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[2015] ZAGPPHC 163
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Butsana Textile Services CC v National Treasury and Another (14166/07) [2015] ZAGPPHC 163 (26 March 2015)
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION, (PRETORIA)
CASE
NO: 14166/07
NOT
REPORTABLE
NOT
OF INTEREST TO OTHER JUDGES
DATE:
26 MARCH 2015
In
the matter between:
BUTSANA TEXTILE
SERVICES
CC
............................................................................
PLAINTIFF
And
THE
NATIONAL
TREASURY
..............................................................................
1
ST
DEFENDANT
THE
DEPARTMENT OF
DEFENCE
..................................................................
2
ND
DEFENDANT
J
U D G M E N T
MUDAU
AJ,
[1]
The plaintiff instituted an action against
the defendants for specific performance alternatively, for damages
with costs. The plaintiff’s
claim is based on a written
contract entered into between the parties pursuant to a tender which
the plaintiff was awarded. The
matter initially served before this
court (per Zondo J) on 1 March 2011. On 23 September 2011 the
plaintiff’s claim was dismissed
with costs. Subsequently, the
plaintiff launched an appeal to the full bench of this court (per
Legodi J and Ebersohn as well as
Kruger AJJ). The appeal was heard on
28 August 2013 followed by a judgment on 17 September 2013. The
appeal succeeded to the extent
set out hereunder:
“
21.1
.1 the order made by the court a quo dismissing the appellant’s
case with costs is amended to read as follows:
21.1
.1.1 “the matter is postponed sine die for trial on the issue
stated in the document titled ‘LIST OF AGREED FACTS
AND
ISSUES’.
2
1.1.1.2 wasted costs occasioned by the postponement to be costs in
the course”.
21.1
.2 each party to pay on costs of the appeal
.”
The
full bench essentially, declined to deal on appeal with the merits of
the dispute between the parties for lack of compliance
with Rule 33
(4).
THE
PARTIES
[2]
The plaintiff, Butsana Textile Services CC, is a close corporation
registered in terms of the Close Corporation Act No 69
of
1984. The 1
st
defendant (the National Treasury) is
represented by the Minister of Finance in an official capacity. The
2
nd
defendant (the Department of defence) is represented
by the relevant Minister in an official capacity.
THE
FACTS
[3]
The following
facts are neither contested nor complex. The plaintiff was awarded a
tender by the 1
st
defendant for the supply of fabrics and textiles to certain specified
government departments, namely, the Department of Safety
and Security
(as it was then called), the Department of Correctional Services (as
it was then) as well as the Department of Defence.
As a consequence
thereof, a written contract was concluded between the plaintiff and
the 1
st
defendant on behalf and (or) for the benefit of the relevant
departments for the period 1 August 2004 to 31 July 2005. The tender
was to be performed in respect of five items referred to in the
contract as: RT 160-02-06- 01T, RT160-02-09-03T, RT160-02-09-04T,
RT
160-02-09-05T and RT 160-02-09-09T.
[4]
It is common cause that the plaintiff received orders for and for its
part, performed in fulfilment of its contractual obligations
in
respect of all the items except for the fifth item referred to as RT
160-02-09-05T above. It is in respect of this item that
no order was
issued by the 2
nd
defendant, which in turn, formed the
basis of the current dispute between the parties and the resultant
action by the plaintiff.
[5]
The issue that falls for determination by this court primarily
concerns the correct interpretation of the contract between the
plaintiff and the defendants. This court, ultimately, is to decide
whether the defendants were in terms of the relevant contract
obliged
to issue an order for the delivery of the item referred to in RT
160-02-09-05T during the period of the contract.
[6]
The document
titled
‘LIST OF AGREED FACTS AND ISSUES’
referred to by the
full bench was, at the commencement of the trial before this court,
and by agreement between the parties handed,
presumably, in terms of
Rule 33 (1) and 33 (2)
of
the Uniform Rules of Court, (“the Stated Case”)
for consideration of
the dispute
in
adjudicating certain questions of law.
