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[2012] ZAGPPHC 358
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KOPM Logistics (Pty) Ltd v Premier, Gauteng Province and Others (51614/2011) [2012] ZAGPPHC 358; 2013 (3) SA 105 (GNP) (5 October 2012)
REPORTABLE
IN
THE NORTH GAUTENG HIGH COURT,
PRETORIA
(REPUBLIC OF SOUTH AFRICA)
CASE
NO: 51614/2011
DATE:05/10/2012
In
the matter between:
KOPM LOGISTICS (PTY) LTD
and
THE
PREMIER, GAUTENG
PROVINCE
.........................................................
1st
Respondent
THE MEMBER OF THE EXECUTIVE
COUNCIL,
DEPARTMENT
OF HEALT & SOCIAL DEVELOPMENT,
GAUTENG
PROVINCE
......................................................................................
2nd
Respondent
DEPARTMENT OF HEALTH & SOCIAL
DEVELOPMENT,
GAUTENG
PROVINCE
.....................................................................................
3rd
Respondent
GAUTENG
SHARED SERVICE
CENTRE
.....................................................
4th
Respondent
JUDGMENT
[1]
During 2007 the fourth respondent, in conjunction with the first
respondent, called for tenders to be submitted to implement
a so-
called "smart card system" for the third respondent. In
short, the "smart card system" entails the designing
of
software and the issuing of a card, similar to a credit card, where
all the details, history, treatment and all other information
relating to a specific patient can be recorded on the card. As and
when the patient presents himself/ herself at the hospitals
or
clinics run by the third respondent, the patient will produce the
card, whereby the amount of administration, paperwork and
waiting
time will be drastically reduced. Another obvious advantage is that
should the patient attend at another hospital or clinic
where he/she
received treatment in the past, the history will immediately be
available to the healthcare practitioner to treat
the patient.
[2]
On or about 15 August 2007 the applicant submitted a tender to the
third and/or fourth respondents. On or about 6 December 2007
the
fourth respondent notified the applicant that the tender has been
awarded to the applicant, subject to the following two conditions:
-
The successful negotiation of the pilot phase of the smartcard
system; and
-
The conclusion of a mutually acceptable agreement between the
applicant and the third respondent;
[3]
Early in April 2008 the third respondent and the applicant committed
themselves to the pilot phase in terms of a so-called "Project
Charter". The pilot phase was successfully implemented and
terminated on or about 9 February 2009. However, the second condition
referred to supra i.e. the conclusion of a mutually acceptable
agreement, proved to be a bone of contention. The upshot was that
applicant issued an application in this court, seeking relief to the
effect that the failure and/or refusal of the third respondent
to
continue negotiations with the applicant to conclude a mutually
acceptable agreement pursuant to the award of the tender be
reviewed
and set aside. The relief also entails;
-
That an order will issue in terms of section 8(l)(c)(ii)(aa) of the
Promotion of Administrative Justice Act, Act No.3 of 2000,
against
the third respondent in terms whereof the third respondent is ordered
to recommence and continue the bona fide negotiations
with the
applicant in order to conclude a mutually acceptable agreement in
respect of the award of the tender aforesaid until such
time as a
mutually acceptable agreement has been concluded or, alternatively,
the negotiations break down due to the parties' inability
to agree on
essential terms of such agreement;
-
That third respondent be ordered to conduct the negotiations with the
applicant in accordance to the terms and conditions of the
said
tender;
-
That third respondent be ordered to pay the applicant's costs and
that any other respondent who opposes the application be ordered
to
pay applicant's costs jointly and severally with third respondent.
I
refer to the lastmentioned as the "main application".
[4]
The application currently before me is interlocutory to the main
application. The applicant seeks the following relief:
-
That first, second and third respondents be ordered to file the
record of proceedings as contemplated in Rule 53(l)(b) containing
all
documentation relating to all and any negotiations and other steps
taken to negotiate with the applicant to conclude an agreement
pursuant to the award of the tender, which documentation shall
include but not be limited to:
-Minutes
of all meetings of representatives of the third respondent pertaining
to this matter;
-Any
correspondence and/or memoranda exchanged within the third respondent
relating to this matter;
-Any
agreements prepared in draft format by the third respondent.
