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[2014] ZASCA 154
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Lepogo Construction (Pty) Ltd v Govan Mbeki Municipality (623/2013) [2014] ZASCA 154; [2015] 1 All SA 153 (SCA) (29 September 2014)
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SUPREME
COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
CASE
NO: 623/2013
Reportable
In
the matter between:
LEPOGO
CONSTRUCTION (PTY)
LTD
......................................................................
APPELLANT
and
THE GOVAN MBEKI
MUNICIPALITY
.....................................................................
RESPONDENT
Neutral
citation:
Lepogo Construction (Pty) Ltd v The Govan Mbeki
Municipality
(623/13)
[2014] ZASCA 154
(29 September 2014).
Coram:
Ponnan, Shongwe, Pillay JJA, Fourie et Mathopo AJJA
Heard:
22 August 2014
Delivered:
29
September 2014
Summary:
Contract – Municipality
invitation to tender – Contract documents prescribing procedure
for entering into a valid contract-
Prescribed formalities not
complied with – No
vinculum juris
created.
ORDER
On
appeal from:
North Gauteng High Court, Pretoria (Fabricius J
sitting as court of first instance)
The
appeal is dismissed with costs.
JUDGMENT
Ponnan
JA (Fourie and Mathopo AJJA Concurring)
[1]
This is an appeal by the appellant, Lepogo Construction (Pty) Ltd
(Lepogo) against the dismissal of its claim for payment of
the sum of
R4 822 084.96 against the Govan Mbeki Municipality (the
Municipality) by the North Gauteng High Court (per
Fabricius J). The
appeal is with the leave of the high court.
[2]
On 11 February 2008 Bigen Africa Services (Pty) Ltd (Bigen Africa)
was appointed by the Municipality as the consulting engineer
for the
construction of a 10ML Post Tensioned Water Reservoir with a dome.
The Municipality, in consultation with Bigen Africa,
then invited
tenders for the construction of the reservoir. Lepogo submitted two
tenders - an original as well as an alternative
tender. Contending
that its alternative tender had been accepted by the Municipality and
that: (a) a binding and enforceable agreement
had come into existence
between them; and (b) the Municipality had subsequently repudiated
that agreement, Lepogo issued summons
against the Municipality for
damages.
[3]
Lepogo’s particulars of claim alleged:
‘
3.1
On or about 29 January 2009 and at Pretoria the plaintiff and
defendant entered into a written contract (being contract no.
8/3/1-62/2007 and hereinafter referred to as “the construction
contract”) for the construction of a 10ML Post Tensioned
Reservoir with a Dome Roof.
3.2 In entering into
the construction contract the plaintiff was represented by J. de Jong
and the defendant by Bigen Africa Services
(Pty) Ltd (“
Bigen
Africa”
). Bigen Africa was in terms of paragraph 1.4 of the
‘tender data’ appointed by defendant as its duly
authorised agent
and acted in this capacity at the time when the
construction contract was entered into and at all material times
thereafter. The
provisions of the aforementioned paragraph 1.4 appear
from paragraph 4.1 below.
3.3 The terms of the
construction contract were embodied in:
3.3.1 A “
Contract
Document
” prepared by or on behalf of the defendant.
This document
included
inter alia
:
3.3.1.1 Defendant’s
tender notice and invitation to tender;
3.3.1.2 The tender
data;
3.3.1.3 The standard
conditions of tender;
3.3.1.4 The contract
data;
3.3.1.5 The pricing
data;
3.3.1.6 The scope of
work;
3.3.1.7 Site
information.
The contract
document is voluminous and it is impractical to attach a copy thereof
hereto. Defendant is already in possession of
a copy thereof and a
true copy thereof will be made available to this Honourable Court at
the hearing of this action.
3.3.1 bis A document
generally referred to as “General Conditions of Contract for
Constructions Works (2004)”. This
document (hereinafter
referred to as “the General Conditions of Contract”) is
voluminous and it is impractical to attach
a copy thereof hereto. . .
.
3.3.2 A letter dated
17 October 2008 under cover of which plaintiff’s original
tender was submitted to defendant. A copy of
this letter is attached
hereto marked “A”. . . .
3.3.3 A letter dated
17 October 2008 under cover of which plaintiff submitted an
alternative tender to defendant. A copy of this
letter together with
the annexures thereto is attached hereto marked “B”.
3.3.4 A letter dated
24 October 2008 addressed by plaintiff to Bigen Africa (acting on
behalf of defendant) in terms of which plaintiff’s
alternative
tender was amended in the respects as set out in the letter and
certain information supplied to defendant. A copy of
this letter
together with its annexures is attached hereto as annexure “C”.
. . .
3.3.6 A letter dated
29 January 2009 addressed by Bigen Africa (acting on behalf of
defendant) to plaintiff in terms of which plaintiff’s
alternative tender was accepted by defendant and plaintiff was
appointed the contractor for the construction of the 10ML Post
Tensioned Reservoir in Embalenhle. A copy of this letter is attached
hereto marked “E”.
