer compels
performance of the sub-contract not directly, but through his
remedies against
the contractor under the main contract. A sixth is
that in a bills of quantities contract a figure is inserted in the
bills for
the nominated sub-contract works which is called a
provisional sum, provisional because when a payment certificate is
prepared
this sum is struck out and replaced by the contract price
derived by multiplying the actual measured quantities by the
appropriate
unit rates in the bills. A common further feature is
that the terms of the sub-contract are settled only after the main
contract
has been concluded. This description is a broad one, and,
of course, its accuracy in a particular case depends upon the terms
of the particular contract. The entire machinery, evolved over many
years, is designed to avoid privity between the employer and
the
nominated sub-contractor, whilst retaining substantial control over
the sub-contract works in the employer’s hands.
Anyone who has
had experience of the electrician driving a hole through the wall
after the plasterer has completed his work, or
the installer of the
alarm lights putting nails into the handiwork of the waterproofer,
will understand the frustrations caused
by everybody blaming someone
else, in the absence of a single contractor to whom one may look to
sort out such matters. This is
the main motive behind the avoidance
of privity with sub-contractors. But the machinery does have
disadvantages for the contractor,
who has to put up with a
sub-contractor whom he might not himself have selected. In more
recent times forms of contract have been
evolved which press less
heavily upon the contractor, but the contract with which we are
concerned in this case is of the traditional
kind, and I think that
my general description is appropriate to it.
The
main contract, concluded in July 1987, is a bills of quantities (or
“rates”) contract. The documents making it
up are the
tender, including conditions of tender, its acceptance, the articles
of agreement, the conditions of contract (GO 677),
the specification,
the drawings and the bills of quantities. When the contract was
concluded, the specification, drawings and
bills for the fire-alarm
sub-contract had not yet been prepared. Much was sought to be made
of this fact.
Do
the sub-contract works form part of the main contract works?
Notwithstanding that the tender
form stated that the fire-alarm nominated sub-contract would later be
advertised separately, it,
together with other such nominated
sub-contracts, was said to be part of the “works in accordance
with the drawings, specifications,
bills of quantities and conditions
of contract”. The intention was that the fire-alarm drawings,
specifications and bills
would be brought into existence and would
form part of the contract. Therefore, notwithstanding that the
sub-contract specifications
and bills had not yet been prepared, I
would have thought that this provision alone puts an end to the much
pressed submission
that the nominated fire-alarm sub-contract works
did not form part of the “Works” as defined in clause 1
(1) (n) of
the conditions of contract. Essentially the “Works”
are “
all
the buildings, structures or services ..... that are to be erected or
constructed in terms of this contract ...” (own emphasis).
Clause 3(1) requires the contractor to “provide everything
necessary for the proper execution of the works, .... and carry
out
and complete the works to the satisfaction of the
representative/agent ....” Clause 21(1) requires the
contractor
to deliver “the works and premises when completed
.... fit for occupation and complete in every particular ....”
It is difficult to think of an archive building fit for occupation
without a proper fire-alarm system.
As the argument of Mr
Duminy
,
for the contractor, developed, it became apparent that what he was
contending for was that clause 16, headed “Nominated
Sub-contractors”, supplied a self-contained contractual regime
which took all nominated sub-contractual works outside the
ambit of
the “Works” and beyond the reach of operation of clauses
3 (1) and 21 (1), as also much of the rest of the
contract. I must
say that if clause 16 does have this sequestering function, that
function is most artfully masked and seemingly
much contradicted.
However, in order to demonstrate this conclusion, and also for the
purposes of the next argument, concerned
with the extent of the
contractor’s duties even if the “Works” argument
should fail, it is necessary to set out
much of clause 16, which
reads in part:
“16. (1) The director-general may nominate a
sub-contractor to execute work or supply or fix goods and such
sub-contractor
shall hereinafter be referred to as a ‘nominated
sub-contractor’.
16. (2) The fact that the director-general has
nominated a sub-contractor shall not create privity of contract
between the director-general
and such nominated sub-contractor.
16. (3) The contractor shall at any time
on being requested to do so by the director-general enter into a
contract with a nominated
sub-contractor within fourteen days of such
request in respect of the work for which he has been nominated, in
which contract the
contractor shall,
inter
alia
, secure
mutatis
mutandis
for himself the same rights that the
director-general has in terms of this contract. If the contractor
satisfies the director-general
in writing that he is unable to enter
into such a contract because -
16. (3) (a) he has an objection which is acceptable to
the director-general against such nominated sub-contractor;
16. (3) (b) a nominated sub-contractor declines to
enter into a contract with the contractor whereby he undertakes the
obligations
set above; or
16. (3) (c) a nominated sub-contractor declines to save
harmless and indemnify the contractor against any negligence on the
part
of such nominated sub-contractor, his agents, workmen and
servants or against any misuse by him or them of any materials or
plant
being the property of the contractor and against all claims a
aforesaid or any claim under the workmen’s Compensation Act,
1941, as amended,
The
director-general shall be entitled to nominate another
sub-contractor.
16. (4) The contractor furthermore undertakes -
16. (4) (a) as against the
director-general, to carry out his obligations to the nominated
sub-contractor under the nominated sub-contract
and to co-ordinate
the nominated sub-contractor’s work and the work under the
main contract
and to ensure that the nominated
sub-contractor carries out and completes the work under such
sub-contract
to the director-general’s
satisfaction;
16. (4) (b) in case of default by the nominated
sub-contractor, to take steps against the nominated sub-contractor
similar to those
set out in 24 hereof if and as requested to do so by
the director-general or, if requested to do so by the
director-general, to
cede to the director-general any rights that the
contractor may have against such nominated sub-contractor arising
from such default;
16. (4) (c) to institute action against the nominated
sub-contractor to enforce compliance by the nominated sub-contractor
with
such sub-contract or to claim damages for non-compliance or
breach of such sub-contract or to take such other steps or to claim
such other sums as may be taken or may be claimable under or arising
from non-compliance or breach of such sub-contracts or from
any
indemnities given by the nominated sub-contractor to the contractor.
If requested to do so by the director-general or, if
requested to do
so by the director-general, to cede to the director-general any
rights that the contractor may have against such
nominated
sub-contractor arising from such non-compliance or breach;
16. (4) (d) if requested to do so by the
director-general, to apply for the sequestration of the nominated
sub-contractor’s
estate (or for the liquidation thereof in the
case of a company), to prove claims against such estate and to take
all such steps
as may be necessary for the recovery of amounts due
under or arising from such sub-contracts or any indemnities given or,
if requested
to do so by the director-general, to cede to the
director-general any rights that the contractor may have against such
nominated
sub-contractor.
