“BINDS HIMSELF AS CO-PRICIPAL DEBTOR” – NO LONGER HAS THE EFFECT OF BINDING SURETIES AS CO-DEBTORS WHEN CLAIMING THE DEBT AMOUNT

Allen West

Sean Janse van Rensburg

A suretyship can be defined as a contract whereby a person, namely the surety, undertakes to the creditor of another person, namely the principal debtor, that as accessory to the principal debtor’s liability, the surety will be liable for the debt. What is evident from the aforementioned definition of a contract of suretyship, is that a suretyship is an accessory obligation. A valid principal obligation must, therefore, exist between the creditor and principal debtor.

A suretyship document often dictates that the surety binds himself as “surety and co-principal debtor in solidum” with the principal debtor. The ramifications of being bound as “co-principal debtor” was recently dealt with by the Supreme Court of Appeal (hereinafter “the SCA”) in the matter of Liberty Group Ltd v Illman, which judgment was handed down electronically on the 16th of April 2020.

The SCA was, inter alia, posed with two questions; firstly whether a surety becomes co-debtor to the principal debt. Secondly, that just as summons on one co-debtor interrupts prescription in respect of all co-debtors, then surely summons on the surety as “co-debtor” would interrupt the running of prescription in respect of sureties as well? The SCA confirmed that a surety, who binds himself as co-principal debtor, does not become a co-debtor with the principal debtor. The Court also found that service of the Summons on a surety as “co-debtor” would not interrupt the running of prescription in respect of the other sureties as well. The rational of the Court is laid out below.   

In March 2003 Charter Life Insurance Company Ltd (which later changed its name to Liberty Active Ltd (“Liberty”) concluded a written broking agreement with ECE Financial Holdings (“ECE”). In terms thereof, ECE was to act as an independent intermediary for Liberty’s financial products. As compensation, ECE would be paid commission on premiums received by Liberty during the currency of the agreement on contracts issued pursuant to proposals submitted by ECE.

In the period during March 2003 and February 2005, eight individuals, including Mr Illman (the Respondent herein), each signed separate but identical deeds of suretyship in terms of which they bound themselves as sureties and co-principal debtors in solidum with ECE for the payment to Liberty of all monies which ECE could in future owe to Liberty, ‘from whatsoever cause arising’.

During March 2003 and March 2011, and before receiving any premiums in respect of contracts issued by Liberty on proposals submitted to it by ECE, Liberty advanced commissions to ECE. However, during the same period, and up to August 2011, the contracts in respect of which commissions were advanced to ECE either lapsed, were cancelled, or terminated because of non-payment of premiums to Liberty. As a result, the commissions which Liberty had paid in advance, became repayable to it by ECE in terms of the agreement and by the sureties in terms of the deeds of suretyship. The total amount of the commissions was R1,029,963.50. Liberty later ceded all its rights to claims arising from the claw-back commissions in respect of the broking agreement to Liberty Group Ltd (LG).

On 14 March 2011, the agreement with ECE was terminated and on 22 September 2011, LG, as cessionary, issued summons against all the sureties and co-principal debtors for re-payment of the commission. On 29 September 2011, the summons was served on one of the sureties, Mr September. He failed to deliver a notice of intention to defend. As a result, LG obtained default judgment against him in January 2012.

The Summons was only served on Mr Illman (the Respondent) on 31 March 2016, approximately five years after it was issued. Mr Illman raised a special plea of prescription to LG’s claim and asserted that to the extent that LG’s claim against him was based on the alleged termination of the agreement on 14 March 2011, such claim became prescribed after three years of that date, in terms of the Prescription Act 68 of 1969.

LG responded and argued that as Messrs September, Illman and the other trustees had bound themselves as sureties and co-principal debtors in solidum with ECE, they became ‘co-debtors.’ As the claim against ECE and the sureties became due on 14 March 2011, service of the summons on Mr September within the prescription period interrupted the running of prescription in favour of ECE and all co-debtors, including Illman. Accordingly, it was pleaded, the claim against Illman had not prescribed.

The High Court in Pretoria found in favour of Mr Illman and the sureties which lead LG to launch an appeal in the SCA.

The SCA considered three cases in the aforementioned appeal, namely Kilroe-Daley v Barclays National Bank, Neon and Cold Cathode Illuminations (Pty) v Ephro and Jans v Nedcor Bank Ltd.

In the Janse case, the Court had to evaluate whether the interruption in the running of prescription in favour of the principal debtor interrupted the running of prescription, in favour of a surety. The Court concluded that there were significant differences between the relationship existing between the principal debtor and surety on the one hand, and that between co-debtors, in solidum on the other. The Court accordingly concluded that an interruption or delay in the running of prescription in favour of the principal debtor, interrupted or delayed the running of prescription in favour of the surety. As between co-debtors, the common law allowed the judicial interruption of prescription of a co-debtor by service on another co-debtor.

In this regard, it was significant that LG referred to Ilman and the other sureties as ‘co-debtors’. LG submitted that the addition of the words ‘co-principal debtor in solidum’ signaled an intention that the liability shall be of the same scope and nature as that of the principal debtor. This made the principal debtor and the surety, co-debtors. Thus, service of summons on any of them, Mr September in this case, interrupted prescription running in favour of the rest.

LG was cognisant that this submission was contrary to the jurisprudence of this court in the decisions of Kilroe-Daley and Neon. In Kilroe-Daley, the accessorial nature of a suretyship agreement to the main contract was emphasised, despite it being a separate contract from that of the principal debtor and his creditor. The addition of the words ‘co-principal debtor’ did not transform the contract into any contract other than one of suretyship. Consequently, it was held that if the principal debt became prescribed the surety’s debt also became prescribed and ceased to exist.

In Neon it was held that the sole consequence (albeit an important one) of a surety binding himself as a co-principal debtor is that, as regards to the creditor, he renounces the benefits such as excussion and division available to him and he becomes liable with the principal debtor jointly and severally. It did not make him a co-debtor.

LG argued that Kilroe-Daley and Neon, to the extent that they limited the effect of the phrase ‘and co-principal debtor’ to only a tacit renunciation of the legal exceptions, had been wrongly decided. The flaw in the criticism of the decisions of the previous judgments lie in the conflation of two distinct concepts: co-debtors and co-principal debtors. The undertaking of the surety is accessory to the main contract. It is an undertaking that the obligation of the principal debtor will be discharged, and if not, that the creditor will be indemnified.

Although the surety binds himself as co-principal debtor, that does not render him liable to the creditor in any capacity other than that of a surety who has renounced the benefits ordinarily available to a surety against the creditor. He does not become a party to the contract between the creditor and the principal debtor.

A surety and co-principal debtor does not undertake a separate independent liability as a principal debtor; the addition of the words ‘co-principal debtor’ does not transform his contract into any contract other than one of suretyship. The surety does not become a co-debtor with the principal debtor, nor does he become a co-debtor with any of the co-sureties and co-principal debtors, unless they have agreed to that effect (our emphasis).

 

There was another string to LG’s bow, based on the rule that if a creditor, through the service of a process, claimed payment from one co-debtor who bound himself jointly and severally with others, the remaining co-debtors could not rely upon extinction of the debt by prescription. The principle was received into Roman Dutch law.

LG urged the Court to apply this principle to the converse situation. In other words, that the interruption of prescription in respect of a surety serves to interrupt prescription in respect of a principal debtor. Once so decided, it was said, the further logical extension of the principle would be that interruption of prescription in favour of a surety would also interrupt prescription in favour of a co-surety. The result would, therefore, be that service on Mr September interrupted prescription in favour of Illman.

