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[2023] ZAKZPHC 89
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Pietermaritzburg Community Development and AIDS Outreach Project v MEC for Health, KwaZulu-Natal (10139/2018P) [2023] ZAKZPHC 89 (25 August 2023)
FLYNOTES:
CONTRACT – Repudiation –
Damages
–
Distribution
of condoms for department – Contention that monthly targets
not met and on lack of supporting documents
– Department had
failed to give notice that it was not satisfied with performance
before it made a recommendation for
the cancellation –
Persistent conduct of officials not to pay the plaintiff's
invoices – Conduct amounted to
a denial of the Department's
contractual obligations towards the plaintiff – Amounted to
repudiation and plaintiff
awarded damages of R11,243,786.
IN
THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL
DIVISION, PIETERMARITZBURG
REPORTABLE
Case
no: 10139/2018P
In
the matter between:
PIETERMARITZBURG
COMMUNITY DEVELOPMENT
PLAINTIFF
AND
AIDS OUTREACH PROJECT
REG
NO: 2003/005781/08
and
THE
MEC FOR HEALTH, KWAZULU-NATAL
DEFENDANT
Coram:
ME Nkosi J
Heard:
06 - 16 February and 10 -
14 July 2023
Delivered:
25 August 2023
ORDER
Judgment
is granted in favour of the plaintiff against the defendant for:
1.
Payment of
the sum of R 11 243 786;
2.
Interest
from date of judgment to date of payment; and
3.
Costs of
suit.
This
judgment was handed down electronically by circulation to the
parties' legal representatives by email as per agreement with
their
respective counsel. The date for the handing down of the judgment is
deemed to be 25 August 2023.
JUDGMENT
ME
Nkosi J
Introduction
[1]
The plaintiff is a non-governmental organisation (NGO) involved in
the field of condom
distribution in and around the Province of
KwaZulu-Natal (KZN). It sued the defendant in his official capacity
as the Member of
the Executive Council (MEC) responsible for the
Department of Health ('the Department') in the KwaZulu-Natal
Provincial Government
for damages in the total sum of R11 243 786
arising from an alleged repudiation by the Department of a contract
that was entered
into between the plaintiff and the Department on or
about 7 September 2017 ('the contract').
The
contract
[2]
Like all government contracts, the contract is made up of two parts.
The first part
constitutes the Special Terms and Conditions of
Contract, and the second part constitutes the General Conditions of
Contract. Of
particular relevance for the purposes of this matter are
the following provisions of the contract:
'Special
Terms and Conditions of Contract
2.5
CHECKING OF SERVICE
Checking
of service shall be done by the nominated official at the Department
of Health, as well as by the Service Provider at intervals
agreed
upon by the Service Provider and the Department of Health. The
Department reserves the right to conduct site visits of the
relevant
warehouse/distribution sites of the awarded supplier.
…
2.22
PRO RATA DECREASE OF COMPENSATION
Should
the services not be rendered to the satisfaction of the Department
and unsatisfactory items/aspects/events have already, in writing,
been brought to the attention of the Bidder,
the Department
reserves the right in terms of paragraphs 2.28 hereunder, to retain
payment to the Bidder for as long as the unsatisfactory
service
continues.
2.25
TERMINATION OF SERVICES
Should
the Bidder fail to meet the conditions of this contract, or continue
rendering unsatisfactory service, the Employer reserves
the right to
terminate the contract,
after written notification has been served
on the Bidder
, with retention of the right to recover from the
Bidder any losses which the Employer may suffer/incur as a result of
the failure,
without prejudicing any other rights it may have.
2.27.1
UNSATISFACTORY PERFORMANCE
Unsatisfactory
performance occurs when performance 1s not m accordance with the
contract conditions.
(i)
Before any action is taken, the Department
shall warn the Bidder
by registered/certified mail
in accordance with the contract
conditions unless the Bidder complies with the contract conditions
and delivers satisfactory supplies
or services within a specified
reasonable time (14 days minimum). If the Bidder does not perform
satisfactorily despite the warning
the Department will:
(a)
Take action in terms of its delegated powers
(b)
Make a recommendation for cancellation of the contract concerned.'
(My
underlining)
'General
Conditions of Contract
8
PAYMENT
8.1
The contractor shall furnish the Province with an invoice accompanied
by a copy of the delivery
note upon fulfilment of [its] other
obligations stipulated in the contract.