16. (4) (e) in the event of the liquidation
or sequestration, as the case may be, of the nominated
sub-contractor’s estate
or the abandonment by him of his
contract or of the termination of such contract, to enter into a
contract with another contractor
nominated by the director-general to
complete the work under such first mentioned contract; and further
agrees that all the provisions
of this contract shall apply
mutatis
mutandis
with equal force to such fresh or
any substituted nominated sub-contracts;
16. (4) (f) to advise the director-general immediately
in the case of the sequestration of the estate of the nominated
sub-contractor
(or of its liquidation, in the case of a company) or
of any breach of contract by such nominated sub-contracts or of his
failure
to pay any damages or the amounts due under or arising from
such sub-contractor and of the steps he proposes to take to carry out
his obligations as set out above;
16. (4) (g) that his failure to carry out any of his
obligations under 16 hereof shall constitute a default as
contemplated under
24 hereof and that the director-general shall be
entitled to exercise the rights therein set out and, in addition
thereto, to claim
from the contractor any damage, loss or costs that
the director-general may suffer as a result of such failure, to
determine such
damage, loss or costs and to deduct the same from any
amounts due to the contractor under this contract or any other
contract heretofore
or hereafter entered into between the government
and the contractor.
16. (5) Payment shall be made to a nominated
sub-contractor by the contractor within seven days of his receipt of
a progress payment
under 23 hereof which includes the value of such
nominated sub-contractor’s work.
(6) . . .” (Own emphasis).
In
clause 16 (4) (a) conceivable support for the contractor’s
argument may be found in the distinction drawn between the
nominated
sub-contractor’s work and the work under the main contract, but
I think that all that is in fact achieved is a
convenient means of
distinction between the particular sub-contractor’s work and
all the other work, particularly as the
“work under the main
contract” must include work done by other nominated
sub-contractors. This is so because the contractor
does not dispute
that he must co-ordinate the work of all sub-contractors as well as
his own work. There are in fact other nominated
sub-contractors.
The result is that no significant support can be derived from the
phrase in question. On the other side there
are numerous clauses
which would be unworkable, or practically so, if the work done by
nominated sub-contractors did not form part
of the works. Among them
are 6 (5), 6 (6), 6 (7), 9, 10 (2), 13 (2) and 22 (1). To take two
examples. Clause 6 (7) entitles the
employer’s engineer to
instruct the contractor to remove “any part of the Works”
which he decides is not in accordance
with the contract. This is a
right fundamental to the proper performance of the contract, and it
is difficult to conceive of its
being hedged around in the case of
sub-contractors. Clause 9 entitles the engineer to be notified by
the contractor whenever “a
portion of the Works” subject
to measurement is to be covered up. Is the work of a nominated
sub-contractor, whose work
must also be measured, to be excepted?
More generally, the exclusion of such work from the “Works”
would be quite
contrary to one of the essential features of the
institution of nominated sub-contracts.
Faced with such difficulties,
Mr
Duminy
was driven
to concede that what the contractor had to deliver under the main
contract was a building with a fire-alarm system and
not a building
devoid of one. This concession, inevitably made, I think, cannot be
successfully qualified, as
Mr
Duminy
tried to do,
and the
ineluctable
conclusion is that work to be performed under the fire-alarm
nominated sub-contract also constitutes part of the “Works”
under the main contract. This conclusion agrees with van Zyl J’s
judgment up to this point.
Is
the contractor responsible for the quality of the sub-contract works?
The next main argument was that,
even if this be so, it was not part of the contractor’s duties
to exercise or provide “technical
supervision” (as
opposed to administrative or co-ordinating supervision).
Consequently, so it was contended, the contractor
cannot be held
liable for defective work of this nature done by a nominated
sub-contractor being paid for. Faced by questions
as to where
technical specialist skill ended and where ordinary builder’s
skill began,
Mr
Duminy
adapted his
argument so that his submission is that the contractor is relieved
from examining the quality of
all
nominated sub-contract works, regardless of the level of skill
required to test their sufficiency. This broadening of the
submission
was again, I think, inevitable, in the light of an example
such as this. Suppose that the contractor is an ordinary builder
who
is going to do the brickwork, but the employer has decided that
the foundations are to be laid under a nominated sub-contract.
I
do not think that any real distinction in the degree of skill is
perceivable, so that a distinction cannot be made on that ground.
Hence the line of distinction has to become nomination or no
nomination, leading inevitably to the submission mentioned earlier
that the works of
all
nominated sub-contractors are excluded from the works. Pausing at
this point, I find the notion that the contractor in the
example
given is not liable for the quality of the foundations a startling
one.
The general provision in clause 16
that is relevant and in itself conclusive on the question presently
under consideration is
that contained in clause 16 (4) (a), the
pertinent part of which I repeat : “The contractor furthermore
undertakes - . .
. (a) . . . to co-ordinate the nominated
sub-contractor’s work and the work under the main contract and
to ensure that the
nominated sub-contractor carries out and completes the work
under such sub-contract to the Director-General’s
satisfaction”. (Own emphasis). The sense in which the word
“ensure”
is used here is “to warrant” or “to
guarantee”. In other words the contractor undertakes to the
employer
that he will deliver the sub-contract works to the employer
in terms of the specifications. The employer’s position is
further
strengthened by clause 16 (4) (g), which makes the
contractor’s failure to carry out any duty under clause 16 a
breach, which
entitles the employer to resort to the remedies
contained in clause 24. Clause 24 (1) (d) in its turn states that
the contractor
is in default if he fails to comply with the
provisions of clause 16. Accordingly I must disagree entirely with
van Zyl J’s
conclusion that: “[T]here is no basis for the
[employer’s] suggestion that the [contractor] breached the main
contract
by failing to ensure that [the sub-contractor] complied with
its obligations in terms of the nominated sub-contract”. As
to
how the contractor’s duty was to be fulfilled, in argument much
emphasis was placed upon legal remedies. Sensible owners
and
builders do not conduct their business in the courts, except when it
is essential. In the normal course the contractor’s
skilled
supervisor or variously skilled supervisors should examine work soon
after it is done and order sub-contractors, whether
nominated or
not, to remove work not in accordance with the contract and do it
over properly. Had the contractor in this case
equipped himself to
do that, much cost, both legal and otherwise, would have been spared.
Contrary to the views I have
expressed,
Mr Duminy
argued that the words quoted from clause 16 (4) (a) do not convey
the generality which on their face they bear, but that they
are
confined and limited in their operation to the particular remedies
set out in the succeeding sub-paragraphs, such as (b) (c)
and (d).
Further it was argued that the only initiating steps that the
contractor need take are to advise the employer of the
sub-contractor’s breaches and other shortcomings. Thereafter
he may sit back passively and await the employer’s decisions
to do or not to do this or that. I disagree entirely. Clause 16
(and particularly sub-clauses (b) to (f) of it) is not a limiting
and
exclusive codification of the employer’s rights and the
contractor’s duties in respect of nominated sub-contractors.
