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“IN THE HIGH COURT OF SOUTH AFRICA”

NORTH WEST DIVISION, MAHIKENG

CASE NUMBER: 403/2016

REPORTABLE

In the matter between:-

LEFETLHO TRADING (PTY) LTD                                                             PLAINTIFF

And

MEC FOR HEALTH NORTH WEST PROVINCE                                  DEFENDANT

JUDGMENT

GUTTA J.

 

A. INTRODUCTION

[1] Plaintiff, Lefetlho Trading (Pty)Ltd instituted an action against defendant, the Member of the Executive Council for the Department of Health, North West Province, for damages arising from a repudiation of a contract.

[2] Plaintiff in its particulars of claim alleged inter alia that:

2.1 During September 2014, defendant appointed plaintiff as a successful bidder in a contract NWD0H 16/2013, outsourcing, cleaning and household services for Clinical areas of Bophelong Psychiatric Hospital.

2.2 Plaintiff’s appointment was for a period of three months from 10 October 2014 until 31 December 2014 for an amount of R118 060.32 per month.

2.3 During 20 October 2014, plaintiff’s contract was extended for the period 31 December 2014 until 31 March 2014.

2.4 During April 2015, plaintiff’s contract was extended for a further period from 1 April 2015 until 31 June 2015.

2.5 During June 2015, the contract was again extended for a period of six months from 1 July 2015 to 31 December 2015.

2.6 Again during December 2015, plaintiff’s contract was extended for 6 months from 1 January 2016 until 30 June 2016.

2.7 At all material times, plaintiff duly complied with the agreement in that services were rendered to defendant in accordance with the agreement.

2.8 On or about 2 February 2016, defendant unilaterally repudiated the contract through a letter of termination signed by the Head of Department. Plaintiff accepted the repudiation, alternatively hereby cancels the agreement.

2.9 Plaintiff suffered damages arising from the breach in the amount of R275 301.60.

[3] Defendant in its plea alleged inter alia that plaintiff was appointed in terms of a closed quotation procedure. Defendant alleged further that the agreement was terminated for the following reasons:

“10.1 The director of the plaintiff did not disclose that her father is a deputy director (Mr D. Senatle) in the office of the defendant, which is against the policy of the defendant.

10.2 It was established in an internal investigation by the defendant that the plaintiff’s director father (Mr D. Senatle) played an active role in the management of the plaintiff and especially the execution of the tender NWPOH16/2013, although he had been employed by the defendant.

10.3 The aforesaid misrepresentation was made fraudulently, alternatively negligently by the plaintiff to the defendant.

10.4 The misrepresentation was material which made the defendant entitled to terminate the closed quotation allocation to the plaintiff with immediate effect”.

[4] Plaintiff in its replication alleged inter alia that:

“7 There is no policy within the North West Department of Health which prohibits children and/or spouses of its employees from conducting business with the State in general and with the North West Department of Health in particular.

8 The North West Department of Health, like all other State departments, require of potential bidders to complete a “Declaration of Interest” form, otherwise known as “SBD 4 form”, in terms of which it is required of a bidder to state whether any director of a bidder company is employed by the state or whether any director of the bidder company has family relations with an employee of the state who may be involved with the evaluation or adjudication of the bid.

9 The plaintiff’s directors did not indicate the name of Mr D Senatle in the “Declaration of Interest” in that the latter was not part of the plaintiff as a director nor was he involved in any manner whatsoever with the evaluation or adjudication of the bid in question.”

 

B. COMMON CAUSE

[5] The following facts are common cause:

5.1 Plaintiff was appointed as the preferred service provider to render cleaning service for the clinical areas of Bophelong Psychiatric Hospital.

5.2 Plaintiff’s agreement was extended four times after the initial period, namely 10 October to 31 December 2014.

5.3 Defendant on or about the 2 February 2016, delivered a letter of termination of the agreement to plaintiff.

 

C. ISSUES OF DISPUTE

[6] The issues for consideration are the following:

6.1 whether plaintiff is a registered entity with registered address;

6.2 whether defendant repudiated the contract;

6.3 whether plaintiff fraudulently alternatively negligently misrepresented by not disclosing that plaintiff’s director’s father (Mr Senatle) was a Deputy Director in the office of the defendant.

6.4 whether Mr Senatle played an active role in the management of plaintiff;

6.5 Whether the misrepresentation was material which entitled defendant to terminate the agreement with immediate effect.

 

D. PLAINTIFF’S WITNESSES

[7] The first witness called for plaintiff was Kealeboga Tryphina Senatle (K T Senatle). She was plaintiff’s sole director. She confirmed plaintiff’s registration number and registered address and said the registered address on the Certificate of Incorporation, namely 3084 Unit 9, Mmabatho, North West and the address appearing in plaintiff’s particulars of claim, namely 24 Captain Sentletse Street, Unit 9 are the same address and that, 3084 is the erf number and 24 is the house number.

