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[2021] ZAGPPHC 108
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MEC Provincial Treasury, Provincial Government of Limpopo v Magnum Simplex International (Pty) Ltd (70477/09) [2021] ZAGPPHC 108 (19 February 2021)
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION, PRETORIA
(1)
REPORTABLE:
YES
/ NO
(2)
OF INTEREST TO OTHER JUDGES:
YES
/ NO
(3)
REVISED
CASE
NUMBER: 70477/09
DATE:
19 February 2021
THE
MEC PROVINCIAL TREASURY, THE PROVINCIAL
GOVERNMENT
OF
LIMPOPO
Plaintiff
V
MAGNUM
SIMPLEX INTERNATIONAL (PTY)
LTD
Defendant
JUDGMENT
MABUSE
J
[1]
By combined summons issued by the registrar of this Court on 17
November 2009, the Plaintiff,
the MEC Provincial Treasury of the
Provincial Government of Limpopo, seeks against the Defendant, Magnum
Simplex International:
1.1
“
an
order declaring that the purported approval/exceptions in respect of
NTP
8419
and 8937 are invalid, void, ab initio and falls to be set aside;
1.2
an order declaring
that
Annexure
‘B’ (to the particulars of claim)
i
s
invalid, void ab initio and falls to be set aside;
1.3
repayment of the amount of R98,486,141.00 less any amount lawfully
paid to the Defendant in terms of
NTP
6891;
1.4
interest on the amount of R98,486,141.00 at the prescribed legal rate
o
f
interest
per annum
,
a tempore morae
,
alternatively from the date of summons;
1.5
cost of suit, such costs to include the costs occasioned by three
counsel.”
[2]
At the same time the Defendant has lodged a counter
claim
against the
Plaintiff in which it seeks:
2.1
payment for annual license and support fees.
2.2
payment of annual license fees (its usage fees based on the ownership
of copyright).
2.3
payment for the reinstatement of annual license and support fees for
the module in Schedule 3.
2.4
payment for modification to the asset module.
[3]
The Defendant’s claims against the Plaintiff amount to
approximately R202 million, the bulk
of which comprises of interest
in an amount of R95 million. The claims in respect of annual
fees and maintenance and support
amount to approximately R95 million.
THE
BACKGROUND
[4]
On
11 August 1999,
and not on
17
February 2000
,
the Plaintiff
requested the Northern Province Tender Board (“the Board”)
to invite tenders for the provision or development
of an Automated
Procurement System under
T
ender
No.
NTP
6891. This tender was valid for the period 1 October 1999 to 31
April 2000.
Seven
companies submitted their tenders to the Tender Board. The
Department recommended Lechabile Information Technology Services
(Pty) Ltd (“Lechabile”) at the amount of R8,949,912.00 by
reason of the fact that it complied with the requirements
for the
Northern Provincial Administration which was mainframe based.
The recommendation was also supported by SITA.
On 17 February
2000, the authority dated 8 February 2002, was granted in terms of
the Northern Transvaal Tender Board Act 2 of
1994 (“the Tender
Board Act”) for acceptance of the tender by Messrs Lechabile to
the sum of R8,949,912.00.
The
Board awarded the tender to a
consortium
of Lechabile
for
the total value of R8,949,912.00
.
The
automated procurement system provided under the said tender is
hereinafter referred to as Module 1.
[5]
It was a condition of the tender that no amendment or variation of
the contract or its provisions
w
ould
be valid and
of force and effect unless the agreement to amend or vary was entered
into in writing, signed by the parties and approved
by the Board.
O
n
20 April 2001, the said tender was lawfully extended for an
additional amount of R932,138.00. Tender NTP 6891 was completed
and signed off by Lechabile on or about 29 May 2001.
[6]
The Plaintiff paid the total amount of R15,699,871.00 made up as
follows to:
6.1
Lechabile, R14,462,716.00.
6.2
Mma-O-Tile Communications (Pty) Ltd, R1,237,155.00, a company
associated with the Defendant.
6.3
the Defendant in an amount unknown to the Plaintiff which is not
included in the amounts set out above.
[7]
At a
precise time and place unknown to the Plaintiff the Defendant
persuaded Mr JNT Mohlala (“Mr Mohlala”), at the time
the
Chief Financial Officer of the Plaintiff, to write a letter to the
Tender Board. A copy of that letter
that
Mr Mohlala wrote to the Tender Board is attached to the particulars
of claim as Annexure ‘A’. It states,
inter
alia
, that:
“
The
Provincial Administration has been implementing the FINEST Financial
Management System since November 2000. Since that
time, all
departments including the Regional Offices have fully implemented the
procurement module of Finest. The Assets
Management function
has been implemented at head office and central regions. The
implementation of the Assets Management
in the other regions is in
progress.
The
cost of implementing the Procurement module was implemented at a cost
of R9.8 million and the Asset Management tender approval
was R11
million. Therefore, the total cost for the implementation of
the Public Finance Management Act (PFMA) requirement
is R20,9
million.
The
Limpopo Provincial Administration implemented the two modules of
Finest to enhance the performance of the Basic Accounting System
to
comply with the requirements of the PFMA. The solution improved
the financial management in the province, but it also
created a
problem of managing three financial systems namely, BAS, PERSAL and
FINEST that eventually slows down the speed of the
service delivery
and increases the labour resources. The usage of the three
systems and the problems of interfacing, necessitated
the
introduction of the fully integrated system in the province.
The
meeting of Heads of Department of March 2002 tasked the Office of the
Director General and Treasury to investigate the possibility
of
implementing the remaining modules of the FINEST in order to have one
integrated financial system in the province. The
investigation
included the preparation of cost benefit analysis of the proposal to
support the decision to implement or not to
implement the full system
….
The
total cost of the remaining modules excluding Supply Chain Management
is R35,787,363. However, the system provider is
offering the
remaining modules at the previously discounted promised price of
R17,110,569.00.
However,
a number of interfaces to fully automate the subsidiary systems and
to facilitate the progressive implementation of FINEST
were provided
at a cost of R4,800,000.00 details of which are provided below as
Additional Interfacing Cost.
The
discounted price was agreed in 2002 and subsequently the Treasury and
the Tender Board Secretariat approached the vendor to
include the
Supply Chain Management functionality.
The
cost of the Supply Chain Management module is R3,500,000.00.
The computer hardware, operating system and other system
software
required to host the Supply Chain Management facility is R850,000.00.
In
order to better manage the tender responses from suppliers and the
subsequent archiving, the solution will require scanners and
document
management software at a cost of R1,250,000.00. This facility
is optional, and the Tender Board can make a decision
based on the
volume of documents handled, the need for their retrieval and the
loss rate of documents.
The
issue of supply Chain Management was discussed with the CFO’s
at the Technical Committee on finance, and the HODs forum
and the
Tender Board Secretariat. All the members agreed to this
approach.”
[8]
The
purpose of the letter was to persuade the Tender Board to acquire
Modules 2 and 3 without following the procurement procedures
th
en
in place.
For unknown
reasons,
the
said letter was not dated.
