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[2011] ZAGPPHC 1
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Telkom SA Limited v Merid Trading (Pty) Ltd and Others (27974/2010,25945/2010) [2011] ZAGPPHC 1 (7 January 2011)
IN THE HIGH COURT OF SOUTH
AFRICA
(NORTH
GAUTENG
HIGH COURT, PRETORIA)
Date: 2011-01-07
Case Number:
27974/2010
In the matter between:
TELKOM SA
LIMITED
.........................................................................
Applicant
and
MERID TRADING
(PTY) LTD
................................................
First
Respondent
BIZ AFRICA 1944
(PTY) LTD
............................................
Second
Respondent
PLESSEY/HEZEKI
JOINT VENTURE COMPANY
............
Third
Respondent
FORTEL
INVESTMENTS CC
….........................................
Fourth
Respondent
BIHATI SOLUTIONS
(PTY) LTD
............................................
Fifth
Respondent
MTHIYANE SEYAMA
PROJECTS
........................................
Sixth
Respondent
and
Case Number: 25945/2010
BIHATI SOLUTIONS
(PTY)
LTD
.........................................................
Applicant
and
TELKOM SA
LIMITED
............................................................
First
Respondent
PLESSEY (PTY)
LTD
........................................................
Second
Respondent
HEZEKI
CONTRACTING (PTY) LTD
..................................
Third
Respondent
BIZ AFRICA 1944
(PTY) LTD
.............................................
Fourth
Respondent
FORTEL
INVESTMENTS CC
................................................
Fifth
Respondent
MERID TRADING (PTY) LTD t/a VUKA
ENTERPRISES
......................................................................
Sixth
Respondent
MTHIYANE
CONSTRUCTION CC
.................................
Seventh
Respondent
SEYAMA SOLUTION
AND PLANT HIRE (PTY) LTD
....
Eighth
Respondent
GIO CONSTRUCTION
AND PLANT HIRE (PTY) LTD
....
Ninth
Respondent
WORLDTEL (PTY)
LTD
........................................................
Tenth
Respondent
MOTATA
TELECOMMUNICATIONS (PTY) LTD
........
Eleventh
Respondent
JAPP
CONSTRUCTION (PTY) LTD
................................
Twelfth
Respondent
JUDGMENT
SOUTHWOOD J
[1]
In
the application under case number 27974/2010 (‘the main
application’) the applicant seeks the following relief in
terms
of its amended notice of motion dated 17 November 2010:
(1) An order
reviewing and setting aside the applicant’s decision taken on
14 November 2008 to accept the proposals submitted
by the six
respondents in terms of RFP0101/2007, and the award of RFP0101/2007
to the six respondents as communicated to them in
the applicant’s
letter of 5 December 2008;
(2) In the event
that the court finds that this application falls within the ambit of
section 7(1)(b) of the Promotion of Administrative
Justice Act 3 of
2000 (‘PAJA’), an order condoning the applicant’s
failure to launch this application within
180 (one hundred and
eighty) days after 14 of November 2008, in terms of the provisions of
section 9 of PAJA;
(3) An order
declaring that the applicant’s acceptance of the proposals
submitted by the six respondents in terms of RFP010/2007
and the
award of tender RFP0101/2007 to the six respondents is null and void
and of no force or effect;
(4) An order that the first and fifth
respondents pay the costs of this application.
Only the first and
fifth respondents oppose the application. The fifth respondent, as
applicant, in an application under case
number 25945/2010 (‘the
related application’) seeks the following relief:
(1) An order declaring that Telkom is
bound by its decision taken on 5 December 2008 to award the said
tender to the applicant (i.e.
the fifth respondent in the main
application);
(2) An order that the first respondent
(i.e. the applicant in the main application) in good faith and with
due diligence and expedition,
engage with the applicant (i.e. the
fifth respondent in the main application) in a process of negotiation
of any outstanding issues
required for the implementation of its
original decision to award the tender to the applicant, including the
negotiation of outstanding
issues required for purposes of the formal
agreement to be concluded between the parties, and to pursue and
implement all remaining
aspects of the tender process in that regard;
(3) An order that the first respondent
(i.e. the applicant in the main application) pay the costs of the
application.
