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[2021] ZAWCHC 119
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ICT-Works Proprietary Limited v City of Cape Town (6582/2020) [2021] ZAWCHC 119 (18 June 2021)
IN
THE HIGH COURT OF SOUTH AFRICA
WESTERN
CAPE DIVISION, CAPE TOWN
Case No:
6582/2020
In
the matter between:
ICT-WORKS
PROPRIETARY LIMITED
APPLICANT
and
THE
CITY OF CAPE TOWN
RESPONDENT
JUDGMENT HANDED
DOWN ELECTRONICALLY
ON 18 JUNE 2021
FRANCIS,
AJ
Introduction:
[1]
This case concerns a contract concluded in 2011 between ICT-Works
Proprietary Limited
(“ICT”) and The City of Cape Town
(“the City”). The contract was pursuant to a tender for
the installation
and maintenance of an automated fare collection
system for the MyCiti Bus Service.
[2]
The City is a municipality established in terms of Local Government:
Municipal Structures
Act
[1]
which, amongst other things, manages the metropolitan area of Cape
Town. ICT is a company with limited liability duly established
and
incorporated as such according to the laws of the Republic of South
Africa.
[3]
There are two distinct but related applications before this court
with regard to the
contract.
[4]
In the first application, ICT seeks declaratory and interdictory
relief to enforce
the contract until it expires in August 2025 (“the
main application”). While the City accepts that the contract in
its current form expires in August 2025, it opposes the main
application on the basis that the contract is unenforceable due to
a
mistake relating to the duration of the contract and, in addition,
the person signing the contract on behalf of the City lacked
the
requisite authority to sign a contract which expires in August 2025.
In the City’s view, the contract was intended to
be for a
limited period of 7 years and was envisaged to expire in February
2018.
[5]
The second application is a conditional counter-application (“the
self-review
application”) in which the City seeks to review and
set aside decisions of its Council made in 2010 leading to the
conclusion
of the contract, and to declare the contract unlawful. It
also seeks ancillary relief concerning the prospective effect of the
orders sought. ICT opposes the City’s self-review application
and denies that the contract was concluded unlawfully.
Background
[6]
Extensive background information, evidence, and argument was
proffered on a variety
of issues, not all of which are relevant for
the purpose of this judgment as will become evident later.
Accordingly, I recite hereunder
only those facts which I consider to
be immediately relevant to the decision reached. These facts are
largely common cause or not
seriously disputed by the parties.
[7]
On 27 March 2008, the City’s Council resolved to support the
investigation into
the development of an Integrated Rapid Transit
(“IRT”) system for Cape Town based on the concept and
principles of
a Bus Rapid Transit (“BRT”) system. The IRT
system is an initiative intended to transform the public transport
sector
over time by integrating all public transport modes into an
improved and coherent system for the commuter. An integral part of
the multi-modal transport system is the BRT system which consists of
a network of trunk bus and feeder bus services provided throughout
the city that integrates with the Metro Rail Passenger Services,
minibus taxis, conventional scheduled bus services, and metered
taxi
services.
[8]
On 17 July 2009, the City advertised a public tender for the
Automatic Fair Collection
System (“AFC system”), under
Tender No. 24G/2009/10, for the:
“
DESIGN,
SUPPLY, DELIVERY, INSTALLATION, TESTING, AND COMMISSIONING OF THE IRT
FARE SYSTEM, THE SUPPLY AND DISTRIBUTION OF FARE CARDS,
AND THE
PROVISION OF MAINTENANCE AND OTHER RELATED SERVICES
”
(“the tender”).
[9]
The entire project in relation to the tender concerned the MyCiti Bus
Service which
provides bus services in and around various suburbs in
Cape Town and the city centre.
[10]
In the main, implementing the AFC system comprises the design,
installation, commissioning, and
maintenance of automatic control
gates at different bus stations operated with smart cards, and
designing and implementing a technologically
advanced bus fare
collection system that entails the use of a contact list smart card
payment system (“the Works”).
The payment system enables
passengers to “tap on” and “tap off” when
passengers enter into and leave the
station, respectively. The smart
cards are pre-loaded with a specific amount of money and are debited
each time the passenger utilises
the bus service.
[11]
The tender had two distinct components: the one relating to the
implementation and commissioning
of the AFC system and the other
relating to the operation and maintenance thereof.
[12]
As far as the installation and commissioning of the AFC system is
concerned, the tender envisaged
that this would occur in two
milestones: the first milestone was to be completed on 5 May 2010 and
involved the implementation
of a temporary fare system through the
so-called AFC hand-held equipment, while the second milestone was to
be completed on 16
February 2011 and entailed the installation,
testing, and commissioning of the permanent equipment necessary for
the operation
of the AFC system.
[13]
As far as the maintenance and operation services were concerned, the
tender provided that both
shall “
commence on the date that
the Engineer issues a Taking- Over Certificate
” and shall
“
continue until 30 June 2015
”.
[14]
The closing date for the submission of tenders was 4 September 2009,
by which date 4 bidders,
including ICT, submitted tenders.
[15]
After the evaluation of the tenders, ICT was adjudged to be the only
responsive bidder and, on
13 August 2010, the City appointed ICT as
the preferred bidder.
[16]
On 13 August 2010, the City Manager authorised the Manager:
Integrated Public Transport, Mr Bassier,
to engage in negotiations
with ICT to conclude the contract. He, in turn, requested Mr Davie
Bosch (“Mr Bosch”), the
Manager: Business Development on
the Integrated Rapid Transport team, to chair the negotiation
meetings. The City also appointed
its delegated agent, Techso, which
was also the Engineer appointed by the City for the project, to take
part in the negotiations.
[17]
Given the nature and duration of the contract, the City embarked on
the process prescribed in
terms of section 33 of the Local
Government: Municipal Finance Management Act
[2]
(“the MFMA”). Where a contract is intended to last longer
than three municipal financial years, section 33 of the MFMA
requires
a municipality to publicise background information on the proposed
project and invite written comments from the local
community, and
solicit the views of the government departments involved with local
government (“the section 33 process”).The
City initiated
the section 33 process with regard to the IRT project on 25 June 2010
and the public were invited to provide their
comments by 31 July
2010. The various government departments were also requested to
provide their comments.
[18]
In anticipation of the negotiations, the Engineer issued a letter to
ICT which set out the parameters
of the negotiations with regard to
the AFC system tender and, on 14 September 2010, the first
negotiations meeting took place in
Cape Town between representatives
of the City and ICT.
[19]
The draft contract which formed the subject matter of the
negotiations was based on the standard
form FIDIC
[3]
conditions of contract for Plant and Design Build for electrical and
mechanical plant, and for building and engineering works,
designed by
the Contractor (First Edition, 1999 – the so-called “Yellow
Book”). A series of meetings were thereafter
held between the
parties, with the Engineer providing report-backs to the City.
