Ya-Rena Civils (Pty) Ltd v Magalies Water and Another (M 372/2018) [2022] ZANWHC 5 (25 January 2022)

IN THE HIGH COURT OF SOUTH AFRICA

NORTH WEST PROVINCIAL DIVISION, MAHIKENG

Case No.: M 372/2018

Reportable: YES / NO

Circulate to Judges: YES / NO

Circulate to Magistrates: YES / NO

Circulate to Regional Magistrates: YES/ NO

In the matter between:

YA-RENA CIVILS (PTY) LTD

Applicant

And

MAGALIES WATER

First Respondent

S & W LIMPOPO CONSULTING ENGINEERS

Second Respondent

Heard : 16 September 2021

Delivered : This judgment is handed down electronically by circulation to the parties through their legal representatives’ email addresses. The date for the hand-down is deemed to be 25 January 2022.

ORDER

This morning, I electronically handed down judgment and I omitted the following orders: 1) the point in limine regarding private privilege is dismissed; 2) the point in limine regarding arbitration clause is dismissed; 3) the applicant’s part A application is dismissed; and applicant’s part B application is granted. This Court may mero motu vary its order if there is a patent error or omission.

WHEREFORE, the following order is made:

(i) The point in limine regarding private privilege is dismissed.

(ii) The point in limine regarding arbitration clause is dismissed.

(iii) The applicant’s part A application is dismissed.

(iv) The applicant’s part B(2)&(3) application is granted.

(v) The period of 28 days within which the Applicant had to deliver its Dispute Notice to the Second Respondent’s Ruling dated 15 August 2017 in terms of clause 10.3.1 of the General Conditions of Contract for Construction Works (governing the contractual relationship between the parties) is hereby extended to 28 days from the date of this order in terms of section 8 of the Arbitration Act 42 of 1965.

(vi) The relief afforded in terms of the above order shall mutatis mutandis be applicable to the First Respondent and it may properly deliver a new Dispute Notice to the Second Respondent’s Ruling dated 15 August 2017 in terms of clause 10.2.1 of the General Conditions of Contract within 28 days of receipt of this order, should it wish to do so.

(vii) No order as to costs.

JUDGMENT

MTEMBU AJ

INTRODUCTION

[1] The applicant seeks orders in terms of Part A and B of the notice of motion. In part A of the notice of motion, the applicant seeks an order declaring the Ruling issued by the second respondent on 15 August 2017 and the subsequent contractual steps taken by the parties thereto to be invalid and set aside; declaring that the second respondent still has to make a ruling on the Dissatisfaction Claim dated 21 July 2017; declaring that the 28 days’ period referred to in clause 10.2.3 of the General Conditions of Contract for Construction Works (“the Contract”) within which the second respondent has to rule on the applicant’s Dissatisfaction Claim dated 21 July 2017 shall commence afresh from the date of this order, if granted.

[2] In part B of the notice of motion, the applicant seeks an alternative relief that the first respondent’s Dispute Notice in terms of clause 10.3.1 of the Contract dated 8 September 2017 be declared invalid for non-compliance with the requirements of clause 10.3.1 in that it was only delivered to the second respondent and not to the applicant. In the alternative relief, the applicant also seeks an order extending the period of 28 days within which it had to deliver its Dispute Notice to the second respondent’s ruling dated 15 August 2017 in terms of clause 10.3.1 of the Contract. In seeking this order, it relies on section 8 of the Arbitration Act 42 of 1965. If the relief sought is granted in part B, the applicant seeks an order that this relief should also be afforded to the first respondent if the first respondent wishes to deliver a new Dispute Notice.

[3] At the core of this application is the interpretation of clause 10.3.1 of the Contract. I will deal with it later. The application is only opposed by the first respondent. The first respondent contends that the application must be dismissed. For convenience I shall, where appropriate, refer to the applicant as the Contractor, the first respondent as the Employer, and second respondent as the Engineer. The reference thereto shall be used interchangeably.

LITIGATION BACKGROUND

[4] Central to the appreciation of the issues is the sequence of material events. The facts are largely common cause.