The applicant in the main application
opposes the grant of this relief and relies on the facts set out in
the main application.
[2] By agreement
between the parties the two applications were enrolled and heard
together. The parties agree that the main application
must be
decided first and that if the substantive relief is granted the fifth
respondent will not be entitled to the relief which
it seeks in the
related application. For the sake of convenience the parties will be
referred to as they are referred to in the
main application.
[3] The following
facts are common cause or cannot be disputed:
(1) The applicant is an organ of State
as contemplated in section 239 of the Constitution of the Republic of
South Africa 1996,
and PAJA.
(2) The applicant is subject to the
provisions of section 217 of the Constitution and accordingly, when
it contracts for goods and
services it must do so in accordance with
a system which is fair, equitable, transparent, competitive and cost
effective. Pursuant
to these constitutional obligations the
applicant has adopted a procurement policy.
(3) The applicant’s procurement
policy states with regard to Requests for Proposals (‘RFP’s’):
‘This
is an alternative procurement method that should be employed where
goods or services are available from general sources
and it differs
from each other not only in price but in other aspects as well (i.e.
quality, availability, features, etc.). A
Request for Proposal (RFP)
is typically used when the product or service cannot be defined with
absolute specificity and further
dialogue with suppliers concerning
the subject of the RFP is expected. The information generally
contained in a RFP is similar
to that listed under paragraph 8.5
(RFB).’
(4) On 8 November 2007 the applicant
published an open Request for Proposal (‘RFP0101/2007’)
with a view to selecting
and appointing service providers for the
provisioning of Telkom Network Services (Construction Services) as
and when required by
the applicant.
(5) The RFP stipulated that the
closing date for the submission of proposals was 12 December 2007.
By the closing date the applicant
had received 61 proposals in
response to the RFP.
(6) The RFP stipulated that the
proposals submitted shall be open for acceptance by the applicant for
a period of 120 days from
the closing date (12 December 2007). The
proposal signed by each proposer contains the following:
‘I/we
agree that the offer herein shall remain binding upon me/us and open
for acceptance by Telkom SA Limited during the
validity period
indicated and calculated from the closing hour and date of the bid’.
(7) The 120 day
period expired on or about 12 April 2008. The period of validity for
proposals to be submitted was not extended
at any time prior to 12
April 2008, either unilaterally by any of the proposers or by
agreement between the applicant and the proposers
who had submitted
proposals. (The first respondent’s counsel contends that prior
to 12 April 2008 the applicant and the
first respondent agreed that
the validity period of the first respondent’s proposal was
extended but there is no factual
basis for the contention.)
(8) The evaluation of the 61 proposals
received and the shortlisting of 15 proposals for further
consideration took place in accordance
with the applicant’s
procurement policy. On 28 February 2008 15 of the proposers who had
submitted proposals were shortlisted
and approved by the applicant’s
Procurement Review Council.
(9) By 12 April 2008 the applicant had
not accepted any of the proposals.
(10) On 24 June 2008, after the
validity period of the proposals had expired, the applicant sent an
e-mail to each of the 15 proposers
whose proposals had been
shortlisted for further consideration and requested them to extend
the validity period of their proposals.
This e-mail reads as
follows:
‘Dear
Proposer
Please
note that the validity period of RFP0101/2007 (Construction Services)
has expired and we kindly request your permission to
increase it with
another 120 days from date of expiry as the tender evaluations are
still ongoing. It will be appreciated if your
confirmation can be
received by no later than Thursday 26 June 2008 12h00.’
(11) Several of the
proposers to whom the message was sent, including the six
respondents, agreed to extend the validity period
by a further 120
days, which extended period expired on or about 12 August 2008. No
further extensions were sought or agreed before
or after that date.
