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[2013] ZASCA 186
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Dr JS Moroka Municipality and Others v Betram (Pty) Limited and Another (937/2012) [2013] ZASCA 186; [2014] 1 All SA 545 (SCA) (29 November 2013)
THE SUPREME COURT OF
APPEAL OF SOUTH AFRICA
JUDGMENT
Case
No: 937/2012
Reportable
In
the matter between:
DR
JS MOROKA MUNICIPALITY
……………………………………..
First
Appellant
THE
CHAIRPERSON OF THE TENDER ADJUDICATION
COMMITTEE
OF THE DR JS MOROKA MUNICIPALITY
………
Second
Appellant
THE
CHAIRPERSON OF THE TENDER ADJUDICATION
COMMITTEE
OF THE DR JS MOROKA MUNICIPALITY
…………
Third
Appellant
THE
ACTING MUNICIPAL MANAGER OF THE
DR
JS MOROKA MUNICIPALITY
…………………………………
Fourth
Appellant
And
BERTRAM
(PTY) LIMITED
…………………………………………
First
Respondent
ELDOCRETE
CC
………………………………………………….
Second
Respondent
Neutral citation
:
Dr JS Moroka Municipality v The Chairperson of
the Tender Evaluation Committee of the Dr JS Moroka Municipality
(937/2012)
[2013] ZASCA 186
(29 November 2013)
Coram
:
Brand,
Maya, Bosielo, Leach and Wallis JJA
Heard
:
15
November 2013
Delivered
:
29
November 2013
Summary
: Tender —
requirement that tenderers submit original tax clearance certificate
or be disqualified — failure to provide
original certificate —
absence of power to condone non-compliance — not affected by
regulations permitting council
to address enquiries to SARS.
ORDER
On appeal from
:
North Gauteng High Court, Pretoria (Hiemstra AJ
sitting as court of first instance):
1
.
The appeal succeeds with costs,
including the costs of two counsel.
2
.
The order of the court a quo is set
aside and is subst
ituted with the following: ‘The
application is dismissed with costs, including
the costs of two counsel where so employed.’
JUDGMENT
LEACH
JA (BRAND, MAYA, BOSIELO AND WALLIS JJA CONCURRING)
[1]
The cardinal issue arising in this
appeal is whether a municipality was justifiably entitled to
disqualify a tender supported by
a copy of a tax clearance
certificate when the invitation to tender had called for an original
certificate to be provided. The
court a quo held that the
municipality had erred in disqualifying the tender for that reason
alone and granted relief designed
to ensure the disqualified tender
was evaluated. With leave of the court a quo, this appeal lies
against that order.
[2]
A
need for toilets gave rise to the tender at the heart of this
dispute. In a written invitation published on 24 June 2012 the first
appellant, the Dr J S Moroka Municipality of Siyabuswa, Mpumalanga
(the municipality) called upon interested parties with the necessary
experience and ‘in good standing with the South African Revenue
Services’ (SARS) to tender for the supply and delivery
of 6 000
VIP toilets.
[1]
In the invitation to tender (in a section headed ‘Bid
Instructions’) it was stated that a failure to submit required
documents would render a tender liable to rejection. In addition, it
listed a number of documents as being ‘minimum qualifying
requirements’ to be made available as ‘the prerequisite
for (tenderers) to qualify for evaluation’. One such
requirement was ‘a valid original Tax Clearance Certificate.’
[3]
Pursuant to this invitation, and after a
tender briefing and site inspection, 11
tenders were submitted, including
tenders from both the first respondent, Betram (Pty) Ltd, and the
second respondent, Eldocrete
CC (‘Eldocrete’). However
the municipality’s bid evaluation committee disqualified the
first respondent’s
tender as not complying with the minimum
qualifying requirement for tenders in that it included a copy of a
SARS tax clearance
certificate and not an original. A number of other
tenders were disqualified for various deficiencies before those that
did qualify
were evaluated. The contract awarded to Eldocrete,
although its bid had been almost R2 million higher than that of the
first respondent.
