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[2016] ZAWCHC 30
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Premier Attraction 300 CC t/a Premier Security v City of Cape Town (11981/2015) [2016] ZAWCHC 30; [2016] 2 All SA 888 (WCC) (9 March 2016)
IN THE HIGH COURT
OF SOUTH AFRICA
(WESTERN CAPE
DIVISION, CAPE TOWN)
Reportable
CASE
NO: 11981/2015
DATE:
09 MARCH 2016
In
the matter between:
PREMIER
ATTRACTION 300 CC t/a
PREMIER
SECURITY
.............................................................................................................
Applicant
And
THE
CITY OF CAPE
TOWN
..............................................................................................
Respondent
JUDGMENT:
09 March 2016
DAVIS J
Introduction
[1]
Applicant seeks the following substantive
relief against the respondent:
1.
Payment in the amount of R 16 469 681.94
( ‘the main claim’), and a further amount of R 2 339
296.27 (‘the
additional claim’). In the
alternative, applicant seeks orders directing that the effect of the
publication of various
Sectoral Determinations in relation to the
remuneration payable to security guards registered with the Private
Security Industry
Regulation Authority (PSIRA), was to increase the
amounts payable by respondent to applicant (Premier), for security
services rendered
by applicant in terms of the tender awarded
to it by the respondent.
2.
An order directing respondent to be
contractually bound to pay Premier for security services allegedly
rendered by it
for three specified cites over various periods;
and
3.
Orders directing respondent within
one week of the granting of the order to take the necessary steps to
process and correct,
if need be applicant’s pro forma invoices
and to furnish applicant with relevant information to enable it to
raise its invoices
accordingly. Furthermore, to make payment of all
amounts and to invoice applicant within 48 hours of presentation of
these invoices.
[2]
The main claim relates to whether applicant
is entitled to a recalculation of the amounts paid by the respondent
to applicant in
terms of a contract which forms the subject matter of
this application during the period of 1 September 2010 to 30
September 2014.
The additional claim relates to invoices issued by
applicant in respect of services rendered at certain specific sites
in respect
of which authorised purchase orders were not issued by the
respondent, and, as a consequence of which, the services were
rendered
in violation of the contract and the relevant regulatory and
statutory framework. Applicant foreshadows the dispute in its
founding affidavit, where it said the following:
‘
Applicant
and respondent did not agree on the interpretation of R.871:
1.
Applicant was of the belief that it was
entitled to a 7.25% increase in the contractual amount payable for
all categories of guards.
Quite apart from anything else, the
7.25% increase was well known in the work force, and the expectation
– across all grades
– was for such an increase;
2.
Respondent interpreted Sectoral
Determination R.871 – insofar as same related to the second
year (with effect from 1 September
2010) – as being that it was
merely obliged to increase the contractual sum payable per security
officer to applicant by
the amount of the minimum wage increase.
’
The
factual background
[3]
Applicant’s claim concerns to a
Tender 138 S Security Services (‘the tender’), which was
awarded to it during
2008, by the respondent for the supply of
security services at various sites. The agreement between
applicant and respondent
was governed by the conditions of a contract
which formed part of the tender document. It commenced on 1 October
2008, and terminated
on 30 September 2014. Applicant
contends that the dispute relates primarily to the method of
establishing the escalation,
or adjustment of rates, or prices paid
by the respondent for the security services as set out in the price
schedule of the tender
document. Sub clause 8.1 of the
conditions of contract states that the rates payable by the
respondent to applicant for security
services rendered would have to
accord with the rate / prices for security services as set out in the
process schedule.
[4]
In this connection clause 11.4 is of
particular relevance:
11.4
LABOUR
(in
respect of General Service and Armed Escort/Patrolling):
11.4.1
The prices of this tender shall be deemed to be FIRM (constant) for
the contract periods Year 1 Year 2 respectively, as well
as for any
agreed extension to year two.
11.4.2
The basis of the tender is the three-year
wage determination agreement concluded for the Private Security
Sector – Government
Gazette No 29188, R 874, dated 1 September
2006. It is expected of Tenderers to use those published
salary rates in
the Gazette to arrive at the Tender prices for this
tender’s Year 1 and similarly the rates for this tender’s
Year
2. Provided that if the prices in fact remain firm
for two years then if the Contract period is extended by mutual
agreement beyond two years, a possible further adjustment in line
with the then current government determination will be considered.
11.4.3
No increase in the labour content of
rates quoted in this tender will be entertained by the Council under
any circumstances during
the contract unless the Minister of Labour
for whatsoever reason decides to depart from that agreement.
Should such departure
occur, an adjustment may be considered which
shall be the difference between the rates in the current gazette and
the rates in
the new gazette for comparable periods, applied to 90%
of the Tender prices for Security Officers (tendered prices / rates
are
expected also to include the cost of fuel, overheads and profits
– of which that deemed 10% shall remain FIRM)
11.4.4
In the event of Minister of Labour
departing from the current wage determination / agreement, the
following shall apply:
11.4.4.1
All applications for price variations must
be accompanied by satisfactory documentary evidence.
11.4.4.2
Only the difference in Rand and cents
between the old and new published rates shall be used, and applied to
90% of the tendered
rates for labour (Security Officers).
11.4.4.3
Contractors who wish to apply for price
adjustment must show how the new prices were calculated, and claim a
new price per applicable
item number (not a general percentage).
11.4.4.4
Notwithstanding anything to the contrary
contained in the Tender document, any claim for an increase in the
tender prices herein
quoted shall be submitted in writing to the City
Manager, for the attention of the Director: Supply Chain Management,
City of Cape
Town, P O Box 655, Cape Town, 8000, in the form of a
written letter (not in form if an invoice or a general circular)
before the
said increase is to become effective. When submitting any
such claim, the contractor shall indicate the actual amount claimed
for
each awarded item. A mere notification of a claim for an increase
without stating the new price claimed for each item or a mere
claim
for an escalation of a percentage shall, for the purpose of this
clause, not be regarded as a valid claim.
11.4.4.5
Notwithstanding anything to the contrary
contained in this contract, the Council reserves the right to request
the Tenderer / Contractor
to submit independent auditors’
certificates or such other documentary proof as it may require in
order to verify a claim
for price increases.
