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[2019] ZAKZDHC 22
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Thekwini Marine Steel and Trade (Pty) Limited v Transnet (SOC) Limited t/a Transnet Port Terminals (D1546/2019) [2019] ZAKZDHC 22 (3 July 2019)
IN THE HIGH COURT OF
SOUTH AFRICA
KWAZULU
NATAL LOCAL DIVISION, DURBAN
Case No. D1546/2019
In
the matter between:
Thekwini
Marine Steel and Trade (Pty)
Limited
Applicant
and
Transnet
(SOC) Limited t/a Transnet Port Terminals
Respondent
Judgment
Lopes
J:
[1]
On the 26
th
February 2019 the applicant, Thekwini Marine
Steel and Trade (Pty) Limited (‘Thekwini’) brought an
urgent application
seeking the following relief:
(a)
Condonation of Thekwini’s failure to comply with the provisions
of
s 3
(2)(a) of the
Institution of Legal Proceedings Against Certain
Organs of State Act, 2002
.
(b)
Directing the respondent, Transnet (SOC) Limited t/a Transnet Port
Terminals (‘Transnet’)
to pay Thekwini the sum of R 20
million.
(c)
Directing Transnet to pay the costs of the application on the
attorney and client
scale.
[2]
On that day, an order was made giving directions for the delivery of
answering and
replying affidavits. The parties were given leave
to approach the senior civil judge on the matter of urgency, and
subsequently
the opposed application came before me on the 31
st
May 2019.
[3]
Transnet delivered a conditional counter-application in the event
that this Court
finds that an agreement with contractual force was
concluded between the parties for the payment of the R20 million.
The
conditional counter-application is that if this court finds that
an agreement was concluded, it is declared to be invalid,
unenforceable
and set aside. In addition, Transnet delivered a
notice in terms of
rule 16
A of the Uniform Rules of this Court
relating to whether the agreement was contrary to the provisions of
s
51
(1)(B)(ii) of the
Public Finance Management Act, 1999
.
[4]
It is necessary to set out the history of the relationship between
the parties:
(a)
On the 22
nd
October 2014, and at Durban, Thekwini and
Transnet concluded a written agreement (‘the Master
Agreement’). The Master
Agreement provided that Thekwini, would
provide facilities for certain activities to be carried out at the
port of the Durban Roro
Port Terminal, for a period of two years’.
(b)
The Master Agreement was to endure from the 1
st
November
2014 to the 31
st
October 2016.
(c)
Clause 19.6 thereof dealt with the term of the contract and its
possible termination:
‘
Not withstanding anything to
the contrary contained in this Agreement, and in addition to all its
other rights, TPT (Transnet) shall
also be entitled to cancel this
Agreement, in whole or in part, (as it in its sole discretion may
determine) upon thirty (30) days’
written notice given to the
service provider (Thekwini) without assigning any reason for such
action. Such termination by
TPT shall not form the subject of
any arbitration or review and shall be binding upon the service
provider, who shall have no claim
of any nature or howsoever arising
against TPT out of such termination, save for payment of all amounts
which may be lawfully due
and payable to the service provider by TPT
for services rendered pursuant to the provisions of this Agreement up
to the expiry
of the said period of thirty (30) days.’
(d)
On the 1
st
of October 2015, and purporting to act in terms
of clause 19.6, Transnet gave Thekwini notice of its intention to
cancel the Master
Agreement with effect from the 31
st
October 2015.
(e)
Thekwini resisted the notice of termination, and refused to vacate
the harbour premises
it occupied pursuant to the Master Agreement.
Transnet then brought an urgent application before this Court for an
order
declaring that the termination of the contract was valid and
lawful. Transnet also sought interdictory relief against
Thekwini
to have its operations removed from the harbour area.
(f)
The matter was heard on an urgent basis on the 30
th
October 2015. An order was granted declaring the agreement between
Thekwini and Transnet to be validly terminated with effect from
the
31
st
October 2015, and further interdicted Thekwini from
remaining in any area in the Durban Roro Port Terminal.
(g)
Leave was sought to appeal against that decision, but was it
refused.
(h)
Thekwini thereafter delivered an application to the Supreme Court of
Appeal for leave to
appeal against the decision of the 30
th
October 2015. This was finally disposed of on the 21
st
January 2016, when the Supreme Court of Appeal dismissed the
application for leave to appeal.
(i)
Thekwini then delivered a claim for unpaid invoices as well as a
damages claim
based on the allegation that there had been an unlawful
cancellation of the contract. This was never resolved.
