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[2015] ZAGPJHC 154
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Airports Company South Africa Limited v Airport Bookshops (Pty) Ltd t/a Exclusive Books (31580/2014) [2015] ZAGPJHC 154; 2016 (1) SA 473 (GJ); [2015] 3 All SA 561 (GJ) (3 July 2015)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
CASE
NO: 31580/2014
DATE:
03 JULY 2015
In
the matter between:
AIRPORTS
COMPANY SOUTH AFRICA
LIMITED
.........................................................
Applicant
And
AIRPORT
BOOKSHOPS (PTY) LTD
t/a
EXCLUSIVE
BOOKS
.....................................................................................................
Respondent
JUDGMENT
DODSON
AJ:
Introduction
[1]
The applicant (“ACSA”) applies
for the eviction of the respondent (“Exclusive Books”)
from the shop that
it occupies in the international departures area
of the OR Tambo International Airport (“the Airport”).
ACSA
has selected a new tenant pursuant to a competitive tender
process.
[2]
Exclusive Books says that it is entitled to
remain in the shop until its judicial review of the tender process
has been decided.
Factual
background
[3]
On 27 March 2009, ACSA and Exclusive Books
entered into a written agreement in terms of which the former let to
the latter “Shop
DFE02- International Departures – A side
OR Tambo International Airport” (“the shop”).
The lease
was for a period of five years backdated to 1 September
2008 and terminating on 31 August 2013.
[4]
On 15 August 2013, the parties concluded a
written agreement (“the extension agreement”) which reads
as follows:
“
We
refer to previous negotiations regarding the extension of the
abovementioned lease agreement that expires on 31 August 2013.
The
said lease agreement is, notwithstanding anything to the contrary
contained in the relevant agreement, herby renewed on month
on month
at the minimum monthly rental of R585,761.70 excluding VAT.
This
letter will form an integral part of the above lease agreement but it
does not waive, extend or change any of the terms and
conditions of
the lease agreement, except as herein stated.”
[5]
On 4 December 2013, ACSA issued what it
describes as a “
request for bids
”
(“RFB”). In terms of the RFB, ACSA invited suitably
qualified companies to submit bids to take up the
rental of 13
shops. It described these as “
foreign
exchange, jewellery and speciality retail stores in the international
arrivals and departures A side terminal.”
[6]
Exclusive Books responded by submitting a
bid in the hope of retaining its tenancy of the shop. It did so
before the deadline
for submission of bids expired at noon on 31
January 2014.
[7]
On 18 June 2014, ACSA informed Exclusive
Books that its bid had been unsuccessful and that, if it so wished, a
“
debriefing session
”
could be arranged upon request made within the next 21 days.
Exclusive Books requested a debriefing by email the following
day “
to
understand the reasoning behind its exclusion from the bid
”.
[8]
On 23 June 2014, and before any debriefing,
ACSA addressed a further email to Exclusive Books giving it notice to
vacate the premises
by 31 July 2014. On 25 June 2014, Exclusive
Books’ attorneys addressed a letter to ACSA asserting that the
decision to award
the tender was irrational, procedurally flawed and
therefore invalid. It also asserted that ACSA was obliged to
give reasonable
notice of the termination of the renewal agreement.
Such “
reasonableness would be
influenced by all circumstances, including a new tenant for the
premises, concluding an agreement consequent
upon a valid tender
process.”
The letter called
on ACSA to withdraw the “
purported
cancellation
” and to undertake
that “
any subsequent cancellation
notice will be based on a reasonable period”
.
[9]
The “
debriefing
session
” was held on 27 June
2014. At the debriefing meeting, ACSA told Exclusive Books that
its bid had failed because it
did not comply with two of the
mandatory criteria. It failed to submit a valid tax clearance
certificate and it failed to
meet the specified percentage of
turnover rental.
[10]
On 11 July 2014, Exclusive Books launched
its judicial review application in terms of section 6(2) of the
Promotion of Administrative
Justice Act, 3 of 2000 (“PAJA”).
Included as respondents were ACSA, the chairperson of the bid
evaluating committee,
the chairperson of the ACSA tender board and
Amger Retailing (Pty) Ltd, the party whose bid for the shop had been
successful.
[11]
On 14 July 2014, ACSA sent a letter to
Exclusive Books reminding it that it was obliged to vacate the shop.
On 15 July 2014,
Exclusive Books’ attorneys replied,
reiterating their stance in the 25 June 2014 letter, referring to the
review application
and asserting that the notice to vacate could not
be implemented until such time as the review application had been
decided.
In the circumstances, they informed ACSA that
Exclusive Books would retain possession of, and continue to trade
from the shop until
the review had been decided.
[12]
On 17 July 2014, ACSA responded, saying
that it would defend the review application and insisting that
Exclusive Books was obliged
to vacate in accordance with the notice
given. Another reminder to vacate was sent on 29 July 2014.
Consistent with
the stance in its letter, Exclusive Books did not
vacate on 31 July 2014 and continues to occupy and trade from the
premises until
this day.
[13]
On 6 August 2014, ACSA disabled the access
cards of all of Exclusive Books’ employees who worked in the
shop. This was
met with a successful spoliation application by
Exclusive Books.
[14]
On 27 August 2014, ACSA launched this
application for eviction on an urgent basis, setting the matter down
for hearing on 2 September
2014. On that occasion, the matter
was struck from the roll on the grounds of want of urgency. The
matter now falls
for decision in the ordinary course. The review
application is still pending.
Validity
of the extension agreement
[15]
ACSA founded its case for the eviction of
Exclusive Books on its interpretation of the extension agreement.
In particular
it contended that the reference to its being renewed
“
on month on month”
entitled it to terminate Exclusive Books right of occupation on one
month’s written notice, as it had done. This was regardless
of
any pending tender process or judicial review.
[16]
ACSA
changed its stance in the replying affidavit. It contended that
the extension agreement was invalid for want of compliance
with
section 217 of the Constitution. Exclusive Books therefore had no
legal basis whatsoever for its occupation. Eviction
should be
granted on the basis of
Graham
v Ridley
.
[1]
Its case based on the founding affidavit was now presented in the
alternative. It is appropriate to deal with this
issue at the
beginning of this judgment.
[17]
In
my view, ACSA was not permitted to change its stance in this manner.
Firstly a party may not approbate and reprobate.
[2]
Secondly, it is trite that a party may not seek to make out a
new cause of action in reply. It must make out its cause
of
action in the founding affidavit.
[3]
The effect is that Exclusive Books has never had an opportunity to
meet this cause of action. This is in conflict with
what the
Constitutional Court has described as the “
fair
hearing component”
of the fundamental right of access to court in s 34 of the
Constitution.
[4]
[18]
Thirdly,
our courts have held that generally an organ of State cannot ignore a
decision or action that it has taken
[5]
on the grounds that it is constitutionally or legally invalid,
without first approaching a court by way of judicial review to have
the decision or action set aside.
[6]
It is a rule that has both a constitutional and a common law pedigree
in the presumption of legal validity of administrative
acts -
omnia
praesumuntur rite esse acta.
[19]
The
decision by an organ of State to enter into a lease agreement is
administrative action.
[7]
The
effect of ACSA’s challenge to the validity of the extension
agreement is to ask this court to treat its decision to conclude
that
agreement as void on the grounds of non-compliance with s 217 of the
Constitution. But it asks the court to do so without
in any way
impugning the extension agreement in its notice of motion or in
separate review proceedings.
[20]
ACSA acknowledges the absence of any such
challenge, but contends that there are exceptions to the rule
requiring it to make such
a challenge. It relies on the
qualifying word “generally” in the judgment of Cameron J
in the
Kirland
case, when he said –
“
Even
where the decision is defective … government should
generally
not be exempt from the forms and processes of review.”
[21]
ACSA argues that this qualification
entitles a court in a particular matter such as the present one to
follow the minority judgment
of Jafta J in
Kirland
and to hold the extension agreement
invalid notwithstanding the absence of any judicial review
proceedings.
[22]
What was meant by the qualifying word
“generally” in the judgment of Cameron J is in my view
apparent from the paragraph
following the one relied on by ACSA, in
which the reasons for the rule are explained:
“
[65]
The reasons spring from deep within the Constitution’s scrutiny
of power. The Constitution regulates all public
power. Perhaps
the most important power it controls is the power the state exercises
over its subjects. When government errs by
issuing a defective
decision, the subject affected by it is entitled to proper notice,
and to be afforded a proper hearing, on
whether the decision should
be set aside. Government should not be allowed to take
shortcuts.
