Ranch International Pipelines (Transvaal) (Pty) Ltd v LMG Construction (City) (Pty) Ltd; LMG Construction (City) (Pty) Ltd v Ranch International Pipelines (Transvaal) (Pty) Ltd and Others

• Jurisdiction: South Africa
• Judge: Coetzee J
• Judgment Date: 17 April 1984
• Citation: 1984 (3) SA 861 (W)
• Court: Witwatersrand Local Division

Coetzee J:

This judgment is delivered in respect of three applications. To avoid confusion I shall refer to the various parties as "Ranch" (Ranch International Pipelines (Transvaal) (Pty) Ltd), "LMG" (LMG Construction (City) (Pty) Ltd), "Fluor" (Fluor Engineers (SA) (Pty) Ltd) and "VM" (Vrey and Maine (Pty) G Ltd). I have already made orders in the first two matters (cases 84/6624 and 84/7260) and indicated that full reasons would follow. These are the reasons as also the judgment in the third matter, which is an application for leave to appeal against the order in case 84/7260.

Ranch was awarded a contract by Fluor for the construction of a certain pipeline. In the main this involved the excavating of a H trench, laying of the pipeline in the trench and thereafter its backfilling and compaction. Ranch had prior to tendering already approached LMG to share the job on a subcontracting basis and for this purpose had obtained its quote to do the excavation and backfilling portion. The main contract is the I usual voluminous civil engineering contract document but the subcontract between Ranch and LMG was not reduced to writing. LMG had to perform its part of the work in accordance with the specification and terms of the main contract.

The first application (case 84/6624) was launched by Ranch against LMG. It sought an order urgently that LMG vacate the site of "the works" and be restrained from thereafter entering on the site.

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In its founding papers Ranch sets forth that certain of the A subcontracted work must be performed simultaneously with certain of the contract work. Because of this, the progress of the entire works depended on strict adherence to a programme in respect of the subcontracted work. All operations referred to together as "mainspread tandem operations" must be performed in part consecutively and in part simultaneously, notwithstanding B that some of such operations are being performed by Ranch and part by LMG. Ranch makes the following allegation in respect of this aspect of the work:

"The rate of progress of each of the said operations is dependent on the rate of progress of all the other operations. If the progress in trench excavation is slow, the stringing is delayed; if the stringing is delayed, the welding is delayed; if the welding is delayed, the laying of the pipe is delayed; C if the laying of the pipe is delayed, the backfill is delayed; and if the backfill is delayed, the 5 kilometre limitation referred to in clause 5 is exceeded and it is necessary to suspend all trench excavation in order to enable the said 5 kilometre limitation not to be exceeded."

Ranch alleged that LMG had not only not adhered to the required rate of progress - which is said to be due to its inadequate D machinery - but that this was compounded by over-excavating of the trench depth. Because of the failure of LMG to keep up the required rate of progress, Ranch terminated the subcontract and engaged another subcontractor (VM) to continue with the subcontracted work. VM moved onto the site and commenced to E work. LMG insisted, however, on carrying on with its contract and threatened to seek an interdict against VM if they did not remove from the site. Ranch's case is that there had been a complete breakdown in its contractual relationship with LMG, that a dispute has developed resulting in an impasse relating to the construction of the contract work due to LMG's F insistence on continuing with the construction. In this regard the following is said:

"LMG insists on continuing with the construction, whilst Ranch is in no circumstances going to pay LMG for any work which it may perform, nor give LMG any instructions in regard to the continuation of the subcontract work. The only way in which this impasse can be resolved is for LMG immediately to vacate the site and subcontract work, failing which the delay in the further construction thereof will be insurmountable."

G Ranch also fears that its contract with Fluor may be placed in jeopardy as a result of this problem which it now has with LMG.