(j)
Thekwini sought to refer the matter to arbitration over a claim for
R3 138 004.77,
for arrear amounts outstanding
for services rendered prior to the cancellation of the Master
Agreement, and damages for the
costs and loss of income sustained by
Thekwini as a result of the cancellation of the Master Agreement.
The claim for damages
was in the sum of R33 569 914.16.
Pursuant to a calculation performed by Robertson’s Accounting
services
for Thekwini, the damages figure was then increased to
R57 433 069.90.
(k)
Transnet objected to the validity of the arbitration proceedings and
the parties then
attempted to settle their differences.
(l)
On the 27
th
November 2018 Transnet delivered a letter to
Thekwini stating, inter alia:
Re
Offer of Settlement of damages claim
Transnet has considered
your claim of consequential damages amounting to R57 433 069.90
as per attached last calculations
by Robertson’s Accounting
services.
‘
Transnet would like to make a
‘full and final’, ‘without prejudice’
settlement offer which in no way admits
or cedes any rights of
Transnet SOC. The terms of the offer are explained below:
Thekwini Marine out of pocket
expenses, including severance packages to staff, tools of trade,
vehicle investment, Anglo American
loan
12, 663,552.00
Legal costs, both Transnet’s
and TMSTs
2,588,737.73
Consequential and loss of income
settlement offer
4,747,710.27
20,000,000.00
The settlement offer is subject to the
following conditions:
§
Every expense payment must be
accompanied by valid and auditable proof of disbursement.
Hence, evidence is required for the
following expenses:
o
Evidence of disbursement will
be furnished for the R12,663,552 restoration expenses;
o
Evidence of legal fees incurred
by TMST amounting to R1,450,000 will be furnished to Transnet;
§
Approval of the appropriate
Transnet Delegation of Authority, should TMST accept the terms;
§
The
settlement terms will remain confidential between the parties
concerned
§
This offer is a “without
prejudice” offer;
§
This is “full and final”
and there will be no further claims for damages for the termination
of this contract, …’
(m)
On the 11
th
December 2018 Thekwini (which had by now
changed its name to Wharf Side Port Services (Pty) Ltd), addressed a
letter to one Alvin
Brijlal recording that it had no other choice but
to accept the R20 million in full and final settlement. Mr Brijlal
was a director
of a non-governmental organisation referred to as
‘Voice’. It purports to assist aggrieved parties in their
interactions
with other contracting parties. Mr Brijlala had
been requested by Thekwini to intervene on their behalf. On the
22
nd
February 2019 Mr Brijlal sent an email to Transnet
asking them to accept the letter from Thekwini for the full and final
settlement
of R20 million. He ended by asking Transnet to
arrange payment urgently.
[5]
Mr
Choudree
, who appeared for Thekwini, conceded that there
was no single agreement recording the signature of both parties.
He submitted
that there can be no doubt that Thekwini accepted the
offer of the 27
th
November 2018. The only matter
left to consider is whether the conditions recorded in the offer were
satisfied. Those
conditions were the production of valid and
auditable proof of the disbursements, including legal fees, and
approval of the appropriate
Transnet delegation of authority.
Mr
Choudree
conceded that in order to prove a concluded
settlement agreement, Thekwini would have to establish approval by
the appropriate
Transnet delegation of authority. Mr
Choudree
submitted that Transnet attempted to impose further conditions which
were not part of the original offer and acceptance, and Transnet
was
not entitled to do so.
[6]
Mr
Choudree
also conceded that efficacy would demand that the
agreement between the parties would be reduced to writing and signed
by the parties.
He submitted, however, that where an offer has
been made and accepted, one party could not change the conditions,
and both parties
were bound by the original offer and acceptance.
[7]
Mr
Choudree
also conceded that it was clear that the figures
set out under the heading ‘Settlement Offer’ were
adjusted to come
to the round figure of R20 million. This was
evidently because persons involved in the negotiations could only
sanction a
settlement agreement of up to R20 million. With
regard to proof of the items of the expenditure, Mr
Choudree
referred me to an internal memorandum dated the 7
th
December 2018, addressed to Dr Popo Molefe the Chairman of the
Transnet Board by Mr Tau Morwe to the Acting Group Chief Executive
of
Transnet. This letter was written at an early stage in the
negotiations and records that the offer of R20 million was rejected
by Thekwini. It further records that Transnet is unable to
improve on the settlement offer without the intervention of an
independent objective party. This activity was clearly prompted
by the intervention of the Department of Public Enterprises,
which
had been approached about the dispute. The Minister had
recommended that the dispute resolved expeditiously.
