AUTHENTICATION OF DOCUMENTS FOR USE IN AND OUTSIDE SOUTH AFRICA

Introduction

Have you ever had to legalise documents within South Africa for use abroad or vice versa?

If you have, then you have no doubt experienced the frustration of having same signed/executed only to find out later that the documents are not legally valid or acceptable

Herewith a brief summary of the requirements for authentication

  1. Documents must be properly authenticated to ensure that they are legally valid for use either within South Africa or abroad.
  2. The country in which the documents will be used will determine the authentication process required.
  3. The process of authentication is simplified where the country is a party to The Hague Convention of 5 October 1961 (which abolishes the requirement of diplomatic and consular legalization for public documents originating in one Convention country for use in another). Documents issued in a Convention country which have been certified by a Convention Apostille are entitled to recognition in any other Convention country without any further authentication. Such recognition is an obligation on the part of the United States to the other countries party to the Convention and the federal courts and state authorities have been alerted to this obligation. Consular officers in Convention countries are prohibited from placing a certification over the Convention Apostille.
    Public documents include:
    • Documents emanating from an authority or an official connected with the courts or tribunals of the state, including those emanating from a public prosecutor, a clerk or a process server;

    • Administrative and notarial documents; and

    • Official certificates which are placed on documents signed by persons in their private capacity, such as official certificates recording the registration of a document or the fact that it was in existence on a certain date and official; and notarial authentications of signatures.

    If you have a document which you want legalized for use in another Convention country, the Convention certification called an Apostille must be affixed to the document by a competent authority. The Apostille is a pre-printed form prescribed by the Convention.

  4. Documents are authenticated with a Certificate of Authentication and/or an Apostille Certificate.
  5. Rule 63 of The Rules of the High Court of South Africa regulates the requirements for authentication where documents are signed / executed outside South Africa for use within South Africa.

To ensure that your documents are legally valid the following is required

SIGNING / EXECUTING OF DOCUMENTS WITHIN SOUTH AFRICA FOR USE OUTSIDE OF SOUTH AFRICA.

  1. Where countries are party to The Hague Convention:
    Currently 77 states including most European countries, the United Kingdom, The United States of America and South Africa1.1 Documents are signed and/or executed in the presence of a Notary Public. The Notary Public will attach his Certificate of Authentication to the documents which must bear his signature, stamp and seal.
    1.2 Documents are then forwarded by the Notary Public to The High Court in the area in which the Notary Public practices. The Court will then attach an Apostille Certificate authenticating the Notary Public’s signature; or-
  2. Where countries are not party to The Hague Convention:2.1 Documents are signed and/or executed in the presence of a Notary Public. The Notary Public will attach his Certificate of Authentication to the documents which must bear his signature, stamp and seal.
    2.2 Documents are then forwarded by the Notary Public to The High Court in the area in which the Notary Public practices. The Court will then attach an Apostille Certificate authenticating the Notary Public’s signature.
    2.3 Documents are then submitted to the Legalisation Section at DIRCO (The Department of International Relations and Co-operation) based in Pretoria to be legalised.
    2.4 Once legalised by DIRCO the documents are then forwarded to the Embassy/Consulate of the country in which they are intended to be used for further authentication.

SIGNING / EXECUTING OF DOCUMENTS OUTSIDE SOUTH AFRICA FOR USE WITHIN SOUTH AFRICA.

Rule 63 of the Uniform Rules of the High Court regulates the requirements for authentication.

In terms of Rule 63 a document is sufficiently authenticated by means of a Certificate of Authentication which bears the signature and seal of office of:

  1. a head of a South African diplomatic or consular mission or a person in the administrative or professional division of the public service serving at a South African diplomatic, consular or trade office abroad; or
  2. a consul-general, consul, vice-consul or consular agent of the United Kingdom or any person acting in any of the aforementioned capacities or a pro-consul of the United Kingdom; or
  3. any Government authority of such foreign place charged with the authentication of documents under the law of that foreign country; or
  4. any person in such foreign place who shall be shown by a certificate of any person referred to in paragraph (i), (ii) or (iii) or of any diplomatic or consular officer of such foreign country in the Republic to be duly authorised to authenticate such document under the law of that foreign country; or
  5. a Notary Public in the:- United Kingdom of Great Britain and Northern Ireland (England or Ireland);
    – Zimbabwe;
    – Lesotho;
    – Botswana;
    – Swaziland; or
  6. a Commissioner Officer of the South African Defence Force as defined in section 1 of the Defence Act, 1957 (Act 4 of 1957) in the case of a document executed by any person on active service.

DOCUMENTS EXECUTED IN NAMIBIA

Documents executed in Namibia cannot be authenticated before a Notary Public.

However, Namibia is a party to The Hague Convention and the documents can thus be authenticated via these formalities.

POWER OF ATTORNEY EXECUTED IN LESOTHO, BOTSWANA OR SWAZILAND

A Power of Attorney which is executed in these countries and which gives authority to a person to take, defend or intervene in any legal proceedings in a Magistrate’s Court within The Republic of South Africa shall not require authentication. However the Power of Attorney must be duly signed and the signature must have been attested by two competent witnesses.

Fairness and the FIDIC Silver Book

The FIDIC General Conditions of Contract, contained in the Silver Book version, requires the Employer to act in the “traditional” role of the Engineer. The purpose of this article is to examine the Employer’s power to make determinations in respect of the Contractor’s claims in terms of Clause 3.5 of the Silver Book Contract, and the manner in which he/she is to make same.

The clause in question reads as follows:

“Whenever these Conditions provide that the Employer shall proceed in accordance with this Sub-Clause 3.5 to agree or determine any matter, the Employer shall consult with the Contractor in an endeavour to reach agreement. If agreement is not achieved, the Employer shall make a fair determination in accordance with the Contract, taking due regard of all relevant circumstances.

The Employer shall give notice to the Contractor of each agreement or determination, with supporting particulars. Each Party shall give effect to each agreement or determination, unless the Contractor gives notice, to the Employer, of his dissatisfaction with a determination within 14 days of receiving it. Either Party may then refer the dispute to the DAB in accordance with Sub-Clause 20.4 [Obtaining Dispute Adjudication Board’s Decision].”

The Employer is thus required to consult with the Contractor, hear the Contractor’s side and attempt to come to an agreement with same regarding the Contractor’s claim against him or her. At this stage it is abundantly clear that this process may cause some tension between parties. Should such an agreement not be reached the Employer must proceed to make a “fair determination” regarding the Contractor’s claim. However, in doing so he/she becomes the judge of his/her own case.

E Baker et al in FIDIC Contracts: Law and Practice 2009 at page 292 alludes to the fact that the duty of the Employer to act fairly may not be a “meaningful duty” as the position is clearly conflicting. However, it is concluded that whilst it may be difficult for the Employer to act fairly in these circumstances it is still, in fact, possible. They rely on English authority (the Sheldebouw BV v St James Homes (Grosvernor Dock) Ltd 2006 BLR 124) to reach this conclusion. In the aforementioned matter counsel argued that it was impossible for the Employer to act fairly as a contract administrator, however, the Court found that this was not the case, but conceded that it would be more difficult for him/her to do so.

E Baker et al further argues that the protective measures provided in the Silver Book safeguards the Contractor’s interests from the Employer’s potential failure to act fairly. They refer to the portion of Clause 3.5 which provides that the Employer’s determination shall not be enforceable if the Contractor notifies the Employer of his/her dissatisfaction with the determination within 14 days of same being made. While this safeguard does allow the Contractor an easy mechanism to escape the enforceability of an unfair determination, this safeguard does not cure the internal conflict that arises when the Employer is empowered to make such determinations.

The interpretations of the word “fair” requires that a determination must be bona fide, professional, honest and arguably impartial. Whether the Employer will be able to act in such a manner when determining a claim which affects his/her own rights and position is almost unimaginable. Even where the Employer acts honestly, his/her position as Employer alone jeopardizes his ability to act bona fide toward the Contractor and to take all relevant considerations into account. There is also risk that he/she will naturally treat his/her own circumstances with more gravitas simply because he/she views same from his/her own perspective. As stated by the Court in Sheldebouw: “it is more difficult for the organisation itself to make a decision which is contrary to its own interests”.

Furthermore, the likelihood of the Contractor ever accepting the Employer’s determinations as satisfactory where it is negative towards him/her seems slim. The process of making determinations in terms of the Silver Book is thus inherently somewhat flawed. It is submitted that negative determinations by the Employer will be submitted for endless review by way of adjudication– rendering the process inefficient, time-consuming and potentially costly.

In practice, the removal of the “independent” Engineer creates a contract where the Employer holds the power and the Contractor stands to be prejudiced. It also creates a determination process wrought with potential inefficiency and which may prove difficult to navigate.

That being said, the Silver Book does allow for contract administration without the “middle man” (the Engineer) which in some circumstances may allow for the parties to work together more efficiently and directly. In some circumstances the conduct of the Engineer may hinder the progress of a project or complicate the channel of communication. In circumstances where the Employer and Contractor are comfortable with the Silver Book determination procedure, the Silver Book is certainly workable. Thus with the right parties – it could work.

In conclusion, Contractors should give due consideration to the impact of the Silver Book and whether it is comfortable with the Employer taking on the role of the Engineer before entering into such a contract. All parties should be aware of the pitfalls contained therein in order to ensure that the Silver Book Agreement is the appropriate contract choice.

Claire Roux

Defective works and succeeding contractor’s liability.

When a contractor is replaced by a new contractor it is of the utmost importance that the succeeding (new) contractor must understand the provisions of his/her appointment agreement, as well as the liabilities imposed in terms of the agreement. Depending on the intention of the parties to the contract, the contractor’s liability regarding defective works could be exempted.

In the recent unreported case of Trencon Construction (Pty) Ltd v South African Airways (Pty) Ltd 2015 JDR 0090 (GJ) the court had to determine whether the replacement contractor was liable for the defective works caused by the former contractor on the project.

In this case, Trencon Construction (“Trencon”) was appointed as the contractor for the construction of a departure lounge at OR Tambo International Airport, subsequent to the liquidation of the initial contractor. The parties concluded a written agreement and the general conditions applicable were the Joint Building Contract Committee: Principal Building Agreement (“JBCC”). When Trencon issued an invoice to South African Airways (“SAA”) for work done in terms of the appointment, the principal agent contended that there was defective works which had to be remedied before a certificate of final completion could be issued. It should be noted that when the Applicant was appointed as contractor the design, manufacture and installation of the shop fronts, which were alleged to be defective by the principal agent and SAA, was done by the previous contractor.

SAA and the project manager relied on clause 8.2 of the JBCC which provides that: “The contractor shall make good any physical loss and repair damage to the works, including clearing away and removing from site, all debris resulting therefrom, which occurs after the date on which the possession of the site is given and up to date of issue of the deemed certificate of final completion…” [my own emphasis]

The court held that clause 8.2 implies that the contractor shall make good the physical loss and repair and damage to works which occurs after the date on which possession of the site is given. It is common cause that the loss or damage occurred after the date on which possession was given to Trencon, and accordingly they were therefore not obliged to make good the loss or repair the damage.

Furthermore, the principal agent never issued a defects list, despite Trencon’s notification that same was outstanding. Accordingly in terms of clause 26.4 of the JBCC, the certificate of final completion is deemed to be issued, and as a result final completion is deemed to have been achieved.

The court also referred to clause 8.5 of the JBCC which provides that: “The contractor shall not be liable for the cost of making good any physical loss or repairing any damage of works where this resulted from the following circumstances: …

8.5.9. design of the works where the contractor is not responsible in terms of clause 4.0…”

It was common cause that Trencon was not responsible for the design of the works which the principal agent and SAA contends to be defective. This is therefore another reason why Trencon cannot be held liable for the loss or damages.

To conclude, due to the provisions of the JBCC and due to the fact that the loss or damage did not occur after the date of possession of the site, Trencon was not responsible for the loss or damaged works that occurred. Should an employer therefore require the succeeding contractor to take responsibility for remedying defects or damages caused by the preceding contractor, the employer must expressly state its intention and ensure that it is included in the agreement.

It should be noted that the JBCC applicable in the Trencon case was the JBCC published in 2007, and in the latest edition of the JBCC published in 2014, clause 8.2 is amended.

It terms of the 2014 JBCC version, clause 8.2 states that: “The contractor shall make good physical loss and repair damage to the works caused by or arising from:

8.2.1.  any cause before the date of practical completion;

8.2.2. any act or omission of the contractor, in the course of any work carried out in pursuance of the contractor’s obligations after the date of practical completion.”

It is clear that the words “which occurs after the date on which the possession of the site is given” has been omitted and accordingly this could have an influence on the liability of the contractor. Clause 8.5 of the 2014 JBCC, however, still excludes the contractor’s liability for the loss or repair of damages caused by the design works for which the contractor is not responsible, and this could ultimately still be a defence for the contractor, should the preceding contractor’s works include design.

In light of the aforementioned it is therefore evident that depending on the type of JBCC edition applicable, the contractor will have a valid defence in these circumstances. However, every situation will have to be determined on its own merits and facts.

 

Anjo Rheeders

Safety Requirements for Swimming Pools

Swimming Pools represent a safety risk and for this reason the legislature deemed it prudent to promulgate regulations that govern the safety measures applicable to swimming pools.

Part D4 of the National Building Regulations, (“regulations”) requires that an owner of any site which contains a swimming pool must ensure that access to such swimming pool is controlled. The regulations also provide that any owner who fails to comply with this requirement shall be guilty of an offence. Additionally, a home owner can also be sued for negligence should someone drown in their swimming pool, depending on whether negligence was present. A pool that does not meet the required safety standards, or where those measures are not effective
can, provide the necessary grounds for showing negligence on the part of the owner.

In addition, Part D5 of the regulations further also provides that an owner shall be deemed to have satisfied the necessary control requirements where access to the swimming pool complies with the relevant South African National Standards (“SANS”), as published by the South African Bureau of Standards(SABS).

In terms of SANS 10400-D the following requirements must be met for swimming pools and swimming baths:

  • A wall or fence must be provided by the owner of a site which contains a swimming pool or a swimming bath to ensure that no person can have access to such pool or bath from any street or public place or any adjoining site other than through:
    • self-closing and self-latching gate with provision for locking in such wall or fence, or
    • A building where such building forms part of such wall or fence.
  • A wall or fence shall be provided in any interconnected complex which contains a swimming pool or swimming bath to ensure that no person can have access to such pool or bath from any street or public place or anywhere within the complex other than through a self-closing and self-latching gate with provision for locking in such wall or fence.
  • Such wall or fence and any such gate therein shall be not less than 1.2 metres high, measured from the ground level, and shall not contain any opening that will permit the passage of a 100mm diameter ball.
  • The constructional requirements of any steel fence or gate must comply with the requirements in SANS 1390.

Extra protection, such as pool covers, pool nets and warning devices can also be used in addition to a fence, with such protective measures having to meet certain SANS compliance standards.

Owners should be aware that some municipalities may have imposed by-laws that govern, and may even provide for stricter safety measures regarding a private swimming pool, and the requirements of these bylaws will have to be adhered to.

Finally, it is important that any pool owner ensures that the safety measures in place are adhered to i.e. that the gate latch works and that the pool cover is secured, etc. Negligence can still exist where reasonable efforts are not taken to ensure that the safety measures are effective.

Allen West

Exciting development at AM Theron Inc!

AM Theron inc is excited to announce a new development within the firm. As of January 2018, Mr Anton Theron has stepped into the shoes of director at AM Theron Inc and has taken the wheel from Hendrik and Amelia Markram, the founders of the firm. Hendrik and Amelia Markram retain a close working relationship with the firm and continue to provide their valuable insights and assistance as expert consultants to the firm. Anton Theron, who is an admitted attorney, notary and conveyancer and the director of Tonkin Clacey Pretoria, brings some 35 years’ worth of experience to the firm. Anton has extensive litigation experience from over ten years spent with the State Attorney’s office. Anton is also a property law expert, and specialises in all aspects of conveyancing. He is currently the convenor for the conveyancing examination, vice-chairperson of the Gauteng Law Council and current member of the central committees and property committees of the Pretoria and Johannesburg Attorneys’ Association, as well as the Gauteng Law Council and the Law Societies of South Africa. Anton is also the drafter and examiner of the conveyancing national exam in South Africa. AM Theron Inc looks forward to the future and development of the of the firm under the careful and diligent guidance of Anton Theron.