4 Plaintiff relies
on all the provisions of the construction contract. The following
provisions of the construction contract are,
however, in particular
relevant to this action: . . .
. . .
6 The total contract
sum payable by defendant to plaintiff in terms of the construction
contract for the construction of the reservoir
. . . amounted to
R10.545 797.00.
7 On 30 January 2009
and in the offices of Bigen Africa in Pretoria plaintiff (represented
by J. de Jong) and defendant (represented
by Bigen Africa) orally
agreed that the site would be handed over to plaintiff on 9 February
2009 to enable plaintiff to commence
with the construction of the
10ML Post Tensioned Reservoir.
8 Defendant failed
to hand the site over to plaintiff on 9 February 2009 or thereafter
to enable it to commence with the construction
of the 10ML Post
Tensioned Reservoir . . .
9.1 On or about 20
April 2009 Bigen Africa, acting as agent on behalf of defendant,
informed the plaintiff in writing that it had
been instructed by
defendant to withdraw the awarding of the construction contract to
plaintiff. . . .
9.2 The
aforementioned letter, . . . constitutes a repudiation of the
construction contract by defendant.
9.3 The plaintiff
has elected to accept the repudiation and to cancel the construction
contract subject to its right to claim all
damages suffered by it as
a result of defendant’s breach of contract from defendant. This
election was conveyed by plaintiff
to defendant by letter dated 23
April 2009.
10.1
As a result of defendant’s aforementioned breach of the
construction contract plaintiff suffered damages in a total amount
of
R4.374 834.96 and [that amount came to be amended at the trial to
R4.822 084.96]. The amount of R4.374 834.96 is calculated
as will
more fully appear from annexure “J” hereto.
[4]
The defendant’s plea to Lepogo’s particulars of claim is
not a model of clarity. In essence the Municipality denied
that a
valid and binding contract had come into existence between it and
Lepogo,
inter alia
,
because one of its former employees, through his fraudulent conduct,
purported to appoint Lepogo when he lacked the authority
so to do.
[5]
Insofar as the procurement of services is concerned, s 217(1) of the
Constitution requires that when an organ of state such
as the
Municipality contracts for goods or services it must do so ‘in
accordance with a system which is fair, equitable,
transparent,
competitive and cost effective’. Section 217(3) of the
Constitution provides that national legislation must
prescribe a
framework within which that policy must be implemented. In this
instance, the legislation contemplated by s 217(3)
is the Local
Government: Municipal Finance Management Act 56 of 2003 (the Act),
which according to s 110(1)(
a
),
applies to the procurement by the Municipality of, inter alia, the
goods and services to be supplied in this case. Section 111
of the
Act obliges each Municipality to have and implement a supply chain
management policy which, in terms of s 112, must be fair,
equitable,
transparent, competitive and cost effective and comply with a
prescribed regulatory framework for municipal supply chain
management.
[6]
Here the Municipality had implemented a supply chain management
policy (the policy) pursuant to s 111 of the Act. In terms of
clause
3.2 of the policy, the council of the Municipality had delegated all
its powers and duties to the accounting officer (in
this instance the
municipal manager) to enable him to discharge the supply chain
management responsibilities conferred by the Act
and the policy.
Clause 3.3 of the policy provides:
‘
3.3.1
The Accounting Officer may in terms of Section 79 of 106 of the MFMA
sub-delegate any supply chain management powers and duties,
including
those delegated to the Accounting Officer in terms of this policy,
but any such sub-delegation must be consistent with
subparagraph 3.2
of this policy.’
Clause
3.3.2(a), however, specifically provided that in respect of ‘any
amount above R10 million (VAT included)’ that
power may not be
sub-delegated by the accounting officer.
[7]
Clause 9 of the policy headed ‘Evaluation of and allocation of
bids/quotations’ provides for a Bid Evaluation Committee
(BEC)
and Bid Adjudication Committee (BAC). The former is tasked with
evaluating all bids received and submitting a report and
its
recommendations regarding the award of the bid to the BAC (clause
9.3). The latter according to clause 9.5 must:
‘
(a)
accept the bid which in all the circumstances appears to be the most
advantageous to the municipality, taking into consideration
the
objectives and stipulations of the preferential procurement policy;
or
(b)
reject all bids.’
[8]
In its tender evaluation report, Bigen Africa recorded that it had
received two tenders from Lepogo Construction and a third
from Lubbe
Construction and Veza Musa Civils JV. It is noteworthy that Lubbe
ranked first on Bigen Africa’s tender evaluation
report.
[9]
On 28 November 2008 the BEC recommended:
‘
That
Lepogo Construction be appointed on Offer B for Bid: 8/3/1 –
62/2008: Construction of 10ML reservoir in Embalenhle for
an amount
of R12,859,264.