[20]
On 8 November 2010, the City’s Bid Evaluation Committee (“BEC”)
presented its
report to the City’s Bid Adjudication Committee
(“BAC”) about the proposed contract. The report recorded
that
the subject matter of the report was a 7-year contract for the
implementation, operation and maintenance of the AFC system, that
approval had been granted to appoint ICT as the preferred bidder,
that negotiations were concluded with ICT, and that approval
was now
being sought for an award of the tender by the BAC.
[21]
The BAC met on 8 November 2010 and awarded the tender to ICT, subject
to the approval of the
City’s Council in terms of section 33 of
the MFMA. The BAC resolved that “
for the reasons set out in
the report and subject to Council approval in terms of Section 33 of
the MFMA and subject to confirmation
that sufficient funding is
available for the duration of the tender, the offer submitted by
[ICT] … be accepted in the negotiated
total amount not
exceeding R376 285 716.09 (incl. VAT) from date of
commencement of contract for a period of 7 years
for maintenance,
warranties and operations”
. The resolution records that the
BAC also confirmed that the maintenance was included in the 7-year
contract.
[22]
On 15 November 2010, the Engineer provided a final report back to the
City. The Engineer reported
that the negotiations had highlighted the
necessity for a Schedule of Deviations. On 16 November 2010, the
Engineer e-mailed the
City’s Senior Legal Advisor, Ms Maureen
Whare (“Ms Whare”), about the different sets of documents
that would
form part of the final contract and raised the issue of
the Schedule of Deviations and posed various questions I relation
thereto.
On 17 November 2010, Ms Whare responded to the Engineer by
interpolating her answers into the Engineer’s e-mail.
[23]
On 26 November 2010, Mr Bosch attached the proposed Schedule of
Deviations to an e-mail which
he sent to the Engineer. The proposed
Schedule of Deviations comprised 13 pages. Pages 10 and 11 of the
Schedule of Deviations
records the amendment of clauses 13B.2 (b) and
13B.6 (b) of the proposed contract which deals with the commencement
and termination
periods for the maintenance and operations services,
respectively.
[24]
The effect of the proposed amendments was that the maintenance and
operations part of the project
would commence from the issuing by the
Engineer of a Taking-Over Certificate once the Works had been
completed and would continue
thereafter for a period of 7 years.
[25]
On 25 November 2010, the City presented a report (written by Ms
Whare) to the Mayoral Council
(“MAYCO”) in relation to
the approval sought from the Council for the award of the tender in
terms of section 33 of
the MFMA (“the section 33 report”).
[26]
The section 33 report is extensive. The executive summary states that
on 27 October 2010, the
Council approved the updated Business Plan
for Phase 1A of the MyCiti IRT project and that the Business Plan had
provided for the
appointment of contractors for the AFC system “
for
a seven-year period”
.
[27]
The report summarised the outcome of the public consultation process
undertaken by the City as
prescribed in the MFMA. In relation to the
AFC system contract, the section 33 report observed that “
(t)his
proposed seven-year contract is for the implementation, operation and
maintenance of an AFC system for the [integrated rapid
transit]
system …
”
[28]
The section 33 report recommended that the Council take into account,
with regard to the AFC
system contract, that the financial
obligations for each financial year of the AFC system contract were
covered as follows:
Cost
2010/11 YR 1
(R m)
2011/12 YR 1
(R m)
2012/13 YR 1
2013/14 YR 1
(R m)
2014/151 YR 1
(R m)
2015/16 YR 1
(R m)
2016/17 YR 1
(R m)
Total
Capital
77.08
186.36
40.80
7.66
7.76
7.87
8.10
335.63
Operation
0.72
.
13.27
14.15
15.23
16.47
17.83
77.66
Total
77.89
186.36
54.07
21.80
22.99
24.34
25.92
413.29
[
29]
The section 33 report went on to record that the financial
obligations were “
to be funded as
follows:
·
Through a total budgetary provision of R335.63
million over a 7 year period which is to be funded from the Public
Transport Infrastructure
and Systems grant (PTISG), and
·
Through a total operating budgetary provision
over 7 years of R77.66 million, which will be paid for partially from
the operational
income and, in so far as it will not be covered, has
been included in the budgeted net Operating System Deficit provision
for the
IRT. This is initially funded from the Rates with a
possibility of finding a partially from the Public Transport
Operating Grants
(PTOG), whom access to the grant is secured as is
supported by national policy. The National Department of Transport
(NDOT) has
agreed that as a transitional measure over the first three
years, the PTOG can be utilised in as far as the deficit is covered
through the above mechanisms to allow time for the PTOG arrangements
to be finalised”.
[30]
Section 7 of the section 33 report provides the background to the
public consultation process
that was undertaken. It also discusses
the reasons for the proposed 7-year term of the tender. Table 1 in
section 7.5 of the section
33 report summarised comments received by
the City. The fourth row of the table discloses that the length of
contracts publicised
by the City was for 7 years, and that the
National Treasury had supported the proposed 7-year contract period
whilst the provincial
government had taken a view that a longer
contract was justified. The City’s response was that “
(s)etting
the contract lengths at seven years with an obligation on the
suppliers to ensure the efficient running of the systems
over the
whole period creates an Incentive on the part of the part of the
supply to ensure that the initial implementation is of
a high
quality.
”
[31]
The section 33 report concludes by listing its appendices. Appendix
IV was described as a “
CD to reach [the Council] by 26
November – Fare System: Full Contract …
”
[32]
On 1 December 2010, the City’s Executive Mayor placed the
section 33 report on the agenda
for Council’s consideration at
the Council meeting to be held on 9 December 2010.
[33]
The Executive Mayor recommended to Council that it:
[33.1] Take
into account that the financial obligations of the City were for 7
years. The operating and capital budget for
each of these years from
2010/2011 through to 2016/2017 was reproduced from the table in the
section 33 report setting out the
City’s financial obligations.
[33.2] Take
into account that the obligations were to be funded through a total
capital budget which was to be funded from
the Public Transport
Infrastructure and Grant System, partially from operational income,
initial funding from rates, and the possibility
of partial funding
from the Public Transport Operating Grant.
[33.3] Support
the inclusion of the required operating and capital budgetary
provisions to cover the Automatic Fare Collection
System contract for
the 7-year contract period in the Medium-Term Revenue and Expenditure
Framework (MTREF) for the City in the
total amount of R376 285.09
(incl. VAT) plus R37 000 000.00 (incl. VAT) for the
estimated contract price adjustment
for a 7-year period.
[33.4] Approve
the entire specific contract documents relating to the AFC system
tender.
[33.5]
Authorise the City Manager or his delegate to sign the contract for
the tender.
[34]
The Council adopted all the recommendations of the Executive Mayor at
its meeting held on 9 December
2010. In addition, the Council
resolved that:
[34.1] The
terms of the contract were noted.
