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[2015] ZASCA 146
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DDP Valuers (Pty) Ltd v Madibeng Local Municipality (233/2015) [2015] ZASCA 146 (1 October 2015)
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SUPREME
COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
No: 233/2015
In
the matter between:
DDP
Valuers (Pty) Ltd
Appellant
and
Madibeng Local
Municipality
First
Respondent
Dijalo
Property
Valuers
Second Respondent
Neutral
citation:
DDP
Valuers (Pty) Ltd
v
Madibeng
Local Municipality
(233/2015)
[2015] ZASCA 146
(1 October 2015).
Coram:
Mpati P, Lewis,
Mhlantla, Bosielo and Swain JJA
Heard:
15 September 2015
Delivered:
1
October 2015
Summary:
Administrative
Law – review of municipal tender – interpretation and
application of
section 7(2)
of the
Promotion of Administrative
Justice Act 3 of 2000
– duty to exhaust internal remedies prior
to instituting judicial review proceedings – the dispute
resolution mechanism
created by
regulation 50
of the
Municipal Supply
Chain Management Regulations does
not constitute an internal remedy
as contemplated by
section 7(2)
of the PAJA.
ORDER
On
appeal from:
Gauteng
Division of the High Court, Pretoria (Makgoba J sitting as court of
first instance).
1
The appeal is upheld with costs.
2
The first and second respondents are ordered to pay the costs of the
appeal jointly and severally, the one paying the other to
be
absolved.
3
The order of the court a quo is set aside and replaced with the
following order:
‘
The
point
in
limine
is dismissed with costs.’
4
The matter is remitted to the court a quo for a decision on the
merits.
JUDGMENT
Mhlantla
JA (Mpati P, Lewis, Mhlantla, Bosielo and Swain JJA concurring):
[1]
This appeal with leave of the court a quo turns on whether the
dispute resolution mechanism created by reg 50 of the
Municipal
Supply Chain Management Regulations, GN
868,
GG
27636
of 30 May 2005 (the regulations) constitutes an ‘internal
remedy’ contemplated in s 7(2) of the Promotion of
Administrative Justice Act 3 of 2000 (PAJA). The litigation in this
matter arose after the Madibeng Local Municipality (the Municipality)
awarded a municipal contract to Dijalo Property Valuers (the second
respondent) one of several entities that had tendered for a
contract
to perform services for it.
[2]
The facts are uncomplicated. On 10 May 2013 the Municipality issued
an invitation to tender for the compilation of a new General
and
Supplementary Valuation Roll for the period 2014 to 2018. Fifteen
bidders submitted tenders. DDP Valuers (Pty) Ltd (the appellant),
which had been the municipal valuer for the Municipality in the
period preceding September 2013, and the second respondent were
shortlisted.
[3]
The second respondent was successful in its bid and was appointed to
perform the services listed in the agreement with effect
from 9
September 2013 until 30 June 2018 in terms of the Service Level
Agreement concluded between it and the Municipality. Upon
being
advised of the award of the tender to the second respondent, the
appellant lodged an
objection
in terms of reg 49 of the regulations
on
the basis that the second respondent’s tender was out of
proportion and far exceeded the appellant’s bid which was
the
second lowest. Reg 49 provides the following:
‘
49.
Objections
and
complaints.
—The
supply chain management policy of a municipality or municipal entity
must allow persons aggrieved by decisions or actions
taken by the
municipality or municipal entity in the implementation of its supply
chain management system, to lodge within 14 days
of the decision or
action a written objection or complaint to the municipality or
municipal entity against the decision or action.’
[4]
On 1 October 2013 the appellant
directed
its
letter of objection to the Municipality
requesting the
latter to provide it with certain information relating to the winning
bidder and the evaluation process. The appellant
also requested the
Municipality in terms of reg 50 of the regulations, to appoint a
competent and qualified person to assist in
resolving the dispute.