The argument could not succeed. Neither in the Roman law nor in the Roman Dutch law had it ever been suggested that the converse should apply – in other words that interruption of prescription against the surety should constitute interruption of prescription against the principal debtor. The Roman Dutch writers, who wrote extensively on the topic and debated the pros and cons thereof, were ad idem that the converse should not apply. It is consequently simply not part of our common law.

LG’s appeal was, thus, dismissed. The SCA did, however, state that should a creditor wish to hold a surety liable as a co-debtor with the principal debtor as well as a co-debtor with any of the other co-sureties and co-debtors, then it is imperative that it is worded as such in your suretyship agreement. The use of the words “the surety binds himself as surety and co-principal debtor in solidum with the principal debtor” will not suffice. It needs to be expressly stated in the suretyship agreement that the surety will be liable as a co-debtor with the principal debtor as well as a co-debtor with any of the other co-sureties and co-debtors.

NEWSLETTER – ISSUE 02

NEWSLETTER
July 2019
Issue 02


FEATURED ARTICLES THIS MONTH
DEVIATION DUE TO CHANGED CIRCUMSTANCES WHEN EXERCISING A REAL RIGHT OF EXTENSION 

BY ALLEN WEST 
The deviation from the section 25(2)(a) and (b) plans when exercising a real right of extension has been a matter that has been deliberated on at length by our Courts and Registrars of Deeds.  Recent case law, in my opinion, has now finally put this thorny issue to rest

Background
In the case of Dolphin Whisper Trading 10 (PTY) LTD v The Registrar of Deeds and another (20645/08) [2009][ZAWCHC] dated 3 March 2009, it was held that if there is not sufficient evidence of changed circumstances, the real right of extension has to be exercised strictly in accordance with the section 25(2)(a) and (b) plans.  This case literally put the cat among the pigeons and developers had to approach the Court when any deviation from the section 25(2) plans occurred.  In the judgement of Roseparkadmin CC and others v Registrar of Deeds (WCHC) Case No 5522 dated 17 May 2011, it was held that section 25(13) of the Act allows the Developer to deviate, in instances of changed circumstances, from the section 25(2) plans and an owner who feels prejudiced may alone apply to court.  It was further held that the Act does not require the developer to first obtain the courts sanction for such deviation.  Two conflicting decisions on which Registrars had to implement a uniform practice

Registrars Ruling
Registrars of Deed at their annual conference in 2011 took cognizance of the Roseparkadmin-case, but felt it prudent to expand on the decision and to usurp the duty to ensure that the exercising of the real right of extension is within the physical boundaries of the reserved right (RCR12 of 2011).
The Chief Registrar furthermore issued a directive providing that proof must be submitted that the real right is exercised within the “foot print” on which the reservation took place, which proof must be in the form of a certificate from a surveyor or architect (see CRC 2 of 2012).

Recent Case Law
In terms of the most recent case in this regard, namely the unreported case of Hartenbos Woonwapark CC v Registrar of Deeds and others, Case No 3273/2017 dated 29 May 2017, the court held as follows:
“I cannot agree that the developer’s failure to divide the sections strictly according the site development plan due to the changed circumstances amounts to non-compliance with the provisions of the Act.  Although the Act requires the sections to be divided according to the site development plan, the Act does envisage that there may be situations where it is not possible to divide the sections strictly according to the site development plan due to “changed circumstances”.  The Act, in those instances, provides remedies to the owners of the units who may be affected by the deviation to approach the court.  I agree with the applicant’s submission that section 25(13) of the Act relates to situations where an owner of a unit in a scheme takes issue with a deviation, and approaches the court for an order obliging the developer to properly comply with the terms of the reservation or any other relief which the court may deem fit, including an award for damages.  It is clear from the reading of section 25(13) of the Act that this section is not concerned with the power of the Registrar of Deeds to refuse to register the transfer nor the court’s approval of the transfer of a unit which is subject”

Conclusion
Where the real right is clearly defined on a diagram, the exercising of the real right may not exceed the boundaries or encroach on other common property in the scheme. However, where no diagram exists, but merely a sketch plan, it is not incumbent on the Registrar of Deeds to police the foot print.


CALCULATION OF INTEREST OF A DEBT  

Carma Prinsloo

BY CARMA PRINSLOO 

The calculation of interest on a debt is governed by the Prescribed Rate of Interest Act 55 of 1975 (hereinafter “the Act”). The Act has been divided into two parts relating to the calculation of interest, being:
(1)  the rate at which interest on debt  is calculated in certain circumstances, and
(2)  interest on a judgment or unliquidated debt.

Interest on debt in certain circumstances
Section 1 of the Act applies in circumstances where the calculation of interest is not governed by any other law, agreement or trade custom.  In these circumstances, the rate of interest shall be calculated by using the repo rate as determined by the South African Reserve Bank, plus 3,5 % per annum.

Interest on a judgment debt
Interest on a judgment debt will become due from the day on which such judgment debt is payable.  As of 1 January 2019, the prescribed rate of interest is 10.25% per annum.

Interest on unliquidated debt
An unliquidated debt shall bear interest as per section 1 of the Act, stating that interest will be calculated by using the repo rate plus 3.5% per annum.

Interest on an unliquidated debt shall run from the date on which payment of the debt is claimed.  Payment of interest may be claimed by the service of a demand or summons.

Should damages claimed include an estimation of a loss (in whole or in part) which will occur in the future, interest on that part of the debt will only commence to run when quantum is determined by judgment or agreement.  Thereafter, the amount will be deemed to be a judgment debt.

The interruption of interest can occur where a debtor offers to settle a debt (whether by tender or making a payment into court).  The interruption will occur from the date of the payment into court or date of the offer made until the date of acceptance of the offer by the creditor.


THE LIABILITY OF THE ARCHITECT IN THE SOUTH AFRICAN LAW

Sumari Benade

BY SUMARI BENADE

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, or in the words of The Shorter Oxford English Dictionary: One whose profession it is to prepare plans of edifices and exercise a general superintendence over their erection.”  A person may only practise as an architect in South Africa if he is registered as such in terms of the Architectural Profession Act 44 of 2000.  Section 27 of this Act stipulates that the South African Council for the Architectural Profession must draw up a code of conduct for registered persons.  All registered persons must comply with the terms as included in this code and failure to do so constitutes improper conduct.

The preamble of the Code of Professional Conduct, issued under BN 154 of 2007, Government Gazette 32731, 27 November 2009, states 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 will be in existence between the parties.  Usually included in the tacit terms of the agreement is that the architect does in fact possess the required skill and ability to be reasonably proficient in his calling.  It is, however, important to be cognisant of the fact that the architect may be also held liable in respect of a delictual claim in the absence of any contractual agreement between the parties.

It is a well-established fact in the South African Law 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 stated the following with reference to the position of an architect: “Where there is a conflict as 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 reasonably exercised by another person of the same profession, the architect will be held liable in damages to his employer.

In the matter of Bentel Associate International (Pty) Ltd v Loch Logan Waterfront (Pty) Ltd 2015 JDR 0323 (FB) the Court had to decide inter alia 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 stated 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 referred to the matter of De Wet v Steynsrust Municipality 1925 OPD 151 in which 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 Court 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 his client, which is that the architect possess “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 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.

When the architect enters into an agreement, it is implied that he 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 does not imply or warrant a satisfactory result.


