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[2010] ZAFSHC 30
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Future Business Advise and Services CC v Premier of Free State (7469/2008) [2010] ZAFSHC 30 (4 March 2010)
FREE STATE HIGH
COURT, BLOEMFONTEIN
REPUBLIC OF SOUTH
AFRICA
Case No. : 7469/2008
In
the
matter
between:-
FUTURE
BUSINESS ADVICE AND SERVICES CC
Applicant
versus
THE
PREMIER OF THE FREE STATE
Respondent
JUDGMENT
BY:
MOCUMIE,
J
_______________________________________________________
DELIVERED
ON:
4
MARCH 2010
MOCUMIE, J
[1]
The
applicant, a close corporation based in Midrand, Gauteng Province,
seeks from this Court that
the
respondent
(“the
Premier of the Free State”)
be ordered to comply with the terms and provisions of the contract
embodied in tender number BDR 4/2008, awarded to the applicant
by the
Premier on 12 May 2008 by immediately permitting and authorising the
applicant to recommence with the provision of the agreed
training and
support services, against proper and due payment of all invoices, as
set out in the tender and costs.
[
2] The
background to this matter is as follows. On 18 April 2008 the
applicant responded to an invitation to bid for the supply
of
training support services to the Free State/Flanders Job
Creation/SMME
1
Project. This project was aimed at providing training to at least
5000 SMME’s and 10 identified government employees at four
Business Support Centres, to wit; Maluti-a-Phofung, Tokologo,
Mathabeng and Mangaung. The letter awarding the tender to the
applicant was signed by the Acting Director General in the Premier’s
office. The applicant proceeded to provide training service
as set
out in the tender document. On 17 July 2008 the Premier suspended
the tender unilaterally and instructed the applicant
by telephone,
through his functionaries, to discontinue all training services. This
letter provided no reasons. On 12 August 2008
the applicant received
a letter from the Premier, advising that training should be suspended
until further notice. The letter reads:
“
1.
Kindly
be advised that this letter confirms our instructions to you to
forthwith suspend the training which you are currently busy
with in
terms of Bid No.BDR4/2008, until further notice.
2. We regret [the] inconvenience
caused and trust you will be shortly requested to proceed with the
training.
3.
We
wish to stress the fact that the suspension should not be viewed as a
repudiation of the legal relationship, which came into
being through
awarding the tender to you.
4
. Your
kind co-operation shall be appreciated.”
(Emphasis
added.)
[3
] The
applicant requested meetings with the Premier and his Acting Director
General as well as other officials responsible for processing
and
awarding tenders. Such meetings were held on five occasions to try
and resolve this impasse on: (a) 17 July 2008, (b) 01
October 2008,
(c) 02 April 2009, (d) 06 April 2009 and (e) 25 May 2009 to no
avail. The applicant’s last letter dated 13
August 2008 in
which he enquired on further developments on the interruption of his
services went unanswered until he learned through
a letter dated 13
October 2008 that the tender was referred to Forensic Auditors who
have filed a report with the Legislature.
The Legislature in turn had
referred the audit report to the responsible parliamentary committee
on 01 October 2008.
[4] The
tender in the meantime remained suspended. It is for these reasons
that applicant believed that after a year and five months
without any
solution being reached by the parties he had no alternative but to
approach this Court. The matter was removed from
the roll per
agreement to enable the applicant to present settlement proposals to
the Premier. The Premier allegedly rejected
the proposals because he
did not want them to be made a court order and further there were
national elections approaching and he
wanted to focus on canvassing
votes for his party.
[5] In
his plea on the merits the Premier raised two points
in
limine;
namely, that the claim was premature and that applicant waived his
rights to continue with the application. This point was subsequently
abandoned because it was devoid of any merit.