Generally
, this means that government
must apply formally to set aside the decision. Once the subject has
relied on a decision, government
cannot,
barring specific
statutory authority,
simply ignore what it has done. The
decision, despite being defective, may have consequences that make it
undesirable or even impossible
to set it aside. That demands a proper
process, in which all factors for and against are properly
weighed.”
(emphasis added)
[23]
The
exception to the rule contemplated in
Kirland
is
that where a statute expressly or impliedly authorises the organ of
state to vary or revoke its decision of its own accord. It
is a
well-recognised exception.
[8]
ACSA did not point to any statutory basis for bringing the matter
within the exception to the rule.
[24]
In the circumstances, the matter must be
decided on the basis that the extension agreement was valid.
Tacit
term
The
law
[25]
As pointed out earlier, ACSA contends that
it is entitled on the basis of the extension agreement to terminate
it on a month’s
notice at its discretion. Exclusive Books
contends that the extension agreement was subjected to a tacit term,
whereby neither
party was entitled to terminate the extension
agreement until completion of a valid and lawful tender process to
identify a new
tenant.
[26]
Nienaber
JA gave the following description of a tacit term in
Wilkins
NO v Voges:
[9]
“
A
tacit term, one so self-evident as to go without saying, can be
actual or imputed. It is actual if both parties thought about
a
matter which is pertinent but did not bother to declare their assent.
It is imputed if they would have assented about such a
matter if only
they had thought about it - which they did not do because they
overlooked a present fact or failed to anticipate
a future one. Being
unspoken, a tacit term is invariably a matter of inference. It is an
inference as to what both parties must
or would have had in mind. The
inference must be a necessary one: after all, if several conceivable
terms are all equally plausible,
none of them can be said to be
axiomatic. The inference can be drawn from the express terms and from
admissible evidence of surrounding
circumstances. The onus to prove
the material from which the inference is to be drawn rests on the
party seeking to rely on the
tacit term. The practical test for
determining what the parties would necessarily have agreed on the
issue in dispute is the celebrated
bystander test. Since one may
assume that the parties to a commercial contract are intent on
concluding a contract which functions
efficiently, a term will
readily be imported into a contract if it is necessary to ensure its
business efficacy; conversely, it
is unlikely that the parties would
have been unanimous on both the need for and the content of a term,
not expressed, when such
a term is not necessary to render the
contract fully functional.”
[27]
Christie
in
The
Law of Contract in South Africa
[10]
describes a tacit term as a “
term
implied from the facts”
and refers to the judgment of Corbett AJA, as he then was, in
Alfred
McAlpine & Son (Pty) Ltd v Transvaal Provincial
Administration
[11]
as-
“
...
An unexpressed provision of the contract which derives from the
common intention of the parties, as inferred by the Court from
the
express terms of the contract and the surrounding circumstances. In
supplying such an implied term the Court, in truth, declares
the
whole contract entered into by the parties.”
[28]
Based
on an analysis of the case law, Christie identifies three areas of
focus in deciding whether or not a tacit term is to be
imported into
a contract.
[12]
[29]
The
first is to consider the express terms of the contract. These
may expressly or impliedly preclude the importation of a
tacit
term.
[13]
A tacit term
would be impliedly excluded where its effect was to contradict an
express term or terms of the contract.
[14]
[30]
The
second area of focus is that the tacit term must be a necessary
one.
[15]
This means that “
[a]
proposed tacit term can only be imported into a contract if the court
is satisfied that the parties would necessarily have agreed
upon such
a term if it had been suggested to them at the time.
”
[16]
[31]
What
is meant by “
necessity”
is apparent from the “
bystander
test”
.
It derives from the judgment of MacKinnon LJ in
Shirlaw
v Southern Foundries (1926) Ltd
[17]
where he said the following:
“
Prima
facie that which in any contract is left to be implied and need not
be expressed is something so obvious that it goes without
saying; so
that, if, while the parties were making their bargain, an officious
bystander were to suggest some express provision
for it in their
agreement, they would testily suppress him with a common ‘oh of
course!’”.
[32]
In considering this aspect, Christie
identifies the following considerations:
[32.1]
the
term should be necessary in a business sense to give efficacy to the
contract;
[18]
[32.2]
however,
that does not mean that the contract as it stands must of necessity
be ineffective without the proposed tacit term;
[19]
[32.3]
necessity
does not equate with a standard of proof beyond reasonable doubt –
a balance of probabilities still applies;
[20]
[32.4]
as pointed out above in the extract from
the judgment of Nienaber JA in
Wilkins v
Voges
, it is not necessary to prove
that the parties applied their minds at the time of concluding the
contract to the issue to which
the tacit term pertains. In this
sense, the test is an objective and not a subjective one.
[33]
The
third area of focus identified by Christie is that the tacit term
sought to be imported must be capable of clear and precise
formulation.
[21]
Does
the extension agreement preclude the tacit term?
[34]
The extension agreement was an extension of
the written lease agreement previously entered into between ACSA and
Exclusive Books.
It is that agreement which was “
renewed
on month on month”
.
However, neither party put up or relied on the terms of the original
lease agreement. More particularly, ACSA did
not rely on any of
its terms to suggest that they either expressly or impliedly
precluded the incorporation of a tacit term.
[35]
What
ACSA did contend was that the extension agreement itself in referring
to a renewal “
on
month on month”
precluded the tacit term contended for. This was so because
renewal on that monthly basis implied that a month’s notice
could given at any time, regardless of any pending tender process or
review. Reliance was placed on two decisions.
The first
is
Tiopaizi
v Bulawayo Municipality
[22]
where the court held as follows:
“
From
the various cases decided in our courts it may now be taken as
settled that
in
the absence of agreement or custom to the contrary
,
a monthly contract of letting and hiring for an indefinite period
requires a month’s notice to expire ... at the end of
a
month.”
[23]
[36]
The
second is
Lyle
v Kemp
[24]
where the court held that:
“
Under
the common law, it is clear that as this is a monthly tenancy a
month’s notice would in the ordinary way be sufficient
to
terminate it.”
[25]
[37]
In my view, the decisions do not preclude
the tacit term contended for. The tacit term contended for,
properly considered,
does not suggest that a month’s notice is
not reasonable or applicable. Rather, it pertains to the point
at which a
month’s notice may be given. If the tacit term
can be proven, it suggests that notice of termination may not be
given
until completion of a lawful tender process. Upon
completion, a month’s notice would apply. The
qualification
that I have emphasised in the above extract from the
Tiopaizi
decision, recognises that the parties to the contract may “
[agree]
… to the contrary”
.
The tacit term, if proven, would fall within that exception.
[38]
Cooper
confirms that a monthly tenancy is not invariably terminable at any
time on a month’s notice.
[26]
He explains the position as follows:
“
A
periodic lease continues until it is terminated by notice given by
either party.
In the absence of
agreement to the contrary
, notice must
be given a reasonable time before the date on which a party decides
to terminate the lease. The period of such notice
must be such that
the lessor has a reasonable opportunity of letting his premises or
the lessee of finding other premises.
A day’s notice is
considered reasonable in the case of a daily lease; a week’s
notice in the case of a weekly lease;
and a month’s notice in
the case of a monthly lease;
but there
is no fixed ratio between the period of the lease and the notice
period
.”
(emphasis
added)
[39]
The enquiry is thus in each instance
determined by the terms of the particular contract and the
circumstances in which it was concluded.
[40]
In those circumstances, the parties express
recordal in the extension agreement that the lease agreement is
“
renewed on month on month”
does not in itself preclude the tacit term. Because the
duration of the tender process was unknown, it was logical to extend
the lease agreement on a month-to-month basis in order that it would
endure for no longer than the time it took to complete the
tender
process. Upon completion, a month’s notice would be
appropriate.
Necessity
[41]
As pointed out above, Exclusive Books bears
the onus to prove that the tacit term is a necessary one in the sense
that it is “
so self evident as to
go without saying”
. A tacit
term being one that is implied by the facts, it is the facts that I
must turn to.