That the Department
of Technical and Engineering Services must source the shortfall of
approximately R4,8m from MIG.’
The
primary motivation as recorded in the minutes of the BEC for that
recommendation was that:
‘
Lepogo
Construction has extensive related experience in the construction of
reservoirs.’
[10]
On 15 January 2009 the BAC met to inter alia consider the
recommendation of the BEC. The minutes of that meeting record:
‘
Resolved
There
seems to be a problem with figures mentioned (R4.5 Million) is much
lower than the amount on Bid. The item be sent back to
Department
Technical Services to provide with vote for verification of funds
availability.’
[11]
On 20 January 2009 a memorandum was despatched by the chairperson of
the BAC, Ms N Ndlovu, to the chairperson of the BEC, Mr
EN Muanza.
That memorandum, which was copied to the municipal manager read:
‘
Kindly
be advised that the Bid Adjudication Committee at its meeting held on
15 January 2009 has resolved as follows:
. . .
That, Lepogo
Construction be appointed on offer B for the above mentioned Bid for
an amount of R12 859 264.00 on condition
the department
provide this committee with vote numbers as proof that the amount of
R12 859 264.00 is budgeted for this
project.’
The
Municipal Manager added in manuscript at the foot of the memorandum:
‘
Approved.
The department (TES) (Department of Technical and Engineering
Services) to handle the issue of the budget with the CFO.’
The
memorandum was thereafter signed by the Municipal Manager and dated
21 January 2009.
[12]
On 26 January 2009, and without being authorised to do so, Mr Muanza
faxed that memorandum to Mr Koos Bultman of Bigen Africa.
The latter
then wrote to Lepogo on 27 January 2009: ‘fax as received
yesterday from Govan Mbeki DM, a proper letter of appointment
will
follow’. Two days later Mr Bultman informed Lepogo:
‘
On
behalf of our client The Govan Mbeki Municipality, Lepogo
Construction (Pty) Ltd is herewith appointed for the Construction of
a 10ML Reservoir in Embalenhle for the sum of R12 859 264-00
(Twelve million eight hundred and fifty nine thousand two
hundred and
sixty four Rand) inclusive of vat, all as per tender documentation
offer B dated 17 October 2008.’
[13]
On 5 February 2009 Mr Muanza wrote to Mr Bultman: ‘Please take
note of the attached Memorandum received from the Municipal
Manager
of Govan Mbeki Municipality.’
The
attached memorandum which was dated 4 February 2009 read:
‘
Please
be informed that I am currently investigating the processes followed
in the finalization of the bid for the Construction
of 10ML Reservoir
for eMbalenhle (Bid 8/3/1 – 62/2008). I therefore instruct you
as Head of Department, and the consultant
(Bigen Africa Services
(PTY) LTD); to henceforth halt processing or disposing of any
document related to the execution of the said
project to any bidder
until further notice.’
On
27 February 2009 and in response to the memorandum from the municipal
manager, Lepogo wrote to Bigen Africa:
‘
1)
We have received our letter of appointment dated 29/1/09 for the
above contract.
2) Our Mr. de Jong
had a meeting with yourselves in your offices on 30/1/09 regarding
this contract. One of the items discussed
was the date for the site
handover which was subsequently set as 9/2/09.
3) On 5/2/09 we were
telephonically informed by yourselves that this meeting will be
postp[h]oned indefinitely as a result of an
e’mail dated 4/2/09
that you received from the Govan Mbeki Municipality. This said e’mail
you forwarded to us on 5/2/09.
4) Subsequent to the
e’mail of 5/2/09 we have been in telephonic communication on a
regular basis to enquire as to when the
site handover would take
place, but to date Bigen Africa has not been able to confirm a date
for this.
5) We have therefore
no alternative but to notify you, as we hereby do, that in terms of
clauses 41; 42; 47; 48 of the G.C.C. we
reserve the right to claim
for any and all costs (direct and indirect) associated with the delay
of the site handover as well as
the delayed start of the contract.’
That
letter was followed on 6 March 2009 with the following:
‘
We
take note of your e’mail dated 2/3/09 which had attached the
memo from the office of the municipality manager of Govan
Mbeki
Municipality dated 24/2/09.
We are unclear as to
the intention of the municipality, or the implications that this memo
may have for Lepogo Construction.
We deem it prudent
however to notify you as we hereby do, that should this action by the
municipality result in costs of whatever
nature to our company in the
present or the future, we shall claim these from the client as per
the G.C.C..
These costs will
include but are not limited to :
a) standing time
b) squardered costs
c) loss of profit,
etc.’
[14]
On 24 February 2009 the municipal manager wrote:
‘
Pursuant
to my memo dated the 4
th
February 2009, regarding my intentions to investigate processes and
circumstances leading to the awarding of the said bid, please
be
informed that I have decided to withdraw the awarding of the bid
8/3/1 – 62/2008 – Construction of 10ML Reservoir,
and
instead opt to re-start the tender process.
