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[2016] ZAGPJHC 3
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Asatico Civil and Construction (Pty) Ltd v Ekurhuleni Metropolitan Municipality (149200/2015) [2016] ZAGPJHC 3 (21 January 2016)
IN THE HIGH COURT OF
SOUTH AFRICA
GAUTENG LOCAL DIVISION,
JOHANNESBURG
CASE NO: 149200/2015
DATE: 21 JANUARY 2016
In the matter between:
ASATICO CIVIL AND
CONSTRUCTION(PTY)LTD
.........................................................
Applicant
And
EKURHULENI METROPOLITAN
MUNICIPALITY
.....................................................
Respondent
JUDGMENT
DAVIS, AJ
[1] This is an opposed application for
summary judgment. It was previously enrolled for hearing on 14
August 2015 on which date
it was removed from the roll and the
Respondent ordered to pay the wasted costs. This was due to the fact
that the Respondent
had only on said date delivered its affidavit
resisting summary judgment. At the hearing before me on 23 October
2015 the papers
were complete and both parties had delivered helpful
heads of argument.
SALIENT FACTS:
[2] The salient facts pertaining to the
Applicant’s cause of action are largely not in dispute. They
can be summarised as
follows:
2.1 The Applicant is a civil
construction company and the Respondent is a metropolitan
municipality established as such in accordance
with the provisions of
the
Local Government: Municipal Structures Act, No. 117 of 1998
.
2.2 During the second half of 2011 the
Respondent invited bids for the rendering of infrastructure services
for the upgrading and
construction of roads and storm water
infrastructure on an “as and when required basis with effect
from date of award until
31 December 2013.”
2.3 The bid notice and invitation to
bid inter alia contained the following:
“Bids are to be completed in
accordance with the conditions and bid rules contained in the bid
documents and supporting documents
must be sealed and externally
endorsed with the contract number and description and placed in (the)
bid box … not later
than 10:00 on Tuesday 13 September 2011.
Bids will be opened immediately thereafter in public in the
conference room ground floor
at the abovementioned address. All bids
shall hold good for 120 days as from the closing date of bids.”
2.4 The Applicant has timeously
delivered a compliant bid.
2.5 On or about 7 March 2012 the
Applicant was informed that the Respondent’s Bid Adjudication
Committee had resolved that
the Applicant’s bid no. 31 for the
contract was accepted and approved. A copy of the appointment
letter, which was not in
dispute, forms part of the papers.
2.6 In terms of the appointment letter
and in terms of the Respondent’s prescribed Supply Chain
Management Policy satisfactory
prescribed guarantees were required
and certain further conditions regarding compliance with local
authority prescripts, tax clearance
certificates and insurance were
all complied with and furnished by the Applicant.
2.7 The award was for the rendering of
the aforementioned services “… at an averaged estimated
contract amount of R67
985 731,04” at prescribed “offered
averaged rates” set out in an annexure to the tender documents.
These rates
were subject to escalation based on the CPA with base
month being September 2011.
2.8 During the period between March
2012 and October 2013 the Applicant was instructed by the Respondent
from time to time to deliver
services at various specified streets,
townships and storm water reticulation, sidewalks and roads. For
purposes of these “as
and when” works Respondent had
issued seven
“Letters of Instruction to
Perform Work”, copies of which were annexed to the Particulars
of Claim.
2.9 The Applicant alleged that it had
complied with all its obligations in terms of its appointment and
delivered the services required
in the aforesaid Letters of
Instruction. The Applicant has submitted invoices to the Respondent
for the services rendered from
time to time.
2.10 A feature of the case is that the
Respondent’s Director: Expenditure has issued a notice in the
following terms on 2
April 2014:
“CONFIRMATION OF PAYMENTS TO
MESSRS ASATICO CIVIL & CONSTRUCTION CC. CONTRACT
A-IS(RW)03/2012: THE UPGRADING AND CONSTRUC-TION
OF ROADS AND STORM
WATER INFRASTRUCTURE ON AN AS AND WHEN REQUIRED BASIS, WITH EFFECT
FROM THE DATE OF AWARD UNTIL 31 DECEMBER
2013. It is hereby
confirmed that Messrs Asatico Civil & Construction CC has done
work in lieu of the abovementioned contract
for the Ekurhuleni
Metropolitan Municipality and has been paid an amount of R60 034
035,45 from the date of award until 31 December
2013. However it
must be noted that an amount of R8 735 569,76 is still being
processed for payment and is due and payable.”
2.11 On 19 November 2014 the Applicant
delivered a letter of demand which was stated to be in terms of
Section 3
of the Institution against Certain Organs of State Act, No.
