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[2012] ZASCA 160
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Command Protection Services (Gauteng) (Pty) Ltd t/a Maxi Security v SA Post Office Ltd (214/12) [2012] ZASCA 160; [2013] 1 All SA 266 (SCA); 2013 (2) SA 133 (SCA) (16 November 2012)
THE SUPREME COURT OF APPEAL OF
SOUTH AFRICA
JUDGMENT
REPORTABLE
Case No: 214/12
In
the matter between:
COMMAND PROTECTION SERVICES
(GAUTENG) (PTY) LTD t/a MAXI
SECURITY
................................................
APPELLANT
and
SOUTH
AFRICAN POST OFFICE LIMITED
................................................
RESPONDENT
Neutral citation:
Command
Protection Services (Gauteng)(Pty) Ltd v South African Post Office
Limited
(214/12)
[2012] ZASCA 160
16 November 2012).
Coram:
Mthiyane DP, Brand,
Cloete and Pillay JJA and Saldulker AJA
Heard:
1 November 2012
Delivered: 16 November 2012
Summary: Acceptance of tender not
unconditional ─ hence it did not bring about a valid and
binding contract between the parties.
___________________________________________________________________
ORDER
___________________________________________________________________
On appeal from:
North Gauteng
High Court, Pretoria (Poswa J sitting as court of first instance):
The appeal is dismissed with costs,
including the costs of two counsel.
___________________________________________________________________
JUDGMENT
___________________________________________________________________
BRAND JA
(MTHIYANE DP,
CLOETE and PILLAY JJA and SALDULKER AJA concurring)
:
[1] This appeal turns on the question
whether or not a binding agreement came into existence between the
parties on the terms alleged
by the appellant. Proceedings commenced
when the appellant, as the plaintiff, instituted an action against
the respondent, as the
defendant, in the North Gauteng High Court,
Pretoria, for damages it allegedly sustained through the respondent’s
repudiation
of an agreement between them. In broad outline the
appellant contended that:
(a) on 28 July 2003 the parties
concluded a written agreement in terms whereof the appellant
undertook to provide guarding services
for the respondent’s
post offices in three regions of the Republic;
(b) on 30 January 2004 the respondent
wrote a letter to the appellant which constituted a repudiation of
that agreement, which repudiation
was accepted by the appellant;
(c) as a result of the respondent’s
breach of contract, the appellant suffered damages in the sum of
about R14 million.
The respondent’s answer to this
claim consisted, in the main, of a denial that the agreement relied
upon by the appellant
ever came into existence.
[2] When the matter came before Poswa
J in the court a quo, he was asked, by agreement between the parties,
to order a separation
of issues. In terms of the separation order he
consequently granted, the issues relating to the contractual
relationship between
the parties were to be determined first while
all other issues, including those relating to the quantum of the
appellant’s
damages, stood over for later determination. At the
end of the preliminary proceedings, Poswa J, in effect, decided all
issues
placed before him against the appellant. In consequence, he
dismissed its action with costs. The appeal to this court against
that
judgment is with the leave of the court a quo.
[3] The exact nature of issues that
arose on appeal will be best understood against the factual
background that follows. It all
started during October 2002 when the
respondent caused an advertisement to be placed in national
newspapers inviting tenders for
the guarding of post offices in six
specified regions of the country. Bidders were invited to apply for
more than one region. Details
of the services required, so the
advertisement said, were stipulated in a document called the Post
Office Request for Proposal,
which could be obtained from the
respondent.
[4] During November 2002 the appellant
submitted tender documents corresponding to the terms of the Request
for Proposal document,
to provide guarding services in all six
regions as advertised. These documents were annexed to the
appellant’s particulars
of claim as PC2. Hence they were
referred to throughout the proceedings by that description. I find it
convenient to do the same.
Clause 5 of annexure E to PC2 stipulated
that ‘acceptance of our proposal will be communicated to us by
letter or order through
the post’ and that ‘communication
as envisaged above will constitute an agreement between the South
African Post Office
Limited and ourselves’. Subsequently, the
appellant indeed received a letter of acceptance from the respondent
dated 28 July
2003.
