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REPUBLIC OF NAMIBIA

HIGH COURT OF NAMIBIA MAIN DIVISION, WINDHOEK

JUDGMENT

Case no: I 1391/2015

DATE: 31 AUGUST 2016

NOT REPORTABLE

In the matter between:

GLOBAL EARTHMOVING CC........................................................................................PLAINTIFF

And

GLENN INVESTMENTS CC..........................................................................................DEFENDANT

Neutral citation: Global Earthmoving CC v Glenn Investments CC (I 1391-2015) [2016] NAHCMD 245 (31 August 2016)

Coram: NARIB AJ

Heard: 08 - 11 August 2016

Delivered: 31 August 2016

Flynote Contract: Joint Venture partnership in the form of locatio conductio rei and locatio conductio operis.

Headnote: Defendant was awarded a tender to construct bituminous and gravel roads in Okakarara.  Defendant entered into a contract of letting and hiring of equipment with the plaintiff, to execute the work. It was then was unable to execute the remainder of the work and further was unable to pay the amount due to plaintiff for the letting and hiring of equipment.

The parties then agreed that plaintiff would assist with the execution of the works by providing contract manager, the site supervisor and site foreman, and both plaintiff and defendant would provide equipment to the project, for which each would issue invoices to the joint venture and further that plaintiff would manage the contract to try and ensure successful completion of the work.

These terms were contained in an email addressed by the plaintiff to its legal practitioners, but also copied to the defendant, with instructions that the agreement in those terms be drawn up for signature of both parties. Such an agreement was never signed, but the parties proceeded to execute the works, on the terms as set out in the emails.

Plaintiff maintained that a joint venture existed between the parties, whereas the defendant maintained that such a joint venture did not exist and that plaintiff was rather a subcontractor to the defendant.

Held, that the agreements between the parties was in the form of two contracts, one being locatio conductio rei and the other locatio conductio operis, which  together constituted a joint venture, that is a partnership to execute the work, so as to secure payment from the Okakarara Town Council and to share the profits on a 50/50 basis.

ORDER

1. Claim 1 has become settled between the plaintiff and the defendant accordingly falls away.

2. Judgment is granted, with costs, in favour of the plaintiff and against the defendant  in respect of claim 2, in the amount of N$1 500 000 with interest thereon at the rate of 20% per annum calculated from the date of judgment to the date of payment.

JUDGMENT

NARIB, AJ:

[1] During March 2013, the defendant, a close corporation, was awarded a tender by the Okakarara Town Council (which I shall herein after refer to as “OTC”) to construct bituminous and gravel roads in Okakarara, under tender no. OK.01/2013 (the tender).  From evidence before me, it is clear that this was the first tender of its kind awarded to the defendant.  It is also clear that at the time of the award, the defendant did not have sufficient equipment and perhaps also the knowhow to execute the work.

[2] During or about August 2013, defendant entered into an oral agreement with the plaintiff, another close corporation, in terms of which plaintiff undertook to render earthmoving services to the defendant at the tender site.  Even though this oral agreement was denied in the plea on behalf of the defendant, it is clear from evidence before me that it was indeed concluded between the parties.

[3] During or about October 2013 the plaintiff and the defendant entered into a further agreement, in respect of the work the defendant was required to perform in terms of the tender.

[4] There is some dispute between the parties as to the proper designation of the latter agreement.  Plaintiff describes it in its particulars of claim as a joint venture (JV) agreement and it was maintained in evidence on its behalf that it is indeed a joint venture.  According to the defendant, plaintiff was a subcontractor in respect of the work defendant had to perform in terms of the tender.

[5] During the trial, I raised with the parties and in particular, the defendant, whether anything turns on whether the agreement is designated a subcontract or a JV.  From the response I received, it appears to me that it is contended on behalf of the defendant that if it is a subcontract, plaintiff is not entitled to share in the profit arising from the execution of the work in terms of the tender, but will only have to be paid for work actually done as per its invoices, and further that the defendant has already paid to plaintiff what was due in terms of the subcontract.

