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[2000] ZASCA 28
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Premier of the Free State Provincial Government and Others v Firechem Free State (Pty) Ltd. (548/98) [2000] ZASCA 28; 2000 (4) SA 413 (SCA); [2000] 3 All SA 247 (A) (29 May 2000)
CASE NO.548/98
IN THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
In the matter between
The Premier of the Free State Provincial
Government First Appellant
The Director-General of the Free State Provincial
Government Second Appellant
The Member of the Executive Council for the Department
of Finance,
Expenditure and Economic Affairs of the Free State
Provincial Government Third Appellant
The Chairman of the Free State Provincial Tender Board
Fourth Appellant
and
Firechem Free State (Pty) Limited
Respondent
BEFORE: HEFER, HARMS, SCHUTZ JJA, FARLAM and
MPATI AJJA
HEARD: 16 MAY 2000
DELIVERED: 29 MAY 2000
Tender boards - proper tender procedures -
interpretation of contracts - presumption of legality - agreements to
agree - severance
- fictional fulfilment - record - costs of
disallowed - practice note - part of counsel’s fees disallowed.
W P SCHUTZ
SCHUTZ JA:
[1] “As I said I was not trying
to outwork the Tender Board I was trying to do it through the Tender
Board in a different
way.” These words were spoken in evidence
by Mr McNaught, the chairman of the respondent, Firechem (Pty) Ltd
(“Firechem”).
The question arises whether there is room
for the “different way” adopted, in the light of the
peremptory terms of
s 4 (1) of the Tender Board Act 2 of 1994 of the
Free State (“the Act”), which states that the Tender
Board “shall
have the sole power to procure supplies and
services for the Province.” Despite this provision, the Tender
Board, so runs
Firechem’s argument, was permitted to and did
allow others to conclude a procurement contract which contradicted a
contract
already established by the Board’s acceptance of a
tender. The sustainability of this argument is the main question in
the
appeal. The appellants are the Premier, the Director-General, the
MEC for Finance, Expenditure and Economic Affairs and the chairman
of
the Provincial Tender Board of the Free State. They were the
unsuccessful defendants in an action heard by Edeling J in the
OPD.
Leave to appeal was granted on petition to the Chief Justice.
[2] Mr McNaught was an experienced marketer of cleaning
materials. His sales were supported by the training of staff in the
use
of these materials. Late in 1994 he conceived a plan to obtain a
contract for the supply of all the Free State Province’s
cleaning material needs by negotiating a contract without going
through tender procedures. Having obtained an introduction to Dr
Setai, the Director General, he was given permission to conduct a
survey of the Province’s needs. This entailed visiting
numerous
hospitals, schools and the like, which, together with preparing a
detailed report, cost Firechem a large sum of money.
When the report
was presented it was accompanied by a draft contract. The
vicissitudes of this contract form an important part
of the story as
it unfolds. Attached to the draft was an annexure C. This set out
details of the proposed supplies of particular
items, department by
department, and month by month. The draft proposed that the Province
would be obliged to take those quantities.
The term was to be seven
years.
[3] Firechem’s proposal contained important
attractions. Instead of importing materials, it would set up a
factory to make
them in the Free State, which would employ local
staff for the great majority of jobs. Firechem would also help to
establish supporting
businesses for previously disadvantaged
entrepeneurs, in fields such as transport and palette making.
Moreover, provincial staff
would be regularly motivated and trained
in the use of cleaning materials.
[4] The presentation of Firechem’s detailed
proposals took place at a further meeting with Dr Setai in March 1995
at which
Mr Hendriks of the Department of Finance was present. The
Tender Board fell under the Finance Ministry and Mr McNaught gathered
that Mr Hendriks had been asked to attend as he was the link between
the Department and the Board. Mr Hendriks made it quite clear
that
there could be no contract without the normal tender procedures being
followed. This was a disappointment to Mr McNaught,
but he did not
give up. In May 1995 he requested a meeting with the Premier, Mr
Lekota, on the subject of “new investment
and RDP in the Free
State.” The Premier’s response was that this subject was
the responsibility of Mr Magashule, the
MEC for Economic Affairs. It
was in this way that a department other than the Finance Department
became involved. Mr McNaught had
several meetings with Mr Magashule
and made a presentation to the Tender Board. Eventually, on 15 August
1995, he met the Premier.
The latter gave his support in principle to
the award of a provincial contract to Firechem along the lines of the
proposal and
the annexed draft contract, but indicated that the
Executive Council would have to make the decision. Mr McNaught was to
be given
the opportunity to make a presentation to that body. A
document headed Motivation was submitted for the use of the Council.
It
concluded by saying that “Firechem is however open to
negotiation relating to the terms, period and conditions of proposed
contract.”
[5] In the meantime Mr Hendriks reported to Mr Magashule
that to comply with the Interim Constitution (requiring fairness,
publicity
and competitive procedures) any proposed contract should be
put out to tender and would have to be approved by the Tender Board,
which had the sole power to procure supplies and services. A suitable
contract could be formulated with the assistance of Firechem
and
other interested parties. The contract would make provision for
building a factory in the Free State, employing a certain minimum
of
local workers and so on. Tenderers would be requested to tender on
the basis that they would comply with these conditions. If
matters
were ordered in this way no one would have reason to be dissatisfied.