All the necessary
and due processes are being taken care of to safeguard the best
interest of Council.’
On
20 April 2009 Bigen wrote to Lepogo:
‘
As
an agent acting on behalf of the Govan Mbeki Municipality we have
been instructed to withdraw the awarding of bid 8/3/1 –
62/
2008 – Construction of a 10ML Reservoir.’
[15]
The undisputed evidence adduced on behalf of the Municipality is that
only after a bid specification committee decides on specifications
for a bid and the consultant, who has been appointed to the project
has done the necessary designs and specifications, will the
tender
issue inviting bids for the construction work. Bids are advertised in
the newspaper and on the Municipality’s website
and notice
board. Once the tenders are received, the consultant consolidates
them and preforms a pre-evaluation assessment. Thereafter,
the
consultant submits a pre-evaluation report to the Municipality, which
serves before the BEC. The BEC is tasked with the evaluation
of the
various bids and it then makes recommendations to the BAC. That
committee, in turn, makes a recommendation to the municipal
manager.
That is the procedure that was followed in this instance.
[16]
When the BAC sat on 15 January 2009 to consider the recommendation of
the BEC, it resolved that it could not deal with the
matter until the
shortfall between the bid amount and the budgeted amount for the
project had been addressed. The BAC accordingly
resolved that the BEC
recommendation not be endorsed until the issue of the shortfall had
been addressed. That resolution notwithstanding,
Mr Johan van der
Merwe, who was then serving as the acting chairperson of the BAC,
subsequently had the minutes of the BAC altered
to reflect that
Lepogo had been recommended for appointment as the contractor to the
project. The altered minutes, after having
been signed by Mr van der
Merwe, were thereafter forwarded to the municipal manager. At a
meeting of the BAC on 3 February 2009
Mr Merwe admitted that he had
‘wrongfully recommended Lepogo’. Mr van der Merwe by way
of explanation thereafter despatched
the following letter to the
municipal manager:
‘
I
hereby would like to report to you that the recommendation letter
issued to you on the 21
st
January 2009 for your approval was wrong.
On the 19
th
January 2009 I asked the secretary of the Adjudication Committee to
do all the recommendation letters for our meeting of 15
th
January 2009. I said to her she must do it the same as the evaluation
committee meetings recommendations.
After she brought it
to me for signatures I forgot to take the letter out of Bid 8/3/1 –
62/2008. It was sent to you for approval
and then it was sent to
Technical Services.
On
the 2
nd
February I realized that this letter went out wrongly. I discussed
the matter with the director Technical Services. He informed
me that
the appointment letter was already given to Lepogo Construction and
there is no way to stop the process.’
[17]
According to the municipal manager, Dr Mathunyane, his approval of
Lepogo’s bid was conditional. The condition, so he
testified,
was that the user department had to ensure that the money for the
completion of the project could be sourced before
they could proceed
with the tender. He explained:
‘
You
cannot appoint a contractor when you do not have the money so the
approval was conditional. After the internal memo which is
copied to
various persons it is necessary for the relevant department to
prepare an appointment letter which I must sign.’
He
testified that in dispatching the memorandum - which was an internal
one – to Mr Bultman, Mr Muanza had breached confidentiality.
The Municipality instituted disciplinary charges against both Mr van
der Merwe and Mr Muanza for their role in the debacle. The
former
resigned before the disciplinary process could be finalised. The
latter was charged with misconduct for communicating an
internal
memorandum. He was found guilty at a disciplinary enquiry and
dismissed.
[18]
Lepogo’s case depends upon the establishment of a contractual
relationship between it and the Municipality. Relying on
the letter
of appointment from Mr Bultman of 29 January 2009 as having given
rise to a contract between it and the Municipality,
Lepogo, in
accordance with its earlier threat, instituted the action, the
subject of the present appeal, against the Municipality
during June
2009. Lepogo alleged in its particulars of claim that ‘the
terms of the construction contract were embodied in
“
A
Contract Document”
’. That
document was incorporated in the Municipality’s invitation to
tender and stipulated from the outset the procedure
to be followed
for the coming into existence of a binding agreement between the
Municipality and the successful tenderer.
[19]
In terms of the contract document a ‘contract’ means ‘the
agreement that results from the acceptance of a
bid by an organ of
state’. The contract document further provided that:
‘
3.13
Acceptance of tender offer
Accept the tender
offer only if the tenderer complies with the legal requirements, if
any, stated in the tender data.
Notify the
successful tenderer of the employer’s acceptance of his tender
offer by completing and returning one copy of the
form of offer and
acceptance before the expiry of the validity period stated in the
tender data, or agreed additional period. Provided
that the form of
offer and acceptance does not contain any qualifying statements, it
will constitute the formation of a contract
between the employer and
the successful tenderer as described in the form of offer and
acceptance.