40 of 2002 which referred to the aforesaid letter and thereafter
stated
the following:
“6. Our client has instructed as
that, as at date hereof, the amount of R5 856 931,76 remains
outstanding which amount is
now due and payable to our client. We
attach hereto, marked Annexure “AS2” a statement
reflecting the aforementioned
amount.
7. In view of the above it is our
instructions to demand from you, as we hereby do, payment in the
amount of R5 856 931,76 …”
2.12 The Applicant pleaded in the
Particulars of Claim that, since the aforesaid letter of demand, the
Respondent has made further
payments and in the Summons only the
amount of R2 860 002,75 was claimed and a statement of account
reflecting this balance was
annexed.
RESPONDENT’S “DEFENCES”:
[3] In the affidavit resisting summary
judgment, the Respondent’s Executive Manager: Corporate and
Legal Services raised
the following defences (in reverse order):
3.1 “The amount claimed has not
been agreed upon”.
3.2 “The amount claimed exceeds
the amount in the appointment letter.”
3.3 “Unlawful instructions.”
3.4 “The Applicant’s
appointment is invalid.”
AD “THE AMOUNT CLAIMED HAS NOT
BEEN AGREED UPON”:
[4] 4.1 The Respondent’s deponent
alleged in his affidavit resisting summary judgment that the
Applicant’s claim is
not for a liquidated amount. This
allegation is simply based on the following statement:
“… in that the Respondent
has not agreed to pay the Applicant the amount claimed in these
proceedings.”
4.2 In the absence of any particularity
substantiating this statement, and in particular in view of the
letter of the Director:
Expenditure of the Respondent dated 2 April
2014 referred to above as well as the appointment itself, this
allegation is both
unfounded and lacks the particularity required
from an affidavit seeking to resist summary judgment.
4.3 The Respondent’s deponent
further denies that the Applicant has in fact rendered services “…
worth the amount
claimed by it in these proceedings”. No
particularity is furnished in respect of this denial and the denial
is followed
by the following statement:
“The work which was allegedly
done must first be assessed to determine whether or not it is worth
the amount claimed in these
proceedings. This cannot be done by the
summary judgment court – this is what is done by a trial
court.”
4.4 Apart from the vagueness of the
statement, there is no reliance on any contractual term regarding
such pre-assessment or establishment
of “worth” prior to
payment. Of course, a party claiming payment can only do so once it
has rendered the service it
was contracted to do but there is no
indication on the papers that this had not been done. Yet again, the
letter of 2 April 2012
appears to confirm that such performance has
indeed taken place. That can be the only manner in which the
admission contained
in the letter to the effect that the amount
mentioned therein “is due and payable” can be
interpreted. Significantly,
the deponent for the Respondent fails to
deal with the contents of this letter or to engage with it at all.
This failure was also
a recurring feature during the argument of the
matter.
4.5 In my view no bona fide defence has
been set out in this regard “… in a manner which is not
inherently and seriously
unconvincing”.
See: Breytenbach v Fiat SA (Pty) Ltd
1976(2) SA 226 (T) (to which judgment I was referred to on behalf of
the Respondent).
AD THE ALLEGED EXCEEDING OF THE AMOUNT
IN THE APPOINTMENT LETTER:
[5] 5.1 Under this heading the deponent
on behalf of the Respondent referred to the amount mentioned in the
appointment letter and
alleged that “on a proper
interpretation” thereof that the Applicant’s claim was
limited to the amount stated
therein. He concluded that “therefore,
the Applicant is not entitled to be paid more than this amount”.
5.2 This allegation patently ignores or
fails to take into account that the appointment letter referred to an
“averaged estimated
contract amount” and further fails to
take into account that the amount excludes VAT and escalation.
5.3 Significantly, the Respondent’s
deponent again failed to deal with the aspects pleaded in the
Particulars of Claim to
which I have referred in paragraphs 2.10 to
2.12 supra.
5.4 The Respondent’s contention
further contains no statement of fact or particularity. It therefore
fails to satisfy the
requirements set out in Maharaj v Barclays
National Bank Ltd 1976(1) SA 418 (A) (to which I was also referred to
on behalf of the
Respondent).
AD “UNLAWFUL INSTRUCTIONS”:
[6] Although this was stated by the
deponent on behalf of the Respondent as a separate ground of a
purported defence, none of the
seven instructions pleaded in the
Applicant’s Particulars of Claim was individually attacked.
The basis for this statement
was purely reliant on the argument that
the appointment itself was invalid, as dealt with hereunder.
AD INVALID APPOINTMENT:
[7] 7.1 The Respondent’s
deponent’s submission is simply that in terms of the invitation
to bid, the bids would only
hold good for 120 days from the closing
date of the bid, i.e. up to 13 January 2012.
7.2 The Respondent alleged that after
said date the Respondent was not in law competent to accept or reject
the bids and accordingly
the acceptance of the bid on 5 March 2012
was invalid and unlawful.
