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[2018] ZASCA 167
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Swifambo Rail Leasing (Pty) Limited v Passenger Rail Agency of South Africa (1030/2017) [2018] ZASCA 167; 2020 (1) SA 76 (SCA) (30 November 2018)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
No: 1030/2017
In
the matter between:
SWIFAMBO
RAIL LEASING (PTY)
LIMITED APPELLANT
and
PASSENGER RAIL AGENCY
OF SOUTH AFRICA RESPONDENT
Neutral
citation:
Swifambo
Rail Leasing v PRASA
(1030/2017)
[2018] ZASCA 167
(30 November 2018)
Coram:
Lewis,
Ponnan, Zondi, Makgoka and Schippers JJA
Heard:
1
November 2018
Delivered:
30
November 2018
Summary:
An
award of a tender vitiated by irregularities, corruption and
‘fronting’ within the meaning of the
Broad-Based Black
Economic Empowerment Act 53 of 2003
set aside: delay in instituting
review proceedings reasonable in the circumstances, and condonation
would be granted if it was
unreasonable.
ORDER
On
appeal from:
Gauteng
Local Division of the High Court, Johannesburg (Francis J sitting as
court of first instance):
The
appeal is dismissed with the costs of two counsel.
JUDGMENT
Lewis
JA (Ponnan, Zondi, Magkoka and Schippers
concurring)
[1]
The Passenger Rail Agency of South Africa (PRASA), the respondent,
until 2014, was effectively controlled by Mr Lucky Montana,
the Group
Chief Executive Officer of PRASA. He and some of his officials
approved the award of a tender for the supply of various
train
locomotives to a recently incorporated company, Swifambo Rail Leasing
(Pty) Ltd (Swifambo), the appellant. The award was
vitiated by a
number of material irregularities, primarily the dishonest and
corrupt conduct of officials of PRASA in advertising
the Request for
Proposals in respect of the supply of locomotives and in awarding the
contract. Swifambo has neither challenged
nor contradicted PRASA’s
evidence that the tender was procured through corruption. But it
insisted that it was an innocent
tenderer, and that the contract
between it and PRASA ought nonetheless to remain in existence and
that the parties should be permitted
to continue performing their
respective obligations.
[2]
On discovering the fraudulent conduct of Mr Montana and others, a
newly reconstituted board of control of PRASA applied to the
Gauteng
Local Division of the High Court to have the contract declared
invalid and for an order setting it aside. I shall refer
to that
court as the high court for the sake of convenience. Francis J
granted the orders sought. The appeal before us is with
his leave.
The chief defences raised by Swifambo in the high court were that
PRASA brought the application some three years after
the contract was
concluded and was thus precluded from seeking relief because of its
unreasonable delay; that Swifambo was an innocent
tenderer, which had
no knowledge of PRASA’s dishonesty; and that it was not
equitable to set aside the contract in the circumstances.
Francis J
rejected all these defences. On appeal, Swifambo persists in them. In
the high court, PRASA also sought an order setting
aside an
arbitration agreement in the contract. That order was not contested
in the high court and it is not an issue in this appeal.
Background
[3]
PRASA is an organ of state, funded by National Treasury. It is
mandated to provide rail services throughout South Africa. On
25
March 2013, and pursuant to a tender process, PRASA decided to
conclude a contract with Swifambo for the purchase of locomotives.
Prior to that, in July 2009, PRASA had published a request for
expressions of interest in the supply of locomotives for the haulage
of passenger trains on various national routes as it had a shortfall
of some 85 locomotives needed for various purposes. Following
that,
in May 2011, a Spanish company, Vossloh España S A U
(Vossloh), inspected PRASA’s fleet, and made recommendations
as
to what PRASA needed in the short, medium and long terms.
[4]
In July 2011, the then Executive Manager: Engineering Services of
PRASA, Mr D Mtimkulu, sent a memorandum to Montana about PRASA’s
needs. He recorded that PRASA’s fleet was outdated and that
this impacted on the reliability of the services PRASA was supposed
to provide. He estimated that it would cost R5 billion over a period
of six years, and recommended that Montana and the Board of
PRASA,
approve the sourcing of 100 locomotives.