 

THE LIABILITY OF THE ARCHITECT IN THE SOUTH AFRICAN LAW

THE LIABILITY OF THE ARCHITECT IN THE SOUTH AFRICAN LAW

 

McKenzie’s “Law of Building and Engineering Contract and Arbitration 7th Edition, p 129” defines an architect as “a duly qualified professional person whose function it is to design and supervise the erection of buildings.” In the Shorter Oxford English Dictionary an architect is described as “One whose profession it is to prepare plans of edifices and exercise a general superintendence over their erection.” One may only practise as an architect in South Africa if you are registered as such in terms of the Architectural Profession Act No 44 of 2000. Section 27 of this Act provides that the South African Council for the Architectural Profession must compile a code of conduct for all registered persons. Such registered persons must adhere to the terms as included in this code and failure to do so will constitute improper conduct.

 

The preamble of the Code of Professional Conduct, issued under BN 154 of 2007, Government Gazette 32731, 27 November 2009, provides that “it is an overriding obligation under the rules that, in carrying out professional work, a registered person is expected to act with due skill, competency and integrity”. Once an architect is appointed by the employer, a binding contract comes into existence between the parties. This means that a claim for negligence could be instituted against the architect in terms of the contract, or based on delict. Tacitly included in the terms of the agreement is that the architect does in fact have the required skills and ability to be reasonably proficient in his/her calling.

 

It is trite law in South Africa that a person who does not practice with the due skill and diligence will be regarded as negligent. In the Supreme Court of Appeal matter, Goliath v MEC for Health, Eastern Cape 2015 (2) SA 97 (SCA), the Court referred to the matter of Van Wyk v Lewis 1924 A.D 438 in which the test for negligence has been defined as “the failure of a professional person to adhere to the general level of skill and diligence possessed and exercised at the same time by the members of the branch of the profession to which he or she belongs would normally constitute negligence.” In the English matter of Nye Sanders & Partners v Alan E Bristow (1987) 37 BLR 92 (CA) the Court held the following with reference to the position of an architect: “Where there is a conflict as to whether he has discharged that duty [to use reasonable skill and care], the courts approach the matter upon the basis of considering whether there was evidence that at the time a responsible body of architects would have taken the view that the way in which the subject of enquiry had carried out his duties was an appropriate way of carrying out the duty, and would not hold him guilty of professional negligence merely because there was a body of competent professional opinion which held that he was at fault.”

 

Should it therefore be found that an architect’s conduct falls short of the conduct that would have been reasonable exercised by another person of the same profession, the architect will be held liable for damages to his/her employer.

 

In the recent matter of Bentel Associate International (Pty) Ltd v Loch Logan Waterfront (Pty) Ltd 2015 JDR 0323 (FB) the Court had to decide inter alia as to whether the defendant’s claim in reconvention, alleging that it has suffered damages as a result of the plaintiff’s failure to perform its obligations in a professional and workmanlike manner and without negligence, should be upheld. The Court held that “the architect’s liability is not absolute in the sense of being liable for whatever occurs. The architect is liable for substantial negligence (Dodd v Estate Cloete and Another 1971 (1) SA 376 (ECD)).” It further alluded to the matter of De Wet v Steynsrust Municipality 1925 OPD 151 where it was held that “an architect must exercise the general level of skill and diligence exercised by other persons exercising the same profession, being skilled and experienced persons.” The learned Judge referred with approval to the position in international law pertaining to the liability of the architect and quoted John R. Heisse from his article “The Measure of Malpractice” Journal of the American College of Construction Lawyers Vol 5, Nr 2, 2011: “Noting that architects and engineers deal in somewhat inexact sciences and are continually called upon to exercise their skilled judgment in order to anticipate and provide for random factors which are incapable of precise measurement the courts have reasoned that the indeterminate nature of these factors makes it impossible for professional service people to gauge them with complete accuracy in every instance.”

 

The benchmark regarding the standard of care that should be applied by an architect in the law of the United States has been defined in the Maine Supreme Court matter of Coombs v Beede 89 Me. 187 A 104 (1896). The Court held that the responsibility of the architect is the same as a doctor to patient or lawyer to client, in that the architect has “some skill and ability in some special employment and offers his services to the public on account of his fitness to act in the line of business for which he may be employed.” The Court further held that the undertaking of the architect implies that he/she consequently possesses the “skill and ability, including taste, sufficient to enable him to perform the required services at least ordinarily and reasonably well; and that he will exercise and apply, in the given case, his skill, ability, judgment and taste, reasonably and without neglect.” The Court then attempted to define the exclusions from the architect’s duty of care, submitting that “the undertaking does not imply or warrant a satisfactory result. It will be enough that any failure shall not be the fault of the architect. There is no implied promise that miscalculations may not occur. An error in judgment is not necessarily evidence of want of skill or care, for mistakes and miscalculations are incidents to all business of life.” Negligence should therefore be evident from the conduct of the architect and it will not suffice to simply state that a mistake was made by the architect.

 

In the matter of Bloomsbug Mills, Inc, v Sordoni Construction Co 401 Pa. 358 (1960), the Pennsylvanian Court confirmed that “an architect is bound to perform with reasonable care the duties for which he contracts. His client has the right to regard him as skilled in the science of the construction of buildings and to expect that he will use reasonable and ordinary care and diligence in the application of his professional knowledge to accomplish the purpose for which he is retained. While he does not guarantee a perfect plan or a satisfactorily result, he does by his contract imply that he enjoys ordinary skill and ability in his profession and that he will exercise these attributes without neglect and with a certain exactness of performance to effectuate work properly done. While an architect is not an absolute insurer of perfect plans, he is called upon to prepare plans and specifications which will give the structure so designed a reasonable fitness for its intended use, and he impliedly warrants their sufficiency for that purpose.”

 

CONCLUSION

 

When the architect thus enters into an agreement, it is implied that he/she is able to perform the work with reasonable skill and diligence. It does, however, not warrant that the result will be without fault and the architect therefore will not be held liable for the fault arising from defects in the plans because he/she does not imply or warrant a satisfactory result.    

Construction Law – Governance of the architectural professions as a whole and the legislative framework determining inter alia architects’ scope of practice and registration requirements

1. In terms of the Council for the Built Environment Act, 43 of 2000 (hereinafter referred to as “the Built Environment Act”), a “registered person” means a person registered in terms of any of the professions’ Acts. These professions’ Acts are defined as the following:

1.1 The Architectural Profession Act, 2000.

1.2 The Project and Construction Management Professions Act, 2000.

1.3 The Engineering Profession Act, 2000.

1.4 The Landscape Architectural Profession Act, 2000.

1.5 The Property Valuers Profession Act, 2000.

1.6 The Quantity Surveying Profession Act, 2000.

2. The Council for the Built Environment thus to a certain extent oversees the architectural, engineering, landscape architectural, project & construction management, property valuators and quantity surveying professions. Each of these professions also have their own professional council and legislation governing them.

3. In terms of section 20(1) of the Built Environment Act:

The council must, after receipt of the recommendations of the councils for the professions submitted to it in terms of the professions’ Acts, and before liaising with the Competition Commission in terms of section 4(q) –

(a) Determine policy with regard to the identification of work for the different categories of registered persons;
(b) Consult with any person, body or industry that may be affected by the identification of work in terms of this section.”

4. In terms of section 20(2) of the Built Environment Act, “the council must, after consultation with the Competition Commission, and in consultation with the councils for the professions, identify the scope of work for every category of registered persons”.

5. The Council for the Built Environment is thus responsible for determining scope / identification of work for each of the professions overseen by it. This will, however, be done based on inter alia the submissions of each of the professional councils in respect of what work persons registered with them may do.

6. The Architectural Profession Act, No 44 of 2000 (hereinafter referred to as “the Architects Act”) provides in section 18(1) that the categories in which a person may register in the architectural profession are as follows:

6.1 Professional architect;

6.2 Professional Senior Architectural Technologist;

6.3 Professional Architectural Technologist; or

6.4 Professional Architectural Draughtsperson.

7. The section also provides for candidates that may be registered in each of the mentioned categories, who must perform work in the architectural profession only under the supervision and control of a professional registered in a specific category.

8. In terms of section 18(2) “a person may not [our emphasis added] practise in any of the categories contemplated in subsection (1), unless he or she is registered in that category”.

9. It is an offence for a person to perform architectural work if he or she is not registered in the appropriate category.

10. In terms of section 26(1):

The council must consult with –
(a) All voluntary associations;
(b) Any person;
(c) Any body; or
(d) Any industry

That may be affected by any laws regulating the built environment professions regarding the identification of the type of architectural work which may be performed by persons registered in any of the categories referred to in section 18, including work which may fall within the scope of any other profession regulated by the professions’ Acts referred to in the Council for the Built Environment Act, 2000.”

11. In terms of section 26(2), “after the process of consultation the council must submit recommendations to the CBE regarding the work identified in terms of subsection (1), for its consideration and identification in terms of section 20 of the Council for the Built Environment Act, 2000”.

12. In terms of section 26(3)(a), “a person who is not registered in terms of this Act, may not perform any kind of work identified for any category of registered persons”.

13. In terms of section 26(4), “subsection 3(a) may not be construed as prohibiting any person from performing work identified in terms of this section, if such work is performed in the service of or by order of and under the direction, control, supervision of or in association with a registered person entitled to perform the work identified and who must assume responsibility for any work so performed”.

14. A person may thus perform work falling within the identification of work of a specific professional under the direction, control and supervision of that registered professional but only if that registered professional assumes the ultimate liability and responsibility for any work so performed.

15. In terms of section 41(1), “a person contravening section 18(2) [our emphasis added], 23, 25(8) or 31(8)(a), (b), (e) or (f) is guilty of an offence”.

16. In terms of section 41(3), “a person convicted of an offence in terms of section 18(2), may be liable to a fine equal to double the remuneration received by him or her for work done in contravention of section 18(2) or to a fine equal to the fine calculated according to the ratio determined for three years imprisonment in terms of the Adjustment of Fines Act, 1991”.

17. In terms of the definitions contained in the Code of Conduct published under the Architectural Act, members of closely allied professions are once again defined as persons registered in terms of the following:

17.1 The Architectural Act;

17.2 The Engineering Profession Act No 46 of 2000;

17.3 The Landscape Architectural Profession Act No 45 of 2000;

17.4 The Project and Construction Management Professions Act No 48 of 2000;

17.5 The Quantity Surveying Profession Act No 49 of 2000;

17.6 The Planning Professions Act No 36 of 2002;

17.7 The Property Valuers Profession Act No 47 of 2000.

18. In terms Rule 2.1 of the Code of Conduct published under the Architectural Act, “a registered person shall only undertake architectural work which is identified for the category of registration in which he/she is registered in terms of section 18 of the Act and in accordance with the registration categories in force”.

19. Practising outside a registration category is thus not only an offence in terms of the Architectural Act but may also form the subject of disciplinary action by the Council.

20. Each of the Acts listed in paragraphs 17.2 – 17.7 contain substantively similar provisions to those of the Architectural Act as discussed above i.e.:

20.1 There are specific categories of registration.

20.2  A person may not practise in any of these categories unless he / she is registered and it is an offence to practice without being properly registered.

20.3 The council must make submissions w.r.t identification of work to the Council for the Built Environment.

20.4 A person who is not registered in terms of the specific Act may not perform any kind of work identified for any of its categories of registered persons, unless such work is performed under the direction, control and supervision of a registered person entitled to perform the work identified. It is imperative that such registered person must assume responsibility and liability for any work so performed.

20.5 A person who practices in a category without being registered may be liable to a fine.

21. Similarly, each of the Codes of Conduct published under the Acts listed in paragraphs 17.2 – 17.7 contain some manner of provision stating that registered persons shall undertake only work which falls within their applicable registration category and failure to comply therewith may result in disciplinary action.

22. In terms of an Interim Policy on the Identification of Work for the Architectural Profession, published by the South African Council for the Architectural Profession and dated 12 June 2013, the following:

22.1 Regulation 2.1 provides that “no person who is registered in any category referred to in Section 18 of the Act, may undertake architectural work unless such work is demarcated for the relevant category of registration in accordance with Schedules 1 and 2, provided that a person registered in any particular category may perform the work demarcated for any lower category. Where work is not specified in the schedules, SACAP should be consulted”.

22.2 Regulation 2.3 provides that “subject to Section 26(4) of the Act, any person who undertakes identified architectural work without being registered with SACAP, is contravening the Act and is guilty of an offence”.

22.3 In terms of Regulation 3(b), “work which falls within the scope of a profession regulated by the different Built Environment Acts and which may be performed by a person registered in terms of section 18(1)(a) of the Architectural Profession Act will be recorded in the applicable CBE Board Notice after it has been confirmed by the relevant council. This will include for aspects of work common to more than one Council and / or discipline, where recognised requisite skill and competence permit the professional within one Council to undertake work demarcated within the scope of work of another Council, without need for dual registrations”.

22.4 Schedule 1 contains a “demarcation of architectural work matrix”, Schedule 2 sets out “specialised services” and Schedule 3 sets out the “definition of architectural work and competencies”.

23. It is thus important for registered persons to familiarise themselves with the identification of work in order to ensure that they are performing work which falls within that of their registration category.

24. In terms of a draft Board Notice published by the Council for the Built Environment during November 2011:

24.1 Section 11(1) states that “a person registered as a professional architect in terms of the Architectural Profession Act, principal consultant or principal agent may perform the scope of services or any one or combination of the services determined in Annexure B which falls within the scope of services of the project and construction management professions regulated by the Project and Construction Management Professions Act, 2000 (Act No. 48 of 2000) if the qualification, training and experience of that person have specifically rendered him or her competent to perform those services and the services are performed within the framework of architectural work”. Annexure B is, however, marked as “to be completed” and no work is listed there as yet.

24.2 Section 11(2) states that “a person registered in a category of registration in terms of the Architectural Profession Act may perform the scope of services relating to costing determined in Annexure C which falls within the scope of services of the quantity surveying profession regulated by the Quantity Surveying Profession Act, 2000 (Act No. 46 of 2000), if the qualification, training and experience of that person have specifically rendered him or her competent to perform those services and the services are performed within the framework of architectural work”. Annexure C is, however, marked as “to be completed” and no work is listed there as yet.

24.3 Section 12 states that “a person registered in a category of registration may perform the scope of work determined in Annexure D which falls within the scope of the engineering profession regulated by the Engineering Profession Act, 2000 (Act 46 of 2000), if the qualification, training and experience of that person have specifically rendered him or her competent to perform that work and the work is performed within the framework of architectural work”. Annexure D does, however, not list any such work.

25. Bearing in mind that the Board Notice mentioned in paragraph 24 supra is only a “draft”, it is not of legal force and effect as yet. It appears that the process of identifying overlapping areas of work is still ongoing. There are, however, not such identified areas as yet and members of the architectural profession would be best serve by adhering to their identification of work.

26. There appear to be similar identifications of work and board notices published by and in respect of the councils for the various associated professions, some of which deal in more detail with inter-council overlap of work and the work that those registered persons may perform although it may be regarded as part of other registered persons’ identification of work. This does, however, not apply to architectural professionals and will not be discussed in more detail here.

27. In conclusion, the following:

27.1 The Council for the Built Environment has a mandate to assess identification of work of the various registration categories of the various professions regulated by the Act set out in paragraph 17.1 – 17.7 supra.

27.2 There may potentially be an overlap in respect of the various professions’ scope / identification of work but this has not been dealt with in so far as the architectural profession is concerned.

27.3 Architectural professionals may thus perform the work identified in their identification of work policy. Work falling within the identification of work of any other professional (such as engineers, quantity surveyors etc.) must be done by said professional, who must assume the responsibility therefor.

27.4 Architects performing work for which they are not registered (whether in the architectural profession or in one of the associated professions) may be found guilty of an offence and may be liable for fines / disciplinary action in respect thereof.

27.5 In addition, any assumption of liability / responsibility for work which falls to be performed by another professional in terms of identification of work will be contrary to legislative provisions and as such unlawful and may therefore be uninsurable.

Construction Law – Governance of the architectural professions as a whole and the legislative framework determining inter alia architects’ scope of practice and registration requirements

1. In terms of the Council for the Built Environment Act, 43 of 2000 (hereinafter referred to as “the Built Environment Act”), a “registered person” means a person registered in terms of any of the professions’ Acts. These professions’ Acts are defined as the following:

1.1 The Architectural Profession Act, 2000.

1.2 The Project and Construction Management Professions Act, 2000.

1.3 The Engineering Profession Act, 2000.

1.4 The Landscape Architectural Profession Act, 2000.

1.5 The Property Valuers Profession Act, 2000.

1.6 The Quantity Surveying Profession Act, 2000.

2. The Council for the Built Environment thus to a certain extent oversees the architectural, engineering, landscape architectural, project & construction management, property valuators and quantity surveying professions. Each of these professions also have their own professional council and legislation governing them.