[5]
Applicant contends that pursuant to having been awarded the tender,
the envisaged negotiations commenced and progressed to an
advanced
stage whereupon the third respondent failed and/or refused to
continue with the negotiations. Applicant therefore submits
that it
is entitled to the record (i.e. for purposes of the main
application), which record consists of all documentation from
the
date when the tender was awarded to the applicant i.e. 19 December
2007 until the third respondent refused to continue with
the
negotiations i.e. during April or May 2011. On 31 October 2011 the
State Attorney served on applicant's attorney a filing notice
purporting to be the record in terms of rule 53, accompanied by a
lever arch file containing documentation. However, applicant
alleges
that all the documentation so made available only included
documentation leading up to the award of the tender and not
any
documentation pursuant thereto. Accordingly applicant's attorney
returned such documentation to the State Attorney, pointing
out the
aforesaid facts by way of a letter dated 4 November 2011. Pursuant
thereto and on 15 November 2011 the State Attorney,
once again,
served a record of proceedings in terms of rule 53 on the applicant's
attorney, under a copy of an index. Applicant
contends that the
index, consisting of nine items, referred to the same irrelevant
documents previously returned to the State Attorney
on 31 October
2011. In addition, the record so provided by the State Attorney and
attached to the index in any event pertained
to a different matter.
The upshot simply is that the respondents have not provided the
applicant with the required record of proceedings.
[6]
In its founding papers in the main application the applicant referred
to various documents which, so it contends, must exist
and which
will, inter alia, constitute part of the record that the applicant
seeks. In this regard reference was inter alia made
to a meeting
between the representatives of the applicant and relevant officials
of the third respondent which took place on 9
March 2009 at the
latter's attorneys. Applicant requests to be put in possession of the
minutes of this meeting. Applicant refers
to the fact that minutes do
exist pertaining to a second negotiation meeting which was conducted
during March 2009 and argues that,
similarly, meetings regarding the
first meeting should also exist. Another example referred to by the
applicant pertains to a "revised
contract" which has been
referred to in correspondence and which would have been forwarded by
the Gauteng Department of Health
to the applicant, for the latter's
review and response. Applicant submits that it is entitled to the
"revised contract"
in all its relevant phases and that such
contract forms part of the record sought by the applicant through
these proceedings. In
short, it is highly improbable that no records
which pertain to the negotiation phase, do exist.
[7]
The deponent on behalf of the third respondent states that the
"record" which was filed on 31 October 2011 contains
the
only documents that the respondents have in their possession; that
the applicant had been informed by the Head of the Department
that
"none of the meetings were minuted and that the respondents have
no documents in their possession other than what was
filed as the
record or what is attached to the founding affidavit"; and that
"a diligent search has been conducted by
officials within the
third respondent ...and I am informed that no further documents or
tape recordings exist The respondents therefore
have no documents to
file in terms of rule 53".
[8]
It is against this background that the application must be
adjudicated. The third respondent is a department of a Provincial
Government. As such it is a creature of statute and an organ of
state. In general terms, therefore, it derives its power to enter
into contractual relationships from statute, as do other bodies or
persons empowered by it to enter into contractual relationships
on
its behalf. Hence, it exercises a public power when entering into
contractual relationships.
[9]
Section 217 of the Constitution, under the heading "Procurement"
provides in subsection (1):
"When
an organ of state in the National, Provincial or Local sphere of
government, or any other institution identified in national
legislation, contracts for goods or services, it must do so in
accordance with a system which is fair, equitable, transparent,
competitive and cost-effective."
Clearly,
section 217 accords with the founding principles encapsulated in
section 1 of the Constitution, and in particular the reference
in the
latter section to the "democratic government" based on
"accountability, responsiveness and openness."
[10]
In Steenkamo N.O. v Provincial Tender Board. Eastern Cape
2006 (3) SA
151
(SCA) at 158D - E, par.fl2h the Court reiterated that the
evaluation of a tender is a process governed by administrative law.