[5]
PRASA published a request for proposals late in November 2011, having
decided to purchase some 88 locomotives. The number actually
needed
was not clear at the time when the application to the high court was
made, nor was it clear whether diesel, electric or
hybrid locomotives
were needed. Accordingly, no proper assessment of actual needs was in
fact made by PRASA. And the normal financial
procedures required by
PRASA’s procurement policy were not followed. It appeared that
PRASA had not obtained the approval
of National Treasury, required in
terms of
s 54
(2) of the
Public Finance Management Act 1 of 1999
.
[6]
Nonetheless, on 9 December 2011, PRASA held a compulsory briefing
session for potential bidders. Swifambo was not listed as
one of the
companies in attendance, but its holding company, Swifambo Rail
Holdings (Pty) Ltd, was present. Swifambo sought to
adduce evidence
that at the briefing, the presentation made by PRASA indicated that
it was willing to consider the purchase of
locomotives as well as
their hiring. I shall return to this issue.
[7]
The specifications for the locomotives to be supplied were drawn by
Mtimkulu. He had no expertise in the subject, but had been
appointed
to a position at PRASA by Montana in 2010, and had a meteoric rise
through the ranks, with a meteoric salary hike to
match it. Mtimkulu
claimed to have diplomas in engineering and later a doctorate. In
fact he had no qualification at all. The specifications
contravened
various requirements of the procurement policy. But they matched
those of Vossloh locomotives manufactured in Spain.
Francis J in the
high court found that the specifications had been tailored by
Mtimkulu to ensure that the entity importing the
locomotives from
Vossloh would be awarded the bid.
[8]
Swifambo does not deny that Mtimkulu behaved dishonestly but
maintains that Swifambo was not aware of this, an issue to which
I
shall return. When the board of PRASA was reconstituted in 2014,
Mtimkulu’s fraud came to light. Disciplinary proceedings
against him were initiated in 2015 but he resigned before any hearing
could be held and he seemed to have disappeared. Montana,
who had
been party to Mtimkulu’s conduct, also resigned in March 2015.
When the application was instituted by the new board,
investigations
into Mtimkulu’s and Montana’s fraud were ongoing.
[9]
After the briefing session in December 2011, Swifambo Holdings (Pty)
Ltd, on 7 February 2012, acquired a company known as Mafori
Finance
Vrydheid (Pty) Ltd (Mafori Finance), the name of which was later
changed (on 5 May 2012) to Swifambo Rail Leasing (Pty)
Ltd, the
appellant. Mafori Finance submitted a bid for the award of the tender
under the name ‘Swifambo Rail Leasing’
on 27 February
2012, some 20 days after that company had been acquired for the
purpose. There were five other bidders.
[10]
Swifambo’s bid did not comply with the requirements of the
request for proposals in a number of material respects. First,
bidders had to supply tax clearance certificates. The certificate
submitted by Swifambo did not have a VAT number. And although
Swifambo indicated that the locomotives would all be manufactured and
supplied by Vossloh, it did not submit any tax clearance
certificate
for Vossloh, which was required as Vossloh was regarded, according to
the bid, as a subcontractor. Although it operated
outside South
Africa, and was not registered as a taxpayer, Vossloh had to supply a
certificate of good standing regarding tax
from the authority where
it was liable for tax.
[11]
Second, no broad based black employment equity (BBBEE) plan for
procurement of goods and services for the duration of the contract
was submitted, as was required by the request for proposals. Third,
the bid did not comply with the local content requirement as
the
locomotives were to be designed and manufactured in Spain. Fourth,
there was no evidence in the bid itself that supported Swifambo’s
assertion that it and its shareholders had previous experience in the
rail industry: the request for proposals required that the
bidder had
to be technically and financially qualified to provide the
locomotives that PRASA needed.
[12]
In the fifth place, Swifambo did not demonstrate in the bid that it
had previous experience in the supply of locomotives (it
could hardly
have done so since it came into existence only a few days before the
bid was submitted) nor did it show the capacity
to manage a project
of the size put out to tender. The five reference letters supplied,
in accordance with the request for proposals,
all related to
Vossloh’s operations in Europe. Moreover, Swifambo indicated in
the bid that it would rely entirely on Vossloh
to fulfill its
obligations, but Vossloh was not a co-bidder, and at the time of the
bid, had no contractual relationship with Swifambo.