(The first respondent’s counsel contends that after 12 August
2008 the parties agreed that the validity
period of the first
respondent’s proposal was extended ‘for a reasonable
time, at least until decision by the applicant’s
procurement
bodies’. Once again there is no factual basis for the
contention. The first respondent does not even allege
that the
parties entered into such a tacit agreement. The fifth respondent
alleges that ‘at least by their conduct the applicant
and the
fifth respondent tacitly agreed to the further extension of the
validity period of the tender’. This allegation
is extremely
vague and unconvincing. It is not alleged what conduct is relied
upon, who entered into this agreement and that they
had the necessary
animus
contrahendi
and
for how long the validity period was extended. The existence of the
tacit agreement must be inferred from all the relevant
facts and
circumstances – see
Standard
Bank of South Africa Ltd v Ocean Commodities Inc
1983
(1) SA 276
(A)
at
292B;
Joel
Melamed and Horwitz v Cleveland Estates (Pty) Ltd
[1984] ZASCA 4
;
1984
(3) SA 155
(A)
at
165I. If an inference can be made from the conduct of the parties it
is by no means clear that ‘the most plausible probable
conclusion’ (see
Joel
Melamed
at
165I) is that the parties agreed to extend the validity period of the
proposal. If the parties knew – as they clearly
did –
that the validity period had expired and no tender had been awarded,
the most plausible probable conclusion is that
the parties were
engaging in a procurement process other than by way of public
tender.)
(12) On 18
September, and after the agreed extended period of the proposals had
expired, the applicant’s Cross-Functional
Sourcing Team, acting
in accordance with the applicant’s Procurement Policy,
submitted a written memorandum to the applicant’s
Procurement
Review Council (‘PRC’) in which the award of the RFP to
the six respondents was recommended. On 18 September
2008 the
applicant’s PRC supported the decision and decided to forward
the memorandum to the applicant’s Executive
Committee for
approval.
(13) On 15 October 2008 the
applicant’s PRC submitted a recommendation to the applicant’s
Executive Committee for support
of the recommendation and onwards
submission to the applicant’s Board of Directors for final
approval.
(14) On about 14
November 2008 the Executive Committee of the applicant submitted the
recommendation of the PRC to the applicant’s
Board of Directors
for acceptance of the recommendations to make the award of the tender
to the six respondents. The applicant’s
Board of Directors
approved the recommendation and resolved to award the RFP to the six
respondents as service providers.
(15) On 5 December
2008, pursuant to the decision taken by the applicant’s Board
of Directors on 14 November 2008, the applicant
sent a letter to each
of the respondents advising them of their appointment as preferred
service providers for the provisioning
of Telkom Network Services
(Construction Services). The award letters specified that any final
award of business and the effective
commencement date of the
appointment as a preferred service provider was conditional upon the
signature of an agreement within
45 days from 5 December 2008
incorporating the matter specified in the award letter.
(16) The 45 day period calculated from
5 December 2008 expired on or about 20 January 2009, but no agreement
as contemplated in
the award letter was signed between the applicant
and any one of the respondents.
(17) After the
issue of the award letters the applicant negotiated with the six
respondents the terms of the final agreements but
no agreements were
concluded with any of the respondents.
(18) By February 2009 the applicant
had not informed the unsuccessful bidders that their proposals had
not been accepted.
(19) During February 2009 one or more
of these unsuccessful bidders lodged a complaint with the office of
the Public Protector with
regard to the procedure relating to the
RFP. Correspondence ensued between the attorneys acting for the
complainants, the Public
Protector, and attorneys acting for the
applicant.
(20) Pursuant to these complaints and
the correspondence which ensued between the applicant and the Public
Protector, on 6 August
2009 the applicant sent identical letters to
the six respondents advising them that the applicant had consulted
with an external
legal counsel and was considering what steps it
should take in respect of the tender.
(21) The applicant decided to suspend
the further negotiation of agreements with the six respondents
pending receipt of legal advice.
The applicant received an opinion
from Senior Counsel to the effect that an unsuccessful bidder who had
been eliminated in the
evaluation process could contend that the
tender process had come to an end when the validity period had
expired without any award
having been made and that he should then be
permitted to submit an approved bid in a subsequent public tender
process in terms
of a new RFP.
(22) On 20 November 2009 the Executive
Committee of the applicant submitted a recommendation to the
applicant’s Board of Directors
for approval to set aside the
award of RFP0101/2007 for the provision of Telkom Network Services
(Construction Services). This
memorandum specifically referred to
the opinion obtained from legal counsel.
(23) On 13 April 2010 the applicant
addressed a letter to the second, third, fourth, fifth and sixth
respondents in which the applicant
advised them of its intention to
bring this application. The applicant gave similar advice to the
first respondent on 13 May 2010.