But
nothing turns on this
.
It was received by the office of the Provincial Tender Board on 24
June 2003. To the said letter the said Mr Mohlala
assigned Code
or Tender N
o.
NTP 8419.
Assigning the said
T
ender
No.
NTP
8419 by Mr Mohlala was wrong in as much as the said code was only
assigned to tenders sought by the Province.
No
tender had been advertised. The Plaintiff had also not called
for quotations from the preferred bidders. This shows
that
already there were negotiations behind closed doors for the
procurement of goods and services between the Plaintiff and the
Defendant.
[9]
On 6
February 2002 the Acting Secretary of the Tender Board
,
a certain Adv BB Mohlala,
purported
to
authorize,
alternatively exempt, in terms of the Tender Board Act the
acquisition of the
Finest
Asset
Management Module, Module 2, for R9,465,000.00 and thereafter
purported to grant approval or exemption to amend the sum to
R11,455,666.00.
The
decision of the Secretary of the Tender Board which purported to
authorise or exempt in terms of the Tender Board Act the acquisition
of the Asset Module 2 for R9,465,000.00 and thereafter purported to
grant approval or exemption to amend the sum to R11,455,666.00
was
unlawful and invalid for failure to follow the procurement
processes. The decision must be impugned on the ground that
it
was not in compliance with s 217(1) of the Constitution, s 33(1) of
the Constitution, s 38(1) of the Public Finance Management
Act No. 1
of 1999 (“PFMA”), and the Treasury Regulations.
[10]
The decision was unlawful
and irregular. In terms of s 217(1) the Secretary of the Tender
Board exceeded his powers. “
This
is in conflict with the value of law and specifically the
principle of legality. These principles require administrative
functionaries to exercise public power conferred on them
and nothing more.”
See
paragraph [81] of
The
Department of Transport v Tasima
2017(2) SA 622 (CC)
at page 644 (“Tasima”).
ACQUISITION
OF MODULE 2
[11]
The
said letter referred to in paragraph [9]
supr
a,
written by Adv BB Mohlala, the Acting Secretary of the Provincial
Tender Board and
d
irect
ed
to the
S
uper
i
ntendent
General of Department of Finance and Economic Affairs
,
Tourism
and
Environment
,
and referring
to Tender N
o.
NTP 8419
:
acquisition
of Finest Asset Management Module, stated as follows:
“
Your
NTP 8419 dated 29 January 2002 refers.
Authority/Exemption
dated 31 January 2002 is hereby granted in terms of the Tender Board
Act, No 2 of 1994 for:
Acquisition
of Finest Asset Management Module at an amount of R9,465,000.00.”
THE
AUTHORITY
[1
2
]
The authority to grant or give exemption in compliance with the
Tender Board Act was found in the following
section:
1
2
.1
Section 4 of the Northern Transvaal Tender Board 2 of 1994.
1
2
.2
Regulation 2 of the Regulations in terms of Act 2 of 1994, Northern
Transvaal Tender Board Regulations, Provincial Notice N
o.
4 of 1997, as
amended by General Notice 99 of 2004.
1
2
.3
Regulation 3 of the Regulations in terms of Act 2 of 1994, Northern
Transvaal Tender Board Regulations, Provincial
Notice N
o.
4 of 1997, as
amended by General Notice 99 of 2004.
1
2
.4
Directive NTP2, directives to Departments in respect of procurement –
clause 4.6 and clause 12.
[1
3
]
According to the Plaintiff
the
Tender Board had not satisfied the
jurisdictional
requirements
because
:
1
3
.1
the request for a single or selected supplier or service provider was
required to be advertised in, at least, the
Provincial Tender
Bulletin
,
setting out
the specific requirements of the Department and the fact that only
tenders complying with the requirements would be
considered for
acceptance. During his evidence, Mr Molako John Petje (“Mr
Petje”) testified that the User Regulations
System
Notifications
are of paramount importance when it comes to issuing a tender.
These were what the user would like the computer
to do. A
system should be functional if it satisfies the User Regulation
System
.
1
3
.2
the request for the invitation of a single or a selected supplier for
a specific brand or trademark had to be submitted
to the Tender Board
for consideration.
1
3
.3
the request to dispense with the invitation of tender must justify:
1
3
.3.1
why the invitation of tenders should be dispensed with (urgency
without explanation
or motivation would not be acceptable).
1
3
.3.2
what the implications would be should the Board insist upon the
invitation
of tenders.
1
3
.3.3
who the previous suppliers or service providers were, when the
previous transaction
took place, at what price the product or service
was obtained because of the previous tender number.
1
3
.3.4
the value of the present equipment if the extension of an existing
system is
involved.
1
3
.3.5
full particulars (including value and quantities) of previous
purchasers, if
the Department wishes to standardize on a specific
contract; and accordingly,
1
3
.3.6
it is the Plaintiff’s case that therefore any ground for the
acquisition
of the Asset Amendment Module, Module 2, was accordingly
void, invalid, ultra vires, and of no force and effect. In
addition,
the assignment of the
No.
NTP 8419 was
in the premises invalid.
[1
4
]
The authority or exemption referred to in paragraph
[
1
1]
supra
was
somehow communicated to the Defendant. Notwithstanding the
aforegoing:
1
4
.1
the Plaintiff paid amounts to the Defendant for it.
1
4
.2
the Defendant in fact did not supply additional or in any other
manner implement the Asset Management Module, Module
2, in a workable
manner
. The
said Module 2 did not satisfy the Plaintiff’s requirements.
AQUISITION
OF MODULE 3
[1
5
]
During the period July 2003 to December 2003 the Tender Board
considered the implementation of the remaining
Module of Finest
,
Module 3,
under:
1
5
.1
Tender N
o.
NTP 8937
which
di
d
not exist.
1
5
.2
when the Provincial Tender Board had no authority in law to consider
implementation of Module 3
,
without
calling for tenders.
[16]
T
he
Defendant concedes that the consideration of the implementation of
Module 3 by the Tender Board was done during July 2003 to
6 November
2003 when the Tender Board approved the implementation of Module 3.
According to the Defendant the consideration
by the Tender Board of
the implementation of Module 3 was done pursuant to the submission of
Annexure ‘A’ to the Plaintiff’s
claim. It
will be recalled that Annexure ‘A’ to the Plaintiff’s
particulars of claim is a letter by Mr
Mohlala to the Secretary of
the Tender Board to consider the approval of the implementation of
the Finest Management System.
The Defendant denies that the
Tender Board
had no authority
in
law to consider the implementation of Module 3 as pleaded.
[17]
On 17 July 2003 the Tender Board purported to approve the
implementation of Module 3,
under the description authority or exemption in writing for the total
sum of R45,747,683.00.
The conduct of the Tender Board in attempting to approve the
implementation of Module 3 under the description
“
authority/exemption in writing for the total sum of
R45,747,683.00 without complying with the
principles
set out in section 217(1) of the Constitution was
unlawful, invalid and without any force and effect. The Tender
Board
exceeded its authority. It obviously relied
on the antiquated provisions of the Tender Board Act.”
