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[2010] ZAGPPHC 180
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Digital Voice Processing (Pty) Ltd v Chairman of the State Tender Board (57294/2007) [2010] ZAGPPHC 180 (17 August 2010)
NOT
REPORTABLE
IN
THE HIGH COURT OF SOUTH AFRICA
/ES
(
NORTH
GAUTENG HIGH COURT. PRETORIA
)
CASE
NO: 57294/2007
DATE:17/08/2010
IN
THE MATTER BETWEEN
DIGITAL
VOICE PROCESSING (PTY)
LTD
................................................
APPLICANT
AND
THE
CHAIRMAN OF THE STATE TENDER
BOARD
...............................
RESPONDENT
JUDGMENT
PRINSLOO.
J
[1]
This review application was heard together with a similar review
application against the same respondent, featuring Sneller
Digital
(Pty) Ltd and Others as applicants. That application was heard under
case no 33921/07.
[2]
I do not propose embarking upon unnecessary repetition. This judgment
should be read in conjunction with the judgment delivered
in the
last-mentioned matter ("the Sneller application").
Introduction
[3]
In January 2000, the applicants in the Sneller application lodged a
tender with the office of the State Tender Board for the
recording,
transcribing and archiving of digitally recorded proceedings in the
High Court of South Africa ("the tender").
[4]
By that time, the Sneller group of companies had already been
rendering similar transcription services to the Department of
Justice
for some sixteen years. At the time they were servicing nine of the
thirteen divisions of the High Court and also rendering
other
corresponding services.
[5]
The tender was lodged in the name of the first applicant in the
Sneller application, Sneller Digital (Pty) Ltd, and was awarded
to
the latter in June 2000. The contract would run until 2005 and it was
thereafter extended until 2006. It appears to be common
cause that
the tender was properly executed by Sneller Digital (Pty) Ltd and
that due performance was rendered.
[6]
In September 2005, the State Tender Board resolved that Sneller
Digital (Pty) Ltd and all its directors, shareholders and associated
companies and their members be restricted from doing business with
the state for a period of ten years. This decision was taken
without any advance warning to Sneller Digital (Pty) Ltd. The latter
challenged the decision in urgent proceedings which culminated
in the
State Tender Board withdrawing the decision and Sneller Digital (Pty)
Ltd withdrawing the urgent application. The State
Tender Board was
ordered to pay the costs. This happened in February 2006.
[7]
In the same month, the State Tender Board, through Chief Director
Mathebula in the Treasury department, initiated a fresh process
aimed
at achieving the same result, namely restricting Sneller Digital
(Pty) Ltd and its directors, partners and associated members
from
doing business with all three spheres of government. This time the
State Tender Board purported to give Sneller Digital (Pty)
Ltd an
opportunity to make representations. This process nevertheless
resulted in the aforesaid parties being blacklisted as described.
[8]
On 15 June 2007, Chief Director Mathebula wrote to the attorneys
acting for the applicants in the Sneller application as well
as the
present applicant informing them that, on 8 March 2007 the State
Tender Board had resolved as follows:
"Sneller
Digital (Pty) Ltd and its directors, partners and all associated
members who were part of Sneller Digital (Pty) Ltd
at the time of the
RT279B/2000 contract be restricted to do business with all three
spheres of government institutions for a period
of ten years;
The
decision to restrict Sneller Digital (Pty) Ltd does not impact on the
current contracts awarded to it prior to the above decision."
The
single reason for taking this decision was described as follows in
the letter:
"The
above decision was taken on the basis that you failed to remove the
suspicion of fraud at the time of submission of your
tender
documents. This is so in the light of the fact that as at 30 January
2000 (closing date of the tender) the directors on
whose basis the
equity ownership was claimed^ were not yet appointed as such as they
were only appointed on 11 February 2000. At
all material times you
were aware that this information was incorrect and therefore
fraudulent. This did not only constitute fraud
but what is generally
regarded as fronting."
This
issue was fully canvassed in the judgment I gave in the Sneller
application ("the Sneller application judgment")
and the
details will not be repeated in this judgment.
