Groenewald NO and Others v M5 Developments (Cape) [2010] ZASCA 47; 2010 (5) SA 82 (SCA) ; [2011] 1 All SA 17 (SCA) (31 March 2010)

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Groenewald NO and Others v M5 Developments (Cape) [2010] ZASCA 47; 2010 (5) SA 82 (SCA) ; [2011] 1 All SA 17 (SCA) (31 March 2010)

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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case no:
283/09
In the matter between:
CC GROENEWALD NO
First Appellant
OVERSTRAND MUNICIPALITY
Second Appellant
ASLA DEVCO (PTY) LTD
Third
Appellant
and
M5 DEVELOPMENTS (CAPE) (PTY) LTD
Respondent
Neutral citation:
CC
Groenewald v M5 Developments
(283/09)
[2010] ZASCA 47
(31 March 2010)
Coram:
NAVSA,
CLOETE, LEWIS, MHLANTLA and LEACH JJA
Heard: 12 March 2010
Delivered: 31 March 2010
Summary:
Local
authority – municipal tender – unsuccessful tenderer having a
right of appeal under
s 62
of the
Local Government: Municipal Systems
Act 32 of 2000
– appeal authority not entitled to award tender to
another unsuccessful tenderer who did not appeal.
______________________________________________________________
ORDER
______________________________________________________________
On appeal from
:
Western Cape High Court, Cape Town (Le Grange J sitting as a court of
first instance).
The appeal is
dismissed with costs, such costs to include the costs of two counsel
.
__________________________________________________________
JUDGMENT
__________________________________________________________
LEACH JA (NAVSA,
CLOETE, LEWIS and MHLANTLA JJA concurring)
[1]
As
this court has recently observed, awards of tenders in the public
sector are a fruitful source of litigation which has led to courts
being swamped with cases concerning complaints about the award of
contracts.
1
This is yet another such case. It arises out of the award of a
municipal contract by the second appellant, the Overstrand
Municipality,
to one of several entities who had tendered for it.
[2]
As
I shall set out more fully below, the tender of the respondent (‘M5’)
was initially accepted but, pursuant to an appeal, the
first
appellant, Mr CC Groenewald, who was at the time the acting municipal
manager, reversed that decision and awarded the contract
to the third
appellant (‘ASLA’). This led to M5 initiating review proceedings
in the Western Cape High Court, Cape Town which
set aside the
municipal manager’s decision to award of the contract to ASLA and
declared M5 to be ‘entitled to enter into a contract
with (the
municipality) pursuant to the allocation of (the tender)’. With
leave of the court a quo, the first appellant, the municipality
and
ASLA now appeal to this court, contending that the review ought to
have been dismissed.
[3
]
Section 217(1) of the Constitution requires organs of state,
including municipalities, to contract for goods and services in
accordance
with a ‘fair, equitable, competitive and cost-effective’
system. The Local Government: Municipal Systems Act 32 of 2000 (the
Systems Act) and the Local Government: Municipal Finance Management
Act 56 of 2003 (the Finance Management Act) were designed to
ensure
compliance with this obligation.
2
At the same time, s 217(2) of the Constitution further provides that
this obligation does not prevent an organ of state from implementing
a procurement policy by providing for ‘categories of preference in
the allocation of contracts’ and ‘the protection or advancement
of persons, or categories of persons, disadvantaged by unfair
discrimination’. In order to comply with s 217(3) of the
Constitution
which requires national legislation to prescribe a
framework within which the policy in s 217(2) is to be implemented,
the Preferential
Procurement Policy Framework Act 5 of 2000 (the PPPF
Act) was passed, s 5 of which empowers the Minister of Finance to
make regulations
to provide a framework for the implementation of a
procurement process.
[4
]
In order to achieve a fair, equitable, competitive and
cost-effective system for the procurement of municipal services, a
municipality
is obliged by s 111 of the Finance Management Act to
have and implement a supply chain management policy which, under s
112 of that
Act, must comply with a prescribed regulatory framework.
