Substance is key in Notifications of Claims

July 22, 2012 · Posted in Legal · Comment 

The main job during the execution of the agreement as “Engineer” (under the GCC) or “Principle Agent” (within the JBCC) demands frequent decisions and judgements around the actions on location. This function will also be often undervalued and will attract major liabilities.

Experts in the building and engineering industry are often appointed as the Engineer or Principle Agent. It is required of the specialist accomplishing this critical function to be au fait not only with the terms of the contract, but the execution thereof.

What are the implications of inadequate decision making by the Engineer or Principle Agent under these types of building agreements? One particular instance in which the courts discussed the yardstick with which the Engineer or Principle Agent is to be assessed is inside the case of Hawkins & Osborn (South) (Pty) Ltd vs Enviroserve Waste Management. The decision not only sets the current benchmark in this regard, but additionally sounds a reminder to Engineers and Principle Agents to behave in a sensible manner when conducting themselves as the Employer’s consultant on location.

In cases like this, as in a number of other scenarios in the building and engineering sector, the Employer (Enviroserve Waste Management) concluded a verbal contract with the Engineer. The Engineer was employed to monitor and administer a number of contract works.

The Employer then signed a written agreement with a Service provider to perform digging on top of a certain site. The written agreement between the Employer as well as the Service provider included the General Conditions of Contract for Works of Civil Engineering Construction – 6th edition.

The service provider raised a disagreement in relation to a “notification” of likely claims communicated to the Engineer within a letter. The Engineer did however not value the letter as suitable notice. The results of the Engineer’s final decision would be a deadlock between the Employer and the Contractor which had to be sorted out by an Arbitrator. The Arbitrator determined that the letter was without a doubt appropriate notice and that the builder was eligible to claim as advised therein.

As a result of the Arbitrator’s ruling, the Employer had to pay the Contractor’s claim, but then claimed damages for breach of contract from the Engineer in the High Court. The Employer based its claim on an allegation that the Engineer breached the contract by neglecting to construe the Contractor’s letter as an most appropriate notice of the intent to claim payment for further work as considered in clause 50(1) within the GCC.

The main court established that no violation of agreement had happened as the Contractor’s letter did not constitute proper notice as considered in clause 50(1) within the GCC.

Nonetheless, it had been held by the Supreme Court of Appeal that:

“…there were absolutely no reason why the notice contemplated in GCC 50(1) cannot be in the form of a letter granted the letter was framed as to convey unequivocally towards the addressee that the writer was invoking, or depending upon, the conditions of the agreement which provided for the giving of notice. It could do so expressly or by insinuation. In the present case, the contents of the last paragraph of the Contractor’s letter was so closely connected with the substance of clause 50(1) that it completely satisfied that standard. The letter furnished the info required by clause 50(1) (a) and (b).”

The Contractor’s letter did comply with the conditions of the contract for the reason that it included the information that was required to represent a notification as needed by clause 50(1) of the GCC. The technical strategy used by the Engineer in working with the “notification” by the Contractor was not considered to be reasonable by the Court of Appeal. On the flip side, the Court discovered that the Engineer’s behavior in this regard wasn’t satisfactory as assessed against the norm of the “reasonable engineer”.

The letter therefore constituted a notice which any sensible engineer would’ve construed as such. The Engineer’s inability to do this therefore constituted a violation of the Engineer’s duty of care and, thus the agreement with the Employer. The Engineer was found liable to the Employer for the amount due and payable to the Contractor under the award of the Arbitrator in the initial settlement between the Employer and the Builder.

Focussing exclusively on particular legal fields, Dirk is able to make early and accurate assessment of merits and manage legal disputes effectively. His specialist practice areas include construction law and engineering law, insurance law, property law, medical law and product liability law.

Considering Prescription – The Construction Law Perspective

June 13, 2012 · Posted in Education · Comment 

Introduction

As in all lawful disputes, extinctive prescription is a vital aspect to be viewed as when assessing the merits of a declare and formulating a protection. Construction law scenarios, in lots of cases, include not only advanced contractual associations, and also tricky technical facets. Analyzing the date on which prescription begins to run entails cautious factual evaluation and if the actions with the affordable person are to generally be factored in to the discussion, factors could get all the more challenging.

Prescription

The 1969 Prescription Act supplies for 4 distinctive simple prescription periods. The intervals are thirty, 15, 6 and three decades respectively. A lot of the instances I’ll be referring to relate to debts which can be subject matter into a 3 calendar year prescription period of time. I’ll also refer briefly to some circumstance in direction of the finish of the presentation the place the thirty 12 months period finds application.

When does prescription begin to operate?

