Eskom loses battle to cancel R5.2bn tender
Eskom has suffered an embarrassing defeat in its attempt to cancel a R5.2 billion fuel tender with black-owned company Econ Oil when an arbitrator ruled that a contract existed between the two parties.
Econ Oil had taken the matter to arbitration when the power utility decided to cancel the tender, with Eskom questioning the adjudicator’s jurisdiction on the matter.
The adjudicator, Kevin Trisk SC, said he felt that a valid, binding and enforceable contract was concluded between the parties on November 8, 2019.
He said the conduct of the defendant (Eskom) in denying the existence of a valid contract constituted a repudiation thereof, and that Eskom was obliged to place all of its orders for the supply, delivery and off-loading of fuel oil of various Grade 1, 2 and 3 for its 11 coal-fired power stations under the contract.
“The claimant (Econ Oil) for damages in respect of past breaches of the contract in the sum of R21 618 633 and for damages in lieu of specific performance for every month that the defendant fails to comply with its obligations under the contract in the amounts set out in the claimant’s submissions dated November 2, 2020, provided that the calculation of such damages in lieu of specific performance commences from August 2020,” read Trisk’s ruling.
Econ Oil contended that it was entitled to various species of relief against the power utility.
The company sought relief in the form of a declarator (a legal action by which a judicial declaration of a fact is obtained) to the effect that Eskom, on or about July 31. 2020, repudiated a contract which the company contends it concluded with the parastatal.
Eskom has been denying the existence of the contract with the oil supplier, however, it admitted that a letter of acceptance was awarded to the company.
Eskom spokesperson Sikonathi Mantshantsha said the power utility would currently not comment on this matter.
“Eskom will litigate through the courts, not through the media,” he said.
According to the adjudication report which the Daily News has seen, the claimant (Econ Oil) sought, in effect, four species of relief, namely, that it be declared: that Eskom’s conduct of denying the existence of a valid contract constituted a repudiation of the contract; that, by necessary implication, a valid, binding and enforceable contract was concluded between the parties and that the parastatal is obliged to place all of its orders for the supply, delivery and off-loading of fuel oil of various Grade 1, 2 and 3 for its 11 coal-fired power stations under the contract.
The company also sought damages in respect of past breaches of the contract and for damages in lieu of specific performance for every month that Eskom failed to comply with its obligations under the contract.
“The claimant also seeks costs of the adjudication proceedings. I will not make a decision in regard to such species of relief. The defendant, in its turn, seeks, in essence, two species of relief, namely that: “(a)n adjudicator never has jurisdiction to determine … (whether ‘… parties … have a binding contract …’). Declining to exercise jurisdiction on this basis does not require the adjudicator to decide that no contract exists. The claimant asserts that a letter of award was signed on behalf of the defendant on November 1, 2019 and by the claimant on November 8, 2019”.
The letter, which the Daily News has seen, read: “Dear Madam, this serves as confirmation that a contract is in place between Eskom Holdings SOC Ltd and Econ Oil & Energy (Pty) Ltd for a period of five (5) years for the supply, delivery and off-loading of fuel oil to various Grade 1, 2 and 3 Eskom’s coal-fired power stations Arnot, Hendrina, Duvha North, Grootvlei, Kendal, Komati, Kusile, Lethabo, Matimba and Camden power stations”.
Econ Oil managing director Nothemba Mlonzi could not be reached for comment.
In his assessment, Trisk said: “Businessmen often record the most important agreements in crude and summary fashion; modes of expression sufficient and clear to them in the course of their business may appear to those unfamiliar with the business far from complete or precise. It is accordingly the duty of the court to construe such documents fairly and broadly, without being too astute or subtle in finding defects.
“The documentation which has been considered herein all ineluctably result in the following conclusions, namely, that: the parties sought to conclude a contract for the supply of fuel oil by the claimant to the defendant’s designated ’coal-fired power stations’ at prices and volumes agreed between the parties; and the contract was concluded on November 8, 2019 on the basis that the claimant would be the sole and exclusive supplier of the fuel oil in question in respect of the coal-fired power stations identified; and defendant has refused to honour the contract thus concluded and contends that such contract never came into existence; and as a consequence, has repudiated the contract. I am bound to dismiss the defendant’s contentions and uphold those advanced by the claimant,” said Trisk. Daily News.