MCB Business Solution t/a Africa Business Solutions v Premier of the Northern Cape (359/2007) [2006] ZANCHC 30 (25 May 2006)

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[2006] ZANCHC 30
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MCB Business Solution t/a Africa Business Solutions v Premier of the Northern Cape (359/2007) [2006] ZANCHC 30 (25 May 2006)

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IN
THE HIGH COURT OF SOUTH AFRICA
(Northern
Cape Division)
Case
Nr: 359/2007
Date
delivered: 25/05/2006
In
the matter between:
MCB Business Solution t/a
Africa Business Solutions
and
The Premier of the Northern
Cape
Coram:
Olivier J
JUDGMENT
OLIVIER
J:
The
applicant, MCB Business Solutions (t/a Africa Business Solutions),
launched this application against the respondent, the Premier
of the
Northern Cape (representing the Department of Education, Northern
Cape), on an urgent basis and set the matter down for
hearing on 13
April 2007. On that date the application was postponed to 11 May
2007, when it was eventually argued.
The
relief which the applicant applied for was a declaratory order that
“there are disputes
between the parties as contemplated in paragraph 21 of annexure ‘H’
hereto”
and an order
that the matter be referred to an “
arbitrator
”
to determine certain disputes.
The
word
“arbitrator”
was obviously initially used erroneously (alternately with the word
“mediator”
)
and the applicant later applied for an amendment to substitute the
word
“arbitrator”
with the word
“mediator”
.
No objection was raised to such an amendment and, in view of the
fact that the applicant’s founding affidavit in any event
made it
very clear that the application had always been aimed at the
appointment of a mediator, such an amendment can be granted
if
necessary.
The
background to the application, very briefly, is that the applicant
and the department concluded an agreement by means of a tender
by
the applicant, the acceptance thereof by the department and the
subsequent conclusion of a written contract (
“the
contract”
), in terms
of which the applicant would rent four printers to the department
(and render certain services in the operation of the
machines) for a
period of three years at a total cost of R492 708.33.
The
contract commenced on 1 December 2006 (although the machines had
apparently already been put into operation by then). During
January
2007 representatives of the department complained that the speed at
which the machines operated (and other functions of
the machines)
did not comply with the requirements in the request for tenders or
with the specifications in the applicant’s tender.
After tests
were conducted the applicant offered to supply two further machines
at no extra cost. There is no indication that
such offer was
accepted.
According
to the deponent for the applicant it at no stage conceded that the
machines did not comply in any respect whatsoever,
while the
respondent’s version is that this was conceded on more than one
occasion.
On
19 February 2007 it came to the applicant’s attention that the
department had discontinued the operation and use of the machines.

On the same day the applicant made written enquiries to the head of
the department in this regard. When this did not elicit any
response the applicant’s attorneys directed a letter to the head
of the department on 22 February 2007.
On
26 February 2007 the applicant received a letter, dated 15 February
2007 but signed on 23 February 2007 (annexure ‘K’ to
the
founding affidavit and hereinafter referred to as such), from the
head of the department, mr Williams, in which it was
inter
alia
stated that
“the
machines cannot deliver at the levels represented in your proposal,
and also fall far short of the performance set out in
the
specifications”
. It
is the respondent’s case that annexure ‘K’ served as
“notice
of cancellation”
of
the contract, an aspect to which I will revert in due course.
On
28 February 2007 the applicant replied in writing, proposing the
installation of 2 further machines.
At
a meeting on 6 March 2007 mr Williams, however, informed the
applicant’s representatives that the contract had been cancelled.

The same attitude was adopted by mr Williams in a subsequent letter
on 8 March 2007.
On
13 March 2007 the applicant’s attorneys addressed a further letter
to the department,
inter
alia
indicating that the
applicant would consider having the matter referred to a mediator in
terms of clause 21 of the contract. On
14 March 2007 mr Williams
replied in writing that, because the contract had already been
cancelled, the contract – including
clause 21 (which provided for
mediation and, if unsuccessful, arbitration) – no longer existed.
