South Africa: Eastern Cape High Court, Grahamstown

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[2014] ZAECGHC 119
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P Ranchod Family Trust and Other v FFT Construction & Brokers (Pty) Ltd (4847/2014) [2014] ZAECGHC 119 (30 December 2014)
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IN THE HIGH COURT OF SOUTH AFRICA
EASTERN CAPE DIVISION, GRAHAMSTOWN
CASE NO 4847/2014
DATE HEARD: 24/12/2014
DATE DELIVERED: 30/12/2014
In the matter between
THE P RANCHOD FAMILY TRUST
Duly represented by Pirywadan Ranchod in his
capacity as Trustee of the Trust.............................................................................FIRST APPLICANT
KANTILAL NARSAI LALLA NO..................................................................SECOND APPLICANT
BERNADETTE CHARMAINE RANCHOD NO..............................................THIRD APPLICANT
and
FFT CONSTRUCTION & BROKERS (PTY) LTD....................................................RESPONDENT
JUDGMENT
ROBERSON J
[1] This is an application for a vindicatory order, brought on an urgent basis. The applicants are the trustees of the P Ranchod Family Trust (the Trust). The Trust is the developer of a building for a concern known as Cashbuild. The Trust has appointed Dup Meyer Building Contractors (the main contractor) as the main contractor. The main contractor has in turn contracted with the respondent company to attend to the manufacturing, assembling and erection of the structural steelwork of the building, and other work. The main contractor owes money to the respondent and the respondent has indicated it will not continue with the work until payment of an arrear amount of R327 000.00 is paid or an acceptable guarantee is furnished. The completion of the building is behind schedule, due in part to bad weather. The Trust seeks the release of a quantity of steel, allegedly owned by the Trust and currently in the possession of the respondent. On the merits, the respondent disputes that the Trust is the owner of the steel, and further resists the application on the basis that it has a lien over the steel and that release of the steel to the applicant will unlawfully interfere with the current contractual relationship between the respondent and the main contractor.
[2] The first applicant (Ranchod) deposed to the founding affidavit. He stated that if the building is not ready for handover on 1 March 2015 to enable Cashbuild to commence trading on 1 May 2015, the Trust and the main contractor will be liable for substantial penalties. The main contractor has agreed to continue with construction in spite of the annual builders’ break. However, as a result of the respondent’s stance that it will not continue with its obligations in terms of the sub-contract with the main contractor, and will not release the steel, the main contractor is unable to commence with the manufacturing, assembling and construction of the steel structure of the building. According to the main contractor, the steel is deteriorating daily because of exposure to the elements which cause the steel to rust, and the rust will have to be treated prior to assembly and erection. In addition, following an inspection by the principal agent for the project, R200 000.00 worth of the steel is missing. The respondent was instructed by Ranchod, the principal agent, and the main contractor to deliver the steel to Grahamstown for storage in a warehouse, but the steel was delivered to a farm some 80 kilometres from Grahamstown.
[3] With regard to ownership, Ranchod stated that the respondent had ordered and paid for the steel with an advance from Pennypinchers, Grahamstown and had submitted an invoice for steel and labour. He annexed to his affidavit a certificate by the principal agent which he claimed confirmed that the value of the steel was included in progress payments made to the main contractor. According to the certificate, the amount due to the respondent for structural steel was R728 641.45. An invoice from the respondent to the main contractor reflected an amount of R850 917.11 due for material and 50% of labour in respect of steel. Ranchod stated that the various documents were proof that the Trust was the owner of the steel.
He further annexed an e-mail from the main contractor to the respondent in which it guaranteed payment to the respondent of “Claim No 7”, and that on receipt of final authorisation by the principal agent, the funds would be transferred into the respondent’s bank account. Ranchod stated that the guarantee was subject to the respondent furnishing the main contractor’s quantity surveyor and the principal agent with documents supporting the claim of R327 000.00. Ranchod was advised by the principal agent that this is normal practice in the building industry and was provided for in the agreement between the applicant and the main contractor. According to Ranchod the respondent has refused to furnish the documents. He annexed an e-mail from the quantity surveyor which indicated that because the respondent had neither delivered the steel to Grahamstown nor furnished documentary evidence of its claim for payment, no payment to the respondent was included in the payment certificate for 15 December 2014.
