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[2012] ZAGPPHC 194
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Esofranki Pipelines (Pty) Ltd and Another v Mopani District Municipality and Others (13480/2011,17852/2011) [2012] ZAGPPHC 194 (29 August 2012)
NOT
REPORTABLE
IN
THE HIGH COURT OF SOUTH AFRICA NORTH
GAUTENG
HIGH COURT, PRETORIA
CASE
NO:13480/2011
17852/2011
DATE:29/08/2012
In
the matter between:
ESOFRANKI
PIPELINES (PTY)
LTD
........................................................
1
st
Applicant
CYCAD
PIPELINES (PTY)
LTD
..................................................................
2
nd
Applicant
And
MOPANI
DISTRICT
MUNICIPALITY
...........................................................
1
st
Respondent
TANGO
CONSULTANTS
CC
......................................................................
2
nd
Respondent
TLONG
REA TRADING SMN
JV
…........................................................
3
rd
Respondent
TLONG
RE YENG TRADING
CC
...............................................................
4
th
Respondent
BASE
MAJOR CONSTRUCTION (PTY)
LTD
...........................................
5
th
Respondent
MAITE
IRENE
MOAKAMELA
....................................................................
6
th
Respondent
MOTLATSO
CONSTANCE MALEBATE
….............................................
7
th
Respondent
LU
JINPU
......................................................................................................
8
th
Respondent
JUDGMENT
MATOJANE
J
INTRODUCTION
[1]
This is an application for the review and setting aside of the
decision of the first respondent, the Mopani District Municipality
to
award a tender for the construction of a welded steel bulk water
pipeline from Nandoni Dam to Nsami Dam in Mopani and Vhembe
District
Municipalities in the Limpopo Province ("the tender") to
the joint venture consisting of second and third respondents.
[2]
In part B of its Notice of Motion Esofranki seeks an order that the
decision to award the tender to the joint venture be reviewed
and set
aside. That any contracts pursuant to the award of the tender be
declared to be of no force and effect, and be set aside.
That
Esofranki be declared to be the sole successful bidder and that the
Municipality be directed to enter into a contract with
Esofranki
alternatively, referring the matter back to the Municipality for
reconsideration.
[3]
Esofranki contends that the Municipality is biased in favour of the
joint venture, and for this reason has awarded the tender
to the
joint venture for the second time. It further contends that the
Municipality and the joint venture have colluded to advance
the
interest of the joint venture.
[4]
Cycad, another unsuccessful tenderer has instituted a parallel review
application relating to the same tender. By agreement
between all the
parties the two review applications have been consolidated and were
heard at the same time.
[5]
Cycad in Part B of its Notice of Motion seeks an order reviewing and
setting aside the award of the tender to the joint venture.
Cycad no
longer prays for an order awarding the tender to Cycad but wants the
tender to be awarded to Esofranki. Cycad contends
that the
Municipality ought not to have eliminated bidders on the basis that
their tender prices were either too high or too low.
Further, the
Municipality ought to have eliminated the joint venture from the
tender adjudication process for failure to have possessed
the minimum
contractor grading designation applicable to the tender.
[6]
The Municipality opposes the relief which Esofranki and Cycad seeks
on various grounds. The Municipality contends that it fully
complied
with the provisions of section 217 of the Constitution, the
Preferential Procurement Policy Framework Act 5 of 2000 ("The
PPPFA") and it's Supply Chain Management Policy when it awarded
the tender to the joint venture, and for that reason alone
the review
application ought to be dismissed with costs.
BACKGROUND
FACTS
[7]
In August 2010 the Municipality invited interested parties to submit
tenders for a construction of a raw water bulk pipeline
from Nandoni
Dam in Thohoyandou to Nsami Dam in Giyani. The tender relates to the
construction of a concrete reservoir with a capacity
of 2 mega litres
and a raw water bulk pipeline from Nandoni Dam to Nsami Dam. Upon
completion of the project, it is envisaged that
raw water will be
pumped from Nandoni Dam through a 500mm diameter pipeline to a
pressure breaker tank near Malamulele and further
through a 600mm
diameter pipeline which will convey water by gravity up to a storage
tank at Nsami Dam. The project was conceived
to address the water
shortage problem in the Giyani Municipal area. It is for this reason
that water has to be sourced from Nandoni
Dam.
[8]
A local State of Disaster with regard to water security was declared
in terms of the
Disaster Management Act 57 of 2002
as the current
water supply infrastructure is inadequate to supply the area with
water and the Municipality is forced to deliver
water by water tanks
to the most affected villages whilst other villagers resort to buying
water at exorbitant prices from those
who have boreholes or fetching
water by wheelbarrows from rivers and other sources.
[9]
On the 28 October 2010 the Municipality awarded the tender to the
joint venture after an adjudication process. Cycad was not
satisfied
with the tender being awarded to the joint venture and launched an
urgent application in the North Gauteng High Court,
Pretoria on 19
November 2010 ("Cycad's first application") for interim
interdictory relief pending the outcome of a review
application.
Esofranki launched a similar application on the 30 November 2010.
Mahowa Inc. entered a notice of intention to oppose
the urgent
application on behalf of the first, second and third respondents. On
the 17 December 2010 the application was by agreement
postponed and
set down for hearing before his Lordship Mr Justice Preller on the 27
January 2011.
[10]
The two applications were settled by agreement between the parties
which agreement was made an order of court by his Lordship
Mr Justice
Preller. In adjudicating the tenders, the Municipality was not aware
that the Preferential Procurement Regulations published
in 725 in GG
22549 of 10 August 2001 were declared invalid on 12 March 2010 by his
Lordship Mr Justice Gorven in the judgment of
Sizabonke Civils CC t/a
Pilcon Projects and Zululand District Municipality and others 2010(1)
SA 356 SCA. The Municipality agreed
that its decision to award the
tender to the joint venture be reviewed and set aside and that the
matter be referred back to it
for re-adjudication. In terms of the
consent order, re-adjudication of the tender was to take place in
terms of the provisions
of the Preferential Procurement Policy Frame
Work Act, No. 5 of 2000 ("the PPPFA") using the 90/10 point
system, 90 points
allocated towards price and 10 points allocated
towards equity promotion goals. The respondents would not take any
further steps
in the implementation and execution of the contract. In
terms of the court order the first, second, third and fourth
respondents
will pay the applicants costs of the application.
