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[2018] ZAGPJHC 522
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UMSO Construction (Pty) Limited v City of Johannesburg and Another (2018/17263) [2018] ZAGPJHC 522; [2018] 4 All SA 507 (GJ) (31 May 2018)
REPUBLIC
OF SOUTH AFRICA
IN THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
CASE
NO: 2018/17263
In
the matter between -
UMSO CONSTRUCTION (PTY)
LIMITED
Applicant
and
CITY OF
JOHANNESBURG
First
Respondent
NEBAVEST (PTY)
LIMITED
Second
Respondent
JUDGMENT
DODSON
AJ
Introduction
[1]
This is an urgent application to interdict
and restrain the first respondent (“the City”) from
proceeding with a tender
process for the construction of civil
engineering infrastructure and low cost housing in Klipspruit
Extension 7, Soweto.
[2]
The tender is, to all intents and purposes,
in respect of the same work as had formed the subject matter of an
earlier tender for
which bids were invited in 2015 (“the
initial tender”). A joint venture to which the applicant
(“UMSO”
or “the applicant”) was a party
submitted a bid in the initial tender. However, UMSO was
ultimately informed
that on account of problems with the tax
clearance certificates of UMSO and its joint venture partner, the
second respondent (“Nebavest”),
and the withdrawal of
Nebavest from the joint venture, the “preconditions” of
the executive adjudication committee
were not met and “the bid
validity had expired”.
[3]
The
applicant seeks to interdict the further processing of the new tender
pending a judicial review of the decision not to proceed
with the
initial tender. Those review proceedings are currently under
way.
[1]
In the review proceedings, UMSO also seeks an order substituting the
City’s decision with one confirming the award
of the tender to
the joint venture.
The
case alleged by the applicant
[4]
The initial invitation to bid was
advertised on 27 March 2015. The joint venture’s bid was
submitted on 27 May 2015
with the bidder reflected as the
UMSO/Nebavest Joint Venture. The contract price was
R435,580,969.40. The bid closed
on 31 May 2015.
[5]
In terms of the invitation to bid, bidders
were required to include in their submissions an original valid tax
clearance certificate
from the South African Revenue Service (SARS)
certifying that the taxes of the bidder were in order.
[6]
UMSO and Nebavest concluded a joint venture
on the same day as their bid, 27 May 2015. As required by the
invitation to bid,
the joint venture agreement was included in the
bid documentation. The joint venture was formed specifically to carry
out the project
which formed the subject matter of the bid.
[7]
Clause 2.1 of the joint venture agreement,
under the heading “PURPOSE” provides as follows:
“
The Parties
hereby establish a Joint Venture being an unincorporated association
under the name of Umso Nebavest Joint Venture ...
for the purposes of
carrying out all or some of the following:
·
Entering into the Contract with the
Employer; and
·
Performing all the Services to be
undertaken for the Project by the Joint Venture under the Contract.”
[8]
“
Project” is defined in clause
1 as –
“
the
KLIPTOWN/KLIPSPRUIT EXT 7 TURNKEY TOWNSHIP DEVELOPMENT”
.
[9]
Clause 2.2 under the heading “LEADING
PARTY” provides as follows:
“
The Parties
hereby appoint Umso the Leading Party and representative of the Joint
Venture, responsible for the supervision, direction
and control,
execution and carrying out of the Project through the Project
Manager, or in accordance with the policy and direction
laid down by
the Executive Committee.”
[10]
Clause 3.2 is headed “contributions”.
Clause 3.2.1 provides:
“
The Parties
acknowledge that the Contract shall be entered into in the name of
UMSO NEBAVEST JV, and the Parties agree that they
will be jointly and
severally liable for UMSO NEBAVEST JV’s obligations under the
Contract.”
[11]
“
Contract” is defined to mean –
“
The contract
or contracts entered into between the Employers and Umso Nebavest JV
for the Project.”
[12]
“
Employer” is defined to mean –
“
City of
Johannesburg Housing Department or other successor in title.”
[13]
All losses and profits of the joint venture
were to be shared between the parties in equal shares.
[14]
Clause 12 entitled “duration of
agreement” reads as follows:
“
12.1
COMMENCEMENT
This Agreement shall come into force
upon signature by the Parties hereto.
12.2 TERMINATION
This Agreement shall terminate upon
the first happening of any one of the following events:
12.2.1 The Agreement in writing of the
Parties to terminate this Agreement;
12.2.2 The Employer terminates the
Contract provided that any Joint Venture obligations that survive
such termination remain in
place;
12.2.3 The Contractor terminates the
Contract provided that any Joint Venture obligations that survive
such termination remain in
place;
12.2.4 The Project has been
successfully completed and all obligations to the Employer have been
met by the Joint Venture. Notwithstanding
the aforegoing, the Joint
Venture shall be deemed to remain intact for purposes of latent
defects.”
[15]
On 3 May 2016, the City addressed an email
to UMSO requesting that the joint venture provide information
regarding the financial
standing of the joint venture members.
[16]
UMSO responded on 5 May 2016 by providing
the audited financial statements for the 2014/2015 financial year in
respect of both companies,
along with the March 2016 quarterly
management accounts for UMSO.
[17]
Mr Tollo Nkosi, a director of UMSO who
deposed to the founding affidavit, goes on to testify that two weeks
later, from around 21
May 2016, he and a fellow director Andile
Tshaka, started receiving anonymous phone calls. These
continued for two weeks
until 4 June 2016. He and Tshaka each
received three phone calls during this two-week period. The first two
calls that he
received sounded like the same person and the third
call that he received was from someone else. Both callers were
male.
[18]
Mr Tshaka’s experience was the same
as his although they could not confirm that they were contacted by
the same individuals.
The callers purported to represent the
City, demanded that UMSO enter into “under-the-table”
talks before it could
be awarded the tender and, upon their refusal
to negotiate, stated that the tender would not be awarded to the
joint venture because
of UMSO’s unwillingness to talk.
[19]
Mr Nkosi stated that the callers were
emphatic that he and Mr Tshaka had to agree to informal terms outside
of the tender process
before the tender would be awarded.
He understood the clear meaning to be that UMSO would have to pay a
bribe in order
to be awarded the tender.
[20]
Mr Nkosi went on to name the official who
he considered to be responsible for the bribes. Reasons are
given for Mr Nkosi’s
view in the founding affidavit, but it is
unnecessary to decide that issue for purposes of the relief sought in
this matter.
[21]
According to Mr Nkosi, he received the last
anonymous call on 4 June 2016. Two days later, on 6 June 2016,
the joint venture
members received an email from the “Ops
Manager: Committees, Legal and Commercial, Strategic Supply Chain
Management”
saying the following:
“
Dear Service
Providers
We are in a process of finalising the
abovementioned bid and one of the requirements is that the bidder(s)
submit their latest original
Tax Clearance Certificate. I received
two copies from our housing department [that] are not updated, ie tax
clearance certificates
that were submitted with the bid documents
expired 11 November 2015 for Nebavest and 19 May 2016 for Umso we
then requested updated
original tax clearance certificates and we
received them with these expiry dates: 6 August 2016 for Umso and 28
October 2016 for
Nebavest. This is less than a period of 12 months.
It is due to the above explanation
that we request Umso/Nebavest JV to provide us with the updated or
[text missing] Clearance Certificates
or SARS pin code / passwords
not later than Friday 10 June 2016, in order to be able [text
missing] the procurement process (sic).”
[22]
On 9 June 2016, UMSO’s attorneys sent
a letter to the City pointing out that:
[22.1]
It is sufficient if the service provider’s
tax clearance certificate is valid when submitted or at the time that
the bid is
adjudicated;
[22.2]
The validity of a tax clearance certificate
at any point in the future is only relevant after the project has
been awarded to a
service provider, when invoices are submitted for
payment; and
[22.3]
The existing tax clearance certificates
were sufficient for the bid adjudication process; and
[22.4]
It would be incorrect for the joint
venture’s bid to be disqualified on the basis of the contents
of the email of 6 June 2016.