[4]
Learning of this when certain of its
representatives visited the municipality on 2 August 2012, the first
respondent proceeded to
launch urgent review proceedings in the North
Gauteng High Court, Pretoria. Citing as respondents the municipality
itself, the
chairpersons of its tender evaluation and adjudication
committees and its acting municipal manager (the four appellants), it
sought
an order reviewing and setting aside the award of the contract
to Eldocrete as invalid and unenforceable, as well as interim relief
suspending the execution of the contract pending the outcome of the
review.
[5]
In seeking this relief, the first
respondent alleged not only that it had in fact attached an original
SARS tax clearance certificate
to its bid, but that its
representatives had seen the original certificate amongst the
original tender documents when they visited
the Municipality on 2
August 2012. This the Municipality denied. It persisted in its
allegation that the first respondent’s
bid had included merely
a copy of a SARS clearance certificate and that the tender had
accordingly failed to comply with one of
the minimum qualifying
requirements for a tender as set out in the tender invitation.
[6]
This was a dispute of fact impossible to
resolve on the papers. The first respondent elected not to have it
determined by way of
oral evidence but to argue the matter on the
papers as they stood. Accordingly, under the well-known procedural
rule applicable
to opposed motions the matter was argued in both the
high court and in this court on an acceptance of the appellants’
allegation
that the first respondent had enclosed a copy of a SARS
tax clearance certificate in its tender and not an original.
[7]
The
high court held that despite the tender invitation having specified
an original certificate as a requirement, the disqualification
of the
first respondent’s tender had been administratively unfair. It
therefore declared both the exclusion of the first
respondent’s
tender and the consequent award of the contract to Eldocrete to be
invalid. However it recognised that the contract
had already been
partially completed and, in order to avoid Eldocrete being
unnecessarily prejudiced, it granted further relief
similar to that
issued by this court in Millennium Waste Management
[2]
- essentially obliging the Municipality to evaluate the tender of the
respondent, compare it to that of Eldocrete and then to accept
whichever of the two was found to be preferable.
[8]
The necessity to comply with the
obligations imposed by s 217 of the Constitution relating to public
procurement policies and procedures
to be adopted by organs of state,
including municipalities, has resulted in the enactment of numerous
interrelated statutes, regulations
and directives. This, in turn, has
given rise to a convoluted set of rules and requirements that have
proved to be fertile ground
for litigation with the law reports
becoming littered with cases dealing with public tenders. It is
unnecessary, for present purposes,
to embark upon a detailed analysis
of all the statutory provisions relating to the process of municipal
procurement of goods and
services by way of tender. For present
purposes it suffices to mention the following:
(a)
The
Preferential Procurement Policy Framework Act 5 of 2000 (the
‘Procurement Act’) requires a municipality to implement
a
procurement policy by following a preference point system in respect
of any ‘acceptable tender’, defined as being
‘any
tender
which, in all respects, complies with the specifications and
conditions of
tender
as set out in the tender document’.
[3]
(b)
On 10 August 2001, the Preferential
Procurement Regulations, 2001 were promulgated under the Procurement
Act. Regulation 16 thereof
provided:
‘
No
contract may be awarded to a person who has failed to submit an
original Tax Clearance Certificate from the South African Revenue
Service ("SARS”) certifying that the taxes of that person
to be in order or that suitable arrangements have been made
with
SARS.’
(c)
Those
regulations were repealed with effect from 7 December 2011 by the
Preferential Procurement Regulations, 2011.
[4]
Regulation 14 of these latter regulations similarly prescribes that a
municipal tender may not be awarded ‘to any person
whose tax
matters have not been declared by the South African Revenue Service
to be in order.’