Should
the Tenderer / Contractor fail to submit such auditors’
certificates or other documentary proof to the City Manager
within a
period of thirty days from the date of the request therefor, it shall
be conclusively presumed that the Tenderer /Contractor
has abandoned
his claim.
[5]
Respondent contends that clause 11.4.4
provides for the agreed requisite procedure which had to be followed
by applicant when making
an application to respondent for price /
rate variations consequent upon a departure from the wage
determination / agreement applicable
at a particular time. In
particular, respondent contends that applicant would have to submit a
claim for an increase in the tender
price to respondent’s
Director Supply Chain Management before such price increase became
effective, and, prior to applicant’s
claim to such increase,
prices being deemed to be valid. Respondent contends further, that
this provision in the conditions of
contract makes it clear that any
price escalation claimed by applicant would be subject to agreement
with the respondent, and that
an application therefor had to be made
and accepted by the respondent prior to agreement having been
reached. Respondent argues
that applicant’s tender bid was
evaluated by respondent, based on a predetermined set of criteria as
provided for in respondent’s
tender document. The tender
was awarded to applicant and the contract was subsequently concluded
between the parties on the
basis of the prices / rates which had been
tendered by applicant. In calculating these prices it was the
applicant’s
sole responsibility to ensure that it took into
account the minimum salary rates as set out in a sectorial
determination which
were published in terms of the
Basic Conditions
of Employment Act 75 of 1997
.
[6]
Applicant submits that it completed the
wage rates to be charged for each category and subcategory of
security officer for the first
two years of the operation of the
tender. In its calculation of these rates, a tenderer was
required to be “guided
by” the rates in the sectoral
determination promulgated on 1 September 2006 (R.874 of Government
Gazette NO 29188).
Applicant argues that it was at all times
aware that the security industry was regulated by sectoral
determinations made by the
Minister of Labour from time to time, and
it would have to take into account these determinations when
adjusting wages. Applicant
contends that all tenderers are
required to be registered with the Private Service Industry
Regulatory Authority (PSIRA) and to
be in good standing with the
latter body. Accordingly, applicant contends that when it
calculated the wage rates and the
pricing schedule it not only took
into account the minimum rates in accordance with the sectoral
determination, but also those
sums required for compliance with the
PSIRA. Accordingly, these wage rates were significantly higher
than the minimum sectoral
determination wage rates. While
applicant contends that the wage rates tendered were required to be
in line with the sectoral
determination as well as the PSIRA pricing
structures, respondent argues that the PSIRA’s “illustrative
pricing structures”
are mere guidelines which carry no
legislative force.
[7]
According to respondent it was incumbent
upon applicant to ensure that the prices at which it tendered enabled
it to comply with
the labour legislation which was relevant to the
employment of security officers and to meet its financial obligations
towards
the employers. To this end respondent refers to clause 17.1
of the Conditions of Contract.
The
CONTRACTOR undertakes that: -
17.1
It shall comply with all the labour legislation
relevant to the employment of Security Officers;
17.2
it shall remain solely responsible for payment of
all costs of the Security Officers including but not limited to
salaries, bonuses,
pension fund contributions, provident / benevolent
fund contributions, medical fund contributions and insurance
premiums, where
applicable; and
17.3
it shall be responsible for the payment of,
inter
alia
, all applicable taxes, charges,
duties or fees assessed or levied by the Central Government,
Workmen’s Compensation Commissioner,
Provincial Government,
Local Authority or a Metropolitan Council in respect of the security
Officers or as a result of the Security
Officers being provided by
the CONTRACTOR in terms of this Contract and it shall, on request,
furnish sufficient documentary proof
to the COUNCIL that any of or
all of these payments have in fact been made.
[8]
Applicant contends that according to the
tender document tenderers were obliged to submit invoices on or
before the 7
th
of each month to an official of respondent who would then authorise
the amount of the invoice as being correct. Only upon
authorisation would the invoice be submitted to respondent for
payment. In exercising its right under clause 10 of
the
tender document, respondent refused to pay applicant any amount other
than that which was in conformity with its interpretation
of the
tender document and the various sectoral determinations. While
contending that the respondent’s interpretation
was incorrect,
applicant contends that it had no option but to submit invoices that
were in accordance with respondent’s
interpretation. Had it
submitted invoices which were different to this interpretation,
respondent would not have authorised them,
and applicant would not
have received payment. This particular contention was in a
response to respondent who argued, having
considered an application
for an increased price, that it offered price increases during the
period 1 September 2013, to 30 September
2014, which prices were
accepted by applicant. The price increases offered by
respondent were commensurate with the increase
provided for in the
relevant sectorial determinations.
[9]
Respondent contends that it is not now open
to applicant, having accepted such escalation, to now seek an
ex
post facto
adjustment of the
escalation.
[10]
Before dealing with the significant
question of interpretation, of the conditions of contract the
respondent raised a number of
points
in
limine,
including prescription and
statutory noncompliance. These are the questions to which I must
first turn.
Prescription
[11]
Mr Katz, who appeared together with Ms
Adhikari on behalf of respondent, referred to
s 12
(3) of the
Prescription Act 68 of 1969
which provides: ‘a debt shall
not be deemed to be due until the creditor has knowledge of the
identity of the debtor
and of the facts from which the debt arises:
Provided that a creditor shall be deemed to have such knowledge if he
could have acquired
it to exercising reasonable care.’
Accordingly, the section requires knowledge of the
material facts from which the debt arises for the period of
prescription to commence
as opposed to knowledge of the relevant
legal considerations. In this connection Mr Katz referred to
Minister of Finance v Gore
2007 (1) SA 111
(SCA) at para 17 where Cameron and Brand JJA said:
‘
This
Court has, in a series of decision, emphasised that time begins to
run against the creditor when it has the minimum facts that
are
necessary to institute action. The running of prescription is
not postponed until a creditor becomes aware of the full
extent of
its legal rights, nor until the creditor has evidence that would
enable it to prove a case comfortably.
