Estate Construction, Kweneng council clash in court
Mpho Mokwape | Monday February 5, 2024 07:22
Estate Construction, owned by one of Sebina brothers, had dealings with the council over the construction of a bus terminus in Molepolole before things turned sour.
In its defence against an appeal filed by the KDC before the Court of Appeal (CoA), the construction company said allegations of collusion between them and the engineer are not only baseless and malicious but have been raised before and dismissed by five different courts, including the CoA on two occasions.
According to the company attorney Unoda Mack, the KDC has not provided any evidence of collusion but instead, it has listed various complaints which are baseless and said to be examples of collusion between the engineer and the contractor. “These allegations are a desperate attempt by the council to separate us from the long overdue money.
The delay in paying the final payment certificate is highly prejudicial to the company that has carried out its obligations in terms of the contract at a hefty cost," he said. He explained that the allegations were raised at the High Court in a case involving the same parties and the same project on appeal where both courts dismissed the allegations of collusion as baseless.
“The same allegations were raised in this case before Justice Zein Kebonang and in the subsequent appeal and were again dismissed by both courts," he explained. Mack submitted that the allegations of collusion have already been litigated and a decision rendered. He added that the council cannot resuscitate them. He said the High Court was, therefore, correct in dismissing them as baseless, holding that they have been decided upon, and as such cannot be raised again.
Validity of final payment certificate
Estate Construction denied allegations that the contract was not followed and that a final payment certificate was not complied with. Mack explained that a final payment certificate constitutes conclusive evidence of liability by the employer of the amount certified thereon to be due.
“That it creates a binding obligation on the part of the employer to pay the amount certified by the engineer, who is the employer's agent and who was acting within the [merits of the] contract,” he said. He further pointed out that courts in the jurisdiction and South Africa have repeatedly stated that a final payment certificate is a liquid document which constitutes a binding obligation to pay.
The attorney also explained that a claim based on such a certificate was unimpeachable, in the absence of a valid defence and that there are limited grounds upon which such a certificate can be contested. He noted that in the case of the contractor, the final payment certificate was issued by the engineer who is an agent of the council in terms of the contract and that he was acting within the scope of his authority. “The validity of the final payment certificate in this case has already been determined by this court,” he said. Mack said the court judgment stated that in terms of the sub-clause in the contract, the engineer is empowered to issue a final payment certificate for such amounts as fairly determined by him to be due even in the absence of a discharge. “On October 2020, the engineer issued a final payment certificate for the sum of P22, 437, 571.96, accompanied by a detailed report explaining how he reached the amount in the certificate,” Mack said. He indicated that if the engineer acted outside the scope of his mandate, then that is a matter that is capable of resolution between him and the employer under the terms of the contract between them.
Mack said the question of the validity of the final payment certificate in the case was conclusively decided and its validity was beyond question and no longer open for debate. “Similarly, any defence the proprietary of the final payment certificate and the amount certified by the engineer thereon to be due and payable cannot be entertained in this appeal,” stated Mack. He also noted that the conclusion by the court in the first appeal settled this case and put paid to any argument that the final payment certificate was invalid, defective, or insufficient to justify the granting of the summary judgment. Based on the said judgment, Mack said there was no discernible defence raised in the council's affidavit or grounds of appeal which was capable of defeating the application for summary judgment based on the final payment certificate. More on the validity of the certificate, Mack argued that what was equally desperate and hopelessly false is the allegation in the affidavit of KDC that the final payment certificate was prepared on September 7, 2020, before the contractor submitted its application for a final payment certificate or that the engineer received an application for a final payment certificate and approved it the same day. He submitted that it was clear that the application for the final payment certificate was applied for on at least four occasions. “The engineer's report on the final payment certificate also makes it clear that the process leading to its issuance took long and that the application was submitted on May 17, 2019,” he said. Further, he noted that in a letter addressed to the council dated December 2020, the engineer made it clear that the contractor first applied for a final payment.
Costs
“To the extent that the council has repeatedly made serious but false accusations of collusion between the contractor and council's agent (the engineer), even after such accusations were dismissed by five courts, such conduct should be visited with punitive costs,” Mack argued. He said assertions of fraud and bad faith are serious allegations which, to be made out must be proven, either directly or by compelling inferences from circumstances. Mack emphasised that they are not to be easily inferred and that it required concrete evidence of bad faith citing that in the present case, the district council has made the accusations without any evidence and repeated them in the appeal even though the same had been dismissed as baseless. “Collusion is defined in the Oxford Dictionary as: 'secret or illegal cooperation in order to cheat or deceive others'. In the case, KDC has repeatedly accused Estate of colluding with the engineer to defraud them, even after such accusations were dismissed,” he said. The attorney contended that such conduct should not be countenanced and the court should show its disapproval of the same by awarding a punitive costs order against the council, lest litigants conclude that it is permissible. He said the institution of vexatious litigation, the making of reckless charges of fraud and scurrilous conduct should be penalised, especially that accusations of collusion are serious ones, particularly when they are repeatedly made without any proof. In conclusion, Mack said the High Court was right in dismissing all the defences raised by the council as unmeritorious. He pointed out that the defences were raised as a ploy to delay the contractor's payment and the appeal stands to be dismissed with costs on attorney and own client scale.
Facts of the case
According to court papers on or around December 17, 2012, the parties herein entered into a written agreement in terms whereof the construction company had to construct a bus terminus and other associated works for the KDC in Molepolole for the sum of P115, 631, 231.71. The said agreement incorporated FIDIC Conditions of Contract for Construction 1999 (Red Book).
In terms of sub-clause of the FIDIC Conditions of Contract, the appellant (employer) was to appoint and did appoint an engineer who was to supervise the execution of the project, issue payment certificates for the appellant to pay the respondent and be deemed to act for the appellant/defendant. The respondent carried out its obligation in terms of the contract and the engineer issued interim payment certificates (IPCs), which were honoured and paid by the appellant, except interim payment certificate (IC) number 20 which the appellant refused to pay, resulting in a legal suit in the High Court. The papers cite that in the said civil suit, the council alleged, as its defence, collusion between the engineer and the contracted company as well as overclaims by the company resulting in overpayment in the sum of P13, 817, 689.01. “The allegation of overpayments or inflated claims was based on the so-called audit report prepared by the appellant's employees and dated April 13, 2016. These allegations of collusion and overpayment or inflated claims were dismissed by both the High Court and the Court of Appeal. The last interim payment certificate, number 21, was issued by the engineer and paid by the council without a whimper. On or around October 7, 2020, the engineer issued certificate number 22, which is a Final Payment Certificate and the council refused to pay for it, again alleging collusion and overpayment, hence the suit and the appeal,” reads the papers.