[11]
The tenders were re-adjudicated in February 2011 and the tender was
again awarded to the joint venture. Esofranki launched
a second
application for an order that the Municipality's decision to award
the tender to the joint venture be suspended pending
the final
determination of Part B of the application in which an order was
sought reviewing and setting aside the applicant's decision
to award
the tender to the joint venture.
[12]
On 16 February 2011 Cycad also launched an urgent application
("Cycads second application") for an order that, pending
the final determination of the appeal against the Municipality's
award of the tender to the joint venture, the respondents be
interdicted and restrained from concluding and/or implementing any
contract for the supply of labour or materials in the furtherance
of
any work in terms of the tender. The urgent application became
academic when the appeal against the Municipality's award of
the
tender to the joint venture was dismissed. On the 4 March 2011 Cycad
informed Mahowa Inc. that it intended reviewing and setting
aside the
award of the contract to the joint venture and the decision on
appeal, and sought an undertaking that pending the review
application, the respondents would not take any further steps to
conclude the contract or execute the contract. The respondent
failed
to provide the undertaking and Cycad launched an application for
urgent interim relief on the 18 March 2011. Mahowa Inc.
acknowledged
receipt of the application on behalf of all the respondents.
[13]
On the 22 March 2011, his Lordship Mr Justice Fabricius granted an
urgent interim interdict at the instance of Esofranki, interdicting
and restraining the respondents from executing the contract pending
the outcome of the review application instituted by Esofranki.
[14]
On 28 March 2011 the Municipality launched an application for leave
to appeal the interim order granted by his Lordship Mr
Justice
Fabricius. On 11 May 2011, the Municipality's application for leave
to appeal was dismissed and on 19 May 2011 the Municipality
applied
for leave to appeal to the Supreme Court of Appeal ("the
petition").
[15]
Esofranki served a second Rule 49(11) application ("the second
Rule 49(11) application") for relief pending the outcome
of the
petition interdicting the respondents from continuing with the
implementation of the tender pending the outcome of the petition.
After granting of the order the joint venture continued to implement
the tender and Esofranki launched an application for a further
interim interdict pending the hearing of the second Rule 49(11)
application which had been postponed sine die by Judge De Vos.
On 8
July 2011 His Lordship Mr Justice Kollapen granted the second interim
interdict at the instance of Esofranki in the midst
of a part-heard
matter before His Lordship Mr Justice De Vos, interdicting the
respondents from taking any further steps in the
execution of the
works subject to any reasonable measures to safeguard the security of
the works.
[16]
The joint venture took the view that it could lay down the pipes that
were on site in order to protect such pipes as the order
allowed for
the protection of the project assets. Esofranki launched the
"contempt application". The joint venture further
brought
an application seeking an interpretation of Judge Kollapen's order.
His Lordship Mr Justice Jordaan granted an order by
agreement between
the parties suspending the works.
[17]
The Supreme Court of Appeal dismissed the Municipality's petition
with costs. On the 24 August 2011, the Municipality served
an
application for leave to appeal to the Constitutional Court.
Esofranki launched the third Rule 49(11) application to ensure
that
the 22 March 2011 interim interdict order remains in force pending
the outcome of the application for leave to appeal to the
Constitutional Court.
[18]
On 1 September 2011, in response to the third rule 49(11)
application, the Municipality launched a counter-application, seeking
on an urgent basis, inter alia, the discharge of the interim
interdict granted by His Lordship Mr Justice Fabricius on 22 March
2011 and a declaration that the Esofranki review application had
lapsed because they had not filed their supplementary founding
affidavit. The Municipality alleged in the founding affidavit in
support of the counter-claim that, in the light of the substantial
execution of the contract, it would not be just and equitable to set
aside the tender and to award the contract to Esofranki or
any other
successful bidder.
[19]
Cycad intervened in the Municipality's counter application and sought
an opportunity to bring its own application for joinder
as it had
material interest in the outcome of these proceedings. The counter
application was postponed sine die, costs reserved.
ISSUES
[20]
Esofranki no longer persists with the contempt of court relief sought
in the third Rule 49(11) application. The third Rule
49(11)
application was intended to ensure that the 22 March 2011 interim
interdict order remains in force pending the outcome of
the
application for leave to appeal to the Constitutional Court. The
third Rule 49(11) application and the counter application
became
academic when the Constitutional Court dismissed the Municipality's
application for leave to appeal to that Court. The Municipality
has
withdrawn its opposition to the condonation application by Esofranki
in the review application and costs will follow the costs
in the main
proceedings as between Esofranki and Mopani. The joint venture has
decided to abandon its rescission application and
has tendered costs,
including costs of two counsels. The issues for determination are the
following:
20.1
The merits of the third Rule 49(11) application and the costs
thereof. Esofranki seeks a cost order de bonis propriis against
Mahowa, the attorney of record for the Municipality.
20.2
Esofranki's and Cycads review applications.
THE THIRD RULE 49(11)
APPLICATION
[21]
It was contended on behalf of Esofranki that the application for
leave to appeal and the appeal are frivolous and vexatious
and the
application for leave to appeal has been noted for the indirect
purpose to gain time for the joint venture to continue
with the
implementation of the tender so as to be able to argue that the
tender has reached such a stage of implementation that
the review
application has become academic.
[22]
At the outset, it is important to set out the circumstances under
which the order of His Lordship Mr Justice Fabricius was
granted as a
background against which this application should be judged. It would
appear from the reading of the record that the
Municipality and
Esofranki had an understanding that the matter would be stood down to
later on in that week to enable Esofranki
to file a replying
affidavit because the Municipality had served the answering affidavit
the previous day on a public holiday.
Esofranki insisted that the
Municipality must file an application for an order condoning the late
filing of its answering affidavit.
By then the Municipality had not
even filed in court. Counsel for the Municipality addressed the court
on the wish to have the
hearing of Part B of the main application to
be heard on an expedited basis in three weeks time so that whoever
would ultimately
succeed in taking over the project would be
potentially in a position to take over the work that has been done.
