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[2013] ZAFSHC 225
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Blackbird Trading t/a BB Tech v Mangaung Metropolitan Municipality and Another (3564/2013) [2013] ZAFSHC 225 (28 November 2013)
IN
THE HIGH COURT OF SOUTH AFRICA
FREE
STATE DIVISION, BLOEMFONTEIN
Case
No: 3564/2013
In
the matter between:
BLACKBIRD
TRADING T/A BB TECH
….......................................................................
Applicant
versus
MANGAUNG
METROPOLITAN MUNICIPALITY
…...........................................
1
st
Respondent
NAMBITI
TECHNOLOGIES
…................................................................................
2
nd
Respondent
CORAM:
NAIDOO, AJ
HEARD
ON
:
21
NOVEMBER 2013
DELIVERED
ON:
28 NOVEMBER 2013
JUDGMENT
[1]
This is an application in which the applicant seeks the following
order:
“
1.
That, pending the outcome of mediation proceedings or, in the event
of a failed
mediation, the final
adjudication of an action or application to be instituted within 20
days after the conclusion of the mediation
in order to establish the
respective rights of the parties:
1.1
The First Respondent be interdicted and
restrained from limiting, curtailing or invading in any unlawful
manner the Applicant’s
contractual rights in terms of Purchase
Contract No. C051/A;
1.2
The First Respondent be ordered to allow
the applicant to continue rendering the goods and services
contemplated in terms of Purchase
Order No C051/A for as long as the
contract prevails:
1.3
The First Respondent be interdicted and
restrained from procuring or utilizing any services, goods or
products of the Second
Respondent or any third party that falls
within the ambit of the goods and services that the Applicant is
obligated to render to
the First Respondent in terms of Purchase
Contract No. C051/A for as long as the contract prevails;
2. That the First
Respondent be ordered to pay the cost of the application, save in the
event of the Second Respondent opposing
then, and in such event, the
First and Second Respondents be ordered to pay the costs of the
application jointly and severally
– the one paying the other to
be absolved.
3.
Further and /or alternative relief.”
[2]
The first respondent opposed the application, alleging fraud and
impropriety on the part of the applicant, a breach of contract
by the
applicant and that the contract was void
ab
initio
largely because the applicant
failed to register for Value Added Tax (VAT) in terms of section 23
of the South African Revenue Act
56 of 1999. The second
respondent did not oppose the application. Mr WA Van Aswegen
appeared for the applicant while
the first respondent was represented
by Mr TL Manye.
[3]
The first respondent called for tenders for the supply and
maintenance of computers and related equipment, and the installation
and configuration of network equipment, in response to which the
applicant placed a bid for the provision of the required goods
and
services. Following the successful bid by the applicant, the first
respondent and the applicant entered into Purchase Contract
No C051/A
(the Purchase Contract) during December 2011, which extensively
regulated the contractual relationship between the applicant
and the
first respondent. Notwithstanding the date of signature, the contract
was to endure for a period of three (3) years, from
26 October 2011
to 25 October 2014.
[4]
It is perhaps useful to highlight certain provisions of the Purchase
Contract, which are pertinent to the present application
and which
will serve to contextualise the current dispute. These are
clauses 20, 21 and 24, which provide as follows:
“
20
.
BREACH OF AGREEMENT
20.1 In the event
that either of the parties is in breach of any term of this
Agreement, and fails to remedy such breach within
14 (fourteen)
days
after receipt of a notice calling upon it to do so, then in
such event the party furnishing the notice shall be entitled to:
20.1.1 compel the
other party to comply with the terms and obligations of the contract;
20.1.2 cancel the
contract forthwith;
20.1.3 in both
instance, claim any damages suffered as a result of the breach.
21.
TERMINATION FOR DEFAULT
21.1 The
Municipality may, without prejudice to any other remedy for breach of
contract, by written notice of default sent to the
Contractor,
terminate this contract in whole or in part:
21.1.1 if the
Contractor fails to deliver any or all of the goods within the
period(s) specified in the contract, or within any
extension thereof
granted by the Municipality;
21.1.2 if the
Contractor fails to perform any other obligation(s) under the
contract; or
21.1.3 if the
Contractor, in the judgment of the Municipality, has engaged in
corrupt or fraudulent practices in competing for or
in executing the
contract.