LATEST DEVELOPMENTS IN CASE LAW
NATIONAL HOME BUILDERS’ REGISTRATION COUNCIL & ANOTHER V XANTHA PROPERTIES 18 (PTY) LTD (780/2018 and 784/2018) [2019] ZASCA 96 (21 June 2019)

The respondent, Xantha Properties 18 (Pty) Ltd embarked upon the construction of a property development in Cape Town

consisting of a number of shops and 223 residential apartments.  It averred that it had no intention of selling these apartments or developing them under a sectional title scheme but with the sole intention to rent them to tenants. Although registered as a ‘home builder’ as defined in the Housing Consumers Protection Measures Act 95 of

1998, it disputed being  obliged to enroll this development project with the NHBRC or to
pay the prescribed enrolment fee under section 14(1) of that Act, arguing that the section did not require a home builder to
enroll houses being constructed solely for the purposes of being let.

The NHBRC and the Minister of Human Settlements, contended otherwise and insisted upon the respondent’s development being enrolled and that it pay the necessary enrolment fee, a sum in excess of R1.5 million. The respondent paid that sum under protest but proceeded to seek a declaratory order in the High Court, Cape Town to the effect that it was obliged neither to enroll its development nor to pay such fee. The respondent’s application succeeded but with the leave of the court a quo, the two appellants appealed against the decision.

The Supreme Court of Appeal allowed the appeal. In doing so it held that the fundamental underlying premise of the Act is to guard against builders constructing sub-standard homes.
Moreover the definition of a home builder’s business was amended specifically to include building homes for purposes of being let or rented out, and there was no reason why the legislature would have decided that homes build for leasing purposes should be treated differently from those constructed for resale. It held that the court a quo had incorrectly reached the conclusion that section 14 did not apply to homes being built for lease and rental purposes. The Supreme Court of Appeal therefore allowed the appeal and granted an order dismissing the respondent’s application with costs.


PUZZLES AND PUNS

If you can’t convince them, confuse them

-Harry Truman


NEWSLETTER MAY 2019 – EXCITING NEW DEVELOPMENTS AT AM Theron INC

NEWSLETTER
May 2019
Issue 01
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EXCITING NEW DEVELOPMENTS AT AM Theron INC

We are excited to announce that as of March 2019, Johan Loots joined our team at AM Theron Inc. as director. Johan, a Pretoria born attorney, specializes in Commercial, Civil and General Litigation, especially in Insolvency Law and Rehabilitations. Johan was appointed in 2000 as moderator and specialist examiner of the Attorney’s Admissions Exam for the Legal Practice Council.

We herewith extend our heartfelt congratulations to our two Professional Assistants, Anjo Rheeders and Sumari Benade, on their admissions as both Conveyancer and Notary Public of the High Court of South Africa respectively during March 2019. We are proud to share this remarkable achievement with them.

Sumari Benade   Anjo Rheeders

FEATURE ARTICLES THIS MONTH
THE LEGAL APPROACH TOWARD TIME BARRING CLAUSES IN INSURANCE CONTRACTS

BY CLAIRE ROUX       Claire Wolmarans

The Constitutional Court, in the case of Barkhuizen v Napier 2007 (5) SA 323 (CC), dealt with the issue of “time-barring clauses” in contracts entered into between private persons.

The salient facts of the case are as follows:

The applicant claimed the insured sum from the respondent upon being in an accident with his insured vehicle. The respondent subsequently rejected the claim.

Two years later, the applicant instituted legal proceedings against the respondent claiming payment of the insured sum together with interest thereon. The respondent responded claiming that they were released from liability due to the applicant’s failure to adhere to the time-limitation clause which formed part of the contract. The relevant clause read as follows: “if we reject liability for any claim made under this policy we will be released from liability unless summons is served… within 90 days of repudiation”. In essence the applicant was time barred from instituting proceedings to pursue his claim.

The applicant argued that the time-limitation clause was unconstitutional as it was contrary to public policy and thus invalid. The basis of the Applicant’s contentions in this regard was that the clause sought to prescribe an unreasonably short period of time within which to institute legal proceedings and as a result it infringed on the right to seek redress from the Court and the right to access the Court.

The Court considered whether public policy tolerates time-limitation clauses. The Court held that it did, subject to the considerations of reasonableness and fairness. Furthermore, the Court reiterated that the Constitution recognises that the right to seek legal redress may be limited in certain instances. The Court also formulated a test for fairness viz, firstly, whether the clause itself is unreasonable and secondly, if the clause is reasonable whether it should be enforced in the circumstances. The Court found that clauses of this type are reasonable and thus operational within our law.

The Court ultimately found that the clause should be enforced in this matter because the applicant failed to show why he had did not act in accordance with the provisions of the time-bar clause. The Court explained that had the applicant been unaware of the time limitation clause or the consequences thereof, or failed to act in accordance with same due to factors outside of his control then the clause would operate unfairly and the Court would not enforce same. However, the applicant seemed to be fully aware of the clause and the effect of same.

This decision opened the door for the Courts to refuse enforcement of certain unfair clauses in contracts between private persons and laid the foundation of the grounds on which to do so.

The Policyholder Protection Rules
On 01 January 2018, the amended policyholder protection rules came into force. Various Rules have been in place regarding time barring since 2011, which the new Rules amplify. The rules build on the position laid down by the Court in Barkhuizen v Napier.

The Rules, firstly, provide that insurers must accept, reject or dispute a claim or the quantum thereof within a reasonable period of time. Thereafter, insurers must give written notice of their decision to the claimant within 10 days of making same.

In the event that an insurance claim is rejected or disputed by the insurer, the Rules provide for a rather stringent set of disclosure obligations which the insurer must fulfil. This ensures that claimants are equipped with the necessary information to properly pursue claims which they feel have been wrongly rejected.

It is also clear that mere notification of the clauses and processes is insufficient. Insurers must also ensure that claimants are made aware of the relevant details and implications thereof in order for them to be well equipped to deal with such clauses and/or to pursue such processes successfully.

The Rules confirm the Court’s power to condone non-compliance with time-limitations should they operate unfairly, as well as in circumstances where the policyholder can show their failure to institute legal proceedings timeously was due to a good cause. It is submitted that the test for fair operation of such a clause remains as decided by the Court in Barkhuizen. It must also be noted that the above requirements must be fulfilled in conjunction with one another.

Insurers are also precluded from imposing unreasonably short time-limitations, as the Rules state that any time-limitation imposed in a policy entered into after 2011, may not be shorter than six months.

The Rules now require insurers to ensure that the policyholder is well aware of the existence of the time-limitation clause, as well as the implications thereof. This protects policyholders from being prejudiced by clauses which they previously would not have been made aware of, or fully understood. It also provides the policyholder with ample opportunity to dispute repudiated claims and follow the correct processes in order to have their claims reconsidered.

Should an insurer fail to act in accordance with the Rules, a policyholder may lay a formal complaint against the insurer. As a result, the Rules have created a more onerous position for the insurer and this should ensure that they act in accordance therewith.

The Rules provide some welcome redress to the unequal power that insurance companies hold over policyholders. Furthermore, the new amendments to the Rules obligate insurers to inform policyholders of the protection in place which makes it more accessible to the policyholder and easier to follow.

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DEFECTIVE WORKS AND SUCCEEDING CONTRACTOR’S LIABILITY

BY ANJO RHEEDERS     Anjo Rheeders

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…” [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. In 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.

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WHO IS REGARDED A NON-RESIDENT FOR PURPOSE OF SECTION 35A OF THE INCOME TAX ACT 58 OF 1962?
BY ALLEN WEST    

Under South African Law there are different types of residents, for example a resident defined by the Income Tax Act, 1962 in terms of the so-called physical presence test and an ordinary resident defined in terms of South African common law.