On
28 March 2007 it came to the applicant’s attention that the
department had again invited tenders for the rental of printers
for
the same period. On the same date the applicant’s attorneys once
again addressed a letter to the department, indicating
that they had
obtained advice form senior counsel and requesting the department to
agree to the appointment of a mediator by no
later than 12:00 on 29
March 2007.
On
29 March 2007 mr Williams replied in writing that
“we
do not consider ourselves bound by any of the terms of the
terminated agreement”
.
On 11 April 2007 this application was served on the respondent at
the local office of the State attorney and, as already mentioned,
set down for 13 April 2007.
In
his opposing affidavit on behalf of the respondent mr Williams
raised several points
in
limine
on behalf of the
respondent. In the first place it was submitted that the notice of
motion does not comply with form 2(a) of the
first schedule to the
Uniform Rules of Court (
inter
alia
in that it did not
state an address, within 8 kilometers of the office of the
Registrar, where notice and service of documents would
be accepted)
and that it should therefore be set aside as an irregular
proceeding.
I
do not deem it necessary to spend too much time on this argument.
Even if the notice of motion does not strictly speaking comply
with
form 2(a), it does contain the address of the applicant’s
attorneys and there is no indication (let alone an allegation
to
this effect) that the respondent was prejudiced by this. In any
event the respondent did not comply, in its
“application”
for the notice of motion to be set aside, with the provisions of
Rule 30. It did not take the necessary steps in this regard within
10 days of the date on which the notice of motion was served on the
respondent and the applicant was not given any opportunity
of
removing the cause of the complaint.
The
other points
in limine
taken in the opposing affidavit concern the short notice (of the
application) given to the respondent. Despite the fact that almost
a month lapsed between the date for which the matter had initially
been set down and the date on which the application was eventually
heard, and the fact that opposing and replying affidavits have been
filed, it was argued on the respondent’s behalf that the
application should be dismissed on this basis alone, alternatively
“on the cumulative
grounds of not making out a case for urgency and its deviation from
the rules relating to the form, service
and sitting of this ….
Court”
.
In
my view the applicant has indeed not satisfactorily explained why
such short notice was given to the respondent. The respondent’s
letter of 14 March 2007, and its reaction to the applicant’s
reference to clauses 21.2 and 21.3 of the contract (and to the

possibility of mediation), must have made it very clear to the
applicant that the respondent would not agree to mediation.
No
explanation was furnished by the applicant’s attorneys for the
delay from 14 March 2007 to 28 March 2007 (apart from stating
that
they were
“in
consultation with”
counsel at some stage), and the same applies to the delay from 29
March 2007 (when it was once again made clear that the department
was not going to agree to mediation) to 10 April 2007 (when the
application was eventually lodged, only two court days before the
initial date of set down). The facts of this matter are therefore
distinguishable from those in
Transnet
Ltd v Rubenstein
2006
(1) SA 5914
(SCA).
The
facts that the department has stopped its payments to the applicant,
that the applicant is still obliged to pay the supplier
from which
it had purchased the machines or that other parties might in the
meantime incur expenses in reaction to the respondent’s
new
invitation for tenders would not in themselves justify the short
notice given to the respondent.
I
do not, however, think that it would be appropriate to dismiss the
application on this ground, or even
“cumulatively”
on the grounds suggested on behalf of the respondent. Whatever
prejudice might have been caused by the short notice can in my
view
be adequately addressed by a suitable costs order, and mr Reinders,
who appeared on behalf of the applicant, conceded that
it would be
fair to order the applicant to pay the wasted costs occasioned by
the postponement on 13 April 2007.
