North-West Medical Waste BK v MEC for Health and Developmental Social Welfare (998/98) [2003] ZANWHC 12 (23 March 2003)

CASE NO. 998/98

IN

THE HIGH COURT OF SOUTH AFRICA

(BOPHUTHATSWANA PROVINCIAL DIVISION)

In the matter between:

NORTH

WEST MEDICAL WASTE BK PLAINTIFF

and

MEC

FOR HEALTH AND DEVELOPMENTAL

SOCIAL

WELFARE DEFENDANT

______________

JUDGMENT

MOGOENG JP.

Introduction

[1] The Plaintiff is the North West Medical Waste CC, a duly registered close corporation involved, as its name suggests, in the business of disposing of medical waste. The Defendant is the MEC for Health and Developmental Welfare in the North West Province.

[2] This is an action for damages. The parties have agreed that I should only focus on the question whether or not there is any liability of the Defendant to the Plaintiff and that in the event of the Defendant being found to be liable quantum will be dealt with by the parties. A brief background to this lawsuit follows below. Background [3] The Defendant advertised a tender in terms of which the relevant service providers were invited to submit tenders for the removal and treatment of medical waste. The specified scope and field of the tender was the total responsibility for the loading, removal, treatment and disposal of waste from participating health care facilities under the jurisdiction of the North West Provincial

Administration. All that a successful tenderer was expected to do was spelled out in a document entitled ‘Specifications for the removal and treatment of waste from participating health care facilities under the jurisdiction of the North West Provincial Administration’ (“the Specifications”). [4] The Plaintiff tendered successfully and his tender was accepted in terms of a letter from the Tender Board dated 21 August 1997. It is stated in that letter, inter alia, that the tender was accepted subject to all the conditions contained in the General Conditions of Tender, Contract and Order (ST36).

This all-important letter lists eight (8) participating hospitals and all clinics in the Klerksdorp/Potchefstroom region which clinics the Plaintiff, in the evidence of its sole Director, Mr George Fourie, has estimated at 31. A contract of service was concluded or came into existence between the parties. The commencement date of the contract period was 01 September 1997.

[2] This is an action for damages. The parties have agreed that I should only focus on the question whether or not there is any liability of the Defendant to the Plaintiff and that in the event of the Defendant being found to be liable quantum will be dealt with by the parties. A brief background to this lawsuit follows below.

Background

[3] The Defendant advertised a tender in terms of which the relevant service providers were invited to submit tenders for the removal and treatment of medical waste. The specified scope and field of the tender was the total responsibility for the loading, removal, treatment and disposal of waste from participating health care facilities under the jurisdiction of the North West Provincial

Administration. All that a successful tenderer was expected to do was spelled out in a document entitled ‘Specifications for the removal and treatment of waste from participating health care facilities under the jurisdiction of the North West Provincial Administration’ (“the Specifications”).

[4] The Plaintiff tendered successfully and his tender was accepted in terms of a letter from the Tender Board dated 21 August 1997. It is stated in that letter, inter alia, that the tender was accepted subject to all the conditions contained in the General Conditions of Tender, Contract and Order (ST36).

This all-important letter lists eight (8) participating hospitals and all clinics in the Klerksdorp/Potchefstroom region which clinics the Plaintiff, in the evidence of its sole Director, Mr George Fourie, has estimated at 31. A contract of service was concluded or came into existence between the parties. The commencement date of the contract period was 01 September 1997.

[5] The cause of action is said to be that but for two hospitals, Klerksdorp Hospital and Tshepong Hospital, none of the participating hospitals and clinics used the Plaintiff’s services pursuant to the aforementioned tender awarded to the Plaintiff. It is alleged that the Defendant has thereby breached the contract as a result of which the Plaintiff has suffered damages which are the subject matter of this claim. [6] All the above facts are either common cause or not in dispute except for the issues of the breach of contract, the Defendant’s liability and the duration of the contract. [7] The Defendant has resisted the Plaintiff’s claim on the following two main grounds: 7.1 The parties have entered into an order-based contract with the result that liability would only arise if there had been an order for the Plaintiff’s services; and 7.2 The Defendant was, in terms of clause 62.2 of ST36 (“clause 62.2"), entitled to use available state facilities or services to save costs, and was, therefore, not obliged to use the Plaintiff’s services. The only other issue in respect of which no agreement could be reached is the duration of the contract. I turn now to immediately dispose of it. The duration of the contract

[5] The cause of action is said to be that but for two hospitals, Klerksdorp Hospital and Tshepong Hospital, none of the participating hospitals and clinics used the Plaintiff’s services pursuant to the aforementioned tender awarded to the Plaintiff. It is alleged that the Defendant has thereby breached the contract as a result of which the Plaintiff has suffered damages which are the subject matter of this claim.