[23]
On the same day Mr Nkosi on behalf of UMSO
sent a letter to the City stating:
“
You will
notice that the periods for the Tax Clearance Certificates issued by
SARS overlap by some seven months and this is beyond
our control.
A similar scenario exists with Nebavest. It has been established by
our company auditors (PWC) that this does
occur from time to time and
as a result of a possible ad hoc audits (sic) that SARS may conduct
and this is quite ordinary.
We further confirm that upon expiry of
the current valid Tax Clearance Certificates issued to yourselves,
new certificates will
be applied for and similarly issue same to
client (COJ) should it be so required otherwise we are unable to
obtain revised tax
clearance certificates at this instance (sic).
We trust you find the above in order.”
[24]
The City did not respond to the letter from
UMSO’s attorneys. However, on 22 June 2016, the City
replied to Mr Nkosi’s
email of 9 June 2016 saying-
“
According to
SARS the Tax Clearance Certificates submitted are invalid for both
companies in the consortium. Should you be contesting
SARS view you
are requested to submit a Tax Clearance pin number for the City to
verify both your tax status (sic).
Please
respond by 23 June 2016 15:00. Failure to comply will be considered
as agreeing to SARS assertion.”
[25]
On the same day (ie 22 June 2016, before
the stipulated time limit expired), Mr Nkosi replied on behalf of the
joint venture as
follows:
“
We note
receipt of your email below. This matter was previously raised by
your colleague and we believe it was adequately addressed.
I attach
correspondence from our auditors that formed basis for the response
previously issued on 9
th
June 2016. (sic).
Your mail provides no evidence nor
reference to the alleged invalidity of the Tax Clearance/s, we
request that you conduct a formal
enquiry at SARS (not by emails) and
similarly we will send our representatives from PWC to form part of
(sic). I trust this is
in order and await your response.”
[26]
Attached to the email was a letter dated 9
June 2016 from PriceWaterhouse Coopers stating:
“
Two
clearances was (sic) issued because at 27/10/2015 when collecting
more clearance certificates the system indicated an o/s amount
in
respect of SDL.
SDL was then paid by UMSO to clear all
tax records and the system ‘reissued’ UMSO’s
clearance dated 28/10/2015
overriding the original one issued on
19/05/2015.”
[27]
The next day, 23 June 2016, and within the
one day deadline set by the City, Nebavest provided its tax clearance
certificate pin
number. The City was also provided with UMSO’s
tax clearance certificate pin number.
[28]
On 24 June 2016, his co-director Mr Tshaka,
received an email dated (but not sent on) 24 May 2016 from the chief
executive officer
of Nebavest. The email chain accompanying the
letter suggests that there was an unsuccessful attempt to send the
letter on
1 June 2016. The material part of the letter reads as
follows:
“
Over time
and after submission of the bid, Nebavest ... has taken the decision
that the company will no longer participate in joint
ventures.
This decision is partly influenced by growing commitments. Nebavest
... therefore proposes a buyout from UMSO Construction
at 24% of the
R65 327 145.41. The figure of R65 327 145.41
is 15% of and a profit from the total project
value of
R435 580 969.40.
We further propose that the 24% be
paid to Nebavest on two transactions: 60% on receipt of appointment
letter from, and 40% on signing
of the service delivery contract with
the City of Johannesburg, the client.
Your prompt
response will be highly appreciated.”
[29]
On the same day, Nebavest addressed a
letter to the City, the material part of which reads as follows:
“
With
Nebavest ... having achieved the Level 8 CE GB PE grading, we
resolved that the approach to enter into joint venture agreements
in
the interests of achieving a high grade, has become redundant.
Our achievement has had a catalytic
effect to the extent of increasing the volume of our work, demanding
greater focus of our resources
and minimising the risk we may
encounter, both from our peers and clients. As such, we have written
to inform Umso Construction
regarding Nebavest’s decision to
withdraw from the joint venture agreement. Our company will no longer
participate jointly
with Umso Construction should the Klipspruit
Extension 7 turnkey: 479/15 bid that was submitted by the joint
venture, be awarded.”
[30]
Twenty-four minutes later, the City
responded, noting the withdrawal.
[31]
Mr Nkosi on behalf of UMSO goes on to aver
that the purported withdrawal of Nebavest is an internal matter
between the members of
the joint venture. It took place after
the tender ought to have been awarded and an effective withdrawal
after the award
of the tender would not result in the cancellation of
the project, particularly where UMSO was responsible for the bulk of
the
work. He also pointed out that UMSO had refused the buy out
proposed in Nebavest’s letter to it and stated that the
terms
of an exit by Nebavest from the joint venture were never agreed.
[32]
On 27 June 2016, three days later, Mr Nkosi
replied to both Nebavest and the City in separate letters. In
the letter to Nebavest
he pointed out that
“
2.1 The
parties, Umso and Nebavest, have a joint responsibility and interest
to ensure that the bid is awarded to the Umso Nebavest
Joint Venture;
and
2.2 No award has taken place and as
a result discussions regarding implementation of the project and any
potential buyout/s of one
party by another cannot take place at this
stage.”
[33]
In the letter to the City he pointed out
that the joint venture was still able to perform the work required by
the bid, that the
bid was in the name of the joint venture and not in
the name of Nebavest, that UMSO was the leading party in the joint
venture
and took on the bulk of the responsibilities, that the
internal arrangements between the parties in the joint venture had no
bearing
on the joint venture’s relationship with third parties
and that “UMSO would in any event perform the work in terms of
the tender on its own”. The City did not respond either
to this letter or to a follow up letter sent on 15 July 2016.
[34]
Following this, over a period of some eight
months, and despite five written requests from UMSO or its attorneys
to the City for
updates on the bid adjudication process, there was
complete silence from the City. None of the requests for
information about
progress with the bid adjudication process was
answered. Mr Nkosi also draws attention to the fact that the
City’s
official responded within 24 minutes to Nebavest’s
email purporting to advise the City of its withdrawal from the joint
venture,
but took nine months to respond to UMSO’s repeated
written requests for information about progress in processing of the
initial
tender.
[35]
Eventually, on 31 March 2017, the
applicant’s attorneys received a letter from the City as
follows:
“
Your letter
of 10 March 2017 refers.
1. The Executive Mayor’s office
has followed up with the Supply Chain Management Unit to establish
the facts following your
letter of enquiry on behalf of your client
Umso Construction Pty Ltd.
2. We note that you are representing
Umso Construction (Pty) Ltd not Umso Nebavest Joint Venture the
entity that bid. However the
facts established are as follows:
2.1 EAC of April 2016 recommended the
awarded to Umso Nebavest Joint Venture subject to Tax matters of the
consortium still being
in order.
2.2 SCM contacted JV to request for
the latest Tax clearance certificates, when the tax clearances for
the 2 companies making up
the Joint Venture were supplied they looked
suspect as the dates were not in the normal dating of SARS. For an
example for Nebavest
the original submission was expiring on
2015-11-04 whereas the updated Tax clearance was expiring on
2016-08-06. The expiring
date was less than 12 months as
expected. The matter was referred to SARS who declined the
certificate as legitimate under case
number 203064280.
2.3 While querying this matter with
SARS an official from Supply Chain Unit Mr S Leso received a call
from M Ntantala the Chief
Executive Officer of Nebavest one of the JV
partners who indicated that her email was down so she phoned to
indicate the following:
2.3.1 That her company has its own Tax
clearance and that she did not understand why they (the other partner
Umso Construction (Pty)
Ltd) were not asking her company for a tax
clearance as she would have given them. So the facts indicate a tax
clearance submitted
was fraudulent. When she later emailed her tax
clearance it was issued on 2016/06/22 different from the one
submitted to the City
by the other JV partner.