Mr Hendriks commented critically on Firechem’s
existing draft
contract saying i a that a term of seven years was abnormally long
for a contract of exclusive supply. The contents
of this memo were
not known to Mr McNaught at the time. However, Mr Hendriks’s
points had gone home and on 20 September 1995
the Executive Council
passed a resolution to the effect that legislative requirements with
regard to tenders must be followed.
Further, the Tender Board was to
review, and if necessary revise the tender documents in relation to
cleaning materials.
[6] In consequence, on 22 September 1995 the Executive
Council instructed the Tender Board that an existing invitation to
tender
should be cancelled. Before a new advertisement was published
a new set of tender documents was to be prepared and considered by
the Departments of Finance and Economic Affairs.
[7] On 3 October 1995 the MEC for Finance, Mr Makgoe,
communicated the
Council’s decision in the following recorded
terms:
“1 That the project was accepted
in principle
;
2 But that it had to go out on general tender to
ensure ‘transparency and not to contravene the law (Interim
Constitution)’
3 . . .
4 That existing tender contracts be extended for three
months;
5 That specifications along the lines of Firechem’s
proposal be drawn up by Tender Board, and
6 Be advertised within . . . three
months . . .
7 Any company in the field could
tender . . .
8 Terms like duration of the contract, SMME [Small
Micro Medium Enterprises] Development, Social Responsibility,
Affirmative Action,
actual investment, cost incurred by Government,
etc to be negotiated with tenderers in the final stages of the
decision - making
process before contract is awarded (was not very
clear on this).
9 No preferences granted to Firechem on the following
grounds:
* Firechem is not a ‘Free State Company’;
* ‘Playing field to be levelled’;
. . .”
[8] In his evidence in chief Mr McNaught said with
reference to par 8 just quoted:
“My understanding of that was that once the
successful tenderer or tenderers had been given their tender award
that they
would be able to make additions or to put other inputs into
the contract that were not necessarily specified in the tender
document,
the reason for that being that the tender document although
it was more comprehensive than the previous tender that had been
withdrawn,
it still was lacking in certain points that it could have
had in.”
[9] As will become apparent as the story unfolds, this
proposition is vital to Firechem’s case. I shall come back to
it, so
will confine myself to two comments at this stage. First, par
8 speaks of negotiations before contract award. McNaught contemplates
negotiations after award. As will become apparent there were
negotiations both before and after award. Secondly, McNaught speaks
of additions where something was “not necessarily specified in
the tender document.” As will further become apparent
he has to
face difficulties arising out of making additions where something was
so specified.
[10] To revert to the narrative, the invitation to
tender was published on 29 December 1995. The document commences:
“
Tender VT 20132/96 For Disinfectants and
Cleansing Agents: Province Free State: Bloemfontein
1 In terms of a notice published in the Provincial
Gazette of 1995/12/29 and in accordance with the Provincial Tender
Board Regulations
promulgated under Provincial Notice no 12 of 14
September 1994 tenders are invited for the supply of the above for
the period 1996/03/01
till 2000/02/28 [ie a period of four years].”
Further relevant terms are:
“
4 Prices must hold good for 90 days and will
thereafter be binding on the successful tenderer.
5 . . .
6 The following documents are attached hereto and
tenderers must assure [sic] that all the relevant documents are
returned.
(i) Tender forms
(ii) Conditions of Contract
(iii) Specifications (Quantity lists).
7 . . .
8 The conditions contained in the VST 36 (General
Conditions and Procedures) and the attached VST 6 and VST 8 [the
tender form],
as well as any other conditions accompanying this
request, are applicable.”
Certain “Important Conditions” which were
attached require mention:
“
1 Tenders are scheduled mechanically in this
Office of the Tender Board. The tender forms have consequently been
drawn up so that
certain essential information is to be furnished in
a specific manner. Any additional particulars shall be furnished in
the enclosed
questionaire or in a separate annexure.
2 The tender forms should not be retyped or redrafted
. . .
11 Orders shall be placed directly by the Provincial
Departments and other approved instances
15 These conditions form part of the tender and failure
to comply therewith may invalidate the tender.”
Certain “Additional Important Conditions”
also require mention:
“
1
Background
1.1 The tender will be divided into five regions as
indicated on attached map.
. . .
1.6 The tenderer intends to manufacture, market and
distribute its products to the Purchaser.
1.7 The tenderer will provide Training officers in the
selection, use and application of the products as described in the
above-mentioned
clause.
. . .
1.9 The tenderer will promote hygiene and cleanliness
through direct training methods, and supply products
on order
to the Purchaser.
2
Successful Tenderer’s Obligations
.
2.1 The tenderer agrees that it will during the term
hereof
2.2
receive orders
from the purchaser for
products as listed in the tender documents
.
2.3 deliver such products . . .
2.4 provide at no additional cost to the Purchaser,
Training Officers, for:
2.4.1 training of new personnel as Training Officers;
2.4.2 training designated staff . . . in the choice,
use, demonstration and application of the products; and
2.4.3 assisting staff . . . in use and application of
the products.
2.5 employ a minimum of 95% . . . of its staff for
administration, training, transport, factory operations, managers and
storemen
from Free State residents.
2.6 furthermore, will also whenever practicable,
assist emerging business by offering contracts to them in support of
the principles
of Reconstruction and Development Program to, for
example supply of transport, paper products, other goods and
services.
