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[2017] ZALMPPHC 10
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Gobela Consulting CC v Makhado Municipality (778/2012) [2017] ZALMPPHC 10 (8 June 2017)
REPUBLIC OF SOUTH AFRICA
IN THE HIGH COURT OF SOUTH
AFRICA
LIMPOPO
DIVISION, POLOKWANE
CASE
NO: 778/2012
Not
reportable
Not
of interest to other judges
8/6/2017
In
the matter between:
GOBELA
CONSULTING
CC PLAINTIFF
And
MAKHADO
MUNICIPALITY DEFENDANT
JUDGMENT
MOKGOHLOA
DJP
1.
The plaintiff sues the
defendant for payment of an amount of R5 113 470.00. The
claim is based on what is alleged in the
amended particulars of claim
as follows:
“
4.
On
or about 22 February 2011, the plaintiff, on invitation by the
municipality, alternatively, the erstwhile municipal manager,
one
Shadrack Tshikalange (Tshikalange), submitted a proposal to review
and develop the anti-corruption strategy and capacity building
for
the municipality. The proposal was entitled ‘Proposal to Review
and Develop the Anti-Corruption Strategy and Capacity
Building for
Makhado Municipality.
…
..
8.
Pursuant to and
as a result of the proposal, the plaintiff was appointed and the
appointment was confirmed in a letter dated 5 May
2011. The said
letter was signed by Tshikalange,, who was acting in his course and
scope of employment as a municipal manager.
9.
Pursuant to the
appointment of the plaintiff, the plaintiff performed in preparation
for the review and capacity building for the
Makhado Municipality
Officials in terms of the proposal. The plaintiff performed in one or
more or all of the following ways:
9.1
.
Drafting, preparing and printing manuals for training;
9.2. employing professionals
to execute the duties in relation to the proposal;
9.3. drafting, preparing and
printing flyers in relation to the proposal;
9.4. employing support staff
who will execute the project as per the proposal, amongst other
things.
10.
In breach of its
obligation in terms of the agreement embodied in the proposal and /
or letter of appointment, defendant has, despite
due demand, failed,
refused and / or neglected to allow plaintiff to perform its
obligations in terms of the proposal”.
2.
The above facts are
largely not in dispute except that Mr Abaphunane Mavhandu (Mr
Mavhandu), the director of the plaintiff, stated
in his testimony
during the trial that the defendant did not make any invitation to
the plaintiff. According to Mr Mavhandu, he
actually read in a local
newspaper a notice disclaimer by the defendant wherein it was stated
that there were problems of corruption
within the municipality. He
contacted the defendant and spoke to one Ms Ndou an official of the
defendant. Mr Mavhandu offered
his service of training the
defendant’s officials on anti-corruption and fraud. Ms Ndou
referred him to Mr Tshikalange the
municipal manager, who requested
Mr Mavhandu to submit a proposal. Mr Mavhandu submitted the proposal
and met with Ms Ndou and
Mr Tshikalange. They discussed and accepted
his proposal.
3.
A month or two later,
and on 05 May 2011, Mr Mavhandu received an appointment letter from
the defendant. The letter stated that
his company was appointed to
conduct training on anti-corruption and fraud for 745 officials and
councillors. The program was to
run from May to November 2011 at a
cost of R7 500.00 per person. Mr Mavhandu was requested to start
the training immediately.
He responded by delivering his acceptance
letter to the defendant. He met with Ms Ndou who explained to him
that the program was
to be rolled out in stages and the trainees will
be divided into four groups. The defendant was to provide the venue
for the training.
4.
Based on the above, Mr
Mavhandu employed extra staff and entered into service agreements
with other four facilitators to assist
in the training.
5.
Mr Mavhandu and his crew
arrived at the agreed venue on the agreed date to start with the
project. Ms Ndou informed him that the
training could not proceed as
there were problems between the mayor and the ANCYL. They were
requested to wait until the problem
is solved. After some days and
when the training could not start, Mr Mavhandu released the
facilitators.
6.
The defendant raised two
special pleas which were later withdrawn. It however proceeded and
pleaded that the appointment of the
plaintiff was invalid and
unlawful as it did not conform with the Municipal Finance Management
Act and the defendant’s Supply
Chain Management Policy.
7.
The starting point will
be in the provision of s 217 of the Constitution
[1]
which reads.
‘
(1) When an organ of
state in the national, provincial or 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.
(2) Subsection (1) does not
prevent the organs of state or institutions referred to in that
subsection from implementing a procurement
policy providing for-
(a)
categories of
preference in the allocation of contracts; and
(b)
the protection
and advancement of persons, or categories of persons, disadvantaged
by unfair discrimination.
(3) National legislation
must prescribe a framework within which the policy referred to in
subsection (2) must be implemented.’
8.
Section
2 of the Local Government: Municipal Finance Management Act
(LGMFMA)
[2]
provides:
‘
The object of this
Act is to secure sound and sustainable management of the fiscal and
financial affairs of municipalities and municipal
entities by
establishing norms and standards and other requirements for-
(a) ensuring transparency,
accountability and appropriate lines of responsibility in the fiscal
and financial affairs of municipalities
and municipal entities;
(b) the management of their
revenues, expenditures, assets and liabilities and the handling of
their financial dealings;
(c)
…
(d)
…
(e)
…
(f)
Supply chain
management; and
(g)
…’
.
9.
Section 111 of the
LGMFMA provides that each municipal entity must have and must
implement a supply chain management policy. The
policy must comply
with the provisions of s217 of the Constitution.