The said document
which was signed in my presence and in open court, by the attorneys
of the parties reads as follows:
“
1.1
In accordance with what was raised in paragraphs 3.2.7 and 3.6 of the
Defendants’ plea, the Defendants contend that the
relevant
tender contract, prepared by or on behalf of the Defendants, does not
oblige the Defendants to order for a delivery of
all the items
covered by the tender contract. The Plaintiff, on the other
hand, contends that it is in fact a term of the
said contract that
orders must be placed for all the items covered by the contract, and
if orders are not so placed for all the
items in the contract then,
so contends the Plaintiff, there is a breach of the agreement by the
Defendants. The Defendants
deny, however, as indicated earlier
herein, that failure to order for all the items covered by the
contract constitutes a breach
of the agreement.
1.2
In essence therefore the parties will be requesting the above
Honourable Court to interpret and pronounce upon which one of
the two
aforementioned contentions is the correct one.
1.3
If the Court finds in favour of the Defendants it should dismiss the
Plaintiff’s action with costs.
1.4
If the Court finds the Plaintiff’s interpretation is correct,
the Court should issue a declaratory order, declaring the
Plaintiff
is entitled to recover from the Defendants so much of its alleged
damages which the Plaintiff is able to prove.
1.5
In essence, therefore, and in accordance with the provisions of
Uniform Rule of Court 33(4) the parties will request a pronunciation
on the merits and the latter issues, if still relevant, can be
decided at a later stage.
”
I
return to this aspect below in this judgment.
[7]
In a letter of acceptance of the
tender by the 1
st
defendant, which was directed to the Plaintiff (page 76 to 77 of the
trial bundle), the following is stated:
“
Your
bid RT160-2004T dated 12 April 2004 has been accepted, subject to all
the terms and conditions embodied therein, for the supply
of the
items indicated per attached circular.
This
letter of acceptance constitutes a binding contract
but
no delivery should be affected until written official orders, which
inter alia indicate delivery instructions, have been received.
Orders
will be placed by participating bodies listed in the document and on
whose behalf the contract has been arranged as and
when required
during the contract period.
”
(Own
emphasis added)…
The
award of this tender is subject to the testing/inspection by any
institution recognised by the South African National Accreditation
System (SANAS). Pre-production samples must be submitted for testing
and approval before mass production can commence. The Department
of
trade and industry (DTI) is currently conducting a review on the
appropriateness of designating industries that produce textiles,
clothing, footwear and leather products as strategic sectors for
preferential treatment in terms of paragraph 12(1) of the regulations
on the Preferential Procurement Policy Framework Act, No 5 of 2000.
As
an interim measure, while the review is underway, the DTI has decided
to designate the textiles, clothing, footwear and leather
products is
set aside for local production and supply to the state.
In
view of the above, only locally manufactured products or products
manufactured locally from imported fabrics or raw material
will be
considered. However, contract is advised to obtain written
confirmation by the Department of Trade and Industry that the
raw
material of fabric could not be sourced locally before they could
import raw material of fabric.”
[8]
In addition to the “stated case”, the plaintiff in its
endeavour to discharge the onus that it has in proving its
case
presented the evidence by its sole member, Mr Julian Mohale Lehana
(“Lehana”). In his evidence, Mr Lehana essentially
confirmed the award of the tender to the plaintiff. He further
testified that in addition to the letter of acceptance, he also
received a circular dated 2 August 2004 ( page 78 of the trial
bundle) issued by one F Alexander addressed to all
departments/administrations
on behalf of the Chief Director: Contract
Management from the office of the 1
st
defendant. Relying
on this circular or memorandum, the plaintiff incurred expenses that
form the basis of its claim against the
defendants.
[9]
Mr Alexander, a Deputy Director: Contract Management at the time in
the office of the 1
st
defendant’s tender board,
testified on behalf of the defendants and confirmed that he was the
author of the circular/memorandum
relied upon by the plaintiff. The
circular was an internal communication addressed to various
departments and not to the plaintiff.
It is his version that it is
not customary or practice to send such an internal circular to
bidders. If it was sent to the plaintiff
in this case, it could only
have been done so erroneously. In so far as it may be relevant, the
relevant part of the circular reads
as follows:
“
1
.
This contract circular consists of 4
pages and cover 23 items.
2.
