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FORM A

FILING SHEET FOR EASTERN CAPE JUDGMENT

ECJ: 180

PARTIES: ENVIROSERV WASTE MANAGEMENT

AND

HAWKINS HAWKINS AND OSBORNE (SOUTH) (PTY) LTD

• Registrar: CA 95/06

• Magistrate:

• High Court: EASTERN CAPE DIVISION

DATE HEARD: 28/05/07

DATE DELIVERED: 25/07/07

JUDGE(S): Jones J, Schoeman J, Dambuza J.

LEGAL REPRESENTATIVES –

Appearances:

• for the Appellant(s): ADV: Waserman and Mr. Nel

• for the Respondent (s): ADV: R.G. Buchanan S.C. and

Mr. T.J.M. Paterson S.C.

Instructing attorneys:

• Appellant(s): NEVILLE BORMAN & BOTHA

• Respondent(s): NETTELTONS ATTORNEYS

CASE INFORMATION -

• Nature of proceedings : APPEAL

Possibly reportable

In the High Court of South Africa

(Eastern Cape Division) Case No CA 95/2006

Delivered

In the matter between

ENVIROSERV WASTE MANAGEMENT Appellant

and

HAWKINS HAWKINS AND OSBORNE

(SOUTH) (PTY) LTD Respondent

SUMMARY: Civil engineering contract for the construction of waste management works – contract providing (a) for written notice to be given to the engineer in respect of adverse physical conditions being encountered during the performance of the contract which could not reasonably be foreseen by an experienced contractor at the time of tender, and which made additional work necessary and (b) for a claim for the additional work if such a notice is given – whether on the facts notice as required by the contract had been given – such notice must specify the nature and extent of the physical conditions in question and the additional work which will be necessary with sufficient clarity to enable the engineer to decide whether to order suspension of the work or to proceed with the additional work or to issue a variation order – the notice does not have to follow the wording used in the clause in the contract, or to refer specifically to the clause, or to comply with formalities other than writing, in order to be a valid notice – this notice was, on facts, held to be a proper notice in terms of the clause.

JUDGMENT

JONES J:

[1] This is an appeal against the judgment of Sandi J in the South Eastern Cape Local Division of the High Court dismissing a claim by an employer (the appellant) for damages against a consulting engineer (the respondent) for breach of a contract. The claim arose from the alleged negligent administration of a construction contract as a result of which the appellant became liable to pay the contractor additional costs which could and should have been avoided. The appellant sought to recover the additional costs from the respondent.

[2] The appellant operates a waste disposal site in Port Elizabeth, which is known as Aloes I. The site has a limited life span. The appellant decided to develop a further site, to be known as Aloes II. It instructed engineers (Bohlokwi Enviro-Waste (Pty) Ltd) to draw up conceptual designs for a further waste disposal pit next to Aloes I and obtained the necessary approval for the project from the Department of Water Affairs. On 25 March 1996 it appointed the respondent, a firm of consulting engineers (which I shall call the respondent or the engineer and which was represented by one Whitnall in this matter), to proceed with the detailed design and contract documents for Aloes II, and to act as the contract manager. In due course the project went to tender, site inspections were made by those invited to tender, and, on 19 June 1997, the respondent accepted the tender of a joint venture between two firms, B&E International (Pty) Ltd and Grassmaster (Pty) Ltd, whom I shall call the contractor and whose tender – R8 516-604-66 – was about R2 million lower than the others. During the course of performing its contract the contractor discovered that it was required to excavate a large volume of additional hard rock which was not part of its tender.¹ It put in a claim for approximately R1·5 million for the extra work. The respondent disallowed the claim. The contractor however persisted with it. The appellant (the employer) refused to pay, and the parties eventually went to arbitration. In the arbitration proceedings the contractor contended inter alia that it had given proper notice to the respondent of unforeseeable adverse conditions giving rise to additional work in a letter dated 8 September 1997. The arbitrator upheld this contention and made an award in favour of the contractor in a total amount of R 2 705 313-25 (the value of the work plus interest) and certain costs, with the result that the appellant became obliged to pay these amounts to the contractor. The appellant’s case against the respondent is that it would not have been obliged to pay this additional amount were it not for the respondent’s negligent management of the contract. It therefore seeks to recover the additional amount from the respondent as damages.