’
[12]
On this basis Mr Katz submitted that, on
applicant’s own version, it was aware of the facts on which it
based its main claim
on 1 September 2010, at the latest, which was a
date on which the Sectoral Determination was promulgated in
Government Gazette
NO 32524 (R.871). For this reason, he argued
that, in the light of the fact that the application was launched on
25 June
2012, the portion of applicant’s claim which arose
during the period 1 September 2010, to 25 June 2012, had prescribed
and
had to fail on this basis alone.
[13]
In particular, Ms Adhikari who argued most
of this component of respondent’s case referred to clause 6 of
the contract which
reads thus:
6
PROCEDURES APPLICABLE TO THIS CONTRACT
6.1
The City will issue official Purchase Order for services required
under this contract. The Council will when the need
arises give
written notice to a member of the Security Service Panel to provide
Security Services at a Site(s) and/or for Area
Patrols. This written
notice will take the form of a formal Council Purchase Order –
supported by “Site Orders”
where applicable, including
among other information the duration of time for which the Contractor
will render the Security Services
at a particular Site(s) and/or Area
(Patrol(s), where necessary. The relevant Purchase Order number
must be shown on every
Invoice.
6.2
In the case of an emergency the Council may give verbal notice to a
member of the Security Service Panel to the services envisaged
in
terms of this Tender. In such circumstances the Council will
confirm the instructions in writing by official Council Purchase
Order.
In
addition this clause must be read together with clause 10 which, to
the extent that it is relevant, reads as follows:
10
SETTLEMENT OF ACCOUNTS
10.1
The CONTRACTOR shall, on or before the 7
th
of each month
submit to the COUNCIL an invoice for the previous month to be duly
authorised by a Council Official as correct, specifying
the services
rendered during that previous month and detailing the amount due and
payable to the CONTRACTOR. Value-Added
Tax shall be shown
separately on each invoice. Invoices must be submitted per site
and the order number must appear on invoice.
Payment shall not
be effected unless credit notes in respect of short postings are
submitted with the invoices.
10.2
All original invoices shall and credit notes must be forwarded to the
following address:
10.3
In addition to the requirements of the Value-Added Tax Act, a valid
Invoice for this contract shall contain
at least the following
details:
10.3.1
- The relevant official Purchase Order number that was issued by
Council;
10.3.2
- Exact date/s of service rendered;
10.3.3
- The Name of the Council Branch for whom the service was rendered;
10.3.4
- Address of the Site / Area where the service was rendered;
10.3.5
- The name and telephone number of the Council representative who
ordered the service;
10.3.6
- Nature of service (in terms of the Price Schedule item number/s and
description);
10.3.7
- Number of Security Officer (how many persons?);
10.3.8
- Grade of each Security Officer who rendered the service;
10.3.8
- Registered Name and number of Dog, if applicable.
[14]
As the applicant was paid on the invoices
submitted, it was contended by Ms Adhikari that the cause of action,
insofar as the period
1 September 2010, to 25 June 2012, was
concerned, had prescribed. Once the procedures and
settlement of accounts pursuant
to clauses 6 and 10 of the contract
had been completed, a cause of action arose which was only pursued by
applicant more than three
years later.
[15]
Mr Kirk-Cohen, who appeared together with
Ms Small on behalf of the applicant, referred to a principle set out
initially in Wessels,
The Law of
Contract in South Africa
2 ed (1951)
Volume 2 at para 2306 – 13 which is to the effect that a
payment made by a debtor to a creditor should, in the
absence of
express appropriation by either party, be appropriated to the debt
which is most onerous to the debtor or, expressed
differently, to the
debt which would be most in the interest of the debtor to pay.
This principle has been confirmed
both in
Ebrahim
(Pty) Ltd v Mahomed and others
1962 (1)
SA 90
at 97 G – H and
Miloc
Financial Solutions v Logistic Technologies (Pty) Ltd and others
[2008] ZASCA 40
;
2008
(4) SA 325
(SCA) at para 46.
[16]
Mr Kirk-Cohen also referred to the decision
in
City of Cape Town v Real People
Housing (Pty) Ltd
2010 (5) SA 196
(SCA)
where reference is made at para 3 to a credit control and debt
collection policy of respondent which contains the following
provision: ‘Payment of any undisputed debt …
will first be allocated to the oldest debt … progressing
to
the latest debt.’ As Nugent JA said, ‘read
together with the policy it is plain that the City is authorised
to
allocate payment made by a debtor to the oldest undisputed, and its
computerised accounting system has been
designed
to
produce that effect.
’
(para 3) In the present case, it was not a
question of respondent being the recipient of payment, but rather as
the body which is
obliged to pay amounts to the applicant. Further,
in
Real People Housing
,
supra the court was dealing with a policy which expressly contained
this provision as opposed to an argument concerning the general
applicability of a common law provision.
[17]
It follows therefore that the cases cited
by Mr Kirk-Cohen are not directly relevant to the question of
prescription. It is
trite law that extinctive prescription
commences to run as soon as the debt is due. As Van Heerden JA said
in
Truter v Deysel
[2006] ZASCA 16
;
2006 (4) SA 168
(SCA) para 16:
‘
A
term ‘debt is due’ means a debt including a delictual
debt, which is owing and payable. A debt is due in a sense
when
the creditor acquires a complete cause of action for the recovery of
a debt, that is, when the entire set of facts which the
creditor must
prove in order to succeed with his or her claim against the debtor is
in place, or, in other words, when everything
has happened which
would entitled the creditor to institute action and to pursue his or
her claim
.’
Accordingly,
if applicant was ‘of the belief that it was entitled to a 7.25%
increase in the contractual amount payable for
all categories of
guards’
between the period September
2010 until 25 June 2012, then the cause of action had arisen during
that period and the debt was accordingly
due. In any event, it
should be recalled that the case brought by the applicant was for
under payment rather than for unpaid
invoices which it had submitted
pursuant to clauses 6 and 10 of the contract to which I have made
reference.
[18]
For these reasons I find that the portion
of applicant’s claim which arose during the period of 1
September 2010, to 25 June
2012, has prescribed and that this portion
of the claim must thus fail.