3. In terms of section 20(1) of the Built Environment Act:

The council must, after receipt of the recommendations of the councils for the professions submitted to it in terms of the professions’ Acts, and before liaising with the Competition Commission in terms of section 4(q) –

(a) Determine policy with regard to the identification of work for the different categories of registered persons;
(b) Consult with any person, body or industry that may be affected by the identification of work in terms of this section.”

4. In terms of section 20(2) of the Built Environment Act, “the council must, after consultation with the Competition Commission, and in consultation with the councils for the professions, identify the scope of work for every category of registered persons”.

5. The Council for the Built Environment is thus responsible for determining scope / identification of work for each of the professions overseen by it. This will, however, be done based on inter alia the submissions of each of the professional councils in respect of what work persons registered with them may do.

6. The Architectural Profession Act, No 44 of 2000 (hereinafter referred to as “the Architects Act”) provides in section 18(1) that the categories in which a person may register in the architectural profession are as follows:

6.1 Professional architect;

6.2 Professional Senior Architectural Technologist;

6.3 Professional Architectural Technologist; or

6.4 Professional Architectural Draughtsperson.

7. The section also provides for candidates that may be registered in each of the mentioned categories, who must perform work in the architectural profession only under the supervision and control of a professional registered in a specific category.

8. In terms of section 18(2) “a person may not [our emphasis added] practise in any of the categories contemplated in subsection (1), unless he or she is registered in that category”.

9. It is an offence for a person to perform architectural work if he or she is not registered in the appropriate category.

10. In terms of section 26(1):

The council must consult with –
(a) All voluntary associations;
(b) Any person;
(c) Any body; or
(d) Any industry

That may be affected by any laws regulating the built environment professions regarding the identification of the type of architectural work which may be performed by persons registered in any of the categories referred to in section 18, including work which may fall within the scope of any other profession regulated by the professions’ Acts referred to in the Council for the Built Environment Act, 2000.”

11. In terms of section 26(2), “after the process of consultation the council must submit recommendations to the CBE regarding the work identified in terms of subsection (1), for its consideration and identification in terms of section 20 of the Council for the Built Environment Act, 2000”.

12. In terms of section 26(3)(a), “a person who is not registered in terms of this Act, may not perform any kind of work identified for any category of registered persons”.

13. In terms of section 26(4), “subsection 3(a) may not be construed as prohibiting any person from performing work identified in terms of this section, if such work is performed in the service of or by order of and under the direction, control, supervision of or in association with a registered person entitled to perform the work identified and who must assume responsibility for any work so performed”.

14. A person may thus perform work falling within the identification of work of a specific professional under the direction, control and supervision of that registered professional but only if that registered professional assumes the ultimate liability and responsibility for any work so performed.

15. In terms of section 41(1), “a person contravening section 18(2) [our emphasis added], 23, 25(8) or 31(8)(a), (b), (e) or (f) is guilty of an offence”.

16. In terms of section 41(3), “a person convicted of an offence in terms of section 18(2), may be liable to a fine equal to double the remuneration received by him or her for work done in contravention of section 18(2) or to a fine equal to the fine calculated according to the ratio determined for three years imprisonment in terms of the Adjustment of Fines Act, 1991”.

17. In terms of the definitions contained in the Code of Conduct published under the Architectural Act, members of closely allied professions are once again defined as persons registered in terms of the following:

17.1 The Architectural Act;

17.2 The Engineering Profession Act No 46 of 2000;

17.3 The Landscape Architectural Profession Act No 45 of 2000;

17.4 The Project and Construction Management Professions Act No 48 of 2000;

17.5 The Quantity Surveying Profession Act No 49 of 2000;

17.6 The Planning Professions Act No 36 of 2002;

17.7 The Property Valuers Profession Act No 47 of 2000.

18. In terms Rule 2.1 of the Code of Conduct published under the Architectural Act, “a registered person shall only undertake architectural work which is identified for the category of registration in which he/she is registered in terms of section 18 of the Act and in accordance with the registration categories in force”.

19. Practising outside a registration category is thus not only an offence in terms of the Architectural Act but may also form the subject of disciplinary action by the Council.

20. Each of the Acts listed in paragraphs 17.2 – 17.7 contain substantively similar provisions to those of the Architectural Act as discussed above i.e.:

20.1 There are specific categories of registration.

20.2  A person may not practise in any of these categories unless he / she is registered and it is an offence to practice without being properly registered.

20.3 The council must make submissions w.r.t identification of work to the Council for the Built Environment.

20.4 A person who is not registered in terms of the specific Act may not perform any kind of work identified for any of its categories of registered persons, unless such work is performed under the direction, control and supervision of a registered person entitled to perform the work identified. It is imperative that such registered person must assume responsibility and liability for any work so performed.

20.5 A person who practices in a category without being registered may be liable to a fine.

21. Similarly, each of the Codes of Conduct published under the Acts listed in paragraphs 17.2 – 17.7 contain some manner of provision stating that registered persons shall undertake only work which falls within their applicable registration category and failure to comply therewith may result in disciplinary action.

22. In terms of an Interim Policy on the Identification of Work for the Architectural Profession, published by the South African Council for the Architectural Profession and dated 12 June 2013, the following:

22.1 Regulation 2.1 provides that “no person who is registered in any category referred to in Section 18 of the Act, may undertake architectural work unless such work is demarcated for the relevant category of registration in accordance with Schedules 1 and 2, provided that a person registered in any particular category may perform the work demarcated for any lower category. Where work is not specified in the schedules, SACAP should be consulted”.

22.2 Regulation 2.3 provides that “subject to Section 26(4) of the Act, any person who undertakes identified architectural work without being registered with SACAP, is contravening the Act and is guilty of an offence”.

22.3 In terms of Regulation 3(b), “work which falls within the scope of a profession regulated by the different Built Environment Acts and which may be performed by a person registered in terms of section 18(1)(a) of the Architectural Profession Act will be recorded in the applicable CBE Board Notice after it has been confirmed by the relevant council. This will include for aspects of work common to more than one Council and / or discipline, where recognised requisite skill and competence permit the professional within one Council to undertake work demarcated within the scope of work of another Council, without need for dual registrations”.

22.4 Schedule 1 contains a “demarcation of architectural work matrix”, Schedule 2 sets out “specialised services” and Schedule 3 sets out the “definition of architectural work and competencies”.

23. It is thus important for registered persons to familiarise themselves with the identification of work in order to ensure that they are performing work which falls within that of their registration category.

24. In terms of a draft Board Notice published by the Council for the Built Environment during November 2011:

24.1 Section 11(1) states that “a person registered as a professional architect in terms of the Architectural Profession Act, principal consultant or principal agent may perform the scope of services or any one or combination of the services determined in Annexure B which falls within the scope of services of the project and construction management professions regulated by the Project and Construction Management Professions Act, 2000 (Act No. 48 of 2000) if the qualification, training and experience of that person have specifically rendered him or her competent to perform those services and the services are performed within the framework of architectural work”. Annexure B is, however, marked as “to be completed” and no work is listed there as yet.

24.2 Section 11(2) states that “a person registered in a category of registration in terms of the Architectural Profession Act may perform the scope of services relating to costing determined in Annexure C which falls within the scope of services of the quantity surveying profession regulated by the Quantity Surveying Profession Act, 2000 (Act No. 46 of 2000), if the qualification, training and experience of that person have specifically rendered him or her competent to perform those services and the services are performed within the framework of architectural work”. Annexure C is, however, marked as “to be completed” and no work is listed there as yet.

24.3 Section 12 states that “a person registered in a category of registration may perform the scope of work determined in Annexure D which falls within the scope of the engineering profession regulated by the Engineering Profession Act, 2000 (Act 46 of 2000), if the qualification, training and experience of that person have specifically rendered him or her competent to perform that work and the work is performed within the framework of architectural work”. Annexure D does, however, not list any such work.

25. Bearing in mind that the Board Notice mentioned in paragraph 24 supra is only a “draft”, it is not of legal force and effect as yet. It appears that the process of identifying overlapping areas of work is still ongoing. There are, however, not such identified areas as yet and members of the architectural profession would be best serve by adhering to their identification of work.

26. There appear to be similar identifications of work and board notices published by and in respect of the councils for the various associated professions, some of which deal in more detail with inter-council overlap of work and the work that those registered persons may perform although it may be regarded as part of other registered persons’ identification of work. This does, however, not apply to architectural professionals and will not be discussed in more detail here.

27. In conclusion, the following:

27.1 The Council for the Built Environment has a mandate to assess identification of work of the various registration categories of the various professions regulated by the Act set out in paragraph 17.1 – 17.7 supra.

27.2 There may potentially be an overlap in respect of the various professions’ scope / identification of work but this has not been dealt with in so far as the architectural profession is concerned.

27.3 Architectural professionals may thus perform the work identified in their identification of work policy. Work falling within the identification of work of any other professional (such as engineers, quantity surveyors etc.) must be done by said professional, who must assume the responsibility therefor.

27.4 Architects performing work for which they are not registered (whether in the architectural profession or in one of the associated professions) may be found guilty of an offence and may be liable for fines / disciplinary action in respect thereof.

27.5 In addition, any assumption of liability / responsibility for work which falls to be performed by another professional in terms of identification of work will be contrary to legislative provisions and as such unlawful and may therefore be uninsurable.

Contract Law – Our Courts’ approach to exemption clauses and the potential impact of the Consumer Protection Act thereon

Introduction:

1. Exemption clauses are provisions in a contract in terms of which a party is protected from certain claims in respect of damages, loss, negligence, non-performance etc. An example of an exemption clause is the following:

“The buyer shall not have or acquire any claim against the seller, nor shall the seller be liable in contract or delict for any general, special or consequential damages sustained by the buyer or any third party flowing directly or indirectly from this contract whether due to acts, omissions or otherwise of the seller or its employees or agents or any other person for whom the seller may be held liable, and the buyer hereby indemnifies the seller and holds it harmless against any such claim as aforesaid.”

2. Such clauses can obviously have onerous implications for the non-benefitting party as they have the effect of excluding or limiting liability on the part of one of the contracting parties. Our Courts have, on a number of occasions, been tasked with assessing whether or not such clauses can be enforced. Recent cases in this regard will be discussed below, in order that our Courts’ historic approach to exemption clauses may be illustrated.

3. Since these decisions were handed down, the Consumer Protection Act, Act 68 of 2008, (hereinafter referred to as “the Act”) has come into force. This Act deals extensively with exemption clauses and the relevant provisions thereof will also be discussed below as this will have an impact on how our Courts approach such exemption clauses in future.

Case law dealing with enforcement of exemption clauses prior to the Act coming into force:

4. The matter of Afrox Healthcare Bpk v Strydom 2002 (6) SA 21 (SCA) may be considered as one of the most well-known and controversial decisions dealing with the enforcement of exemption clauses.

The facts of the matter are briefly as follows:

4.1 The respondent was admitted for an operation and post-operative medical treatment at the appellant’s hospital facilities.

4.2 After the respondent had undergone the operation, a nurse in the employ of the appellant negligently caused him injury by applying a bandage too tightly, cutting off the blood supply to a part of his body.

4.3 The respondent then instituted a claim against the appellant, who denied liability based on an exemption clause contained in the admission agreement. The court a quo held that the exemption clause could not be enforced and the matter was taken on appeal.

4.4 The exemption clause which the appellant sought to have enforced read as follows:

“I absolve the hospital and / or its employees and / or agents from all responsibility and indemnify them from any claim instituted by any person (including a dependant of the patient) for damages or loss of whatever nature (including consequential damages or special damages of any nature) flowing directly or indirectly from any injury (including fatal injury) suffered by or damage caused to the patient or any illness (including terminal illness) contracted by the patient, whatever the causes are, except only with the exclusion of intentional omission by the hospital, its employees or agents.”

4.5 The respondent argued that he should not be bound by the exemption clause as the same was against public policy for the following reasons:

4.5.1 There was an unequal position between the parties concluding the agreement, with the hospital being in a stronger bargaining position;

4.5.2 The exemption clause had the effect of exempting the hospital and its employees from properly carrying out their duties;

4.5.3 The clause exempted hospital personnel from gross negligence; and

4.5.4 The exemption clause conflicted with the constitutional right of access to healthcare.

4.6 In the alternative to his argument that the exemption clause was contrary to public policy, the respondent argued that the clause was unenforceable for being unreasonable, unfair and contrary to the principles of good faith which underlie our law of contract.

4.7 In the further alternative, the respondent argued that his attention should have been drawn to the clause and the appellant’s failure to do so constituted a breach of a legal duty owed to the respondent.

4.8 In its consideration of the matter, the Supreme Court of Appeal expressed the view that an exemption clause excluding the appellant from gross negligence would indeed be contrary to public policy. In this case, however, the Court found that gross negligence had not been alleged by the respondent and, as such, this consideration did not find application in the matter.

4.9 The Court held that:

4.9.1 Clauses of this nature are the norm not the exception, are sound business practice and not contrary to public policy.

4.9.2 There was no evidence that the respondent was in a weaker bargaining position than the appellant.

4.9.3 There are sufficient sanctions by professional bodies and legislation to ensure that medical professionals perform their duties properly in compliance with their professional rules.

4.9.4 The clause does not conflict with the Constitution as contractual freedom is also a constitutionally enshrined right.

4.9.5 While the principle of good faith is one of the foundations of our law of contract, it is not a rule of law based on which the exemption clause can be set aside.

4.9.6 There was no duty on the appellant’s clerk to explain the clause to the respondent nor could the respondent allege that he did not expect such a clause bearing in mind that such clauses have become the norm instead of the exception.

4.10 The exemption clause was, accordingly, upheld by the Supreme Court of Appeal.

5. In the matter of Mercurius Motors v Lopez 2008 (3) SA 572 (SCA) the Court dealt with exemption clauses that undermine the very essence of a contract The facts of the matter are briefly as follows:

5.1 The respondent delivered a vehicle that he was leasing to the appellant for a service and certain minor repairs. The vehicle was stolen while on the premises.

5.2 The respondent instituted action based on his contract of deposit with the appellant. The appellant denied that the loss of the vehicle was due to any negligence on its part and relied on exemption clauses in the contract of deposit, one of which appeared on the reverse side of the repair order form (under a carbon copy which had to be detached to reveal the terms and conditions) and read as follows:

“I/we acknowledge that Mercurius shall not be liable in any way whatsoever or be responsible for any loss or damages sustained from fire and / or burglary and / or unlawful acts (including gross negligence) of their representatives, agents or employees.”

5.3 The court a quo held that the exemption clauses were printed in such a manner so as not to draw the reader’s attention thereto and, as such, the respondent had been misled and the clauses could not be upheld. The Court a quo further found that the appellant had not taken reasonable steps to secure the vehicle as there were inter alia not adequate processes in place to ensure that the keys were not left in the vehicle overnight.

5.4 The respondent’s claim was awarded with costs.

5.5 On appeal, the Supreme Court of Appeal held that a person delivering a motor vehicle to be serviced or repaired would ordinarily rightly expect that the depositary would take reasonable care in relation to the safekeeping of the vehicle entrusted to him or her. An exemption clause such as the one relied upon by the appellant, that undermines the very essence of the contract of deposit, should be clearly and pertinently brought to the attention of the customer who signed a standard-form contract, not by way of an inconspicuous and barely legible clause that referred to the conditions on the reverse side of the page in question. The exemption clause was thus not upheld.

5.6 The Supreme Court of Appeal further held that, by not safeguarding the keys to the vehicle, the employees of the appellant did not act as a reasonable person in their circumstances would have acted.

5.7 The appeal was thus dismissed with costs.

6. In the more recent matter of Naidoo v Birchwood Hotel 2012 (6) SA 170 (GSJ), the Court held a different view on the enforcement of an exemption clause.  The facts of the matter are briefly as follows:

6.1 The plaintiff was a guest at the Birchwood Hotel (hereinafter referred to as “the hotel” and wanted to exit the hotel premises.

6.2 He found that the gate to one of the entrances of the hotel was closed and waited for a security guard to open the gate. When realising that the gate was still not opening, the plaintiff alighted from his vehicle and walked towards the gate himself.