It was
made clear that this was an operational matter and it was for
Transnet to decide the issue.
[8]
A further letter by Dr Molefe to the Minister of Public Enterprises
records that any
amount over R20 million would breach the fiduciary
duty of Transnet in complying with the
Public Finance Management Act,
1999
, because there was no evidence or audit trail to support the
payments requested. The view was taken that Thekwini would have
difficulty in proving any consequential damages or loss of profits.
Mr
Choudree
submitted that the internal memorandum of the 7
th
December 2018 indicated that the documents had been made available by
Thekwini, and that the tender by Transnet had been made with
full
knowledge of those documents. That is not, however, what the
internal memorandum purports to state. No reference
is made to
the fact that Thekwini had provided documents to substantiate the
expenditure contained in the offer. The letter
of the 27
th
November 2018 addressed by Dr Molefe to the Minister of Public
Enterprises records that there is no evidence or audit trail to
support the proposed payment.
[9]
Mr
Choudree
further submitted that in terms of the Transnet
delegation of authority network, any litigation or dispute resolution
process had
to authorised by the Chief Operating Officer together
with the concurrence of the Chief Legal Counsel, for amounts up to
but not
exceeding R35 million. The concurrence of the Group
Chief Executive was only required where a settlement agreement
exceeded
R100 million. Thekwini was entitled to rely on the operation
of the Turquand rule in assuming that all the internal delegations
and authorities had been complied with by Transnet. Mr
Choudree
submitted that the unsigned draft settlement agreement contained in
the papers could not have been drafted without the necessary
authorities knowing of its existence. He submitted that in
these circumstances the necessary authorised personnel in Transnet,
who could have concluded the agreement, must have been prepared to do
so and that is why the draft agreement was prepared.
[10]
Mr
Choudree
submitted that in terms of s 195 (g) of the
Constitution, when dealing with Public Administration, the necessity
for transparency
is emphasized. It was therefore incumbent upon
Transnet to have provided timely and accessible information to
Thekwini.
[11]
Mr
Choudree
submitted that in the circumstances an offer and
acceptance had taken place and the suspensive conditions had been
fulfilled.
Accordingly Thekwini was entitled to an order that
Transnet pay to it the sum of R20 million.
[12]
Mr
Gajoo
SC who appeared for Transnet, submitted that there
was a very narrow dispute between the parties. An offer had
been made
by Transnet to Thekwini on the 27
th
November
2018. That offer was, however, subject to express conditions
comprising the submission of valid proof of incurring
the expenditure
by Thekwini, and the approval of the relevant Transnet authorities.
The fact that Thekwini may have accepted
the offer on the 11
th
December 2018 did not mean that the suspensive conditions had been
satisfied.
[13]
Mr
Gajoo
submitted that Thekwini bore the onus of proving the
fulfilment of the suspensive conditions. In this regard he
referred
to
Resisto Dairy (Pty) Ltd v Auto Protection Insurance Co
Ltd
1963 (1) SA 632
(A) at 644H, and
Trinity Asset Management
(Pty) Ltd v Grindstone Investment 1 132 (Pty) Ltd
2018 (1)
SA 94
(CC), paras 69 and 157. Mr
Gajoo
also referred to
Red
Dunes of Africa CC v Masingita Property Investment Holdings
(159/2014)[2015] ZASCA 99 (1 June 2015) at paras 10 and 11
regarding the fulfilment of suspensive conditions.
[14]
Mr
Gajoo
pointed out that in Thekwini’s founding
affidavit it clearly records that it relies on the offer of
settlement dated the
27
th
November 2018, and further
records the conditions to which the settlement offer was subject.
The affidavit goes on to allege
that the contents of that offer, and
the letter by a director of Thekwini to Mr Brijlal, constitute a
valid and binding agreement.
Mr
Gajoo
pointed out that
this does not mean that the suspensive conditions do not have to be
fulfilled, and no allegations that it had
done so, have been made by
Thekwini.
[15]
He submitted that the suggestion that the proof of expenses referred
to in the offer had been
provided to Transnet before that document
was concluded, does not entitle Thekwini to rely on that fact. It was
required to set
out compliance with the suspensive condition, and had
not done so. Mr
Gajoo
further drew my attention to the
internal memorandum relied upon by Thekwini. The memorandum is
from the Group Chief Operating
Officer of Transnet to the Acting
Group Chief Executive, is dated the 26
th
November 2018,
and records at clause 6.1 that the offer made by Transnet was subject
to the conditions listed in that paragraph.