[42]
It was common cause between the parties
that the conclusion of a fresh lease agreement to replace the fixed
term lease agreement
with Exclusive Books had to be via a
legally-compliant, public tender process. In those circumstances, the
ideal would have been
for the tender process to have been completed
before 31 August 2013 when Exclusive Books’ previous lease
agreement terminated.
[43]
However, that was not to be. The
extension agreement was signed by Exclusive Books on 30 July 2013 and
by ACSA on 15 August
2013, 16 days before the lease was due to end.
It was manifestly entered into to avoid the looming problem
that Exclusive
Books’ lease would end and there was no tenant
to replace it.
[44]
From ACSA’s perspective, an outcome
where Exclusive Books vacated the premises on 31 August 2013 without
a tenant to replace
it was manifestly undesirable and irrational
because it would have forfeited the rental otherwise payable, it
would have had to
contend with a cavernous empty space in the
international departure area and the facility previously provided by
Exclusive Books
to passengers would no longer be available.
[45]
From Exclusive Books’ perspective,
its vacation of the premises on 31 August 2013 was also undesirable
and irrational.
It was a potential bidder for the new lease.
Were it to succeed in its bid in the tender process, it would have
gone to the
trouble and expense of vacating the premises, only to
have to go to the further trouble and expense of reinstating itself
in the
shop concerned. It too would have forfeited the revenue
from its business.
[46]
However, once the tender process had
reached its conclusion, it was obviously necessary for there to be
provision to require Exclusive
Books to vacate as quickly as
reasonably possible in the event that its bid was not successful.
[47]
Exclusive Books pointed to these factual
circumstances in its answering affidavit in contending for the tacit
term. In essence,
ACSA’s response to these averments in
its replying affidavit was simply that they were “
absurd
and outrageous”
and that they
conflicted with the wording of the extension agreement.
[48]
Read
in isolation, the extension agreement is far from clear. This is
particularly so when one has regard to the circumstances in
which it
was concluded. The notional officious bystander is likely to
have had a number of questions. ACSA’s
simple reliance on
the terms of the extension agreement is thus not helpful. Given that
these are motion proceedings in which final
relief is sought, it is
Exclusive Books’ version on the factual circumstances relating
to the tacit term that must prevail,
unless they are “
far-fetched
or clearly untenable”
.
[27]
Moreover, ACSA in its replying affidavit chose not to engage
with Exclusive Books about the significance of the factual
circumstances surrounding the conclusion of the extension agreement,
other than to say that a tacit term was an “
absurd
contingency”
.
[49]
That is not to say that Exclusive Books’
version must be taken at face value. Its factual version must
still be sufficient
to support the inferences that must necessarily
be drawn for incorporation of a tacit term.
[50]
There is a further component of the
circumstances in which the extension agreement was concluded, that
needs to be taken into account.
That is the constitutional and
statutory regime that applied. Both parties in these
proceedings proceeded on the assumption
that section 217 of the
Constitution governed the letting of the premises or at least the
decision-making pertaining to it, although
Exclusive Books disputed
that it applied to the conclusion of the extension agreement.
[51]
I examine first whether section 217 applies
in general terms to the letting of the premises concerned and
decision-making pertaining
to it. Then I consider its
application to the extension agreement.
[52]
Section 217 provides in relevant part as
follows:
“
217
Procurement
(1)
When an organ of state in the national, provincial or local sphere of
government, or any other institution identified in national
legislation, contracts for goods or services, it must do so in
accordance with a system which is fair, equitable, transparent,
competitive and cost-effective.”
[53]
As a state-owned company, ACSA would not be
an organ of state in the national provincial or local sphere of
government. However,
it is an organ of state specifically
listed as a “
major public entity
”
in schedule 2 of the Public Finance Management Act, 1 of 1999
(“PFMA”). The PFMA is “
national
legislation”
as envisaged in
section 217(1). This is because s 51(1)(a)(iii) of the
PFMA echoes s 217(1) of the Constitution in requiring
that—
“
An
accounting authority for a public entity-
(a)
must ensure that the public entity has and maintains-
(i)
...
(iii)
an appropriate procurement and provisioning system which is fair,
equitable, transparent, competitive and cost-effective.”
[54]
Further, the
Preferential Procurement
Policy Framework Act, 5 of 2000
defines an “
organ
of state”
as, amongst other
things—
“
any
other institution or category of institutions included in the
definition of ‘organ of state’ in section 239 of the
Constitution and recognised by the Minister by notice in the
Government Gazette as an institution or category of institutions to
which this Act applies.”
[55]
In
Government Notice R501 of 2011,
[28]
the Minister recognised as categories of institutions to which that
Act applied, all public entities listed in schedules 2 and
3 of the
PFMA. The
Preferential Procurement Policy Framework Act is
the
legislation specifically envisaged in s 217(3) of the Constitution.
[56]
Accordingly,
ACSA is an organ of state as envisaged in s 217(1). However, the
question that then arises is whether the phrase “
contracts
for goods or services”
refers to the acquisition of goods or services only or whether it
includes the disposal of goods, such as the sale or letting of
state-owned immovable property. In this regard, academic commentary
diverges. Bolton in
The
Law of Government Procurement in South Africa
[29]
is of the view that it does include the sale and letting of assets.
She refers to and adopts a definition of procurement as—
“
[t]he
process which creates, manages, and fulfils contracts relating to the
provision of supplies, services or engineering and construction
works, the hiring of anything, disposals and the acquisition or
granting of any rights and concessions.”
[30]
[57]
In her view the exclusion of the sale and
letting of assets would be illogical and contrary to the purpose of
the provision.
[58]
Penfold
and Reyburn,
[31]
on the other
hand, adopt a different approach:
“
The
phrase ‘contracts for goods or services’ should be
interpreted generously. It should apply to contracts for the
provision of goods or services to the relevant body as well as
contracts for the provision of goods or services on behalf of the
body (i.e. the contracting-out or outsourcing of public functions).
For example, it would include a contract for the rollout of
antiretroviral drugs on behalf of the Department of Health.
Nevertheless, it would probably exclude contracts where the state
is
providing (rather than procuring) the goods or services or other
forms of benefit.”
[59]
They refer to the heading of s 217,
“Procurement”, and to the definition of procurement in
the UNCITRAL Model Law, which
defines “procurement” as
“
the acquisition of goods,
construction or services”
.
[60]
What
limited case law there is seems to favour the exclusion of the
disposal of assets from s 217. In
Londoloza
Forestry Consortium (Pty) Ltd and Another v South African Forestry Co
Ltd and Others
[32]
the court was concerned with an attempted privatisation of state
forests through the sale of 75% of the shares in a subsidiary
of the
respondent. The court stated, without giving any reasons, that
the contract envisaged was not a contract for goods
or services as
contemplated in either s 217 of the Constitution or s 51(1)(a)(iii)
of the PFMA.
[33]
[61]
In
CSHELL
271 (Pty) Ltd v Oudtshoorn Municipality
[34]
the court was concerned with the sale of an immovable property
belonging to a municipality. The court held there that s 217
did not apply because “
[t]here
is no reference in s 217 of the Constitution ... of [sic] the
disposal of capital assets and more particularly the disposal
of
immovable assets. In terms of the national sphere it is regulated by
the Disposal of State [Land] Act. The disposal of property
by a
municipality is regulated solely by s 14 of the [Municipal Finance
Management Act].”
[62]
On
the other hand, Binns-Ward J in
SA
Metal Machinery Co (Pty) Ltd v City of Cape Town
,
[35]
treated “
the
procurement or disposal of goods and services by organs of State”
as being required to comply with s 217 of the Constitution. He
did not, however, give reasons for his view.
[63]
In
my view, it is unnecessary to resolve this conundrum here.
Whilst the letting of the shop involves the disposal by way
of
letting of a state asset, the effect of the contract is to provide a
service for those members of the public making use of the
departures
area at the airport. Absent a private bookstore operator like
Exclusive Books, ACSA would be expected to provide
a similar service
itself. In my view that falls within the concept of
“
contracting
for goods and services”
,
particularly on the purposive approach that I am bound to adopt in
the interpretation of the Constitution.
[36]
Although not identical, it is similar to that category identified by
Penfold and Reyburn, as “
contracts
for the provision of goods or services on behalf of the body [ie the
contracting-out or outsourcing of public functions].”
[64]
For
the same reasons, s 51(1)(a)(iii) of the PFMA would in my view
also apply, along with the relevant Treasury Regulations
made in
terms of s 76 of the PFMA requiring a competitive process.
