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IN THE HIGH COURT OF SOUTH AFRICA

FREE STATE PROVINCIAL DIVISION

Case No: 2676/2019

In the matter between:

LOHAN CIVILS (PTY) LTD[1]                                                                                          Applicant

and

TOKOLOGO LOCAL MUNICIPALITY[2]                                                                  Respondent

 

Coram: Opperman, J

Date of hearing 12 June 2020.

Delivered This judgment was handed down on 17 June 2020 and electronically by circulation to the parties’ legal representatives by email and release to SAFLII on 17 June 2020 at 15h30.

Summary Application for leave to appeal - contractual processes and remedies in issuing of certificate for civil works – dispute of facts

 

JUDGMENT

 

[1] This case is a classic example of the complexity of the adjudication of some cases in proceedings by motion. Although the law is clear, the application thereof demands precautious handling by all involved; the applicants, the respondents and the courts.

[2] It is generally known that appeals lie against orders and not judgments. That said; an order may not be just a fluke. The rationale must have legal substance.

[3] This brings me to the right to appeal. It is, among others, managed by the application for leave to appeal. It may not be abused but the hurdle of an application for leave to appeal may never become an obstacle to justice in the post-constitutional era. The Superior Courts Act 10 of 2013 regulates the adjudication for leave to appeal specifically. The interpretation of the legislative test evolved in case law.

[4] Historically the rule was: “In that reasonable prospects exists that another Court, sitting as the Court of Appeal, would come to different findings and conclusions on the facts and the law.”[3] It is now being worded differently in The Superior Courts Act 10 of 2013[4] per section 17(1) to read:

“(1) Leave to appeal may only be given where the judge or judges concerned are of the opinion that-

(a) (i) the appeal would have a reasonable prospect of success; or

(ii) there is some other compelling reason why the appeal should be heard, including conflicting judgments on the matter under consideration;

(b) the decision sought on appeal does not fall within the ambit of section 16 (2) (a); and

(c) where the decision sought to be appealed does not dispose of all the issues in the case, the appeal would lead to a just and prompt resolution of the real issues between the parties.”

[5] In Shinga v The State & Another (Society of Advocates (Pietermaritzburg Bar) intervening as Amicus Curiae); S v O’Connell & Others 2007 (2) SACR 28 (CC) at [53] the court held that applications for leave to appeal is a judicial task of some delicacy and expertise. This task requires a careful analysis of both the facts and the law that provided the basis for the judgement. Presiding officers should approach the question whether another court may reach a different conclusion with “intellectual humility and integrity, neither over-zealously endorsing the ineluctable correctness of the decision that has been reached, nor overanxiously referring decisions that are indubitably correct to an appellate Court”.

[6] In S v Smith 2012 (1) SACR 567 (SCA) the court laid down the approach to an application for leave to appeal as follows:

“What the test of reasonable prospects of success postulates is a dispassionate decision, based on the facts and the law, that a court of appeal could reasonably arrive at a conclusion different to that of the trial court. In order to succeed, therefore, the appellant must convince this court on proper grounds that he has prospects of success on appeal and that those prospects are not remote, but have a realistic chance of succeeding. More is required to be established than that there is a mere possibility of success, that the case is arguable on appeal or that the case cannot be categorised as hopeless. There must, in other words, be a sound, rational basis for the conclusion that there are prospects of success on appeal.”

[7] There cannot be a difference in “that it must be proven that reasonable prospects exist that another Court, sitting as the Court of Appeal, would come to different findings” and “the appeal would have a reasonable prospect of success.” Both refer to “success” and a “prospect” and it is what it is.

[8] With reference to the Smith-case Schippers AJA in MEC Health, Eastern Cape v Mkhitha (2016) ZASCA 176 (25 November 2016) noted that:

“[16] Once again it is necessary to say that leave to appeal, especially to this court, must not be granted unless there truly is a reasonable prospect of success. Section 17(1)(a) of the Superior Courts Act 10 of 2013 makes it clear that leave to appeal may only be given where the judge concerned is of the opinion that the appeal would have a reasonable prospect of success; or there is some other compelling reason why it should be heard.

[17] An applicant for leave to appeal must convince the court on proper grounds that there is a reasonable prospect or realistic chance of success on appeal. A mere possibility of success, an arguable case or one that is not hopeless, is not enough. There must be a sound, rational basis to conclude that there is a reasonable prospect of success on appeal.

[18] In this case the requirements of 17(1)(a) of the Superior Courts Act were simply not met. The uncontradicted evidence is that the medical staff at BOH were negligent and caused the plaintiff to suffer harm. The special plea was plainly unmeritorious. Leave to appeal should have been refused.”

[9] I adjudicated the application on the basis that there must be a sound, rational basis for the conclusion that there are prospects of success on appeal.

