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[2015] ZAKZDHC 57
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Perumal v Ahmed Al-Kadi Private Hospital Ltd and Another (4172/2015) [2015] ZAKZDHC 57 (9 July 2015)
IN THE HIGH COURT OF
SOUTH AFRICA
KWAZULU-NATAL LOCAL
DIVISION, DURBAN
Case No: 4172/2015
DATE: 09 JULY 2015
In the matter between:
Dr Leon Yaseen
Perumal
..........................................................................................................
Applicant
And
Ahmed Al-Kadi Private Hospital
Ltd
.........................................................................
First
Respondent
Dr
Jackpersad
...........................................................................................................
Second
Respondent
Judgment
Lopes J
[1] The first respondent in this
application, the Ahmed Al-Kadi Private Hospital Ltd, has embarked
upon the building of a private
hospital in the Mayville area. It is
anticipated that construction will be completed, and the hospital
will be functional by February
or March of 2016.
[2] In anticipation of the hospital
containing a fully functional radiology department, interested
candidates were invited to tender
for the position of the radiology
unit service provider.
[3] The applicant, Dr Leon Yaseen
Perumal, responded to this invitation, and was requested to attend an
interview on the 10th March
2014. At the interview Dr Perumal
provided a power-point demonstration, which was given to various
members of the Board of the
hospital. The hospital’s record of
the presentation indicates that it was very well received by the
members of the Board.
[4] On the 10th June 2014 the hospital
sent Dr Perumal a letter. The relevant content is as follows:
‘Your tender presentation to the
Board members on the 10 March 2014, and proposal dated 14 March 2014,
as the radiology service
provider at the Ahmed Al-Kadi Private
Hospital refers.
As you aware, this tender was opened
and numerous candidates tendered.
It gives me great pleasure to advise
you that you are awarded the tender after adjudication by the Board
of Directors at a meeting
held on 10th June 2014.
This appointment is based on the
following conditions:
1. The size of the unit is 385 sqm
2. The unit needs to include all
services, incl. MRI and CT Scan
3. A 10 year lease with the option of
renewal
4. A market related rental of R285.00
per sqm effective from date of operation, with an 8% increase in
rental annually
5. Beneficial Occupation from date of
completion of the building, allowing you sufficient time to set up.
You shall be advised of
the date in due cause, (sic)
6. Your commitment to providing
complementary or a reduced rate radiology service to the Islamic
Medical Association Baytul Nur
Trust qualifying patients. The details
hereof to be negotiated and finalised in the documentation,
agreements and contracts to
follow.
7. We accept you investment offer of
R10 000 000 (ten million rands) towards the purchase of ordinary
shares in the Ahmed Al-Kadi
Private Hospital Limited.
The above constitute the material terms
of the agreement and our offices will be in contact once the
documentation, contracts and
agreements have been drawn up by the
legal team and a meeting will be scheduled for the signing thereof.
All our rights remain strictly
reserved.
We kindly request that you treat this
appointment confidentially until such time as the non-successful
candidates have been informed.
Welcome to the Ahmed Al-Kadi Private
Hospital family.’
I shall hereinafter refer to this
letter as ‘the letter of appointment’.
[5] Having received the letter of
appointment, Dr Perumal believed that a binding contract had been
concluded between him and the
hospital. However, some considerable
time later, and as the building progressed, the hospital began to
express the view that his
appointment had only been a provisional
one. Various demands were made by the hospital, and disputes arose
between the hospital
and Dr Perumal which may be summarised as
follows:
(a) The ‘shell’ dispute.
The hospital maintained that all it was obliged to provide was a
‘shell’ - i.e.
385m2 of the building in accordance with
the letter of
appointment, without any improvements.
Disputed items which emerged, were:
(i) The air conditioner. The rest of
the building was air-conditioned. The hospital maintained that
because the radiology unit required
special air- conditioning, this
had to be provided by Dr Perumal. It was not part of the letter of
appointment.
(ii) The generator. Although the rest
of the building was to have its own generator, the power requirements
of the radiology unit
were such that a separate and independent
generator would be needed. Dr Perumal agreed that he would be
responsible for the cost
of the generator.
(iii) The fire-fighting equipment. The
radiology equipment required specialist fire-fighting equipment,
using gas. The hospital’s
view was that the additional cost of
this item was for the account of Dr Perumal.