Esofranki after
agreeing that the matter would stand down, during
roll call, allowed his Lordship Mr. Justice Fabricius to grant an
order against
the Municipality and the joint venture. The court
granted an interim order without considering what was contained in
the answering
affidavit which sought to explain why the order should
not be granted.
[23]
The Municipality felt aggrieved at the manner in which it was dealt
with before His Lordship Mr. Justice Fabricius. It felt
that its
right to a fair hearing was violated and took the matter on appeal to
redress what it thought was wrong. In dismissing
the Municipality's
application for leave to appeal, His Lordship Mr Justice Fabricius
held that his order was not appealable and
that there were not
reasonable prospect of another court coming to a different
conclusion. The higher courts determined that the
order by Mr Justice
Fabricius was interlocutory and was not appealable. In my view, all
steps taken by the Municipality were in
accordance with the Uniform
Rules of Court and Rules of the Supreme Court of Appeal. I do not
agree that the attempts by the Municipality
to overturn what it
thought was a violation of its constitutional right to be heard in
court was frivolous and vexatious or that
it was dishonest and part
of a stratagem to subvert the course of justice.
[24]
It appears further from the record that between October 2010 when the
tender was awarded to the joint venture and January 2011
when the
award was by agreement reviewed and set aside by his Lordship Mr
Justice Preller no interdict was sought and none was
granted, nothing
stopped the joint venture from executing the tender. Execution of the
tender stopped after the order of His Lordship
Mr Justice Preller. It
is important to note that the order before Preller J was by consent
and the Municipality had agreed to the
setting aside of the first
tender award. It follows therefore that the fact that the
Municipality discharged that costs order does
not provide proof as
contended by Esofranki and Cycad that the Municipality is biased in
favour of the joint venture. In any event,
the costs of the review
application were paid long after the tender was awarded.
[25]
The joint venture resumed the execution of the tender in February
2011 after re-adjudication. An interdict was granted by His
Lordship
Mr. Justice Fabricius J on 22 March 2011 interdicting and restraining
the Municipality and the joint venture from executing
the tender. The
record of the proceedings before Fabricius J indicates that counsel
for the Municipality never purported to act
for the joint venture,
counsel specifically informed the court that he acted for the
Municipality alone and no counsel represented
the joint venture even
though Mahowa might have indicated to Esofranki and Cycad that he did
act for the joint venture.
[26]
Mahowa Inc.'s Pretoria correspondent attorneys have deposed to an
affidavit wherein it is conceded that it was the correspondent's
attorney's error which resulted in the Notice to Opposed being
delivered on behalf of all the respondents instead of the
Municipality
alone. This concession is contradicted by an earlier
settlement agreement that Mahowa concluded on behalf of the joint
venture
which was made an order of court by His Lordship Mr. Preller
J, burdening the joint venture with costs. Mahowa further personally
consulted with Ms Malebate, a representative of the joint venture and
drafted affidavits that he personally sent to Esofranki.
He also
signed an acknowledgment of receipt when papers were served on the
first, second, third and fourth respondents by Esofranki.
Until the
19 April 2010 when Attorney Mahowa notified Cycad in writing that he
was only acting for Municipality and Ramothwala,
Mahowa represented
the first to fifth respondents in all the proceedings preceding the
review application in the Cycad mattes.
[27]
The order granted by Fabricius J was not served upon the joint
venture which continued to execute the tender. The works were
interdicted by his Lordship Mr Justice Webster on 1 April 2011 to 4
April 2011 and later extended to 15 April 2011. On 15 April
2011 his
Lordship Mr Justice Fabricius extended the order to the 11 May 2011
whereupon the application for leave to appeal was
dismissed. On the
19 May 2011 the Municipality applied for leave to appeal to the
Supreme Court of Appeal. During the time that
the interdict was
suspended by the applications for leave to appeal, the joint venture
and the Municipality as they were entitled
to do, continued to
execute the tender until they were interdicted from doing so.
[28]
In my view, there is no basis for the contention by Esofranki that
the actions of the Municipality legitimised contempt of
the various
orders of this court and that the Municipality had an ulterior and
misguided motive of advancing the interests of the
joint venture.
Nothing prevented Esofranki from seeking declaration of contempt if
it felt that it had a case. During all this
time the tender had not
been set aside and it existed as a matter of fact. It was not
unlawful to give effect to it until it is
set aside by a court in
proceedings for judicial review. See Oudekraal Estates (Pty) Ltd v
City of Cape Town
2004 (6) SA 222
(SCA) [26].
[29]
In our law, all administrative acts are presumed to have been done
rightly until such time that the decision is set aside by
a court of
law. The Municipality was accordingly entitled to proceed on the
basis that the award of the tender was valid and lawful
until set
aside by the court. The presumption of regularity is explained by
Lawrence Baxter Administrative Law at 355-6 and at
380 as follows:
"There
exists an evidential presumption of validity expressed by the maxim
omnia praesumuntur rite esse acta; and until the
act in question is
found to be unlawful by a court, there is no certainty that it is".
[30]
Esofranki raises the issue of alleged contempt in these proceedings
to demonstrate that the Municipality was biased against
it and acted
in collusion with the joint venture. They point out that Mahowa has
fraudulently represented to the court and all
parties to these
proceedings that he represented both the Municipality and the joint
venture. That Mahowa on behalf of the Municipality
paid the taxed
costs that were claimed from the joint venture and that both the
Municipality and the joint venture have jointly
implemented a
stratagem to ensure that as much work is done for so long as
possible. There is no merit in these submissions because
what Mahowa
may have done after the award of the tender and during litigation
cannot be a ground of review.