The memorandum then
refers at clause 8.1 to the fact that Transnet required an auditable
trail for all expenses and claims.
This was in addition to
approval of the delegation of authority. In setting out the
history of the matter in that memorandum,
there is no reference to
Thekwini having submitted proof of its claims to Transnet.
[16]
Mr
Gajoo
submitted that where a settlement of R20 million is
proposed, it is only the Chief Operating Officer, together with the
concurrence
of the Chief Legal Counsel that are needed to certify
payment. This was not the province of the Group Chief Executive
who
dealt with matters over a R100 million. The limitation on
employees of Transnet negotiating and concluding contracts without
consulting
the relevant legal advisers employed by Transnet, are
clearly set out in clause 6.5 of the legal policy of the Transnet
group.
This had not been done in this matter.
[17]
Mr
Gajoo
submitted that with regard to the operation of the
Turquand rule,
One Stop Financial Service (Pty) Ltd v Neffensaan
Ontwikkelings (Pty) Ltd and Another
2015 (4) SA 623
(WCC) refers
to the fact that
s 20(7)
and (8) of the
Companies Act, 2008
are
regarded as a codification of the Turquand rule. The effect of
the original rule and the statutory changes is that an
outsider
concluding an agreement with a company, may assume that its officers
have the powers ordinarily associated with the positions
they
occupy. The contracting party would then not have to
investigate whether the company’s act of internal management
were appropriate. In terms of
s 20(7)
of the
Companies
Act 2008
a third party may presume that the company with whom it is
contracting has complied with its formal and procedural requirements,
unless the third party bore knowledge or ought to have bore knowledge
of the company’s failure to do so. Where a party
knows of
the levels of authority required, and those levels are not present in
the contractual arrangements, the third party cannot
rely on an
assumption of compliance by the company with its internal
requirements.
[18]
Mr
Gajoo
submitted that in the circumstances Transnet was
entitled to an order dismissing the application together with an
adverse order
of costs, including the costs of two counsel and the
costs which were reserved.
[19]
In reply Mr
Choudree
submitted that Transnet indicated its
fulfilment of the suspensive conditions, which was implicit in its
subsequent negotiations.
He referred to the draft settlement
agreement which was never signed but which recorded that Transnet had
reviewed Thekwini’s
claim and made the full and final offer of
R20 million on the 27
th
November 2018. Mr
Choudree
also referred to the figures in the offer of settlement which he
submitted were clearly odd. I understood him to mean by
this
that they probably did not accord with any factual position, but were
rather adjusted to comply with arriving at the total
figure of R20
million. He submitted that these figures were ‘negotiated’.
Mr
Choudree
also referred to the internal memorandum of the
7
th
December 2018 in which Mr Tau Morwe the Acting Group
Chief Executive of Transnet recorded that had requested and received
evidence
for the disbursements in the sum of R12 663 552
and legal fees in the sum of R1 450 000. Mr
Choudree
also referred me to an email message sent by a Transnet employee to
Mr Brijlal advising him that the settlement agreement detailing
the
terms of the settlement had been sent to their Group Office for
signature. It was thereafter be forwarded to Thekwini
for
acceptance.
[20]
Mr
Choudree
also reiterated Transnet’s constitutional
obligations to inform Thekwini about its policy requirements. This
was with regard
to the delegation of authority.
[21]
Urgency was not dealt with by either party at the hearing before me.
I shall not, in those
circumstances, deal with that question, but
assume that the matter was properly before me when it was argued.
[22]
The following are common cause:
(a)
That an offer of settlement in writing was made by Transnet on the
27
th
November 2018.
(b)
Thekwini’s director, acting via Mr Brijlal, indicated that she
had no other choice
but to accept the offer in full and final
settlement of the dispute between the parties. That letter was
forwarded by Mr
Brijlal to Transnet on the 11
th
December
2018.
(c)
Accordingly, an agreement was concluded between the parties at that
stage.
(d)
The agreement was, however, subject to two conditions:
(i)
the provision of valid and auditable proof of the disbursements
claimed; and
(ii)
approval of the appropriate Transnet delegation of authority.
(e)
The conditions were suspensive conditions, and in the circumstances
Thekwini bears the onus
of establishing that they have been
fulfilled.