7.3 In support of the aforementioned
allegation the Respondent relied on an unreported judgment of
Southwood J in the Gauteng Division
of this Court under case nos.
27974/2010 and 25945/2010 in Telkom SA Ltd v Merid Trading (Pty) Ltd
and Others as quoted with approval
in Joubert Galpin Searle Inc and
Others v
Road Accident Fund 2014(4) SA 148 (ECP)
per Plaskett, J.
7.4 In the judgment of Southwood J the
court inter alia held at [14]:
“As soon as the validity period
of the proposal had expired without the Applicant awarding a tender
the tender process was
complete – albeit it unsuccessfully –
and the Applicant was no longer free to negotiate with the
Respondents as if
they were attempting to enter into a contract. The
process was no longer transparent, equitable or competitive. All the
tenderers
were entitled to expect the Applicant to apply its own
procedure and either award or not award a tender within the validity
period
of the proposals. If it failed to award a tender within the
validity period of the proposals it received it had to offer all
interested
parties a further opportunity to tender. Negotiations
with some tenderers to extend the period of validity lacked
transparency
and was not equitable or competitive …”
7.5 The heads of argument delivered on
behalf of Respondent also relied on a judgment of Kollapen J in City
Connect Business Solutions
(Pty) Ltd v City Manager of the City of
Tshwane Metropolitan Municipality [2015] ZAGPPHC 115 (4 March 2015)
wherein the decisions
of Southwood J and Plaskett J quoted above were
relied on with approval.
7.6 It must immediately be apparent
that, in the matter under consideration, there was no negotiation
with the Applicant or with
any other tenderer to enter into a
contract after the bid validity period. There was on the face of it
no differentiation in the
treatment of bidders. All the bids were
apparently equally assessed and the Respondent simply unduly delayed
in awarding the tender.
There was therefore no prejudice to the
principles of equitable competitiveness.
7.7 In the Joubert Galpin Searle-case
the Road Accident Fund commenced a process aimed at obtaining consent
“of the bidders
who had not been eliminated from the process”
to extend the tender validity period after it had lapsed. This is,
again,
not a feature of the case under consideration.
7.8 Another set of distinguishing
factors are the facts that the contract period for which the bid had
been awarded had itself expired
and there were no outstanding items
in respect of the tender, neither in the form of outstanding
instructions or work to be performed.
Save for payment of the
balance of the contract works, the works, the instructions, the
performance and, apparently, the assessment
of the performed works,
had all been completed.
7.9 However, even if one were to have
regard to the distinguishing features, the Respondent’s
argument that once the validity
period of proposals in a procurement
process has lapsed, any acceptance of such proposals and appointments
pursuant to such acceptance
would constitute constitutionally invalid
administrative acts, appears to be correct.
7.10 Pursuant hereto, it has been held
that:
“Logic, general legal principle,
the Constitution and the binding authority of [the Constitutional
Court] all point to a default
position that requires the consequences
of invalidity to be corrected or reversed where they can no longer be
prevented. It is
an approach that accords with the rule of law and
principle of legality”.
See: Allpay Consolidated Investment v
CEO, SA Social Security Agency 2014(4) SA 179 (CC) at [30].
7.11 Insofar as the “default
position” is concerned, the Applicant sought to rely on the
“Oudekraal-principle”
enunciated in Oudekraal Estates
(Pty) Ltd v City of Cape Town and Others 2004(6) SA 222 (SCA). The
effect of this judgment is
that until an invalid administrative
action is set aside by a court in proceedings for judicial review, it
exists in fact and has
legal consequences that cannot simply be
overlooked.
See also: MEC for Health, Eastern Cape
and Another v Kirland Investments (Pty) Ltd t/a Eye & Laser
Institute 2014(3) SA 481
(CC)
South African Reserve Bank v
Shuttleworth 2015(5) SA 146 (CC) at [32].
7.12 An undue delay in reviewing and
setting aside an administrative act which resulted in an invalid
contract is a public policy
consideration which may militate against
setting aside such an administrative act.
See: Wolgroeiers Afslaers (Edms) Bpk v
Munisipaliteit van Kaapstad 1978(1) SA 13 (A);
Eskom Holdings Ltd and Another v New
Reclamation Group (Pty) Ltd 2009(4) SA 628 (SCA) at 637;
Khumalo and Another v MEC for
Education, KwaZulu Natal 2014(5) SA 579 (CC).
7.13 In the present instance 3½
years have elapsed since the invalid appointment at the time when the
action was instituted
and more than 1½ years have lapsed since
the expiry of the contract period itself by the time that action was
instituted.
At no stage during this whole period and neither even in
its opposition to the application for summary judgment had the
Respondent
attempted any review proceedings, threatened with the
institution thereof or made any effort to have the appointment set
aside.