[31]
In a judicial review, the focus is on the process, and on the way in
which the decision-maker came to the challenged conclusion,
all the
facts which allegedly occurred after the award of the tender, are
irrelevant and are not taken into account. Courts have
always taken
care to distinguish between the merits of a decision and the process
by which it is reached. The former cannot justify
a breach in the
standards of the latter. See Yates v University of Bophuthatswana and
others
1994 (3) SA 815
(BG) at 835G. Rustenburg Platinum Mines Ltd v
Commission for Conciliation Mediation and Arbitration
2007 (1) SA 576
(SCA). The repeated allegations by Esofranki that the Municipality,
the joint venture including Mahowa were corrupt and acted in
contempt
of the orders granted by this court are not sourced from the record
or the Notice of Motion as supplemented in terms of
Rule 53(l)(b) and
importantly Rule 53(4). Accordingly, any facts and material which
were not before the Municipality and which
were not considered by the
Municipality when the decision was made are irrelevant for purposes
of determining whether or not the
decision in issue is reviewable.
LEGAL
FRAMEWORK
[32]
Section 217(1) of the Constitution of the Republic of South Africa
Act 108 of 1996 governs the award of tenders. The award
of tenders
must be made in accordance with a system that is fair, equitable,
transparent, competitive and cost-effective. The Supreme
Court of
Appeal in Millenium Waste Management (Pty) Ltd v Chairperson, Tender
Board, Limpopo Province and Others
2008 (2) SA 481(SCA)
at para 4
described section 217 as:
"Laying
down minimum requirements for a valid tender process and contracts
entered into following an award of the tender to
a successful
tenderer".
See
also Steenkamp NO v Provincial Tender Board, Eastern Cape
2007 (3) SA
121
(CC) at para 20.
[33]
Organs of state are required to adhere to a procurement policy that
fall within the framework created by the PPPFA and the
CIDB Act.
Section 16(3) of the CIDB Act obliges the Minister for National
Development responsible for Public Works to prescribe
the manner in
which public sector construction contracts may be invited, awarded
and managed within the framework of the registrar
and within the
framework of the procurement policy.
[34]
It is common cause that the tenders had to be adjudicated in terms of
the Municipality's Supply Chain Management Policy, the
PPPFA and
section 217 of the Constitution.
[35]
The Municipality is obliged, in terms of section 2(l)(a) of the
PPPFA, to adjudicate an "acceptable tender" in accordance
with a preference points system prescribed in the PPPFA.
[36]
An "acceptable tender" is defined in the PPPFA as a tender
which, in all respects, complies with the specifications
and
conditions of tender as set out in the tender document. The
definition of "acceptable tender" in the PPPFA: Chairperson
Standing Tender Committee and Others v JFE Sapela Electronics (Pty)
Ltd
2008 (2) SA 638
SCA at para 14.
[37]
An organ of state is obliged to score contracts with a rand value of
more than R500 000,00 in terms of a points system that
allows for 90
points to be awarded to the lowest acceptable tender and a maximum of
10 points to be allocated for the achievement
of equity promotion
goals. See section 2(l)(a) of the PPPFA.
[38]
Equity promotion goals include, in terms of section 2(l)(d) of the
PPPFA, contracting with persons that were historically disadvantaged
("HDI"s) on the basis of race, gender or disability. Any
goal for which a point may be awarded must be clearly specified
in
the invitation to bid. See section 2(l)(e) of the PPPFA.
[39]
An organ of state is obliged to award the contract to the bidder that
scores the highest points unless objective criteria justifies
the
award of the tender to another bidder. Section 2(l)(f) of the PPPFA.
Criteria justifying the award of the tender to an entity
other than
the bidder with the highest score may not include any criteria
associated with the award of points for equity promotion
goals. See
section 2(l)(f) of the PPPFA.
[40]
Regulation 9 of the Regulations promulgated under the PPPF Act
provides that "despite Regulation 3(4), 4(4), 5(4), 6(4)
and
8(80), a contract may, on reasonable and justifiable grounds be
awarded to a tenderer that did not score the highest number
of
points."
[41]
Pursuant to the provisions of the CIDB Act, the Minister adopted
Regulations ("the CIDB Regulations") prescribing
the manner
in which public sector construction contracts should be invited,
awarded and managed. Section 16(3) of the CIDB Act,
Regulations
published in GN 692 in GG 26427 of 9 June 2004, as amended.
[42]
The Regulations compel contractors to apply to the CIDB for
registration in at least one contractor grading designation.
(Regulation
7(2)). Contractors may register in one or more classes of
work but may hold only one contractor grading designation in a
particular
class of work (Regulation 7(3)). Examples of the classes
of work would be Civil Engineering (CE), Electrical Engineering (EP)
and
Mechanical Engineering (MB).
[43]
The CIDB will award a contractor grading designation to a contractor
with reference to the contractor's financial capability
and work
capability (Regulation 11). The contractor grading designations
ranges between 1 to 9.
[44]
Each contractor grading designation indicates a contractor's
capability to undertake a contract in the range of tender values
associated with the designation in the class of the construction work
to which the category of designation of the contract relates
to
(Regulation 17).
[45]
For example, a contractor grading designation of 1 indicates that the
contractor is considered to be capable of undertaking
a contract with
a contract value of less than R200 000.00; a contractor grading
designation of 8 indicates a capability to perform
a contract with a
maximum contract value of R130 000.00 and a contractor grading
designation of 9 indicates a capability to perform
a contract with a
contract value higher than R130 000.00 but with no limitation.
[46]
The CIDB may also classify a contractor as a "potentially
emerging" enterprise by identifying the principals who
are
previously disadvantaged persons, by establishing whether the
principals own at least 50% of the enterprise and by establishing
whether the principals exercise the authority to manage the assets
and daily operations of the enterprise and appropriate managerial
and
financial authority in determining the policies and directing the
operations of the enterprise (Regulation 13). A contractor
registered
as a "potentially emerging" enterprise will carry the
designation "PE".
[47]
This case cannot be properly decided without first having regard to
the manner in which Esofranki, a civil engineering group
with a turn
over of 1.9 billion conducts this litigation. Esofranki and Cycad,
despite their protestations to the contrary are
not independent. The
Esofranki-Cycad joint venture was awarded a tender by the Ethekwini
Municipality for the construction of the
Western Aqueduct Phase Two.
The KwaZulu Natal High Court in the matter of Sanyathi Civil
Engineering and Consultants v Ethekwini
Municipality reviewed and set
aside the award of the tender to the Esofranki-Cycad joint venture as
the court found that corruption
could not be ruled out in the tender
process.
