Kubu tsa Tlhabiroe Construction CC JV and Others v Moqhaka Local Municipality (5254/07) [2008] ZAFSHC 29 (15 May 2008)

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[2008] ZAFSHC 29
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Kubu tsa Tlhabiroe Construction CC JV and Others v Moqhaka Local Municipality (5254/07) [2008] ZAFSHC 29 (15 May 2008)

IN THE HIGH COURT
OF SOUTH AFRICA
(ORANGE
FREE STATE PROVINCIAL DIVISION)
Case
No. : 5254/07
In the
matter between:-
KUBU
TSA TLHABIROE CONSTRUCTION CC JV
First
Applicant
KUBU
TSA TLHABIROE CONSTRUCTION CC
Second
Applicant
P
J FISCHER CONSTRUCTION CC
Third
Applicant
and
MOQHAKA
LOCAL MUNICIPALITY
Respondent
_____________________________________________________
HEARD
ON:
24
APRIL 2008
_____________________________________________________
JUDGMENT
BY:
VAN
DER MERWE J
_____________________________________________________
DELIVERED
ON:
15
MAY 2008
_____________________________________________________
[1] The
first applicant is a joint venture established by agreement between
the second applicant and the third applicant. For the
sake of
convenience I will herein refer to the applicants simply as the joint
venture. The respondent is a duly constituted local
municipality
(“the municipality”).
[2] The decisive issue in
this application is whether the joint venture has proved that a
binding agreement was entered into between
the joint venture and the
municipality for the supply, delivery and installation by the joint
venture of 450 VIP toilet structures
(“structures”) at
Matlwangtlwang Phase 3 (“the area”) within the boundaries of the
municipality.
[3] By
notice published in the local press, the municipality
inter
alia
invited tenders for the supply, delivery and installation of
structures in the area, in accordance with the tender documents
available
at the offices of the municipality. These tender documents
consisted of several parts or sections
inter
alia
,
conditions of tender, general conditions of contract, special
conditions of contract, specifications and schedule of quantities.

The conditions of tender included a provision that the successful
tenderer shall sign a contract agreement within 21 days after
receiving notification that its tender has been accepted or such
extended period which the municipality may grant. The schedule
of
quantities provided for 450 structures but included the following
provision:
“
10. QUANTITIES
PROVISIONAL ONLY
The Quantities set out in the Schedule
of Quantities are provisional only and the quantities of work finally
accepted and certified
for payment, and not the quantities given in
the Schedule of Quantities shall be used for determining payments to
the Contractor.
The validity of the Contract shall in
no way be affected by difference between the quantities in the
Schedule of Quantities and quantities
finally certified for payment.
Work shall be valued at the rates and lump sum prices tendered,
subject only to the provisions of
the General Conditions of Contract
and the Provisions of paragraphs 11 and 12 of the Preamble.”
[4] The joint venture
submitted a tender for 450 structures on the aforesaid basis. On 11
June 2007 the bid adjudication committee
of the municipality resolved
that the project for the supply, delivery and installation of
structures in the area be awarded to the
joint venture at the
tendered contract sum of R1 544 890,38 and
“
...
that
completion period will be within 16 weeks from the date of site
handover.”
[5] On
27 June 2007 the municipality directed the following letter to the
joint venture:
“
PROJECT NO:
MIG/FS/0440/S/07/07: SUPPLY, DELIVERY & INSTALLATION OF VIP
STRUCTURES: PHASE III: MATLWANGTLWANG: APPOINTMENT AS
CONTRACTOR
We
have pleasure in advising you that your tender to the value of R1 544
890.38 (One Million Five Hundred & Forty Four Thousand
Eight
Hundred and Ninety Rand Thirty Cent) for the above project was
accepted on a Bid Adjudication Committee meeting held on 11
June
2007.
Kindly
note that there are certain special conditions attached to the
awarding of the contract. These include the following:
LOCAL PARTICIPATION GOAL
...
SITE STAFF
...
PROJECT BOARD
...
PAYMENT CERTIFICATES
Payment
certificates are to be submitted on a monthly basis at least on the
22
nd
of each and every month. Please note that the claim form must be
attached in each claim submitted to the Moqhaka Local Municipality.

