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[2013] ZAGPPHC 262
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Mec of Health, Limpopo Provincial Government v Sakhiwo Health Solutions Limpopo) (Pty) Ltd (32723/13) [2013] ZAGPPHC 262 (16 August 2013)
NOT
REPORTABLE
IN THE HIGH COURT OF SOUTH AFRICA
(NORTH GAUTENG HIGH COURT)
Case
Number: 32723/13
DATE:16/08/2013
In
the matter between:
THE
MEC OF
HEALTH,
....................................................................
APPLICANT
LIMPOPO
PROVINCIAL GOVERNMENT
And
SAKHIWO
HEALTH
SOLUTIONS
...................................................
RESPONDENT
(LIMPOPO)
(PTY) LTD + 49 OTHERS
JUDGMENT
Fabricius
J,
In
these opposed proceedings, the Applicant seeks a declaratory order
that the Service Level Agreement concluded between the parties,
in
terms of which first Respondent was appointed as “Implementing
Agent” for the Revitalisation of Health and Safer
Development
Facilities” in the Limpopo Province, was duly terminated by the
effluxion of time on 13 March 2013. It also seeks
an order compelling
the first Respondent to hand over certain documents, and an interdict
relating to the Respondents’ alleged
interference with
contractors and consultants. An order is also sought against the 2nd
to 50th Respondents, which would oblige
them to direct all enquiries
and payment claims to the Applicant and not to the first Respondent.
These Respondents did not oppose
the application. First Respondent
filed a counter-application in terms of which it sought an order
declaring that the Applicant
was not entitled to terminate the
relevant Service Delivery Agreement, and sought further ancillary
relief in that context.
2.
There
is no conflict of fact between the parties and the arguments revolve
around the interpretation of the relevant contract.
3.
Accordingly
I deem it convenient to first deal with the documentation that was
placed before me and thereafter with the parties’
argument. The
Department of Health and Social Development, Limpopo, issued a
Request For Proposal (RFP) under RFP number: HEDP
849/07. This was in
early 2008.
This
RDP contained a paragraph relating to the Scope Of Work”, which
included “Facility Management for a maintenance
period of five
years after commissioning”. The relevance of this quote will
become apparent hereunder. The objective of the
invitation was that
the Department, which was in the process of improving the level and
quality of health and social development
facilities in the province,
could meet the required standards of health and social development
and that the quality of services
of it. could respond to the desired
needs of the people. It was stated that at the core of this project
was the balancing of quality,
cost and time within which a facility
was to be delivered. It was stated that financial proposals had to be
made based on a clearly
defined fee. In the context of the
administrative process that was to be followed, it was stated that
the bid document would be
made up of various “TH forms”,
in fact eight of them. As far as the evaluation process was
concerned, certain points
would be given for certain requirements and
under the heading “Health and Social Development Infrastructure
Planning”
relevant experience was required for “Facility
Management for maintenance of facilities after commissioning.”
As
Annexure B to the invitation to bid, the “Basic Conditions of
Contract” were a part. It was stated in clause 1.1
thereof that
the contract would come into being on the date of issue of the letter
of acceptance of the bidder’s bid and
would continue and force
for a period of 36 months The bidder would further more be obliged to
enter into a Service Level Agreement.
4.
The
Respondent put up a financial proposal and under the heading “Fee
Calculation Example'1, it is stated that the fee structure
was
inclusive of the programme management fee, the commissioning fee, and
the facility maintenance management fee as being 22,01%.
This
percentage relates to published guidelines for relevant disciplines.
It is noteworthy that no separate fee for “Facility
Maintenance
Management” was quoted.
5.
On
2 June 2008 the Department issued a letter awarding the contract to
the Respondent and two aspects of this letter are important
for
present purposes, namely clause 1 and part of clause 4.2. Clause 1
reads as follows: "Your bid for Appointment of the
Program
Management Unit/Services for the Revitalisation of Health and Social
Development Facilities...for the abovementioned Institute
has been
accepted subject to compliance to all the conditions and requirements
contained therein and further to specification.
Your appointment is
for management of health facilities (Vote 7) only.” It was
stated there that for each and every project,
the Scope of Work would
be specified by the Department on a yearly basis and confirmed in
writing. The relevant part of clause
4 refers to the scope of
supplementary services and in this context stated “Post
Occupancy Facility Maintenance Management
Services.”