[3] The matter came before Sandi J as a stated case. The parties agreed to separate the issues in terms of rule 33(4). They drew up an agreed statement of facts and proceeded to trial on certain defined issues which were formulated in some detail. In summary, the issues are

1. whether the respondent breached its contract with the appellant by negligently failing to construe the letter of 8 September 1997 as proper notice in terms of clause 50 of the general conditions of contract;

2. whether, in the event of a finding in favour of the respondent on the first issue, the appellant’s entire cause of action against the respondent must be dismissed with costs, or whether, on the strength of certain assumptions set out in the statement of facts, the pleadings in any event make out a valid cause of action against the respondent, regardless of whether proper notice was given or not.

The parties were agreed that in the determination of these issues the trial court should have regard to the allegations in the pleadings, the facts in the agreed statement of facts, the assumed facts in the agreement to separate the issues, and the terms of the contract. In doing so, Sandi J disagreed with the award and the arbitrator’s findings of fact. He held that the letter of 8 September was not a proper notice in terms of clause 50 and the respondent was therefore not in breach of contract for misconstruing it. He made the further finding that, because notice was a condition precedent to the contractor’s right to payment for additional work and because no notice had been given, the contractor was not entitled to payment for additional work and the appellant had no cause of action against the respondent to recover such a payment. In other words, he held that ‘his finding in respect of the letter of 8 September 1997 was determinative of the whole case’. He accordingly dismissed the appellant’s claim against the respondent, and made a costs order against the appellant.

[4] Civil engineering contracts are frequently lengthy and are made up of a lot of documentation. They can be complicated. This contract was relatively straightforward as far as these kinds of contracts go. It comprised a signed form of agreement to which was attached the tender documents, the acceptance document, the general and special conditions of contract, and the design documents which included the drawings, specifications, the priced schedule of quantities, and schedules of rates and prices. Whether complicated or straightforward, these contracts nowadays do their best to make provision for one of the major difficulties frequently encountered in contracts where the works involve extensive excavation at varying depths. Nobody knows for sure what lies deep under the ground. In this contract the works required the excavation of an enormous hole of considerable depth for the disposal of large quantities of waste material. The engineer and the contractor did their best to evaluate the nature of the subsurface material which had to be excavated and removed, and to estimate the extent of perhaps the biggest enemy – hard rock – before fixing a proper contract price. But the Scottish poet, who knew that the best laid schemes of mice and men often go awry, would not have been surprised that hard rock was found to be present in this hole in quantities and places which nobody foresaw.

[5] How did this contract attempt to address a potential problem of hard rock? The answer is to be found in the tender procedure and the terms of the contract. Before submitting their tenders, tenderers inspected the site on 8 May 1997 and examined a trial hole which had been made by the engineer to indicate the underlying geology and which he had used to estimate his bill of quantities. A band of hard rock was revealed, and beneath it soft clay, which was expected to continue down for the rest of the excavation. The bill of quantities made provision for the excavation of soft, intermediate and hard material, and estimated a quantity of 47 652 m³ of hard material. The contract recorded however that the contractor was deemed to have inspected the site prior to tender, and had satisfied itself inter alia about the subsurface conditions on site and the nature and extent of the work and material, and was deemed to have obtained information as to risks, contingencies and other circumstances which may affect the tender. The contract also provided that the quantities set out in the bill of quantities were the estimated provisional quantities to be used for a comparison of tenders, and were not to be taken as actual and final. Final quantities on which payment would be based were to be measured on site. In making his tender, the contractor chose to charge a ‘through rate’ instead of giving different prices for the excavation of soft, intermediate and hard material. In doing so it ran the risk of perhaps having to excavate greater quantities of hard rock than the engineer’s estimate at the same rate as soft and intermediate material. The choice of a through rate was one of the considerations which made the contractor’s tender more attractive than the other tenders. The contract further provided, in clause 3(3), that the contractor was deemed to have based his tender on the technical data given in the tender documents, and that if, in the performance of the contract, circumstances should differ from this technical data, which caused delay or additional cost, the contractor would be entitled to make a claim in accordance with clause 51. For the rest, the contractor accepted in clause 3(4) that he was deemed to have satisfied himself, before tendering, of the correctness and sufficiency of his tender for the works, and of the rates and prices set out in the schedule of quantities, which would, ‘except in so far as otherwise provided for in the contract,’ cover full payment for the discharge of the contractor’s obligations. The contract did provide otherwise. It contained provisions for variations to the work under clause 39, which the contractor would be obliged to perform but for which adjustments to the contract price could be made in terms of clause 40, and it also laid down the circumstances and the procedure for making claims for additional payment of compensation for unforeseen additional work in terms of clause 51.² The contractor’s claim for additional payment in this case was made in terms of clause 51. Clause 50 stipulated that a claim in terms of clause 51 must be preceded by a notice in terms of clause 50. The relevant portions of clause 50 are clauses 50(1), 50(3) and 50(4) which read:

‘(1) If during the execution of the works the contractor shall encounter adverse physical conditions (other than weather conditions at the site or the direct consequences of those particular weather conditions) or artificial obstructions, which conditions or obstructions could not have been reasonably foreseen by an experienced contractor at the time of submitting his tender, and the contractor is of the opinion that additional work will be necessary which would not have been necessary if the particular physical conditions or artificial obstructions had not been encountered, he shall give notice to the engineer in writing as soon as he becomes aware of the conditions aforesaid, stating

(a) the nature and extent of the physical conditions and artificial obstructions encountered, and

(b) the additional work which will be necessary by reason thereof.

(3) Unless otherwise instructed by the engineer, the contractor shall carry out the additional work proposed in the notice or notices under sub clauses (1) and (2) without limiting the right of the engineer to order a suspension of work in terms of clause 42 or a variation in terms of clause 39.

(4) If the contractor has duly given the notice referred to in either sub-clause (1) or (2), he shall be entitled, in respect of any delay or additional cost, to make a claim in accordance with clause 51, provided that the cost of all work done by the contractor prior to giving the notice or notices in terms of sub-clauses (1) and (2) shall be deemed to be covered by the rates and prices referred to in clause 3(4).’

Sub-clause 50(2) provided for further notices in respect of further unforeseen physical conditions giving rise to the need for further additional work. It takes the matter no further.

[6] The terms of the contract are designed to protect the interests of the employer and the contractor. For this reason they cater for the possibility of unforeseen adverse contingencies like hard rock which might cause loss or delay to the prejudice of either or both of them. It provides for measures which enable the work to be done for the benefit of the employer despite the adverse contingencies, and for the contractor to be paid for additional work in appropriate circumstances. It also protects the employer against the possibility of having to pay more than he bargained for. In all of this the engineer plays a vital role. Although he acts as the employer’s agent, administers the contract for him and is expected to look after his interests, he must also play an unbiased professional role in his dealings with the contractor, which makes his status sui generis. He has considerable powers in his administration of the contract, which include the power to decide upon variations to the work and the contract price and to issue variation orders, to grant extensions of time to the contractor or to call upon him to expedite the works, to suspend work on the contract, to issue certificates for payment to the contractor, to determine claims for additional payment, and to determine disputes between the employer and the contractor. He must do these things within the framework of the terms of the contract and the law, and in the context of the performance of ongoing work.

[7] It is common cause that time was of the essence in the performance of this contract. The contractor undertook to complete the work in a period of 20 weeks, starting on 1 July 1997 and ending on 15 November 1997. His progress was under constant scrutiny by the engineer. Initially, everything went according to plan. But after a while, the appellant and the engineer realised that there was a flaw in the design of the hole which required quite drastic revision. It related to the steepness of the sides. It became necessary to change the gradient from 1:1 to 1:1·5. The consequence was a decrease in the capacity of the hole. This could be counteracted by excavating 3 metres deeper, or by variations to the design and the work, or by raising the cap above the hole. The upshot was that the appellant authorized the engineer to issue a variation order which required the contractor to make the necessary variation to the gradient, and to excavate an extra 3 metres down. This variation order was dated 6 August 1997 which was during the sixth week of the contract. The contractor was then ahead of schedule. But from about 11 August 1997 the excavation started to slow down significantly as a result of the increased hardness of the material. On 30 August 1997 the contractor started to rip and stockpile with a CAT D8 dozer. On 5 September 1997 the engineer wrote to the contractor in the following terms:

‘We have been monitoring progress on a regular basis and bring to your attention our concern that production is falling behind programme.