Statutory
non compliance
[19]
On 24 June 2015, applicant purported to
send a notice to respondent in terms of the Institution of Legal
Proceedings against Certain
Organs of the State Act 40 of 2002 (‘the
Institution of Proceedings Act’). One day after the notice had
been sent to
respondent this application was launched. Mr Katz
submitted that the notice did not comply with the following
pre-emptory
provisions of the Institution of Proceedings Act, namely
s 3 (1) which provides that no legal proceedings may be instituted
against
an Organ of State for the recovery of a debt unless the
creditor has first given the Organ of State written notice of its
intention
to institute the legal proceedings, alternatively unless
the Organ of State has consented in writing to the institution of
legal
proceedings without notice, or despite a defective notice. In
addition, s 3 (2) (a) requires that the notice must be served on the
relevant Organ of State within six months from the date on which the
debt became due. Notwithstanding the provisions of the
Institution of Proceedings Act, according to Mr Katz, applicant chose
not to apply for condonation for its failure to give due
notice to
the respondent in its founding affidavit, nor was condonation sought
in its replying affidavit. Section 3 (4) of the
Institution of
Proceedings Act grants the court a discretion to condone
noncompliance with the Act’s provisions subject to
three
requirements:
(a)
the debt has not been extinguished
by prescription;
(b)
good cause exists for the creditor’s
failure ;in this case applicant’s failure to serve the
notice in accordance
with s (3) (2) (a) of the Institution of
Proceedings Act; and
(c)
the organ of State was not unreasonably
prejudiced by the failure.
These
requirements are conjunctive, and the applicant bears the onus to
establish each of these. For a justification of these provisions
see
Minister of Agriculture and Land Affairs
v CJ Rance (Pty) Ltd
2010 (4) SA 109
(SCA) at para 30.
[20]
It follows from my finding that part of
claim has not prescribed. But the second and third requirements
remain to be examined.
In
Rance
,the court dealt with the question of the “good cause”
requirement in terms of s 3 (4) (b) (ii) at paras 36 –
37:
‘
[36]
‘Good cause’ within the meaning contained in s 3(4) (b)
(ii) has not been defined, but may include a number of
factors which
will vary from case to case on differing facts. Schreiner
JA in dealing with the meaning of ‘good
cause’ in
relation to an application for rescission, described it thus in
Silber v Ozen Wholesalers (Pty) Ltd
:
‘
The
meaning of “good cause” in the present sub-rule, like
that of the practically synonymous expression “sufficient
cause” which was considered by this Court in
Cairn’s
Executors v Gaarn
,
1912 A.D. 181
,
should not lightly be made the subject of further definition.
For to do so may inconveniently interfere with the application
of the
provision to cases not at present in contemplation. There are
many decisions in which the same or similar expressions
have been
applied in the granting or refusal of different kinds of procedural
relief. It is enough for present purposes to
say that the
defendant must at least furnish an explanation of his default
sufficiently full to enable the Court to understand
how it really
came about, and to assess his conduct and motives.’
[37]
The prospect of success of the intended claim play a significant role
– ‘strong merits may mitigate fault; no merits
may render
mitigation pointless’. The court must be placed in a
position to make an assessment on the merits in order
to balance that
factor with the clause of the delay as explained by the applicant.
A paucity of detail on the merits will
exacerbate matters for a
creditor who has failed to fully explain the cause of the delay.
An applicant thus acts at his own
peril when a court is left in the
dark on the merits of an intended action, e g where an expert report
central to the applicant’s
envisaged claim is omitted from the
condonation papers.’
[21]
Mr Katz contended that applicant understood
the implications of the Institution Proceedings Act because on 24
June 2015, its attorneys
generated a letter to respondent which
concluded as follows:
‘
Our
client accordingly gives notice under
s 3
of the
Institution of Legal
Proceedings Against Certain Organs of State Act 40 of 2002
that it
intends to institute proceedings for the above relief. Our client is
obliged – pursuant to s 3 of the Act - to set
forth briefly the
facts giving rise to debt. These facts have been previously set
forth, and we refer to our prior correspondence,
attached for ease of
reference. For the sake of avoidance of doubt, however, we
record that:
1.
Our clients were in a contractual
relationship under tender number 138S throughout the period 1 October
2008 to 30 September 2014.
Although the contract was initially
for a two year period, it was duly renewed through this period;
2.
During the contract, there were Sectoral
Determinations which came into effect. These Sectoral
Determinations varied the minimum
wage payable, and were the trigger
for our client becoming entitled to increases in the contractual
amounts payable;
3.
The parties are not in agreement as to the
proper interpretations of the contract, as read with Sectoral
Determinations in question,
as read with the provisions of PSIRA.
In the result, their interpretations differ;
4.
Their differences in interpretation give
rise to the claim.
5.
In addition to this, we respectfully refer
you to paragraphs 10 and 11 above as regards the issuance of order
numbers.’
[22]
Finally, after a debate in Court on 16
November 2015, applicant brought an application for condonation.
I should add that
prior thereto, on 06 November 2015, applicant was
specifically “invited” by respondent in its answering
affidavit to
make application for condonation .However in its
replying affidavit filed by applicant on 11 November 2015, it merely
stated: ‘To
the extent necessary (applicant) requests the above
Honourable Court to condone the noncompliance.’
[23]
In the application for condonation Mr
Sayed, who deposed to an affidavit on behalf of the applicant, says
that the letter of 24
June 2015, was the culmination of ‘the
fourteen drafts of the founding papers’. The letter relating to
Institution
of Legal Proceedings Act was sent on the same day
applicant finalised its application as to the amount which it was
owed. Consequently,
‘there was no time prior to the letter of
24 June 2015, when the letter could have been sent and at the same
time include
the claim amount’. Mr Sayed also contends
that respondent, if condonation is to be granted, will suffer no
prejudice.
It has committed itself to a version of events as at
18 February 2015, and it had never suggested that it needed more time
to investigate
applicant’s case. Furthermore, he
contended that respondent’s first reliance upon noncompliance
with the Institution
of Legal Proceedings Act occurred but five court
days before the hearing. Accordingly, applicant by virtue of
the agreement
and the consensus reached with regard to the regulation
of proceedings in terms of an order in June 2015, was under the
impression
that compliance with this legislation would not feature in
the litigations.
[24]
By contrast
Mr
Verwant
, a legal advisor of respondent
provided the following version in a further affidavit to which he
deposed.
