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.