(d)
The
Local Government: Municipal Systems Act 32 of 2000 (‘the
Systems Act’), requires a municipality to have a supply
chain
management policy that is ‘fair, equitable, transparent, cost
effective and competitive and as may be provided for
in other
national legislation’
[5]
in order to procure municipal services.
(e)
Section
112(1) of the Local Government: Municipal Finance and Management Act
56 of 2003 (‘the Municipal Finance Act’),
requires a
municipal supply chain management policy to also comply with a
regulatory framework that covers as a minimum a wide
range of issues.
These include, in particular, ‘open and transparent
pre-qualification processes for tenders and other bids’,
[6]
‘bid documentation, advertising of and invitations for
contacts’
[7]
and ‘screening processes . . . for prospective contractors on
tenders or other bids above a prescribed value’.
[8]
(f)
On 30 May 2005, the Municipal Supply Chain Regulations were
promulgated under s 168 of the Municipal Finance Act.
[9]
Regulation 43 thereof provides:
‘
(1)
The supply chain management policy of a municipality or municipal
entity must, irrespective of the procurement process followed,
state
that the municipality or municipal entity may not make any award
above R15 000 to a person whose tax matters have not been
declared by
the South African Revenue Service to be in order.
(2)
Before making an award to a person, a
municipality or municipal entry must first check with SARS whether
that person’s tax
matters are in order.
(3)
If SARS does not respond within seven
days such person’s tax matters may for purposes of
subregulation (1) be presumed to
be in order.’
[9]
In the light of these provisions, the
reasoning of the high court in regard to the exclusion of the first
respondent’s tender
appears to have been as follows: the
critical requirement was the tenderer’s tax affairs being in
order; it was incumbent
upon the municipality under reg 43 of the
Municipal Supply Chain Regulations of 2005 to check with SARS whether
that was the case;
an original SARS tax clearance certificate is not
a material requirement to do so (presumably on the basis that an
original is
not required to ascertain from SARS whether the
tenderer’s tax affairs are in order); and accordingly
disqualification from
the tender process of a tender supported by a
copy of a SARS tax clearance certificate rather than an original was
procedurally
unfair as the requirement of an original was not
‘critical’.
[10]
Not
only is precisely what was meant by this finding unclear but the
underlying reasoning is doubtful, particularly given the fact
that at
the time the preservation of secrecy provisions contained in s 4 of
the Income Tax Act 58 of 1962 would have made it very
difficult for a
municipality to investigate the tax affairs of any tenderer, save
possibly if the tenderer had provided its consent
to any information
being made available under s 4(2B) of that Act.
[10]
But I do not find it necessary to deal any further with that issue.
Essentially it was for the municipality, and not the court,
to decide
what should be a prerequisite for a valid tender, and a failure to
comply with prescribed conditions will result in a
tender being
disqualified as an ‘acceptable tender’ under by the
Procurement Act unless those conditions are immaterial,
unreasonable
or unconstitutional.
[11]
[11]
The requirement that tenders should only
be awarded to persons whose tax affairs have been declared by SARS to
be in order echoes
loudly throughout the statutes and regulations
mentioned above, and there is no hint on the papers of any contention
that this
is in any way unconstitutional, unreasonable, irrelevant or
immaterial. Nor is it suggested that it was unreasonable, irrelevant
or immaterial for the appellants to have required an original, rather
than a copy, of a tax clearance certificate. Counsel for
the first
respondent therefore correctly accepted that the lawfulness of the
municipality’s condition set out in the tender
invitation
imposing an original SARS clearance certificate as a minimum
qualifying requirement could not be challenged. He submitted,
however, that the appellants should have been satisfied with the copy
provided and that the failure to provide an original was
something
which the appellant could and should have condoned.
[12]
The
immediate difficulty I have with this argument relates to its
underlying premise that there existed a discretion to condone
a
failure to comply with any of the minimum qualifying requirements set
out in the tender invitation. The respondent was unable
to point to
such a discretion being afforded in any of the relevant legislation
or regulations, and, as Brand JA said in Pepper
Bay:
[12]
‘
As
a general principle an administrative authority has no inherent power
to condone failure to comply with a peremptory requirement.
