Brief Summary

Intervention — Special Investigating Unit — Application for leave to intervene in payment proceedings — SIU asserting irregularities in contract procurement — Requirement for direct and substantial interest — SIU failed to demonstrate prima facie proof of right to intervene — Application dismissed. HT Pelatona Projects (Pty) Ltd sought payment from the Nelson Mandela Bay Municipality for unpaid certificates related to a construction contract. The SIU sought to intervene, claiming the contract was unlawfully procured and that it had a right to oppose the payment application. The legal issue was whether the SIU had a direct and substantial interest in the matter and could demonstrate a prima facie case for intervention. The court held that the SIU did not meet the requirements for intervention as it failed to show a direct and substantial interest or prima facie proof of a right to intervene, resulting in the dismissal of the application.

Comprehensive Summary

Summary of Judgment

1. Introduction

This judgment concerned an application to intervene in pending motion proceedings for payment. The intervention application was brought by the Special Investigating Unit (SIU) as an intervening party seeking leave to enter the litigation between HT Pelatona Projects (Pty) Ltd (Pelatona) and the Nelson Mandela Bay Local Municipality (the municipality).

The underlying (main) proceedings were instituted by Pelatona on 16 November 2020 (with the payment application launched on 11 November 2020) for payment of R4 315 000 allegedly due under a series of payment certificates issued by the municipality’s principal agent. The municipality, on the papers referred to in the judgment, did not dispute that it had no defence and that it was legally obliged to pay.

The SIU was not a party to the main application, but sought to be joined as second respondent and to file opposing papers. It indicated that it intended simultaneously to institute (and, in argument, asserted it had instituted) a counter-application to review the construction contract awarded by the municipality to Pelatona, on the basis that it was allegedly irregularly and unlawfully procured. The court recorded, however, that apart from an unsigned founding affidavit attached to the intervention application, there was nothing before it (such as a notice of motion setting out review relief) demonstrating that review proceedings had in fact been instituted.

The intervention application was opposed by Pelatona. The municipality did not oppose the SIU’s intervention application.

The general subject-matter of the dispute was whether the SIU had a legally cognisable basis to intervene in payment litigation founded on payment certificates, in order to prevent Pelatona from receiving payment pending the SIU’s investigation and contemplated review of the underlying COVID-19 related procurement contract.

2. Material Facts

Pelatona was awarded a municipal tender on 28 April 2020 for the construction of 2000 toilets, standpipes and aerators for various informal settlements within the Nelson Mandela Bay district. In execution of the work, Pelatona received seven payment certificates issued in its favour by the municipality’s principal agent. Of these certificates, five remained unpaid, and the unpaid portion totalled R4 315 000.

It was common cause on the version placed before the court that Pelatona’s payment claim in the main application was founded on these payment certificates. The municipality did not dispute, as stated in the judgment, that it was legally obliged to make payment and that it had no defence to the payment application.

The SIU’s intervention was premised on its assertion that the municipality had given it an undertaking to withhold implementation of the contract and, on the SIU’s version, to withhold payments pending the finalisation of the SIU’s investigation and contemplated review proceedings before the Special Tribunal. The court quoted the undertaking and observed that it did not expressly refer to a commitment to withhold payments, but stated that the municipality would not implement the contract pending investigation and review.

On the SIU’s version, during August 2020 it conducted an investigation into alleged irregularities relating to the municipality’s appointment of service providers for infrastructure projects and procurement of goods and services. The SIU alleged that documentation provided by the municipality indicated Pelatona was improperly and unlawfully appointed, including that no approval existed for a deviation from a competitive bidding process. The SIU further alleged that it interviewed various municipal employees about the procurement.

The SIU’s stated concern was that if the payment application succeeded, its investigation would be hampered and its efforts to prevent irregular expenditure would be undermined. It also asserted that payment should be opposed until investigations could determine whether work was indeed done and whether value for money was achieved.

The court identified material omissions and deficiencies in the SIU’s factual presentation. It noted that the SIU did not make factual averments supporting a conclusion that Pelatona’s work was not performed, was deficient, or that value for money was not received. The court further noted that the SIU’s allegations rested on information obtained from interviews and documents, without confirmatory affidavits from the persons interviewed.

A further material fact for the court’s analysis was that the SIU did not allege that the payment certificates themselves were issued through collusion or that the issuer exceeded their mandate fraudulently. The certificates’ status as enforceable instruments in the payment claim was therefore, on the papers described in the judgment, unassailed.

3. Legal Issues

The central legal questions were whether the SIU satisfied the requirements for intervention in pending civil proceedings, specifically whether it demonstrated a direct and substantial legal interest in the subject matter of the litigation that could be prejudicially affected by the court’s order, and whether it made prima facie proof of a right to intervene in a manner that was serious and not frivolous.