(24) The fifth
respondent launched the related application on 6 May 2010 and the
applicant launched the main application on 18 May
2010.
[4] The principal issue raised in this
case is the legal consequence of a failure by a public body to
accept, within the stipulated
validity period for the (tender)
proposals, any of the proposals received.
[5] The applicant’s primary
contention may be summarised as follows: the proposals submitted
constituted offers by the proposers
to the applicant to supply the
required services to the applicant on the terms set out in the
proposal. Such offers were open
for acceptance for a period of 120
days after the closing date (i.e. until 12 April 2008). The legal
nature of the proposal was
an option granted to the applicant (i.e.
an offer coupled with an undertaking to keep the offer open for a
specified period of
120 days), and the applicant was entitled to
exercise the option and accept the proposal within the validity
period. After 12
April 2008 there was no longer a valid option open
for acceptance by the applicant. On 24 June 2008, when the applicant
requested
the 15 shortlisted proposers to ‘increase their
validity period with another 120 days’ and the proposers agreed
to
the request, as a matter of law this could not constitute an
extension of or amendment to the initial proposals and offers which
had lapsed, but constituted new offers made by each of the proposers
who agreed to the request, and which new proposals were on
the same
terms and conditions as the initial proposals, save that they were
open for acceptance by the applicant until 12 August
2008. The
applicant contends that as the validity period of the proposals had
long since expired the applicant could not validly
have accepted any
of the proposals and that the other proposers must have appreciated
by this time that their proposals, which
were not open for acceptance
beyond the stipulated period of 120 days, had long since lapsed.
[6] According to the first
respondent’s answering affidavit and first respondent’s
counsel’s heads of argument
the first respondent opposes the
application on the following grounds:
(a) The applicant and the respondents
concluded oral or, at least, tacit agreements to extend the second
validity period from 8
August 2008 at least until the date of the
award on 5 December 2008;
(b) When the award was made an
enforceable agreement came into existence between the applicant and
each of the respondents;
(c) After the award was made, the
applicant and the first respondent (and, presumably, the other
respondents too) in any event concluded
an enforceable agreement with
consensus on all material terms;
(d) The applicant cannot rely upon its
own refusal (following complaints by the unsuccessful bidders) to
sign the written agreement
in frustration of fulfilment of the simple
conditions;
(e) There is
nothing unfair, unconstitutional, unlawful or reviewable about the
negotiation and conclusion of the agreements with
the successful
bidders during the extended offer period (to the exclusion of the
unsuccessful bidders who had not, even, met the
applicant’s
minimum requirements);
(f) On the contrary, if the award and
consequent agreement is set aside, the first respondent (and,
presumably, the other respondents
too) would suffer immense prejudice
and themselves become the victims of unfair and unconstitutional
treatment.
[7] The fifth
respondent contends that the court is precluded from granting the
relief sought by the applicant because of the applicant’s
delay
in instituting these proceedings. In this regard the fifth
respondent relies on the provisions of section 7 of PAJA. (At
the
hearing the first respondent’s counsel adopted the fifth
respondent’s argument.) With regard to the merits, the
fifth
respondent contends that the parties were free to extend the validity
period of the bidders’ proposals and that there
was nothing
unfair about the applicant continuing to negotiate with the 15
bidders who had submitted acceptable tenders. According
to the fifth
respondent the tenderers who fell out of the race had their moment
and the extension of the validity period by agreement
with the 15
shortlisted tenderers who had submitted acceptable tenders, after the
expiry of the validity period, cannot conceivably
be said to be
unfair to the tenderers who fell out of the race. The fifth
respondent also contends that the court must consider
all the
relevant circumstances of the tender and adjudicate the matter on the
basis of whether the applicant’s decision to
award the tender
to the six respondents was reasonable (see
Bato
Star Fishing (Pty) Ltd v Minister of Environmental Affairs
[2004] ZACC 15
;
2004
(4) SA 490
(CC)
paras
42 and 45) and taking into account that not every slip in the
administration of a tender must be visited by judicial sanction
(see
Moseme
Road Construction v King Engineering Construction
2010
(4) SA 359
(SCA)
para
21). Finally the fifth respondent contends that the applicant’s
letter of acceptance of 5 December 2008 does not contain
a suspensive
condition.
