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[2011] ZAGPJHC 38
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Lambda Test Equipment CC v Broadband Infraco (Pty) Limited and Another (10/11872) [2011] ZAGPJHC 38 (13 May 2011)
NOT
REPORTABLE
SOUTH GAUTENG HIGH COURT, JOHANNESBURG
CASE NO: 10/11872
DATE:13/05/2011
In the
matter between:
LAMBDA
TEST EQUIPMENT CC
….......................................................
Applicant
and
BROADBAND
INFRACO (PTY) LIMITED
…...............................
First Respondent
CORAL-I-SOLUTIONS
(PTY) LIMITED
..................................
Second
Respondent
JUDGMENT
VAN EEDEN AJ
:
The applicant is a close corporation involved in the sale, supply
and support of test equipment used in the telecommunications
industry. It supplies equipment used in the testing of fibre optic
links and transmission systems used by,
inter alia
, the first
respondent. The first respondent is a State-owned private company
with the State as its sole shareholder. It is
an organ of state as
provided for in Section 239 of the Constitution of the Republic of
South Africa, 1996 selling high capacity
long distance transmission
services to licensed fixed and mobile network operators, internet
service providers and other value
added network service providers.
Mr Rome represented the applicant and Mr Bokaba SC the first
respondent. I am indebted to both counsel for comprehensive sets
of
heads of argument, and the careful argument they presented.
The first respondent awarded a tender to the second respondent and
subsequently concluded a contract with it for the supply and
delivery of 24 off-production equipment sets to carry out optical
characterisations of fibre and the testing of SDH and Ethernet
services. The applicant is one of six unsuccessful tenderers. It
contends that the award of the tender to the second respondent
is
invalid for a number of reasons, and the first respondent disputes
this. The second respondent does not oppose the relief
sought. The
chronological background of events that culminated in the parties
ending up in the special opposed motion court
on 9 May 2011 may be
summarised as follows:
On 27 February 2009 the first respondent issued the tender in issue
with a closing date of 18 March 2009.
On 29 April 2009 a so-called clarification meeting was held,
seemingly at the request of the first respondent, the purpose
of
which was to allow the tenderers to explain the nature of the
relevant equipment. It appears that for an undisclosed reason
this
meeting was not attended by the second respondent.
On 14 July 2009 the first respondent called upon the applicant to
give it a revised quotation on a list of certain of its tendered
equipment. The list was prepared by the first respondent and
provided for a reduced quantity of the equipment. The applicant
was not requested to provide a revised quote in respect of its
alternative tender.
On 6 August 2009 the first respondent’s internal committee,
established to evaluate the tenders, submitted a request
to the
procurement committee to approve the second respondent’s
tender.
On 4 November 2009 the second respondent was awarded the tender,
and on 6 November the applicant was informed that its tender
was
unsuccessful. The applicant then requested a meeting with the
first respondent, which was held on 11 November 2009.
On 25 November 2009 the applicant, dissatisfied with the outcome of
the tender, caused its attorney of record to address a
detailed
letter to the first respondent. It sets out the applicant’s
contentions as to why the tender procedure was
flawed and at the
hearing of this matter, reliance was still placed on those
contentions. In the main these contentions entail
that the
applicant should have been afforded the opportunity to provide a
further quote on its alternative tender, that it
and the second
respondent had quoted for different products resulting in the
quotations not being comparable and complaining
that 20 points had
been allowed for Broad Based Black Economic Empowerment, whereas
Regulation 4 of the Preferential Procurement
Policy Framework Act,
5 of 2000 allowed for a maximum of 10 points. (I interpose to
mention that it was common cause that
20 points had indeed been
allowed, and that the applicant tendered on this basis. All the
tenders were thus scored on this
basis.) The letter further
requested the first respondent to confirm by close of business on
26 November 2009 that it would
not execute
“the
order pending your response to this letter, (i.e. if you agree to
cancel the order) or until the outcome of the review
proceedings,
should you not agree to cancel the tender”
. It
reserved the applicant’s right to apply to the High Court for
an order interdicting the first respondent if it failed
to provide
an undertaking not to proceed.
