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REPUBLIC OF SOUTH AFRICA

IN THE HIGH COURT OF SOUTH AFRICA

GAUTENG LOCAL DIVISION, JOHANNESBURG

CASE NO: 2015/04987

Reportable

Of interest to other judges

Revised.

16/3/2015

In the matter between:

DBT TECHNOLOGIES (PTY) LIMITED                                                                  Applicant

and

AUGUST GENERAL SERVICING SOUTH AFRICA

(PTY) LIMITED (IN LIQUIDATION)

(MASTER’S REFERENCE:  T21132/2014)                                                First Respondent

THEODOR WILHELM VAN DEN HEEVER N.O.                                  Second Respondent

DEON MARIUS BOTHA N.O.                                                                   Third Respondent

CAROLINE MNAKGOKOLO LEDWABA N.O.                                       Fourth Respondent

JUDGMENT

 

VICTOR, J:

[1] This is an urgent application in terms of which the applicant seeks various relief directing the respondents to release steel materials in various stages of manufacture for installation at the Medupi and Kusile power stations.  The applicant claims that it has paid for the steel. Both power stations are at critical stages of completion.  The first respondent held steel on its premises only for the work it did for the applicant and for no other customers.

[2] The materials were brought onto the premises situated at 137 Bosworth Street, Alrode Extension 4, Alberton and at Thulisa Park situated at 167 South Road, Thulisa Park, Johannesburg (premises) by the first respondent at the instance of the applicant and at this stage the applicant has paid for a total tonnage of 2 633, 40 referred to as paid material described more fully below. The applicant also seeks unfettered access to the premises to remove the paid material and to take all steps necessary to preserve the paid material whilst on the premises.

[3] The applicant also seeks an order that the respondents account for all payments received by and on behalf of the first respondent arising out of the disposal by the respondents of any material not released to the applicant, to point out to the applicant the whereabouts of 347,86 tonnes of unpaid material manufactured but not paid for by the applicant and in the event that unpaid material is not to be found on the premises, to point out to the applicant where the missing material can be found that is the difference between 2 633,30 tonnes of paid material and the tonnage actually found on the premises and finally to provide the applicant with all the documentation pertaining to the sale and/or removal of the unpaid material and the missing material from the premises.  The applicant also seeks a costs order.

[4] This is the second application in the litigation history between the applicant and the first respondent (in liquidation) concerning the Medupi and Kusile power stations currently under construction.  Bringing both power stations on line is a crucial step towards contributing towards meeting the electricity demands of the country in this current era of electricity outages.

[5] On 1 September 2014 I granted an order in terms of which I directed that the respondents release to the applicant certain data books and tube sheets so that the machinery at the power stations could be commissioned. The applicants also at the time sought relief in respect of material on the site belonging to it but did not pursue that relief at the time.  There was no objection by the parties to my hearing this second urgent application.  

[6] An application for leave to appeal my judgment was filed and an application in terms of section 49(11) of the Uniform Rules of Court was heard before Windell J. She granted the applicant leave to execute my order.  An urgent appeal was brought against the judgment of Windell J and this was dismissed by a full bench of this division.

 

Aspects relating to the commissioning of Medupi and Kusile power stations which cannot be disputed on plausible grounds

[7] The applicant has contractual obligations directly related to the supply and delivery of materials for the Kusile and Medupi power stations. Units 3 and 4 of Medupi and Kusile units 2 and 3 are already far behind schedule.  The delay caused by the liquidators in refusing to release the paid material (which will be more fully described below) has delayed the pre-assembly of certain items which in turn has delayed the erection and installation of the items.  It will continue to have a knock on effect delaying the commissioning of these units and the final synchronisation of the power stations into the national power grid.

[8] Schedules attached to the founding affidavit reflect that erection and completion deadlines have already been missed in respect of Medupi and the erection of Kusile unit 2 must be completed by the end of June 2015. The delay in delivering paid materials has the very real risk of delaying the commissioning process and the ultimate start up of the Medupi and Kusile power stations.  The applicant could be liable in damages running at R1 455 000 per day.

[9] The applicant faces the challenges of having to fabricate missing material (also described more fully below) and must mitigate its exposure to delay damages. The Alrode premises have been sold and there is no confirmation that the applicant’s rights have been conveyed to the new owners. The applicant’s attorney of record has been able to establish the whereabouts of the total material paid for which forms the subject matter of this application.

 

Ownership of the Materials

[10] The submission is made that the material currently on the premises is owned by the applicant and has been paid for by the applicant. As stated above the steel on the premises are for the work it did for the applicant and for no other customers. The respondent disputes the applicant’s ownership of the material currently on the premises.  The high water mark of the respondent’s defence is that it disputes the applicant’s ownership and refers in vague terms to some of the material supplied to its site belonging to steel suppliers who hold a reservation of ownership. No persuasive detail is supplied by the respondents as to how much of the steel on the premises belong to third parties. No confirmatory affidavits have been filed.

