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[2008] ZAWCHC 120
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Syntell (Pty) Ltd v City of Cape Town and Another (17780/2007) [2008] ZAWCHC 120 (13 March 2008)
IN
THE HIGH COURT OF SOUTH AFRICA (CAPE OF GOOD HOPE PROVINCIAL
DIVISION)
CASE
NO. 17780/2007
In
the matter between:
SYNTELL
(PTY)
LTD APPLICANT
and
THE
CITY OF CAPE TOWN 1
ST
RESPONDENT
ACTARIS
SOUTH AFRICA
(PTY)
LTD
2
ND
RESPONDENT
JUDGMENT
DELIVERED
ON
13
MARCH
2008
Introduction
1. Section 62 of the
Local Government: Municipal Systems Act 32 of 2000 ("the Systems
Act") provides a
right
of
internal appeal
to a person
"whose
rights are affected by a decision taken by a political structure,
political office-bearer, councillor or staff member
of a municipality
in terms of a power or duty delegated or sub-delegated by a
delegating authority to the political structure,
political office
bearer, councillor of staff member",
2. At issue in the
present application is the applicability of section 62 of the Systems
Act in procurement matters. The issue arose
in the following
circumstances.
3. The applicant
(âSyntellâ) and the second respondent (âActarisâ) both
competed (along with three other companies) for
a tender invited by
the Electricity Services Directorate of the first respondent (âthe
Cityâ) in the last quarter of 2006.
4. The City currently
has four different systems for the provision of prepaid electricity
to residential and small business consumers.
The provision of prepaid
electricity involves the operation of computer programme software and
the hardware equipment needed to
operate
such a system.
5.
Syntell is currently a service provider to the City in respect of
prepaid electricity services in the former Tygerberg and the
former
Cape Town metropolitan local areas, in these areas the City runs two
systems -one for each geographic area - off its own
mainframe, using
software provided and maintained by Syntell. The City pays Syntell a
licence fee.
6. Actaris is the
current service provider in the former Blaauwberg local metropolitan
area. Actaris provides a complete service
in its area and the City's
only involvement is the vetting of periodic reports it receives from
Actaris, and the receipt of the
revenue.
7. Another firm is the
service provider in the Oostenberg and Helderberg areas. The City
owns both the. hardware and software in
respect of the service in
those areas and the service provider is responsible only for
maintenance and support.
8. There is no
operational compatibility between the four systems.
9. The City's
Electricity Services Directorate, by notice dated 15 September 2006,
invited tenders for the supply, delivery and
commissioning of an
Electricity Prepaid Uniform Vending System under tender number
69E/2006/07.
10. Syntell, Actaris and
three other parties submitted tenders in response to the invitation.
11. The respective
service providers, including Syntell, had been providing their
services in terms of annual contracts, but when
the tender process
reached an advanced stage, the City changed the contractual
arrangements so that the respective agreements could
each be
terminated on a month's notice. The contracts will be terminated as
the single system is introduced.
12. On 15 January 2007,
the tender was awarded to Actaris by the City's Supply Chain
Management Bid Adjudication Committee ("the
Bid Committee").
13. By letter dated 19
January 2007, Actaris was advised by the City that its tender had
been accepted. Actaris was, however, also
informed in that letter
that it should
"please
note that the award of this tender is subject to a 21 day appeal
period in terms of the Municipal Systems Act and no
rights will
accrue for 21 days from date of this notification or until any such
appeal has been finalized".
14. As will become
apparent below, this
letter
is central to the
differing contentions between the parties.
15.
By fetter dated 19 January 2007, Syntell was advised by the City
that its tender had been unsuccessful.
16. Syntell, which was
the highest-ranked of the unsuccessful tenderers, appealed on 8
February 2007 (within the requisite period)
to the City Manager.
Syntell supplemented its appeal grounds by
letters
dated 30 March 2007
and 18 May 2007.
17. Syntell was granted
an oral hearing and the appeal was fully argued before the City
Manager (Mr. Achmat Ebrahim) on 24 July
2007.
18. Before the appeal
was determined, however, a full bench of this Court delivered a
judgment in
Reader
and Another v Ikin and Another
(CPD Case No.: A574/05), on 16 August 2007 ("the Reader
judgment"). The Reader judgment interpreted the provisions of
s
62 of the Systems Act in a manner which resulted in the availability
of internal appeals under the provision being much more
limited than
had been the case in terms of the City's understanding of the
provision.