In regard to the prejudice to LMG which flows from Ranch's termination of the contract, it says the following:

"There will be no prejudice to LMG since, if it should subsequently be held that Ranch's cancellation was in breach of H contract, LMG will have its remedy in damages. Moreover, in order to avoid any suggestion, even though it would be without foundation, that, if successful in any such proceedings, LMG might not be able to recover its damages, Ranch is prepared and hereby tenders a banker's or insurance company guarantee in respect of all amounts which may be determined to be owing by Ranch to LMG in respect of work performed under the subcontract I to date and any damages which may be awarded to LMG should it be held that Ranch's cancellation of the subcontract was unlawful, less all and any damages for which LMG is found to be liable to Ranch. The guarantee will be obtained and made available within the next twenty-four hours."

The legal basis for Ranch's case is its allegation that there was an implied or tacit term of its contract with LMG that

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A "If there was a final breakdown in the relationship between Ranch and LMG, or if Ranch decided to cancel the subcontract without due cause, LMG would vacate the site but retain its right to sue for damages."

In a lengthy answering affidavit LMG denied these tacit or implied terms alleged by Ranch. The nub of its case is that Ranch's predicament is of its own making. It says the following:

B "Coordination of the contract works is one of the many responsibilities of the applicant and the most important one. The applicant's inability and failure to coordinate the contract works lies at the heart of the present dispute. It is this failure which is the root cause of the predicament in which the applicant now finds itself and the cause of the criticism levelled against it by Fluor in the site minutes and other documents annexed to the applicant's papers. This failure has hampered the respondent in the performance of its duties C under the subcontract, resulting in progress delays and additional costs. There are two main factual episodes which demonstrate the lack of coordination of the contract works by the applicant, and which have delayed the respondent in the progress and execution of its part of the subcontract:...".

LMG's attitude is that it is entitled to complete the contract, which it is willing and able to do. In this regard the following is said:

"51.

If respondent were to be deprived of its right to D complete the contract, it will suffer harm which could not be compensated for by an award of damages by a Court some years hence.

51.1

The repondent will be constrained to retrench at least 50 of its valued employees at present employed on the pipeline construction in issue.

51.2

These include valuable personnel E for whom the respondent could find no gainful employment at present and would mean that the respondent would be deprived of the services of these people.

51.3

As already intimated, the respondent is employing approximately R1,4 million worth of machinery on this project, a substantial portion of which was acquired specially for the project. If the respondent now had to cease its operations it would not find work in the short term for this machinery and could not F finance its commitments in respect of the machinery. The result almost inevitably would be a repossession of the machinery by the respondent's creditors. The problem is not only one of an eventual compensation in damages but one of an immediate cash flow for which the bond tendered by the applicant is no remedy.

52.

A claim for damages would of necessity involve the assessment and proof of the respondent's loss of profits. G For this purpose, respondent would be required to know the exact quantity and cubic capacity of earthworks done and similar information, none of which would be available to the respondent and all of which would be available to the applicant and which the applicant would be under no obligation to make available to the respondent. Even an undertaking by the applicant to furnish information would not remedy the situation; the applicant has, in the H immediate past, committed at least two serious breaches of contract.

53.

Since the respondent's active involvement in this pipeline project, it has not tendered in respect of other major contracts and in the result, a cessation of activities on this pipeline project will cause it to be left without any immediate projects with which to continue its normal operations.

54.

To allow the respondent to continue with the work under this contract would not work any great hardship in the I applicant. This statement can be demonstrated and proved by the events of the last number of days."

Details are then given to illustrate these statements and it concludes as follows:

"55.

The above events prove and demonstrate that if put to it, the applicant and respondent can work together in the completion of this contract. As at the time of the dictation of this affidavit, the work by the respondent in co-operation with the applicant is continuing apace and may even

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have been completed, that is to say, insofar as the Diep A River crossing is concerned."

When Ranch indicated after receipt of this answering affidavit that it was no longer proceeding with its application on an urgent basis, LMG forthwith lodged its own counter-application (case 84/7260), citing VM as second respondent and Fluor as third respondent. In this application it claims an order B against VM interdicting it from performing its subcontract and that it vacate the contract site relating thereto. Against Ranch it seeks an order interdicting it from interfering with its right to work on the site and contract works in...