It must be seen against the ample background of the common law and
against the rest of the contract. The contractor has his own
rights
against the sub-contractor, even be he nominated, under the
sub-contract as given force by the common law, and he is
obliged to
use his rights when indicated. The employer’s position is
similar, save that he relies upon the main contract,
again as given
force by the common law, and the power he is given under the same to
require the contractor to compel the sub-contractor’s
performance under the sub-contract. He is not confined to the
special remedies set out in clause 16 (4). These are explicit
additional remedies, which may either not be available at common law,
or which might arguably fall into that class. The object
is to
strengthen the employer’s position, where he has no privity
with the sub-contractor, and avoid unnecessary arguments.
I conclude
that clause 16 (4) (a) means exactly what it says. The contractor
must ensure that the nominated sub-contractor performs,
or face
liability in damages.
If
the contractor does not dispose over the skills necessary to
supervise specialised work then he must either acquire them or
not
undertake the contract. He is not entitled to make a virtue of his
lack of skill to excuse himself from supplying “technical
supervision”. The contractor called witnesses who claimed that
builders in the Western Cape did not have such skills and
they were
not expected to have them. According to them the contractor was
entitled to rely on the employer’s specialist
engineer, in this
case Reitz and Geithner. No trade usage to this effect was pleaded.
No doubt there are several reasons for
this, one of them perhaps
being that on the contractor’s inevitable concession a builder
would, in terms of such a trade
usage, also not be expected to
provide “technical supervision” of foundation laying, in
the example already given.
Trade usage aside, this evidence is
inadmissible. It is no mere background. It directly contradicts
the contract. I say this
because the employer’s engineer is
employed and paid by him to look after his interests. He is not
employed nor paid by
the contractor. Nor may the contractor give him
any instructions. Nor does the engineer owe loyalty to the
contractor. He owes
it to the employer, who is at times the
contractor’s adversary with the engineer his champion.
A further argument raised on behalf
of the contractor is that there is no separate item for “technical
supervision”
in the bills of quantities.
Ergo
no duty, runs the argument. This argument stems from the notion that
there is something extraordinary or unexpected, rather than
integral,
about such supervision, which was the view expressed in the evidence
held inadmissible. I do not agree. No special
rate is provided for
“ordinary” supervision of sub-contractors or for
supervision of the contractor’s own employees.
Yet such
supervision must be provided. That is common cause. What has to be
decided is whether in terms of the contract “technical”
supervision also has to be provided. As I have sought to
demonstrate, the distinction between “technical” and
“ordinary”
nominated sub-contracts fades away once
examined. There is therefore simply no basis for requiring special
provision for supervision
if supervision in either form is needed to
deliver complete works complying with the contract. Nor is there
any basis for requiring
special provision simply because a
sub-contractor is nominated, unless one starts from the premise that
the contractor is not responsible
for the performance of such
persons, which would beg the question.
Accordingly,
subject to the further points to be dealt with, I am of the view that
the counterclaim should have succeeded.
I
have made no mention of English cases such as
North
West Metropolitan Regional Hospital Board v T A Bickerton & Son
Ltd
[1970] 1 All ER
1039
(H L) and the considerable literature that they have generated,
not because I am unacquainted with the same, but because, whatever
tendencies may be indicated, they do not help to solve the issues
before us, which involve a breach by the contractor.
The
effect of taking cession
As
was his entitlement, the employer did take cession of the
contractor’s rights against the sub-contractor, under clause
16
(4) (b). This act, so it was argued, once performed constituted an
election, which when made constituted a waiver of all other
rights
which the employer might otherwise have had against the contractor. I
can find no trace of a suggestion in the clause that
the taking of a
cession has so drastic a consequence as to terminate permanently all
the employer’s remedies. He might,
for instance take cession
at a stage when neither he nor the contractor has means of knowing
whether the sub-contractor is worth
suing. Why, in such a situation,
should he not be entitled to turn back to the contractor upon
discovering that the sub-contractor
is indeed not worth powder and
shot? Cession is, to my mind, merely an additional course, not
available as of right under the
common law, but in some cases of
value to the employer. He might, for instance, conclude that his
contractor has not the means,
or the special skills or even the
determination to pursue litigation to a successful conclusion. Even
without these factors he
may simply prefer to have direct control
over the litigation.
There was some cursory debate before
us as to whether it would be open to an employer who has demanded and
received cession of
the contractor’s rights against the
sub-contractor to institute and pursue a claim against the contractor
without either
excussing the sub-contractor or re-ceding the rights
to the contractor, or without having some sufficient justification
for not
proceeding against the sub-contractor in terms of the
cession. As the matter was not fully argued, I prefer to leave the
question
open. This point was not raised by the contractor either in
the court
a quo
or in this court. It arose from a question put by the court. Even
if the point is sound in law, if it had been raised as a special
dilatory defence in the court
a
quo
the employer
might have been able to answer it by reference to facts which are not
before the court. Accordingly, it is not open
to the contractor to
rely upon it now.
Circumstances
surrounding termination of sub-contract as a defence
I mention this subject also because
it was argued, not because I think that it is an issue. It arises in
this way. After repeated
attempts had been made to obtain
satisfaction from the sub-contractor without avail, the contractor
wrote to the employer requesting
instructions to terminate the
sub-contract. (In passing, thereby impeccably recognizing the
long-established order of things as
between employer, contractor and
sub-contractor). On 2 December 1991 the employer responded by
instructing the contractor to
do so, which he did on the next day.
Also on 2 December the employer nominated two new persons to complete
the sub-contract, stressing
the urgency of the situation. The
contractor was asked to confirm the re-nomination. This the
contractor declined to do, on 4
December, giving as his reason that
it had not been given sufficient information as to the basis on which
the new nominees were
to be appointed. With a dispute as to the
financial implications of the first sub-contractor’s default in
prospect, the
contractor seems to have required the employer to
surrender his rights against him as the price of acceptance of the
new nominees.
This may have been a breach on the contractor’s
part. It seems as if it was.
Mr
Duminy
, however,
contends that it was the employer who was in breach. Who was in
breach was not an issue below, and even if it were possible
for us to
resolve the question, which I think it is not, I fail to see what
bearing it has on the decision of the issues which
are before us.
Supposing that the employer should have stayed his hand in making
the appointments and was for that reason in
breach, I do not think
that the administration of the contract is to be treated as the equal
of playing a game of forfeits, where
one wrong move entails losing
all. The postulate for purposes of this defence is that there had
been a breach by the sub-contractor,
for which the contractor was
responsible, and that the employer had consequently suffered damage.