6.
What
followed was a “Service Delivery Agreement” dated 30
September 2008 It is necessary to refer to certain parts,
terms and
definitions thereof The preamble to this Agreement referred to the
relevant context, namely that the Department had allocated
funds for
purposes of the HEDP 849/08 Programme and required the Respondent, as
Agent, to provide services in order to implement
such Infrastructure
Programme. Under the heading Interpretation”, which heading was
stated to be inserted, for reference
purposes only, the usual “Sole
Agreement” clause was inserted and it is necessary to quote
this clause 1.2 “This
document shall be deemed to constitute
the sole agreement between the parties, with reference to its HEDP
849/08 Programme, read
with the Letter of Award and Letter of
Acceptance and shall cancel and negate any prior, verbal or written
communications relating
to such subject matter whether expressed or
implied, including any letters, memoranda or minutes.” Before
continuing, I may
also add that it was the Applicant’s case
that this clause was clear, and meant what it usually meant, namely
that this document
was the sole agreement between the parties read
together with the letter of award and the letter of Acceptance The
Respondents
in turn argued that the agreement also included the HEDP
846/08 Program, which in turn, as I have said, made reference to
“facility
management for the maintenance period of 5 (five)
years after commissioning”. The “Period of Agreement”
was defined
as being the period specified in HEDP 849/08, commencing
on the signing of this agreement. I already mentioned that Annexure
“B”
to the invitation to bid referred to a period of 36
months. Clause 6 of the agreement referred in turn to the “Period
of
Agreement” and clause 6.2 stated the following: The contract
shall endure for a period of 36 months after signature by both
parties.” It is my view that this clause is unequivocal,
unambiguous and overwhelmingly clear, and I will again refer to
it in
the contents of the parties’ argument. Clause 9.20 referred to
certain responsibilities of the Respondent which, in
terms of this
clause, required maintenance, including post-occupancy facility
maintenance mar.ageiTie: a servica. The Applicant
said that mis
clausa merely provided that first Respondent would be responsible for
maintenance service obviously during the validity
period of the
Agreement. Respondent, I may add at this stage, which by now would
have been obvious, said that this maintenance
referred to the five
year period that appears in the RFP under the heading “Scope of
Work”. Clause 9.21 at first glance
appears innocuous, but
having regard to the proper context, it is necessary to keep it in
mind. It states that the Respondent would
enter into agreements,
subject to the approval of Applicant, with each of the Service
Providers, namely contractors, suppliers
and other professional
Service Providers envisaged by the agreement. It was Applicant’s
case that this right could obviously
not outlive the duration of any
agreement inasmuch as the overseer of the whole project was the
Applicant, a government service,
which was responsible, and which had
to decide what it required and when, obviously within the framework
of the Agreement entered
into. The point was made by Applicant that
for instance Respondent could not enter into an agreement during the
last week of the
three year period with a contractor, and then insist
on being responsible for the subsequent maintenance for another
period of
five years, obviously for remuneration. It was Applicant's
case that the Agreement did not provide for this arrangement, which
was in any event wholly absurd
7.
For
present purposes it can be assumed that Applicant happily paid
Respondent, who in turn happily received the remuneration agreed
upon, and obviously hoped that this arrangement would continue for a
long time, for obvious reasons. The Agreement would have expired
on
the 29th of September 2011 ie. after the period of 36 months referred
to in clause 6.2. It is for this reason and I cannot think
of any
other, that Applicant wrote to Respondent on 14 December 2010 and
said that following in the first unnumbered paragraph
of this letter:
“We refer to our current appointment as PMU for your Department
which is due to expire on 28 September 2011
unless we reach agreement
for the extension of such appointment. The purpose of this letter is
to approach yourself with the view
of extending our appointment'1.
Nothing was said of any five year period that had allegedly been
envisaged or was part of the relevant
contract.
8.
On
12 September 2011 the Department wrote to Respondent stating in the
context of Contract HEDP 849/08, that the contract with the
Department was extended until 30 September 2012 with the same terms
and conditions.
9.
