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[2008] ZASCA 112
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Government of the Republic of South Africa v Thabiso Chemicals (Pty) Ltd (148/2007) [2008] ZASCA 112; 2009 (1) SA 163 (SCA) ; [2009] 1 All SA 349 (SCA) (25 September 2008)
Links to summary
THE SUPREME COURT OF
APPEAL
OF SOUTH AFRICA
Case number: 148/2007
In the matter between:
THE GOVERNMENT OF THE
REPUBLIC OF SOUTH AFRICA APPELLANT
and
THABISO CHEMICALS (PTY) LTD RESPONDENT
Neutral citation:
Government of the RSA v Thabiso Chemicals
(148/2007)
[2008] ZASCA 112
(25 SEPTEMBER 2008)
CORAM: HARMS ADP, BRAND, MAYA JJA,
BORUCHOWITZ
et
KGOMO AJJA
HEARD: 5 SEPTEMBER 2008
DELIVERED: 25 SEPTEMBER 2008
CORRECTED:
SUMMARY
: Contract
arising from tender procedure – cancelled by State Tender Board
on behalf of Government on basis that award of
tender influenced by
incorrect information impliedly furnished by respondent –
whether implication relied upon established
on facts –
relationship between parties governed by law of contract –
administrative law no role to play.
_____________________________________________________
ORDER
______________________________________________
On appeal from
: HIGH
COURT, PRETORIA (BOTHA J)
Sitting as court of First Instance.
(1) The respondent's application for
condonation of the late filing of its heads of argument, is dismissed
with costs.
(2) The respondent's Pretoria attorneys
will not be entitled to recover any fees or disbursements from their
own client pertaining
to the condonation application.
(3) The appeal is upheld with costs,
including the costs occasioned by the employment of two counsel.
(4) The order of the court a quo is set
aside and the following is substituted in its stead:
'The plaintiff's claim is dismissed with costs.'
______________________________________________________________
JUDGMENT
______________________________________________________________
BRAND JA (Harms ADP, Maya JJA, Boruchowitz
et
Kgomo AJJA
concurring)
[1] Preliminary
issues in this appeal arose from a condonation application by the
respondent for the late filing of its heads of
argument, I find it
appropriate to deal with these preliminary issues at the end of the
judgment. As to the merits, proceedings
started when the respondent
('Thabiso') instituted action against the appellant ('the
Government') in the Pretoria High Court.
According to the particulars
of claim, its claim was for damages in the amount of R15 016 846,
allegedly arising from
the wrongful cancellation by the State Tender
Board ('the Tender Board'), representing the Government, of a
contract between the
parties. In its plea, the Government admitted
both the contract and its cancellation by the Tender Board, but
denied that the cancellation
was wrongful.
[2] At the commencement of the trial, the
parties asked the court
a quo
(Botha
J) to order a separation of issues. In terms of the separation order,
the issues surrounding the wrongfulness of the Tender
Board's
purported cancellation were decided first, while the quantum of
Thabiso's alleged damages stood over for later determination.
The
preliminary issues were decided in favour of Thabiso. Hence the court
declared that the cancellation of the contract by the
Tender Board
was wrongful and ordered the Government to pay the costs of the
preliminary proceedings. The Government's appeal against
that
judgment is with the leave of the court a quo.
[3] It is common cause that the contract
between the parties originated from an invitation by the Tender Board
for tenders to deliver
cleaning materials to various Government
departments. In terms of the invitation, the closing date for tenders
was 10 April 2001.
Thabiso's tender was submitted in time. In due
course it was notified by the Tender Board that its tender had been
accepted. In
accordance with the invitation, the tender was expressly
made subject, firstly, to the Regulations promulgated under the State
Tender Board Act 86 of 1968 ('the Regulations'), secondly, to the
State Tender Board General Conditions and Procedures (ST36) as
published in the State Tender Bulletin on 17 May 1991 ("the
General Conditions'), and, thirdly, to certain special conditions
pertaining to the specific tender ('the Special Conditions').