Section twelve from the Act supplies as follows:

12. … (1) … prescription shall start to operate when the debt is due. (two) … (3) A personal debt shall not be judged for being owing until finally the creditor has understanding of the identity on the debtor and in the information from which the credit card debt arises: … a creditor shall be considered to acquire these types of information if he could have acquired it by performing exercises sensible treatment.”

When is the debt owing?

The decision in Martin Harris & Seuns OFS (Pty) Ltd v Qwa-Qwa Regeringsdiens 2000 (three) SA 339 (A) gives you an excellent illustration of when a credit card debt becomes due for the purposes of Section twelve(1) of your Act.

The information of this matter are briefly as follows:

* The building contract provided that the appellant would be paid after a progress certificate was issued by an architect (the principal agent) in respect of work already performed. These certificates were issued and the appellant was duly paid.

* Within three several years after completion of the works as a whole, but extra than three several years after uncertified sections of work was done, the appellant instituted action for an outstanding balance in respect of uncertified work.

* The respondent alleged that the claim had prescribed because the entitlement/debt arose when each portion of work had been completed.

The Court held in the contractor’s favour and I summarise the position as follows:

* The issuing of progress certificates was only a contractual mechanism to place the contractor in a position to finance the continuation of the completion of your works.

* The completion of each specific segment in the work did not entitle the appellant to receive payment for the work.

* Only upon completion of your work as a whole would the appellant have this sort of entitlement.

* The appellant’s declare would rest upon a certificate as a separate and self-supporting cause of action, the place a certificate had already been issued.

* The would then be for payment from the percentage from the value in the works for which the architect had certified.

* Prescription in the appellant’s claim (for payment for all sections which had not appeared in any certificate) began to run at the earliest in the event the work as a whole was completed.

The financial debt had therefore not become due and respondent accordingly failed in its prescription argument.

In LTA Building v The Minister of Public Works and Land Affairs 1992 (1) SA 837 (C) the court also shed much more light on the same question.

The claimant claimed for losses sustained in consequence from the delay in the commencement with the works. The building contract provided for the completion of the works within 33 months from date of acceptance of your tender. A further term was that the employer would hand over the site within a certain time period. The progress on site and completion with the project were adversely affected by:

* The employer’s late handover of your site (7 working days delay).

* Completion delayed because of to causes beyond the contractor’s control (320 working days). The defendant then raised a prescription argument and said that the plaintiff’s claim had become prescribed because the debt claimed for became due 33 months and 10 days (7 working days and 3 non-working days) after acceptance of your tender.

* This argument resulted in 16 July 1986 being calculated as being the date on which the personal debt was to obtain become because of.

* Summons was served on 5 December 1989.

The defendant’s argument however did not take into proper consideration that a further term from the contract provided for the contract time period to become extended in the event of delays because of to causes beyond the contractor’s control.

This provision extended the date on which the personal debt became because of with a further 320 working days. The defendant was unsuccessful.

Awareness and deemed knowledge

As we have seen Part 12(3) from the Act gives you that a credit card debt is not regarded for being owing till the creditor has awareness or is considered to have understanding with the identity in the debtor, as well as on the info from which the debt arises.

In Minister of Public Works and Land Affairs v Group Five Building Limited 1999 (4) SA twelve (SCA) counsel for the contractor contended that the employer’s claim had become prescribed in terms of Segment 12(one) on the Prescription Act.

The employer had allegedly become aware on the relevant details by thirty May 1991. The contract was terminated on 3 December 1991 and the employer’s counter-claim was delivered on 1 December 1994. The contractor had therefore to prove that prescription had begun to operate.

In the instant case, the date on which the employer gained expertise with the info from which the financial debt arose (30 May 1991) was irrelevant as this particular contract contained a clause which entitled the employer’s engineer to require the contractor to remedy defective work. The very earliest stage once the employer’s damages could conceivably have become owing was when the contractor, who had the duty to remedy the defective work, had the last chance to do so. This was the date on which the contract was cancelled (three December 1991).

The employer’s counter-claim was delivered on one December 1994 and therefore fell within the three 12 months prescriptive period of time. The contractor had accordingly failed to prove that prescription had run.

The affordable man or woman

In Drennan Maud & Partners v Pennington Town Board 1998 (three) SA 200 (SCA), the appellant was a civil engineering consultancy. It designed and recommended the construction of the reinforced concrete retaining wall for the reason that Town Board wished to protect certain properties which became threatened by the Umzinto River in Kwa-Zulu Natal. The Town Board accepted design and proceeded to engage a contractor to build the wall.

During September and November 1989 heavy rains fell and the river came into flood. Sinkholes formed in the backfill material behind the wall during this interval. These developed progressively and eventually became very substantial. By January 1990 the river was flowing freely under the whole length on the wall and the Town Board were back to in which they had been before the appellant was consulted and claimed was for the wasted costs of building the wall.