The suspension of the operation of the new contract with the second
respondent was sought until the dispute
with the appellant had been
resolved.
[5]
The Municipality replied on the same day by email stating that in
view of the fact that the appellant had instituted action
against it
for payment of outstanding invoices, it would be unethical for the
appellant to continue communicating with the Municipality
and its
staff.
[6]
The appellant’s reply to the email from the official was that
its objection was a separate issue which had nothing to
do with the
summons issued against the Municipality. The appellant concluded by
stating:
‘
Should
we not receive the information requested, we will also take legal
action on this matter against your municipality.’
The
Municipality did not respond to the appellant’s letter and its
request in terms of reg 50 of the regulations.
[7]
The appellant
proceeded
to launch an application in
the
Gauteng Division of the High Court, Pretoria
for
the review and setting aside of the Municipality’s award of the
tender to the second respondent on a number of grounds
including,
inter alia:
(a)
That the tender Bid Evaluation Committee (BEC) had evaluated the
tender on criteria in respect of functionality
that differed from
what was stated in the tender specifications set out in the Request
for Proposals (RFP).
(b)
That the BEC evaluated the tender based on responsiveness instead of
the preference points system prescribed
in regs 5 and 6 of the
Preferential Procurement Regulations
[1]
and contrary to reg 4(5) thereof.
[8]
The Municipality and second respondent opposed the application. In
their answering affidavits, the respondents raised a point
in
limine
that the appellant had not exhausted internal remedies in terms of s
7(2) of the PAJA, and in particular reg 50 of the regulations,
prior
to launching the judicial review proceedings. It was argued that
upholding the point
in
limine
would be dispositive of the case.
[9]
The matter came before Makgoba J. The learned judge was asked to
determine the point
in
limine
before considering the merits. He held that reg 50 of the regulations
constituted an internal remedy and that the appellant either
had to
exhaust that remedy or approach the court for exemption as
contemplated in s 7(2) of the PAJA. Since the appellant had done
neither, the court a quo upheld the point
in
limine
and dismissed the application with costs.
[10]
The issue to be determined is whether the dispute resolution
mechanism created by reg 50 constitutes an internal remedy as
contemplated in s 7(2) of the PAJA. The Municipality abides the
decision of this court and accordingly did not make any submissions
in respect of the merits of the appeal. The second respondent, whilst
abiding the decision of the court, submitted written heads
of
argument to address the issue of costs of the appeal in the event the
appeal is upheld.
[11]
Central
to the issues is reg 50 of the regulations, which provides the
following:
‘
50.
Resolution
of
disputes,
objections,
complaints
and
queries.
—
(1)
The
supply chain management policy of a municipality or municipal entity
must provide for the appointment by the accounting officer
of an
independent and impartial person not directly involved in the supply
chain management processes of the municipality or municipal
entity
—
(a)
to
assist in the resolution of disputes between the municipality or
municipal entity and other persons regarding —
(i)
any
decisions or actions taken by the municipality or municipal entity
in the implementation of its supply chain management
system; or
(ii)
any
matter
arising
from
a
contract
awarded
in
the
course
of
its
supply
chain
management
system; or
(b)
to
deal with objections, complaints or queries regarding any such
decisions or actions or any matters arising from such contract.
(2)
A
parent
municipality
and
a
municipal
entity
under
its
sole
or
shared
control
may
for
purposes
of
subregulation
(1)
appoint
the same person.
(3)
The
accounting officer, or another official designated by the accounting
officer, is responsible for assisting the appointed person
to perform
his or her functions effectively.
(4)
The
person appointed must —
(a)
strive
to resolve promptly all disputes, objections, complaints or queries
received; and
(b)
submit
monthly reports to the accounting officer on all disputes,
objections, complaints or queries received, attended to or resolved.
(5)
A
dispute, objection, complaint or query may be referred to the
relevant provincial treasury if —
(a)
the
dispute, objection, complaint or query is not resolved within 60
days; or
(b)
no
response is received from the municipality or municipal entity within
60 days.