[37]
[65]
That
is the position generally. What is the position in relation to
the extension agreement? In my view, once s 217
and the PFMA’s
statutory framework apply generally to the letting of the premises
and the decision-making pertaining to it,
that remains the case,
whatever the circumstances. Those include the conclusion of the
extension agreement. Indeed,
this contention underlay the
impermissible challenge to the extension agreement by ACSA in reply.
However, the regime created
by s 217 and the relevant statutory
provisions is not an inflexible or irrational one. For example,
as is apparent from Bolton’s
work, it does not impose a
competitive bidding process in every situation – there are
several recognised exceptions, notwithstanding
that s 217 and
the statutory framework apply.
[38]
[66]
One
of the categories of exceptions mentioned by Bolton is amendments to
existing contracts.
[39]
She recognises that “
single
source procurement”
may be appropriate in the case of variation of an existing contract,
provided that the effect is not to create an entirely new
contract
not envisaged by the original tender process.
[40]
A variation would also be appropriate to deal with an exceptional or
unforeseeable event.
[41]
[67]
The extension agreement was a variation of
the original lease agreement. Neither party suggested that the
original lease agreement
was invalid. The constitutional and
statutory framework for contracting by an organ of state applied at
the time of its conclusion.
[68]
If one takes the extension agreement as
consisting only of its express words and interprets it in the manner
contended for by ACSA,
it contemplates a lease that could run
indefinitely. This is so notwithstanding that it was “
month
on month
”. So read, the
extension agreement has the potential to bypass the requirements of s
217 and the statutory framework
of the PFMA. As an indefinite
lease it gives rise to a contract that could not have been envisaged
at the time of the original
tender process. That tender process
envisaged a lease of limited duration. On that basis the
extension agreement and
the decision-making giving rise to it would,
in my view, be unlawful and invalid.
[69]
If, on the other hand, the tacit term
contended for by Exclusive Books is incorporated into the extension
agreement, the extension
operates only temporarily and only for as
long as it takes to complete a valid tender process for a new lease
agreement.
It provides for what was probably an unforeseen
circumstance ie that the tender process for a new lease had not been
completed
by the end of the previous lease. The limitation in
duration brought about by the tacit term thus renders the extension
agreement
compliant with s 217 of the Constitution and the PFMA’s
statutory framework, on the basis that it is a limited and legitimate
exception to the competitive process that should ordinarily apply.
[70]
It
is a rule of interpretation of contracts that a meaning that confers
validity on the contract is to be preferred over one that
does not.
This is in terms of the maxim
ut
res magis valeat quam pereat
.
[42]
In the present circumstances, the tacit term contended for is
necessary not just to give the extension agreement business
efficacy,
but also to give it legal validity. As recognised in the above
extract from
Wilkins
NO v Voges
,
a tacit term will more readily be imported into a contract if it is
necessary to ensure its business efficacy. All the more
so
where it is necessary to ensure its legal validity.
[71]
Additional evidence in support of a tacit
term is to be found in what in fact transpired subsequent to
conclusion of the extension
agreement. ACSA made no attempt to
terminate it until completion of the tender process and appointment
of a new tenant.
Exclusive Books made no attempt to leave.
ACSA in making out its cause of action in its founding
affidavit, did not simply
aver that it had given a month’s
notice. Instead it set out how it had, after conclusion of the
extension agreement,
conducted and completed a tender process in
which Exclusive Books had been unsuccessful, whereupon it had given
Exclusive Books
one month’s notice to vacate.
[72]
ACSA
advanced two further arguments against the incorporation of a tacit
term. It pointed out that Mr Trisk, the deponent
to the
answering affidavit on behalf of Exclusive Books, was not present at
the time of conclusion of the extension agreement.
There was
therefore no evidence to support Exclusive Books’ version as to
its
animus
contrahendi
.
[43]
However, as pointed out above, the test for establishing a tacit term
is an objective one. It is deduced from the facts.
It is
not even necessary to prove that the parties considered the
eventuality on which the tacit term turns. There is sufficient
evidential material from which the tacit term can be inferred.
Most of it is common cause. The absence of Trisk is
not an
impediment to the case for a tacit term.
[73]
ACSA’s other argument was that the
tender process could not have been to mind when the extension
agreement was concluded on
15 August 2013 because the bid was only
issued on 4 December 2013, three and a half months later. But
the request for bids
is a comprehensive, detailed document consisting
of some 230 pages. Its conception and preparation must have
commenced well
before its issue. It is also improbable that the
parties in concluding the extension agreement operated without regard
to
the legal context that I have outlined above in relation to s 217
and the statutory framework under the PFMA.
[74]
I am accordingly of the view that Exclusive
Books has, on a balance of probabilities, shown that the
incorporation of the tacit
term contended for is necessary.
Is
the tacit term capable of precise formulation?
[75]
Given that these are motion and not trial
proceedings, Exclusive Books has referred to the tacit term in
descriptive terms, not
on the basis of a precisely pleaded wording.
[76]
In its answering affidavit, Exclusive Books
described the tacit term as follows:
“
At
all material times ... the parties contemplated that the respondent’s
tenancy would not be terminated before the conclusion
of a valid and
lawful tender process and the valid and lawful award of a tender for
occupation of the shop.”
[77]
In my view, the descriptive formulation by
Exclusive Books is in order, provided that it can be translated into
a precise formulation.
[78]
Before considering that question, there is
another matter to be considered. Based on the analysis up to
this point, Exclusive
Books has made out a case for a tacit term that
precluded termination of the extension agreement before the
conclusion of the tender
process. Exclusive Books, however,
contends further that the tender process must be a lawful one and
that that qualification
must form part of the tacit term.
[79]
Whether this qualification is to be
incorporated as part of the tacit term must be determined on the
basis of the bystander test.
If an officious bystander had
asked the parties at the time of conclusion of the extension
agreement whether they contemplated
a strictly lawful tender process,
it could justifiably be predicted that they would have said “
of
course!”
This is borne out
by the express term of the RFB that subjected the tender process to
the law of the Republic of South Africa.
It is also fair to
suggest that contracting parties domiciled in South Africa, one of
whom is an organ of state, would be concerned
to respect the rule of
law as a foundational constitutional value in any of their dealings.
[80]
I am accordingly satisfied that the tacit
term would have to provide for a lawful tender process. In the
circumstances, the
tacit term is appropriately formulated as follows:
“
Neither
party may terminate this agreement until completion of a lawful
tender process.”
[81]
I am thus satisfied that the tacit term is
capable of clear and precise formulation.
Implications
of the lawfulness requirement
[82]
Exclusive Books contended that acceptance
of the lawfulness requirement of the tacit term had the necessary
consequence that, provided
that they had launched judicial review
proceedings challenging the lawfulness of the bid, ACSA could not
exercise any right to
terminate the extension agreement until the
review proceedings had finally been decided (along, presumably, with
any appeals).
[83]
Acceptance of this contention requires me
to impute to the parties by way of a component of the proven tacit
term, or by way of
a further tacit term, consensus at the time of
concluding the extension agreement, that this would be the effect of
a judicial
review of the decision to award the bid to another party.
[84]
In my view, this contention is not
sustainable. Had the notional officious bystander asked the
parties on 15 August 2013 whether
Exclusive Books could remain in
occupation pending a judicial review of the award of the bid to
another tenant, consensus was unlikely
to have followed.
[85]
Exclusive Books would no doubt have liked
the idea. Such an arrangement would have allowed Exclusive
Books to extend its stay
simply by launching a review, even one that
lacked any prospects of success. But ACSA would likely have
insisted that their
chosen tenant replace Exclusive Books pending the
review. It would no longer, in these circumstances, be facing
the prospect
of an empty shop, as there would be a new tenant to
occupy the space. Even consensus on the basis that Exclusive Books
could stay
on if it was a well-grounded review, would have been
unlikely.
[86]
What is the upshot of this? In order
to secure an ejectment order, ACSA must show that the extension
agreement entitles it
to that relief. The extension agreement
allows ACSA to terminate upon completion of a lawful tender process.
ACSA can
show that it completed a tender process and gave Exclusive
Books a month’s notice to vacate. In my view, the only way that
ejectment can be resisted by Exclusive Books is if it is (a) entitled
and (b) able to prove in these proceedings, irrespective
of the
pending review, that ACSA has failed to comply with the lawfulness
component of the tacit term. It is to these questions
that I
now turn.