That framework
3
also requires goods and services above a transaction sum of R200 000
to be procured by way of a competitive bidding process.
4
In addition, the regulations promulgated under the PPPF Act (the
‘preferential procurement regulations’) which, with some
justification,
have been criticised both in regard to their clarity
as well as their content,
5
provide for the use of a formula for the evaluation of tenders in
which points are awarded in respect of various criteria.
[5
]
In February 2007, the municipality intended to develop some 3 000
low-cost houses. In order to facilitate this project and to
comply
with its constitutional and statutory obligations, it published an
advertisement inviting tenders for the appointment of an
‘implementation agent’ for its housing projects. The
advertisement specifically stated that the municipality did not bind
itself
to accept the lowest or any tender and that tenders would be
‘subject to the Standard Conditions of Tender, the Preferential
Procurement
Regulations of 2001 and (its) Supply Chain Management
Policy’.
[6
]
This advertisement was misleading as in fact the municipality had
not adopted a supply chain management policy, but nothing turns
on
its failure to do so. What is important is that the advertisement led
to 16 tenders being received by the municipality, five of
which were
considered to be acceptable. These included tenders from M5, ASLA and
a close corporation known as Blue Whale Property
CC (‘Blue Whale’).
[7
]
The municipality employed a firm of consulting engineers, ICE Group
(Pty) Ltd (‘ICE’), to evaluate these tenders. This it
did in
detail, scoring each in terms of the applicable formula prescribed by
the preferential
procurement
regulations.
It is unnecessary to set out the formula in question, it being
sufficient for present purposes to record that it involved
scoring
each tender out of a maximum of 100 points, ten of which (so-called
‘PPPFA’ points) related to those goals set out in
s 2(1)(d) of
the PPPF Act.
[8] Having
evaluated the tenders, ICE compiled a written report to the
municipality dated 23 March 2007 in which it stated that
the two
tenders most worthy of consideration were those of M5, which it had
scored at 91.6 points, and ASLA, which had been awarded
91 points.
The difference between the two related to the scores allocated in
respect of the ten PPPFA points, M5 having been given
a single point
and ASLA 0.6 points in that regard – their scores otherwise having
been identical. The other three tenders lagged
far behind in the
scoring stakes. Those in third and fourth places were scored at 78.94
and 40.25 points respectively, while that
of Blue Whale languished in
a very distant last place with but 17.25 points. Based solely on its
slightly higher score, ICE recommended
that M5 should be appointed
rather than ASLA.
[9
]
ICE’s report was placed before the municipality’s tender
evaluation committee. It also decided to recommend to the
municipality’s
tender adjudication committee that M5 should be
awarded the contract.
[10
]
On 13 April 2007 the municipality’s tender adjudication committee
met and accepted the recommendations of ICE and the evaluation
committee that M5 should be awarded the contract. Consequently, on 20
April 2007 M5 was informed that its tender had been successful.
The
four unsuccessful tenderers were simultaneously informed in writing
of the outcome and that they had 21 days to lodge an appeal
under s
62 of the Municipal Systems Act.
[11
]
Unhappy that it had been unsuccessful, Blue Whale decided to
appeal, and lodged a notice within the stipulated period. ASLA also
filed a notice of appeal in which it contended that the evaluation
report of ICE had not been independent. But it did so only on
31 May
2007, almost three weeks out of time. Since the only appeal lodged
in time was that of Blue Whale, and since it clearly had
no prospect
of success, it is surprising to say the least that it took some nine
months to finalise the appeal.
[12] In the
meantime, the municipal manager when the appeal was launched, Mr
Koekemoer, had been replaced by Groenewald, who was
acting as
municipal manager, and it was he who eventually determined the appeal
and awarded the contract to ASLA. This he did despite
being of the
view that ASLA’s appeal could not be considered and that of Blue
Whale had to be dismissed.