6.3 The gate had jammed and the wheels had come off the rails. The gate fell on the plaintiff as he approached and caused serious bodily injuries.

6.4 The plaintiff sought to recover damages from the hotel based on his assertions that the hotel had been negligent and could have prevented the harm from occurring had it:

6.4.1 Properly maintained the gate;

6.4.2 Ensured that the gate was safe for public usage; and

6.4.3 Warned the public of the potential danger created by the state of disrepair of the gate.

6.5 The hotel denied negligence and relied on an exemption clause on the back of the hotel registration card, which stated that:

“The guest hereby agrees on behalf of himself and the members of his party that it is a condition of his / their occupation of the Hotel that the Hotel shall not be responsible for any injury to, or death of any person or the loss or destruction of or damage to any property on the premises, whether arising from fire, theft, or any cause and by whomsoever caused or arising from the negligence (gross or otherwise) or wrongful acts of any person in the employment of the Hotel.”

6.6 Guests were directed to the exemption clause by an instruction on the registration card which read “Please read terms and conditions on reverse!”

6.7 The Court found that the security guard had failed to take reasonable steps to prevent the accident by warning the plaintiff to keep at a distance. The Court further found that reasonable steps on the part of the hotel would entail regular checks to ensure that every gate was well maintained and functioning properly at all times. If a gate was not functioning well, the hotel should have warned the public of the potential danger posed by the gate.

6.8 Turning to deal with whether or not the exemption clause was binding on the plaintiff and if it was not against public policy the Court applied the test formulated in Barkhuizen v Napier 2007 (5) SA 323 (CC) in which it was stated that, when challenging a contractual term, the question of public policy inevitably arises. But that this was no longer difficult to determine because:

“Public policy represents the legal convictions of the community; it represents those values that are held most dear by the society. Determining the content of public policy was once fraught with difficulties. That is no longer the case. Since the advent of our constitutional democracy, public policy is now deeply rooted in our Constitution and the values that underlie it. Indeed, the founding provisions of our Constitution make it plain, our Constitutional democracy is founded on, among other values, the values of human dignity, the achievement of equality and the advancement of human rights and freedoms, and the rule of law. And the Bill of Rights, as the Constitution proclaims, is a cornerstone of that democracy, it enshrines the rights of all people in our country and affirms the democratic [founding] values of human dignity, equality and freedom.

… Thus a term in a contract that is inimical to the values enshrined in our Constitution is contrary to public policy and is, therefore, unenforceable.”

6.9 The Court stated that, according to the two-stage enquiry espoused in the Barkhuizen case, it may first examine whether a term in a contract is objectively reasonable. If it finds that it is, the next enquiry is whether it should be enforced in the particular circumstances. The Court expressed the view that exemption clauses that exclude liability for bodily harm in hotels and other public places have the effect, generally, of denying a claimant judicial redress.

6.10 The Court thus held that a guest in a hotel does not take his life in his hands when he exits through the hotel gates. To deny him judicial redress for injuries he suffered in doing so, which came about as a result of the negligent conduct of the hotel, offends against notions of justice and fairness.

6.11 The plaintiff’s claim thus succeeded.

The provisions of the Act which may impact the enforcement of exemption clauses

7. The above decisions are somewhat divergent when it comes to upholding exemption clauses.

8. The position has, however, been clarified to a certain extent by the Act, which came into effect on 01 April 2011 and which sets the promotion and advancement of the economic welfare of consumers in South Africa as its primary purpose. The Act seeks to protect vulnerable consumers and, at present, the Act applies to consumers with an annual turnover not exceeding R2 000 000.00 (two million rand), subject to further exemptions / exclusions which may apply (as set out in section 5 of the Act).

9. The Act prescribes certain fundamental “consumer rights” of which the right to “fair, just and reasonable contract terms” may significantly impact the validity and enforceability of exemption clauses as terms that do not comply with the requirements of the Act may be declared unlawful and set aside by the Court.

10. Section 48 of the Act contains a general prohibition on unfair, unreasonable and unjust contract terms and also prohibits any agreement that requires a consumer to waive any rights, assume any obligations or waive any liability of a supplier on terms that are unfair, unreasonable or unjust or if such terms are imposed as a condition of entering into an agreement. The section also lists criteria in order to determine whether a condition of a contract is unfair, unreasonable or unjust terms, which include the following:

10.1 Terms that are “excessively one-sided in favour of any person other than the consumer or other person to whom goods or services are to be supplied”.

10.2 Terms which are “so adverse to the consumer as to be inequitable”.

10.3 If the consumer relied upon a false, misleading or deceptive representation or statement of opinion provided by or on behalf of the supplier, to the detriment of the consumer.

11. Section 48(2) of the Act also requires that, if the agreement is subject to a term, condition or notice that may be unfair, unreasonable, unjust or unconscionable in terms of the criteria listed above, the fact, nature and effect of that term, condition or notice must specifically be drawn to the attention of the consumer in a manner and form that satisfies the formal requirements set out by the Act. If this provision is not complied with the Court may set aside the specific terms and conditions that were not drawn to the attention of the consumer.

12. Section 49(1) of the Act states that provisions in consumer agreements must be drawn to the consumers’ attention if such provisions:

12.1 In any way limit the risk or liability of the supplier or any other person.

12.2 Constitute an assumption of risk or liability by the consumer.

12.3 Impose an obligation on the consumer to indemnify the supplier or any other person for any cause.

12.4 Are an acknowledgement of any fact by the consumer.

13. In addition to the above, section 49(2) states that, if a provision or notice concerns any activity or facility which is subject to risks, the supplier must specifically draw the fact, nature and potential effect of those risks to the consumer’s attention. The consumer must agree thereto by signing or initialling or otherwise indicating acknowledgment thereof. This is required for any risks:

13.1 That are of an unusual character or nature.

13.2 The presence of which the consumer could not reasonably be expected to be aware of or notice, which an ordinarily alert consumer could not reasonably be expected to notice or contemplate in the circumstances.

13.3 That could result in serious injury or death.

14. Section 49(3) and 49(4), read together with section 22, states that any such provisions, conditions or notices must be written in plain language and must be drawn to the attention of the consumer in a conspicuous manner and form likely to attract the attention of an ordinarily alert consumer having regard to the circumstances. Furthermore, this must be done before the consumer:

14.1 Enters into the agreement,

14.2 Begins to engage in the activity;

14.3 Enters or gains access to the facility; or

14.4 Is required or expected to pay for the transaction.

15. In terms of section 49(5), the consumer must be given adequate opportunity in the circumstances to receive and comprehend the provision or notice.

16. Section 51 of the Act further contains certain outright prohibitions on the terms that can appear in contracts and states inter alia the following:

“A supplier must not make a transaction or agreement subject to any term or condition if –

(b) it directly or indirectly purports to –
(i) waive or deprive a consumer of a right in terms of this Act;
 (ii) avoid a supplier’s obligation or duty in terms of this Act;
 (iii) set aside or override the effect of any provision of this Act; or
 (iv) authorise the supplier to –
  (aa) do anything that is unlawful in terms of this Act; or
  (bb) fail to do anything that is required in terms of this Act …”

17. Section 51(1)(c)(i) of the Act further specifically prohibits terms that purport to “limit or exempt a supplier of goods or services from any liability for a loss directly or indirectly attributable to the gross negligence of the supplier or any person action for or controlled by the supplier …”.

18. Section 51(1)(c)(i) accords with the Court’s decision in the Afrox case in which it was held that the exclusion of gross negligence in an exemption clause is contrary to public policy.

19. In terms of section 52 of the Act, if the Court determines that provision was (in whole or in part) unconscionable, unjust, unreasonable or unfair, the Court may make a declaration to that effect and make any order that it deems just and reasonable in the circumstances. This includes an order to compensate the consumer for losses and expenses.

Conclusion

20. It is clear that the Act does not preclude a party form including an exemption clause in an agreement. The Act does, however, offer a more clear recourse to a non-benefitting party who seeks to impugn the enforceability of such a clause.

21. There seems to be an argument to be made that, had the Act been in force when the Afrox matter was decided, the outcome may have been different, specifically with regard to the obligation to draw the patient’s attention to the exemption clause. The decisions in the Mercurius Motors and Naidoo matters seems to be more in line with the provisions of the Act.

22. The Act does, however, not have retrospective effect and the provisions can only be relied on in respect of agreements entered into after 01 April 2011. The manner in which our Courts will approach the provisions of the Act remains to be seen as there has not been reported case law on the subject as yet.

23. It will be of particular interest how the Court will approach the question whether or not an exemption clause is so adverse as to be inequitable. It may well be that the test laid down in the Naidoo matter may find application, i.e. that a clause will be found to be inequitable if it has the effect of denying judicial redress to such an extent that it offends against notions of justice and fairness.

24. For a further discussion on the effect of the Act on product liability claims, please refer to an article by the same author titled “Our Courts’ approach to product liability claims and the impact of the Consumer Protection Act thereon, with specific reference to manufacturers’ and suppliers’ liability”.

Product Liability – Our Courts’ approach to product liability claims and the impact of the Consumer Protection Act thereon, with specific reference to manufacturers’ and suppliers’ liability

Prior to the Consumer Protection Act, Act 68 of 2008, (hereinafter referred to as “the Act”) coming into force, a person seeking to recover damages from a supplier in respect of defective goods could rely on either contractual remedies or the common law warranty against latent defects. A person seeking to recover damages from a manufacturer in respect of defective goods was, in the absence of a contractual relationship with said manufacturer, required to claim in delict. This last-mentioned claim, due to its very nature, necessitated inter alia that negligence on the part of the manufacturer be alleged and proved in order for the claim to succeed.

This position was confirmed in the matter of CIBA-GEIGY (Pty) Ltd v Lushof Farms (Pty) Ltd and Another 2002 (2) SA 447 (SCA). The facts of the matter are briefly as follows:

1. A farmer purchased pesticide, on recommendation from the supplier, for purposes of combatting weeds in his pear orchards.

2. The pesticide caused physical damage to the farmer’s pear trees, which resulted in crop failure.

3. The farmer instituted a claim against the supplier, based on a breach of the common law warranty against latent defects, and against the manufacturer, based on delict.

4. The supplier, in turn, claimed indemnification from the manufacturer in respect of any of the farmer’s damages for which it was held liable.

5. The court a quo upheld the farmer’s claims against both the manufacturer and the supplier as well as the supplier’s claim against the manufacturer. The manufacturer appealed this decision.

The Supreme Court of Appeal (hereinafter referred to as “the Court”) confirmed that the court a quo had been correct in upholding the farmer’s claim against the supplier and in upholding the supplier’s claim for indemnification from the manufacturer.

Turning to deal with the farmer’s claim against the manufacturer, the Court summarised the claim as follows:

1. The claim is delictual in nature, based on the manufacturer’s alleged negligence in manufacturing and marketing a product intended inter alia for use on pear trees without conducting sufficient tests of the product on such pear trees, while the application of the product in the recommended manner could potentially be harmful.

2. In so far as the farmer had not purchased the product directly from the manufacturer, its alleged liability comes down to what is sometimes known as “product liability”.

The manufacturer’s defences to the farmer’s claim were two-fold, namely that the court a quo did not make any finding in its judgment as to what its duty of care to the farmer would supposedly be and that the farmer did not prove that it had been negligent in any way.

With reference to the duty of care aspect, the manufacturer argued that this can only be founded on an agreement and, since it had no agreement with the farmer, there was thus no wrongfulness in this instance. According to the Court, although the historical origin of the manufacturer’s liability is an agreement between the manufacturer and the distributor, the liability extends via the other contracting party to any third party who utilises the product in the prescribed manner and suffers damage as a result thereof. The Court further found that it follows as a matter of course that a manufacturer who distributes a product commercially, which, in the course of its intended use, and as the result of a defect, causes damage to the consumer thereof, acts wrongfully and thus unlawfully according to the legal convictions of the community.

With reference to the negligence aspect, the Court stated that the farmer did not require so-called strict liability (i.e. liability without proof of negligence) to be imposed on the manufacturer but rather that any liability on the part of the manufacturer would require proof of negligence. According to the Court, this accorded with the positive law which applied at the hearing of the matter.

The Court held that if a manufacturer produces and markets a product without conclusive prior tests, when the utilisation thereof in the recommended manner is potentially hazardous to the consumer, such negligence on the part of the manufacturer may expose him to delictual liability to the consumer. The Court concluded that the farmer had succeeded in proving that the manufacturer had not performed conclusive tests in respect of specifically pear trees’ sensitivity to the product in question prior to the commercial release thereof for use on such trees. The Court accordingly found that the manufacturer was negligent and delictually liable to the farmer. The appeal was dismissed.

The position as outlined in the above matter has, however, been changed by section 61(1) of the Act, which introduces strict liability of inter alia manufacturers and suppliers and which reads as follows:

“(1)  Except to the extent contemplated in subsection (4), the producer or importer, distributor or retailer of any goods is liable for any harm, as described in subsection (5), caused wholly or partially as a consequence of –

(a) Supplying any unsafe goods; or

(b) A product failure, defect or hazard in any goods; or

(c) Inadequate instructions or warnings provided to the consumer pertaining to any hazard arising from or associated with the use of any goods.
irrespective of whether the harm resulted from any negligence on the part of the producer, importer, distributor, or retailer, as the case may be.”

In terms of section 61(4), liability of a particular person in terms of the section will not arise if:

(a) The unsafe product characteristic, failure, defect, or hazard that results in harm is wholly attributable to compliance with any public regulation;

(b) The alleged unsafe product characteristic, failure, defect or hazard –

(i) Did not exist in the goods at the time it was supplied by that person to another person alleged to be liable; or

(ii) Was wholly attributable to compliance by that person with instructions provided by the person who supplied the goods to that person, in which case subparagraph (i) does not apply;

(c) It is unreasonable to expect the distributor or retailer to have discovered the unsafe product characteristic, failure, defect or hazard, having regard to that person’s role in marketing the goods to consumers;

(d) The claim for damages is brought more than three years after the –

(i) Death or injury of any natural person;

(ii) Earliest time at which a person had knowledge of the material facts about any illness of any natural person;

(iii) Earliest time at which a person with an interest in any property had knowledge of the material facts about the loss of or physical damage to that property (whether it is movable or immovable);

(iv) Latest date on which a person suffered any economic loss that results from harm contemplated in paragraphs (i) to (iii) above.

While the Act has limited application in terms of section 5 thereof, section 5(5) specifically states that:

 “If any goods are supplied within the Republic to any person in terms of a transaction that is exempt from the application of this Act, those goods, and the importer or producer, distributor and retailer of those goods, are nevertheless subject to section 60 and 61.”

The Act has thus introduced the concept of strict liability when it comes to damages suffered as a result of defective products, in terms of which manufacturers and suppliers, amongst others, may be held liable. This strict liability may be applied even to transactions which would normally be exempt from the application of the Act, provided that the parties to the transaction acted in the ordinary course of business (as per the Act’s definition of a “transaction”).

The manner in which our Courts will approach the strict liability provisions of the Act remains to be seen as there has not been reported case law on the subject as yet.

Medical Law – “Negligent misstatement” of a patient’s HIV status: what risk befalls the health care provider?

 1. In the matter of Geldenhuys v National Health Laboratory Services 2014 JDR 1656 (GP) the appellant (Ms Geldenhuys) instituted action against the respondents (the National Health Laboratory Services and the MEC for Health and Welfare, Limpopo) for damages suffered as a result of an alleged negligent misstatement in respect of her HIV status. The Court a quo dismissed the claim and the appellant brought the matter on appeal.

Background Facts

2. After presenting with certain untoward symptoms during February 2002, the appellant decided to undergo two blood tests at the Provincial Hospital in Pietersburg in order to establish her HIV status. She underwent the first test on 8 February 2002, the results of which revealed that she was “reactive”, which meant that she was HIV positive.

3. The attending doctor at the time instructed the matron of the hospital to inform the appellant of the results of the first test. The doctor thereafter destroyed the test results.

4. The matron testified that she commenced the interview with the appellant in her office on 11 February 2002 but did not continue as the results of the second blood test became available for collection. The matron left the consulting room to collect the said blood test result in order to inform the appellant of its contents.

5. The second blood test, which had been taken on 10 February 2002, revealed an indeterminate result, i.e. the antibodies of the appellant were insufficient to confirm the HIV serology. In laymen’s terms, the appellant’s blood would not allow for a conclusive test and thus the test did not confirm the appellant’s HIV status.