This
brings me to the merits of the matter. The applicant relies on the
provisions of clause 21 of the contract and contends that
it enjoins
the department, in the event of a dispute such as this, to subject
itself to a process of mediation. Under the heading
“
DISPUTE
RESOLUTION”
clauses
21.1 and 21.2 provide as follows:
“
21.1 Amicable
settlement
The Parties shall
make every effort to resolve any complaints or disputes in the
monthly meetings before any further action is considered.
Referral
to Mediator
If the Parties are
unable to resolve any complaints or disputes within 14 … days …
the Parties shall refer the complaint or dispute
to a neutral
mediator. … if the Parties accept the recommendations in an
agreement, it shall be legally binding on them.”
In
clause 21.3 of the contract provision is made for arbitration in the
event that
“the Parties
do not accept the recommendations or corrective steps of the
mediator”
.
What
immediately strikes one is the repeated use of the word
“shall”
in these provisions. It could be argued to be an indication that
the parties intended these provisions to be peremptory and to
apply
in the event of “any” complaint or dispute.
The
question is if a dispute about whether the machines functioned as
undertaken by the applicant, could be viewed as one to which
the
parties had intended clause 21 to apply. Upon its ordinary
grammatical meaning the wording of the provisions of clauses 21.1
and 21.2 of the contract would seem to apply to
“any
… disputes”
and
there is no clear indication in the contract that the word
“any”
should not in this case be given its ordinary wide meaning (see
Arprint Ltd v Gerber
Goldschmidt Group South Africa (Pty) Ltd
1983 (1) SA 254
(A) at 261B-E,
Proctor
& Gamble SA (Pty) Ltd v Carlton Paper of South Africa (Pty)
Ltd and Another
1997 (3)
SA 292
(T) at 296G and
Manyasha
v Minister of Law and Order
[1998] ZASCA 112
;
1999 (2) SA 179
(SCA) at 190).
Furthermore
it could be argued that this would correspond with the even wide
wording of clause 27.1 of the General Conditions of
Contract (GCC),
which also apply
“...
to all bids, contracts and orders including bids for … services …
hiring, letting …”
(clause 2.1 of the GCC), except where such provisions would be in
conflict with those of a contract like the one concerned here
(clause 2.3 of the GCC). Under the heading
“Settlement
of Disputes”
clause
27.1 of the GCC also provides that
“any
dispute or difference of any kind whatsoever”
should
be attempted to be amicably resolved.
On
the other hand it could possibly be argued that the reference in
clause 21.1 of the contract to
“monthly
meetings”
where
disputes could be addressed, could be interpreted to mean that the
parties intended those provisions to apply only to disputes
arising
during the course and execution of the contract (as opposed to a
disputed regarding the actual conclusion of the contract).
When
considering the meaning of the provisions of clause 21 they should
obviously be considered in the context of the contract as
a whole,
and more specifically also against the background of the provisions
of clause 7.2 (to which I will revert in due course)
and the problem
is that, as will be seen below, there are indications that the
intention was that the delivery of the
“correct”
machines would form part of the services to be rendered by the
respondent, and therefore arguably of the execution of the contract.
This
brings me to the question of cancellation, and the provisions of
clause 7.2 at the contract. In its opposing affidavit the
respondent made various (and somewhat confusing) averments regarding
the legal basis upon which it had allegedly cancelled the
contract.
It was submitted that the fact that the specifications provided by
the applicant were
“false”
brought it within the ambit of section 2 (1) (g) of the Preferential
Procurement Policy Framework Act, 4 of 2000 (the PPPF Act),
and that
on this basis the respondent would have been entitled to cancel.
I
fail to see how the provisions of the PPPF Act could possibly have
any bearing at all on this case. Even if the applicant had
supplied
“false”
information regarding the attributes of the machines this would have
had nothing to do with the purpose of the PPPF Act, as set
out in
its preamble and read with the applicable provisions of the
Constitution. In view of what follows, and also because it
is not
necessary for the purposes of this application to decide whether
there was a factual basis (as opposed to legal provision
therefore)
for cancellation, I deem it unnecessary to lend any further
consideration to this contention.
