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2012
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[2012] ZAKZDHC 41
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PPD Engineering & Hardware Suppliers CC v eThekwini Municipality (4880/12) [2012] ZAKZDHC 41 (6 July 2012)
In
the KwaZulu Natal High Court, Durban
Republic
of South Africa
Case No : 4880/12
PPD
Engineering & Hardware Suppliers CC
…..................................................
Applicant
and
eThekwini
Municipality
…...............................................................................
Respondent
Judgment
Lopes J
[1] This is an application for an
interim interdict pending the outcome of a review for the setting
aside of a tender awarded by
the respondent, the eThekwini
Municipality (‘the municipality’) for the supply and
delivery of mechanical and insertion
type electromagnetic flow water
meters (‘water meters’).
[2] The history of the matter may be
summarised as follows .
Water meters have been used by the
municipality to monitor water consumption for approximately 100
years.
The applicant is a manufacturer of
both water meters and what are referred to as electronic flow
controllers. The two pieces of
equipment are, in some installations,
used together and are viewed by the applicant as an integrated unit.
The water meter gives off an electric
impulse every time half a litre of water passes through it. This
signal is transmitted to
the electronic flow controller which has a
valve, and after a specified amount of water has passed through the
valve it shuts
off, limiting or restricting entirely the flow of
water.
During November of 2010 the
municipality invited tenders for the supply of approximately 70 000
water meters. The tender closed
on the 19
th
November of
2010.
In this application the relevant part
of the tender was that for 15mm water meters, and the tender
specifications in respect thereof
required that they :
‘
comply
with regulations relating to water meters in terms of the National
Standard for water meters : SANS 1529-1 : 2003 or
the latest
applicable National Standard
’
(Clause 4(b)); and
‘
be
approved and equipped to generate a high frequency pulse output
(two pulses per litre for 15mm meters) so that the flow can
be
controlled by the Electronic Flow Limiter Devices currently used by
the department
’
(Clause 4(g));
‘
If
it is not a standard feature, Tenderers must stipulate on the
Schedule of Prices the extra cost per water meter for the provision
of a pulse output facility and any other facility that does not
accommodate a reed switch in order to be compatible with the
Electronic Flow Limiter Devices used by the Department.
’
(Clause 5(a)).
By way of explanation, ‘electronic
flow controllers’ and ‘Electronic Flow Limiter Devices’
are one and
the same, and I use the latter terminology in referring
to them.
Eleven entities tendered, three of
which were regarded as non-responsive by the municipality.
The tender was initially awarded to
Joat Sale & Services CC, but after an internal appeal procedure,
that award was set aside
and the tender was awarded to the applicant
in November of 2011.
On the 15
th
February 2012
and after it had purchased and tested some of the applicant’s
15mm water meters, the municipality’s
attorneys wrote to the
applicant complaining that the water meters did not comply with the
required technical specifications
because :
they could not be controlled by the
electronic flow limiter devices currently used by the municipality;
the water meters were not approved
in terms of the relevant approval required from the National
Regulator for Compulsory Specifications
(NRCS) under the
specifications recorded in SANS 1529-9:2008 (‘SAN1529-9’).
The applicant replied to this letter
and confirmed that its 15 mm water meter ‘
is
competent to work within any Electronic Flow Limiter Device. To my
expert (manufacturers’s) knowledge, all Electronic
Flow
Limiter Devices uses (sic) water meter pulse output to control the
flow of water
.’
On the 10
th
April 2012 the
municipality’s attorneys again wrote to the applicant
reiterating that the applicant’s water metres
could not be
controlled by the electronic flow limiter devices currently used by
the municipality. That complaint is in addition
to the complaint
that the applicant’s meter had not been approved under the
specifications set out in SANS 1529-9. The
applicant was given 14
days to provide satisfactory proof that its water meters could be
controlled by the electronic flow limiter
devices used by the
municipality, and that the meters were approved in accordance with
the relevant SANS specification.
As nothing was done by the applicant,
on the 26
th
April 2012 the municipality cancelled the
contract.
Other than the suggestion by the
applicant’s representative in his letter of the 22
nd
February 2012 that ‘
my 15 mm is competent to work
with any electronic flow limiter device
’ there is no
suggestion in the correspondence, nor yet any statement in the
application papers of the applicant, that its
water meters were in
fact able to be controlled by the electronic flow limiter devices
used by the municipality.