[8] She explained that after studying marketing in 2012 she was unemployed and decided to start a business so she could empower herself and other youth who could not secure employment. Her appointment date as director of plaintiff was 2 February 2012. Prior to 2014 she catered for government departments. During 2014 she went to study Financial Management in Cape Town and left her mother who was the manager to run plaintiff in her absence.

[9] She said plaintiff submitted a closed quotation for the outsourcing of cleaning and household services for clinical areas at Bophelong Psychiatric Hospital. Five bidders including plaintiff were evaluated and plaintiff was recommended as it scored the highest points.

[10] She said her father, Mr Senatle is employed by the Department of Health but is not involved in the evaluation or adjudication of bids and she has no family members who are involved in the evaluation of tenders. She denied that between 2012 to 2016 she had abused the Supply Chain Management or committed any fraud or improper conduct. She further denied that Mr Senatle had a substantial interest in her company between October 2014 to February 2016 and was involved in managing the business activities of plaintiff. She said Mr Senatle helped with transport during his lunch time or weekends as her mother did not have transport.

[11] She was questioned about her understanding of the tender documents, particularly paragraph 2.7, 2.9 and 2.10 of SBD 4, Declaration of Interest which reads:

“2.7 Are you or any person connected with the state presently employed by the state….

2.9 Do you, or any person connected with the bidder, have any relationship (family, friend, other) with a person employed by the state and who may be involved with the evaluation and or adjudication of this bid?

2.10 Are you, or any person connected with the bidder, aware of any   relationship (family, friend, other) between any other bidder and any person employed by the state who may be involved with evaluation and or adjudication of this bid?”

She said, her understanding of SBD4 when read with paragraphs 1 and 2 was that the disclosure only relates to family members who are involved in bid adjudication and evaluation. She did not have any intention of misrepresenting that her father is employed in the Department of Health. She said in 2014, it was not explained to her when she completed the form that she must disclose even if the person is not employed in Supply Chain Management as long as they work for the State.

[12] She said during October 2014 to February 2016, plaintiff employed 30 people who became unemployed when the contract was terminated. She did not have contracts with the employees and did not know all their names. She said they purchased cleaning materials which amount varied from R6 000.00 to R10 000.00 from KC Chemicals and Setshogo. The amount claimed is the contract amount of R590 301. 60 less the employees’ salaries which is the profit in the amount of R275 301.60.

[13] Under cross examination, she admitted that presently her mother is the director and that she has since resigned. She did not know that she was supposed to appoint an accountant as the accounting officer. She attended business school from July 2013 until November 2014. While in Cape Town her mother submitted the tenders and completed the tender forms but they communicated telephonically. When asked in what capacity did her mother complete the forms, she replied as director as she signed on her behalf. She said because the company is registered in her name that is the reason why her mother wrote her name in the SBD forms and not her own name. It was put to her that this constitutes fraud. She replied that she gave her mother verbal authority to act as the director. She said although she had email, she did not think that it was necessary for the documents to be emailed to her because her mother ran the business on her behalf. She conceded that on the SBD forms it does not appear that her mother signed in a representative capacity. She said it is because the SBD forms do not stipulate that you need to disclose if someone signs on your behalf.

[14] The next witness for plaintiff was Lasiwe Christebella Senatle (Mrs Senatle). She is the mother to KT Senatle and the wife of Mr Senatle. She said, KT Senatle studied marketing in 2010 and returned in 2011 and could not secure employment. KT Senatle decided to open a catering business and she supported her daughter. She accompanied her to CIPRO to register the business.

[15] During 2014 they were invited telephonically to submit quotes. She collected the specifications as the manager for plaintiff. KT Senatle was at that time attending College in Cape Town. She telephoned KT Senatle who told her what to write in the forms. There was no briefing held or any explanation on how to complete the forms. She said KT Senatle gave her the power to sign the tender form on her behalf. She said she did not indicate in the forms that she was signing on KT Senatle behalf because there was no provision made in the form.

[16] A week before the 01 October 2014, she was informed that plaintiff was the successful bidder and she should go to the hospital and meet one Ben Mothokgo. Mr Senatle took her to the hospital and they met Mr Mothokgo. Mr Senatle left and she accompanied Mothokgo to his office. She explained to Mr Mothokgo that KT Senatle sent her to manage plaintiff in her absence while she was at school. It was put to her that Mr Mothokgo said both she and Mr Senatle introduced themselves as the owners during the site orientation meeting. She denied this and said Mr Senatle was not part of the meeting or orientation.