(6)
If
the provincial treasury does not or cannot resolve the matter, the
dispute, objection, complaint or query may be referred to
the
National Treasury for resolution.
(7)
This
regulation must not be read as affecting a person’s rights to
approach a court at any time.’
[12]
The overarching statutory provision, s 7(2) of the PAJA, provides the
following:
‘
(2)
(a)
Subject
to
paragraph
(
c
)
,
no court or tribunal shall review an administrative action in terms
of this Act unless any internal remedy provided for in any
other law
has first been exhausted.
(b)
Subject
to paragraph (
c
),
a court or tribunal must, if it is not satisfied that any internal
remedy referred to in
paragraph
(
a
)
has
been exhausted, direct that the person concerned must first exhaust
such remedy before instituting proceedings in a court or
tribunal for
judicial review in terms of this Act.
(c)
A
court or tribunal may, in exceptional circumstances and on
application by the person concerned, exempt such person from the
obligation
to exhaust any internal remedy if the court or tribunal
deems it in the interest of justice.’
[13]
In
Reed
and others v The Master of the High Court and
others
,
[2]
Plasket J defined the term ‘internal remedy’ when used in
administrative law
as
follows:
‘
[
T]he
composite term “internal remedy” . . . is used to connote
an administrative appeal – an appeal, usually on
the merits, to
an official or tribunal within the same administrative hierarchy as
the initial decision-maker – or, less
common, an internal
review. Often the appellate body will be more senior than the initial
decision-maker, either administratively
or politically, or possess
greater expertise. Inevitably, the appellate body is given the power
to confirm, substitute or vary
the decision of the initial
decision-maker on the merits. In South Africa there is no system of
administrative appeals.
Instead
internal appeal tribunals are created by statute on an
ad
hoc
basis.
’
(Footnotes
omitted.)
[14]
Generally, the duty to exhaust internal remedies is not in and of
itself absolute
[3]
nor is it automatic.
[4]
That much is clear from the latitude given to courts in s 7(2)
(c)
of
the PAJA, to exempt applicants, in exceptional circumstances and upon
application made by the person concerned, from exhausting
internal
remedies if deemed by the court to be in the interest of justice.
Furthermore, ‘a court will condone a failure to
pursue an
available remedy where the remedy is illusory or inadequate, or
because it is tainted by the alleged illegality.’
[5]
Under the common law, the two ‘paramount considerations’
are (a) whether the domestic remedies are capable of providing
effective redress, and (b) whether the alleged unlawfulness
undermines the internal remedies themselves.
[6]
[15]
Section 7(2) of the PAJA was considered by Mokgoro J in
Koyabe
v Minister of Home Affairs (Lawyers for Human Rights as Amicus
Curiae)
,
[7]
where it was held that an aggrieved party must take reasonable steps
to exhaust internal remedies in view of the rationale of internal
remedies as ‘a valuable and necessary requirement in our
law’.
[8]
However, it was
also held that this requirement should not be rigidly imposed, nor
should it be used by administrators to ‘frustrate
the efforts
of an aggrieved person or to shield the administrative process from
judicial scrutiny’.
[9]
The court held that
internal remedies are necessary because they are designed to provide
more readily available, immediate and cost-effective
relief.
[10]
They defer to the executive administrative autonomy and afford the
relevant ‘higher administrative body’ an opportunity
to
rectify its own irregularities before resorting to litigation.
[11]
They also enable the administrators, where applicable, to apply
specialised knowledge which may be of a technical or practical
nature,
[12]
including
fact-intensive cases, where administrators have easier access to the
relevant facts and information, which benefits courts
in judicial
review proceedings having the full record of an internal
adjudication.