It is possible that the extent
of the damage, i.e. the cost of
putting right, might have been less if the process of re-nomination
had run its full course, rather
than that the employer should have
engaged the two nominees as his direct contractors, which is what
happened when the contractor
adopted the stance already mentioned.
If so, this might be a matter for mitigation when
quantum
has to be decided (I express absolutely no opinion on the matter).
The employer’s conduct might also once have given rise
to a
claim by the contractor for the profit that he would have been
entitled to as a percentage of the ultimate price of the provisional
sum (the sub-contract price). But these are all things that would
have had to be raised and I fail to see that their possible
existence
in the past detracts from the fact that the employer has suffered a
loss for which the contractor is accountable if the
appeal succeeds
in other respects.
Prescription
Finally,
the contractor contends that, all else failing, the employer’s
counter- claim has become prescribed. The issue
is when prescription
began to run. The relevant facts are that the employer became aware
of the defects by not later than 30 May
1991. The sub-contract was
terminated on 3 December 1991. The employer’s counterclaim was
delivered on 1 December 1994.
In
terms of
s 12
(1) of the
Prescription Act 68 of 1969
prescription
commences to run as soon as a debt is due. A debt is deemed not to
be due until the creditor has knowledge of the
facts from which the
debt arises:
s 12
(3). If the employer’s claim in this case
began to prescribe only some time after the date on which the
employer gained
such knowledge, then the date of gaining knowledge,
which is to be taken to be 30 May 1991, would be irrelevant. My
conclusion
is that that is in fact the case. I accept the employer’s
argument that the earliest possible such date is 3 December 1991,
which falls within the prescriptive period. The basis of the
argument is that the employer would not have been entitled to bring
its damages claim merely upon the defective work originally delivered
being discovered. This is so, as it is of the nature of
a building
contract such as this one, that the defaulting party usually has an
opportunity and indeed a duty to put right initially
defective work.
Clause 6 (7), already mentioned, entitles the employer’s
engineer to require defective work to be done over,
and under the
sub-contract the contractor has the same right against the
sub-contractor. These are not the only provisions that
are relevant,
but it is unnecessary to refer to more. The sub-contractor’s
breach, once committed, is not set in stone.
The relevant engineer
can require the works to be broken up and the breach to be remedied.
But a stage is reached when the
defaulter is entitled to no more
chances. That is the very earliest stage at which the employer’s
damages claim could conceivably
have become due. In the present case
it could, at the earliest, only have been on the date on which the
sub-contract was cancelled,
3 December 1991, which falls within the
prescriptive period. The matter is complicated by the dispute about
the nomination of
new nominated sub-contractors, but this does not
detract from the fact that the very earliest date on which
prescription could
possibly begin to run
was
3 December 1991. The onus of proving that prescription had run
rested on the contractor and he has failed to do so.
For
these reasons I consider that the contractor has not proved that the
counterclaim has become prescribed.
The
appeal is allowed with costs, such costs to include those consequent
on the employment of two counsel.
The
following order is made in terms of an agreed draft:
1 Paragraphs 1, 5 and 6 of the order
of the court
a quo
are set aside.
2 It is declared that respondent should bear the
additional costs incurred as a result of the employment of the
sub-contractors
Visiotronic (Pty) Ltd and Whip Fire Protection
Services (Pty) Ltd including the related supervision costs of the
consulting engineers
J D Reitz and Geithner.
3 The matter is referred back to the
court
a quo
for a determination of the quantum of the claim in reconvention.
W
P SCHUTZ
JUDGE
OF APPEAL
CONCUR
HEFER JA
NIENABER
JA
PLEWMAN JA
I have had the benefit of reading
the judgment of Schutz JA in this matter. I am, with respect,
constrained to a different conclusion
for reasons which make it
necessary to expand upon the nature of the contract in issue.
Construction contracts for the erection
of large buildings or the
execution of substantial works are normally (and probably
necessarily) complex documents. One reason
why this is so is that
experience has taught that despite every effort to describe the work
to be performed with great exactitude
construction work entails
uncertainties which necessitate that such contracts incorporate
provisions which permit the omission
of, the addition to, or the
variation of the works. In the form with which this appeal is
concerned the contract is that classified
in our law as
locatio
conductio
operis
.
Several forms of contract are in common use. Lump sum contracts
cater in one way for the apportionment of the risks inherent
in
construction work. Contracts based on Bills of Quantities do so in
another way. The choice between these two forms (and indeed
others)
will be dictated by what the parties consider desirable in their
circumstances. Contract forms for both types have over
time been
developed on an industry basis such as those prepared and approved by
the Institute of South African Architects or the
Association of South
African Quantity Surveyors and the Building Industries Federation, or
in Great Britain a form published by
the Royal Institute of British
Architects. These documents are the subject matter of the standard
text books in this field. They
have very similar basic structures.
Why they are complex is because of the desire to define the work to
be done in such a manner
as to reduce the uncertainties as far as
possible. As is pointed out in the judgment of Schutz JA, often
provision is made for
the use of specialist subcontractors. This can
add to the complexities. Then too, terms are often included to allow
payment to
be made to the contractor as the work progresses. This is
usually done on the basis of interim valuations and measurements.
Control
of the standard of the work must then be exercised at the
time of the grant of certificates authorising payment. It is with a
contract in this general form that this appeal is concerned.
The appellant used its own standard contract forms.
The problem which arose related to the employment of a specialist to
instal
a fire alarm system. It will be convenient to refer to
appellant where it is appropriate as “the employer”and
the
respondent as “the contractor” (or, where the
context so requires, “the main contractor”). The parties
entered into a contract in July 1986 for the conversion of the old
Roeland Street gaol in Cape Town into a building to house the
State
Archives. The Department of Works’ standard tender and
contract forms were those used. The contract, as is always
the case
with such projects, was constituted by a number of separate
documents. These were:
i) A tender.
ii) An acceptance of tender.
iii) A formal contract.
iv) A set of Conditions of Contract.
v) A Bill of Quantities.
vi) Drawings and Specifications.
The structure is familiar. The fact that a
multiplicity of documents was to be used called for an order of
precedence to be laid
down because the standard forms could (and did)
lead to a conflict between separate parts thereof. What is
fundamental to the
case and to the proper construction of the
contract is that the contract is a Bill of Quantities contract. It
is so described
in the standard form used and its provisions clearly
take that form. The provision determining the order of precedence is
found
in the Bill of Quantities (the Bill). It provides:
“Indien daar enige teenstrydighede bestaan
tussen hierdie voorbereidsels en die kontrakvoorwaardes (GO 676)
geniet eersgenoemde
voorrang.”
In short the Bill carries the day in any case where
conflicts arise between its provisions and those in any other of the
contract
documents.
Another feature of the contract is that it makes
provision in
Section 6
of the Bill for prime cost items and
provisional sums. These are the subject of clauses 15(1) and (2) of
the conditions of contract.
