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[2011] ZAKZPHC 44
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Kobitec (Pty) Ltd and Another v eThekwini Municipality and Another (5984/2010) [2011] ZAKZPHC 44 (18 October 2011)
IN THE KWAZULU-NATAL HIGH COURT, PIETERMARITZBURG
REPUBLIC OF SOUTH AFRICA
Case No. 5984/2010
In the matter between:
KOBITEC (PTY) LTD FIRST
…....................................................
APPLICANT
LEGALPERFECT SOFTWARE SOLUTION
(PTY) LTD
…...................................................................
SECOND
APPLICANT
and
eTHEKWINI MUNICIPALITY
…................................
FIRST
RESPONDENT
LAW ACTIVE (PTY) LIMITED
….............................
SECOND
RESPONDET
JUDGMENT
Delivered: 18 October 2011
MBATHA J
[1] This is an application for a review in terms of Rule
53 in which the applicants seeks the review, correction and setting
aside
of actions by the First Respondent said to be administrative
actions capable of review.
THE PARTIES AND THEIR GENERAL BACKGROUND
[2] The First Applicant is Korbitec (Pty) Limited
(“Korbitec”), a duly registered company with limited
liability with
its principal place of business in Cape Town where it
carries on business as a developer and vendor of computer software
for the
legal market.
[3] The Second Applicant is Legalperfect Software
Solutions (Pty) Limited (“Legalperfect”), a duly
registered company
with its principal place of business in
Johannesburg where it likewise carries on business as a developer and
vendor of computer
software for the legal market. The Applicants will
be refered to as Korbitec and Legalperfect respectively in this
judgment.
[4] The main drive behind this application is Korbitec.
Legalperfect aligned itself with the relief being sought by Korbitec
and
the founding affidavit of its director appears at page 157 to 161
of the papers. It is fair to say that Legalperfect’s
involvement
in this application is in the nature of a principled
stand for any of the relief claimable in the Notice of Motion as it
was not
directly involved in the history of this piece of litigation.
[5] The First Respondent is the eThekwini Municipality;
a Local Government institution established in terms of the Municipal
Structures
Act 177 of 1998 and is the municipality for the Durban
Metropolitan and adjacent areas (“the municipality”).
[6] The Second Respondent is Law Active (Pty) Limited
(“Law”), a duly registered company with the same business
description
as Korbitec and Legalperfect with principal place of
business in Johannesburg.
[7] Law initially filed a notice of intention to oppose
the relief being sought in this application for review but later
withdrew
its opposition but nevertheless caused an answering
affidavit to be filed on its behalf. An application to strike out
this answering
affidavit followed and an order was eventually taken
by consent to the effect that this affidavit be struck out. I have
ignored
this affidavit and any reference to its contents in the
affidavits filed on behalf of the municipality. It should be
mentioned
however that it came to the attention of Mr Louis Kruger,
the head of revenue of the municipality, who deposed to the answering
affidavit on behalf of the municipality, that “the business”
which forms the subject matter of this application had
been
transferred to Law when all along he had been dealing with Law
Holdings (Pty) Limited, previously known as Lawyers Access
Web (Pty)
Ltd, then represented by one Trevor Coppen as its director.
Apparently “the business” had been transferred
to Law
with effect from 1 January 2008 and Trevor Coppen also happens to be
its director. The attitude of the municipality is to
deal with Law on
the basis that it is a subcontractor of Law Holdings (Pty) Ltd and
that it will continue to carry on with the
agreement and involvement
of Law as if the agreement between Law and Law Holdings (Pty) Ltd had
not been concluded. Nothing turns
on this development as the relief
being sought by the applicants is to challenge and have the business
arrangement itself reviewed.
For the purpose of this judgment I will
ignore this development and refer to Law as the contracting party
with the municipality
as if though it was the contracting part from
the beginning.
THE ORDERS BEING SOUGHT
The Notice of Motion as amended seeks the
following relief:
Declaring that an agreement concluded between the
First Respondent (“the City”) and the Law (“Law”)
in terms of which Law was afforded exclusive electronic access to
the City’s rates clearance data via its IRCAM portal be
declared to be void
alternatively
that all decisions by the
City to enter into and give effect to such agreement be reviewed
and set aside;
Reviewing and setting aside, and correcting, the
City’s decision to deny the Applicants (“Korbitec”),
and
the public electronic access to the City’s rates
clearance data via its IRCAM system on terms less favourable than
those
granted to Law;
Declaring that Korbitec and the public are entitled to
electronic access to the City’s rates clearance data via its
IRCAM
system on terms no less favourable than those granted to Law;
and
Mandating the City to do all things necessary to give
the Applicants and the public access to its rates clearance data
via its
IRCAM system on terms no less favourable than granted to
Law.