[6] Plaintiff instituted two claims against the defendant.  Claim 1 was for payment of an amount of N$513 618.75.  This claim arose from the agreement of August 2013 referred to above.  Claim 1 was settled between the parties at the commencement of the trial, the defendant and a certain Mr. Mandume Kawana, (who is a member of the defendant, and also its sole witness during the trial), having agreed to pay to plaintiff, jointly and severally, the one paying the other to be absolved, an amount of N$660 000 in three equal instalments of N$220 000 each, payable monthly from not later than 1 September 2016, 1 October 2016 and 1 November 2016 respectively, and each party to bear its own costs.  Even though the parties recorded this agreement by confirming it on record, it was not made an order of court, as Mr. Kawana is not a party to these proceedings.

[7] Claim 2 arises from the agreement of October 2013, in terms of which the defendant says, plaintiff is not entitled to share in the profit arising from the tender, and that the defendant has already paid to plaintiff all moneys due in terms of the sub-contract.

[8] I have to determine the nature of the second agreement and whether plaintiff has been paid the amounts due in terms thereof.

[9] Plaintiff, who was represented during the trial by Mr. Erasmus, called three witnesses in support of its claim.  They were Mr. Christian Zu Hohenlohe, the managing member of the plaintiff, Mr. Jan-Ole Derra, an accountant, who did work for the plaintiff and Mr. Andre Engelbrecht, who was employed as a site agent by the plaintiff during the execution of the works as per the tender.

[10] Defendant, who was represented by Ms. Mainga, only called one witness, being Mr. Mandume Kawana, the managing member of the defendant.  He is referred to in the exhibits as Mandume, but I shall herein refer to him as Mr. Kawana.

[11] Mr. Zu Hohenlohe testified that he had been approached through an intermediary by Mr. Kawana of the defendant, and a meeting was arranged at Cessebon Guesthouse in Otjiwarongo attended by Mr. Kawana, Mr. Engelbrecht and him.

[12] During that meeting it became clear to Mr. Zu Hohenlohe that the defendant had serious problems in executing the work in terms of the tender.  The defendant had also failed to pay to plaintiff the amount of N$513 618.75 due for rental of machinery. This was the amount claimed as per claim 1 of the particulars of claim, as I have said before. According to Mr. Zu Hohenlohe, there was a real risk that if plaintiff would not assist the defendant with the successful completion of the work, plaintiff would not see any payment from the defendant regarding the equipment rental agreement, as the “OTC” would then terminate the tender agreement.

[13] According to Mr. Zu Hohenlohe, Mr. Kawana proposed that plaintiff take over the entire project and attend to the work, but this was not acceptable to the plaintiff, as the risk attendant to such a takeover would be too much for the plaintiff to bear, particularly, in view of the fact that the defendant had received from OTC an upfront amount of N$2 100 000 and failed to provide OTC with a construction guarantee.

[14] According to Mr. Zu Hohenlohe, what was agreed to, was that plaintiff would assist the defendant by joining it in a joint venture on a 50/50 profit basis, on condition that once payment was received from the OTC, all outstanding invoices of the plaintiff would first be settled.

[15] If I understand the evidence of Mr. Zu Hohenlohe well, the agreement was that plaintiff would take over the management of the project, and that both plaintiff and the defendant would avail the necessary equipment to the project, for which they would each bill the joint venture, and in addition, plaintiff would bill the joint venture for its management of the project, that is, making decisions on the execution of the work, the work program and the like, but that official communication with the consulting engineers and OTC would be on the letterhead of the defendant, as the defendant was the appointed tenderer.  After all the expenses were taken care of, whatever profit remains would be shared between the plaintiff and the defendant on a 50/50 basis.