1
st
Point
in
limine
:
PREMATURITY
[
6] The
Premier avers that the applicant’s claim is premature on the
basis that once the parties failed to resolve the dispute
the matter
should have been referred to mediation in terms of clause 27.1 –
27.3 of the General Conditions of Contract which
provides:
“
27.1 If any dispute or
difference of any kind whatsoever arises between the purchaser and
the supplier in connection with or arising
out of the contract, the
parties shall make every effort to resolve amicably such dispute or
difference by mutual consultation.
27.2 If, after
thirty (30) days, the parties have failed to resolve their dispute or
difference by such mutual consultation, then
either the purchaser or
the supplier may give notice to the other party of his intention to
commence with mediation. No mediation
in respect of this matter may
be commenced unless such notice is given to the other party.
27.3 Should it not
be
possible
to settle a dispute by means of mediation, it may be settled in a
South African court of law.
27.4 Mediation
proceedings shall be conducted in accordance with the rules of
procedure specified in the
[G]CC
2
.
27.5 Notwithstanding any reference to
mediation and/or court proceedings herein,
(a) the parties shall continue to
perform their respective obligations under the contract unless they
otherwise agree; and
(b) the purchaser shall pay the
supplier any monies due the supplier.....”
[
7] It
is common cause that this matter was not referred to mediation by the
parties before the applicant approached this Court for
the relief set
out in paragraph [1],
supra
.
Adv Johnson submitted, on behalf of the applicant, that the series of
meetings which took place between the applicant and the
Premier
should be considered as mediation which had failed. This submission
is incorrect. Mediation in legal parlance is a dispute
resolution
process used in matters of this nature where a neutral third party is
brought into the fold to mediate between the parties
to come to an
agreement. Mediation in its formal meaning is analogous to an
arbitration process which according to
The
New Shorter Oxford English Dictionary
refers to the settlement of a dispute by a person chosen by the
opposing parties in a dispute to decide the differences between
them.
The applicant was not given the General Conditions of Contract when
the application was approved. He was therefore unlikely
to have
known about the mediation clause until the Premier filed his opposing
papers, to which these conditions were annexed.
[8] A
proper reading of Clause 27 does not make mediation peremptory. The
choice, in terms of Clause 27.2, lies with
“either
the purchaser [the Premier] or the supplier [the applicant]
may
give
notice to the other party of his intention to commence mediation.”
Clause 27.3 is even more relevant because it stipulates clearly that
“Should
it not be possible to settle a dispute by means of mediation, it may
be settled in a South African Court of law.”
(Emphasis added).
[
9]
However one interprets these clauses, the jurisdiction of this Court
has not been ousted. The current law on arbitration has
been stated
as follows in
Universiteit
van Stellenbosch v J A Louw (Edms) Bpk
1983(4) SA 321 (a) at 333G – 334B:
“
It has
always been recognized that an arbitration agreement does not
necessarily oust the jurisdiction of the Courts; see
The
Rhodesian Railways Ltd v Mackintosh
1932
AD 359
at 375. See also
s 3
(2) of the
Arbitration Act 42 of 1965
.
However that may be, when a party to an arbitration agreement
commences legal proceedings, a defendant who was party to the
agreement
and who has entered appearance to defend and not delivered
any pleadings is given the right by
s 6
of the Act to apply to the
Court for a stay of the proceedings. The
onus
of
satisfying the Court that it should not, in the exercise of its
discretion, refer the matter to arbitration is on the party who
instituted the legal proceedings. See
Kathmer
Investments (Pty) Ltd v Woolworths (Pty) Ltd
1970
(2) SA 498
(A)
at
504H. It follows that the plaintiff had to discharge that
onus.
In
Rhodesian
Railways v Mackintosh
(cited
above) at 375 it was said that the discretion of the Court to refuse
arbitration, where such an agreement exists, was to
be exercised
judicially, and only when a "very strong case" had been
made out.