More significantly, no steps had been taken in defying the
appointment or in not making payment in compliance therewith, save
for the balance claimed in the Particulars of Claim.
7.14 In the present instance, the
Respondent has simply not sought to have its own invalid
administrative act set aside. In this
regard it has also been held
that even where a decision was defective, an organ of State should
generally not be exempt from the
forms and processes of review. It
should be held to the pain and duty of proper process and must apply
formally to a court to
set aside the defective decision so that the
court can properly consider its effects on those subject to it.
See: MEC for Health, Eastern Cape and
Another v Kirland Investments (Pty) Ltd t/a Eye & Laser
Institute, supra at par. 64 and
105.
7.15 The apparent anomaly that flows
from the above and the Oudekraal principle to the effect that an
unlawful act can produce legally
effective consequences “…
is not one that admits easy and consistently logical solutions. But
then the law often
is a pragmatic blend of logic and experience. The
apparent rigour of declaring conduct in conflict with the
Constitution and PAJA
unlawful is ameliorated in both the
Constitution and PAJA by providing for a just and equitable remedy in
its wake.”
See: Bengwenyama Minerals v Genorah
Resources (Pty) Ltd 2011(4) SA 113 (CC) at [85].
7.16 The proper approach quoted with
approval in the Bengwenyama Minerals-case and the Allpay Consolidated
Investment-case is that
stated by Moseneke DJC in Steenkamp NO v
Provincial Tender Board, Eastern Cape 2007(3) SA 121 (CC) at paras.
[29] and [30] namely:
“It goes without saying that
every improper performance of an administrative function would
implicate the Constitution and
entitle the aggrieved party to
appropriate relief. In each case the remedy must fit the injury.
The remedy must be fair to those
affected by it and yet vindicate
effectively the right violated. It must be just and equitable in the
light of the facts, the
implicated constitutional principles, if any,
and the controlling law. It is nonetheless appropriate to note that
ordinarily a
breach of administrative justice attracts public law
remedies and not private law remedies. The purpose of a public law
remedy
is to pre-empt or correct or reverse an improper
administrative function … Ultimately the purpose of a public
remedy is
to afford the prejudiced party administrative justice, to
advance efficient and effective public administration compelled by
constitutional
precepts and at a broader level, to entrench the rule
of law … Examples of public remedies suited to vindicate
breaches
of administrative justice are to be found in Section 8 of
the PAJA. It is indeed so that Section 8 confers on a court in
proceedings
for judicial review a generous jurisdiction to make
orders that are just and equitable.”
7.17 Applying these principles to the
present case, I find that it was insufficient for the Respondent to
simply refer to the invalidity
of the appointment and the
vulnerability of its administrative act without dealing with any of
the aforesaid issues which would
arise once the act has been declared
invalid. Important considerations which the Respondent clearly
purposely sought to avoid
were the factors mentioned in paragraphs
2.10 – 2.12 and 7.6 – 7.8 supra.
7.18 In Chairperson, Standing Tender
Committee and Others v JFE Sapela Electronics (Pty) Ltd and Others
2008(2) SA 638 (SCA) the
invalid administrative acts in a tender
process was allowed to stand inter alia due to the extent of the
completion of the work.
In the present instance, all the work had
already been completed and the only consequence in setting aside the
invalid administrative
acts or upholding the Respondent’s
current defence, would be to deprive the Applicant of money to which
it is entitled as
payment for works in respect of which the public
within the area of jurisdiction of the Respondent has already
received the benefit
and would still continue to enjoy such benefit.
No defence was disclosed as to why the present matter should, in the
circumstances,
not be treated as a similar exception as in the
Sapela-case to the “default-position” following an
invalid administrative
act.
7.19 The failure of the Respondent and
its deponent to deal with the particularity of the Particulars of
Claim, the various instruction
letters, the invoices, statements and
undertakings to pay annexed thereto, including but not limited to the
letter of 2 April 2014
as well as the factors mentioned hereinbefore,
appears to be a conscious avoidance of issues which, in my view, does
not amount
to the bona fide tendering of a defence.
[8] I am therefore of the view that the
Respondent has not satisfied the requirements for resisting summary
judgment.
[9] In the premises summary judgment is
granted against the Defendant for:
1. Payment of the amount of R2 860
002,75;
2. Interest on the aforesaid amount at
the rate of 9% per annum from 19 November 2014 to date of payment;
3. Costs of suit.
N DAVIS
ACTING JUDGE OF THE HIGH COURT
GAUTENG LOCAL DIVISION
JOHANNESBURG
Date of Hearing: 23 October 2015
Date of Judgment: 21 January 2016
Applicant: Adv: Pretorius WG
Respondent: Adv: Mofokeng Z