6. The appellant testified that she was informed by the matron that she was, in fact, HIV positive. The matron, on the other hand, testified that she informed the appellant of the result of the second blood test as being indeterminate but that the appellant should in any case treat herself as HIV positive until she could confirm her HIV status by undergoing further conclusive HIV tests. The matron then destroyed the second blood test, which she later testified was standard procedure and done in order to protect the appellant’s privacy.

7. On the respondent’s version of events, since the second blood test was indeterminate and it could not be established whether the appellant was HIV positive or not, she was advised by the matron to repeat the test in six weeks.

8. The appellant underwent a further blood test on 12 February 2002, which revealed that she was “incontrovertibly” HIV negative.

Court a quo

9. On an agreement between the parties the Court a quo was called on to decide:

9.1. Whether the appellant had been told she was HIV positive;

9.2. Whether the appellant thereafter tested negative for the syndrome;

9.3. The aspect of negligence; and

9.4. The aspect of damages.

10. It would appear that the Court a quo had some difficulty evaluating either party’s version as both sets of the blood test results (8 and 10 February 2002) were destroyed. The Court a quo could therefore not consider the content of such blood tests and neither party attempted to recreate copies of the said blood tests in order to assist the Court a quo in its evaluation of the evidence.

11. The Court a quo ruled in favour of the respondents on the basis that it favoured the version of events put forward by the matron, which was the more likely of the two versions on the basis that the matron was an experienced HIV counsellor. The Court a quo held further that the appellant had suffered no damages. As such, the matter was brought on appeal by the appellant on both these findings.

12. In order for the appeal to have succeeded, the appellant was required to establish that the Court a quo’s evaluation of the evidence was flawed.

Appeal Court

13. On the basis that the appellant’s cause of action was based on a negligent misstatement, the appeal Court considered two possible scenarios with regard to the available evidence:

13.1. If the appellant’s version is to be accepted, the first scenario whereby the matron informed the appellant that she is HIV positive (based on the content of the first blood test) as was conveyed to the matron by the attending doctor, does not qualify as a misstatement, but a mere conveyance of the facts as they were at that stage.

13.2. Secondly, on the premise that the attending doctor misinterpreted the first blood test and it did not, in actual fact, reveal the appellant to be “reactive”, then a misstatement would have indeed occurred (the matron informing the appellant that she is HIV positive based on the doctor’s misinterpretation of the first blood test). The appellant has, however, not pleaded her cause of action as one based on the matron’s negligence in “not checking” the doctor’s advice. Had the appellant not relied on a negligent misstatement as her cause of action, the outcome may have been different.

14. Consequently, the appeal Court held that the appellant had failed to prove that the Court a quo had erred in its evaluation of the evidence and the appeal could not succeed.

15. The appeal Court went on to consider a further reason why the appellant could not succeed.

16. The appellant underwent a further blood test which revealed that she was HIV negative three days after she was informed of her status by the Matron. On the appellant’s version she considered herself HIV positive for the three day period but on the matron’s version the appellant thought that she may have been HIV positive for the three day period. The appeal Court had to consider the damages suffered by the appellant during this three day period on both versions put before it.

17. The appeal Court agreed with the Court a quo that the appellant had failed to prove that she had suffered damages during the said three day period between thinking that she was or may have been HIV positive and having her negative HIV status confirmed.

Conclusion

18. In terms of section 13 of the National Health Act 61 of 2003 (“the Act”), the person in charge of a health establishment must ensure that a health record containing such information as may be prescribed is created and maintained at that health establishment for every user of health services. The Act also creates an obligation that all information concerning a patient, including information relating to his or her health status, treatment or stay in a health establishment is confidential.

19. The Ethical Guidelines for Good Practice with regard to HIV of the Health Professions Council of South Africa further creates a duty on health care practitioners to treat HIV test results of patients with the highest possible level of confidentiality. Health care establishments and health care practitioners (hereinafter collectively referred to as “health care providers”) need further bear in mind that all persons with HIV or AIDS have the legal right to privacy in terms of the Constitution of South Africa.

20. In casu, the matron testified that the act of destroying the HIV blood test results was in accordance with standard procedure and with a view to protect the appellant’s privacy. It must be noted, however, that there is no provision made in legislation whereby health care providers are required to destroy HIV blood test results.

21. In order to adhere to the provisions of the Act and to avoid situations of “he-said-she-said” with regard to disclosures of a patient’s HIV status as is seen in this case, health care providers must maintain patient records. Furthermore, it is shrewd for health care providers to be aware that, in general, insurance policies include provisions relating to the keeping of records and a failure to maintain proper records may prejudice a health care provider’s cover in terms of its insurance policy.

22. The crucial element with regard to maintaining patient records is that such records remain confidential. It would appear that there is a duty on health care providers to take reasonable steps to safeguard such records in order to prevent a breach of that confidentiality and a patient’s right to privacy. It must be borne in mind that, with regard to records relating to a patient’s HIV status, a stricter criterion is applicable, being the highest possible level of confidentiality.

 

Medical Law – Res Ipsa Loquitur debate

It has until recently been accepted that the maxim of res ipsa loquitur (the facts speak for themselves) does not find application in cases involving medical negligence in accordance with the findings of the Appeal Court in the matter of Van Wyk v Lewis [1924 AD 438].  This position was recently reconsidered by the Supreme Court of Appeal (“SCA”) in the matter of Goliath v MEC for Health, Eastern Cape 2015 (2) SA 97 (SCA).

Generally speaking, for a plaintiff to succeed with his case, he carries the onus to prove on a balance of probabilities that the defendant was, inter alia, negligent.  In matters involving allegations of medical negligence, this would mean that the plaintiff has to prove that the defendant’s conduct did not meet the general level of skill and diligence possessed and exercised at the time by members of the defendant’s profession.

The maxim of res ipsa loquitur provides for instances where a court may, on the mere facts presented to it, draw an inference of negligence against the defendant in instances where the incident in question could not have occurred in the absence of negligence.  The application of the maxim was expressed in the matter of Sardi & others v Standard General Insurance Co Ltd 1977 (3) SA 776 (A) as “where the only known facts, relating to negligence, consist of the occurrence itself”.  

Certain requirements have crystallised over the year in case law, many of which relate to motor vehicle accidents, regarding the application of the maxim.  These include:

• The facts of the matter must be such as to give rise to an inference of negligence on the part of the wrongdoer.  The Court in the matter of Stacey v Kent 1995 (3) SA 344 (E) held that the maxim “gives rise to an inference, not a presumption of negligence”.  It further held that a court is not compelled to draw the inference.

• The maxim can only be invoked where the negligence depends on absolutes.  The matter of Pringle v Administrator, Transvaal 1990 (2) SA 379 (W) involved the tearing of the plaintiff’s superior vena cava during surgery.  The court held that, if the evidence presented was such as to show that the mere fact of the perforation indicated negligence, the maxim could be applied.  However, on the particular facts of the case no such evidence emerged and, as such, the maxim did not find application.  On this basis, the question of negligence had to be decided on all the surrounding circumstances of the case.

• The maxim may assist a plaintiff who has little or no evidence at his disposal to persuade a court of the defendant’s negligence.  This is particularly so in instances where the facts of the incident are solely under the control of or within the knowledge of the defendant.  It assists the plaintiff in these instances in that the defendant cannot hide behind his own silence to the detriment of the plaintiff by not giving evidence.

• Once the plaintiff has proven the incident from which the inference of negligence on the part of the defendant is drawn, the defendant has the opportunity to adduce evidence to show that the incident did not occur due to negligent conduct on his part.  To quote the learned Judge in the Stacey case:  “. . . he [referring to the defendant] must tell the remainder of the story or risk judgement being given against him.”  In the absence of an acceptable explanation as to why the defendant was not negligent, a court may make a finding of negligence against him.

• The court in the Stacey case further held that the defendant’s explanation must have “substantial foundation in fact” and must be sufficient to eradicate any inference of negligence made by the court.  Insofar as the assessment of the applicability of the maxim is concerned, the defendant does not, however, carry an onus to prove on a balance of probabilities the correctness of his explanation.  Only once all the evidence is considered at the end of the case will aspects such as the probability and credibility of the defendant’s version be taken into account.   

• The maxim has no bearing on the onus of proof, which remains that of the plaintiff (Madyosi v SA Eagle Insurance Co Ltd 1990 (3) SA 442 (A)).  The court in the Sardi matter warned against a piecemeal approach of “(a) first drawing the inference of negligence from the occurrence itself, and regarding this as a prima facie case; and then (b) deciding whether this has been rebutted by the defendant’s explanation”.  The court held that, just as would be the case in any other matter involving negligence, at the end of the trial it has to decide whether the plaintiff has discharged his onus of proving negligence on a balance of probabilities having regard to all the evidence, the probabilities and the inferences drawn.  

The question of the application of the maxim in medical negligence cases again came before the SCA in the matter of Goliath v MEC for Health, Eastern Cape 2015 (2) SA 97 (SCA).  Coincidentally, this case, as with the Van Wyk matter, involved a swab being left behind in the patient’s body following surgery.  In the appellant’s case, it was a gauze swab left behind during a routine hysterectomy for a fibroid uterus.  The appellant had to subsequently undergo a laparotomy performed by a certain Dr Muller for removal of the gauze and sued the respondent as the employer of all the medical staff involved (the medical practitioners and the nursing staff) in the surgery.

Both the appellant and Dr Muller testified in support of the appellant’s case.  Dr Muller testified that “leaving an abdominal swab in the abdomen invariably causes abdominal infections” and that “it should not happen ever”.  He further testified that “it’s . . .  a very rare situation to have a swab left in an abdomen after an operation” as there are strict procedures to be followed at all times after surgery to ensure that all swabs are accounted for to avoid exactly the appellant’s situation. 

No witnesses were called by the Respondent.

The court a quo dismissed the appellant’s action on the basis that she failed to discharge the onus of proving negligence, however, granted leave to appeal.  In its decision, the court a quo held that it is bound by the decision in the Van Wyk case in accordance with the stare decisis legal precedent system and had no alternative but to apply the findings of that judgement to the effect that the maxim does not apply to medical negligence cases.  Judge Lowe, however, commented that had he been entitled to rely on the said maxim, the outcome may have been different as “the absence of an explanation by the defendant may well have been sufficient, by way of inferential reasoning, to establish negligence on the part of the medical staff concerned”.

The SCA in its judgement opined that it may well be time for us to eliminate the term res ipsa loquitur from our legal vocabulary.  It summarised the nature and requirements of the maxim as crystallised in case law and discussed above.  The court reiterated that a piecemeal approach as warned against in the Sardi matter should not be adopted and that the question at the end of the case remains whether a plaintiff has, when regard is had to all the evidence led, probabilities and inferences, discharged his onus to prove negligence on the part of the defendant.

The SCA reiterated that it depends on the facts of every particular case as to whether and inference of negligence is justified and to what extent expert evidence is necessary.  It further reiterated that a court is not called to decide the issue of negligence until such time as all evidence has been led.  As such, any explanation proffered by the defendant would form part of the evidential material to be considered in deciding whether the plaintiff has proved negligence.

Turning to the facts of the particular case, the SCA held that the matter must be approached on the basis that one of the swabs was not removed following surgery as it could not have found its way into the appellant’s abdomen in any other way.  As the appellant was under general anaesthetic during the surgery, she did not have full knowledge of what occurred during the operation.  The facts of what occurred during surgery were solely within the knowledge of the respondent’s employees, none of whom were called to testify.  As such, no evidence was led as to whether a swab count did indeed take place prior to completing the surgery, whether the strict protocols that Dr Muller alluded to had been followed, the level of training of the particular employee responsible for the swab count, etc.  

The SCA emphasised that it is not necessary for a plaintiff in a civil case to prove that the inference she seeks the court to draw is the only reasonable inference.  It suffices for her to convince the court that the inference is the “most readily apparent and acceptable inference from a number of possible inferences”

The SCA held that the appellant adduced sufficient evidence for an inference of negligence to be drawn against the employees of the respondent involved in her surgery.  The respondent, by failing to adduce any evidence whatsoever to show that reasonable care was indeed taken during the surgery, took the risk of judgement being given against him.  The court further drew a negative inference against the respondent that his failure to call the relevant employees to testify could be indicative of a concern that their evidence would expose unfavourable facts.

The SCA found that the appellant discharged her onus to prove her case on a balance of probabilities when regard is had to all the evidence, probabilities and inferences and upheld the appeal with costs.

CONCLUSION

It would therefore appear that the SCA in the Goliath matter has overturned the position established in the Van Wyk matter with regard to the application of the maxim of res ipsa loquitur in medical negligence cases.   Even though the SCA does not specifically name it as such, it applied the principles of the maxim to draw an inference of negligence from the mere fact that a swab was left behind after surgery. 

Practically speaking, it will not suffice for the plaintiff to merely establish a causal link between the healthcare provider’s conduct and the adverse result on order for him to succeed with an argument based on the maxim, i.e. that the inference of negligence should be drawn against the defendant.  The plaintiff will also have to produce evidence to the effect that the incident could not have occurred in the absence of negligence on the part of the healthcare provider, which evidence will have to be adduced by a medical expert.  The SCA in the Goliath matter relied heavily on the evidence provided by Dr Muller, including that a swab should never be left behind following surgery, in order to arrive at the conclusion that the incident could not have happened in the absence of negligence.

Once a plaintiff has adduced sufficient evidence from which an inference of negligence can be drawn by reliance on the maxim, it is up to a defendant to provide an explanation as to why no negligence should be found on his part.  A defendant should therefore consider very carefully before deciding not to lead evidence in circumstances where the maxim may be found by a court to apply.   As Lord Justice Brooke stated in the matter of Ratcliffe v Plymouth and Torbay Health Authority [1998] EWCA Civ 2000“It is likely to be a very rare medical negligence case in which the defendants take the risk of calling no factual evidence, when such evidence is available to them, of the circumstances surrounding a procedure which led to an unexpected outcome of a patient.  If such a case should arise, the judge should not be diverted away from the inference of negligence dictated by the plaintiff’s evidence by mere theoretical possibilities of how that outcome might have occurred without negligence:  the defendants’ hypothesis must have the ring of plausibility about it . . .”

Construction Law – Certain instances where the NHBRC could be held liable by a home owner for rectification of major structural defects in a new home

INTRODUCTION:

1. In the unreported matter of Stergianos v National Home Builders Registration Council 2012 JDR 1982, the Plaintiff, Mr Stergianos, issued summons against the National Home Builders Registration Council (“NHBRC”), alleging that the NHBRC is obliged to remedy the defects evident in his home.

2. In our law the Housing Consumers Protection Measures Act 95 of 1998 (“the Act”) protects home owners in certain circumstances from the effects of poor workmanship on the part of home builders who are registered with the NHBRC.

3. Before we delve into the facts of the aforesaid matter, the following relevant Sections of the Act should be taken into consideration where a home owner wishes to hold the NHBRC liable for defects evident in a home resulting from defective workmanship on the part of a home builder:

3.1. Section 3 of the Act specifies the objectives of the NHBRC which include, inter alia, the following:
3.1.1. Representing the interests of housing consumers by providing warranty protection against defects in new homes;
3.1.2. Regulating the home building industry;
3.1.3. Providing protection to home owners where home builders fail to comply with their obligations in terms of the Act; and
3.1.4. To establish and promote ethical and technical standards in the home building industry.

3.2. In terms of Section 10(1) of the Act, a “home builder” is required to be registered with the NHBRC prior to the commencement of construction and if not, no payment may be received from a housing consumer in respect of the sale or construction of a home.  Section 10(2) determines that where a “home builder” is not registered with the NHBRC, he is prohibited from constructing a home.

3.3. The NHBRC is required, in terms of Section 12, to publish a Home Building Manual (“HBM”) which contains technical standards with which home builders must comply.

3.4. Further, Section 14(1) of the Act determines that a home builder is not allowed to commence building a home before:
3.4.1. the prescribed documentation, information and fee have been submitted to the NHBRC;
3.4.2. the NHBRC has accepted the aforesaid and entered same into its records; and
3.4.3. a certificate of proof of enrolment has been issued.

