Time periods in the FIDIC Gold Book?

Universal Coal Development (Pty) Ltd v Mineral Resources Development (Pty) Ltd (33182/2021) [Dec. 2021] ZAGPPHC 839

The dispute in this case involved a difference of interpretation of a clause involving a coal processing plant contract using FIDIC Gold as a basis. Was the contract for a fixed period of 96 months or until the coal became depleted at Kangala Colliery?

Universal Coal Development (UCD) (Contractor) sought that Mineral Resources Development (MRD) (subcontractor) hand over possession, operation and control of the processing plant and that MRD complete an inspection with UCD of the plant and make a report on the condition of the plant and nay maintenance works needed. MRD sought that ‘UCD are to comply with all obligations under the contract.’

There was also another issue in this case as to whether the court’s relief granted to either party is final or interim, due to the fact that both parties were also going to arbitration shortly after the court case on a similar issue. The court stated that any relief granted shall ‘be treated as interim in nature.’

The contractual dispute is that the UCD claims that the coal reserves in respect of which the contract had been entered into have been depleted, and therefore the contract has terminated. MRD contends that the contract terms provide for a contract period of 96 months and that this period is to run its course. Despite the admitted depletion of the coal reserves, coal could from time to time be sourced from other collieries, which can still be crushed, washed and screened, MRD says.?In the meantime, the UCD should continue to pay MRD the agreed fixed monthly contract price until the return of the Plant to MRD, its owner.

Clause 1.1.53 of the contract, which is in form of a FIDIC Gold Book contract for “Design, Build and Operate” projects, with standard clauses and terms, to be completed to suit a specific project, defines “Operation Service” as follows: “a period of 96 months performance compliance operations commencing on the issue of a Commissioning Certificate and terminating on the Plant Manager issuing a certificate of completion of the performance compliance operations as more fully detailed in the Employer’s Requirements”. However, the duration of UCD’s contract of supply with Eskom (employer) says that the duration of the contract is either

1)?????A period of 8 years (96 months), or;

2)?????When the total quantity of coal being 16,500 tons (approx.) has been delivered to Eskom.

3)?????Expiring earlier than 1) and 2) if UCD has on request of Eskom increased the quality of coal to be supplied such that the coal reserve will have been totally depleted prior to the contract period.

These three terms were agreed between UCD and MRD – the contract specifically incorporates it by reference in clause 1.5.

The court ordered that Eskom’s requirements in respect of that coal, its specifications and source, in fact becomes UCD’s requirements vis-a-vis MRD as operator of the Plant. The UCD/Eskom contract is back-to-back with the UCD/MRD contract.

The court found that there was a prima facie case that the contract included a tacit term that all the time clauses in the contract relating to operation of the Plant should be read to mean until the depletion of the coal reserves or 96 months, whichever comes first. MRD was directed, pending final determination of arbitration proceedings, to hand over possession, operation and control of the Plant within 24 hours from service of the court order, and to pay UCD’s costs.

GEORGE GIBBS - LLB (HONS) LPC ACIARB - CONSULTANT