Is
a lawfulness challenge permissible in these proceedings?
[87]
This answer to this question depends on
whether or not Exclusive Books is entitled to bring what has come to
be known as a collateral
challenge to the validity of the tender
process.
[88]
In
Oudekraal
Estates
(Pty) Ltd v City of Cape Town and Others
,
[44]
the Supreme Court of Appeal held as follows:
[35]
It will generally avail a person to mount a collateral challenge to
the validity of an administrative act where he is threatened
by a
public authority with coercive action precisely because the legal
force of the coercive action will most often depend upon
the legal
validity of the administrative act in question. A collateral
challenge to the validity of the administrative act will
be
available, in other words, only ‘if the right remedy is sought
by the right person in the right proceedings’.
[45]
Whether
or not it is the right remedy in any particular proceedings will be
determined by the proper construction of the relevant
statutory
instrument in the context of principles of the rule of law.”
[89]
In
the present matter, ACSA is a public authority. It is
established in terms of
s 2
of the
Airports Company Act No. 44 of
1993
. It is an organ of state envisaged in paragraph (b)(ii) of
the definition of that term in s 239 of the Constitution.
The
tender process amounts to administrative action.
[46]
ACSA seeks coercive action against Exclusive Books in the form of
ejectment from the premises that it occupies. For
the reasons
given above, its entitlement to act coercively through a court order
is dependent upon the legal validity of its administrative
action in
the conduct of the tender process. In those circumstances, on
the basis of
Oudekraal
,
it is the “
right
remedy ... sought by the right person in the right proceedings”.
[90]
In
Helicopter
& Marine Services (Pty) Ltd and Another v V&A Waterfront
Properties (Pty) Ltd and Others,
[47]
the Constitutional Court dealt with an application for leave to
appeal from the judgment of the Supreme Court of Appeal in
V&A
Waterfront Properties (Pty) Ltd and Another v Helicopter &
Marine Services (Pty) Ltd and Others.
[48]
There the tenant under a lease operated a helicopter service from the
leased premises. The lease agreement required
it to comply with
the rules and regulations of the South African Civil Aviation
Authority. Under those rules and regulations,
the South African
Civil Aviation Authority had grounded the helicopter service.
The landlord sought an interdict enforcing
the relevant term of the
lease agreement by interdicting the tenant from operating the
helicopter service. The tenant raised
a collateral challenge to
the validity of the grounding order of the South African Civil
Aviation Authority. The South African
Civil Aviation Authority
had been joined as a respondent. The SCA allowed an appeal
against a decision of the High Court
refusing the interdict.
The SCA rejected the collateral challenge on the basis that it was
not a case of the South African
Civil Aviation Authority seeking to
enforce its grounding order, but rather the landlord enforcing the
terms of its lease.
[49]
[91]
In
its application for leave to appeal to the Constitutional Court, the
tenant contended that the circumstances for permitting a
collateral
attack as identified by the SCA in
Oudekraal
were too narrowly circumscribed and should be expanded by the
Constitutional Court. The Constitutional Court refused the
application for leave to appeal. It held that it was
unnecessary in that matter to decide whether or not
Oudekraal
had
been decided on too narrow a basis. It upheld the grounds upon
which the SCA dismissed the collateral challenge.
[50]
It went on to point out that it had been open to the tenant to take
the grounding decision of the South African Civil Aviation
Authority
on review, yet the tenant had failed to do so.
[51]
[92]
This matter differs from the
V&A
Waterfront
matter
.
The applicant in these
proceedings is an organ of state. Moreover, the tacit term has
as one of its specific requirements
that the tender process be
lawful. Insofar as the Constitutional Court criticised the
tenant in that case for failing to
bring an application for judicial
review, this matter is also distinguishable. Within a very
short time of learning of the
outcome of the tender process,
Exclusive Books brought judicial review proceedings. There is
no suggestion that it has done
anything to delay the judicial review
proceedings. By contrast, ACSA, on its own version, failed
initially to file a complete
record in terms of Rule 53(4) in the
review proceedings and only supplemented the record several months
later. It has yet
to file an answering affidavit.
[93]
Nor can it fairly be suggested that
Exclusive Books should be precluded from raising a collateral
challenge because it has a pending
review application. On that
approach, Exclusive Books would be worse off for having taken the
trouble to bring a review.
[94]
In
Kouga
Municipality v Bellingan and Others
,
[52]
the respondents had applied to the High Court for the review and
setting aside of a municipal bylaw regulating liquor trading hours.
The High Court granted an order declaring the bylaw invalid but, at
the same time, suspended the order of invalidity for a period
to
allow for its amendment.
[95]
The respondents had brought the review
application because they had been charged with contraventions of the
bylaw. However,
the effect of that part of the order that
suspended the order of invalidity was that their review did not avail
them as a defence
in the criminal proceedings. The SCA
explained their predicament as follows:
“
[17]
So
far as the appropriateness of the order of the court a quo is
concerned, the suspension of the order declaring the by-law invalid
not only had the effect that the applicants could be prosecuted
during the period of suspension ─ which is precisely the
result
they sought to avoid ─ but also meant that they were precluded
during that period from mounting a collateral challenge
to the
validity of the bylaw ─ which means that although they were
successful, they were in a worse position than they would
have been
in had they brought no proceedings at all. That is a result which
would ... be inexplicable to a layman.”
[96]
The SCA decided the matter on the basis
that the respondents should not be worse off for having brought the
judicial review proceedings.
It amended the declaratory relief
so as to recognise the invalidity of the bylaw for the purposes of
any prosecution of the respondents.
[97]
Similarly, in this matter, Exclusive Books
should not be worse off for having launched review proceedings.
Their having done
so does not, in my view, close the door to a
collateral challenge in this application.
[98]
A
further potential impediment to the collateral challenge is the fact
that the successful bidder in the tender process, Amger Retailing,
whilst a respondent in the review application, is not a party to the
present proceedings. A similar issue arose in
City
of
Tshwane
Metropolitan Municipality v Cable City (Pty) Ltd
.
[53]
In that case, the municipality sought to recover regional services
council levies from the respondent. It relied on
a notice
published by the Minister of Finance in the
Government
Gazette
in terms of s 12(1)(b) of the Regional Services Council Act, 109 of
1985. The notice purported
inter
alia
to
allow the municipality to estimate the liability for levies of a
person who had failed to submit returns.
[54]
The respondent made a collateral challenge to the validity of the
relevant clause in the Minister’s notice. The
municipality resisted the respondent’s collateral challenge
inter
alia
on the grounds that the Minister had not been joined as a party.
[55]
[99]
The
SCA rejected this argument on the part of the municipality, pointing
out that the collateral challenge did not involve a declaration
of
constitutional invalidity of the notice, or its setting aside.
[56]
The SCA also pointed out that once a party was entitled to raise a
collateral challenge in its defence, the court had no discretion
to
refuse to consider it.
[57]
It relied on the following passage in
Oudekraal
:
“
[36]
It is important to bear in mind (and in this regard we respectfully
differ from the court a quo) that in those cases in which
the
validity of an administrative act may be challenged collaterally a
court has no discretion to allow or disallow the raising
of that
defence: the right to challenge the validity of an administrative act
collaterally arises because the validity of the administrative
act
constitutes the essential prerequisite for the legal force of the
action that follows and
ex hypothesi
the subject may not then be precluded
from challenging its validity.”
[100]
Similarly, no relief is sought by Exclusive
Books in
this application
by way of counter-application or otherwise, setting aside or
declaring to be invalid the tender process. It seeks solely
to
resist ejectment. If Exclusive Books is entitled to raise a
collateral challenge, as I believe it is, on the authority
of
Oudekraal
I have no choice but to hear it. If I uphold the collateral
challenge it will not, in my view, bind the reviewing court.
There the review and setting aside is squarely sought. The
evidential basis will be different. In this matter, no record
has yet been filed, nor has ACSA in its answering affidavit sought to
meet the collateral challenge on its merits. The successful
bidder’s
answering affidavit will also have to be considered, should it file
one. Even if unlawfulness is proven in
the review, the
reviewing court will still have to decide in terms of s 8 of PAJA and
s 172 of the Constitution, whether or not
the setting aside of the
tender process is a just and equitable remedy. If it decides
that it is not, that will clothe the
tender process with the
lawfulness required by the tacit term.