[13]
Despite material non-compliance with the request for proposals (which
was not disputed by Swifambo) the Bid Evaluation Committee
of PRASA,
which first met on 27 March 2012, recommended to the Bid
Adjudication Committee that the bid be awarded to Swifambo.
And at a
meeting held on 24 July 2012, the Board of PRASA approved Swifambo as
the preferred bidder for the procurement of dual
electric diesel
locomotives. The contract between PRASA and Swifambo was concluded on
25 March 2013. Only after that, on 4 July
2013, was a contract for
the supply of locomotives concluded between Swifambo and Vossloh.
[14]
As I have said, Swifambo does not deny the irregularities in the
bidding process. It takes issue, however, with the allegation
of
‘fronting’ made by PRASA; with the nearly three year
period between the decision to award the bid by PRASA and the
bringing of the application; and with the order of the high court
setting aside the contract. It complains also that PRASA has
relied
on hearsay evidence in its founding and replying affidavits; that
much of PRASA’s evidence as to fraud and fronting
is to be
found only in its reply to Swifambo’s answering affidavit
(despite the fact that Swifambo was afforded the opportunity
to
respond to that); and it denies that it was the only bidder to offer
to sell locomotives to PRASA, alleging that at least two
of the
bidders also included a purchase option in their bids.
[15]
In the founding affidavit of PRASA, deposed to by Mr Popo Molefe, the
new chairman of the reconstituted board, in addition
to raising the
irregularities in Swifambo’s bid, said that PRASA considered
the award to have been vitiated not only by the
irregularities to
which I have already alluded, and which are not disputed, but by
other factors. These included a change in the
procurement strategy
for a lease to an outright purchase; the ‘appearance’ of
a fronting relationship between Swifambo
and Vossloh which, as a
Spanish entity, did not have BBBEE credentials; the apparent
preference afforded to Swifambo throughout
the tender process, in
particular in that the specifications were ‘tailored to suit
the products supplied by Swifambo’;
and that the
diesel-electric locomotives were not evaluated by a technical
committee, as a result of which those that were acquired
from Vossloh
exceeded the maximum height suitable for South African railway lines.
[16]
Francis J in the high court found for PRASA on all these issues and
concluded that he should entertain the application to have
the
contract set aside despite the unreasonable delay in the institution
of proceedings. He also found that the hearsay evidence
was
admissible under
s 3(1)
of the
Law of Evidence Amendment Act 45 of
1988
.
[17]
Swifambo on appeal contends that the findings were incorrectly made
for a number of reasons. It complains that they are based
on hearsay
evidence and on inferences from facts that have not been proved.
It denies that it was guilty of the practice
of fronting, and asserts
that PRASA had not made out a case for fronting in the founding
affidavit. It complains that the entire
judgment of the high court
was informed by the finding that Swifambo was not an innocent
tenderer. Swifambo also argues that Francis
J had made findings of
fact that were misdirected. And it contends that the delay in
bringing the application was unreasonable
and should not be condoned.
I shall deal with these arguments in turn. Since the finding on
fronting colours the issues of delay
and the remedy granted, I shall
deal with the issues of fronting and delay last.
Hearsay
evidence
[18]
The founding affidavit deposed to by Molefe started thus:
‘
I commenced
my involvement with the applicant [PRASA] as part of an entirely
reconstituted board of control on 1 August 2014 and
accordingly many
of the facts set out herein are not within my personal knowledge. I
am nevertheless aware of the facts . . . from
an investigation the
board has caused to be conducted into the conduct of the applicant’s
business prior to my involvement.
The applicant’s business is
both substantial and technically complex, and it took significant
effort and a considerable amount
of time for the reconstituted board
to familiarize itself with the intricacies of PRASA’s business.