A
letter written by
BB Mohlala, the Secretary of the Provincial Tender Board
to the Head
of Department, Department of Finance and Economic
Development in that regard states as follows:
“
Tender
No. NTP 8937 Authority to appoint consultants for implementation of
the remaining
module of the Finest Financial Management System.
We
refer to your letter dated 7 July 2003 and wish to inform as follows:
1.
Authority dated
17/7/2003, to appoint consultants is hereby granted in terms of the
Tender Board Act, No. 2 of 1944.
2.
The implementation
of the remaining module of the Finest Financial Management
System by Simplex International to the amount of R45,747,673.00
(Forty-Five Million
Seven Hundred
and Forty-Seven Thousand Six Hundred and Seventy-Three
Rands
Only) is hereby approved subject to the following additions:
(i)
That the letter by
SITA dated 11 July 2003, the concerns raised in paragraph 4.1 to 4.3
are adhered to;
(ii)
The Department
should inform the Board in writing whether these conditions or
concerns have been complied with. For ease of
reference the
letter from SITA is hereby attached.”
[18]
Authority to grant or
give exemption in compliance with the Tender Board Act is found in
the
following sections:
18.1
Section 4(1) of the Northern Transvaal Tender Board Act, 2 of 1994,
provides as follows:
“
Powers
of the Board
:
(1)
The board shall
have the sole power to procure supplies and services for the
province, and,
subject to the provisions of any other Act of the
provincial
legislature,
to arrange the hiring or letting of anything, or the
acquisition or
granting of any right for or on behalf of the Province, and to
dispose of movable Provincial property,
and
may for that purpose -
(a)
On behalf of the
Province conclude an agreement with a person within or outside the
Republic for the furnishing of supplies and
services to the
Province, or for the hiring or letting of anything or the
acquisition
or granting of any right for or on behalf of
the Province or for the disposal of
movable Provincial property;
(b)
With a view to
concluding an agreement referred to in paragraph (a), in any
manner it
may deem fit, invite offers and determine the manner in
which and the condition subject to which such offers
shall
be made”;
18.2
Section 4(2) of the Northern Transvaal Tender Board Act provides as
follows:
“
No
exemption, condonation, settlement or amendment which may be to the
prejudice of the Province shall be granted,
negotiated or made under paragraph (g) and (h) of
sub-section (1) without the
prior approval of the Treasury.”
18.3
Regulation 2 of the Regulations issued in terms of Act 2 of 1994,
Northern Transvaal
Tender Board Regulations, Provincial
Notice No. 4 of 1997, as amended by General
Notice 99 of 2004 provides as follows:
“
Subject
to the provisions of any Act of the Provincial Legislature, supplies
and services for and on behalf of
the acquisition
or granting of any right for and on behalf
of the Province and the disposal of movable
Provincial property shall
be procured,
arranged or disposed of through the
Board or in terms of the Public
Finance Management Act, 1999 (Act No. 1 of
1999) (as amended by Act No.
29 of 1999).”
18.4
Regulation 3 of the Regulations issued in terms of Act 2 of 1994,
Northern Transvaal
Tender Board Regulations, Provincial
Notice No. 4 of 1997, as amended by General
Notice 99 of 2004 provides as follows:
“
(1)
The Board may ex post facto approve any action of a Provincial
component
whereby any power conferred upon the Board by the Act or these
Regulations
has been exercised, if the Board is satisfied that such an action of
the Provincial
component took place in circumstances of emergency or otherwise as in
the best
interest of the Province and was done without negligence, provided
that the
Province has not suffered any damage as a result thereof.”
18.5
Directive NPT2, Directives to Departments in respect of procurement -
clause 4.6
and clause 12 provides as follows:
“
Single
suppliers / service providers
:
4.6.1
the practice not to advertise the requirement where a single or a
limited number
of suppliers / service providers are concerned, has a negative impact
on the
procurement system as:
(a)
the market is never informed of the requirement of the Province and
alternative suppliers / service providers
with alternative, similar,
or equal
products / systems / services are not informed or
afforded the opportunity
to offer their products / systems / services to the Province;
…
4.6.2
to eliminate the above perception and to achieve greater transparency
on the
requirements of
the Province, all tenders, including single or selected suppliers /
service provider tenders must be advertised in at least the
Provincial Tender
Bulletin. Tender specifications for single or selected supplier
/ service provider
tender invitations must clearly indicate the specific requirements of
the
Department and the fact that only tenderers complying with the
requirements will
be considered for acceptance.
4.6.3
requests for the invitation of single or selected supplier tenders
for a specific
brand or trademark product only must be submitted to the Provincial
Tender
Board for consideration - see paragraph 3.6.3 of NPT2.
4.6.4
requests that the invitation of tenders be dispensed with must be
submitted to
the Board. The following information must be furnished in
addition to information
considered necessary by the Department:
(a)
why the invitation of tenders should be dispensed with (the argument
of
urgency without explanation for such motivation is not
acceptable);
(b)
what the implications would be should the Board insist upon the
invitation
of tenders;
(c)
who the previous supplier / service providers were, if any, when the
previous transaction took place, at what price
the product / service
was
obtained as well as the previous tender number(s);
(d)
…
(e)
full particulars (including value and quantities) of previous
purchases, if a
Department wishes to standardise on a specific product.”
Clause
12 provides as follows:
“
12.3.1
… applications for the exemption / deviation from normal
tender
procedures must be accompanied by a recommendation to
the effect that
the request is supported.
12.3.2
when it is clear that alternative action is proposed with the sole
purpose of
circumventing Tender Board directives, or that urgency
is the result of
negligence or bad planning of a Department, the application will not
be
supported without very sound reasons.”
This
is not denied by the Defendant. The Defendant’s approach
is that the Tender Board complied with the provisions
of the Tender
Board Act and the Regulations promulgated thereunder.
[19]
According to the
Plaintiff none of the jurisdictional requirements were satisfied in
that:
19.1
the request for a single or selected supplier or service provider was
required to be
advertised in, at least, the Provincial Tender Bulletin setting
out
the specific
requirements of the Department and the fact that only tenderers
complied with the
requirements would be considered for acceptance;
19.2
the request for the invitation of a single or selected supplier for a
specific brand or
trademark had to be submitted to the board for consideration;
19.3
the request to dispense with the implication of tenders must justify:
19.3.1
why the invitation of tenders should be dispensed with (urgency
without
explanation or motivation would not be acceptable);
19.3.2
what the implications would be should the Board insist upon the
invitation
of tenders;
19.3.3
who the previous suppliers or service providers were, when the
previous transaction
took place, at what price the product or service
was obtained as well as the previous tender number;
19.3.4
the value of the present equipment if the extension of an existing
contract
is involved;
19.3.5
full particulars (including value and quantities) of previous
purchases if a
Department wished to standardize on a specific product.
It
is the Plaintiff’s case that accordingly any ground for the
acquisition of Asset Management
Module 3 is void, invalid, ultra vires and of no force and effect for
failure to comply with the
principles of s 217 of the Constitution.