It is not
possible to define, and certainly it is undesirable for any court to
attempt to define with any degree of precision, what
circumstances
would constitute a "very strong case". In
Metallurgical
and Commercial Consultants (Pty) Ltd v Metal Sales Co (Pty) Ltd
1971
(2) SA 388 (W)
COLMAN
J at 391H refers to English authorities which say:
"there
should be 'compelling reasons' for refusing to hold a party to his
contract to have a dispute resolved by arbitration".
It
has also been said that before a court refuses a stay of proceedings
it has to be satisfied that there is no sufficient reason
why the
matter should not be referred to arbitration in accordance with the
agreement. See
Bristol
Corporation v John Aird & Co
1913
AC (HL (E)) 241 at 252,257 and 260.
”
[1
0]
In
PCL
Consulting (Pty) Ltd v Tresso Trading 119 (Pty) Ltd
2009(4) SA 68 (SCA) at 71H – 72D the Court held:
“
If a
party institutes proceedings in a court despite such an agreement,
the other party has two options:
(i)
It may apply for a stay of the proceedings in
terms of
s 6
of the
Arbitration Act 42 of 1965
;
'6(1)
If any party to an arbitration agreement commences any legal
proceedings in any court (including any inferior court) against
any
other party to the agreement in respect of any matter agreed to be
referred to arbitration, any party to such legal proceedings
may at
any time after entering appearance but before delivering any
pleadings or taking any other steps in the proceedings, apply
to that
court for a stay of such proceedings.
(2) If on any such application the
court is satisfied that there is no sufficient reason why the dispute
should not be referred
to arbitration in accordance with the
agreement, the court may make an order staying such proceedings
subject to such terms and
conditions as it may consider just.'
or
(ii) it may in a
special plea (which is in the nature of dilatory plea) pray for a
stay of the proceedings pending
the final determination of the
dispute by arbitration.
The
definitive statement of the law in this regard is to be found in
B
Rhodesian
Railways Ltd v Mackintosh1932 AD 359 at 370 -371
where
Wessels ACJ said:
'All
that
sec 6(1)
Of
Act 8 of 1928 (Southern Rhodesia), quoted at 367-368 of the judgment,
which is (for present purposes) to the same effect as s
6 of the
current South African
Arbitration Act quoted
above, n3.
lays down is that you cannot adopt the cheaper and speedier procedure
therein provided when once you have delivered pleadings or
taken any
other step in the proceedings. If you have taken any step in the
proceedings, then you can no longer adopt the speedier
and less
costly procedure of applying to the Court to stay proceedings but you
must file your pleadings in the ordinary way. In
pleading, however,
you can raise the defence that the case ought to be decided by
arbitration; this can be done by a special preliminary
plea.'
In the
present proceedings, the defendant has simply pointed out
that
the
lease contains an arbitration clause in wide terms. That is not
sufficient. The defendant was obliged to go further and set the
terms
of the dispute.
”
The
Premier has taken none of these procedural steps or has done so
totally inadequately to enable a Court to non-suit the applicant.
The point
in
limine
in this respect is dismissed.
[1
1] The
Premier seems to suggest that there was an agreement that the
applicant would withdraw his application before the suspension
of the
contract could be uplifted, and that because he failed to do so he
has breached the agreement or has repudiated the tender
contract. In
the result, the contention went, the Premier was entitled to cancel
the contract. The Acting Director General in
the office of the
Premier, Mr Albertus Johannes Venter
(“Venter”)
in his opposing affidavit went on to say:
“
It has in
any event subsequently come to my attention that the applicant has
breached the agreement since the outset. The applicant
failed to
provide capacity development programs and training for Government
employees employed at the Business Support Centres,
and furthermore
failed to provide continuing support to SMME’s at the
respective Business Support Centres. Respondent has
therefore
terminated the agreement in terms of clause 23.1 of the General
Conditions of Contract. A copy of the said termination
is annexed
hereto as annexure ‘AJV6’.”