[13]
[16]
In this court, counsel for the appellant submitted that reg 50 of the
regulations does not provide an internal remedy in that
the tribunal
does not have the powers to declare the award of the tender invalid
and set it aside. I agree. The heading of reg
50 merely refers to the
‘resolution of disputes, objections, complaints and queries’.
What
is envisaged by subregulation (1) is that the procedure be contained
in a municipality’s Supply Chain Management policy
(the SCM
policy). This seems to suggest that the SCM policy must itself set
out the procedure.
[17]
The functions of the independent and impartial person are twofold. He
or she must:
(a)
assist
in the resolution of disputes between the municipality
or municipal entity and other persons regarding any decisions or
actions
taken by the municipality or municipal entity in the
implementation of its supply chain management system or any matter
arising
from a contract awarded in the course of its supply chain
management system; or
(b)
deal
with objections, complaints or queries regarding any such decisions
or actions or any matters arising from such contract. Such
appointed
person must (i) strive to resolve promptly all disputes, objections,
complaints or queries received; and must (ii)
submit monthly
reports to the accounting officer on all disputes, objections,
complaints or queries received, attended to or resolved.
Having
regard to the words used in reg 50, in the context of the regulations
as a whole and the apparent purpose to which they are
directed,
[14]
reg 50 is not an internal remedy as envisaged in s 7(2) of the PAJA.
[18]
In addition, reg 50 does not set out the manner in which these
complaints, queries or objections will be dealt with and what
documents will be considered in the process of dealing with them.
The
grounds upon which the decisions may be challenged are not specified.
The
appointed person is required to ‘submit monthly reports to the
accounting officer’. The independent and impartial
person is
not directly involved in the supply chain management processes,
evincing the lack of the hierarchy and specialised knowledge
requirements mentioned in
Koyabe
.
There appears to be no indication that the report(s) will be
communicated to the aggrieved person. Importantly,
the powers of the
independent and impartial person are not set out in reg 50, but they
clearly do not include powers to correct
or set aside the decision of
the Municipality complained of. It is clear that this person has no
decision-making powers.
This
too falls short of what an internal remedy would constitute.
[19]
Where the dispute remains unresolved within a period of 60 days, or
no response is received from the municipality within that
period, the
aggrieved party may refer the dispute to the relevant provincial
treasury, failing which it may be escalated to the
national treasury.
No
procedure is provided on how these objections and complaints would be
resolved save to state that if the impartial person is
unable to
resolve the dispute, the aggrieved party may refer the dispute to the
provincial treasury. Similarly, if the latter cannot
resolve the
dispute, the complaint or objection must be referred to the national
treasury. The regulation is silent as to how and
by whom the dispute
would be resolved at these levels and on further action if the
national treasury has not resolved the dispute.
[20]
Finally,
subreg (7) provides that the ‘regulation must not be read as
affecting a person’s rights to approach a court
at any time’.
A person is therefore given a choice either to lodge a dispute in
terms of reg 50 of the regulations or launch
an application in court.
As
has been pointed out by Professor Phoebe Bolton,
[15]
on a reading of the regulations, there is no intention on the part of
the legislature for the independent and impartial person
to have
remedial powers. He or she is simply required to resolve or settle
complaints and objections. On the wording of the regulations,
a
municipality or municipal entity is under an obligation to provide
for the filing of objections and complaints without prescribing
remedial outcomes. The regulations do not provide an internal remedy
in terms of s 7(2) of the PAJA.
Consequently,
the regulations do not constitute an internal remedy.
[21]
In my view the decision of Plasket J in
ESDA
Properties (Pty) Ltd v Amathole District Municipality
[16]
is correct. In that case, the learned judge was faced with provisions
similar to those of reg 50, ie ss 108 and 109 of Amathole
District
Municipality Supply Chain Management Policy, 2012.
[17]
The learned judge held as follows in paras 10-11:
‘
In
my view it was, for two reasons, not obligatory for ESDA to have
first utilised this mechanism before applying for the review
of the
award of the tender.