On
1 August 2012 Respondent again wrote to the Department, and referred
to the current appointment which was due to expire on 30
September
2012 unless an agreement was reached for the extension of such. The
purpose of the letter was to “approach yourselves
with a view
of extending our appointment”. It was then stated in this
letter that “as you are aware all projects in
our scope of work
in terms of the SDA will have to brought to completion by ourselves
and we have a subsequent five year Facility
Maintenance Management
obligation post-occupancy in respect of all projects constructed
under the management of (ourselves). The
current Facility Maintenance
Management component of our scope of works also had another 2 - 3
years to run.” It was stated
that it was estimated that
Respondent would operate in the Province in terms of the existing
contract for at least another five
or more years. The last sentence
then read as follows “We therefore want to respectfully request
your consideration to extent
(sic) our contract to 30 September 2014
or at least until 30 September 2013”. This meant that at the
least a one year extension
was asked for, alternatively a two year
extension, but certainly not a five year extension.
10.
The
Department replied on 28 September 2012 and extended the contract
until 30 March 2013 “with the same terms and conditions
of the
contract". That, in my view, upon a proper interpretation of the
Agreement between the parties ought to be the end
of the matter, but
on 8 November 2012 Respondent wrote to the Department and said the
following, and I will quote certain sub-paragraphs:
10.1
“The Contract was for the period of 3 (three) years. However,
this was extended by a year to September 2012. Recently
it has been
extended by another six months to March 2013. “
10.2
“Sakhiwo (the Respondent) also appreciates the gesture of the
extension of the contracts twice by yourself'
A
meeting was then requested as Respondent wished to discuss the
process for completion by themselves of projects commenced with,
and
those that would extent beyond 30 March 2013 and the process of
Facility Maintenance Management post-occupation for a period
of five
years from the date of occupation in respect of facilities erected by
themselves and also in respect of existing post-occupation
facilities
erected by others.
11.
The
Department replied on 25 March 2013 stating that the contract would
expire on 30 March of that year, and that it did not intend
to extent
the contract further.
12.
On
28 March 2013 Respondent wrote to Applicant telling it that it was
misguided in respect of the advice given to them as to how
interpret
the SDA. and said that it was clear that the contract provided that
they would have to complete all projects forming
part of the Scope of
the Works through to commissioning of the facility with the five year
post-construction responsibility for
Facility Maintenance Management.
That in their view was the only feasible interpretation that could be
given to the contract. It
was stated that “the reference to the
contract enduring for the period of 36 months (clause 6.2 of the SDA)
(as extended
twice in this instance) as also provided in the RFP only
refers to the period within which projects under the Scope of Works
could
be added to the contract. We accept that no projects can be
added to the Scope of Works after 30 March 2013.”
13.
Other
correspondence between the parties does not take the argument any
further, which ought to be apparent by now. I will firstly
deal with
the Applicant’s argument. Mr Erasmus SC in the context of the
factual matrix that I have set out, relied on the
normal, so called
Shifren Rule contained in clause 1 2 of the Agreement which has
stated that the SDA Agreement was the sole memorium
of the Agreement
between the parties.
See
SA Sentrale Co-op Graan Maatskappy Bpk v Shifren
1964 (4) SA 760(A)
and Brisley v Drotsky
2002 (4) SA 1
(SCA) at 10 to 12.
When
interpreting a contract the fundamental object is to ascertain and to
give effect to the common intention of the parties as
reflected, in
the case of a written agreement, in that agreement. The intention of
the parties had to be construed from the language
which they used,
not what either of them may have had in mind.
See
Engelbrecht v Senwes Ltd
2007 (3) SA 29
(SCA) par 7. The golden rule
of interpretation is that tf the language of the contract is clear
and unambiguous, effect must be
given to its ordinary everyday
meaning, unless of course it leads to an absurdity or something which
the parties never envisaged.
See
Durban’s Water Wonderland (Pty) Ltd v Botha
1999 (1) SA 982
(SCA) at 989.
Accordingly
Applicant’s Counsel submitted that the Agreement could not have
been clearer in its terms, with reference to clause
6 2 which
provided for the mentioned period of 36 months Accordingly, the
contract was terminated by the effluxion of time as at
end of March
2013. The construction placed on the Agreement in the correspondence
of Respondent would lead to absurd results inasmuch
as Respondent
contended that it was entitled to “see out” the project,
and to remain in charge of Management and Maintenance
even after the
Agreement had been terminated, due to the five year clause that
appeared in the RFP. A well known principle of interpretation
of
agreements is
that
the Court will never interpret an agreement where such would lead to
an obvious absurdity. I asked Counsel the obvious question
in this
context namely if Respondent was entitled to oversee maintenance for
a further five year period, what would be the rights
and obligations
of the parties in this context and what would be the fee structure
that had allegedly been agreed upon? Or not
agreed upon, one may add?