[5] In argument, counsel referred to
the letter of acceptance – again emulating the description of
the document in the appellant’s
particulars of claim – as
PC3 and I propose to do the same. As it happened, the issues that
later arose, both in the court
a quo and on appeal, turned mainly on
the wording of PC3. In the circumstances, the contents of this
document seem to warrant a
full quotation. It was addressed to the
appellant and it read:
‘
LETTER
OF APPOINTMENT
It
is with pleasure that we inform you that the Tender Board has awarded
the above tender proposal to [you]. As a result you are
appointed as
the supplier of the above-mentioned service as per our tender
proposal.
This
appointment is subject to the following:
BEE
improvement; and
The
successful finalisation and signing of a formal contract.
A
draft contract will be forwarded to you within (7) seven working days
for your comment and to the effect mutually agreed on amendments
and
finalisation into a formal contract. You are kindly advised to
acknowledge receipt of this letter of appointment and provide
this
office with the contact information of the person(s) responsible for
the finalisation of the contract process.
Yours
sincerely
[Signed
on behalf of the appellant]
Accepted
and signed on behalf of the respondent]’
[6] On 30 July 2003 a meeting took
place in Pretoria, attended by representatives of both parties. It is
common cause that at that
meeting the appellant’s
representatives were told that, though it had tendered for all six
regions advertised, it had been
awarded the tender in respect of
three of these regions only, namely the Western Cape, the Northern
Region and the Central Region.
It is also common cause that it was
agreed at that meeting that, since the respondent’s contract
with its previous service
provider would terminate on 31 August 2003,
the appellant would provide the guarding services in the three
regions mentioned as
of 1 September 2003. Shortly after the meeting,
the respondent provided the appellant with a draft contract. Though
it was envisaged
at the meeting that the contract would soon be
finalised, this did not happen. Four further drafts were to follow.
The last of
these was only provided to the appellant in December
2003. All these drafts were prepared by the respondent’s
attorney. They
were all lengthy documents, covering over 50 pages and
their provisions differ in numerous respects from the provisions of
the
respondent’s original tender. A further common feature of
these drafts was a clause devoted entirely to the issue of BEE,
which
is the well-known abbreviation for black economic empowerment. This
topic is covered in clause 39 of both the first and final
draft. In
both drafts this clause provides, inter alia, that the appellant
would maintain a BEE component of at least 40 per cent
throughout the
contract period and that the respondent reserved the right to monitor
compliance with this requirement at six monthly
intervals.
[7] In the meantime, and while the
parties were negotiating the terms of the consecutive drafts, the
appellant started providing
guarding services for the respondent in
the Western Cape, the Northern Cape and the Central Region as was
contemplated at the meeting
of 30 July 2003. As it happened, however,
the drafts never metamorphosed into a formal agreement. The reason
flows from a letter
written by the respondent’s chief executive
officer to the appellant on 30 January 2004. This letter was
subsequently relied
upon by the appellant in its particulars of claim
as a repudiation of the contract between the parties. Its contents
warrant citation
as it encapsulates the respondent’s version of
the relationship between the parties at the time. The relevant part
of this
letter stated:
‘
1.
As you are aware the South African Post Office (“the Post
Office”) conditionally appointed your company to render
guarding security services in 3 operational regions as delineated by
the Post Office for its purposes. This appointment was on
a
month-to-month basis from 01 September 2003, subject to and until
finalisation of negotiations and conclusion of the written
agreement
as contemplated in paragraph 3 hereof.
2.
Prior to such appointment, the Post Office had published an
invitation for tenders to which your company had submitted its
response
(“the tender response”).
3.
It was a term and condition of the appointment that your company and
the Post Office (collectively referred to as “the
parties”)
would conclude and sign a written agreement within a reasonable
period from the date of award of the said tender
to your company.
4.
. . .
5.
Regrettably, whilst negotiations towards conclusion of a written
agreement were in progress, your company engaged in conduct
that has
materially and seriously undermined the trust and utmost good faith
relationship between the parties. Examples of such
conduct (and this
is by no means an exhaustive list of incidents) are:-
.
. .
6.
. . .
7.
. . . The incidents constitute a clear breach of the basis of the
existing relationship between the parties. The Post Office
therefore
hereby exercises its rights and gives your company notice that:-
7.1
it will not continue with any contractual negotiations with your
company as envisaged in the award of the tender to your company;
and
7.2
the month-to-month contractual relationship between the parties will
come to an end on 29 February 2004 on which date your company
must
vacate all premises of the Post Office.