8.2
Payments shall be made promptly by the Province, but in no case later
than thirty (30) days
after submission of an invoice or claim by the
Contractor.
8.3
Payments will be made in Rand unless otherwise stipulated.
8.4
Payments for goods are made by the Province only. Any disputes
regarding late or delayed
payments must be taken up with the
department and if a problem persists, the Supply Chain Management
Office can be requested to
investigate the delays.
9
INVOICES
All
invoices submitted by the Contractor must be Tax invoices indicating
quantity ordered and quantity delivered, the amount of
tax charged
and the total invoice amount.'
[3]
For the reason which will become apparent later on in this judgment,
I propose to
adopt as a starting point a brief comment on the terms
'checking of service' and 'delivery note' that are used in clauses
2.5 and
8.1, respectively, of the contract. Starting with the term
'checking of service', what appears to have been intended by the
parties
by the use of that term was an ongoing liaison between the
nominated official of the Department and a person designated by the
service provider to ensure that the Department was satisfied with the
services provided by the service provider during the subsistence
of
the contract.
[4]
Regarding the term 'delivery note', on the other hand, it is
significant to note that the term is not defined anywhere
in the
contract. It is only the word
'delivery'
which is defined
under the 'Definitions' clause of the contract, and is assigned the
meaning:
'delivery in compliance with the conditions of the
contract or order'
. Furthermore, it was apparent from the
evidence led before this court that it was never discussed or agreed
between the parties
as to which document/s, in.particular, should
accompany the plaintiffs invoices as contemplated in clause 8.1 of
the contract.
[5]
Within the context of the comments made in the preceding paragraphs,
I now proceed
to deal with the remaining terms of the contract I
consider relevant for the purposes of this judgment. The gist of the
contract
is encapsulated in the request for proposals that was
published by the Department on 9 December 2016. For the sake of
convenience, I will first deal with the pricing guide which formed
part of the plaintiff's tender for the contract.
The
pricing guide
[6]
Amongst the documents included in the tender documentation for the
contract was the
pricing guide for bidders in respect of each one of
the 11 districts where the distribution was to occur. It contained
the detailed
information which had to be taken into account by the
bidders in the pricing of their bids for each district, including the
number
of primary collection sites in the district; the types of
secondary distribution sites, such as taverns, shops, traditional
offices
and others as specified by the Department; the estimated
number and weight of boxes of male and female condoms to be
distributed
per month, and, the maximum distance to be travelled by
the contractor's employees between the primary distribution sites and
the
secondary distribution sites in each district.
[7]
According to the pricing guide, the estimated number of boxes of male
and female condoms
the contractor was expected to distribute per
month throughout the districts were: 141.65 (male) and 10.14 (female)
for Amajuba
District; 1023 (male) and 74 (female) for eThekwini
District; 173.27 (male) and 9.52 (female) for Harry Gwala District;
128.58
(male) and 12.31 (female) for iLembe District; 210.06 (male)
and 14.81 (female) for Ugu District; 300.78 (male) and 21.54 (female)
for uMgungundlovu District; 165.16 (male) and 11.64 (female) for
uMkhanyakude District; 131.04 (male) and 9.23 (female) for uMzinyathi
District; 186.16 (male) and 13.24 (female) for uThukela District;
262.63 (male) and 18.66 (female) for uThungulu District, and;
221.80
(male) and 15.66 (female) for Zululand District.
[8]
Based on the pricing guide, the prices tendered by the plaintiff for
distribution
in its tender document were R145 per box of male condoms
and R85 per box of female condoms. After further negotiations between
the parties, the total revised bid price of the plaintiff, inclusive
of transportation, storage, human resources and training was
fixed at
an all-inclusive monthly budget of R706 831. The tender price for
distribution was also revised to R241 per box per month,
inclusive of
human resources, transportation, training and storage.
The
evidence
[9]
The first witness who testified for the plaintiff was Dr Humphrey
Mubiru ('Mubiru
'), who is the director of the plaintiff. His
evidence, briefly stated, was that the plaintiff had considerable
experience in the
field of condom distribution in and around the KZN
Province. It had carried out numerous similar projects for
communities, municipalities
and government departments in KZN over
the last 20 years. The plaintiff was granted tax exemption by the
South African Revenue
Service (SARS) in terms of a letter dated
November 2005, a copy of which was tendered as evidence.