[101]
I am accordingly satisfied that Exclusive
Books is entitled to raise a collateral challenge. This is so
notwithstanding that
the successful bidder is not a party to these
proceedings.
Is
the collateral challenge founded?
Introduction
[102]
The
framework in which a tender process is to be scrutinised for legality
was summarised by the Constitutional Court in
AllPay
Consolidated Investment Holdings (Pty) Ltd and Others v Chief
Executive Officer, South African Social Security Agency and
Others
,
[58]
as follows:
“
[45] Section
217 of the Constitution, the [Preferential Procurement Policy
Framework] Act and the
Public Finance Management Act provide
the
constitutional and legislative framework within which administrative
action may be taken in the procurement process. The
lens for
judicial review of these actions, as with other administrative
action, is found in PAJA. The central focus of this
enquiry is
not whether the decision was correct, but whether the process is
reviewable on the grounds set out in PAJA. There
is no magic in
the procurement process that requires a different approach. Alleged
irregularities may differ from case to
case, but they will still be
assessed under the same grounds of review in PAJA. If a court
finds that there are valid grounds
for review, it is obliged to enter
into an enquiry with a view to formulating a just and equitable
remedy. That enquiry must
entail weighing all relevant factors,
after the objective grounds for review have been established.”
[103]
Exclusive Books in explaining its defence
in the answering affidavit made clear at the outset that it contended
that the tender
process “
was
tainted by illegality”
. To
this end, it annexed to its answering affidavit in this application,
the notice of motion, founding affidavit and the
annexures in the
review application.
[104]
ACSA objected to this. It sought the
striking out of the review application on the grounds that a party
may not attach such
a document without identifying in its answering
affidavit which particular parts it sought to rely on. There is
no merit
in this objection. Exclusive Books summarised the review
grounds in the answering affidavit in this application. The
founding
affidavit in the review was attached to provide the
necessary adumbration. The summary of the review grounds in the
answering
affidavit provided guidance as to what to look out for in
the founding affidavit. Moreover, the preceding analysis of the
case law pertaining to a collateral challenge illustrates the
relevance of any related judicial review proceedings. The
inclusion of the review application in its entirety was thus
appropriate. It provided the legal and evidential basis for
Exclusive Books’ collateral challenge.
[105]
ACSA also took up the attitude that the
review application was irrelevant because it was entitled to
terminate the extension agreement
on a month’s notice,
regardless of the judicial review. My findings that the tacit
term has been proven and that a
collateral challenge is available to
Exclusive Books, disposes of this argument.
[106]
The consequence of ACSA’s stance is
that there is no attempt in its replying affidavit to meet the
collateral challenge.
The consequence is that I must perforce
decide the collateral challenge on the basis of Exclusive Books’
version.
[107]
I turn to the grounds of the collateral
challenge.
First
ground: the tax clearance certificate
[108]
One of the reasons given by ACSA at the
“
debriefing session”
for the rejection of Exclusive Books bid was its failure to comply
with the mandatory requirement that bidders provide a tax clearance
certificate. Section III of the bid document contains the “
Evaluation
Procedure & Criteria”
.
Paragraph 3 of that section lists “
Mandatory
Administrative Requirements.”
These include the following:
“
All
bids duly lodged as specified in this RFB will be examined to
determine compliance with the mandatory administrative requirements
and conditions. Bids with deviations from the stipulated
requirements/conditions as defined in this RFP will be eliminated
from further consideration, and excluded from the Tender process.
Save
in exceptional circumstances
, no Bid
shall be considered unless it meets each and all of the following
mandatory criteria:
3.1
...
3.4
A valid Original Tax Clearance Certificate (In the absence of a valid
original tax clearance certificate, Bidders must
provide proof of
application from SARS);
3.5
...
3.6
The Bidder must meet the specified percentage of turnover rental set
out in Section V (the Retail Opportunities).” (
emphasis
added)
[109]
Exclusive Books was unable to provide a tax
clearance certificate. Instead, it attached to its bid an
explanatory letter.
The letter explained the difficulties
arising from the fact that the assets and liabilities of Exclusive
Books and 40% of its shares
had been acquired from the Times Media
Group with effect from 1 December 2013, ie three days before the bid
was issued. As
a result of this, those newly in control of
Exclusive Books were delayed by office closures over the Christmas
period and proceedings
that had taken place before the Competition
Commission, in completing “
statutory
processes”
and in reviewing the
state of the business’ record keeping.
[110]
By the time of writing the letter on 31
January 2014, those newly in control of the business had found two
aspects of its tax affairs
that had yet to be resolved.
Firstly, as far as PAYE was concerned, nothing was owing to SARS, but
the previous owners of
the business had failed to respond
expeditiously to queries from SARS and SARS had yet to update its
records. To address this,
the new owners of the business had met with
SARS to deal with its concerns and had requested a tax clearance
certificate, but this
was not yet forthcoming from SARS.
[111]
Secondly, as far as VAT was concerned,
there were moneys due by SARS to Exclusive Books, but an audit had to
be undertaken before
any refund could be made. This too
prevented a tax clearance certificate from being issued. SARS
had failed to address
this issue for almost two years and the
previous owners of the business had failed to ensure that the audit
was done.
[112]
The letter concluded by asking that
Exclusive Books not be prejudiced by the failure by the previous
owners of the business to ensure
that its tax affairs were in order
and undertook to work with SARS towards resolving the issues
“
forthwith
in order for the clearance certificate
to be issued”
.
[113]
Exclusive Books pointed to that part of the
bid documentation that provided that in “
exceptional
circumstances”
, noncompliance
with the mandatory requirements of the bid could be excused. In
this regard, Exclusive Books made the following
complaint:
“
90.
On the basis of what was conveyed to [Exclusive Books’]
attorney at the debriefing meeting, it would appear that
[ACSA]
indeed acted in an impermissible way by summarily closing its mind to
considering whether there were exceptional circumstances
present or
considering the explanation offered by the applicant.
91
...
94.
For [ACSA] not to have properly weighed these factors and not to have
made even the slightest enquiry regarding [Exclusive
Books’]
... tax position indicates that it did not apply its mind properly to
the question before it... Had it been considered
there could have
been no conceivable reason to regard the certificate to be an
impediment at that time.”
[114]
Because of ACSA’s stance in these
proceedings, these averments stand unanswered. On the evidence
before me, that renders
the tender process unlawful on the following
grounds of review recognised in PAJA:
[114.1]
Relevant considerations, being the
submissions contained in Exclusive Books explanatory letter regarding
the tax certificate, were
not considered
(s 6(2)(e)(iii)
of PAJA);
[114.2]
In failing to consider the explanation,
ACSA’s decision was characterised by arbitrariness
(s 6(2)(e)(vi)
of PAJA);
[114.3]
ACSA’s decision was not rationally
connected to the purpose of the empowering provision
(s
6(2)(f)(ii)(bb)
of PAJA). The provision in the request for bids
documentation is seemingly aimed at ensuring that bidders’ tax
affairs are
in order, not as a mechanical tool for exclusion of
bidders. The explanation given suggested strongly that the
purpose of
tax compliance would not be subverted by an award of the
bid to Exclusive Books;
[114.4]
The decision was not rationally connected
to the information before ACSA in the form of the explanation,
because it suggested that
the explanation had been ignored
(s 6(2)(f)(ii)(cc)
of PAJA).
Second
ground: minimum turnover rental
[115]
As appears from the extract from the RFP
quoted above, bidders were also required to “
meet
the specified percentage of turnover rental”
.
The RFP specified a minimum monthly rental of R300 000 and a
“
minimum percentage of turnover
annual rental
” of 16%.
[116]
The narrative portion of Exclusive Books
bid dealing with this aspect is entitled “
Highest
turnover possible in the best retail environment”
.
The narrative goes on to explain its approach to the forecasting of
sales growth over the next five years and what gross
sales figures
this would give rise to during that period. It emphasised that
it would “
embark on appropriate
marketing strategies to maximise sales and growth in the market
place”
and that “
the
primary objective of this store is to generate the highest turnover
possible... supplying both ACSA and Exclusive Books
with a
significant return on resources invested.”
It concluded by saying “
in
addition the rental offered to ACSA demonstrates a strong commitment
to a partnership we feel will be rewarding for both sides.”