[9]
The applicants in the Sneller application challenged this decision by
means of a review application launched in September 2007.
[10]
On inspecting the record supplied by the respondent in the Sneller
application in terms of the provisions of rule 53, the second
applicant in the Sneller application, Ms Van den Heever, who was also
a director of the present applicant, stumbled upon the full
text of
the actual decision taken in March 2007. The relevant portions read
as follows:
"Sneller
Digital
and
DVP
,
their directors, partners and all associated members who were part of
Sneller at the time of the RT279B/2000 contract be restricted
to do
business with all three spheres of government and government
institutions for a period often years; ... The decision to restrict
Sneller Digital
and
DVP
does not impact on the current contracts awarded to the companies
prior to this decision being taken;..." (Emphasis added.)
The
reference to "DVP" is a reference to the applicant.
It
is common cause that when Chief Director Mathebula informed the
applicant's attorneys of the decision in his letter of
1
5
June 2007,
supra,
he
quoted an edited version of the resolution by omitting the reference
therein to the applicant.
[11]
Ms
Van den Heever made the discovery on 27 November 2007. At that point
she was in the process of resigning as a director of the
applicant.
The same applies to the fourth applicant in the Sneller application.
Ms Joubert, who had also been a director of the
applicant but was
also resigning at that time, towards the end of November 2007. On 6
December 2007 Ms Van den Heever conveyed
the news that the applicant
had also been blacklisted in the resolution to the deponent to the
founding affidavit who is also a
director of the applicant.
[12]
This application was then launched, on an urgent basis, on 7 December
2007. It was aimed at obtaining urgent interim relief
restraining the
respondent from acting upon or implementing the decision blacklisting
the applicant for ten years pending the outcome
of the substantive
application for review which came before me. On 18 December 2007,
this court granted the interim relief applied
for and ordered that
the costs of the urgent application would be costs in this main
application.
[13]
What is left for decision is the prayer contained in paragraph 2.2 of
the notice of motion:
"An
order reviewing, correcting and setting aside the decision of the
respondent as set out in the minutes of its meeting dated
8 March
2007, a copy of which is annexed hereto marked 'A'."
The
relevant portions of the resolution have been quoted.
If
the relief is to be granted, the order should be limited to refer
only to the blacklisting of the applicant, because the order
dealing
with the blacklisting of the applicants in the Sneller application is
contained in the judgment of the Sneller application.
Is
there a relevant link, for purposes of the present dispute, between
the applicant and the applicants in the Sneller application
?
[14]
Those blacklisted in terms of the resolution under attack are the
following:
"Sneller
Digital and DVP, their directors, partners and all associated members
who were part of Sneller at the time of the
RT279B/2000 contract."
[15]
In the opposing affidavit, the deponent on behalf of the
respondent, after referring to the March 2007 resolution, simply
makes the following bald statement:
"I
may mention that it came to the attention of the Board that the
applicant was one of the companies associated with Sneller
Digital
(Pty) Ltd and that it was in fact sharing the same directors with
Sneller Digital."
In
reply, the deponent on behalf of the applicant says the following:
"The
only apparent link relates to the fact that the applicant and Sneller
Digital shared two directors at the time, namely
Ms Van den Heever
and Ms Yolanda Joubert. This association is a consideration not
related at all to the decision as formulated
by the respondent
blacklisting both Sneller and the applicant. It is an irrelevant
consideration and is demonstrative of the bias
that the respondent
has against Sneller Digital being projected against the applicant
without any rational basis. The applicant
is not part of the Sneller
group and is entitled to fair administrative action from respondent
in its own right."
Ms
Van den Heever and Ms Joubert are the second and fourth applicants in
the Sneller application. As I pointed out, they resigned
as directors
of the applicant before this application was launched.
[16]
What is even more important, in my view, is that it is undisputed
that the applicant did not even exist at the time when the
tender was
lodged and the alleged fraud perpetrated by the applicants in the
Sneller application. It is undisputed that the applicant
was only
incorporated in 2001.