[10]
During or about 2015 or 2016, he was approached by certain officials
of the Department who requested
him to give them advice on
formulating a strategy which could be utilised by the Department to
achieve success in the condom distribution
programme it was embarking
upon. Such officials included Ms Thuli Buthelezi, who was responsible
for condom distribution in the
Province of KwaZulu-Natal, as well as
her erstwhile supervisor, Dr R Ndaba. He was informed that the
programme was part of a campaign
to assist the South African
Government to meet its target of reducing the prevalence of HIV/AIDS,
STI's and TB infections in the
country.
[11]
It was during his discussions with the relevant Department officials
when he was requested by
them to write a proposal on how to expand
the condom distribution project in KZN. He did so, and delivered the
proposal to Dr Ndaba.
Dr Ndaba advised him that the Department would
publish an advertisement inviting tenders for condom distribution in
the KZN Province
based on the suggestions made by him in the written
proposal. The relevant advertisement was subsequently published in
the newspapers
on 9 December 2016. It invited interested parties to
submit bids for the distribution of condoms throughout the KZN
Province over
a period of three years.
[12]
The plaintiff was one of the bidders who submitted bids in response
to the advertisement. Its
bid was considered by the Department with
the other bids received by it in a competitive bidding process. The
plaintiffs bid was
considered successful by the Department, and the
resultant contract was signed on behalf of the parties on 7 September
2017. In
terms of the contract, the price payable by the Department
to the plaintiff for its services was R706 831 per month, inclusive
of all applicable taxes. The agreed date for the commencement of the
contract was 20 September 2017. However, the Department instructed
the plaintiff not to commence with condom distribution until it had
been officially introduced to the relevant officials in each
one of
the 11 districts in the Province.
[13]
In order to carry out its obligations in terms of the contract, the
plaintiff was required to,
inter alia
, identify sites which
would be used for condom distribution; ('the secondary distribution
sites'); obtain permission from the owners
and/or occupiers of the
secondary distribution sites to allow the plaintiff to use their
sites for condom distribution, and conduct
the education and training
in relation thereto; recruit and train suitable persons to carry out
the work of condom distribution
and to educate members of the public
on the correct usage thereof; identify suitable premises to be used
for condom storage in
each one of the 11 districts and conclude
leases with the owners or occupiers thereof, subject to the
Department's approval; collect
supplies of condoms from the storage
facilities of the Department ('the primary distribution sites') and
transport them to the
plaintiff's warehouses in each one of the
eleven districts; monitor and supervise the work of the distributors
and trainers in
the field and report monthly to the Department on the
overall work done by the plaintiff.
[14]
The plaintiff commenced performing its obligations in terms of the
contract on 20 September 2017,
save for those districts where it was
unable to commence operating due to reasons beyond its control. These
included,
inter alia
, the delay on the part of the Department
to formally introduce the plaintiff to the relevant officials in some
of the districts;
the unavailability of condoms for distribution at
some of the Department's primary distribution sites while the
affected districts
were waiting for the delivery of stock; as well as
the unrestricted number of organisations who were entitled to collect
condoms
directly from the primary distribution sites.
[15]
The plaintiff submitted five invoices to the Department for the
services it rendered during the
period November 2017 to March 2018,
but none of those invoices was paid by the Department. This was
notwithstanding the numerous
meetings he had with the relevant
officials of the Department, as well as the repeated exchange of
emails and telephone calls between
him and them, to establish the
reason/s for non-payment. The officials concerned gave him a variety
of excuses for non-payment
of the plaintiff's invoices.
[16]
During or about March 2018 he finally informed the relevant officials
of the Department that
the plaintiff could not continue to distribute
condoms without being paid for its services. By then, the plaintiff
was experiencing
serious cash flow problems. In response, certain
officials of the Department had begged him to let the work continue,
to which
he agreed. Thereafter, the plaintiff continued to distribute
most of the remaining condoms at its own expense, without rendering
any invoice/s to the Department for its services. By the time the
plaintiff ceased its services in terms of the contract it had
already
distributed a total number of 12 780 000 male condoms, and 780 000
female condoms.
[17]
It was put to Mubiru during his cross-examination by Mr
Mthembu
,
who appeared with Ms Dhoda for the defendant, that the quantities of
condoms which the plaintiff was required to distribute monthly
in
each district were stipulated in pages 53 to 63 of the contract. This
was admitted by Mubiru, but he added that the monthly
targets of
condom distribution in each district were 'scratched out' in terms of
certain emails which were subsequently received
by the plaintiff from
the relevant officials of the Department. When he was asked to
produce proof of such emails, he was unable
to do so.
