THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

JUDGMENT

Case number:  148/2007

In the matter between:

THE GOVERNMENT OF THE
REPUBLIC OF SOUTH AFRICA

APPELLANT

and

THABISO CHEMICALS (PTY) LTD

RESPONDENT

Neutral citation:
Government of the RSA v Thabiso Chemicals (148/2007)
[2008] ZASCA 112 (25 SEPTEMBER 2008)

CORAM:

HARMS ADP, BRAND, MAYA JJA, BORUCHOWITZ et
KGOMO AJJA
HEARD:

5 SEPTEMBER 2008
DELIVERED:
25 SEPTEMBER 2008
CORRECTED:

SUMMARY:
Contract arising from tender procedure – cancelled by
State Tender Board on behalf of Government on basis
that award of tender influenced by incorrect information
impliedly furnished by respondent – whether implication
relied upon established on facts – relationship between
parties governed by law of contract – administrative law
no role to play.

_____________________________________________________

ORDER
______________________________________________

On appeal from:
HIGH COURT, PRETORIA (BOTHA J)

Sitting as court of First Instance.
(1)
The respondent's application for condonation of the late filing of its
heads of argument, is dismissed with costs.
(2)
The respondent's Pretoria attorneys will not be entitled to recover any
fees or disbursements from their own client pertaining to the condonation
application.
(3)
The appeal is upheld with costs, including the costs occasioned by the
employment of two counsel.
(4)
The order of the court a quo is set aside and the following is substituted
in its stead:
'The plaintiff's claim is dismissed with costs.'
______________________________________________________________

JUDGMENT
______________________________________________________________

BRAND JA (Harms ADP, Maya JJA, Boruchowitz et Kgomo AJJA concurring)

[1] Preliminary issues in this appeal arose from a condonation application
by the respondent for the late filing of its heads of argument, I find it
appropriate to deal with these preliminary issues at the end of the judgment.
As to the merits, proceedings started when the respondent ('Thabiso')
instituted action against the appellant ('the Government') in the Pretoria High
Court. According to the particulars of claim, its claim was for damages in the
amount of R15 016 846, allegedly arising from the wrongful cancellation by
the State Tender Board ('the Tender Board'), representing the Government, of
a contract between the parties. In its plea, the Government admitted both the
contract and its cancellation by the Tender Board, but denied that the
cancellation was wrongful.

[2] At the commencement of the trial, the parties asked the court a quo
(Botha J) to order a separation of issues. In terms of the separation order, the
issues surrounding the wrongfulness of the Tender Board's purported
cancellation were decided first, while the quantum of Thabiso's alleged
damages stood over for later determination. The preliminary issues were
decided in favour of Thabiso. Hence the court declared that the cancellation of
the contract by the Tender Board was wrongful and ordered the Government
to pay the costs of the preliminary proceedings. The Government's appeal
against that judgment is with the leave of the court a quo.

[3] It is common cause that the contract between the parties originated
from an invitation by the Tender Board for tenders to deliver cleaning
materials to various Government departments. In terms of the invitation, the
closing date for tenders was 10 April 2001. Thabiso's tender was submitted in
time. In due course it was notified by the Tender Board that its tender had
been accepted. In accordance with the invitation, the tender was expressly
made subject, firstly, to the Regulations promulgated under the State Tender
Board Act 86 of 1968 ('the Regulations'), secondly, to the State Tender Board
General Conditions and Procedures (ST36) as published in the State Tender
Bulletin on 17 May 1991 ("the General Conditions'), and, thirdly, to certain
special conditions pertaining to the specific tender ('the Special Conditions').

[4] From the beginning of November 2001, the contract was implemented
in that Thabiso complied with orders placed by Government departments in
accordance with the terms of the agreement. However, on 11 January 2002,
the Tender Board sought to terminate this contractual relationship by way of a
formal letter of cancellation bearing that date. Thabiso regarded the Tender
Board's attempt at cancellation as a repudiation in the sense of an anticipatory
breach. At first, Thabiso attempted to persuade the Tender Board not to
persist in its cancellation. But these attempts proved to be unsuccessful.
Consequently, Thabiso accepted what it regarded as a repudiation of the
contract, whereupon it instituted the action for damages which led to the
present appeal.