3.5. Section 15(2) states that the NHBRC is allowed to disburse any amount contemplated by Section 17(1) of the Act.  In terms of Section 17(1) the NHBRC shall pay an amount for rectification from the fund established for that purpose in terms of Section 15(4), where:
3.5.1. within:
3.5.1.1. five years of the date of occupation, a major structural defect has emerged in a home as a result of non-compliance with the NHBRC Technical Requirements and the home builder has been notified accordingly within that period;
3.5.1.2. twelve months of the date of occupation, a roof leak attributable to workmanship, design or materials has manifested itself in respect of a home and the home builder has been notified accordingly within that period;
3.5.2. the home builder is in breach of the home builder’s obligations in terms of Section 13(2)(b)(i) regarding the rectification of such defect;
3.5.3. the relevant home was constructed by a registered home builder, had been enrolled with the Council and, at the occupation date, the home was enrolled with the Council subject to Section 14(4), (5) and (6);
3.5.4. the home builder no longer exists or is unable to meet his obligations; and
3.5.5. in the case of a home that has been enrolled with the Council on a project basis in terms of Section 14(2), the application has been made by the MEC pursuant to an agreement in terms of Section 15(4)(c).

3.6. In terms of Section 17(2) the NHBRC is empowered to either reduce any amount that may be expended in terms of Section 17(1), in exceptional circumstances, make a payment to a home owner in full and final settlement instead of rectifying the defect, or refuse any claim.

BACKGROUND FACTS:

4. In the aforesaid matter, the Plaintiff concluded a contract with the Contractor, Herrington Construction CC, for the building of a home for the Plaintiff.  The home was constructed with a number of difficulties along the way, where after the Plaintiff took occupation thereof.

5. During the first year of occupation, cracks began to develop in the concrete floor slab which worsened progressively.  Attempts to fill the cracks failed as they continued to open.  The Plaintiff appointed a structural engineering expert, Mr Kleinhans, to determine the cause of the cracks.  Mr Kleinhans was of the view that the cause was structural.

6. The Plaintiff then issued summons against the NHBRC in terms of Section 17 of the Act, seeking orders that the NHBRC was responsible for the rectification of the structural defects in the home, and to rectify the defects within 180 days and to pay its costs.

7. The NHBRC refused the Plaintiff’s claim.  All the elements of the cause of action set out in Section 17(1) of the Act have either been admitted by the NHBRC or were not in dispute.  The only element in dispute, which had to be determined by the Court, is the cause of the defect.  If it were to be found that the cracks in the floor slab were caused by a major structural defect, the Plaintiff would be entitled to the relief contemplated by Section 17(1), otherwise the action will fail.

8. Section 1 of the Act defines the term “major structural defect” as:
“a defect which gives rise or which is likely to give rise to damage of such severity that it affects or is likely to affect the structural integrity of a home and which requires complete or partial rebuilding of the home or extensive repair work to it, subject to limitations, qualifications or exclusions that may be prescribed by the Minister.”

9. According to Kleinhans, the site on which the home was built had, right from the start, presented certain technical challenges as the home was built on a primary dune and the characteristics of the site signalled that special precautions had to be taken when building on a dune as same is mobile.

10. Kleinhans required to assess the relevant documentation in order to determine whether the home complies with technical requirements and prescribed standards, however, very little documentation could be found in this regard.  Kleinhans regarded a record of three Dynamic Cone Penetrometer (“DCP”) tests conducted before building commenced as most likely to classify the soil type in order to designate a class to the site as required in terms of the Home Building Manual.  According to Kleinhans, the said results raised concern, as well as a need to take remedial measures.

11. He then conducted a DCP test to determine the density of the fill below the slab and also evaluated the “health of the structure” by taking relevant photographs of the cracks, recording them on a plan and examining same for a pattern.  Most cracks were in the floor slab, while some were in the ceiling and walls.

12. Mr Kleinhans came to the conclusion that the defects in the concrete floor slab of the home were indeed caused by major structural defects in the substructure of the home and consequent settling of the slab.  The test results also confirmed that the fill beneath the slab was not sufficiently compacted to bear the weight of the slab.

13. The NHBRC also appointed an expert, Mr Mathibeli, who was of the view that the cracks were caused by shrinkage as a result of poor workmanship when the concrete slab was poured and secondly, the builder’s failure to place expansion joints in the slab where required.  Mr Mathibeli, who has not conducted any tests, came to the conclusion that the defects in the slab were not structural in nature.

CONCLUSION:

14. After assessing both experts’ views, the Court ordered the NHBRC to rectify the structural defects in the Plaintiff’s home in terms of Section 17 of the Act, subject to the maximum amount prescribed by regulation 13(1), read with regulation 13(2), of the regulations promulgated in terms of the Act.  The Court also ordered the NHBRC to pay the Plaintiff’s costs.

Construction Law – The nature of on-demand guarantees

1.  In construction contracts, on-demand guarantees or unconditional performance bonds are a means of guaranteeing the performance of the contractor to its employer. 

2.  On-demand guarantees are similar to letters of credit or promissory notes payable on demand.

3.  In Lombard v Landmark & Others  the following was held:

“… The guarantee creates an obligation to pay upon the happening of an event. …The guarantee was to protect the Academy in the event of default by Landmark and it is to the guarantee that one should look to determine the rights and obligations of the Academy and Lombard.”

4.  Lord Denning in Edward Owen Engineering Ltd v Barclays Bank International Ltd stated the principle as follows:

“A bank which gives a performance guarantee must honour that guarantee according to its terms. It is not concerned in the least with the relations between the supplier and customer; nor with the question whether the supplier has performed his contracted obligation or not; nor with the question whether the supplier is in default or not. The bank must pay according to its guarantee, on demand if so stipulated, without proof or conditions.  The only exception is where there is a clear fraud of which the bank has notice.”

5.  Similarly, Donaldson LJ held in  Intraco Ltd v Notis Shipping Corporation (The Bhoja Trader) that:

Irrevocable letters of credit and bank guarantees given in circumstances such as that they are the equivalent to an irrevocable letter of credit have been said to be the lifeblood of commerce. Thrombosis will occur if, unless fraud is involved, the Courts intervene and thereby disturb the mercantile practice of treating rights thereunder as being the equivalent of ‘cash in hand”.

6.  In Compass Insurance Company Ltd v Hospitality Hotel Developments (Pty) Ltd  this ratio was taken further when it was held that:

the reason for requiring strict compliance with a letter of credit is that it is an instrument that compels a bank to pay on demand irrespective of the status of the underlying debt” .

7.  This allows for international commerce to take place.

ON-DEMAND BONDS AND CONDITIONAL BONDS (SURETYSHIPS)

8.  The distinction between an on-demand bond and a conditional bond was dealt with by Brand JA in Minister of Transport & Public Works, Western Cape & Another v Zanbuild Construction (Pty) Ltd & Another as follows:

“In the parlance of the English authorities the dispute can be usefully paraphrased as being whether the guarantees are ‘conditional bonds’ (as suggested by Zanbuild) or ‘on demand bonds’ (as suggested by the department). The essential difference between the two, as appears from these authorities, is that a claimant under a conditional bond is required at least to allege and – depending on the terms of the bond – sometimes also establish liability on the part of the contractor for the same amount.  An ‘on demand’ bond, also referred to as a ‘call bond’, on the other hand, requires no allegation of liability on the part of the contractor under the construction contracts. All that is required for payment is a demand by the claimant, stated to be on the basis of the event specified in the bond.”

9.  In the absence of fraud, or the demand somehow being deficient as measured against the terms of the bond, the Guarantor is obliged to pay the Applicant irrespective of any disputes between the Second Respondent and the Applicant. The Court does not look behind the demand.

THE FRAUD EXCEPTION

10.  What would constitute a fraud has been dealt with in a number of cases, the most recent of which is the Guardrisk Insurance Company Ltd v Kentz (Pty) Ltd where Theron JA held:

“It would be useful to briefly consider the legal position in relation to the fraud exception. It is trite that where a beneficiary who makes a call on a guarantee does so with knowledge that it is not entitled to payment, our courts will step in to protect the bank and decline enforcement of the guarantee in question. This fraud exception falls within a narrow compass and applies where:

‘… the seller, for the purpose of drawing on the credit, fraudulently presents to the confirming bank documents that contain, expressly or by implication, material representations of fact that to his (the seller’s) knowledge are untrue.’

Insofar as the fraud exception is concerned, the party alleging and relying on such exception bears the onus of proving it.  That onus is an ordinary civil one which has to be discharged on a balance of probabilities, but will not lightly be inferred.  In Loomcraft Fabrics CC v Nedbank Ltd and another, it was pointed out that in order to succeed in respect of the fraud exception, a party had to prove that the beneficiary presented the bills (documents) to the bank knowing that they contained material misrepresentations of fact upon which the bank would rely and which they knew were untrue. Mere error, misunderstanding or oversight, however unreasonable, would not amount to fraud.  Nor was it enough to show that the beneficiary’s contentions were incorrect. A party had to go further and show that the beneficiary knew it to be incorrect and that the contention was advanced in bad faith. …

Guardrisk contended that the demands under the guarantees were fraudulent as Kentz had not given Brokrew adequate notice within which to remedy the breaches alleged by it. It was argued that Kentz had elected not to rely on its right to summarily terminate the construction contract. Instead, and in terms of the letter dated 24 February 2010, it gave Brokrew seven days written notice to remedy its alleged breaches, when it was, in terms of clause 15.2(d) of the contract, obliged to provide 28 days written notice to Brokrew.  Furthermore, so the argument went, Kentz had failed to comply with the provisions of clause 2.5 of the construction contract in that it had not given notice to Brokrew of the clause it intended to rely upon and the amount that was to be paid to it in terms of clause 2.5. For these reasons, it was contended that the termination of the contract by Kentz was premature and unlawful.”

11.  These allegations proved to be insufficient and/or irrelevant with the result that payment under the guarantee was enforced by the Court.

12.  In Balfour Beatty Civil Engineering v Technical General Guarantee Co Ltd the Court held that:

“In this assessment one is entitled to remind oneself that the question is not whether Leadrail or its liquidator might be able to show that the sum claimed under the bond was in fact due. Nor is the question whether the beneficiary in the light of the evidence might not have some anxiety as to whether the sum was due and have some anxiety about whether Leadrail might not have a good claim to the return of the money if it is paid by the surety. The question is whether when the demand was made the persons acting on behalf of the plaintiffs knew that the sum claimed was not due from Leadrail, and dishonestly made a demand despite that knowledge.”

13.  The SCA’s finding in Coface South Africa Insurance Co Ltd v East London Own Haven t/a Own Haven Housing Association is also significant in this context:

“[15] … At paragraph 63 Cloete JA said the following:

‘The appellant complied with the provisions of clause 5. It was not necessary for the appellant to allege that it had validly cancelled the building contract due to the second respondent’s default. Whatever disputes there were or might have been between the appellant and the second respondent were irrelevant to the first respondent’s obligation to perform in terms of the construction guarantee.’

[16] Cloete JA recorded that there was no suggestion of fraud on the part of the employer at paragraphs 64 and 65 he said:

‘[64]   Once the appellant [the beneficiary] had comply with clause 5 of the guarantee, the first respondent [the guarantor] had no defence to a claim under the guarantee. It still has no defence. The fact that an arbitrator has determined that the appellant was not entitled to cancel the contract, binds the appellant – but only vis-à-vis the second respondent [the employer]. It is res inter alios acta so far as the first respondent is concerned. As the cases to which I have referred above make abundantly clear, the appellant did not have to prove that it was entitled to cancel the building contract with the second respondent as a precondition to enforcement of the guaranteed given to it by the first respondent. Nor does it have to do so now.

[65]    For these reasons, it is not in my view bad faith for an employer, who has made a proper demand in terms of a construction guarantee, to continue to insist on payment of the proceeds of the guarantee, when the basis upon which the guarantee was called up has subsequently been found in arbitration proceedings between the building owner and the contractor to have bene unjustified. I would add that the fact that the arbitrator’s award is final as between the appellant and the second respondent does not mean that it is correct, or that the appellant would have to set it aside before calling up the guarantee, much less that the appellant is acting in bad faith in seeking to enforce payment under the guarantee against the first respondent.’

[17] At this stage it is necessary to consider cases that have come before this Court after Dormell dealing with letters of credit and construction guarantees.

[18]  In Casey v First Rand Bank Ltd (608/2012) [2013] ZASCA 131 this court, in relation to a letter of credit, had to deal with an assertion that the principal debt had prescribed. The guaranteeing bank’s client sought a declarator to that effect, submitting that the claim that the client had made upon the bank knowing that the claim had prescribed was fraudulent. It was contended that the effect of a declarator that the debt had prescribed was to extend the ambit of legitimate challenges to a letter of credit beyond the narrow confines of the fraud exception. In Casey, Swain AJA noted that:

‘(12)   … An irrevocable letter of credit is not accessory to the underlying contract and is distinguishable in law from a suretyship which is accessory to the principal obligation. See ABSA Bank Bpk v De Villiers 2001 (1) SA 481 (HHA).’

Later, he confirmed:

‘(14)   The distinction sought to be drawn on behalf of Casey and Kimberley is without merit. The issue of the irrevocable letter of credit by the Bank of America in favour of Firstrand, established a contractual obligation on the Bank of America to pay Firstrand as beneficiary, provided that the conditions specified in the credit were met. Reciprocal obligations in these terms were created by the letter of credit between the Bank of America and Firstrand. An order declaring that Firstrand had no right to draw-down on the letter of credit, must inevitably have as a consequence that the Bank of America was not obliged to honour this draw-down claim. Such an order would infringe upon the autonomy of the irrevocable letter of credit. The argument was advanced simply to circumvent the autonomy of the letter of credit.’

[19] In First Rand Bank Limited v Brera investments CC (385/2012 [2013] ZASCA 25, this court was faced with a situation where the guaranteeing bank sought to rely on events that occurred after demand had been made in terms of the guarantee. In that regard the decision in Dormell was relied upon. Malan JA, preferred the minority view in Dormell. At paragraph 11 of Brera, the autonomy of letters of credit, demand guarantees, performance bonds and similar documents was restated. The dictum in Lombard referred to above was reaffirmed.”

14.  In Turkey IS Banhasi v Bank of China it was found that even the likelihood that it would be found that the creditor had no right to claim on the bond was insufficient to establish fraud.

15.  The aforementioned cases have now clarified the current legal position in our jurisdiction in relation the onus of proof of the available defences to on-demand guarantees.

Insurance Law – The consequences of non-fulfilment of a condition precedent contained in an insurance policy: a recent decision

In Screening and Earthworks (Pty) Ltd v Hollard Insurance Company Limited the South Gauteng High Court recently considered whether a ‘condition precedent’ in an insurance policy placed a positive contractual obligation on an insured. The judgement is noteworthy to players in the machinery-breakdown-insurance field, but also to liability and indemnity Insurers.

The Plaintiff claimed the cost of repairing its cone crusher which became damaged as a result of the failure of the crusher’s main bearing from Insurers. The failure occurred during late October of 2007. Insurers refused indemnity under the Machinery Breakdown and Loss of Profit policy, raising a number of defences (certain of which fell away during the course of the trial). The most important remaining defence put up by Insurers was that the Plaintiff failed to preserve the damaged parts of the crusher and failed to make the parts available to it for inspection.

Kathree-Setiloane J considered first the following general condition of the policy:

“The due observance and fulfilment of the terms of this Policy … shall insofar as they relate to anything to be done or complied with by the insured be a condition precedent to any liability of the company [Insurers] to make any payment under this Policy.”

The particular term on which Insurers relied stipulated that:

“… on the happening of any event which may result in a claim under this Policy the insured shall as soon as possible and at its own expense … iii) preserve any damaged parts and make them available for inspection by a representative or surveyor of the company.” (hereinafter referred to as “the preservation condition”).

The Judge pointed out that the defence on which Insurers sought to rely was a ‘special defence’ founded on exceptions contained in the policy, and thus stood to be proved by Insurers. He considered the dictionary definitions of “preservation” (“preserving, being preserved, from injury or destruction”), “preserve” (“to keep safe”, “to keep safe from change or extinction” and “to protect from decay and damage”).

Insurers’ arguments

Insurers argued that the preservation condition was a condition precedent to a successful claim and that the Plaintiff had to comply with it, failing which Insurers were at liberty to deny liability under the policy.

Insurers also argued that the inclusion of a preservation clause in a policy of this nature was essential, as in its absence, Insurers would “be left to the mercy of the insured’s unilateral decision-making, leaving the insurers with no checks or balances” and that ‘strict observance’ was a condition precedent to liability on its part.

Plaintiff’s evidence

The Plaintiff led evidence by its own representatives as well as a number of experts.