The
first is that ss 108 and 109 do not create an internal appeal or
review in which the decision-maker has the power to confirm,
substitute or vary the decision complained of. Instead, it creates a
dispute resolution mechanism in which a person, with no
decision-making
powers, is appointed to assist the parties to resolve
their dispute, acting, it would appear, as a mediator or conciliator.
This
is not an internal remedy contemplated by s 7(2) of the PAJA.
The second reason is that s 109(6) provides in express terms that
a
party has a choice of either using the dispute resolution mechanism
or approaching a court. In other words, it does not operate
to
prevent a party from approaching a court “at any time”.’
[22]
In the result, since reg 50 of the regulations did not provide an
internal remedy, there was no obligation on the appellant
to utilise
its provision or apply for an exemption in terms of s 7(2)
(c)
of
the PAJA. Therefore, the court a quo erred when it concluded that
even though a purported internal remedy would not be effective
and
its pursuit would be futile, it was still incumbent upon the
appellant to approach the court for exemption from the obligation
to
exhaust internal remedies. The court a quo erred in upholding the
point
in
limine
.
[23]
In my view, the only other provision that could have been applicable
is s 62 of the Local Government: Municipal Systems Act
32 of 2000
(the Systems Act),
[18]
which
is a general appeal provision for municipalities and does constitute
an internal remedy contemplated in s 7(2) of the PAJA.
Unlike reg 50
of the regulations, in that section, the appeal authority is
empowered after considering the appeal to confirm, vary
or set the
decision aside, provided such variation will not adversely affect the
rights that have already accrued to the preferred
bidder. In the
majority judgment of
City
of Cape Town v Reader and others
,
[19]
Lewis JA considered the meaning of s 62 of the Systems Act to be that
a decision can only be appealed against in terms of that
section, if
the outcome of the appeal does not detract from the rights of the
successful applicant.
[24]
In
Groenewald
NO and Others v M5 Developments (Cape)(Pty) Ltd
,
[20]
it was held that unsuccessful tenderers were entitled to appeal under
s 62 of the Systems Act. Leach JA held:
‘
Section
62(1) allows a person to appeal by giving “written notice of
the appeal and reasons” to the municipal manager
who, under s
62(2) has then to submit ‘the appeal’ – obviously
the notice of appeal and the reasons lodged therewith
under s 62(1) –
to the appeal authority for it to consider ‘the appeal’
under s 62(3). Although in terms of this
latter subsection the appeal
authority is empowered to “confirm, vary or revoke the
decision”, it exercises that power
in the context of hearing
“the appeal”, viz the appeal and the reasons lodged by
the aggrieved person under s 62(1).’
[25]
In this case, the appellant as an unsuccessful tenderer would have
been entitled to appeal under s 62. However, the Municipality
had
already awarded the contract to the second respondent and the parties
had already signed an agreement to that effect resulting
in the
rights accruing to the second respondent. It follows that the
appellant could not resort to that procedure in order to comply
with
s 7(2) of the PAJA.
[26]
In the result, the only recourse available for the appellant as an
unsuccessful bidder was to apply for the judicial review
of the
tender award and the conclusion of the contract, which it did. The
appeal must therefore succeed.
[27]
What remains is the question of costs. The second respondent in
its written heads of argument submitted that it should
not be ordered
to pay the costs of appeal. It submitted that it would not be
fair or equitable to mulct it with these costs
as it did not oppose
the appeal and it gave all the parties notice of its non-opposition,
three and a half months before the hearing
of the appeal. In the
alternative, it submitted that it should only be liable for the
appellant’s costs until 9 June 2015
when it filed its notice to
abide.
[28]
The basic rule is that all costs are in the discretion of the court.
It is true that the second respondent filed a notice to
abide the
decision of the court. This obviously does not have the effect of
setting aside the order of the court a quo. The appellant
still had
to proceed with the appeal to have that order set aside so that the
review process could proceed. The appellant therefore
had no choice
but to carry on with the appeal.