[20]
The Defendant denies the aforegoing allegations by the Plaintiff.
The Defendant’s
case is
that the process followed by the Professional Tender Board in
awarding
the authorisation or exemption for the implementation
of Module 3 was done in accordance with the provisions of
the Tender Board Act. It is furthermore the Defendant’s
case that the members of the Tender Board were duly authorised
to
take the resolution to authorise or exempt the
implementation
of Module 3 and the resolution was taken at a properly
constituted meeting of the Board. The Defendant does not seem
to juxtapose
these admissions against the
provisions of s 217 of the Constitution, s 33(1) of the Constitution
and
s 38(1) of the PFMA
which were applicable at the time when the
authorisation or exemption
was given.
[21]
In addition, the assignment of the No. NTP 8937 was, in the premises,
invalid.
[22]
The authority or exemption was communicated to the Defendant by the
Head of the Department in a letter dated
2 December 2003, who
misrepresented the amount of the purported authority or exemption by
adding an amount of R6,838,104.00 in
respect of an annual maintenance
cost or an annual maintenance fee when he and the Defendant knew this
was incorrect. The
Defendant denies these allegations.
[23]
Notwithstanding the aforegoing the Plaintiff paid amounts to the
Defendant for it. The
Defendant did
not supply and install or in any manner implement the remaining
Modules,
Module 3, in a workable
manner. Module 3 did not satisfy the Plaintiff’s
requirements. This
allegation is denied by the Defendant. As far as the Defendant
is concerned the Plaintiff’s
payments
to the Defendant in respect of Module 3 were made lawfully and were
valid.
Furthermore, the Defendant’s case is that it supplied,
installed, and implemented Module 3
in a workable manner which satisfied the requirements of the
Plaintiff. As an example,
project reports were submitted by the Defendant to the Plaintiff and
further reports were presented
at the Project Committee Meetings, evidence in the supply,
installation,
implementation of the Module.
[24]
In order to obtain
payment from the Plaintiff the Defendant was required to invoice and
produce to the officials of the Plaintiff
approval for payment.
Thereafter a clerk would cause payment to be made by electronic fund
transfer (“EFT”).
The Plaintiff’s losses
hereinafter particularised were the consequence of a fraudulent
scheme or conspiracy entered by officials
of the Plaintiff, including
the Northern Province Tender Board and the Director and/or agents
and/or servants of the Defendant,
who wrongfully committed the acts
as set out in the preceding paragraphs. The Defendant submitted
invoices and produced to
officials of the Plaintiff for payment for
the purported implementation, installation, licence fees,
maintenance, and support of
the Finest Modules 1, 2 and 3. The
Plaintiff set out those invoices in the particulars of claim.
The total of those
invoices is R300,309,131.50.
[25]
In respect of the aforegoing claims the Plaintiff paid the Defendant
an amount of R98,486,141.00
made up of the invoices set out in
the Plaintiff’s particulars of claim. The
Plaintiff is unable to identify
what amount was paid to the Defendant
in respect of Module 1 which was provided and implemented with
the consequence that
they are seeking judgment
in respect of the cause of action pleaded in paragraph
[29] above
ought to be reduced by
whatever amount the Defendant shows
it lawfully received in respect
of Module 1.
[26]
In the alternative to the aforegoing, the Plaintiff pleads that the
purported approval of the
Tender Board for authority and/or exemption
to appoint the Defendant in terms of NTP 8419
and NTP 8937 was formalised into a written agreement on or about
21October 2004 at
Polokwane, Limpopo, the Plaintiff represented by BM Mphahlele and the
Defendant represented by TP Prabaharan.
A copy of
the written agreement is attached to the Plaintiff’s
particulars
of claim as Annexure ‘B’.
[27]
In terms of the preamble or recital of Annexure ‘B’
prepared and submitted by the
Defendant
for signature by the Plaintiff:
27.1
MSI, the Defendant, prepared and submitted the proposal to the
licensee, the Plaintiff, and the licensee has awarded
tenders NTP
6891, NTP 8419 and NTP 8937 to the Defendant;
27.2
the parties have agreed to enter into an agreement whereby,
inter
alia
, the Defendant undertook to conduct the project and
deliverables on the terms and conditions contained in the Agreement.
In
the first place it was not correct that the Agreement was concluded
following an award of tenders. No tenderers were issued
for NTP
8419 and NTP 8937.
[28]
The subsequent
formalisation into a written agreement, Annexure ‘B’,
purporting to validate, alternatively legalise
and further
alternatively authorise, or otherwise sanction the prior void,
invalid, ultra vires approval of the Tender Board for
authority or
exemption to appoint the
Defendant in terms of NTP 8419 and NTP 8937 was
ultra vires, void,
unenforceable and invalid for the following reasons:
28.1
MP Mphahlele did not have the authority to bind the Limpopo
Provincial Government
in terms of s 4(1) of the Tender Board Act;
28.2
alternatively, acted ultra vires in terms of the Tender Board Act,
alternatively,
the
PFMA.
28.3
Further Provincial Procurement Policy from Act 5 of 2000, further
alternatively, NTP 6891 was not awarded to the
Defendant but to an
entity known as Lechabile Technology Services (Pty) Ltd.
28.4
NTP 8419 and NTP 8937 were not tenders and were not awarded to the
Defendant in terms of a legitimate tender procedure.
28.5
The agreement is in breach of the provisions of the Board’s
Directives contained in NTP1 and NTP2 respectively,
regulatory
standards and conditions which may not be varied for any contract
issued by the Board and the Plaintiff in that:
28.5.1
the agreement purported to absolve the Defendant of all liability for
any
failure to perform its obligations, any consequential, direct,
special, punitive,
or
incidental damages whether in contract or delict or otherwise,
whether
based on the purported agreement, any commitment performed or
undertaken in terms thereof or otherwise;
28.5.2
if it is found that Mr Mphahlele, the Head of Limpopo Treasury, had
the requisite
authority, then he acted outside of authority in
concluding a one-sided agreement which in certain of its terms was
contrary to
the best interests of the public and the public
interests.
THE
DEFENDANT’S CASE
[29]
According to the
Defendant Tender NTP 6891 was for development, implementation and
supply delivery and maintenance of an automated procurement system.
The Defendant admits that the said tender was awarded
to the
consortium led by Lechabile. The members of the
consortium were Lechabile, IBM, Management Solution and Motcom.
[30]
It is the Defendant’s case that the authorisation or exemption
granted by the Tender Board in relation
to Module 2 was done in
accordance with the provisions of the Tender Board Act.
[31]
According to the Defendant the fact that the process followed in
obtaining the authorisation or exemption
was lawful, was further
substantiated by the Plaintiff in a letter to the Auditor General
dated 11 May 2000, responding to a query
on the approval of the
implementation of Modules 1 and 2. According to Annexure ‘MS14’
to the Plea, the Procurement
Module, Module 1, was implemented prior
to the implementation of the PFMA and all provinces had their own
Provincial Acts.