[17]
In the Sneller application, the respondent argued that the
blacklisting took place in terms of the provisions of the tender
contract so that the principles of administrative law have no role to
play in the outcome of that dispute. Similarly, the applicants
in the
Sneller application could not rely on the provisions of the Promotion
of Administrative Justice Act, 3 of 2000 ("PAJA")
for
relief. This issue was dealt with fully in the judgment in the
Sneller application.
In
the present application, the respondent raised the same argument in
the opposing affidavit and in heads of argument, but the
argument,
correctly in my view, was not proceeded with during the hearing
before me. The then non-existent applicant was clearly
not a party to
the tender contract.
Applying
PAJA
[18]
On a proper reading of the resolution of March 2007, it seems that
the applicant was blacklisted on an equal footing with Sneller
Digital (Pty) Ltd: "Sneller Digital and DVP, their directors,
partners ... etc" and "The decision to restrict Sneller
Digital and DVP does not impact ..."
[19]
The respondent gave the applicant no prior warning that it was being
considered for blacklisting and no process was followed
by which the
applicant was given an opportunity of making representations, whether
personally, by writing or by means of legal
representatives to the
respondent prior to the taking of the decision.
[20]
In the founding affidavit, it is alleged that the decision has
potentially catastrophic implications for the applicant. This
statement is motivated as follows:
Most
of the applicant's business is conducted with various government
departments. Its annual turn-over with government departments
is
currently in the order of R8 million to R9 million. If the applicant
cannot continue doing business with the state, then the
applicant
will close down and its twenty five employees will lose their jobs.
The
applicant currently provides the following services to the state:
15.1 the supply of delegate, address and conference systems;
15.2
video conferencing and data projection systems;
15.3
court recording systems.
The
applicant has been working with the state in regard to the
implementation in South Africa with a video conferencing facility
between the prisons and courts. The applicant has successfully
installed and run a pilot project between Westville prison and the
magistrate courts at Durban and Pinetown.
Following
the success of this pilot project, the State Information Technology
Agency has requested the applicant to bid for the
provision of video
conferencing solutions between other prisons and courts in South
Africa ... The applicant is obliged to submit
its bid by 20 December
2007.
The
value of the tender is between R20 million and R30 million. If the
project succeeds, further magistrate courts and prisons will
be
included and the contract value will be worth at least R100 million.
The
respondent has, by virtue of its aforesaid decision, placed any
business dealings that the applicant has or may have in future
with
the government and government institutions in serious jeopardy. The
applicant cannot, in all fair conscience, engage the government
and
government institutions in business dealings now knowing that a
decision placing restrictions upon it has been taken by the
respondent in the circumstances set out above."
[21]
Section 3(1) of PAJA provides that administrative action which
materially and adversely affects the rights or legitimate
expectations
of any person must be procedurally fair.
[22]
In section 1 of PAJA "administrative action" is defined as
meaning "any decision taken, or any failure to take
a decision,
... which adversely affects the rights of any person and which has a
direct, external legal effect..."
In
Grey's
Marine Hout Bay (Pty) Ltd v Minister of Public Works
[2005] ZASCA 43
;
2005
6 SA 313
(SCA) at 323D-F it was held that the phrase "must have
a direct and external legal effect" was probably intended rather
to convey that administrative action is action that has the capacity
to affect legal rights.
[23]
Section 3(2)(b) of PAJA reads as follows:
"In
order to give effect to the right to procedurally fair administrative
action, an administrator, subject to subsection (4),
must give a
person referred to in subsection (1)-
(i)
adequate notice of the nature and purpose of the proposed
administrative action;
(ii)
a reasonable opportunity to make representations;
(iii)
a clear statement of the administrative action;
(iv)
adequate notice of any right of review or internal appeal, where
applicable; and
(v)
adequate notice of the right to request reasons in terms of section
5."
In
my view, the exclusion to be found in subsection (4) does not apply
for present purposes.