[6] All the above facts are either common cause or not in dispute except for the issues of the breach of contract, the Defendant’s liability and the duration of the contract.

[7] The Defendant has resisted the Plaintiff’s claim on the following two main grounds:

7.1 The parties have entered into an order-based contract with the result that liability would only arise if there had been an order for the Plaintiff’s services; and

7.2 The Defendant was, in terms of clause 62.2 of ST36 (“clause 62.2"), entitled to use available state facilities or services to save costs, and was, therefore, not obliged to use the Plaintiff’s services.

The only other issue in respect of which no agreement could be reached is the duration of the contract. I turn now to immediately dispose of it.

The duration of the contract

[8] The Plaintiff contended that the duration of the contract was three years. In its letter dated 12 September 1997, the Tender Board informed the Defendant that the contract was to run for a period of one year only from 01 September 1997 to 31 August 1998. The above contention is, therefore, belied by both the above letter of the Tender Board, as well as by the Plaintiff’s own Particulars of Claim. It calculated its claim on the basis of a 13 months’ period. This is more supportive of the conclusion that the contract was known to be operative for 12 months than for 36 months. In the result, I am satisfied and find that the duration of the contract was indeed 12 months only. The two defences [9] The two defences taken together really come down to the following: The Defendant did not give official orders to the Plaintiff because a need never arose for the Defendant to do so. A need never arose because the Defendant, taking advantage of a cost-saving opportunity presented by clause 62.2, used the facilities of some of its hospitals or the Department of Public Works to render the same services which the Plaintiff was contracted to render to the Defendant. I will therefore deal with these grounds together, rather than individually, because they are intertwined. No particular order will be followed in addressing them.

[8] The Plaintiff contended that the duration of the contract was three years. In its letter dated 12 September 1997, the Tender Board informed the Defendant that the contract was to run for a period of one year only from 01 September 1997 to 31 August 1998. The above contention is, therefore, belied by both the above letter of the Tender Board, as well as by the Plaintiff’s own Particulars of Claim. It calculated its claim on the basis of a 13 months’ period. This is more supportive of the conclusion that the contract was known to be operative for 12 months than for 36 months. In the result, I am satisfied and find that the duration of the contract was indeed 12 months only.

The two defences

[9] The two defences taken together really come down to the following: The Defendant did not give official orders to the Plaintiff because a need never arose for the Defendant to do so. A need never arose because the Defendant, taking advantage of a cost-saving opportunity presented by clause 62.2, used the facilities of some of its hospitals or the Department of Public Works to render the same services which the Plaintiff was contracted to render to the Defendant. I will therefore deal with these grounds together, rather than individually, because they are intertwined. No particular order will be followed in addressing them.

[10] I move from the premise that the Defendant is a responsible State Department led by responsible people. This, together with the facts before me, has led me to believe that the Department would not have decided to out-source services for 8 hospitals and 31 clinics when only 2 hospitals required those services. The money attendant to the compilation of the specifications, the advertisement of the tender, the processing of the tenders, affecting the whole Province, by the Defendant and the Tender Board would not have been expended in the absence of a definite need having been identified for the services in question. Otherwise it would have been grossly irresponsible of the leadership of the Department. I am satisfied, on the facts, that a need was identified for, inter alia, the Plaintiff’s services, hence the aforementioned laborious process that culminated in the awarding of the tender. [11] The Defendant must have known when the tender was advertised and awarded that some and which of its hospitals, if any, have functionally efficient incinerators; that the Department of Public Works had the capacity to render some of the services intended to be outsourced and the extent to which this could be done. As Mr Fourie pointed out in his evidence, such an understanding would explain why, although the Plaintiff was awarded the tender for the Southern Region of the North West Province, not all the hospitals in that Region were listed as participating hospitals. In other words, only those health care facilities which were identified as requiring the Plaintiff’s services were listed. Those which had no need for those services were left out of the list.