The task was exacerbated
by resignations, dismissals and a generally
un-cooperative attitude from certain employees within the
organisation. In some instances
PRASA’s records were concealed,
spirited away or destroyed and it was only through the interaction
and assistance of the
investigators that the facts set out in the
affidavit were discovered. The facts specific to this case were
discovered and only
revealed through the broader investigation into a
number of relationships and activities the board suspected were
generally corrupt.
Having regard to all the steps that were
reasonably required prior to and in order to initiate these review
proceedings, I respectfully
submit that this application has been
brought within a reasonable time.
The facts have been presented to me by
the investigators and are mainly derived from documents attached as
annexures. The attached
documents are contemporaneous documents and
form part of the applicant’s records under my control. I cannot
think of any
reason to doubt the reliability of the documents.
. . .
I have obtained
confirmatory affidavits [from employees of PRASA] only where I am
confident that the employees concerned will not
be intimidated and
the integrity of the investigation will be maintained.’
[19]
Swifambo’s chief complaint appears to be that allegations of
fraud and corruption should not be made lightly, and should
be based
on hard facts, or amount to the ‘clearest evidence’ or
‘clear and satisfactory evidence’. It argues
that no such
evidence was tendered by PRASA. Molefe’s conclusion, in the
replying affidavit, that there were ‘irregular
and corrupt
practices at PRASA’, is criticized on the basis that there is
no direct evidence supporting it. However, Swifambo
in its heads of
argument on appeal gives no detail as to what evidence it objected
to. Moreover, it did not take issue with the
conclusion itself,
professing ignorance as to the practices within PRASA. Swifambo did
not contest the merits of the application,
and did not generally
dispute the factual allegations made by Molefe. Nor did Swifambo
dispute the contents, or the reliability,
of the documents attached
to the affidavits deposed to by Molefe. And as Francis J held,
confirmatory affidavits were provided
in respect of the replying
affidavit. Thus while hearsay evidence is generally not permitted in
affidavits, where there is no reason
to doubt the reliability of the
allegations made, they are uncontested, and the deponent says he
believes them to be true, they
will be admissible.
[20]
Section 3(1)
of the
Law of Evidence Amendment Act provides
that
hearsay evidence is inadmissible unless the court, having regard to
the nature of the proceedings; the nature of the evidence
tendered;
its probative value; the reason why the evidence is not given by the
person upon whose credibility it depends; any prejudice
to the party
who objects to its admissibility; and any other factor which, in the
opinion of the court, should be taken into account,
is of the view
that the evidence should be admitted in the interests of justice. As
Francis J held, the evidence in the documents
supporting both the
founding and replying affidavits was not alleged to be unreliable and
the facts and documents were discovered
by independent investigators
in the course of their broader investigation into corruption within
PRASA. The reasons why direct
evidence could not be given were
explained by Molefe in the passages quoted above: some employees of
PRASA had resigned, others
were uncooperative, records were
concealed, and in so far as possible documentary evidence was
adduced. Swifambo had the opportunity
to examine all the evidence and
to respond to it. But since it did not dispute that there was
corruption, claiming ignorance, it
was not in any way prejudiced by
the admission of the evidence. The application was manifestly in the
public interest. And it was
in the interests of justice to admit the
evidence adduced by PRASA. Swifambo did not take issue with any of
the allegations of
PRASA’s corruption. Francis J thus correctly
admitted the evidence.
The
purchase option
[21]
Francis J found that Swifambo was the only bidder to offer the sale
of locomotives to PRASA, rather than leases for which the
other
bidders tendered. Swifambo argues that the finding was incorrect. The
request for proposals anticipated that the successful
bidder would
let locomotives to PRASA. The high court regarded this as an
indication of corruption. However, Swifambo argues on
appeal that the
finding was due to the failure of the court to have regard to an
affidavit, which it applied to admit, by an attorney
who alleged that
at the compulsory bidder briefing, potential bidders had been advised
that a sale of locomotives would be considered.
[22]
As PRASA points out, however, Swifambo amended its application so as
to ask only for a document that was attached to the affidavit
to be
admitted. That document does not indicate that the request for
proposals was amended in any way. The fact that one other
bidder also
tendered a sale option does not change the fact that the request for
proposals does not expressly refer to the purchase
of locomotives and
was not amended. In the circumstances, Francis J correctly concluded
that Swifambo was at an advantage in the
tender process since other
bidders were not given an opportunity to bid to sell locomotives to
PRASA. There was no misdirection
of fact in this regard.