2.3.2 Secondly she called to indicate
that her company is officially withdrawing from the Joint Venture.
This means the Joint
Venture that was awarded no longer exist. This
was later followed up by an email. When the follow up email was sent
she copied
UMSO construction. Umso Construction (Pty) Ltd whom
you represent did not dispute this but just alerted us that the other
JV partner was minor partner and did not need them (Nebavest 45 (Pty)
Ltd. (sic) This in itself was to the City an acceptance that
the JV
had collapsed.
3. It was on the
basis of these 2 reasons that the recommendation was halted. The
Executive Adjudication Committee precondition
was not met. The Joint
Venture partner is no longer party to the Joint Venture. This implies
the entity that bid no longer exist.”
(the
grammatical and other errors are in the document itself)
[36]
Mr Nkosi goes on at some length in the
founding affidavit to answer the allegations in the City’s
letter of 31 March 2017.
It is not necessary for the decision
required of the court in this matter to consider the adequacy or
otherwise of those responses.
What is important is that he
points out that neither the alleged fraud in relation to the tax
certificates, nor the alleged collapse
of the joint venture had ever
been taken up with UMSO and they had never been afforded any
opportunity to respond before “the
recommendation was halted”.
[37]
UMSO’s attorneys sent their response
to the City’s letter of 31 March 2017 on 12 April 2017.
In the letter UMSO’s
attorneys announced their intention to
bring review proceedings and requested the provision of a range of
documents relating to
the bid evaluation and adjudication process for
purposes of the review.
[38]
On 26 April 2017, the City replied refusing
to provide the documents on the basis that the request came on behalf
of UMSO and not
on behalf of the joint venture. A further
letter from UMSO’s attorneys pointing out in what respects it
considered
the City’s stance to be erroneous went unanswered.
[39]
The upshot was the launch by UMSO of the
review application in respect of the initial tender, which was served
on the City on 4
July 2017. The grounds of the review pertain
to the impact of the alleged attempts at bribery on the
decision-making process,
the delays in the process, the procedural
unfairness in concluding that the tax certificates were fraudulent
without affording
the joint venture an opportunity to respond and an
error of law in regard to the impact of the purported withdrawal of
Nebavest.
[40]
Consequent upon the review, the City became
obliged to furnish its record of proceedings in terms of Rule
53(1)(b) on or before
6 July 2017. Nothing was received from
the City and as a result the matter was set down for hearing on an
unopposed basis
for 28 August 2017. Three days before the
review application was due to be heard, on 25 August 2017, the City
belatedly delivered
a notice of intention to oppose. This
resulted in the removal of the matter from the unopposed roll as well
as settlement
negotiations, which did not succeed.
[41]
Following this, despite letters of enquiry
from the applicant’s attorneys, neither the record nor any
answering affidavit
was filed in the review proceedings by the time
that this urgent application was launched on 7 May 2018, ten months
after the record
was due.
[42]
On 28 February 2018, Mr Nkosi discovered
that the City had decided to open a new tender process in respect of
the works which were
the subject matter of the initial tender. A
letter was therefore sent by UMSO’s attorneys on the same day
in which it -
[42.1]
pointed out that the record had still not
been provided;
[42.2]
stated that it had come to UMSO’s
attention that the City intended to advertise a tender for works
which were identical to,
or substantially the same as, the works or
projects which formed the initial tender, now the subject matter of
the review application;
[42.3]
averred that the delaying of the review
application by failing to file the record was a delaying tactic;
[42.4]
requested a date to be provided by when the
record would be filed;
[42.5]
requested a written undertaking that
pending the review the City would not proceed to advertise a new
tender in respect of the works;
and
[42.6]
stated that if they did not do so, UMSO
would proceed with an urgent interdict to suspend the continuation of
the new tender process.
[43]
Notwithstanding the request for an
undertaking not to proceed with the new tender, it was indeed
advertised on 5 March 2018.
It is not disputed that it relates
to essentially the same works as those under the initial tender.
[44]
Letters were then sent by UMSO’s
attorneys on 8 March 2018, 19 March 2018 and 25 April 2018, following
up on the letter of
28 February 2018, pointing out that the new
tender had been initiated and calling on the City, through its
attorneys, not to proceed
with the new tender process.
[45]
The City did not respond and accordingly
the present application was launched on 8 May 2018 to interdict the
processing of the new
tender. Nebavest is joined as the second
respondent in the application but has not opposed it.
The
City’s answer
[46]
The City’s answering affidavit is
deposed to by Mr Mogashoa, the group head: legal and contracts
department of the City.
[47]
The City’s answering affidavit
reveals substantial new information regarding the bid process which
was obviously not known
to UMSO at the time that it launched the
urgent proceedings. Apparently, the joint venture was identified as
one of four short
listed bidders after deliberation by the bid
evaluation committee or “BEC”.
[48]
The City’s executive adjudication
committee (“EAC”) “
which
is the body that is empowered to award large tenders”
requested a liquidity and going concern analysis report on UMSO
and Nebavest. The report was furnished on 13
April 2016. It expressed some reservations about their
financial positions
and on this basis recommended that the City seek
a performance guarantee.
[49]
The EAC held various meetings in relation
to the tender. The last meeting was held on 26 April 2016. A
report was prepared
for purposes of that meeting and concluded that
the joint venture had the necessary technical ability to handle the
project under
consideration. The report therefore recommended
that the tender be awarded to the joint venture.
[50]
The minute of the meeting forms an
attachment to the City’s answering affidavit. I need to
quote the material part of
the minute in full because there is
significant dissonance between the minute and the version contained
in the answering affidavit
and the correspondence from the City
officials that followed the EAC meeting, including the letter of 31
March 2017 referred to
earlier. The material part of the minute
reads as follows:
““
6.
REPORTS
Item 6
CONTRACT NO 479/15 – RESUBMISSION: KLIPTOWN/KLIPSPRUIT
EXTENSION 7,
TURNKEY DEVELOPMENT PROJECT
The Committee raised the following
concerns, comments and queries:
1. Probity needs to give opinion
services on the report
2. Page 30
for Risk identifier, the
role of the probity advisor was to see if risk is managed in a
transparent way and considered all the
facts
3. The only risk were the initial work
was done was the financial risk?
4. That the City Treasury department
also to conduct their own financial risk analysis
5. Committee advised the user
department to do request performance guarantee in the same way they
use to do it for constructions,
which is requesting for bank
guarantee and GSSCM should request the service providers to submit
the valid tax clearance certificates.
The user department responded as
follows:
(i) Probity explained that it provided
advisory services rather than opinion services.
Ø
They were advising BEC committee as
moving along with the process, unlike they were audits and checking
compliance at the end of
the process
Ø
BEC committee picked-up that there
was discrepancy with opening-tender register, the number of bidders
on the register vicar vid
the actual bid documents
Ø
The starting point was to reconcile
the open register with the actual documents received
Ø
The discrepancy aroused as a result
of the fact that when they were moving the bid documents, some of the
consortium bid documents
got removed from the main document and that
was received.
Ø
The role of Probity was to get
Quantity survey to review the specification process to ensure that
the process followed was fair
and transparent
Ø
Quantity Surveyor advised that the
process was separated into pre-contract stage and post-contract
stage, were in post-contract
stage they were looking at financial
analysis of tenders which has been received
(ii) That all risks
associated with the bidder were considered.
(iii) That the City Treasury
analysis come to the same conclusion as the probity advisor’s
analysis, if the City has
to make an award we have to request the
bidders to provide recent audited financial statements and letter of
guarantee were they
say they will be able to execute work.