Clause 15(2) is relevant to the dispute.
It reads:
“15(2) A provisional sum as indicated in the
tender documents for work to be performed by a Nominated
Sub-contractor or
for material to be supplied and fixed shall be
expended at such times and in such amounts in favour of such persons
as the Representative/Agent
shall direct. Such amounts shall be
payable by the Contractor or by the Director-General in terms of 16
(5), 16(6) or 16(7) hereof
as the case may be without discount or
deduction (accordingly all provisional sums are net). At the
settlement of an account the
amount expended shall be set against
such provisional sum and the balance shall be added to or deducted
from the Contract Sum,
as the case may be; provided that no deduction
shall be made by or on behalf of the Director-General in respect of
any damages
paid or allowed by any Nominated Sub-contractor to the
Contractor, the intention being that the Contractor and not the
Director-General
shall have the benefit of any such damages. The
Schedule Rates providing for profit and attendance on any provisional
sum shall
be adjusted on a value pro-rata basis.”
The provisional sums are introduced in the Bill by the
following provision:
“
VOORLOPIGE BEDRAE EN
BOUERSWERK IN VERBAND DAARMEE (ALLES VOORLOPIG)
Alle voorlopige bedrae is netto en
dek voorsiening van materiaal en toerusting en installasie waar van
toepassing deur spesialis
firmas. Voorlopige bedrae sluit
nie
bouersafslag in
nie, maar die tenderaar mag onder die ‘Profyt’-item
toelaat vir profyt soos hy nodig ag.
Die Kontrakteur word verwys na Klousules B7.1 en B7.2
van die ‘VOORBEREIDSELS’ afdeling vir definisies en
verstelling
van ‘Bediening’.”
I need not quote B7.1 and B7.2 but they do not place any
obligation on the contractor to supervise the work of nominated
subcontractors.
What is more, in paragraphs G, H and I provisional
sums are stated in respect of fire alarms and, as I shall show, in
fact provide
a provisional sum for “Bediening”.
Two features of the contract are important. One is the
power of the employer to vary the work by omission, addition or
variation.
Clause 18(1) provides that “no variations,
additions, omissions and substitutions whatsoever by the
Director-General shall
vitiate this Contract”. This is a
provision which can only effectively exist when it is coupled (as it
is in this case)
with provisions which determine changes in the price
where the scope of the work changes. To accommodate this the final
price
in this contract is determined only after completion of the
work.
Although much of what follows is set out in the
judgment of my brother Schutz it will also be convenient for me to
recount certain
facts. After the conclusion of the contract, and
clearly in terms of what the parties contemplated, tenders were
invited and obtained
for the fire alarm installation. As a result
the employer appointed a firm KPL-ETSA (Pty) Ltd (the subcontractor)
to do this and
instructed the contractor (in terms of clauses of the
contract to which reference will presently be made) to conclude a
contract
with the subcontractor to supply the necessary materials and
to instal the fire alarm system.
What has given rise to the litigation is the fact that
it became clear at some point that the subcontractor was not
performing
its obligations. In particular it was not installing
field wiring as specified. On 2 December 1991 the contractor (after
having
been instructed to do so by the employer) terminated the
subcontract. The subcontract work was at that time incomplete and in
part defective.
The sequence of events (upon which some argument was
based in this Court) was as follows. On 2 December 1991 the employer
wrote
to the contractor as follows:
“
According to your letter, the nominated
subcontractor - Messrs KPL-ETSA (Pty) Ltd - is in default.
...... you are hereby instructed to terminate your
contract with KPL-ETSA (Pty) Ltd.
The Department hereby nominates the following
subcontractors to complete the work - copies of quotations attached.”
(The names and the estimated value of the work and an
estimated completion date as well as the need to carry out the work
in phases
as required by the employer’s consultants are then
set out.)
On 4 December 1991 the contractor wrote to the
employer, in relation to the newly nominated subcontractors,
declining, for reasons
given, to enter into contracts with them. It
is unnecessary to deal at any length with this because it is
irrelevant to my reasons
for differing from Schutz JA. The final
outcome was that the employer wrote to the contractor on 9 December
1991:
“
The Department is of the view that your refusal
to employ the subcontractor’s ... constitutes a breach of
contract.
As the matter is one of extreme urgency, the Department
has no alternative but to conclude contracts directly with the
aforementioned
subcontractor. All the Department’s rights as
against yourselves are reserved.
You are also required, in terms of clause 16(4)(b) and
(c) of the contract, to cede to the Department, forthwith, all your
rights
against Messrs KPL-ETSA (Pty) Ltd.”
(This letter too featured in an argument before this
Court.)
The employer then employed the two replacement
subcontractors to remedy and complete the installation. It averred
that it had
incurred expense exceeding the original subcontract sum
in an amount of R755 484,53, mainly because this sum had been
unnecessarily
paid to the original subcontractor. It claimed this
from the contractor and (by way of an instruction to the Quantity
Surveyor)
deducted it in the final account prepared (in terms of
clause 23(4) of the contract conditions). A final account is only
prepared
when the work is complete.
This was the state of affairs when
the litigation commenced. The first area of disagreement related to
the deduction in the final
certificate of the sum of R755 484,53 and
the second to a claim by the contractor for extra remuneration under
the contract because
(so it was contended) it was given “late
instructions” and suffered delays. In the first claim the
contractor sought
a declarator to the effect that the employer was
obliged to bear all the costs related to the employment of the second
subcontractors
and, in the second claim a declarator that the
employer was obliged to compensate the contractor for its losses as a
result of
other delays and the “late giving of instructions”.
The latter claim was dismissed by the court
a
quo
and there
is no appeal against that order. An order was also sought requiring
the employer to rectify the final account by
deleting the deduction
therein of the above amount. This is merely consequential relief
flowing from the first claim. The plea
put all these matters in
issue. The employer at some later time (precisely when cannot be
determined from the papers) introduced
a counter claim for damages in
the amount of R755 484,53 on the grounds of an alleged breach by
the contractor of the main
contract (thereby reintroducing the amount
deducted in the final certificate in a different guise).
A number of pre-trial conferences
was held to obtain admissions and in an attempt to limit the issues.
Thereafter a document called
a “Statement of Case” (not
taking the form of a Stated Case in terms of the rules of court) and
a supplementary document
called “Agreed Statement of Issues and
Onera” were prepared. It was largely on the basis of the
admissions and the
contentions and counter contentions in these
documents that the trial was conducted. The parties also introduced
what were said
to be “agreed documents” without their
being identified and proved by witnesses. Only a very limited amount
of evidence
was led and what was led was the subject of an objection
to its admissibility. It was however agreed that quantum should
stand
over. In the end the court
a
quo
was asked to
decide the matter on the basis of the admissions to be found in the
pleadings and elsewhere, the documents which were
common cause, and
subject to argument on the objection, the evidence. It is not an
unfair comment that the pleadings themselves
are anything but models
of what they should be and that it is extremely difficult to be
certain what was ultimately in issue.