On 30 November 2009 the first respondent’s attorney of record
addressed a letter to the applicant’s attorney, denying
that
the tender process was flawed and refusing to cancel the tender
process. It also stated that any litigation would be
opposed.
On 10 December 2009 the applicant’s attorney addressed a
further letter to the first respondent’s attorney. It
recorded that it had received instructions to commence review
proceedings and stated that it expected to be in a position to
serve the review towards the end of January 2010. It also warned
that, in view of the pending review application, any contract
between the first and the second respondents would be at risk
should the review be successful.
On 16 February 2010 the first and second respondents concluded the
contract pursuant to the latter having been awarded the
tender.
The applicant was not advised of the conclusion of the contract.
On 29 March 2010 the applicant launched the present application.
It received the record pursuant to the provisions of Uniform
Rule
53 on 5 May 2010, and filed two supplementary affidavits, the first
on 28 June 2010 and the second on 17 August 2010.
On 23 September 2010 the first respondent filed its answering
affidavit. This was filed in response to the founding affidavit
and the two supplementary affidavits.
On 29 October 2010 the applicant’s replying affidavit was
filed.
On 6 December 2010 the applicant’s attorney of record
addressed a letter to the Deputy Judge President in terms of
Section 9.13 of this Division’s Practice Manual. It applied
for a special allocation of the matter, and advised that argument
was expected to be at least one day. It called for an allocation
in the week of 14 to 18 February 2011. The next
day the
Deputy Judge President personally advised that the matter could
proceed as requested.
1
On 28 January 2011 the applicant’s attorney of record again
wrote to the Deputy Judge President, this time advising that
counsel was not available on 14 April 2011, and requesting that the
matter be heard on 9 May 2011. On the very same day the
Deputy
Judge President advised the applicant’s attorney that the
matter could be enrolled as requested.
2
Against this background the applicant seeks orders, some portions of
which I have emphasised, in the following terms:
“1.1 The award of the
tender for portable testing fibre optic equipment made by the first
respondent in favour of the second
respondent
during
November 2009
under first respondent’s tender number INFTEN0025 (“the
tender”) is hereby reviewed and set aside.
1.2 The award of the tender
to the second respondent is declared to have been unlawful and
unfair.
1.3 The first respondent is
directed to
reconsider the competing tenders of the applicant and the second
respondent (and all other parties who submitted tenders
to
the applicant in the respect of the said equipment, and in response
to applicant’s invitation to tender in respect of first
respondent’s tender number INFTEN0025) in accordance with all
applicable laws, regulations and in accordance with the requirements
of s217 of the Constitution.”
The chronology reflects that by no later than 25 November 2009 the
applicant, when its attorney addressed a letter to the first
respondent, was sufficiently appraised of the facts surrounding the
tender to take steps to safeguard its position. In fact,
it
threatened an urgent application if its demands were not met. That
notwithstanding, it first approached the High Court more
than a year
later, i.e. on 6 December 2010, when it wrote to the Deputy Judge
President to secure a date for the hearing of the
matter. As
already stated, the applicant’s letter was answered the very
next day but even then it later declined the April
dates offered for
the hearing of the matter, instead opting for a hearing on 9 May
2011. The end result is that the application
comes before Court
some sixteen months after the applicant first had sufficient
knowledge of the facts to have approached a Court
for relief. Mr
Rome submitted that any application for interim relief would have
been opposed, and that it may very well have
been unsuccessful.
That submission only puts up skittles to knock them down. The court
must pronounce judgment on the factual
position as it prevails
today.
The conditions of tender stipulated that the final contract document
would be issued to the successful tenderer within one week
of
acceptance of the tender, and for the agreement to be signed within
two weeks of such acceptance. The first respondent stated
in its
answering affidavit that the equipment has been supplied and
delivered to its satisfaction and that same is currently
been used
by it for the purpose for which it was acquired. It is evident that
the contract concluded pursuant to the award of
the tender was
executed and is complete, and it is therefore not surprising that
this is common cause. The applicant’s
attitude, however, is
that
“it is irrelevant
if the tender has already been awarded and executed to its
conclusion. The issue for the court to determine
is whether the
tender process was flawed or not”
3
and that irrespective of whether the second respondent
“has been paid for the
production test equipment and the equipment delivered to
[the
first respondent]
(which is
denied) the tender still falls to be set aside as the tender process
was flawed”
.
