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[2015] ZASCA 104
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African Information Technology Bridge 1 v The MEC for Infrastructure Development Gauteng Province (134/2014) [2015] ZASCA 104 (2 July 2015)
THE SUPREME
COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Not
Reportable
Case
No: 134/2014
In
the matter between:
AFRICAN
INFORMATION TECHNOLOGY
BRIDGE
1 (PTY)
LTD
APPELLANT
and
THE
MEMBER OF THE EXECUTIVE
COUNCIL
FOR INFRASTRUCTURE
DEVELOPMENT
(formerly part of PUBLIC
TRANSPORT,
ROADS AND WORKS)
GAUTENG
PROVINCE RESPONDENT
Neutral
citation:
African
Information Technology Bridge 1 v The MEC for Infrastructure
Development Gauteng Province
(134/2014)
[2015] ZASCA 104
(2 July 2015)
Coram:
Maya
and Bosielo JJA and Schoeman, Fourie and Mayat AJJA
Heard:
5
May 2015
Delivered:
2
July 2015
Summary:
Tender
procedure - contracts vitiated by fundamental justus error and
therefore invalid and unforceable - appeal dismissed
ORDER
On
appeal from:
North
Gauteng High Court, Pretoria (Makgoka J sitting as court of first
instance).
The
appeal is dismissed with costs, including the costs of two counsel.
JUDGMENT
Schoeman
AJA (Maya and Bosielo JJA and Fourie and Mayat AJJA concurring)
[1]
The issue in this appeal is whether the Member of the Executive
Council for Infrastructure Development, Gauteng Province, (the
MEC)
entered into contracts with the appellant, a company named African
Information Technology Bridge 1 (Pty) Ltd (AITB 1), and
if so,
whether AITB 1 rendered services to the MEC and suffered damages
relating to three tenders. These were tender GC 1417/05/2006
(tender
1417), GC 1418/05/2006 (tender 1418) and GC 1419/05/2006 (tender
1419), for six projects. The court below granted judgment
in a
diminished amount in favour of AITB 1 in respect of one of its five
claims against the MEC, but dismissed the further claims.
AITB 1
appeals with leave of the court below.
[2]
Five witnesses testified during the trial, but the documentary
evidence spoke louder and clearer than any of the witnesses.
The
parties and the background.
[3]
AITB 1 is a company that was formerly known as Crestwell Trading 9
(Pty) Ltd (Crestwell). By a special resolution of the company,
dated
8 June 2006, the name of Crestwell was changed to African Information
Technology Bridge 1 (Pty) Ltd (AITB 1). Furthermore,
the main
business and main object of Crestwell was changed from ‘General
trading in all aspects’ to ‘Information
technology’.
These changes were registered with the Registrar of Companies on 9
June 2006. The sole director of AITB 1 was
Mr N H Tucker.
[4]
Another main role player is African Information Technology Bridge
(Pty) Ltd. The acronym this company used in all its dealings
relevant
to this matter was AITB, but to prevent confusion I will refer to it
as African Bridge. The latter company had three
directors, Mr N
H Tucker, his wife Mrs G Tucker and Ms N Rose-Dukhie.
[5]
The Gauteng Department of Transport and Public Works (the department)
was involved in the development of Construction Contact
Centres and
for that purpose a pilot project was initiated in January 2006.
[6]
African Bridge was invited to complete a pilot project for the
department in conjunction with another company, iNathi Technology
Holdings (Pty) Ltd (iNathi). The role of African Bridge was to
provide services and ‘soft-skills’ while iNathi
was
responsible for turnkey presentations and infrastructure.
[7]
This pilot project was successfully completed. It was a precursor to
the six projects that formed the subject matter of the
three tenders
referred to earlier, tenders 1417, 1418 and 1419. In May 2006
the department invited the three tenders.
[8]
Ms Rose-Dukhie was the sister of one of the senior managers in the
department, Ms Rose-Frazer, who was to be part of the project
management and the responsible person for the roll-out of the
project. This connection would have disqualified African Bridge from
the tender process. Negotiations between the directors of African
Bridge to buy out Ms Rose-Dukhie’s shares in African Bridge
were unsuccessful as they could not agree on a price for Ms
Rose-Dukhie’s shares.