[13]
Groenewald explained how this somewhat surprising result came
about. After he had been appointed to the post in November 2007,
he
went through the available documentation, including the reports of
ICE and the evaluation committee, and was initially somewhat
confused
by the differences in the scoring. He discussed the matter with the
chairperson of the tender evaluation committee, Ms La
Cock, who
advised him that the evaluation committee had received certain
information relevant to the PPPFA points which contradicted
that
accepted by ICE, and that because it perceived that ICE had also
erred in other respects of the scoring in regard to those
points, it
had re-assessed the tenders, increased the score of M5 to 94.3 points
and that of ASLA to 93.4 points, but reduced Blue
Whale’s score to
15.25 points. None of this appears in the minutes of the tender
evaluation committee or in its recommendation
to the tender
adjudication committee. Nevertheless, according to La Cock, as M5
still retained a slight lead over ASLA, the evaluation
committee had
also decided to recommend M5.
[14] On
considering this information, and although he accepted the validity
of the criticism of ICE’s scoring, Groenewald concluded
that the
evaluation committee had itself also incorrectly scored the tenders.
Doing his own scoring exercise, he decided that ASLA
ought to have
been awarded 92.4 points, fractionally more than M5 to which he gave
92.3 points. As in his opinion ASLA had outscored
M5, albeit by a
minimal margin, he concluded that it and not M5 ought to have been
awarded the contract.
[15
]
In the light of this, Groenewald considered himself to be on the
horns of a dilemma. On the one hand, he thought that ASLA’s
appeal
could not be entertained as it had been filed out of time while that
of Blue Whale was devoid of merit and had to be dismissed.
On the
other, he felt it would be irregular, improper and, indeed,
unconstitutional for M5 to be awarded a contract which the tender
adjudication committee, on his scoring, ought to have awarded to
ASLA.
[1
6]
Finding himself in a quandary, Groenewald took legal advice. Having
done so, and as part of what he viewed to be the overall
appeal
process, he wrote to both M5 and ASLA on 29 January 2008, informing
them that he had difficulty in respect of the scoring
and inviting
them to make written representations on certain issues on or before 6
February 2008. At the same time he made it quite
clear to ASLA that
its appeal could not be considered as it had been lodged out of time
and that, in any event, there was no merit
in its allegation as to
ICE’s lack of impartiality.
[1
7]
Although ASLA responded swiftly to Groenewald’s request to
provide further information, M5 did not: and so the municipal manager
wrote to it on 7 February 2008, extending the period for its response
to 11 February 2008. In reply, however, attorneys acting for
M5 wrote
to him, stating that M5 could not provide the information requested
in the time available and requesting a further extension
of 14 days.
Groenewald was not prepared to agree and, taking into account the
fresh information furnished by ASLA, he increased its
score to 92.4
points, a total slightly higher than the 91.6 points he had awarded
M5. In the light of this, he felt duty bound to
award the contract to
ASLA. It was this decision that was the subject matter of M5’s
application for review which, in due course,
was upheld in the court
a quo.
[18] Although a
plethora of issues was raised in the papers, the ambit of the dispute
narrowed and only four issues were ventilated
before this court of
which only two need to be determined. The first is whether an appeal
against the adjudication committee’s
award of the contract lay
under s 62(1) of the Systems Act which provides:
‘
A
person whose rights are affected by a decision taken by a political
structure, political office bearer, councillor or staff member
of a
municipality in terms of a power or duty delegated or sub-delegated
by a delegating authority to the political structure, political
office bearer, councillor or staff member, may appeal against that
decision by giving written notice of the appeal and reasons to
the
municipal manager within 21 days of the date of the notification of
the decision
.’
[19] In
City
of Cape Town v Reader & others
6
the issue arose whether a landowner had a right under s 62 to appeal
against the approval of certain building plans for the erection
of a
structure on its neighbour’s property. The majority held that s 62
gives no general right to appeal to those who object to
a municipal
planning permission or decision and that a neighbour, who was not a
party to the application for the approval of the
building plans, did
not have a right directly affected by a decision on the application
and thus had no right to appeal under s 62.