[34.2] As
prescribed by section 33 of the MFMA, “
a recommendation was
to be submitted to MAYCO for recommendation to Council, to the effect
that:
(i)
The Council is satisfied with the City of
Cape Town (“the City”) will secure a significant capital
investment or will
derive a significant economic or financial benefit
from the contract;
(ii)
It approves the entire contract exactly as
it is to be executed;
(iii)
It authorises the City Manager to sign the
contract on behalf of the City of Cape Town.
”
[35]
The City explains, in its answering affidavit in the main
application, that it cannot “
establish with certainty
whether or not the Schedule of Deviations was provided to Council on
9 December 2010
” because it was unable to find, in its
records, a copy of the CDs on which would have been stored the full
contract with
the Schedule of Deviations. Mr Bosch’s evidence
is that he believes that the Schedule of Deviations would have been
included
in the CD which, in turn, would have served before the
Council.
[36]
On 24 February 2011, Mr Marsden signed the contract on behalf of the
City; the contract had already
been signed by ICT.
[37]
The contract provides that it will be in two phases:
[37.1] The
first phase is the implementation phase. It involves the construction
and
installation of the
relevant Works. It commences on 25 February 2011, and continues until
the Engineer issues a Taking-Over Certificate.
[37.2] The
second phase is the maintenance phase. It commences when the
Taking-Over Certificate is issued and continues for
a period of seven
years
[38]
The issue of the duration of the contract arose in October 2015
during an exchange of correspondence
between Ms Greenwood, the City’s
AFC Project Manager representing the City, and ICT on when the
maintenance period would
commence in the context of the change in the
milestones that had been agreed by the parties. The City eventually
accepted ICT’s
explanation that the maintenance period of the
contract commenced on the issue of the Engineer’s Taking-Over
Certificate.
[39]
There was some delay in the completion of the Works, and the Taking
Over Certificate was only
issued by the Engineer on 2 August 2018.
The Engineer also certified that the implementation phase was
completed on 1 June
2018. In terms of the contract signed by the
parties, this means that the maintenance period would commence from
the issue of the
Taking-Over Certificate on 2 August 2018 and
continue for a period of 7 years thereafter. In effect, the total
contract period
was more than 14 years.
[40]
On 30 November 2018, the City wrote to ICT stating it had been
reviewing all existing contracts
for compliance with section 33 of
the MFMA and it was discovered that in terms of the section 33
process embarked on by the City,
the contract period was in fact 7
years. The City, therefore, concluded that the contract was no longer
valid as it had expired
on 28 February 2018 (7 years after the
commencement date of 28 February 2011)
[4]
.
[41]
On 13 December 2018, ICT replied that the contract terms were clear,
and that the City was required
to abide by them.
[42]
After taking legal advice, on 25 July 2019, the City advised ICT that
the City Manager maintained
that the contract had expired in February
2018, that the City would seek condonation to extend the contract,
and would issue a
formal letter after meeting with the City’s
Legal Services Unit the following day.
[43]
In August 2019, the City failed to pay the ICT invoice for June 2019.
[44]
After meetings to attempt to resolve the impasse, ICT and the City
signed another contract, Contract
2A, in order to facilitate payment.
The City then resumed payment for the work which was completed under
the AFC system contract.
[45]
On 27 March 2020, the City issued a new Tender, “
TENDER
NO: 295S/2019/20 – SUPPLY, INSTALL, COMMMISION, OPERATE AND
MAINTAIN THE IRT FARE SYSTEM AND OTHER-RELATED SERVICES
”
which was essentially the same as the AFC system tender for which ICT
had been appointed.
[46]
On 8 June 2020, ICT launched an urgent application, seeking an
interim interdict precluding the
City from making a new tender award
pending the finalisation of an application for a final interdict.
[47]
On 29 June 2020, ICT and the City concluded a further contract for
the continued provision of
services by ICT. This was without
prejudice to the rights and remedies of either of the parties under
the AFC system contract,
and their dispute with regard to the
validity and duration of this contract.
[48]
In July 2020, the parties agreed to an order providing a timetable
for this matter. In accordance
with that agreement, ICT delivered a
revised notice of motion on 21 July 2020.
[49]
On 26 October 2020, the City filed its conditional
counter-application, in which it sought:
[49.1] The
review and setting aside of the Council’s approval of ICT’s
tender for the contract, its approval of
the AFC system contract, and
its authorisation of the City Manager or his delegate to sign the
contract on behalf of the City.
[49.2] A
declaration that the contract was unlawful and invalid to the extent
that it was inconsistent with the approvals
granted in terms of s 33
of the MFMA by providing for a 7-year operations and maintenance
period after the issuing of a Taking-Over
Certificate.
Issues and
submissions
[50]
It is common cause that the contract as currently worded runs until
August 2025. This is apparent
from the Schedule of Deviations and the
Taking-Over Certificate issued by the Engineer.
[51]
ICT relies on the plain wording of the contract and seeks a
declaratory order that the contract
is still extant and continues
until August 2025.
[52]
The City, on the other hand, contends that it was always intended
that the total contract period
would be for seven years. The City
alleges that the amendment of clauses 13B.2 (b) and 13B.6 (b)
discloses a mistake which was
unnoticed because Ms Whare and the
Engineer did not work initially with the Schedule of Deviations but
with phrases disembodied
from their contractual context. They had
intended merely to effect changes to the contract to cater for the
considerable time which
had elapsed since the contract had been put
out to tender. Furthermore, Mr Marsden did not have the authority to
sign a contract
binding the municipality to a contract which was, in
effect, for more than 14 years instead of the 7 years as intended by
the City.
Accordingly, the City is of the view that the contract has
lapsed and is of no force or effect.
[53]
ICT bases its claim for the enforcement of the contract in the main
application on the law of
contract. Similarly, the City also relies
on the private law of contract - mistake and lack of authority - to
avoid being bound
by the AFC system contract. Out of an abundance of
caution, the City has applied by way of a counter-application for an
order declaring
the contract to be invalid as it was not in
compliance with section 33 of the MFMA.
[54]
The City has sought to argue that its defences of no authority and
mistake are contractual defences
which arise from facts which
occurred after the award of the tender. In this regard, the City
places great weight on two decisions:
Cape
Metropolitan Council v Metro Inspection Services (Western Cape) CC
and Others
[5]
and
Government
of the Republic of South Africa v Thabiso Chemicals (Pty) Ltd
[6]
.
In
Thabiso
Chemicals
,
Brand JA held that, once the tender in that case was awarded, the
relationship between the parties was governed by the principles
of
contract law
[7]
.
[55]
These cases, however, do not assist the City. They concern conduct
after
the
conclusion of the contract. When the contract terms were being
negotiated, ICT was a preferred bidder and the tender had yet
not
been awarded to it. The tender was only awarded after Mr Marsden had
signed the contract and the City Manager had notified
ICT that the
City had awarded the contract to it (ICT)
[8]
.