(iv)
One of the recommendations was to explore Jozi@work.”
The Chairperson proposed that the item
be approved subject to amendments.
Individual members concurred.
Therefore it was
RESOLVED
1. That Contract No: 479/15: Kliptown
Klipspruit EXT 7 Turnkey Development Project be awarded to Umso
Nebavest JV for an amount
not exceeding R435 461 804.21
(including 14% VAT and 10% Contingencies) for a construction period
of 3 Years.
2. That General Conditions of Contract
agreement (GCC2010, 2nd Edition) be entered into with Umso Nebavest
JV.
3. That the Acting Executive Director:
Housing be authorized to sign the contract, in consultation with the
Group Head: Group Legal
and Contracts, and avail a copy to Group
Head: Strategic Supply Chain Management within 30 days from signature
thereof.
4. That the Acting Executive Director:
Housing shall, before the contract referred to above is signed,
ensure that the contractor
is up to date with the payments of its
municipal accounts with the City of Johannesburg Metropolitan
Municipality, or that adequate
arrangements for payment thereof have
been made and to provide the Executive Director: Finance with written
confirmation thereof.
5. That the Group Chief Financial
Officer be authorised to sign the letter of award after the
provisions of paragraph 4 above have
been complied with.
6. That the Bid Evaluation Committee
confirms that none of the Directors of the recommended tenderer are
in the service of the City.
7. That permission
be granted to the Department of Housing to enter into negotiations
with the recommended tenderer to determine
the nature and extent of
works that could be subcontracted to local SMME’s.”
(the
grammatical and other errors are in the document itself)
[51]
Based on this minute, the City alleges in
its answering affidavit that the EAC raised “
concerns,
comments and queries”
including a
concern regarding the submission of valid tax clearance certificates.
[52]
The answering affidavit then goes on to
refer to the correspondence between the City, UMSO and Nebavest,
which has already been
referred to earlier in the judgment.
[53]
Strangely, the answering affidavit makes no
mention of the fact that an award of the tender had in fact been made
to the joint venture
at the meeting on 26 April 2018 as recorded in
the minute, save where Mr Mogashoa avers that-
“
The City
advised the joint venture on 19 July 2016 that the award was for the
joint venture, not for the applicant and that the
City had not been
given information on the second respondent.”
[54]
This averment is misleading. The
document attached to the answering affidavit to substantiate the
averment says nothing of
the sort. Rather, it is an internal exchange
of email correspondence between City officials on 19 May 2016.
The particular
email upon which reliance is, misleadingly, placed, is
addressed by Nokuzola Deliwe to Zacharia Moabi Pekane at 3:31pm and
reads
as follows:
“
Hi Moabi,
Thanks for the information below, on
the attachments, there is quarterly management accounts statement for
UMSO and nothing for
Nebavest. Kindly request the document from
Nebavest because the award is for Joint Venture and not for one
company.
Regards,
Zola.”
[55]
This is followed by another email from her
saying:
“
Hi Moabi,
Also ask Nebavest to use their own
letterhead for Quarterly Management Account Statements.
Regards
Zola.”
[56]
Moabi then responds to Zola saying:
“
It sorted
now (sic).”
[57]
Mr Mogashoa then goes on to aver as
follows:
“
The City
officials, namely Nokuzola Deliwe and Kiran Ramkissoon, made various
enquiries to the SARS (sic) regarding the tax clearance
certificates
by members of the joint venture. SARS advised that the certificates
were invalid. SARS provided the City officials
with case numbers
regarding queries regarding the validity of the tax clearance
certificates.”
[58]
This correspondence between the City
officials is then attached, along with UMSO and Nebavest’s tax
clearance certificates.
On three of them there is written onto
the certificate in handwriting the words “
Declined
for SARS”
and a case number is
then given and on the fourth certificate in handwriting appear the
words “
No Records per SARS
”
and a case number is again given.
[59]
The affidavit then goes on to make
reference to the correspondence referred to earlier regarding
Nebavest’s withdrawal from
the joint venture.
[60]
Mr Mogashoa does concede that the City had
not, before 31 March 2017, ever advised the applicant that the City
had taken a decision
regarding the tender. No explanation is given in
this regard, save that it is alleged in the answering affidavit that
the City
could not convey the decision of the EAC to the joint
venture until the City had satisfied itself with the tax affairs of
the joint
venture. However, as appears from the correspondence, the
documents upon which the City allegedly reached its conclusion in
relation
to the alleged fraud pertaining to the tax certificates had
already been provided to the City, allegedly by SARS, by 10 June
2016.
[61]
The City also denies strenuously that there
was any bribery as alleged by the applicant.
[62]
The City takes three points
in
limine
on the basis of which it
contends that the application stands to be dismissed without the need
to enquire into its merits:
[62.1]
The applicant has no legal standing to seek
relief because it was not the bidder in the initial tender. The
bidder was the
joint venture. Therefore it was the joint
venture alone that could seek relief in its own name.
[62.2]
The parties that have submitted bids in the
new tender are interested parties who ought to have been joined in
the urgent application
as respondents.
[62.3]
The applicant failed to make out any case
for urgency. The urgency was self-created as a result of the delays
in launching the urgent
application.
[63]
In relation to the merits of the
application, the City disputed on various grounds that the applicant
had made out a case for the
grant of interim relief.
[64]
I proceed to consider the first two points
in limine
.
Urgency is considered at the end of the judgment.
Legal
standing
[65]
The City disputed the applicant’s
legal standing. There were two components to this argument. The
first is that the
effect of rule 14 is that an entity such as a
partnership or unincorporated association must bring proceedings in
the name of the
partnership or the unincorporated association.
A member of an unincorporated association and a partner of a
partnership cannot
bring proceedings in its own name.
[66]
Both parties characterised the joint
venture as a partnership. The joint venture agreement
characterises it as an unincorporated
association. At this
stage of the proceedings nothing turns on this as the principles
regarding joinder are essentially the
same for both.
[67]
The
City relies for its challenge to legal standing, on the judgment of
this court in
Stefanutti
Stocks Cycad Pipelines Joint Venture v Rand Water Board and others,
Stefanutti Stocks (Pty) Ltd v Rand Water Board and
others.
[2]
[68]
Rule 14 provides in relevant part as
follows:
“
(2) A
partnership, a firm or an association may sue or be sued in its
name.”
[69]
Association is defined in rule 14(1) as-
“
any
unincorporated body of persons, not being a partnership”.
[70]
The word “may” is used in rule
14(2) and not the words “must”, or “shall”.
The provision
is facilitative rather than peremptory.
Stefanutti
is not authority for any conclusion to the contrary. In that
case, the situation was the reverse of the present case.
A
joint venture sued in its own name and its standing to do so was
challenged. The court, correctly, rejected that challenge.
There, the joint venture was characterised as a partnership and the
court recognised its standing to sue. Correctly so: rule 14(2)
provides for this.
[71]
In
Ex-TRTC
United Workers Front and others v Premier, Eastern Cape,
[3]
Van
Zyl J explained the position as follows:
“
The feature
that a partnership, and an unincorporated association have in common
is that they have no legal personality of their
own and do not exist
apart from the individuals of whom they are composed. It is by virtue
of their legal nature, as well as the
common-law rule, that a
defendant may as of right demand the joinder in case of joint owners,
joint contractors, partners and persons
who have a direct interest in
the outcome of the action, that each constituent member of these
three legal figures must be joined
and cited by name to avoid the
claim being excipiable for non-joinder. It is in this context that
rule 14 was introduced. The purpose
of the rule is to simplify the
method of citation by enabling an aggregate of persons to be sued in
the name which is descriptive
of it and to ensure that a plaintiff’s
claim is not defeated by technical defences of non-joinder. ‘In
effect the rule
says this: the common law procedure of suing each
individual member of an unincorporated association need therefore not
to be followed,
the plaintiff being entitled to sue the
unincorporated association by name.’ The rule enables a
plaintiff to successfully
sue the members of an association or, in
the case of a partnership, the individual partners where he may not
know who they are.
