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[2009] ZAGPPHC 124
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Group Ywo Trading Enterprise CC v Construction Industry Development Board (44681/08) [2009] ZAGPPHC 124 (5 August 2009)
IN THE HIGH COURT OF SOUTH AFRICA
(NORTH-GAUTENG
HIGH COURT, PRETORIA)
Case No.: 44681/08
In the matter
between:
GROUP YWO TRADING
ENTERPRISE CC Applicant
and
CONSTRUCTION
INDUSTRY DEVELOPMENT BOARD Respondent
JUDGMENT
Judgment
reserved:: 05 August 2009
LEGODI J,
1. In
this application, the applicant is asking for relief as follows:
"1.
The decision by the Regulatory Hearing Committee/tribunal of the
respondent, alternatively the administrative action taken by
the
Respondent on a date unknown to the Applicant and of which the
Respondent informed the Applicant under cover of a letter dated
16
July 2008, is judicially reviewed in terms of section 24 of the High
Court Act read with Rule 53, alternatively in terms of
the
Promotion
of Administrative Justice Act, 2000 (Act no. 3 of 2000) and the Order
by the Respondent is replaced by the following order:
Group Ywo Trading
Enterprises CC is fined to an amount of R30 0000 (thirty thousand
rand), payable in no more than three (3) consecutive
instalments
commencing on the first day of the month following this order. The
fine is to be paid into the account of the CIDB,
the particulars of
which is in the possession of Group Two Trading Enterprises CC.
Proof
of payments as stipulated above is to be faxed to the CIDB for the
attention of Mr Stephen van Huyssteen within four calendar
days
after payment has been made to fax number 086 688 0443 and to Mrs H
Strydom at 012 664 0307.
The
CIDB shall publish the order in the Government Gazette.
The
CIDB is ordered to update database and website to correctly reflect
the contents of this order.
2. The
respondent is ordered to pay the costs of this application
3.
Further/or
alternative relief
The applicant is a
construction company, its main business being building and doing
construction work as its main source of income.
The
respondent is Construction Industry Development Board (established
in terms of Act 34 of 2002), its core business being to
promote a
uniform and ethical standard within the construction industry, with
an ancillary obligation to publish and enforce
a wide of conduct for
all construction related procurement, and participants involved in
the government procurement process.
The
applicant falls under the resp
ondent
insofar as it relates to construction work falling within the
respondents control that is, for Government Tenders.
The
applicant had previously been graded by the respondent to a Grade 4
CEPE, and thus entitling the applicant to tender for
work up to R3
000 000 in value.
Subsequent
to the upgrading, an allegation was made against the respondent that
it paid an official of the respondent R6 000 to
increase the grading
up to Grade 5 CEPE.
This
resulted in the Regulatory Hearing Committee of the respondent
finding the applicant guilty. It then made its recommendations
to
the Board, the respondent. The first respondent having considered
the recommendations made an order or issued a sanction
as follows:
That
the following specific provisos are set
by
the Board, pertaining to the continuation of or commencement of
construction-related work falling within the ambit of the CIDBs
mandate:
Group
Ywo Trading Enterprises CC and any other legal entity of which Mr
Madoda Richmond Khoba (ID number 680520 5864 081), Ms
Lebohang
Patience Twala (ID number 820511 0688 089), Ms Vangile Eunice Kosie
(ID number 710226 0658 080) and Ms Zoleka Sylvia
Khoba (730413 0723
082) are directors or members
as
per Registrar of Companies and Close Corporations database, are
p
rohibited to commence with,
procedure or attempt to procure any construction-related work
falling within the
ambit
of the CIDBs mandate, for a period of twelve (12) calendar
months, from the effective date of the sanction, which is the
date
on which you r
eceive this
notice; and
Group
Ywo Trading Enterprise CC and any other legal entity of which Mr
Madoda Richmond Khoba (ID number 680520 5864 081), Ms Lebohang
Patience Twala (ID number 820511 0688 089), Ms Vangile Eunice Kosie
(ID number 710226 0658 080) a
nd
Ms Zoleka Sylvia Khoba (730413 0723 082) are directors or members as
per Registrar of Companies and Close Corporations database,
are
allowed to continue with or complete any construction-related work
falling within the ambit of the CICBs mandate, whic
h
commenced prior to the effective date of this sanction; and
That
Group Yw Trading Enterprises CCs grading designation of 5CEPE as
per CIDB register of contractors be downgraded to 4CEPE
with
immediate effect; and
That,
Group Ywo Trading Enterprises CC and other legal entity of which Mr
Madoda Richmond Khoba (ID number 680520 5864 081), Ms
Lebohang
Patience Twala (ID number 820511 0688 089), Ms Vangile Eunice Kosie
(ID number 710226 0658 080) and Ms Zoleka Sylvia
Khoba (730413 0723
082) are directors or members as per Registrar of Companies and
Close Corporations
database, be barred from applying for an amendment of category
status to a higher grading designation or registration
in a
different class of works on the registrar of contractors, in any
class
of construction works
listed in Schedule 3 of the CIDB regulations for a period of
twelve
(12) calendar months,
which
period will commence on the effective date of this sanction; and
That,
Group Ywo Trading Enterprises CC must pay fine of R30 000 (thirty
thousand rand) in no more than three instalments during
the periods
of prohibition mentioned in paragraph 1 and 3, in terms of
sub-regulation 29(2)(e) of the CIDB regulations. The
amounts shall
be paid into the following bank account of the CIDB:
Account
holder: Construction Industry Development board.
