The Mhlontlo municipality has lost another vital case in its fight against a R48m damages claim by a company that wanted to develop a large housing project at Tsolo Junction just outside the town of Tsolo. The SCA found against the municipality’s special plea to have the hefty claim dismissed.

A Daily Dispatch report notes that according to court papers, the municipality and TDH Tsolo Junction signed an agreement on how the project would be carried out.

The project stalled in 2010 because the municipality failed to meet its part of the agreement with regard to the provision of bulk services.

In its particulars of claim, the company said that despite notifying the municipality in writing in March 2010 of its breach of the agreement and giving it 30 days to remedy the breach, the municipality had stood fast in its refusal to provide the bulk services required.

The company said it was forced to cancel the agreement in December 2010. It said it suffered R48m in damages as a result.

It is also claiming interest at a rate of 15.5% per annum on the R48m from December 2016.

Last year, the Eastern Cape High Court (Mthatha) dismissed all the special pleas but granted the municipality leave to appeal to the SCA on one interesting point.

The Daily Dispatch report says the SCA has now upheld the High Court decision.

The municipality had claimed that TDH Tsolo Junction had failed to meet all the conditions in the letter of appointment before the agreement was signed, meaning the agreement – despite being signed by both parties – had never come into play and the claim for damages was not sustainable.

Acting SCA Judge Aubrey Ledwaba, with four other judges concurring, said the letter of appointment had expressly provided that the development of the property would be governed by a written contract.

‘The undisputed evidence was that during the negotiations between the parties that preceded the conclusion of the agreement, the representatives of the (company) had explained why the documents in question were not applicable to the project and that this was accepted by the (municipality’s) representatives.’

He said the contract specified it was the sole memorial of the agreement.

‘Accordingly, the agreement was clearly not subject to the alleged suspensive condition in the letter of appointment as submitted by the (municipality).’

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Judgment