[48]
The present legal representative of Cycad appeared for the
Esofranki-Cycad joint venture in the Natal matter. Counsel took
issue
with the submission by counsel for the joint venture that the
founding papers in the two applications that presently serve
before
the court were remarkably so similar that it was clear that they were
drafted by the same hand or at the very least, the
one served as the
inspiration of the other.
[49]
It is self-evident from a comparison of paragraph 130 of the founding
affidavit in the Cycad matter and paragraph 14.29 in
the Esofranki
matter that the two overlap completely or one served as the
inspiration of the other. The deponent in the Cycad matter
stated:
"130.1
The third respondent failed to submit a valid tax clearance
certificate in that the purported tax clearance certificate
lapses on
25 September 2010;
130.2
the purported letter of Good Standing of the third respondent issued
by the Office of the Compensation Commissioner lapses
on 31 August
2010 due to the 2009 return not having been submitted;
130.3
the Joint Venture failed to submit the qualifications, experience and
positions of the sole member of the second respondent,
Constance
Malebate, one of the key personnel has required in terms of page 21
of the List of Returnable Documents;
130.4
the Joint Venture failed to submit a valid financial reference from a
bank as required in terms of page 23 of the List of
Returnable
Documents;
130.5
the second respondent failed to submit a schedule of its experience
as required by page 30 of the List of Returnable Documents;
130.6
the second and third respondents failed to submit a properly worded
guarantee as required in terms of CI.3 at page 58 of the
List of
Returnable Documents. The document which purports to be a 'Guarantee'
from tropical Eden Brokers CC, does not satisfy the
requirements of
the pro forma guarantee; and
130.7
the Joint Venture failed to submit the (sic) certificate reflecting
the Joint Venture's CIDB grading."
[50]
In the Esofranki application the following is stated by the deponent:
"14.29.1
The fifth respondent failed to submit a valid tax clearance
certificate. The purported tax clearance certificate marked
7\R24',
lapses on 25 September 2010;
14.29.2
the purported Letter of Good Standing issued by the Office of the
Compensation Commissioner relating to the fifth
respondent,
annexed marked 'AR25', lapses on 31 August 2010 due to the 2009
return not having been submitted. No such letter was
filed on behalf
of the fourth respondent;
14.29.3
the fourth and fifth respondents failed to submit the qualifications,
experience and positions of the sole member of the
fourth respondent,
Constance Malebate, one of the 'key personnel' as required in terms
of page 21 of the 'List of Returnable Documents'
annexed marked
'AR26';
14.29.4
the fourth and fifth respondents failed to submit a valid financial
reference from a bank as required in terms of page 23
of the List of
Returnable Documents. A letter from First National Bank
('FNB'), annexed marked 'AR27', is incomprehensible
and fails, on a
plain reading of the document, to satisfy the requirement that the
fifth respondent is in good standing with FNB.
The fourth respondent
has failed to submit the letter confirming that it is in good
financial standing, as required;
14.29.5
the fourth respondent failed to submit to submit a schedule of its
relevant experience as require by page 30 of the List
of Returnable
Documents, annexure marked 'AR28'; and
14.29.6
the fourth and fifth respondents failed to submit a properly worded
guarantee as required in terms of CI.3 at page 58 of
the List of
Returnable Documents, which purports to be a 'Guarantee' from
Tropical Eden Brokers CC, does not satisfy the requirements
of the
pro forma guarantee. The purported
'Guarantee'
from Tropical Eden Brokers, annexed marked 'AR29', also falls
hopelessly short of the requirement of the table A2, annexed
marked
V\R30."
[51]
The conclusion is inescapable that the applicants have embarked on a
deliberate strategy to attack the flanks of the Municipality
simultaneously in a pinching motion until it capitulates and award
the contract to Esofranki. In its Notice of Motion, Cycad sought
that
the tender be awarded to it and after a detailed and sustained
technical attack on the tender process, it now, for unexplained
reasons, suggests in its Heads of Argument that the tender should now
be awarded to Esofranki. A simile used by the counsel for
the
Municipality is apt, "the stalking horse now withdraws and the
candidate becomes Esofranki who says we want the tender
to be awarded
to us". This in my view, suggests an ulterior motive to benefit
and or advance the cause of Esofranki in the
litigation.
[52]
If any further proof of collusion between Esofranki and Cycad is
sought, one has to have regard to a letter, provisionally
admitted as
evidence, by Mr Thomson, Esofranki's legal representative addressed
on behalf of Cycad, who had legal representation
of their own. The
letter suggested that if the Municipality were to settle on the
suggested terms, Esofranki and Cycad would refrain
from supporting
any future criminal investigations against the Municipality.
I
now proceeded to deal with the provisionally admitted letters and
affidavits.
[53]
On the final day of argument, counsel for the joint venture sought to
introduce into evidence two documents, one being a letter
from
Esofranki's legal representative (exhibit "A") and the
other being a letter from Cycad's attorneys (exhibit "B").
Esofranki objected to having its letter placed before the court on
the basis that it was privileged because it entailed settlement
discussions between the parties. There was no objection to the
handing up of exhibit "B" which was sent at the instance
of
Cycad to all parties distancing itself from the contents of exhibit
"A". The two letters were provisionally admitted
into
evidence as Esofranki even objected to the court having a look at the
letter if only to determine its admissibility.
[54]
I quote the contents of exhibit "A" to show why it is, in
my view, admissible as evidence in these proceedings:
"1.
Having regard to recent developments which have resulted in five
departments of the Limpopo Provincial Government being
placed under
administration and the probable investigation of this tender and its
award as also the conduct of the legal proceedings
and the costs
associated therewith (which we intend encouraging) we are instructed
to make the following proposals:
"1.1
That the respondents withdraw their opposition to the application;
1.2
That the first respondent confirms the award of the tender to our
client;
1.3
That the respondents jointly and severally tender payment of our
client's legal costs and those of Cycad;
1.4
Our client would withdraw the relief sought against Mr Mahowa (on the
basis that each party pays its own costs); and
1.5
Our client and Cycad would refrain form pursuing or encouraging or
supporting any future investigations into
matters relating to
this tender and the conduct of the legal proceedings." (own
emphasis).