[16] To prove the above agreement, Mr. Zu Hohenlohe submitted into evidence, as exhibit “A”, a copy of an email dated 28 October 2013, addressed to plaintiff’s legal practitioners of record, but also copied to Mr. Kawana, with the instructions to draw up an agreement in the terms set out there, for signature by the plaintiff and the defendant.

[17] He further submitted into evidence as exhibit “A1”, a reply from Mr. Kawana, in reply to exhibit “A”.  In view of the dispute between the parties, it is useful to set out the text of both these emails herein.  Exhibit “A” reads:

‘Subject: (JV) between Glenn investment ˗ Global

Dear Francois,

we need a very short and sweet agreement between the two companies to complete the works in Okakarara.

Similar to PCC and Global that time but now Global does the site etc.

Contract name: OK 01/2013 Construction of services (roads)

I think we can make the agreement based on a JV effectively from the 21^st of October 2013.

(before that time Global only did plant hire to Glenn Investments as reflected in the invoices attached)

Global is the principle of the project under Ronnie Venter

Global calls the shots of executing the work, program, etc.

Global can also subcontract auxiliary works to 3^rd parties within the budget (meaning within the prices which works were tendered for originally) as we are now under time pressure to finish all works!

Global is only liable for quality of works commenced AFTER the commencement date.

All cost/debt etc. which the project occurred before our time of involvement are fully against Glenn Investments and have to be paid by them.

such as: outstanding invoices to suppliers, plant hire, etc. etc….

Glenn investments has to provide a full list thereof upon signature of this agreement

Your trust account will be the account the client has to pay the money in from now and money can only be released upon both parties approval.

A claim will be submitted to the client and the money paid to you.

We submit an invoice from Global for its plant and supervision which then has to be paid from your trust account.

Profit (if there is any) at the end of the project will be spilt 50/50.

Money due to Global in works and machine rates etc. has priority.

The agreed plant hire rates apply.

The machines Global supplies are charged against the JV and will be paid at the end of the month from the “JV Claim” same for Glenn investments.

The manpower Global supplies are charged under P&G (Preliminary and General)

We will furnish the project with:

a contracts manager/surveyor (on/off site) ˗ Ronnie Venter ˗ charged at NAD 25'000- a month ˗ No S&T applicable - suitable accommodation if needed against JV

a site supervisor (on site) ˗ Andre Engelbrecht ˗ charged at NAD 15'000-a month ˗ S&T NAD 100- per day for food (suitable accommodation against JV)

a site foreman (on site) ˗ charged at NAD 15'000 a month ˗ S&/T NAD 50,-per day (suitable accommodation against JV)

A log book for vehicles will be held, each vehicle is charged at NAD 2,50- per Km excluding Diesel.

Diesel is arranged at the Okakarara petrol station or the fuel receipt needs to be shown and claimed.

Andre Engelbrecht has 2 allowable trips charged against the JV a month to Windhoek

Contracts manager. site foreman have each 2 allowable trips charged against the JV to Otjiwarongo per month

Attached you find all details of Glenn Investments

Invoices due to me are also attached.  The October invoice is charged on minimum hours and will change as well as the statement once I have receive the plant return sheets today or tomorrow.

Ronnie/Mandume,

Please add, comments or amend my mail with your input asap.

Kind regards,

Christian M. Prinz zu Hohenlohe Langenburg

director’

[18] Exhibit “A1” reads:

‘The agreement is good but the invoice of +-380 000.00 must be paid to Glenn investment so it pay some outstanding invoices, this invoice was due before Global involvements, with that we can sign the contract anytime or advice otherwise.

Regards

Mandume’

[19] Claim 2 of plaintiff’s particulars of claim setting out the material terms of the agreement is, in essence, a summary of the terms stated in exhibit “A”, but these terms are denied as per the defendant’s plea.