‘
The
City has been unreasonably prejudiced by Premier’s failure to
timeously serve a notice in terms of the Institution of
Proceedings
Act in that –
1.
Premier on its version was aware that it
disagreed with the City as to the amounts due to it in terms of the
contract which forms
the subject matter of this dispute during or
about October 2010.
2.
However at no point prior to 9 December
2014 did Premier raise its concerns in this regard with the City.
3.
Premier issued 3764 invoices to the City
during the contract period. At no point during this entire
period did Premier raise
a dispute with the City as it was entitled
to do in terms of the conditions of contract, nor did it seek to have
such dispute arbitrated.
4.
By Premier submitting invoices over a
period of more than four years without
(i)
engaging the dispute resolution mechanisms
in the contract,
(ii)
issuing a notice to the City in regard to
the dispute, or
(iii)
instituting legal proceedings against the
City,
the
City could reasonably and did rely on Premier’s acquiescence as
to the manner and rate of payment in terms of the contract.
5.
Indeed, after the expiry of the tender at
issue in this matter, viz during September 2014, the City issued a
new tender based on
precisely the same principles in regard to
payment terms as the 2008 tender.
If
the City had been aware of issues which Premier now raises it would
have issued the new tender on different conditions.
Specifically, the City would have expressly excluded the
applicability of the PSIRA rate to the contract price.
6.
The City assumes, as it was reasonably
entitled to, that Premier – and for that matter all other
parties in the position of
Premier – accepted the City’s
calculations in respect of the Minister of Labour’s departures
from the sectoral
determinations.
7.
Further, the City emphasises that it has
not made provision in its budget for the increased amounts which
Premier, now some seven
years after the commencement of the contract,
five years after the difference of opinion concerning the
calculations of the contract
price and eight months after the
expiration of the contract, claims.
8.
The above issues are patently unfair to the
City. They can hardly be described as anything other than
unreasonable prejudice.
’
[25]
On the strength of this affidavit and the
finding in
CJ Ranch, supra
,
Mr Katz submitted that an application for condonation in
terms of s 3 (4) of the Institution of Proceedings Act was
required
to set out fully the explanation for the delay, which
explanation must cover the entire period of delay and
must be
considered to be reasonable. Furthermore, application for
condonation must be made as soon as the party realises
that it is
required to do so.
[26]
Mr Katz also referred to applicant’s
own version, namely, that it required a period of seven months in
which to formulate
its claim against the respondent. It had
consulted its attorneys in November 2014. It then met with officials
of the respondent
on 09 December 2014. It wrote a letter of demand to
respondent on 14 January 2015. Respondent then replied with a
detailed letter
of 18 February 2015. Two weeks later, on 04 March
2015, applicant briefed counsel and a week later it consulted with
counsel again;
that is on 12 March 2015. On 08 April 2015, it
briefed counsel with further information regarding the calculations
upon which
its claim was based after which its legal team began
to draft the founding affidavit in May 2015. This work took a
further month to finalise and founding papers were issued on 25 June
2015. There is, in Mr Katz’s view, no explanation as
to why at
any stage during this process the applicant did not direct a notice
to the City in terms of s 3 of the Institution of
Proceedings Act.
[27]
With regard to prejudice, Mr Katz pointed
out that applicant had issued in excess of 3000 invoices to the
respondent during the
contract period without engaging the dispute
resolution mechanism contained in terms of clause 38.1. By
submitting invoices
during the contract period without raising any
dispute, the respondent could reasonably, and in fact did rely on
applicant’s
acquiescence as to the manner and rate of payment
in terms of the contract. After the expiry of the tender it
issued during
September 2014, respondent issued a new tender based on
precisely the same principles with regard to payment terms as were
contained
in the 2008 tender. According to Mr Katz, had
respondent been aware of issues which applicant now seeks to raise,
it would
have issued a new tender on different conditions.
Furthermore, he contended that the respondent had not made provision
in
its budget for the increased amount which applicant now at a very
late stage seeks to claim. This was patently unfair and was clearly
prejudicial to the respondent.
[28]
Mr Katz emphasised to the court that the
applicant bore the onus of establishing that the respondent was not
unreasonably prejudiced
by its failure to give timeous notice.
It was not for the respondent to show that it was prejudiced by the
delay. To hold
that the respondent bore such an onus would amount to
a material misdirection in that it would entail a reversal of the
onus as
set out in
CJ Ranch
at paras 51-52.
[29]
Mr Kirk-Cohen contended that on 18 February
2015, the applicant’s had received an 81 page letter which
included a passage,
‘it should be noted at the outset that the
parties have had, and by all accounts still have, a good working
relationship.
It however appears that there were a few clauses in the
Tender that led to interpretational differences and this has led to
the
current impasse.’ This letter concluded thus:
‘
Having
regard to the above and the supporting documents attached thereto it
is clear that the City of Cape Town is not liable for
any amounts
allegedly due to your client. Any action instituted by your client
will be vigorously defended in any Forum of its
choosing. It should
be noted that your client tendered and was one of the successful
service providers and replacement tender…
which is awarded on
the same basis… We hope this satisfies your queries raised to
date in your meetings and correspondence
with the City.’
[30]
According to Mr Kirk-Cohen, it required
some significant amount of time to examine the contents of this
letter and its annexures
before generating relevant spread sheets to
calculate whether there was a claim to be brought by applicant. It
was only after the
81 page letter had been produced that the
possibility of a claim “really emerged.”
[31]
It appears to me that, regrettably,
applicant was not prudently advised in this regard. Thus it
opened itself up to the argument
that it never demonstrated any
cause, let alone good cause ,for its non-compliance with the relevant
legislation until the proverbial
thirteenth hour, and then only,
after the insistence of the Court. However, as an order
was granted in 2015, which
seems to have generated the
incorrect impression on the part of applicant that compliance with
the Institution of Proceedings
Act would not feature in this
litigation and that, further, were I to deny condonation, this would
ensure that applicant could
not vindicate any rights which it enjoys
under s 34 of the Republic of South Africa Constitution Act 108 of
1996, the spirit, purport
and objects of which should figure in any
such application, I am prepared to grant the necessary condonation.