[10] I move from the premise that the Defendant is a responsible State Department led by responsible people. This, together with the facts before me, has led me to believe that the Department would not have decided to out-source services for 8 hospitals and 31 clinics when only 2 hospitals required those services. The money attendant to the compilation of the specifications, the advertisement of the tender, the processing of the tenders, affecting the whole Province, by the Defendant and the Tender Board would not have been expended in the absence of a definite need having been identified for the services in question. Otherwise it would have been grossly irresponsible of the leadership of the Department. I am satisfied, on the facts, that a need was identified for, inter alia, the Plaintiff’s services, hence the aforementioned laborious process that culminated in the awarding of the tender.

[11] The Defendant must have known when the tender was advertised and awarded that some and which of its hospitals, if any, have functionally efficient incinerators; that the Department of Public Works had the capacity to render some of the services intended to be outsourced and the extent to which this could be done. As Mr Fourie pointed out in his evidence, such an understanding would explain why, although the Plaintiff was awarded the tender for the Southern Region of the North West Province, not all the hospitals in that Region were listed as participating hospitals. In other words, only those health care facilities which were identified as requiring the Plaintiff’s services were listed. Those which had no need for those services were left out of the list.

[12] The Plaintiff gave a quotation relating to the rendering of all the specified services, namely, the loading, removal, treatment and disposal of waste as defined in the Specifications in respect of all the participating hospitals and clinics. None of these institutions, which are listed in the letter of acceptance, were at any stage excluded from being serviced by the Plaintiff on the basis that they had their own facilities or that Public Works was or would be helping them in terms of clause 62. On the contrary, after the Plaintiff had complained about their failure to use its services, the Tender Board wrote the following the following letter to the Defendant: “Ref: NW270/97 13 Feb. 1998 Enq: Mrs De Wee Att: Mr J. Tulsee The Deputy Director General Department of Health and Developmental Social Welfare Private Bag X2068

MMABATHO 2735 NW270/97: REMOVAL AND TREATMENT OF MEDICAL WASTE: YOUR LETTER DATED 23 JANUARY 1998. ------------------------------------------------------------------------------------ The Tender Board has at its meeting of the 10th February 1998 directed that your Department be advised that its aim in requesting an investigation into the complaint by various companies was to ensure that the approved tenderers are able to execute the contract. The Board further directed that your Department should inform all the hospitals and clinics to employ the approved tenderers. _______

SECRETARY TO TENDER BOARD” In response to the above letter the Defendant directed the following letter dated 27 February 1998 to all Medical Superintendents, all Regional and District Managers: “REF. NO.: 4/2/3 (MAIN) NW 270/97 ENQ.: N.S. MANONG TEL. NO.: (0140)875056

[12] The Plaintiff gave a quotation relating to the rendering of all the specified services, namely, the loading, removal, treatment and disposal of waste as defined in the Specifications in respect of all the participating hospitals and clinics. None of these institutions, which are listed in the letter of acceptance, were at any stage excluded from being serviced by the Plaintiff on the basis that they had their own facilities or that Public Works was or would be helping them in terms of clause 62. On the contrary, after the Plaintiff had complained about their failure to use its services, the Tender Board wrote the following the following letter to the Defendant:

“Ref: NW270/97 13 Feb. 1998

Enq: Mrs De Wee

Att: Mr J. Tulsee

The Deputy Director General

Department of Health and

Developmental Social Welfare

Private Bag X2068

MMABATHO

2735

NW270/97: REMOVAL AND TREATMENT OF MEDICAL WASTE: YOUR LETTER DATED 23 JANUARY 1998.

------------------------------------------------------------------------------------

The Tender Board has at its meeting of the 10th February 1998 directed that your Department be advised that its aim in requesting an investigation into the complaint by various companies was to ensure that the approved tenderers are able to execute the contract.

The Board further directed that your Department should inform all the hospitals and clinics to employ the approved tenderers.