[17] Plaintiff employed 20 cleaners and 2 supervisors. KT Senatle paid the salaries and she did not have access to the banking account for the period October 2014 to February 2016. She denied that Mr Senatle managed the business affairs of the plaintiff during working hours. She said during October 2014 to February 2016, plaintiff did not have a vehicle and they either hired a motor vehicle and at other times used Mr Senatle’s vehicle. She said Mr Senatle  was not remunerated for assisting to transport and bring cleaning materials. She said, Mr Senatle works in Finance Internal Control for defendant and was not at that time awarding contracts with Supply Chain Management or involved in adjudicating quotes.

[18] Under cross examination, she said since January 2017 she is the director of plaintiff as KT Senatle was doing an internship and she has access to the new account at FNB. She did not have access to the account in December 2016.

She was referred to plaintiff’s bank statement dated 12 February 2016 where there were transactions for airtime top up for her cellular phone. She explained that this was purchased by KT Senatle because she used her phone for the employees. Although she said she received a salary as a manager in the amount of R3600.00, this was not reflected in the statement. She also conceded that there were several transactions where money was used for them as a family, for example, Pick n’ Pay, and other cash withdrawals. She could also not explain whether the fuel purchased in Kuruman was to fill Mr Senatle’s motor vehicle as they travelled in his vehicle.

[19] She was referred to page 15 of the Declaration of Interest which reads:

“I, the undersigned KT Senatle,

certify that the information furnished in paragraphs 2 and 3 above is correct. I accept that the state may reject the bid or act against me should this declaration prove to be false”.

When questioned why she didn’t write her name in the SBD4 forms as she appended her signature in a representative capacity instead of misrepresenting that she was KT Senatle, she replied that she was not supposed to write her name as her name did not appear on the CK1. She said she signed in the capacity as director and did not disclose this as she was never asked to disclose this in the forms. She admitted that she did not have written authority to act on behalf of plaintiff as manager. She said, when she completed the SBD forms she had no intention to mislead the department.

 

E. ABSOLUTION FROM THE INSTANCE

[20] At this stage of the proceedings, plaintiff closed its case and defendant’s counsel, Mr Scholtz applied for absolution from the instance. Mr Scholtz submitted inter alia that

20.1 on plaintiff’s version, Mrs Senatle completed the forms in her capacity as a director. There is no proof that she had the authority to complete the forms and even if she had the authority she could not create the impression that she is the director. This is fraudulent misrepresentation;

20.2 plaintiff failed to prove its quantum as the claim in the Particulars of Claim does not corroborate the bank statement;

20.3 damages suffered if any is R83 301.60 which falls in the jurisdiction of the Magistrate Court.

[21] Counsel for the plaintiff, Mr Masilo submitted inter alia that:

21.1 Mrs Senatle was authorised by the director to sign the forms. Hence there was no misrepresentation. Mrs Senatle believed that she was authorised to sign;

21.2 on the quantum claimed, he conceded that the amount claimed does not reflect any deduction for material and petrol;

21.3 both KT Senatle and Mrs Senatle believed that the Declaration of Interest related to someone working in Supply Chain Management and Mr Senatle was not employed in Supply Chain Management.

[22] This Court after hearing the submissions, dismissed the application for absolution from the instance with cost in the action and undertook to provide reasons in the written judgment. What follows are my reasons for the aforesaid ruling.

[23] The test for absolution to be applied by a trial court at the end of a plaintiff’s case was formulated in Claude Neon Lights (SA) Ltd v Daniel[1]  in these terms:

“….(W)hen absolution from the instance is sought at the close of plaintiff’s case, the test to be applied is not whether the evidence led by plaintiff establishes what would finally be required or to be established, but whether there is evidence upon which a Court, applying its mind reasonably to such evidence, could or might (not should nor ought to) find for the plaintiff…”

This implies that a plaintiff has to make out a prima facie case – in the sense that there is evidence relating to all the elements of the claim – to survive absolution because without such evidence no court could find for the plaintiff… As far as inferences from the evidence are concerned, the inference relied upon by the plaintiff must be a reasonable one, not the only reasonable one… The test has from time to time been formulated in different terms, especially it has been said that the court must consider whether there is ‘evidence upon which a reasonable man might find for the plaintiff’…Such a formulation tends to cloud the issue. The court ought not to be concerned with what someone else might think; it should rather be concerned with its own judgment and not that of another ‘reasonable’ person or court. Having said this, absolution at the end of a plaintiff’s case, in the ordinary course of events, will nevertheless be granted sparingly but when the occasion arises, a court should order it in the interests of justice”.

[24] The question for consideration is thus whether there is evidence upon which this Court applying its mind reasonably to the evidence could or might find for the plaintiff.

