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[2011] ZAKZDHC 90
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Korbitec (Pty) Ltd and Another v eThekwini Municipality and Another (5984.2010) [2011] ZAKZDHC 90 (18 October 2011)
IN
THE KWAZULU-NATAL HIGH COURT, DURBAN
REPUBLIC
OF SOUTH AFRICA
Case
No. 5984/2010
In
the matter between:
KORBITEC
(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:
1.1
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;
1.2
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;
1.3
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
1.4
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]
2001
(1) SA 348 (WCC)
[3]
2008
(2) SA 481 (SCA)
[4]
2010
(4) SA 359
(SCA)