Evidence made it clear that the Plaintiff started stripping the failed crusher shortly after the failure: parts were separated; some components were left in situ while others were freighted away to the Plaintiff’s workshop where certain parts were undressed further; some critical parts were even torch cut.

Expert evidence confirmed that the torch cutting may have caused the “killing of” evidence (not only of the parts which were cut, but also possibly the surrounding parts).

Under cross-examination, the Plaintiff’s representative conceded that these actions “killed evidence” but he attempted to soften this by offering that he had not intended to obscure or destroy evidence. He contended that he was simply driven by practical considerations and expediency when he instructed and oversaw the dismantling, hauling and cutting of the parts.

Insurers’ appointed loss adjuster apparently visited the site during November 2007 and his letter to the Plaintiff was accepted into record as an aid memoire or memorandum of sorts. The loss adjuster took some photographs of certain parts which were made available to him for inspection. It was contended by the Plaintiff that the loss adjuster failed to make a demand or request to see further evidence.

In response to these arguments, Kathree-Setiloane J observed that it was apparent from the evidence that the Plaintiff had become aware at a very early stage (mere days after the failure) of the “event which may result in a claim” and that the Plaintiff would have appreciated the ‘serious nature of the event’ almost immediately. It would thus have been apparent to the Plaintiff at such an early stage that an insurable event had occurred. The Plaintiff should have then complied with the obligation placed on it by the policy to preserve the failed component parts in order to make it available to Insurers.

The learned Judge observed further that the contractual obligation to preserve evidence is ‘absolute’ and that the test was thus not whether the Plaintiff’s failure to comply was intentional or negligent. The test was simply this: “was it preserved or not?” He agreed with Insurers’ contention that the Plaintiff’s failure to preserve the damaged parts was patent and fatal to the plaintiff’s claim and commented:

“What is absolutely certain at this time, is a complete and utter failure to preserve inter alia the damaged parts in the form of the component bearing. The bearing had for all intents and purposes been completely “destructed” by this stage in complete disregard of the plaintiff’s contractual and absolute obligations to preserve.”

The Judge commented on the mind-set of the Plaintiff as being apparent from its conduct and referred to the Plaintiff’s reliance of its broker’s advice to: “… carry on, do what you must as if you were uninsured …. The Plaintiff acknowledged to have interpreted the broker’s advice as “… do not waste time, do not wait, carry on because your income is standing, we will do whatever to get you going.”

The Court also commented pointedly that it was not for Insurers to demand to see the preserved damaged parts but for the Plaintiff to preserve same and “make them available” to Insurers for inspection.

Further expert evidence

By the time the Plaintiff’s experts became involved in the study of the occurrence, the failure to preserve and the consequences of such failure had become manifest and its consequences had been apparent.

One expert reported the he was only able to consider “the possible cause of failure having only inspected the inner ring, cage and two rollers” and he expressed grave misgivings on the fact that the cage had been cut at the point where the damage occurred, stating that the fact of the cutting made it “impossible to determine if there was a fracture, crack or distortion.” His report and his verbal evidence was littered with qualification and similar observations, concluding unsatisfactorily that on the sparse evidence available to him, he could merely conclude that the fracture of a cage pocket would usually be the sudden result of severe shock. His report made it clear that other possibilities could not be excluded.

One other expert reported plainly that the Plaintiff had killed evidence.

All the experts agreed that the only reliable mechanism for determining the cause of the failure with absolute certainty would be to examine the bearing as a full component.

The Court’s observations

Given the experts’ common view that there was a dire need to inspect a whole component, the learned Judge considered the practicality of preservation clauses as conditions precedent that place an ‘absolute obligation’ on the Plaintiff. He went on to say that preservation clauses were not merely inserted into policies so that Insurers would be allowed to avoid liability on vague and unreasonable technicalities. Preservation clauses, he stated, were essential for the proper assessment of the facts of a matter since such terms (that oblige a party to take on a positive duty) were designed to minimise the incidence of risk and to determine the extent of a loss.

The Judge referred, with approval, to similar clauses that have found application in our law –

First, the ‘timeous notice clauses’ which were found to be conditions precedent in Norris v Legal and General Assurance Society Limited : Watermeyer J in casu found (after considering various precedents) that a condition which imposes an obligation on an insured which was clearly intended to have some legal effect, in terms of which

“[t]he insured shall on the happening of any loss or damage to the property insured give immediate notice thereof in writing to the Company and shall at his own expense within 30 days after the happening of such loss or damage deliver to the Company a claim in writing with such detailed particulars and proofs as may be reasonably required …”

was indeed a condition precedent and the Plaintiff, having failed to comply with either of the conditions, was consequently not entitled to indemnity.

The Judge stated that Insurers would “obviously want to know immediately of the happening of a fire so that it could investigate the cause and effect thereof under the most favourable circumstances … Delay in notifying the Company … might well result in serious prejudice to the Company.”

Second, in Russel, N.O. and Loveday, N.O. v Collins Submarine Pipelines Africa (Pty) Ltd the Court found that a positive obligation in the form of assistance and co-operation was deemed to be a suspensive condition for the positive election by Insurers “to exercise their right to associate.”

Conclusion

Kathree-Setiloane J concluded that the uncontroverted evidence led on behalf of the Plaintiff (through its experts and representatives) equated to an admission that there had been a breach of its obligation to preserve. In law such a breach of an express term of the contract allowed Insurers to avoid liability and to reject the claim. It was found that Insurers had discharged its onus to prove on a balance of probabilities that the Plaintiff had failed to comply with its obligation and that Insurers were entitled to reject the Plaintiff’s claim.

The judgement is sound for many reasons. Where circumstances present an Insured with the opportunity to tamper with or destroy evidence, whether intentionally or not, it is crucial that Insurers are allowed reliance on a condition precedent to allow it a fair opportunity to investigate a claim.

Such conditions should be regarded as designed to ensure the preservation of evidence in order that Insurers may perform their own assessment but also to assist the Insured in the technical and commercial management of its plant and business.

Construction Law – Homebuilders must register with the NHBRC before commencement of building works to claim payment

1. The judgment in the matter of Cool Ideas 1186 CC (Cool Ideas) v Anne Christine Hubbard (“Hubbard”) & Minister of Justice and Constitutional Development confirms finally that an homebuilder is not entitled to receive compensation for a house constructed for a housing consumer unless registered in terms of the Housing Consumer Protection Measures Act. 

BACKGROUND

2. Cool Ideas and Hubbard entered into a building contract on 13 February 2006 in terms of which Cool Ideas undertook to construct a residence for Hubbard for consideration of R2 695 600.00. The building project was however executed by Velvori Construction CC (Velvori) in terms of its appointment by Cool Ideas.

3. The building project was enrolled by Velvori, as required in terms of the Act.  Velvori was duly registered as a home builder as required by section 10 the Act.  Cool Ideas was not.

4. The building works were completed in October 2008, but Hubbard took issue with the quality of the works and refused to make payment to Cool Ideas. Hubbard instituted arbitration proceedings in terms of the building contract, claiming the costs of the remedial works. Cool Ideas accordingly instituted a counter-claim for the balance of the contract price. The arbitrator found in favour of Cool Ideas i.e. that Hubbard had to make payment to Cool Ideas. Hubbard failed to comply with the arbitral award.

5. Cool Ideas approached the High Court for an order enforcing the arbitral award, which application Hubbard opposed on the basis that Cool Ideas was not registered as a home builder in terms of the Act. Cool Ideas argued that it, in fact, registered as a home builder during the litigation proceedings and that construction was done by Velvori, a registered home builder. The High Court granted the order and made the arbitral award an order of court.

6. Hubbard appealed to the Supreme Court of Appeal. The majority upheld the appeal submitting that the purpose of the Act is to protect consumers and therefore Cool Ideas was required to register before commencing with construction. The Court further submitted that enforcement of the arbitral award would disregard a prohibition in law. The dissenting judgment of the Supreme Court of Appeal submitted that Cool Ideas did not intentionally fail to register and that refusing to enforce the award would be unjust.

7. Cool Ideas applied to the Constitutional Court for leave to appeal the judgment by the Supreme Court of Appeal, which application was granted. The appeal was, however, dismissed in terms the majority judgment handed down by Majiedt AJ (Moseneke ACJ, Skweyiya ADCJ, Khampepe J and Madlanga J).

MAJORITY JUDGMENT

8. The majority judgment held that the interpretation given by the Supreme Court of Appeal in terms of section 10(1)(b) of the Act, namely that registration is a prerequisite for building works to be undertaken by a homebuilder, must be upheld. It further held that the failure to register would result in the home builder being ineligible to seek consideration for the work done in terms of the building agreement.

9. It held that the underlying building agreement remains valid, notwithstanding that Cool Ideas was not entitled to consideration as a result of its failure to register as required in terms of section 10(1)(b) of the Act. It held that the legislative scheme does not suggest that the building contract be invalidated by statutory prohibitions.

10. According to the judgment it is difficult to conceive how the entire agreement must be invalidated as a result of the conclusion that an unregistered home builder is not entitled consideration for work done in terms of section 10(1)(b) of the Act. It further held that it is inconceivable that the Legislature would enact provisions incorporating various protective measures for the benefit of consumers but then render their contract invalid. Therefore, the parties are entitled to retain what has been done or rendered in terms of the agreement. i.e. In these circumstances, restitution is not legally sound, as would have been the case with an invalid agreement. Therefore Cool Ideas would also not be entitled to file a suit against Hubbard based on unjust enrichment. 

11. In light of the aforementioned the Court dismissed the appeal with costs.

DISSENTING JUDGMENT

12. The judgment written by Froneman J (Cameron J, Dambuza AJ, and Van der Westhuizen J) opposed the conclusion of the majority judgment dismissing the appeal.

13. The fundamental difference in this judgment as opposed to the majority judgment lies in the constitutional principle. It held that public policy in the interpretation, application and enforcement of contracts embrace the principle of fairness. This judgment therefore disagrees that with the finding that a private arbitration award may not be enforced conflicting to a statutory provision. It held that the inevitable result of the reasoning of the main judgment is that Cool Ideas will be deprived of its right to payment for work fairly and properly done. The provisions of the Act should be interpreted in a manner that embrace the principle of fairness and avoids an unjust and unfair result.

14. The majority judgment found that the building contract between the parties remain valid, but that Cool Ideas are however disentitled to claim or enforce payment for any work done in terms of such agreement. This result, is in terms of the dissenting judgment on any standard, prejudicial and unfair to Cool Ideas. If the building contract was held to be invalid, Cool Ideas, could in terms of the common law, enforced an enrichment claim. By clothing the contract with validity, an enrichment claim is avoided.

15. The Court raised the following question: How can it be that Cool Ideas’ contract with Hubbard is valid, but its claim is unenforceable?  The Court argued that the Act employed various measures to protect housing consumers and therefore it would be reasonable to interpret the provisions of the Act in a manner that is fair and does not deprive Cool Ideas of its right to reasonable consideration.

16. According to the judgment, Hubbard did not sought the Act’s protection to attain proper building or correction of building works by Cool Ideas, but to escape payment of what she had been fairly found to owe to Cool Ideas.

17. The dissenting judgement further argued that there were various ways of achieving the purpose of the Act (i.e. enforcement of proper performance by home builders for housing consumers) and striking the correct balance between the interest of housing consumers and those who have performed construction work. In other words, the Act can be read to protect consumers without barring Cool Ideas’ claim for performance.

Engineering Law – Final Certification & Defences thereto

The issuing of a final certificate in terms of a building contract carries with it certain legal consequences for Employers and Principle Agents (normally Architects, Quantity Surveyors or Engineers). In the case of Ocean Diners (Pty) Ltd V Golden Hill Construction the Court clarified the legal position.

These consequences depend in the first instance on the proper interpretation of the applicable contractual terms. Where a building agreement provides that a final certificate shall constitute conclusive evidence as to the sufficiency of the works and materials, as well as of the value thereof, it is determinative of the respective rights and obligations of the parties in relation to matters covered by the certificate. The certificate therefore constitutes (in the absence of a valid defence) conclusive evidence of the value of the works and the amount due to the contractor.

STATUS OF THE FINAL CERTIFICATE

The Court found that the certificate embodies a binding obligation on the part of the employer to pay that amount and gives rise to a new cause of action (subject to the terms of the contract). The failure of the employer to make payment as contractually stipulated entitles the contractor to sue on the certificate.

If the effect of a building contract is to confer finality upon a certificate validly issued, it cannot be withdrawn or cancelled by an architect in order to correct mistakes of fact or value in it, unless the contract provides for it, alternatively such an arrangement is agreed to by the parties.

Therefore, once the architect has issued the final certificate, he is functus officio insofar as the certificate and matters pertaining thereto are concerned. That being so, the architect cannot withdraw or cancel the final certificate.

A final certificate is not even open to attack because it was produced on erroneous reports of the agent of the employer or the negligence of the employer’s architect. The failure of the employer’s professional team to properly scrutinise the claims put forward by the contractor and to rectify any errors, or their possible negligence in failing to satisfy themselves as to the correctness of the claims and valuations before issuing the certificate, will accordingly not provide a defence to an action on the certificate. It can also not provide a basis for the cancellation or withdrawal of the certificate by the architect.

PUBLIC POLICY

An undertaking by an employer in a building contract that a final certificate shall be conclusive evidence of the employer’s indebtedness is not in the least offensive to public policy. A party may also contractually agree to abandon his ordinary right to prove that an admission was wrongly made (on his behalf by his principle agent). Such a contractual term is not in itself against public policy.

The purpose of such a clause is to bring about finality in the respective rights and obligations of the parties. It also obviates the need for litigation over what are likely to be minor issues. To ensure this, the parties contractually bind themselves to accept as final and conclusive the certificate of a professional person they are entitled to expect will act fairly and impartially. Its provisions cannot therefore be said to be contrary to public considerations.

POSSIBLE DEFENCES TO THE CERTIFICATE

The certificate is, however, not indefensible. It is subject to all defences that may be raised in an action based on a final certificate. Any defence available to the employer, or on which the employer seeks to rely, ought to be pleaded.

All authorities indicate that negligent or innocent misrepresentation (relating to an architect’s certificate) would not be a valid defence to a claim on a final certificate. Possible defences to the certificate would be limited to considerations offensive to public policy, such as fraud.

EMPLOYER’S RIGHTS

When it is known that the final certificate is not entirely accurate in relation to either the valuation reflected therein or the amount due to the contractor, it would not be contrary to public policy to enforce it. Public policy is largely concerned with the potential for manifest unfairness or injustice within a given situation.

Where the employer has suffered damage through a negligent failure on the part of either his quantity surveyor or architect to act in his best interests, he would (subject to prescription) have an action for damages against the specific member of the professional team. The situation where the certificate is known to be inaccurate is therefore not one inherently fraught with unfairness or injustice as far as the employer is concerned.

Engineering Law – Should an Engineer’s duties be extended beyond its contractual obligations?

The question of what the extent of an engineer’s duties are, usually come into play whenever an engineered structure fails.  One prominent element to this question is whether an engineer’s duties extend beyond a contractual obligation with its employer.    

In Strijdom Park Extension 6 (Pty) Ltd v Abcon (Pty) Ltd this issue was raised and clarified by the Supreme Court of Appeal.

BACKGROUND
In this matter the engineer was employed by Strijdom Park Extension 6 (Pty) Ltd (“the employer”) to design a steel reinforced concrete slab separating the ground floor from the basement of a warehouse which was erected by Abcon (Pty) Ltd (“the contractor”).  The concrete slab failed two years after occupation of the warehouse was taken.

The employer instituted a claim for damages against the contractor and the engineer, alleging that they had breached their respective agreements with the employer.  The claim against the engineer was settled, but the claim against the contractor was heard on appeal.  
The parties were in agreement that the collapse must have occurred during the casting of the slab when the concrete was poured over and into the network of the reinforcing steel.   
The question that had to be decided on appeal was, firstly, whether the failure of the slab was at least partly attributable to a defective engineering design and, secondly, whether the engineer had a duty to the contractor.  

The Court considered the following undisputed evidence:
•    the failure was due to the collapse of the upper of two criss-cross mats of steel bars that had been encased in the concrete to reinforce it;
•    the collapse was a consequence thereof that many of the stools (which kept the two mats apart) were found to have been bent out of shape;
•    the contact between the upper mat and the stools was limited to one bar of the mat resting on the centre of the horizontal piece of each of such stools;
•    the stools were not fastened; and
•    the stool collapse occurred during the casting of the slab.