The requirements of the following departments/administrations are
included in this contract:
South
African Police Service
South
African National Defence Force
Correctional
Services
3.
The acceptance of all goods ordered in terms of this contract will be
subject to inspection/testing by any institution recognised
by SANAS
for compliance with the specifications prior to dispatch from the
factory. A copy of the inspection certificate must accompany
each
consignment. The cost of inspections would be for the
department’s/administration’s account. However if it does
not comply with the specifications, the cost will be for the account
of the supplier.
4.
Quantities shown in this circular are subject to evaluation of 10%.
All quantities
must
be taken up during the contract period.
(Own emphasis)
5.
Orders must be placed as soon as possible but not later than 3
months after commencement of the contract
.
6.
Prices are inclusive of 14% VAT.”
[10]
It is to Rule 33 referred to above that I now return. For
convenience, Rule 33 in so far as relevant reads:
“
33
Special Cases and Adjudication upon Points of Law
(1)
The parties to any dispute may, after institution of proceedings,
agree upon a written statement of facts in the form of a special
case
for the adjudication of the court.
(2)
(a)
Such statement shall set forth the facts agreed upon, the
questions of law in dispute between the parties and their contentions
thereon. Such statement shall be divided into consecutively numbered
paragraphs and there shall be annexed thereto copies of documents
necessary to enable the court to decide upon such questions. It shall
be signed by an advocate and an attorney on behalf of each
party or,
where a party sues or defends personally, by such party.
(b)
Such special case shall be set down for
hearing in the manner provided for trials or opposed applications,
whichever may be more
convenient.
(c)
If a minor or person of unsound mind is
a party to such proceedings the court may, before determining the
questions of law in dispute,
require proof that the statements in
such special case so far as concerns the minor or person of unsound
mind are true.
(3)
At the hearing thereof the court and the parties may refer to the
whole of the contents of such documents and the court may
draw any
inference of fact or of law from the facts and documents as if proved
at a trial.
(4)
If, in any pending action, it appears to the court
mero motu
that
there is a question of law or fact which may conveniently be decided
either before any evidence is led or separately from any
other
question, the court may make an order directing the disposal of such
question in such manner as it may deem fit and may order
that all
further proceedings be stayed until such question has been disposed
of, and the court shall on the application of any
party make such
order unless it appears that the questions cannot conveniently be
decided separately.
(5)
When giving its decision upon any question in terms of this rule the
court may give such judgment as may upon such decision
be appropriate
and may give any direction with regard to the hearing of any other
issues in the proceeding which may be necessary
for the final
disposal thereof.
(6)
If the question in dispute is one of law and the parties are agreed
upon the facts, the facts may be admitted and recorded at
the trial
and the court may give judgment without hearing any evidence."
[11]
Rule 33 (1) and Rule 33 (2) provide a mechanism of disposing of a
case without the necessity of leading evidence (
Sibeka v Minister
of Police
1984 (1) SA 792
(W)
). Importantly,
there must be an actual agreement between the parties on the stated
facts, at least for the purposes of the special
case (
Bane v
D’Ambrosi
2010 (2) SA 539
(SCA)
) .In
terms of Rule 33 (1) it is trite that the parties may proceed under
this sub- rule as of right and the court is obliged to
hear the
special case as formulated by the parties in terms thereof. In
contrast however, Rule 33(4) is invoked so that a factual
issue can
be determined which can give direction to the rest of the case, to
obviate the leading of unnecessary evidence, to avoid
delays as well
as the cost implications.
[12]
Writing for the full bench, Legodi J, stated at Para (10) regarding
this matter that:
“
Request
for a pronunciation on merits under Rule 33(4) in my view, was
misplaced. I say so, because in terms of Rule 33(4) the court
acts
mero motu
if it appears to it that there is a question of law or fact which may
conveniently be decided either before any evidence is led
or
separately from any other question. Secondly, in as much as the
parties sought to resolve the issues as quoted in paragraph
(7) of
this judgement, they could not have done so without leading of
evidence, as the issue or issues aforesaid appeared to have
been
contested and could not be resolved as a point of law which require
evidence”.