. . .
3.16 Issue final
contract
Prepare and issue
the final draft of the contract documents to the successful tenderer
for acceptance as soon as possible after
the date of the employer’s
signing of the form of offer and acceptance (including the schedule
of deviations, if any). Only
those documents that the conditions of
tender require the tenderer to submit, after acceptance by the
employer, shall be included.’
The form of offer
and acceptance annexed to the contract document, provided:
‘
[t]he
employer . . . has solicited offers to enter into a contract for the
procurement of . . .’;
‘
[t]he
tenderer . . . has examined the documents listed in the tender data
and addenda thereto and by submitting this offer has accepted
the
conditions of tender’;
. . .
‘
[t]his
offer may be accepted by the employer by signing the acceptance part
of this form of offer and acceptance and returning one
copy of this
document to the tenderer . . ., whereupon the tenderer becomes the
contractor in the conditions of contract . . .’.
. . .
ACCEPTANCE
By signing this part
of this form of offer and acceptance, the employer . . . accepts the
tenderer’s offer. . . . Acceptance
of the tenderer’s
offer shall form an agreement, between the employer and the tenderer
upon the terms and conditions contained
in this agreement and in the
contract that is the subject of this agreement.
. . .
Notwithstanding
anything contained herein, this agreement comes into effect on the
date when the tenderer receives one fully completed
original copy of
this document, including the schedule of deviations (if any). Unless
the tenderer (now contractor) within five
days of the date of such
receipt notifies the employer in writing of any reason why he cannot
accept the contents of this agreement,
this agreement shall
constitute a binding contract between the parties.’
[20]
It is undisputed that the form of offer and acceptance had not been
completed by the parties. It is the completion of that
form,
according to clause 3.13, that constitutes the formation of a
contract between the Municipality and the successful tenderer.
And,
in terms of clause 3.16, the agreement only comes into effect on the
date when the tenderer receives a fully completed version
of the
contract document. Even then, according to clause 3.16, a contractor
has five days after the signing and issuance of the
final version of
the contract document by the Municipality to notify the Municipality
of his non-acceptance of the contents of
the agreement. Only
thereafter, in the words of clause 3.16, does a ‘binding
contract’ come into existence between
the parties. Thus, what
clause 3.13 does is to stipulate the procedure to be followed for the
conclusion of an agreement and clause
3.16 goes further in
stipulating when a binding contract comes into existence.
[21]
It was, however, argued on behalf of Lepogo that the words employed
in the contract document are obscure and that it lacks
clarity. In my
view the contract does not admit of any doubt. The manner in which
the contract was to be concluded was clearly
prescribed in the
Municipality’s invitation to tender. Thus whatever was done
prior thereto was simply preliminary to the
conclusion of and did not
give rise to a binding agreement between the parties. It must
therefore follow that in
relying on the letter of
appointment from Mr Bultman of 29 January 2009 as having given rise
to a contract between it and the Municipality,
Lepogo misconceived
the position, because there was in truth no decision on the part of
the municipality to approve (let alone
accept) its tender. That being
so, there is also no room for Lepogo to rely on the doctrine of quasi
mutual assent (see
Pillay & Another
v Shaik & Others
2009 (4) SA 74).
[22]
In an endeavor to avoid what on the face of it was an insuperable
difficulty, counsel
submitted that because
Lepogo
had been appointed pursuant to its alternative
tender the general conditions in the contract document did not apply
to it.
Two factors, however, militate against that submission.
First, clause 2.12 of the contract document requires an alternative
tender
to be submitted ‘strictly in accordance with all the
requirements of the tender documents’. And, second, Lepogo’s
alternative tender specifically provided that the: ‘[c]onditions
of the original tender as far as not contrary to this letter
will
apply’. The alternative tender was concerned with an
alternative schedule of quantities and works. There was thus nothing
in the alternative tender that contradicted the offer and acceptance
provisions in the contract document. Counsel was ultimately
constrained to concede as much.
[23]
It follows that the appeal must fail and in the result it is
dismissed with costs.
V
M PONNAN
JUDGE
OF APPEAL
Pillay
JA (Shongwe JA concurring)
[24]
I have had the benefit of reading the judgment of Ponnan JA. I agree
with his conclusion but I have taken a different view
in arriving at
it.
[25]
‘. . . a binding contract is as a rule constituted by the
acceptance of an offer.’
[1]
The offer and the acceptance are two of the fundamental formalities
required to establish a binding contract. This appeal is, with
the
leave of the court below, directed at the order of the North Gauteng
High Court (Fabricius J) dismissing the claim of the appellant
with
costs. It concerns the question of whether there existed a contract
on which Lepogo Construction (Pty) Limited, the appellant,
could rely
to found a claim for damages against the Govan Mbeki Municipality,
the respondent, an organ of state.