What it effectively does is to allow the
individual persons who formed the partnership or firm or association
to sue or be sued
in the name the entity usually bears. ‘Implicit
in at least the provisions of sub-rules (1) and (2) is that the
actual party
which trades thus is the actual plaintiff’.
[4]
To put it differently, the members of the partnership or association,
as the case may be, will be regarded as if they had
been cited
individually by name.
[15] Rule 14 is therefore
nothing
more than a procedural aid
assisting a plaintiff to cite certain
legal entities that do not have any existence separate from their
members or owners.”
[72]
That
judgment was followed by this court in
United
Apostolic Faith Church v Boksburg Christian Academy
,
[5]
holding that -
“
I
n
the absence of the procedural aid of Uniform Rule 14(2), the
Plaintiff would have been constrained to cite and join each
individual
forming part of the association. The rule thus simplifies
the method of citation by
enabling
such a body of persons to be sued in the name which it normally bears
and which is descriptive of it. It ensures that a plaintiff’s
claim is not defeated by technical defenses in regard to the citing
of a party. Rule 14(2) is, however,
a
procedural aid only. It cannot vest legal personality where it does
not exist
.”
(emphasis
added)
[73]
The effect of rule 14(2) in the context of
this matter is that UMSO had a choice either to sue in the name of
the joint venture
or to follow the common law path and ensure that
both parties to the joint venture, UMSO and Nebavest, were joined.
In this
case, it chose the latter course. However, because
Nebavest has purported to withdraw from the joint venture, and is
seemingly
no longer cooperating with UMSO, the appropriate method of
joinder was to join it as a respondent. This UMSO has done.
[74]
The
second component of this challenge was made on the basis of the
Constitutional Court’s decision in
Areva
NP v Eskom Holdings SOC Ltd and Ano.
[6]
However that case is distinguishable on the facts. One company
in a group submitted a bid in response to a tender as agent
for
another company in the group. When the company that had
submitted the bid as agent brought review proceedings to set
aside
the award of the tender to a different company, it asserted standing
on the basis that it had submitted the bid in its own
right.
The Constitutional Court found that this was not the basis of the
bid. Because it had made the bid as agent
for another entity
and not in its own right, its legal standing was rejected.
[7]
[75]
In the present matter, UMSO did not act as
agent for the joint venture or for Nebavest. It was a party to
the joint venture
and stood to benefit from the bid, if awarded, in
its own right. It therefore clearly has a direct and
substantial legal
interest in the dispute.
[76]
In the circumstances, I am satisfied that
UMSO had legal standing to bring the urgent application.
Non-joinder
[77]
The
position in relation to joinder was summarised in
Mashike
and Ross NNO and another v Senwesbel Limited and another
[8]
as follows:
“
[20] Where a
party has a direct and substantial interest in any order a court may
make, or if such order cannot be sustained or
carried into effect
without prejudicing that party, the joinder of that party is
necessary unless the court is satisfied that that
party waived his or
her right to be joined or agreed to be bound by the order.
The
enquiry as to non-joinder is a matter of substance and not of form:
‘
The
substantial test is whether the party that is alleged to be a
necessary party for purposes of joinder has a legal interest in
the
subject-matter of the litigation, which may be affected prejudicially
by the judgment of the Court in the proceedings concerned
. . .’
And
in Amalgamated Engineering Union v Minister of Labour,
it
was said:
“
Indeed it
seems clear to me that the Court has consistently refrained from
dealing with issues in which a third party may have a
direct and
substantial interest without either having that party joined in the
suit or, if the circumstances of the case admit
of such a course,
taking other adequate steps to ensure that its judgment will not
prejudicially affect that party’s interests.’
A ‘direct and
substantial interest’ in a matter connotes ‘an interest
in the right which is the subject-matter
of the litigation and . . .
not merely a financial interest which is only an indirect interest in
such litigation’.”
[78]
The City contended that the application
stood to be dismissed on account of UMSO’s failure to join the
parties who had submitted
bids in the new tender process. UMSO
contended in response that the bidders in the new tender did not have
a direct and substantial
interest warranting joinder. They argued
that the bidders in the new tender did not have any legal rights or
legitimate expectations
with regard to the processing stages of the
new tender. Were the City to cancel the new tender before any
award is made,
that decision would not have any direct external legal
effect on the bidders and no right of theirs would be infringed.
The
grant of the interim interdict sought in this application would
be no different in its effect. Accordingly there was no need
for the bidders in the tender to have been joined.
[79]
In
support of this contention, UMSO relied on cases which establish that
where a public authority takes a decision to cancel a tender
prior to
its adjudication, its decision does not amount to administrative
action under the Promotion of Administrative Justice
Act No. 3 of
2000 (“PAJA”).
[9]
[80]
There is no direct correlation between the
enquiry as to (a) whether conduct amounts to administrative action
within the definition
of that term in section 1 of PAJA (which
includes requirements that the decision in question adversely affects
rights and has a
direct external legal effect) and (b) whether a
party potentially affected by litigation in relation to a pending
tender process
has a direct and substantial legal interest in, or is
otherwise potentially prejudiced by, the relief sought.
[81]
The interim interdict sought against the
processing of the new tender in the present proceedings is aimed at
preserving the position
pending a review of the decision-making
pertaining to the initial tender. In the review, UMSO seeks
relief that will take
the form not only of reviewing the City’s
decision-making in relation to the initial tender, but also of
confirming the award
of the initial tender to it. Such a result
would render the new tender process nugatory because it is in respect
of the same
works.
[82]
In those circumstances, there can be no
question that the bidders in the new tender have a direct and
substantial interest in the
outcome of the dispute and are
potentially prejudicially affected by its outcome. They ought
therefore to be joined in the present
application.
[83]
The
position where there is non-joinder was dealt with in
Mashike
[10]
as follows:
“
[22]
Where there is a non-joinder the court may direct that steps be taken
to let the matter stand over until the interested parties
have been
joined or have indicated that they would be bound by the
judgment. One way is to let the matter stand over until
interested parties have filed their consents to be bound. Another is
to issue a rule nisi rather than compelling the
applicant
to start proceedings de novo.”
[84]
In the course of the hearing, I enquired of
both parties whether the court should issue a
rule
nisi
rather than dismissing the
application or requiring the applicant to start proceedings afresh.
[85]
Counsel
for the City contended on the basis of
Mashike
that it was not open to the court to issue a
rule
nisi
because there was no application for the grant of such
rule
nisi
before me. In
Mashike
,
the court had declined to come to the assistance of the appellant
because there was no application before it either for a stay
of
proceedings pending joinder, or for the issue of a
rule
nisi
.
[11]
The City also contended that tenders were an open, public process and
UMSO could have, and ought to have taken steps before
commencing
proceedings to establish the identity of the bidders in the new
tender and to have joined them from the start.
No public source
of such information was however identified by the City.
[86]
UMSO contended that it was open to the
court to grant a
rule nisi
together with interim relief, notwithstanding that a rule
nisi
formed no part of the notice of motion. During reply, UMSO moved an
application for the grant of a rule nisi together with interim
relief
from the bar.
[87]
It
seems to me that the only realistic source of the information as to
the identity of the bidders in the new tender was the City
itself.
The City made it clear before the launching of the review, that it
would not respond to a request for documents needed
for the review
because UMSO had no standing as it was not the bidder. It is
probable that a request for information about
the bidders would have
met with a similar response. In those circumstances it would be
unfair to nonsuit UMSO on the basis of non-joinder.