[18]
The evidence of Mubiru was corroborated in all material respects by
the evidence of eight other
witnesse.s who were all employed by the
plaintiff during the subsistence of the contract, namely, Simon
Ntsele, Khuthala Nkabinde,
Ntethelelo Ngxongo, Brian Mlotshwa, Linda
Zuma, Pearl Mlotshwa, Zimhlophe Mkhize and Sphelelo Hlatshwayo. They
each testified in
respect of the specific districts to which each one
of them was assigned by the plaintiff for the purposes of the
contract.
[19]
The gist of their evidence was that pursuant to their respective
employment contracts with the
plaintiff, they first obtained
permission from the owners and/or occupiers of the secondary
distribution sites in their respective
districts to distribute
condoms and teach the recipients about the correct use thereof. They
used their own transport to collect
boxes of condoms in varying
quantities from the primary distribution sites in their respective
districts and distributed them at
the various secondary distribution
sites. To serve as proof of the services they rendered, they got the
owners and/or occupiers
of the secondary distribution sites concerned
to sign the forms which were commonly referred to as the 'bin cards'
acknowledging
receipt of the quantities of condoms distributed at
their respective establishments.
[20]
The bin cards were specifically designed by the plaintiff to serve as
a monthly reporting tool
to the Department for the purposes of the
contract. The individual recipients of condoms were also made to sign
a different form
designed by the plaintiff confirming their
attendance of training sessions conducted by the plaintiffs employees
where they were
taught about the correct usage of condoms. Just like
the bin cards, the latter forms were also utilised by the plaintiff
as a reporting
tool to the Department.
[21]
After the close of the plaintiffs case, the first witness who
testified for the Defendant was
Ms Thuli Buthelezi ('Buthelezi '),
who is employed by the Department in the capacity of Assistant
Director of its HAST unit. HAST
is an acronym for AIDS, Sexually
Transmitted Infections and Tuberculosis, which is a unit of the
Department responsible for,
inter alia
, the distribution of
condoms throughout the province of KZN. According to Buthelezi, her
area of responsibility is HIV prevention,
and her experience in the
field dates back to the time of her employment with the Department
during or about 2013.
[22]
Her evidence, briefly stated, was that the plaintiff was required to
distribute a total of 2
795 male condom boxes and 1 023 female condom
boxes per month. However, from the commencement of the contract, on
20 September
2020, the plaintiff failed to discharge its contractual
obligation to distribute the requisite number of condom boxes. She
said
there were also instances when the plaintiff delayed
commencement with the distribution of condoms in some districts.
Furthermore,
the first invoice submitted by the plaintiff for payment
for the period 20 September 2017 to 20 October 2017 did not contain
sufficient
details to enable the Department to determine the actual
amount of work done by the plaintiff during that period.
[23]
In an attempt to address the matter, she and the other officials of
the Department held a meeting
with Mubiru during or about January
2018. At that meeting, they advised Mubiru that it would not be
possible for the Department
to pay the invoices submitted by the
plaintiff without the supporting documentation. Mubiru undertook to
provide the Department
with supporting documentation, but he never
did. Instead, she started receiving threats from certain persons she
believed were
associated with the plaintiff. They queried the
non-payment of the plaintiff's invoices. This caused her to cease any
further involvement
in the receipt and consideration of the
plaintiff's invoices.
[24]
It was put to her during her cross-examination by Mr
Blomkamp
,
who appeared for the plaintiff, that the plaintiff had subsequently
submitted the required supporting documentation, which were
received
by Sandile Miya on behalf of the Department. She said she was not
aware that the plaintiff had done so as her direct interactions
with
the plaintiff had ceased shortly after the meeting they held with
Mubiru in January 2018. Her next involvement in the matter
was when
she was part of a team of officials in the Department who reviewed
the bin cards submitted by the plaintiff. They found
that the bin
cards contained a lot of duplications, while the information
contained in some of them was barely legible. However,
she admitted
in response to a question put to her by Mr
Blomkamp
that the
problems they found in the bin cards were never referred to the
plaintiff for resolution.
[25]
Ms Buthelezi added that in addition to the bin cards, the plaintiff
was required to submit to
the Department other supporting
documentation to prove that it had done the work. Such documentation
included the lease agreements
in respect of the secondary
distribution sites, the receipts signed by the owners and/or
occupiers of those sites, as well as the
attendance registers of the
training sessions conducted by its employ·ees at the secondary
distribution sites. A question
was put to her by Mr
Blomkamp
as to whether this was stipulated anywhere in the contract, to which
her response was that she did not know.