Bank: Standard Bank
Branch: Menlyn
Account Type: Current
Account number: 03
224 346 4
Bank
code: 01-23-45-15
Please
note the following proviso set by the Board, pertaining to the
periods referred to in paragraph 1 and 3 and the payment
of the
fine:
That
the periods of prohibition will continue to be effective beyond
twelve (12) calendar months
from the effective date of this
sanction, in the event that Group Ywo Trading Enterprises CC fails
to settle the full fine
on or before the date the period of twelve
(12) calendar months lapses, in which case the prohibitions will
remain effective
until the fine has been paid in full.
That
proof of such payment must be faxed to the CIDB, fax number 086 688
0443 for the attention of Mr Stephen van Huyssteen, within
4 (four)
calendar days after the payment has been made, and for attention Mrs
H Strydom, fax number 012 664 0307.
This
decision was communicated to the applicant in the letter of the 16
July 2008. It is this decision against which a review
is been
sought.
The
grounds of review are set out as follows:
13.1 The
respondent exceeded its powers in terms of the Act and Regulations
in that the Regulations merely allow the Respondent
to impose a
fi
ne OR barring from
tendering and not both.
The respondent was
not authorised to take the action it had taken and acted ultra
vires the empowering provision.
The
respondents action is not authorised by the empowering provision
of the Regulations.
The
action by the respondent is unreasonable to the extent that no
reasonable person could have so exercised the power performed
by
the Respondent.
The
action by the Respondent is not consistent with the evidence and
circumstances in the matter and is grossly irregular
.
Some
of these grounds appear to be inter-linked. Having stated these
grounds of review in paragraph 14 of the founding affidavit,
the
applicant concludes as follows:
14.
I
state with respect that the order by the respondent is misplaced
and grossly unfair in the circumstances. I state that
the
applicant had been advised and accepted the advice that the
purpose for the penalty provision in the regulations in
the way
it is currently couched in the Regulation, is to either fine a
company and allow the company to continue with its
work., or to
bar a company from tendering and thereby curtail the income of the
company, which will have the effect of a
sever sanction fine.
On the one hand, if a fine is imposed, the company will have to
be able to continue its operations
in order to generate an income
to be able to pay the fine. On the other hand, barring a party
from tendering is with respect
a massive sanction. The effect of
such an order is that a company is in effect told that it may not
make a living for
twelve months. I state with respect that the
only difference between the two sentence options is that in the
case of a
fine, the fine is paid to the respondent, whilst in the
case of barring a party from tendering, the respondent would
not
receive any income from a fine. In both instances the guilty
party is suffering financially.
I
state with respect that in this case where both options were
exercised at the same time, the applicant is being severely
prejudiced
by the action of the respondent. The applicant has to
pay a substantial fine whilst being barred from obtaining further
contracts.
The effect of the order by the respondent is with
respect that the applicant will have to lay off its employees, but
does not
have cash flow to do so. I respectfully point out to the
Honourable Court that if the applicant may not tender for any
contracts
during the twelve months, the knock-on effect would be
that the applicant will not have work for the next 18 month, and
then
when the applicant is allowed to be re-enrolled, it may only
tender for the contracts lesser in value due to the downgrading of
the applicant. The order by the respondent is therefore with
respect completely unrealistic and draconic.
As
I said, the main allegation against the applicant was that, it
provided a fraudulent and or false financial statements to the
respondents during an application to amend its category status to a
higher grading designated in contravention of section 19(2)
of the
Act read with Regulation 10(6)(a). Section 19(2) reads as follows:
Any
registration which is proved to the satisfaction of the
Board
to have been made in error. As a result of misrepresentation or
in circumstances not authorised by the Act, must
be removed from
the register and the reason for the removal must be made in the
register
The
grading in question was granted on 25 September 2007. This entitled
the applicant to tender for R5 000 000 in value as opposed
to R3 000
00 which is on grade 4CEPE. In addition, the applicant as a
Potential Energy Enterprise would have been entitled to
tender for
public construction work in one higher grading now that is
registered on the register. This would mean that the applicant
with
a 5CEPE grading designation would be allowed to tender and undertake
a contract for public construction works that a grade
6 would
qualify for, thus enabling the applicant to tender for and undertake
public construction work to the value of R10 000
000.
Regulation
29(19) and (20) is relevant to the issue of ultra vires raised by
the applicant.
Regulation
29(19) provides that if the accused is found guilty of a
transgression charged with or if he or she admits that he
or she is
guilty of the charge, the committee must inform the Board
accordingly and recommend to the Board the appropriate action
to be
taken.