8.
. . .’
[8] According to the appellant’s
particulars of claim, the contract upon which it founded its case
came about when the respondent
accepted the offer contained in PC2,
in terms of its letter of 28 July 2003, PC3, which was in turn
accepted on behalf of the appellant,
as appears from the wording at
the foot of PC3. With regard to the statement in PC3 that ‘this
appointment is subject to
. . .
BEE improvement; and
The successful finalisation and
signing of a formal contract’, the appellant pertinently
pleaded that these provisions did
not constitute suspensive
conditions. In addition, various alternative allegations were made
in the appellant’s particulars
of claim, which would arise in
the event of the court finding – contrary to the appellant’s
main allegation –
that the provisions of PC3 referred to did
in fact constitute suspensive conditions. These related to
fulfilment of the suspensive
conditions, waiver, estoppel and
fictional fulfilment. In its plea the respondent, in turn, contended
that the provisions of
the letter referred to indeed constituted
suspensive conditions which had not been fulfilled. The appellant’s
alternative
allegations relating to waiver, estoppel and fictional
fulfilment were essentially met in the plea by bald denials.
[9] Much of the evidence led during
the course of the trial had relevance to these alternative
allegations. On appeal, counsel for
the appellant, however, made it
clear from the outset that these alternative contentions were no
longer pursued. Ultimately the
outcome of the appeal thus turns on
one question only: whether on a proper interpretation of PC3, it
constituted an unconditional
acceptance of the appellant’s
offer contained in the tender document.
[10] The way in which the appellant
introduced the debate in its particulars of claim, raised the concept
of suspensive conditions.
As explained by Botha J in
Design and
Planning Service v Kruger
1974 (1) SA 689
(T) at 695C-E, a
suspensive condition of a contract, properly so called, suspends the
operation of all or some of the obligations
flowing from that
contract, pending the occurrence or non-occurrence of a specific
uncertain future event. If the condition is
fulfilled, the
obligations under the contract become enforceable. If the condition
is not fulfilled, the agreement becomes unenforceable
(see also eg
Jurgens Eiendomsagente v Share
[1990] ZASCA 81
;
1990 (4) SA 664
(A) at 674E-J;
De Wet & Van Wyk
Kontraktereg & Handelsreg
5 ed Vol 1
at 146-154; RH Christie
The Law of Contract
6 ed (2011) at 137
and 145).
[11] It is clear that, thus
understood, the stipulation in PC3 which rendered ‘this
appointment subject to the successful
finalisation and signing of a
formal contract’ could never have been intended as a suspensive
condition in the true sense.
If a formal contract were to be
finalised and signed, this would not result in the agreement
constituted by the respondent’s
acceptance of PC2, becoming
operative. What would happen in that event is that a new agreement,
being the one constituted by the
‘formal contract’, would
come into operation. At the same time it is equally clear to me that
the respondent’s
case was never that the stipulation under
consideration constituted a suspensive condition in the real sense.
Right from the outset
the respondent’s case was that PC3 was
not an unconditional acceptance of the appellant’s tender
contained in PC2;
that, on the contrary, the acceptance was
especially made subject to two conditions; that these conditions were
never fulfilled;
and that in consequence the contract between the
parties relied upon by the appellant, with the terms reflected in
PC2, never came
into existence. By the same token, the appellant’s
case was from the beginning that PC3 constituted an unconditional
acceptance
of its offer contained in PC2 with the result that a
contract came into existence on those terms.
[12] The dispute thus arising is not
novel. It frequently happens, particularly in complicated
transactions, that the parties reach
agreement by tender (or offer)
and acceptance while there are clearly some outstanding issues that
require further negotiation
and agreement. Our case law recognises
that in these situations there are two possibilities. The first is
that the agreement reached
by the acceptance of the offer lacked
animus contrahendi
because it was conditional upon consensus
being reached, after further negotiation, on the outstanding issues.