The
tailoring of the specification
[23]
I have already referred to the fact that the specifications for the
locomotives to be acquired were drawn by Mtimkulu who was
not
qualified to do so. The procurement policy of PRASA required that
specifications be drawn by a cross-functional sourcing committee.
The
specifications would, in the ordinary course, take into account
exactly what would function on South African railway lines.
Instead,
Mtimkulu made provision for the Vossloh locomotives, tailoring the
requirements to what Vossloh was manufacturing in Europe.
This
process ensured that Swifambo would score the highest points in the
technical evaluation.
[24]
The high court set out in detail the specifications that matched the
Vossloh locomotives. Swifambo does not, on appeal, dispute
any of the
facts. It argues merely that the high court drew the ‘most
adverse inference’ from the undisputed facts.
There is,
however, no other inference to be drawn. Many of the features of the
Vossloh locomotives were of no relevance to the
needs of PRASA, yet
they were required in the specifications. Swifambo argues, however,
that these features were public and disclosed
by PRASA in its request
for expressions of interest. Moreover, other bidders could
match some of the specifications. That
is beside the point. Swifambo
argues that a more benign explanation of the uncanny resemblance
between the specifications and the
Vossloh locomotives can be given.
But it does not suggest what that might be. The high court correctly
concluded that the specifications
had been tailor-made for the
benefit of Vossloh, and thus Swifambo. It correctly held that this
was a factor that leads to the
conclusion that the tender process was
corrupt.
Fronting
[25]
PRASA alleged that Swifambo was a ‘front’ for Vossloh,
who would not have been able to bid itself because it was
not based
in South Africa and did not meet the requirements of the procurement
policy nor the request for proposals that necessitated
that it be
Broad-Based Black Employment Equity (BBBEE) compliant. Swifambo, on
the other hand, had a level 4 BBBEE rating.
[26]
Swifambo argues that it was not knowingly a party to ‘fronting’.
A fronting practice is defined in the
Broad-Based Black Economic
Empowerment Act 53 of 2003
as a transaction, arrangement or other act
or conduct that undermines the achievement of the objectives of the
Act.
Section 1(c)
refers to the ‘conclusion of a legal
relationship with a black person for the purpose of that enterprise
achieving a certain
level of broad-based black economic empowerment
compliance without granting that black person the economic benefits
that would
reasonably be expected to be associated with the status or
position held by that black person’. Any person who knowingly
engages in a transaction that undermines the BBBEE Act would be
guilty of an offence under s 13O of the Act.
[27]
Swifambo attacks the finding of the high court that it was guilty of
fronting on various bases. It argues that, since fronting
is a
criminal offence, PRASA should have shown beyond reasonable doubt
that Swifambo was knowingly a party to a fronting transaction.
This
argument loses sight of the nature of the proceedings: it is not a
criminal prosecution, but an application to set aside a
transaction
vitiated by serious irregularities. It also argues that the
allegation of fronting is made only obliquely in the founding
affidavit, where Molefe stated that there was an ‘appearance of
fronting’, since Vossloh was the real bidder hiding
behind a
company controlled by black persons. However, the allegation is borne
out by the chronology of events leading to the making
of the bid, and
of the events after the tender was awarded. I have already alluded to
these events.
[28]
I emphasize that a shelf company, Mafori Finance, was acquired by
Swifambo Holdings (Pty) Ltd 20 days before the bid was made.
Its name
was changed to Swifambo after the bid was submitted. Before then, in
May 2011, Vossloh had done a needs assessment in
respect of PRASA
locomotives, and made recommendations as to its short, medium and
long term requirements. Vossloh was not eligible
to bid. It did not
have any BBBEE rating. If it were to supply locomotives to PRASA it
had to become part of a BBBEE compliant
enterprise. Vossloh’s
status was far from clear: in the bid it was described as a
subcontractor, but it was supplying all
the locomotives via Swifambo
– the main obligation of Swifambo under the contract with
PRASA. The contract between Swifambo
and Vossloh was concluded only
on 4 July 2013, more than a year after the bid was submitted. In
terms of that contract, Swifambo’s
only obligation was to
accept delivery of locomotives, and to procure their handing over to
PRASA. It played no other role.