Any individual, who is ordinary resident (common law concept) in South Africa during the year of assessment or, failing which, meets all three requirements of the physical presence test, will be regarded as a resident for tax purposes.

An individual will be considered to be ordinary resident in South Africa, if South Africa is the country to which that individual will naturally and as matter of course return after his or her wanderings. It could be described as that individual’s usual or principal residence, or his or her real home. If an individual is not ordinarily resident in South Africa, he or she may still meet the requirements of the physical presence test and will be deemed to be a resident for tax purposes.

To meet the requirements of the physical presence test that individual must be physically present in South Africa for periods exceeding-
• 91 days in total during the year of assessment under consideration;
• 91 days in total during each of the five years of assessment preceding the year of assessment under consideration; and
• 915 days in total during those five preceding years of assessment.

An individual who fails to meet any one of these three requirements will not satisfy the physical presence test.

If the individual is neither ordinary resident, nor meets the requirements of the physical presence test, that individual will be regarded as a non-resident for tax purposes. This means that individual will be subject to tax only on income that has its source in South Africa. A non-resident will, however, be subject to the withholding of tax on the sale of immovable property, as provided for in Section 35A of the Income Tax Act 1962.

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LATEST DEVELOPMENTS IN CASE LAW

National Home Builders Registration Council v Michiel Wessel Adendorff & others (406/2018) [2019] ZASCA 20

In this matter, the Supreme Court of Appeal had to determine whether a trust is a “home builder” in terms of sections 1 and 10(1) of the Housing Consumer Protection Measures Act 95 of 1998 (“the Act”).
The salient facts of the matter are as follow: During 2013 an NHBRC inspector, whilst

conducting a routine inspection, discovered that the trustees of the Mike’s Trust were constructing a sectional title housing development on the property for the benefit of the Trust. It is common cause that initially the Trust registered as a ‘home builder’ in terms of section 10 of the Act, for a period of one year, but failed to renew its registration. The Trust continued with the construction of new homes on the property, whilst not registered as a home builder. It was served with notices of non-compliance by the NHBRC, but refused to comply. Consequently, the NHBRC launched the application against the trustees.

The Trust submitted that it is not regarded as a person and therefore it is not required to register as a home builder in terms of the Act. The Court considered the relevant provisions of the Act and confirmed that “the Act is consumer-protection legislation, having as its object the protection of consumers against home builders who construct homes with structural defects, to provide consumers with information about competent builders, and to give effect to the rights of consumers.” The Act therefore requires registration of home builders and the enrolment of houses being built to ensure that the aims and objects of the Act are optimally achieved.

It was evidently confirmed by the Court that there can be no cogent reason for the legislature to exclude a trust that owns property, and is building a home, from the provisions of the Act, where the manifest purpose of the Act is the protection of the housing consumer, and maintaining the minimum standards required of home builders. Trusts are therefore deemed to be home builders as envisaged in the Housing Consumers Protection Measures Act 95 of 1998 and should register as such.

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PUZZLES AND PUNS

What’s wrong with lawyer jokes?
Lawyers don’t think they’re funny and
other people don’t think they’re jokes.

The Legal Approach Towards Time Barring Clauses in Insurance Contracts

The Constitutional Court, in the case of Barkhuizen v Napier 2007 (5) SA 323 (CC), dealt with the issue of “time-barring clauses” in contracts entered into between private persons.

The salient facts of the case are as follows:

The Applicant had entered into a short-term insurance contract with the Respondent for insurance of his motor vehicle. On 24 November 1999 the motor vehicle was involved in an accident which caused the vehicle damages beyond economic repair. The Applicant thus claimed the insured sum, i.e. R181 000 from the Respondent. The respondent repudiated the claim on the grounds that the Applicant had used the vehicle for business purposes despite the insurance agreement providing that the vehicle must be used for private purposes only.

On 8 January 2002, two years later, the Applicant instituted legal proceedings against the Respondent claiming payment of the insured sum together with interest thereon. The Respondent responded to the action with a special plea, claiming that they were released from liability due to the Applicant’s failure to adhere to the time-limitation clause which formed part of the contract. The relevant clause read as follows: “if we reject liability for any claim made under this policy we will be released from liability unless summons is served… within 90 days of repudiation”. In essence the Applicant was time barred from instituting proceedings to pursue his claim.

The Applicant argued that the time-limitation clause was unconstitutional as it was contrary to public policy and thus invalid. The basis of the Applicant’s contentions in this regard was that the clause sought to prescribe an unreasonably short period of time within which to institute legal proceedings and as a result it infringed on the right to seek redress from the Court and the right to access the Court.

The Court, inter alia, considered whether public policy tolerates time-limitation clauses. The Court held that it did, subject to the considerations of reasonableness and fairness. Furthermore, the Court reiterated that the Constitution recognises that the right to seek legal redress may be limited in certain instances.

Relying on the Mohlomi decision the Court held further that the general test for enforceability is whether the provision affords the Applicant an “adequate and fair opportunity to seek judicial redress. Notions of fairness, justice and equity, and reasonableness cannot be separated from public policy”. The Court also formulated a test for fairness viz, firstly, whether the clause itself is unreasonable and secondly, if the clause is reasonable whether it should be enforced in the circumstances.

The Court found that in respect of the first leg of the test two considerations would need to be weighed up against one another. One being the maxim, pacta sunt servanda and the other being the right to seek legal redress. The Court found that clauses of this type are reasonable and thus operational within our law. The Court thereafter moved on to examine the circumstances in which the clause would operate, in order to assess whether same should be enforced.

The Court ultimately found that the clause should be enforced in this matter because the Appellant failed to show why he had failed to act in accordance with the provisions of the time-bar clause. The Court explained that had the Applicant been unaware of the time limitation clause or the consequences thereof, or failed to act in accordance with same due to factors outside of his control then the clause would operate unfairly and the Court would not enforce same. However, the appellant seemed to be fully aware of the clause and the effect of same. Thus, in the circumstances, the Court found that the clause operated reasonably.

This decision opened the door for the Courts to refuse enforcement of certain, unfair clauses in contracts between private persons and laid the foundation of the grounds on which to do so.

 

The Policyholder Protection Rules

On 01 January 2018 the amended policyholder protection rules came into force. Various Rules have been in place regarding time barring since 2011, which the new Rules amplify. The rules build on the position laid down by the Court in Barkhuizen v Napier.

The Rules firstly provide that insurers must accept, repudiate or dispute a claim or the quantum thereof within a reasonable period of time. Thereafter, insurers must give written notice of their decision to the claimant within 10 days of making same.

In the event that an insurance claim is rejected or disputed by the insurer, the Rules provide for a rather stringent set of disclosure obligations which the insurer must fulfil. This ensures that claimants are equipped with the necessary information to properly pursue claims which they feel have been wrongly rejected. Insurers are required to inform the insured of the following:

 

  • The reasons for the decision “in sufficient detail to enable the claimant to dispute such reasons if the claimant so chooses”;
  • That the insured party may within 90 days make further representations in respect of its claim;
  • Details of the internal claim escalation and review process required by Rule 17.5. Rule 17.5 provides that an insurer must establish and maintain an appropriate internal process for claim decision escalation and/or review and for resolution of claim related disputes;
  • That the insured party has a right to lodge a complaint against the insurer with the relevant Ombudsman, together with the relevant contact details of same, any applicable time limitations, and other relevant legislative provisions relating to the lodging of such a complaint; and
  • Of any time limitation provision for the institution of legal actions contained in the policy, as well as the implications thereof or, in the absence of same, of the operation of the Prescription Act, the prescription period applicable and the implications of the Act.