The
quotation in paragraph (7) referred to by Legodi J is for all intents
and purposes, the same as what has been quoted in paragraph
[6] of
this judgment, repeated for convenience.
[13]
In this matter, there was, in my respectful view, no proper
compliance with Rule 33(2) in that the document relied upon was
also
not signed by the advocates representing the parties as the rule
provides but, by the attorneys only. In addition, the process
followed, was, in my respectful view, a hybrid between the procedures
envisaged in Rule 33(1) and (2) as well as Rule 33(4). The
only
difference being that in addition to the stated case as referred to
above; each party also presented evidence alluded to above.
However, given the
advanced stage of the matter when it came before me for determination
and delays already incurred, I considered
it to be inappropriate to
let such procedural issues obstruct or delay the determination of the
matter in the interests of
the
parties
and the ends
of
justice
.
[14]
In defending the plaintiff’s claim, the defendants pleaded
that:
3.1
…
3.2.
It was a special condition of this tender that:
3.2.1
The products offered should bear the SABS mark or a test report
issued by any testing agent recognised by a South African
National
Accreditation Systems (
SANAS)
not older than one year that
proves that the offered product does comply with the specifications;
3.2.2
Alternatively, a report from any testing organisation accredited by
SANAS
that proves that tenderer can deliver the offered items
according to the specifications.
3.2.3
The tenderer was still expected to submit the pre-production samples
when requested to do so to the relevant testing agent
recognised by
SANAS
;
3.2.4
The tenderer was still expected to submit 3 pairs of pre-production
samples to the relevant testing agent or any testing agent
recognised
by SANAS;
3.2.5
Mass production shall only commence after the Department and the
contractor concerned have been notified by the relevant testing
institution that the pre-production samples have been approved;
3.2.6
In the event the pre-production samples are not approved by the
relevant testing institution a second set of pre-production
samples
incorporating corrections/ improvements are required, the corrected
samples must reach the relevant testing institution
within 21 days
after the relevant testing institution had notified the tenderer of
its findings;
3.2.7
Deliveries must commence as soon as possible after receipt of an
official order;
3.2.8
If the tenderer is only a supplier and not an actual manufacturer of
the product and will be sourcing the product from another
company, an
original letter from that company/supplier confirming firm supply
arrangement in this regard had to accompany the tender;
3.2.9
The said supplier must confirm that it has familiarised itself with
the item description/ specification and tender conditions;
3.3
On or about 12
th
April 2004 the Plaintiff submitted a
tender. The Plaintiff has furnished South African Fine Worsteds as
their manufacturer and
supplier of the fabrics as required in terms
of the tender.
3.4
In its tender the Plaintiff specified that the delivery period will
be 60 days after the receipt of an order;
3.5
…
3.6
It was a condition of this tender, alternatively an agreement between
the parties that no delivery should be effected until
written orders
have been received. Orders will be placed by participating bodies
listed in the bid document on whose behalf the
contract has been
arranged as and when required during the contract period…”
[15]
The rules pertaining to the interpretation of documents were set out
in
Natal
Joint Municipal Fund v Endumeni Municipality
2012
(4) SA 593
(SCA)
as
follows at Para [18] by Wallis JA:
“
The
present state of the law can be expressed as follows:
Interpretation
is the process of attributing meaning to the words used in a
document, be it legislation, some other statutory instrument,
or
contract, having regard to the context provided by reading the
particular provision or provisions in the light of the document
as a
whole and the circumstances attendant upon its coming into existence.
Whatever the nature of the document, consideration must
be given to
the language used in the light of the ordinary rules of grammar and
syntax; the context in which the provision appears;
the apparent
purpose to which it is directed and the material known to those
responsible for its production. Where more than one
meaning is
possible each possibility must be weighed in the light of all these
factors. The process is objective, not subjective.
A sensible meaning
is to be preferred to one that leads to insensible or unbusinesslike
results or undermines the apparent purpose
of the document. Judges
must be alert to, and guard against, the temptation to substitute
what they regard as reasonable, sensible
or businesslike for the
words actually used. To do so in regard to a statute or statutory
instrument is to cross the divide between
interpretation and
legislation; in a contractual context it is to make a contract for
the parties other than the one they in fact
made. The ‘inevitable
point of departure is the language of the provision itself’,
read in context and having regard
to the purpose of the provision and
the background to the preparation and production of the document
.”