[8] It will be convenient to deal
first with the question of the applicant’s delay in instituting
these proceedings before
considering the merits of the application.
[9
] The
main application is partially an application for judicial review of
an administrative action in terms of section 6 of PAJA.
The
applicant’s counsels’ heads of argument rely on a number
of grounds of review specified in section 6. The first
and fifth
respondents contend that the applicant did not bring its application
within the 180 day period stipulated by section
7(1) of PAJA.
However the applicant argues that section 7(1) of PAJA does not apply
when the decision maker applies to set aside
its own decision as the
date of the decision maker’s decision is not covered by
paragraphs (a) and (b) of section 7(1) which
provide for the date
from which the 180 days must run. The applicant contends that the
common law rule as enunciated in
Wolgroeiers
Afslaers (Edms) Bpk v Munisipaliteit van Kaapstad
1978
(1) SA 13
(A)
applies
(i.e. the court must decide (a) whether the proceedings were
instituted after the passing of a reasonable time and (b),
if so,
whether the unreasonable delay ought to be overlooked. In deciding
(b) the court exercises a judicial discretion, taking
into
consideration all the relevant circumstances.)
[10
] Section
7(1) of PAJA provides that –
‘Any proceedings for judicial
review in terms of section 6(1) must be instituted without
unreasonable delay and not later
than 180 days after the date –
(a) subject to subsection (2)(c), on
which any proceedings instituted in terms of internal remedies as
contemplated in subsection
(2)(a) have been concluded; or
(b) where no such remedies exist, on
which the person concerned was informed of the administrative action,
became aware of the action
and the reasons for it or might reasonably
have been expected to have become aware of the action and the
reasons.’
On the face of it
the use of the word ‘any’ indicates clearly that the
section is intended to apply to all proceedings
for judicial review
but this interpretation may be affected by the context. As pointed
out in
Commissioner
for Inland Revenue v Ocean Manufacturing Ltd
[1990] ZASCA 66
;
1990
(3) SA 610
(A)
at
618H-I ‘
Any
is “a word of wide and unqualified generality. It may be
restricted by the subject-matter or the context, but
prima
facie
it
is unlimited’ (Per Innes CJ in
R
v Hugo
1926
AD 268
at
271.). ‘In its natural and ordinary sense,
any
–
unless restricted by the context – is an indefinite term which
includes all of the things to which it relates’
(Per Innes JA
in
Hayne
& Co v Kaffrarian Steam Mill Co Ltd
1914
AD 363
at
371.)’ While PAJA appears to govern all proceedings for
judicial review the failure of the Legislature to provide for
a date
where the decision maker wishes to review its own decision indicates
that section 7(1) was not intended to apply to such
proceedings. As
long ago as 1977 our (then) highest court held that a public body may
not only be entitled but also duty bound
to approach a court to set
aside its own irregular administrative act – see
Transair
(Pty) Ltd v National Transport Commissioner and Another
1977
(3) SA 784
(A)
at
792H-793G. Even if the Legislature cannot be presumed to know the
state of the law, the omission seems to be deliberate and
the court
must give effect to the Act as it stands. Furthermore, it seems to
be clear that a court cannot read into the Act something
that was
overlooked by the Legislature – see
Jaga
v Dönges NO & Another
1950
(4) SA 653
(A)
at
664G. Counsel for the respondents had difficulty in suggesting the
words which could fill the
casus
omissus
and
eventually, as I understood them, accepted the applicant’s
contention that where the decision maker seeks to review its
own
decision the common law rules must be applied. This means that all
the relevant circumstances must be taken into consideration,
particularly the strength of the case on the merits. Accordingly I
turn to a consideration of the merits.
[11] As appears
from the parties’ opposing contentions they have diametrically
opposed points of departure. The applicant’s
approach is that
there has not been compliance with section 217 of the Constitution
(i.e. the administrative process is flawed).
On the other hand, the
respondents’ approach is that the rules of contract apply, that
the parties were free to extend the
validity period of their
proposals, that they in fact did so and accordingly that the award of
the tender is valid. For this approach
the first and fifth
respondents rely on the legal position set out in
Manna
v Lotter and Another
2007
(4) SA 315
(C)
paras
12-29.