[26]
In 2008, the respondent, decided to have a ‘10ML Post Tensioned
Reservoir with Dome Roof’ constructed. It appointed
Bigen
Africa Services (Pty) Ltd, an engineering company, as its authorised
agent (‘the agent’) to source a construction
company, on
its behalf, to construct the required reservoir by way of tender, and
to monitor the design and construction thereof.
[27]
A call for tenders, a process the respondent is bound to employ, is a
mere request to potential service providers (in this
case
contractors) to submit offers capable of being accepted or rejected
at the discretion of the offeree. If accepted, a contract
between the
offeror and offeree comes into existence.
[28]
An invitation to tender from an organ of state and the processing
thereof is governed by
s 3
of the
Promotion of Administrative Justice
Act 3 of 2000
,
s 2(1)
of the
Preferential Procurement Policy
Framework Act 5 of 2000
,
Local Government: Municipal Finance
Management Act (56/2003
): Municipal Supply Chain Management
Regulations
[2]
and its
preferential procurement policy. This system is intended to provide
for a fair, equitable, transparent, competitive and
cost effective
process as contemplated in s 217(2) of the Constitution of the
Republic of South Africa, 1996 so as to award contracts
upon tender.
[29]
It is common cause that the agent advertised for tenders for this
project and would deal with tenderers on behalf of the respondent
in
regard to the tendering processes which, with the conditions of the
proposed construction agreement, were embodied in the following
contract documents:
5.1
Defendant’s tender notice and invitation to tender;
5.2
The tender data;
5.3
The standard conditions of tender;
5.4
The contract data;
5.5
The pricing data;
5.6
The scope of work;
5.7
Site information and
5.8
General Conditions of Contract for Construction Works (2004).
[30]
On 17 October 2008, the appellant responded to the invitation and
submitted two tenders – a main tender for R16 676 790.13
and an
alternative one for R12 859 264.00 – through the
authorised agent.
[3]
The main
tender was accompanied by a covering letter from the appellant. The
alternative tender was attached to a separate letter
which dealt
mostly with technical matters related to the construction of the
reservoir. Of importance however, is that it included
a paragraph
which read as follows - ‘conditions of the original tender as
far as not in contrary (sic) to this letter will
also apply’.
These were not the only tenders for this particular contract. After
the agent had sieved through the tenders,
it sent them on to the
respondent municipality with a recommendation as to who it thought
would be the appropriate contractor to
be awarded the contract. Hence
a proper offer to build the 10 ML reservoir was made to the
respondent.
[31]
In terms of the supply chain management regulations, the tender bids
served before a Bid Specification Committee, a Bid Evaluation
Committee and a Bid Adjudication Committee,
[4]
before being presented to the municipal manager for consideration and
approval.
[32]
After the Bid Specification Committee had considered the tenders, the
appellant’s tenders, together with another, served
at the Bid
Evaluation Committee meeting on 17 December 2008. It recommended that
the appellant be appointed as the contractor to
construct the
reservoir as undertaken in its alternative tender. However it
qualified the recommendation and directed the respondent’s
Department of Technical and Engineering Services (TES) to source a
shortfall of R4,8 million to make up the required tender amount
of
R12 859 264.00. It sent a memorandum to that effect to the
Bid Adjudication Committee.
[33]
According to the minute of the meeting of the Bid Adjudication
Committee of 15 January
2009,
that particular tender was indeed discussed but was left unresolved
because the question of the R4,8 million shortfall was
still
outstanding. The committee returned the item to the TES to confirm
the availability of funds to cover the shortfall. However
a
memorandum allegedly from this committee, dated 20 January 2009,
found its way to the municipal manager for approval. This memorandum
contained a resolution and motivation supporting the appointment of
the appellant in respect of the alternative tender. (There
was
evidence on behalf of the respondent that at some stage the Bid
Adjudication Committee may have decided to recommend another
construction company.) It is unclear how or why this memorandum was
sent to the municipal manager in the form that it arrived on
his
desk. It is, however, not necessary to investigate that aspect in
this judgment. The municipal manager approved the appointment
of the
appellant as ‘resolved’ subject to the TES sourcing the
budgetary requirements for the project through the respondent’s
chief financial officer. He endorsed the memorandum to that effect
and it was sent to the TES to deal with the budget since it
was the
department which would oversee the project and ultimately operate the
reservoir.