[9]
To overcome this dilemma, Mr Tucker changed the name of Crestwell to
AITB 1. The similarities in the names of AITB 1 and African
Bridge
are striking, and, as will become apparent quite clearly deliberate.
AITB 1 signed the bid documents on 10 June 2006, the
day after the
name change from Crestwell to AITB 1 was registered.
[10]
On 28 June 2006 a meeting of the Departmental Acquisition Council
(the DAC) of the department was held. This body was inter
alia vested
with the authority to adjudicate on the tenders submitted in the
instant matters. The minutes of the meeting recorded
that tender 1417
be awarded to ‘AITB Inathi JV’ with certain conditions
pertaining to a reduction of the tender price,
which was subsequently
effected. The DAC decided to award the tender in respect of 1418 to
‘AITB and Inathi JV’ as
it ‘was the second highest
tender to specification and on points claimed basis.’ In
respect of tender 1419 it was decided
that the appointment of ‘AITB/
Inathi JV’ would be conditional on the conclusion of a detailed
joint venture agreement
between African Bridge, iNathi and Royal Yard
Holdings.’ The latter was a wholly female owned company.
[11]
It is common cause that the acronym AITB was used for African Bridge
in dealings between the department and African Bridge.
The
abbreviation on the letterheads of African Bridge refers to AITB and
African Bridge referred to itself as AITB.
[12]
After the meeting of the DAC, on 28 June 2006, letters of acceptance
for tenders 1417 and 1418 were written and signed by Mr
Maabane on
behalf of the Director: Procurement and BEE. These letters were
addressed to African Bridge (AITB) and iNathi. In respect
of tender
1417 the conditional acceptance as provided for in the decision of
the DAC was set out.
[13]
On 5 July 2006, an employee of AITB 1, Mr Zikalala, on the
instruction of Mr Tucker, went to the department and requested that
the letters of appointment be changed to reflect that the tender of
AITB 1 had been accepted. Ms Mokgoro, an employee of the department,
signed the letters in the absence of the Director: Procurement and
BEE and Mr Maabane. It is common cause that the DAC did not
meet to
discuss the amended letters of award.
[14]
On 6 July 2006 Ms Rose-Frazer had a meeting with Mr Tucker and Mr
Keshwar, the sole director of iNathi. At this meeting
Ms
Rose-Frazer presented documents wherein the respective
responsibilities of iNathi and African Bridge were set out with
regard
to tenders 1417 and 1418. Mr Tucker was dissatisfied as he
believed that the monetary values allocated to the respective
responsibilities
favoured iNathi. These letters by the
department, in respect of tenders 1417 and 1418, were addressed to
African Bridge and
not AITB 1. Furthermore, both documents made
provision for Mr Tucker to sign on behalf of African Bridge, which he
did in respect
of tender 1418, although he did not sign at the
designated space in respect of 1417. However, he did sign an
addendum in
respect of each of these documents wherein Mr Tucker and
Mr Keshwar ‘on behalf of their respective companies agreed to .
. . amendments to their teaming agreements’. These
addenda recorded arrangements between Mr Keshwar’s
company
and Mr Tucker’s company inter se. Mr Tucker did not
alert the department or anybody else that the agreement was not
between
African Bridge and the department, but that the department
was contracting with AITB 1. The contracts referred only to
African
Bridge and not to AITB 1. I will refer to these agreements as
‘the 6 July agreements’.
[15]
On 7 July 2006 a meeting was held between the parties in respect of
tender 1419 to carry into effect the condition imposed
by the DAC,
for acceptance of the tender, on condition that a tripartite joint
venture agreement had to be concluded between African
Bridge, iNathi
and Royal Yard Holdings. Mr Tucker refused to sign the agreement as
there was a further requirement that Royal Yard
Holdings would also
be a party to tenders 1417 and 1418. However, iNathi and Royal Yard
Holdings signed the contract with the department
in respect of tender
1419.