[117]
A table was then provided under the heading
“
Proposed Rentals”.
The
table reads:
Year 1
Year 2
Year 3
Year 4
Year 5
Projected Gross
sales (R)
29,400,000
30,576,000
32,104,800
34,031,088
36,413,264
Specified
Percentage of Turnover Rental %
16
16
16
16
16
Specified Minimum
Monthly Rental
392,000
407,680
428,064
453,748
485,510
Proposed
Minimum Monthly Rental
300,000
324,000
349,920
377,914
408,147
Proposed
Percentage of Turnover Rental %
12.24
12.72
13.08
13.33
13.45
Projected Monthly
Rental Revenues
300,000
324,000
349,920
377,914
408,147
Shop's sm
236.81
236.81
236.81
236.81
236.81
Projected Monthly
Rental revenue per square meter
1,267
1,368
1,478
1,596
1,724
[118]
ACSA interpreted the table to mean that
Exclusive Books in its bid was offering to pay the amounts in the
table identified in bold
as the “
Proposed
Minimum Monthly Rental”
and the
“
Proposed Percentage of Turnover
Rental %”
. On this basis,
it was offering to pay only amounts ranging between 12,24% and 13,45%
of turnover by way of rental when the
specified minimum percentage in
the bid documentation was 16%.
[119]
Exclusive Books described its wording of
the table as “
perhaps
unfortunate”
. They
explained that their inclusion of the “
Specified
Percentage of Turnover Rental”
as
16% throughout manifested their recognition that that was the
percentage they were required to and intended to pay and that the
following row entitled “
Specified
Minimum Monthly Rental”
represented
the projected amounts that would be payable to ACSA by way of
rental. These amounts represent 16% of the projected
gross
sales.
[120]
It is an understatement to describe the
table as “
unfortunate”
.
In my view the table is so confusing that it must have been apparent
on any reasonable reading that there had been a mistake.
No
rational bidder would identify a higher amount of monthly rental that
could be payable based on its projected sales and the
specified
percentage turnover of 16% openly, and then offer to pay a
noncompliant percentage of turnover rental at the minimum
specified
monthly rental, not linked to its turnover. This in a tender
process where maximisation of rental offered in the
bid would have
been the goal. The table was also out of kilter with the
narrative portion of the bid, emphasising that ACSA
would benefit
from its projected maximisation of sales revenue.
[121]
Exclusive Books complained that ACSA failed
to seek clarification in this regard or to afford it any form of
hearing where it might
clarify the table. It described this
omission as “
all the more
indefensible in light of the fact that the applicant has been the
incumbent in the shop space for 11 years and has
conducted it with
huge success. The applicant was not some unknown entity. At the very
least, the applicant was entitled to be
asked to explain the meaning
and import of the ‘proposed rental’ table.”
[122]
In my view this complaint is justified.
The error was so glaring, that it could not reasonably be taken at
face value.
There were two rational options open to ACSA.
[122.1]
It could have treated the “
Specified
Percentage of Turnover Rental”
and the “
Specified Minimum Monthly
Rental”
in the table as those
offered by Exclusive Books and, if it was successful in the bid, made
payment of the rental on that basis
a condition of the lease.
[122.2]
Alternatively, it could have sought
clarification from Exclusive Books and that would no doubt readily
have been forthcoming.
[123]
Apart
from this, if ACSA intended to rely on an obvious error on the part
of Exclusive Books in rejecting the bid, it was bound
by the duty to
proceed fairly to warn it of its intended approach and to afford it a
hearing in this regard. Our courts have
held that where a
public authority intends deciding a matter on a novel basis which an
affected party could not have anticipated,
the latter is entitled to
a hearing.
[59]
On this
basis too, ACSA should have afforded Exclusive Books an opportunity
to clarify the table before rejecting its bid.
[124]
Accordingly, on the evidence before me, the
tender process was in this respect unlawful on the grounds that—
[124.1]
a relevant consideration, in the form of
the clarification that would inevitably have been forthcoming from
Exclusive Books, if
asked, was not considered
(s 6(2)(e)(iii)
of
PAJA);
[124.2]
its decision-making was not rationally
connected to the information before it
(s 6(2)(f)(ii)(cc)
of PAJA);
and
[124.3]
it was procedurally unfair
(s 6(2)(c)
of
PAJA).
Third
ground: information not made available
[125]
Mr Trisk says that, subsequent to being
notified of the outcome of the tender process, he met with a Mr
Hartzenberg. Hartzenberg
represents the successful bidder,
Amger Retailing, and was responsible for its bid. Hartzenberg
informed Trisk that he had
been aware when preparing Amger’s
bid that ACSA had taken a decision that there would no longer be two
bookshops in the international
departures area at the airport.
Henceforth there would be place for only one. This had come to
Hartzenberg’s
attention when ACSA informed him that his
existing lease would not be renewed in the premises that he had until
then been trading
from as a CNA franchisee at the international
departures area.
[126]
Exclusive Books’ complaint was that
this was sensitive and important information that was not made
available to them.
It would have affected the way that bidders
priced their bids. As an effective monopoly in that area, a lone
bookshop could anticipate
significantly higher revenue and on that
basis could offer significantly higher rentals to ACSA.
[127]
Although ACSA put up no evidence in answer
to this, counsel for ACSA argued that the fact that there would only
be one bookshop
operating in the international departures area was
apparent from the bid documentation.
[128]
It is so that of the 13 shops listed in the
bid documentation as being subject to the tender, only one is
envisaged as a bookshop.
A table in the bid documentation
suggests that there are some 56 retail outlets in the international
departures area. One
of those listed, apart from Exclusive
Books, is “
CNA"
,
with its “
lease status”
given as “
expired/N2”
.
N2 means that “
these outlets form
part of this tender bid”
.
[129]
However, it is still not possible to infer
from this that there would henceforth only be one bookshop in the
entire departures area.
If CNA gave up its shop in the current
tender process, there was nothing to suggest that another bookshop
opportunity would
not be made available in one of the other shops
falling outside the 13 subject to the tender. For example, a number
of these shops
have their “
lease
status”
described as “
expired/N3”
which denotes that “
these outlets
will be tendered in January 2014”
.
There is nothing to suggest that one or more bookshops would not be
accommodated in this later tender process.
[130]
Accordingly, on the available evidence,
Hartzenberg was the only bidder privy to this information.
[131]
In
AllPay
,
[60]
the Constitutional Court approved of the following dictum in the
SCA’s decision in
Premier,
Free State and Others v Firechem Free State (Pty) Ltd:
[61]
“
One
of the requirements ... is that the body adjudging tenders be
presented with comparable offers in order that its members should
be
able to compare. Another is that a tender should speak for
itself. Its real import may not be tucked away, apart from
its terms.
Yet another requirement is that competitors should be treated
equally, in the sense that they should all be entitled
to tender for
the same thing. Competiveness is not served
by
only one or some of the tenderers knowing what is the true subject of
tende
r...
That would deprive the public of the benefit of an open competitive
process.”
(emphasis
added)
[132]
In my
view, the failure to provide Exclusive Books with the information
made available to Hartzenberg was neither fair, nor equitable,
nor
transparent. It distorted the competitive process.
Section 217 of the Constitution and the statutory framework
under the
PFMA require a tender process that is
inter
alia
fair,
equitable, transparent and competitive.
[133]
Moreover,
s 3 of PAJA, which encapsulates the right to procedurally fair
administrative action, provides in relevant part as follows:
“
3.
Procedurally fair administrative action
affecting any person
(1)
Administrative action which materially and adversely affects the
rights or legitimate expectations of any person
must be procedurally
fair.
(2)(a)
A fair administrative procedure depends on the circumstances of each
case.
(b)
In order to give effect to the right to procedurally fair
administrative action, an administrator ... must give
a person
referred to in subsection (1)-
(i)
adequate notice of the nature and purpose of the proposed
administrative action;
(ii)
a reasonable opportunity to make representations;
(iii)
a clear statement of administrative action.”
[134]
In my view, ACSA’s failure to convey
this information to Exclusive Books offended against sub-paragraphs
(i), (ii) and (iii)
of s 3(2)(b) of PAJA. Adequate notice of
the nature and purpose of the proposed tender process required that
the bidders
be informed of this. The requirement of “
a
clear statement of administrative action”
also required this information to be conveyed. The failure to
do so deprived bidders other than Amger Retailing of a reasonable
opportunity to make appropriate representations in their bids.