It was alleged by the engineers that by no later than 13 November 1989 the Town Board had awareness in the details from which the alleged declare arose. It was later alleged that the Town Board acquired regarded awareness in the light on the info known to it by the above date. The Town Board should have exercised sensible care.

In his judgement the Honourable Mr Justice Olivier made the following statement: “… a creditor shall be considered to possess the required awareness if he might have acquired it by training acceptable care. In my view, the requirement exercising acceptable care required diligence not just in the info underlying the financial debt, and also in relation to the evaluation and significance of those facts. This means that the creditor is regarded to obtain the requisite know-how if a acceptable individual in his position would have adduced the specifics from which the credit card debt arises.”

It was clear from the subsidence of the backfill material behind the wall that the design had failed and could not withstand the scouring effect on the passing flood. Since the Town Board’s claim was for the wasted costs of building the wall, the loss claimed for had already occurred when the Town Board acquired considered knowledge that the wall did not serve the purpose for which it was designed and built and that the related costs were wasted.

The consultant’s prescription argument was therefore well founded because the respondent’s summons was issued outside of the three 12 months prescription period of time.

Prescription and arbitrations

Arbitration plays a major role in the building industry as alternative dispute mechanism. I would like briefly, and in closing, to discuss one or two important facets of prescription pertaining to arbitrations.

Area 13(one)(f) with the Act states that the completion of prescription will be delayed if the debt may be the object of the dispute subjected to arbitration.

What is Arbitration?

In Murray & Roberts Construction (Cape) (Pty) Ltd v Upington Municipality 1982 3 SA 385 (NC) it was held that the referral to an engineer (in terms of a written agreement between the plaintiff and the defendant) was also a dispute subjected to arbitration for purposes of Part 13(1)(f) from the Act. This final decision was upheld in the Appellant Division. It therefore followed that the completion of prescription was delayed right until one calendar year after the arbitration proceedings had come to an end.

Proceeding with the Arbitration

It should also be noted that the mere existence of an agreement between parties for disputes between them to generally be referred to and decided by arbitration does not suffice for the purposes of delaying the running of prescription and that the words subjected to arbitration means that the parties are required to refer disputes to arbitration and to actually proceed with the arbitration proceedings.

Judgement Financial debt

In Primavera Building SA v Government of Northwest Province & another 2003 (3) SA 579 (BPD) the settlement agreement and the resultant Court Order provided, inter alia, that the award by the arbitrator would operate as an Order of Court.

The arbitrator’s award therefore acquired the status of the judgment credit card debt for purposes of Area 11(a)(two) in the Prescription Act, which meant that a thirty yr. prescriptive interval would be applicable to the award.

Dirk is an experienced lawyer in managing construction law disputes using the full range of dispute settlement processes including litigation, arbitration, adjudication, mediation and negotiation. He is also an expert in engineering law, insurance law, property law, medical law and product liability law.

Adjudication Introduced

February 28, 2012 · Posted in Education · Comment 

From the government white paper on Producing an Natural environment for Reconstruction Expansion and Progress inside the Building Industry in 1999, it was argued that the standard mechanisms and methods for last dispute resolution (typically arbitration or litigation) are much too high priced and time consuming.

In March 2001 federal government printed a draft code of practice, entitled “Adjudication in Engineering and Construction Contracts in South Africa”, proposing a move towards fast and reasonably priced dispute resolution mechanisms in said contracts.

The Development Sector Development Board (“CIDB”) issued a draft Practice Manual for public remark in August 2003. This practice guidebook, printed on the back of the white paper, also advocates using adjudication as the cost and time effective alternative dispute resolution mechanism to arbitration and litigation.The world Bank also advocates that adjudication processes be utilized on jobs which it funds.

The Primary Construction Arrangement in the Joint Building Contracts Committee (“JBCC”) published in March 2004, integrated adjudication in the local development industry even further.

Adjudication – The general Rules

Whilst adjudication is presently being introduced locally, several members of the construction industry remain unclear concerning what adjudication is and the way it can be applied. Despite the fact that the terms and conditions of adjudication are agreement specific, adjudication can, in broad phrases, be defined as becoming: “… an accelerated and cost effective sort of dispute resolution. The result is really a conclusion by a 3rd party intermediary that is closing and binding about the events in dispute, until the choice is reviewed by litigation and arbitration.”

The method and Principles of Adjudication

Any dispute arising from, or even in connection using the agreement should be effective at getting referred to adjudication supplied the essential terms and conditions are integrated while in the contract at the ideal time. While the procedural specifications for referral of disputes and conducting the adjudication will change from agreement to agreement, one particular has the capacity to distinguish specified underlying rules:

* A party referring a dispute to adjudication should do so in crafting, will have to submit the dispute inside the time period stated from the contract with needed details, failing which it forfeits the right to dispute the make a difference.