It is also
noteworthy that in both the cases cited in
Mashike
in support of the view that a court was entitled to issue a
rule
nisi
in circumstances of a non-joinder, no such relief had been sought at
the commencement of the application.
[12]
As Van Dijkhorst J put it in
Ex
parte Sengol Investments
,
“
a
rule nisi is
a
judicial invitation
to join issue and the failure to appear after proper notice thereof
is regarded as a waiver of the right to be joined and a submission
to
the order of the Court.”
[13]
(emphasis
added)
[88]
In those circumstances, it is appropriate
that the court grant a
rule nisi
calling upon the City and the bidders in the new tender to show cause
why an order should not be made as sought in the notice of
motion.
[89]
The question that then rises is whether
UMSO has made out a case for the grant of an interim interdict
pending the return day of
the
rule
nisi
. In the analysis that
follows, that assessment is made on a
prima
facie
basis on the facts and arguments
that are before me. The bidders in the new tender may present
different facts and argument
on the return day of the
rule
nisi, should they choose to enter the
fray. The findings in this judgment are not intended in any way
to bind the court that
considers the matter at that stage. Nor
should they be read as binding the court hearing the review.
[90]
I accordingly turn to consider whether UMSO
has satisfied the requirements for the grant of an interim interdict.
Requirements
for an interim interdict
Prima
facie right
[91]
The question whether or not UMSO has shown
that it has a
prima facie
right must be determined with reference to its constitutional right
to seek the judicial review of the City’s decision-making
in
relation to the initial tender. UMSO must show that it has a
prima facie
case for the review and setting aside of that component of the City’s
decision-making that had the effect of denying the
joint venture the
final award of the initial tender.
[92]
In making this assessment, it must be borne
in mind that UMSO was constrained in preparing its founding affidavit
in this application
by the City’s failure over a period of some
10 months to deliver the record of its decision-making, as it was
required to
do in terms of rule 53(1)(b). A proper assessment
of the strength of the case in a review application is best made
after
the record has been filed and the applicant has exercised its
right in terms of rule 53(4) to deliver a supplementary affidavit
supplementing its grounds of review, together with an amended notice
of motion.
[93]
However, the City has attached to its
answering affidavit a part of the record. This includes the tax
certificates with the
handwritten inscriptions on them to which I
have referred above and what may turn out to be the most important
part of the record,
namely the minutes of the EAC decision of 26
April 2016.
[94]
One of the review grounds which already
forms part of the review and which was also referred to as a ground
of review in the papers
in this application is the complaint that the
City breached UMSO’s right to procedurally fair administrative
action.
More particularly, UMSO was never given a proper
opportunity of responding to the allegations of fraud and invalidity
in relation
to the tax clearance certificates before it was decided
not to proceed with the initial tender.
[95]
The
principle is well established that before a public authority takes a
decision on the basis of information of which the affected
party was
unaware, that authority must inform the party of that information and
the affected party must be given the opportunity
to be heard in
relation to that information.
[14]
[96]
The flimsy and hearsay nature of the
evidence put up by the City in support of the alleged fraud made it
all the more important
that this component of procedurally fair
administrative action was complied with. Whilst there was an
exchange of correspondence
on the tax certificates, this was left
hanging by the City. The City did not respond to UMSO’s
email of 22 June 2016,
sent within the stipulated deadline,
suggesting a proper clarification of the issue with SARS, with UMSO’s
auditors present.
Given this and the submission of the SARS pin
numbers within the stipulated deadline, UMSO was entitled to believe
that the concerns
regarding the tax certificates had been addressed.
Nor were the tax certificates now attached to the answering
affidavits
with the handwritten notes on them, ever put to the joint
venture. On this basis alone, UMSO has a
prima
facie
case for the review of the City’s
decision-making.
[97]
On the face of it, the City’s
decision-making based on the withdrawal of Nebavest from the joint
venture was dealt with in
a similarly procedurally unfair manner.
UMSO was entitled to be heard before the City decided not to proceed
with the tender
on that ground.
[98]
When one takes into account the minute of
the EAC’s meeting of 26 April 2016, on the basis of which UMSO
will be able to supplement
its review grounds in its supplementary
affidavit, it becomes apparent that UMSO has a number of further
potential grounds for
a review of the City’s decision-making.
[99]
The most glaring of these is that, contrary
not only to the City’s correspondence in the period immediately
following the
meeting, but also to the answering affidavit in this
application, the minute reveals that the EAC in fact took a final
decision
to award the tender to the applicant. In the
resolution of the committee recorded at the end of the minute, the
only precondition
to the signature of a contract with the joint
venture consequent upon the award is “
that
the contractor is up to date with payments of its municipal accounts
with City of Johannesburg Metropolitan Municipality, or
that adequate
arrangements for payment thereof have been made”
.
[100]
Because
of the misleading communications from the City officials following
this meeting, UMSO was led to believe that the initial
tender was
discontinued and no decision was made to award the tender to it.
The fact that a final decision was in fact taken
by the EAC on 26
April 2016 to award the tender to the joint venture will introduce
into the review proceedings the question whether
the City is now
bound by that decision on the basis that it is
functus
officio
.
The well-established principle is that if the City wished to set
aside its own decision, it could not do so of its own accord
and
would have to apply to court to have its decision set aside.
[15]
What this suggests
prima
facie
is that UMSO may have a case not just for the review of the City’s
decision-making but also an order compelling it to give
effect to the
decision of its EAC to award the tender to, and conclude a contract
with, the joint venture.
[101]
What the minute also reveals is that,
prima
facie
, there were a number of
misleading statements in the correspondence addressed by City
officials to UMSO following the meeting of
26 April 2016:
[102]
The email from the City of 6 June 2016
begins by saying “
[w]e are in a
process of finalising the above mentioned bid”
.
This was not correct. The minute shows that the bid had been
finalised by the award of the tender and a decision had been
taken by
the EAC to conclude a contract with the joint venture.
[103]
The email of 6 June 2016 goes on to say
that “
one of the requirements is
that the bidders submit their latest original tax clearance
certificate”
. This is
incorrect. In the deliberations preceding the resolution
adopted at the end of the meeting, it is noted that
–
“
[c]ommittee
advised the user department to do request performance guarantee in
the same way they use to do it for constructions,
which is requesting
for bank guarantee and GSSCM should request the service provider to
submit the valid tax clearance certificates
(sic).”
[104]
However, what is minuted in this part of
the report is an exchange, with the Committee raising issues and the
Departmental officials
then responding. This part of the minute
does not purport to reflect any decision-making by the EAC.
That is reserved
for the last part of the minute under the heading
“RESOLVED”. What is clearly the final decision of
the EAC is
then set out in seven paragraphs in bold print. From
that part of the minute, it appears that at the end of the meeting,
after considering the Department’s response along with
amendments proposed by the chairperson, the EAC decided to award the
tender to the joint venture without stipulating any condition that
tax clearance certificates be provided.
[105]
Although the City claims to attach to its
answering affidavit its letter of 3 May 2016, all that is attached is
an email that says
“
kindly find
attached formal communication from City of Joburg Housing Department
for your attention”
.
However, we know from the reply sent by Mr Nkosi on behalf of UMSO
that the City’s letter of 3 May 2016 elicited the
provision by
UMSO of its financial statements and those of Nebavest.
Prima
facie
, then, the letter of 3 May 2016
must have requested either financial statements or information about
the financial position of
the joint venture companies.
[106]
Again, when one turns to the resolution
actually taken by the EAC, no reference whatsoever is made to any
requirement that the joint
venture provide financial information of
this nature as a precondition of the award. There is no mention
of financial statements
or financial information whatsoever.