[11] It is the applicant’s case that the second, third and fourth respondents as liquidators would have known about the ownership issues and the applicant’s assertion of ownership in dispute since July 2014 when they were appointed provisional liquidators. In the light of the history of this matter and its self evident urgent nature I find that the second to third respondent have had enough time to consider their position regarding ownership. The respondents would have known, having regard to the undisputed invoices, the undisputed schedules, in particular Annexure FA10 which has been generated by the first respondent’s CEO himself that the material on the premises have in fact been paid for by the applicant and that it was the owner of the material.

 

Interpretation and the context of the Contract between the applicant and the first respondent

[12] The applicant is the main subcontractor to the contractor Hitachi in a construction of the Medupi and Kusile Power Stations.  Hitachi is the contractor to Eskom which is in construction parlance the ‘employer’ in the construction of those power stations.  The respondents dispute the interpretation of the use of the word ‘employer’ in the contract. The use of the word ‘employer’ has to be interpreted in relation to the context and manner in which the parties have been conducting their contractual relationship and obligations prior to the liquidation of the first respondent.

[13] There is a chain of construction companies utilised in the construction of the power stations. The parties who have contractual obligations invariably depend on the due and proper performance of companies in that chain of construction. In this instance the first respondent’s performance of its contractual obligations impacted on the applicant’s performance of its contractual obligations to Hitachi and in turn the latter’s obligations to Eskom.  There is therefore a knock on effect if a party does not perform its contractual obligations. In the case of non-performance it exposes the parties in the chain of construction to significant damages claim.  Each power station has six units completed in six stages.

[14] The applicant subcontracted the manufacture and erection of certain components to the first respondent in terms of two written subcontracts concluded between them in accordance with FIDIC Conditions of Contract for Plant Design Build, the Yellow Book 1^st edition 1999 as amended and amplified in terms of the Medupi Power Station project and a subcontract of 23 February 2009 as amended and amplified in respect of the Kusile Power Station project. 

[15] The relevant terms for the purposes of this application are clause 4.1 in terms of which the first respondent waived all liens in respect of the subcontract work. The applicant alleges that it would become the owner of plant and material when the first respondent received payment from them, the applicant.

[16] The second, third and fourth respondents are in possession of work in progress, completed items and incomplete items in terms of the subcontract agreements.  There are three categories. The outstanding material comprises 2 981, 16 tonnes which is the total of the paid and unpaid materials. The paid materials comprise 2 633, 30 tonnes and the unpaid material comprises 347, 86 tonnes. The dispute relates to the paid materials.  The first respondent was contractually bound to manufacture material for the applicant totalling 18 991, 08 tonnes. It paid for 18 643, 22 tonnes but has only received delivery of 16 009, 92 tonnes of the 18 643, 22 tonnes of material paid for.

[17] It follows that there are 2 633, 30 tonnes of material in respect of which the applicant is the owner and this material should be in the possession of the liquidators at the premises.  Prior to the launch of this application the applicant was of the mistaken view that all the tonnage had been delivered but subsequently did an inventory and found out that only 16 009, 92 of the paid for 18 643,22 tonnes had been delivered leaving 2 981, 16 tonnes on the premises. In addition, the applicant asserts that the former director of the company in liquidation is disposing of the steel on the premises.  The liquidators have not put any security on the premises and this is of course another source of a dispute between the parties.  For the purposes of my judgment I do not have to determine that dispute.

[18] The ownership, the interpretation of whether the applicant is the owner of the steel is critical to this matter.  This needs to be proved on the balance of probabilities.  The onus to retain possession is on the respondents and the alleged feint claim that there are third parties who have delivered steel to the site and who have reserved ownership are, therefore, entitled to the steel that they delivered.  The respondents have not given detail, they have not given names or put up affidavits from those steel suppliers who may have reserved ownership in this regard.  Therefore, I have to determine whether there was an intention to effect transfer of the steel upon payment having been made.

[19] The respondent is the possessor of the paid for steel and the question is whether that steel must now be handed over to the applicants.  For the respondents to hold on to the steel in question, there has to be causa detentionis or an express agreement and in this case I also have to take into account surrounding circumstances and the manner which the applicant and first respondent conducted themselves prior to their dispute.  The respondents are adamant that the reliance by the applicant on clause 7.7, namely, that upon payment the ownership of the steel will vest in the applicant is wrong as upon liquidation the “contract died”.  The payments were however made prior to liquidation.

[20] It is common cause that the applicant has made payment in excess of R456 million and it claims that by virtue of the calculations that I have referred to, the respondent has to hand over the 2,9 tons of steel in question. 