[56]
The decision by the City to conclude the contract is public in
nature. It has obvious impacts
on the public and the public interest
(not to mention the use of public funds). And it was made within the
legislative and regulatory
framework governing local government,
including the MFMA. In
Polokwane
Local Municipality v Granor Passi (Pty) Ltd and another
[9]
,
Wallis JA dealt as follows with the submission that a resolution
taken by a municipality in relation to a contract was contractual
and
could not be reviewed and set aside under PAJA:
The resolution
undoubtedly embodied a decision. Was it of an administrative nature?
In my view a decision regarding the implementation
of a contract to
which the municipality is a party is an act of administration. It was
taken by an organ of state, exercising a
public power or function in
relation to the enforcement of a contract concluded in terms of the
empowering provisions governing
transactions of this character. It
had a direct, external legal effect and adversely affected Granor’s
rights. It did not
fall within any of the statutory exceptions.
Accordingly, it was administrative action and reviewable under PAJA.”
[57]
When Mr Marsden signed the contract, he was not exercising a power in
terms of a clause in the
contract and he was not exercising a private
contractual power. He was exercising a public power, delegated to him
by the City
Manager, whose powers to conclude a contract are governed
by statute (the MFMA). Furthermore, Mr Marsden did not exercise an
independent
discretion when signing the contract but was merely a
signatory to a contract which had already been negotiated and which
the Council
had resolved to accept. Such conduct plainly falls within
the ambit of administrative action (and is in any event the exercise
of public power).
[58]
In my view, whether or not specific performance should be granted or
whether the City should
be allowed to escape the consequences of the
contract through mistake or lack of authority, depends on whether or
not the contract
is lawful. If the contract is unlawful, any acts (or
decisions) taken as a consequence of the unlawful contract are
rendered invalid.
[10]
[59]
Fundamental to the resolution of both applications is the answer to
the question: was the municipality
empowered to conclude the contract
that it did or, put differently, was the contract lawfully concluded
in compliance with the
legislative prescripts which had to be
followed in concluding the contract? As the Constitutional Court
remarked in
Fedsure
Life Insurance Ltd and Others v Greater Johannesburg Transitional
Metropolitan Council and Others
[11]
:
“…
a
local government may only act within the powers lawfully conferred
upon it. There is nothing startling in this proposition –
it is
a fundamental principle of the rule of law, recognised widely, that
the exercise of public power is only legitimate were
lawful. The rule
of law – to the extent at least that it expresses the principle
of legality – is generally understood
to be a fundamental
principle of constitutional law”.
(footnote
omitted)
[60]
The City submitted that it is not obliged to bring a review
application in circumstances where
the contract was purportedly not
properly concluded (because of a mistake or lack of authority) or had
lapsed due to the effluxion
of time. The City’s contention is
without legal foundation. The Constitutional Court has held that
organs of state may not
engage in self-help when they contend that
there has been an irregularity in public administration: they are
obliged to approach
the courts to determine the question
[12]
.
[61]
The City does not dispute that its powers to contract are derived
from and limited by the MFMA.
That is public power. Alleged
non-compliance with the MFMA is at the core of the City’s
case. Mr Marsden’s actions
stand unless reviewed and set
aside as long as he was purportedly exercising a power derived from
statute and doing so for the
purpose of concluding a public contract.
As Counsel for ICT argued, the decision to conclude a contract, and
the actual conclusion
of it through signature, are inseparable: they
stand or fall together.
[62]
Logically, the same principle must apply to the contractual defence
of mistake. The foundation
of the two defences is the same, namely a
lack of consensus between the parties - in the one case, because of
the content of the
contract, and in the other case, because of the
lack of authority to bind one of the parties. If an allegation of
lack of authority
gives rise to the need for review, so, too, must
the allegation of mistake.
The
counter-application
[63]
In its conditional counter-application, the City seeks to set aside
its decision of 9 December
2010 to approve the contract in terms of
section 33 of the MFMA, and its decisions to approve the tender and
to authorise its City
Manager or his delegate to sign the AFC system
contract on behalf of the City. The City contends that the Council
did not approve
the entire contract exactly as it was executed, as
required by sub-section 33(1)(c)(iii) of the MFMA.
[13]
Accordingly, the decision did not comply with a mandatory and
material procedure or condition prescribed by the MFMA, and
thus
contravenes the MFMA.
[64]
The City is candid (and it is common cause) that there is doubt as to
whether or not the full
Schedule of Deviations served before the
Council. However, according to the City, this issue is unimportant
because the recommendation
upon which the resolution was based
presupposed a 7-year contract and not a contract in excess of 14
years.
[65]
For its part, ICT opposes the counter-application on three grounds:
[65.1]
firstly, the City’s review application is unreasonably and
impermissibly late;
[65.2]
secondly, non-compliance with section 33 of the MFMA does not
automatically result in nullity as the Council complied
with the
provisions of section 33 of the MFMA in its decision-making process;
and
[65.3]
thirdly, even if the City’s arguments about section 33 of the
MFMA are correct, the City’s conduct was
unconscionable when
measured against the constitutional principles of reliance,
accountability and rationality and, in light of
its conduct, the City
should be estopped from raising the alleged invalidity of the
contract.
[66]
Before considering the submissions of the parties, it is necessary to
consider the general legal
principles that have evolved relating to
the principle of legality and self-review by organs of state, as well
as the relevant
legislative instruments against which the City’s
conduct is to be measured.
The principle of
legality and self-review
[67]
The principles governing self-reviews by organs of state and reactive
challenges to extant administrative
and executive decisions appear to
be settled, and it is possible to distil the following principles
from the existing legal authorities:
[67.1] Organs
of state acting in their own interest and seeking to set aside their
own decisions, must rely on the principles
of legality and may not
rely on the Promotion of Administrative Justice Act 3 of 2000
(“PAJA”)
[14]
.
However, there is very little distinction between the grounds of
review of administrative action under PAJA and the review
of
executive action under the principle of legality. Plaskett AJA (as he
then was) on behalf of the Supreme Court of Appeal, explained
this in
Minister
of Home Affairs and Another v Public Protector
[15]
“…
broad
grounds going to the lawfulness, procedural fairness and
reasonableness of official decisions have been recognised …
The only difference in the grounds of review that I can discern at
present is that those exercising executive power have been exempted
from having to act fairly … and disproportionality (as an
aspect of unreasonableness) has not yet been recognised as a ground
of review…
”
Thus, those
exercising executive power may rely on the PAJA grounds of review in
a legality review except those grounds relating
to reasonableness and
procedural fairness, and they may also rely on procedural
rationality
[16]
.
[67.2]
Decisions made by organs of state which are not challenged in the
appropriate proceedings, by the right parties seeking
the right
remedy, at the right time, are treated as effective and binding,
unless they are set aside by a court – even if
the decisions
may be vitiated by some irregularity
[17]
.
As the Supreme Court of Appeal observed in
Minister
of Home Affairs and Another v The Public Protector,
“
until
a court is appropriately approached and an allegedly unlawful
exercise of public power is adjudicated upon, it has binding
effect
merely because of its factual existence
”
[18]
.