_______

SECRETARY TO TENDER BOARD”

In response to the above letter the Defendant directed the following letter dated 27 February 1998 to all Medical Superintendents, all Regional and District Managers:

“REF. NO.: 4/2/3 (MAIN) NW 270/97

ENQ.: N.S. MANONG

TEL. NO.: (0140)875056

DEPARTMENTAL CIRCULAR NUMBER 07 OF 1998 TO: ALL MEDICAL

SUPERINTENDENTS

ALL REGIONAL

AND DISTRICT MANAGERS 27/02/98 RE: TENDER NW 270/97: REMOVAL AND TREATMENT OF MEDICAL WASTE: ALL HOSPITALS AND

CLINICS The Provincial Tender Board at its meeting of the 10 February 1998 directed the Department that all hospitals and clinics should employ the approved tenderers for the removal and treatment of all medical waste (copy of letter ref. No. NW 270/97 dated 13.02.98 is attached). You are therefore kindly requested to ensure that hospitals and clinics comply with the directive of the Tender Board. Our failure to honour the contract may have serious legal implications, hence the request to make use of the approved tenderers as soon as possible. Your co-operation in this regard will be appreciated.

DEPUTY DIRECTOR GENERAL: HEALTH AND DEVELOPMENTAL SOCIAL WELFARE” [13] Clearly, both the Tender Board and the Defendant were at all times aware that the Defendant had bound himself, in the case of the Plaintiff, to utilize the services of the Plaintiff in all the specified hospitals and clinics. They knew, correctly so, that their failure to honour these contractual obligations could have serious legal consequences for the Defendant. They did not raise clause 62 as a defence. On the contrary, they urged their institutions to comply with the contract.

DEPARTMENTAL CIRCULAR NUMBER 07 OF 1998

TO: ALL MEDICAL

SUPERINTENDENTS

ALL REGIONAL

AND DISTRICT MANAGERS

27/02/98

RE: TENDER NW 270/97: REMOVAL AND TREATMENT OF MEDICAL WASTE: ALL HOSPITALS AND

CLINICS

The Provincial Tender Board at its meeting of the 10 February 1998 directed the Department that all hospitals and clinics should employ the approved tenderers for the removal and treatment of all medical waste (copy of letter ref. No. NW 270/97 dated 13.02.98 is attached).

You are therefore kindly requested to ensure that hospitals and clinics comply with the directive of the Tender Board. Our failure to honour the contract may have serious legal implications, hence the request to make use of the approved tenderers as soon as possible.

Your co-operation in this regard will be appreciated.

DEPUTY DIRECTOR GENERAL: HEALTH AND DEVELOPMENTAL SOCIAL WELFARE”

[13] Clearly, both the Tender Board and the Defendant were at all times aware that the Defendant had bound himself, in the case of the Plaintiff, to utilize the services of the Plaintiff in all the specified hospitals and clinics. They knew, correctly so, that their failure to honour these contractual obligations could have serious legal consequences for the Defendant. They did not raise clause 62 as a defence. On the contrary, they urged their institutions to comply with the contract.

[14] The above understanding of what the relevant contract entailed was shared by both parties to the contract. The Plaintiff, knowing the nature and extent of the services it was expected to render to the hospitals and clinics in question, employed about 9 more people so as to enhance its capacity to meet its obligations and upgraded its facilities so that it could satisfy the relevant legal requirements. All the hospitals and clinics were visited more than once, by Mr Fourie, were told and reminded that the Plaintiff’s services were available to them and that if their staff required any training the Plaintiff was ready to give such training. As I said above, only two hospitals made use of the services. I say the above, being alive to some unsubstantiated allegations by some hospitals, contained in letters whose authors were not called to testify, also alluded to by Mr Fourie, that they used their incinerators or those of Public Works instead of the Plaintiff’s services. This was challenged by Mr Fourie on the basis that the alleged State incinerators were not fit for use since they did not meet the minimum legal requirements and no evidence was led to the contrary. Besides the contract is not all about incinerators. It is about the loading, removal, treatment and disposal of all medical waste. An unsubstantiated reliance on one item (to wit incineration) for an unspecified number of health care facilities, could not have relieved the Defendant of his broader responsibility.

[15] The Defendant also sought refuge in a statement in the letter of acceptance that says ‘This acceptance letter is not an official order, consequently no supply/service must be carried out until an official order has been received from the department concerned.’