* The terms and procedures of adjudication are agreed and detailed inside the contract, which results in an informed, transparent and speedy choice. If successfully referred, every single social gathering must be given a reasonable chance to condition their case (with no hearing), to be aware of what the case from it really is and also to generally be placed owning all evidence acquired by the adjudicator.

* Adjudicated disputes ought to be settled within the contract period because the agreement itself kinds the basis for enforcing the decision of the adjudicator. As a standard rule, all disputes are to be resolved within a 42 day interval of becoming referred to adjudication.

* The position associated with an adjudicator is just not that relating to an arbitrator. The adjudicator is tasked with settlement of your dispute in the contractual legal rights and obligations between the parties.

* Adjudicators must base their choices on the subject matter of the dispute at hand only and must keep away from conducting hearings to solve disputes. Adjudicators should really stay clear of person contact with either party and could not discuss issues using a party without having informing the opposite party of the dialogue as well as end result thereof.

* It really is necessary to effective adjudication that adjudicators achieve a stability between an inquisitorial method and adherence for the principles of organic justice in order to deal with the parties quite. An adjudicator may not for example get ready his own critical route analysis and draw any conclusions as a result, with out affording the parties an opportunity of making submissions about the accuracy thereof.

* Adjudicators have to answer all concerns set to them and are commonly required to deliver written factors for their choices.

* It goes without stating that adjudication can only triumph should the adjudicator is impartial and doesn’t have (or seem to acquire) any romantic relationship with any of the parties nor possess an curiosity during the outcome of your adjudication.

* The adjudicator should really also possess the ideal, following notifying the get-togethers, to talk about legal and specialized industry experts for guidance in parts in which the adjudicator recognizes that he will not be adequately equipped. This provision is aimed at making sure that justice is served, even supposing the adjudicator may well not personally possess every one of the techniques needed to resolve a make any difference.

* The decision of the adjudicator is final and binding on the parties, unless of course it is actually reviewed by either arbitration or litigation. The choice will become enforceable quickly, no matter if the dispute is to be referred for final resolution or not.

* Final resolution of the dispute may, in certain situations, only be referred to arbitration or litigation following a “cooling down” interval has elapsed letting the functions to create this choice following very careful consideration of the merits of their circumstance.

Can Adjudication Work?

Can adjudication work? You can only form a view on this with due regard of other jurisdictions where by adjudication were released, experimented with and examined. From the Uk, adjudication grew to become mandatory on all primary contracts and sub-contracts in 1998, from the introduction of the Housing Grants Development Regeneration Act (1996). From your subsequent statistics (dependent on somewhere around 4 850 adjudications up to September 2001) it’s obvious that adjudication can offer a fast summary treatment for resolving disputes:

* 74% of disputes referred resulted in a decision, the balance being settled or abandoned;

* 76% of referrals ended up completed in less than forty hours;

* 73% of disputes involved non-payment; other important matters were variations, decline / expense and details of legislation;

* 81% of adjudications involved a referral by a party lower within the construction chain;

* Almost fifty % of all referrals were by sub-contractors versus key contractors; and

* 68% of decisions were in favour with the referring party.

There can thus be little doubt that adjudication has had a marked influence over the construction industry inside the United kingdom.

The significant proportion of adjudications relating to “non-payment” difficulties does appear to reveal that where disputes tend to be more sophisticated, such as negligent layout or construction, and so are prone to affect even more contracts (these kinds of as insurance policies), parties may well be additional reluctant to resolve issues through adjudication.

An additional point of concern is the instant enforceability of selections. A party facing an adverse award might for example be obliged to generate payment to some party in intense money problem. Should the choice of the adjudicator then be decided as incorrect by a later forum, the party in the wrong end of the adjudicator’s decision then runs the threat that the recovery of monies paid may perhaps no longer be probable.

Adjudication Within the Upcoming

It truly is distinct that adjudication can, and possibly will, perform a significant position in the regional construction business being an more choice dispute resolution mechanism. A good working knowledge of processes, procedures and pitfalls underneath the many standard types of building contracts will be a pre-requisite in long term negotiations of contracts.

Adhering to the procedural prerequisites for declaring, conducting and settlement of disputes will demand some amount of talent and specialisation to properly protect a party’s legal rights under the contract.

The procedural and certain requirements of the variety of the conventional development agreements, such as FIDIC, BIFSA, JBCC and NEC will type the subject matter of a collection of foreseeable future publications.

The Construction and Engineering Regulation staff has the knowledge to help consumers involved in disputes where adjudication will be the selected dispute resolution mechanism.

Dirk is an attorney specialising in product liability and property law. He fills the void in the vast legal services market by offering specialist legal advice to specific industries.