[20] However, Mr. Kawana on behalf of the defendant accepted when he testified, that the above emails were exchanged.  Mr. Zu Hohenlohe maintained that the work was executed in terms of the understanding as per the above emails, which according to him constituted the terms of the JV.  Mr. Kawana on the other hand maintained that the agreement contemplated in the emails did not materialize, as a JV was specifically excluded by the terms of the agreement which he had with OTC in terms of the tender document.

[21] For this contention, Mr. Kawana relied on an extract from a tender document which, to my mind, was a part of the instructions to tenderers, and which was received into evidence as exhibit “Q”.  According to Mr. Kawana, this document prohibited JV arrangements and only subcontracts were permitted in terms of the tender.  The relevant part of clause 3.1.16 of that extract on which he relied reads as follows:

‘No Joint Ventures are allowed for this contract.  Generally, when allowed, a tender submitted by a joint venture of two or more firms must be accompanied by the document of formation of the joint venture, authenticated by a notary public or other official deputed to witness sworn statements, in which is defined precisely the conditions under which the joint venture will function, its period of duration, the participation of the several firms forming the joint venture and any other information necessary to permit a full appraisal of its functioning.  This submission shall include a designation by power of attorney from all parties to the joint venture, of one of the parties to act as sponsor of the joint venture, and of one person from the sponsoring party in which is vested the authority to bind all parties or persons comprising the joint venture in respect of any matter concerning the Tender and any Contract which may result there from.’

[22] This is the basis on which Mr. Kawana says that according to the contract documents for the tender, JV’s were specifically excluded and that plaintiff and the defendant, for this reason could not have a JV.

[23] As was, in my view, correctly pointed out on behalf of the plaintiff, clause 3.1.16 of the tender document does not completely prohibit JV’s, but lays down requirements that a JV had to comply with for a tender submitted by it to be compliant with the bit requirements and to be eligible for the award of the tender.  As we have seen above, the tender was awarded to the defendant already in March 2013.  The arrangement between the plaintiff and the defendant was entered into much later, during October 2013, after the defendant ran into problems with the execution of the works and requested the plaintiff for assistance, first in the form of machinery, but later also to supervise and execute the work.  This is not only borne out by the evidence of Mr. Zu Hohenlohe, which I referred to above, and which I have no difficulty in accepting, but also by objective evidence, in the form of documents which were received into evidence.

[24]  Exhibit “A” and “A1” both demonstrate that the defendant was willing to abdicate its responsibilities in terms of the contract with OTC to the plaintiff, so much so that plaintiff would make all the critical decisions, including decisions on subcontractors, execution of the works, work program, appointment of contract manager/surveyor, site supervisor or site foreman and the like.  Much was made of the fact that Mr. Kawana, on behalf of the defendant stated in his reply as per exhibit “A1” ‘… we can sign the contract anytime or advice otherwise.’  Mr. Kawana testified that with the words ‘advice otherwise’, he had in mind that the consulting engineers would advise that JV was not permitted, in which case the agreement would not be signed.  He testified further that this was indeed the case and that the JV agreement could not be signed.  However, as I shall demonstrate below, objective facts and documents admitted into evidence, as well as Mr. Kawana’s own evidence demonstrate that there was agreement between the parties to cooperate in the execution of the works, with the view to secure payment from the OTC.

[25] Exhibits “B”, “B1”, “C”, “C1”, “D”, “E” are all copies of letters on the letterhead of the defendant, which were, according to the evidence of Mr. Zu Hohenlohe, prepared by or on behalf of the plaintiff, for signature of Mr. Kawana on behalf of the defendant and addressed to Worley Parsons, that is, the consulting engineers appointed by the Government of Namibia, on behalf of OTC for the tender.  These were all extention of time or standing time claims in terms of the contract between OTC and the defendant. Defendant did not dispute this evidence, and in fact seemed to accept that the extension of time claims were prepared by the plaintiff for signature of Mr. Kawana.  Mr. Kawana admitted having signed these documents.