[23]
The circumstances of the settlement offer are unusual in the sense
that consequential damages
and loss of income has been quantified in
the curious amount R4 747 710.27. It is
overwhelmingly probable that
this was a balancing figure in order
that the total arrived at was R20 million. What is curious is
that the previous litigation
had determined that termination of the
Master Agreement was lawful, and it is difficult to understand how
Thekwini could have claimed
damages. However, as so often
happens in settlements, matters are taken into account which cannot
be accurately and numerically
calculated.
[24]
There is a debate on the papers whether a valid and auditable proof
of disbursements was provided
to Transnet. Thekwini maintains
that that was done even prior to the offer of the 27
th
November 2018. There is certainly evidence that documents had
been complied by the staff of Transnet on the basis that such
evidence had been provided. Whether that was done in anticipation of
the proof and merely as a method of accelerating the time
limits in
the event that the evidence was provided, is not clear. I
shall, however, accept for purposes of this judgment
that such
evidence had been provided.
[25]
What remains to be considered is either the appropriate Transnet
delegation of authority was
provided. The Legal Policy of the
Transnet group, which was compiled on the 11
th
April 2016,
provides that any form of negotiation or correspondence with third
parties on behalf of Transnet that requires the
expertise of a person
trained in the practice of law falls within the definition of ‘legal
services’. Clause 6.5 of
that policy document provides that no
employee of Transnet, regardless of seniority, may negotiate and
conclude a contract without
consulting the relevant in-house legal
advisers on terms of the contract. It is also required that the
signatory to such an instrument
must possess the necessary authority
or delegation to conclude the agreement on behalf of Transnet.
[26]
On the 26
th
November, 2018, the day before the offer was
made by Transnet, a letter was signed by Mr Mlamuli Buthelezi, the
Group Chief Operating
Officer of Transnet and Mr Tau Morwe the Acting
Group Chief Executive approving the offer which was made. In
the Delegation
of Authority Framework document approved by the board
directors of Transnet on the 31
st
August 2016, clause
5.6.1 deals with the approval to commence and settle any litigation,
arbitration or other form of alternative
dispute resolution.
That clause provides that an amount of up to R35 million may be
concluded by the Chief Operating Officer
of Transnet, but only with
the concurrence of its Chief Legal Counsel.
[27]
The offer after the 27
th
November 2018 was made by Mr
Mlamuli Buthelezi the Group Chief Operating Officer of Transnet.
It was approved by the Acting
Group Chief Executive. That
document however was an internal memorandum, and not a document which
contractually bound Transnet
to Thekwini. The problem with the
document is that although it is signed by the Group Chief Operating
Officer and the Acting
Group Chief Executive, there is no indication
of concurrence by the Chief Legal Counsel.
[28]
If the Group Chief Executive had authority to deal with contracts
exceeding R100 million, is
it correct to assume than that he was
entitled to conclude all agreements falling below R100 million, and
that he could do so without
the concurrence of the Chief Legal
Counsel?
[29]
The purpose of including the Chief Legal Counsel in the delegation of
authority document was
clearly to ensure that the proper legal advice
was obtained when legal services were included. That was
clearly the case
in the offer and acceptance because the agreement
was designed to settle the consequences of the Master Agreement after
considerable
litigation had taken place between the parties.
[30]
A settlement agreement of some ten pages was prepared. It was
obviously intended by the
persons who prepared that document that it
would be signed by the representatives of both parties. The
document is clearly
a legal document both in its structure and
content. It was, however, never signed. With regard to the
application of the
Turquand rule, both parties were clearly aware
that the proper delegation of authority had to be followed prior to
the parties
being able to finally conclude their agreement.
[31]
In my view it was clear that the parties always intended that a
settlement agreement would be
drafted and signed by them. The
offer and acceptance constituted an agreement subject to suspensive
conditions. It seems
clear that one of those conditions, that a
comprehensive agreement be drafted, and signed by properly delegated
authorities, never
occurred. In those circumstances there
cannot be said to be an agreement between the parties. It has
failed because
of the failure of suspensive conditions
[32]
With regard to costs, they should follow the results. In my view
there is no basis for making
an award of costs on a punitive scale.
I accordingly make the following order:
‘
The application is
dismissed with costs, such costs to include those which were reserved
in the application and the costs consequent
upon the employment of
two counsel’
Lopes
J
Date
of hearing:
31
st
of May 2019.
Date
of judgment:
3
rd
July 2019.
For
the Applicant:
Mr ABG Choudree
(instructed by Mhlanga Incorporated).
For the Respondent:
Mr V I Gajoo SC and
Mr M Z F Suleman (instructed by Livingston
Leandy
Attorneys)