[16]
Later, after difficulties arose between the parties relating to the
execution of the tenders, the department became aware that
it had not
contracted with African Bridge, but with AITB 1. Despite this, the
department continued to negotiate with AITB 1, knowing
it was AITB 1
and not African Bridge, in an attempt to complete the tender. This,
however, came to nought.
[17]
It is common cause that AITB 1 performed work in respect of tender
1417 and the department paid an amount of R220 000 to AITB
1.
Furthermore, the court below granted judgment in favour of AITB 1 for
the amount of R617 894,40 in respect of the first claim,
relating to
tender 1417, with ancillary relief relating to interest and
costs.
Did
the department contract with AITB 1?
[18]
It is the case of AITB 1 that valid contracts were concluded with the
department upon the award of the tenders to AITB 1 in
respect
thereof. The court below found that the 6 July agreements constituted
the contracts between AITB 1 and the department in
respect of tenders
1417 and 1418. I will first deal with the award of the tenders.
The defence raised by the department was
that no contracts were
entered into. In this context the defence was in fact that there was
a unilateral mistake on the part of
the department.
The
award of the tenders, the subsequent contracts and the unilateral
mistake
[19]
In respect of tender 1419, the conditions imposed by the DAC were not
complied with, and Mr Tucker did not sign any contract
with the
department as he admittedly refused to do so when requested. It is
not clear on what basis AITB 1’s claim is founded
in respect of
tender 1419 as the evidence clearly established that no contract was
ever concluded between AITB 1 and the department.
It is therefore not
necessary to further deal with tender 1419.
[20]
In respect of tenders 1417 and 1418 the department pleaded that it
intended to contract with African Bridge and not AITB 1
and therefore
no contracts were entered into in respect of those tenders.
[21]
One of the primary requirements of any contract is that there must be
a meeting of the minds regarding the essentials of the
contract that
the parties intend concluding. As a result:
‘
Mistake,
whether caused by misrepresentation or not. . . is generally regarded
as a defect of the will, thus vitiating the consent
or assent of the
parties . . . .[F]
f
or
the formation of a valid agreement the concurrence of the will of the
parties is necessary and essential, and. . .the will can
be vitiated
by defects as e.g. mistake, misrepresentation, fraud and duress.’
[1]
[22]
For the purposes of this appeal, the only defence that we are
concerned with, which was raised by the department in denying
the
validity of the contracts between the parties (with reference to
tenders 1417 and 1418), amounts to a unilateral
error
in persona
by
the department. It is a unilateral mistake because it is only the
department that mistakenly thought that it had contracted with
African Bridge, as Mr Tucker knew that the tender documents were
completed in the name of AITB 1. Such a defence, which avoids
the
contract, has been said to be difficult to establish. In
National
and Overseas Distributors Corporation (Pty) Ltd v Potato Board
,
[2]
the following
was said:
'Our
law allows a party to set up his own mistake in certain circumstances
in order to escape liability under a contract into which
he has
entered. But where the other party has not made any misrepresentation
and has not appreciated at the time of acceptance
that his offer was
being accepted under a misapprehension, the scope for a defence of
unilateral mistake is very narrow, if it
exists at all. At least the
mistake (
error
)
would have to be reasonable (
justus
)
and it would have to be pleaded. In the present case the plea makes
no mention of mistake and there is no basis in the evidence
for a
contention that the mistake was reasonable.'
[23]
However, if a mistake is a fundamental mistake, and a
justus
error,
in
other words a reasonable mistake,
[3]
it has the
result that the contract is void
ab
initio
.
[4]
In
Bird
v Sumerville
[5]
this court
held that where a seller addressed an offer to sell a block of flats
to a specific person (the buyer), a valid contract
was not concluded
when the offer was accepted by the buyer and a person of whom the
seller was not aware.
Kok
v Osborne
[6]
was a matter
where the seller accepted an offer ostensibly made by two buyers
jointly. However, the offer was actually from only
one buyer.
It was clear that the defendant in that instance would not have
accepted the offer had he known the true position.
There Jones
J said:
‘
.
. . [H]e is not bound by his apparent acceptance of it if he was
genuinely mistaken, even though his mistake is unilateral, provided
that he acted reasonably in the circumstances and his mistake was
justus.