[12] The
Constitution lays down minimum requirements for a valid tender
process and contracts entered into following an award of
a tender to
a successful tenderer: the tender process, preceding the conclusion
of contracts for the supply of goods and services,
must be ‘fair,
equitable, transparent, competitive and cost-effective’ –
section 217 of the Constitution. The
decision to award a tender
constitutes administrative action and therefore the provisions of
PAJA apply – see
Millennium
Waste Management (Pty) Ltd v Chairperson, Tender Board: Limpopo
Province and Others
2008
(2) SA 481
(SCA)
para
4;
Metro
Projects CC v Klerksdorp Local Municipality
2004
(1) SA 16
(SCA)
para
12;
Logpro
Properties CC v Bedderson NO and Others
2003
(2) SA 460
(SCA)
para
5. Generally, once a contract has been entered into pursuant to the
award of the tender the rules of contract apply –
see
Cape
Metropolitan Council v Metro Inspection Services CC
2001
(3) SA 1013
(SCA)
para
18;
The
Law of Government Procurement in South Africa
Phoebe
Bolton
Lexis
Nexis Butterworths page 30 para 5. In accordance with the principle
or doctrine of legality a contract entered into without
complying
with the prescribed tender processes is invalid and the court has no
discretion to enforce the contract or refuse to
enforce it –
see
Municipal
Manager: Qaukeni v FV General Trading CC
2010
(1) SA 356
(SCA)
paras
14, 15 and 16;
Premier,
Free State and Others v Firechem Free State (Pty) Ltd
2000
(4) SA 413
(SCA)
para
30;
Eastern
Cape Provincial Government v Contractprops 25 (Pty) Ltd
2001
(4) SA 142
(SCA)
paras
8 and 9. It follows that, even if no contract is entered into, all
steps taken in accordance with a process which does not
comply with
the prescribed tender process are also invalid – see section 2
and 172(1) of the Constitution:
Pharmaceutical
Manufacturers of South Africa: In re ex parte President of the
Republic of South Africa
[2000] ZACC 1
;
2000
(2) SA 674
(CC)
para
48.
[13] Once the
applicant was advised that its tender process was irregular because
it did not comply with the prescribed tender procedure
the applicant
was duty bound to approach a court to set aside its own irregular
administrative act – see
Municipal
Manager: Qaukeni v FV General Trading CC supra
para
23. The applicant was under a duty not to submit itself to an
unlawful contract and was obliged to ignore the award of the
tenders
and resist any attempt to enforce them – see
Premier,
Free State and Others v Firechem Free State (Pty) Ltd supra
para
36;
Municipal
Manager, Qaukeni v FV General Trading CC supra
para
23. The applicant was entitled to bring an application to review and
set aside the award of the tenders and/or apply for a
declarator that
the award of the tenders was null and void and of no force and effect
– see
Municipal
Manager: Qaukeni v FV General Trading CC supra
paras
25 and 26.
[14] The question to be decided is
whether the procedure followed by the applicant and the six
respondents after 12 April 2008 (when
the validity period of the
proposals expired) was in compliance with section 217 of the
Constitution. In my view it was not.
As soon as the validity period
of the proposals had expired without the applicant awarding a tender
the tender process was complete
– albeit unsuccessfully –
and the applicant was no longer free to negotiate with the
respondents as if they were simply
attempting to enter into a
contract. The process was no longer transparent, equitable or
competitive. All the tenderers were
entitled to expect the applicant
to apply its own procedure and either award or not award a tender
within the validity period of
the proposals. If it failed to award a
tender within the validity period of the proposals it received it had
to offer all interested
parties a further opportunity to tender.
Negotiations with some tenderers to extend the period of validity
lacked transparency
and was not equitable or competitive. In my view
the first and fifth respondent’s reliance only on rules of
contract is
misplaced.
[15] A further reason for finding
against the first and fifth respondents is that they have not laid a
basis for finding that the
validity period of their proposals was
lawfully extended until the tenders were awarded.