Mr Fourie who had been awarded State tenders for the period of 10 years preceding the awarding of this controversial tender said that, in order to justify payment, all services rendered to the State must be preceded by some written request or order for those services. This was not challenged by the Defendant. The only statement that is a remote semblance of a challenge to this direct evidence is a non-committal response by Mr Lujabe to a leading question by counsel for the Defendant as to whether the above statement meant that the contract in question was order-based. Mr Lujabe’s response was ‘you can say so’. Conclusion [16] The contract in question was not concluded for the joy of concluding it and then filing it in the archives of the respective parties. There was good reason for entering into that contract. There were also serious and definite obligations flowing from the contract, which had to be honoured by each party. To that end, the Plaintiff was willing and able to render the services it had undertaken to render to the participating health care facilities from the beginning to the end of the duration of the contract. It invited the Defendant to use its services and tendered those services. It never cancelled the contract but held the Defendant to the terms of the contract. I am also satisfied that the Defendant concluded the agreement with the good intention to honour it. Regrettably, there was a bureaucratic bungle somewhere down the chain of command of the Department as a result of which the Defendant failed to honour his obligations to the Plaintiff as he should have done. [17] In conclusion, I find that the Defendant is liable to the Plaintiff as alleged by the Plaintiff and that the duration of the contract was 12 months.

[15] The Defendant also sought refuge in a statement in the letter of acceptance that says ‘This acceptance letter is not an official order, consequently no supply/service must be carried out until an official order has been received from the department concerned.’

Mr Fourie who had been awarded State tenders for the period of 10 years preceding the awarding of this controversial tender said that, in order to justify payment, all services rendered to the State must be preceded by some written request or order for those services. This was not challenged by the Defendant. The only statement that is a remote semblance of a challenge to this direct evidence is a non-committal response by Mr Lujabe to a leading question by counsel for the Defendant as to whether the above statement meant that the contract in question was order-based. Mr Lujabe’s response was ‘you can say so’.

Conclusion

[16] The contract in question was not concluded for the joy of concluding it and then filing it in the archives of the respective parties. There was good reason for entering into that contract. There were also serious and definite obligations flowing from the contract, which had to be honoured by each party. To that end, the Plaintiff was willing and able to render the services it had undertaken to render to the participating health care facilities from the beginning to the end of the duration of the contract. It invited the Defendant to use its services and tendered those services. It never cancelled the contract but held the Defendant to the terms of the contract. I am also satisfied that the Defendant concluded the agreement with the good intention to honour it. Regrettably, there was a bureaucratic bungle somewhere down the chain of command of the Department as a result of which the Defendant failed to honour his obligations to the Plaintiff as he should have done.

[17] In conclusion, I find that the Defendant is liable to the Plaintiff as alleged by the Plaintiff and that the duration of the contract was 12 months.

Order [18] Accordingly, I make the following order: The Defendant is liable to pay damages to the Plaintiff; The duration of the contract was 12 months; and The Defendant is to pay costs to the Plaintiff. M.T.R.

MOGOENG

JUDGE

PRESIDENT OF THE HIGH COURT

APPEARANCES

DATE OF HEARING : 25 MARCH 2003

DATE OF JUDGMENT : 28 MARCH 2003

COUNSEL FOR APPLICANT : ADV C. ZWIEGELAAR

COUNSEL FOR RESPONDENTS : ADV H. LEVER SC

ATTORNEYS FOR APPLICANT : ABDUL KADER AHMED ATTORNEYS

ATTORNEYS FOR RESPONDENTS : THE STATE ATTORNEY

Order

[18] Accordingly, I make the following order:

The Defendant is liable to pay damages to the Plaintiff; The duration of the contract was 12 months; and The Defendant is to pay costs to the Plaintiff.

M.T.R.

MOGOENG

JUDGE

PRESIDENT OF THE HIGH COURT

APPEARANCES

DATE OF HEARING : 25 MARCH 2003

DATE OF JUDGMENT : 28 MARCH 2003

COUNSEL FOR APPLICANT : ADV C. ZWIEGELAAR

COUNSEL FOR RESPONDENTS : ADV H. LEVER SC

ATTORNEYS FOR APPLICANT : ABDUL KADER AHMED ATTORNEYS

ATTORNEYS FOR RESPONDENTS : THE STATE ATTORNEY