Why then was the City official asking for this? Moreover, an analysis
of the joint venture
companies’ liquidity and going concern
analysis had already been commission by the EAC and furnished on 13
April 2016. That
would have necessitated provision and analysis of
their financial statements.
[107]
What is also not explained by the City is
why, if the provision of financial statements and tax clearance
certificates were preconditions
stipulated by the EAC, they were not
both requested immediately following the meeting of 26 April 2016.
Why ask only for
the financial statements and then wait until June to
request new tax clearance certificates?
[108]
The City’s letter of 31 March 2017
(which precipitated the review application) says that “EAC of
April 2016 recommended
the awarded (sic) to UMSO Nebavest joint
venture subject to Tax matters of the consortium still being in
order.” Again,
prima facie
,
this was incorrect.
[108.1]
Firstly, the minute shows that the EAC did
not
recommend
the award, it
made
the award to the joint venture.
[108.2]
Secondly, the resolution containing the
award made no reference whatsoever to “
tax
matters of the [joint venture] still being in order”
,
whether as a precondition or otherwise.
[109]
In paragraph 3 of the letter of 31 March
2017, the City says, referring to the alleged flaws in the tax
clearance certificates,
“
the
executive adjudication committee precondition was not met”
.
As already pointed out, no precondition pertaining to the provision
of tax clearance certificates was stipulated by the
EAC. The
only precondition was proof of payment of the joint venture’s
municipal accounts.
[110]
What
these misleading statements in the correspondence suggest is that the
applicant has a reasonable prospect of showing that the
decision-making process pertaining to the initial tender was flawed
in a manner giving rise to several potential review grounds,
as
listed under section 6(2)(e) of PAJA,
[16]
and on the basis of the principle of legality.
[111]
This is so without even enquiring into the
alleged bribery. Nevertheless, the fact that these misleading
statements were made
in the correspondence and their timing, lends
weight to, and calls for an investigation in the review proceeedings
of, UMSO’s
allegations in this regard.
[112]
What
also lends support to the applicant’s endeavour to make out a
prima
facie
case is the City’s failure in the review proceedings over a
period of 10 months to provide the record, whilst at the same
time
proceeding with the new tender which, if not interdicted, will render
the review proceedings moot. In the absence of
a proper
explanation, this bears the hallmarks of an attempt to pre-empt the
decision of this court in the review. The City’s
answer
to this in argument was that the applicant had failed to bring an
application to compel the City to provide the record.
That is not an
adequate response. A party reviewing administrative action is
entitled to the record as a component of its
right of access to court
in terms of section 34 of the Constitution. The public
authority whose decision-making is subject
to review is under a
corresponding constitutional duty promptly to provide the record.
This is also consistent with the constitutional
goal of open and
accountable decision-making.
[17]
[113]
In
arguing that a
prima
facie
case had not been made out, the City again made the argument that the
applicant was not the bidder in respect of the initial tender,
but
rather the joint venture. That assertion has already been dealt
with above in discussing the question of legal standing.
Beyond
that, the significance or otherwise of the purported withdrawal of
Nebavest from the joint venture is a matter to be dealt
with at the
remedial stage of the review proceedings and need not form a part of
the present enquiry. Even if it is necessary
to evaluate it
now, the wording of the termination clause in the joint venture
agreement
[18]
and UMSO’s letter following Nebevest’s purported
withdrawal suggests prima facie that the joint venture was not
terminated
because the clause was not complied with – agreement
in writing was required. And if it was terminated, the joint
venture
agreement provides for joint
and
several
liability.
[19]
The City would have been aware of these provisions because the
joint venture agreement had to form part of the bid documents.
[114]
The
City also made reference to the provisions of the Municipal Finance
Management Act
[20]
and the regulations issued under that Act pertaining to the
requirement that municipalities not award bids to persons whose tax
matters have not been cleared by SARS. This misses the point.
First, the tender had already been awarded. Second,
UMSO was
entitled to a hearing before it was deprived of the benefit of the
award on the basis of allegations of fraud relating
to the tax
clearance certificates.
[115]
I am accordingly satisfied that UMSO has
shown that it has a
prima facie
right.
Irreparable
harm
[116]
In the event that interdictory relief is
refused and the new tender process is allowed to proceed, resulting
in an award of the
new tender, the review proceedings in respect of
the initial tender will be rendered moot. UMSO is not one of
the bidders
in respect of the new tender. The effect will be
that it is deprived of its constitutional remedy of judicial review
in relation
to the decision-making pertaining to the initial tender.
[117]
The review proceedings hold within them the
possibility that UMSO may yet have the award of the initial tender to
the joint venture,
or to itself, confirmed. The tender is for a
substantial contract price. UMSO, no doubt, also expended funds
in submitting
the joint venture’s bid in response to the
initial tender.
[118]
I am accordingly satisfied that the
applicant faces irreparable financial harm if the interim relief is
not granted.
Balance
of convenience
[119]
This
criterion requires the court to weigh the prejudice to the applicant
if the interim relief is refused against the prejudice
to the
respondent if it is granted.
[21]
In doing so, the court must take into account the applicant’s
prospects of success in the review proceedings.
The stronger
the prospects of success, the less the need for the balance of
convenience to favour the applicant and
vice
versa
.
[22]
[120]
It is my
prima
facie
view that the applicant’s
prospects of success in the review are at the strong end of the
spectrum. The prejudice that
it will suffer if the interim
relief is refused has been explained earlier in this judgment.
[121]
The prejudice to the City will be the delay
in finally resolving the question of who will do the work required
for the project.
Also relevant in this regard is the prejudice
to the public interest insofar as the work which forms the subject
matter of the
initial and new tenders is low cost housing for which
there is a desperate need.
[122]
This notwithstanding, the primary cause of
the substantial delays in the matter has been the City, both in the
way that it dealt
with the award of the initial tender by the EAC and
in its unconscionable delays in the provision of the record for
purposes of
the review proceedings.
[123]
Insofar as the public interest is
concerned, even though the project relates to the provision of low
cost housing, it is also in
the public interest that the legality
surrounding the decision-making process be adjudicated upon by a
court of law, rather than
the City being allowed to pre-empt the
decision of this court through the award of the new tender.
[124]
There is no reason, moreover, why the
review proceedings cannot be expedited through approaching the Deputy
Judge President for
case management aimed at an accelerated exchange
of affidavits and an early hearing.
[125]
In the circumstances, the balance of
convenience favours the applicant.
No
other satisfactory remedy
[126]
The City argued that the applicant had
available to it a suitable alternative remedy in the form of a claim
for damages in the event
that it was able to show that the process in
relation to the initial tender was flawed.
[127]
Assuming
that such a remedy is available to the applicant (which is open to
serious doubt
[23]
),
an award of damages would contemplate that the City in effect pays
twice, or substantially more than necessary, for the same
work.
[128]
This would give rise to an unconscionable
waste of public funds. It is far preferable that the deserving
bidder is ultimately
identified pursuant to the judicial review
process, resulting in either the confirmation by the court of the
award made on 26 April
2016 or remittal to the City for proper
evaluation and adjudication in a lawful tender process.
[129]
Accordingly, there is no suitable
alternative remedy other than the review proceedings, combined with
the interdictory relief sought
in this application.
Urgency
[130]
The City argued that the application is not
urgent and that the applicant’s delay in seeking interim relief
only on 7 May
2018 when it had first learned of the new tender on 28
February 2018, deprived the applicant of any entitlement to approach
the
court on an urgent basis.
[131]
In
response, the applicant pointed out that it had acted responsibly in,
before rushing to court, seeking to secure through correspondence
an
undertaking from the City not to proceed with the new tender.
The relevant correspondence in this regard has been referred
to
above. The applicant referred to
Stock
and Ano v Minister of Housing and others.