[10] To reiterate; it is trite that Lohan did civil works in relation to the “Construction of a River Inlet Structure, Abstraction Works and Booster Pump Stations with associated work, near Riverton” in accordance with contract number: TLM/BWSBD/ABS/02.

[11] Everybody and all are in agreement that it had to be decided by the court whether or not the appointed engineer could have, in terms of the contract between the parties, issued the contentious certificate for civil works under the prevailing circumstances.

[12] The finding of the court on the circumstances that prevailed is the reason for the application for the leave to appeal. This is the finding:

“[20] Both parties committed to the facts in their affidavits and it is clear that the monies are due but the process that caused the certificate was blemished by both. There is not a dispute of facts.

V THE FACTS

[21] It is a commonplace fact in this case that: “To survive, the contractor is dependent on monthly payments to be made on the basis of statement.”[5] Contracts are sacred in law and all parties thereto must diligently comply with their responsibilities to ensure that projects that, among others serve the community, can be successful. It is in the interest of a sustainable democratic economy.

[22] Reading of the papers unequivocally shows that the events and contractual clauses that lead to and regulate the certificate are not in issue. The facts were complicated and garbled to support the claim and defend unbecoming behaviour. (Accentuation added)

[23] It stands proven that:

1. Pursuant to a tender process Lohan was appointed in 2016 by the Municipality to do specified work. The total contract price to be R47 653 760.75 including VAT and with 10% contingency margin.

2. The contract appointed engineers for the Municipality. The contract declared that all amounts that would become due to Lohan in respect of the works in terms of the contract shall be claimed by delivering to the engineer a monthly statement. Payment certificates will then be issued and payments implemented.

3. One such payment did not come to fruition. The payment was subject to a common cause understanding and contractual clause that it was up to the Municipality to approve variation orders to the works under agreement.

4. The work came to a halt on 4 December 2018 because Lohan alleged that in breach of contract the municipality failed to process and pay the payment certificates and similarly failed to process the claims and variation orders which were given through to it by the consulting engineers.(Accentuation added)

5. Due to the frustrating delay the consulting engineer got caught up in the middle. He went forth and issued a certificate for a lower amount notwithstanding the fact that the Municipality refused or neglected to process the variation orders. (Accentuation added)

“The respondent failed to respond to or comply with the demand for payment and on 20 March 2019 Mr Barnard of Aurecon[6] certified Payment Certificate no. 16 after reducing the amount payable to the applicant from R5 002 002.42 to R4 364 322.94.”[7]

6. The certificate states a contract price adjustment.

7. The certificate is not final and therefore no contract price adjustment could have been included. Page 96 of the GCC decrees this and it is common cause that it is a clause of contract that must be complied with.

8. An adjustment can only be made on the certificate following the issue of the certificate of completion. Compared to the payment certificate it is apparent that a contract price adjustment of four million rands could never have been included.

9. The variation orders of R7 211 509.73 exceeding 15% of the sum of the contract price does not fall within the authority of the engineer.

10.  The matter could have been referred to arbitration in terms of the GCC.

11.  The allegation that the Municipality failed to deal with the applications might be a breach of contract but does not make the certificate valid. The applicant’s remedy was to cancel the contract due to the frustrations of the payments; not for the engineer to issue the ill-fated certificate.”

[13] The municipality abandoned the issue of non-joinder. It should therefore not be regarded. Although I ruled on the matter the parties indicated that the non-joinder question should not affect the outcome of the case on the evidence as a whole.

[14] The grounds for appeal are:

1. The court erred in finding, as proven fact, that:

1.1  The payment certificate included variation orders in an amount of R7 211 509.73 which exceeds 15% of the contract sum, which variations had to be approved by the Respondent; and not its engineer; and

1.2  the total contract price amounts to R47 653 760.75.

1.3  The municipality refused or neglected to process the variation orders;

1.4  No contract price adjustment could have been included in the payment certificate as it is not final;

1.5  An adjustment can only be made on the certificate following the issue of the certificate of completion and that the contract price adjustment of four million could never have been included;

1.6  The matter could have been referred to arbitration in terms of the GCC;

1.7  The applicant’s remedy was to cancel the contract due to the frustrations of the payment; not for the engineer to issue the ill-fated certificate.

2. The court failed to consider and have due regard to the content of the Contract Data to the contract between the parties, specifically that contract variations up to 20% of the contract value did not require the approval of the Respondent as stipulated in clause 6.11 of the General Conditions of Contract.

3. The court erred in finding that the applicant did not deal with the matter of arbitration in its Heads of Argument whereas it was dealt with in paragraph 51 of the Applicant’s Heads of Argument.

4. The court erred in finding that the applicant should have joined the National Department of Water Affairs and Sanitation and that the issue of joinder dictates the outcome of the matter where the respondent’s counsel waived reliance on this ground of opposition to the applicant’s claim during the hearing of the matter.