[5] In the letter of 11 January 2002, the Tender Board's grounds of
cancellation – in so far as they were persisted in – were formulated thus:
'When scrutinizing your tender documents for the second time after the award of the
above tender, it was found that the correct documents are required by paragraph 7.3
of the [Special Conditions], which reads as follows, had not been submitted with your
tender:
"7.3
Where a tender is not a SABS listed company or a permit holder of any of the
products that are offered, a SABS report (not older than 12 months) which proves
that his manufacturing facilities and quality control systems comply with SABS
requirements, should be handed in not later than 10 April 2001."
. . .
In view of the fact that the documents required by the above paragraph 7.3 . . .
should have been submitted before 10 April 2001, your tender did not comply with
the special tender conditions at the time of tender and therefore the State Tender
Board approved on 13 December 2001 that your above contract be cancelled.'

[6] Though the cancellation letter made reference to 'documents', the
wording of paragraph 7.3 plainly shows that it requires one document only, ie
a favourable report by the SABS on the tenderer's manufacturing facilities and
quality control systems. What is more, the furnishing of the report is clearly a
provisional requirement only. It need not be complied with if the tenderer is
either a SABS listed company or permit holder. Thabiso admitted that it had
never obtained a SABS report as contemplated in paragraph 7.3 and that a
report of that kind was thus never furnished to the Tender Board. It also
admitted that as at 10 April 2001, it was not a SABS permit holder in respect
of the cleaning materials referred to in its tender. Its answer to the Tender
Board's complaint was essentially that, as at 10 April 2001 it was a SABS
listed company and that it was therefore not required to file a SABS report.
The Tender Board's response amounted to a denial that Thabiso was in fact a
SABS listed company.

[7] In his evidence at the trial, the managing director of Thabiso, Mr Brian
Nyezy, persisted in the allegation that Thabiso was indeed a SABS listed
company. The Government, on the other hand, relied on the evidence of a
senior SABS official, Mrs Sibongile Dlamini, to the effect that it was not.

Although the obscurities surrounding qualification as a SABS listed company
may render Mr Nyezy's confusion understandable, I am persuaded that Mrs
Dlamini's testimony conclusively proved the Government's point. I therefore
agree with the court a quo's factual finding that, as at 10 April 2001, Thabiso
was neither a SABS listed company, nor a permit holder as envisaged in
paragraph 7.3. It follows that, in my view, Thabiso did not comply with the
special condition in paragraph 7.3. Nonetheless, on my reading of the tender
documents as a whole such non-compliance did not, on its own, constitute a
ground for cancellation by the Government.

[8] In its cancellation letter of 11 January 2002, the Tender Board indeed
relied on Thabiso's failure to file a SABS report, per se, as its basis for
cancellation. That, however, was not the position taken by the Government in
the court a quo. There it relied on clause 24.8.2 of the General Conditions
(ST 36). This clause provides that:
'24.8
Where a contract has been awarded on the strength of information furnished
by the contractor which, after the conclusion of the relevant agreement, is proved to
have been incorrect, the [Tender Board] may, in addition to any legal remedy it may
have –
24.8.1 . . .
24.8.2 cancel the contract and claim damages which the State may suffer as a result
of having to make less favourable arrangements.'

[9] As the factual basis for resorting to the provisions of clause 28.4.2, the
Government contended that the tender was awarded on the basis of
information furnished by Thabiso to the effect that it was a SABS listed
company, which representation subsequently proved to be incorrect. The
change of tack by the Government, in relying on a ground for cancellation
different from the one referred to in its letter of cancellation, by itself, was not
of any consequence. As Nienaber JA said in Datacolor International (Pty) Ltd
v Intamarket (Pty) Ltd 2001 (2) 284 (SCA) para 28:
'It is settled law that an innocent party, having purported to cancel on inadequate
grounds, may afterwards rely on any adequate grounds which existed at . . . the time

(cf Putco Ltd v TV & Radio Guarantee Co (Pty) Ltd and other Related Cases 1985 (4)
SA 809 (A) at 832C-D).'

[10] The real issue to be decided by the court a quo therefore fell within a
narrow ambit, namely, whether the facts relied on by the Government could
sustain a cancellation under clause 24.8.2. Botha J found that it could not. His
reasons for this finding appear from the following admirably succinct
statement:
'Clause 24.8.2 of ST 36 gives the Tender Board the right to cancel a tender if it has
been awarded on the strength of information which, after the conclusion of the
agreement, has been proved to have been incorrect. In view of the fact that the
plaintiff [Thabiso] never alleged that it was SABS listed, the defendant [the
Government] cannot rely on Clause 24.8.2 for its cancellation of the contract.'