 

It is also clear that mere notification of the clauses and processes is insufficient. Insurers must also ensure that claimants are made aware of the relevant details and implications thereof in order for them to be well equipped to deal with such clauses and/or to pursue such processes successfully. It is thus the obligation of the insurer to provide information regarding the protection provided by the rules available and accessible to their clients – which provides some redress to the unequal positions private persons find themselves in when dealing with insurance companies.

   

   The Rules further state:

“ 17.6.8      Any time limitation provision for the institution of legal action that may be provided for in a policy entered into on or after 1 January 2011-

(a)   may not include the period referred to in rule 17.6.3(b) in the calculation of the time limitation period; and

(b)   must provide for a period of not less than 6 months after the expiry of the period referred to in rule 17.6.3(b) for the institution of legal action.

 17.6.9   Despite the expiry of the period allowed for the institution of legal action in a time limitation clause provided for in a policy entered into before or after 1 January 2011, a claimant may request the court to condone non-compliance with the clause if the court is satisfied, among other things, that good cause exists for the failure to institute legal proceedings and that the clause is unfair to the claimant.

 17.6.10 For the purposes of section 12(1) of the Prescription Act, 1969 (Act 68 of 1969) a debt is due after the expiry of the period referred to in rule 17.6.3(b).”

 

The Rules confirm the Court’s power to condone non-compliance with time-limitations should they operate unfairly, as well as in circumstances where the policyholder can show their failure to institute legal proceedings timeously was due to a good cause. It is submitted that the test for fair operation of such a clause remains as decided by the Court in Barkhuizen. It must also be noted that the above requirements must be fulfilled in conjunction with one another. However, what exactly “among other things” refers to in this provision is currently unclear.

Insurers are also precluded from imposing unreasonably short time-limitations, as the Rules state that any time-limitation imposed in a policy entered into after 2011 may not be shorter than six months.

The Rules now require insurers to ensure that the policyholder is well aware of the existence of the time-limitation clause, as well as the implications thereof. This protects policyholders from being prejudiced by clauses which they previously would not have been made aware of, or fully understood. It also provides the policyholder with ample opportunity to dispute repudiated claims and follow the correct processes in order to have their claims reconsidered.

Should an Insurer fail to act in accordance with the Rules, a policyholder may lay a formal complaint against the insurer. As a result, the Rules have created a more onerous position for the Insurer and this should ensure that they act in accordance therewith.

The Rules provide some welcome redress to the unequal power that insurance companies hold over policyholders. Furthermore, the new amendments to the Rules obligate Insurers to inform policyholders of the protection in place which makes it more accessible to the policyholder and easier to follow.

 

Claire Wolmarans

THE ROLE PLAYERS IN THE CONSTRUCTION PROFESSION AND THEIR RESPONSIBILITIES

  1. INTRODUCTION

The different duties and functions of the role players involved in a typical construction project are fundamental in the understanding of the proper operation of a construction site.   The purpose of this article is to provide clarity as to the functions of certain of the professionals involved in a typical construction site. Simply put, who does what?

It is intended to address the different role-players involved on a typical construction site and the relationships and responsibilities of such role-players in a relatively simple construction project.

The typical construction site can be quite complex, not only in the technical sense, but also because the various professional disciplines must work in unison, as a team, to achieve the required result. In most cases “the required result” includes the delivery of the agreed product, within budget, and within the agreed timeframe. The three primary considerations are usually “scope”, “cost” and “time”.

Apart from these three considerations, safety on site is also one of the key requirements of the modern construction operation. In the modern construction framework numerous safety requirements are prescribed by legislation. Ensuring compliance with these requirements involves the ongoing monitoring of operations on site by a dedicated safety officer.

Over and above the safety officer, the typical construction team involves a number of professionals from different disciplines within the engineering sector. They are usually highly qualified individuals who have specialized knowledge in their own field of expertise.

The professionals that need closer attention are architects, engineers, quantity surveyors and project managers.

Other professionals will include the Land Surveyor and the Landscape Architect. A discussion of these professions does not fall within the ambit of this article.

 

  1. THE ARCHITECT

Architects are artists. They combine architectural history, science and art within the built environment to produce designs that will not only meet the client’s requirements, but also enhance the environment.

The Shorter Oxford English Dictionary describes the architect as:

“One whose profession it is to prepare plans of edifices and exercise a general superintendence over their erection.”

An architect is usually the first professional to be contracted by the client. They are also the leaders of the construction team. In many building projects the role of the architect is to co-ordinate a team of specialist consultants, such as landscape architects, engineers, quantity surveyors, interior designers, and even contractors and sub-contractors.

An architect must be professionally qualified and lawfully registered to practise. They also subscribe to a code of conduct that requires them to perform all duties with professional integrity.

An architect can make a valuable contribution to any project, even before any design work commences, particularly in the following respects:

  • Feasibility Studies

 

It may be necessary to establish the economic relationship between factors influencing the cost of a development on the one hand, and the estimated return from the project that a client could expect. Most architects are able to assist with such a basic financial analysis.

  • Site Selection

 

Architects are able to advise clients on the selection of a suitable site based on the client’s needs. This advice can often reduce the cost of the project through the appropriate assessment and selection process of a site. Architects may consider and advise clients on issues such as sub-soil conditions, availability of services, local building regulations, heritage implications, site orientation and views, as well as solar energy design requirements.

  • Budget Planning

 

Experienced architects can provide a client with a reasonable estimate of expected costs for the different phases of a building development. These estimates can be broken down into the site development phase, construction phase, the cost of furniture and fittings, the estimated cost of landscaping and other external works. They may also provide the client with some indication of the expected cost of finance and consultants’ fees, as well as possible ongoing maintenance costs.

  • Preparation of a project schedule

 

On smaller projects, architects are sometimes engaged by clients to prepare a project schedule of events. This is normally done at an early stage in the project in order to allow for the ongoing monitoring of the project activities and to what extent certain activities are being completed. It also gives the client an indication of whether or not certain deadlines will be met.

With larger projects, this task is within the responsibility of a project manager. In recent times the development of the project management profession has, to some extent, depleted the role of the architect on this particular issue. The management of resources and activities, and ultimately time and money, is increasingly becoming the responsibility of the project manager.

  • Schematic Design

 

Architects will prepare, at the outset of the project, a schematic design based on the information and initial brief given to them by the client. The schematic design will also take into consideration the architect’s understanding of statutory requirements. Government and local councils may have specific regulations which affect design solutions and the project schedule. This is also the opportune time for the client to make any amendments to proposed designs. Any changes at this stage would be far less expensive than significant design changes at a later stage when detailed designs have been completed by the architect. The design process therefore starts with the schematic design and leads through a progression of designs. The client develops the design with the architect into a final design which, at the end of the process, should be in accordance with the client’s requirements. During the design process the architect will also explore and illustrate the cost options for each design and any changes made thereto. The client should therefore be in a position to take the cost factors into consideration when a design is being developed.

  • Obtaining Approvals

 

Approvals for any project must be obtained from a number of authorities. An architect can submit applications for approval, together with the required information on a client’s behalf and may also respond to any technical queries raised by any of the approving authorities.

A number of authorities may be involved in the approval process inter alia:

  • The Local Authority
  • ESKOM
  • Fire Services
  • Liquor Control Authority
  • Environmental Protection Authority
  • Heritage Authority
  • Health Authority

The architect will also be au fait with the national building regulations. Any design prepared by the architect should be in compliance with the national building regulations, as well as certain requirements that the local authorities may have in this regard.