5. The court erred in finding that the flawed process preceding the issuing of a payment certificate included a contract price adjustment which can only be made on the certificate following the issue of the certificate of completion and that contract price adjustment could not have been included in the payment certificate and claim of the applicant.

6. The court failed to have due regard to the following:

6.1.That the provisions contained in clauses 6.8.2 and 6.10.1 to 6.10.1.4 of the GCC, which expressly allows for the application of contract price adjustments in the value of certificates issued in terms of clause 6.10.1, being interim payments;

6.2.The payment certificate on which the claim is based included variation orders and contract price adjustments which were already included in the previous interim payment certificates and paid by the respondent;

6.3.Contract price adjustments were allowed in terms of the respondent’s revised letter of appointment dated 1 August 2018, annexure “R6”.

7. The court erred in finding that:

7.1.The payment certificate is ill-fated and invalid;

7.2.The process that caused the issuing of the payment certificate was blemished and flawed.

8. The court erred in not finding that:

8.1  The payment certificate was duly issued by the engineer on behalf of the respondent in terms of the GCC;

8.2  The payment certificate is not invalid;

8.3  The respondent is liable to the applicant for payment of the amount of R4 364 322.94 in terms of the payment certificate and that the applicant is in terms of GCC entitled to such payment.

9. The court thus erred in dismissing the application with costs and in not granting the application.

[15] The opposition of the respondent to the grounds of appeal is the following:

3.1  It is established law that appeals lay against orders and not judgments. The practical application of this truism in the matter at hand means that unless Lohan is able to convince the court – with reference to the test mentioned above – that it will probably succeed in the appeal against the order, the application cannot be granted.

3.2  As mentioned earlier, the judgment is understood as simply indicating that because the process leading up to the issuing of the certificate upon which Lohan sued was tainted with contractual, private law irregularity, the application cannot succeed. That finding of the court is exactly correct, because the common cause facts (and those exposed by the Respondent) are unassailable. That is to say, that to the extent the court found that the engineer could not issue the certificate – given the contractual substratum – was absolutely correct. It matters not how the court came to that finding.

3.3  Lohan alleged that “ in breach of the contract, the Respondent failed to process and pay the payment certificates and similarly failed to process the claims and variation orders which were given through to it by the Respondent’s consulting engineers.”[8]

3.4  This reveals that the Municipality had – at least and at a level of provenance to approve submitted variation orders. Thus, renders obsolete the argument that the Engineer had the authority to approve the variation order; – why then the alleged breach on the part of the Municipality? It was because of this alleged breach that Lohan wrote to inter alias Mr Barnard of Aurecon on 19 February 2019 and stated:

“Our payment certificates are being obstructed as the claims and variation orders are not being processed by the client.”

and

“We hereby demand compliance from the client to approve the VO’s (i.e. the variation orders) for certification in terms of clause 9.3.1.1.3 of the GCC.”

3.5  Lohan so understood that it was up to the Municipality to approve inter alia the variation orders to the works under the agreement. Whether it was within or outside an agreed percentile of the value of the works is immaterial, especially since Lohan never conclusively showed what the value or contract sum was from the outset.[9]

3.6  As retort Aurecon wrote on 20 February 2019 to the Municipality and stated: “It is the opinion of the engineer that in accordance with clause 3.1.2 and clause 9.3.1.1.3 an urgent meeting be arrange (sic) with Tokologo Local Municipality and the Department of Water and Sanitation. Ultimately to clarify the final payment certificates and the budget going forward.”[10]

3.7  The Municipality did not respond, even after a letter was written by Symington & de Kok Attorneys on 5 March 2019.[11]

3.8  In this letter, payment was sought of R5,002,002,42, and an allegation was made “......our client’s payment certificates are being obstructed by yourselves” and attention was once again drawn to clause 9.3.1.1.3 of the GCC. The Municipality was granted a period of 14 days to remedy what was alleged to be the breach failing which “ our client reserves the right to cancel the contract in which event you will also be held liable for further damages which our client may have suffered because of your breach of contract.”

3.9  Notwithstanding the demand for over R5 million earlier, and without the Municipality approving variation orders, processing these etc., the engineer issued payment certificate no. 16 on 20 March 2019 in an amount of just over R4.3 million.[12] This he plainly could not do.

3.10 Clause 9.3.1.1.3[13] states the contractor may terminate the contract if the employer persists in the interfering with or obstructing the issuing of any certificate, for 14 days after receipt of written notice from the contractor to remedy the default. The clause does not empower the engineer to issue a certificate in the event of such persistence. But this is exactly then what the engineer did – because as the court found the engineer got somewhat caught in the middle. He decided to bring an end to the dispute by issuing the certificate, but he plainly could not do so.