The
merits
[32]
The applicant has contended that it had no
option but to submit invoices based on what it referred to as “the
City’s
interpretation” of the conditions of contract and,
in particular, clause 11.4.3 in order to receive any payment.
Its
argument therefore, is that if it had submitted invoices for what
it considered were the price escalations to which it was entitled
by
virtue of the wage adjustments brought about by the new sectorial
determinations, respondent would otherwise not have had any
payment
thereof. Significantly, the applicant never made any attempt to
exercise its rights contained in the conditions of contract
as
provided for in clause 42 thereof:
42
ARBITRATION
42.1
Should any dispute arise between the parties in connection with:
42.1.1
the rights and obligations of any party in terms of arising out of
this Contract or out of its termination; or
42.1.2
the implementation or interpretation of this Contract, or
42.1.3
the rectification, termination or cancellation of this Contract, or
42.1.4
any matter affecting the interest of the parties in terms of the
Contract
that
dispute may, unless resolved between the parties, be referred to, and
be determined by arbitration in terms of this clause.
[33]
On its own version, the first time that the
applicant sought to raise any issues with regard to the conditions of
contract with
respondent, was during a meeting held on 09 December
2014. It issued no less than 3764 invoices to respondent
for payment
and, accordingly, apart from not attempting to vindicate
the rights which it might have had under the conditions of contract
in
terms of clause 42, respondent avers that applicant waived its
right to claim a shortfall in respect of the services rendered in
its
invoices. In short, by accepting payment from the respondent of the
amounts invoiced by applicant, the latter had signalled
its
acceptance of an amended price escalation. At no point did it
issue a notice of breach to the respondent in terms of
clause 38.1 of
the Conditions of Contract, nor did it declare a dispute to seek to
have such dispute arbitrated in terms of clause
42 thereof.
[34]
In
Road
Accident Fund v Mothupi
2000 (4) SA 38
(SCA) Nienaber JA held that the test to determine the intention to
waive is an objective one. Thus, the question of waiver must
be
judged by its outward manifestations. Mental reservations which are
not then communicated have no legal consequences and an
outward
manifestation of intention must be judged from a perspective of the
other party concerned; that is to say ‘from the
perspective the
latter’s notional alter ego, the reasonable person standing in
his shoes.’ (para 16) In developing
the content
and test for this ‘outward manifestation’,
Nienaber JA said:
‘
The
outstanding manifestations can consist of words; or some other form
of conduct from which the intention to waive is inferred;
or even of
inaction of silence the duty to act or speak exist. A
complication may arise where a person’s outward manifestations
of intention are intrinsically contradictory as for instance where
one telefax indicates an intention to waive and another, perhaps
as a
result of a typographical error does not.’ (para 18)
[35]
Mr Katz referred to applicant’s
founding affidavit to the effect that it was required to reduce the
amount for which it invoiced
the respondent ‘in line with the
City’s interpretation of the contract before payment would be
forthcoming’.
This however was never communicated to
respondent at the relevant time. Furthermore, there were no
reservation of rights
by applicant whereby it sought at some later
stage to dispute the correctness of the amounts for which it had
invoiced the respondent.
It submitted invoices and
it was paid on those invoices. It never disputed the correct
amount of the payments,
nor did it ever invoke the dispute resolution
mechanism maintained in the conditions of contract.
[36]
By contrast Mr Kirk-Cohen contended on the
strength of
Greathead v SA Commercial
Catering and Allied Workers Union
[2000] ZASCA 142
;
2001
(3) SA 464
(SCA) at para 17:
‘
There
is nothing to show that the appellant either expressly or by conduct
waived or agreed to abandoned the law point. Moreover,
senior
counsel for the appellant informed the Court that the point did not
occur to counsel who argued the matter for the appellant
in the court
below, the appellant could not have considered to abandoning these
rights if he (and his legal revisers) had not appreciated
it.’
[37]
However, this is not the factual matrix
which confronts this court. As indicated earlier, in his
founding affidavit
Mr Meyers
,
on behalf of the applicant, sets out a difference of interpretation
of Sectorial Determination R.871. It is clear
from
paragraph 36 of the founding affidavit that, on this version, the
applicant and the respondent had not agreed on the interpretation
of
R.871 from an early stage. In the founding affidavit Mr
Meyers continues by conceding:
‘
Applicant
has now been advised that both parties erred in their
interpretation. However, what must be emphasised is the
practical
effect of what occurred 37.1. Firstly, exercising its right
under clause 10 of the contract … Respondent refused to pay
any amounts other than those which were in conformity with its own
interpretation. As a result, in order to receive payment
at all
applicant was obliged to submit invoices based upon respondent’s
interpretation with
which it
disagreed
. Respondent was
paid only these amounts not – as it avers – the amounts
which were due and lawfully payable
under the contract.
Secondly, applicant – consonant with it interpretation as to
what respondent was obliged to pay
– increased its wages to its
security officers by amounts which significantly exceeded the amounts
by which respondent increased
the amounts payable. The effect
of this – over time (because the dispute went on for several
years) was that the business
which applicant received from
respondents seems to be profitable.’
[38]
This is an entirely different factual
matrix from the proposition urged by Mr Kirk-Cohen, namely that
applicant did not appreciate
the right which it enjoyed. The founding
affidavit makes it clear that applicant generated invoices based upon
amounts which, in
its view, were incorrect and it did so for a
considerable period without demure and certainly without any attempt
to invoke rights
which it might have enjoyed in terms of the
condition of contract; in particular clause 42, being the arbitration
clause. On the
basis of this finding, it appears that there is no
point in engaging further with whether applicant was entitled as of
right to
claim payment of a shortfall on the basis of what was agreed
between the parties because it had waived unequivocally whatever
rights
it might have enjoyed thereunder.
The
additional claim
[39]
The applicant has also made a claim for R 2
339 296.27, which is based upon an averment that when respondent’s
second tender
was awarded to applicant resulting in a commencement of
a new contract with effect from 1 October 2014, applicant was
requested
to take over additional sites; that is to provide
additional security for these sites.
[40]
The background to this component of the
case is set out in the founding affidavit as follows:
‘
At
approximately 15h00 on 25 December 2010 there was a break in at
sub-council 4 C Jordaan. As a result of this break in Mr
Sayed
was called by respondent’s co-ordinator for the area, Mr Derick
Dankers.
