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South African Law • Jurisdictional Corpus
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Government of the Republic of South Africa v Thabiso Chemicals (Pty) Ltd

Citation(148/2007) [2008] ZASCA 112 (25 September 2008)
JurisdictionZA
Area of Law
Contract LawAdministrative LawPublic Procurement Law

Facts of the Case

The State Tender Board, representing the Government, invited tenders to deliver cleaning materials to various Government departments. The closing date for tenders was 10 April 2001. Thabiso Chemicals (Pty) Ltd submitted a tender which was accepted. The tender was subject to the Regulations under the State Tender Board Act 86 of 1968, the State Tender Board General Conditions (ST36), and certain special conditions. The contract was implemented from November 2001. However, on 11 January 2002, the Tender Board cancelled the contract on the grounds that Thabiso had failed to submit a SABS report as required by paragraph 7.3 of the Special Conditions. Paragraph 7.3 required tenderers who were not SABS listed companies or permit holders to submit a SABS report not older than 12 months proving that their manufacturing facilities and quality control systems complied with SABS requirements. Thabiso had not submitted such a report, and at 10 April 2001, was neither a SABS listed company nor a permit holder. Thabiso regarded the cancellation as a repudiation and instituted an action for damages of R15,016,846.

Legal Issues

  • Whether the cancellation of the contract by the State Tender Board was wrongful
  • Whether Thabiso furnished incorrect information that influenced the award of the tender within the meaning of clause 24.8.2 of the General Conditions (ST36) and regulation 3(6)(b) of the Regulations
  • Whether conduct (submitting a tender without the required SABS report) could constitute an implied representation that Thabiso was a SABS listed company
  • Whether administrative law principles apply to disputes arising from contracts concluded pursuant to a tender process
  • Whether the cancellation process was procedurally fair and whether Thabiso was afforded audi alteram partem

Judicial Outcome

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

Ratio Decidendi

1. After a tender has been awarded and a contract concluded, the relationship between the parties is governed by the principles of contract law, not administrative law. 2. For purposes of clause 24.8.2 of ST36 and regulation 3(6)(b) (dealing with cancellation based on incorrect information furnished by a contractor), 'furnishing of information' is not limited to express statements but includes implied representations by conduct. 3. Where a tenderer submits a tender without a required SABS report, and the special conditions exempted SABS listed companies or permit holders from submitting such a report, the tenderer's conduct impliedly represents that it is either a SABS listed company or a permit holder. 4. An innocent misrepresentation (furnishing incorrect information without fraud or negligence) is sufficient to trigger the cancellation provisions in clause 24.8.2 and regulation 3(6)(b). 5. The general principle that implied misrepresentation by conduct is equivalent to misrepresentation by express words applies to public procurement contracts.

Obiter Dicta

Brand JA made observations about administrative law principles and procedural fairness. The court a quo had made comments supporting the notion that the contractual relationship might be affected by principles of administrative law, which gave rise to arguments about whether the cancellation process was procedurally fair and whether Thabiso was granted a proper opportunity to address the Tender Board (audi alteram partem) prior to cancellation. Brand JA clarified that he did not believe administrative law principles had any role to play in the outcome of the dispute. He observed that the fact that the Tender Board relied on authority derived from a statutory provision (s 4(1)(eA) of the State Tender Board Act) to cancel the contract, or that grounds for cancellation were reflected in a regulation, did not convert the relationship into one governed by administrative law. The provisions of the Regulations and ST36 became part of the contract through incorporation by reference.

Legal Significance

This case is significant in South African law for clarifying the relationship between administrative law and contract law in public procurement contexts. It established that once a tender is awarded and a contract concluded, the relationship is governed by contract law, not administrative law, even though the contract originated from a tender process conducted under statutory authority. The case also illustrates the principle that implied representations (through conduct) can constitute the furnishing of incorrect information for purposes of contract cancellation clauses in tender agreements. It confirms that a tenderer's conduct in submitting a tender without required documentation can constitute an implied representation about the reason for the omission, which if incorrect, can justify cancellation under contractual provisions dealing with incorrect information.

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Judgment No. SC 70/2002, Civil Appeal No. 391/00
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