Ububele Alfa Chemicals (Pty) Ltd v Mondi Ltd and Another (7102/09) [2009] ZAKZPHC 50 (16 October 2009)

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[2009] ZAKZPHC 50
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Ububele Alfa Chemicals (Pty) Ltd v Mondi Ltd and Another (7102/09) [2009] ZAKZPHC 50 (16 October 2009)

IN THE KWAZULU-NATAL
HIGH COURT, PIETERMARITZBURG
REPUBLIC OF SOUTH
AFRICA
CASE NO. 7102/09
In the matter between:
UBUBELE ALFA CHEMICALS
(PTY) LIMITED APPLICANT
and
MONDI LIMITED
FIRST
RESPONDENT
SILVIX
SECOND
RESPONDENT
JUDGMENT
Delivered
on 16 October 2009
______________________________________________________
SWAIN J
[1] The central issue in
this application is whether the applicant has established the
conclusion of a tacit
“tender
agreement”
between the applicant and the first respondent, allegedly
incorporating the conditions under which the first respondent would
consider the submission of tenders, invited by the first respondent,
from the applicant and the second respondent, amongst others,
for the
supply of a certain chemical to the first respondent.
[2] If the existence of
such an agreement is established, the applicant complains that the
first respondent, in awarding the contract
tendered for to the second
respondent, acted in breach of this agreement. As a consequence, the
applicant seeks as initial relief,
an order directing the first
respondent to supply the applicant with copies of all documentation
supplied by the second respondent
to the applicant, in connection
with the tender. Combined with this relief, the applicant seeks
leave to supplement its founding
papers within five days of its
receipt of such documentation.
[3] Thereafter, the
applicant seeks substantive relief in the form of an order setting
aside the contract concluded between the
respondents, declaring that
the tender submitted by the second respondent did not comply with the
conditions of tender, ought not
to have been considered by the first
respondent and directing the first respondent to consider the tenders
submitted without consideration
of the second respondent’s tender.
Certain alternative relief is also sought, which need not be
considered at this stage.
[4] It is clear that
“the seeking of
tenders is no more than an invitation to do business and the tender
is an offer which can be accepted or rejected
at will”.
G & L Builders
cc v McCarthy Contractors (Pty) Ltd.
1988 (2) SA 243
(ECLD) at 247 B
[5] In the present case
however, what is contended for is the existence of an
“underlying
contract” (“onderliggende kontrak”)
between the first respondent and the tenderers.
Wentzel v
Gemeenskapsontwikkelingsraad
1981 (3) SA 703
(T)
at 708 D – H
or
“the
creation of a contractual relationship”
between the first respondent and the
“tenderers
prior to acceptance of a specific tender”
G & L Builders
supra at pg 248 i
[6] The submission of Mr.
Rall, S.C., who appeared for the applicant, was that a tacit
“underlying contract”
a so-called
“tender
agreement”
was concluded between the first respondent and all the tenderers, in
terms of which the first respondent was obliged to deal with
the
tenders in terms of certain conditions.
[7] Mr. Rall, S.C.
disavowed any reliance upon the concept of quasi-mutual assent to
establish the existence of such a tender agreement.
In other words,
it is not the applicant’s case that there was no true consensus
ad
idem
between the parties, but that the conduct of the first respondent led
the applicant to reasonably believe that the first respondent
had
agreed, so that the first respondent is to be treated as if it had
agreed.