[11] In this court the Government found further support for its case in
reg 3(6)(b) of the Regulations promulgated under the State Tender Board Act
on 20 May 1988, which were in operation at the time, though subsequently
replaced by Regulations published on 5 December 2003. The relevant part of
reg 3(6)(b) provides:
'(6)
If an agreement has been concluded with any contractor on the strength of
information furnished by him in respect of which it is after the conclusion of such
agreement proved that such information was incorrect the Board may, in addition to
any legal remedy it may have –
(a)
. . .
(b)
terminate the agreement and recover from the contractor any damages which
the State may suffer by having to make less favourable arrangements thereafter.'

[12] I do not believe that reg 3(6)(b) takes the matter any further. It is
virtually identical in its wording to clause 24.8.2. Any interpretation or
implementation which is good for the one must therefore be good for the
other. The essential element of both is the furnishing of information, ie a
representation by the tenderer, which influenced the award of a tender in his
or her favour, but which subsequently turned out to be incorrect. Fraud or
even negligence is not required. For purpose of both provisions, even an
innocent misrepresentation on the part of the tenderer will suffice.

[13] The only incorrect information furnished – or misrepresentation – by
Thabiso contended for by the Government, in this court and in the court a
quo, is that it held itself out to be a SABS listed company, which it was not. No
one suggests that a representation to this effect would be of no consequence
in the award of the tender. Shorn of unnecessary frills appended in evidence
and in argument, the outcome of the dispute therefore turns on one simple
issue of fact: did Thabiso, at any time prior to the award of the tender in its
favour furnish incorrect information by holding itself out as a SABS listed
company, or not? As I said earlier, Botha J, in the court a quo held that it did
not. On this narrow basis he therefore decided the matter against the
Government. In the event, the only question we have to decide is whether we
agree with that factual finding.

[14] From Botha J's reasoning, it is apparent in my view, that he only
considered the possibility of presenting information by express words. If this
was indeed the only possibility to be considered, the learned judge was
obviously correct. Nowhere in the tender documents did Thabiso make the
express statement that it was a SABS listed company. The fact that it
subsequently tried to justify its failure to furnish a report on that basis, is of no
consequence. But on my reading of clause 24.8.2 – and, for that matter, reg
3(6)(b) – I can see no reason to limit the enquiry to the furnishing of incorrect
information by way of express statements. It is a generally accepted principle
that the effect of an implied misrepresentation by conduct is equivalent to a
misrepresentation by express words. I think that this general principle should
also find application in an enquiry under clause 24(8)(2) and reg 3(6)(b). Thus
understood, information conveyed impliedly by conduct would, for the
purposes of these provisions, be the equivalent of furnishing information by
express words. In the event, the enquiry would then be, as in all cases where
reliance is placed on an implied representation by conduct, whether the
implication can be said to be justified (see eg Standard Bank of South Africa
Ltd v Coetsee 1981 (1) SA 1131 (A) at 1135E).

[15] Reverting to the facts of this case, Thabiso submitted a tender without
the SABS report contemplated by the special condition in paragraph 7.3.

Read in the context of this special condition as a whole, Thabiso's conduct is
capable of only three possible inferences: firstly, that Thabiso is a SABS listed
company, secondly, that it is a SABS permit holder with reference to any of
the products offered in the tender and, thirdly, that its failure to furnish the
report was due to an oversight. The second of the possible inferences
referred to, can be disregarded. It was clear from the tender documents that
Thabiso was not the holder of a SABS permit.

[16] Of the other two inferences, I think that, objectively speaking, the first
mentioned is by far the most likely one. Why should it be inferred that
Thabiso, whose tender included all other documents required, would suffer
from an oversight in this single respect? From a subjective point of view, the
inference that Thabiso was a SABS listed company was clearly the one drawn
by the Tender Board. What is more, that was the very inference Thabiso
intended to convey. We know as a fact that the reason why it had failed to
furnish the SABS report was that it was under the mistaken impression that it
was a listed company. In the circumstances it hardly lies Thabiso in the mouth
to say that the Tender Board should not have drawn the inference which it did.

[17] I believe this is the end of the matter. The Government had established
the furnishing of incorrect information on which it relied. It follows that I do not
agree with the court a quo's finding that clause 24.8.2 was not applicable. The
inevitable result, in my view, is that the appeal must succeed.

