The Development Bank of Southern Africa (DBSA) sued two companies for almost R15m for work related to the construction of a new administration block in the Eastern Cape.
However, because the original work was not completed in time in 2015, DBSA cancelled the contract. A new contractor had to be brought in, with a new tender process and new contract, which cost DBSA another R30m in total.
In 2018, DBSA sued the original contractors and its financial services provider, Fusion Guarantee, which stood surety for one of the contractors. However, the trial is yet to be heard.
Fusion, when it was first sued by DBSA for R13m, brought an application to have the entire case dismissed because it said DBSA waited too long to bring its case and therefore the entire matter should be thrown out of court.
Fusion argued its case to dismiss the main claim in August. However, Johannesburg high court Judge Jabulani Dlamini dismissed Fusion’s case last week.
As Dlamini noted, the case before him was not about whether DBSA’s claim was valid but when the claim materialised in terms of law. If it arose within the time frame the law allows, Fusion’s case is without merit and the trial must go ahead.
Fusion claims it arose in August 2015, the date when work was supposed to have been finished (“practical completion”). DBSA, however, says the claim arose when it cancelled the contract in October 2015.
Fusion argued the claim cannot be pursued after the cancellation of the contract, because cancellation means all obligations between the parties are terminated. There would therefore be nothing to sue on. Further, Fusion was a financial provider and “bound itself only to make good the contractor’s contractual obligations vis-à-vis the employer. That cancellation completely extinguishes an obligation and has no existence after the termination of the contract.” In other words, Fusion’s relationship was tied to the contractor’s obligations, which were extinguished when the DBSA cancelled the contract.
Fusion says its financial guarantee was conditional on this contractual relationship existing between DBSA and the contractor. But the relationship was severed because the DBSA cancelled the contract. This means the claim could not have arisen in October 2015, when DBSA cancelled, but must be before.
The DBSA argued Fusion is getting into the merits of its (DBSA’s) claim in the main trial that has yet to happen.
Dlamini agreed with the DBSA. He noted that DBSA’s claim arose in October 2015 and it sued in October 2018, within the time limit (three years) allowed in law. Fusion does not dispute that DBSA cancelled in October 2015 and thus, Dlamini concluded, the “logical” conclusion is that the papers were “validly issued and served” in a proper fashion.
He dismissed Fusion’s application with costs. There was no mention of a trial date for the main case.
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