Cold Link Africa November / December 2019 | Page 35

CONTRIBUTORS
INCORPORATING COLD CHAIN
Consequences of termination
of principal building agreements
By Edwin Giesteira
I share some thoughts on the consequences of the termination of a principal
building agreement by the employer due to contractor’s default.
(Part 2 of 3)
CONSEQUENCES OF TERMINATION
BY THE SUBCONTRACTOR IN TERMS
OF NSSA CLAUSE 38.3
to formally relinquish possession of the has exercised a lien or issued notice of
subcontract works to the contractor and reservation of ownership. The provisions of
remains responsible for the n/s works until clause 38.5.5 and 38.5.7 should assist with
There are several provisions peremptorily then – this sounds like a contradiction as, the resolution of such issues.
making the employer liable for certain in the case of a clause 38.3 termination, obligations 1 and it is submitted that, with the contractor has by now also been Clause 38.5.2
the contractor removed, this creates a terminated. However, the contractor is On relinquishing possession of the n/s
contract between the employer and the also obliged [36.5.1] to hand over the works the subcontractor shall remove
subcontractor once the principal building works and record status, etc. therefore, from the site his temporary buildings,
agreement is removed by termination if done without delay, the process can plant and machinery without delay.
in terms of clause 38.3. The reason this is dovetail with the contractor’s hand over possible is that the principal agent, acting of the works.
The subcontractor must remove
temporary buildings, plant and
machinery [38.5.2] – this may involve
on behalf of the employer, is extensively It is submitted that where neither engaged in the appointment of the n/s the contractor nor the employer or its removal of any temporary walls in
subcontractor and instructs the contractor agents have notified the subcontractor basements or on lower levels where
to appoint the n/s subcontractor on the of the termination, the employer may allowed by the contractor prior to
basis of the N/S Subcontract Agreement have to step in as the knowledge was termination but in certain cases the
which incorporates such terms. They have within its purview and it failed to advise subcontractor may want to leave them
therefore incorporated terms in the n/s the subcontractor who it knows does in place with the written permission of the
agreement which create a conditional not have access to such information to employer because of the probability of
and subsidiary contract between the latter’s potential prejudice but this is further involvement. They may equally be
the employer and the subcontractor arguable. in the employer’s interests to retain them,
The problem with this provision is that
which comes into effect upon the
with the subcontractor’s permission, if it
implementation of the termination in some instances a subcontractor’s wishes to employ another subcontractor
provisions and allows the subcontractor work is of such an independent and to complete the works.
to sue the employer for specific severable nature that it is possible for a The subcontractor may need to
performance. lien to be exercised over it 3 , particularly make security arrangements and/or
2
Edwin Giesteira qualified with
a BSc (QS) at the University of
Pretoria in 1978. He acquired an
MSc (Real Estate) at the same
university in 2011. Edwin became
a Fellow of the Association of
Quantity Surveyors (Southern
Africa) in April 2013 and has
worked for various building
contractors mainly as senior
quantity surveyor. Projects include
Unitas, Muelmed and Pretoria
Heart Hospitals and the Carousel.
He was a director of Stocks
Leisure Developments for five
years. He has stood in as lecturer
for Quantities to BSc Construction
Management Honours students
at the University of Pretoria for
a semester. Edwin has been
consulting to project managers
and contractors for 10 years but
now only consults on construction
disputes or acts as adjudicator or
arbitrator in disputes. 
where there is reservation of ownership leave some of its staff on site to protect Clause 38.5.1 clauses. In such cases, the subcontractor its interests, but the employer will also Execution of the N/S works shall should not relinquish control and should probably appoint security personnel cease. The subcontractor shall remain exercise a lien over its works 4 or notify its to secure the site, even before the responsible for the n/s works [8.1] reservation of ownership. A contractor contractor has departed, to secure The principal agent must immediately
until possession is relinquished to the or employer is not entitled to take the its investment. Unless agreed to the compile and issue a status report on the
contractor. law into its own hands and dispossess contrary, security arrangements the progress of the works for the contractor
a subcontractor by devious means or employer makes on site are to protect [PBA 36.5.2] and for the subcontractor
by force of its property over which it its own interests and the subcontractor [NSSA 38.5.3]. This report must be
remains responsible for its plant, works handed to the employer, contractor and
and materials until removed from site or subcontractor. It is suggested that the
properly delivered to the employer. subcontractor has a very keen interest in
The subcontractor must immediately
take steps to stop its work on site and
5
this status report and should preferably
The ongoing poor economic conditions have led to failures by some of our large contractors
which in turn leads to problems for subcontractors such as those in HVAC.
COLD LINK AFRICA •
November/December 2019
Clause 38.5.3 have one available and issue it to the
The principal agent shall forthwith principal agent and demand that he
compile a report on the status of the sign it off and issue it as his own instead
portion of the n/s works executed by of allowing the latter to do it as it may
the subcontractor and shall issue such not contain all the facts and details the
report to the employer, contractor and subcontractor is able to provide and
subcontractor. would like it to record.
1.
2.
3. Significant amongst these being clauses 38.5.5 and 38.5.7
This contract lacks any alternative dispute resolution provisions.
See inter alia Melcorp SA (Pty) Ltd v Joint Municipal Pension Fund (Transvaal) 1980 2 SA 214 (W) installed
lifts remained the property of the subcontractor; Pellow and Another v Club Refrigeration CC (469/03)
[2004] ZASCA 91; [2006] 3 All SA 420 (SCA) (29 September 2004 installed refrigeration equipment that
could be detached and removed. Note that these subcontractors had provisions on the passing of
ownership which weighed heavily upon the ratio decidendi.
4. Even if the subcontractor has signed a waiver of lien as part of the contract documents. An attorney
with knowledge and experience of liens should provide advice in the matter and it would be advisable
to obtain advice when the termination is looming rather than to wait until after the termination.
5. See a few cases such as Wightman v Headfour (Pty) Ltd (66/2007) [2008] ZASCA 6 (10 March 2008); Top
Assist 24 (Pty) Limited T/A Form Work Construction v Cremer and Another (5335/2015) [2015] ZAWCHC 102
(28 July 2015); Taddese and Others v Peer NO and Others (5250/2016) [2016] ZAKZDHC 26 (4 August 2016)
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