(iv) Plugs and power points. This item
included interior electrical fittings and lighting. The hospital
alleged these were for Dr
Perumal’s account.
(b) The financial documentation
dispute. As time passed, and the building progressed, the hospital
began to demand financial documents
from Dr Perumal, in order to
satisfy the Board members that he was able to afford to pay for the
necessary radiology equipment,
and the additional costs of setting up
the radiology centre.
(c) The progress of the building
dispute. Disputes arose as the building project evolved, arising from
the need of the hospital
to have floor-plans for the radiology unit
finalised, in order that the construction could be continued as
planned.
(d) The shares in the hospital. Dr
Perumal had undertaken to contribute an investment of R10m towards
the purchase of shares in
the hospital. It is clear from the
correspondence that those shares were initially issued at R10 per
share, but that after the
end of July 2014 they increased in price.
Dr Perumal is of the view that he agreed to pay R10m for the shares
as at the 10th June
2014, and has until the 31st July 2015 to pay
that amount or secure it. The hospital could not unilaterally
increase the price
of the shares, which he maintains they sought to
do.
(e) The radiology rates. At the time
the letter of appointment was issued, there was no final agreement as
to whether radiology
services to be provided to qualifying patients
of the Trust would be complimentary, or at a reduced rate, and the
extent of any
such reduction.
[6] The above disputes resulted in the
applicant’s attorneys addressing a letter on the 23rd April
2015 to Dr Perumal, stating
that:
(a) the letter of appointment was
‘conditional’;
(b) certain conditions of the agreement
had not been met;
(c) on the 10th April 2015 the hospital
had demanded certain financial documentation by the 30th April 2015.
In the absence of Dr
Perumal being able to provide the documents
requested, the hospital would assume that Dr Perumal had misled the
Board members;
(d) the financial documentation was
required to enable the hospital to confirm the provisional
appointment of Dr Perumal;
(e) no conclusive and binding agreement
would come into effect until the written contracts prepared on behalf
of the hospital had
been signed by both parties. This included the
lease agreement and the agreement to provide radiology services to
qualifying patients
of the Trust.
[7] Although the contents of this
letter were refuted by Dr Perumal’s attorney, it precipitated a
letter from the hospital’s
attorneys dated the 4th May 2015
stating that because Dr Perumal had not timeously provided the
documentation and information required
by the hospital, ‘we
hereby notify you of the revocation of your conditional appointment
as radiology service provider dated
10 June 2014.’
[8] Dr Perumal then brought an urgent
application seeking an order that:
(a) the hospital’s revocation of
his appointment as radiology service provider be declared invalid,
and set aside; and
(b) the hospital be interdicted from
appointing any other party in Dr Perumal’s stead.
[9] When the application first came
before this court, the point was taken by the hospital that a certain
Dr Jackpersad had received
a provisional appointment as the radiology
unit service provider. The hospital submitted that the application
was accordingly defective
for want of the joinder of Dr Jackpersad,
and the interdict requested was incompetent.
[10] On the 21st May 2015, by consent,
an order was granted by this Court, inter alia, joining Dr Jackpersad
as the second respondent,
and recording that Dr Jackpersad would
abide the decision of this court. The hospital undertook not to do
anything to alter the
status quo pending the outcome of this
application.
[11] The letter to Dr Jackpersad, which
was received by him on the 8th May 2015, was very different in
content to the letter of
appointment sent to Dr Perumal. Dr
Jackpersad’s letter records that his appointment was
provisional, and included as conditions
of his appointment that
financial documentation and purchase orders for the radiology
department be provided by him to the hospital,
together with a
detailed business plan. The hospital reserved the right to request
further information and documentation, if necessary.
The letter also
records that Dr Jackpersad is aware of the dispute between the
hospital and Dr Perumal, and that the hospital will
not be liable for
any damages which may be incurred by Dr Jackpersad pursuant to any
order that this court may make in this application.
[12] Mr Choudree, who appeared for Dr
Perumal, submitted that the letter of appointment constituted the
conclusion of a contract
between Dr Perumal and the hospital. He
referred to the language of the letter of appointment which, he
submitted, unequivocally
indicated that the hospital intended to
accept Dr Perumal’s tender. The letter of appointment contained
all the essential
elements necessary to constitute an agreement
between the parties.