[29]
Counsel for Swifambo submitted that that is the essence of any BBBEE
transaction. The entity with the skills and assets contracts
with a
black owned entity which is BBBEE compliant. The argument ignores the
purpose of the BBBEE Act, which is to transfer capital
and skills to
black people. Swifambo personnel played no real role in so far as
PRASA was concerned, and so there was no skills
transfer and no
change of asset holding. Vossloh had complete control over every
aspect of the contract between Swifambo and PRASA,
including the
appointment of members of the steering committee overseeing the
acquisition and commissioning of locomotives. Swifambo’s
real
role was undoubtedly to enable Vossloh to become the real bidder for
the tender. In
Esorfranki
Pipelines (Pty) Ltd v Mopani District Municipality
[2014] ZASCA 21
;
[2014] 2 All SA 493
(SCA) (para 26) this court
described fronting as a ‘fraud on those who are meant to be the
beneficiaries of legislative measures
put in place to enhance the
objective of economic empowerment’.
[30]
Accordingly, the high court did not err in finding that Swifambo was
a party to a fronting practice, and was not an innocent
tenderer.
This, apart from other factors that I will discuss, clearly colours
the nature of the remedy to which PRASA is entitled.
Delay
[31]
Francis J in the high court found that the nearly three year delay in
bringing the application was unreasonable, but that given
the public
interest in state owned entities not being corrupt, and the enormous
cost to the country incurred through the tender
process, the period
for bringing the application should be extended and the delay
condoned. The parties had assumed, as had the
high court, that the
application was brought by PRASA under the Promotion of Access to
Administrative Justice Act 2 of 2000 (PAJA).
That Act provides that
applications must be brought within 180 days of the decision under
review (s 7(1)), but that an applicant
may apply for an extension of
that period and condonation under s 9 if the interests of
justice require it.
[32]
In
State Information Technology Agency SOC Ltd v Gijima Holdings
(Pty) Ltd
[2018] ZACC 40
;
2018 (2) SA 23
(CC) the Constitutional
Court held that where the State or an organ of state seeks to review
its own decision, the PAJA is not
applicable. Instead, any
application for review that it may bring would have to be based on
the principle of legality, and at common
law such an application must
be brought within a reasonable period – without unreasonable
delay. Swifambo argues that the
period between the making of the
decision to award the bid to it and the date when the application was
brought, more than two years,
was unreasonable. Moreover, complains
Swifambo, PRASA did not apply for an extension of time in the
application initially, and
Molefe did not explain the reasons for the
delay in the founding affidavit. PRASA did, however, apply to amend
its notice of motion
before the hearing was held in the high court,
and Swifambo did not object to the amendment. It did take issue with
the assertion
that the delay was not unreasonable in the
circumstances.
[33]
In particular, Swifambo argues that three periods are not accounted
for in PRASA’s explanation set out in the replying
affidavit.
Francis J accepted that the three periods were not explained but
found that in all the circumstances the apparent delay
was to be
condoned.
[34]
I have already set out Molefe’s explanation for bringing the
application only in November 2015. He pointed out that the
entire
board of PRASA was reconstituted in August 2014, more than two years
after the tender was awarded. It had taken time for
the new board to
familiarize itself with the complexity of the PRASA business
operation. And about 40 complaints of maladministration
at PRASA had
been made to the then Public Protector. She had spent some two years
in attempting to investigate the complaints.
The Auditor General had
also been tasked with investigating illegal expenditure by PRASA, and
PRASA needed to examine his report.
Montana, who had controlled PRASA
and its staff, was obstructive, and attempted to cover up his role in
various corrupt transactions,
including the award of the tender to
Swifambo. He resigned only in March 2015, and left before providing
any response to the Public
Protector’s report entitled
‘Derailed’. The Public Protector had experienced similar
obstruction in her investigation,
and so had released her report only
in August 2015. In it she said:
‘
I must
record that the investigation team and I had immense difficulty
piecing together the truth as information had to be clawed
out of
PRASA management. When information was eventually provided, it came
in dribs and drabs and was incomplete. Despite the fact
that the
means used to obtain information included a subpoena issued in terms
of s 7(4) of the Public Protector Act, many of the
documents and
information requested are still outstanding.’