[4] Mr. Gerrie Els, who conducts the business of the main contractor, deposed to a supporting affidavit. He stated that it was agreed between the main contractor and the respondent that the respondent would order the steel from Pennypinchers who would advance the funds to the respondent and debit the amount to the main contractors account. The purchase price, including labour, was R850 917.11. Els stated that the respondent has failed to provide the quantity surveyor and the principal agent with the documents required to evaluate the labour and materials claimed for and approve payment of the respondent’s claim. He furnished a guarantee to the respondent but the respondent has demanded a bank guarantee. According to Els the respondent has not commenced with the manufacturing of the structural steelwork. The main contractor has taken over the obligations of the respondent and will require a minimum of four weeks to manufacture and assemble the steel structure. If the main contractor does not immediately receive the steel the building will not be completed in time and the main contractor will be liable for penalties. Els referred to concerns which were raised about the deterioration of the steel but did not allege that he had inspected it himself.
[5] Mr. Danie Strydom deposed to the respondent’s answering affidavit. He stated that besides bad weather, delays in the project were caused by financial mismanagement of the main contractor in that payments to the respondent were not made timeously and the main contractor utilised funds earmarked for the respondent for payment of debt extraneous to the project.
[6] Strydom stated that the erection of the steelwork cannot commence before certain preparatory work, which includes the setting and curing of cement, is finalised, and 21 days have passed. The suppliers for such preparatory work are not available until 5 January 2015. The performance of the preparatory work is included in the contract between the main contractor and the respondent.
[7] Strydom contended that the main contractor is in breach of the payment schedule on the project. The respondent’s retention of the steel is a consequence of a debtor/creditor lien, in that the main contractor is indebted to the respondent in the sum of R327 327.30 and a further R400 000.00 for work completed which the main contractor is retaining until completion of the project. The main contractor is further indebted to the respondent for R150 000.00 to R190 000.00 for work done which still has to be confirmed by the quantity surveyor. The main contractor therefore owes the respondent approximately R900 000.00. In addition the respondent is owed R100 000.00 for work done in manufacturing the steel. As a result, so Strydom concluded, the respondent is entitled to perform its obligations in terms of the contract with the main contractor and has a lien in relation to monies owed by the main contractor as well as in relation to further work performed on the manufacture of the steel. The steel has already been manufactured and all that is required now is assembly and erection, subject to the completion of the preparatory work.
[8] Strydom pointed out that neither the applicant nor the main contractor have accused the respondent of a breach of the contract or cancelled the contract. The respondent is therefore lawfully entitled to continue with the work. Removal of the steel from the respondent’s possession would therefore be unlawful, as would be the main contractor’s performance of the work.
[9] Strydom asserted that the respondent is the owner of the steel. Pennypinchers paid cash into the respondent’s bank account and debited the main contractor’s account with Pennypinchers. This arrangement was reached because the main contractor had cash flow problems. The respondent purchased the steel from the monies in its bank account and did so in the name of the respondent. Some of the steel is with the supplier in a secure environment. Strydom denied that it is deteriorating.
[10] With regard to the furnishing of documentation to verify the respondent’s claim, Strydom stated that it was agreed that the respondent would raise a rate per bill of quantities, which is a rate of payment per portion of the completion of the project. The request for documentation was therefore a stratagem to frustrate and delay payment and was not a standard practice in the construction industry, in which Strydom has been involved for 30 years. The quantity surveyor was at all times able to audit and evaluate the work done. The main contractor’s guarantee was not acceptable because of its financial mismanagement.
[11] Mr. Marius van Vuuren deposed to an affidavit concerning the condition of the steel. He set out his experience and expertise in the manufacture, assembly, and erection of steel structures. He viewed the steel and was satisfied that the steel has been properly manufactured and treated for corrosion resistance, and is structurally sound. He could not find rust and was able to determine that the steel had been treated and is not a safety hazard in its present environment.