[26] Exhibits “P1” to “P6” which were also received through the evidence of Mr. Zu Hohenlohe constitute a summary of the expenses incurred by the contractors in the execution of the work in terms of the tender.  Even though some elements of these accounting records appear to be disputed on behalf of the defendant, I did not understand the defendant to contend that the contents of these documents were entirely false.  Such contents were in part based on invoices from the plaintiff to the defendant for the execution of the works in terms of the tender requirements and include things such as costs associated with the use of a plaintiff’s grader, a loader and a vehicle, costs of diesel, costs of labour, hiring of trucks, costs of materials and the like.  It also includes expenses related to the use of defendant’s compactor and costs of spares to repair some of equipment such as the defendant’s trucks. The copies of the invoices were received into evidence as exhibits “P7” to “P10”.

[27] Exhibits “R1” to “R9” are copies of email correspondence, including photographs of the construction site, which are on the letterhead of the defendant but which Mr. Kawana admitted, where drafted by Mr. Zu Hohenlohe.  These are emails, most of it addressed to the consulting engineers, that is, Mr. Mervin Muukua of Worley Parsons, and also to certain Andre of the defendant, and also to Mr. Kawana of the defendant.  In these emails, Mr. Zu Hohenlohe raises concerns regarding delays by the consulting engineers in approving certain rate request, and further request specifications for some of the works to be executed in terms of the tender.  He further draws to the attention of the consulting engineers, possible extension of time claims and standing time claims which would arise from delays in decisions related to the rate approval, specifications and further possible delay claims arising from standing time of equipment and manpower, as well as the delay resulting from the inclement weather conditions.

[28] Finally, during cross-examination, Mr. Kawana also admitted that, not only was the initial agreement between plaintiff and the defendant that they would have a JV, but further that the agreement was that the proceeds of the standing time/delay claims would be shared between the plaintiff and the defendant on a 50/50 basis.

[29] Therefore, if as testified on behalf of the defendant by Mr. Kawana, plaintiff merely provided two machines to the project on a letting and hiring basis, and further was merely responsible for checking the levels of the road, why was it so intimately involved with the management of the contract, subsequent to the initial agreement evidenced by exhibits “A” and “A1”?

[30] I have no difficulty in finding that plaintiff was not merely a subcontractor, who would render an invoice to the defendant for work executed by it.  I find that the defendant had trouble in executing the works in terms of the tender documents, and that plaintiff had substantial interest in the successful completion of the works, due to the initial letting and hiring of equipment agreement, in terms of which the defendant owed to plaintiff an amount of N$513 618.75.  It was in the interest of the plaintiff to salvage the dire situation, in particularly, in the light of the fact that the defendant had received an upfront payment of N$2 100 000,00 from the OTC, which Mr. Kawana on behalf of the defendant said, was used to purchase equipment for the project.

[31] Plaintiff’s interest was not only to provide machinery for the execution of the work, but also to see to it that the work was successfully executed, to secure payment by the OTC, which in turn would improve its chances of receiving payment from the defendant and further to share in the profits from the project. The documents I have referred to above, amply demonstrate the plaintiff’s involvement in the project. The defendant failed to discover and produce during the trial, any document of substance arising during the time of plaintiff’s involvement in the project to contradict the plaintiff’s version in this regard.

[32] The contract between plaintiff and the defendant may present some conceptual legal difficulties in the sense that it seems to me to have elements of both locatio conductio rei and locatio conductio operis[1].  In regard to locatio conductio rei, it is clear from exhibit “A” that both plaintiff and the defendant could make equipment available for the execution of the works and they would receive payments for such equipment from the proceeds payable by OTC to the defendant.  The initial arrangement was that OTC would pay the moneys into the trust account of the plaintiff’s legal practitioners of record and from there each of the parties would receive payments, the payments due to the plaintiff, taking precedence.