  • Preparing Documentation for Construction

 

Following the approval of the design by the client, as well   as the   relevant authorities, the architect   will prepare drawings and specifications which will be used during the construction process. These documents will be used during the identification of suitable contractors. They will also be used, where necessary, to obtain further designs from relevant professionals such structural engineers, mechanical engineers and electrical engineers. The construction documents can be detailed and complex. They require skill, experience and time to prepare. It will normally include a set of large- and small scale fully dimensioned and detailed drawings, known as “the working drawings”.

This set of drawings is accompanied by a written, bound volume giving full descriptions, details and direction in relation to all work to be carried out. The set of drawings is known as “the specification”. The documents prepared by the architect may often also include further drawings and specifications prepared by any specialist consultants appointed by either the client or the architect on the client’s behalf. Architects, in their role as leaders of the design team, have a good knowledge of the building and construction industry, as well as available technology. They also know providers of specific products and services and may make valuable recommendations to clients. During the design stage many building projects will require specialist consultants in specific areas of the work to be executed. These consultants include engineers (structural, civil, mechanical and electrical), quantity surveyors, project managers, land surveyors, landscaping architects, etc. An architect will advise the client on the need for such consultants, may recommend certain preferred consultants and will also advise on the roles that they will play.

  • Regulation of the Architects Profession

 

Architects are regulated by the Architectural Profession Act 44 of 2000. The Act makes it an offence to practise as an architect without proper registration. The Act also provides for the registration of architects, senior architectural technologists, architectural technologists and architectural draft persons.

The Act regulates the relationship between the South African Council for the Architectural Profession and the Council for the Built Environment. This entity is called into being by the Council for the Built Environment Act, 43 of 2000.

In recent times, the identification of work to be executed by the relevant professional bodies has been the focus of the Council for the Built Environment. Most of the Councils regulating their individual professions are now finalizing their “Identification of Work” documents within their own professions. It has also been instrumental in the co-ordination of the various Councils that were established through their respective Acts in 2000.

The Architectural profession is no exception. The identification of work provides for categories of work within which registered persons are permitted to operate.

The aim is to regulate the conduct of registered persons to ultimately protect the public in their dealings with registered persons and to maintain the integrity of the architectural and/or other regulated professions in the construction and engineering industry.

 

  1. THE ENGINEER

Engineering has been an aspect of life since the beginning of human existence. Civil engineering might be considered properly commencing between 4000 and 2000 BC in Ancient Egypt and Mesopotamia when humans started to abandon a nomadic existence, thus causing a need for the construction of shelter. During this time, transportation became increasingly important leading to the development of the wheel and sailing.

The construction of Pyramids in Egypt in approximately 2700-2500 BC might be considered the first instances of large structure constructions. Other ancient historic civil engineering constructions include the Parthenon in Ancient Greece (447-438BC) and the Great Wall of China in 220 BC.

In ancient times, engineers were typically referred to as architects or master builders. In the 18th century, the term civil engineering was first used to recognize it as a separate field from military engineering. The first self-proclaimed civil engineer was John Smeaton who constructed the Eddystone Lighthouse.

An engineering qualification is highly sought after in South Africa at the moment. According to the Human Sciences Research Council, the growth in the demand for labour in the engineering sector is expected to rise. This has put significant pressure on the limited professionals presently available in the market.

There are many different types of engineering qualifications. Without dealing with the detail of every engineering discipline, some of the main ones are:

    • Civil engineering
    • Electrical engineering
    • Mechanical engineering
    • Metallurgical engineering
    • Industrial engineering
    • Clinical engineering
    • Mining engineering
    • Chemical engineering
    • Aeronautical engineering

Perhaps the most recognized branch of engineering is Civil Engineering, the reason being that it directly affects the infrastructure used by society. Civil engineers are commonly involved in all aspects of community infrastructure, housing and construction. Our homes, roads, airports and bridges are built thanks to the involvement of civil engineers.

Civil engineering includes the following different specialties:

    • Environmental Engineering
    • Geotechnical Engineering
    • Hydraulic Engineering
    • Materials Science
    • Structural Engineering
    • Transportation Engineering

Engineers are regulated by the Engineering Profession Act 46 of 2000. The Act makes it an offence to practise as an engineer without proper registration. The Act also provides for the registration of engineers, candidate engineers and specified categories in the engineering profession. The Act regulates the relationship between the Engineering Council of South Africa and the Council for the Built Environment. The identification of work to be executed by the relevant professional bodies has been the focus of the Council for the Built Environment. Most of the Councils regulating their individual professions are now finalizing their “Identification of Work” documents within their own professions. It has also been instrumental in the co­ordination of the various Councils that were established through their respective Acts in 2000.

The Engineering profession is no exception. The identification of work provides for categories for work within which registered persons are permitted to operate. The aim is to regulate the conduct of registered persons to ultimately protect the public in their dealings with registered persons and to maintain the integrity of the engineering and/or other regulated professions in the construction industry.

 

  1. THE QUANTITY SURVEYOR

The quantity surveying profession emerged in England at the beginning of the 19th century. Prior to the first recorded usage of term “quantity surveyor” in 1859, the term “measurer”, “custom surveyor” or “surveyor” were used. In those early days the quantity surveyor acted as master tradesman, measuring the work at completion and frequently submitting final accounts to the building owner.

As a direct result of these activities it often became the the practice of building owners to have the work executed under contract and to call for tenders before any work was undertaken. A procedure therefore developed whereby building owners would approach an architect to design a building.

Drawings and specifications were distributed to selected master builders, who would then submit tenders for the total price rather than a collection of prices from master tradesmen. The task of arriving at an accurate estimate of cost or tender can be carried out in only one way, that of measuring the quantities of all materials and labour necessary to complete the work, i.e. preparing bills of quantities.

As each builder had to prepare his/her own bills of quantities for each project, they realized soon that it would be more economical for them, as a group, to employ one surveyor to measure quantities for all of them. They would thus share the costs of the surveyor, obtain identical bills of quantities which ensure that they would all be tendering on exactly the same basis. The builder owner subsequently realized that it would be to his/her personal advantage to appoint and pay the fees of the quantity surveyor. Thus the independent professional quantity surveyor gained consultant status.

Quantity surveyors become involved in the various stages of the project as essentially a financial consultant to the client. The client would normally engage an architect to prepare a design and the required drawings for the construction of a project. The architect’s drawings, being specific structural designs, be required, are then passed on to the design engineer. The engineer will then prepare designs for the specific design elements that would be required.

From the engineer, the finalised drawings would be passed on to the quantity surveyor in order to “measure” from the designs and prepare bills of quantities. The measurement from the finalised drawings involves the determination of the quantity materials and resources that would be required to complete the project.

Anything and everything from volume of concrete, tons of steel, number of bricks to square metrics of paint would be detailed. The bills of quantities are normally broken down into specific sections of measured items according to a pre-arranged and/or agreed strategy. The bills of quantities normally would form one of the cornerstone documents of a construction contract.

Professional quantity surveyors render a wide spectrum of services to their clients, but naturally attend to gain experience or concentrate their services in a specific field. The services that quantity surveyors could offer include:

 

  • Estimating and costs advice using techniques and an intimate knowledge of building and construction economics.
  • Cost planning enables clients to make informed decisions on various design alternatives with actual costs constantly monitored against original budgets.
  • Property development advice provide a pre-design study involving technical and/or economic investigations enabling the client to decide whether, and in what form, a project is to be proceeded with.
  • Valuation of work in progress, cash flow assessment of budgets and final account preparation in respect of a contract. The quantity surveyor measures and valuates the work in progress, determines the value of any variations ordered by the principle agent and ensures that a reasonable settlement of the cost of a project is achieved.