4
Price
4.1 The price of the product/s will be as tendered.
5
Duration
5.1 This contract shall endure for the initial term,
as stated in the tender documents;
5.2 Thereafter, this contract may be extended for
periods of 3 . . . months at a time when the need therefor arises.
6
Purchase Orders
6.1 The Purchaser will ensure that proper order are
furnished for products to be supplied by the Tenderer.
7
Delivery
7.1 The tenderer will
deliver the products ordered
in terms as tendered
. . .
7.3 The tenderer
will deliver the goods, ordered by
the departments
. . .”
(Own emphasis.)
[11] It will be observed that these “Additional
Important Conditions” introduce into the conditions of tender
the kind
of special inducements that Firechem had offered initially
and which the Executive Council had decided other applicants should
be given the opportunity to match.
[12] Firechem’s tender, which was signed on 22
January 1996, was on the prescribed form, which reads in part:
1 “I/We hereby
tender to supply all or any of
the supplies
as and/or to render all or any of the services
described in the attached documents to the
Provincial
Legislature
on the terms and conditions and in accordance with the
specification stipulated in the tender documents
(and which shall
be taken as part of, and incorporated into, this tender) at the
prices and on
the terms regarding time for delivery and/or
execution inserted
therein
.
2
I/We agree that -
(a) . . .
(b) this tender and its acceptance shall be subject to
the terms and conditions contained in the General Conditions and
Procedures
(VST 36) . . .
3 I/We furthermore confirm that I/we have satisfied
myself/ourselves as to the correctness and validity of my/our tender
. . .”
(Own emphasis.)
The last page of the tender drew attention to certain
“Important Conditions”
on the reverse side. Three of them read:
“
2 Tenders should be submitted on the official
forms and should not be
qualified by the tenderer’s own conditions of
tender. Failure to comply with these requirements or to renounce
specifically
the tenderer’s own conditions of tender, when
called upon to do so, may invalidate the tender.
3 If any of the conditions on this tender form (VST 8)
are in conflict with any special conditions, stipulations or
provisions incorporated
in the tender, such special conditions,
stipulations or provisions shall apply.
3 This tender is subject to the Tender Board
regulations made in terms
of section 9 (1) of the Tender Board Act, . . ., and the
General Conditions and Procedures (VST 36) as published . . .”
After certain other annexures to the tender form there
follows a series of pages each of which names and describes a product
in
accordance with a quality specification. The names are trade names
such as Exclude, Stericlean and Pacify.
Each product has an item number and a unit tender price
is quoted. In each case under the heading “Quantity” the
words
“As required” have been typed in. In
cross-examination Mr McNaught agreed that this meant that specific
quantities
were not stated in the tender, so that, as required by the
departments, orders would be placed. Firechem would have to supply in
accordance with these orders.
[13] It will be remembered that Firechem’s tender
was dated 22 January 1996. Tenders closed on the 24 th. On the 30th
Firechem
submitted a further document to the chairperson of the
Tender Board. Firechem referred to its tender and went on to say that
an
attached addendum showed that “there have been vital
omissions in the Tender. Essential products have not been included in
the range but are needed for daily use in Government Departments.”
What gave rise to this letter, according to the unchallenged
evidence
of Mr McNaught, was the following. Being very unhappy about the
omissions he spoke to the MECs for Finance and Economic
Affairs with
a view to the tender being withdrawn and supplemented. This they were
unwilling to do, particularly as the tender
had already been delayed
once. Their advice to him was to write to the Tender Board, pointing
out what he felt were omissions,
and offering the Tender Board “that
I [McNaught] would, if successful in tendering, make up the
differences.” Annexed
to the letter of 30 January 1996 was a
list of 13 omissions. An annexure to the letter proceeded:
“
These were omitted from Tender no VT 20132/96 and
the Seller requests
permission to supply these products as per its delivery
schedule.”
In evidence Mr McNaught said that by this schedule he
meant the annexure C to the draft contract annexed to his proposal of
March
1995, to which I have made reference earlier.
[14] The letter of 30 January 1996 raised two further
matters. The one was that there was no definition of SMME
development. Permission
was sought to discuss this matter with the
Board before final adjudication. The other was a request that
Firechem be allowed to
supply in industrial sized, not supermarket
sized containers.
This also Firechem wished to discuss with the Board.
[15] On 10 May 1996 a recommendation was made to the
Board by an Action Committee that had been appointed some time
before. It consisted
of officials from both departments and from the
Board. The recommendation was that contracts be concluded in terms of
s 4 (1) (a)
of the Act. The recommendation reflected that there had
been 41 tenderers, but of the ten lowest only two intended
manufacturing
in the Free State, namely Firechem and a company called
Khotso.
The Action Committee recommended that the tender be
awarded to those two, Firechem to get the Bloemfontein, Western,
Southern and
Northern regions and Khotso the Eastern region, both for
a period of five years. Some of the reasons for making the award to
Firechem
were said to be the following:
“
4 In a separate contract to be signed between the
Province and
Firechem (refer annexure B) Firechem has committed
themselves to:
(i) Provide at no additional cost to the Province,
Training Officers, for:
(i) Training new local personnel as Provincial Training
Officers.