The
same applies to the suggestion by mr Williams that the furnishing
of the specifications amounted to
“corrupt
or fraudulent practices in competing for … the contract
”,
as envisaged in clause 23.1 of the GCC, although I have to mention
that, apart from the fact that on the face of it clause
23.1 of the
GCC deals with the remedies of a
“purchaser”
(which the respondent is not), the respondent has not even made the
allegation that the applicant acted fraudulently or corruptly
in
furnishing the specifications. Mr Sibeko quite correctly conceded
that mr Williams was wrong in relying on the provisions of
clause
23.1 of the GCC.
In
my view the provisions of clause 7.2 (read with those of clause
7.2.3) of the contract are of more importance. It provides that,
“If the client
determines that the services are not rendered as contemplated in
this agreement, the bid document and ‘Schedule
A’ hereto the
client may - … Cancel this agreement with immediate effect …”
.
The
question is whether these provisions, viewed in isolation and if the
provisions of clause 21 are disregarded for the moment,
would have
provided the respondent with the remedy of cancellation on the
ground that the machines which the applicant had delivered,
did not
comply with the requirements of the initial invitation for tenders
or with the specifications in the applicant’s tender.
To
answer this question one would have to determine whether the
delivery of machines which did so comply would constitute a
“service”
as envisaged in clause 7.2. On behalf of the applicant it was argued
that this is not the case and that the provisions of clause
7.2
pertain only to services as envisaged in the preceding clause
(clause 6). It was argued that the delivery of the correct machines
would not have constituted a service as envisaged in clause 6.
The
heading of clause 6 is “THE SERVICES” and according to clause
6.1
“The services that
are intended in terms of this Agreement in the service area are as
follows:
Delivery
of photocopy machines
…”
It
is clear that the reference
“photocopy”
machines was intended to be a reference to the printing machines
which are the subject of the agreement. “
Service
Area”
is defined in
clause 1.8 of the contract as
“…
the areas in which the services are to be rendered …”
.
It
is not clear at all whether it was intended that the provisions of
clause 6 of the contract could only apply to such services
as would
actually be rendered on a daily and continuing basis
“in
the services area”
(like
the installation and maintenance of the machines) – and not to the
question whether the machines delivered did in fact comply
with
certain standards – and, even if so, whether the provisions of
clause 7.2 were intended to be limited in its application
to
services as envisaged in clause 6.
In
clause 1.7 of the contract the word
“Services”
is defined as meaning
“…
the services to be rendered by the Service Provider to the Client in
terms of this agreement”
.
When regard is had to the rest of the provisions of the contract
(apart from those of clause 6) the following appears:
In
terms of clause 7.2
“services”
would be rendered
“as
contemplated in this agreement, the bid document and ‘Schedule A’
hereto”
.
In
clause 5.1 it was agreed, under the general heading
“SCOPE
OF SERVICES”
, that
“The services …
shall … include the services as outlined in ‘Schedule A’ …”
.
When regard is had to schedule A the services would then have
included
“To deliver …
machines … as provided for in schedule B”
.
Schedule B provides for the supply of printers with certain
specified and agreed capabilities.
These
provisions, read together and in context, could be interpreted to
mean that one of the services which the applicant had been
intended
to render, was not merely to deliver printing machines, but
specifically to deliver printers complying with particular
specifications. If so, the delivery of non-compliant machines could
be interpreted to be a failure to render a
“service”
,
as contemplated in clause 7.2 of the contract.
On
this interpretation, and disregarding for the moment clause 21 and
its widely worded provisions, the contract would then have
provided
the respondent with the remedy of cancellation in the event that the
machines delivered by the applicant did not comply
with the
specifications agreed upon.
Clause
7.2 does not prescribe the method of cancellation or the manner in
which notice of cancellation should be given. To determine
whether
the respondent had indeed
“made
an election to cancel is a question of fact to be decided on the
evidence”
(see
Peters
and Others NNO v Schoeman and Others
[2000] ZASCA 152
;
2001 (1) SA 872
(SCA) at 882A-B).