 

Quantity Surveyors are regulated by the Quantity Surveying Profession Act 49 of 2000.

The Act makes it an offence to practise as a quantity surveyor without proper registration. The Act also provides for the registration of quantity surveyors specified categories in the quantity surveying profession. The Act regulates the relationship between the South African Council for the Quantity Surveying Profession and the Council for the Built Environment. The Act also prescribes that a Professional Code of Conduct be published and subscribed to by all registered members of the Association of Quantity Surveyors. The Code of Professional Conduct is included in the bundle of documents.

 

  1. PROJECT AND CONSTRUCTION MANAGEMENT PROFESSIONS

As a discipline, project management developed from different fields of application including construction, engineering and defense. In the United States, the forefather of project management is Henry Gantt, developed planning and control techniques. He is famous for his use of the Gantt chart as a project management tool. The 1950s marked the beginning of the modern project management era. Again, in the United States, prior to the 1950s, projects were managed on an ad hoc basis, using mostly Gantt Charts and informal techniques and tools. At the same time, technology for project cost estimating, cost management and engineering economics was evolving.

Project management involves the planning, monitoring and control of all aspects of the project and the motivation of all those involved in it to achieve the project objectives on time and to the specified cost and standard.

The project manager seldom participates directly in the activities that produce the end result, but rather strives to maintain the progress and productive mutual interaction of various parties in such a way that overall risk of failure is reduced.

A project manager is also often a client representative and has to determine and implement the needs of the client. The ability to adapt to the various internal procedures of the contracting parties, and to form close links with the nominated representatives is essential in ensuring that the key issues of cost, time, quality as well as client satisfaction can be realized.

Traditionally, three constraints have been listed as “scope”, “time” and “cost”. These are also referred to as the “Project Management Triangle”, where each side represents a constraint. One side of the triangle cannot be changed without affecting the others.

The time constraint refers to the amount of time available to complete a project. The cost constraint refers to the budgeted amount available for the project. The scope constraint refers to what must be done to produce the project’s end result.

These three constraints are often in conflict i.e.:

        • Increased scope typically means increased time and increased cost
        • Time constraints could mean increased costs and reduced scope
        • Budgetary constraints could mean increased time and reduced scope

The discipline of project management is about providing the tools and techniques that enable the project team (not just the project manager) to organize their work to meet these constraints.

Another approach to project management is to consider the three constraints as finance, time and human resources. If you need to finish a job in a shorter time, you can throw more people at the problem, which in turn will raise the cost of the project, unless by doing this task quicker we will reduce costs elsewhere in the project by an equal amount.

Project management is composed of several different types of activities such as:

  • Analysis and design of objectives and events
  • Planning the work according to the objectives
  • Assessing and controlling risk (or Risk Management)
  • Estimating resources
  • Allocation of resources
  • Organizing the work
  • Acquiring human and material resources
  • Assigning tasks
  • Directing activities
  • Controlling project execution
  • Tracking and reporting on progress
  • Analyzing the results based on the facts achieved
  • Defining the products of the project
  • Forecasting future trends in the project
  • Quality Management
  • Issues management

Project and Construction Managers are regulated by the Project and Construction Management Professions Act 48 of 2000. The Act makes it an offence to practise as a project and construction manager without proper registration. The Act regulates the relationship between the South African Council for the Project and Construction Management Professions and the Council for the Built Environment.

 

  1. THE PROCESS OF A TYPICAL CONSTRUCTION SITE

After the finalization of the design process between the client and the architect, the architect will refer the finalized design to a specialist structural engineer for the preparation of any detailed structural designs that may be required and may influence the costing of the project.

Any other designs that may be required, such as storm water drainage and electrical systems, may also be referred to specific design consultants such as a civil engineer, as well as an electrical engineer.

As soon as these designs have been completed the architect may refer the various designs, including the detailed designs and specifications to a quantity surveyor.

The quantity surveyor will in turn prepare, from the drawings and specifications, a bill of costs. This process is normally referred to as “measuring”.

The bill of quantities can be used to secure the correct contractor to execute the work. There are several ways to select a building contractor, however the most common are:

  • Tendering – public (open) and private (selective)
  • Negotiated contracts
  • A combination of both

Public Tendering is done by invitation through the press and is open to all builders, irrespective of their qualifications or experience.

Private Tendering usually involves a pre-select group of builders who are known to be familiar with, and have a good track record in the particular type of project at hand. Selective, or private tendering, usually involves an invitation to tender that is extended to, at most, five or six building contractors.

In selecting a contractor, it is essential to consider more than one tender price. The architect, civil engineer, quantity surveyor and I or project manager should be able to assist a client in evaluating tenders received, by considering:

  • Value for money
  • The tender’s ability to meet the project schedule, appropriately staff the project, and provide the necessary plant and equipment to execute the works.
  • The tenderer’s experience in the specific type of project, as well as the tenderer’s reputation for quality of work.
  • The tenderer’s reputation for co-operation, particularly if the project involves extensions to occupied premises.
  • The tenderer’s financial stability.

In private or selective tendering, it is essential that most of this information be obtained and assessed before the contractors are invited to tender. In this process it is usually understood that the lowest tender will be accepted, i.e. the invited contractors would not have been approached by the client if they had not been pre-qualified and accepted on the above mentioned grounds. In general, the contractor should be selected on the overall value that they represent, and not merely the tendered price.

A preferred contractor represents real value in reliability, speed, quality of work and in the fact that the project may ultimately cost the client less if executed by the contractor, as opposed to a contractor of lesser ability, who has tendered at a lower price.

Negotiated Contracts comes into play when a client (or the consultant advising the client) has identified a preferred contractor, the contract is normally concluded through negotiation.

The negotiation process can be facilitated by the professional advising the client and the contract can be concluded between the client and the contractor directly. A further option is for the contract to be concluded between the contractor and the consultant advising the client, such as the architect, acting as the client’s agent.

In most cases where negotiated contracts are concluded, the client must be made aware of the fact that the price for the execution of the works is not given in competition. The client should therefore seek expert advice on whether or not the price received from the contractor is reasonable.

Most standard contracts include provisions for the contract to be administered by an architect, or an alternative consultant acting as the client’s principle agent.

The principle agent will be responsible for:

  • Assessing and certifying payments to be made by the client to the contractor. These payments are also known as “progress payments”. The principle agent therefore acts as the agent of the client when approving and certifying for payment of work executed.
  • Assessing, issuing, referring and authorising any contract variations or additional work. The principle agent will also determine the value of any variations or additional work, as advised by the appropriate consultant (normally the quantity surveyor) tasked with the determination of the value of the work executed.
  • Assessing and determine any requests for extensions of time.
  • Assessing compliance of materials and workmanship with the quality specified in the contract.
  • Being the custodian of the contract documents and shall keep a set of signed documents in his possession for safekeeping.
  • Assessing the progress that is being made with the completion of the works and will give guidance to the contractor as to the state of completion of the works required in order to certify practical completion.
  • Certifying practical completion of the works. The principle agent will then issue a works completion list to the contractor within a specified time of the certification of practical completion.
  • Assessing the status of completion of any work included in the works completion list. As soon as the work has satisfactorily been completed by the contractor, the principle agent shall issue a certificate of works completion.
  • At the end of the defects liability period, the principle agent shall inspect the works and issue a certificate of final completion of the works if the works has, in the opinion of the principle agent, reached final completion.
  • The final account will also be compiled by the project manager, the quantity surveyor or any other consultant responsible therefore. The final account will be issued to the client and contractor by the principle agent.
  • In order to execute the required tasks, the principle agent will have to attend on-site on a regular basis, in order to perform the duties required from a principle agent.
  • During the course of construction the respective consultants will, as part of their responsibility to supervise the work, inspect the works with the specific purpose in mind, attend regular site meetings, comment on any site minutes that may have been prepared, advise the contractor on the proper execution of the works and issue instructions.

