The Silo Hotel at the V&A Waterfront in Cape Town will have to undergo further remedial work costing an estimated R30.6 million in present value after the failure of screeding on the solid floor slabs at the hotel.

This cost includes losses associated with the building being out of commission during the execution of the work.

Remedial work at an alleged cost of about R6 million has already been carried out at the hotel, which had to close its business for five months while this temporary work was carried out.

The further work is envisaged to provide a permanent solution to the floor problem.

This emerged in a Cape Town High Court judgment handed down by Judge Ashley Binns-Ward, on Tuesday, in an appeal against an arbitration award, filed by professional consulting structural engineers GR Sutherland and Associates

GR Sutherland and Associates was appointed by V&A Waterfront Holdings in 2014 to be the consulting structural engineer on the building project.

The project involved the modification, adaption and conversion of an old grain silo in the V&A Waterfront section of the Cape Town harbour area into a building that would, among other things, accommodate a luxury boutique hotel.

Multiple respondents

V&A Waterfront Holdings; Mace Management Services, the principal consultant and project manager of the building contract; executive architects on the project Van der Merwe Miszewski Architects, Jacobs Parker Architects CC and Rick Brown & Associates; principal building contractor WBHO; Greenlie Concrete, a subcontractor to WBHO that has been liquidated; and The Silo Hotel, which is leasing the hotel from V&A Waterfront Holdings, were all cited as respondents in the case.

The appeal flows from a dispute that arose between V&A Waterfront Holdings and the consultants.

However, Binns-Ward said at this stage the arbitration proceedings are being prosecuted by V&A Waterfront Holdings only against GR Sutherland and Associates.

GR Sutherland and Associates has applied for an order setting aside the arbitration agreement, or alternatively that the arbitration agreement shall cease to have effect with reference to the dispute relating to the failure of the screed flooring at the Silo Hotel.

Floor levels

Binns-Ward said the arbitration dispute between GR Sutherland and Associates and V&A Waterfront Holdings had arisen from part of the work done to the silo building that required the floor levels in the section of the structure that houses the boutique hotel to be raised above the level of the solid floor slabs, using a special type of lightweight screed.

He said the screeding work was done by Greenlite Concrete in terms of a subcontract with WBHO but the screed did not function satisfactorily, with the result that the floors of the hotel became uneven.

This led to the temporary remedial work being done to the floors of the hotel.

Binns-Ward said the causes of the problem were investigated by Professor Vernon Collis, an engineer and architect, who held that the consultants, WBHO and Greenlite Concrete were each, in the several respects, at fault for the unsatisfactory work.

V&A gave notice to each of the parties with which it had an arbitration agreement of its intention to proceed against them while also issuing an invitation to those parties to agree to proceedings in which the issues could be addressed and determined on a consolidated basis between everyone involved.

Binns-Ward said GR Sutherland and Associates declined the invitation, and V&A Waterfront Holdings has reportedly concluded a settlement with WBHO and is proceeding only against GR Sutherland and Associates for the time being.

Alleged breach

He said V&A’s claim is founded on an alleged breach by GR Sutherland and Associates of its contract with V&A.

“V&A alleges that had Sutherland properly performed its obligations under the contract the defective light-weight screeds would not have been laid,” said Binns-Ward.

“It computes its resultant damages in the sum of the rental it did not receive from the hotel while the interim remedial solution was being implemented (R7.1 million) plus the cost of the remedial work associated with the initial interim and subsequent long-lasting solutions.

“The pleaded claim acknowledges, however, that Sutherland’s liability is limited in terms of its contract with V&A to an amount twice its contract fee, viz. R14.5 million,” he said.

GR Sutherland and Associates in its plea to the claim denied the screeding work fell within the ambit of its contractual responsibility and any liability by it was excluded by virtue of a clause of its contract because the primary or direct responsibility for it lay with the other consultants or those involved in carrying out the work.

Binns-Ward said GR Sutherland and Associates also pleaded that it is excused from liability to V&A because the failure of the claimant’s principal agent, Mace, to properly oversee the renovation was the cause of the problem and V&A has “assigned” its claim to the hotel and consequently lacks standing to pursue it.

Binns-Ward said GR Sutherland and Associates finally pleaded that V&A is precluded from advancing the claim because in terms of the lease agreement between V&A and the hotel, The Silo Hotel undertook at its cost to remedy any latent defects in the building after the completion of the remodelling work.

‘Another clause’ influencing liability

He said it will be for the arbitrator to determine the effect of the clause on the pleaded claim but it is relevant for present purposes to observe that another clause appears to have the effect of materially limiting the possibility of concurrent liability by any of the consultants to V&A for damages because of a breach of their contracts by any of them.

In its lease agreement with V&A, The Silo Hotel waived any right of action against its landlord for any latent defects in the reconstructed silo and has instituted a claim in a separate case in the High Court in Cape Town.

This relates to its concerns around the income it allegedly has lost and will in the future lose through its inability to use the hotel accommodation while remedial work is carried out.

However, Binns-Ward, doubting the hotel’s action will ever come to trial, indicated that even it were to proceed, its subject matter is materially different from V&A’s claim against GR Sutherland and Associates.

He said there is no direct contractual relationship between GR Sutherland and Associates and the other consultants or the building contractor – and any duty by any of those parties not to act negligently was a duty owed in contract to V&A as the employer.

He added that the only conceivable basis for a claim by GR Sutherland and Associates against the other consultants or the building contractor to ameliorate the effect of an award or judgment against it on V&A’s claim against it would lie in delict.

Delict is a violation of the law.

Binns-Ward said he is very doubtful about the viability of any such a claim, and that all the other bases for the other proceedings that GR Sutherland and Associates contends should be taken into account to show there is good cause to grant its application are tenuous.

“Accordingly, as a matter of probability, the postulate that if the relief is not granted Sutherland will become embroiled in multiple proceedings involving the same evidence, unnecessarily incur duplicated costs, be exposed to prejudicial ‘procedural jockeying’ and possibly conflicting decisions seems to me unlikely to materialise.

“In the result, the case the applicant has made out is not a compelling one,” he said.

Defect ‘fully repaired’

V&A Waterfront spokesperson Donald Kau said the defect in the screed flooring of the hotel was discovered over the low trading period during the Covid-19 pandemic.

He said the hotel was closed for five months, during which time the defect was fully repaired.

“We do not believe any further works are necessary to correct any defect. However, the long-term nature of contracts requires understanding of future liability albeit highly remote.

“No further closure of the hotel is anticipated,” he said.

Kau said the V&A instituted arbitration proceedings against GR Sutherland and Associates with a view to determining liability, which brought an application to have the arbitration moved to the high court.

He said the Cape High Court has now dismissed Sutherland’s application and the matter continues in arbitration.

Kau said the V&A states in the arbitration proceedings that it suffered damages of R43 978 491.25 as a result of Sutherland’s breach.

This was made up as follows:

• R7.117 million for loss of rental recovery from The Silo Hotel;

• R6 million incurred for implementing the remedial works; and

• R185 491.25 for electricity and water charges for implementing the remedial works.

“The R30.6m [in the judgment] would be an estimate of a more comprehensive rectification in the unexpected instance of the defect recurring,” he said.