Contractor wins court battle with government over R3m payment claim

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21-06-2021
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Daily Dispatch
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A R3m payment due to a contractor for “standing time” on a housing contract stood unpaid for eight years because former provincial human settlements department head Gaster Sharpley had “some moral objection” to approving a payment for a three-month period when the contractor was idle.

Sharpley misunderstood the contract he had signed with the contractor.

He refused to pay the claim, arguing it was not based on actual work done and milestones achieved, and that it was not in the public interest for a contractor to be paid for standing time.

Aveng Grinaker-lta Building Cape was appointed in 2012, after a public tender, to rectify 700 defective houses in emaxesibeni (Mount Ayliff) at a contract price of R59m.

A condition of the contract was that the department would hand over the site within 10 working days of the start of construction.

But the contractor was prevented from starting work on the project as 500 houses remained occupied.

Giving notice to the department of its inability to start demolition and rebuilding of the houses in January 2013, the contractor subsequently claimed R3m for the 80-day delay which ensued, a legitimate claim in terms of the contract.

After a torturous process through the department, the contractor’s claim was eventually presented to Sharpley a year later.

He refused to pay the claim, asserting the contract did not allow for “standing time” but only for claims based on actual work done and milestones achieved.

The housing reconstruction was completed by October 2015.

However, by then the parties were engaged in litigation.

In evidence before the high court in East London, Sharpley persisted with his view that “standing time” was not sanctioned by the contract and that he felt it was wrong to pay for such a claim.

While he agreed under crossexamination that the contractor was entitled to compensation for the delay caused by the department[’s failure to hand over the site on time, he asserted that additional funding should have been secured before approving the claim.

Now judge John Smith has found that provisions in the contract guaranteed the contractor’s entitlement to compensation for losses suffered as a result of the department’s failure to hand over the site within the contract time.

The accounting officer could not refuse to pay the claim except if the principal agent, responsible for investigating and assessing the claim, had incorrectly calculated the amount to be claimed.

The court rejected the suggestion that “standing time” did not represent genuine losses by the contractor but was an attempt to derive undeserved financial gain.

“To my mind nothing can be further from the truth.

“When a contractor establishes a site, it moves not only manpower, but also expensive machinery.

“Any delays that prevent it from deploying these resources and claiming compensation in terms of the contract result in real financial losses on the part of the contractor,” the court found.

Smith was giving judgment on behalf of a full bench of the high court in Makhanda hearing the department’s appeal against the judgment of acting judge Pops Mageza in the East London court, who found in favour of the contractor, but for different reasons.

The appeal court dismissed the department’s argument that Sharpley’s refusal to sign off on the R3m payment was an administrative act.

“While the decision of an organ of state to award a contract is clearly an administrative act, which would be subject to judicial review, a decision to implement or refuse to implement a term of a contract is not administrative action,” Smith said.

The accounting officer could not refuse to pay the claim except if the principal agent, responsible for investigating and assessing the claim, had incorrectly calculated the amount to be claimed