What is especially difficult
to discern clearly is the basis upon which the damages claimed in the
claim in reconvention are said
to have arisen. It would seem that
the amount claimed represents sums paid to the first subcontractor
for work which was duplicated
by the second subcontractors. Schutz
JA so understood the submission made in this regard and so did I.
Without wishing to sound unduly critical of counsel’s
well intended efforts, what they in fact achieved seems to have been
the opposite of what they intended. A considerable amount of
confusion arose. In order to ensure that this Court dealt only with
matters which were truly appealable counsel were required to
formulate a statement of the issues on appeal which they did in the
form of a draft order - being the order proposed in Schutz JA’s
judgment.
The appeal accordingly must be dealt with on the basis
of the submissions made and contentions advanced in this Court, in
the heads
of argument and by counsel in argument.
The arguments revolved around the provisions of
clauses 3(1) and 16 of the contract. The foundation stone in
appellant’s
argument is the contention that the contractor is
obliged by the terms of clause 3(1) to deliver (as one would in a
sale or a lump
sum contract) the complete works which would include
the subcontractor’s work. Clause 3(1) reads:
“
3(1) The Contractor shall provide everything
necessary for the proper execution of the Works, comply with the
provisions of the
Contract and Orders in Writing and carry out and
complete the Works to the satisfaction of the Representative/Agent,
who may from
time to time issue further or amended Drawing and/or
Orders in Writing.”
The contractor’s counsel sought to argue that the
subcontract works are not covered by this clause. It was said that
as a
fact no specification for any subcontract work existed at the
time when the contract was concluded. It followed, so it was argued,
that the subcontract works were therefore a separate form of works
not falling within clause 3(1).
There is no substance in this submission. Subcontract
works were clearly within the contemplation of the parties at the
time of
their concluding the main contract. But what is even more
compelling is the fact that the contract not only made specific
provision
for the engagement of nominated subcontractors but it is
specifically designed to permit changes in the works if such are
required
or desired by the employer. As has been pointed out clause
18(1) states that changes will not vitiate the contract. What
finally
constitutes the works is only determined at the time of
delivery (but, I should add, delivery as provided for in the
contract).
I agree with Schutz JA’s rejection of this
argument.
However a further word is necessary. The appellant’s
claim in reconvention is also based on a misconception of the meaning
of clause 3(1). Clause 3(1) does not provide (as appellant’s
argument suggests) that the State Archive Building is to be
handed
over to the employer. The object of clause 3(1) is to saddle the
contractor firmly with the obligation to execute the work
in the
manner provided in the contract and to clearly vest control of the
manner in which and standard to which the work must be
carried out in
the Representative/Agent (the “agent”). It is this
control which is vital to the operation of the contract.
Delivery
(in the sense of the pleading) is governed by clause 21. It takes
place in stages. There is a “first delivery
stage” and a
“final delivery stage”. Both are controlled and directed
by the agent in terms of certificates
to be issued. Delivery is
subject to the agent’s opinion as to when (in the case of first
delivery) the works are “fit
for occupation” and (in the
case of final delivery) subject to all defects having been rectified.
I will return to this
aspect when dealing with appellant’s
claim in reconvention. I would only add that Schutz JA also speaks
of “delivery
under the main contract of a building”. To
do so is, with respect, to stray into the concepts of a lump sum
contract where
such a statement would be true. It may seem a fine
point but in my view it is important to keep firmly in mind that the
present
contract is one for work to be executed. If this is not done
relevant provisions which govern the determination of the
contractor’s
obligations can be misunderstood.
The other clause around which the debate centred was
clause 16. Although it is set out in Schutz JA’s judgment, it
will
be convenient to repeat it in part here. The relevant
provisions read:
“
16. (1) The Director-General may nominate a
sub-contractor to execute work or supply or fix goods and such
Sub-contractor shall
hereinafter be referred to as a ‘Nominated
Sub-contractor’.
16. (2) The fact that the Director-General has
nominated a Sub-contractor shall not create privity of contract
between the Director-General
and such Nominated Sub-contractor.
16. (3) The Contractor shall at any time on being
requested to do so by the Director-General enter into a contract with
a Nominated
Sub-contractor within fourteen days of such request in
respect of the work for which he has been nominated, in which
contract the
Contractor shall, inter alia, secure mutatis mutandis
for himself the same rights that the Director-General has in terms of
this
Contract. If the Contractor satisfies the Director-General in
writing that he is unable to enter into such a contract because
16. (3) (a) he has an objection which is acceptable to
the Director-General against such Nominated Sub-contractor;
16. (3) (b) a Nominated Sub-contractor declines to
enter into a contract with the Contractor whereby he undertakes the
obligations
set out above; or
16. (3) (c) a Nominated Sub-contractor declines to
save harmless (sic) and indemnify the Contractor against any
negligence on
the part of such Nominated Sub-contractor, his agents,
workmen and servants or against any misuse by him or them of any
materials
or plant being the property of the Contractor and against
all claims as aforesaid or any claim under the Workmen’s
Compensation
Act, 1941, as amended, the Director-General shall be
entitled to nominate another Nominated Sub-contractor.
16. (4) The Contractor furthermore undertakes -
16. (4) (a) as against the Director-General, to carry
out his obligations to the Nominated Sub-contractor under the
Nominated
Sub-contract and to co-ordinate the Nominated
Sub-contractor’s work and the work under the main contract and
to ensure that
the Nominated Sub-contractor carries out and completes
the work under such sub-contract to the Director-General’s
satisfaction;
16. (4) (b) in case of default by the Nominated
Sub-contractor, to take steps against the Nominated Sub-contractor
similar to
those set out in 24 hereof if and as requested to do so by
the Director-General or, if requested to do so by the
Director-General,
to cede to the Director-General any rights that the
Contractor may have against such Nominated Sub-contractor arising
from such
default.”
Contractor’s counsel argued that clause 16
provides a separate regime for nominated subcontractors (at least so
I understood
him). In my view that proposition is overstated.
Clause 16 is clearly interlinked with many other provisions in the
contract.
What is true, however, is that just as with all other
contracts, particular clauses have to be considered in the light of
specific
problems. For example matters relating to prime cost items
must be considered fundamentally in terms of clause 15 and variations
in terms of clause 18. In this sense clause 16 is the primary clause
to which reference must be had. But of course it must be
read in
conjunction with other provisions in the contract.