The question whether an
unsuccessful tenderer would have a right to appeal against the
acceptance of the tender of another was specifically
left open.
[20
]
In its papers in the application a quo, as well as in its heads of
argument filed in this court, M5 argued both that ASLA was
not a
party to the appeal due to its notice of appeal having been filed
late and that, as an unsuccessful tenderer, it did not have
clearly
defined rights adversely affected by the decision of the tender
adjudication committee. Relying upon the majority decision
in
Reader
it
therefore contended that neither ASLA (nor Blue Whale for that
matter) had enjoyed a right to appeal under s 62 and that, on this
basis alone, it ought not to have been awarded the contract. In
argument, however, counsel for M5 stated that for purposes of the
appeal he conceded that both ASLA and Blue Whale had enjoyed a right
of appeal under s 62.
[2
1]
This concession was correctly made. As I have mentioned, the
decision of the majority in
Reader
was based on the reasoning that a neighbour could not be considered
as a person whose rights were affected by the municipality’s
decision in regard to building plans approved for a neighbouring
property as it had not been a party to the application process
relating
to those plans. In the present case, of course, the
unsuccessful tenderers, together with M5, were all parties to the
tender approval
process. I therefore have no difficulty in
concluding that both ASLA and Blue Whale were entitled to appeal
under s 62.
[
22]
That brings me to the next issue, namely, whether Groenewald, as
appeal authority, was entitled to award a contract to an unsuccessful
tenderer who had not appealed against the initial decision to award
it to another. Arguing that Groenewald had been perfectly entitled
to
do so, counsel for the appellants, as a starting point, contended
that an appeal in terms of s 62 is a so-called ‘wide appeal’
7
involving a re-hearing of the issues. From that base, they argued
that the award of a municipal contract was a matter falling within
the public domain, involving a decision which had to be taken in the
public interest in the light of the various constitutional and
statutory imperatives I have already mentioned, including the
necessity to advance those goals identified in the PPPF Act. The
award
of the contract therefore had to be considered in this
constitutional and statutory context, and it was necessary for a
municipality
to act lawfully in doing so. In these circumstances, so
the argument went, a municipal manager was bound in his re-hearing of
the
matter to award the contract to the party to whom it should have
been awarded in the first place, even if that party had not appealed.
[23] Counsel for
M5 conceded that s 62 involved an appeal in the wide sense and, for
present purposes, I intend to accept that he
was correct in doing so.
But that does not mean that such an appeal requires the re-evaluation
of each submitted tender. If that
were so, administrative anarchy
would result. In a simple case such as this involving the
re-consideration of but three tenders,
the appeal process took nine
months and I shudder to think how long it would have taken had it
been necessary to deal with, say,
50 tenders just because one
unsuccessful tenderer had decided to appeal.
[2
4]
The obvious fallacy in the appellants’ argument is found on an
examination of the section under which the appeal authority
is
empowered to act. Section 62(1) allows a person to appeal by giving
‘written notice of the appeal and reasons’ to the municipal
manager who, under s 62(2) has then to submit ‘the appeal’ –
obviously the notice of appeal and the reasons lodged therewith
under
s 62(1) – to the appeal authority for it to consider ‘the appeal’
under s 62(3). Although in terms of this latter subsection
the appeal
authority is empowered to ‘confirm, vary or revoke the decision’
it exercises that power in the context of hearing
‘the appeal’
viz the appeal and the reasons lodged by the aggrieved person under s
62(1). That defines the ambit of the appeal,
the sole issue being
whether that aggrieved person should succeed for the reasons it has
advanced. It is not for the appeal authority
to reconsider all the
tenders that had been submitted. If that had been the legislature’s
intention, it would have said so. It
did not, and for obvious
reasons. There is a need in matters of this nature for decisions to
be made without unreasonable delay.
If each and every tender had to
be revisited it could easily become an administrative nightmare with
the appeal authority having
to hear representations from all parties
who tendered, some of whom might have no realistic prospect of
success, in regard to a
myriad of issues, many of which might in due
course be proved to be wholly irrelevant. This could never have been
the legislature’s
intention. It is inconsistent with the
requirement that a person aggrieved must file a notice of appeal with
reasons within a fairly
short period.