[26]
Notwithstanding the aforegoing, Ms Buthelezi remained steadfast in
her assertion that the Department
required the plaintiffs invoices to
be accompanied by the supporting documentation to prove that it had
done the work. This was
notwithstanding her evidence that the
Department had designated a 'nominated official' in each district who
was responsible for
checking the plaintiffs services as contemplated
in clause 2.5 of the Special Terms and Conditions of Contract under
the heading
'CHECKING OF SERVICE'. A similar assertion was made by Mr
Nkosinathi Roji ('Roji'), who testified for the Department in his
capacity
as Deputy Director of the Medical Male Circumcision and HIV
Prevention unit (MMC) of the Department.
[27]
Roji stated in his evidence that his involvement in the contract was
to authorise payments to
the plaintiff, and to attend to any queries
which might arise in relation thereto. He said the queries regarding
the plaintiffs
invoices were first brought to his attention by
Buthelezi towards the end of October 2017. At that stage, the
plaintiff had submitted
only its first invoice in respect of the
period 20 September 2017 to 20 October 2017. The first invoice was
queried by Buthelezi
on the basis that it did not contain sufficient
information to enable the Department to make payment thereof, such as
the actual
services which were provided by the plaintiff for the
relevant period.
[28]
Roji added that according to his experience, the plaintiff's invoice
was supposed to contain
a detailed description of the work done by
it, such as the total number of condom boxes it distributed, the unit
price for condom
boxes, as well as the amount of VAT payable in
respect of each invoice. However, just like Buthelezi who testified
before him,
Roji was unable to indicate the specific clause of the
contract which contained a requirement to that effect.
[29]
It was put to Roji during his cross-examination by Mr
Blomkamp
that the second invoice submitted by the plaintiff in respect of the
period 20 October 2017 to 20 November 2017 contained even
lesser
details than its first invoice, which contradicted his and
Buthelezi's evidence that the plaintiff was requested to provide
more
details on its invoices when they held a meeting with Mubiru during
or about January 2018. His response was that the plaintiff
had also
failed to submit copies of the delivery notes with its invoices. He
admitted that the term 'delivery note' was not defined
in the
contract, but added that according to his understanding, it meant
supporting documentation, such as the bin cards, the record
of the
training sessions conducted by the plaintiff's employees, as well as
copies of the lease agreements in respect of the secondary
distribution sites.
[30]
He further testified that after the plaintiff's submission of
supporting documentation to the
Department a team comprising himself,
Buthelezi and Miya had gone through the bin cards and recorded on a
piece of paper the total
number of condom boxes which were
distributed by the plaintiff from 20 September 2017, which was the
date of the commencement of
the contract, up to the end of December
2017. Based on their calculations, he then wrote a letter dated 19
June 2018 addressed
to Dr M Gumede ('Gumede'), the Acting Head of the
Health Department; Dr T D Moji ('Moji'), the Acting Deputy Director
General of
the District Health Services; and Dr V Mubaiwa
('Mubaiwa'), the Chief Director of the Strategic Health Programs. In
that letter,
he recommended that the plaintiff be paid the pro rata
amount ofR180 991 for the services it provided from 20 September 2017
to
the end of December 2017, inclusive of storage costs for those
months, and that the contract be terminated with immediate effect.
His letter of recommendation was approved by Gumede on 18 September
2018. However, the plaintiff declined to accept the pro rata
payment
that was offered to it by the Department.
[31]
Apart from the evidence of Buthelezi and Roji, Mr Mthembu had also
led the evidence of the relevant
officials who were responsible for,
inter alia, the issuing of condoms to the plaintiffs employees from
the primary distribution
sites in their respective districts. They
included Mr Xolani Mbangatha ('Mbangatha') from Ugu District, Mr
Thabiso Joshua Makhoba
('Makhoba') from Amajuba District, Ms Zanele
Nelisiwe Ntombela ('Ntombela') from uMgungundlovu District and Ms
Ntsoaki Portia Lecheko
('Lecheko') from uMzinyathi District. The
evidence of the relevant officials from the remaining districts was
summarised by Mr
Mthembu
in a manuscript comprising 15 pages,
which was admitted as evidence marked Exhibit 'K' following
confirmation by Mr Blomkamp that
the contents thereof were admitted
by the plaintiff.
