Steenkamp NO v Provincial Tender Board, Eastern Cape

• Jurisdiction: South Africa
• Citation: 2006 (3) SA 151 (SCA)

Steenkamp NO v Provincial Tender Board, Eastern Cape
2006 (3) SA 151 (SCA)

2006 (3) SA p151

Citation	2006 (3) SA 151 (SCA)
Case No	528/05
Court	Supreme Court of Appeal
Judge	Harms JA, Cameron JA, Jafta JA, Ponnan JA and Mlambo JA
Heard	November 17, 2005
Judgment	November 30, 2005
Counsel	W G Burger SC (with D M Davis) for the appellant.; R G Buchanan SC and S V Notsche SC for the respondent.

Flynote : Sleutelwoorde B

Company — Contracts by — Contract on behalf of company to be formed — Validity of — Tender submitted on behalf of, and contract subsequently awarded to, company about to be formed — Semble: Company not yet incorporated unable to perform juristic act such as submitting tender and unable to C have someone act as agent on its behalf — Submission of tender and subsequent contract thus invalid — Moreover, in submitting tender on behalf of company not yet incorporated, company commencing business prior to issue of certificate to 'commence business' in terms of s 172 of Companies Act 61 of 1973 — Submission of tender thus contra legem D and null and void.

Delict — Pure economic loss — General principles restated — General approach to delictual liability for pure economic loss caused by administrative breaches.

Delict — Pure economic loss — Loss suffered by successful tenderer as a result of negligent but bona fide award of contract — Out-of-pocket expenses — Constitution and Provincial Tender Board Act E (Eastern Cape) 2 of 1994.

Tender board — Tender process — Legal duty of board in tender process — In evaluating tenders, tender board not owing legal duty to tenderers either in statute or at common law.

Headnote : Kopnota

The appellant was liquidator of a company that had, upon invitation by the respondent (the board), successfully submitted a tender for F the provision of certain services to the province. At the time of submission of the tender, as well as at the time of close of the tenders, the company had not yet been incorporated. Pursuant to the award of the contract to the company, the province placed an order with the company as a result of which the company incurred expenses in an G amount of R4,35 million. Thereafter the tender award was set aside on review to the High Court, at the instance of one of the unsuccessful tenderers. The appellant instituted action in the High Court for recovery from the board of the company's out-of-pocket expenses incurred after the award. The appellant's case was that the board had owed a common-law duty to the company and that it had negligently, H albeit bona fide, acted in breach of that duty in awarding the contract to the company. The Court a quo held that, because the company had not been incorporated at the time of submission of its tender or at the time of close of the tenders, its tender had been void, that the board could therefore not have owed a 'duty of care' to the company and that it had, accordingly, not acted wrongfully in making its award. The Court consequently found that the I company had not acted wrongfully in making its award.

Held, that, inasmuch as a public tender process was governed by the Constitution and legislation made under it, the tender process under consideration was governed by the interim Constitution and the Provincial Tender Board Act (Eastern Cape) 2 of 1994. (Paragraphs [8] - [9] and [11] at 157C - D and 158B - C.) J

2006 (3) SA p152

Held, further, that a legal duty could have its origin either in statute or at common law, or both. As to whether breach of a A legal duty gave rise to an action for damages: (1) where a legal duty had its origin in statute, breach of that duty gave rise to an action for damages only where such an action was provided for in the relevant statute, whether expressly or by implication; (2) where a legal duty had its origin in the common law, breach of that duty gave rise to an action for damages only where justified by policy considerations; (3) B where a legal duty had its origin both in statute and at common law, and it appeared from the statute that breach of that duty did not give rise to an action for damages, the common law could not be invoked to provide the plaintiff with such an action because that would be contrary to the statutory scheme. (Paragraphs [19], [20] and [22] at 160C - E and 161A/B - C.)

Held, further, that the appellant relied on a duty which had its origin in the common law because it appeared from the applicable C legislation that breach of that duty did not give rise to an action for damages. (Paragraphs [23], [29] and [30] at 161D/E, 163E and 164C.)