[34]
Mr Bultman, who represented the agent, testified that he dealt only
with Mr Muanza in regard to the reservoir project and on
26 January
2009 he received a facsimile copy of the endorsed memorandum. It was
sent by Mr Muanza, the director: Technical Engineering
Services. On
27 January 2009, Mr Bultman communicated with the appellant by
sending it a copy of the same memorandum under a cover
letter wherein
he promised that a proper letter of appointment would follow and
enquiring as to when they could have their first
meeting. On 29
January 2009, the agent addressed a letter to the appellant. It read
as follows –
‘
On
behalf of our client The Govan Mbeki Municipality, Lepogo
Construction (Pty) Ltd is herewith appointed for the Construction of
a 10 Mℓ Reservoir in Embalenhle for the sum of R12 859 264-00
(Twelve million eight hundred and fifty nine thousand
two hundred and
sixty four Rand) inclusive of vat, all as per tender documentation
offer B dated 17 October 2008
The
items shown as rate only are not approved and should only be
incorporated into your design and construction if approved in writing
by ourselves
Congratulations,
and we are looking forward to a successful project.’
[35]
On or about 30 January 2009, the municipal manager was informed that
the process in respect of which he approved the appointment
of the
appellant to construct the reservoir had been compromised. He
requested those who had told him about the alleged compromise
to put
this in writing. He then directed a letter to Mr Muanza informing him
that he was investigating the processes followed in
the finalisation
of the bid for the construction of the reservoir and instructed him,
as head of the department, and the agent
to stop processing or
disposing of any document related to the execution of the project
until further notice. Upon receipt hereof,
Mr Muanza dispatched a
copy of this letter to the agent who in turn sent a copy thereof to
the appellant.
[36]
At a meeting of 6 March 2009 attended by the agent and municipal
officials, the status regarding this project and its processes
were
discussed and the agent was instructed to urgently cancel the
appellant’s appointment as the contractor in respect of
the
construction of the reservoir.
[37]
On 20 April 2009 the agent sent a letter to the appellant. It read as
follows:
‘
Construction
of a 10Mℓ Post Tensioned Reservoir
As
an agent acting on behalf of the Govan Mbeki Municipality we have
been instructed to withdraw the awarding of bid 8/3/1-62/2008
–
Construction of a 10Mℓ Reservoir.’
The
appellant then sued the respondent for damages in an amount
of
R4822 084.96.
[38]
In his testimony, Mr de Jongh who testified on behalf of the
appellant, said that he regarded the letter of appointment as
acceptance of the offer by the respondent and as far as he was
concerned, a contract between the appellant and respondent had
thereby been brought into existence. He further testified that he
regarded the withdrawal of the ‘awarding of the bid’
as
constituting repudiation of the contract and the appellant accepted
this. He explained that as a result, the appellant suffered
damages
in respect of direct costs for standing time of labour and the plant
and loss of profit. It is on this basis that it sued
the respondent.
[39]
The respondent pleaded that the process of approval for the
appointment of the appellant for this project was tainted by fraud
by
one of the members of the Adjudication Committee and consequently
there was no animus contrahendi between it and the appellant.
It
further pleaded that the approval of the appointment was not lawful,
and maintained that no contract between them existed. The
crisp issue
to be decided therefore is whether a contract was properly concluded
by the parties.
[40]
When the matter was dealt with in the court below, the claim was
dismissed on the basis that the process and in turn the agreement
lacked legality and consequently could not be enforced. Mr Delport,
who appeared for the respondent, submitted that the approach
was
incorrect and that the court below should have at least applied the
principles of estoppel or the Turquand Rule.
[41]
I do not consider it necessary to deal with this appeal on the basis
adopted by the court below or as suggested by Mr Delport
since the
matter can be disposed of on a much simpler basis.
[42]
The conditions as set out in the contract document(s) clearly
prescribe the processes to be followed in order to conclude a
contract upon which one of the parties could rely to found a proper
claim. Of relevance to this appeal is the contract condition
relating
to the mode of acceptance of the offer. In the Preferential
Procurement Regulations
[5]
‘contract’ means ‘the agreement that results from
the acceptance of a bid by an organ of state’. In the
Standard
Conditions of Tender
[6]
certain
undertakings relating to the mode of acceptance, for the respondent
to complete are listed. These subsections are clear
and unambiguous
and read as follows:
‘
3.13
Acceptance of tender offer.
3.13.1
Accept the tender offer only if the tenderer complies with the legal
requirements, if any, stated in the tender data.
3.13.2
Notify the successful tenderer of the employer’s acceptance of
his tender offer by completing and returning one copy
of the form of
offer and acceptance before the expiry of the validity period stated
in the tender data, or agreed additional period.
Provided that the
form of offer and acceptance does not contain any qualifying
statements, it will constitute the formation of
a contract between
the employer and the successful tenderer as described in the form of
offer and acceptance.
3.14
Notice to unsuccessful tenderers
After
the successful tenderer has acknowledged the employer’s notice
of acceptance, notify other tenderers that their offers
have not been
accepted.
3.15
Prepare contract documents
If
necessary, revise documents that shall form part of the contract and
that were issued by the employer as part of the tender documents
to
take account of
a)
addenda issued during the tender period,
b)
inclusions of some of the returnable documents,
c)
other revisions agreed between the employer and the successful
tenderer, and
d)
the schedule of deviations attached to the form of offer and
acceptance, if any.