In the case of clause 16 it must also be read in the
light of the scheme of the contract as a whole. This is particularly
so with
clause 16(4)(a). It is in this clause that Schutz JA finds
an obligation resting on the contractor to supervise (in the fullest
sense) the work of the subcontractor. I, for reasons I give below,
believe that the word “ensure” must be read in
a much
more restricted sense. The scheme of the contract is one in which
the work is defined; it is performed under the control
of and to the
satisfaction of the agent; it is paid for at a unit price on the
basis of the amount of such work as has actually
been executed and
paid for in terms of a system which values and measures monthly what
has been satisfactorily completed. In the
case of work for which
provisional sums are provided in the Bill(be it work to be performed
or material to be supplied or fixed)
the sums so provided may only be
expended at times and in amounts as the agent directs. This is so
stated in clause 15(2). What
is more is that payments of any amount
are made (and can only be made) on a certificate based on the value
of the work which has
been “satisfactorily executed” in
the opinion of the agent. This is so stated in clause 23(2)(b)(i).
While the contractor is obliged to
pay for subcontract work the reality is that the subcontract work is
not work which the contractor
itself executes. In saying this I do
not question the fact that there is contractual privity between the
main contractor and the
subcontractor. But what the reality
underscores is that the contractor is only to perform such work in
relation to the subcontract
as is clearly provided for in the main
contract as work he must do. This connotes work described and priced
in the Bill. He cannot
be asked to do work for which he has not
stipulated a price because he and the employer have not agreed
thereon. The mechanism
provided in the present contract is a common
one. In
North West
Metropolitan Regional Hospital Board v T A Bickerton & Son Ltd
[1970] 1 All ER
1039
(HL) it was said by Lord Reid at p 1043 d-e:
“
The scheme for nominated sub-contractors is an
ingenious method of achieving two objects which at first sight might
seem incompatible.
The employers want to choose who is to do the
prime cost work and to settle the terms on which it is to be done,
and at the same
time to avoid the hazards and difficulties which
might arise if they entered into a contract with the person they have
chosen to
do the work. The scheme creates a chain of responsibility.
Subject to a very limited right to object, the principal contractor
is bound to enter into a contract with the employers’ nominee,
but it has no concern with the terms of that contract, for
those
terms are settled by the employers and their nominee. I can find
nothing anywhere to indicate that the principal contractor
can ever
have in any event either the right or the duty to do any of the prime
cost work itself. That would, I think, be contrary
to the whole
purpose of the scheme, and it would be strange if the contractor
could have to do work for which it never tendered
and at a price
which it never agreed.”
The ingenuity and success of the scheme may be a matter
for opinion. I myself do not have any enthusiasm for this device but
Lord
Reid is undoubtedly correct when he says that the contractor is
not bound or entitled to do such work. Experience shows that
technical
persons such as Quantity Surveyors seem, in general, not to
experience difficulty with the manner in which the subcontract work
is incorporated into the main contract. This no doubt is because
they concern themselves with realities, namely, that it is work
performed for the employer by a person selected by the employer at a
price agreed to by the employer and in terms of a contract
dictated
by the employer. Lawyers however find the concept of contractual
privity more absolute. The result is that courts are
left to
reconcile the conflicting pieces of paper in accordance with ordinary
interpretive aids so as to discern what the true
intention of the
parties was. One such interpretive guide is that the courts should
endeavour to interpret contracts in a manner
which will give them
business efficacy. To attempt to compel a contractor to do work
which he has not priced would hardly do that.
Before dealing further with the construction of clause
16, I should outline appellant’s case in the claim in
reconvention.
As originally pleaded the employer’s case was
that the contractor was obliged by clause 3(1) to deliver the entire
work
and that the contractor breached “his obligations”
(sic) in three respects. In paragraph 5 of the claim the contractor
was said (i) to have failed to ensure that KPL-ETSA carried out and
completed the work under the contract properly, (ii) to have
failed
to ensure that KPL-ETSA complied strictly with the conditions of the
contract, and (iii) to have failed to enforce compliance
by KPL-ETSA
with the subcontract. The pleading goes on to make averments as to
the consequences of such breaches.
In the course of pre-trial procedures and discussions
and at a late stage (the date cannot be determined from the record) a
further
allegation was added. This is pleaded as para 6 bis. (Why
it was added to para 6 (which contains the averments as to the
consequences
of the breach) is obscure.) However, it reads:
“
6 bis By virtue of the defects in the work done
by KPL-ETSA as set out above (the contractor) breached clause 3(1) of
the Conditions
of Contract in that it failed to carry out and
complete the works to the satisfaction of the (agent).”
I understood appellant’s counsel to base his
argument four square on this proposition. The pleadings as a whole,
however,
reveal a curious situation. In the particulars of claim it
is alleged:
“10. The Works as defined in the contract
including the fire detection and protection services and carbon
dioxide installation,
have been completed and handed over to the
Defendant.”
This allegation is admitted in the plea. A fact
admitted in a pleading is eliminated as an issue in any action. Why,
in these
circumstances, appellant was permitted to introduce
paragraph 6 (bis) is not clear. The question of course is how the
matter is
to be dealt with now. Since I am of the view that the
ambit of clause 3(1) has been misconceived (by both parties) it
would, I
think, be preferable to overlook the technical difficulty
which arises and deal with what was argued. In a case where the
pleadings
seem to have played very little part this ought not to be
unduly harsh on the contractor.
The averment in paragraph 6 bis renders the plea
circular because one simply comes back to ask in what respect the
contractor is
said to have failed to carry out and complete the
works. This was a question repeatedly put on the contractor’s
behalf at
the pre-trial stages of the case. At one of the many
pre-trial conferences the answer was that clause 16(4)(a) “reiterated
the contractor’s obligation to complete and deliver the works
and accordingly places the risk of any default on the part
of any
nominated subcontractor on the contractor”. It is this
proposition which must be considered. It turns, it would
seem, on
the word “ensure” in clause 16(4)(a). I therefore return
to consider whether a duty of supervision is imposed
by this word.
In Schutz JA’s judgment this proposition is considered on the
basis that the contractor had to equip himself
to supervise the
subcontract work. The difficulty with that proposition is that the
Bill does not provide that the contractor
is to do such work. In
fact it defines his duties quite differently as the quotation from
the Bill set out above makes clear.
In terms of the Bill no duty of
supervision of the subcontract works was placed on the contractor.
Indeed the section of the
Bill listing the provisional items makes it
clear that “bediening” of the installation of the fire
alarm system was
to be by a nominated subcontractor. Items G and I
in section 6 under “Brand Alarms” read:
“G. Voorsien die bedrag van R520 000 vir brand
alarm installasie.
...
I. Laat toe vir bediening R10 400.”
These are both provisional sums.