[13] With regard to the ‘shell’
issue, Mr Choudree submitted that General Electric, the company
providing the radiology
equipment, had stated that ordinary air-
conditioning, and the use of sprinklers as fire-fighting equipment,
would be ineffective
in such a unit. What was required was for gas to
be used for fire-fighting. He submitted that the hospital, as
landlord, was required
to provide the basic infrastructure for the
radiology unit, (ie. the same facilities provided to other tenants of
the building),
and that Dr Perumal was prepared to pay the difference
between the facilities provided by the hospital and any additional
facilities
required because the radiology unit was unique.
[14] Mr Choudree submitted that Dr
Perumal was entitled to a declaration that the letter of revocation
was invalid, and that the
hospital was not entitled to import
conditions such as only providing a shell, etc. He submitted that
everything reverted back
to the letter of appointment, which stood on
its own as a contract.
[15] With regard to the transcripts of
the recordings of meetings which had been put up by the hospital in
further answering affidavits,
Mr Choudree stated that those
transcripts are not accepted by Dr Perumal. Where any disputes emerge
from those transcripts with
regard to the terms of the contract, they
should be referred for the hearing of oral evidence.
[16] Mr Choudree referred to CGee
Alsthom Equipment Enterprises Electriques, South African Division v
GKN Sankey (Pty) Ltd
1987 (1) SA 81
(A). That case involved the
construction of a nuclear power station for Eskom. CGee Alsthom was
responsible for the supply and
installation of electrical equipment
for the power station. GKN, as a sub-contractor, quoted to provide a
cable support system.
CGee Alsthom addressed a telex to GKN notifying
them that they had been awarded the contract. When GKN placed orders
for the steel
and advised CGee Alsthom that it had done so, numerous
aspects of their agreement had not been finalised. These aspects
related
to the quality assurance and quality control, finishing and
packaging specifications, the general administrative conditions
relating
to the operation of the contract, and the specifications for
certain components of the support system.
[17] Negotiations on these issues broke
down, and CGee Alsthom informed GKN that it had awarded the contract
for the fabrication
and supply of the cable support system to another
company. GKN then sued CGee Alsthom for damages for repudiation of
contract.
It claimed that its tender had been an offer which had been
accepted by CGee Alsthom, and a binding contract had been concluded
by the parties. GKN referred to conduct of the parties after the
acceptance of its offer.
[18] GKN was awarded damages by the
local division and the matter went on appeal to the Appellate
Division. The Appeal Court held
that the letter of acceptance from
CGee Alsthom could only be construed as meaning that the tender of
GKN had been accepted. Whilst
outstanding matters which had not yet
been agreed upon, might well prevent an agreement from having
contractual force, the intention
of the parties was what was
important. This intention was to be gathered from the parties’
conduct, the terms of the agreement
and the surrounding
circumstances. The Appeal Court held that as a matter of probability,
the telex of acceptance constituted an
unqualified acceptance of the
respondent’s tender, and despite the existence of outstanding
matters, that telex had been
intended to constitute a binding
contract. Accordingly, the repudiation by CGee Alsthom entitled GKN
to damages.
[19] It is important to note that
negotiations conducted between CGee Alsthom and GKN after the
acceptance of GKN’s tender,
were for the purpose of settling
the terms of a formal contract to be signed by the parties.
[20] Mr Choudree submitted that, as in
CGee Alsthom, the fact that there were a number of outstanding
matters which were not included
in the contract between the hospital
and Dr Perumal, does not preclude this court from finding that a
binding agreement was concluded.
Outstanding matters could be left to
future negotiations with a view to comprehensive contractual
documents being drafted. When
the parties finalised the outstanding
matters, the final contract would incorporate and supersede the
original contract. If the
parties failed to reach final agreement,
the original agreement would stand. The contractual force of the
original agreement is
to be gathered from the conduct of the parties,
the terms of the agreement and the surrounding circumstances.
[21] Mr Choudree also submitted that
the balance of convenience favoured that I grant an order
interdicting the hospital from appointing
Dr Jackpersad, both because
of the letter of provisional appointment made to Dr Jackpersad, and
for the avoidance of any doubt.