At the time the Module was implemented there
was no requirement to get prior National Treasury approval to
implement a financial
system. About Asset Module 2 the
Plaintiff was alerted to the provision of Treasury Regulation 7.3.1
and an application was
therefore made to the National Treasury to
obtain approval. The understanding was that approval is for all
other Modules,
Asset Management being included in the application for
approval.
[32]
The Defendant states that at all relevant times relating thereto it
relied and acted upon the representations
made by the Plaintiff and
the Provincial Tender Board in relation to the approvals,
authorisations or exemptions relating to Modules
2 and 3.
According to it, the representations made on behalf of the Plaintiff
and the Tender Board were made by duly
authorised representatives of
the Plaintiff and the Tender Board with the necessary authority to
bind the Plaintiff in terms of
the relationship therein. Acting
upon such representations, the Defendant concluded Annexure ‘B’
to the Plaintiff’s
particulars of claim and installed the
Finest Software for Modules 2 and 3 respectively at all the
Departments in the Limpopo Province
and further maintaining them on
behalf of the Province.
[33]
The only Modules that are at the centre of the dispute between the
parties are Modules 2
and 3. It is the Plaintiff’s case that Modules 2 and 3
should have been procured through a
tender
process. The Plaintiff contends that because these Modules 2
and 3 were not procured through a
lawful tender
process, their procurements was void, invalid and ultra
vires
and of no force and effect. For this reason, the
procurement of Modules 2 and 3
should be set aside, so contends the Plaintiff.
[34]
On the other hand, it is the Defendant’s case that, relying on
Annexure ‘B’ to the Plaintiff’s
particulars of
claim and on the conduct of the Tender Board and some officials of
the Plaintiff, the Plaintiff and the Defendant
had concluded a valid
agreement between them. Annexure ‘B’ to the
Plaintiff’s particulars of claim is a
Project Agreement between
Magnum Simplex International Ltd, the Defendant, on one side and the
Limpopo Provincial Government on
the other side. It was signed
by both parties to it on 21 October 2004. Mr DB Prahabaran
signed in his capacity as
the Director on behalf of Magnum Simplex
International (Pty) Ltd, the Defendant, while Mr MB Mphahlele, in his
capacity as the
Head of the Department of Finance and Economic
Development, signed for the Department of Finance and Economic
Development.
[35]
Quite clearly the Plaintiff relies on the law in support of its
position, on:
35.1
section 217 of the Constitution;
35.2
State Tender Board Act 86 of 1968;
35.3
Public Finance Management Act 1 of 1999
;
35.4
Preferential Procurement Policy Framework Act 5 of 2000
;
35.5
the Northern Transvaal Tender Board Act, No 2 of 1994.
[36]
Section 2 of the Constitution provides as follows:
“
This
Constitution is the supreme law of the Republic, law or conduct
inconsistent with it is
invalid, and the obligations imposed by it (the Constitution) must be
fulfilled.”
This
section makes it clear that the Constitution is the supreme law of
the land. It reigns supreme above all laws whether
national or
provincial or municipal. Everything had to be done in
accordance with the dictates of the Constitution.
Any law,
whether national or provincial or municipal that was inconsistent
with any section of the Constitution became, to that
extent, invalid
and of no force and effect. Section 2 indirectly declared as
invalid and of no force and effect any law that
was inconsistent with
its provisions. Therefore, any reliance on the law that was
inconsistent with the Constitution is invalid
and of no
consequences.
[37]
All the laws, such as the Tender Board Act, that were inconsistent
with the Constitution on 4
February 1997, when the Constitution started to operate, had
to be
redrafted to bring them in line with the
provisions of the Constitution, unless they or parts of
them became
inoperative by virtue of their inconsistency with the
Constitution. This implied that a system with these
attributes
had to be put in place by means of legislation or other regulation.
Once such a
system is in
place and the system complies with the Constitutional demands of s
217(1), the question whether any procurement is
valid must be
answered with reference to the national
legislation or regulation.
In this regard see
Chief
Executive Officer, South African Social
Secret Agency v Cash
Paymaster Services (Pty) Ltd
2012 (1) SA 216
SCA
at para [15] page 221
where Tshiqi JA,
as she then was, states that
:
“
[15]
Section 217(1) of the Constitution prescribes the manner in which
organs of State
should procure goods and services. In particular, organs
of
State must do so in
accordance with a system which is fair, equitable, transparent,
competitive, and cost-
effective. This implies that a ‘system’ with these
attributes has to be put in place by
means of legislation or
other regulation. Once such a system is in place and the
system complies with the constitutional demands of s 217(1),
the
question whether
any procurement is ‘valid’ must be answered with
reference to the mentioned
legislation or regulation.”
[38]
Section 217(1) of the Constitution provides that:
“
When
an organ of state in the national, provincial and local sphere of
Government, or any
other institution identified in national legislation, contracts for
goods or services, it must do so in accordance with a system
which is
fair, equitable, transparent, competitive and cost
effective.”
S
217(1) applies to the organ of state in the national, provincial, and
local sphere of
Government. The Provincial Government of Limpopo would be included in
these organs of
state. In terms of s 239 of the Constitution, an organ of state
means:
“
(a)
Any department of state or administration in the national, provincial
or local sphere of government; or
(b)
any other functionary or institution –
(i)
exercising a power or performing a function in terms of the
Constitution or a provincial constitution;
or
(ii)
exercising a public power or performing a public function in terms of
any legislation but does not
include a court or a judicial officer.”
[39]
Section 217 of the Constitution makes in plain that public
procurement must be effected according to a system
which is “
fair,
equitable, transparent, competitive and cost effective”
.
Actions relating to procurement and licensing ordinarily qualify as
administrative actions. In
Umfolozi Transport Edms (Bpk) v
Minister van Vervoer
[1997] ZASCA 8
;
[1997] 2 ALL SA 548
(A)
, the Supreme Court
of Appeal decided that the award of a state tender amounted to
administrative action. These requirements
set out in s 217(1)
are repeated in s 38(1) of the PFMA which came into operation on 1
April 2000 and s 33(1) of the Constitution.
Similar
requirements are included in various Provincial Tender Boards’
legislation. S 38(1)(iii) of the PFMA provides
that:
“
The
accounting officer for a department, trading entity or constitutional
institution –
(a)
must ensure that the department, trading entity or constitutional
institution has and maintains –
(iii)
an appropriate procurement and provisioning system which is fair,
equitable, transparent, competitive and cost
effective.”
An
accounting officer is defined as any person mentioned in s 36.
Section
36 deal with accounting officers. It states that:
“
(i)
Every department and every
constitutional institution must have an accounting officer, (ii)
subject to subsection (3)
–
(a)
The
head of a department must be the accounting officer for that
department.”