Clause 7.7 of the FIDIC contract concluded between the applicant and first respondent reads as follows:

“Each item of plant and materials shall to the extent consistent with the laws of the country become the property of the employer at whichever is the earlier of the following times free from liens and other encumbrances

(a)  When it is delivered to the project site. 

(b)  When the contractor receive payment from the employer of the value of the plant and/or materials in question.”

[21] It is the respondents’ case that the word employer in
clause 7.7 can never be read to mean the applicant.  It is their contention that having regard to all the various schedules and contracts that make up the FIDIC contract, the employer can only be Eskom and no one else, therefore, that clause relating to ownership upon payment cannot be read to include the applicant.

[22] It is important to analyse whether upon a proper construction of the contract itself, the context and the conduct of the parties, whether that word employer can be read to mean the applicant. 

[23] The respondents rely on the case of Bothma Mabhato Transport Edms Beperk v S Bothma en Seun Transport Edms Beperk 2014 (2) SA 494 SCA very heavily to suggest that the applicant cannot succeed in this regard that the applicant has dressed up this application as a rei vindicatio application when in fact it is seeking specific performance.  In Bothma Mabhato reliance was placed by Wallis JA on his earlier judgment of Natal Joint Municipal Pension Fund v Endumeni Municipality 2012 (4) SA 593 (SCA) the dictum at para 18 :

“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.”

[24] In the case of Kruger v Joles Eiendomme Pty Ltd and another 2009 (3) SA 5 SCA, judgment by Cloete J where he refers to the fact that the conduct of the parties is an important feature in the interpretation of a contract. It is the applicant’s case that the word employer as in various parts of the document, can only refer to the applicant and not to Eskom.  Although there is a definite definition that the word employer does mean Eskom, in this case I have to have regard to the surrounding circumstances and the conduct of the parties.

[25] The respondent contends that the application has been dressed up as a rei vindicatio when in fact it is for specific performance.

[26] In my view the applicant’s claim is based not only on the contractual provision but also on the common law that is in relation to the materials. It is common cause that the steel materials do not belong to the second to third respondents or to the company in liquidation. There is no legal basis upon which the respondents can continue to hold the material. The feint attempt to claim that other steel suppliers have a reservation of ownership on the material cannot stand in the light of the bald denials and the lack of detail by the respondents.  In the matter of Dreyer and Another NNO v AXZS Industries (Pty) Ltd 2006 (5) SA 548 (SCA) in a vindicatory action by the respondent for the delivery of certain movables by the appellants the respondent alleged that it acquired ownership of the goods pursuant to a post-liquidation auction sale and that although the conditions of sale had not reflected the goods as forming part of the subject matter of the sale they had indeed done so by virtue of a prior old agreement.  Brand JA in para [4] page 550 stated:

“A party who institutes the rei vindicatio is required to allege and prove ownership of the thing.  Since one of the incidents of ownership is the right to possession of the thing a plaintiff who establishes ownership is not required to prove that the defendant’s possession is unlawful.  In that event the onus to establish any right to retain possession will rest on the defendant, as long as the plaintiff does not go beyond alleging ownership.”

[27] Since 2009 the parties in this matter have conducted themselves in a way in which the applicants claim it has had, namely, that when it made advance payments in some instances and where it made payments for materials it regarded itself as the owner of the material even in respect of material that was not delivered to the project site. 

[28] The applicant has carried out a very detailed exercise to demonstrate unequivocally that the steel found on the site pursuant to the inventory, which now shows a much reduced tonnage on site, can be linked to the invoices and the payments.  In particular, an analysis of FA10, to which I have already referred, demonstrates unequivocally that there is an item number and invoice found in TM9.

[29] Contrary to what the respondents have claimed that the applicant did not put up one invoice or statement to demonstrate that the material has been paid for, quite the contrary.  What the applicant did was to draw up a schedule to extract from the very invoices what it ordered, what has been delivered and what has been paid for.  That exercise is to be found in Annexure TD5 and the detail therein. In my view, there has been sufficient evidence to demonstrate that there has been sufficient identification by the applicant of the steel and in circumstances such as this where the paper work

[30] I have already referred to the very important and critical factor that all the steel on the two premises referred to only relate to one project and that is the project between the applicant and the first respondent in liquidation.  The further emphasis is that there are two further invoices and statements that were produced by the managing director or chief executive officer of the first respondent in liquidation as also FA10 and the applicant, therefore, also relies on the very ipse dixit of Mr Brandner of the first respondent who compiled the invoices in question. 

