TUV SUD South Africa (Pty) Ltd v Eskom Holdings Limited (2020/11544) [2022] ZAGPJHC 158 (18 March 2022)

Key Facts

Transaction Type

Issues

• The primary issue was whether TÜV SÜD South Africa (PTY) LTD is entitled to payment by Eskom Holdings Limited for an aggregate amount of R5,961,441.25 (excluding VAT) for services rendered in September, October, and November 2017. The applicant claimed these amounts based on verified payment assessment certificates, while the respondent contested liability, arguing disputes over the contract terms and the validity of the Task Order.
• The court had to determine whether the Task Order issued on 20 March 2017 for 'Unit 6 MGO Boiler Inspections and NDT' was a standalone contract or an extension of the original NEC3 Engineering & Construction Short Contract (2015). The applicant argued it was subject to the original agreement, while the respondent claimed it was independent. The court concluded the Task Order must be construed in terms of the 2015 agreement.
• The respondent argued the agreement was invalid due to undefined terms and lack of proper execution. The court applied the Wilken v Kohler rule, holding that Eskom cannot avoid liability for services it consumed without protest, even if the agreement was unenforceable. This principle was used to affirm the applicant's right to payment despite alleged procedural deficiencies in the contract.

Holdings

• The court determined that the respondent (Eskom) must pay the applicant (TÜV SÜD South Africa) three specified sums for services rendered in September, October, and November 2017, as these amounts were verified and certified by Eskom's Project Leader, Mr. De Jager, without valid dispute.
• Interest at 10.5% per annum was awarded on each of the three payments from 15 August 2018 until final payment, based on the court's finding that Eskom failed to challenge the certified invoices within the required timeframe, rendering their objections belated.
• The court ruled that Eskom cannot avoid liability by claiming the Task Order was invalid or improperly certified, applying the Wilken v Kohler principle that both parties' performance under an agreement (even if unenforceable) obligates payment for consumed services.

Remedies

• The court ordered Eskom Holdings Limited to pay TÜV SÜD South Africa (Pty) Ltd three distinct sums: R2 759 045.75, R1 935 652.50, and R1 266 743.00 (all excluding VAT) for services rendered in September, October, and November 2017, respectively.
• Interest was awarded on each of the three amounts at the mora rate of 10.5% per annum, commencing from 15 August 2018 and continuing until the date of final payment.
• Eskom was ordered to pay the applicant's costs of two counsel, including senior counsel, in addition to the principal amounts and interest awarded.

Monetary Damages

Legal Principles

• The principle that parties must be held to the substance of their conduct, even if formalities are lacking, was invoked. The court held that Eskom could not escape liability for services consumed without protest, emphasizing fairness over strict contractual formalities.
• The court prioritized the actual conduct of the parties (e.g., De Jager's certification of invoices and the performance of services) over the absence of formal written agreements or signatures, particularly in the context of the Task Order and its integration with the original contract.
• The court applied the purposive approach to interpret the undefined term 'Employer's Representative' in the contract, considering the roles and responsibilities of De Jager and Managa in the context of the agreement and their positions as Project Leader and Project Manager.

Precedent Name

• PCL Consulting (Pty) Ltd t/a Phillips Consulting SA v Tresso Trading 119 (Pty) Ltd
• Plascon-Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd
• Treasure the Karoo Action Group and Another v Department of Mineral Resources and Others
• Body Corporate of Greenacres v Greenacres Unit 17 CC & Another
• Wilken v Kohler
• Universal Piling and Construction v VG Clements
• Legator McKenna Inc & Another v Shea

Key Disputed Contract Clauses

• The Task Order (clauses 10.1-10.4) specified the scope, timeline, and pricing for Unit 6 MGO Boiler Inspections. The dispute centered on whether this Task Order was a standalone contract or an extension of the 2015 NEC3 agreement. The court ruled the Task Order must be interpreted in terms of the original agreement, rejecting the respondent's claim of independence.
• Clauses 50.1 and 50.2 outline the procedures for assessing and verifying work to determine payment entitlement. The applicant asserted these clauses were fulfilled through certified payment assessments by Mr. De Jager, while the respondent contested their validity. The court upheld the applicant's position, finding the assessments and certifications adequate under the contract terms.
• Clause 4.3 of the agreement designates the Employer's Representative responsible for processing invoices and verifying assessments. The court determined that Mr. Johan de Jager, as Project Leader, qualified as the Employer's Representative despite the absence of a formal definition in the contract. This clause was central to the dispute over whether his certification of payment assessments was sufficient to render invoices due and payable.

Judge Name

Passage Text

• 40. As the respondent has not succeeded in any of its defences and the applicant's claim succeeds.
• 34. The Wilken v Kohler rule... means that Eskom cannot escape liability where TÜV has delivered on its obligation and Eskom has consumed the service.
• 39. I have found that there exist properly executed and processed payment assessment certificates that make the applicant's case insurmountable on the merits... There is no question of liability to be determined by an arbitrator.

Damages / Relief Type

• Costs of two counsel, including senior counsel, awarded to the applicant.
• Compensatory Damages: R5 961 441.25 (excluding VAT) awarded for services rendered in September, October, and November 2017.
• Interest at 10.5% per annum awarded on all payments from 15 August 2018 until final payment.