In
the Paymaster Services case, the Court had the following to say at
paragraphs [17] and [18] at page 222:
“
[17]
The main object of the PFM Act is to secure transparency,
accountability, and sound management of the revenue, expenditure,
assets and liabilities of the institutions to which the Act applies
(s 2). SASSA and SAPO, as mentioned, are such entities
more
particularly because they are both funded, fully or substantially,
from the National Revenue Fund or by way of tax, levy or
other money
imposed in terms of national legislation, and they are accountable to
Parliament (s 1). The PFM Act, read with
the Treasury
Regulations, is such legislation. It should be noted that it
was not the respondent’s case that the PFM
Act or the Treasury
Regulations were unconstitutional, only that SASSA did not comply
with their provisions.
[18]
Section 51(1)(a) of the PFM Act states that an accounting authority
for a public entity must (inter alia)
ensure that the particular
public entity has and maintains an appropriate procurement and
provisioning system which, echoing the
words of the Constitution, is
fair, equitable, transparent, competitive, and cost-effective.
The National Treasury may in
terms of the PFM Act make regulations or
issue instructions applicable to all institutions to which the Act
applies concerning
the determination of a
framework for an appropriate procurement and provisioning system
which is fair,
equitable, transparent, competitive and cost-effective
(s 76(4)).”
[40]
The most emphatic way an organ of state can show that it complied
with the requirements of s 217(1) of the
Constitution is through a
public, transparent tender process in which all tenderers are treated
fairly and equitably. Accordingly,
a public tender constitutes
the most preferable method of engaging public procurement. This
is what Pickard JP had to say
about the benefits of tender
procedures:
“
Tender
procedures, as we have come to know them over many years, have been
the result of a vast experience gained in the procuring
of services
and goods by Government. They have evolved over a long period
of time through trial and error and have crystalised
into a procedure
that has become vital to the very essence of effective government
procurement. Strict rules have developed
over the years in
order to ensure that the system works effectively. The very
essence of tender procedures may well be described
as a procedure
intended to ensure that government, before it procures goods or
services or enters into contracts for procurement
thereof, is ensured
that a proper evaluation is done of what is available, at what price
and whether or not that which is procured
serves the purposes for
which it is intended.”
See
Cash Paymaster
Services (Pty) Ltd v Eastern Cape Province and Others 1999(1) SA 324
CKHC at 350 F-H
.
[41]
It is as clear as crystal that s 217(1) does not demand a tender
process. It simply provides that the
system that an organ of
state uses when contracting for goods or services must be fair,
equitable, transparent, competitive, and
cost effective.
In
casu
, what is of paramount importance though is that generally a
tender process will invariably constitute the most effective way of
complying with the principles of fairness, equitability, and
competitiveness. Accordingly, an open tender, or in the least
some comparable procedure should generally be followed in relation to
contracts of a substantial value as in the current matter.
In
this instant case no tender for procurement of Modules 2 and 3 was
advertised. This is not in dispute. The negotiations
with
the procurement of the Modules were only between the Plaintiff and
the Defendant. There was no compliance with the provisions
of s
217(1). As a result of the failure to observe the provisions of
s 217, no other person or company took part in negotiations
for the
procurement of those Modules. The negotiations were not
transparent, they were unfair to other people who would have
been
interested parties should they have been notified. There is no
proof that the Defendant’s prices were competitive
and cost
effective. Accordingly, the conclusion of the Project Agreement
between the Plaintiff and the Defendant, Annexure
‘B’ to
the particulars of claim, which lead to the unlawful procurement of
Modules 2 and 3 of Finest System, and which
followed upon the said
negotiations, was effected in violation of s 217 of the
Constitution. May I at this stage hasten to
refer to the
judgment of Municipal Manager:
Qaukeni Local Municipality
and Another v General Trading CC
2010 (1) SA 356
(SCA)
in which
Leich AJA, held, at paragraph [15] thereof, that:
“
Consequently,
in a number of decisions this Court has held that the contracts
concluded in similar circumstances
without
complying with the prescribed process are invalid. In Premier,
Free State and Others
v Firechem, Free
State (Pty) Ltd
2000 (4) SA 413
(SCA), this Court
set aside a contract concluded in breach of Provincial
Procurement
Procedures, holding that such a
contract was entirely submissive of a credible tender
process”
and that it would “deprive the
public of the benefit of an open competitive
process.”
[42]
There was another acceptable manner in terms of which the Limpopo
Tender Board could
have lawfully procured the goods or services with the Defendant.
This method included choosing from a list of
quotations
submitted from preferred bidders. This list should have been
previously compiled after an open and competitive
process. In
this case it is of crucial
importance that both the compilation of
the list of preferred bidders
and ultimate choice of a
particular
service provider satisfies the requirements of s 217(1).
The Plaintiff did not even try to use this
method. No compilation of quotations of the list of preferred
bidders was made. This is due mainly to
the fact
that the negotiations for the procurement of the Models
were exclusively
between the Limpopo Government and the Defendant.
Only the Defendant negotiated with the Plaintiff.
[43]
The procurement of goods by an organ of state must be procedurally
fair in keeping with the
principle of fairness and with equitability. Interested parties
should be given a reasonable
opportunity to make their own representations in connection with the
award of the relevant
contract. This requirement of fairness and equitability is also
echoed by s 33(1) of the Constitution
which
provides that:
“
Everyone
has the right to an administrative action that is lawful, reasonable
and procedurally fair.”
All
the tenderers must, over and above, be treated fairly and equally and
be furnished with
the same information and give equal opportunities.
[44]
Counsel for the Plaintiff referred the Court in his heads of argument
to the judgment of
Premier, President and
Others v Firechem Free State (Pty) Ltd
2000 (4) SA 413
SCA at
page 429
para 30H-I. This judgment is a classical illustration of a process
that could be
labelled as one that undermined the principle of fairness,
equitability, and competitiveness.
In this case the SCA struck down a contract
for the provisions
of the cleaning material to the Free
State Province by reason of the fact that
the contract finally
concluded with the provincial
department
differed from the terms of the invitation to the tender
and the letter of
acceptance produced by the Tender Board. The effect thereof was
to undermine the
fairness of the process. Judge Schutz JA, in dealing with the
situation of the award of a tender outside the applicable
framework stated that:
“
One
of the requirements … is that the body judging tenders be
presented with comparable offers in
order
that its members should be able to compare. Another is that a
tender should speak for itself.
Its
real import may not be tucked away, apart from its terms ….”
[45]
Counsel for the Plaintiff contended that it should always be borne in
mind that s 217 of the
Constitution prescribes the way organs of state should procure
goods
and services. He stated furthermore that organs of state
must do so in accordance with a system that is fair,
equitable, competitive, and cost effective. He found support in
the judgment of
Froneman J in
Allpay Consolidated Chief Executive
Officer v Sassa 2014 (1) 604 (CC), 620 para [40]
where, after referring to Bolton in The Law of Government Procurement
in South
Africa at 57,
stated that:
“
One
of the primary reasons for the express inclusion of the five
principles of s 217(1) of the Constitution
is to safeguard the integrity of the government procurement Process.
The inclusion of the principles, in addition
to ensuring
the prudent use of producers, is also aimed
at preventing corruption.”
[46]
Transparency promotes openness and accountability. These principles
serve an especially important function.
They encourage good
decision making in relation to the procurement and prevent the
ever-present possibility of corruption in the
assessment and award of
contracts. By so doing they inculcate in the public confidence
in the procurement process.