19. On the City's
understanding of the Reader judgment when a tender is awarded, the
unsuccessful tenderers are
"third
parties" vis a vis
the
successful tenderer, in the sense of that expression as employed by
Davis J in the judgment.
20.
Accordingly, on 14
September
2007,
the City addressed
a letter to Syntell's attorneys, advising that
the appeal authority
had almost completed its findings when the
Reader
judgment intervened. According to the City's letter, this Court made
the following ruling in that case:
"The
Systems Act provides for an appeal for a party aggrieved by the
initial decision but does not extend to third parties
who contend
that their rights or legitimate expectations have been adversely
affected by the decision')
although the City had
appealed that judgment, it was bound by the full bench's
interpretation of s 62 of the Systems Act until
the appeal was
decided;
as soon as the City
made the tender award on 15 January 2007 rights were determined and
Syntell would be regarded as a third party
vis-a-vis the successful
tenderer;
in the light of the
decision in the
Reader
judgment, Syntell as a so-called
"third
party" vis-a-vis
Actaris
had no right of internal appeal in respect of the tender award in
terms of s
62
of the Systems
Act.
21.
Syntell's attorneys wrote to the City in response and submitted that
the Actaris tender award was significantly different from
the
decision referred to in the
Reader
case
supra,
not
least because the Actaris award, unlike the approval considered in
the Reader case, was expressly made conditional upon no appeal
being
lodged within the stipulated period, or any appeal being dismissed.
The City was accordingly requested to finally decide
the appeal, and
(in accordance with the terms of the decision to award the tender to
Actaris) to suspend the implementation of
the tender award until it
had done so.
22. Syntell's entreaties
met with no success. Syntell consequently applied as a matter of
urgency in early December 2007 for a
rule
nisi
and an interim
interdict. In essence what Syntell asked for was an order directing
the City Manager to determine the appeal lodged
by Syntell and
interdicting Actaris from taking steps to implement the
tender
award pending the
determination
of the
appeal.
23. Both the City and
Actaris opposed the application and filed answering affidavits. The
parties then agreed that Syntell be granted
a
rule
nisi,
returnable on
Tuesday, 29 January 2008, without any interim interdictory relief. An
order was made to that effect by this Court
on 12 December 2007.
Syntell also indicated in its replying
affidavit,
filed the next day,
that it would also be asking on the return of the
rule
nisi
for a
declaratory order (declaring that Syntell was entitled to appeal the
Actaris tender
award)
"in order to ensure that the requisite clarity is provided as to
the respective rights of Syntell and Actaris (and other
tenderers) in
the light of the
Reader
decision and the City's interpretation thereof".
A
copy of the notice of motion as it was proposed to be amended was
appended to the replying papers.
Urgency
24. It is necessary to
determine the legal issue at the core of this application as soon as
possible, not only to clarify the rights
of Actaris and Syntell, but
also the
"many
other unsuccessful tenderers"
who
have been
"turned
away or placed on hold".
The
public interest requires that clarity be obtained on the correctness
of the City's attitude to appeals in procurement cases
as a matter of
urgency. It is also in Actaris' interest that its. position be
clarified as soon as possible, and before it continues
to implement
the tender any further.
25. The application is
also rendered urgent by the fact that Actaris is currently proceeding
to implement the tender. Actaris' description
of the steps already
taken by it in this regard underscore the need for an expeditious
determination of this application, before
any more costs are
incurred, potentially fruitlessly. Actaris has moreover indicated
that it will begin the process of removing
and replacing Syntell's
vending systems
"during
approximately April or May 2008".
it
is clearly necessary to have a resolution of the matter well before
that.
The substantive
issues
26. Section 62 of the
Systems Act provides a right of internal appeal by a person
"whose
rights are affected by a decision".
27. The relevant appeal
authority - determined in accordance with section 62(4) of the
Systems Act -
"must
consider the appeal, and confirm, vary or revoke the decision",
although
"no
such variation or revocation of a decision may detract from any
rights that may have accrued as a result of the decision"
(section 62(3)).
The relevant appeal authority must commence with an appeal within six
weeks and decide the appeal within a reasonable
period (section
62(5)).
28. Mr
Farlam, who together with Ms Norton, appeared for Syntell, pointed
out that an internal appeal is an important safeguard
against faulty
administrative decision-making. He relied on Baxter (Administrative
Law, 1984, p.255):
"It
provides an aggrieved individual with the assurance that the
decision will be reconsidered by a second decision-maker.