Claims are payable within thirty days after the submission of the Tax
Invoice and supporting documents. These must include the
stand
numbers of the premises where structures were erected with a
signature of the occupant of the stand to indicate his acceptance
of
the completed structure.
CONSTRUCTION SURETY
...
SITE MEETINGS
...
These
will be held on dates to be determined and minutes will be kept in a
prescribed format.
GENERAL
7.1 NO material must be ordered until
the correct number of structures to be erected is determined on site.
7.2 Structures
are only to be erected on registered stands, a drawing will be
provided indicating the relevant stands, no structures
erected for
residents on informal stands will be accepted and paid for.
7.3 Your contact, and council
representative, for the duration of the project at the Moqhaka Local
Municipality will be Mr H Rautenbach.
He can be contacted at
telephone no 056 216 9255 or fax number No 056 2169 123, and all
written correspondence must be directed
to the Manager: Technical
Services, for attention Mr HB Rautenbach.
You are requested to reply to the
acceptance of this contact in writing within 5 working days of
receipt of this letter, following
which a site handover meeting will
be scheduled.
We
hope that we can look forward to a good working relationship
regarding the successful and timeous completion of the project.”
The
letter was signed by Mr. H. Rautenbach, the said official in the
employ of the municipality, on the face of it on behalf of the
municipal manager of the municipality. This letter was referred to
in the papers and during argument as MM5 and I will do the same.
[6] The joint venture
responded to MM5 on 2 July 2007 by a letter referred to as MM6, in
the following terms:
“
PROJECT
NO: MIG/FS/0440/S/07/07: SUPPLY, DELIVERY & INSTALLATION OF VIP
STRUCTURES: PHASE III: MATLWANGTLWANG: ACKNOWLEDGEMENT
OF APPOINTMENT
We hereby wish to confirm receipt of
your appointment letter as a contractor; the above Project Number
bears reference.
We would like to confirm that we
accept our appointment as a contractor for the project as indicated
above. We would also wish to
confirm that we will abide by all the
rules and conditions pertaining to the execution of this project that
includes finishing the
project within the acceptable and specified
timeframe.
At the same time,
we would like to bring your attention to fact that on the indicating
our appointment as a contractor, it appears
that our enterprise name
has been misspelled thus we would like to provide you with the proper
spelling:-
KUBU
TSA TLHABIROE CONSTRUCTION CC J/V.
We would like to thank you for valued
support.”
[7] After
MM6, the joint venture on more than one occasion unsuccessfully
attempted to commence with the implementation or execution
of the
project. Finally, on 23 August 2007, the municipality responded by
letter signed by its municipal manager and dated 23 August
2007. In
this letter it was conveyed to the joint venture that it had been
established that of the 450 sites within the area where
structures
were supposed to be installed, only 37 sites are on the formal
establishment in the area and that the rest of the sites
form part of
informal settlement. In the light hereof the joint venture was
requested to indicate whether it would be prepared to
continue with
the project on the basis of 37 sites and installations only. The
joint venture responded by letter from its attorneys
stating in no
uncertain terms that it would not be prepared to do so. The evidence
in the answering affidavit that there are only
37 formal or
registered stands in the area, is not disputed. The attitude of the
joint venture that it is not prepared to execute
the project on the
basis that only 37 structures are involved, was repeated during
argument by counsel for the joint venture after
taking specific
instructions in respect thereof.
[8] In the answering
affidavit the municipal manager of the municipality stated that he
has no knowledge of MM5 and that it was written
without his
authority. I think that on the evidence as a whole this statement is
false. It is not necessary, however, to dwell
hereon as the
statement is in any event immaterial, as counsel for the municipality
was constrained to concede. It is common cause
that the
municipality’s bid adjudication committee was properly authorised
on behalf of the municipality to take a resolution in
respect of the
tender and that as a result of its resolution, MM5 was formally and
deliberately communicated by the municipality
to the joint venture.
[9] The case of the joint
venture in the founding affidavit and also specifically in the notice
of motion, is that a contract in respect
of 450 structures was
concluded when the joint venture by MM6 accepted the offer made by
the municipality by MM5. In the replying
affidavit an attempt was
made to make a case on the basis that a binding obligation arose as a
result of the mere taking of the resolution
by the bid adjudication
committee. This argument was not abandoned by counsel for the joint
venture. The argument can, however,
be briefly disposed of. The
joint venture is not only not allowed to make a new case in reply,
but the proposed new case is in any
event clearly untenable. No
binding agreement, let alone a binding agreement in respect of 450
structures, can in terms of the law
of contract come into existence
in the present circumstances by the mere resolution to accept the
tender in itself. Regulation 1(e)
of the Preferential Procurement
Regulations, 2001 pertaining to the
Preferential Procurement Policy
Framework Act, No. 5 of 2000
, published in Government Notice No. R725
in Government Gazette No. 22549 of 10 August 2001, referred to by
counsel for the joint
venture, makes no difference to the law of
contract and the application thereof. This provision simply defines
the term “contract”
for purposes of the regulations as the
agreement that results from the acceptance of a tender by an organ of
state.
[10] I deem it
unnecessary to deal with the argument on behalf of the municipality
that as a result of outstanding matters no final
agreement was
reached or constituted by MM5 and MM6. I am prepared to accept,
without deciding, that an agreement was entered into
in terms of MM5
and MM6. The decisive question then is whether such an agreement
would bind the municipality to the supply, delivery
and installation
of 450 structures. In my view, that is not the case. It will be
remembered that it was stated in MM5 that no material
must be ordered
until the correct number of structures to be erected is determined on
site and that structures are only to be erected
on registered stands,
that a drawing will be provided indicating the relevant stands and
that no structures erected for residents
on informal stands will be
accepted and paid for. In the result, at best for the joint venture,
an agreement in terms of MM5 and
MM6 would be one for the supply,
delivery and installation of structures only on the registered stands
in the area. As stated earlier,
it is not disputed that these are
only 37 stands. That, however, is not the agreement that the joint
venture seeks to enforce.
On the contrary, as stated above, it is
made clear by the joint venture that it seeks to enforce an agreement
in respect of 450 structures.
[11 It follows that the
application must fail and that it is not necessary to consider the
further arguments presented on behalf of
the municipality.
[12] Costs must follow
the result, save for the wasted costs of 28 February 2008. Counsel
for the municipality correctly accepted
that these costs must be
borne by the municipality.
[13] The
application is dismissed with costs, excluding the wasted costs of 28
February 2008, which costs must be paid by the respondent.
________________________
C.H.G. VAN DER MERWE,
J
On
behalf of applicants: Adv. Thabo Seneke
Instructed
by:
Mabalane
Seobe Attorneys
BLOEMFONTEIN
On
behalf of respondent: Adv. G.J.M. Wright
Instructed
by:
Bokwa
Attorneys
BLOEMFONTEIN
/sp