(ii) Provide at no additional cost, equipment in
quantities
required for application of the product, ownership of
which will vest in the Province.
(iii) Construct a manufacturing plant for the products
within the Welkom area and have regional offices at Bloemfontein and
Phuthaditjhaba.
. . .
(iv) Employ a minimum of 95% of its staff for
administration, training, transport and factory operations from Free
State residents.
(v) Firechem will issue a tender for transportation of
the products. . . .
(vi) Firechem will assist a local emerging entrepeneur
to establish a woodworking business . . .[to manufacture palettes] .
. .”
The recommendation ended on this note:
“
It must be noted that the approval of the Tender
Board for VT 20132/96 is subject to the contract (Annexure B) being
signed by the
Province and Firechem.”
As will be seen later, a similar provision eventually
found its way into the letter accepting the Tender.
[16] No annexure B was attached to the document
discovered by the appellant, but in his evidence Mr McNaught said
that Mr Sebusi,
head of the office of the Tender Board, well knew
what the form of the contract was (Mr McNaught’s implication
being that
it was along the lines of the draft contract annexed to
the original proposals.) Annexure B was never produced during the
course
of the litigation, so that we are left to speculate about its
precise content. Mr Pillay, who was a member of the Tender Board
staff and the Action Committee at the time, gave evidence for
Firechem (he had since left the employ of the Province).
Although there was some hesitation about his evidence,
the upshot was that there was no Annexure B attached to the
recommendation.
But he said that he and the other members of the
Action Committee were aware of the contents of the draft contract
which had accompanied
Firechem’s original submission (that is
in 1995).
The members of the Tender Board, he said, would not have
reached their decision without being similarly aware. But as to what
the
content of the contract to be signed between the Province and
Firechem was to be, he said the following:
“
This other company Khotso, this company did not
undertake to build
a plant or to do this and that and supply training et
cetera? . . . No, they did
not. . . .
Is that the reason why there should have been another
contract with Firechem but not with Khotso? . . . The contract with
Firechem
was to look after the interest of the Province, to enter
into a contract to make sure that their promises to the Province were
adhered to Court: Promises in regard to what? . . . In building the
factory.
And the SMME’s and so on? . . . And the SMME
development.”
[17] It is important to notice that no draft contract
accompanied the tender
documents. This was confirmed by Mr Pillay.
[18] Mr Pillay said that the recommendation of a five
year contract was intended and that the stipulation of a four year
period
in the invitation to tender was a mistake. Everyone involved
in the discussions had five years in mind. The admissibility of some
of Mr Pillay’s statements will be considered later.
[19] A meeting of the Board on 14 May 1996 reached no
final decision. It dealt with some formal matters and decided that
the manufacturing
plants should be visited, which was later done.
[20] On 29 May 1996 the Tender Board made its decision,
as follows:
“
The Board decided to approve as recommended on
the following
condition,:
Khotso . . .
. . .
Firechem Free State: Bloemfontein, Northern, Western,
and Southern Regions.
1 The contract shall be jointly drawn up by Economic
Affairs and the State Attorney and will be jointly signed by the
Province and
Firechem.
. . .
5 Purchasing orders of all user departments to be
monitored on order to provide the Province with a clear analysis of
the Expenditure
for one year. Monthly reports to be submitted to the
Office of the Provincial Tender Board.
6 Monitoring mechanisms must be in place in order that
the committed investment by Firechem is adhered to.”
[21] On 31 May 1996 the critical document in this case,
the acceptance of Firechem’s tender, was issued. In part it
reads:
“
Sir/s
TENDER VT 20132/96 FOR DISINFECTANTS AND CLEANSING
AGENTS:
PROVINCE FREE STATE: BLOEMFONTEIN: NORTHERN, WESTERN,
AND SOUTHERN REGIONS PERIOD: 1996/03/01 TILL 2000-02-28 sic CLIENT
DEPARTMENT:
VARIOUS USER DEPARTMENTS
1 Your tender VT 20132/96 dated 1996/01/22 has been
accepted subject to all the terms and conditions embodied therein,
for the supply
of the items indicated hereunder and/or as further
specified in the annexure(s).
2 Tender approved on condition that a contract jointly
drawn up by Economic Affairs and the State Attorney be signed by the
Province
and Firechem.
3 SABS and ISO 9002 be strictly adhered to and officials
of the Tender Board and SABS Bloemfontein Branch, be allowed to
conduct
spot checks on delivery at any given time.
4 Clear time frames be provided on the completion and
functioning of the Plant.
5 Inspection of the Plant to be conducted by officials
on a regular basis.
6 Purchasing orders of all user departments to be
monitored in order to provide the Province with a clear analysis of
the Expenditure
for one year. Monthly reports of orders to be
submitted to the Office of the Provincial Tender Board.
7 This letter of acceptance constitutes a binding
contract but no delivery should be effected until written official
orders, which
inter alia indicate delivery instructions, have been
received. Orders will be placed, by the participating bodies listed
in the
tender documents and on whose behalf the contract has been
arranged, as and when required during the contract period.”
(Own emphasis.)
There followed a table listing 56 items against
Firechem’s tendered prices.
The “Basis of Delivery” in each case was
stated to be “As Tendered.” The
“
Brand” in each case was stated to be
“According to specification and as
tendered.”