BACKGROUND TO THIS APPLICATION
[8] For a proper perspective of the issues involved it
is expedient to deal with information provided by the municipality in
the
answering affidavit on its behalf by Mr Louis Kruger. I do this
as it seems that when filing the founding affidavit on behalf of
Korbitec, it may not have known about the time frames when the
alleged agreement between Law and the municipality came into being
and the circumstances prevailing at the time.
[9] In order for an immovable property to be transferred
to a buyer, a conveyancing attorney requires what is called “a
rates
clearance certificate”. Section 118 of the Municipal
Systems Act No. 32 of 2000 (“the System Act”) prevents
the
registration of transfer of any immovable property except on
production to the registrar of deeds of this prescribed certificate
issued by the municipality concerned which certifies that all amounts
that became due in connection with that property for municipal
service fees, surcharges on fees, property rates and other municipal
taxes and levies have been paid in full. The effect of section
118 of
the Systems Act was a broadening of the scope of what was
traditionally called “a rates clearance certificate”
giving the municipality the opportunity to recover not only
outstanding rates but basically anything outstanding by way of
indebtedness
to the municipality in connection with the property
concerned prior to its transfer to the new owner. I will continue to
refer
to this certificate as the rates clearance certificate.
[10] In order for the municipality to cope with this
demand of checking whether there is any amount outstanding and due to
it before
issuing a rates clearance certificate it involved a check
with many internal systems within the municipality, each of whom may
potentially have a debit on its books against that property. To
consolidate this task the municipality caused to be designed an
internal computerised system called IRCAM prior to the year 2003. The
conveyancers were obliged to provide certain specific information
when requesting rates clearance certificate and this information
(provided manually) was fed into the IRCAM system which then
generated a pathway to all sections in the municipality that may have
had debits in respect of the property and accumulated the
information
necessary in order to inform the conveyancer of what had to be paid
in order to receive the rates clearance certificate.
IRCAM would then
produce a document known as “the attorney report” which
would inform the attorney of the amount due
and how it was made up.
Once payment of the required amount had been made a rates clearance
certificate would be manually created
and collected by the attorney
concerned.
[11] Whilst IRCAM was no doubt a useful tool for the
processing of rates clearance certificates it still left a lot of
work to be
done manually and internal interaction by various
departments within the municipality with IRCAM. Of importance is the
fact the
IRCAM was not designed to have an interface with the outside
world but a computerised internal mechanism for use by municipal
employees.
[12] In 2003 the municipality received an approach from
Law to consider the creation of a portal within IRCAM allowing Law
access
to it so that conveyancers could address the municipality
electronically when applying for rates clearance certificates and to
do so by means of a program to be devised, installed and paid for by
Law. The object was for Law to communicate directly with conveyancers
inclined to use its service via the internet and to use the portal
thus created to gather all the required information form IRCAM,
determine the amount due to the municipality, inform the conveyancing
attorney accordingly, and once payment of the rates and other
charges
had been paid, to produce an electronically devised rates clearance
certificate which the conveyancer can then print at
his or her end of
the computer. For this service Law charges the conveyancing attorney
a fee of which 15% payable to it by Law
adequate to meet all expenses
from the municipality’s side to keep the system operating.
Moreover it relieved the municipality
from the burden of the manual
component of the internal use of IRCAM.
[13] Not surprisingly this innovation was a success and
by the year 2009 almost all, if not all, rates clearance certificates
were
issued through the portal means with Law. It is safe to assume
that the municipality, Law and the conveyancers using Law’s
portal into the inner workings of IRCAM were content with this
arrangement.