[31] The respondents contend that no proof of payment was made. There were no invoices and delivery notes set out in the founding affidavit. There was no schedule and one cannot establish ownership simply by way of allegations.  The respondents contend that proof of delivery was required by the applicants.  According to the respondents the clarification document in Volume 4 does not prove ownership. It was submitted that the drafters of the application were aware of the ownership problem and tried to avoid dealing with it.  These are integrated contracts and according to the respondents the applicant’s case is ambiguous. The respondents contend the reliance on the privilege in respect of a proposed settlement between the parties. I have not considered the proposed settlement agreement in coming to the conclusion I have. The respondents deny that the applicants had the animus to the owner.

[32] The applicants have criticised the fact that the liquidators have not been forthcoming. It was submitted on behalf of the respondents that there was no duty to report to the applicants. They only have to report to the creditors. They do not have to debate an account with a creditor that has not proved a claim and therefore owe no duty of explanation to the applicants.  The respondents fear that if they do not comply with a court order they would face contempt applications. This submission must fail based on the requisite onus in contempt proceedings. A reasonable and honest explanation about the missing material would suffice. The first respondent’s very detailed table set out as “TD5” links the steel supplied and paid and the key identification number.

[33] I find that the various annexures and Annexure “FA10” produced by the first respondent in liquidation and confirmed by one of the directors of the first defendant to be correct does indeed establish the ownership of the material by the applicants.  The further submission on behalf of the respondents is that the handing over of an asset would result in a preference. This is incorrect in the light of the fact that by virtue of payment and the interpretation which I attribute to Clause 7.7 ownership vested in the applicant prior to liquidation. The first respondent is not the owner and the first respondent held no lien over the goods and the so-called steel suppliers have not been identified by the respondent. They are not supported by any of the creditors by way of affidavit.

[35] The applicants have submitted that a robust and common sense approach be adopted. The applicant submits that there was no entitlement on the part of the respondents to keep the steel and the dispute as to who is owner makes no difference ultimately even on the respondents’ interpretation of the contract Eskom is the owner thus nullifying the respondents continued dententionis of the steel.  I find that ultimately the respondents have not asserted a right in law to hold onto the steel material.

[36] Regarding the executory nature of the contracts the applicant is not asking the respondents to perform any executory function after liquidation. Ownership vested in the applicant prior to liquidation and this right not only emanates from the contract but for a common law right to rei vindicatio.

[37] Annexure “TD9” is an affidavit by Mr George Christopher Brandner who confirms that he has read the affidavits of Van den Heever and this then confirms Annexure “FA10” and its correctness. There is in place a mutually agreed inventory. On 31 July 2014 the first respondent sent an invoice Annexure “FA13” indicating that an amount of R5 202 786,45 was due in respect of unpaid invoices and this is for the 347 tonnes referred to. Annexure “FA12” demonstrates unequivocally on the first respondent’s own statement that the applicant has paid for all the paid materials it has claimed and that the unpaid material of some 340 tonnes which is not present on the premises in any event is reflected in the unpaid invoices recorded in that statement.

[38] There have been protracted negotiations regarding the release of the paid material. The applicants contend that the refusal by the liquidators to release the paid material is as a result of an attitude and this attitude was present at the previous application heard by me. There is no security in place and a lot of the material has clearly disappeared. I am of the view that the material is for a national interest and clearly there is a possibility that the metal is being cut up for scrap metal. Undertakings to preserve the material have not been undertaken the affidavit of Van Wyk and Coetzee regarding the cutting up of the material for scrap. This is denied.

[38] There is, in my view, no further defence justifying the continued detentionis by the respondent for holding onto the material in question.  The material in question is necessary to complete a project which is in the national interest and in this regard is a further justification for the grant of the order. I do not regard this fact to be emotional or a cri de coeur.

The order which I intend making is the draft order marked X.   The draft order in paragraph 2.5, 2.6, 2.7 and 2.8 has been amended to delete the 24 hours to “by close of business on Monday 8 March 2015”. 

 

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M VICTOR

JUDGE OF THE HIGH COURT OF SOUTH AFRICA

GAUTENG LOCAL DIVISION, JOHANNESBURG

 

COUNSEL FOR THE APPLICANT                       P DANIELS SC

                                                                        E THERON SC

                                                                        MR J W STEYN

INSTRUCTECD BY                                            DLA CLIFFE DEKKER HOFMEYR INC

                                                                        1 Protea Place

                                                                        Corner Fredman Drive and Protea Place

                                                                        Sandton

                                                                        Ref:  S de Vries/01959983

                                                                        Tel:  (011) 562 1892

COUNSEL FOR THE RESPONDENTS

INSTRUCTED BY                                              DE VRIES INCORPORATED

                                                                        De Vries House

                                                                        93 Protea Road

                                                                        Chislehurston

                                                                        Sandton

                                                                        Ref:  A Bonnet/st

                                                                        Tel:  (011) 775 6000

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