[22] It should be noticed the period stated in the
acceptance, 1996/03/01 till 200002-28 (sic), is four years, as stated
in the
invitation to tender. The recommendation to the Board had been
five years, and that was the period for which it had decided the
contract should be awarded.
[23] The first question that arises is whether a
contract such as was envisaged by paragraph 2 of the letter of
acceptance was concluded.
Firechem relies upon a contract signed on 7
June 1996 (referred to as “the delivery contract”).
According to Mr McNaught’s
unchallenged evidence, after further
negotiations he was requested to attend at Mr Magashule’s
office ( he was the MEC for
Economic Affairs) in order to sign. The
State Attorney, Mr Botha, was present at the signing ceremony. Mr
Botha had been furnished
with a copy of the proposed contract on the
previous evening. Mr McNaught signed on behalf of Firechem. Mr
Magashule asked Mr Botha
if he was comfortable with the document and
received an affirmative answer. After paging through the contract he
called for Mr
Osmond, chief director of the department, to sign on
behalf of the Province, but it was found that he was away. Mr
Magashule then
asked Mr Neels van Rooyen, who was present at the
meeting, to sign. This he did. Mr van Rooyen was a deputy director in
the Department
of Economic Affairs, bearing particular responsibility
for SMME development.
[24] The signed contract was a lineal descendant of the
draft which had been
annexed to Firechem’s March 1995 proposals. It
dealt in extenso with the obligation to build a local factory and
employ local
employees, to train staff, to issue a tender for the
provision of transport services, to assist a woodworking entrepeneur
and so
forth, in accordance with what has been set out at length
above.
This calls forth no comment. But some of the other terms
arouse immediate
comment. For one, the initial term was five years,
automatically renewable for a further five years, ie the contract was
for ten
years. For another, Firechem was obliged to supply and the
Province was obliged to accept delivery of quantities of the product
in accordance with the annexed schedule C. This schedule was eight
pages long and detailed supplies to each department month by
month
for a 12 months period. The total price for a year was ± R17.8
million without VAT. The total quantity of each product
to be
supplied to each department over a 12 months period was also
specified.
[25] In short, this is not a contract under which the
Province determines the
quantity of its purchases by placing orders, but a
contract in terms of which it is obliged to accept deliveries of
fixed quantities
for a ten year period. The prices are fixed, subject
to escalation of 10% p a, as provided in the tender. Such a fixed
quantities
contract is at variance with the invitation to tender,
Firechem’s tender (“as required”) and the letter of
acceptance.
[26] A further feature of annexure C is that it includes
within it the “omissions” to which Firechem had drawn
attention
in its letter of 30 January 1996 (Mr McNaught conceded as
much). These items were never put out to tender, so that the other
tenderers
had not had an opportunity to tender for them either in the
overall tender or separately. Similarly, the fixed quantities and the
ten year period, as appears from what I have said already, did not
form part of the invitation to tender.
[27] Section 6 (4) of the Act requires that all
decisions of the Board shall be
recorded. No resolution of the Board has been produced
which amends the
acceptance letter of 29 May 1996, or which delegates to
another the power to do so (provision is made for delegation in s 5
of the
Act). So, one is bound to ask, by virtue of what can the
delivery contract be one of the kind contemplated by the letter of
acceptance?
[29] Firechem’s answer is to refer to the decision
approving the recommendation that “the contract (Annexure B)”
be signed, read against the background of various negotiations and
alleged agreements between Mr McNaught and representatives of
the
Province prior to the letter of acceptance. The members of the Tender
Board were fully apprised of the contents of Annexure
B (so it is
argued) and intended that a contract akin to it would be concluded.
What is striking is the pointlessness of such a
procedure. First the
Board calls for tenders. Then it adjudicates them. Then it selects
one on the tendered terms. Then it allows
the whole matter to pass
out of its hands to another department, which is entitled to undo all
its work. Mr Pillay’s evidence
was sought to be relied upon by
Firechem as supporting its contention that the Board envisaged a
contract along the lines of the
later delivery contract. Whether that
is the true import of Mr Pillay’s evidence is open to serious
question, in the light
of the passage I have quoted above as to what
he thought the Board’s intentions were.
[29] But I do not think that the case is to be decided
upon the basis of Mr Pillay’s views. To do so would be to
ignore the
parol evidence rule in a fundamental way.
It is not for him to tell us what the Board intended,
when the Board has expressed its intentions in words that are capable
of ready
interpretation. One must ask oneself what was expressed to
be intended when the acceptance referred to “a contract . . .
signed by the Province and Firechem.” This expression must be
read together with the statement that “This letter of
acceptance constitutes a binding contract . . ..” If the
contract brought into being by this acceptance was to bind, then
the
further contract envisaged could not be one which contradicted it.
What must have been intended was something additional to
the tender
contract already concluded, such as one dealing with the inducements
offered by Firechem, for instance building a factory
in the Free
State, or, conceivably one dealing with the details of the tender
contract but not so as to contradict it or the provisions
of the Act.
[30] Support for this interpretation is provided by the
presumption that a lawful contract, one in accordance with the Act
and proper
tender procedures, was intended. Having regard to the
prior history the delivery contract was certainly not one in accord
with
the Act or such procedures. That is so because to allow a tender
board to withhold from the body of tenderers its intention to
conclude a secret agreement with one of them, an agreement which the
others have never seen and have had no chance to match, would
be
entirely subversive of a credible tender procedure. One of the
requirements of such a procedure is that the body adjudging tenders
be presented with comparable offers in order that its members should
be able to compare. Another is that a tender should speak
for itself.