3.11 The Municipality admitted that it refused to process the variation orders, for reasons not requiring any finding.[14] Whether the Municipality was correct in its stance or not is irrelevant. The fact is that it refused the certificate and processing of the applied for- variation orders.

3.12 Whether for the reasons the court found or other, the ratio and the order are exactly correct. The full bench cannot find otherwise.

[16] The law dictates that if a court is unable to decide an application on paper, it may dismiss the application or refer the matter for oral evidence or refer the matter to trial.[15] Overarchingly; unless the application is dismissed, the court should adopt the procedure that is best calculated to ensure that justice is done with the least delay.

[17] The decision is not to be taken lightly. A robust approach may be employed to avoid fastidiousness and abuse of procedure. The approach must be applied with care and the advantages of oral evidence must be carefully weighed to prevent the settling of facts on probabilities. The manner in which viva voce evidence would disturb the balance of probabilities is the yardstick. Whether a factual dispute exists is not a discretionary decision; it is a question of fact.

[18] The tendency of resorting to affidavits has been denounced ninety years ago by Tindall, J in Saperstein v Venter's Assignee 1929 TPD 14, P.H. A at [71] and is still the law.

[19] A person claiming relief acts at his peril in proceeding by motion action; he cannot by electing to proceed by motion deprive his opponent of a number of procedural advantages. The flip side is that the respondent may not sabotage the proceedings that is established law for expeditious and cost-efficient resolve of civil cases.

[20] I concluded that there is not a factual dispute but reading of the papers pertaining to the application for leave to appeal and arguments of counsel convinces that I might have been mistaken on that point. It might be that the severe factual dispute that is accentuated in the contradictions with the findings of the court alluded to in the grounds for leave to appeal, may cause another court to dismiss the application on this basis or refer for oral evidence or trial. It is on this basis that the application for leave to appeal is granted; that the dispute of fact might be too severe for a proper and effective finding of fact.

[21] This case is a prime illustration of the fact that access to courts in terms of the Constitution[16] is not absolute and not the absolute solution. Again, Lohan motions for payment of the amount of R4 364 322.94, interest on the amount of R4 364 322.94 at 10.25% calculated from 5 April 2019 to date of payment and costs of the application based on a certificate issued for civil works. Whether the certificate was issued in compliance with the contract is the issue. The evidence shows that the costs of the work and the work are not in dispute and in the least; the whole situation is solvable. The work was done and the monies are due but for the contentious certificate.

[22] The parties might, after some mature consultations and in the spirit of the historical thesis and background of Rule 41A of the High Court,[17] end the matter in the fair interest of everybody involved.[18]

“Over 2000 years ago in Greece there was a lawyer named Protagoras. A young student, Euthalos, requested to apprentice under him but was unable to pay his fees. The student struck a deal saying, “I will pay your fees the day I win my first case in court”. The teacher agreed. When the training was complete, and a few years had elapsed without the student paying up, the teacher decided to sue the student. The teacher thought to himself: “If I win the case, in terms of the law, the student will have to pay me, as the case is about non-payment of fees. If I lose the case, the student will still have to pay me, because he would have won his first case. Either way I will get paid”. The student’s view was “If I win the case, I won’t have to pay the teacher, as the case is about non-payment of fees. And if I lose the case, I don’t have to pay him since I wouldn’t have won my first case. Either way I will not pay the teacher”.

This is known as the Protagoras Paradox. Whichever way you look, both sides have equally convincing arguments; one can go either way in supporting the teacher or the student and would not be wrong.1 This article explores a recent example of the Protagoras Paradox which occurred in the Supreme Court of Appeal, and considers how the ultimate result is relevant to considerations of whether mediation is not a more appropriate means of resolving medical negligence cases in particular.

The lay person often assumes that adjudication of disputes via the legal system is an objective, predictable method of determining justice. Our judiciary performs an important and, for the most part, an admirable role in the administration of justice. The reality is, however, that the legal system depends in large measure on the abilities, idiosyncrasies and attitudes of human beings and, as in all areas of life, those human beings have strengths and weaknesses, differences in character, intellect and experience. There is therefore the ability for disagreement; whether legitimate and reasonable, or not.

Added to this are the inordinate delays and costs in getting a matter to finality before the courts, and the question of how accessible justice really is in South Africa today.[19]

 

[23] ORDER

1. Leave to appeal is granted and to the Full Bench of this division.

2. Costs to be costs in the appeal.

 

 

______________________

M. OPPERMAN, J

 

Appearances

For applicant: Advocates C.D. Pienaar & J.S. Rautenbach

Chambers Bloemfontein c/o Symington & De Kok BLOEMFONTEIN

For respondent: Advocate S Grobler SC

Chambers, Bloemfontein c/o Kruger Venter Inc Bloemfontein

REF: SK/BK/TB0010

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