Held, further, that in determining whether or not to extend the boundaries of common-law delictual liability as was sought by the appellant, the relevant public policy considerations were the following: D

(1)

The board exercised a discretion or value judgment in awarding a contract and, in general, public policy considerations did not favour the recognition of damages claims for the wrong exercise of a discretion negligently made. (Paragraph [32] at 164H - 165B.)

(2)

The majority of members of the board were lay persons who had not necessarily been able to understand the technicalities of tender E requirement and documents. They had to rely on, but were not bound by, advice. (Paragraph [31] at 164F.)

(3)

A disappointed tenderer had no action for damages for loss of profits flowing from his not being awarded the contract. There was no reason in principle to distinguish between various types of pure economic loss and to afford him an action for damages for his out-of-pocket expenses flowing from his not being awarded the contract. F (Paragraphs [33] and [36] at 165D/E and 166F.)

(4)

While accountability was an important public policy factor, if delictual liability were imposed in a young democracy with limited resources such as South Africa, the potentiality of a claim by every successful tenderer would cast a shadow over the deliberations of a G tender board on each tender that might slow down the process or even bring it to a grinding halt. (Paragraphs [39] and [40] at 167D and 167G.)

(5)

While the availability of other remedies was often taken as an indication of whether or not a claim for damages should be recognised, the availability of review to an unsuccessful tenderer could hardly be an argument for conferring a damages claim on the H successful tenderer. To allow the successful tenderer an action for damages where the disappointed tenderer had none would imply that, during the consideration process, the board owed a legal duty to the successful tenderer but not to the other tenderers. Policy considerations did not justify such discrimination. The board owed a legal duty to a class of persons and not to one or two members of the class and, if their breach did not justify a damages claim in one I instance, it was difficult to justify in another. (Paragraphs [41], [43] and [44] at 167H, 168F and 168H - 169A.)

(6)

In ordinary contractual relations, one contracting party was not liable for damages in delict to the other if the contract were void or voidable. There was no good reason why the position should be any different J

2006 (3) SA p153

where the contract was preceded or affected by an administrative action. (Paragraph [45] at 169C.) A

Held, further, weighing up the above policy considerations, that the existence of an action by tenderers, successful or unsuccessful, for delictual damages that were purely economic in nature and were suffered because of a bona fide and negligent failure to comply with the requirements of administrative justice could not be inferred from the statute in question. Likewise, the same B considerations stood in the way of the recognition of a common-law legal duty in those circumstances. (Paragraph [46] at 169E.)

Held, accordingly, that the appeal had to be dismissed for this reason alone. (Paragraph [56] at 171I.)

Held, further, that the Court a quo had also been correct in finding that the company's tender offer was invalid and that therefore the board owed no duty of care to the company. Prior C to incorporation a company was not yet in existence and could not perform a juristic act such as submitting a tender. Since it was not impossible to act as agent for a non-existent principal, no one could act as its agent either. (Paragraph [48] at 169G - I.)

Held, further, that the submission of a tender involved more than merely making an offer but amounted to the D conclusion of a preliminary agreement (which was also a juristic act) in which the tenderer accepted the tender conditions imposed and undertook to comply with them. By submitting a tender, an option contract was concluded and the option was exercised by the award of the tender. It followed that because of the company's non-incorporation the award to it did not lead to a valid contract. (Paragraph [51] at 170G - 171C.) E

Held, further, that the company had not been entitled to commence business prior to the issue of a certificate entitling it to commence business, but had nevertheless commenced business by submitting a tender. That was done contra legem and the tender offer was therefore null and void. (Paragraph [52] at 171C/D.)

The decision of Van Zyl J in the Ciskei High Court in Steenkamp NO v Provincial Tender Board, Eastern Cape, confirmed. F

Cases Considered

Annotations

Reported cases

Cape Metropolitan Council v Metro Inspection Services (Western Cape) CC and Others2001 (3) SA 1013 (SCA) (2001 (10) BCLR 1026): referred to G

Cash Paymaster Services (Pty) Ltd v Eastern Cape Province and Others 1999 (1) SA 324 (Ck) ([1997] 4 All SA 363): referred to

Eastern Cape Provincial Government v Contractprops 25 (Pty) Ltd2001 (4) SA 142 (SCA) ([2001] 4 All SA 273): compared

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