4
When an unsuccessful tenderer launches a review application, a Court
is almost always placed in an unenviable position. On the
one hand
the contract may be stopped with possible devastating consequences
for Government and the successful tenderer. On the
other hand, if
the works are allowed to be completed, the tenderer that should have
been awarded the tender would unjustly be
deprived of the benefits
of the contract. This has led the Supreme Court of Appeal to state
that tendering has become a risky
business and that Courts are often
placed in an invidious position in exercising the administrative law
discretion – a
discretion that may be academic in a particular
case, leaving a wronged tenderer without any effective remedy.
5
The Supreme Court of Appeal referred to
Sebenza’s
case,
6
in which the contract concluded pursuant to the award of the tender
had been completed, as in this matter. In that matter Kirk-Cohen
J
held that an order reviewing and setting aside the decision to
accept the tender would be meaningless and have no practical
effect,
for the simple reason that the contract in question had not only
been awarded but completed. The conclusion in
Sebenza’s
case was reached by following a long line of cases to the effect
that Courts will not adjudicate upon abstract, hypothetical
or
academic issues.
7
If the order sought will have no practical effect, a Court will
decline to issue an order.
8
It is not every long delay that will result in a refusal to set
aside invalid administrative actions, and this is particularly
so
when the result thereof can still be undone, for example when
unlawful permission granted can still be revoked.
9
In appropriate circumstances the Court will decline, in the
exercise of its discretion, to set aside an invalid administrative
act.
10
It has been held that that discretion plays an essential and
pivotal role in administrative law, for it constitutes the
indispensible
moderating tool for avoiding or minimising injustice
when legality and certainty collide. It has also been pointed out
that
where an aggrieved party fails to institute review proceedings
within a reasonable time, the effect of the delay is to validate
what would otherwise be a nullity. In such matters a Court will
allow an invalid administrative act to stand because of the
effluxion of time.
11
It follows that I disagree with the applicant’s contentions
quoted hereabove.
In the instant matter the applicant knew that the first respondent
had refused to cancel the tender process. The conditions of
tender
are clear that a contract would be concluded within a short period
after the tender was awarded. I can find no reason
to hold that the
applicant was unaware that the contract would be concluded and
executed to finality during the sixteen month
period that it
proceeded to Court at its chosen leisurely pace. The failure of the
first respondent to notify the applicant
of the conclusion of the
contract was probably by design, but that would change nothing.
Nobody but the applicant can be blamed
that the contract was
completed before it arrived at court. To issue the order sought by
the applicant would be impractical,
since it would require the first
respondent to revert back to its position in late 2009 or early 2010
when the tender was called
for and awarded. Due to the effluxion of
time and the needs of the first respondent not being static, the
position that prevailed
in 2009 and 2010 can practically not again
be attained. A new tender for further equipment has even been
called for, and the
suggestion that it is the result of the second
respondent’s inferior equipment, is no more than speculation.
Besides,
it is evident that the first respondent used the equipment
for testing, and that can also not be undone. It follows that I
disagree
with Mr Rome’s submission that there was no evidence
that the 2009/2010 position cannot be reverted to. Mr Rome also
submitted
that since one is dealing with a contract for the supply
of movables, it can easily be unravelled by returning the goods in
issue.
He used the example of a horse, and submitted that the
return of the equipment would be no different from returning any
other
thing, such as a horse. In respect of the use of the
equipment he submitted that the second respondent, upon repaying the
monies
received in terms of the contract, would have a claim based
on unjustified enrichment against the first respondent. To my mind
the very answers demonstrate the uncertainty that would be created
by such an order: - why should the second respondent be compelled
to
take back used goods after such a long period, will the equipment
still be worth anything to the second respondent, what value
should
be placed on the use of the equipment and why should the second
respondent be forced into possible litigation when it
has not
committed any wrong in receiving the tender? Mr Rome conceded that
it was not clear whether the other tenderers would
still be
interested in having their tenders reconsidered. They were not
cited as respondents, and there is nothing to indicate
that they
were given notice of this application. These considerations
constitute yet a further reason why the orders sought
are
impractical. In the final analysis it seems clear to me that the
result of the administrative action cannot realistically
be undone.