[24]
Against this background, I am of the view that the respondent's
decision to blacklist the applicant, which is administrative
action
as intended by PAJA, was clearly procedurally unfair and flew in the
face of the peremptory provisions of section 3. For
that reason
alone, I am of the opinion that the decision, in as far as it affects
the applicant, falls to be reviewed and set aside.
The relevant
ground of review is contained in section 6(2)(c) of PAJA.
On
the particular facts, the decision is also reviewable, in my opinion,
on other grounds to be found in section 6, namely that
it was taken
arbitrarily or capriciously, that relevant considerations were not
considered and that it was so unreasonable that
no reasonable person
could have taken such a decision.
The
only remaining defence presented by the respondent: the decision was
never communicated to the applicant so that the application
is
premature and falls to be dismissed
[25]
As authority for this proposition, the respondent relies on the case
of
Lek
v
Estate
Agents Board
1978
3 SA 160
(C) at 167H-168A-D where it was,
inter
alia,
stated
that:
"A
decision taken by a corporate or juristic person like the respondent
has no legal efficacy until such time as it has been
communicated to
the person concerned. Until such communication takes place there is
no decision which could form the subject-matter
of an appeal or a
review."
[26]
In this case, the written communication by the Estate Agents Board
that the applicant's application for a fidelity fund certificate
had
been refused was in fact communicated in the Cape. The learned judge
applied this fact to assume jurisdiction over the matter
in the Cape
Provincial Division.
[27]
In the passages referred to, the learned judge also stated the common
law principle that the pronouncement of the decision
of a Court is
the decisive
moment
and that someone affected by the resolution of a company is not bound
thereby until the resolution has been communicated
to that person.
See the authorities quoted in the passages referred to.
[28]
The State Tender Board is neither a "corporate or juristic
person" like the Estate Agents Board, nor is it a court
of law
or a company. It is an organ of state which took administrative
action adversely affecting the rights of the applicant,
as intended
by the provisions of sections 1 and 3 of PAJA,
supra.
The
applicant's remedies lie in the provisions of sections 6 and 8 of
PAJA. In fact, the applicant has already obtained temporary
relief as
provided for in section 8(1 )(e) and is now asking for the setting
aside of the administrative action in terms of section
8(1 )(c). The
applicant relies on some of the review grounds listed in section 6.
[29]
The decision under attack has not been withdrawn by the State Tender
Board. Indeed, in this application, the respondent seeks
to defend
that decision. As I indicated, it does so by alleging that "it
came to the attention of the Board that the applicant
was one of the
companies associated with Sneller Digital (Pty) Ltd and that it was
in fact sharing the same directors with Sneller
Digital".
[30]
When I debated this argument with Mr Tokota for the respondent,
namely that the review application was premature because the
decision
had not yet been officially communicated to the applicant, I asked
him whether that meant that the applicant was, after
all, not
blacklisted. He indicated, quite properly, that he could not make
such a submission. Mr Labuschagne for the applicant
argued, if I
understood him correctly, that on the stance adopted by the
respondent, the applicant is without remedy. The decision
adversely
affecting its rights was taken, but it cannot proceed with the review
application. Mr Labuschagne argued that such an
approach would fly in
the face of section 34 of the Constitution, which provides for access
to courts or other appropriate tribunals.
At one point Mr Tokota
argued that the applicant's remedy was to apply for a
mandamus
forcing
the respondent to remove the applicant's name from the blacklist. I
fail to see how such a remedy would differ from the
remedies provided
for in section 8 of PAJA. In any event, on this argument of Mr
Tokota, it is not clear why an application for
a
mandamus
would
also not be premature in view of the
Lek
decision.
[31]
Lek
was
decided long before the Constitution and PAJA were promulgated. The
applicant, as it was entitled to do, proceeded in terms
of PAJA to
attack the unfair administrative action taken by the State Tender
Board, adversely affecting the applicant's rights.
I cannot see how
Lek
can
stand in the way of such a process.
[32]
Moreover, I have difficulty with the argument that the decision was
never
communicated
to the applicant. At the very least, the decision was communicated
when the record was handed over to the applicant's
attorneys in terms
of rule 53.