There
is no basis upon which it can be found that the respondent had not
made such an election, at the latest by 6 March 2007,
when mr
Williams informed the representatives of the applicant that the
contract had been cancelled. Insofar as it might be argued
that the
applicant placed the fact that such an election had been made in
dispute (although it admitted that this was what mr Williams
had
declared at the meeting of 6 March 2007), the fact would remain that
the application is for final relief and that the respondent’s
version in this regard will normally prevail (see
Staatsdiensliga
van Suid-Afrika en andere v Minister van Waterwese
1990 (2) SA 440
(NK) at 443G and
Plascon-Evans
Paints Ltd v Van Riebeeck Paints (Pty) Ltd
[1984] ZASCA 51
;
1984 (3) SA 623
(A) at 634E-635C).
In
his opposing affidavit mr Williams referred to annexure ‘K’ as
the notice of cancellation and he stated that the contract
was
cancelled
“as set out
in annexure ‘K’”
.
In the said letter mr Williams did indeed inform the applicant that
“… we are left with
no option but to … give you notice of the termination of the
contract in whole. The termination is without
prejudice to any
other legal remedy we may have for breach of contract”
.
Had mr Williams left it at this, there would have been no doubt
that the applicant had also been given clear notice of cancellation.
In
the last paragraph of annexure ‘K’ mr Williams, however, went on
to inform the applicant as follows:
“
It
is procedural to allow a remediation solution to be proffered by the
defaulting party. You thus have an opportunity to present
such a
solution. It must be clear that the solution cannot, in effect,
change the specifications of the tender nor the assertions
made in
your tender application. Any solution that does this would be
considered to be in conflict with Supply Chain Management
policy and
regulations. You thus have 48 hours to proffer a viable solution,
failing which the contract will be terminated with
immediate effect.”
As
already mentioned, annexure ‘K’ eventually reached the applicant
on 26 February 2007. On 28 February 2007 the applicant
responded by
proposing the delivery of two further machines. When the respondent
failed to respond to the applicant’s letter
of 28 February 2007,
the applicant called for a meeting and at that meeting, which took
place on 6 March 2007, mr Williams informed
the representatives of
the applicant that the contract had been cancelled.
Even
though annexure ‘K’ could be argued not to have been a clear and
unequivocal notice of cancellation (see
Datacolor
International (Pty) Ltd v Intamarket (Pty) Ltd
[2000] ZASCA 82
;
2001 (2) SA 284
(SCA) at 299F-300I,
Putco
Ltd v TV & Radio Guarantee Co (Pty) Ltd and Other Related
Cases
1985 (4) SA 809
(A) at 830E-F,
Kragga
Kamma Estates CC and
Another v Flanagan
[1994] ZASCA 137
;
1995 (2) SA 367
(A) at 375C-F and
Peters
and Others NNO v Schoeman and Others, supra
,
at 882C-D), the applicant’s representatives were informed of the
election to cancel in no uncertain terms at the meeting on
6 March
2007, long before the respondent was requested to partake in
mediation.
I
am of the view that in this case, and especially in view of what
follows, a cancellation in terms of clause 7.2 of the contract
would
indeed have terminated the contract in its entirety. It is simply
inconceivable that the intention could have been to provide,
on the
one hand, for cancellation
“with
immediate effect”
, and
indeed
“without any
prejudice to the rights of”
the department (clearly referring to its common law contractual
rights and remedies), while on the other hand providing for
arbitration
even after such cancellation. An obligation to subject
to arbitration in respect of a certain issue would in my view be
completely
irreconcilable with an entitlement, in respect of the
same issue, to cancel as envisaged in clause 7.2.