[67.3] Once
the subject has relied upon a decision, a government cannot, barring
specific statutory authority, simply ignore
what it has done. Organs
of state are not entitled to simple disregard administrative actions,
even if they believe the decisions
to be unlawful, unless and until
those decisions are set aside by a competent court. To do otherwise,
would be impermissible self-help,
which is contrary to the rule of
law
[19]
. Organs of state have
a higher duty to respect the law, to fulfil procedural requirements,
and to respect rights when doing so
[20]
.
[67.4] Where
an administrative decision has not been frontally challenged in
review proceedings, and a party challenges its
validity in opposing
proceedings in which the other party relies on the decision, the
party impugning the decision raises what
the Constitutional Court
terms a “reactive challenge”
[21]
.
Where the party concerned was aware of the decision, and a legal
challenge was immediately available to it, the delay rule plays
an
important role
[22]
.
[67.5] The
delay rule applies to reviews under the principle of legality. It
requires a party to institute review proceedings
within a reasonable
time. The Constitutional Court has emphasised that this requirement
is informed by the constitutional duty
on all organs of state to
perform their constitutional obligations without undue delay
[23]
.
The requirement “
is
based on sound judicial policy that includes an understanding of the
strong public interest in both certainty and finality. People
may
base their actions on the assumption of the lawfulness of a
particular decision and the undoing of the decision threatens a
myriad of consequent actions”
[24]
.
[67.6] The
issue of delay is determined by using a two-stage process.
[25]
[67.7] In the
first stage, the court determines whether the delay is unreasonable
or undue. This is factual enquiry in which
all relevant circumstances
are considered, and the court makes a value judgment
[26]
.
The court will consider the explanation provided for the delay and
the explanation should cover the entire period of the delay.
Where
there is no explanation, the delay will necessarily be
unreasonable
[27]
.
[67.8] In the
second stage, if the delay is unreasonable, the court must determine
whether it should exercise its discretion
to overlook the delay to
entertain the application
[28]
.
There must be a good reason for the court to do so, based on
objective facts. The test is flexible and is informed by several
factors:
[67.8.1]
The potential prejudice to affected parties as well as the possible
consequences of setting aside the impugned decision, and any
prejudice may be ameliorated by the court’s power to grant just
and equitable remedies
[29]
.
[67.8.2]
The nature of the impugned decision. This requires a court to
somewhat consider the merits of the challenge
[30]
.
[67.8.3]
The conduct of the party bringing the review. In
Buffalo
City
,
Theron J held that “
[t]his
is particularly true for state litigants seeking to review their own
decisions for the simple reason that often they are
best placed to
explain the delay
”.
[31]
[67.9] Where a
court refuses to determine the validity of a decision (even a
decision vitiated by irregularity) as a result
of unreasonable delay,
the delay “
in
a sense would … ‘validate’ nullity
”
[32]
.
The rationale behind this principle is the need for certainty and
finality for both parties affected by a decision as well as
the
administration of the state.
[67.10]
In exceptional cases, even if a review is unreasonably late and there
is no basis to overlook
the delay, a court may still be required to
declare conduct unlawful
[33]
.
This principle – the so-called “
Gijima
principle” – applies only where “
the
unlawfulness of the impugned decision is clear and not disputed
”
[34]
.
In
Buffalo
City
,
Theron J held that this principle must be “
interpreted
narrowly and restrictively so that the valuable rationale behind the
rules on delay are not undermined
”
[35]
.
The regulatory
framework for the acquisition of goods and services
[68]
Every municipality must have and implement a supply chain management
policy (“SCM policy”) that
gives effect to the MFMA’s
requirements relating to supply chain management
[36]
.
In reflecting the principles of section 217(1) of the Constitution,
the SCM policy must be “
fair,
equitable, transparent, competitive and cost-effective
”
[37]
.
The City has adopted a SCM policy
[38]
which is in accordance with the MFMA and the
Municipal Supply Chain
Management Regulations issued
by the National Treasury.
[39]
[69]
A municipality’s SCM policy is not only an internal management
document that binds the municipality
in the execution of its
procurement activities but it is also a public document to which
parties wishing to participate in tendering
processes have a right of
access and they must comply with these rules when they participate in
any tenders
[40]
.
[70]
In general, councillors are prohibited from being involved in
procurement matters and may not be members
of bid committees or
attend bid committee meetings
[41]
.
An exception is made when it comes to the procurement of goods and
services which involve long-term financial commitments for
a
municipality. In contracts of this sort, the council takes centre
stage. However, until final approval by the council of a contract
with long-term financial commitments, the usual procurement
procedures must be followed
[42]
.
[71]
If a municipality wishes to enter into long-term contracts that may
impose financial obligations on the municipality
beyond the 3 years
covered in its budget
[43]
,
section 33
of the MFMA provides that a municipality may enter into
such contracts only if:
“
(a)
The municipal manager, at least 60 days before
the meeting of the municipal council at which the contract is to be
approved –
(i)
Has in accordance with section 21A of the
Municipal Systems Act –
(aa)
made public the draft contract and an information statement
summarising the municipality’s
obligations in terms of the
proposed contract; and
(bb)
invited the local community and other interested persons to submit to
the municipality
comments or representations in respect of the
proposed contract; and
(ii)
has solicited the views and
recommendations of -
(aa)
the National Treasury and the relevant provincial treasury;
(bb)
the national department responsible for local government; and
(cc)
if the contract involves the provision of water, sanitation,
electricity, or any other service as may
be prescribed, the
responsible national department;
(b)
the municipal council has taken into account -
(i)
The municipality’s projected
financial obligations in terms of the proposed contract for each
financial year covered by the
contract;
(ii)
the impact of those financial obligations
on the municipality’s future municipal tariffs and revenue;
(iii)
any comments or representations on the
proposed contract received from the local community and other
interested persons; and
(iv)
any written views and recommendations on
the proposed contract by the National Treasury, the relevant
provincial treasury, the national
department responsible for local
government and any national department referred to in paragraph (a)
(ii) (cc); and
(c)
the municipal council has adopted a resolution in which -
(i)
it determines that the municipality will
secure a significant capital investment or will derive a significant
financial economic
or financial benefit from the contract;
(ii)
it approves the entire contract exactly as
it is to be executed; and
(iii)
it authorises the municipal manager to
sign the contract on behalf of the municipality.
”
[72]
It is apparent from the plain wording of section 33 of the MFMA that:
[72.1]
The draft contract which the municipality proposes to conclude must
be publicised and circulated for comment;
[72.2]
The municipal council must carefully consider the municipality’s
projected financial obligations for each
financial year covered by
the contract and how those obligations will impact on future
municipal tariffs and revenue;
[72.3]
The municipal council must consider the comments, representations,
views, and recommendations received on the
proposed contract;
[72.4]
In adopting the resolution, the municipal council must be satisfied
that the municipality will secure significant
capital investment or
derive significant financial economic benefit from the contract;
[72.5]
The municipal council must approve the entire contract exactly as it
is to be executed – this assumes that
the contract to be
executed is placed before the council when it makes its decision; and
[72.6]
The municipal council must authorise the municipal manager to sign
the contract, which the council has viewed
and approved, on behalf of
the municipality.