3.16
Issue final contract
Prepare
and issue the final draft of the contract documents to the successful
tenderer for acceptance as soon as possible after
the date of the
employer’s signing of the form of offer and acceptance
(including the schedule of deviations, if any). Only
those documents
that the conditions of tender require the tenderer to submit, after
acceptance by the employer, shall not be included.’
The
above sets out how the contract is concluded and the formalities to
be followed thereafter.
[43]
The standard forms of offer and acceptance referred to in the
Standard Conditions of Tender make provision for basic details
of the
agreement and signatures of the representatives of the respective
parties as well as witnesses.
[44]
It is trite that where, in a proposed contract, the mode of
acceptance is stipulated, it is that mode that must be followed
before a contract is concluded.
[7]
In
Westinghouse
Brake & Equipment (Pty) Ltd v Bilger Engineering (Pty) Ltd
1986 (2) 555 (A) at 573F it was stated that an offeror may always
prescribe the mode of acceptance of his offer in order that a
vinculum
juris
should be created. In
Driftwood
Properties (Pty) Ltd v McLean
1971 (3) SA 591
(A) at 597D it was stated that ‘It is trite
than an offeror can indicate the mode of acceptance whereby a
vinculum
juris
will be created’. In
Withok
Small Farms (Pty) Ltd & others v Amber Sunrise Properties 5 (Pty)
Ltd
2009 (2) SA 504
(SCA) at 508 para 10, it was held that ‘
It
is a trite principle of the common law that, unless the contrary is
established, a contract comes into being when the acceptance
of the
offer is brought to the notice of the offeror. It is also trite that
an offeror may indicate, whether expressly or impliedly,
the mode of
acceptance by which a
vinculum
juris
will be created’
.
However in this case,this stage of the process had not yet been
reached since the bid had not been accepted by the organ of state
–
the respondent. Significantly neither party had signed the offer and
acceptance forms and neither were any of the conditions
which were
supposed to follow the acceptance of the offer, in particular the
issue of the final contract, complied with. In my
view there is
simply no contract that had come into existence and that would be the
end of the matter.
[45]
When these conditions of the contract were pointed out to Mr Delport
he accepted the position as correct and in the light thereof,
chose
to rather argue that because the appellant had been appointed in
respect of the alternative tender, the general conditions
and
processes as set out in the contract documents did not apply (as it
would if appointed for the primary tender). He accepted
that if it
was found that the general conditions of the contract were applicable
to the alternative offer, then proper acceptance
could only have been
effected in the prescribed manner. In support of that submission, he
referred to a condition in the appellant’s
covering letter to
the alternative tender viz ‘conditions of the original tender
as far as not in contrary to this letter
will also apply’. (It
is clear that it was intended to read ‘. . . as far as it is
not contrary to this letter will
also apply’) He further argued
that in that event, the conduct of the respondent from the time he
received the letter of
appointment from its agent, was sufficient
reason to infer that the contract had been concluded. He specifically
referred to the
fact that the appellant was afforded the opportunity
to conduct a site inspection and also that he was given to understand
that
the site would be handed over to the appellant on 9 February
2009. He was however unable to point out anything in the letter which
was ‘contrary’ to the general contract conditions that
could possibly render them inapplicable to the alternative tender.
Moreover it is doubtful that there could have been a situation in
which the general contract conditions would not have been applicable
to the alternative tender.
[46]
Absent anything contrary in the conditions, it follows that the
general body of the conditions indeed applies to the alternative
offer. There is consequently no contract between the parties and the
appellant has no basis on which to base a claim for damages.
[47]
The appeal is accordingly dismissed with costs.
R
PILLAY
JUDGE
OF APPEAL
APPEARANCES:
FOR
APPELLANT: Adv P P Delport SC
Instructed
by:
Pennells
Attorneys, Pretoria
Phatsoane
Henney Attorneys, Bloemfontein
FOR
RESPONDENT: Adv P L Mokoena SC
Instructed
by:
Ramathe
MJ Attorneys c/o Maoumakoe Attorneys, Pretoria
M
O Seobe Attorneys, Bloemfontein
[1]
Watermeyer ACJ in
Reid
Bros (SA) Ltd v Fischer Bearings Co Ltd
1943 AD 232
at 241.
[2]
Published
in GN R868,
GG
27636, 30 May 2005.
[3]
In
terms of paragraph 1.4 of the Standard Conditions of Tender,
communications between the
respondent,
as employer, and tenderer(s) had to be through the agent only.
[4]
All
of these are independent internal committees.
[5]
W
hich
is attached to Portion 1 of the tender document.
[6]
Another
section of the tender document.
[7]
This
was the position as early as 1924 - see
Laws
v Rutherfurd
1924 AD 261.