On
behalf of the applicant it was contended that the provisions of
section 3
(1) of the
Arbitration Act, 42 of 1965
, would have
prevented such a cancellation. These provisions read as follows:
“
Unless
the agreement otherwise provides, an arbitration agreement shall not
be capable of being terminated except by consent of all
the parties
thereto.”
Apart
from the fact that, on the above interpretation of clause 7.2 of the
contract, it could be argued that the parties had in
fact indeed
contractually agreed that such a cancellation would be competent,
the problem is simply that the applicant has in my
view not made out
any case at all why the provisions of clause 21 (of which the
arbitration clause forms part) should on these
facts and in these
circumstances apply to the exclusion of those in clause 7.2.
The
two sets of provisions are completely irreconcilable. While clause
21 would appear to have been intended to subject any possible
form
of dispute to mediation and arbitration (to the exclusion of a
remedy like cancellation by one of the parties), clause 7.2
provides
for unilateral cancellation.
The
available evidence provides no solution to this inconsistency and no
acceptable method of interpretation would, on the face
of it, solve
the problem. An interpretation (or even the implementation of the
contra proferentem
principle– see
The Law
of Contract
, Christie,
4
th
ed, pp255-257) to the effect that the provisions of clause 21 were
intended to deprive the respondent of the normal remedy of

cancellation, would be completely arbitrary and without any factual
basis, would lead to the absurd result that the provisions of
clause
7.2 would be rendered nugatory and would moreover be inconsistent
with the presumption against the waiver of a right normally
conferred by law (see
Le
Roux v Odendaal
1954 (4)
SA 432
(N) at 441 and
Van
Aswegen v Van Aswegen
2006 (5) SA 221
(SE) at 247); for such an interpretation would in
effect impute to the respondent an intention to waive the remedy of
cancellation
or rescision.
Apart
from this, and even if it were to be accepted that clause 21 was
intended also to apply to disputes regarding the attributes
of the
machines, the fact is that there is on the papers a factual dispute
regarding whether, as at the meeting of 6 March 2007,
there was in
fact any dispute about whether the machines complied with
specifications (see paragraph 6 above). Once again the
respondent’s
version in this regard would have to prevail (see the
Staatsdiensliga
and
Plascon-Evans
cases referred to above), which would mean that the Court would have
to accept that at the time of cancellation of the contract,
there
was no dispute to subject to mediation or arbitration.
It
follows that I am of the view that the application should be
dismissed and that the applicant should be ordered to pay the costs
thereof, including those wasted by the postponement on 13 April
2007.
On
behalf of the respondent mr Sibeko argued that such costs should
include the costs of two counsel. As grounds for such an order
he
advanced the fact that the application was brought on an urgent
bases while there existed no grounds therefore and that the
respondent had to comply with certain time constraints in the filing
of its opposing affidavit and heads of argument (which, so
it was
argued, rendered the matter complicated) and he argued that the case
was of
“sufficient”
interest and importance to the respondent to justify such an order.
In
my view there is no merit in any of these grounds. The absence of
urgency could certainly not in itself be a ground for such
an order.
Furthermore the parties agreed (on 13 April 2007) on the periods
within which the further affidavits and heads of argument
would be
filed (within the period of just less than a month before the
hearing) and I cannot see how this could have justified
the costs of
two counsel. The mere fact that the matter might be of importance
to the respondent is, obviously, also not a ground
for such an
order. In my view the matter was not complex and there is no reason
why the costs should include the costs of two
counsel.
In
the premises the following orders are made:
The
application is dismissed.
The
applicant is ordered to pay the costs of the application, including
the wasted costs occasioned by the postponement on 13
April 2007.
________________________
C
J OLIVIER
JUDGE
NORTHERN
CAPE DIVISION
For
the Applicant: Adv S J Reinders
On
behalf of: Du Toit Bomela Attorneys, KIMBERLEY
For
the Respondent: Adv L T Sibeko, SC & Adv A P S Nxumalo
On
behalf of: The State Attorney, KIMBERLEY