Harms
JA. speaking on behalf of the court, stated:
"Once
the tender is awarded, the relationship of the parties is that of
ordinary contracting parties, although in particular
circumstances
the requirements of administrative justice may have an impact on the
contractual relationship." (my emphasis)
In
the current instance it is common cause that the acceptance of the
applicant's tender did not give rise to the simultaneous coming
into
being of a contract. In this regard the letter of acceptance under
the hand of the Deputy General Manager: Procurement, Gauteng
Shared
Service Centre, dated 6 December 2007, clearly states that "...your
bid in respect of the abovementioned tender has
been successful,
subject to the provisions of paragraph 2." The latter paragraph
then reads: "This award is subject to
the successful negotiation
of the pilot phase and conclusion of a mutually acceptable agreement
between your company and the Gauteng
Department of Health. This
office will be in contact with you shortly to commence the
contractual matters".
[11]
Based on the last mentioned letter it was argued on behalf of the
respondents that the acceptance of the tender read with the
said
letter amounts to "an agreement to agree, to contract on terms
still be agreed upon." Therefore (so the argument
goes), the
process pursuant to the acceptance and awarding of the tender is
governed by the normal civil law of contract or the
common law, that
it does not constitute administrative action and is therefore not
subject to review. Such an agreement to agree
in future is not
binding. (See: Van Aardt v Galway
2012 (2) SA 312
(SCA); Kerr, The
Principles of the Law of Contract (6ed) p.80).
Suffice
it to say that respondents' attitude in this regard is inherently
unfair. One glimpse at the tender documentation presented
by the
applicant is sufficient to make one realise the amount of time,
effort and cost which applicant must have put into the tender.
The
question remains, however, whether respondents' attitude is legally
justifiable?
[12]
The underlined remarks by the court in Steenkamp supra (i.e. to the
requirements of administrative justice which may have an
impact on
the contractual relationship in particular circumstances), referred
back to the earlier judgment by the Supreme Court
of Appeal in Logbro
Properties CC v Bedderson N.O. & Others
2003 (2) SA 460
(SCA).
With reference to certain conditions which applied to a tender offer
Cameron JA (as he then was) speaking for the court
in Logbro said the
following at 466F - G:
"Even
if the conditions constituted a contract (a finding not in issue
before us and on which I express no opinion), its provisions
did not
exhaust the province's duties towards the tenderers. Principles of
administrative justice continued to govern the relationship,
and the
province in exercising its contractual rights in the tender process
was obliged to act lawfully, procedurally and fairly.
In consequence,
some of its contractual rights - such as the entitlement to give no
reasons would necessarily yield before its
public duties under the
Constitution and any applicable legislation."
At 466H - 467A Cameron JA continued:
"This
is not to say that the conditions for which the province stipulated
in putting out the tender were irrelevant to its
subsequent powers.
As will appear; such stipulations might bear on the exact ambit of
the ever-flexible duty to act fairly that
rested on the province. The
principles of administrative justice nevertheless framed the parties'
contractual relationship, and
continued in particular to govern the
province's exercise of the rights it derived from the contract."
With reference to the judgment in Cape
Metropolitan Council v Metro Inspection Services (Western Cape) CC &
Others
2001 (3) SA 1013
(SCA) Cameron JA stated:
"The
case is thus not authority for the general proposition that a public
authority empowered by statute to contract may exercise
its
contractual rights without regard to public duties of fairness. On
the contrary: the case establishes the proposition that
a public
authority's invocation of a power of cancellation in a contract
concluded on equal terms with a major commercial undertaking,
without
any element of superiority or authority deriving from its public
position, does not amount to an exercise of public power."
(at
467H - 468A)
At
468B - C Cameron JA continued:
"In
the present case, it is evident that the province itself dictated the
tender conditions, which McLaren J held constituted
a contract once
the tenderers had agreed to them. The province was thus undoubtedly,
in the words of Streicher JA in Cape Metropolitan
supra 'acting from
a position of superiority by virtue of it being a public authority'
in specifying those terms. The Province
was therefore burdened with
its public duties of fairness in exercising the powers it derived
from the terms of the contract."