’
[7]
[24]
In
Beyers
v Mckenzie
,
[8]
de Villiers CJ
referred with approval to a decision of the House of Lords and said
the following:
‘
. . . [I]t
was held that if B, a person of no credit, gets goods from A by
trading under a name and address closely resembling those
of C, who
is known to A as a respectable trader, . . . [because] A believed he
was dealing with C, there was no contract with B.
. . .’
[25]
In
Sonap
Petroleum (SA) (Pty) Ltd v Pappadogianis
,
[9]
it was held,
in a case of unilateral mistake, that:
‘
.
. . the decisive question in a case like the present is this: did the
party whose actual intention did not conform to the common
intention
expressed, lead the other party, as a reasonable man, to believe that
his declared intention represented his actual intention?
. . . To
answer this question, a three-fold enquiry is usually necessary,
namely, firstly, was there a misrepresentation as to
one party's
intention; secondly, who made that representation; and thirdly, was
the other party misled thereby? . . . The last
question postulates
two possibilities: Was he actually misled and would a reasonable man
have been misled?’
[26]
Having determined the general principles relating to a unilateral
error
in persona
,
I now turn to the facts to determine whether the department’s
mistake was
justus
,
thereby avoiding the contract, or conversely, whether the
department’s expressed intention to be bound could be
reasonably
relied upon by AITB 1 with the effect that the contract
would be regarded as valid and enforceable, notwithstanding the
existence
of the material mistake.
The
representation.
[27]
On 5 June 2006, five days before the bid documents were submitted, Mr
Tucker wrote a motivational letter in support of the
respective bids.
This letter referred to the successful conclusion of the pilot
project by the joint venture of African Bridge
and iNathi. The letter
was written on the letterhead of African Bridge and had an African
Bridge logo. It further referred to previous
developments African
Bridge had finalised for the department as proof that the bidder
could successfully complete projects.
This was a covering
letter to a 28 page document with the heading ‘Proposal for the
Construction Contact Centre’s Pretoria
& Benoni—Tender
No:GC 1417/05/2006’ and ‘AITB (Pty) Ltd Consortium
Proposal to Gauteng Department of Public
Transport Roads &
Works.’ Furthermore, at the time of the writing of the letter,
the name of Crestwell had not been changed
to AITB 1. The latter had
not completed any projects for the department whatsoever and did not
complete the pilot project of the
department.
[28]
Regarding the bid submission itself, it was a requirement that
certain certificates be attached to the bid documents as proof
that
the tenderer complied with statutory prescripts. Although the tenders
were submitted in the name of AITB 1, the Unemployment
Insurance Fund
reference numbers, the Pay As You Earn numbers and VAT registration
numbers used in the bid documents
,
were those of African Bridge. Furthermore, the bid documents
required information relating to the number of years the bidding
company had been in business; the number of employees employed by the
bidding company; the assets of the company; the income of
the company
for the previous six months; and the value of the work performed by
the bidding company for the previous three years.
The information
supplied in the documents relating to these aspects was that of
African Bridge and not AITB 1. Further relevant
questions posed in
the bid documents were: ‘Do you share any facilities?’
and ‘Did the firm exist under a previous
name?’ The
answers to both these questions were ‘No’, whereas the
true position was that AITB 1 and African
Bridge had exactly the same
address and as stated previously the name of AITB 1 was changed the
day before the bid documents were
submitted. Correspondence
subsequent to the award of the tenders continued referring to African
Bridge by both the department and
Mr Tucker himself.
[29]
The minutes of the DAC meeting make it clear that the department
intended to contract with a joint venture of African Bridge
and
iNathi. The correspondence and further documentation shows that the
intention of the department never changed.
[30]
In this regard Mr Tucker had deliberately set out to create the
impression that it was African Bridge and not AITB 1 that submitted
the tender bid. This is clear from the letter accompanying the bid
documents that referred to African Bridge having successfully
completed the pilot project and two other projects; the name of
Crestwell being changed to AITB 1, which closely resembled the
name
of African Bridge and the acronym used by African Bridge; and the
information in the bid documents relating to African Bridge
and not
AITB 1. The only inference is that these actions were done solely to
confuse and obscure.