[25] It is common cause that:

25.1 the plaintiff was awarded the tender and the contract was extended four times;

25.2 In the letter addressed to plaintiff terminating the contract with immediate effect, the reasons advanced were inter alia that:

Mr Senatle who was employed as assistant director: Internal Control was actively involved in the business activities and affairs of the plaintiff;

At the time plaintiff tendered and during the subsistence of the contract, plaintiff neglected and failed to disclose that it had and still has a relationship with an employee in the Department of Health, which was a requirement in terms of the SBD forms that any relationship between a bidder and any of the employees of the department must be disclosed.

Plaintiff was guilty of misrepresentation in the form of non-disclosure.

25.3 KT Senatle and Mrs Senatle admitted that they did not disclose that Mr Senatle was KT Senatle’s father and director of the defendant’s office.

[26] Both Mrs Senatle and Ms KT Senatle testified that they believed that the question in the SBD form related to whether they have a family member who is working in Supply Chain Management involved in bid adjudication and evaluation and that Mr Senatle did not work in Supply Chain Management. Furthermore they both testified that they had no intention to mislead the Department.

[27] Defendant in its plea alleged that the misrepresentation was made fraudulently alternatively negligently. The main reason why this Court did not grant absolution from the instance was because should the Court find that the misrepresentation was neither fraudulent nor negligent but innocent, then the Court applying its mind reasonably to such evidence could or might find that the defendant was not entitled to terminate the contract. Mr Scholtz also relied largely on the fact that Mrs Senatle signed the SDB4 forms when she was not authorised to do so and also signed as KT Senatle which constitutes fraud. This was not plaintiff’s case in the Particulars of Claim. Furthermore absolution from the instance, is often granted sparingly. In the circumstances I refused the application for absolution from the instance and allowed the trial to proceed.

 

F. DEFENDANT’S WITNESSES

[28] Defendant’s first witness was Lebogang Brian Mokaila (Mr Mokaila). During 2015 he was employed by plaintiff as a cleaner at the Bophelong Psychatric Hospital, for approximately 9 months. He said, Mr Senatle employed him at the Bophelong Psychatric hospital. Mr Senatle informed them that he was in charge of the cleaning material and he would not keep the materials at the hospital because of theft. Mr Senatle stored the cleaning materials in his motor vehicle and brought it to the hospital everyday, sometimes at 9am or 11am and or 3pm. As soon as he arrived they would refill the containers from his motor vehicle. Mr Senatle would often have a short meeting with the cleaners to establish if there were any problems and what was required.

[29] Mr Mokaila said they initially received their salary but after 3 months Mr Senatle did not pay them for a period of 3 months. After the second month of not receiving a salary, he sent Mr Senatle a text message. One day Mr and Mrs Senatle arrived and they were both under the influence of alcohol. After they refilled the soap at 3pm, Mr Senatle requested that he remain behind and they exchanged words. Mrs Senatle was on the phone and thereafter she complained about the manner in which he spoke to Mr Senatle. Mrs Senatle fired him and Mr Senatle also said the company was his and ordered him to return his uniform. He approached Mr Mothokgo, the administrative manager at the hospital and reported to him that both Mr and Mrs Senatle were under influence and fired him. Mr Mothokgo told him that he had opened ‘a can of worms’ as Mr Senatle was awarded the tender by one Mompie Segwabane. Mr Mokaila lodged a complaint of corruption at the Premier’s Office, against Mr Senatle

[30] One Mr Moloto summoned him to a meeting where Mr and Mrs Senatle were present. Mr Senatle’s supervisor, Mr Phetoe was present. Mr Senatle complained that Mr Mokaila disrespected him and is the only person asking for money. Mr Mokaila complained that 3 months and 14 days had lapsed and he wasn’t paid. Mr Moloto told Mr Senatle to give him a final warning and asked Mr Mokaila to apologise to Mr Senatle. Mr Mokaila refused to apologise.

[31] The outcome of the meeting was that he was told to return to work and that Mr Senatle would fire him if he behaved in the same way again. He said although he returned to work, Mr Senatle would shout at him and had people police him. When Mr Senatle heard that he had written a letter to the Premier’s Office, Mr and Mrs Senatle and Mr Phetoe fired him and told him to go to the Premier’s Office. An investigation was conducted against Mr Senatle by the Office of the Premier. He said the outcome of the investigation was that “Mr Senatle’s company was withdrawn from the hospital”.

[32] Under cross examination he was questioned that in his examination in chief he said he was employed at Lefetlho Trading, working at Bophelong Psychiatric Hospital and not for Mr Senatle. He replied that “if I was asked who hired me at Lefetlho I would have said Mr Senatle but the question was not posed”. When questioned whether he has proof that Mr Senatle hired him, he said that Mr Senatle used to refill the soap everyday at the hospital and had a meeting with him. Mr Senatle’s motor vehicle was registered at the gate when he arrived and from time to time Mr Senatle reminded him that plaintiff was his company.