The
appellate body is able to exercise a calmer, more objective and
reflective judgment Detached from the 'dust of the
arena', as it
were, and the immediacy of the initial decision, the second
decision-maker is in a better position to discern
a faulty
reasoning process and, in particular, to evaluate facts".
29. Mr Farlam submitted
that it is therefore in the City's interest, as well as that of all
tenderers, and indeed of the public
at large, that there be an appeal
mechanism available in procurement matters. That was also apparently
the intention of the drafters
of the Systems Act.
30. It is trite that the
conduct and determination of a public tender process amounts to
administrative action within the meaning
of s 33 of the Constitution
of the Republic of South Africa, act 108 of 1996 and the
Promotion of
Administrative Justice Act, 3 of 2000
. Syntell is clearly a party
whose rights are affected by the tender award to Actaris. Those
rights include, not least, the right
to just administrative action
(see
Transnet Ltd v
Goodman Brothers (Pty) Ltd
[2000] ZASCA 151
;
2001 (1) SA 853
(SCA)).
31. The tender award
against which Syntell appealed was a decision made by the Bid
Committee, a
"committee
of officials"
with
the delegated power (under
section 165(1)
of the City's System of
Delegations) to make a final award in respect of the procurement of
services where such award exceeds R200
000.00. As a decision of
"staff
members",
the
relevant authority to hear an appeal against It was, in terms of
section 62(4)(a) of the Systems Act, the municipal manager
of the
City.
32. In
the
Reader
case,
supra,
a
full bench of this Court held that no appeal under section 62 was
available to a party aggrieved by the City's approval of another
party's building plans. This was because thesecond party acquired a
right (to erect the structure for which approval had been sought)
upon approval of the building plans and the only compelling
interpretation of section 62(3) of the Systems Act was, in the
Court's
view, that:
"once
a right accrues as a result of a decision, that decision cannot be
reversed on appeal if the reversal take away the right
initially
granted"
1
.
It is important to
note, in this regard, that, according to the judgment in
Reader
,
the approval decision in that case was not made conditional upon
being confirmed on appeal or becoming final in the event of no
timeous appeals being lodged.
33. It is common cause
between Syntell and Actaris that the above-quoted part of the
judgment was the ratio of the Court's decision.
34. The respondents
contend, however, that in terms of the judgment in
Reader
,
no appeal under section 62 is available to a party aggrieved by the
City's award of a tender to another party. As indicated earlier,
In
its letter of 14 September 2007 the City relied upon the following
part of the
Reader
judgment
2
"The
mechanism created by ss62(1) and 62(3) of the Systems Act
provides an appeal for a party aggrieved by the initial
decision
but does not extend to third parties who contend that their
rights or legitimate expectations have been adversely
affected by
the decision. The latter group, however, have a right of access
to a court to set aside such a decision".
35. I
pause to point out that this finding has far reaching consequences:
first, it would seem
that only an unsuccessful applicant would have the right to the
internal appeal mechanism created by section
62. Any other
interested party would not have this remedy available to it as,
invariably; it would be argued by the successful
applicant that
rights had accrued to it. Second, it would result, one would
imagine, in an increase in the number of reviews
brought before
court, a process which is more expensive, time consuming and
require a more onerous burden to discharge than
does an internal
appeal.
36. The question whether
Syntell has a right of appeal in terms of section 62 of the Systems
Act turns on the interpretation of
the judgment in
Reader
.
37. It is
well-established that the interpretation of a court's judgment should
follow the principles applicable to the interpretation
of documents.
In
Firestone South
Africa (Pty) Ltd v Genticuro AG
1977 (4) SA 298
(A) the Appellate Division said the following at
304D-F:
"The
basic principles applicable to construing documents also apply to
the construction of a court's judgment or order:
the court's
intention is to be ascertained primarily from the language of the
judgment or order as construed according
to the usual, well-known
rules ... Thus, as in the case of adocumen
t,
the judgment or order and the court's reasons for giving it must
be read as a whole
in order to ascertain its intention",
[emphasis
added]
(See
also
Plaaslike
Oorganqsraad, Bronkhorstspruit v Senekal
2001
(3) SA 9
(SCA) at par9-11).