Its real import may not be tucked away, apart from its terms. Yet
another requirement is that competitors should be
treated equally, in
the sense that they should all be entitled to tender for the same
thing. Competiveness is not served by only
one or some of the
tenderers knowing what is the true subject of tender. One of the
results of the adoption of a procedure such
as Mr McNaught argues was
followed is that one simply cannot say what tenders may or may not
have been submitted, if it had been
known generally that a fixed
quantities contract for ten years for the original list of products,
and some more, was on offer.
That would deprive the public of the
benefit of an open competitive process. It is not to be assumed that
the Board intended to
visit the iniquities that I have mentioned upon
the body of tenderers, or upon the public generally. Indeed the
contrary is to
be presumed - that in referring to “a contract”
a lawful contract was intended.
[31] Once this conclusion is reached the emphasis placed
by Firechem on the signing ceremony is seen to be misplaced. Mr
McNaught
stressed that the contract was signed on the Province’s
behalf by a deputy director on the instructions of the MEC for
Economic
Affairs and in the presence of the State Attorney. However,
the undisputed evidence of the deputy chief legal advisor of the
Province,
Mr Wessels, called as a witness for the Province, was that
Mr van Rooyen, even Mr Magashule, neither of them, was empowered to
sign on behalf of the Tender Board.
Proper delegation lacking, that opinion, founded on the
Act, appears to be wholly in accordance with the Act.
[32] The reason why I have not so far made mention of s
187 of the Interim
Constitution (Act 200 of 1993) is that the
unconstitutionality of the Tender Board’s actions in
authorising a secret contract’s
conclusion was not pleaded nor
explored in evidence. If it had been open to us to apply them that
section’s requirements
of fair, public and competitive tender
processes, administered by impartial and independent tender boards,
would merely have strengthened
the Province’s case.
[33] In finding for Firechem Edeling J referred to the
arguments raised by the Province which have been explored so far.
They were
dismissed in one sentence reading “With the exception
of the ten year period, I do not regard any of these aspects of
material
importance or consequence.” The ten year period also
proved no obstacle. Some time after the delivery contract had been
signed,
after a query was raised by the State Attorney as to its
duration, Mr McNaught replaced one of the pages. The effect was to
reduce
its duration to five years, which both Mr McNaught and Mr
Pillay stated in evidence was what the Tender Board had intended
(this
despite the fact that both the invitation to tender and the
acceptance of tender stipulated a four years period). Edeling J
rectified
the contract to reduce its term to five years. Even if this
rectification was competent, in regard to quantities and omissions
the judgment a quo simply passes over the questions raised and
deserves no further consideration.
[34] Mr Potgieter, for Firechem, attempted to save the
situation by arguing, in the alternative, for severance. Those parts
of the
delivery agreement which contradicted the acceptance of the
tender were to be severed, leaving an agreement, attenuated, yet
still
in force. The first difficulty I have with this argument is
that severability was not pleaded, nor explored in the trial (never
mind fully explored), so that it is too late to try to raise it now.
But in any event, Mr McNaught’s own evidence is wholly
contradictory of readiness on his part to accept a contract without
fixed quantities. His professed readiness, expressed in
correspondence,
to renegotiate the delivery contract after objections
to it were raised, must be seen against the background of his earlier
evidence.
The delivery contract was aimed at providing guarantees for
both parties, he stated, firm undertakings on Firechem’s part
as to building a factory and so forth and firm undertakings by the
Province as to the quantities it was obliged to take. When it
had
become clear that the Province was prepared to pay damages rather
than be bound to Firechem, he commenced his proceedings by
way of
motion, claiming an order that the Province give effect to the
delivery contract. The enforceability of that contract is
the
essential dispute in the case. Accordingly there is no room for
severance. There are further reasons why severance is not a
possibility. One is that the court is being asked to carve out the
terms of a contract upon which the parties were to agree. Another
is
that the severance contended for involves a complete contradiction of
Firechem’s case. Firechem’s contention was
that the
Province’s stand that the tender contract was binding amounted
to a repudiation. Now it contends that the delivery
contract be cut
down to conform with that very tender contract.
[35] Mr Potgieter’s final argument was that
because of the Province’s refusal to recognise the delivery
contract or
negotiate a further one, the “condition”
which he submitted was contained in paragraph 2 of the acceptance of
the tender
had been fictionally fulfilled against the Province. If
correct, this would have the desirable consequence, from Firechem’s
point of view, that it would have the right to supply all the
Province’s needs for at least four years, without having to
erect a factory, or do the other things envisaged. I have so far
refrained from speaking of the provision in question as a condition,
or of its fulfilment. That has been deliberate.