The purpose of the involvement of the consultants, as well as the principle agent, is to ensure that the work being executed by the contractor is in accordance with the terms of the contract, including the specifications and drawings. The duty however, remains with the contractor to closely supervise the construction of the works and to ensure complete compliance with the requirements of the contract. For the duration of the contract, the principle agent, as well as the various consultants involved in the construction process, must maintain effective communication with the contractor to allow proper performance, as required by the contract. Communication also involves clear instructions to the contractor where direction is required on the rectification of any defects in the construction. Instructions or directions of this nature may include explanatory sketches and drawings.

If any instruction involves a variation in the cost of the works, it is the contractor’s responsibility to notify the principle agent of any changes in the project costs, before executing any such instructions. Where an instruction may cause a significant variation to the cost of the works, the principle agent will submit the variation to the client for assessment and will then revert to the contractor in accordance with the client’s instructions.

Situations may arise where the contractor is unable to complete all the contractual obligations by the stipulated date for practical completion. In such cases, the principle agent is required to consider the contractor’s claim and, if appropriate, grant an extension of time, effectively adjusting the date for practical completion.

Delays may be caused by factors beyond the contractor’s control, such as:

  • Local Authorities
  • Variations to the original contract
  • Industrial disputes
  • Disputes with neighbours
  • Inclement weather
  • Delays in issuing instructions
  • Delays in receiving appropriate designs from the professional team

In cases where delay is beyond the contractor’s control, the contract usually will require that the contractor be remunerated adequately for costs incurred as a result of the delay.

The possibility of delays occurring during the contract period can be minimised by:

  • Properly preparing the contract documents issued to the contractor
  • Establishing that the contract price is fair
  • Establishing trust and co-operation between the parties
  • Adequate time allowed for construction of the works
  • Prompt and informed decision-making
  • Maintaining effective communication between the parties involved in the contract throughout the contract period

The date for practical completion is the date nominated in the contract on which the works must be completed and available for use.

Practical completion can be defined as:

“the state of completion of the works where, in the opinion of the principle agent, completion has been substantially achieved and the works can effectively be used for the purpose intended”.

The date for practical completion may be subject to change, as discussed above.

The principle agent will issue the notice or certificate of practical completion after being satisfied that the work has been completed in accordance with the contract, that all requirements and services are fully operational and that the project is fit for occupation.

Before issuing the notice, the principle agent will undertake a comprehensive inspection of the works and list any items which require further attention by the contractor. Once the certificate of practical completion is issued, the client may occupy the building and must also insure the building from that date.

The terms of the normal building contract usually dictate that the contractor will remain liable to remedy defects in workmanship and materials which become apparent during the “defects liability period” specified in the contract.

The contractor is required to rectify such defects during the period and I or at the end of the period, as instructed by the principle agent.

Prior to the completion of the defects liability period, the principle agent will undertake a “final certificate inspection” and list any unsatisfactory items for the contractor’s further attention.

All items listed by the principle agent must be rectified to the principle agent’s satisfaction before a final certificate will be issued. This provides the client with protection against faults developing after occupation for the length of the defects liability period. The defects liability period can be as long as twelve months, depending on the terms of the contract.

At the satisfactory completion of the required rectification work, the principle agent will issue the final certificate. This signifies the successful completion of the defects liability period and formally completes the contract between the client and the contractor.

 

 

 

THE AFFECT OF SPLUMA ON ACTS OF REGISTRATION OF LAND SITUATED IN THE JURISDICTION OF TSHWANE

Introduction

The purpose of this note is to briefly set out the practice and procedure pertaining to diverse acts of registration affected by the Spatial Planning and Land Use Management Act, 16 of 2013 (“SPLUMA”) and the Tshwane LUM By – Law.

Any land development application submitted before 1 July 2015 will not be affected by SPLUMA and will be dealt with under the legislation in terms of which it was submitted. Where this is the case the provisions in the legislation relating to consent by the Municipality for purposes of registration with the Registrar of deeds shall still be required with a proviso from the Council that section 53 of SPLUMA does not apply.

The different acts of registration will then be according to the legislation that is applicable.

Removal of Restrictive Conditions

Section 16(2) of the LUM By-law provides for the removal of restrictive conditions and the following must be provided to the Registrar of Deeds for the endorsement of the title deeds:

An Application in terms of section 3 (1) (v) of the Deeds Registries Act 47 of 1937, accompanied by:

  • Notice in the Provincial Gazette;
  • The affected titles;
  • In terms of Section 16(f) to (i) the applicant shall deliver the notice of the removal contemplated in section 16(2) plus the provincial Gazette notice;
  • The Registrar shall in terms of section 16(2)(g) endorse the title deed with the removal of the conditions – Only if there are conditions to be complied with prior to the endorsement shall a section 16(10) be required but this will be clear in the decision of the Municipality that is presented to the Registrar.

Opening of a Township Register

Section 16(4) provides for the process of the township establishment and the process for the opening of a township register and the following must be lodged with the application for the opening of a township register in terms of section 16(7) of the LUM By-law:

  • Consent in terms of Act 70 of 1970(if required);
  • Notification in terms of Section 16(4)(m) of the approval of the township establishment application for purposes of determining the date of validity in terms of section 43(2) of SPLUMA;
  • The approved Conditions of Establishment contemplated in section 16(4)(f);
  • An approved layout plan of the township;
  • Certificate by Municipality that all pre-proclamation conditions have been complied with (Section 16(7)(b)) and if required the registration transaction that may be done simultaneously with the opening of the township register;
  • The approved General Plan of the township;
  • Letter for an extension of time if applicable as contemplated in section 16(6) (12 months) of the LUM By-law, which extension shall not be for a period longer than 5 years as contemplated in section 43(2) of SPLUMA.

Subdivision and Consolidations

Section 16(12)(a) provides land development applications for the subdivision and consolidation of land , excluding consolidation of farm land and agricultural holdings, (first have to be excised) but including the subdivision of farm land, and the following must be lodged:

  • Notification by the Municipality in terms of Section 46(1);
  • The approval of the consolidation or subdivision;
  • Other consents required by virtue of other legislation;
  • Certificate of Compliance with conditions of approval in terms of Section 16(10)(b);
  • Extension of time in terms of Section 16(13) and (14) if not lodged within 12 months;
  • Proof of new conditions from Municipality.

Opening of a Sectional Title Register

  • Notification by the Municipality in terms of Section 46(1);
  • Certificate of Compliance in terms of Section 16(10)(b) or a certificate in terms of section 28 (9) of the Act to the effect that all land use is in place.

Note: For the Extension of a scheme or a unit you still need to get a section 28(9) confirmation of land use rights.

General

A compliance certificate, in terms of Section 16(10) (b) read with Section 53 of SPLUMA, will also have to be lodged for the following acts of registration:

  • First transfer or registration from the township;
  • First transfer or registration from the subdivision;
  • First transfer or registration from the consolidation;
  • First transfer or registration from the scheme, unless section 28 (9) of the Act has already been afforded;
  • Incision.
  • Amendment or cancellation of a general plan.

 

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