[4] From the beginning of November 2001,
the contract was implemented in that Thabiso complied with orders
placed by Government
departments in accordance with the terms of the
agreement. However, on 11 January 2002, the Tender Board sought to
terminate this
contractual relationship by way of a formal letter of
cancellation bearing that date. Thabiso regarded the Tender Board's
attempt
at cancellation as a repudiation in the sense of an
anticipatory breach. At first, Thabiso attempted to persuade the
Tender Board
not to persist in its cancellation. But these attempts
proved to be unsuccessful. Consequently, Thabiso accepted what it
regarded
as a repudiation of the contract, whereupon it instituted
the action for damages which led to the present appeal.
[5] In the letter of 11 January 2002, the
Tender Board's grounds of cancellation – in so far as they were
persisted in –
were formulated thus:
'When
scrutinizing your tender documents for the second time after the
award of the above tender, it was found that the correct
documents
are required by paragraph 7.3 of the [Special Conditions], which
reads as follows, had not been submitted with your tender:
"7.3 Where a
tender is not a SABS listed company or a permit holder of any of the
products that are offered, a SABS report
(not older than 12 months)
which proves that his manufacturing facilities and quality control
systems comply with SABS requirements,
should be handed in not later
than 10 April 2001."
. . .
In view of the fact that the
documents required by the above paragraph 7.3 . . . should have been
submitted before 10 April 2001,
your tender did not comply with the
special tender conditions at the time of tender and therefore the
State Tender Board approved
on 13 December 2001 that your above
contract be cancelled.'
[6] Though the cancellation letter made
reference to 'documents', the wording of paragraph 7.3 plainly shows
that it requires one
document only, ie a favourable report by the
SABS on the tenderer's manufacturing facilities and quality control
systems. What
is more, the furnishing of the report is clearly a
provisional requirement only. It need not be complied with if the
tenderer is
either a SABS listed company or permit holder. Thabiso
admitted that it had never obtained a SABS report as contemplated in
paragraph
7.3 and that a report of that kind was thus never furnished
to the Tender Board. It also admitted that as at 10 April 2001, it
was not a SABS permit holder in respect of the cleaning materials
referred to in its tender. Its answer to the Tender Board's complaint
was essentially that, as at 10 April 2001 it was a SABS listed
company and that it was therefore not required to file a SABS report.
The Tender Board's response amounted to a denial that Thabiso was in
fact a SABS listed company.
[7] In his evidence at the trial, the
managing director of Thabiso, Mr Brian Nyezy, persisted in the
allegation that Thabiso was
indeed a SABS listed company. The
Government, on the other hand, relied on the evidence of a senior
SABS official, Mrs Sibongile
Dlamini, to the effect that it was not.
Although the obscurities surrounding qualification as a SABS listed
company may render
Mr Nyezy's confusion understandable, I am
persuaded that Mrs Dlamini's testimony conclusively proved the
Government's point. I
therefore agree with the court
a
quo's
factual finding that, as at 10 April
2001, Thabiso was neither a SABS listed company, nor a permit holder
as envisaged in paragraph
7.3. It follows that, in my view, Thabiso
did not comply with the special condition in paragraph 7.3.
Nonetheless, on my reading
of the tender documents as a whole such
non-compliance did not, on its own, constitute a ground for
cancellation by the Government.
[8] In its cancellation letter of 11
January 2002, the Tender Board indeed relied on Thabiso's failure to
file a SABS report, per
se, as its basis for cancellation. That,
however, was not the position taken by the Government in the court a
quo. There it relied
on clause 24.8.2 of the General Conditions
(ST 36). This clause provides that:
'24.8 Where a
contract has been awarded on the strength of information furnished by
the contractor which, after the conclusion of
the relevant agreement,
is proved to have been incorrect, the [Tender Board] may, in addition
to any legal remedy it may have –
24.8.1 . . .
24.8.2 cancel the
contract and claim damages which the State may suffer as a result of
having to make less favourable arrangements.'
[9] As the factual basis for resorting to
the provisions of clause 28.4.2, the Government contended that the
tender was awarded
on the basis of information furnished by Thabiso
to the effect that it was a SABS listed company, which representation
subsequently
proved to be incorrect. The change of tack by the
Government, in relying on a ground for cancellation different from
the one referred
to in its letter of cancellation, by itself, was not
of any consequence. As Nienaber JA said in
Datacolor
International (Pty) Ltd v Intamarket (Pty) Ltd
2001
(2) 284 (SCA) para 28:
'It is settled law
that an innocent party, having purported to cancel on inadequate
grounds, may afterwards rely on any adequate
grounds which existed at
. . . the time (cf
Putco
Ltd v TV & Radio Guarantee Co (Pty) Ltd and other Related Cases
1985 (4) SA 809
(A)
at 832C-D).'