See
also
Investigating Directorate: Serious Economic Offences &
Others v Hyundai Motor Distributors (Pty) Ltd & Others: in re
Hyundai
Motor Distributors (Pty) Ltd v Smith NO & Others
2001
(1) 545 (
CC)
Para 23 – 24, 26]
[16]
In
Bothma-Batho
Transport (Edms) Bpk v S Bothma & Seun Transport (Edms) Bpk
2014
(2) SA 494
(SCA)
Wallis JA, with reference to Para [18] of the
Endumeni
judgment said the following:
“
[11]
That statement reflected developments in regard to contractual
interpretation in Masstores (Pty) Ltd v Murray & Roberts
Construction (Pty) Ltd
[2008] ZASCA 94
;
[2008 (6) SA 654
(SCA) para 7); KPMG Chartered
Accountants (SA) v Securefin Ltd & Another
[2009 (4) SA 399
(SCA)
para 39) and Ekurhuleni Municipality v Germiston Municipal Retirement
Fund
[2010 (2) SA 4
98 (SCA) paras 12–14]. I return to it and to
those cases only because we had cited to us the well-known and much
cited summary
of the earlier approach to the interpretation of
contracts by Joubert JA in Coopers & Lybrand & Others v
Bryant
[1995] ZASCA 64
;
[1995 (3) SA 761
(A) at 768A–E], that:
‘
The
correct approach to the application of the 'golden rule' of
interpretation after having ascertained the literal meaning of the
word or phrase in question is, broadly speaking, to have regard:
(1)
to the context in which the word or phrase is used with its
interrelation to the contract as a whole, including the nature and
purpose of the contract ...
(2)
to the background circumstances which explain the genesis and purpose
of the contract, i.e. to matters probably present to the
minds of the
parties when they contracted ...
(3)
to apply extrinsic evidence regarding the surrounding circumstances
when the language of the document is on the face of it ambiguous,
by
considering previous negotiations and correspondence between the
parties, subsequent conduct of the parties showing the sense
in which
they acted on the document, save direct evidence of their own
intentions.’
[12]
That summary is no longer consistent with the approach to
interpretation now adopted by South African courts in relation to
contracts or other documents, such as statutory instruments or
patents. Whilst the starting point remains the words of the document,
which are the only relevant medium through which the parties have
expressed their contractual intentions, the process of interpretation
does not stop at a perceived literal meaning of those words, but
considers them in the light of all relevant and admissible context,
including the circumstances in
which
the document came into being. The former distinction between
permissible background and surrounding circumstances, never very
clear,
has fallen away.
Interpretation is no longer a process that occurs in stages but is
‘essentially one unitary exercise
’
.”
EVALUATION
[17]
Against this background, it is to the facts, which as indicated
above, are on the main, common cause that I now revert to in
my
evaluation of the relevant documents that formed the basis of the
contract and the evidence. By way of summary and for convenience
purposes the common cause facts are:-
17.1
The plaintiff was awarded the tender by the 1
st
defendant
for the supply of fabrics and textiles to certain government
departments for a specified period.
17.2
A contract was concluded between the plaintiff and the 1
st
defendant to give effect to the tender.
17.3
The contract was entered in respect of the order and delivery of five
specified items.
17.4
The contract between the parties was however subject to certain terms
and conditions stipulated in the contract.
17.5
The 2
nd
defendant issued orders only in respect of 4 of
the 5 items, and the plaintiff for its part, supplied and delivered
the said items
in honour of its contractual obligations. The 2
nd
defendant paid for the delivered items in full.
17.6
When the 2
nd
defendant failed or refused to order the 5
th
item, the plaintiff considered this conduct as constituting a
repudiation of the agreement between the parties, hence the current
claim for specific performance or damages disputed by the defendants.
[18]
It has been contended by counsel on behalf of the plaintiff in his
written heads of argument that:
“
The
statements, in the contract circular, to the effect that all
quantities
must
and not merely
may
be taken up during the contract period, and also the directive in
paragraph 5 to the effect that orders must be placed as soon
as
possible but not later than 3 months after the commencement of the
contract period, are clear indications that in the minds
of the
Defendants, in particular the First Defendant, the intention was that
all quantities must be taken up”.