[33] He said prior to working for plaintiff he was employed at Shoprite and he left them to open his own business where they supplied many things including office furniture. He could not recall supplying cleaning materials. He denied approaching Mrs Senatle to purchase chemicals from his sister who is a chemical distributor in Johannesburg. He also denied telling Mr Phetoe that he was going to get plaintiff fired and his company will get the cleaning service. He said it’s a fabrication as he has never applied for the tender and did not even know the procedure to follow.

[34] He said after he launched his complaint with the Office of the Premier, it was agreed with the hospital and the investigating officer that Mr Senatle must register at the security gate when he enters the hospital’s premises. A security officer informed him that when Mr Senatle enters the hospital’s premises he does not write his name but writes Mrs Senatle’s name. He took this footage to the Premier’s Office. He denied trying to assault Mrs Senatle. He denied the allegations that he slept during working hours and was frequently absent from work. He reiterated that Mr Senatle and his wife would come to the hospital under the influence and Mr Senatle would walk around with his wife.

[35] The next witness was Dr Daniel Byani Makubu (Mr Makubu). He is a director in the Department of Health, responsible for Supply Chain. Mr Makubu explained the procedure followed when a person submits a quotation. They are guided by National Treasury prescripts. If the threshold is 0 – R500 000.00 they get quotations while if it’s above R500 000.00 it goes on open bid. The invitation to quote sets out the criteria, namely valid clearance certificates and the declaration forms, namely the SBD4, the Declaration of Interest. Treasury made this form mandatory and all bidders have to complete the forms. It was intended to counter corruption and nepotism.

[36] He was referred to the plaintiff’s SBD4. He said when his directorate processed this form they were under the impression that the form was completed by KT Senatle who was the sole director, until they had a visit from the Premier’s office that plaintiff was fronting. There was no power of attorney. The SBD4 form was completed by Mrs Senatla. He further said that KT Senatle did not disclose that she has any relative in the state. This clause in the SBD4 form did not bar a person with relatives employed by the state from submitting quotations. It only sought a declaration.

[37] He was referred to the letter dated 2 February 2016 written to plaintiff terminating the cleaning contract. He explained that there was a complaint received at the Premier’s Office and an investigation was conducted and it was found that Mr and Mrs Senatle were actively running this business. Hence this letter cancelled the contract. He said they are guided by the Public Finance Management Act and Regulations which sets outs the Accounting Officer’s powers. KT Senatle’s failure to disclose that her father is employed by the state. This amounts to corruption and they were entitled to cancel the contract.

[38] He said, Mr Senatle was employed as the Assistant Director: Internal Control by the Department of Health. This is the financial branch, Internal Control is the internal arm of the department responsible for audit and compliance in the whole department. The directorate is responsible for preventing fraud. As audit manager Mr Senatle was responsible for corruption and prevention strategies. He holds a senior position and plays an active role in preventing fraud. Mr Senatle heads the inspectors to see that the SBD forms are completed. Mr Senatle’s unit checks the SBD forms for compliance. Plaintiff’s SBD4 passed through Mr Senatle’s unit. He was surprised to read the investigation report that Mr Senatle posed as a manager, Mr Senatle was in a position of trust and he knew what he was doing was wrong.

[39] He said the Department was open to a meeting and to give plaintiff an audience. When questioned why the Department did not request reasons before terminating the contract, he replied that the letter explains the reasons for cancellation and that serious issues of integrity, misrepresentation and corruption were raised. He said plaintiff was unlawfully using human resources and with corruption you can effect immediate termination. They are guided by the Public Finance Management Act and integrity. He reiterated that plaintiff’s attorney gave them an ultimatum to pay half a million rands and did not deal with the core issues in that they did not dispute that the contents of the letter terminating the contract was false or misleading.

[40] Under cross examination, he said for this bid, people were invited from shortlisted bidders who participated in the open bid. There was a briefing session to explain the forms which are in clear and simple english. Although it was a closed quotation, the briefing was in the main bid and bidders accordingly had training. Plaintiff understood and went to the last stage of pricing. The invitation to bid also had an enquiry to allow bidders who didn’t understand to ask questions. KT Senatle could have asked the accounting officer if she didn’t understand the question.

