MEC for Department of Human Settlements, Eastern Cape Province v Aveng Grinaker - LTA Building Cape (Pty) Ltd (EL 459/2015) [2021] ZAECGHC 56 (8 June 2021)

Key Facts

Transaction Type

Issues

• The primary issue was whether the accounting officer's rejection of the claim for 'standing time' was contractually justified. The court examined if the JBCC Agreement explicitly provided for compensation for delays caused by the Department's failure to hand over the site. The appellant argued the contract did not sanction 'standing time' claims, while the respondent contended the agreement required compensation for such losses. The court found the Department's refusal was based on an incorrect interpretation of the contractual provisions.
• The court considered whether the accounting officer's refusal to approve the claim was subject to judicial review under the Promotion of Administrative Justice Act (PAJA). It was determined that the decision was based on contractual provisions, not administrative authority. The court concluded that such decisions are governed by contract law principles and not PAJA, as the power to approve claims was retained by the Department under the JBCC Agreement.
• The court addressed whether the respondent adhered to the contractual requirements for submitting a claim, including timely notice of delay and submission of the claim. It was established that the respondent provided notice of the delay on 15 January 2013, notified its intention to claim after the delay ceased on 29 April 2013, and submitted the claim in compliance with the JBCC Agreement. The appellant's argument that the claim was untimely was dismissed.

Holdings

• The accounting officer's rejection of the claim was based on an incorrect understanding of the contractual provisions, as there was no contractual basis to exclude compensation for 'standing time' in this case.
• The respondent was entitled to compensation for delays caused by the Department's failure to give possession as per clause 29.2 of the JBCC Agreement, which explicitly provided for extension of the contract period and adjustment of the contract sum in such circumstances.
• The Department was contractually obliged to pay the amount certified in interim payment certificate No. 32, issued on 15 October 2014, as the respondent had fulfilled all procedural requirements for the claim.
• The principal agent's role was to recommend payment to the Department, not to have final authority on claims under clause 29.2, as the Department retained authority to approve or reject such claims.

Remedies

• Costs are awarded to the respondent, including those arising from the application for leave to appeal.
• The appeal is dismissed with costs, including the costs occasioned by the application for leave to appeal.

Contract Value

Monetary Damages

Legal Principles

• The judgment underscores the doctrine of pacta sunt servanda, holding that the Department was contractually obligated to honor the terms of the JBCC Agreement. The court rejected the accounting officer's refusal to pay the claim, as it violated the binding nature of the contract.
• The court emphasized that the construction of written agreements must be based on the explicit wording of the contract rather than subjective intentions of the parties. This principle was central to determining the respondent's entitlement to compensation under clause 29.2 of the JBCC Agreement.

Precedent Name

• Oude Kraal Estates Pty Ltd v City of Cape Town & Others
• President of the RSA and Others v SARFU and Others
• Lekup Prop Co 4 (Pty) v Wright
• Scott v Poupard
• Steenkamp N.O. v Provincial Tender Board, EC

Key Disputed Contract Clauses

• Clause 29.2 of the JBCC Agreement explicitly provided that the contractor (respondent) was entitled to a revision of the practical completion date and an adjustment of the contract sum for delays caused by the employer's (Department's) failure to provide site possession. The court determined this clause directly entitled the respondent to compensation for the 80-day delay, rejecting the Department's claim that 'standing time' was not sanctioned by the agreement.
• Clause 15.2.1 of the JBCC Agreement required the employer (Department) to hand over the site to the contractor within 10 working days of the construction period's commencement. The court found this clause was breached, forming the basis for the respondent's claim for compensation due to the Department's failure to meet this obligation.

Cited Statute

• Promotion of Administrative Justice Act
• Public Finance Management Act

Judge Name

• L. Flatela
• N.G. Beshe
• J.E. Smith

Passage Text

• (a) The appeal is dismissed with costs, including the costs occasioned by the application for leave to appeal.
• Provisions aimed at protecting a party against financial losses suffered as a result of delays caused through the fault of the other party are invariably included in construction contracts. They not only serve to protect the interests of the contractor, but also that of the employer. Thus the JBCC Agreement made provision for penalties under certain circumstances if the respondent failed to execute the work timeously. When a contractor establishes site, it moves not only manpower, but also expensive machinery. Any delays that prevent it from deploying these resources and claiming compensation in terms of the contract, result in real financial losses on the part of the contractor. These can be easily quantified, in particular in a case where the contract is based on a priced bill of quantities. If an employer is exempt from the contractual responsibility to compensate a contractor for such bona fide claims, there is a real danger that contracts of this nature may never be completed successfully. Thus, if anything, public interest demand that contractors must be compensated for losses suffered as a result of the employer's fault, where the contract so provides. The government is in no different position.
• The evidence has established on a balance of probabilities that: (a) the respondent had been precluded from carrying out the works in accordance with the agreement as a result of the appellant's failure to give it possession of the site; (b) the respondent gave timeous notice of the delay and its intention to submit a claim in respect of the losses suffered; (c) the principal agent duly determined the value of the claim, issued an interim payment certificate and recommended it for payment; (d) Mr Sharpley's decision ... was founded on the contractual provisions; (e) his decision was based on an incorrect understanding of the relevant contractual provisions; (f) properly construed, the contracts provided that the respondent was entitled to an extension of the contract period and to compensation for the losses suffered as a result of the Department's failure to give possession of the site on the due date; and (g) the Department was accordingly contractually obliged to pay to the respondent the amount certified for payment in interim payment certificate No. 32, issued by the principal agent on 15 October 2014.

Damages / Relief Type

• Costs of the suit awarded to the respondent, including costs for the application for leave to appeal.
• Compensatory Damages for R3,038,972, interest thereon, and costs of the suit.