[35]
Furthermore, Montana misled the new board as to the nature of the
complaint made to the Public Protector, saying it was a trivial
matter. And then, despite several requests by Molefe to Montana to
provide a response, he had not done so before he left PRASA.
Molefe
said, in his replying affidavit:
‘
Mr Montana
held sway over PRASA through the active assistance of his associates
and the intimidation of those who would not do his
bidding. PRASA
employees who did not bend to his will were victimized, suspended or
dismissed.’
[36]
The board considered legal advice and ‘launched this
application as soon as it was in a position to do so. It did so
notwithstanding the time consuming preparation that was required in
order to launch the application.’ In all the circumstances,
said Molefe, PRASA launched the application within a reasonable time
after the reasons for the decision became known to the new
board.’
Molefe pointed out too that senior employees who attempted to deal
with irregularities at PRASA were dismissed by
Montana. These
included the general manager: group legal services and the group
executive manager: risk, legal and compliance.
And while the
investigation was in progress, Montana instructed certain employees
to delete electronic documents. Swifambo does
not challenge the
finding of the high court that Montana, who was implicated in the
irregular and unlawful activities, prevented
the dissemination of
information to investigators even after he had left PRASA. The board
was thus kept ignorant of the full extent
of the wrongdoing at PRASA
including the wrongful award of the tender to Swifambo.
[37]
Swifambo argues on appeal that that does not matter. That the facts
came to light only a few months before the application
was launched
is irrelevant, it asserts. Delay runs from the date of the decision
(in July 2012) and not from the time when the
board became aware of
the unlawfulness of the decision, the full extent of which was
appreciated only in late 2015. It relies in
this regard on
Cape
Town City v Aurecon SA (Pty) Ltd
[2017] ZACC 5
;
2017 (4) SA 223
(CC), which confirmed the decision of
this court in
Aurecon
South Africa (Pty) Ltd v City of Cape Town
[2015] ZASCA 209
;
2016 (2) SA 199
(SCA). In
Aurecon
(SCA)
this court said that if the period of delay started only when the
entity wronged became aware of the wrong, this would ‘automatically
entitle every aggrieved applicant to an unqualified right to
institute judicial review only upon gaining knowledge that a decision
(and its underlying reasons), of which he or she had been aware all
along, was tainted by irregularity, whenever that might be.
This
result is untenable as it disregards the potential prejudice to [the
tenderer] and the public interest in the finality
of administrative
decisions and the exercise of administrative functions’ (para
6). This statement was approved by the Constitutional
Court (para 42)
on appeal to it.
[38]
In that case the City had awarded a tender and discovered much later
that there might have been an irregularity in the award.
It sought to
have it set aside once it became aware of the irregularity. This
court held that the application for review was brought
out of time
but nonetheless determined that there was nothing irregular in the
process. The Constitutional Court held that the
delay was
unreasonable in the circumstances, refused condonation, and did not
consider whether the award had been irregular.
[39]
This case is totally distinguishable from
Aurecon
. The PRASA
board once reconstituted did not ascertain the irregularity in the
award of the bid to Swifambo for all the reasons
stated until August
2015 and launched the application for review in November of that
year. It acted as expeditiously as possible.
On the assumption that
there was indeed delay at common law (for just under three years), it
applied for condonation. In my view,
there was no unreasonable delay
in all the circumstances. However, it is useful to consider whether
condonation should have been
granted by the high court, given the
lengthy period between the award of the contract and the institution
of review proceedings.
Condonation
[40]
The overriding consideration in condoning delay is the interests of
justice. In
Aurecon
SCA
this court said (para17) that in determining whether condonation
should be granted, the relevant factors that require consideration
are the nature of the relief sought; the extent and cause of the
delay; its effect on the administration of justice; the
reasonableness
of the explanation for the delay; the importance of
the issues raised and the prospects of success on review. The
Constitutional
Court endorsed this statement.