[24]
There the court held:
“
In
Nelson
Mandela Metropolitan Municipality and others v Greyvenouw CC and
others
2004 (2) SA 81
(SE) in para [34] ...
the
court held that protracted attempts by a litigant to resolve a matter
before it approached a court did not amount to dilatory
action which
negated the urgency of the matter...
In my view the opposition which has
been raised by the respondents to urgency is not justified, in terms
of the correspondence which
has been generated, particularly the
desperate attempts by applicant’s attorney to obtain a response
by Mr Davids or anyone
else who was responsible for the TRA.
Accordingly I regard it as appropriate for the court to hear the case
as one of urgency.”
[132]
The applicant also points out that waiting
for a hearing in the ordinary course will result in the relief sought
in this application
being rendered nugatory because the new tender
will likely by then have been awarded.
[133]
There is merit in both parties’
contentions. It is so that the applicant did not act with
sufficient urgency in pressing
the City for a response to its request
for an undertaking not to proceed with the new tender. On the
other hand, it was appropriate
for it to attempt to secure the
undertaking before approaching the court. Even if it had
approached the court at an earlier
stage, it would still have been
necessary to proceed urgently in order to avoid the review
proceedings being rendered nugatory.
[134]
A further aspect that warrants the hearing
of the matter on an urgent basis is that each of the parties make
serious allegations
of corruption or fraud against the other.
The City’s allegation in this regard is, at this stage, a
flimsy one. The
applicant, by contrast, has put up sufficient
evidence to raise real concerns, particularly once consideration is
given to the
minute of 26 April 2016. If interdictory relief is
not granted because the matter is found not to be urgent and the
review
proceedings are allowed to become moot, there is a risk that
the alleged malfeasance will never receive judicial scrutiny.
Moreover, in a society that has been brought to its knees by
corruption, allegations of corrupt activity that have a reasonable
measure of substantiation lend weight to an argument that the matter
should be heard on an urgent basis.
[135]
It was accordingly appropriate that this
matter be enrolled on the urgent roll and the relevant provisions of
the rules dispensed
with.
Remedy
[136]
The applicant has made out a case for the
grant of interim relief halting the new tender process pending the
return day.
[137]
It is appropriate that the matter be
postponed to a date for hearing on the unopposed roll in order that
it may first be established
whether any of the parties that made bids
in the new tender process wish to oppose the relief sought. If
there is opposition,
the hearing of the matter can be postponed on
the return day for a hearing on the opposed motion roll.
[138]
It is appropriate that the question of
costs stands over for determination on the return day of the
rule
nisi
or when the matter is heard on the
opposed motion roll in the event of opposition.
[139]
I accordingly make the following order:
1.
The non-compliance by the applicant with
the rules relating to time limits and service is condoned and it is
ordered that the matter
be heard as one of urgency.
2.
A rule
nisi
is issued calling upon the persons identified in annexure “
A
”
to this order (“the bidders in the new tender”) to show
cause on Wednesday 4 July 2018 (“the return day”)
why the
following order should not be made:
2.1.
The bidders in the new tender are joined as
the third to forty-second respondents;
2.2.
Pending the final determination of the review application
instituted out of this Court under case number 17/23864, the first
respondent
is interdicted and restrained from in any way proceeding
further with the processing, evaluation or adjudication of the tender
“
Construction of Civil Engineering Infrastructure and 1631
Low Cost Houses in Klipspruit Extension 7, Soweto – 547/18
”
(“the new tender”).
3.
Pending the return day and the
determination of the rule
nisi
,
the first respondent
is interdicted and restrained from in any
way proceeding further with the processing, evaluation or
adjudication of the new tender
.
4.
The first respondent must within 5 court
days of this order provide the applicant with all the information in
its possession as
to the principal places of business and/or the
registered addresses of the bidders in the new tender.
5.
The applicant must serve a copy of this
judgment and order together with the notice of motion, founding,
answering and replying
affidavits, with annexures, on the bidders in
the new tender –
5.1.
by email at the email address set out in
annexure “
A
”
to this order, within 5 court days of this order; and
5.2.
in accordance with rule 4(1), within 10
days of this order.
6.
Those of the bidders in the new tender that
wish to show cause on the return day why an order should not be made
in terms of paragraphs
2.1 and 2.2 above must serve on the applicant
and the first respondent and file with the Registrar of this court, a
notice of intention
to oppose, by no later than 5 court days before
the return day.
7.
The costs of this application are reserved.
_____________________
AC DODSON
Acting Judge of the High Court
BY
ORDER
_______________
THE
REGISTRAR
Date
of hearing: 22 May 2018
Date
of judgment: 31 May 2018
For
the applicant: F Joubert SC and A Roeloffze
Instructed
by: Boqwana Burns Attorneys
For
the first respondent: O Mooki and T Seroto
Instructed
by: Mkhabela Huntley Attorneys Inc
[1]
See Case
No. 17/23864.
[2]
[2013]
ZAGPJHC 171 (7 June 2013).
[3]
2010 (2) SA
114 (BHC).
[4]
Per
Horwitz AJ in
Absa
Bank Ltd v Blignault and Ano and 4 similar cases
1996 (4) SA 100
(O) at 102D.
[5]
2011
(6) SA 156
(GSJ) at para 45.
[6]
2017
(6) SA 621 (CC).
[7]
See
especially at para [44].
[8]
[2013] 3
All SA 20
(SCA) at paragraph 20.
[9]
City
of Tshwane v Nemviti Technologies (Pty) Ltd
2016
(2) SA 495
(SCA) at para 32;
SAAB
Grintek Defence (Pty) Ltd v South Africa Police Service and Others
[2016]
3 All SA 669
(SCA) para 34.
[10]
Above
footnote 8.
[11]
At para 22.
[12]
Ex
parte Sengol Investments
(
Pty
)
Ltd
1982
(3) SA 474
(T) at 477H – 478F;
Ex
parte Jacobson: In re: Alec Jacobson Holdings
(
Pty
)
Ltd
1984
(2) SA 372
(W) at 377F–H.
[13]
Above at
478F.
[14]
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;
Farjas
(Pty) Ltd v Regional Land Claims Commissioner, Kwazulu-Natal
1998
(2) SA 900
(LCC) at para 29 - 30;
Logbro
Properties cc v Bedderson NO and others
2003 (2) SA 460
(SCA) at para [23] – [26];
Majake
v Commission for Gender Equality and Others
(09/14527)
[2009] ZAGPJHC 27 (12 June 2009).
[15]
Oudekraal
Estates (Pty) Ltd v City of Cape Town and others
2004
(6) SA 222
(SCA) at para 37;
MEC
for Health, Eastern Cape and Ano
v
Kirland
Investments (Pty) Ltd t/a Eye & Lazer Institute
2014
(3) SA 481
(CC) at para 40.
[16]
Including,
for example, the administrative action having been taken
–
· for an ulterior purpose or
motive;
· after taking into account
irrelevant considerations;
· after ignoring relevant
considerations;
· in bad faith; and
· arbitrarily or capriciously.
[17]
Helen
Suzman Foundation v Judicial Service Commission and Others
2017
(1) SA 367
(SCA) at paras [12] to [20].
[18]
See above
para 15.
[19]
See above
para 11
[20]
Act No. 56
of 2003.
[21]
Van
Loggerenberg
Erasmus
Superior Court Practice
D6-20.
[22]
Van
Loggerenberg above D6-20 to D6-21.
[23]
See in this
regard
Olitiski
Property Holdings v State Tender Board and Ano
2001 (3) SA 1247
(SCA);
Steenkamp
NO v Provincial Tender Board Eastern Cape
2006 (3) SA 151
(SCA) and
South
African Post Office v De Lacy and Ano
2009
(5) SA 255 (SCA).
[24]
2007 (2) SA
9
(C) at 12E – 13A