38. As Mr Farlam pointed
out, reliance accordingly cannot be placed exclusively on the part of
the Reader judgment quoted in paragraph
34 above. The relevant part
of the judgment is qualified by the words immediately preceding it:
"For these
reasons,
section 62(1) read with section 62(3) of the Systems Act does not
appear to provide any viable internal remedy to
an
aggrieved party such as appellant in the present dispute"
3
(emphasis added).
39. In his pursuasive
argument, Mr Farlam relied on this point: From a reading of the
judgment as a whole, it is clear that the
reason for the judgment,
evident in paragraph 25 of the judgment
4
,
was that section 62(3) prohibits a variation or revocation on appeal
which detracts from
accrued
rights
and that the
mechanism provided by section 62(1) can therefore not be used in
cases where reversal on appeal will take away such
rights.
Interpreting the judgment in accordance with this ratio results in
the least possible restriction of the
"safeguard"
represented by the
right of appeal in terms of section 62 of the Systems Act, and gives
full effect to the plain and unambiguous
meaning of section 62(1) (a
subsection which is not indicated in the text as being qualified in
any manner).
40. Mr
Farlam emphasized that in this case, in notable contrast to the
application considered in the
Reader
case, the City explicitly notified Actaris in its letter of 19
January 2007 that the tender award was subject to a twenty one (21)
day appeal period in terms of the Systems Act and that
"no
rights will accrue for 21 days from date of this notification or
untill any
such appeal has been finalized
"
(emphasis - added).
This was in accordance with the City's Supply Chain Management Policy
(SCMP), in terms of which all tenders
must be conducted, which
provides that the actual awarding of a tender to the successful
tenderer may only take place
"after
the satisfactory resolution of any appeals".
41. Mr Binns-Ward, who,
together with Mr Oliver, appeared for the City, submitted that
Syntell's argument proceeds from a misdirected
characterisation of
the facts, which is premised on the contractual extension by the City
to third parties of a right of appeal
in terms of s 62 of the Systems
Act. That was plainly not the position. Section 62 operates, where it
applies,
ex lege
and
not ex
contractu.
42. Syntell's
contentions, however, rest throughout on the premise that Syntell had
a right of appeal by operation of section 62(1)
of the Systems Act,
which right was not limited by virtue of the provisions of section
62(3) of the Act since - as Actaris was
explicitly notified - no
rights would accrue to it until an appeal had been finalized.
43.
Without Actaris having accrued rights which could be affected by a
reversal on appeal, the appeal mechanism in section 62(3),
on the
reasoning in
Reader
,
was available to Syntell and other successful tenderers. Once its
appeal was lodged, Syntell was, and still is, entitled to have
it
considered and decided.
44. Mr
Binns-Ward contended that the actual position was that the City
accepted Actaris's bid, but because it assumed the existence
of an
appeal in terms of s 62 in the circumstances, it advised Actaris,
consistent with the provisions of its supply chain management
policy,
that the decision would not be effective until the expiry of the
appeal period, or the determination of any appeal lodged
during the
period. The actual incidence of the aforesaid suspension was,
however, obviously dependent on the existence of the criterion
for
the suspension, viz. the existence in law of a right by aggrieved
third parties to appeal in terms of s 62. Absent the factual
existence of such criterion, there was no suspension with the
consequence that the decision was immediately effective and rights
accrued in the sense determined in the Reader judgment.
45. It is plain
from a general consideration of the
Reader
judgment that the full bench was persuaded by the argument addressed
to it by theappellant's counsel (Mr Rosenberg, who also
appeared for
Actaris) that s 62 of the Systems Act was no more than a
codification of the common law doctrine of
functus
officio.
See the
summary of counsel's submissions, made with reference to Baxter,
Administrative Law
at 372-3, at paragraphs 20 and 21 of the judgment.
5
46.
There
is no evidence on record what the thinking was underlying the City's
"suspension" of the award. Mr Essop, in the
answering
affidavit, simply records that the City applied section 211 of the
SCMP which, he notes,
"was
evidently
drawn up on the assumption that unsuccessful tenderers had a right to
appeal in terms of section 62 of the Systems Act against
the award of
a tender contract to another party (emphasis added)".
The
Court cannot conjecture as to the assumptions underlying the City's
decision or the provisions of the SCMP. What is dear is
that the
decision communicated to Actaris was a decision to accept its tender,
but to award the tender only if and when no appeal
was lodged or a
lodged appeal had been determined.