[22] Mr Pillemer who appeared for the
hospital submitted that:
(a) the letter of appointment was
intended only to indicate the hospital’s approval of Dr Perumal
as a person who would provide
radiological services;
(b) the letter of appointment was only
provisional because there were areas which had not been agreed upon
between the parties -
i.e. the ‘shell question’ and
others;
(c) he was not suggesting that there
was not an agreement, but merely one that was not binding on the
parties, because they had
not intended to conclude a binding
agreement. What the parties had done was made an agreement to agree;
(d) the letter of appointment indicated
no more than that Dr Perumal would get a shell with no air
conditioning, fire-fighting equipment,
etc. The lease still had to be
drawn up and signed, and the letter of appointment was simply not
capable of dealing with all the
requirements of a properly drafted
lease;
(e) whilst the letter of appointment
was almost an agreement, the critical features of what Dr Perumal was
going to do, and what
he would pay for, were not disclosed by the
letter of appointment;
(f) the financial requirements which
were insisted upon by the hospital in the form of the production of
financial statements, a
business plan and proof of payment for
equipment, was an implied term of the letter of appointment;
(g) with regard to the provision of
complimentary or reduced rate radiology services to qualifying
patients of the Trust, no agreement
had been reached, and this was
essential to any proper conclusion of an agreement between the
parties;
(h) even if the letter of appointment
was to be held to constitute a concluded agreement, there was no
mechanism to deal with the
outstanding matters which had not been
agreed;
(i) if it were to be held that a
contract has been concluded, this Court still had an option not to
enforce it. Specific performance
is a remedy which lies within the
discretion of a court to award or refuse. In these circumstances a
court would not be inclined
to enforce it.
[23] Mr Pillemer submitted that there
was a complete breakdown of trust between the parties and this had
undermined any contractual
relationship between them. They had
reached an impasse with regard to the funding of additional items
which the hospital maintained
it should not have to bear. It was not
possible to say which party should have to bear the financial
obligation of providing air
conditioning, the generator, ceilings and
electricity and the fitting-out of the unit.
[24] Mr Pillemer submitted that it was
open to the court to find that there was a contract but to make an
election not to enforce
it, and in those circumstances Dr
Perumal would have a contractual claim
against the hospital for damages. He also submitted that if an
agreement had been concluded,
then it had been repudiated by Dr
Perumal to the extent that the hospital was entitled to cancel it. Dr
Perumal’s repudiation
was to be found in his failure to provide
financial details, etc.
[25] Mr Pillemer submitted that this
case went beyond the interpretation of the contract, and concerned
whether or not the contract
could be enforced, and if so, to what
extent. Mr Pillemer referred to Pitout v North Cape Livestock
Co-operative Ltd
1977 (4) SA 842
(A). The judge considered whether an
offer made during negotiations, and the acceptance of that offer,
would give rise to an enforceable
contract. He held that this was
something that had to be decided upon the facts of a particular case.
Where negotiations were terminated,
the court would be required to be
satisfied that the parties intended the original promise to
constitute a concluded bargain on
precise terms, and that they were
content to stand by that bargain, irrespective of the course of
future negotiations.
[26] In my view there is no doubt that
Dr Perumal and the hospital concluded a valid and binding agreement.
I say this because:
(a) the hospital invited tenders
setting out the factors which had to be included in a presentation to
be presented by tenderers;
(b) Dr Perumal completed a
demonstration to the Board of the hospital;
(c) As is evident from the letter of
appointment:
(i) after adjudication of numerous
tenders by the Board members they decided to award the tender to Dr
Perumal;
(ii) the space to be allocated to the
radiology unit is set out, that it needs to include all radiology
services including MRI and
CT scans, that there is to be a ten year
lease with the option of a renewal, an eight per cent per annum
increase on the market
related rental of R285 m2 , with beneficial
occupation to be given in sufficient time to allow Dr Perumal to set
up the radiology
unit;
(iii) that Dr Perumal would provide
complimentary or reduced rate radiology services to qualifying
patients of the Trust, and that
would be negotiated and agreed upon
in the final contract documents;
(iv) the hospital accepted Dr Perumal’s
offer of R10m towards the purchase of ordinary shares;
(d) the letter of appointment records:
The above constitutes the material terms of the agreement Thereafter,
it records that documentation,
contracts and agreements which will be
drawn up by the hospital’s legal team would be signed in due
course;
(e) Dr Perumal is asked to keep his
award confidential until such time as the ‘non¬successful
candidates have been informed
(sic)’;
(f) the fact that there was no
‘deadlock breaking’ provision in the letter of
appointment, cannot affect its validity
as an agreement.