As Christie The Law of Contract in SA 3ed 152 explains,
it is somewhat of a
solecism to describe as a conditional contract one in
which the condition is purely potestative (the si volam of Roman
law), as
such a provision is destructive of any enforceable
agreement. Nor does it matter if the provision is cast as a term:
Christie (op
cit) 109. The result is the same. Accordingly, if the
provision is potestative it does not matter for present purposes
whether
it is classified as a condition or a term. In either case
enforcement is dependent upon the will of both parties, in this case
particularly the will of the Province. An agreement that the parties
will negotiate to conclude another agreement is not enforceable,
because of the absolute discretion vested in the parties to agree or
disagree: Scheepers v Vermeulen
1948 (4) SA 884
(O) at 892, Putco Ltd
v TV & Radio Guarantee Co (Pty) Ltd and Other Related Cases 1985
(4) 809 (A) at 828 I. Such a discretion
was vested in the parties as
they were to sign “a contract” the precise terms of which
were not fixed in the letter
of acceptance, which, unlike the Action
Committee’s recommendation, did not refer to annexure B. As the
Tender Board neither
awarded a contract for the whole of the Free State nor
exactly followed that
Committee’s recommendations as to demarcation, the
elusive annexure B, whatever it did contain, could not have served as
the
contract to be signed. There was, accordingly room for a
breakdown in negotiations before a contract was concluded. The
position
is similar to that described in Namibian Minerals
Corporation Ltd v Benguela Concessions Ltd
[1996] ZASCA 140
;
1997 (2) SA 548
(A) at 567
A-C:
“
Since this provision was couched as a suspensive
condition, it cannot, in my judgment, be said that the parties could
have intended
to have had a binding agreement simply upon the
exercise of the option. They had expressly agreed that only a fuller
arrangement
would have bound them to the joint venture. Fulfilment of
the condition was necessary and the condition required consensus of
the
parties. It is thus not a case where the exercise of the option
would have given rise to a contract and that other terms would merely
have been left for later negotiation and agreement. I therefore am of
the view that the exercise of the option could not have
given rise
to a contract with certain or ascertainable terms and that on this
ground the ‘farmin’ clause is void for
vagueness.”
[36] Not only was there room for a breakdown in
negotiations. If we are to ignore the delivery contract that is what
happened.
The delivery contract has to be ignored because to give
effect to it would be to countenance unlawfulness. The Province was
under
a duty not to submit itself to an unlawful contract and
entitled, indeed obliged, to ignore the delivery contract and to
resist
Firechem’s attempts at enforcement. Its acts in doing so
did not amount to an unlawful repudiation. Nor, for the reasons
already given, could matters be saved by severance.
[37] Under these circumstances Firechem’s resort
to the doctrine of fictional
fulfilment of a condition is futile. Even if the
provision were technically a condition the Province was under a duty
not to fulfil
it in the way that Firechem required. Nor does it make
any difference if the provision is a term and resort is had to the
analogous
principle applicable to the frustration of the performance
of a term: see Christie (op cit) 167-8.
[38] The unlawfulness which would be involved in the
fulfilment of the provision on Firechem’s terms is not the only
ground
for concluding that fictional fulfilment cannot operate. As a
matter of interpretation of the acceptance letter, seen against its
background, it could not have been the intention of the parties that
the tender contract should bind the Province without its receiving
the collateral benefits which had all along been an important, even
decisive factor in the award of the tender.
The accepted tender was never intended to stand on its
own as a contract.
[39] Although the Province is successful in its appeal,
comment must be made about the conduct of the Tender Board in
particular.
The Province called no witness who had been a member of
the Board or one of its officials. Consequently this court as well as
the
public are left to speculate, as far as the record in this case
might inform, as to quite what happened when the tender was awarded
to Firechem.
Further criticism is attracted to the Province by the
manner in which the appeal was prosecuted once the Province had lost
below.
The Record - Condonation - Costs
[40] The record should have been filed on 30 December
1998. It was filed on 16 July 1999. Application has been made for
condonation
of the late filing, which has been opposed. When it was
filed the record was in a lamentable state. This has wasted a great
deal
of judicial time and made what should have been something quite
straightforward, a burden. Nor was this state of affairs helped
by
the filing of a proper practice note. The note was entirely
deficient. When the record was filed the new rules of the Supreme
Court of Appeal had been in operation for over six months. They were
simply ignored by the State Attorney.
[41] In support of the condonation application it was
said that the initial delay resulted from a misunderstanding between
the State
Attorney and Sneller Transcriptions (Pty) Ltd as to whether
merely the oral evidence (only some 270 pages) or also the exhibits
should be prepared. Then there was a difficulty about the quality of
some of the exhibits, even when the court file was examined.
But the
number of exhibits involved was not large. The general impression is
one of a lack of urgency.
However, balancing the degree of non-compliance against
other relevant factors such as prospects of success and the
importance of
the issues raised, I consider that condonation should
be granted. The appellants will have to pay the wasted costs of the
opposed
application for condonation, as opposition was justified.
[42] As I have indicated, the record was in a lamentable
state. To give some
examples: Many quite unnecessary documents were
included. Thus the petition to the Chief Justice requesting leave to
appeal and
the whole of the opposed motion proceedings preceding the
reference to trial (running to 254 pages) were included.
As a result we were presented with 20 volumes of record.
Bulk was also added by the duplication or triplication of annexures
sometimes
in a clump, sometimes widely dispersed. It would have
required a mathematician deeply versed in chaos theory to work out
the system.
For instance, there were two copies of the judgment of
the court a quo. Unfortunately for myself I read the first that I
discovered.
It happened to be the indistinct copy. Bulk was also
added by unnecessary retyping.