Sub-regulation
20 provides as follows:
20. The
appropriate action to be taken may include-
where the charge
relates to a transgression of section 18(1) of the Act-
allowing
the contractor in terms of section 18(4) of the Act to complete the
construction works concerned,
ordering
the removal of the name of a contractor from the register in
accordance with section 19 of the Act,
issuing
a warning to the accused,
reprimanding
the accused,
reporting
the accused to Director-General or the Public Protector or both,
imposing
a fine not exceeding R100 000 on the accused or,
suspending
the accused from participating in public sector procurement for
period of time, and
mak
ing
a lost determination that the accused, the Board or the party who
initiated the investigation, must defray all or part of
the costs
incurred to conduct the investigation.
Regulation
29(21) provides that the Board must publish the details of the
finding in the Gazette and if applicable, update the
register of
contractors accordingly.
The
crisp issue raised was whether, the respondent in imposing the
sanction could have invoked the provisions of Regulation 29(20)(e)
and (f), that is, whether it was entitled to suspend and impose a
fine at the same time in terms of subparagraphs (e) and (f)
of the
regulation as referred to above.
Of
course, the other issue was whether the extension of the sanction on
other people was within the powers of the respondent.
Or to put it
differently, whether such a sanction was not so unreasonable that it
ought to be impugned?
I
find it necessary to immediately deal with the argument which was
presented on behalf of the respondent. The view taken was
that in
interpreting subparagraphs (e) and (f) referred to earlier in this
judgment, regard should be had to the enabling legislation
and in
particular, section 19(2) of the Act in question. The submission
was that, in terms of section 19(2) the respondent was
entitled to
issue any sanction. This submission is somewhat clouded. Section
19(2) in my view relates to an application for
a registration. That
is, discovery of fraud or misrepresentation which led to the
registration of a particular construction
entity with the
respondent. Such a discovery in terms of section 19(2),
must lead to the removal of such an entitys particulars from the
register held and kept by the respondent. This in my view,
has
nothing to do with a sanction as envisaged in term
s
of Regulation 29(20) read with sub-regulation (19).
It
looks like other than sanction, as in removal in terms of section
19(2), the only sanction that the respondent can impose would
be in
terms of Regulation 29(20). I do not see the provisions of
Regulation 29(19) and (20) to be in anyway inconsistent with
the
enabling legislation.
I
now turn to deal with the attack relating to the imposition of both
fine and suspension. As correctly pointed out by counsel
on behalf
of the respondent,
or
in between (e) and (f), means either of the two or could
also be used to show that there is a choice or an alternative.
Having
correctly given the
meaning of
or,
counsel for the respondent still argued that the respondent was
entitled to impose fine and suspe
nsion
in terms of sub-paragraph (e) and (f). I have had very serious
difficulty in understanding the logic of the submission.
Quite
clearly, the legislation intended a choice to be made between
suspension or fine. You just cannot have it both and this
could not
have been intended in the Regulation. Such an entitlement is also
not sanctioned in terms of the enabling Act, or
to put it
differently, it is not specifically sanctioned by the Act. Without
much ado, the respondent was not entitled to impose
the suspension
and the fine at the same time.
The
other attack as I see it, relates to the broad way in which the
sanction had been couched. I am referring here to the suspension
to
include other persons and or entities which may not necessarily
constitute the same members or shareholders of the applicant.
Secondly, in my view, a company or close cooperation should be
distinguished as a separate legal entity from its members,
shareholders or directors. To impose a sanction of suspension and
barring as stated in paragraphs 1 and 3 of the sanction quoted
earlier in this judgment would be unreasonable and unwarranted.
In
conclusion, I have been requested by counsel on behalf of the
applicant to review and set aside the sanction imposed and
substitute it with a sanction as set out in prayers 1 and 3 of the
notice of motion. I am not inclined to substitute a sanction
for
the respondent. Whilst the decision is destined to be reviewed and
set aside, and in particular the sanction, I think the
best will be
to remit the matter to the respondent for
reconsideration
of a sanction. Remember, it is not the finding of the applicant
guilty which is been attacked here, but rather
the punishment or
sanction. Therefore the finding of guilty should remain intact.
Consequently, I hereby
make an order as follows:
25.1
The sanction imposed by the respondent and conveyed to the applicant
on the 16 July 2008 is hereby reviewed and set aside.
25.2
The matter is remitted to the Board/Respondent for reconsideration
of the sanction.
25.3
The respondent to pay for the costs of the application.
Mr
LEGODI
JUDGE
OF THE HIGH COURT
For
the Applicant: HARRINGTON INC.
C/o
FRIEDLAND HART INC
Suite 301, Block 4
Monument Office ParK PRETORIA
Ref: G painter Tel: 012
424 0200
For the
Respondent: HAUPT & EARLE ATTORENYS
2
nd
Floor, Cherry Lane, Neuw Muckleneuk, PRETORIA
REF:
C0031 TEL: 012 346 8110