If “ensure” is to be construed as imposing
a supervisory duty on the contractor there is then a conflict between
the
Conditions of Contract and the Bill. The Bill would consequently
either override the conditions or the word “ensure”
would
have to be given a different significance in section 16(4)(a). One
must also have regard to the realities which the parties
would have
had in mind. In the nature of things (with works with which the
contract is concerned) it would scarcely be expected
that someone
stand over all the workmen involved and supervise the insertion of
every screw or bolt. Common sense tells one that
supervision would
take the form of periodic inspections and tests. This is precisely
what happened: experts were engaged by the
employer and defects were
picked up. No one at that stage suggested that the contractor was in
breach of the contract in not himself
having done so. What was
required of him is precisely what is provided for in clause 16(4)(b).
The subcontractor’s failure
amounted to a default and the
contractor was instructed to invoke his contractual rights and, if
necessary, all that he could then
do was to enforce the subcontract
by normal civil proceedings and thereby “ensure” that the
subcontract work was performed.
When it became apparent that the
subcontractor was not capable of performing the only other remedy was
invoked.
It does not seem to me that clause 16(4)(a) can
envisage anything more than this. Its wording is singularly
inapposite to convey
an intention that the risk of the consequence of
any default by the subcontractor fell on the contractor (as the
employer’s
pleaded contention goes). In my view when clause
16(4) is read in the light of the other provisions of the contract
and of the
scheme it provides, it means no more than that compliance
is to be brought about by means appropriate to the circumstances -
that
is by normal legal procedures. This does not result as is
suggested that the contractor is conducting his business in the
courts.
What supports this conclusion is the fact that control
of the works is maintained by the agent and that no payments can, if
the
contract is correctly administered, be made by the agent for
defective work. What has not been correctly done must be redone
before
it can be certified for payment. There is therefore no call
for extreme (and unpriced) measures of supervision. It is all in
fact taking place in terms of various clauses in the contract.
There are thus several defects in the employer’s
case as I have outlined it. Firstly it seeks to recover payments
which,
on the facts, one must assume had been incorrectly certified.
Certification is not the contractor’s obligation. It is the
agent’s. The claim in reconvention was misconceived because no
breach was established and because the damage arose (or can
only have
arisen) because payments were incorrectly certified and not from any
other cause. Importantly the contractor was not
under a duty to
supervise the subcontract works in the manner suggested.
There are some additional difficulties. When the
contractor sought instructions from the employer as to how to deal
with the subcontractor
the employer’s response was not to
charge the contractor with a failure to provide supervision. Nor was
any such allegation
made thereafter, not even in cross-examination of
Mr Wright the contractor’s director in control of the contract.
All that
was put to him was “... and I put it to you that the
contract was for the construction and delivery of everything that
went
into this archives (sic) building”. The answer (after an
intervention) was - “that’s correct, as defined in the
contract”. The matter was left there. The case argued was
thus not put to Mr Wright. His evidence was “... our
responsibility initially was to elicit from the specialist nominated
subcontractor, an indication that his works were ready for
inspection
and thereafter to solicit that inspection and approval by the
consultants. That having been achieved it would be our
responsibility to hand over the completed contract to the
department”. There was no challenge of this. I accept that to
the extent to which the witness may in part of his evidence have
purported to construe the contract it was inadmissible. But the
point of the quotation is that the case (subsequently) argued was not
put. One further piece of evidence also seems to me to answer
the
criticisms implicit in Schutz JA’s judgment. In
cross-examination the terms of a letter written by the contractor at
a time before the termination of the subcontract was put to Mr
Wright. I quote a portion thereof. “[we] ... have been
closely monitoring and expediting the performance of this critical
subcontractor ... we believe in this that we and the consultants
have
gone beyond what could normally be expected. ...” What the
purpose of the cross-examination was and why the facts were
not
investigated in re-examination is not clear to me. But this seems to
stand as evidence of strenuous efforts to ensure that
the subcontract
work was carried out. By contrast the employer led no evidence.
For these reasons I would dismiss the appeal. This
renders it unnecessary for me to deal with the arguments based on the
cession,
alleged breaches surrounding the renomination instructions
or prescription though I would state that I am in agreement with
Schutz
JA on both the issue of the cession and prescription. The
order I propose is:
The appeal is dismissed with costs.
C PLEWMAN
MARAIS JA
. . .
MARAIS JA
:
I
have had the benefit of reading the judgments of Schutz JA and
Plewman JA. I agree with the judgment of Schutz JA and with the
order he proposes. I agree too with both of them that the taking of
a cession of the contractor’s rights against the sub-contractor
does not amount to a waiver or abandonment of the employer’s
rights against the contractor.
My
preference for the view of the contractor’s obligations taken
by Schutz JA is based upon the following considerations.
The
contrary view does not, in my opinion, take sufficient account of the
full amplitude of the contractor’s obligation
under clause
16(4)(a) “to ensure that the nominated sub-contractor carries
out and completes the work under such sub-contract
to the
Director-General’s satisfaction”. Nor does it
accommodate the undeniable fact that the contract postulates
that the
contractor is to ------------------------------------
be liable for the sins of the
nominated sub-contractor. I say that because of the existence in the
contract of clauses such
as cl 16( 7) and cl 17(8) which
absolve the contractor of such liability but only in particular
circumstances. If no liability
was intended to exist in any
circumstances these clauses would have been superfluous. The
omission of any generally applicable
clause expressly excluding the
liability of the contractor for the shortcomings of nominated
sub-contractors is also surprising
if that was indeed what was
intended. No less surprising, if sec 16 was intended to amount to a
numerus clausus
of the employer’s rights when defective work had been done by a
nominated sub-contractor, is that there is not a simple
statement to
that effect in the contract.
The
absence of any specific provision in the Bills for “supervision”
of the particular sub-contract is, in my view,
too slender a basis
for approaching the matter on the footing that there is an
inconsistency between the Bills and the contract
so that the Bills
are to prevail. I do not think anything turns on the provision in
the Bills for “bediening” in
respect of fire alarms. I
do not understand that term to be synonymous with “supervision”.
That item in the Bills
caters for attendance upon the
sub-contractor in order to co-ordinate the sub-contractor’s
work with his own and for the
provision of that which the
sub-contractor may need on the site to do his work, which are not the
same thing.
What Schutz JA has said about the
contractor being
able
,
if so minded, to procure appropriate supervision of technical and
complex nominated sub-contract work was said, I think, to make
the
point that the contractor is not helpless and vulnerable in that
respect. As I read it, the real thrust of his judgment is
that the
contractor is effectively a guarantor of the performance of the
nominated sub-contractor. If the contractor chooses
not to
supervise or to procure appropriate supervision of the nominated
sub-contractor’s work, that is his prerogative.
But if his
confidence in the sub-contractor turns out to be misplaced, he may
(depending upon which of the remedies available
to the employer the
employer invokes) have to suffer the consequences.
____________________
R M MARAIS
HEFER
)
CONCUR
NIENABER
JA)