1.
During this call, on 25 December 2010, Mr
Dankers requested that applicant provide two Grade D security
officers to the site.
2.
Mr Sayed was at home when he received this
call and, shortly thereafter, went to the site to establish how many
guards would be
required.
2.1
When Mr Sayed arrived at the site, law
enforcement officers were present and showed Mr Sayed where the break
in took place.
Mr Sayed was told to ensure that his guards
watch over the entire building and pay particular attention to one
area of the premises.
2.2
Within 5 minutes of Mr Sayed’s
arrival at the site applicant’s guards arrived.
2.3
Applicant provided two Grade D guards for
the day shift and two Grade D guards for the night shift, as
requested.
3.
From 25 December 2010 to the end of
February 2013, applicant provided two Grade D security officers to
the Jordaan site.
’
[41]
Mr Meyers then continues in his affidavit
by referring to a meeting with Mr Sayed of the applicant and Mr Andre
Strydom, the head
of Safety and Security of respondent which took
place during May 2012 regarding issues of payment. Respondent’s
coordinator
Mr Dankers was also present at this meeting. According to
Mr Meyers no dispute was raised regarding money owed to the
applicant.
During February 2013, Mr Sayed had a further conversation
with Mr Strydom who promised that the Sports and Recreation
Department
had undertaken to revert directly to Mr Sayed that
afternoon with regard to payment for the provision of security for
the site.
Failure to do so would permit Mr Sayed to remove the
guards forthwith, which is exactly what happened.
[42]
In November 2014, Mr Meyers provides a
further basis for this claim:
‘
The
Northdene Hall site (a community hall in Kraaifontein) experienced a
break-in.
1.
Mr Dankers called Mr Sayed at his home
during the night regarding the break-in and requested applicant
provide security to the site;
2.
Pursuant to this request, Mr Sayed provided
two Grade D guards for the site;
2.1
Two Grade D security officers were provided
to work Monday to Friday night shifts (from 4pm to 7pm).
2.2
One guard was provided to work during the
day on weekends and on public holidays.
3.
During 2013 and 2014, Mr Dankers conveyed
to Sayed that an official within the respondent (Mr Combrink) had
queried whether –
as a fact - respondent was providing this
service and/or whether the correct number of guards were on duty.
As a result,
and for its part, applicant carried out inspections on a
daily basis to ensure that the correct number of guards was being
supplied.
4.
Feedback was provided to Mr Dankers:
4.1
He was advised that the inspections had
shown that applicant had satisfied itself that it was providing
guards as contracted;
4.2
Applicant keeps a comprehensive record of
its guards on various sites in what is known as an occurrence book or
“OB”.
Mr Sayed gave these occurrence books to Mr
Dankers to provide to Mr Combrink. The purpose was to demonstrate
which guards had been
on site during which periods;
5.
Mr Sayed subsequently made contact with Mr
Dankers again to discuss the on-going non-payment;
’
A
further component of this claim was generated by a ‘break in’
during October 2013, in the Parow Valley area. Mr Meyers
continues
with his explanation as follows:
‘
1.
Shortly after the break in Mr Sayed was called by
Mr Dankers and they agreed to the following:
1.1
Mr Sayed would meet with Mr Dankers on the
Saturday morning; and
1.2
Mr Sayed would arrange for two Grade D
security officers to be sent to the site that (Friday) evening.
2.
On the Saturday morning Mr Sayed went to
evaluate the extent of the damage at the site and discussed the
security officer requirement
with Mr Dankers.
2.1
Mr Dankers suggested that the security
officers worked from inside the building in an office.
2.2
Mr Sayed was not happy with this suggestion
and it was agreed that the guards would remain outside the building
and that they should
be supplied with an outside shelter and a
toilet.
3.
Since that date, two Grade D security
officers were provided by applicant to this site. As at the end
of the contract on 30
September 2014, they were still so provided.’
It
is these three sets of events upon which applicant seeks an order
that respondent is contractually bound to pay applicant for
these
services rendered in the amount of R 2 399 296.27.
[43]
In his answering affidavit on behalf of
respondent, Mr Jackson, the Head: Facilities Management, Safety and
Security in the Corporate
Services and Compliance Directorate of
respondent, admitted the factual basis of these claims as set
out in the founding
affidavit. The defence raised by respondent
is that the additional claims did not comply with the necessary
statutory framework
as set out inter alia in clause 16 of the General
Conditions of Contract.
[44]
Mr Katz submitted that applicant rendered
services in a manner which had not accorded with these contractual
arrangements, and accordingly,
was not entitled to receive payment
for these services. The tender and applicant’s acceptance
thereof was
subject to the terms of the FCM policy which
the City had adopted and implemented as required in terms of s 111 of
the Municipal
Finance Management Act 56 of 2003 (“the MFMA”).
In terms of s 110 (1) (a), of the MFMA there is a procedure which
deals with supply chain management and the procurement by a
municipality of goods and services. In terms of s 111 of the
MFMA, which applies to each municipality, a municipal entity is
required to implement a supply chain management policy which gives
effect to provisions of the legislation. In terms of s 112 of
the MFMA a supply chain management policy of a municipality
must be
fair equitable, transparent, competitive and cost effective and
comply with the prescribed regulatory framework for municipal
supply
chain management.
[45]
Mr Katz referred to the adoption by the
respondent of a Supply Chain Management Policy (SCM) on 31 July
2013. Section 329
of this policy provides that, in respect of
goods and services with the exception of professional services where
there are other
mechanisms in place for excepting a bid, no work
shall commence, or goods be delivered before an official order has
been placed
for the vendor. Section 330 of the policy provides
that respondent shall not be liable for payment for any goods
delivered
or services rendered in contravention of s 329.
[46]
Mr Katz therefore submitted that it was not
open to applicant to deliver the services to the respondent in the
absence of duly issued
purchase orders irrespective of whether this
was done at the instance of respondent’s employee.