[55]
Cycad in exhibit "B" distanced itself from exhibit "A"
in its entirety and informed all the parties that
the contents of and
proposals made in exhibit "A" were never discussed or
cleared with it or its legal representatives
and that Mr Thompson did
not have a mandate to speak on its behalf. Mr Thompson is called upon
to set the record straight.
[56]
Esofranki sought to introduce an affidavit from Mr Thompson
explaining the circumstances under which exhibit X was written.
Various
newspaper articles about alleged pending criminal prosecutions and
investigations by the CIDB into corruption in the Limpopo
province
were attached to the affidavit. The affidavit was also provisionally
admitted into evidence.
[57]
Mr Thompson in his affidavit fails to explain how it came about that
he saw fit to address a letter on behalf of Cycad who
already had
legal representation. He failed to set the record straight as
demanded in exhibit "B". Mr Thompson further
fails to
explain why the investigation of corruption in the Limpopo Province
should give rise to a concern on the part of Esofranki
as the
Municipality was not placed under administration. Mr Thomson states
in his affidavit that exhibit "A" was well
received and
that he received two innocuous responses from the respondents. The
attorneys for the joint venture and Mahowa disputes
Mr Thompson's
assertions and denies having undertaken to respond once they have
obtained instructions from their clients. The attorneys
for Mahowa
are adamant that there were not settlement negotiations taking place.
[58]
The contents of exhibit "A" clearly speaks for itself.
Esofranki is prepared to ignore the crime that it contents
the
Municipality and its legal representatives have committed if only it
can get the contract. This is all the more so in circumstances
where
Mahowa has alleged in his duplicating affidavit that the relief
sought against him de bonis propriis was brought for the
ulterior
motive of pressurising him to advise his client, the Municipality, to
settle with Esofranki and Cycad.
[59]
It is clear that the joint venture and Mahowa are not relying on the
letter to obtain an irregular advantage in respect of
a concession or
admission made during settlement negotiations, but to show that it
contains a threat that if the matter is settled
on suggested terms
Esofranki and Cycad will refrain from pursuing or encouraging or
supporting any future investigation into the
matters relating to the
tender and the conduct of the legal proceedings. The letter in my
view demonstrate the ulterior purpose
for seeking costs de bonis
propriis against Mahowa and is under the circumstances admissible
into evidence to demonstrate that
there was a threat made. See
Hoffend v Elgety 1949(3) SA 91 (A) at 108-9 and Naidoo v Marine &
Trade Ins Co. Ltd
1978 (3) SA 666
at 681 B-
[60]
Failure to admit the letter into evidence will be against public
interest as the letter also refers to the conduct of the present
legal proceedings. Esofranki relies heavily on allegations of
corruption and fraud on the part of the Municipality and its legal
representatives. These allegations are damaging in the extreme and
intended to be so as stated by Mr Luderitz SC appearing for
Esofranki. Mr Luderitz SC attributed unlawful and dishonest conduct
to his more senior colleague and his junior in open court.
The
gratuitous aspersions cast by Mr Luderitz SC on his colleagues during
argument are not been made on affidavit in the third
Rule 49(11)
application and cannot be responded to properly by the legal
representatives concerned. Such conduct cannot be countenanced
and
should be censured.
[61]
The letter further demonstrates that attorney Thompson/ Esofranki is
prepared to hamper the proper administration of justice
through
extortion or bribery in exchange for the contract. Such conduct ought
not to be countenanced and should be censured. Hunt,
S.A Criminal Law
and Procedure, vol. II, p 204 defines the crime of compounding as:
"unlawfully
and intentionally agreeing for reward not to prosecute a crime which
is punishable otherwise than by fine only".
See
Arend and Another v Astra Furnishers (Pty) Ltd
1974 (1) SA 298
(C),
COSTS
DE BONIS PROPRIIS
[62]
Esofranki seeks a punitive de bonis propriis cost order on attorney
and own client scale, including the costs incumbent upon
employment
of two counsel against the attorney of record of the Municipality,
Mahowa. It is submitted that the costs order sought
against Mahowa is
justified by his alleged dishonest conduct in representing both the
Municipality and the joint venture in an
attempt to advance the
improper motives of the Municipality. In a sanctimonious and
disingenuous manner, Esofranki seeks costs
de bonis propriss against
Mahowa with dirty hands and with an ulterior motive. Much as Mahowa
did not have authority to represent
the joint venture the same
applies to Mr Thompson who did not dispute in his affidavit, the
averment of Cycad in exhibit "B"
that he did not have the
authority to represent Cycad.
[63]
Mahowa Inc.'s Pretoria correspondent attorneys have deposed to an
affidavit wherein it is conceded that it was the correspondent's
attorney's error which resulted in the Notice to Oppose being
delivered on behalf of all the respondents instead of the
Municipality's
alone. From the reading of the record of the
proceedings before Fabricius J on the 22 March 2011, counsel for the
Municipality
expressly placed on record that he was acting for the
Municipality alone. The joint venture was not represented. The
contention
that Mahowa faxed affidavits on behalf of the joint
venture is not raised in the founding affidavit of the review
application with
the result that Mahowa is not given an opportunity
to explain his conduct.
[64]
It is submitted that Mahowa appears not to have advised his client
appropriately, consequently, has caused a substantial amount
of the
tax payers monies to be wasted by repeated, defective and meritless
applications for leave to appeal which Mahowa ought
to have advised
his client on, despite being repeatedly warned by Esofranki that
appealing against an interim order constitutes
an abuse of the
process of court. The difficulty with this submission is that
Esofranki deliberately chose to ignore adverse evidence
in the
answering affidavit of the Municipality that it is not correct that
Mahowa advised the Municipality not to comply with the
orders granted
by this court. The affidavit states that Mahowa advised the
Municipality to comply with the orders granted by this
court when
such orders were in full force and effect and the Municipality
complied with such orders. In my view, this submission
is based
entirely on speculation and is malicious. Mahowa is neither an
official nor an employee of the Municipality. He has no
power to
influence its actions or inactions other than to provide the ordinary
services of an attorney who is guided by senior
counsel.