Christie : The Law
of Contract in South Africa
5
th
Edition at pg 82
[8] The enquiry to
establish the existence of the tacit tender agreement contended for
is along the following lines:
……
.”the one party says ‘but we
truly agreed; our (or my, or his) conduct proves it’, and the
enquiry is concerned with the proper
inference to be drawn from the
proved facts”
Christie supra at
pg 82
[9] As I said in
Sewpersadh &
another v Dookie
2008 (4) SA 127
(DCLD) at para 26 and 27
as regards the nature of
the test to be applied to determine whether an inference may be drawn
on the particular facts, that a tacit
contract has been concluded, I
respectfully agree with the dictum of Comrie J in
Muller v Pam Snyman
Eiendomskonsultante (Edms) Beperk
[2000] 4 All SA 412
(C)at 419 b – c
where he stated the
following
“
The idea of a compelling inference
appeals to me; a compelling inference derived from proof on a balance
of probabilities of unequivocal
conduct usually in a business
setting”
[10] Taking this dictum
into account, as well as other authorities which are discussed by
Christie, (supra at pg 85) the learned
author formulates the test as
to whether a tacit agreement has been concluded, as follows, with
which I respectfully agree
“
In
order to establish a tacit-contract, it is necessary to prove, by the
preponderance of probabilities, conduct in circumstances
which are so
unequivocal that the parties must have been satisfied that they were
in agreement. If the Court concludes on a preponderance
of
probabilities that the parties reached agreement in that manner, it
may find the tacit contract established”
[11] This, in my view, is
the nature of the onus which the applicant has to discharge on a
preponderance of probabilities. Is there
unequivocal conduct of the
parties, which compels one to draw the inference, that the first
respondent intended to be contractually
bound by the requirements it
had provided for tenderers, and the applicant likewise in submitting
its tender, intended to be contractually
bound by such requirements?
[12] The cornerstone of
the argument of Mr. Rall, S.C. is the decision of McLaren J in the
unreported case of
Logbro Properties
cc v Malan N O and others
Case No. 3831/95
13 February 1997
where McLaren J on the
facts of that case, came to the conclusion that a tender agreement
had been concluded between the parties.
Although conceding that the
tender in that case was one involving a provincial government body,
Mr. Rall, S.C. submitted that
the Court had nevertheless dealt with
the matter on a purely contractual basis. He submitted that a
comparison of the terms contained
in the tender documents in that
case, should lead to a similar conclusion, namely the conclusion of a
tender agreement between
the applicant and the first respondent.
[13] McLaren J however,
at page 10 of the Judgment, had the following to say
“
Before I examine the provisions in
the documents which the applicant completed I draw attention to the
following factors which,
in my view, demonstrate the desirability,
and hence the probability, of the conclusion of tender agreements
between the committee
and the tenderers.
1.1 All the properties offered for
sale belonged to the State. The policy of the committee in disposing
of business sites is to
sell them “to the public by public tender
or auction with a reserve price.” Furthermore, “all cases of
alienation of immovable
State property without cost or at a payment
lower than the market value thereof must be submitted to the Treasury
for approval.”
These provisions are clearly laid down to ensure
good, clean government and to avoid corruption. Suitable terms in a
tender agreement
could also serve to achieve these objects.
1.2 Generally, an invitation to tender
is simply a request that offers should be submitted to the other
party which may, for instance,
decide to construct the buildings for
which tenders were submitted by using a different manner of
construction than that which
was envisaged in the invitation
(G
& L Builders 249 D)
or
to sell a property by private treaty to a tenderer
(Wentzel
707 C-D)
. Such
flexibility in its position as seller would hold no attraction for
the committee which may only sell its properties in
accordance with
the prescribed policy. A tender agreement may prevent a party who
calls for offers from dealing with them as it
pleases.”
[14] The learned Judge at
page 15 of the Judgment, after examining the terms of the tender
documents, had the following to say:
“
I considered the terms of the
documents set out above in the light of the undisputed facts and the
probabilities (to the extent
that they can be determined from the
said facts and the background circumstances) and I came to the
conclusion that the applicant
and the committee concluded a tender
agreement.”
[15] It is therefore
clear that the learned Judge in examining the probabilities as to
whether a tender agreement had been concluded,
placed a great deal of
weight upon the desirability of the existence of a tender agreement,
because:
[15.1] The property
belonged to the State and had to be sold to the public by public
auction with a reserve price. Alienation
of immovable State property
without cost, or at a payment lower than market value, had to be
submitted to the Treasury for approval.
The object was to ensure
good, clean government and to avoid corruption.
[15.2] The flexibility
afforded to the committee by the common law rule that an invitation
to tender was simply a request for
offers, held no attraction for the
committee, which could only sell its properties in accordance with
the prescribed policy. A
tender agreement therefore fulfilled the
desirable objective of preventing the committee from dealing with the
offers it called
for, how it pleased.
[16] In this regard Mr.
Rall, S.C. submitted that the first respondent is a public listed
company, which has just as much an interest
as a government
department in maintaining good and clean governance and to avoid
corruption. This is undoubtedly so, but the all
important
distinction, in my view, lies in the concept of flexibility referred
to by McLaren J.