This could have an adverse effect on the lining contractor [who was required to seal the hole for health reasons] and subsequent beneficial occupation by our client.

Please report on the situation and proposals to improve matters at the site meeting to be held on Tuesday 9^th September 1997.’

The contractor did not wait for the site meeting. It replied in writing on 8 September 1997. This is the letter which is central to the dispute. It reads:

‘CIVIL WORKS AT ALOES WASTE DISPOSAL SITE: CONSTRUCTION

PROGRAMME

We acknowledge receipt of your letter dated 5 September re the above.

Progress to date is as follows:- (As measured against the revised programme submitted on 27 August 1997).

Situation Comments

Load & Haul 7 days behind 3 days lost to inclement weather

(7 days ahead of digging conditions have became

original programme) extremely hard due to shale

encountered at the 30 m elevation.

Subsoil drain 8 days behind This is a variable order which started

late due to waiting for material.

Trim side 1:1,5 slopes 2 days behind

As indicated in our site correspondence (No 22 dated 27/8/97) at our initial meeting with the resident engineer it was stated that the lining contractor would require two occupations of approximately one week each to install the lining (as reflected in our original program). We have tried to reprogram the contract in order to give the lining contractor more time but feel that it is unfair to expect us now to accommodate him in week eleven of a twenty week contract.

In order to catch up with the load and haul we increased our dozing capacity by adding a D 85 dozer to our team as from the 2^nd September and plan to start drilling and blasting a large portion of the estimated 103 000 m³ of hard shale as from tomorrow.’

[8] Sandi J held that this letter was not a notice in terms of clause 50(1), but simply a reply to the letter of 5 September requesting an explanation for the slow down and calling for proposals for improvement. In coming to that conclusion his judgment accepts arguments by counsel for the respondent which in my view emphasised unduly two factors which were not directly relevant. This appears, with respect, to have pointed the learned judge in the wrong direction and to have diverted his focus from the real issue. The learned judge related the two factors to which I have referred. They are, first, the obligation of the contractor not to rely on the quantity of hard rock in the engineer’s schedule of quantities, but to satisfy himself, if necessary by making his own investigations and measurements, of the nature and extent of the material he has agreed to excavate, and, second, the option of the contractor to call for a revision of rates in terms of clause 40 when given the variation order of 6 August, which was not exercised. His finding was that clause 3 of the contract, read in its entirety, places the onus on the contractor to obtain all relevant information relating to subsurface conditions. He cannot rely on the insufficiency of the data given to him in the tender document. If the information is not sufficient, he must conduct his own investigation or take a risk. His only escape arises from the practicality of obtaining the relevant information. This is reinforced by clause 47(1) which says that the quantities set out in the bill of quantities are estimates subject to re-measurement on site. Sandi J held further, in effect, that the contractor failed to use his proper remedy which was to seek a variation in the rates and prices when variation order No 10 was issued. While clause 3 certainly does impose obligations on the contractor in respect of the quantity of hard material to be excavated, Sandi J’s description of these obligations does not tell the whole story. It does not take into account the provisions of sub-clause 3(4) which says:

The contractor shall be deemed to have based his tender on the technical data given in the tender documents and, if in the performance of the contract any circumstance shall differ from the said technical data, which difference causes delay or additional cost, the contractor shall be entitled to make a claim in accordance with clause 51.