The horse has bolted, and a court order cannot change that.
It must be obvious that I have approached the matter on the
assumption that there was unlawful administrative action that could
be set aside. For the reasons given, I am however persuaded that
this is an instance where unlawful administrative action, if
such is
indeed the case, must be allowed to stand in the interests of
certainty.
Although I have assumed that there was unlawful administrative
action, I am by no means convinced that an analysis of the grounds
relied upon will bear out the assumption. Mr Rome submitted that
the first respondent was bound by Section 2(b)(i) of the Procurement
Act
12
as read with Section 4 of GN R725, which provides that a maximum of
ten points should be awarded to a tenderer being a historically
disadvantaged individual for contracts in excess of R500 0000.00.
It was common cause that the first respondent had allocated
twenty
points to this consideration, and that the applicant had tendered on
this basis. But Mr Rome also submitted that the
first respondent is
not an organ of state in terms of the Procurement Act. According to
Section 1 of the Procurement Act, an
organ of state would include an
“organ of state”
in Section 239 of the Constitution if it was also recognised by the
Minister by notice in the Government Gazette as an institution
to
which the Procurement Act applies. Accepting that the first
respondent is an organ of state for purposes of Section 239 of
the
Constitution, there is nothing before me to indicate that the
Minister also recognised the first respondent by notice in
the
Government Gazette. Mr Bokaba SC submitted that there was no such
government notice and Mr Rome did not take issue with
it. The first
respondent is, however, listed in Schedule 2 of the Public Finance
Management Act,
13
and as such it is presumably bound by the provisions of this latter
Act. The learned authors Patrick Lane SC and Corrie Moll
14
conclude that a public entity such as the first respondent is bound
by the Public Finance Management Act and the regulations
promulgated
thereunder. It may very well be that this Act or Treasury
regulations bind the first respondent to the provisions
of the
Procurement Act, but since it was not argued and given the
conclusion that I have already reached, I do not propose to
investigate this issue on my own. I should, however, point out that
it appears to be generally accepted that the Procurement
Act gives
effect to Section 217(2) of the Constitution, which requires the
State, when contracting for goods and services, to
do so in
accordance with a system that is fair, equitable, transparent,
competitive and cost-effective.
15
Mr Rome was undoubtedly correct that the equipment identified in the
second respondent’s tender did not precisely meet
all the
specifications stipulated. But there are degrees of compliance with
any standard and it is notoriously difficult to
assess whether less
than perfect compliance falls on one side or the other of the
validity divide.
16
The first respondent openly pointed out that on technical issues
the second respondent scored the lowest. It was nevertheless
granted the tender because overall it scored the highest.
The last main ground of review upon which the applicant relied, was
that it was unfairly not given the opportunity to adjust
its
alternative tender when circumstances changed. Mr Rome fairly
conceded that this point in itself would not carry the day
for the
applicant. In my view if the applicant seriously wanted to pursue
the alternative tender, it should have done so when
it provided the
first respondent with the further information requested in respect
of the main tender. At the very least, it
should then have
clarified the future of the alternative tender.
In a number of matters the unsuccessful aggrieved party was allowed
some of its costs and this prompted Mr Rome to submit that
if the
application should be unsuccessful, the applicant should be awarded
costs at least until filing of the answering affidavit.
17
The submission was based on the contention that it was only then
when it was established when the contract was concluded. The
presence of special circumstances, such as that a party’s
attempts to finalise the review as quickly as possible were
frustrated by the other’s refusal to let him have the
necessary information and documentation, may give rise to such an
order. Those special circumstances do not apply in the instant
matter and it does not follow automatically that an unsuccessful
litigant becomes entitled to the costs simply because there has been
unlawful administrative action. The latter point was clearly
illustrated by the matter of
Moseme Road Construction
.
18
In that matter there was a dissenting view that the unsuccessful
aggrieved party should be awarded costs, but the majority
of the
Court held that costs should follow the result. In the circumstances
of this matter, it appears to me that I should follow
the same
approach.
In the circumstances I make the following order:
The application is dismissed with costs.