[25] Thus while
I accept that the appeal is a wide one in the sense of a re-hearing,
it is a re-hearing related to the limited
issue of whether the party
appealing should have been successful. In the context of a municipal
tender, an appeal by a person whose
tender was unsuccessful therefore
does not entitle the appeal authority to reconsider all the tenders
that were lodged and to decide
whether the committee which
adjudicated upon the tender ought to have awarded the contract to a
person whose tender was not accepted,
but who did not appeal against
that decision (and who might no longer have any interest in being
awarded the contract). In the present
case, the appeal related solely
to whether the contract should have been awarded to Blue Whale rather
than M5 and, having concluded
that issue against Blue Whale and
declining to consider ASLA’s appeal, the appeal should merely have
been dismissed and the adjudication
committee’s decision left
undisturbed.
[26] Furthermore, while Groenewald
may have had concerns about the legality of the award of the tender,
it is important to bear
in mind that those concerns were based on his
perceptions flowing from his own investigations on issues identified
by him and that
his conclusions were challenged by M5.
[2
7]
It was suggested during argument that if Groenewald had not been
empowered to award the contract to ASLA, the court a quo should
have
referred the matter back to the adjudication committee to enable it
to reconsider the award, and that this court should therefore
make
such an order. There seems to me to be no merit in this suggestion.
Groenewald’s power under s 62(3) was to ‘consider the
appeal, and
confirm, vary or revoke the decision’. He had no power to refer the
matter back to the adjudication committee for reconsideration.
That
being so, the court a quo could not have made an order on review that
Groenewald could not have made, and neither can this court.
[28] The
conclusion that Groenewald should merely have dismissed the appeal
under s 62 renders it unnecessary to deal with any
of the other
questions raised on appeal. In regard to the question of costs, it is
clear that the matter is of substantial importance
and the parties
were correctly agreed that costs should follow the event and that the
employment of two counsel was justified.
[2
9]
In the result, the following order is made:
‘
The appeal is dismissed with costs,
such costs to include the costs of two counsel’.
__________________
L E LEACH
JUDGE OF APPEAL
APPEARANCES
1
st
& 2
nd
APPELLANTS: E W Fagan SC
3
rd
APPELLANT: H C Schreuder
1
st
APPELLANT & Instructed by Fairbridges Attorneys, Cape
2
ND
APPELLANT Town;
McIntyre
& Van der Post, Bloemfontein.
3
rd
APPELLANT Instructed by Louw du Plessis Inc, Somerset West;
McIntyre
& Van der Post, Bloemfontein.
RESPONDENT: J
W Olivier SC (with him R B Engela)
Instructed
by Malan Laäs & Scholtz Inc, Durbanville;
Webbers,
Bloemfontein.
1
Per Harms
DP in
Moseme
Road Construction CC & others v King Civil Engineering
Contractors (Pty) Ltd & another
[2010]
ZASCA 13
para 1.
2
See
Municipal
Manager:
Qaukeni
Local Municipality & another v FV General Trading CC
2010 (1) SA 356
(SCA)
[2009] ZASCA 66
para 11.
3
Promulgated in GN
R 868 in GG 27636 of 30 May 2005.
4
Quakeni
paras 12 and 13.
5
See
eg
Hidro-Tech
Systems (Pty) Ltd v City of Cape Town & others
2010 (1) SA 483
(C)
[2009] ZAWCHC 125
paras 51-53.
6
2009 (1) SA
555
(SCA)
[2008] ZASCA 130.
7
Compare eg
Tikly
& others v Johannes NO & others
1963 (2) SA 588
(T) at 590F-591A;
Nichol
& another v Registrar of Pension Funds & others
[2006] 1 All SA 589
(C) paras 19-22; Cora Hoexter
Administrative
Law in South Africa
pp 66-68.