It also does not take into account the preamble to clause 50(1) which deals with physical conditions which could not reasonably be foreseen at the time of tender. The result is that Sandi J’s reasoning, to an extent, side-steps the question of different circumstances and unforeseen physical conditions, which is the critical issue. The contractor’s right to call for varied rated and prices following variation order No 10 is not relevant. The contractor could not be expected to bring an application under clause 40 because, when variation order No 10 was issued, nobody could have reasonably foreseen the volume of hard rock at 30 metres. The engineer obviously did not expect it. If he had, he would never have ordered the variation. The statement of agreed facts and the allegations in the pleadings do not leave room for a conclusion that the contractor could or should have expected it at that stage. The result is that a clause 40 variation in pricing begs the question. Logically, it has nothing to do with this case because this can only be a claim under clause 51 for additional work caused by unforeseeable physical conditions encountered subsequent to variation order No 10. Sandi J’s thorough and well-crafted judgment is therefore vitiated in part by a misdirection about the relevance of clause 40, and the applicability of the provisions of clause 3 to which he referred. In my view this appears to have induced him to view the real issue from a skewed perspective.

[9] The real issue is what precisely clause 50 of the contract requires in the way of notice to the engineer, and whether or not the letter of 8 September measured up to those requirements. The parties placed different interpretations of what a clause 50 notice should contain. But in my view there is no real difficulty about the proper interpretation of the clause. Its wording expresses the intention of the contract in terms which, on the face of it, are relatively simple, clear and unambiguous and which have established meanings in their contractual context. It requires the contractor to give written notice to the engineer in clearly defined circumstances (which have direct relevance to the problems which confronted the contractor in this case) and in my view the sub-clause spells out precisely what the notice must contain, also in clear language. Sandi J’s judgment on this point is, I suppose, a reflection of the way the matter was argued before him. It analyses at some length a number of authorities which set out the general principles of the interpretation of contracts, and the sometimes controversial and apparently conflicting approaches of the courts about what evidence, if any, may be used to assist the court in coming to its conclusion. I do not think that it is necessary for me to repeat the exercise. As I understand the judgment his conclusion was that it is necessary to arrive at the intention of the parties by having regard to the words they have chosen to express it, read in the context of the clause, the context of the contract as a whole, and its proper contractual setting, all viewed together from a common sense and purposive perspective. This seems to me to be a proper approach.³ The statement of agreed facts does not contain any evidence of background or surrounding circumstances which bears directly upon what a proper notice should contain, and the judgment does not in my view rely upon inadmissible evidence.

[10] Clause 50 tries to balance the interests and obligations of the employer and the contractor in the event of unforeseeable problems arising during the performance of the contract. It does so by requiring notice. The underlying purpose of the notice described in sub-clause 50(1) is discernible from wording of the sub-clause, and from consequences of the notice set out in sub-clauses (3) and (4). Sub-clause (1) requires a notice in writing to the engineer. Notice must be given when the contractor encounters adverse physical conditions during the performance of the work which could not reasonably have been foreseen by an experienced contractor when submitting his tender, and which, in the opinion of the contractor, will make additional work necessary which would not have been necessary if the adverse physical conditions had not been encountered. Neither party suggests that there is anything obscure about this wording. It clearly sets out the circumstances which must be present when notice is to be given. Sub-clause (3) gives one of the purposes of the notice. It is to ensure that the contractor does the additional work for the benefit of the employer despite the unforeseen snags. But this is subject to the engineer’s right on behalf of the employer to order either suspension of the work or a variation. This is also for the benefit of the employer. It enables the employer and the engineer to consider other options which may be more desirable to the employer, or less costly. If the engineer decides not to order suspension or a variation, the contractor must do the additional work and sub-clause (4) gives him the right to make a claim under section 51 for delay or additional cost. To make all of this practicable sub-clause (1) stipulates precisely what the notice shall contain. The contractor who encounters unforeseeable adverse physical conditions shall

‘give notice to the engineer in writing as soon as he becomes aware of the conditions aforesaid, stating

(a) the nature and extent of the physical conditions . . . encountered, and

(b) the additional work which will be necessary by reason thereof’.

Once again, nothing in my opinion could be clearer. A contractor fulfils his obligations in terms of sub-clause (1) if his notice sets out the nature and extent of the adverse physical conditions and the additional work in sufficient detail and clarity to enable the engineer to make a meaningful decision about what to do about it. This must be done immediately – during the hurly-burly of doing the work and frequently under the pressure of time constraints – for the good reason that it is necessary to draw the engineer’s attention in writing as soon as possible to seriously adverse factual information relating to the performance of the contract. This is why no formality is specified for this notice, other than the requirement of writing.

