Du Preez v Tornel Props (Pty) Ltd

The appellant (Du Preez) entered into a building contract on 10 November 2006 with Jonker Projekte CC to construct a residential house on her property for R1 million including VAT. Jonker CC was subsequently liquidated in November 2006. The respondent (Tornel Props) purchased the right to complete the construction from Jonker CC's liquidators and in December 2006 entered into an agreement with the appellant to complete the works for R920,000. The contract provided for progress payments upon completion of certain phases approved by an inspector or valuer. Disputes arose over whether VAT was included in the contract price and whether certain items (swimming pool, paving, balustrades) were included in the scope of work. In May 2007, the respondent invoiced for a progress payment of R600,000 plus VAT. The appellant's attorneys responded that payment was only due upon completion, contrary to the contract terms. The respondent ceased building works when payment was not made. On 15 June 2007, the appellant purported to cancel the contract, alleging repudiation by the respondent. The respondent sued for damages.

• Whether the respondent's conduct in ceasing building work constituted a repudiation of the contract
• Whether the appellant was obliged to make progress payments under the contract
• Whether the appellant's refusal to make progress payments entitled the respondent to withhold its reciprocal obligation to continue building
• Whether the appellant's purported cancellation of the contract itself constituted a repudiation
• The correct quantum of damages to be awarded to the respondent
• Whether reliance on an unproven quotation (Neobuild) constituted admissible evidence for calculating damages

The appeal was partly upheld. The order of the court a quo was set aside and replaced with an order that: (1) The defendant pay the plaintiff R104,817; (2) The defendant pay interest thereon from 1 June 2007 to date of final payment at 15.5% per annum; (3) The defendant pay the costs of the action; (4) The defendant's counter-claim is dismissed with costs. The application for condonation was granted with the appellant paying costs on the opposed party and party scale. The appellant was ordered to pay the costs of the appeal.

The binding legal principles established are: (1) Repudiation is assessed objectively from the perspective of a reasonable person in the innocent party's position, not the subjective intention of the allegedly repudiating party; (2) Where a contract requires progress payments and one party refuses to make such payments contrary to express contractual terms, the other party is entitled to withhold its reciprocal obligation to perform; (3) Such withholding of performance does not constitute repudiation where it is legally justified by the other party's breach; (4) An unjustified purported cancellation of a contract can itself constitute repudiation, entitling the innocent party to accept the repudiation and cancel the contract; (5) The test for repudiation is whether a reasonable person would conclude that proper performance will not be forthcoming; (6) For expert evidence regarding quantum of damages, proper proof through expert testimony is required - unproven quotations or reports do not constitute admissible evidence regardless of how convenient they may be.

The Court noted that although peripheral disputes existed between the parties regarding VAT inclusion and the scope of work (swimming pool, balustrades, paving), these disputes did not cause the termination of the contractual relationship. The Court observed that the defendant's refusal to make payments appeared motivated by fear that the plaintiff would not complete the house, but this did not entitle her to refuse payments contrary to the express wording of the contract - the safeguard lay in insisting that claims for progress payments be approved by a valuer or inspector. The Court also commented on costs, noting that although the defendant succeeded in substantially reducing the damages award, this did not constitute sufficient success to warrant a costs award in her favour given her failure on the merits and the fact that her unjustifiable conduct brought about the termination of the contract. Regarding the condonation application for failing to lodge proper copies of the record, the Court indicated this was granted in the interests of justice but with costs on the opposed scale, noting the default did not warrant a punitive costs order.

This case clarifies important principles in South African contract law regarding: (1) the objective test for repudiation - focusing on the perception of a reasonable person in the innocent party's position rather than the subjective intention of the repudiating party; (2) the right of a party to withhold reciprocal performance when the other party fails to comply with material contractual terms; (3) the distinction between justifiable withholding of performance and repudiation; (4) the requirement for proper expert evidence to prove quantum of damages - unproven quotations do not constitute admissible evidence; and (5) the application of construction contract principles, particularly regarding progress payments. The case demonstrates how a party's unjustified purported cancellation can itself constitute repudiation entitling the innocent party to cancel and claim damages.