[14] The tranquillity of the arrangement between the
municipality and Law came under threat quite inconspicuously. At some
time
Korbitec came into being (the date of its incorporation is not
stated) and provided a similar service to the one provided by Law
to
other municipalities and institutions. If it wanted to access a rate
clearance certificate on behalf of its clients from the
municipality
it had no option other than to make use of the services of Law or do
so manually. Mr Adriaan Jacobus Basson who deposed
to the First
Applicant’s founding affidavit describes Korbitec as one of the
largest legal software developers, vendors and
service providers at
the leading edge of technology and states that it deals with large
banks and financial institutions where
data integrity and security is
of paramount importance. I have no reason to doubt Korbitec’s
self-confidence and its ability
to at least provide a portal into
IRCAM with the same efficiency as Law had done for the better part of
7 years.
[15] According to Mr Basson, Korbitec became
increasingly dissatisfied with Law’s service and in the course
of 2009 decided
to create software to communicate directly with
IRCAM. This according to Mr Basson would preclude the need to refer
its clients
to its principal competitor in Durban, namely, Law, and
to promote the latter’s business. With this object in mind
representatives
of Korbitec met representatives of the municipality
in August 2009 to explore the establishment of a direct electronic
link between
Korbitec and IRCAM at the expense of Korbitec. According
to Mr Basson the meeting went well and this seems to be borne out by
the
contents of various emails that passed between Korbitec and the
municipality during that period.
[16] In the months that followed the municipality became
less enthusiastic about allowing Korbitec a portal into IRCAM judging
from
the contents of the emails that passed between them. On 2
December 2009 Mr Basson addressed an email to Mr Kruger asking him to
explain Law’s involvement with Korbitec’s proposal and
went on to add that Korbitec had resolved to terminate its use
of Law
as a conduit. On 9 December 2009 Mr Kruger provided a detailed
response to Korbitec’s proposal and in essence told
it that the
municipality only wished to deal with Law. According to Mr Basson
this placed Korbitec in a serious predicament as
the conduit between
it and Law had been terminated and it therefore had to submit
Korbitec’s Durban customers’ rates
clearance applications
manually. It informed the municipality of this decision and received
a response from Mr Kruger to the effect
that it should reinstate its
link with Law. I need to add that there is not even a suggestion that
Law is precluding Korbitec from
using its portal into IRCAM.
THE RELIEF CLAIMED
[17] The Applicants seek to have the contract,
association or arrangement between the municipality and the Law
reviewed and set
aside. To this end they required the record of all
the arrangements, decisions and actions pertaining to this decision
from the
municipality and after a considerable delay were provided
with whatever documents the municipality could (or wanted) to
provide.
[18] I have thus far referred to the workings between
the municipality and Law in respect of IRCAM as “an
arrangement”.
This arrangement was never reduced to writing and
Mr Kruger calls it an oral agreement that was reached between the
municipality
and Law sometime during the latter part of 2003. Mr
Kruger goes on to say when he concluded the agreement he did so with
the authority
and under the guidance of Mr Kumar who was the Deputy
City Manager at the time. This is confirmed by Mr Kumar on affidavit.
The
events leading up to the implementation of the portal into IRCAM
by Law is recorded in a number of emails and the fact of the
implementation
of this system and its continued use for a number of
years leads one to the inevitable conclusion that an oral agreement
came into
being between the municipality and Law.
[19] When Mr Basson deposed to the founding affidavit on
behalf of Korbitec the terms of the arrangement between Law and the
municipality
were not known to it and it was assumed that the
municipality has afforded Law exclusive direct access to and use of
its electronic
rates system amounting to a monopoly in favour of Law
that is unconstitutional and in contravention of a plethora of
statutory
and regulatory prescripts and constitutes unfair and
unlawful administrative action. The municipality responded to this
allegation
by saying that when it concluded the agreement with Law in
2003 it did so in terms of section 114 (2) of the Durban Extended
Powers
Consolidated Ordinance, No. 18 of 1976 which then regulated
its powers to contract with third parties at the time. This section
reads as follows:
“
114 TENDERS
(2) (a) Notwithstanding the provisions of any law the Council may,
without calling for tenders, enter into any contract of any
nature
subject to the limitations set forth in paragraph (b).
(b) (i) The estimated expenditure under such contract shall not
exceed R10 000 in any one calendar month, or such higher amount
as
the Council may with the consent of the Administrator decide.
(ii) Such contract shall not be one under which expenditure will be
incurred for a period of exceeding twelve months.”
[20] It seems that the municipality did not call for
tenders when it entered into the arrangement with Law but assumed
that since
no expenditure would be incurred by it in implementing
this arrangement is was entitled to implement to arrangement without
having
to put the matter out for tender.