[18] What remains are observations originating from comments by the court
a quo which seem to support the notion that the contractual relationship
between the parties may somehow be affected by the principles of
administrative law. These comments gave rise to arguments on appeal, for
example, as to whether the cancellation process was procedurally fair and
whether Thabiso was granted a proper opportunity to address the Tender
Board in accordance with the audi alteram partem rule prior to the
cancellation. Lest I be understood to agree with these comments by the court
a quo, let me clarify: I do not believe that the principles of administrative law
have any role to play in the outcome of the dispute. After the tender had been

awarded, the relationship between the parties in this case was governed by
the principles of contract law (see eg Cape Metropolitan Council v Metro
Inspection Services CC 2001 (3) SA 1013 (SCA) para 18; Steenkamp NO v
Provincial Tender Board, Eastern Cape 2006 (3) SA 151 (SCA) paras 11 and
12). The fact that the Tender Board relied on authority derived from a
statutory provision (ie s 4(1) (eA) of the State Tender Board Act) to cancel the
contract on behalf of the Government, does not detract from this principle. Nor
does the fact that the grounds of cancellation on which the Tender Board
relied were, inter alia, reflected in a regulation. All that happened, in my view,
is that the provisions of the Regulations – like the provisions of ST36 –
became part of the contract through incorporation by reference.

[19] Finally, there are the preliminary issues pertaining to Thabiso's
condonation application, necessitated by the late filing of its heads of
argument. Both the condonation application and the heads of argument were
filed, way out of time, only one week before the hearing of the appeal. The
resulting inconvenience for this court and the appellant, is self-evident. The
explanations advanced for this flagrant non-compliance of the rules, clearly
indicate that Thabiso's Pretoria attorneys are solely to blame. The excuses
proferred by the attorneys are so flimsy in nature that they do not warrant a
detailed account. Suffice it to say, in my view, that these excuses do not even
come close to justifying condonation. But, because I hold the view that the
appeal would in any event have been successful, the dismissal of the
condonation application will be of little consequence, save for issues of costs.
The order I therefore propose to make is that the condonation application be
dismissed with costs and that Thabiso's Pretoria attorneys will not be entitled
to recover any fees or disbursements from their own client pertaining to the
unsuccessful condonation application.

[20] For these reasons it is ordered that:
(1)
The respondent's application for condonation of the late filing of its
heads of argument, is dismissed with costs.

(2)
The respondent's Pretoria attorneys will not be entitled to recover any
fees or disbursements from their own client pertaining to the condonation
application.
(3)
The appeal is upheld with costs, including the costs occasioned by the
employment of two counsel.
(4)
The order of the court a quo is set aside and the following is substituted
in its stead:
'The plaintiff's claim is dismissed with costs.'

...……………..
F D J BRAND
JUDGE OF APPEAL

Appearances:
For Appellant:
B R Tokota SC

N A R Nqoepe

Instructed by

The State Attorney, Pretoria

The State Attorney, Bloemfontein

For Respondent:
M M Ripp SC

P J Vermeulen

Instructed by

Ramothwala Lenyai Inc, Pretoria

Mosiu Attorneys, Bloemfontein
THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

Case number:  148/2007
In the matter between

THE GOVERNMENT OF THE
REPUBLIC OF SOUTH AFRICA

APPELLANT

and

THABISO CHEMICALS (PTY) LTD

RESPONDENT

From: The Registrar, Supreme Court of Appeal
Date:
2008-09-25
Status:
Immediate

Today the Supreme Court of Appeal (SCA) upheld an appeal by the South African
Government against the judgment of the Pretoria High Court in favour ot Thabiso
Chemicals (Pty) Ltd (Thabiso).

Thabiso was the plaintiff in the High Court. It sued the Government for damages in
an amount exceeding R15 million, allegedly arising from the wrongful cancellation of
a contract between the parties by the State Tender Board, on behalf of the
Government.

The contract originated from a tender by Thabiso to deliver cleaning materials to
State Departments, which was accepted by the State Tender Board. Soon thereafter
the State Tender Board, in the exercise of its statutory powers to act on behalf of the
Government in matters of this kind, purported to cancel the contract resulting from
the award of the tender. The basis relied upon was that the tender had been
awarded on the strength of information furnished by Thabiso which subsequently
proved to be incorrect. The High Court's decision that the cancellation had in fact
been wrongful was ultimately derived from its factual finding that Thabiso had not
furnished any incorrect information prior to the award of the tender.

The SCA held, however, that although Thabiso did not furnish any incorrect
information by express words, it did so by implication. And, so the SCA further held,

even though this misrepresentation by implication was innocently made, it
constituted a sufficient ground for the State Tender Board to cancel the contract.
Hence the cancellation could not be said to be wrongful and, consequently, the
appeal was upheld with costs.

FDJB