[5] This matter was before Djadje J on 30 May 2019. On that day, this Court mero motu separated the preliminary points raised by the first respondent from the main application to be adjudicated separately. The first

respondent raised three (3) points in limine, which are: (i) Lis alibi Pendens; (ii) Private Privilege; and (iii) Arbitration clause. This Court only dealt with the first point in limine. It upheld the point in limine of lis alibi pendens with costs and dismissed the entire application. Dissatisfied with this outcome, the applicant delivered an application for leave to appeal. This application too was dismissed with costs. Consequently, the applicant brought a petition for leave to appeal to the Supreme Court of Appeal (“SCA). The SCA granted the leave to appeal to the full Court of this division on 26 August 2020. The appeal was heard on 19 February 2021 and the judgment was delivered on 4 March 2021. The appeal was upheld and the point in limine of lis alibi pendens was dismissed.

[6] Consequently, the matter was set down for determination of the balance of the dispute. During the hearing before me, the parties requested that the two (2) remaining points in limine must be simultaneously dealt with the main application, so as to avoid a further delay in this matter. Therefore, I am required to determine the two outstanding preliminary points and the main application.

[7] Before I deal with the main application it is apt that I firstly deal with the points in limine.

IN LIMINE POINTS

[8] The first respondent contends that the factual allegations that form basis of this application constitute ‘without prejudice’ settlement negotiations for the purpose of resolving the dispute pending before this Court. Reliance thereto is irregular, irrelevant, and unacceptable. Ms Lekokotla, appearing on behalf of the first respondent, submitted that the first respondent’s concern was that the applicant ought to have obtained a consent for disclosing the contents of settlement negotiations which were conducted on a ‘without prejudice’ basis. The applicant contends that this objection is vague and does not state with any measure of precision what exactly the objection is. Mr Van Rhyn, appearing on behalf of the applicant, submitted that the striking out of portions of an affidavit is regulated by Uniform Rule 6(15) read with Rule 6(11) of the Uniform Rules. The application must be on notice in terms of Rule 6(11). It must clearly indicate the passages to which objection is taken and set out grounds for the objection. The portion sought to be struck out must be scandalous, vexatious, or irrelevant.

[9] I agree, an application for the striking out of any matter from an affidavit has to satisfy two requirements: firstly, that the matter to be struck out is scandalous, vexatious or irrelevant; and secondly, the applicant must satisfy the Court that he or she will be

prejudiced if the matter is not struck out. See Beinash v Wixley [1997] ZASCA 32; 1997 (3) SA 721 (SCA) at 733A-B. None of these requirements are met. During the hearing, Ms Lekokotla conceded that the point in limine in respect of private privilege does not dispose of merits of the application. She further submitted that it is not the first respondent’s case that the portions of the founding affidavit are scandalous, vexatious or irrelevant, but the inclusion of the settlement negotiations is likely to influence the Court’s findings. I did not understand this submission. It is a convoluted submission to comprehend. Regrettably, there is no merit in this point in limine. Accordingly, it stands to be dismissed.

[10] The first respondent’s second point in limine is that this application be stayed pending finalization of the arbitration proceedings. The first respondent contends that the parties agreed in terms of the Contract to resolve disputes through arbitration. It contends that this application is ill conceived. On the other hand, the applicant contends that its right to pursue its contractual claim through arbitration proceedings is time barred. It can only utilise arbitration proceedings upon being granted an order to do so by this Court, hence part B of its application seeks an order uplifting the 28 days’ period within which it had to deliver its Dispute Notice to the second respondent’s ruling dated 15 August 2017 in terms of clause 10.3.1 of the Contract. Once a contractual claim is time-barred, it is no longer a prerogative of the arbitrator, but of the Court to extend it. Ms Lekokotla correctly admitted to what Mr van Rhyn submitted that the applicant’s right to pursue its contractual claim has become time barred. Ms Lekokotla submitted that she does not have instructions to abandon this point in limine but admitted that this point in limine is hopeless. I have no reason why this point in limine should stand. Accordingly, it stands to be dismissed.