21.2
In the event that the Municipality terminates the contract in whole
or in part, the Municipality may procure, upon such terms
and in such
manner, as it deems appropriate, goods similar to those undelivered,
and the Contractor shall be liable to the Municipality
for any excess
costs for such similar goods, works or services. However, the
Contractor shall continue performance of the contract
to the extent
not terminated.
24. SETTLEMENT OF
DISPUTES
24.1 If any dispute
or difference of any kind whatsoever arises between the Municipality
and the Contractor in connection with or
arising out of the contract,
the parties shall make every effort to resolve amicably such dispute
or difference by mutual consultation.
24.2 If, after
thirty (30) days, the parties have failed to resolve their dispute or
difference by such mutual consultation, then
either the Municipality
or the Contractor may give notice to the other party of his intention
to commence with mediation. No mediation
in respect of this matter
may be commenced unless such notice is given to the other party. If
the Parties are unable to agree on
the choice of a Mediator, any
Party may apply to the President for the time being of the Law
Society of the Free State Provinces
or another mutually agreed
nominating organisation, to appoint a Mediator. If the Parties accept
the recommendations of the Mediator,
the Parties shall record such
recommendations in an agreement, which shall be legally binding on
the Parties.
24.3 Should it not
be possible to settle a dispute by means of mediation, it may be
settled in a South African court of law.
24.4 Notwithstanding
any reference to mediation and/or court proceedings herein:
24.4.1 the parties
shall continue to perform their respective obligations under the
contract unless they otherwise agree; and
24.4.2
the Municipality shall pay the Contractor any monies due to the
Contractor for goods delivered and services rendered according
to the
prescripts of the contract.”
[5]
It is common cause that the applicant performed in terms of the
contract, for just over a year after signature of the Purchase
Contract, and was paid approximately R14 million by the first
respondent. By way of a letter dated 15 February 2013, the first
respondent unilaterally suspended the contract “
pending
finalisation of an investigation into non-compliance with Supply
Chain Management practises”.
From
the papers it is apparent that the applicant made several attempts to
obtain further information regarding the suspension
of the contract,
without success. On 19 June 2013, the applicant received a
communication via electronic mail from the first respondent,
advising
that “
the outcome of the
investigation was forwarded to our Anti-Fraud and Corruption unit for
their recommendations”.
It is
apparent from this that the investigation was complete, as the
outcome thereof was forwarded as indicated. The applicant’s
complaint is that up to the date of the hearing of this matter, it
had not received a report or any other information concerning
the
investigation.
[6]
It is also common cause that shortly after the first respondent
suspended the Purchase Contract with the applicant, it employed
another service provider to provide the goods and services that it
had contracted with the applicant to provide, without taking
any of
the steps stipulated in the Purchase Contract, particularly as
provided for in clauses 20, 21 and 24 of the contract.
[7]
Mr Manye indicated during argument that the report relating to the
investigation is not complete and that a fair order would
be to
direct the first respondent to complete the report, so that an
assessment can be made as to whether the Purchase Contract
is illegal
or not. Mr Manye also conceded that the first respondent has made
serious allegations against the applicant in its Answering
Affidavit,
without the necessary substantiation. In addition, he conceded
that the City Manager, acting as Accounting Officer
of the first
respondent, was perhaps hasty in suspending the contract and
employing another contractor. It is clear that certain
information
would have been brought to the attention of the Accounting Officer,
which precipitated her action. It is also
not disputed that she
was acutely aware of her responsibility to protect public funds (as
she is expected to do), and to act in
accordance with that
responsibility. An investigation was launched, but seemingly
prior to the investigation being finalised,
the first respondent took
the action that it did to suspend the contract with the appellant and
employ another contractor. The
appellant was not informed of
the outcome of the investigation, which appears to have been
completed, at least by June 2013, nor
was it given the opportunity to
respond to what appear to be serious allegations levelled against it.
Additionally, if the
first respondent had found any fraud or
corrupt conduct on the part of the applicant, it was statutorily
obliged in terms of the
Municipal Finance Management Act 56 of 2003
and the
Preferential Procurement Policy Framework Act 5 of 2000
to
act against the applicant. It has not done so. The
first respondent also failed to act in terms of the prescripts
of the
Purchase Contract, which remains a valid contract. The terms of
which are binding on the first respondent.