[16] Furthermore, the applicant’s
letters to the six respondents, all dated 5 December 2008, advising
them that they were
preferred service providers for the provisioning
of Telkom Network Services (Construction Services) clearly does not
contain an
unqualified acceptance of the respondents’ proposals
such as would give rise to a binding agreement. The letters clearly
stipulate that –
‘Any
final award of business including the effective commencement date
will be contingent upon the signature of an Agreement,
within 45 days
from the date of this facsimile, incorporating,
inter
alia
,
the following:
Telkom’s Standard Terms and
Conditions for Rendering (Turnkey) Services for Telkom
An appropriate discount structure in
line with the required 15 % saving on current Telkom cost as
detailed in the original Proposal
Bid conditions as detailed in the
original Proposal
BEE Commitment Plan’
(See e.g.
Premier,
Free State and Others v Firechem Free State (Pty) Ltd supra
paras
21 and 35)
[17] There is also
no room for finding that the requirement of a written agreement
signed by the parties was a condition which had
been fictionally
fulfilled. If the award process was flawed, as it has been found to
be, the applicant was under a duty not to
submit itself to an
unlawful contract and was obliged to resist the respondents’
attempts to enforce such a contract –
see
Premier,
Free State and Others v Firechem Free State (Pty) Ltd supra
paras
36 and 37.
[18] Insofar as it
was suggested that the applicant is estopped from denying that an
agreement had been entered into this would
be contrary to what is
required by law, namely that the contract be entered into pursuant to
a tender process which is ‘fair,
equitable, transparent,
competitive and cost-effective’, and estoppel cannot operate –
see
Eastern
Cape Provincial Government and Others v Contractprops 25 (Pty) Ltd
2001
(4) SA 142
(SCA)
paras
11 and 12.
[19] As far as the
declarator is concerned it must follow from the finding that the
tender process was flawed, that the applicant’s
acceptance of
the proposals submitted by the six respondents and the applicant’s
award of the tender to the six respondents
were null and void and of
no force or effect. As already mentioned a declarator is an
appropriate remedy – see
Municipal
Manager: Qaukeni v FV General Trading CC
2010
(1) SA 356
(SCA)
para
26. The applicant is therefore entitled to the declarator which it
seeks. This will also have an impact on the issue of unreasonable
delay which must now be considered.
[20] The
respondents’ approach is that the delay which must be
considered is from 14 November 2008, when the decision was
taken to
award the tenders, until 18 May 2010, when this application was
launched (i.e. a period of 18 months). It seems to me
that this is
not correct. Until February 2009 the applicant clearly proceeded in
the belief that it was acting properly in terms
of a lawful process.
It only became aware that the tender process was flawed when it
received counsel’s opinion at about
the beginning of August
2009. Thereafter the applicant complied with its internal procedures
before the application was launched.
On 20 November 2009 the
applicant’s Executive Committee submitted a recommendation to
the applicant’s Board of Directors
for approval to set aside
the award of RFP0101/2007. This recommendation incorporated a
summary of counsel’s opinion: that
once the validity period of
the proposals had expired with no extension of the period being
arranged before the expiry of the validity
period, there were no
valid bids in existence and an award could not be validly made. The
applicant does not say what the Board
of Directors decided on that
day and correspondence ensued about the delay in finalising the
tender. At the end of January 2010
the applicant informed the Public
Protector that the Board of Directors’ approval of the
Executive Committee’s recommendation
of 20 November 2009 was
still awaited. In a letter dated 13 May 2010 the applicant informed
the first respondent’s attorneys
that it intended to apply for
the review and setting aside of the award of the tender. From
another letter dated 13 April 2010
it appears that by then the
applicant’s Board of Directors had resolved to review its
decision to award the tenders and that
the applicant was already
preparing the application. The applicant eventually issued the
application on 18 May 2010.
[21] In the light of these facts the
applicant contends that there was no unreasonable delay in
instituting these proceedings.
In argument the applicant’s
counsel readily conceded that there are gaps in the narrative but
contended that the applicant
is a very large organisation and that
‘it takes a long time to turn such a big ship around’. I
do not agree. There
is no factual basis for the contention that it
would take a long time for the applicant to reverse a decision
previously taken.
On the face of it all that was required was a
recommendation by the applicant’s Executive Committee to the
applicant’s
Board of Directors and once the Board of Directors
had taken its decision the papers could have been prepared. In my
view once
the applicant had received counsel’s opinion that the
tender process was flawed the applicant’s Board of Directors
could have taken the necessary decision and the application could
have been prepared and launched within a period of about two to
three
months. A period of 10-12 months is obviously unreasonable.