[65]
In its founding affidavit, Esofranki stated that His lordship Mr
Justice Fabricius interdicted "all of the respondents
from
continuing with the implementation of the tender until ..."
despite conceding that no order has to date been granted
against
Mahowa, Esofranki refused the invitation by Mahowa to state clearly
that references made in respect of all respondents
excluded Mahowa
and persisted with the false claims that Mahowa was guilty of
contempt of court thereby attempting to mislead the
court. Such
conduct is reprehensible and the application against Mahowa should
not have been launched.
[66]
It is submitted further that Mahowa filed lengthy affidavits,
deliberately attaching same documents repeatedly in order to
bolster
the volume of the third Rule 49(11) application, that he attached
numerous irrelevant and bulky documents without referring
to the
relevant part of such documents. Such conduct, it was argued
constitutes a serious abuse of the process of court warranting
a de
bonis propriis costs order. It was further argued that such
documentation was attached simply for purposes of attempting to
delay
the adjudication of the third Rule 49(11) application and to tie up
the time of the legal representatives of Esofranki.
[67]
The third Rule 49(11) application before Tuchten J would not have
been disposed off in an urgent court in the matter of hours
as there
were many parties separately represented. There were two counsels for
Esofranki, two counsels for the Municipality, two
counsels for the
joint venture and one counsel for Mahowa. If one have regard to the
founding affidavit which had a total of 196
pages, the answering
affidavit and the counter application alone without annexures, the
papers were already voluminous. In any
event, His Lordship Mr Justice
Tuchten was in a better position to consider whether indeed court
papers were burdened to the extend
submitted if the submission was
raised properly in the papers before him. It was Esofranki's legal
representatives who prepared
the record and could have excluded from
the record irrelevant annexures and confined the record to what was
relevant to the relief
being sought.
[68]
In my view, the application for punitive costs against Mahowa was
brought by an attorney for an ulterior purpose, to force
the
Municipality to capitulate. This is aggravated by the fact that with
full knowledge that Mahowa was never a party to any of
the
applications that served before various courts, Esofranki falsely
contended that Mahowa failed to provide a re-adjudication
report in
contempt of the court order. Mahowa was deliberately accused of
unprofessional, dishonourable and unworthy conduct. He
was
maliciously accused of wasting taxpayer's money and failing to
respond to correspondence. The above conduct by Esofranki and
its
attorney calls for an order of costs on an attorney and client scale.
GROUNDS
OF REVIEW
CIDB GRADING
[69]
The standard Conditions of the Bid required the Municipality, on
opening of the tenders, and before the detailed evaluation
of the
tenders, to satisfy itself that the tenders met all the requirements
of the Bid Data read with the conditions of the Bid,
were properly
and fully completed and signed and were responsive to all the
requirements of the tender conditions.
[70]
It is common cause that the contractor grading designation of "9CE"
was required. The joint venture submitted the
following documents:
70.1
A screen dump from the CIDB website for Base Major reflecting a CIDB
grading of 8CE as at 23 August 2010; and
70.2
A screen dump from the CIDB website for Tlong reflecting a CIDB
grading of 1 CEPE as at 23 August 2010.
[71]
In the Bid Evaluation Report of 1 February 2011 the Municipality
evaluated the joint venture relying on a "screen dump"
dated 27 October 2011, approximately, a year after the date of the
bid submission. It is clear that the joint venture did not comply
with the requisite CIDB grading that was specified in the bid
document at the time of submitting it's tender and ought to have
been
disqualified along with the five other bidders who did not comply
with the requisite CIDB grading. The joint venture bid cannot
be
regarded as "acceptable" in that it does not comply with
the specification and conditions of the municipalities' own
bid
document and was accordingly irrational, arbitrary and unreasonable.
FAILURE
TO COMPLY WITH TENDER CONDITIONS
[72]
Bidders were required, for purposes of claiming points for
functionality and competence, to provide at least the following
information:
72.1
A list of five references with contact details;
72.2
Proof of banking details;
72.3
Proof that the bidder enjoyed a bank rating of "C" or
better;
72.4
Registered financial institutions' full details as guarantor in the
amount of 10% of the contract value for surety purposes;
72.5
Copies of the curriculum vitae, experience and specific knowledge of
the site manager and other key personnel; and
72.6
Proof of ownership of vehicles and equipment.
[73]
Tlong failed to submit a list of its own qualifications and
experience or list of key personnel or plant equipment. Ms Malebate,
a sole member of Tlong, failed to submit a list of her own
qualification and experience in the construction industry. The joint
venture claimed that Tlong was a lead partner although it failed to
meet the requirement of a CIDB grading of at least 8CEPE. Base
Major's CIDB grading of 8CE failed to satisfy the minimum contractor
grading designation required of the lead partner.
[74]
Base Mayor alleges that it has always had a CIDB grading of 9CE but
fails to explain why it tendered on the basis that it had
a CIDB
grading of 8CE.
BIAS
IN FAVOUR OF THE JOINT VENTURE
[75]
The following facts support the conclusion that the decision to
appoint the joint venture was vitiated by bias, bad faith and
ulterior purpose of using Ms Malebate for fronting. One of the
documents the Municipality would have considered in adjudicating
the
tender is the joint venture agreement recording inter alia, that the
two entities are both service providers in the field of
civil
construction and that they have in their individual capacities
amassed experience in implementing the construction. Tlong
was only
created after the invitation to tender was extended and a week before
the tender was actually submitted. It has no employees,
assets or
income.
[76]
The Municipality will have noted that the Tlong did not conduct any
business at the time the tender was submitted. It did not
exist at
the given address. I agree with counsel for Cycad that the
representation that the joint venture carries on business at
given
address is a fraud on the Municipality and they should not have been
allocated a point in respect of locality. The given
address is a
residential house with only a few furniture. Had proper investigation
been done, the Municipality would have found
that Mrs Malebate is
employed at an unrelated company, MM Paving and it is part of Selby
Construction, she and the owner are brother
and sister. There are in
fact neither offices nor an operating business address.
[77]
Ms Malebate made a false representation that the total number her
firm has been in business was three years. Tenderers were
required to
list all shareholders by name, position, identity numbers and
citizenship, HDI etc. It is falsely represented that
Mr Jim Lu a
Chinese national obtained South African citizenship on the date of
his birth.