[12] Clause
23.1 of the General Conditions of Contract provides:
“
23.Termination
for default
23
.1
The purchaser, without prejudice to any other remedy for breach of
contract,
by
written notice of default sent to the supplier
,may terminate this contract in whole or in part:
(a) if the supplier fails to deliver
any or all of the goods within the period(s) specified in the
contract, or within any extension
thereof granted by the purchaser
pursuant to GCC Clause 21.2;
(b) if the supplier fails to perform
any other obligation(s) under the contract; or
(c) if the
supplier, in the judgment of the purchaser, has engaged in corrupt or
fraudulent practices in competing for or in executing
the contract.”
[
13] Clause
23.1 must not be read in isolation but in conjunction with clause
21.2 to which it refers, which provides that:
“
21.
Delays in the supplier’s performance.
If at any time
during the performance of the
contract,
the supplier or its subcontractor(s) should encounter conditions
impeding timely delivery of the goods and performance
of services,
the supplier shall promptly notify the purchaser in writing of the
fact of the delay, its likely duration and its
cause(s).As soon as
practicable after receipt of the supplier’s notice, the
purchaser shall evaluate the situation and may
at his discretion
extend the supplier’s time of performance, with or without the
imposition of penalties, in which case the
extension shall be
ratified by the parties by amendment of contract.”
[
14] The
submission on behalf of the Premier that the applicant did not
perform his obligations in terms of the contract is, in my
view, an
afterthought. It was in fact the Premier who impeded the performance
of the contract by the applicant. That is why the
alleged breach was
not raised from the onset as a counterclaim or during the numerous
meetings held with the Premier or his officials.
In any event the
Premier failed to satisfy certain requirements set out in the very
clauses on which he seeks to have the contract
cancelled.
1
4.1 He
must have sent a written notice of default to the supplier (clause
23.1);
1
4.2
He should have evaluated the situation first with or without
imposition of penalties (clause 21.2). This much was conceded by
the
Premier’s counsel, Mr Claasen; and
1
4.3
He may even, in his discretion, have extended the supplier’s
time for performance (clause 21.2).
[
15] Mr
Claasen further submitted that the contract/tender document was not
clear in so far as the exact responsibilities of the
Premier are
concerned. This submission is, in my view, somewhat disingenuous. The
tender document is a standard document that was
engineered by the
Premier. If there was anything wrong with the tender document the
Premier through his functionaries was at liberty
to improve it.
However, as the tender document stands it is clear and unambiguous;
otherwise it would have been construed against
the Premier because
that office composed the document. See
Patel
v Le Clus (Pty) Ltd
1946 TPD 30
at 34;
Horty
Investment Pty Ltd v Interior Acoustics (Pty)Ltd
1984(3) SA 537 (W) at 540A-B
[16] In
my view the Premier has not shown that there was any justification
for suspending the performance of the contract by the
applicant. In
addition there is no evidence that the applicant has breached the
terms of contract. It is accordingly the Premier
who has repudiated
the contract. The applicant being the innocent party is entitled to
seek an order for specific performance,
as it has done. The party
wishing to claim specific performance in terms of a contract must:
1
6.1 allege
and prove the terms of the contract;
1
6.2 allege
and prove compliance with any antecedent or reciprocal obligations or
must tender to perform them. See:
SA
Cooling Services v Church Council of the Full Gospel Tabernacle
1955 (3) SA 541
(D);
RM
Van de Ghiste (Pty)Ltd v Van de Ghiste
1980 (1) SA 250
(C).
1
6.3 allege
non-performance by the defendant; and
1
6.4 claim
specific performance. See
LTC
Harms
Amler’s
Precedent of Pleadings,
356.