INVALIDITY OF THE SECOND RESPONDENT’S RULING AND NON-COMPLIANCE WITH CLAUSE 10.3.1

[11] On 27 January 2014, the parties entered into a written contract for the construction of 29 mega litre reservoir for the Pilansberg Water Scheme. The applicant would render the services in respect of the contract and the first respondent would make payments to the applicant in respect of the work done by the applicant based on payment certificate issued by the second respondent. The first respondent would pay to the applicant the amount certified by the second respondent within 28 days of receipt. The contract was for an amount of R36 969 628,72. The construction was intended to be completed within a period of 393 days, commencing on 10 February 2014 and to be finalised on 10 March 2015.

[12] In the event that the project was not completed as envisaged, the applicant would be subjected to a penalty fee calculated at the rate of R25 169,25 per day. It is common cause that the applicant did not complete the project within the estimated period. As a result, the applicant asked for extension of the completion of the project. On 10 July 2017, the second respondent issued an approval certificate in terms of which it was certified that the project was considered to be finally complete on 26 April 2017. On 20 July 2017, the second respondent issued payment certificate dated 26 April 2017. The second respondent deducted an amount of R4 580 803,50 as penalties for 182 days’ late completion of the project. This resulted in a negative balance of R129 916,30 due by the applicant to the first respondent. Dissatisfied with this payment certificate, on 21 July 2017, the applicant delivered its Dissatisfaction Claim to the second respondent challenging the 182 days’ penalties. In challenging the 182 days’ penalties, the applicant did not dispute the delay of 182 days for completion of the project but

argued for a waiver or reduction in penalties. On 15 August 2017, the second respondent made a ruling on the Dissatisfaction Claim and stated the following:

“1. Ya Rena previously requested for extension of time without cost from 01 August 2015 until 29 January 2016, a total of 182 days. Extension of time without cost can only be granted to Ya Rena from 01 August 2015 to 30 November 2015 – a total of 122 days.

2. Ya Rena be penalized for late completion from 01 December 2015 to 29 January 2016 – a total of 60 days to compensate Magalies for loss of income.

3. The penalty amount to 60 days x R25 169,25 = R1 510 155.

4. Payment Certificate No.20 for the amount of R3 379 608,11 (VAT Incl) will be submitted to Magalies Water and will be Payable to Ya Rena within 28 days in accordance with Clause 10.2.3.

5. This ruling is subject to the strict condition that Ya Rena withdraws all legal action tabled against Magalies Water on this contract.

6. The above is considered to be the full and final settlement of this Contract.”

[13] A Day after the ruling, on 16 August 2017, the applicant addressed a letter to the first and second respondents accepting the ruling on condition that each party pays its own costs regarding the pending action under case number 1252/2016.

[14] On 11 September 2017, the first respondent delivered its Dispute Notice to the second respondent challenging the ruling of the second respondent in terms of clause 10.3.1 of the Contract. The applicant got knowledge of the first respondent’s Dispute Notice on 21 September 2017.

[15] The applicant contends that the second respondent’s ruling of 15 August 2017 on its Dissatisfaction Claim dated 21 July 2017 is not a ruling as envisaged in clause 10.2.3 of the Contract and therefore it is invalid and of no force. The applicant’s contention is that the ruling is clearly a conditional one. It is not conclusive. The applicant further contends that the first respondent’s Dispute Notice is invalid for two reasons, namely: (i) it followed on an invalid ruling; and (ii) it was only delivered to the second respondent and not to it, as required in terms of clause 10.3.1 of the Contract. The 28 days’ period for delivery of a Dispute Notice expired on 12 September 2017. The applicant contends that it only became aware of the first respondent’s Dispute Notice on 21 September 2017. The applicant’s contention is that had it known on 11 September 2017 that the first respondent delivered a Dispute Notice and that the matter had not become settled, it would have also delivered a Dispute Notice. On this basis, it contends that the second respondent’s ruling dated15 August 2017 and all subsequent steps taken by the parties are invalid.

[16] It is apt that I outline the procedure for dispute resolutions in terms of the Contract. The procedure for the dispute resolutions is governed by clause 10.2 of the Contract, excluding those required to be dealt with in terms of clause 10.1. In terms of clause 10.2.1 of the Contract, both the contractor which is the applicant in these proceedings and the employer, the first respondent in these proceedings, have the right to deliver a written and substantiated Dissatisfaction Claim to the Engineer, the second respondent, in respect of any matter arising from the contract. In terms of clause 10.2.2 of the Contract, if the Contractor or Employer fails to submit such a Dissatisfaction Claim within 28 days after the cause of dissatisfaction, it shall have no further right to raise any dissatisfaction claim, meaning such party’s right to dispute becomes time barred.