 

G. PLAINTIFF RE-OPENED ITS CASE

[41] At this stage, plaintiff applied to reopen its case and call Mr Phetoe as there was evidence led by defendant which was not put to plaintiff’s witnesses. This Court after hearing counsels for both plaintiff and defendant granted the application for plaintiff to lead the evidence of Mr Phetoe on the following limited issues.

a) the meeting of the 14 December;

b) the conduct of Mr Mokaila;

c) dismissal of Mr Mokaila; and

d) drunkeness of Mr and Mrs Senatle.

[42] Plaintiff called Mr Pule Phetoe (Mr Phetoe). He was plaintiff’s supervisor. When asked to explain Mr Mokaila’s  conduct, he replied that they were colleagues. He said Mr Mokaila used to excuse himself more than other colleagues. In a month he would only work 15 days and of the 15 days, he would work only 7 or 8 days and would ask to be excused on the other days to attend to other issues. He said he spoke to Mr Mokaila about his absence from work and thereafter Mr Mokaila attended to his duties.

[43] When asked to explain his knowledge of any altercations between Mrs Senatle and Mr Mokaila he replied that on Saturday, Mr Senatle came to check how things were going at work and Mr Mokaila asked Mr Senatle when are they going to be paid and there was an altercation.   He was in another ward and was called. There was a misunderstanding regarding payment. He said at times it took time for the salary to be paid. Under cross examination, he confirmed that the exchange of words on the Saturday concerned the payment of the employees’ salaries and they agreed to a meeting on the 14 December.

[44] He was present at the meeting of 14 December. Also present was Mr and Mrs Senatle, Mr Motogo, and Mrs Mokaila, Ms Modise and Mrs Tyolo, Head of Psychiatric unit. Mrs Mokaila and Mrs Modise are supervisors. The meeting was arranged to discuss the argument on Saturday. Everyone reprimanded Mr Mokaila and told him to apologise to Mrs Senatle. He apologised to her and they embraced and he proceeded with his duties. When asked what Mr Mokaila did wrong for which he was encouraged to apologise he replied that,

1) Mokaila attacked Mrs Senatle about payment of salaries;

2) His manner of approaching Mrs Senatle was inappropriate because his emotions were high;

3) He confronted Mrs Senatle in the presence of employees and this caused embarrassment.

[45] Regarding Mr Mokaila’s dismissal, he said in 2016, Mrs Senatle called him while he was on lunch enquiring about Mr Mokaila’s whereabouts. Mr and Mrs Senatle arrived and Mrs Senatle informed Mr Mokaila that it was his last month because it was month end. Mr Mokaila accepted it and that was the end of the meeting. He said he has never seen Mr and Mrs Senatle drunk.

 

H. EVALUATION

[46] Plaintiff’s contract with defendant was terminated by defendant and the reasons advanced by defendant for terminating the contract was twofold, namely:

a) Mr Senatle who is employed as Assistant Director: Internal Control was involved in the management of the business activities and affairs of the plaintiff; and

b) Plaintiff neglected and failed to disclose its relationship with an employee of defendant, namely Mr Senatle, which is a requirement of the SBD forms.

 

Was Mr Senatle involved in the management of plaintiff’s business.

[47] Mr L Mokaila, a previous employee of plaintiff was the complainant in the investigation into the allegations of corruption and remunerative work outside the public service against Mr Senatle. Mr Mokaila said inter alia the following:

47.1 He was appointed by Mr Senatle. This was not disputed.

47.2 Mr Senatle attended the hospital during various hours, including working hours;

47.3 Mr Senatle played an active role in the operation of the business.

47.4 Mr Senatle kept all the cleaning materials in his vehicle and once a day he would deliver the materials and he would have a short meeting with the staff. This was not disputed.

[48] Although Mr Mokaila was a disgruntled employee, I accept Mr Mokaila’s evidence as there is corroboration in the investigation report compiled by the Office of the Premier as well as the evidence of Mr Phetoe set out more fully hereinbelow.

[49] Defendant relied on a report which was prepared after an investigation was concluded by the Office of the Premier against Mr Senatle. The contents of the report are not disputed. What can be gleaned from the report is the following:

49.1 Mr Mokaila complained that Mr Senatle is the one managing the company on a full time basis, and displays unwarranted treatment towards him.

49.2 Mr Senatle records his wife’s name when entering the hospital premises during delivery of cleaning materials.

49.3 Mr and Mrs Senatle introduced themselves as owners of the company and failed to disclose that they were the managing directors of plaintiff during introduction, orientation and operations of the company. The report reads that:

“Mr B Mothokgo and Ms D Garegae (Corporate Service Manager) confirmed that the hospital has been constantly engaging with Mrs L Senatle for consultation during the company’s operations following their appointment and that Mr D Senatle used to accompany his wife most of the time”. (Own emphasis)

49.4 Mr Senatle conducts work namely the business operations of plaintiff outside the public service without approval of the Department, in contravention of the provisions of Section 30(1) of the Public Service Act 4 of 1994.