[11] The next question is perhaps more difficult. It is whether, on the facts, the letter of 8 September 1997 was a notice in terms of clause 50. It was a written communication to the engineer referring to the hard rock encountered by the contractor at the 30 metre level. There is no suggestion in the agreed facts that it was not written as soon as reasonably possible after the hard rock was encountered. Does it set out the nature and extent of adverse physical conditions encountered by the contractor and the additional work which it made necessary in sufficient detail and clarity to enable the engineer to make a meaningful decision about what to do about it? The letter was in reply to a query about the contractor falling behind schedule. The contractor’s reply agrees that the work was indeed behind schedule, it gives the extent to which it was behind, and it gives the reasons. With regard to the load and haul (the excavation work) it said that it was 7 days behind as at 8 September. It said that it had lost 3 days due to inclement weather, and that digging conditions had become extremely hard due to shale encountered at the 30 metre elevation. The letter explained that in order to catch up, the contractor had increased its dozing capacity by adding a D 85 dozer to its team as from 2 September, and it planned to start drilling and blasting a large portion of the estimated 103 000 m³ of hard shale as from 9 September.⁴ The engineer was therefore told that 103 000 m³ of extremely hard rock – more than double the estimated volume for the rest of entire hole – had been encountered at a depth of 30 metres (which, as everybody knew, made it part of variation order 10 dated 6 August), and that it would require an additional bulldozer and drilling and blasting to remove it. Drilling and blasting had been used to get through a band of rock higher up, but was not anticipated for this volume of hard material and this depth. In my opinion this information complied fully with the duty to give notice to the engineer that adverse physical conditions had been encountered which necessitated additional work. It gives proper details of the nature and extent of the adverse physical conditions – extremely hard shale of a specified, very large, quantity (which had been estimated reasonably accurately), at a specified location – and details of the additional work – drilling and blasting. That was all the information which the contractor was able to give. It was all the information that the engineer needed to make a meaningful decision about whether he should consider suspension or a variation of the work, or let the contractor continue with his proposed programme of drilling and blasting. It would, of course, have made the decision easier if the letter had expressly called itself a notice under clause 50(1). But in my judgment, the letter of 8 September was nevertheless proper notice in terms of the sub-clause, and it entitled the contractor to make a claim for the additional work in terms of clause 51. The engineer was professionally negligent and in breach of his contractual duty to the appellant in failing to view it in that light.

[12] Sandi J’s judgment gives three chief reasons for concluding that the letter of 8 September was not a proper notice. They are interrelated, and, with

respect, all flawed. He held that to be a valid notice in terms of the contract, it must be clear from the letter that it was a notice in terms of the clause and not merely a reply to a query about delay. He held that from statements in the minutes of a subsequent site meeting, and in subsequent correspondence, the letter was not intended by the contractor to be notice in terms of clause 50. He held that it was not a notice because it did not say that the presence of hard rock at 30 metres was not reasonably foreseeable at the time of tender.

[13] In order to test the reasons given by the court a quo, one may perhaps look at what clause 50 does not say. It says nothing to indicate that a notice is not a proper notice if it does not say that it is a notice in terms of clause 50, in marked distinction from the wording of the notice of a claim under clause 51, which specifically requires the notice to refer to ‘this clause’. Clause 50 does not say that the notice must indicate in some formal way that it is a notice. It does not suggest that it is necessary to repeat the language of the clause to be a proper notice. There is, in my view, an element of absurdity in the suggestion that in order to be a notice in terms of this sub-clause, the notice must give notice that it is a notice. Sub-paragraphs (a) and (b) set out what the notice must contain, and, significantly, they do not include an express requirement that the notice must state that the adverse physical conditions were not foreseeable at the time of tender, or that a claim for additional work is contemplated. Foreseeability is an issue that might arise in due course when the validity of the claim is considered, but it need not be part of the notice. All it must do is advise the engineer of the facts. If it does, it is a notice. As I have already said, in the nature of its contractual setting and in the light of its purpose, the only formality is that it must be in writing. The purpose of this notice provision is not to prescribe formalities, non-compliance with which will deprive a contractor of a remedy to which he would otherwise be entitled. The learned judge a quo’s quotation of the definition of word ‘notice’ in Loots, Construction Law (Juta 1995) at 581 as being ‘a formal written document’ required by the contract does not support his conclusion. The section of the book which contains the quotation relates primarily to notice of a claim under the contract, where a number of formalities may be required⁵. It is of little help in considering the requirements of a valid notice under clause 50 of this contract. The words ‘give notice’ in the law of contract frequently have a formal connotation, for example when used to terminate services, or to vacate premises. But not necessarily. The OED says that the words mean to intimate, to inform, to notify, to point out. In the context of clause 50 it seems to me that a legalistic definition is quite out of place. When the clause enjoins the contractor to give the engineer notice of adverse physical conditions, it requires him to advise or inform him about the adverse physical conditions. Simply put, he must tell him about them. He is not called to compose a formal legal document until he makes his claim in terms of section 51.