This
led to Ms Van den Heever discovering the full text of the resolution
and passing it on to the other director of the applicant.
If the
decision had not been communicated, this application would not have
been launched.
[33]
It is also clear, from a general reading of the opposing affidavit,
that the deponent to that affidavit was at all relevant
times well
aware of the fact that Ms Van den Heever was also a director of the
applicant. The deponent, Chief Director Mathebula,
deals with the
correspondence exchanged between himself and the applicant's
attorneys (who also acted for the applicants in the
Sneller
application) after the urgent application had been settled in
February 2006 and the new process had been launched aimed
at
purportedly giving the applicants in the Sneller application the
opportunity to be heard. This has already been referred to
earlier in
this judgment and it was also fully canvassed in the judgment in the
Sneller application. In dealing with the correspondence,
the chief
director makes it clear that he knew that the attorneys of record of
the applicants in the Sneller application also acted
for the present
applicant. He was also alive to the fact that Ms Van den Heever, to
whom some of the letters were addressed, was
a director of both
Sneller Digital (Pty) Ltd and the applicant. When referring to a
response to one of his letters he says the
following:
"I
may mention that save for concluding that restricting these companies
will result in chaos in the South African judicial
and legislative
system no representations were made on behalf of the applicant by the
said Linda van den Heever and the applicant's
attorneys
despite
the fact that it was clear to them that the decision was likely to
affect the applicant as well
."
(Emphasis added.)
In
paragraph 32 of the opposing affidavit the deponent says the
following:
"The
record that was filed only pertains to Sneller Digital and was not
meant to inform the applicant of the decision of the
8th March 2007.
However,
to the extent that Van den Heever and Joubert were also directors of
the applicant, the decision to restrict Sneller Digital
also affected
the applicant.
"
(Emphasis added.)
In
paragraph 34.2 of the opposing affidavit the deponent says:
"I
submit however that Linda Beatrice van den Heever was aware that all
associated companies to Sneller, more particularly
those in which she
was a director, including the applicant, were affected by the
decision."
When
dealing with the allegation in the founding affidavit that the
applicant did not even exist in 2000 when the tender was granted
to
Sneller Digital (Pty) Ltd, the deponent states:
"Even
if such would be true, which is not conceded, it is an issue that
should have been brought to the attention of the respondent
by Linda
van den Heever when she was called upon to make representations on
behalf of Sneller and its associated companies which
included the
applicant."
Consequently,
it is clear from the opposing affidavit that the respondent knew that
the applicant's directors were aware of the
fact that the decision
also affected the applicant. This was even before Ms Van den Heever
made the discovery in November 2007.
[34]
Quite apart from any other considerations, I am of the opinion that
the "editing" of the resolution by excising the
name of the
applicant when the letter was written in June 2007, in itself
constitutes unfair administrative action. It is not the
conduct one
would expect from the reasonable administrator. It leaves one with
the impression of underhand conduct aimed at misleading
the
applicant.
Conclusion
[35]
In all the circumstances, I have come to the conclusion, and I find,
that a proper case has been made out, in terms of the
provisions of
PAJA, for the relief claimed.
The
order
[36]
I make the following order:
1.
The decision of the respondent as set out in the minutes of its
meeting dated 8 March 2007, in as far as it refers to the applicant,
is reviewed and set aside.
2.
The respondent is ordered to pay the applicant's costs, which will
include the costs flowing from the employment of senior counsel.
W
R C PRINSLOO
JUDGE
OF THE NORTH GAUTENG HIGH COURT
57294-2007
HEARD
ON: 26 APRIL 2010
COUNSEL
FOR THE APPLICANT: E C LABUSCHAGNE SC
INSTRUCTED
BY: STEGMANNS ATTORNEYS
COUNSEL
FOR THE RESPONDENT: B R TOKOTA SC
ASSISTED
BY Z Z MATEBESE
INSTRUCTED
BY: STATE ATTORNEY