49.5 It was recommended that Mr Senatle be formerly charged for acts of misconduct, and that plaintiff’s name be placed on the list of restricted supplies for misrepresentation.

[50] Plaintiff’s witness, Mr Phetoe corroborated Mr Mokaila’s evidence concerning the altercation between him and Mr Senatle, namely that:

50.1 On Saturday Mr Senatle came to check how things were going at work.

50.2 There was an altercation between Mr Senatle and Mr Mokaila as Mr Mokaila asked Mr Senatle when they were going to receive their salaries.

50.3 Mr Senatle was present at the meeting to resolve the dispute between Mr Mokaila and Mrs Senatle.

50.4 Both Mr and Mrs Senatle informed Mokaila when he was finally dismissed and his contract was not renewed.

[51] KT Senatle and Mrs Senatle were in my view not credible witnesses and they both attempted in their testimonies to protect Mr Senatle in that:

51.1 KT Senatle said Mr Senatle’s vehicle was only used sometimes to take them to the hospital before he went to work. However she confirmed the investigation report which recorded that Mr Senate would assist plaintiff to deliver materials to the hospital. She also admitted the report which stated that Mr Senatle was often in the company of Mrs Senatle when she consulted with Mr Mothokgo and Ms Garegae during the company’s operations.

51.2 Mrs Senatle said Mr Senatle assisted to transport and bring cleaning material and was not remunerated. She did not deny when she was confronted with plaintiff’s bank statements that money was withdrawn from plaintiff to pay their family expenses or that money was withdrawn from plaintiff to pay for fuel when they travelled to Kuruman in Mr Senatle’s vehicle. Thus the income generated by plaintiff was used to benefit Mr and Mrs Senatle and KT Senatle.

[52] This Court draws a negative inference from the fact that plaintiff did not call Mr Senatle to refute defendant’s case and the contents of the Premier’s report.

[53] From the aforegoing evidence, I am of the view that Mr Senatle was involved in the management of plaintiff.

 

Plaintiff’s neglect and failure to disclose its relationship with Mr Senatle

[54] It is common cause that:

1. Mrs Senatle misrepresented that KT Senatle signed the SBD forms when in fact she completed and signed the forms using KT Senatle’s name.

2. Mrs Senatle did not indicate that she was signing the forms in a representative capacity.

3. There is no proof that Mrs Senatle was appointed by plaintiff in the capacity of director or manager.

4. In the Declaration of Interest, dated 7 September 2014, Mrs Senatle failed to disclose that plaintiff is connected to Mr Senatle who was employed as Assistant Director for defendant.

[55] KT Senatle contradicted herself when she first testified that she appointed Mrs Senatle as a manager while she was in Cape Town and later testified that she gave Mrs Senatle verbal authority to sign the SBD4 as a director. Further there is no documentary proof that Mrs Senatle was appointed as a director or manager or received a salary in her capacity as manager or director

[56] Although both KT Senatle and Mrs Senatle testified that the SBD forms were completed by Mrs Senatle on telephonic instructions from KT Senatle, this does not explain why Mrs Senatle would forge KT Senatle’s signature knowing that KT Senatle did not sign the forms. Mrs Senatle’s conduct was fraudulent. KT Senatle and Mrs Senatle’s explanation that the SBD forms did not provide for a person to sign in a representative capacity, or that Mrs Senatle had to sign KT Senatle’s name because plaintiff is registered in KT Senatle’s name holds no water. The documents could have been emailed or faxed to KT Senatle so she could sign and return the forms to Mrs Senatle. Mrs Senatle could have signed the forms if she was duly authorised by KT Senatle and stated that she was signing in a representative capacity.

[57] Both Mrs Senatle and KT Senatle’s evidence that they were not briefed how to complete the forms and they believed the question related to someone involved in Supply Chain Management and not just employed by the state and they believed that they answered truthfully and did not intend to mislead, is improbable especially when the Court considers that the words on the SBD 4 form is neither vague nor ambiguous and is written in clear English as Mr Makubu testified.

[58] Regulation 16A (9)(f) of the Public Finance Management regulation reads:

“Avoiding abuse of Supply Chain Management system.

The Accounting Officer or Accounting Authority must:-

(f) cancel a contract awarded to a supplier of goods or services:-

(i) if  the supplier committed any corrupt or fraudulent act during the bidding process or execution of that contract; or

(ii) if any official or other role player committed any corrupt or fraudulent act during the bidding process or the execution of that contract that benefited that supplier”.