[17] In terms of clause 10.2.3, the Engineer has to give his adequately reasoned ruling in writing to both parties within 28 days after delivery of the Dissatisfaction Claim. In terms of clause 10.3 of the Contract, should either party dispute the Engineer’s ruling on a Dissatisfaction Claim, it must deliver a written and substantiated Dispute Notice to the Engineer for the dispute to be referred to adjudication in terms of clause 10.5, and if the dispute remains unresolved, it will be referred to arbitration in terms of clause 10.7.

[18] As already stated above, the applicant contends that the Engineer’s ruling of 15 August 2017 on its Dissatisfaction Claim dated 21 July 2017 is not a ruling as envisaged in clause 10.2.3 of the Contract and therefore it is invalid and of no force. I am battling to understand the applicant’s contention. The Engineer issued its ruling on 15 August 2017. Without any delay, the applicant accepted the Engineer’s ruling. However, I am mindful of the fact that it was a conditional acceptance of the ruling. The condition was that each party must pay its own costs in respect of the pending litigation.

[19] The legal status of the ruling was not challenged. At no stage, did the applicant question the status of the Engineer’s ruling. The dispute on the status of the Engineer’s ruling only came after the applicant had become aware that the Employer had challenged the ruling of the Engineer in terms of clause 10.3.1 by delivering its Dispute Notice within 28 days of receipt thereof. I find this conduct as opportunistic. Again, the ground raised in support of this contention is flimsy. The applicant’s contention is that the Engineer’s ruling is conditional and therefore it is invalid. On a proper interpretation of Clause 10.2.3 of the Contract, this clause does not set a standard or a threshold that the ruling must meet. All what it says is that the Engineer shall within 28 days of receipt of the Dissatisfaction Claim give his adequately reasoned ruling. There is no strict requirement to be met. All what is required is that the ruling must be adequately reasoned. I am unable to find any defect on the Engineer’s ruling dated 15 August 2017 which calls for its invalidity. The matter is essentially one of interpretation. At the risk of stressing the obvious, it must be pointed out that the first step in interpreting a written contract is to read it. This entails attaching to each word that ordinary meaning which the context seems to require and applying the common rules of grammar (including syntax)[1]

[20] In Natal Joint Municipal Pension Fund v Endumeni Municipality [2012] 2 All SA 262 (SCA); 2012 (4) SA 593 (SCA), the SCA had regard to the following:

“The present state of the law can be expressed as follows. Interpretation is the process of attributing meaning to the words used in a document, be it legislation, some other statutory instrument, or contract, having regard to the context provided by reading the particular provision or provisions in the light of the document as a whole and the circumstances attendant upon its coming into existence. Whatever the nature of the document, consideration must be given to the language used in the light of the ordinary rules of grammar and syntax; the context in which the provision appears; the apparent purpose to which it is directed and the material known to those responsible for its production. Where more than one meaning is possible each possibility must be weighed in the light of all these factors. The process is objective not subjective. A sensible meaning is to be preferred to one that leads to insensible or unbusinesslike results or undermines the apparent purpose of the document. Judges must be alert to, and guard against, the temptation to substitute what they regard as reasonable, sensible or businesslike for the words actually used. To do so in regard to a statute or statutory instrument is to cross the divide between interpretation and legislation. In a contractual context it is to make a contract for the parties other than the one they in fact made. The ‘inevitable point of departure is the language of the provision itself’, read in context and having regard to the purpose of the provision and the background to the preparation and production of the document”[2].

[21] The next issue is the alleged non-compliance with clause 10.3.1 of the Contract by the employer. The applicant contends that the employer’s Dispute Notice submitted on 11 September 2017 was only delivered to the Engineer and thus it is invalid since it was not delivered to it, as required in terms of clause 10.3.1 of the Contract. This requires a scrutiny and proper interpretation of clause 10.3.1 of the Contract.