[73]
Section 33 of the MFMA is important when viewed within the context of
a council’s strategic responsibility
for preparing a financial
plan as part of its budgetary process for the municipality. Contracts
that will last longer than 3 financial
years impacts on municipal
budgets and, hence, on future municipal tariffs and other revenue
sources to cover the expenditure for
the project. Indeed, budgets are
a central element of a council’s financial duties and functions
and it is one of those functions
that cannot be delegated
[44]
.
It is, therefore, particularly important, as a general principle,
that there is compliance with section 33 of the MFMA. This is
underscored by section 19(1)(c) of the MFMA which states that a
municipality may only spend money on a capital project if “
section
33 (of the MFMA) has been complied with, if that section applies to
the project concerned
”
.
Was there an
unreasonable delay?
[74]
There is no dispute that, objectively, the City delayed in launching
its counter-application
for self-review. The City’s Council
took a decision on 9 December 2010 to approve the contract which then
commenced on 25
February 2011. The City launched a reactive
counter-application on 26 October 2020, that is, more than nine years
and eight months
after the Council took the decision.
[75]
ICT submitted that the City’s delay in prosecuting its review
application is impermissibly
unreasonable and has furnished lengthy
submissions in this regard. The City, on the other hand, alleges that
it has provided a
proper explanation for its delay and that, at a
factual level, there was no unreasonable or undue delay.
[76]
I deal hereunder with only those aspects of the City’s delay
that I deem relevant
in assessing the issue of the delay:
[77]
There is no explanation whatsoever for the delay between February
2011 (when the contract
was concluded) and August/September 2018 when
the City states it discovered the irregularity whilst conducting a
review of all
existing contracts to ascertain compliance with section
33 of the MFMA. In
Buffalo
City
,
the Constitutional Court noted that, “
municipalities
must have effective structures and mechanisms in place to ensure
proper oversight for its service delivery project.
This is one of its
core responsibilities. It must detect and prevent the abuse of
taxpayers’ monies. A lack of effective
oversight leads to a
dysfunctionality within the municipality by creating loopholes for
fraud and corruption
”
[45]
.
[78]
Municipalities are obliged in terms of section 116(1) of the MFMA to
conduct a periodic review
of all contracts once every three years in
the case of contracts for longer than 3 years. If the City had in
fact conducted a proper
review and complied with its statutory
obligation, it may well have uncovered the discrepancy much sooner,
as indeed it did during
the review of contracts conducted in
August/September 2018. The failure to provide an explanation for this
delay makes the delay
unreasonable
[46]
.
[79]
In the City’s replying affidavit in the counter-application,
the deponent, Mr Fortune,
states as follows with regard to the
August/September 2018 review:
“
The review
established that the section 33 process that had been followed did
not allow for a contract of longer than seven years
duration. On the
basis of this, the City Manager concluded that the contract was no
longer valid
”.
This is the
self-same basis on which the City now brings its self-review
application. If the City was serious about correcting its
non-compliance with section 33 of the MFMA, this would have been an
ideal opportunity to do so and one would have expected the
City to
have immediately taken the necessary legal steps to correct the
situation. However, it did not do so.
[80]
Between October 2018 and July 2019 (a period of approximately nine
months),
the City engaged ICT on the validity of the contract and
also sought legal advice from its internal and external legal
advisors.
The City’s explanation for this nine-month delay is
unreasonable since the Municipal Manager had already taken a firm
view
that the contract was unlawful in August/September 2018 and this
was communicated to ICT.
[81]
The City entered into a further additional contract (Contract 2A)
with ICT
in July 2019. Having done so, surely the Municipality must
have by then decided that the AFC system contract was at an end.
However,
it did not nothing much between July 2019 to 27 Mach 2020
(approximately eight months) when the City issued a new tender. In
the
absence of an explanation, the eight-month delay is unreasonable.
[82]
After the City issued a new tender on 27 March 2020, it engaged in
settlement
negotiations from mid-April to late May 2020, which
negotiations were unsuccessful. Again, a period of two months had
lapsed (March
to May 2020) for which there is no reasonable
explanation. What negotiations would have achieved in the light of a
clear and material
irregularity, is unclear. Settlement negotiations
could not cure the irregularity, especially when this irregularity
had an impact
on budgetary processes. Accordingly, this two-month
delay, too, is unreasonable.
[83]
The City knew from at least September 2018 that the contract was
unlawful for lack of compliance
with section 33 of the MFMA and yet
it waited until 6 June 2020 for ICT to launch the main application
before the City decided
to file its counter-application which was
done on 26 October 2020. The City provided no explanation for certain
periods of the
delay and those periods where it did provide an
explanation, the explanations provided were largely unsatisfactory.
Indeed, having
regard to the City’s explanations for the delay,
it is difficult not to conclude that the City’s delay in
bringing
the self-review was not only unreasonable but egregious.
Should
the delay be overlooked?
[84]
In deciding whether or not to overlook the City’s unreasonable
delay, it is necessary to
consider the nature of the impugned
decision and the conduct of the City in approaching this court. Each
of these factors must
be considered separately and the latter alone
is sufficient to refuse to overlook the delay
[47]
.
[85]
Regarding the nature of the impugned decision, the City contends that
the contract is invalid
because it is in breach of section 33 of the
MFMA in that it is more than 7 years in duration. I agree. From the
evidence placed
before this court, it is apparent that the City’s
section 33 resolution of 9 December 2010 was based on the
recommendation
of the Mayoral Committee of 1 December 2010. This
recommendation, in turn, was based on the report of the BAC which
was, in turn,
based on the report of the BEC. All the reports and
recommendations disclosed that the intended contract period for the
entire
contract, including both construction and maintenance, was 7
years. The information statement that was publicised in terms of the
section 33 process makes it clear that the contract period was for 7
years, and the engagement with national and provincial departments
was based on a 7-year contract period. Indeed, the City stoutly
defended its stance that the contract should not be longer than
7
years. Crucially, the financial obligations for each of the 7
financial years were disclosed in the recommendation and the
subsequent
Council resolution.
[86]
It is so that there is some doubt whether or not the full Schedule of
Deviations, disclosing
in effect a contract in excess of 14 years,
served before the City’s Council. However, what is apparent is
that the recommendation
upon which the resolution was based admits of
no doubt: the Council resolved to conclude a contract which would
endure for only
7 years. Accordingly, the fact that the City
concluded a contract which endures for more than 14 years is a
material irregularity.