[31]
The court
a quo
found the following.
‘
On
a consideration of all the facts, I am satisfied that Tucker
conveniently used the name of AITB [African Bridge] instead of the
plaintiff [AITB 1] to present to the defendant that the same company
that successfully completed the pilot project with Inathi,
was the
one bidding for tenders 1417, 1418 and 1419. He knew that had the
true state of affairs come to the attention of the department,
the
bid by the plaintiff would not have been accepted. The plaintiff
simply did not qualify in any respect for the tender.’
[32]
I agree with this conclusion. It is clear that Mr Tucker deliberately
misled the department to create the impression that it
was African
Bridge contracting with the department and not a different entity
with no experience, no assets and no personnel.
[33]
The department was clearly mistaken with regard to the entity with
whom it thought that it was contracting.
There
is no doubt that the department intended to award the tenders to
African Bridge, a company that it was familiar with and which
had
completed the pilot project and complied with all the requirements of
the department in respect of the particular tenders.
The
department’s continued reference to African Bridge and not AITB
1 bears witness to what the department intended.
It was also
clearly a material mistake, and Mr Tucker conceded that if the
tenders were submitted with the particulars of AITB
1, it would not
have been awarded the tender as it had no personnel, assets or track
record with the department.
[34]
Furthermore, the mistake of the department was
justus
as the
actions of Mr Tucker were deliberately taken to mislead. It was
reasonable for the department to conclude that it was accepting
the
tender of African Bridge as Mr Tucker had deliberately created the
confusion. The minutes of the meeting of the DAC show that
the
department was of the view that it was African Bridge that had
submitted the tenders. Such mistake in respect of the identity
of the
other contracting party was fundamental.
[35]
Therefore, there was a material and
justus
error in respect of
the contracts purportedly entered into between AITB 1 and the
department in respect of tenders 1417 and 1418.
In such a situation,
there is no contract and both are void
ab initio.
However,
there is a further matter to consider, as the court below was of the
view that in spite of there being a material mistake
initially, there
was subsequently a valid counter-offer by the department addressed
specifically to AITB 1, which was accepted,
and which gave rise to
valid contracts in respect of tenders 1417 and 1418.
Did
the agreement of 6 July 2006 constitute a valid counter-offer by the
department to AITB 1 that was accepted by Mr Tucker on
behalf of AITB
1?
[36]
The court below
held that the department and AITB 1 did enter into contracts in
respect of tenders 1417 and 1418, in spite of the
initial error
relating to the contracting parties, due to the following: (a) The
bid documents were submitted in the name of AITB
1;(b) the letter
awarding the tender to African Bridge on 28 June 2006 was changed on
5 July 2006 by Ms Mokgoro to read that it
was awarded to AITB 1; and
(c) the meeting of 6 July 2006 between Ms Rose Fraser, Keshwar and Mr
Tucker resulted in Mr Tucker and
Mr Keshwar signing the agreement
presented to them. This was the so-called counter offer that both Mr
Tucker and Mr Keshwar signed
‘on behalf of their respective
companies’.
The
court a quo found that the re-issue of the letters of award in the
name of AITB 1, which were signed by Ms Mokgoro, had the
effect that
a reasonable man would have believed that the department accepted
AITB 1 as the other contracting party.
[37]
The letters of notification of the award of the tenders to the joint
venture of African Bridge and iNathi, dated 28 June 2006,
setting out
the necessary arrangements to be made for the signing of the
contracts were addressed to African Bridge. The agreements
dated 6
July 2006, (representing the contracts referred to in the letters of
award) presented by the department to Mr Tucker and
Mr Keshwar, were
similarly addressed to African Bridge and iNathi as a joint venture.
It is important these documents are
dated 6 July 2006, a day after
the letters of award were changed to refer to AITB 1 and not African
Bridge. The respective contracts
had the following provision relating
to a Service Level Agreement (SLA):
‘
This
signed agreement will be followed by
A
Service Level Agreement will be drafted by the GDPTRW [Gauteng
Department of Public Transport, Roads and Works] for both parties,
i.e. African Information Technology Bridge (Pty) Ltd and iNathi
Technology Holdings (Pty) Ltd (Joint Venture)’.