THE CONTRACTOR’S ARGUMENT
The contractor, firstly, took the stance that it was not liable for the damages as it had constructed the concrete slab in accordance with the engineer’s design, which was allegedly defective.

Secondly, the contractor relied on the fact that the engineer had approved the way in which the reinforcement was installed.  

Lastly, the contractor pointed out that the engineer’s design did not indicate that there had to be two bars of the top mat per stool, nor that the stools had to be fastened.

The contractor claimed that it did not notice the collapse of the upper mat, nor did it realise that the stools had not been tied.  It is clear from the contractor’s evidence that he left every relevant decision pertaining to the assembly of the reinforcement to the engineer and the steel contractor.  

THE EMPLOYER’S ARGUMENT
The employer contended that:
•    It was the duty of the contractor to assemble the reinforcement mats and to maintain same in the correct position.

•    Proper construction practice demanded that, wherever possible, two bars of the upper mat should be placed on each stool and that the feet of the stools be tied.  There is no reason for an engineer to indicate these practices on his drawings as these requirements are part and parcel of proper construction practice and solely the contractor’s duty.

•    The contractor should have noticed the collapse during the pouring process and should have stopped the work in order to consult the engineer.

•    If the contractor had observed its duties as set out above, the failure would not have occurred.

THE COURT’S APPROACH
The Court agreed with the employer’s stance.  

There was no evidence supporting the allegation that the engineer’s design was defective.
Although the engineer had approved the steel structure on site, he did not carry a duty to supervise the work of the contractor.  It was the contractor’s decision how it carried out the construction work and it cannot shift the blame to the engineer in the circumstance where it did not perform its work in a proper and workmanlike manner.  It was also the contractor’s obligation to ensure that the construction of a design is free of defects.

In the Court’s view, it was reasonable of the engineer to expect that the contractor would ensure proper assembly of the reinforcement mat by noticing any displacement and taking appropriate action if it occurred.  

The Court further clarified that the engineer had only a contractual duty to its client and not to the contractor.  The engineer did not even have a duty to intervene if the contractor appeared to be going wrong (unless it was apparent to the engineer that the contractor did not know his business and was going to go wrong).  Such a duty to intervene would only arise if the contractor appeared set on an incredible act of recklessness.  

The Court therefore held that the slab had failed because the contractor failed to carry out the construction in a proper and workmanlike manner.

CONCLUSION
•    An engineer’s duties are not extended beyond what is set out in his agreement with his employer.  

•    An engineer will therefore not have the duty to supervise the work of a contractor, unless he is contractually required to do so and he cannot be held liable for another party’s contractual breach.

Engineering Law – Should an Engineer’s duties be extended beyond its contractual obligations?

The question of what the extent of an engineer’s duties are, usually come into play whenever an engineered structure fails.  One prominent element to this question is whether an engineer’s duties extend beyond a contractual obligation with its employer.    

In Strijdom Park Extension 6 (Pty) Ltd v Abcon (Pty) Ltd this issue was raised and clarified by the Supreme Court of Appeal.

BACKGROUND
In this matter the engineer was employed by Strijdom Park Extension 6 (Pty) Ltd (“the employer”) to design a steel reinforced concrete slab separating the ground floor from the basement of a warehouse which was erected by Abcon (Pty) Ltd (“the contractor”).  The concrete slab failed two years after occupation of the warehouse was taken.

The employer instituted a claim for damages against the contractor and the engineer, alleging that they had breached their respective agreements with the employer.  The claim against the engineer was settled, but the claim against the contractor was heard on appeal.  
The parties were in agreement that the collapse must have occurred during the casting of the slab when the concrete was poured over and into the network of the reinforcing steel.   
The question that had to be decided on appeal was, firstly, whether the failure of the slab was at least partly attributable to a defective engineering design and, secondly, whether the engineer had a duty to the contractor.  

The Court considered the following undisputed evidence:
•    the failure was due to the collapse of the upper of two criss-cross mats of steel bars that had been encased in the concrete to reinforce it;
•    the collapse was a consequence thereof that many of the stools (which kept the two mats apart) were found to have been bent out of shape;
•    the contact between the upper mat and the stools was limited to one bar of the mat resting on the centre of the horizontal piece of each of such stools;
•    the stools were not fastened; and
•    the stool collapse occurred during the casting of the slab.

THE CONTRACTOR’S ARGUMENT
The contractor, firstly, took the stance that it was not liable for the damages as it had constructed the concrete slab in accordance with the engineer’s design, which was allegedly defective.

Secondly, the contractor relied on the fact that the engineer had approved the way in which the reinforcement was installed.  

Lastly, the contractor pointed out that the engineer’s design did not indicate that there had to be two bars of the top mat per stool, nor that the stools had to be fastened.

The contractor claimed that it did not notice the collapse of the upper mat, nor did it realise that the stools had not been tied.  It is clear from the contractor’s evidence that he left every relevant decision pertaining to the assembly of the reinforcement to the engineer and the steel contractor.  

THE EMPLOYER’S ARGUMENT
The employer contended that:
•    It was the duty of the contractor to assemble the reinforcement mats and to maintain same in the correct position.

•    Proper construction practice demanded that, wherever possible, two bars of the upper mat should be placed on each stool and that the feet of the stools be tied.  There is no reason for an engineer to indicate these practices on his drawings as these requirements are part and parcel of proper construction practice and solely the contractor’s duty.

•    The contractor should have noticed the collapse during the pouring process and should have stopped the work in order to consult the engineer.

•    If the contractor had observed its duties as set out above, the failure would not have occurred.

THE COURT’S APPROACH
The Court agreed with the employer’s stance.  

There was no evidence supporting the allegation that the engineer’s design was defective.
Although the engineer had approved the steel structure on site, he did not carry a duty to supervise the work of the contractor.  It was the contractor’s decision how it carried out the construction work and it cannot shift the blame to the engineer in the circumstance where it did not perform its work in a proper and workmanlike manner.  It was also the contractor’s obligation to ensure that the construction of a design is free of defects.

In the Court’s view, it was reasonable of the engineer to expect that the contractor would ensure proper assembly of the reinforcement mat by noticing any displacement and taking appropriate action if it occurred.  

The Court further clarified that the engineer had only a contractual duty to its client and not to the contractor.  The engineer did not even have a duty to intervene if the contractor appeared to be going wrong (unless it was apparent to the engineer that the contractor did not know his business and was going to go wrong).  Such a duty to intervene would only arise if the contractor appeared set on an incredible act of recklessness.  

The Court therefore held that the slab had failed because the contractor failed to carry out the construction in a proper and workmanlike manner.

CONCLUSION
•    An engineer’s duties are not extended beyond what is set out in his agreement with his employer.  

•    An engineer will therefore not have the duty to supervise the work of a contractor, unless he is contractually required to do so and he cannot be held liable for another party’s contractual breach.

The Interpretation of “Pay in Full” in terms of the Medical Schemes Act

In the recent matter of Board of Healthcare Funders of Southern Africa v Council For Medical Schemes 2011 JDR 1471 (GNP), the first and second applicants approached the Court with a request to issue a declaratory order regarding the interpretation of the words “pay in full” in regulation 8(1) of the General Regulations made pursuant to the Medical Schemes Act, 131 of 1998.

The applicants contended that the Court had to decide three issues, namely:
1.    The first applicant’s entitlement to institute proceedings for declaratory relief;
2.    The interest and locus standi of the intervening respondents in opposing the relief sought by the applicants; and
3.    The meaning of the words “pay in full” in regulation 8(1) of the General Regulations which were promulgated in terms of section 67 of the Act.

Regulation 8 has been in force since 1 January 2000. According to the applicants, the current problem came into existence on 11 November 2008 when the Appeal Board decided two cases on appeal which was referred by the Appeal Committee in terms of section 50 of the Act. The Appeal Committee and the Appeal Board had, pursuant to these two decisions, interpreted the words “pay in full” in regulation 8 to mean that the medical scheme must make full payment of a service providers’ invoice in respect of the costs of providing health care services for Prescribed Minimum Benefits without taking the rules of the medical scheme into consideration in dealing with any complaints.

It was the applicants’ contention that “pay in full” means payment according to the rules of the Medical Scheme, while according to the respondents, the decisions by the Appeal Board have not been challenged as yet and presently medical aid schemes are bound to this authority and have to pay service providers’ invoices in full.
The main complaint by the respondents was that the first applicant had no direct and substantial interest in the application as the judgment would not have an impact on it. Although the first applicant contended that it represented 75 registered medical aid schemes and therefore had locus standi, the Court found this not to be the case. This was due to the fact that the first applicant saw fit to have the second applicant, who is a registered medical aid scheme, joined. Furthermore, only 15 registered medical schemes, in the founding and supplementary founding affidavits, confirmed that a declaratory order should be sought.

The Court held that had the first applicant been so sure that it represented all 75 medical aid schemes it would not have been necessary to join the second applicant or to obtain affidavits and signatures of 15 members of the first applicant. The Court concluded from this that the first applicant did not in fact represent 75 members, but only the 15 members mentioned in the papers.

The non-joinder of all the medical schemes rendered the application fatally defective as the Court could not find that the first applicant, as a general representative of the medical schemes, would be prejudicially affected by a judgment, but found that its members may all be prejudicially affected and accordingly, all the members should have jointly instituted the application for a declaratory order.

The Court found that the first applicant did not have locus standi for the following reasons:
1.    The matter was one that could be classified as a representative matter, but not all the medical schemes had been joined and it had not been launched as a representative matter due to the fact that the first applicant did not have any mandate to litigate on behalf of all 75 of its members;

2.    In order to institute action in terms of Section 38 of the Constitution, a litigant needs to show that a right enshrined in the Bill of Rights has been encroached upon as well as sufficient interest in the relief sought. The first applicant did not explicitly aver any such infringement and the Court found that the First Plaintiff would not be directly influenced by the judgment and did not have a sufficient interest in the relief sought.

With regard to the second applicant the court held that it could not succeed in the application on its own, as none of the other medical aid schemes or administrators had been joined.

As a result the court dismissed the application without deciding the meaning of the words “pay in full”.

Alternative Dispute Resolution – Extinctive Prescription in Arbitration

Arbitration plays a major role in the construction industry as alternative dispute mechanism. Section 13(1)(f) of the Act states that the completion of prescription will be delayed if the debt is the object of a dispute subjected to arbitration.

What is a Reference to 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 Section 13(1)(f) of the Act. This decision was upheld in the Appellant Division. It therefore follows that the completion of prescription was delayed until one year after the arbitration proceedings came 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 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 Debt

In Primavera Construction 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 a judgment debt for purposes of Section 11(a)(2) of the Prescription Act, which meant that a 30 year prescriptive period would be applicable to the award.

Alternative Dispute Resolution – Does Adjudication Work?

In the government white paper on Creating an Environment for Reconstruction Growth and Development in the Construction Industry in 1999, it was argued that the conventional mechanisms and procedures for final dispute resolution (normally arbitration or litigation) are too costly and time consuming.

In March 2001 government published a draft code of practice, entitled “Adjudication in Engineering and Construction Contracts in South Africa”, proposing a movetowards rapid and inexpensive dispute resolution mechanisms in said contracts.

The Construction Industry Development Board (“CIDB”) issued a draft Practice Guide for public comment in August 2003. This practice guide, published on the back of the white paper, also advocates the use of adjudication as a cost and time efficient alternative dispute resolution mechanism to arbitration and litigation.

The World Bank also advocates that adjudication procedures be used on projects which it funds.

The Principal Building Agreement of the Joint Building Contracts Committee (“JBCC”) published in March 2004, incorporated adjudication into the local construction industry even further.

ADJUDICATION – THE GENERAL PRINCIPLES

 While adjudication is presently being introduced locally, many members of the construction industry remain unclear as to what adjudication is and how it is applied. Although the terms of adjudication are contract specific, adjudication can, in broad terms, be defined as being:

“… an accelerated and cost effective form of dispute resolution. The outcome is a decision by a third party intermediary which is final and binding on the parties in dispute, unless the decision is reviewed by litigation and arbitration.”

The Process and Principles of Adjudication

 Any dispute arising from, or in connection with the contract should be capable of being referred to adjudication provided that the necessary terms are incorporated in the contract at the appropriate time. While the procedural requirements for referral of disputes and conducting the adjudication will vary from contract to contract, one is able to distinguish certain underlying principles:

– A party referring a dispute to adjudication must do so in writing, must submit the dispute within the time period stated in the contract with all necessary information, failing which it forfeits the right to dispute the matter.

– The terms and procedures of adjudication are agreed and detailed in the contract, which results in an informed, transparent and speedy decision. If successfully referred, each party must be given a reasonable opportunity to state their case (without a hearing), to know what the case against it is and also to be placed in possession of all evidence obtained by the adjudicator.

– Adjudicated disputes must be resolved within the contract period as the contract itself forms the basis for enforcing the decision of the adjudicator. As a general rule, all disputes are to be resolved within a 42 day period of being referred to adjudication.

– The role of an adjudicator is not that of an arbitrator. The adjudicator is tasked with settlement of the dispute within the contractual rights and obligations between the parties.

– Adjudicators must base their decisions on the subject of the dispute at hand only and must avoid conducting hearings to resolve disputes. Adjudicators should avoid individual contact with either party and may not discuss matters with a party without informing the other party of the discussion and the outcome thereof.

– It is essential to successful adjudication that adjudicators achieve a balance between an inquisitorial approach and adherence to the rules of natural justice in order to treat the parties fairly. An adjudicator may not for instance prepare his own critical path analysis and draw any conclusions from it, without affording the parties an opportunity of making submissions on the accuracy thereof.

– Adjudicators must answer all questions put to them and are normally required to provide written reasons for their decisions.

– It goes without saying that adjudication can only succeed if the adjudicator is impartial and does not have (or appear to have) any relationship with any of the parties, nor have an interest in the outcome of the adjudication.

– The adjudicator should also have the right, after notifying the parties, to refer to legal and technical experts for assistance in areas where the adjudicator recognises that he may not be adequately equipped. This provision is aimed at ensuring that justice is served, despite the fact that the adjudicator may not personally possess all the skills necessary to resolve a matter.

– The decision of the adjudicator is final and binding on the parties, unless it is reviewed by either arbitration or litigation. The decision becomes enforceable immediately, whether the dispute is to be referred for final resolution or not.

– Final resolution of the dispute may, in some instances, only be referred to arbitration or litigation after a “cooling down” period has elapsed allowing the parties to make this decision after careful consideration of the merits of their case.

CAN ADJUDICATION WORK?

Can adjudication work? One can only form a view on this with due regard of other jurisdictions where adjudication had been introduced, tried and tested.

In the United Kingdom, adjudication became mandatory on all prime contracts and sub-contracts in 1998, through the introduction of the Housing Grants Construction Regeneration Act (1996). From the following statistics (based on approximately 4 850 adjudications up to September 2001) it is clear that adjudication can provide a quick summary procedure for resolving disputes:

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

76% of referrals were completed in less than 40 hours;

73% of disputes concerned non-payment; other significant issues were variations, loss / expense and points of law;

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

Almost 50 % of all referrals were by sub-contractors against main contractors; and

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

There can thus be little doubt that adjudication has had a marked influence on the construction industry in the United Kingdom.

The high percentage of adjudications relating to “non-payment” issues does seem to indicate that where disputes are more complex, such as negligent design or construction, and are likely to affect further contracts (such as insurance policies), parties may be more reluctant to resolve matters through adjudication.

A further point of concern is the immediate enforceability of decisions. A party facing an adverse award may for instance be obliged to make payment to a party in severe financial difficulty. Should the decision of the adjudicator then be determined as incorrect by a later forum, the party at the wrong end of the adjudicator’s decision then runs the risk that the recovery of monies paid may no longer be possible.

ADJUDICATION IN THE FUTURE

It is clear that adjudication can, and probably will, play a major role in the local construction industry as an additional alternative dispute resolution mechanism. A good working knowledge of processes, procedures and pitfalls under the various standard forms of construction contracts will be a pre-requisite in future negotiations of contracts.

Adhering to the procedural requirements for declaring, conducting and settlement of disputes will require some level of skill and specialisation to effectively protect a party’s rights under the contract.

The procedural and specific requirements of a number of the standard construction agreements, such as FIDIC, BIFSA, JBCC and NEC will form the subject matter of a series of future publications.

The Construction and Engineering Law team at AM Theron Inc has the expertise to assist clients involved in disputes where adjudication is the selected dispute resolution mechanism.

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