[59] In summary the evidence of plaintiff, on its own version, is that Mrs Senatle completed and signed the said documents as the owner of plaintiff using KT Senatle’s name. The evidence also confirms a misrepresentation regarding the completion and signature of the SBD4 forms as well as the Declaration of Interest. Mrs Senatle provided false information in the standard bid documents by failing to disclose that Mr Senatle was connected to the bidder and employed by the State. The fact that such information was not disclosed in itself does not justify the repudiation of plaintiff’s claim. The question is whether the misrepresentation was negligent or fraudulent, whether it was material.

[60] In Culverwell and another v Brown[2] Friedman J said:

“Just as the onus of proving that one party has repudiated the contract is on the other party who asserts it. Schlinkmann v Van der Walt and others 1947 (2) SA 900 (E) at 919) so also the onus of proving that a breach is material is on the party asserting it”.

[61] The general effect of a misrepresentation and fraud on a contract is simply stated that a party who has been induced to enter into a contract by misrepresentation of an existing fact is entitled to rescind the contract provided the misrepresentation was material, and was intended to induce him to enter into the contract and did so induce him.

[62] The essential elements for a claim or defence based on fraud are the following[3]:

a) There must be a representation by the other party or by the party’s agent. In casu the representation was by Mrs Senatle in the Declaration of Interest that neither she nor KT Senatle have a relationship with a person employed by the state. Also Mrs Senatle represented that KT Senatle signed the Declaration of Interest when it was Mrs Senatle who signed KT Senatle’s signature. Further it was established that Mr Senatle played on active role in the management of plaintiff.

b) It must be alleged that the fraud or misrepresentation was false and or intentional or negligent. Defendant in its plea alleged that the misrepresentation was made fraudulently alternatively negligent by plaintiff to defendant.

c) It must be alleged that the representation induced the representative or innocent party to act. Plaintiff was awarded the tender. Defendant alleged that the misrepresentation was material hence defendant was entitled to terminate the closed quotation allocation to plaintiff with immediate effect.

[63] Mr Makubu’s evidence confirmed why the misrepresentation was material. He testified that Mr Senatle occupied an important position in the defendant, namely Assistant Director: Internal Control which is the financial branch responsibile for audit. His directorate was responsible for preventing fraud. As audit manager he was responsible for corruption and prevention strategies. Mr Senatle’s unit checks the SBD compliance. Thus the SBD4 passes through Mr Senatle’s unit. As he lead the inspections he was responsible to see that the SBD forms were completed. For this reason the non-disclosure was material. Further the fact that plaintiff was used as a family business in which Mr and Mrs Senatle and KT Senatle were involved lends further support to the fact that the misrepresentation and non-disclosure was material.

[64] Our Court takes misrepresentation in tender proceedings in a very serious light. The Supreme Court of Appeal (SCA) in SJ Tshopo & Others v The State[4], sentenced the accused to imprisonment of 4 years for inter alia fraudulently completing a Declaration of Interest Form. The Court said:

“26 As to the element of prejudice by the fraudulent representation I agree with the finding of the court a quo:

It was argued that the Department of Education has not suffered any prejudice or potential prejudice as it paid monies for services actually rendered and not more. The state has an interest in keeping strict control over state tender which are being unscrupulously used for self-enrichment by the public servants. So does the general public whose funds are used to finance such projects and also other tenderers. There is evidence that the members of the public complain that the employees of the state misuse their position to obtain tenders. The failure to reveal in tender application the employment relationship with the state and the relationship with the MEC, the first appellant’s wife and the relationship between the first and second appellants is prejudicial to other tenders and the Community at large and frustrate the state’s efforts to eliminate the favouritism of Declaration of Interest seek to combat”.

[65] From the above statement it is clear that the SCA considers behaviour similar to that of plaintiff and the Senatles’ to be fraudulent. Accordingly the misrepresentation was material. Furthermore in terms of the regulations to the Public Finance Management Act, defendant was entitled to cancel the contract if any corrupt or fraudulent act was committed during the bidding process.

[66] Accordingly, I am of the view that plaintiff failed to discharge the onus of proof that defendant repudiated the contract.

 

I. ORDER

[67] In the result, plaintiff’s claim is dismissed with costs.

 

 

________________

N. GUTTA

JUDGE OF THE HIGH COURT

 

 

APPEARANCES

DATE OF JUDGMENT RESERVED              : 26 OCTOBER 2017

DATE OF JUDGMENT                                   : 15 DECEMBER 2017

ADVOCATE FOR PLAINTIFF                        : ADV MASILO

ADVOCATE FOR DEFENDANT                    : ADV SCHOLTZ

ATTORNEYS FOR APPLICANT                    : MOTSHABI & MODIBOA ATTORNEYS

ATTORNEYS FOR RESPONDENT               : STATE ATTORNEY

 

[1] 1976(4) SA 403 (A) at 409G-H

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