[27] There is no doubt from the papers
that a number of matters had not been finalised by the parties.
Although the hospital suggests
that Dr Perumal accepted that he was
only given a ‘shell’ and that he would pay for air
conditioning, I am not satisfied
that it has been established on the
papers that he should pay for all of it.. What has, however, been
established, is that he would
pay for the generator required. He
agreed to this at a meeting held on the 15th October 2014. It also
seems clear that if the air-conditioning
and fire-fighting equipment
necessary for the radiology unit differed from that provided
throughout the hospital, then the additional
cost of that specialised
equipment should be for the account of Dr Perumal.
[28] With regard to Dr Perumal’s
contribution of R10m for the purchase of shares in the hospital, it
is clear from the papers,
that as at the 10th June 2014, it was
intended by the hospital that the shares would be priced at R10 per
share. It is also clear
from the papers that the subsequent increase
in the price of the shares cannot affect the agreement which was
concluded with Dr
Perumal, and that he was entitled to have until the
31st July 2015 within which to raise the R10m.
[29] I disagree that the failure of Dr
Perumal to provide financial documentation constituted a breach of
the agreement between
the parties. This was not dealt with in the
letter of appointment. It was not necessary for it to have been a
material term of
the agreement that Dr Perumal would provide proof of
his ability to purchase the radiology equipment, and the cost of
setting up
the unit. The demand that he provide financial information
arose so long after the letter of appointment, that the probabilities
are that this was an afterthought on the part of the Board. Dr
Perumal was asked at short notice to provide the financial documents.
His failure to do so does not affect his performance of the terms of
the letter of appointment, or, indeed, his ability to perform
in
providing the radiology unit. If the hospital wanted the assurance of
the financial viability of Dr Perumal to perform, that
was something
they should have considered when they drafted the letter of
appointment. It was a not a necessary or obvious term
of the
agreement, nor is it necessary to provide business efficacy to the
agreement.
[30] In deciding whether the parties
concluded an agreement on the 10th June 2014, it is also relevant to
look at their conduct
thereafter. Significant progress was made
between the parties towards finalising the layout of the radiology
unit, and the Board
of the hospital offered to extend terms to Dr
Perumal should he have difficulty financing the necessary equipment.
It was even
envisaged that this could be amortised into the rental
payable by Dr Perumal. That they would have done all this in the
absence
of a belief by both parties that they had concluded a binding
agreement, seems highly improbable.
[31] It also seems highly improbable
that anyone in the position of either the hospital or Dr Perumal,
would have concluded a provisional
agreement, when so much else had
to be done by each party in order to fulfil it. It makes no business
sense for Dr Perumal to have
concluded a provisional agreement and
gone to the lengths to which he has clearly gone to, in trying to
fulfil the agreement.
[32] I am not persuaded that;
(a) the agreement was provisional;
(b) the hospital was entitled to cancel
the agreement concluded by the letter of the 10th June 2014.
The fact that the parties may have
difficulty in resolving the remaining outstanding issues will have to
be the subject of further
negotiation between them. This was not an
agreement to agree in the sense that it could be said to be
unenforceable. The parties
concluded a firm agreement and they are
bound by its contents. The language of the letter of appointment
makes this clear. Having
made this finding, Dr Perumal’s
entitlement to an interdict follows, at least for the duration of his
agreement with the
hospital. I see no reason why an order for costs
should not follow the result.
[33] In the circumstances I grant the
following order:
1. The respondent’s revocation of
the applicant’s appointment as a radiology provider, as
contained in the respondent’s
letter dated the 4th May 2015, is
declared to be invalid and is set aside;
2. For the duration of the parties’
agreement, the respondent is interdicted and restrained from
appointing any other party
in the applicant’s stead;
3. The respondent is directed to pay
the applicant’s costs of suit.
Date of hearing: 22nd June 2015.
Date of judgment: 9th July 2015.
For the Applicant: ABG Choudree
(instructed by Derik Jafta Attorneys).
For the Respondent: M Pillemer SC,
with Johan Ploos van Amstel (instructed
by Shaukat Karim & Co).