____________________
H VAN
EEDEN
ACTING
JUDGE OF THE HIGH COURT
Counsel
for applicant: Adv G B Rome
Instructed
by: Eversheds
Counsel
for First Respondent: Adv T J B Bokaba SC
Instructed
by: Mkhabela Huntley Adekeye Inc
Counsel
for the Second Respondent: No appearance
Date of
hearing: 9 May 2011
Date of
judgment: 13 May 2011
1
The matter was allocated for 14 and not 11 April
2010, but nothing turns on this.
2
I draw attention to the prompt response from the Office of the
Deputy Judge President for this reason. In
Millennium
Waste Management (Pty) Ltd v Chairperson, Tender Board: Limpopo
Province & Others
2008 (2) SA 481
(SCA)
the Supreme Court of Appeal grappled with the
difficulty presented by invalid administrative acts when they have
already been
acted upon by the time that they are brought under
review. Jafta JA explained that a decision to accept a tender is
almost always
acted upon immediately by the conclusion of a contract
with the tenderer, and that it is often immediately followed by
further
contracts concluded by the tenderer in executing the
contract. To set aside the decision to accept the tender, with the
effect
that the contract is rendered void from the outset, could
have catastrophic consequences for an innocent tenderer, and adverse
consequences for the public at large. He explained that those
interests must be carefully weighed against those of the
disappointed
tenderer if an order is to be made that is just and
equitable. Jafta JA further stated that it appeared that in some
cases applicants
for review would approach the High Court promptly
for relief, but that their cases were not expeditiously heard and as
a result
by the time that the matter was finally determined,
practical problems militating against the setting-aside of the
challenged
decision would have arisen. Consequently the scope of
granting effective relief to vindicate the infringed rights was
drastically
reduced. He stated that it may help if the High Court
gives priority to such matters. It is accordingly gratifying to
note
the promptness with which the applicant’s requests for
judicial assistance were dealt with.
3
Page 750 para 112.
4
Page 735 para 50.
5
Harms DP in
Moseme
Road Construction CC & Others v King Civil Engineering
Contractors (Pty) Ltd & Another
2010 (4) SA 359
(SCA) [1].
6
Sebenza Kahle Trade CC v Emalahleni
Local Municipal Council & Another
[2003] 2 All SA 340
(T).
7
JT Publishing
(Pty) Ltd & Another v Minister of Safety and Security &
Others
1997 (3) SA 514 (CC) 524-525.
8
Eagles Landing
Body Corporate v Molewa NO & Others
2003 (1) SA 412
(T).
9
Oudekraal Estates (Pty) Ltd v City of Cape Town & Others
2010 (1) SA 333
(SCA).
10
Oudekraal Estate
(Pty) Ltd v City of Cape Town
2004 (6)
SA 222
(SCA) [36].
11
Chairperson,
Standing Tender Committee & Others v JFE Sapela Electronics
(Pty) Ltd & Others
2008 (2) SA 638
(SCA) [28] and [29].
12
Preferential Procurement Policy Framework Act No
5 of 2000
.
13
Public Finance Management Act No 1 of 1999
.
14
Legislative
Economic Equality
-
2005
International Construction Law Review published by T & F Informa
UK Limited.
15
Cf
The Quest for
Clarity: An Examination of the Law Governing Public Contracts
,
Calli Ferreira The South African Law Journal Vol 128
Part 1
page
172.
16
RMR Commodity
Enterprise CC t/a Rass Blankets v Chairman, Bid Adjudication
Committee & Others
[2009] 3 All SA
41
(SCA) [11].
17
E.g.
Sebenza Kahle Trade CC v Emalahleni Local Municipal
Council & Another
[2003] 2 All SA 340
(T);
Chairperson,
Standing Tender Committee & Others v JFE Sapela Electronics
(Pty) Ltd & Others
2008 (2) SA 638
(SCA) [28] and [29];
Darson
Construction (Pty) (Ltd) v City of Cape Town and Another
2007 (4) SA 488
(C).
18
Moseme Road Construction CC & Others v
King Civil Engineering Contractors (Pty) Ltd & Another
2010 (4) SA 359
(SCA) [1].