The dispute raised questions of law and the application of law to facts. On the legal side, it concerned the scope of the SIU’s statutory powers under the Special Investigating Units and Special Tribunals Act 74 of 1996, including whether section 5(5) (and the SIU’s general mandate) could be interpreted to include a power to intervene and oppose payment proceedings instituted against a state institution. On the factual and evidential side, it concerned whether the SIU’s affidavit material amounted to prima facie proof of a legally protectable interest, and whether the material placed before court was adequate and admissible to justify intervention.

The court was also required to consider the legal significance of payment certificates as constituting a distinct cause of action, and how that affected the SIU’s asserted interest in stopping payment pending investigation and review.

4. Court’s Reasoning

The court approached the intervention application by first restating the governing test for intervention, namely that an applicant must satisfy the direct and substantial interest requirement. Relying on constitutional authority, the court treated “direct and substantial interest” as a legal interest in the subject matter of the case that may be prejudicially affected by the order sought. The focus was therefore on whether the SIU had shown a right in the subject matter of the payment litigation between Pelatona and the municipality that could be adversely affected by the payment order.

The court further stated that an intervening party must provide prima facie proof of the right to intervene. It described this as requiring allegations which, if capable of proof, would attract success, and that the application must be made seriously and not frivolously. This framed the inquiry as one requiring not final proof, but sufficient factual and legal content to show a sustainable basis to enter the proceedings.

On the SIU’s reliance on statute, the court examined the legislative framework governing the SIU, including the purpose expressed in the long title of the Act and the President’s role in conferring a mandate by proclamation. The court emphasised that the SIU is a creature of statute, and that its mandate is defined by its terms of reference as set out in a presidential proclamation. The SIU’s powers and functions had therefore to be located within the Act and its proclamation, rather than derived through implication beyond what was reasonably supported by the statutory text.

The SIU argued that section 5(5) of the Act, which empowers it to institute civil proceedings where evidence substantiating allegations in section 2(2) has been obtained, should be interpreted purposively to include powers reasonably necessary or incidental to the express power to sue, and that this included the right to intervene and oppose civil proceedings against state institutions. The court rejected this expansive approach as incompatible with the text and scheme of the Act. It accepted reasoning in earlier authority that the SIU’s statutory role is to investigate and report, to refer evidence of crimes to prosecutors, and to institute civil proceedings where appropriate, but not to make binding determinations and not to exercise authority outside its statutory framework. The court held that there was “no room” in the Act to sanction the issuing of “instructions” to another organ of state, and it characterised the SIU’s interpretive approach as effectively adding words to the statute, which it described as akin to “statutory-interpretation-by-amendment”.

In relation to the proclamation applicable to this matter, the court referred to Proclamation No. R. 23 of 2020, which mandated the SIU to investigate and recover losses arising from COVID-19 related procurement. The court reasoned that recovery of losses and the prevention of potential losses must be pursued within the ambit of the statutory mechanisms, which include the institution of civil proceedings. Importantly, it held that the existence of the payment application did not prejudice the SIU’s right to investigate, nor its right to institute civil proceedings for recovery of losses it believes its investigation has uncovered.

Turning to the SIU’s attempt to demonstrate a prima facie right to intervene, the court identified what it regarded as a “fundamental difficulty” in the SIU’s stated basis for intervention: the SIU claimed it needed to oppose payment until it could establish whether work was done and whether value for money had been achieved, yet it offered no primary factual averments suggesting that the work was not done, was deficient, or that value for money was not obtained. The court treated the SIU’s stance as conclusory rather than evidentially grounded.

The court also addressed the admissibility and quality of the SIU’s evidence. It held that the SIU’s allegations based on interviews and information from municipal employees, without confirmatory affidavits, constituted inadmissible hearsay, and that legal conclusions drawn about unlawfulness amounted to inadmissible opinion evidence. In this connection, the court reiterated that motion proceedings require factual averments sufficient to support the relief sought, and that conclusions without primary facts are inadequate.

A further strand of reasoning concerned the SIU’s reliance on having issued “instructions” to the municipality. The court found this contention misdirected and bad in law, because the SIU had no legal right to issue instructions to the municipality. It held that the SIU could not clothe itself with a power not conferred by law. The court also found the assertion that a payment order would affect the course of investigations to be a conclusion unsupported by primary facts.

The court then dealt with an aspect it regarded as central to the payment dispute: Pelatona’s claim was founded on payment certificates, and the court considered authority on the legal status of such certificates. It treated payment certificates as giving rise to an obligation to pay, and as constituting a self-standing and distinct cause of action, enforceable without needing to traverse the underlying construction contract. The court noted that the SIU did not challenge the certificates on grounds such as collusion or fraudulent excess of mandate. On that basis, Pelatona’s right to payment on the certificates remained “undisturbed” on the papers.