[10] The real issue to be decided by the
court a quo therefore fell within a narrow ambit, namely, whether the
facts relied on by
the Government could sustain a cancellation under
clause 24.8.2. Botha J found that it could not. His reasons for this
finding
appear from the following admirably succinct statement:
'Clause
24.8.2 of ST 36 gives the Tender Board the right to cancel a tender
if it has been awarded on the strength of information
which, after
the conclusion of the agreement, has been proved to have been
incorrect. In view of the fact that the plaintiff [Thabiso]
never
alleged that it was SABS listed, the defendant [the Government]
cannot rely on Clause 24.8.2 for its cancellation of the
contract.'
[11] In this court the Government found
further support for its case in reg 3(6)(b) of the Regulations
promulgated under the
State Tender Board Act on 20 May 1988, which
were in operation at the time, though subsequently replaced by
Regulations published
on 5 December 2003. The relevant part of reg
3(6)(b) provides:
'(6) If
an agreement has been concluded with any contractor on the strength
of information furnished by him in respect of which
it is after the
conclusion of such agreement proved that such information was
incorrect the Board may, in addition to any legal
remedy it may have
–
(a) .
. .
(b) terminate
the agreement and recover from the contractor any damages which the
State may suffer by having to make less favourable
arrangements
thereafter.'
[12] I do not believe that reg 3(6)(b)
takes the matter any further. It is virtually identical in its
wording to clause 24.8.2.
Any interpretation or implementation which
is good for the one must therefore be good for the other. The
essential element of both
is the furnishing of information, ie a
representation by the tenderer, which influenced the award of a
tender in his or her favour,
but which subsequently turned out to be
incorrect. Fraud or even negligence is not required. For purpose of
both provisions, even
an innocent misrepresentation on the part of
the tenderer will suffice.
[13] The only incorrect information
furnished – or misrepresentation – by Thabiso contended
for by the Government, in
this court and in the court a quo, is that
it held itself out to be a SABS listed company, which it was not. No
one suggests that
a representation to this effect would be of no
consequence in the award of the tender. Shorn of unnecessary frills
appended in
evidence and in argument, the outcome of the dispute
therefore turns on one simple issue of fact: did Thabiso, at any time
prior
to the award of the tender in its favour furnish incorrect
information by holding itself out as a SABS listed company, or not?
As I said earlier, Botha J, in the court a quo held that it did not.
On this narrow basis he therefore decided the matter against
the
Government. In the event, the only question we have to decide is
whether we agree with that factual finding.
[14] From Botha J's reasoning, it is
apparent in my view, that he only considered the possibility of
presenting information by express
words. If this was indeed the only
possibility to be considered, the learned judge was obviously
correct. Nowhere in the tender
documents did Thabiso make the express
statement that it was a SABS listed company. The fact that it
subsequently tried to justify
its failure to furnish a report on that
basis, is of no consequence. But on my reading of clause 24.8.2 –
and, for that matter,
reg 3(6)(b) – I can see no reason to
limit the enquiry to the furnishing of incorrect information by way
of express statements.
It is a generally accepted principle that the
effect of an implied misrepresentation by conduct is equivalent to a
misrepresentation
by express words. I think that this general
principle should also find application in an enquiry under clause
24(8)(2) and reg
3(6)(b). Thus understood, information conveyed
impliedly by conduct would, for the purposes of these provisions, be
the equivalent
of furnishing information by express words. In the
event, the enquiry would then be, as in all cases where reliance is
placed on
an implied representation by conduct, whether the
implication can be said to be justified (see eg
Standard
Bank of South Africa Ltd v Coetsee
1981 (1)
SA 1131
(A) at 1135E).
[15] Reverting to the facts of this case,
Thabiso submitted a tender without the SABS report contemplated by
the special condition
in paragraph 7.3. Read in the context of this
special condition as a whole, Thabiso's conduct is capable of only
three possible
inferences: firstly, that Thabiso is a SABS listed
company, secondly, that it is a SABS permit holder with reference to
any of
the products offered in the tender and, thirdly, that its
failure to furnish the report was due to an oversight. The second of
the possible inferences referred to, can be disregarded. It was clear
from the tender documents that Thabiso was not the holder
of a SABS
permit.