[33] However, the defendant further hired the services of the plaintiff to execute the work.  As I have shown above, plaintiff provided management services to the project, and it seems to me, was responsible for keeping proper accounting records, contract management, including matters such as generating invoices, initiating standing time claims for signature of the defendant, executing the work in accordance with the instructions received from the OTC or the consulting engineers, be it through the defendant or directly from OTC or the consulting engineers, and advising on use of certain materials for proper execution of the work.  This was a contract of work (location conductio operis).

[34] As I have said before, the interest of both plaintiff and the defendant lay therein that the work as per the tender is properly executed, with the aim to avoid cancellation of the contract between the defendant and the OTC and further to secure payment from the OTC.  It would seem to me that the skills and knowhow of the plaintiff was pivotal for both parties, towards this end.  That is the reason why the defendant was willing to give the responsibility to execute the remainder of the work, after the plaintiff concluded the second agreement with it, to the plaintiff.  This is also the reason why the defendant agreed, on the version of Mr Kawana, during his evidence, that the proceeds of the standing time claims should be shared on a 50/50 basis.

[35] Mr. Kawana also conceded during cross-examination that the contract between the plaintiff and the defendant was open ended, in the sense that no specific amount of payment was fixed.  According to Mr. Kawana, plaintiff would be paid upon invoices issued, but there was no limit set, as to how much would eventually be paid to plaintiff in terms of the contract between the parties.  This is both in respect of the locatio conductio operis and the locatio conductio rei, I have outlined above.  This ties in with the evidence on behalf of the plaintiff that the common interest of the parties was to avoid the cancellation of the contract by OTC and to see to it that the work was done and payment by OTC is secured.

[36] I accordingly find on the facts before me that it is more probable that the parties agreed that whatever profit remains, after the expenses of the project are settled, would be shared between them on a 50/50 basis. The concession made by Mr. Kawana, regarding the sharing of the proceeds of the standing time claims on a 50/50 basis, which I referred to above, also supports such a contractual term.

[37] It therefore follows that all the essentialia of a partnership as set out in Joubert v Tarry & Co[2] are present in this matter.  These are that:

“each of the partners brings something into the partnership, that the business be carried on for the joint benefit, with the object of making a profit and for a legitimate purpose[3]”

[38] I have outlined above, what each of the parties contributed to the project.  The defendant was awarded the tender by OTC, and also brought in some of the equipment necessary to execute the project.  Plaintiff brought in its knowhow, and  management skills. Equipment of both parties was also essential for the standing time claims, after the work on the project ceased during December 2013, until the contract with OTC was terminated due to lack of funds.  It was for the joint benefit of the parties to see to it that the contract with OTC is not cancelled, and it is clear that profits were to be shared on a 50/50 basis.

[39] I accordingly conclude that there existed a JV between the plaintiff and the defendant.

[40] The fact that the JV agreement was eventually not signed as initially intended is of no moment, as the parties, for the most part, conducted themselves according to the terms of the unsigned documents evidenced by exhibits “A” and “A1”[4].

[41] During the course of the trial plaintiff and the defendant agreed on the quantum of N$1 500 000 in favour of the plaintiff, should I find that a JV agreement existed between them.  I have come to the conclusion that the plaintiff was able to demonstrate the terms of the joint venture agreement alleged as per its particulars of claim.

[42] In the result I make the following orders:

1. Claim 1 has become settled between the plaintiff and the defendant accordingly falls away.

2. Judgment is granted, with costs, in favour of the plaintiff and against the defendant in respect of claim 2, in the amount of N$1 500 000 with interest thereon at the rate of 20% per annum calculated from the date of judgment to the date of payment.

G Narib

Acting Judge

APPEARANCES

PLAINTIFF: F Erasmus

Francois Erasmus & Partners, Windhoek

DEFENDANT: I Mainga

Inonge Mainga Attorneys c/o

Conradie & Damaseb, Windhoek

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