In that event the
law will recognise no contractual relationship, the
offer and acceptance notwithstanding, unless and until the
outstanding issues
have been settled by agreement. The second
possibility is that the parties intended that the acceptance of the
offer would give
rise to a binding contract and that the outstanding
issues would merely be left for later negotiation. If in this event
the parties
should fail to reach agreement on the outstanding issues,
the original contract would prevail (see eg
CGEE Alsthom
Equipments et Enterprises Electriques, South African Division v GKN
Sankey (Pty) Ltd
1987 (1) SA 81
(A) at 92A-E;
Namibian
Minerals Corporation Ltd v Benguela Concessions Ltd
[1996] ZASCA 140
;
1997 (2) SA
548
(A) at 567A-C).
[13]
Illustrations of cases that were
held by this court to be manifestations of the first possibility are
to be found in
Namibian Minerals Corporation
and in
Premier,
Free State v Firechem Free State (Pty) Ltd
2000 (4) SA 413
(SCA)
while the facts in
Alsthom Equipment
and in
Murray &
Roberts Construction Ltd v Finat Properties (Pty) Ltd
1991 (1) SA
508
(A) were held to demonstrate the second (see also
Lewis v
Oneanate (Pty) Ltd
[1992] ZASCA 174
;
1992 (4) SA 811
(A) at 820I-821E). The
criterion as to whether the facts of a particular case indicate the
one or the other was succinctly summarised
thus by Corbett JA in
Alsthom Equipments
at 92E:
‘
Whether
in a particular case the initial agreement acquires contractual force
or not depends upon the intention of the parties,
which is to be
gathered from their conduct, the terms of the agreement and the
surrounding circumstances.’
[14] Proceeding from the premise of
this criterion, the appellant’s argument started with a
reference to the terms of PC2
and PC3. With regard to the tender,
PC2, it emphasised the stipulation in clause 5 of annexure E that
‘Acceptance of our
proposal will be communicated to us by
letter or order through the post’ and that ‘communication
as envisaged above
will constitute an agreement between [the
parties]’. Since this document originally emanated from the
respondent in draft
form, so the argument went, this is a strong
indication that both parties intended that the sending of a letter of
acceptance would
result in a final and binding agreement between the
parties. With reference to the letter of acceptance, PC3, the
appellant’s
argument relied on the following. The letter is
headed ‘Letter of Appointment’, it informs the appellant
‘with
pleasure’ that the Tender Board has awarded [past
tense] the above tender proposal to [you]’, ‘and that as
a
result you are appointed [present tense] as the supplier of the
above-mentioned service as per our tender proposal’. What
was
not said, so the appellant pointed out, was that an agreement would
only come into operation on formalisation and signature
of a final
contract.
[15] Having regard to the terms of
both documents, so the appellant’s argument proceeded, this is
not a situation where one
is faced with trying to cobble together the
terms of an agreement from, for example, oral communications and
items of correspondence.
Annexure PC2 constitutes a detailed written
contractual offer, made up to a large extent of contractual terms
emanating from the
documents provided by the respondent itself. There
is therefore no improbability about the parties having concluded an
agreement
on the particular terms; there is more than sufficient
detail set out in the documents for the parties to implement their
agreement.
[16] Barring the last part of PC3,
which follows upon the proviso ‘this appointment is subject
to’, I think the appellant’s
arguments based on the terms
of PC2 and 3 would be virtually unassailable. In fact it would
closely resemble the facts of
Alsthom Equipments
(compare the
statement by Corbett JA at 93B-D). As it happens, however, my very
difficulty with the argument arises from that last
part. I shall
presently revert to that difficulty. But first I proceed to trace the
progression of the appellant’s further
argument based on the
subsequent conduct of the parties. In this regard the appellant
referred: (a) to the agreement between the
parties, at their meeting
of 30 July 2003, that the appellant would provide guarding services
from 1 September 2003; and (b) the
fact that the appellant pointed
out, the appellant indeed provided those services, despite the
parties’ lack of success in
finalising a formal contract. The
inherent probabilities are, so the appellant argued, that these
services were rendered in terms
of the agreement constituted by PC2
and 3. The position taken by the respondent in correspondence and in
its plea, namely, that
what was provided was merely a service on a
month-to-month basis, pending the finalisation of the formal
contract, so the appellant
maintained, was not borne out by the
evidence of either Mr Vilakazi or Mr Els, who were the only witnesses
who testified on behalf
of the respondent.