[8]
The first respondent has made a number of bald statements and
allegations in its Answering Affidavit regarding fraud and improper
conduct on the part of the applicant, without any substantiation. In
this regard, Mr Van Aswegen referred the court to an excerpt
from the
case of
Allpay Consolidated
Investment Holdings (Pty) Ltd) and Others v Chief Officer, South
African Social Security Agency and Others
2013(4) SA 557 (SCA), which was a case
involving a public tender. Nugent JA said at paragraph 4 on
page 559:
“
Whatever
place mere suspicion of malfeasance or moral turpitude might have in
other discourse, it has no place in the courts –
neither in the
evidence nor in the atmosphere in which cases are conducted. It is
unfair, if not improper, to impute malfeasance
or moral turpitude by
innuendo and suggestion. A litigant who alleges such conduct must do
so openly and forthrightly so as to
allow the person accused a fair
opportunity to respond. It is also prejudicial to the judicial
process if cases are adjudicated
with innuendo and suggestion
hovering in the air without allegations being clearly articulated.
Confidence in the process is built
on transparency and that calls for
the grounds upon which cases are argued and decided to be openly
ventilated.”
This
was said in relation to suggestions and innuendo in the appellant’s
affidavits regarding dishonesty and corruption, but
which were not
pursued as part of the arguments in court. I am in agreement that the
views of the learned judge in this regard
also find application in
this case.
[9]
The first respondent has not provided any challenge to the
applicant’s averments that it would suffer irreparable harm
if
the relief it seeks in this application is not granted. Although Mr
Manye, in argument, suggested that the applicant has the
option to
bring an action for damages against the first respondent, he avoided
dealing with the applicant’s averments in
this regard, made in
the Founding Affidavit. The first respond similarly did not
deal with this in its Answering Affidavit,
save to deny the
allegations. With regard to the balance of convenience, the first
respondent does not dispute the allegations
of the appellant in the
Founding Affidavit, but merely states that the contract between it
and the appellant was void
ab initio.
The further allegation made by the first respondent in this regard
that its employees/officials who unlawfully failed to comply
with
several statutes in procuring goods and services on behalf of the
first respondent have resigned, appears to have no relevance
to the
issue of balance of convenience.
[10]
The first respondent is privy to information that enables it to
assess whether or not the applicant has committed a breach
of
contract or has acted improperly in securing the bid relevant to this
matter. If it so finds, then it has the option to proceed
in terms of
clause 20, 21 or 24 of the Purchase Contract and take the steps
provided for therein. The applicant, in any event,
seeks interim
relief and not a final order in this matter.
[11]
On a consideration of all the circumstances relevant to this matter,
I am of the view that the applicant has established a
case for the
relief that it seeks and I accordingly make the following order:
11.1
Pending the outcome of mediation proceedings or, in the event of a
failed mediation, the final adjudication of an action or
application
to be instituted within twenty (20) days after the conclusion of the
mediation in order to establish the respective
rights of the parties:
11.1.1 The First
Respondent is interdicted and restrained from limiting , curtailing
or invading in any unlawful manner the Applicant’s
contractual
rights in terms of Purchase Contract No C051/A.
11.1.2 The First
Respondent is ordered to allow the Applicant to continue rendering
the goods and services contemplated in terms
of Purchase Contract No.
C051/A for as long as the said contract prevails;
11.1.3
The First Respondent is interdicted and restrained from procuring or
utilising any services, goods or products of the Second
Respondent or
any third party, which fall within the ambit of the goods and
services that the applicant is obliged to render to
the first
respondent in terms of Purchase Contract No. C051/A for as long as
the said contract prevails.
11.2 The First
Respondent is ordered to pay the costs of this application.
S.
NAIDOO, AJ
On
behalf of the applicant: Adv. W.A. van Aswegen
Instructed
by:
Peyper
Sesele Attorneys
BLOEMFONTEIN
On
behalf of the respondent: Adv. T.L. Manye
Instructed
by:
Moroka
Attorneys
BLOEMFONTEIN