It only
has such power if it has been afforded the discretion to do so.’
[13]
The
decision in Pepper Bay is instructive. The court in that matter was
called upon to decide whether a Chief Director, to whom
the power to
grant fishing licences under a general notice had been delegated,
enjoyed the necessary authority to condone the failure
of a person to
comply with certain peremptory procedural requirements relating to
applications for such licences as prescribed
in the general
notice. In regard to the Chief Director’s powers, Brand JA said
the following:
[13]
‘
The
Chief Director derives all his (delegated) powers and authority from
the enactment constituted by the general notice. If the
general
notice therefore affords him no discretion, he has none. The question
whether he had a discretion is therefore entirely
dependent on a
proper construction of the general notice.’
[14]
The first respondent did not seek to
dispute the correctness of this decision. It also accepted that a
discretion to condone a failure
to comply with the peremptory
requirement of an original tax clearance certificate in the present
case was entirely dependent upon
a proper construction of the
documents forming part of the tender invitation. Although unable to
refer to any specific provision
in the tender invitation or the
various documents included therewith (which included the bid
instructions and the standard terms
and conditions of bid) where
mention is made of a discretion afforded to a municipal official or
committee to condone a failure
to comply with any prescribed
condition of tender, it argued that such a discretion is implicit in
clause 3 of the standard terms
and conditions of bid. It reads as
follows:
‘
3.1
All bids validly submitted will be taken into consideration. Each
tender/bid will be reviewed and evaluated for its ability
to deliver
the specific requirements of the bid in line with set criteria of
paragraph 3.3.
3.2
Dr JS Moroka Local Municipality is under
no obligation to accept any tender/bid, or to accept the lowest
tender/bid.
3.3
All tenders/bids will be reviewed and
evaluated in accordance with the following criteria:
■
General
Information supplied by the bidder
■
Compliance
with bid requirements
■
Technical
■
Operational
■
Preferential
Procurement.'
[15]
This argument cannot be accepted. The
clause relates to bids ‘validly submitted’ and, as is
indeed stated in clause
2.5.5 of the standard terms and conditions of
bid, only tenders submitted ‘in the prescribed manner may be
accepted as valid
bids’. That clause merely states the obvious.
A bid that does not satisfy the necessary prescribed minimum
qualifying requirements
simply cannot be viewed as a bid ‘validly
submitted’. Moreover, the tender process consists of various
stages: first,
examination of all bids received, at which stage those
which do not comply with the prescribed minimum standards are liable
to
be rejected as invalid; second, the evaluation of all bids
‘validly submitted’ as prescribed in clause 3; and third,
a decision on which of the validly submitted bids should be accepted.
The fact that all bids validly submitted are to be taken
into
consideration as set out in clause 3.1
affords
no discretion to condone and take into account bids not validly
submitted but disqualified.
[16]
In
these circumstances it is clear that there was no discretion to
condone a failure to comply with the prescribed minimum prerequisite
of a valid and original tax clearance certificate. That being so, the
tender submitted by the first respondent was not an ‘acceptable
tender’ as envisaged by the Procurement Act and did not pass
the so-called ‘threshold requirement’ to allow it
to be
considered and evaluated. Indeed, its acceptance would have been
invalid and liable to be set aside - as was held by this
court in
Sapela Electronics.
[14]
On this basis the appellants were perfectly entitled to disqualify
the first respondent’s tender as they did.
[17]
As a last line of defence, so to speak,
the first respondent argued in the alternative that for reasons of
public policy its tender
ought not to have been disqualified but
should have been evaluated. This argument was founded essentially on
the fact that it was
lower than that of Eldocrete and the statement
in Millennium Waste Management that:
‘
(O)ur
law permits condonation of non-compliance with peremptory
requirements in cases where condonation is not incompatible with
public interest and if such condonation is granted by the body in
whose favour the provision was enacted (SA Eagle Insurance Co
Ltd v
Bavuma)’.