[29]
The general rule on appeal is that a substantially successful party
is entitled to the costs of the appeal. There is no reason
to depart
from the general rule on the facts of this case. Accordingly, the
appellant is entitled to its costs of appeal which
shall be paid by
both respondents jointly and severally.
[30]
In the result, I make the following order:
1
The appeal is upheld with costs.
2
The first and second respondents are ordered to pay the costs of the
appeal jointly and severally, the one paying the other to
be
absolved.
3
The order of the court a quo is set aside and replaced with the
following order:
‘
The
point
in
limine
is dismissed with costs.’
4
The matter is remitted to the court a quo for a decision on the
merits.
__________________
N Z
MHLANTLA
JUDGE
OF APPEAL
APPEARANCES:
For
Appellant: B C Stoop SC
Instructed
by: Coetzer and Partners, Pretoria
Honey Attorneys,
Bloemfontein
For
Respondents: No appearance
[1]
Preferential Procurement Policy
Framework Act, 2000
: Preferential Procurement Regulations, GN R502,
Government Gazette
34350 of 8 June 2011.
[2]
Reed v Master of the High
Court of SA
[2005]
ZAECHC 5
;
[2005] 2 All SA 429
(E) para 25.
[3]
Koyabe v Minister of Home
Affairs (Lawyers for Human Rights as Amicus Curiae)
[2009]
ZACC 23
;
2010 (4) SA 327
(CC) para 38.
[4]
Lawrence Baxter
Administrative
Law
(1984) at 720.
See also Cora Hoexter
Administrative
Law in South Africa
2
ed (2012) at 539.
[5]
Hoexter (note 4 above) at 539.
(Footnotes omitted.)
[6]
Baxter (note 4 above) at 721.
[7]
Koyabe
(note 3 above) para 34-49.
[8]
Paragraph 38.
[9]
Paragraph 38.
[10]
Paragraph 35.
[11]
Paragraph 36.
[12]
Paragraphs
36-37.
[13]
Paragraph 37.
[14]
Natal
Joint Municipal Pension Fund v Endumeni Municipality
[2012]
ZASCA 13; 2012 (4) SA 593 (SCA)
para
18.
[15]
Phoebe Bolton
‘Municipal tender awards and internal appeals by unsuccessful
bidders’
Potchefstroom
Electronic LJ
2010 (13) 3 at 80, available at
http://www.nwu.ac.za/p-per/index.html
.
[16]
ESDA
Properties
(Pty) Ltd v Amathole District Municipality & others
[2014] ZAECGHC 76; 2014 JDR 1878
(ECG).
[17]
The policy adopted by the
Amathole District Municipality is very similar to reg 50 of the
regulations.
[18]
Section 62
subsecs (1), (2) and (3) of the
Local Government: Municipal Systems
Act 32 of 2000
provide:
‘
(1)
A person whose rights are affected by a decision taken by a
political structure, political office-bearer, councillor or staff
member of a municipality in terms of a power or duty delegated or
sub-delegated by a delegating authority to the political structure,
political office bearer, councillor or staff member, may appeal
against that decision by giving written notice of the appeal
and
reasons to the municipal manager within 21 days of the date of the
notification of the decision.
(2)
The municipal manager must promptly submit the appeal to the
appropriate appeal authority mentioned in subsection (4).
(3)
The appeal authority must consider the appeal, and confirm, vary or
revoke the decision, but no such variation or revocation
of a
decision may detract from any rights that may have accrued as a
result of the decision.’
[19]
City of
Cape Town v Reader & others
[2008]
ZASCA 130
;
2009 (1) SA 555
(SCA) para 32.
[20]
Groenewald NO & others v
M5 Developments (Cape)(Pty) Ltd
[2010] ZASCA 47
;
2010 (5) SA 82
(SCA) para 24.