[17] It is this aspect
which was emphasised by Mr. Voormolen, who appeared for the first
respondent, in advancing his argument that
no tender agreement was
concluded. He submitted that the first respondent wished to keep its
position flexible and referred to
various provisions in the tender
documents in support of this contention:
[17.1] By reference to
the letter in which the first respondent invited tenders, he drew
attention to the provisions that the request
for tenders
“is
not an offer to contract”
and that
“contract
negotiation”
was
envisaged. It was also stipulated that
“we
reserve the right to reject any and all proposals received”
.
[17.2] The tender
documents contained the provision that
“It
is
Mondi’s
intention to make a decision regarding the successful
tenderer by
the end of April 2009”
.
He submitted that this was not a promise, but a statement of
intention.
[17.3] It was specified
that
“Mondi hereby
request (
sic
)
tenderers to provide us
with a quotation”
and
“Mondi expects to
enter into a one year
agreement”
which he submitted indicated that the first respondent wished to keep
its position as flexible as possible.
[18] However, the
argument of Mr. Rall, S.C. was that the covering letter by the first
respondent inviting tenders, had as its object
the main agreement and
not any tender agreement. By reference to other conditions in the
tender documents, he submitted that there
would be no point in
stipulating these conditions, if the first respondent was not going
to be bound by them.
[19] I find it
unnecessary however to examine each of these
“conditions”
referred to by Mr.
Rall, S.C. in turn, nor to examine the extent to which identical, or
similar provisions in the Logbro case, led
McLaren J to find that the
existence of a tender agreement had been established, for the
following reasons:
[19.1] The version of
the first respondent is that in terms of the covering letter, the
first respondent did not undertake any
obligations in favour of the
tenderers. The first respondent
“expected
to”
enter into a
one year agreement with a successful service provider and that
“contract negotiation”
was envisaged. In order to succeed a tenderer would have to satisfy
the first respondent that the offer contained in its tender,
would
meet the requirements of the first respondent.
[19.2] No good reason
emerges on the papers to explain why the first respondent would
sacrifice the flexibility it enjoyed to contract
with any tenderer it
pleased, on whatever terms it chose. An attitude on the part of the
first respondent that, in order to succeed,
a tenderer’s offer
would have to meet the first respondent’s requirements, does not
mean that the first respondent is contractually
bound to adhere to
these requirements in accepting any offer.
[19.3] In my view, the
express provision in the covering letter that the first respondent
reserved the right
“to
reject any and all
proposals received”
is an indication that the first respondent wished to make it clear
that its ability to contract freely, was not compromised. This
is
precisely because it was unnecessary to expressly state such a
reservation by virtue of the common law rule to this effect.
The fact
that it was, I regard as an indication that the first respondent did
not want to compromise its right to contract freely.
In the Logbro
case, McLaren J regarded a provision that the highest tender would
not necessarily be accepted, as indicative of
the existence of a
tender agreement, because it was unnecessary and inappropriate to
specify this by virtue of the common law rule.
The learned Judge
then concluded however, that the parties to a tender agreement may
wish to make it clear that the highest offer
would not necessarily be
accepted. In other words, an indication that the parties intended to
conclude a tender agreement. This
conclusion must however be
considered in the context of the learned Judge’s remarks, that a
tender agreement may prevent a party
from dealing with offers as it
pleases. Precisely because of the absence of such freedom on the
part of the committee in that
case, this was not an important
consideration in coming to the conclusion that the learned Judge did.
[19.4] Consequently, a
distinguishing feature of the Logbro case, which renders a direct
comparison of the terms in that case with
those in the present case,
a misleading exercise, is that the question to be asked in the
present case, namely why the first respondent
would sacrifice the
flexibility it enjoyed to contract with whoever it pleased, did not
need to be asked in the Logbro case.
[19.5] Furthermore, in
my view, of decisive importance in the Logbro case was the provision
that
“Tenders which do
not comply with the requirements set out below shall not be
considered”
. In
this regard, McLaren J had the following to say:
“
Because the committee was offering
State land for sale by public tender, there is every reason to
believe that it would try to implement
good tendering practice by the
rejection of tenders which do not comply with a tender agreement, and
thereby to ‘maintain the
level playing field which other tenderers
expect’. …………..It is exactly the kind of clause which I
would expect to find
in a tender agreement regulating the tender
procedure of State land by public tender”.
