City of Tshwane Metropolitan Municipality v RPM Bricks (Pty) Ltd

• Jurisdiction: South Africa
• Judge: Harms ADP, Farlam JA, Lewis JA, Ponnan JA and Musi AJA
• Judgment Date: 27 March 2007
• Citation: 2008 (3) SA 1 (SCA)
• Docket Number: 177/2006
• Hearing Date: 05 March 2007
• Counsel: PP Delport SC for the appellant PP Solomon SC (with PT Rood) for the respondent
• Court: Supreme Court of Appeal

Ponnan JA:

[1] On 5 July 2001 the council of the present appellant, the City of Tshwane Metropolitan Municipality (the defendant in the court below), H resolved to add the respondent, RPM Bricks (Pty) Ltd (the plaintiff in the court below), to its list of already approved suppliers for the supply and delivery of coal to its Pretoria West and Rooiwal power stations. For convenience I will refer to the parties by their appellation in the court below. I

[2] The plaintiff was thus duly placed on the council's list of approved coal suppliers on inter alia the following terms:

(a)

the supply contract was to commence on 1 April 2001 and to endure for a period of three years;

(b)

the coal was to be despatched by rail to the railway sidings of the J respective power stations;

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(c)

the total price for all coal delivered during any calendar month was A to be paid within 30 days after receipt by the city electrical engineer of a fully specified account;

(d)

the price payable for the coal supplied and delivered had two component parts, namely, the free on rail (FOR) price of the coal per ton (which varied according to the calorific value of the coal) plus the railage cost; and B

(e)

the FOR and railage prices were to be fixed for the first year of the contract, whereafter prices were to increase in accordance with the producer price index for the previous year.

[3] By letter dated 10 July 2001 the plaintiff was officially informed that C it had been added to the list of coal suppliers of the defendant and that it could proceed with the execution of the tender. Nothing happened however until May 2002. The reason for this was that Spoornet, which was buckling under the pressure of existing orders and did not have any available railway carriages, was unwilling to enter into transportation contracts with new clients such as the plaintiff. To address this difficulty, D at a meeting with employees of the defendant during May 2002, the plaintiff expressed a willingness to deliver coal by road. Pursuant to that meeting, on 15 May 2002 the plaintiff despatched a letter to one of the defendant's employees indicating that it was willing and able to supply 30 000 tons of coal by road transport. There followed in that letter a E schedule of prices for coal of different calorific values.

[4] On 28 May 2002 the defendant placed an initial order with the plaintiff and, after a trial run using road transportation, placed several more orders with the plaintiff for the month of June. On 13 June 2002 the plaintiff despatched a letter to the defendant in which it recorded: F

As you are aware Transnet at present cannot supply rail trucks and this has now forced everybody to turn to road transport which in turn has created a golden opportunity for the owners of trucks to demand very high fees for road transport . . . .

There followed a schedule of prices. The letter continued G

Be rest assured that the moment that Transnet can supply rail trucks again on a regular basis we trust that we will then be able to reduce our prices as follows . . . .

A schedule of lower prices then followed. Whilst awaiting a response to H that letter the plaintiff continued to deliver coal by road at the price originally agreed with reference to rail transportation.

[5] By letter dated 22 August 2002 the plaintiff was informed that its application for an increase in price had been approved and that the new prices, which would come into effect on 1 July 2002, would be as set out I in a document annexed thereto. The plaintiff implemented its terms with retrospective effect to that date and invoiced the municipality for the difference between the original price and the increased price for the months of July and August. These invoices were paid by the defendant. The plaintiff continued thereafter to supply and deliver coal to the defendant at the increased price for the remainder of 2002 and the J

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month A of January 2003. It invoiced the defendant and was paid up to and including November 2002.

[6] On 8 January 2003 the plaintiff received a letter from the defendant which read:

Your final account for December 2002 to the amount of R1 755 485,80 B has been settled without alterations.

The consequent payment anticipated by the plaintiff after receipt of that letter did not materialise. Instead, by letter dated 30 January 2003, the plaintiff was informed that the incorrect annexure had inadvertently been affixed to the municipality's letter of 22 August 2002. The correct C annexure which, it was asserted, had to replace the previous annexure, was enclosed.

[7] The plaintiff's subsequent demand for payment for the months of December 2002 and January 2003 elicited the response from the defendant that the plaintiff had been overpaid for the months of July to D November 2002. In consequence, so it was asserted by the defendant, the plaintiff was in fact indebted to it (the defendant).

[8] The plaintiff caused summons to be issued out of the Pretoria High Court for payment of the sum of R2 646 134,40 for what it alleged was the defendant's total outstanding indebtedness to it for coal supplied and E delivered to the latter for the months of December 2002 and January 2003. In the alternative the plaintiff alleged that the defendant had retained and utilised the full volume of coal that had been delivered to it and it therefore had been enriched at the expense of the plaintiff in that sum. However, the plaintiff deliberately chose not to pursue its claim F based on enrichment in the court a quo.

[9] The first of the various defences raised by the defendant in its plea and the only one that I will in due course consider was the following:

Defendant pleads that at no time did it resolve to vary the supply contract . . . as required by s 38(1) of the Gauteng Rationalisation of G Local Government Affairs Act 10 of 1998 [1] (the Act) nor did it comply with the formalities prescribed by s 38(3) of the Act at any stage.

The plaintiff replicated that the defendant was precluded by the doctrine of estoppel from relying on s 38 of the Act. Patel J, who heard the matter, granted judgment in favour of the plaintiff. [*] This appeal is with his leave. H

[10] Section 38 of the Act provides:

Extending or varying a tender agreement

(1)

Subject to subsection (2), a municipal council on its own initiative or upon receipt of an application from the person, body, organisation I

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or corporation supplying goods or services to the municipal A council in terms of this Chapter, may resolve to extend or vary a tender agreement if -

(a)

the circumstances as contemplated in section 35(2)(a) prevail; or

(b)

with due...