[22] The relevant clause for consideration is the following:

“10.3 Dispute Notice

10.3.1 The Contractor or the Employer, hereinafter referred to as “the parties”, may deliver to the other a written notice, hereinafter referred to as a “Dispute Notice”, of any dispute arising out of or in connection with the Contract;

Provided that:

10.3.1.1 The dispute arises from an unresolved claim.

10.3.1.2 Reference shall be made to this Clause in the Dispute Notice.

10.3.1.3 A copy of the Dispute Notice shall be delivered to the Engineer.

10.3.1.4 The Dispute Notice shall clearly state the nature of the dispute and the extent of the redress sought.

10.3.1.5 The Dispute Notice shall be delivered within 28 days of the event giving rise to the dispute has arisen. Failing such delivery, the parties shall have no further right to dispute the matter.

10.3.2 If either party shall have given notice in compliance with Clause 10.3.1, the dispute shall be referred immediately to adjudication in terms of Clause 10.5,” [My Emphasis]

[23] In order to understand the procedure regarding the submission of the Dispute Notice, one must read clause 10.3.1 together with its sub-clauses 10.3.1.1 – 10.3.1.5. Clause 10.3.1 is incomplete without reference to its sub-clauses. It is evident from the text of these sub-clauses that , first, clause 10.3.1 identifies a person who must deliver a Dispute Notice. It is glaring that a person who must deliver a Dispute Notice is the Contractor or the Employer. It explicitly states that the Contractor or the Employer may deliver to the other a written notice. However, the inclusion of the words “may” denotes that it is not peremptory. It does not require an exact and substantial compliance. The use of the words “provided that” signifies that clause 10.3.1 must be read in conjunction its sub-clauses. It cannot be read in isolation from its subclauses, otherwise its meaning will be lost. Clause 10.3.1.1 identifies the nature of the dispute that must exists in order for clause 10.3.1 to kick in, it must be a dispute that arises from an unresolved claim. Clause 10.3.3 gives a clear direction as to whom this Dispute Notice must be delivered to. It is evident from this clause that a Dispute Notice must be delivered to the Engineer. The inclusion of the words “shall” denotes an exact and substantial compliance. It also obviates any uncertainty as to whom this Dispute Notice must be delivered to. It is peremptory. Without any shadow of a doubt it is manifest that a Dispute Notice must be delivered to the Engineer.

[24] In order to refer the dispute to adjudication, the Contractor or the Employer must have given notice in compliance with clause 10.3.1. However, as already stated above, it is conspicuously clear that in order for clause 10.3.1 to have a complete meaning, it must be read with its sub-clauses, and this is evident from the words “provided that”. The words “provided that’’ give context under which clause 10.3.1 may be applicable.

[25] It is common cause that the Employer’s Dispute Notice was delivered to the Engineer within 28 days as required in terms of clause 10.3.1.5. The applicant’s contention that a failure to deliver a Dispute Notice to it rendered the notice invalid cannot succeed. The clause 10.3.1 read with its sub-clauses does not require such a compliance. A delivery of the Dispute Notice to the Engineer within a prescribed timeframe is sufficient.

EXTENSION OF PERIOD IN TERMS OF S 8 OF ARBITRATION ACT

[1]CINEMA CITY (PTY) LTD v MORGENSTERN FAMILY ESTATES (PTY) LTD AND OTHERS [1980] 1 All SA 430 (A); [1980] 1 SA 796, at 803G-H. This approach has not changed, in Smit v Minister of Justice and Correctional Services and Others (CCT 235/19; 243/19) [2020] ZACC 29; 2021 (3) BCLR 219 (CC) ; 2021 (1) SACR 482 (CC) (18 December 2020), it was held that, “ [54] Endumeni Municipality reminds us that the process of attributing a meaning to words used in a statute also involves consideration of the ordinary rules of grammar and syntax”.

[2] [2012] 2 All SA 262 (SCA); 2012 (4) SA 593 (SCA), at para 18

[3] It is also available in this citation: Samancor Holdings (Pty) Ltd and Others v Samancor Chrome Holdings (Pty) Ltd and Another [2021] 3 All SA 342 (SCA); 2021 (6) SA 380 (SCA)

[4] Ibid at para 35

[5] Ibid at para 35

[6] Ibid at para 33