[32]
The gist of the evidence of the relevant officials in the 11
districts was primarily that: firstly,
the number of condom boxes
collected by the plaintiffs employees from their respective primary
distribution sites fell short of
the monthly targets stipulated in
the contract for the duration of the contract, and: secondly, that at
no stage during the subsistence
of the contract had any of the
primary distribution sites within their respective areas of
jurisdiction experienced a shortage
of condom boxes. It was also
confirmed by all the witnesses from the districts that they kept
records (in the form of bin cards)
of the total number of condom
boxes which were collected by the plaintiffs employees from the
primary distribution sites in their
respective districts.
[33]
Notably, it was only Makhoba, from Amajuba District, who stated in
his evidence that his office
had also kept copies of the bin cards
which were completed by the plaintiffs employee, Mr Mfundo Mlotshwa
('Mlotshwa'), for reporting
purposes to the Provincial office of the
Department. These contained,
inter alia
, the secondary
distribution sites to which the condom boxes were distributed by
Mlotshwa, as well as the total number of condom
boxes which were
distributed at those sites. It was indicated by Makhoba in his
evidence-in-chief that some of the copies of the
bin cards kept in
his office records reflected a lesser number of condom boxes than the
same bin cards that were submitted by the
plaintiff to the Provincial
office of the Department.
[34]
It was put to Makhoba during his cross-examination by Mr
Blomkamp
that the reason for the number of bin cards kept in his office being
lesser than the number submitted by the plaintiff to the Provincial
office of the Department was that Mlotshwa only furnished his office
with copies of the bin cards while he kept the originals for
submission to the Department at the end of the month. There were
instances when some of the clinics requested additional boxes
of
condoms before the end of the month, which were then distributed by
Mlotshwa and added to the original bin cards for the months
in which
the additional distributions occurred prior to the submission thereof
to the Department. This was not disputed by Mlotshwa.
Assessment
of the evidence
[35]
In my view, it is clear from the terms of the contract dealing with
the 'pricing structure' that
the quantities of condoms which were
stipulated for monthly distribution in each district were by no means
intended to serve as
the prerequisite for the plaintiff's entitlement
to payment for its services, particularly, in respect of the first
month when
the plaintiff was still to put in place the necessary
infrastructure and wait for the Department to introduce it and its
employees
to the Department officials in all the 11 districts.
Instead, the quantities were intended to serve as a pricing guide for
bidders
in the calculation of their respective bid prices, and to be
used by the Department to measure the plaintiff's performance for the
duration of the contract. Apart from that, there is nothing else in
the contract which suggests that the plaintiff would not receive
any
payment it if did not distribute the requisite number of condoms per
district over any period of the contract. .
[36]
In terms of the contract, the target number of condom boxes the
plaintiff was required to distribute
per month was 17.6 million. In
order to reach that target, the plaintiff was required in each one of
the eleven districts in the
Province to,
inter alia
, employ
and train staff to distribute condoms and to conduct training of the
recipients thereof; conclude lease agreements in respect
of its
warehouses for the storage of condoms, and; obtain written consent
from the owners and/or occupiers of the secondary distribution
sites
to conduct training and distribute condoms on their premises. Bearing
this in mind, I believe that it was impractical for
the Department's
officials to expect the plaintiff to distribute the target number of
17.6 million condoms within the very first
month of the contract (20
September 2017 to 20 October 2017) without first allowing the
plaintiff a reasonable period to,
inter alia
, recruit staff,
secure warehouses for storage and obtain permission from the owners
and/or occupiers of the secondary distribution
sites to distribute
condoms and conduct training on their premises.
[37]
Besides, it was admitted by Buthelezi that the plaintiff was ordered
by the Department not to
start operating in any district until its
workers were formally introduced to the Department's officials in
that district. It was
further admitted by Buthelezi that in some
districts the holding of meetings to introduce the plaintiffs workers
to the Department's
officials in the districts concerned was delayed
for more than a month, which resulted in the plaintiff not being able
to commence
with the distribution of condoms in those districts, at
least, during the first month of the contract.
Repudiation
of the contract
[38]
According to the evidence of Buthelezi, the reason for non-payment of
the plaintiffs first invoice
for the period 20 September 2017 to 20
October 2017 was the lack of supporting documentation. Although the
only supporting documentation
required in terms of the contract was a
copy of the delivery note, the plaintiff had nonetheless complied
with the Department's
requirement by submitting copies of,
inter
alia
, the bin cards in respect of the period 20 September 2017 to
26 December 2017, the lease agreements in respect of its warehouses
for the storage of condoms, as well as the consent forms signed by
owners and/or occupiers of the secondary distribution sites.