Finally, the court noted that even if the SIU had a clear mandate to prevent payment during its investigation (which the court stated it did not), the appropriate course would have been to approach a court for interdictory relief. The intervention application, as framed and supported, was not sustained in fact or law and amounted to suspicion rather than a prima facie case.

In acknowledging broader context, the court endorsed judicial sentiment encouraging the SIU’s anti-corruption work, but nevertheless found the present application ill-conceived and insufficiently supported.

5. Outcome and Relief

The court dismissed the SIU’s application for leave to intervene. The SIU was ordered to pay costs.

No substantive relief was granted to the SIU permitting intervention, the filing of opposing papers, or the advancement of a counter-application within these proceedings.

Cases Cited

SA Riding for Disabled Association v Regional Land Claims Commissioner 2017 (5) SA 1 (CC).

Polokwane Local and Long Distance Taxi Association v Limpopo Permissions Board and Others [2017] ZASCA 44.

Engen Petroleum Limited v The Business Zone 1010 CC t/a Emmarentia Convenience Centre [2015] ZASCA 176.

Masetlha v President of the Republic of South Africa 2008 (1) SA 566 (CC).

Masuku v Special Investigating Unit and Others (P55372/2020) [2021] ZAGPPHC 273 (12 April 2021).

Konyn and Others v Special Investigating Unit 1999 (1) SA 1001 (TkHC).

Asla Construction (Pty) Ltd v Buffalo City Metropolitan Municipality 2017 (6) SA 360 (SCA).

Special Investigating Unit v Chauke Quantity Surveyors & Project Management in Association with Listed Entities & Others [2020] ZAGPJHC 257.

Joob Joob Investments (Pty) Ltd v Stocks Mavundla Zek Joint Venture 2009 (5) SA 1 (SCA).

Nurcha Finance Company (Pty) Limited v Oudtshoorn Municipality [2016] ZASCA 28.

Dros (Pty) Ltd and Another v Telefon Beverages CC and Others [2003] 1 All SA 164 (C).

Swissborough Diamond Mines (Pty) Ltd and Others v Government of the Republic of South Africa and Others 1999 (2) SA 279 (W).

Willcox and Others v Commissioner of Inland Revenue 1960 (4) SA 599 (A).

Reynolds N.O. v Mecklenberg (Pty) Ltd 1996 (1) SA 75 (W).

Radebe v Eastern Transvaal Development Board 1988 (2) SA 785 (A).

Special Investigating Unit v MEC for Health, Province of the Eastern Cape and Another 2021 (1) SACR 645 (ECM).

Legislation Cited

Special Investigating Units and Special Tribunals Act 74 of 1996.

Prevention and Combating of Corrupt Activities Act 12 of 2004.

Rules of Court Cited

No rules of court were cited in the judgment.

Held

The court held that the SIU failed to satisfy the requirements for intervention because it did not demonstrate a direct and substantial legal interest that would be prejudicially affected by an order in the payment application. The court further held that the SIU did not make prima facie proof of a right to intervene on the evidential material presented, which was characterised as consisting largely of hearsay and conclusory assertions.

The court held that the SIU’s statutory powers under the Special Investigating Units and Special Tribunals Act are confined to those granted by statute and proclamation, and do not include a power to issue “instructions” to a municipality to halt implementation or payment, nor an implied power to intervene in payment proceedings merely because the SIU intends to investigate or review the underlying contract.

The court held that the payment certificates constituted a self-standing basis for Pelatona’s payment claim, and because the SIU did not challenge the certificates’ issuance on grounds such as fraud or collusion, Pelatona’s right to payment on the certificates was not displaced by the SIU’s investigative concerns.

LEGAL PRINCIPLES

Intervention in pending civil proceedings requires the prospective intervening party to show a direct and substantial legal interest in the subject matter of the dispute, meaning a legal interest that may be prejudicially affected by the order of court. The intervening party must also make prima facie allegations capable of proof that would sustain the right to intervene, and must demonstrate that the intervention is serious and not frivolous.

The SIU, as a statutory body, is confined to exercising the powers and performing the functions expressly conferred by the Special Investigating Units and Special Tribunals Act 74 of 1996 and the relevant presidential proclamation defining its terms of reference. A court will not enlarge those powers by interpretive methods that effectively add to the statutory text.

In motion proceedings, affidavits must contain the primary factual averments necessary to support the relief sought. Allegations based on unconfirmed interviews may amount to inadmissible hearsay, and legal conclusions about unlawfulness unsupported by admissible facts may amount to inadmissible opinion rather than evidence.

A payment certificate in construction-related disputes may give rise to an obligation to pay and constitute a distinct, enforceable cause of action, such that the entitlement to payment may be pursued without reliance on, or proof of, the underlying contract, unless the validity or integrity of the certificate is properly placed in issue on recognised grounds.

HT Pelatona Projects (Pty) Ltd v Nelson Mandela Bay Local Municipality (2807/2020) [2022] ZAECPEHC 1 (18 January 2022)