In
this regard, counsel was relying upon a circular alluded to above at
Para [8] and [9] which, the 1
st
defendant denies formed
part of the original contract. It was also contended on behalf of the
plaintiff that:
“
When
consideration is had to the language used by the Defendants in the
acceptance letter and the contract circular, it is evident
that in
terms of ordinary rules of grammar and syntax, the contract circular
is an attachment to the letter of acceptance and the
Defendants were
obliged to take up all the items within a period of three months
after the award of the tender.”
[19]
However, from the common cause documents the following (which the
parties agreed to in their contract) needs to be highlighted;
this
was also alluded to by counsel for the defendant which:
19.1
“…
no delivery should be effected until written
official orders, which, inter alia, indicate delivery instructions
have been received.”
19.2
“
Pre-production samples must be submitted for testing and
approval before mass production can commence.”
19.3
“It is a condition that deliveries must commence as soon as
possible after receipt of an official order…
”
19.4
“The delivery period of the material is 60 days after receipt
of an order
and not before receipt of an order”
. (Own
emphasis)
19.5
“Orders will be placed by participating bodies listed in the
bid document on whose behalf the contract has been arranged
as and
when required
during the contract period’.
[20]
A proper reading of the contract in my respectful view clearly shows
that for the plaintiff to effect delivery of the specified
items, the
following had to happen:
20.1
first, an official order from the defendant had to be received.
20.2
the plaintiff was then obliged to effect delivery 60 days after
receipt of the official order and;
20.3
as and when required during the contract period.
To
my mind, “as and when required”, could only mean under
the circumstances that, it was subject to the defendant exercising
an
option whether a need arose, at any given time during the contract
period, to place an order with the plaintiff. Any suggestion
that the
2
nd
defendant was obliged to place an order irrespective
of whether any need arose is not only absurd, but is certainly not
supported
by the terms of the contract which are common cause.
[21]
Reliance by the plaintiff upon the disputed document, a circular
which, undisputedly has been addressed to government institutions
(Departments/administrations), particularly paragraph 4 thereof, the
relevant part of which, reads: “…
All quantities
must
be taken up during the contract period”
does not
avail the plaintiff and is therefore misplaced. In any event, the
circular cannot be read in isolation from the other
general and
specific terms of the contract in this matter. Read in this context
therefore, and with particular regard to the whole
contract (with its
terms and conditions), the word
must
is in my view, only in
respect of items that the defendant would have identified a need to
place an order and not more. I am fortified
in this view primarily
because the 1
st
defendant contracted with the plaintiff
for and on behalf of the relevant government departments which,
ordinarily would firstly
identify a need for as well as make use of
the items subject to the contract.
[22]
There is no justification to read into the circular that the 1
st
defendant had issued an instruction that the relevant government
departments/administrations
must
place orders for an item in
respect of which, there was no need. If that was the case, the result
would be wasted expenditure of
public funds, which inevitably would
put strain on the national treasury. Secondly, the other terms of the
contract alluded to
above would as a result be rendered nugatory.
[23]
For all these considerations, the submission by the plaintiff that
the defendants were obliged to issue an order in respect
of the
remaining 5
th
item in their contract is without any merit
and falls to be rejected.
[24]
I turn now to consider the costs in this matter. The defendants as
the successful parties will generally be entitled to costs
(see, for
example,
Union Government (Minister of Railways & Harbours) v
Heiberg
1919 AD 477
at 484). I see no reason in the present
matter to depart from the general rule.
[25]
In the premises the plaintiff’s action is dismissed with costs.
MUDAU TP
Acting Judge of the
High Court
Date
of hearing: 10 – 11 February 2015
Counsel for the
Plaintiff: M P VAN DER MERWE
Instructed by: TIM
DU TOIT & CO INCORPORATED, PRETORIA
Counsel for the
defendant: MR M MOJAPELO
Instructed by: THE
STATE ATTORNEY, PRETORIA
Date of judgment: 26
March 2015