[1
7] Specific
performance, which an innocent party may choose to enforce, is an
order to perform a specified act or to pay money in
pursuance of a
contractual obligation. (
Christie
The Law of Contract
,
5
th
Edition, 522). A final mandatory interdict in a contractual matter is
an order for specific performance. (
Klimax
Manufacturing Ltd v Van Rensburg
2005
(4) SA 445
(O). Assuming the innocent party makes out a case, his
claim will be granted, subject only to the Court's discretion. The
locus
classicus
is the judgment of Innes CJ in
Farmers’
Co-op Society (Reg) v Berry
1912 AD 356:
“
Prima facie
every party to a b
inding
agreement who is ready to carry out his own obligation under it has a
right to demand from the other party, so far as it
is possible, a
performance of his undertaking in terms of the contract. As remarked
by Kotze CJ in
Thompson
v Pullinger
(1894) 1 OR at p301, ’the right of a plaintiff to the specific
performance of a contract where the defendant is in a position
to do
so is beyond all doubt’. It is true that Courts will exercise a
discretion in determining whether or not decrees of
specific
performance will be made. They will not, of course, be issued where
it is impossible for the defendant to comply with
them. And there are
many cases in which justice between the parties can be fully and
conveniently done by an award of damages.
But that is a different
thing from saying that a defendant who has broken his undertaking has
the option to purge his default by
the payment of money. For in the
words of Storey (Equity Jurisprudence,
sec 717(a)
,) ‘it is
against conscience that a party should have a right of election
whether he would perform his contract or only pay
damages for breach
of it.’ The election is rather with the injured party, subject
to the discretion of the Court.”
[1
8]
De
Villiers AJA
said in
Haynes
v King Williamstown Municipality
1951
2 SA 371
(A) at 378G:
“
The
discretion which a court enjoys,
although it must be exercised judicially, is not confined to specific
types of case, nor is it circumscribed by rigid rules. Each
case must
be judged in the light of its own circumstances.”
(
Christie
,
supra
,
523).
See
too
Santos
Professional Football Club (Pty) Ltd v Igesund and Another
2002
(5) SA 697
(C) at 701E. It was for the Premier to allege and prove
facts on which the court must exercise its discretion in his favour.
Although
specific performance is a discretionary remedy, the general
rule is that where, owing to the difficultly of assessing damages or
otherwise, it is not possible to do justice by an order for the
payment of money, and where it is in the power of the Premier to
carry out his undertaking, then a decree of specific performance is
the only appropriate remedy. (
Farmers'
Co-Operative Society (Reg ) v Berry
(
supra)
;
BK
Tooling (Edms) Bpk v Scope Precision Engineering (Edms) Bpk
(
supra
)
and also
Tamarillo
(Pty) Ltd v BN Aitken (Pty) Ltd
1982 (1) SA 398
(A) at 426.
[19]
In my
view the applicant has satisfied the above mentioned requirements and
has shown that it is possible for the Premier to perform
its
obligations in terms of this contract. The Premier has failed to show
why this Court should exercise its discretion against
the grant of
the order prayed for.
[
20]
Insofar as costs are concerned, the applicant was forced to come to
court after negotiations had failed and there was no willingness
on
the part of the Premier to resolve the impasse soon or at all. I am
inclined to agree with Mr Johnson that this matter was not
complicated to have two counsel represent the Premier. The Premier
must accordingly bear the costs of this application.
[21]
In
the circumstances I make the following order:
Order:
[1] The
respondent
(the Premier) is ordered to comply with the terms and provisions of
the contract embodied in tender number BDR 4/2008, awarded
to the
applicant (Future Business Advice and Services CC) by the respondent
on 12 May 2008 permitting and authorising the applicant
within one
month of this order to recommence with the provision of agreed
training and support services, against proper and due
payment of all
invoices, as contemplated in the tender.
2. The
respondent is ordered to pay the costs of this application on a party
and party scale.
___
_______________
B
.C.
MOCUMIE, J
On
behalf of the
applicant: Adv.
J.M.C. Johnson
Instructed
by:
Naudes
BLOEMFONTEIN
On
behalf of the respondent:
Adv
J.Y Claasen (SC)
&
Adv.
A. Williams
Instructed
by:
State Attorney
BLOEMFONTEIN
1
SMME – This acronym stands for Small and Medium Market
Enterprises
2
[G]
CC – Stands for General Conditions of
Contract.