[39]
Even after receipt of the aforesaid supporting documentation from the
plaintiff, the relevant
officials of the Department persisted in
their refusal to pay any of the invoices submitted by the plaintiff.
Their excuses for
non payment ranged from the complaint that
some of the bin cards were either duplicated or illegible to the
contention that
the plaintiff had failed to meet the condom
distribution targets stipulated in the contract. However, as I
indicated in the preceding
paragraphs of this judgment, it is not
stipulated anywhere in the contract that the plaintiff was required
to meet any target as
a prerequisite for payment. In the
circumstances, I am satisfied that the plaintiff has succeeded to
prove on a balance of probabilities
that the Department officials
concerned had repudiated the contract by their conduct.
[1]
See also: Nash v Golden Dumps (Pty) Ltd
[2]
,
where the court held that 'Where one party to a contract, without
lawful grounds, indicates to the other party in words or by
conduct a
deliberate and unequivocal intention no longer to be bound by the
contract, he is said to "repudiate" the contract
... '.
[40]
Besides, even if the plaintiff was required to reach a certain target
as a prerequisite for payment,
which was clearly not the case in my
view, the plaintiff's failure to reach such target would not in
itself entitle the Department
to terminate the contract without first
giving the plaintiff notice in terms of clause 2.27. 1(i) of the
contract. In such notice,
which had to be sent by registered or
certified mail, the Department was required to allow the plaintiff a
reasonable period (not
less than 14 days) to deliver satisfactory
performance, failing which the Department would then be entitled to
make a recommendation
for the cancellation of the contract.
[3]
[41]
It is common cause that the Department had failed to give the
plaintiff any notice in terms of
clause 2.27.1(i) that it was not
satisfied with the plaintiff's performance in terms of the contract
before it made a recommendation
for the cancellation of the contract.
In any event, by the time the contract was terminated by the
Department (on 19 June 2018),
the plaintiff had already accepted,
either expressly or impliedly, the Department's repudiation of the
contract through the persistent
conduct of its officials not to pay
the plaintiff's invoices. Had it not, the Department's failure to
give notice of termination
in terms of the contract would have
constituted an act repudiation in itself.
[42]
It was indicated by both Buthelezi and Roji in their evidence that
they believed that the plaintiff
was required in terms of the
contract to submit the aforesaid 'supporting documentation' with its
invoices. However, even if they
honestly and on good grounds believed
that they were entitled to act in the way that they did, the
Department will still be guilty
of repudiation because their conduct
amounted to a denial of the Department's contractual obligations
towards the plaintiff.
[4]
In my
view, their conduct would clearly lead any reasonable person to the
conclusion that the Department did not intend to carry
out its part
of the contract at all.
[5]
Summary
of the tendering process
[43]
Based on my assessment of all the evidence led during the trial in
its totality, the tendering
process in respect of the contract may be
summarised as follows:
(a)
Firstly, the Department's Bid Evaluation Committee (BEC) made a
recommendation to the Department's
Bid Adjudication Committee (BAC)
that the relevant tender be awarded to the plaintiff based on the
plaintiffs quoted price of Rl
05 per box of condoms;
(b)
The BEC's recommendation was, in tum, approved by the BAC, but
subject to confirmation by
the plaintiff that its quoted price was
inclusive of the following costs: (i) transportation; (ii)
storage/warehousing; (iii) human
resources; and (iv) training;
(c)
Upon receipt of the requisite confirmation from the plaintiff, the
BAC proceeded to
grant its approval of the revised bid price of the
plaintiff, inclusive of the human resources, transportation, training
and storage/
warehousing costs, in an all-inclusive annual budgeted
amount of R8 481 972. Divided by 12, the annual budgeted amount came
to
an all inclusive monthly budgeted amount of R706 831; and
(d)
In its determination of the budgeted amount, the BAC used the pricing
guide stipulated in
pages 53 to 63 of the contract, and its approval
was subsequently ratified by Dr S T Mtshali, in his capacity as the
erstwhile
Head of Department, on 25 July 2017.
[44]
In essence, this is a brief summary of how the plaintiffs monthly
payment of R706 831 was arrived
at, not by calculating the number of
condoms or boxes distributed by the plaintiff per month as the
target.