[38]
At the end of the letters of confirmation and appointment, provision
was made for the signatures of Ms Rose-Fraser on behalf
of ‘DPTRW’
(ie the department), Mr Tucker on behalf of ‘AITB’ (ie
African Bridge) and Mr Keshwar on behalf
of iNathi. In respect of
tender 1417, Mr Tucker did not sign in the designated place but
signed a handwritten addendum dealing
with the arrangements of Mr
Keshwar and Mr Tucker ‘on behalf of their respective
companies’. The agreement relating
to tender 1418 was signed by
Mr Tucker in the designated space, which made provision for his
signature as ‘Nicholas H Tucker,
For and on behalf of AITB who
warrants the authority thereto.’ It is common cause that the
Service Level Agreements were
not signed in respect of 1417 and 1418.
[39]
It is important that although Mr Tucker had the name of the company
changed on the letters awarding the tender, the next day
he did not
raise the fact that the contracts were not in AITB 1’s name
(according to Mr Tucker, the correct contracting party)
or inform Ms
Rose-Fraser that the information needed to be corrected. Mr Tucker,
furthermore, signed these agreements on behalf
of African Bridge.
[40]
The court below found that these agreements comprised the counter
offer by the department to AITB 1 that the latter had accepted.
This
cannot be. These documents were addressed to African Bridge which is
indicative of the fact that at that stage the department
still
intended to contract with African Bridge. This contract was in
any event a consequence of the tender process. As found
above, the
exercise of the option, posed by the tender was due to mistake and
rendered the contract void
ab
initio
.
The so-called counter-offer was still not addressed to AITB 1. Thus
it cannot be said that a new contract was entered into as
the
contemplated contracts could only be completed with a party after a
tender process. Furthermore, the record does not disclose
that the
DAC ever considered awarding the tender to AITB 1. The court
a
quo
found
that the tenders would not have been awarded to AITB 1 if the
department had not made a mistake. Besides that, the letter
of award
envisaged that the parties had to enter into an agreement. The
agreement of 6 July was that agreement and it was not a
separate,
self-standing contract.
[41]
I am accordingly of the view that the department proved that the
contracts with AITB 1 were vitiated by the mistake. Therefore
the
appeal should be dismissed. There was no cross-appeal against the
order that was granted in respect of the first claim against
the
department based on tender 1417. This is understandable as the
department conceded that the work in respect of tender 1417
had been
partially completed.
[42]
The following order is made.
The
appeal is dismissed with costs, including the costs of two counsel.
__________________________
I Schoeman
Acting
Judge of Appeal
APPEARANCES
For
Appellant:
I Moosa
Instructed by:
Carls Attorneys, Bassonia
Matsepes Inc, Bloemfontein
For
Respondent:
Q Pelser SC (with him R Kgoroeadira)
Instructed by:
The State Attorney, Pretoria
The State
Attorney, Bloemfontein
[1]
L C Hofmann ‘The basis of
the effect of mistake on contractual obligations’ (1935) 52
SALJ
532.
[2]
National and Overseas
Distributors Corporation (Pty) Ltd v Potato Board
1958
(2) SA 473
(A) at 479F-H.
[3]
See SWJ Van der Merwe et al
Contract General
Principles
4 ed
(2012) at 37.
[4]
Spenmac (Pty) Ltd v Tatrim CC
2015 (3) SA 46
;
[2014] ZASCA 48
(SCA) para 26.
[5]
Bird v Sumerville &
another
1961 (3) SA
194 (A).
[6]
Kok
v Osborne & another
1993 (4) SA 788 (SE).
[7]
At 799 C-D.
[8]
Beyers
v Mckenzie
(1880) F
125
at 128.
[9]
Sonap Petroleum (SA) (Pty)
Ltd (formerly known as Sonarep (SA) (Pty) Ltd) v Pappadogianis
[1992] ZASCA 56
;
1992 (3) SA 234
(A) at 239I-240B.