[21] In his replying affidavit Mr Basson accepted that
the oral agreement between the municipality and Law had been
concluded during
2003 but persisted in his attack on the legality of
this agreement on the basis that Mr Kruger had no authority to
conclude this
agreement on behalf of the municipality. He pointed to
the absence in the documents provided, of a delegation of authority
to Mr
Kruger to enter into this agreement. I am not prepared to even
consider the alleged absence of authority to enter into the
agreement.
Firstly, it seems on the face of it that the municipality
was entitled to enter into the agreement without the need to call for
tenders and, secondly, the agreement has been in force for more than
seven (7) years and in these circumstances reliance on such
a
technicality to set aside the agreement would be manifestly uncalled
for even if the required written authority cannot be produced,
as
such authority can nevertheless in all the circumstances be implied.
[22] The existence of the oral
agreement between the municipality and Law since 2003 can hardly be
labelled an administrative action
capable of being reviewed and set
aside. The cases relied upon on behalf of the First Applicant for
this proposition,
Logbro
Properties CC v Bedderson No
1
and others
2003 (2) SA 460
SCA and
SA
Metal Machinery Co (Pty ) Ltd
v
City of Cape Town
2
[2000] ZASCA 127
;
2001 (1) SA 348
(WCC) goes no further
than to identify the competitive process, and the interaction therein
by public officials, in the securing
of a tender as an administrative
action. Even if I am wrong in assuming that the oral agreement does
not amount to an administrative
action and is capable of review I
would not have granted the order seeking to declare the agreement
void because the adverse consequences
to both the municipality and
Law outweighs the necessity to visit any judicial sanction on the
failure by the municipality to comply
with statutory requirements
back in 2003. Support for such an approach can be found in
Millenium
Waste Management (Pty) Ltd v Chairperson
Tender
Board Limpopo Province and others
3
2008 (2) SA 481
(SCA) at par 23 and
Moseme Road
Construction CC and Others v King Civil
Engineering
Contractors (Pty) Ltd and Another
4
2010 (4) SA 359
(SCA) at par 21.
[23] The matter does not end there.
It seems that this application was premised on the understanding that
by concluding the agreement
with Law the municipality has denied the
public in general access to information which they previously had.
This is quite simply
not the case. Although the valuation of property
roll is in the public domain, the account of any individual in
relation to property
is not and these accounts have never been
accessible to all and sundry. Korbitec has no better
locus
standi
than any
member of the public to be declared entitled to have access to a port
via IRCAM. I agree with the submission made by counsel
who appeared
on behalf of the First Respondent that what Korbitec is seeking is
tantamount to an order compelling the municipality
to enter into an
agreement with it. This in my view is the untenable result that will
follow should any of the orders sought be
granted.
[24] Lastly, I should mention that a belated attempt was
made in the replying affidavit filed on behalf of Korbitec to the
effect
that the decision not allow Korbitec direct access to IRCAM
during 2009 as evidenced in the emails during that period between it
and the municipality amounted to an administrative decision and that
all the plethora of legislation referred to then became applicable
to
such a decision, rendering it reviewable on any number of grounds. In
my view this decision was nothing more than a decision
not to
contract with Korbitec.
[25] It follows that the application must fail and I
make the following order
The application is dismissed with costs including the
costs consequent on the employment of two counsel. The order as to
cost is
made against the Applicants’ jointly and severally the
one paying the other to be absolve.
______________
MBATHA J
Date of Hearing: 28 March 2011
Date of Judgment: 18 October 2011
For the Applicant: L.B. Broster Sc
J.G. Dickerson Sc
Instructed by: EDWARD NATHAN SONNENBERGS
Suite 2302, 23
rd
floor
Durban Bay House
333 Anton Lembede Street
Durban
For the First Respondent: Adv P.J. Olsen Sc
Adv B.S.M Bedderson
Instructed by: LINDA MAZIBUKO AND ASSOCIATES
231–233 Mathews Meyiwa Road (StramfordHill)
Morningside
DURBAN
1
2003
(2) SA 460
SCA
2
[2000] ZASCA 127
;
2001
(1) SA 348
(WCC)
3
2008
(2) SA 481
(SCA)
4
2010
(4) SA 359
(SCA)