[87]
Counsel for ICT argued that the failure to comply with section 33 of
the MFMA does not nullify
the contract. I do not agree. While it is
indeed so that non-compliance with certain statutory formalities may
not lead to nullity,
it is necessary, however, to ascertain whether
there was substantial compliance with section 33 of the MFMA in light
of its purpose
[48]
.
[88]
In my view, the purpose of s 33 of the MFMA is to ensure that the
council is fully apprised of
the financial impact, both in terms of
expenditure and income, of the long-term project on the budget of the
municipality. Given
the budgetary implications of contracts longer
than 3 years, a council ought to consider the sources of funding for
the project
during each financial year in which the contract for the
project is to endure. In this matter, if, on ICT’s argument,
the
contract was to endure for at least 14 years, it means that the
Council would have had to apply its collective mind to how the
expenditure for the AFC system contract would be covered for each of
the 14 years and would have to make provision in its budget
for this
expenditure. However, the financial impact of the project expenditure
after year 7 was not made available to the Council.
[89]
The length of the contract, and its attendant financial consequences,
would of necessity have
a ripple effect on other issues which
required a resolution by the Council, such as whether or not the
project has a financial
benefit. Clearly, the Council could only make
such a determination if it had all the available information at its
disposal for
the entire contract period. In the matter at hand, the
Council only had at its disposal the financial information for 7
financial
years and no longer. It could, therefore, not legitimately
conclude that the City would derive a significant economic financial
benefit from the contract beyond 7 years.
[90]
It was further argued on behalf of ICT that section 33 of the MFMA
does not prohibit contracts
with a variable termination date: it
merely adds a layer of procedure to be followed where a contract will
have financial obligations
for a municipality beyond the 3-year
budget cycle. It was also argued that the contract in this matter was
a standard FIDIC contract
which made provision for the issue of
variation orders where there may be a delay in the completion of the
Works or if the scope
of the Works was to be increased. This would
invariably push forward the completion date of the project.
[91]
However, ICT’s interpretation of section 33 of the MFMA is
difficult to reconcile with
the plain wording of the aforesaid
section which states expressly that a municipality must make
provision for each financial year
of the project. In any event,
if there were to be variation orders during the course of the
contract period which may have
required an extension of the
completion date of the project, clause 232 of the City’s SCM
policy (applicable at that time)
makes provision for such an
eventuality. This clause provides that “
any increase in
contract period must be approved by the BAC and that the community
must be advised of the proposed increase and
be invited to provide
written comments thereon
”. It is common cause that no
application to the BAC was made to increase the contract period after
the commencement of the
contract.
[92]
Furthermore, the section 33 process is not meant to interfere with
the normal procurement process.
The section 33 process concerns
itself with the length or duration of a contract and whether or not
adequate financial resources
are in place to secure the
financial commitments arising from the contract. The Council is not
meant to re-evaluate or re-adjudicate
the tender. Extending the
contract period for longer than 7 years constitutes a material
deviation from the tender document in
relation to the duration of the
contract and, as such, is unfair and in breach of the principles of
fairness, competitiveness,
and transparency
[49]
.
In effect, the contract represents a tender that was materially
different from the one that was evaluated and adjudicated.
[50]
[93]
In my view, it is clear and undisputed that the contract entered into
with ICT for a period in
excess of 7 years was unlawful in that it
contravened section 33 of the MFMA as well as the threshold
requirements of fairness,
competitiveness, and transparency which are
required for a valid procurement process.
[94]
On the other hand, the conduct of the Municipality in bringing this
application proscribes this
court from overlooking the delay. As
counsel for ICT so cogently argued, the City’s vacillating
stance, its resort to self-help,
the unacceptable explanation for the
delay in bringing this self-review application, and its dilatory
attitude, all militate against
this court overlooking the delay. I
agree and am unable to find any basis upon which the delay may be
overlooked.
Relief
[95]
This not the end of the enquiry, however. Even where there is no
basis for a court to overlook
an unreasonable delay, a court may
nevertheless be constitutionally compelled to declare the organ of
state’s conduct unlawful.
As the court observed in
Gijima
,
this is so because section 172(1)(a)
[51]
of the Constitution enjoins a court to declare invalid any law or
conduct that it finds to be inconsistent with the Constitution
[52]
.
In
Buffalo
City,
the Constitutional Court held that the
Gijima
principle
applies “
where
the unlawfulness of the impugned decision is clear and not
disputed
”
[53]
.
[96]
The contract entered into was clearly unlawful on the undisputed
facts before this court with
regard to the section 33 process. This
court must, therefore, declare the contract invalid and set it aside.
The unlawfulness of
the contract entered into with ICT cannot be
ignored and the court is obliged, as in
Buffalo City
and
Gijima
, to set aside a contract it knows to be
unlawful. Of course, the court must make an order that is just and
equitable and which
may ameliorate any hardship which could follow
the declaration of invalidity.
[97]
ICT has argued that it will suffer actual and potential prejudice if
the City’s self-review
application is upheld. In light of the
August 2025 termination date in the contract and the earlier
assurances of the validity
of the contract provided to ICT by the
City, ICT concluded employment contracts, financing contracts, and
lease agreements to ensure
that it could meet its obligations under
the contract.
[98]
While it may be so that ICT may suffer some prejudice, one must take
into account the fact that
ICT is contracted to perform the same
services on the same terms for an uninterrupted period until 30 June
2021,
albeit
under a different contract. This means that
ICT has had the benefits of a contract from March 2018 to June 2021,
that is,
more than three years, without having to tender for it.
[99]
Justice and equity dictate that the City should not benefit from its
unreasonable delay and nor
should ICT be prejudiced by the illegality
of the contract. I, therefore, intend making an order declaring the
contract to be invalid
but not setting it aside retrospectively so as
to preserve the rights which have already accrued to ICT. The order
does not permit
ICT to obtain further rights under the invalid
agreement. The declaration of invalidity shall also not affect any
payments made
by the City to ICT in terms of the contract up to an
including 5 July 2019.
[54]
Costs
[100]
Ordinarily, in a commercial matter like this, even though there are
broad issues of public interest at stake,
costs would follow the
result. Both parties have been partially successful in that the
contract was declared to be unlawful but
has not been set aside
retrospectively and ICT is not divested of its accrued benefits under
the contract.
[101] It
appears to me, however, that ICT should not be mulcted with the costs
of the main application which it brought
in good faith and in the
absence of any indication that the City would invoke reactive relief
under the principle of legality.
The City, too, gave ICT assurances
since at least 2015 up until 2018 with regard to the extended
duration of the agreement and
did not do anything to correct the
situation until ICT instituted legal action.
[102]
The fact that the City has achieved nominal success to the extent
that there is a declaration of constitutional
invalidity, does not
mean that the City should not bear the consequences of its failure to
comply with its constitutional obligation
to approach the court to
correct the irregularity as soon as it was identified. Substantially,
too, and not unlike the position
of the respondent in
Gijima
,
it is ICT that succeeds. I say so because it is obvious that the
City’s belated efforts were directed at avoiding the contract
whereas ICT, on the other hand, in good faith took legal action in
seeking to enforce the contract and succeeded in not being divested
of the benefits accruing to it under the contract.