[41]
There is undoubtedly a public interest in entertaining the
application for review. At least R2 billion of taxpayers’
money
has been spent in pursuit of a fraudulent and corrupt tender. The
explanation for the delay, if such there is, is clear and
plausible. It is in the interests of PRASA and the
general public that the award of the contract to PRASA be reviewed.
And in
Aurecon
CC
the court said that if the irregularities raised had ‘unearthed
manifestations of corruption, collusion or fraud in the tender,
this
court might look less askance in condoning the delay. The interests
of clean governance would require judicial intervention’
(para
50).
[42]
In this matter, both PRASA and Swifambo were not innocent. The award
of the tender to Swifambo was corrupt. And there is no
reason to
interfere with the exercise of the high court’s discretion to
grant condonation. It was in the interests of justice
and in the
public interest.
Equitable
remedy
[43]
The high court, in the exercise of its discretion, ordered that the
contract between PRASA and Swifambo be set aside. Is there
any reason
to interfere with its decision? Swifambo argues that there is. The
contract has been part performed, and the parties
can continue to
perform, it contends. PRASA argues, on the other hand, that if the
contract were to stand, good money would be
thrown after bad. While
Swifambo contends that Vossloh is ready to deliver more locomotives,
Vossloh is silent. There has been
no confirmation by Vossloh by
affidavit or otherwise that it is in a position to deliver
locomotives that are fit for purpose.
[44]
The locomotives already delivered to PRASA (some 13 in all) are not
fit for purpose. They cannot be, and are not, used. Swifambo
insists
that they are in use because they have clocked up (between them) some
71 000 kms. That is not correct. They have been tested
on railway
lines in the country, and have been found to be unsafe.
[45]
A Transnet engineering report dated 23 September 2015, for example,
states that:
‘
The side
clearance and height of the AFRO4000 locomotive [supplied by Vossloh]
exceeds that of the Transnet gauge for diesel locomotives
and the
locomotive can therefore not be declared compliant . . .
In addition, the
height of the AFRO4003 exceeds the Vosloh dimensional drawing . . .
Minor modifications could be considered to
reduce the height in the
silencer area . . . as well as to rectify items which result in side
clearance infringements.’
[46]
A report of the Railway Safety Regulator, dated November 2015, stated
that the AFRO4000 series of locomotives is designed and
manufactured
to a height above that of the rail head. It thus exceeded the vehicle
structure gauge height required for diesel locomotives.
On the other
hand, a report commissioned by Swifambo stated that the locomotives
supplied complied with the specifications of the
contract. That is
hardly surprising since the specifications were drawn by Mtimkulu to
match those of the Vossloh locomotives.
[47]
The continued performance of the contract would serve no useful
purpose. It might benefit Vossloh and Swifambo, but it would
be to
the detriment of the public and to the detriment of PRASA. While it
is true that PRASA’s current locomotives are old
and must be
replaced, it assists no one to spend public money on new locomotives
that are not fit for purpose. Swifambo contends
that PRASA will have
to start the tender process again, which will be costly and will take
time. But as PRASA argues, that is unavoidable,
and preferable to
spending a further R1 billion on locomotives that cannot safely be
used on South African railway lines.
[48]
Apart from the fact that no purpose would be served in continuing
with the performance of the contract, the high court was
correct in
saying that it would be harmful to allow a contract, concluded in a
corrupt process, to stand. I see no reason to interfere
with the
discretion exercised by Francis J.
[49]
Accordingly the appeal is dismissed with the costs of two counsel.
________________________
C
H Lewis
Judge
of Appeal
APPEARANCES
For
Appellant: D Mpofu SC (with him N Rajab-Budlender, M Stubbs and M
Nxumalo)
Instructed
by:
Edward
Nathan Sonnenbergs, Johannesburg
Honey
Attorneys, Bloemfontein
For
Respondent: A Subel SC (with him QG Leech SC)
(Heads
also prepared by A Dipa and S Scott)
Instructed
by:
Werksmans
Attorneys, Johannesburg
Michael
du Plessis Attorneys, Bloemfontein