[3] Having tendered, having been
awarded the tender, and having its water meters found wanting, the
applicant seeks to review the
tender award in order to have it set
aside. Pending the final outcome of the review the applicant now
seeks interim relief interdicting
and restraining the municipality
from issuing a further tender for the supply of water metres on the
basis of what it describes
as ‘
the same unlawful
terms and specifications set forth in the tender under review
’.
[4] The requirements for interim
interdictory relief are :
a prima facie right, though open to
some doubt;
a well-grounded apprehension of
irreparable harm if the interim relief is not granted and the
ultimate relief is eventually granted;
a balance of convenience favouring
the grant of the interim relief; and
the absence of any other satisfactory
remedy.
See
:
Olympic Passenger
Service (Pty) Ltd v Ramlagan
1957 (2) SA 382
(D).
[5] Ms
Nicholson
who appeared
for the applicant submitted that the applicant’s prima facie
right is established by the following :.
The award of the tender was unlawful
as it was in breach of SANS 1529-9 approval. In this regard the
applicant’s water meters
are only designed to provide free
water. They have not been approved together with the municipality’s
electronic flow limiter
devices under SANS 1529-9 which is required
because when they are used together with water meters, consumers are
charged for
water consumption. In addition, all equipment used for
billing purposes had to be verified and certified in terms of the
Trade
Methodology Act, 1973. As this was not done by the
municipality prior to the installation of the equipment, the tender
is unlawful.
The tender award should be set aside
because it is anti-competitive and accordingly unfair.
[6] Dealing firstly with the issue of
unlawfulness, it is common cause between the parties that when a
water meter and an electronic
flow limiter device are used together
in combination, they require approval in terms of SANS 1529-9. What
is in dispute between
the parties is whether that approval can be
given for components viewed separately (on the version of the
municipality) or whether
they must be considered together for
approval (on the applicant’s version). The applicant submits
that when it compiled its
tender document it was unaware that
approval was required for its water meters in terms of SANS 1529-9 if
they were going to be
used together with the electronic flow limiter
devices currently used by the municipality. The applicant maintains
that it only
became aware of this fact when it received
correspondence from the municipality’s attorney on the 15
th
February 2012.
[7] Mr
Goddard
, who appeared
for the municipality, submitted that it is obvious from the tender
document that such approval was required. The
tender document,
however, refers only to the fact that the 15mm water meters are
required to comply with SANS 1529-1. It is clear
from the fact that
the municipality not only regarded the applicant’s tender as
being compliant, but eventually awarded the
tender to the applicant,
that only one of two circumstances could have applied :
either the municipality believed that
the applicant had complied with SANS 1529-9; or
the municipality did not itself
consider the matter of SANS 1529-9 approval at that stage.
Mr
Goddard
conceded that the
municipality was in error in regarding the applicant’s tender
as compliant when it did not have SANS 1529-9
approval.
[8] Ms
Nicholson
submitted that
the unlawfulness of the municipality’s conduct with regard to
the tender is also to be found in the fact that
it was obviously
using water meters which only had SANS 1529-1 approval together with
electronic flow limiter devices, without
having obtained SANS 1529-9
approval. This was being done in the process which followed after the
supply of the water meters.
[9] I am by no means persuaded that it
is revealed in the papers that the municipality has acted unlawfully
as suggested by the
applicant. However, even if I accept that the
municipality does combine water meters which only have SANS 1529-1
approval with
electronic flow limiter devices without combined SANS
1529-9 approval, that does not mean that the tender process or the
award
of the tender was unlawful. At best what it means is that the
municipality is not obtaining the proper approval prior to the
installation
of water meters and electronic flow limiter devices
being used together.
[10] With regard to the allegations of
anti-competitive conduct,
Ms Nicholson
submits that the tender
process is intrinsically anti-competitive because :
the electronic flow limiter devices
originate from one entity – USC Metering (Pty) Ltd trading as
Utilities;
the only other manufacturers
currently in possession of SANS 1529-9 approval for both water
meters and electronic flow limiter
devices when used in conjunction
are Elster Kent (Pty) Ltd and Sensus SA (Pty) Ltd, whose water
meters are used in conjunction
with the electronic flow limiter
devices manufactured by Utilities; and
after cancellation of their contract
by the municipality, the applicant sought to obtain a sample of the
Utilities electronic
flow limiter device in order to ensure that its
water meters could be made compatible with it. The reply from the
attorneys acting
for Utilities stated that :
‘
We
have also been requested to advise that in the absence of a
commercial relationship with your client, our client is not in a
position to supply product to it
.’