[47]
Much of the debate between counsel
turned on the interpretation of a judgment in
City
of Tshwane Metropolitan Municipality v RPM Bricks (Pty) Ltd
2008 (3) SA 1
(SCA) where respondent had been added to the list of
appellant’s approved suppliers for the supply and delivery of
coal to
certain of its power stations. Respondent then caused a
summons to be issued for an outstanding amount which alleged was the
appellant’s total indebtedness to it for coal supplied and
delivered during a specified period. One of the defences
raised by the appellant was that it had not varied the supply
contract in terms of the procedures set out in s 38 (1) Gauteng
Rationalisation of the Local Government Affairs Act 10 of 1998, nor
had it complied with the formalities prescribed in terms of
s 38 (3)
of that Act. Ponnan JA, in dealing with this defence, drew an
important distinction as follows:
‘
It
is important at the outset to distinguish between two separate, often
interwoven, yet distinctly different ‘categories’
of
cases. The distinction ought to be clear enough conceptually.
And yet, as the present matter amply demonstrates,
it is not always
truly discerned. I am referring to the distinction between an
act beyond or in excess of the legal powers
of a public authority
(the first category), on the other hand, and the irregular or
informal exercise of power granted (the second
category), on the
other. That broad distinction lies at the heart of the present
appeal, for the successful invocation of
the doctrine of estoppel may
depend upon it. (See TE Dönges & L de van Winsen
Municipal Law
2 ed (1953) 38 -41)
In
the second category, persons contracting in good faith with a
statutory body or its agents are bound , in the absence of knowledge
to the contrary, to enquire whether the relevant internal
arrangements or formalities have been satisfied, but are entitled to
assume that all the necessary arrangements or formalities have indeed
been complied with (see for example
National and Overseas
Distributors Corporation (Pty) Ltd v Potato Board
1958 (2) SA 473
(A);
Potchefstroom se Stadsraad v Kotze
1960 (3) SA 616
(A)).
Such persons may then rely on estoppel if the defence raised is that
the relevant internal arrangements or formalities
were not complied
with.
As
to the first category: failure by a statutory body to comply with
provisions which the legislature has prescribed for the validity
of a
specified transaction cannot be remedied by estoppel because that
would give validity to a transaction which is unlawful and
therefore
ultra vires.’ (paras 11 – 13)
[48]
In
RPM Bricks
,
the court went on to hold that, even though the respondent had been
misled into believing that the appellant’s employees
were duly
authorised to vary an agreement that had been lawfully concluded with
it, this could not deprive the appellant of a power
which had been
bestowed upon it by the legislature for ‘to do so would be
deprive the ultra vires doctrine of any meaningful
effect
’
.
(para 18)
[49]
The question for determination in this case
is, whether the defence put up by respondent concerns internal
arrangements, or a statutory
framework. Significantly, in the
answering affidavit, little if any specificity is provided with
regard to this defence.
All that Mr Jackson says insofar
as respondent’s defence is concerned is that ‘Premier
chose to render services in
a manner which do not accord with the
express terms of the contract and as such is not entitled to payment
for such services
’
.
Accordingly, he states that respondent denies that Premier was
entitled to raise invoices which in total amount to R 2 339 296.27
for the three sites referred to in these paragraphs
for
the reasons set out above
.’ (my
emphasis)
[50]
Significantly neither clause 8.4 of the
Special Conditions of Contract nor clause 16 relied upon by Mr Katz
deal at all with the
procedures required to provide services for the
additional sites as pleaded by the applicant. To the extent that s
329 of the SCM
Policy provides that no work shall commence before an
official order has been placed with the vendor’, no such denial
is
pleaded in Mr Jackson’s affidavit. To the contrary, it
would appear that a successful tenderer such as applicant is
allocated ‘a coordinator’ in each area where there are
sites which it services and the coordinator serves as a point
of
contact for tenderers and their dealing with respondent.
There was no denial, for example, that Mr Derek Dankers
was such a
coordinator nor that a certain request arose from coordinators such
as Mr Dankers regarding emergencies such as burglaries
or cancelled
contracts with existing service providers. This is stated in
the founding affidavit and admitted by Mr Jackson
in his answering
affidavit.
[51]
For these reasons, it would appear that the
distinction drawn in the
RPM Bricks
case
,
supra
can be applied in this case and
that applicant’s case for the additional claim falls to be
examined within the second category
to which Ponnan JA referred in
RPM Bricks, supra
.
The evidence put up by respondent did not gainsay this conclusion.
Accordingly, at best for respondent, the claim
was based on an
irregular exercise of a competent power.
Conclusion
[52]
Given the finding with regard to
prescription and waiver the main claim for the payment of R
16 469 681.94 together with
interest thereon must be
dismissed. The alternative claim however for the reasons which
are set out above must succeed.
[53]
Given that I found that the applicant has
been successful only in part and taking account of where the
emphasis of the pleadings
and argument were placed , I propose that a
costs order be made whereby the respondent should be liable for
thirty percent of the
costs which were incurred by the applicant
pursuant of this litigation.
[54]
For these reasons therefore:
1.
The application for the payment of the sum
of R 16 469 681.94 is dismissed.
2.
The application for the payment of the sum
of R 2 339 296.27 together with interest at the prescribed
rate
a tempore mora
is upheld subject to the following qualifications:
2.1
It is directed that respondent was
contractually bound to pay applicant in regard to services rendered:
2.1.1
On the site known as the Law enforcement
Office (Site PRE324) during the period October 2013 to September
2014;
2.1.2
On the site known as the Northdene Hall
(Site PRE326) during the period November 2012 to June 2014;
2.1.3
On the site known as Subcouncil 4 C Jordaan
(PRE228) during the period December 2010 to February 2013;
2.2
It is directed that respondent – within one week of the grant
of the order herein –take such steps as are necessary
to
process (and, if necessary, to correct) applicant’s pro forma
invoices which are set out in annexure V to the affidavit
of Ismael
Meyers and to furnish such information to applicant to enable it to
raise invoices accordingly;
3.
Respondent is directed – within one
week of the presentment of invoices as contemplated above – to
make payment of the
sums due to applicant.
4.
Respondent is ordered to pay thirty per
cent of applicant’s costs which were incurred in the
application in respect of the
main and additional claim, these costs
to include thirty per cent of the costs of two counsel.
DAVIS
J