It is difficult for an organ of
state to award a contract in the absence of some form of public
process in the light of the Constitution
and principles of open
procurement. In the very least it is imperative that the public
should be notified that a public body
contemplates negotiating the
contract with a particular entity.
[47]
Finally, the principle of competitiveness and cost effectiveness are
the imperatives that an
organ of state should consider, together with other factors.
The organ of state must in procuring goods or
services try to procure such goods or services at the lowest possible
cost. The organ of
state must always try to achieve value for money. This
principle of
competitiveness and cost effectiveness was applied in the judgment of
Grinaker LTA Ltd and Another v Tender Board
(Mpumalanga)
[2002] 3 All SA 336
at 356 T, para [70]
.
One of the bases upon which the
award of a tender for rehabilitation and construction
of a
road was struck down was the considerable difference between the
higher price of
the
successful tenderer and the lower price of the unsuccessful
tenderer. This prompted De Villiers J, as he then was, to state
that:
“
The
award by the first respondent of the tender to a tenderer who has not
tendered the lowest price is contrary to the provisions
of the
guiding document and more particularly
section 217(1) of the
Constitution in that it results in the contract
for services which is not
competitive and cost effective.”
See
also Cash Paymaster Services at p 351 F-H where the Court stated
that:
“
The
task of the tender board has always been and will always be primarily
to ensure that
the government gets the best service and value for that for which it
pays. If that were not the
prime purpose of the tender board and policy considerations were to
override those considerations,
the very purpose of the tender board is defeated, and no tender board
needs to exist.
It
would then be quite simple for government simply, on a basis of
policy determination, to enter into contracts for whatever
it
required without intervention of a tender
board.”
[48]
It is imperative and of supreme importance that in deciding whether a
particular procedure is
consistent with the fundamental principles set out in s 217 of
the
Constitution, that such principles should be taken as a whole.
[49]
Before analysing the Project Agreement or Annexure “B”
between the parties, it is
my view,
of paramount importance that I emphasize the following. These
are the
words of Jafta J in the judgment of Tasima.
“
37.
Where, as here, the validity of the source of the right of the
Applicant sought to
preserve was also impugned on the basis that it was an illegal
source, a Court can
hardly close its eyes to these and proceed to grant an order
preserving an illegally
obtained right.”
Therefore,
the constitutionality or legality of the Project Agreement was an
issue pre-eminently within the competence of this Court.
Once
the Court has established that the conclusion of the Project
Agreement conflicted with s 217(1) of the Constitution, the Court
is
obliged by s 172(1)(a) of the Constitution to declare the agreement
to be invalid. As guardians of the Constitution, Courts
are
under an obligation to uphold it. A decision is invalid because
of its inconsistency with the Constitution, it can never
have legal
force and effect. This is fundamental to the principles of
Constitutional democracy. See paragraph [79]
of the Judgment of
the minority in the Tasima matter. “
The declaration of
invalidity is a mandatory consequence of inconsistency with the
Constitution. Section 2 of the Constitution
proclaims that the
Constitution is the supreme law and that law or conduct that is
inconsistent with it is invalid.”
Secondly, on 21
October 2014, the date on which the Project Agreement was signed, the
provisions of s 217 of the Constitution
were in force and had to be
applied in all procurement of goods and services. Thirdly, and
lastly, the provisions of sections
2 and 217 of the Constitution were
in force on the dates on which BB Mohlala purported to authorise or
alternatively exempt in
terms of the Tender Board Act the acquisition
of Modules 2 and 3 of the Finest System. The Project Agreement
is therefore
invalid, unlawful and of no force and effect.
THE
COUNTER-CLAIM
[50]
The following paragraphs of the Defendant’s counsel’s
heads of argument encapsulate the Defendant’s
case:
“
1.
As the evidence
demonstrated, the Plaintiff initiated these current proceedings
in an
effort to frustrate and
undermine the Defendant’s genuine claims arising
from the
lawfully
concluded agreements
between the parties.
2.
In essence, when it became apparent to the Plaintiff that the
Defendant sought
to
enforce his
rights in terms of the concluded agreements
,
more so, in the light of the Thohoyandou interdict
proceedings and the letters of demand despatched on behalf of
the Defendant against the Plaintiff long before the Plaintiff could
even initiate these
proceedings.
3.
It is indeed revealing that only after the Defendant has demonstrated
an intention to initiate legal proceedings against the
Plaintiff, the Plaintiff in an attempt to frustrate the
Defendant’s genuine claims flowing from the Plaintiff’s
breach, decided to initiate these frivolous proceedings
against the Defendant and advanced the case which was not
supported
by any evidence, such as fraud, corruption, illegality and
challenging the Defendant’s
ownership
of Finest, with the hope of
escaping
its obligations under the
lawfully
concluded agreements
.”
[51]
The underlined parts of the paragraphs quoted above prove that the
Defendant’s case is undoubtedly
that on 21 October 2014, the
Plaintiff and the Defendant concluded a valid agreement.
[52]
In my view, this argument by counsel that the parties had concluded a
valid agreement does not advance the
case for the Defendant because
it loses complete sight of the circumstances under which the
agreement was concluded. It ignores
completely the provisions
of s 217(1) of the Constitution; the provisions of s 33(1) of the
Constitution and the provisions of
s 38(1) (iii) of the PFMA.
[53]
The agreement concluded by and between the Plaintiff and the
Defendant on 21 October 2014 is constitutionally
invalid and
unenforceable against the Plaintiff. The process that was
followed by the Plaintiff to procure goods and services
on 21 October
2014 was constitutionally invalid and unlawful. This agreement
provided for the procurement of goods and services
by the Defendant
to the Plaintiff and ought to have been concluded pursuant to the
procurement processes contemplated in s 217(1)
of the Constitution.
The said section requires, among others, that a service provider from
whom goods and services are provided
should be selected through a
system that is “
fair, equitable, transparent, competitive
and cost effective”
.
[54]
The said agreement was, for the following fundamental reasons, not
concluded in accordance with the prescripts
of s 217(1) of the
Constitution; s 33(1) of the Constitution; s 38(1) of the PFMA.
54.1
there was no public invitation to interested parties to submit
tenders for the provision of goods and services
provided for in the
Project Agreement;
54.2
the Project Agreement was not concluded in a transparent manner;
54.3
the Defendant’s goods and services were not assessed to
determine if the agreed price was competitive and
cost effective;
54.4
the process which led to the conclusion of the agreement was not fair
in that other service providers were not
publicly invited to submit
tenders or quotations for the provisions of the goods and services in
issue.
[55]
Under the circumstances,
the appointment of the Defendant was constitutionally invalid in
terms of s 2 of the Constitution, the
conclusion of the Project
Agreement was not authorised by the Plaintiff in the manner
contemplated in s 217 (1) of the Constitution
and is therefore
invalid.