[11] Although it was suggested that
this reply was somewhat ambiguous, it appears to my mind, clearly to
convey that Utilities did
not wish to supply the applicant with one
of its electronic flow limiter devices. This is perhaps unsurprising
as the two entities
are in competition with one another.
[12] Ms
Nicholson
also pointed
to the fact that, since 2004, only Utilities’ electronic flow
limiter devices had been used by the municipality.
She submitted that
the process leading up to the supply of electronic flow limiter
devices was anti-competitive and not in accordance
with the proper
tender procedures. However, as pointed out in the municipality’s
answering affidavits, the Municipal Finance
Management Act, 2003
which provides for the statutory framework for municipal procurement
systems had not yet been promulgated,
and the municipality’s
Supply Chain Management Policy was only adopted in September of 2005,
after Utilities had supplied
the electronic flow limiter devices.
[13] Even accepting that the process
adopted for the procurement of the electronic flow limiter devices
was not in accordance with
modern procedures, and perhaps even
anti-competitive, how does that affect the tender which the applicant
now wishes to have set
aside? In my view it does not. The
municipality finds itself in the position where it has a large number
of electronic flow limiter
devices which it now wishes to use in
conjunction with water meters. What it needs however, are water
meters, and it makes no sense
for them to acquire water meters that
are not compatible with the electronic flow limiter devices which it
already has. To do otherwise
would result in the economic folly that
all the electronic flow limiter devices which it has already
purchased might be rendered
useless. If a consumer uses the
applicant’s water meter in an application where free water is
provided and no charge is levied,
if the consumer changed his/her
consumption pattern in the future, that water meter would be rendered
useless because it could
not be used with the respondent’s
electronic flow limiter devices.
[14] Even the fact that Utilities may
have assisted Elster Kent (Pty) Ltd and Sensus SA (Pty) Ltd in
obtaining the necessary SANS
1529-9 approval, does not necessarily
indicate anti-competitive conduct on the part of the municipality.
The tender document required
that the water metres be compatible with
the electronic flow limiter devices currently used by the
municipality. It obviously did
not occur to the applicant at the time
it made the tender that it should obtain a Utilities manufactured
electronic flow limiter
device in order to ensure that its water
meters could operate in conjunction with it. The applicant was
clearly confident that
the two units could operate together.
Unfortunately it turned out not to be so.
[15] However, had the applicant taken
the prudent step of testing its equipment together with the Utilities
electronic flow limiter
device prior to making its tender, it would
have avoided the situation in which it found itself. It is no answer
to this to maintain
that Utilities refused to supply an electronic
flow limiter device. Had it been asked for by the applicant, one has
difficulty
in envisaging how the municipality could have avoided
ensuring that the applicant was given an electronic flow limiter
device to
test together with its water meter prior to completing the
tender. Indeed, it was conceded by Mr
Goddard
in argument that
the municipality could not have resisted such a request.
Unfortunately the applicant did not make that request
and only has
itself to blame in that regard.
[16] Having failed to satisfy the
first requirement of a prima facie case for interim relief (even one
open to some doubt), is there
any basis on which the review
application can proceed? Ms
Nicholson
submitted that the
applicant may yet be able to establish the necessary evidence
required in order to prove its case. In my view
that would be too
late. It is required to have established the prima facie case
already. Ms
Nicholson
submitted that the prospects of success
in the contemplated review proceedings represent the measure of the
strength or otherwise
of the alleged right that the applicant was
required to establish prima facie, in order to obtain interim relief.
In my view the
applicant has not established any prospects of success
in the principal case.
[17] I accordingly make the following
order :
(a) the application for interim relief
and the review application are dismissed.
(b) the applicant is to pay the
respondent’s costs of the application.
Date of hearing : 27
th
June
2012
Date of judgment : 6
th
July
2012
Counsel for the Applicant : J F
Nicholson (instructed by M P Lutge Incorporated)
Counsel for the Respondent : G D
Goddard (instructed by Linda Mazibuko Attorneys)