[17] Further evidence relied upon by
the appellant derived from the testimony of the respondent’s
witness, Mr Els. According
to this evidence it was the practice of
the respondent at the time to attempt, after the relevant appointment
had been made, to
try to negotiate discounts on the successful
tenderer’s price. Such an alteration would plainly constitute
an amendment to
the terms of the appointment agreement hence this
practice would explain, so the appellant argued, the reference to
‘mutually
agreed on amendments’ in PC3. What is more, so
the argument proceeded, this reference to ‘mutually agreed on
amendments’
lends further support to the contention that the
parties regarded PC3 as resulting in a valid and binding agreement:
if no agreement
came into existence by virtue of PC3, there would be
no basis for any reference to ‘mutually agreed on amendments’.
In this event, the parties would simply be free to negotiate whatever
terms might ultimately be agreed upon, if agreement were
ever to be
reached.
[18] This brings me to my difficulty
with the appellant’s argument, which, as I have said, arises
mainly from the last part
of PC3. For the sake of the closer analysis
I intend, it bears repetition. It reads:
‘
This
appointment is subject to the following:
BEE
improvement; and
The
successful finalisation and signing of a formal contract.
A
draft contract will be forwarded to you within 7 (seven) working days
for your comment and to . . . effect mutually agreed on
amendments
and finalisation into a formal contract. You are kindly advised to
acknowledge receipt of this letter of appointment
and provide this
office with the contact information of the person(s) responsible for
the finalisation of the contract process.’
[19] The expression ‘subject to’
is generally understood in the contractual context, to introduce a
some or other condition
(see eg
Pangbourne Properties Ltd v Gill &
Ramsden (Pty) Ltd
1996 (1) SA 1182
(A) at 1188A-C). Thus
understood, the introduction to the last part immediately gives rise
to the impression that PC3 was not an
unconditional acceptance of the
tender in PC2, as contended for by the appellant; that although the
tender, PC2, expressly dictated
an unconditional acceptance of its
terms, PC3 did not adhere to that demand. Instead, it presented the
appellant with a conditional
acceptance or counter-offer which the
latter then formally accepted at the foot of the letter.
[20] Underneath ‘subject to’
PC3 then requires ‘BEE improvement’. It is clear to me
that these words are
not sufficiently certain to constitute a
provision of a contract, whether in the form of a condition or a
term. Though it indicates
that the respondent was not satisfied with
the appellant’s existing BEE status, it is not clear in what
respect and to what
extent that status would have to improve in order
to meet the appellant’s requirements. This was therefore
clearly a topic
on which the respondent called for further
negotiation and agreement. It is true, as the appellant argued, that
the reference to
‘BEE improvement’ could notionally be
understood to reflect an intent that PC3 would give rise to a binding
contract
while this solitary issue stood over for later negotiation
and agreement. From the respondent’s perspective this would
mean,
however, that if the parties should fail to reach agreement on
this issue, the respondent would nonetheless be bound to a two year
contract without its BEE requirements ever being satisfied. I find
this postulation highly unlikely. It would hardly be compatible
with
the fact that PC3 underscored the appellant’s BEE improvement
as the one topic on which the respondent regarded negotiation
and
agreement as essential. Moreover, the notion that the respondent
regarded the BEE issue as one of lesser importance that could
subsequently be dealt with in isolation, is refuted by the draft
agreements that were subsequently prepared on its behalf where
the
BEE clearly took centre stage. A far more likely inference, in my
view, is that the respondent intended – and that it
was so
accepted by the appellant – that there would be no binding
agreement until the BEE requirements that the appellant
would have to
meet, had been agreed upon.
[21] The second stipulation under
‘subject to’ requires the ‘successful finalisation
. . . of a
formal contract’. ‘Finalisation’
envisages a process, which in the context can only signify further
negotiation,
while the reference to ‘successful’ suggests
an awareness that the process might not be successful. In the
context,
‘successful’ can only mean resulting in a formal
contract. Conversely stated, the requirement can only mean that
unless
and until the further negotiations that were contemplated
resulted in a formal agreement, there would be no contractual
relationship
between the parties. This inference, I believe, is
underscored by the last two sentences of PC3. The penultimate
sentence envisages
that a draft agreement would be prepared by the
respondent; that the draft would be forwarded to the appellant; that
the appellant
would then have the opportunity to suggest amendments
to the draft; and that, if agreement could be reached on the
amendment proposed,
this would lead to the finalisation of a formal
agreement. In the last sentence the appellant is asked to nominate
its representatives
during the finalisation process. As I see it this
means, in short, that as yet there was no binding contract. The
contract would
only come into existence upon the successful
finalisation of the contract process, after inter-action between
representatives of
the parties.