[56]
The fact that the
Defendant was the sole supplier for the Finest System in the Republic
was never advanced as the reason to avoid
complying with the
provisions of s 217(1); s 33(1) of the Constitution, s 38(1) of the
PFMA. No evidence that the Plaintiff
was privy to this
knowledge. In the premises it does not advance the Defendant’s
case. The question that this
Court must adjudicate is whether
the procurement of Modules 2 and 3 complied with the provisions of
the Constitution or the PFMA
and the Treasury Regulations and not
whether there were other suppliers of the Finest System in the
Country.
[57]
It still does not advance
the Defendant’s case to plead that the acquisition of the
Finest System was approved by the National
Treasury. Such
approval conflicted with the Constitution. Two wrongs, even
three, do not make a right.
[58]
It is correct that Modules 2 and 3 did not contain any specifications
by the Plaintiff.
That is
so because no tender was advertised in respect of those modules.
[59]
In the circumstances it is also difficult to appreciate how the
Defendant could counter-claim
on an illegal agreement. In accordance with the doctrine of
illegality, a contract
entered
without complying with the prescribed tender process
or in
contravention of s 217(1) of the Constitution is invalid
and the Court has no discretion to enforce it.
In the
circumstances
there is extraordinarily little chance of the
counterclaim
succeeding.
[60]
In its POC, the Plaintiff claims repayment of the amount of
R98,486,141.84 with interest. The bases
of such claim are
firstly, that the payments that were made to the Defendant were not
made in terms of valid crusade and secondly,
the Defendant was
unjustly enriched in the sum of R98,486,141.84. For that
reason, it is the Plaintiff’s case that
the Defendant is
obliged to refund the said amount by reason of
condictio ob turpem
vel iniustam causam
alternatively
condictio indebiti
,
further alternatively
condictio causa data causa non secuta,
Importantly the only reasons based on which the Plaintiff seeks
refund of the said amount are that the payment was made without
a
valid causa and furthermore that the Defendant was unduly enriched.
THE
PAYMENTS WERE MADE WITHOUT A VALID CAUSA
[61]
It is not in dispute that the Plaintiff made the payments to the
Defendant totalling the amount claimed.
It is also not in
dispute that the Defendant received the said amount. As seen
earlier, it is the Defendant’s case
that payment to it of the
said amount was legal. The said payments were made by the
Plaintiff in respect of Modules 1, 2,
and 3 of the Finest System.
The Plaintiff has, with reference to the invoices, been able to
establish how that amount is
made of.
[62]
The only problem that the Plaintiff has is that it is unable to prove
the amount that was paid in respect
of Module 1, which was procured
lawfully. In paragraph 31 of the POC the Plaintiff admits that
of the said amount he is unable
to prove the amount that was paid to
the Defendant in respect of Module 1. Still the Plaintiff
claims payment of the whole
amount which means that the Plaintiff
claims also refund of the amount lawfully paid by him to the
Defendant.
[63]
The Plaintiff does not know the amount that the Defendant should be
ordered to refund. It is not R98,486,141.84.
In the
premises I have conclude that the Plaintiff has not proved the amount
refundable.
[64]
Secondly, there is
another hurdle for the Plaintiff. While the Court accepts that
the Finest System gave the Plaintiff problems
here and there, such
problems have not been quantified.
[65]
Thirdly, even with these
problems, some form of service was rendered by the Defendant to the
Plaintiff based on the said invalid
agreement. Even if the
Project Agreement was unconstitutional, it does not mean that the
Plaintiff did not derive any benefit
from the System. In the
premises, fairness and equity demands that the Court should recognise
the benefit that the Plaintiff
enjoyed under an invalid agreement or
the service that the Defendant rendered to the Plaintiff under an
invalid agreement.
I conclude that this Court is disinclined to
order the refund of the sum claimed by the Plaintiff.
[66]
It is not necessary to consider the issue of unjust enrichment
claimed in the papers.
[67]
Section 172(1) of the Constitution provides as follows:
“
When
deciding a Constitutional matter within its power, a Court –
(a)
may declare that any law or conduct that is inconsistent with the
Constitution is invalid to the extent
of its inconsistency; and
(b)
may make any order that is just and equitable including –
(i)
an order limiting the retrospective effect of the declaration of
invalidity; and
(ii)
an order suspending the declaration of invalidity for any period and
on any conditions, to allow
the competent authority to correct the
defect.”
[68]
Section 172(1) of the Constitution directs the Court to declare
invalid any law or conduct that is inconsistent
with the
Constitution. Based on the documents before this Court, the
Project Agreement or Annexure ‘B’ to the
POC, was
unlawful as no tender process was followed. There are therefore
sufficient reasons to necessitate a declaration
of nullity in terms
of s 172(1)(a). It is obvious that once the Court declares the
contract unlawful the contract must be
set aside. The analysis of the
documents at hand show convincingly that both the Plaintiff and the
Defendant were equally guilty
of perpetuating an illegality.
[69]
The Constitutional Court had the following to say in pronouncing a
remedy in
Steenkamp N.O. v The Provincial Tender Board Eastern
Cape 2007(3) SA 121 (CC)
:
“
It
goes without saying that every improper performance of an
administrative function would implicate the Constitution and entitle
the aggrieved party to appropriate relief. In each case the
remedy must fit the injury. The remedy must be fair to
those
affected by it and yet vindicate effectively the right violated.
It must be just and equitable in the light of the
facts, the
implicated conditional principles, if any, and the controlling law.
It is nonetheless appropriate to note that
ordinarily a breach of
administrative justice attracts the public law remedies and not
private law remedies. The purpose
of a public law remedy is to
pre-empt or correct or reverse an improper administrative function
…. Ultimately the
purpose of a public remedy is to
afford the prejudiced party administrative justice, to advance
efficient and effective public
administration compelled by
constitutional precepts and at a broader level, to entrench the rule
of law.”
See
paragraph 30 of
Allpay
Security Agency and Others (Corruption Watch** and Another) 2014(4)
SA 179 CC at para [30]
.
[70]
The Court makes the
following order:
1.
It is hereby declared that the purported approvals or exemptions in
respect of NTP 8419 and
NTP 8937 are invalid, void ab initio, and are
hereby set aside.
2.
It is hereby declared that Annexure B is invalid, void ab initio, and
is hereby set aside.
3.
An absolution from the instance is hereby ordered with regard to the
Plaintiff’s claim
for refund of the sum of R98,486,141.00.
4.
The Defendant’s counter-claim is hereby dismissed, with costs.
5.
The Defendant is hereby ordered to pay the costs of this suit, such
costs to include the
costs consequent upon the employment of three
counsel.
PM
MABUSE
JUDGE
OF THE HIGH COURT
Appearances
:
Counsel
for the
Plaintiff
:
Adv J Nxusani SC
Adv HC Janse van Rensburg
Instructed
by:
Rudman Attorneys
Counsel
for the
Defendant:
Adv P Mokoena SC
Adv E Mokutu
SC
Instructed
by:
Werksmans Attorneys
c/o Mabuela
Attorneys
Date
on the opposed roll before Mabuse J:
27 January -
13 February 2020
Date
of Judgment:
19
February 2021