Tame N.O and Others v Tala Light Weight Construction (Pty) Ltd and Others (6550/2019) [2025] ZAWCHC 63 (24 February 2025)

The above case concerns a restitutionary claim due to a breach of contract. The court clarified the law on restitutionary remedies, holding that the general rule that a party claiming restitution is required to tender restoration of what it received pursuant to a contract, may be departed from in an appropriate case, taking into account equitable considerations. Where restitution is no longer physically possible then the failure to tend such restitution is not necessarily fatal to the innocent’s party’s claim.  

Background

The plaintiffs, who are the trustees of the Chapman’s Bay Development Trust (“the Trust”) and the first defendant concluded two building contract turnkey solutions agreements wherein the first defendant had to construct two freestanding residential dwellings on land owned by the Trust at erf 4[…] and erf 4[…]1, Chapman’s Bay, Cape Town (“the agreements”). The dwellings to be constructed by AFCO would be within a new housing development known as the Chapman’s Bay Estate. The contracted amounts for the construction of the dwellings were R3 274 419.00 (VAT inclusive) for the dwelling on erf 4[…] and R3 525 417.00 (VAT inclusive) for the dwelling on erf 4[…]1 The first defendant at the time of concluding the agreements was known as AFCO Building Solutions (Pty) Ltd (“AFCO”).

The main dispute between the parties is whether the Trust is entitled to restitution or restitutionary damages in the form of payment of the difference between the amounts that the Trust paid to AFCO and the value of the completed works.

The central contention in the course of the trial and subsequent argument is the effect of clause 8.1 of the agreements in terms of which the agreed contract price in respect of the works to be paid to AFCO as contractor, were subject to the confirmation of the QS (quantity surveyor) of the monthly progress achieved. AFCO was required to submit the payment to the QS before the 20th of each month. Payment by the Trust would be made subject to confirmation of the progress that has been reached for the month by the QS to the Trust. The determination of the QS would be final and binding on the parties.

Parties’ arguments

In essence, the plaintiffs’ argument was that there was a breach of the agreements in that AFCO failed to construct the two dwellings in a proper and workmanlike manner, deviating from approved architectural plans and the specific issues included. Thus, the plaintiffs’ claims are:

1. Failure to construct the buildings in a proper and working manner per the following:
2. Incorrect installation of damp proof membranes.
3. Improperly set internal door openings.
4. Substandard electrical installations.
5. General construction defects.

• The Trust overpaid AFCO by R728,159.66 for one dwelling and R828,863.00 for the other, as the value of the work completed was less than the amounts paid. These amounts represent the difference between what the Trust paid to AFCO before the agreements were cancelled in February 2019 and the value of the work executed by AFCO on the partially built dwellings as determined by the plaintiffs’ quantity surveyor per clause 8.1 of the same.
• Payment of R281 250.00 in penalties for construction delays exceeding the contractual period.
• Suretyship claims against the second, third, and fourth defendants based on suretyship agreements with each limited to R800 000.00.

The defendants argued that the construction was according to the agreements and it was not required to remedy any issues as the work had been done in accordance with industry standard. This was in response to the plaintiffs’ written communication to AFCO to the effect that it needed to rectify the breach identified which was in contravention of the agreements. Further, they argued that clause 8.1 bars the restitution relief claimed in the action on the basis that the certificate of completed works issued by the Trust per its particulars of claim amounts to a re-valuation of work previously done by AFCO. In other words, the plaintiffs’ claims amounted to an impermissible re-valuation of work already certified and paid for, which was not allowed under the terms of the agreement.

The defendants further argued that they cannot be held liable for delay penalties as the same was caused by the plaintiffs’ obstructive and unprofessional conduct which unduly prevented AFCO from completing its work. Furthermore, they challenged the integrity of the plaintiffs’ QS and were of the view that the QS’s valuation was not a valid basis for restitution.

The evidence

The plaintiffs called on four witnesses while the first defendant elected not to call any witnesses.

Court’s Evaluation

On the issue of breach of contract,the Court referred to a decision by the Court inVictoria Falls and Transvaal Power Co Ltd v Consolidated Langlaagte Mines in which Innes CJ authoritatively stated that the purpose of and the fundamental rule in the award of damages for breach of contract, is to place the innocent party in the position he or she would have occupied had the contract been properly performed, so far as that can be done, by the payment of money and without causing undue hardship to the defaulting party. This effectively places the party who has complied with his obligations in terms of the agreement but who is a victim of a breach thereof by the other party in the position he would have occupied had there been no breach.

Concerning restitution, the Court stated that a party who however seeks restitution, thereby exercises not a claim for contractual damages per se, but a distinct contractual remedy. That is, a claim for restitution in the form of repayment of the purchase price previously paid by a claimant is a distinct contractual remedy. This principle was subsequently approved by the SCA in National Sorghum Breweries (Pty) Limited t/a Vivo Africa Breweries v International Liquor Distributors (Pty) Limited, where Olivier JA noted that a claim for restitution in the form of repayment of the purchase price previously paid by the claimant, was a distinct contractual remedy.

The Court held that the required elements for a cause of action seeking restitution were the following:“…the necessary allegations were the conclusion of the contract, the breach thereof, the payment of the purchase price, and the cancellation of the contract.”

Findings of the Court

On the evidence provided, the Court found in favour of the plaintiffs and held that AFCO breached the agreements by failing to construct the buildings according to the agreements.

The Court further held that the plaintiffs have established their entitlement to restitutionary damages for payment of the difference between the amounts the Trust paid to AFCO for the construction of the dwellings and the value of the completed work executed by AFCO. This was on the basis that both dwellings had subsequently been sold to third parties following the remedial work performed by the Trust to complete the buildings. On this basis, restoration by the Trust to AFCO would be physically impossible. Further, demolishing the properties to restore what the Trust had received from AFCO, would not make practical or commercial sense. The Court thus departed from the general rule on restitution claims taking into account equitable considerations.

The defendants were held liable for delay penalties as they were enforceable and the suretyship agreements were also enforced against the second, third, and fourth defendants.

Key takeaways

• Where restitution of a building is not physically practical then it does not mean that the claim for restitution will automatically fail.
• Before you sign an agreement, make sure that you understand your obligations and can perform the same according to agreed standards and specifications.
• An agreement that is legally sound, clear, and effectively managed can save your company from potential legal issues even when a project goes wrong. This is why legal advice is a business investment, not a cost.
• Suretyship agreements are enforceable. You need to understand the legal implications of signing a suretyship agreement. That is, count your cost before you sign one.
• Properly drafted delay clauses work. The plaintiffs recovered R281 250.00 in penalties because the agreements included clear consequences for delay. As a practical step – include liquidated damages clauses with defined daily penalties for late delivery, and track project timelines closely.

The above article is for information purposes only and does not constitute professional legal advice. Consult an attorney for legal advice on your unique circumstances.

For assistance with contract review, please contact us on info@mhmattorneys.co.za

Article written by Hazel Moshidi