[45]
In conclusion, I accordingly find the defendant liable for the
damages suffered by the plaintiff
arising from the defendant's
repudiation of the contract.
Quantum
of damages
[46]
Regarding the quantum of damages payable by the defendant to the
plaintiff, it was argued by
Mr
Blomkamp
that in cases of breach and/or repudiation of contract, the award of
damages is intended to put the innocent party in the position
in
which it would have been in if the contract had been properly
honoured by the guilty party.
[6]
That is of course trite, but the challenge comes with the actual
calculation of the amount of damages payable by the guilty party
to
the innocent party arising from the breach or repudiation of
contract.
[47]
In
Esso
Standard SA (Pty) Ltd v Katz
[7]
the Appellant Division held that:
'It
has long been accepted that in some types of cases damages are
difficult to estimate and the fact that they cannot be assessed
with
certainty or precision will not relieve the wrongdoer of the
necessity of paying damages for his breach of duty.'
See
also
Sun
World International Inc v Unifruco Ltd
,
[8]
where it was held that:
'Our
courts do not non-suit a plaintiff who has suffered patrimonial loss
and is incapable of proving the quantum thereof with mathematical
precision if satisfied that such evidence as was reasonably available
was adduced ...'
[48]
In the present case, the only evidence before me on the issue of
quantum was that of Mubiru.
According to his calculations, the
plaintiff suffered damages in the total sum of R11 243 786, which is
the difference between
the payments of R706 831 per month for 36
months which the plaintiff would have received and the expenses it
would have reasonably
incurred during the same period had the
contract been allowed to run its course without being repudiated by
the defendant. No evidence
was led by the defendant to refute the
plaintiffs evidence on quantum. Therefore, in the absence of any
evidence to gainsay the
plaintiffs evidence on quantum, I am
satisfied that the plaintiffs evidence on quantum is reasonable after
due consideration of
the estimated expenses it would have incurred if
the contract had run its course.
Order
[49]
Judgment is granted in favour of the plaintiff against the defendant
for:
1.
Payment of damages in the total sum of R11 243 786;
2.
Interest from the date of judgment to date of payment; and
3.
Costs of suit.
ME
NKOSI J
Appearances
For
the Plaintiff: Mr Blomkamp SC
Instructed
by: L L
M Attorneys, Scottsville, Pietermaritzburg.
Tel:
033 - 346 2391
Cell:
064 - 505 9742
Ref:
L MANYATHI
Email:
llmattorneysinc(a),gmail.com
For
the Defendant: Mr Mthembu SC
Instructed
by: Ms
Nosisa Gwebela, The State Attorney, KZN,
Pietermaritzburg.
C/O
AP Ngubo Attorneys, Durban.
Tel:
031- 365 2542
Ref:
24/6804/18/P/P33 and N.NOGWEBELA/cet
Email:
Tsepojama@merchiston.co.za /
dhodahawa@telkomsa.net
Date
of Hearing: 06 - 16 February and 10 -
14 July 2023
Date
of Delivery: 25 August 2023
[1]
See Vromolimnos (Pty) ltd and another v Weichbold and another
[1991]
3 All SA 856
;
1991 (2) SA 157
(C) at 163.
[2]
1985 (3) SA 1 (A)
[3]
See
Smith
v Weeks
1922 TPD 235
;
Bulawayo
Municipality v Bulawayo Indian Sports Ground Committee
[1956] I All SA 85; 1956 (1) SA 34 (SR).
[4]
See
Metalmil
(Pty) Ltd v AECI Explosives and Chemicals Ltd
[
1994] 4 All SA 7
(AD) at 15.
[5]
See
Ponisammy
and another v Versailles Estates (Pty) Ltd
[
1973] 1 All SA 540
; 1973 (I) SA 372 (A) at 387;
Tuckers
land and Development Corporation (Pty) Ltd v Hovis
1980 (1) SA 645
(A) at 653;
Discovery
life Ltd v Hogan and another
2021 (5) SA 466
(SCA) para 17.
[6]
Trotman
and another v Edwick
1951 (I) SA 443 (A).
[7]
Esso
Standard SA (Pty) Ltd v Katz
1981 (1) SA 964
(A) at 969-970G.
[8]
Sun
World International Inc v Unifruco Ltd
1998 (3) SA 151
(C) at 170F-G; See also
Hersman
v Shapiro & Co
1926 TPD 367
at 379-380.