[135]
Accordingly, on this basis too, on the
evidence before me, the tender process was unlawful on the grounds
of—
[135.1]
failure to comply with the requirements of
s 217 of the Constitution and the statutory framework under the PFMA;
and
[135.2]
procedural unfairness as envisaged in
s 6(2)(c) read with s 3(2) of PAJA.
[136]
There are further grounds on which
Exclusive Books contends that the tender process was unlawful. It is
not necessary for me to
consider them all. They will be considered in
the review proceedings. The above grounds are sufficient to
show for purposes
of the present proceedings and on the available
evidence that the tender process was not lawful and that the
collateral challenge
must accordingly succeed.
Conclusion
[137]
On the basis of the foregoing analysis,
ACSA has failed to show that it has completed a lawful tender
process. The tacit term
required it to do so before it gave
notice to Exclusive Books to vacate and before it sought its
ejectment.
[138]
I accordingly make the following order:
1)
The application is dismissed.
2)
The applicant is ordered to pay the
respondent’s costs, including the costs of two counsel.
ALAN
DODSON
ACTING
JUDGE OF THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION
JOHANNESBURG
Counsel
for the applicant: A Baba SC and T Myandeni
Instructed
by: Mothle Jooma Sabdia Inc,
2
nd
Floor West Tower
Nelson
Mandela Square
Maude
Street
Sandton
Johannesburg
Counsel
for the respondent: A Subel SC and J Meiring
Instructed
by:Cliffe Dekker Hofmeyr Inc
1
Protea Place
Sandown
Date
of hearing : 11 May 2015
Date
of judgment: 3 July 2015
[1]
Graham
v
Ridley
1931 TPD 476.
[2]
Sager
Motors (Pvt) Ltd v Patel
1968
(4) SA 98
(RA) at 101F.
[3]
See,
for example,
Swissborough
Diamond Mines (Pty) Ltd and Others v Government of the Republic of
South Africa and Others
1999
(2) SA 279
(T) at 323F-J.
[4]
De
Beer NO v North-Central Local Council and South-Central Local
Council and Others (Umhlatuzana Civic Association Intervening)
[2001] ZACC 9
;
2002 (1) SA 429
(CC) at paras 10-11;
S
v Malindi and Others
1990 (1) SA 962
(A) at 976D.
[5]
This would contemplate a decision taken and communicated to and
relied on by those affected by it.
[6]
Oudekraal
Estates (Pty) Ltd v City of Cape Town and Others
2004 (6) SA 222
(SCA) at paras 39-40;
Member
of the Executive Council for Health, Eastern Cape and Another v
Kirland Investments (Pty) Ltd t/a Eye & Laser Institute
2014
(3) SA 481
(CC) at paras 64-65.
[7]
Grey’s
Marine Hout Bay (Pty) Ltd v Minister of Public Works and Others
[2005] ZASCA 43
;
2005
(6) SA 313
(SCA) at paras 19-28.
[8]
See Hoexter
Administrative
Law in South Africa
Juta 2
nd
Ed at p 278.
[9]
[1994] ZASCA 53
;
1994
(3) SA 130
(A) at 136H–137D.
[10]
6
th
Ed LexisNexis at p 164.
[11]
1974
(3) SA 506
(A) at 531H- 532A.
[12]
Above
at pp 174-181.
[13]
Christie
above at pp 174-175.
[14]
De
Lange v Absa Makelaars (Edms) Bpk
[2010] 3 All SA 403
(SCA) at para 22;
Nedcor
Bank Ltd v SDR Investment Holdings Co (Pty) Ltd
[2008] ZASCA 11
;
2008 (3) SA 544
(SCA) at para 12.
[15]
Christie
above at pp 176-179.
[16]
Per
Brandt JA in
City
of Cape Town (CMC Administration) v Bourbon-Leftley
2006 (3) SA 488
(SCA) at para 19.
[17]
[1939]
2 KB 206
at 227.
[18]
Reigate
v Union Manufacturing Co (Ramsbottom)
[1918] 1 KB 592
at 605.
[19]
Boeschoten
& Lorentz v Minister of Mines
1933 TPD 169
at 177-178.
[20]
Minister
van Landbou-Tegniese Dienste v Scholtz
1971 (3) SA 108
(A) at 196H-197A.
[21]
Christie
above at pp 179-180.
[22]
1923
AD 317.
[23]
At
326.
[24]
1948
(1) SA 165
(D).
[25]
At
166.
[26]
Landlord
& Tenant
Juta 2
nd
Ed at pp 65-66
[27]
Plascon -Evans Paints
Ltd v Van Riebeeck Paints (Pty) Ltd
[1984] ZASCA 51
;
1984 (3) SA 623
(A)
at
635C.
[28]
Contained
in
Government
Gazette
34350 of 8 June 2011.
[29]
2
nd
Ed 2007 LexisNexis at pp 67-68.
[30]
RB
Watermeyer, A Generic and Systemic Approach to Procurement: the case
for an international standard Public Procurement Law Review,
number
1 Sweet & Maxwell 2005 at p 39.
[31]
Chapter
25 Public Procurement in Constitutional Law of SA, Juta pp 25-7 to
25-8.
[32]
[2008]
JOL 22041
(T).
[33]
Above
at 18.
[34]
[2012]
3 All SA 527
(WCC) at paras 32-36.
[35]
2011
(1) SA 348
(WCC) at para 5.
[36]
Soobramoney v
Minister of Health, KwaZulu-Natal
[1997] ZACC 17
;
1998 (1) SA 765
(CC) at paras 16-17;
S
v Makwanyane and Another
[1995] ZACC 3
;
1995
(3) SA 391
(CC)
at para 9.
[37]
Published under GN R225 in
Government
Gazette
27388
of 15 March 2005 as amended by GN R146 in
Government
Gazette
29644
of 20 February 2007 and GN R874 in
Government
Gazette
37042
of 15 November 2013. See in particular regulation 16A.6
regulating “
Procurement
of goods and services”
.
Regulation 16A.7 regulating the letting of immovable state property
at “
market-related
tariffs”
would
also require a competitive process or a process which reflected the
competition inherent in market-determined rentals.
[38]
Bolton above at pp162 – 172.
[39]
Bolton above at pp172, 204 – 207.
[40]
Bolton above at pp 172, 205. See also Bolton
Scope
for Negotiating and/or Varying the Terms of Government Contracts
Awarded by way of a Tender Process
(2006)
2 Stell LR 266, especially at 280-282.
[41]
Ibid at 282.
[42]
McCullogh
v Fernwood Estate Ltd
1920
AD 204
at 209
;
Jubelius
v Griesel
1988
(2) SA 610
(C) at 626F.
[43]
Intention to enter into an agreement.
[44]
2004
(6) SA 222
(SCA).
[45]
Per
Conradie J in
Metal
& Electrical Workers Union of SA v National Panasonic Co (Parrow
Factory)
1991
(2) SA 527
(C) at 530 C-D and Scott J in
National
Industrial Council for the Iron, Steel Engineering and Metallurgical
Industry v Photocircuit SA (Pty) Ltd & Others
1993 (2) SA 245
(C) at 253 E-F, citing Wade
Administrative
Law
6
th
Ed at 331.
[46]
Steenkamp
NO v Provincial Tender Board, Eastern Cape
2007
(3) SA 121
(CC) at par 21.
[47]
[2005] ZACC 21
;
2006
(3) BCLR 351
(CC).
[48]
2006
(1) SA 252
(SCA).
[49]
Above
at paras 10–15.
[50]
Above
at paras 5 – 6.
[51]
Above
at para 7.
[52]
2012
(2) SA 95
(SCA).
[53]
2010
(3) SA 589
(SCA).
[54]
Above
at paras 1-6
[55]
At
para 10.
[56]
At
para 12.
[57]
At
para 16.
[58]
2014
(1) SA 604
(CC) at para 45.
[59]
Theron
v Ring van Wellington
1976 (2) SA (1) (A) at 29 A-E and at 46A;
Maharaj
v Chairman, Liquor Board
1997 (1) SA 270
(N) at 277 G-I;
Logbro
Properties cc v Bedderson NO and Others
2003 (2) SA 460
(SCA) at para 23– 26.
[60]
Above
at para [39]
[61]
2000
(4) SA 413
(SCA) at para 30.