1. The plaintiff provides civil engineering services. The defendant was one of its clients. The defendant decided to upgrade the water supply to Tembisa and for that purpose engaged the plaintiff as a consultant. This was formalised in two instructions. The first instruction, for a new water pressure tower and pump station, ("the pump station instruction) was reflected in a letter of appointment dated 7 March 2005 and a letter of acceptance dated 9 May 2005. The second instruction, to reline the reservoir feed providing the water, ("the reservoir instruction") was reflected in a letter of appointment dated January 2006 and a letter of acceptance dated 17 February 2006.

2. The contractor appointed by the defendant did not adhere to the work schedule. This meant that the plaintiff had to perform additional services above those specifically identified in the contracts between the parties. The plaintiff was entitled in these circumstances to recover additional fees from the defendant. The plaintiff raised these additional charges under the reservoir instruction. The plaintiff from time to time submitted invoices to the defendant claiming payment. The defendant did not pay anything. It later emerged that the defendant withheld payment because the defendant disputed the plaintiff's entitlement to the additional fees and withheld payment under both instructions because the two instructions were in practical terms linked.

3. The defendant was an established client of the plaintiff and the plaintiff adopted a conciliatory attitude to the defendant's failure to pay what the plaintiff believed was due. In about June 2011, representatives of the parties attended a meeting to settle the matter. The defendant made a written offer of settlement. The settlement offer acknowledged that the amount claimed by the plaintiff under the pump station instruction was due in full. But in relation to the reservoir instruction, the defendant's offer ignored completely the extra services which the plaintiff was obliged to perform. The plaintiff responded in a letter dated 22 July 2011 rejecting the defendant's offer and making a counter-offer of settlement. The counter-offer was for an amount excluding VAT of R1 308 369,92 under the pump station instruction and, similarly excluding VAT, for R1010176,88 under the reservoir instruction. In arriving at the latter amount, ie in respect of the reservoir instruction, the plaintiff reduced its claim in respect of the additional work. There was no immediate response to the plaintiff's counter-offer.