[14] It follows from the above that the notice does not cease to be a notice because, according to its heading, its subject was the construction programme, or because the letter was in reply to the query of 5 September. It is and remains a notice if its content gives notice of the facts which are required by clause 50(1), regardless of whether it also deals with other unrelated matters. Similarly, it does not cease to be a notice because it does not refer in so many words to all the circumstances which gave rise to giving notice of the facts, such as why the contractor formed the opinion that additional work was necessary, or what the contractor could reasonably have foreseen when he submitted his tender. Sandi J’s judgment makes much of the fact that the letter of 8 September ‘does not contain even a remote suggestion that the shale encountered by the contractor at the 30 metre level could not reasonably have been foreseen’. The judgment repeats that comment on a number of occasions. In my opinion, this is a misdirection. Neither the wording nor the spirit of clause 50 requires this allegation in the notice. It only becomes a consideration later, when the validity of the claim is considered. Furthermore, the finding is wrong on the facts. The only inference from a reference to shale at the 30 metre level was that it was not foreseen or foreseeable at the time of tender, because the tender was for excavation work which did not extend to the 30 metre level. The contractor was not called upon to apply his mind to subsurface conditions at that level. He did not do so, and neither did the engineer. The engineer knew that when he received the letter of the 8 September. It was not as if he had to grope in the dark for the facts because the letter did not sufficiently place them before him. This was not a passing reference to a matter of little moment. The only proper way to read the letter is that it referred to adverse physical conditions which were not reasonably foreseeable at the time of submitting the tender because the tender did not involve work that deep. In any event the whole question of the foreseeability or otherwise of the extremely hard shale is a red herring. On the agreed facts and the allegations in the pleadings,⁶ everyone accepts that quantity of hard rock at that level was indeed unforeseeable. The engineer knew that when he received the letter of 8 September. He knew that his bill of quantities estimated a total amount of 47 652 m³ of hard rock at a higher level which had been removed, and that the respondent’s professional opinion was that only clay was expected below it. He knew that the contractor had not been called to apply his mind to the presence of rock at the 30 metre level at the time of tender. He knew that excavation to the 30 metre level was in terms of a variation made late into the performance of the contract when there had been nothing to alert him or the contractor to the possibility of changed conditions. He knew at that stage that he, the professional expert on the site, had not foreseen large amounts of hard rock at the 30 metre level. He knew that the contractor had now encountered an enormous quantity of very hard rock at the very lowest level of the hole, 30 metres, which would require drilling and blasting, which was patently additional work. In this context, how can the contractor’s failure to use the specific words ‘unforeseeable adverse physical conditions’ invalidate his notice?

[15] Mr Buchanan argued on behalf of the respondent that evidence of the subsequent statements and conduct of the contractor is admissible in order to interpret the letter of 8 September. He relied on Breed v Van den Berg and others 1932 AD 283 at 291-2 which says that where the evidence is that the parties subsequently placed a particular interpretation on their contract, that is how the court should interpret it, even if the court thinks that it really meant something else. This rule has since been applied and approved in a number of cases. It has no application here. The principles of the interpretation of contracts are irrelevant to whether or not the letter gave notice. The court was not concerned with the interpretation of the letter, i.e. with what the wording of the letter meant. Its concern was with whether or not the letter gave notice. This is a question of fact, not interpretation. Either the letter gave notice or it did not. If it did, what the parties said or did afterwards is irrelevant. Notice was still given. If it did not, nothing that the parties said or did afterwards can change anything. Much the same reasoning applies to another related argument, that the evidence shows that the letter of 8 September was not intended by the contractor to be a notice, and accordingly, it was not a notice. This is not logical. If the letter gave notice, that is the end of the matter. It does not matter what the writer said he intended by writing the letter or what his motives were.