[15]
[18]
The
first respondent’s argument on this issue faces a fundamental
difficulty.
The
decision in SA Eagle Insurance Co Ltd v Bavuma,
[16]
referred to as authority for the proposition in the dictum in
Millennium Waste Management quoted above that condonation can be
granted where it is not inconsistent with public policy, related to a
statutory provision enacted for the specific benefit of an
individual
or body. It was held that such a benefit may be waived by that
individual or body provided that no public interests
were affected
thereby and that it was not open to another person, whom the statute
was not intended to benefit, to insist that
the provision be
observed. In my view, that does not support the proposition that, if
it is
not
inconsistent with public policy, non-compliance with a peremptory
requirement of a tender can be condoned so that a tender which
is
‘unacceptable’ as envisaged by the Procurement Act may be
accepted. Not only is such a proposition inconsistent
with
the decision of this court in Pepper Bay - a decision regularly
followed and approved, including in Millennium Waste Management
- but
it also offends the principle of legality, as emphasised by this
court in Sapela Electronics. Accordingly, in my respectful
view,
insofar as the judgment in Millennium Waste Management may be
construed as accepting that a failure to comply with the peremptory
requirement of a tender may be condoned by a municipal functionary
who is of the view that it would be in the public interest for
such
tender to be accepted, it should be regarded as incorrect.
[19]
In these circumstances the high court
erred in granting the order that it did, and the first respondent’s
application ought
to have been dismissed.
[20]
The following order will issue:
1
The appeal succeeds with costs,
including the costs of two counsel.
2
The order of the court a quo is set
aside and is substituted with the following:
The
application is dismissed with costs, including the costs of two
counsel where so employed.’
L
E Leach
Judge of Appeal
APPEARANCES:
For
1
st
to 4
th
Appellant:: N J Graves SC (with him
D N Lundström)
Instructed by:
Allardyce and Partners,
Johannesburg
Lovius Block Attorneys,
Bloemfontein
For
Respondent: : M Snyman
Instructed by:
1
st
Respondent:
Schoombee Attorneys,
Newlands
2
nd
Respondent:
Geyser and Coetzee
Attorneys, Centurion
Vermaak and Dennis
Attorneys,
Bloemfontein
[1]
In this instance ‘VIP’ does not imply a product of
superior quality — it is an acronym for Ventilated Improved
Pit toilets.
[2]
Millennium Waste Management v Chairperson, Tender Board, Limpopo
Province and others
2008 (2) SA 481
(SCA) para 35.
[3]
Section 1 of the PPPF Act.
[4]
Published in GG No R 502 of 8 June 2011.
[5]
Section 83(3) of the Systems Act.
[6]
Section 112(1)(e).
[7]
Section 112(1)(g).
[8]
Section 112(1)(i).
[9]
In G/N 868 of 2005.
[10]
The position has since altered. Section 4 of the Income Tax Act 58
of 1962 was repealed by
s 271
of the
Tax Administration Act 28 of
2011
,
s 256
of which provides a procedure whereunder a person to
whom a taxpayer has presented a tax clearance certificate may
confirm a
taxpayer’s tax compliance status with SARS.
[11]
See
in this regard, albeit obiter, the comment of this court in
Millennium Waste Management para 19.
[12]
Minister of Environmental Affairs and Tourism v Pepper Bay Fishing
(Pty) Ltd; Minister of Environmental Affairs v Smith
2004 (1) SA 308
(SCA) para 31.
[13]
Para 31.
[14]
Chairperson,
Standing Tender Committee v JFE Sapela Electronics (Pty) Ltd
2008
(2)
SA 638
(SCA) para 11.
[15]
Para 17.
[16]
1985 (3) SA 42
(A).