[12] In reply Ranchod referred to minutes of a meeting in which it was recorded that an inspection by the principal agent, an architect, revealed that the steel was rusting. All surfaces had to be inspected and approved before painting commenced. Strydom’s allegation that the painting, preparation and manufacturing was complete was therefore untrue. Ranchod referred to an e-mail from the principal agent which reflected that the manufacturing was only 20% complete. Further, the main contractor is attending to the preparation work and does have access to supplies.
[13] With regard to ownership of the steel, Ranchod referred to a note in the minutes of a meeting on 22 October 2014 which recorded “structural steel has been paid.” He stated that the respondent could not dispute the fact that the applicant paid the main contractor who paid Pennypinchers, and that the respondent could not claim ownership on the basis that it had paid for the steel.
[14] A number of procedural points were taken by both parties, amongst which was an averment that there was no resolution authorising Strydom to depose to the answering affidavit. This point was not strongly pursued and Strydom did state in his affidavit that he had been duly authorised. Points taken by the respondent included the fact that service had been effected on the respondent before the application had been issued by the registrar. For reasons which will become apparent, I do not intend dealing with the various points.
[15] There is a dispute of fact about the condition of the steel. Ranchod’s affidavit is based on hearsay and I have no reason to reject the contents of Van Vuuren’s affidavit as far-fetched or untenable. I therefore must accept that evidence.
[16] There is a dispute about ownership of the steel. It is far from clear to me how payment by the applicant to the main contractor came about and the certificate relied upon does not clearly demonstrate that payment was made. There was no affidavit from the principal agent. However I shall assume, without deciding, that the applicant paid the main contractor for the steel. I intend to decide this matter on the basis of the two remaining grounds of opposition on the merits.
[17] It is correct, as was submitted on behalf of the applicant, that a debtor/creditor lien would not apply in the present matter because there was no contractual relationship between the applicant and the respondent. However it was submitted that the lien in respect of the applicant, if it was the owner of the steel, was an enrichment lien. The respondent claimed that it had manufactured the steel, thereby improving it and enriching the applicant as owner. The respondent claimed that the price of this further work was R100 000.00 which has not been paid. There was a dispute about the extent of the manufacturing but Ranchod’s assertion that it was 20% complete was based on hearsay. Again I have no reason to reject Strydom’s assertion that it is complete as far-fetched or untenable and must accept that the manufacturing is complete. The applicant did not assert that in the event of the steel being manufactured, it did not accept the work or that it was of poor quality. It was common cause that in terms of the contract between the main contractor and the respondent that the respondent was required to manufacture the steel.
[18] It follows that the respondent is entitled, on the basis of an enrichment lien, to retain possession of the steel.
[19] A more compelling reason in my view for the respondent’s retention of the steel is its contractual entitlement to possession, in terms of its contract with the main contractor. In my view this is a complete answer to the applicant’s claim based on ownership. The respondent is lawfully in possession of the steel in terms of its contract with the main contractor. The applicant does not allege that the contract has been cancelled. The contract between the applicant and the main contractor is still in force. The effect of the release of the steel to the applicant would prevent the respondent from carrying out its obligations in terms of the contract. The respondent has committed no wrong towards the applicant which entitles the applicant to interfere in the contract between the respondent and the main contractor. The applicant cannot without a lawful basis effectively terminate a contract between two other parties.
[20] On these two grounds therefore I find that the applicant, even if it is the owner of the steel, is not entitled in the circumstances alleged, to claim it from the respondent.
[21] The application is dismissed with costs, including the costs which were reserved on 23 December 2014.
_______________
J.M. ROBERSON
JUDGE OF THE HIGH COURT
Appearances:
For the Applicants: Mr. X Mvulana, Mvulana Attorneys, Grahamstown.
For the Respondent: Mr. O Huxtable, Huxtable Attorneys, Grahamstown