10.
Regulation 12 of the
Supply Chain Management Policy implemented in terms of the LGMFMA
provides:
“
Range of procurement
processes.
(1)
A supply chain
management policy must, subject to regulation 11 (2), provide for the
procurement of goods and services by way of-
(a)
petty cash purchases, up
to a transaction value of R2 000 (VAT included);
(b)
written or verbal
quotations for procurements of a transaction value of over R2 000
up to R10 000 (VAT included);
(c)
formal written price
quotations for procurements of a transaction value over R10 000
up to R200 000 (VAT included);
(d)
a competitive bidding
process for –
(i) procurements above
transaction value of R200 000 (VAT included); and
(ii) the procurement of long
term contracts.
(2)
A supply chain
management policy may allow the accounting officer –
(a)
to lower, but not to
increase, the different threshold values specified in sub regulation
(1).
11.
Section 113 of LGMFMA
provides that a municipal entity is not obliged to consider an
unsolicited bid received outside its normal
bidding process. If it
decides to consider such unsolicited bids, then the consideration
must be done in accordance with the prescribed
framework. These are
that:
(a)
The service offered in
terms of the bid is proven to be unique innovative concept;
(b)
The reasons for not
going through the normal bidding processes are found to be sound.
12.
Applying the above
legislation to the instant matter, it is clear that the
appointment of the plaintiff to review and develop
the
anti-corruption strategy for the municipality, albeit a good
initiative, is in breach of the provisions of the above stated
legislation which are designed to ensure a transparent,
cost-effective and competitive tendering process in the public
interest.
Therefore such appointment is invalid and will not be
enforced.
13.
The plaintiff does not
dispute the applicability of these legislation in the present matter.
It however argued that the defendant
cannot plead that the contract
is invalid without filling a counter claim for a declaratory order. I
find that this argument lacks
substance and wish to demonstrate as
follows:
14.
In MEC for Health,
Eastern Cape and Another v Kirland Investment (Pty) Ltd
[3]
,
Kirland instituted a review application impugning (i) the decision of
the Superintendent – General (SG for Health in Eastern
Cape)
refusing to approve Kirland’s application to establish private
hospitals in the Eastern Cape; (ii) the decision of
the Acting SG to
approve the application; (iii) the SG’s decision to withdraw
that approval; and the MEC’s decision
to dismiss Kirland’s
internal appeal. The High Court set aside the impugned decision. The
appeal to the Supreme Court of
Appeal (SCA) was unsuccessful.
15.
Despite finding that the
approval of the Acting SG was invalid, the Supreme Court of Appeal
left the invalid approval intact after
reviewing the High Court’s
order. The SCA held that it lacked jurisdiction to set aside the
Acting SG’s decisions because
they have never been taken on
review.
16.
The Constitutional Court
(CC) held that whilst it is true that the officials of the Department
of Health failed to take the Acting
SG’s approval on review,
and since the SCA had found that the approval was invalid as it was
unlawfully made, the Court ought
to have declared it invalid. The CC
held further that the SCA did not require the request for review to
assume jurisdiction over
the matter as it already had jurisdiction
because the validity of the approval was one of the issues
pertinently raised in the
pleadings and canvassed in the evidence.
17.
Similarly, in the
present matter, the plaintiff sues the defendant on the basis of the
appointment letter dated 5 May 2011. This
letter was pursuant the
plaintiff’s proposal to render services to the defendant.
Admittedly, the appointment of the plaintiff
by the defendant was
invalid and unlawful. As stated in Kirland’s case, ‘a
decision flowing from such conduct
must not be allowed to remain in
existence on the technical basis that there was no application to
have it reviewed and set aside.’
[4]
18.
Furthermore, the
invalidity of the plaintiff’s proposal and subsequent
appointment was canvassed in the defendant’s
plea. Paragraph 3
thereof reads:
“
The
Defendant pleads that the request did not abide by the Municipal
Finance Management Act 2003 and the Defendant’s Supply
Chain
Management Policy and such request is invalid and unlawful”
What is missing in the
paragraph is the sentence to the effect that the defendant sought to
have the appointment reviewed.
19.
It is clear and cannot
be disputed that the appointment of the plaintiff is unlawful and
invalid. This conduct offends the provisions
of section 217 of the
Constitution and the LGMFMA which requires that when an organ of
state contracts for goods or services, it
must do so in accordance
with a system which is fair, equitable and transparent.
20.
I fully agree with the
Constitutional Court when it stated:
“
Corrupt practises
should not escape the reach of our courts solely on the basis that no
application to have them set side was made.
If the validity of a
corrupt decision were raised in the pleadings, a court is duty-bound
to declare it invalid if that is established
by evidence. Section 172
(1) (a) of the Constitution obliges every court, when deciding a
constitutional matter within its powers,
to declare invalid any
conduct that is inconsistent with the Constitution. The section
admits on no discretion.”
[5]
Order
1.
The plaintiff’s claim is dismissed with costs.
MOKGOHLOA
DJP
REPRESENTATIONS
1.
For
the Plaintiff :
Instructed
by :
2.
Counsel
for the defendant :
Instructed
by :
3.
Date
of hearing :
4.
Date
handed down :
[1]
Constitution of the Republic of South Africa Act 108 of 1996
[2]
56 of 2003
[3]
2014 (3) SA 481 (CC)
[4]
Ibid in para 44
[5]
Ibid in para 46