[16] Of the other two inferences, I think
that, objectively speaking, the first mentioned is by far the most
likely one. Why should
it be inferred that Thabiso, whose tender
included all other documents required, would suffer from an oversight
in this single
respect? From a subjective point of view, the
inference that Thabiso was a SABS listed company was clearly the one
drawn by the
Tender Board. What is more, that was the very inference
Thabiso intended to convey. We know as a fact that the reason why it
had
failed to furnish the SABS report was that it was under the
mistaken impression that it was a listed company. In the
circumstances
it hardly lies Thabiso in the mouth to say that the
Tender Board should not have drawn the inference which it did.
[17] I believe this is the end of the
matter. The Government had established the furnishing of incorrect
information on which it
relied. It follows that I do not agree with
the court a quo's finding that clause 24.8.2 was not applicable. The
inevitable result,
in my view, is that the appeal must succeed.
[18] What remains are observations
originating from comments by the court a quo which seem to support
the notion that the contractual
relationship between the parties may
somehow be affected by the principles of administrative law. These
comments gave rise to arguments
on appeal, for example, as to whether
the cancellation process was procedurally fair and whether Thabiso
was granted a proper opportunity
to address the Tender Board in
accordance with the
audi alteram partem
rule
prior to the cancellation. Lest I be understood to agree with these
comments by the court a quo, let me clarify: I do not believe
that
the principles of administrative law have any role to play in the
outcome of the dispute. After the tender had been awarded,
the
relationship between the parties in this case was governed by the
principles of contract law (see eg
Cape
Metropolitan Council v Metro Inspection Services CC
2001
(3) SA 1013
(SCA) para 18;
Steenkamp NO v
Provincial Tender Board, Eastern Cape
2006
(3) SA 151
(SCA) paras 11 and 12). The fact that the Tender Board
relied on authority derived from a statutory provision (ie s 4(1)
(eA)
of the State Tender Board Act) to cancel the contract on behalf
of the Government, does not detract from this principle. Nor does
the
fact that the grounds of cancellation on which the Tender Board
relied were, inter alia, reflected in a regulation. All that
happened, in my view, is that the provisions of the Regulations –
like the provisions of ST36 – became part of the
contract
through incorporation by reference.
[19] Finally, there are the preliminary
issues pertaining to Thabiso's condonation application, necessitated
by the late filing
of its heads of argument. Both the condonation
application and the heads of argument were filed, way out of time,
only one week
before the hearing of the appeal. The resulting
inconvenience for this court and the appellant, is self-evident. The
explanations
advanced for this flagrant non-compliance of the rules,
clearly indicate that Thabiso's Pretoria attorneys are solely to
blame.
The excuses proferred by the attorneys are so flimsy in nature
that they do not warrant a detailed account. Suffice it to say, in
my
view, that these excuses do not even come close to justifying
condonation. But, because I hold the view that the appeal would
in
any event have been successful, the dismissal of the condonation
application will be of little consequence, save for issues
of costs.
The order I therefore propose to make is that the condonation
application be dismissed with costs and that Thabiso's
Pretoria
attorneys will not be entitled to recover any fees or disbursements
from their own client pertaining to the unsuccessful
condonation
application.
[20] For these reasons it is ordered that:
(1) The respondent's application for
condonation of the late filing of its heads of argument, is dismissed
with costs.
(2) The respondent's Pretoria attorneys
will not be entitled to recover any fees or disbursements from their
own client pertaining
to the condonation application.
(3) The appeal is upheld with costs,
including the costs occasioned by the employment of two counsel.
(4) The order of the court a quo is set
aside and the following is substituted in its stead:
'The plaintiff's claim is dismissed with
costs.'
...……………..
F D J BRAND
JUDGE OF APPEAL
Appearances:
For Appellant: B R Tokota SC
N A R Nqoepe
Instructed by
The State Attorney, Pretoria
The State Attorney, Bloemfontein
For Respondent: M M Ripp SC
P J Vermeulen
Instructed by
Ramothwala Lenyai Inc, Pretoria
Mosiu Attorneys, Bloemfontein