This highlights what I
regard as a basic distinction between a call for private tenders in
the commercial arena and that of a call
for tenders by organs of
State. In the latter case Section 217 of the Constitution provides
that they must procure for goods or
services in accordance with a
system which is fair, equitable, transparent, cost effective and
competitive. As pointed out by
Mr. Voormolen, because their
adjudication is
“administrative
action”
the
provisions of Section 33 of the Constitution and the provisions of
the
Promotion of Administrative Justice Act No. 3 of 2000
apply to
the decisions of
“organs
of State”
.
Consequently, such decisions are subject to judicial review and may
be tested for administrative fairness by this Court.
Logbro Properties
cc v
Bedderson
N O & Others
2003 (2) SA 460
(SCA) at paras 5 - 11
No such considerations
apply in the present case. There was no obligation upon the first
respondent to
“maintain
a level playing field”
between the various tenderers, as the object of the whole exercise
was for the first respondent to conclude the best deal that
it was
able to, amongst those who tendered for the supply of the specific
chemical.
[19.6] Accepting the
absence of such a clause in the present case, Mr. Rall, S.C. sought
to draw a similar inference from the following
provision:
“
Mondi’s requirement is minimum
level 4 B E E contributor and the tenderer must provide proof of its
B E E status”.
The argument was that the
use of peremptory language was an indication that the first
respondent was obliged to reject non-compliant
tenderers. I do not
regard compliance by any tenderer with this requirement as a
pre-requisite for consideration of the tender.
It is nothing more,
nor less, than what it is described as, namely a
“requirement”.
The question has
again to be asked – why would the first respondent wish to restrict
its ability to accept an offer which met
all of its other
requirements, purely because of a failure to comply with this
particular requirement? No cogent reason is suggested
on the papers
for such an intention.
[20] When all of the
above is considered, I am satisfied that the applicant has failed to
discharge the onus of proving on a balance
of probabilities
unequivocal conduct of the parties, which compels me to draw the
inference that the first respondent intended
to be contractually
bound by the requirements it had provided for tenderers and the
applicant, in submitting its tender, intended
to be contractually
bound by such requirements. As pointed out above, this is not a case
where the applicant accepts there was
no true consensus
ad
idem
between the parties, but seeks to hold the first respondent to such
an agreement, on the basis that the first respondent, by its
conduct,
led the applicant to believe that it had agreed to the terms of the
alleged tender agreement, and the first respondent
must be treated as
if it had agreed.
[21] Regarding the issue
of costs. Mr. Voormolen submitted that costs on the attorney and
client scale were justified, as the applicant
had unjustifiably
alleged
mala
fides
on the part of the first respondent. The applicant alleged that the
first respondent was using the tender process as a sham to
create the
impression it was utilising an open and fair tender process, when it
intended all along to retain the second respondent
as its supplier.
The response of Mr. Rall, S.C. was that considering all of the
evidence there was justification for the allegation.
I am not
satisfied that this is a case where in the exercise of my discretion,
I should order the applicant to pay the costs on
a punitive scale,
for the reason that the applicant’s belief that it had not been
dealt with fairly by the first respondent,
is not entirely without
merit. The applicant should however pay the costs of the adjourned
hearing, which were reserved.
The order I make is the
following:
1. The application is
dismissed.
2. The applicant is
ordered to pay the costs of the first and second respondents, such
costs to include the costs of the hearing
on 03 September 2009.
____________
SWAIN J.
Appearances:
/
Appearances:
For the Applicant
:
Mr.
A. J. Rall, S.C.
Instructed
by : Grimbeek Van Rooyen & Partners
C/o Stowell &
Company
` Pietermaritzburg
For 1
st
Respondent : Mr. V. Voormolen
Instructed
by : Shepstone & Wylie
Pietermaritzburg
For 2
nd
Respondent : Mr. C. J. Pammenter, S.C.
Instructed
by : Fluxman’s Attorneys
C/o Shepstone &
Wylie
Pietermaritzburg
Date of Hearing : 13
September 2009
Date of Filing of
Judgment : 16 October 2009