Further more, what did the reference to 36 months in Annexure B to
the Invitation to Bid mean? Also what
is the effect of Respondent not
having quoted the price separately for Facility Maintenance? These
questions are quite apart from
the clarity of clause 6.2 of the
Agreement between the parties.
See
Lambons (Edms) Bpk v BMW (SA) (Edms) Bpk
[1997] ZASCA 51
;
1997 (4) SA 141
(HHA) at 158
14.
Respondent’s
Counsel Mr. Maleka SC eloquently adopted a novel approach He said
that he did not intend to go beyond the Shifren
Principle or clause
6.2 at all. He said that upon a proper interpretation of clause 1.2
of the Agreement, which I have quoted,
the reference to the “HEDP
849/08 Programme” meant that the request for proposal (RFP) was
incorporated into the Service
Delivery Agreement by reference, and
that gave Respondent the right to do the maintenance management
irrespective of the provisions
of clause 6.2 which referred to the
period of the contract as being 36 months. He accepted that the
provisions of clause 6.2 provided
that the Agreement would endure for
a period of 36 months. He also accepted that the duration of the
Agreement was properly extended
until 30 March 2013. His argument was
therefore that on a reasonable interpretation of the contractual
documents which included
the RFP, the Service Delivery Agreement
contemplated that the Scope of Works” provided therein,
expressly provided for the
right and obligation to provide Facility
Maintenance and Management services for a period of five years after
the date of commissioning
of each of the projects which fell within
the Scope of Works. I therefore had to take regard of all of the
documents to ascertain
the true intention of the parties. This
approach is however, as ought to be obvious when I refer to the
correspondence, that correspondent
did not see it that way at the
time the letters were written requesting an extension and being
grateful for the subsequent “extension"
Mr Maleka SC
however also referred me to the conduct of the parties which would
assist in the interpretation of the Service Delivery
Agreement. In
the main, in this context, he relied again on the terms of the RFP
and Respondent’s response thereto. He emphasized
that his
submissions were not intended to contradict the terms of the Service
Delivery Agreement, but to assist in the interpretation
of that
Agreement, and it was a well established rule that a Court would be
entitled to have regard to evidence of the conduct
of the parties in
that context I was referred to Rane Investment Trust v Commissioner
South African Revenue Service
2003 (6) SA 332
(SCA) at par 27 in
support of that argument. It appears however clearly from par 26 of
that judgment that a Court is only entitled
to have regard of the
conduct of the parties, when attempting to interpret an agreement,
when there is an ambiguity or uncertainty.
See
also: A J Kerr, The Principles of the Law of Contract, 6th Edition at
409 and 416-417
In
my view, as I have already stated, there is no ambiguity or
uncertainty in the present context and in the context of clause 6.2
of the Service Delivery Agreement, ft is as clear as the view from
the top of Mount Everest in good weather, as I imagine that
scenery.
Or perhaps as clear as the waters of the Okavango Delta, which
scenery I do not have to imagine.
15.
My
conclusion is therefore that the interpretation given by Respondent
to the Service Delivery Agreement is unwarranted and cannot
be
sustained.
16.
Accordingly
I grant Prayers 2 3, 8 and 9 of the Notice of Motion with costs,
including the cost of two Counsel, and also order that
the Counter
Application be dismissed with costs including the cost of two
Counsel.
JUDGE HJ FABRICIUS
JUDGE
OF THE NORTH GAUTENG HIGH COURT
Case
no.: 32723/13 Parties’ Representatives:
Counsel
for the Applicant: Adv C. Erasmus SC
Adv
M Kgatle
Instructed
by The State Attorney
Counsel
for the 1st Respondent: Adv Maleka SC
Adv
Koboni
Instructed
by: Poswa Inc
Heard
on: 01/08/2013
Date
of Judgment: 16/08/2013 at 10:00