[22] I believe my interpretation of
PC3 is borne out by the subsequent conduct of the parties. The
appellant nominated one of its
senior employees, Mr Steve Bolton, as
its representative in the proposed contract negotiations. The
respondent’s attorney,
Mr Vilakazi, prepared the first draft
contract. The draft was then forwarded to the appellant and
negotiations ensued which in
turn led to the preparation of further
drafts by Mr Vilakazi. From all this it should be plain that I do not
agree with the interpretation
of ‘mutually agreed on
amendments’ in the penultimate sentence of PC3 which was
contended for by the appellant in argument.
It will be remembered
that this contention proposes that the expression must be understood
to refer to an amendment to the terms
of the agreement constituted by
PC2 and PC3. I do not agree with this proposal. As I see it, the
expression is clearly used in
the context of the draft contract which
was contemplated. It can therefore only refer to amendments to the
draft which, if agreed
upon, would become part of the proposed
contract.
[23] Lastly there is the reliance by
the appellant on the agreement by the parties at their meeting of 30
July 2003, that the appellant
would provide guarding services as from
1 September 2003 and the undisputed evidence that effect was given to
that agreement. The
argument which the appellants sought to build on
this evidence was that it constituted confirmation of an agreement
embodied by
PC2 and PC3. I think there are several answers to this
argument. In the first place, the agreement at the meeting of 30 July
2003
was clearly reached at a stage when the parties both anticipated
that a formal agreement would be finalised by 1 September 2003.
It
therefore lends no support to the inference that a binding agreement
already existed on 30 July 2003.
[24] In the second place there is
evidence which seems to indicate that the appellant rendered the
guarding services from 1 September
2003 on terms pertinently agreed
upon at a meeting of 12 August 2003 and that these terms were
substantially different from those
reflected in PC2 and PC3. That, of
course, would put paid to the whole argument. But, be that as it may,
the wording of PC3, as
I have said, leaves little, if any, room for
doubt that final agreement had not yet been reached. In that light
the most likely
inference is that the appellant rendered the guarding
services from 1 September 2003 pursuant to a collateral agreement and
not
in terms of an agreement reflected in PC2 and PC3. Whether this
collateral agreement was impliedly on a month-to-month basis as
suggested by the respondent, or on some other basis, is therefore of
no consequence.
[25] The conclusion I arrive at is
therefore that PC3 did not constitute an unconditional acceptance of
the tender contained in
PC2; but that it was intended by the
respondent and accepted by the appellant as a counter-offer. The
agreement that came into
existence when the appellant accepted this
counter-offer was an agreement to negotiate. Whether that agreement
would be enforceable
in the light of decisions such as
Southernport
Developments (Pty) Ltd v Transnet Ltd
2005 (2) SA 202
(SCA) and
Everfresh
Market Virginia (Pty) Ltd v Shoprite Checkers
(Pty) Ltd
2012 (1) SA 256
(CC), is one we do not have to
consider. That is not the agreement that the appellant relied upon.
The agreement the appellant
relied upon is one that, in my view,
never came into existence. I therefore agree with the outcome of the
litigation in the court
a quo, albeit for reasons that are materially
different.
[26] For these reasons the appeal is
dismissed with costs, including the costs of two counsel.
_____________
F D J BRAND
JUDGE OF APPEAL
APPEARANCES:
For
Appellant: J A NEWDIGATE SC
N
DE JAGER
Instructed
by: GROSS PAPADOPULO & ASSOCIATES
PRETORIA
Correspondents:
LOVIUS BLOCK ATTORNEYS
BLOEMFONTEIN
For
Respondent: J P VORSTER SC
R
P A RAMAWELA
Instructed
by: M VILAKAZI TAU ATTORNEYS
PRETORIA
Correspondents:
THE STATE ATTORNEY
BLOEMFONTEIN