Order
In the
circumstances, I make the following order:
1.
The main application is dismissed.
2.
The counter-application succeeds only to the extent that the contract
concluded
between the parties on 24 February 2010 is declared
unlawful and invalid.
3.
The order in paragraph 2 does not have the effect of divesting
ICT-Works Proprietary
Limited of any rights which may have accrued to
it prior to the date of this judgment and does not affect any
payments that may
have been made to it in terms of the contract up to
and including 5 July 2019.
4.
The City of Cape Town is directed to pay the costs of ICT-Works
Proprietary Limited
in both the main application and the
counter-application, inclusive of the costs of two counsel.
FRANCIS, AJ
APPEARANCES
:
Counsel
for Applicant:
Adv. G Budlender (SC)
Adv. M Tsele
Adv.
M D Beer
Instructing
Attorney:
S Kayana
Counsel
for Respondent:
Adv. K Pillay (SC)
Adv. R Patrick
Instructing
Attorney:
P Vanda
[1]
117
of 1998.
[2]
56 of 2003.
[3]
The FIDIC Suite of Construction Contracts is written and published
by the International Federation of Consulting Engineers. The
“FIDIC”
acronym stands for the French version of the Federation’s name
(Federation Internationale des Ingenieurs
– Conseil).
[4]
The date should have been
25
February 2011 since the agreement commenced on 25 February 2011.
[5]
2001 (3) SA 1013
(SA)
at paragraph [11].
[6]
[2008] ZASCA 112
;
2009 (1) SA 163
(SCA)
.
[7]
At
paragraph
[18].
See also,
Steenkamp
NO v Provincial Tender Board, Eastern Cape
2006
(3) SA 151
(SCA)
at
paragraph [12] referring to
Logbro
Property CC v Bedderson NO
2003 (2) SA 460
(SCA)
at
paragraph [10].
[8]
See,
Milnerton
Lagoon Mouth Development (Pty) Ltd v Municipality of George and
Others
[2005]
JOL 13628
(C)
.
[9]
[2019]
2 All SA 307
(SCA)
paragraph
[11].
[10]
Seale v Van Rooyen
No and Others
;
Provincial
Government, North West Province v Van Rooyen NO and Others
2008 (4)
SA 43
(SCA)
at
paragraphs [12] to [14].
[11]
19
99
(1) SA 374
(CC)
at
paragraph [56].
[12]
Merofong City Local
Municipality v AngloGold Ashanti Limited
2017
(2) SA 375
(CC)
at
paragraphs [41], [42] and [62].
[13]
S
Section
33(1)(c)(ii) of the MFMA provides that a municipal must adopt a
resolution in which “
it
approves the entire contract exactly as it is to be executed
”.
[14]
Gijima
paragraph [38].
[15]
2018 (3) SA 380
(SCA)
at footnote 25.
[16]
Law Society of
South Africa and Others v President of the Republic of South Africa
2019 (3) SA 30
(CC)
paragraph
[61]-[65].
[17]
Oudekraal Estates
(Pty) Ltd v City of cape Town
2004 (6) SA 222
(SCA)
paragraphs
[26]-[31]; and
Magnificent
Mile Trading 30 (Pty) Ltd v Charmaine Celliers
2020 (4) SA 375
(CC)
paragraph [1].
[18]
2018 (3) SA 380
SCA
paragraph [38].
[19]
Kirland
paragraphs [89] and [103].
[20]
Ibid
paragraph
[82].
[21]
Department of
Transport and others v Tasima (Pty) Limited
2017
(2) SA 622
(CC)
paragraph
135.
[22]
Merafong
paragraphs
[70]-[74].
[23]
Tasima
paragraph
[142].
[24]
Khumalo and Another
v MEC for Education: KwaZulu Natal
2014 (5) SA 579
(CC)
paragraph
[47].
[25]
Buffalo
City Metropolitan Municipality v Asia Construction (Pty) Limited
2019 (4) SA
331
(CC) (“
Buffalo
City”
)
.
[26]
Ibid
paragraph
[48].
[27]
Ibid
paragraph
[52].
[28]
Ibid
paragraph [48].
[29]
Ibid
paragraph [54].
[30]
Ibid
paragraph [55].
[31]
Ibid
paragraph [59].
[32]
Harnaker v Minister
of the Interior
1965
(1) SA 372
(C) at 381C
(
per
Corbett J, as he then
was), cited with approval in
Oudekraal
paragraph [27].
[33]
Buffalo City
paragraph [63].
[34]
Ibid
paragraph
[66]. See also,
Gijima
paragraph [41].
[35]
Buffalo City
paragraph [71].
[36]
Section 111 of the MFMA.
[37]
Section 112(1) of the MFMA.
[38]
Supply Chain Management Policy (Incorporating Preferential
Procurement), approved 27 March 2008.
[39]
Local
Government: Municipal Finance Management Act (56/2003):
Municipal
Supply Chain Management Regulations, GNR
. 68,
GG
27636, 30 May 2005.
[40]
Nelson Mandela Bay
Municipality v Afrisec Strategic Solutions (Pty) Ltd
2008
JDR 1014 (SE)
paragraph
[31].
[41]
S117
of
the MFMA.
[42]
Section 33
(4) of the MFMA.
[43]
Section 33
(1) of the MFMA.
[44]
Section 160(2)(b) of the Constitution.
[45]
Buffalo City
paragraph [81].
[46]
Khumalo
paragraph
[50].
[47]
See,
Buffalo City
at paragraph
[82].
[48]
See,
Allpay
Consolidated Investment Holdings (Pty) Ltd and Others v Chief
Executive Officer of the South African Social Security Agency
and
Others
2014
(1) SA 604
(CC)
paragraph
[28]-[30];
African
Democratic Party v Electoral Commission
[2006] ZACC 1
;
2006
(3) SA 305
(CC)
paragraph
[25].
[49]
cf.
Premier,
Free State and Others v Firechem Free State (Pty) Ltd
2004
(4) SA 413
(SCA)
at
paragraph [30]
.
[50]
cf.
Loghdey v City
of Cape Town
2010
(6) BCLR 591
(WCC)
at
paragraph [49].
[51]
Section 172 provides:
“
1. When deciding
a constitutional matter within its power, a court
a.
Must declare that any law or conduct that is
inconsistent with the Constitution is invalid to the extent of its
inconsistency;
and
b.
May make any order that is just and equitable, including
i.
an order limiting the retrospective effect of the declaration of
invalidity; and
ii.
an order suspending the declaration of invalidity for any period and
on any conditions, to allow the competent authority
to correct the
defect.
[52]
Paragraph
[52].
[53]
Paragraph [66].
[54]
Apparently, no payments were effected under the contract after
5 July 2019 when another contract, Contract 2A, was concluded
between the parties on 10 July 2019.