[16] As I see it, a finding on appeal that the first issue must be determined in favour of the appellant makes it unnecessary to consider the other issues. Mr Buchanan for the respondent puts it thus in his heads of argument:

It is common cause that there are two central issues in the determination of the appeal:

1 was the letter of 8 September 1997 a proper notice in terms of clause 50(1)?

2 if the letter of 8 September 1997 was not such a notice is the appellant’s claim barred by the provisions of clause 50(4)?

For practical purposes the second issue arises only in the event of a finding in favour of the respondent on the first issue. I shall nevertheless briefly allude to it. I accept the submission by Mr Wasserman for the appellant that the so-called ‘second and third issues’ referred to during argument in the court below and in the judgment a quo are merely different ways of saying the same thing. His argument before us comes down to this: the plaintiff makes out a complete cause of action by alleging

1. that the defendant was under a contractual duty to administer the construction contract;

2. that, once advised of the hard rock at the 30 metre level, that duty included the duty to advise the appellant to vary the contract in one of various possible ways so as to avoid the additional cost of excavating the hard rock;

3. that he was in breach of that duty;

4. that if he had not been in breach of that duty, the appellant would at that stage have exercised one or other of the options to avoid the additional costs;

5. that the breach caused him not to do so but instead to incur the additional costs, and that those costs are therefore recoverable from the respondent as damages.

For present purposes these allegations must be taken to be correct. The respondent’s answer is that that is all very well, but the appellant was never liable to pay the additional costs because payment thereof was conditional upon the issue of a notice under clause 50. Clause 50 (4) precludes payment of the additional costs to the contractor if notice was not given. Notice was not given. The appellant was therefore not liable to pay the additional costs to the contractor, and has not suffered loss for which the respondent can be held responsible. On this analysis, it seems to me that the particulars of the plaintiff’s claim allege a valid cause of action, and the question of the notice in terms of clause 50 is not necessarily determinative of it. On the assumed facts the respondent was in breach of contract, and the fact of the matter is that the appellant suffered loss in consequence. But the question remains whether or not the contractor’s failure to give notice provides a defence to the claim upon which the defendant is entitled to rely. There may be factual considerations which have a bearing on the answer to that question. I do not believe that I should purport to make a finding on that point, particularly because of the finding already made that the contractor gave proper notice.

[17] The learned judge a quo recorded an agreement between the parties about the appropriate costs order if he should find in favour of the respondent. There is nothing in the agreement to separate the issues or the statement of agreed facts about a costs order if he should find in favour of the appellant, and I cannot find any such agreement in the record. There was no recorded argument about whether or not the costs of the trial of the separated issues should follow the result of that part of the hearing, regardless of the final outcome of the trial. It seems to me that those costs should therefore be reserved for decision by the trial court. If, however, there was an agreement about a costs order in other terms, the parties are given leave to approach this court for a variation of the costs order.

[18] In the result there will be the following order:

1. The appeal is allowed with costs which shall include the costs of two counsel.

2. The order of the court a quo is set aside and will be replaced with an order

   1. declaring that the defendant’s authorized representative, Mr M Whitnall, was in breach of his contractual obligations to the plaintiff by failing to construe the letter of 8 September, annexure F to the particulars of plaintiff’s claim, as a proper notice in terms of clause 50 of the general conditions of the contract;

   2. that the costs of the trial of the separated issues be reserved for decision by the trial court;

   3. that the matter is remitted to the trial court for determination of the further issues between the parties.

RJW JONES

Judge of the High Court

12 July 2007

SCHOEMAN J I agree.

I SCHOEMAN

Judge of the High Court

DAMBUZA J I agree.

N DAMBUZA

Judge of the High Court

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