Clearly,
then, the Court distinguished Cape Metro on the basis that in Logbro
the administrator was acting from a position of superiority.
Hence,
the decision to call for new tenders was administrative even if it
were sourced in contract.
[13]
In the current instance the stage of entering into a contractual
relationship has not yet been reached. In view of the remarks
by
Cameron JA particularly with regard to public duties of fairness when
exercising the powers deriving from the terms of (an already
established) contract, there seems to be no good reason why the
ongoing process (i.e. negotiations post acceptance of the tender
but
preceding the establishment of a contract), should not also be
subject to the Province's public duties of fairness and openness.
In
addition, if in particular circumstances the requirements of
administrative justice may have an impact on the contractual
relationship
itself (Steenkamp supra) the nature of the process under
consideration can only be that of administrative law.
[14]
In President of the Republic of South Africa v South African Rugby
Football Union 2000 m SA 1 (CC) it was held that whether
conduct
constituted administrative action can better be decided on a
case-by-case basis. Relevant considerations in the diagnosis
may
include: the source of the power, the nature of the power, its
subject matter, whether it involves the exercise of a public
duty and
how closely it is related to policy matters - which are not
administrative - or the implementation of legislation, which
is
characteristic of administrative action. Applying these criteria to
the current facts it is evident that the latter are on all
fours with
the approach followed in
Logbro
: the ongoing,
post-tender process still derives from the implementation of
legislative powers. Moreover, it is not closely related
to policy
matters and constitutes the exercise of a public power. Procedural
fairness apply and, hence, the requisites of openness,
transparency
and bona fide negotiations are applicable. Therefore, the ongoing
process is clearly distinguishable from the common
law position where
an agreement to agree does not have binding force. The considerations
here are different. The nature of the
relationship is determined by
constitutional considerations and imperatives: the ongoing process
falls within the parameters of
administrative action which may
materially and adversely affect the rights or legitimate expectation
of the applicant. At the very
least the process must be procedurally
fair (section 3(1) of the Promotion of Administrative Justice Act,
Act No.3 of 2000) and
must accord with the constitutional norms of
fairness and openness.
[15]
On the facts of the matter it is highly improbable that third
respondent and/or parties under its control and/or acting on
its
behalf, possess no documentation which may be relevant for purposes
of the main application and the relief sought therein.
The denials
made on behalf of third respondent in this regard are unconvincing,
generalised in nature, not well substantiated and
bold. I do not
accept them. The duty to negotiate in good faith inter alia implies
that respondents must keep proper records of
all relevant
documentation. The probability of the existence of, at the very
least, minutes of meetings and draft agreements is
overwhelming. In
any event, no basis has been laid to claim privilege to any of the
documentation which are probably still in its
possession.
The
following order is made:
1.
First, second and third respondents are ordered to file the record of
proceedings as contemplated in Rule 53(l)(b) containing
all
documentation relating to all and any negotiations and other steps
taken to negotiate with the applicant to conclude an agreement
pursuant to the award of the tender, number RFPGT/GDH/103/2007 to the
applicant, commencing on 19 December 2007 to the date hereof,
which
documentation shall include but not be limited to:
1.1
Minutes of all meetings of representatives of third respondent
pertaining to this matter;
1.2
Any correspondence and/or memoranda exchanged within the third
respondent relating to this matter;
1.3
Any agreements prepared in draft format by the third respondent;
2.
The third respondent is ordered to pay the costs of the application
which costs shall include the costs occasioned by the employment
of
two counsel.
T
J Kruger
Acting
Judge of the High Court.
CASE
NO 51614/2011
DELIVERED
ON: 05/10/2012
HEARD
ON: 10/09/2012
FOR
THE APPLICANT: ADV J DE BEER
INSTRUCTED
BY: FRIEDLAND HART SOLOMON & NICOLSON
FOR
1-3 RESPONDENTS: B NEUKIRCHER SC & H C JANSE VAN RENSBURG
INSTRUCTED BY: STATE ATTORNEY