[78]
The representation is made that the contract is going to be managed
and executed in equal portions by Tlong and Base Major
when it is
obvious that Tlong has no experience in construction work at all.
According to the joint venture agreement the equity
participation was
going to be on 30:70 basis yet when it comes to claiming points in
respect of women, the joint venture claims
50 percent of the
available points - instead of 30 percent of the available 2.5 points
and on PDI should have been 30 percent of
the available 3 points.
[79]
I agree with Cycad's contention that the decision to award the tender
to the joint venture falls to be reviewed and set aside
on, inter
alia the following grounds:
79.1
Section 6 (2)(b) of PAJA, read with the Preferential Procurement
Policy Framework Act, 5 of 2000 ("The
PPPFA
Act") and the Construction Industry Development Board Act 38 of
2000 ("CIDB Act") and its regulations;
79.2
Section 6(2)(d) of PAJA, the decision to award the tender to the
joint venture was materially influenced by an error of law;
79.3
Section 6(2)(e)(iii) of PAJA, the decision of the Municipality took
irrelevant considerations into account and failed to take
relevant
considerations into account;
79.4
Section 6(2)(e)(vi) of PAJA, the decision of the Municipality was
taken arbitrarily;
79.5
Section 6(2)(f) of PAJA, the decision of the Municipality was not
rationally connected to the purpose for which it was taken,
the
purpose of the empowering legislation and the information before the
Municipality;
79.6
Section 6(2)(h) of PAJA, the decision of the Municipality is so
unreasonable that no reasonable person could have so exercised
the
power; and
79.7
Section 6(a)(iii) of PAJA, there is a reasonable suspicion of bias in
favour of the joint venture.
[80]
The Constitutional Court had found that where there is a procedurally
unfair administrative action, this is a violation of
the
Constitution, and the court must in terms of section 172(l)(a),
declare such action to be invalid. See Bengwenyama Minerals
v Genorah
Resources supra. The conduct of the Municipality is inconsistent with
the constitution and is invalid in terms of section
172 (l)(a) of the
Constitution.
REMEDY
[81]
Section 6 of PAJA, grants a court a broad discretion when crafting a
remedy, to ensure that it is just and equitable. The Constitutional
Court in Bel Porto School Governing Body and Others v Premier,
Western Cape, and Another
[2002] ZACC 2
;
2002 (3) SA 265
SA (CC) stated:
"
The flexibility in the provision of constitutional remedies means
that there is no constitutional straightjacket such as
suggested in
the High Court or in argument in this Court. The appropriateness of
the remedy would be determined by the facts of
the particular case.
In a constitutional state with a comprehensive bill of rights
protected by a judiciary with the power and
the duty to do what is
just, equitable and appropriate to enforce its provisions: Par 181.
See also President of the Republic of
South Africa and Another v
Modderklip Boerdery (PTY) Ltd 2005(5) SA 3 (CC)".
[82]
If follows that the fact that a contract has been invalidated does
not automatically lead to the invalidation of all acts performed
pursuant thereto. Froneman J in Bengwenyama Minerals v Genorah
Resources 2011(4) SA 113 stated :
"The
rule of law must never be relinquished but the circumstances of each
case must be examined in order to determine whether
factual certainty
requires some amelioration of legality, and if so, to what extent.
The approach taken will depend on the kind
of challenge presented -
direct or collateral; the interests involved, and the extent or
materiality of the breach of the constitutional
right to just
administrative action in each particular case".
[83]
In replying oral argument, Esofranki's counsel handed up to court a
draft order in which, at paragraph 5, Esofranki seeks to
be awarded
the balance of the partially completed contract which is the subject
of the review application. The proposed relief
raises a multiplicity
of underlying factual issues that have not been ventilated and is in
my view, not just and equitable under
the circumstances as it will
not serve the purpose of ensuring that water is brought to the
destitute communities.
[84]
Esofranki has disputed the quality and workmanship of the work that
has been done by the joint venture. There are also a number
of
material risks that have arisen since the work was stopped as a
result of exposure of the site to the elements and bedding
contamination. Esofranki will not take responsibility for the work
and will not give the Municipality any guarantee for such work.
The
joint venture on the other hand will not give the Municipality a
guarantee for the work it has done because not all of it has
been
tested and there will be no incentive to give any guarantee if it is
not going to be paid for such guarantee. Other complex
issues that
have not been considered are the logistical, legal and financial
viability of such a relief. Issues regarding the extent
to which the
contract has been completed, the ownership of materials, whether if
the balance of the contract is legally and factually
severable, it
should be put out to tender etc.
[85]
In my view, public interest will be served if the Municipality could
independently at the joint venture's costs, verify that
all the work
done meets the required standards and all concerns are remedied by
the joint venture.
[86]
In the circumstances, applicants have succeeded in their challenge to
the Municipality's decision to award the tender to the
joint venture.
I however, am of the view that each party should pay its own costs
because of the unreasonable and unconscionable
manner in which
Esofranki and its attorney including Cycad conducted this litigation.
I am also of the view that Esofranki and
its attorney should be
ordered to pay the ninth respondent's (Mr Mahowa's) costs on a
punitive scale as a result of the vexatious
and unjustified attack on
Mr Mahowa.
[87]
The following order is made:
1.
The tender process is declared illegal and invalid and is set aside.
2.
The Municipality is ordered to independently and at the joint
venture's costs, verify that all the work has been done according
to
specifications and that the joint venture does all the necessary
remedial work and work is completed as soon as possible in
terms of
the agreement.
3.
Each party is ordered to pay its own costs .
4.
Esofranki Pipelines (Pty) Ltd is ordered to pay ninth respondents'
costs on the attorney and own client scale, including the
costs
reserved on 3 and 4 October 2011.
5.
The Registrar of the court is ordered to transmit a copy of this
judgement to the Law Society of the Northern Provinces. The
Law
Society shall consider this judgment with the view to conduct an
investigation into the conduct of Mr Mahowa and Mr Thompson
in these
proceedings.
K
E MATOJANE
JUDGE
OF THE HIGH COURT