[22] The question
which remains is whether this unreasonable delay should be
overlooked. In my view it should. The applicant is
seeking to avoid
the consequences of an unlawful tender process where no final
agreement has been concluded and no party is acting
pursuant thereto.
As already pointed out where the tender procedures had not been
complied with the applicant is duty bound to
apply to set aside any
resulting contract and not to submit the enforcement of any such
contract. The applicant is entitled to
a declarator to the effect
that the acceptance of the proposals submitted by the six respondents
and the award of the tender to
the six respondents were null and void
and of no force and effect. It would therefore make no sense to
refuse the relief sought
in the review part of the application. I am
mindful of the fact that the first and fifth respondents allege that
they will suffer
financial prejudice because of the delay in
finalising the tender but these allegations are not convincing:
there are no facts
to support them. In my view the principle of
legality must prevail.
[23] The applicant is therefore
entitled to the substantial relief sought in its amended notice of
motion.
[24] With regard to costs the
applicant is not entitled to the costs of the whole founding
affidavit. These papers run to 566 pages
and include many documents
which were not relevant to the case which the applicant sought to
advance. In my view the founding
affidavit should not have exceeded
200 pages and the costs of the remaining papers must be disallowed.
[25] All the parties employed senior
counsel although only the applicant employed two counsel. It was not
argued that the applicant
is not entitled to the costs of two counsel
and in my view it is. The issues are of sufficient importance to
warrant the employment
of two counsel.
[26] With regard to the related
application the fifth respondent’s counsel conceded that the
court could not grant the relief
set out in prayer 1 of the notice of
motion for the simple reason that the application was brought too
late. A further reason
was that there was no evidence that the
decision sought to be reviewed and set aside was taken. As already
mentioned the parties
agree that if the applicant is granted
substantive relief the related application must be dismissed.
[27] The following orders are made –
I In the main application under case
number 27974/2010:
(1) The applicant’s
decision taken on 14 November 2008 to accept the proposals submitted
by the six respondents in terms of
RFP0101/2007, and the award of
RFP0101/2007 to the six respondents as communicated to them in the
applicant’s letter of 5
December 2008 are reviewed and set
aside;
(2) It is declared
that the applicant’s acceptance of the proposals submitted by
the six respondents in terms of RFP0101/2007
and the award of the
tender RFP0101/2007 to the six respondents is null and void and of no
force and effect;
(3) The first and fifth respondents
are ordered to pay the applicant’s costs of this application,
jointly and severally, the
one paying the other to be absolved, such
costs to include the costs consequent upon the employment of two
counsel but to exclude
the costs of preparing 365 pages of the
founding affidavit and annexures.
II In the related application under
case number 25945/2010:
(1) The application is dismissed with
costs, such costs to include the costs consequent upon the employment
of two counsel.
_______________________
B.R. SOUTHWOOD
JUDGE OF THE HIGH COURT
CASE
NO: 27974/2010
HEARD
ON: 18 November 2010
FOR
THE APPLICANT: ADV. N.G.D. MARITZ SC
ADV.
L.A. RETIEF
INSTRUCTED
BY: Maluleke Msimang & Associates
FOR
THE FIRST RESPONDENT: ADV. J. MARAIS SC
INSTRUCTED
BY: Macintosh Cross & Farquharson
FOR
THE FIFTH RESPONDENT: ADV. L. HALGRYN SC
INSTRUCTED
BY: Jacobson and Levy Inc.
DATE
OF JUDGMENT: 7 January 2011
CASE
NO: 25945/2010
HEARD
ON: 18 November 2010
FOR
THE APPLICANT: ADV. L. HALGRYN SC
INSTRUCTED
BY: Jacobson and Levy Inc.
FOR
THE FIRST RESPONDENT: ADV. N.G.D. MARITZ SC
ADV.
L.A. RETIEF
INSTRUCTED
BY: Maluleke Msimang & Associates
FOR
THE SIXTH RESPONDENT: ADV. J. MARAIS SC
INSTRUCTED
BY: Macintosh Cross & Farquharson
DATE
OF JUDGMENT: 7 January 2011