Rule 8 (6) (b), which states that printed contracts
should not be retyped if there is a clear photostatic copy available,
was ignored.
(In some cases retyping was necessary, but I am not
speaking of those cases). Had there been a proper index, that would
have alleviated
the problems. But there was not. Rule 8 (6) (c)
requires that the original pagination should be retained where
possible. Where
it is not retained on the original pages then the
index should have a second column reflecting the old numbers. As no
such column
was provided and as the index did not show where Exhibit
B started, there had to be a search for documents contained in that
lengthy
exhibit. The matter was made worse because Rule 8 (6) (d)
(ii), requiring the transposition of references to exhibits in the
record
to the numbers in the appeal record, was also ignored. Nor
were exhibit numbers indicated on the top of every page of exhibits,
as required by Rule 8 (6) (d) (i). Matters would have been improved
if a core bundle, such as is required by Rule 8 (7) in appropriate
cases (of which this was certainly one, given the state of the
record) had been provided.
But it also was not. Finally, no heed was paid to Rule 8
(6) (g) (ii) which requires that volumes are to be so bound that upon
being
eased open they will lie open without manual or other restraint
and upon being so opened and thereafter repeatedly closed, the
binding is not to fail. Because of this non-compliance alone the
Registrar should have rejected the entire record. There is good
reason for this rule. Records are meant to be read, not fought with.
[43] Before the hearing of the appeal the State Attorney
was asked to give reasons why because of all the unnecessary
inclusions
in the record be should not be ordered to pay the costs of
preparation and perusal of the record de bonis propriis.
A lengthy explanation was given stressing that the
Tender Board’s file had
disappeared, that Firechem’s attorneys were
unco-operative and that the particular attorney involved was bearing
a very heavy
work load. The State Attorney may count himself lucky
that we have decided, taking all the circumstances into account, not
to order
costs de bonis.
[44] But the state of the record as a whole is such that
a punitive order must be made. This court has warned often enough.
The
order that I propose is that nothing may be recovered as between
party and party for the preparation of the record.
[45] That leaves the practice note which must accompany
the heads of arguments in terms of the Practice Direction set out at
1997 (3) SA 345-346
(SCA) and the heads of argument themselves. The
importance of that part of the Practice Direction requiring an
indication of which
parts of the record need not be read was
explained and stressed in Caterham Car Sales & Coachworks Ltd v
Birkin Cars (Pty)
Ltd and Another
[1998] ZASCA 44
;
1998 (3) SA 938
(SCA) at 954 H -
955 B. Barely any attempt to comply was made by Mr C H G van der
Merwe SC and Mr J Y Claasen who signed the heads.
This case cried out
for a careful attempt. Further, scant attention was paid to Rule 10
(3) in drawing the heads. References to
specific pages and paragraphs
were absent. No chronology was provided, nor copies of subordinate
legislation which had been referred
to. Again, this court has spoken
often enough. The order which I propose is that all the fees relating
to the appeal of the two
counsel concerned be limited to those
taxable on a party and party basis, imited both between party and
party and in relation to
their own client.
[46] When Firechem’s application was referred to
trial on 10 October 1996 costs were reserved, as also the question
whether
the costs of two counsel should be awarded. Edeling J awarded
these costs, including the costs of two counsel, to Firechem. That
order has to be reversed.
[47] Edeling J in finding for Firechem also awarded it
costs on the attorney and own client scale. There were several
reasons given
for doing so, including his view that the Province had
absolutely no case and knew it all along, yet persisted in its
defence.
In the light of our conclusions, Edeling J was quite wrong.
But an additional reason for the special order was the appellants’
great tardiness in making proper discovery, which led to the
necessity for Firechem to prepare and set down an application to
compel discovery, to serve two rule 35 (3) notices, to move for and
obtain an order to compel compliance with the same, to set down
a
further application to the same effect to co-incide with the
commencement of the hearing of the trial and to spend a day perusing
a number of files and a box of documents produced during the trial.
Edeling J’s order will have to be set aside, but Firechem
is
entitled to all its costs relating to the procedural steps described.
It should also be granted one day’s costs on the
attorney and
client scale, such costs to include the costs of two counsel.
[48] In the result:
1 Condonation of the late filing of the record is
granted.
2 The appellants are to pay the costs of the condonation
application jointly and severally.
3 The appeal is allowed.
4 The respondent is ordered to pay the costs of appeal
save for the costs of the appeal record under items B and C of rule
18.
5 Costs of two counsel are allowed, subject to par 6.
6 The appellants’ counsel are not entitled to
recover more than their taxed
party and party costs.
7 The order of the Court a quo is set aside and replaced
by the following
“
A. The plaintiff’s claim is dismissed with
costs including the costs
of two counsel save for the costs of one day.
B. The plaintiff is to pay the costs reserved on 10
October 1996,
including the costs of two counsel.
C. The defendants are to pay jointly and severally all
the costs relating to the plaintiff’s application to compel
discovery,
two rule 35 (3) notices and the two applications to compel
compliance with the same; and the plaintiff’s costs for one day
of trial on the attorney and client scale, such costs to include the
costs of two counsel.”
W P SCHUTZ
JUDGE OF APPEAL
CONCUR
HEFER JA
HARMS JA
FARLAM AJA
MPATI AJA