47. Mr
Binns-Ward submitted that there is no indication in the Systems Act
that local authorities may by making their decisions
subject to a
right of appeal in terms of s 62 of Systems Act and purporting to
suspend the determinative effect of their administrative
actions
pending the determination of any such appeals invest
"third
parties"
with
rights of appeal under s 62 which they would otherwise not have had.
48. Mr Farlam's response
was that the cart, here, is being put before the horse. On the
Reader
reasoning, Syntell had a meaningful appeal remedy, provided that no
rights had accrued as a result of that decision. The factual
situation applicable was that, because of the form in which the
decision was communicated, no rights had in fact accrued. The Systems
Act accordingly provided a right of appeal on the facts in this case.
49. Mr Binns-Ward
pointed out that the Systems Act suggests that the suspension of
administrative decisions made by municipal functionaries
under
delegated authority so as to render them more effectively amenable to
internal appeal in terms of s 62 is a competence intended
to be
subject to regulation by the Minister responsible for local
government: see s 72(1)(a)(ii) of the Systems Act. It is important
in
this respect not to overlook the consideration that any such
regulation by the Minister could not lawfully discriminate between
the rights of persons to appeal administrative decisions at which
they were aggrieved unless a rational basis for the differentiation
could be demonstrated. Reliance was placed on s 9 of the
Constitution.
50. Mr Farlam's response
was threefold: First, there is no evidence that this was the reason
for the "suspension" in question.
There are also no
regulations in place, which means that the City was entitled to act
in terms of its SCMP. Third, section 72(1)(a)(ii)
empowers the
Minister to make regulations to regulate "the suspension of
decisions on appeal", which in itself presupposes
that a valid
and competent appeal lies and has been lodged against a particular
decision (which would not be the case if the respondents'
contentions
are correct).
51. Mr Binns-Ward
developed a further argument along the following lines:
(a) Assuming,
but not conceding, that it might be competent for local authorities
to exercise powers of suspension in a manner
similar to what the
Act contemplates by the powers vested in the Minister in terms of s
72, it would, in any event, equally
be plainly unconstitutional for
a local authority by its own decision to decide to make some of its
administrative decisions
amenable to internal appeal by aggrieved
affected persons in terms of s 62 of the Systems Act and others
not. It could not,
for example, afford the privilege to aggrieved
tenderers, but not to aggrieved objectors to a building plan
application. Section
62 itself does not provide any basis for such
discrimination.
(b)
it is difficult for example to conceive of a rational basis for a
local authority to act discriminately by generally suspending
the
determinative effect of its administrative decisions awarding a
tender contract so as to afford a right to aggrieved unsuccessful
tenderers to appeal while not affording an equivalent privilege to
objectors to the approval by its officials of building plan
applications. The legal character of the interest of the
unsuccessful tenderer in the decision made to award the tender to
a
competing tenderer is indistinguishable from that which the
objector to the building plan application has when it the
application is approved notwithstanding its objection.
(c) The
nature of the unsuccessful tenderer's right and interest
in the circumstances
has been expressly described by the SCA in
Transnet
v Goodman Bros
,
supra, at paragraph [11].
6
The right that falls to be protected is the right to administrative
action that is lawful, reasonable and procedurally fair.
It is
precisely the same legal right
that
an objector
to a
building plan application has: cf.
Erf
One Six Seven Orchards CC v
Greater
Johannesburg
Metropolitan Council (Johannesburg Administration) and Another
[1998] ZASCA 91
;
1999 (1) SA 104
(SCA) (more particularly the reference to the
approval of building plans as administrative
action
and the
acknowledgment of the court of first instance recorded by the
appeal
court,
without demur
from the appeal court, that a neighbour had a right to be heard in
the process); and
Muller
NO and Others v City of Cape Town
2006 (5) SA 415
(C) at paragraph [76].
(d) This
all goes to buttress the cogency of the contention that the
City
did not
intend
to
purport
contractually to
extend rights of appeal to Syntell that it did not enjoy
automatically in terms of s 62; and that it did not
intend that the
effectiveness of its decision to accept the bid of Actaris should
be suspended if there were in fact no right
of appeal by
third
parties
in terms
of s 62.
52. Mr
Farlam responded that if the City has acted unconstitutionally, this
is a point to be taken by parties whose constitutional
rights might
have been infringed. In any event, there is no reason to be
pessimistic about the constitutional implications of distinguishing
between different kinds of decisions and appeals. First, one is not
dealing with a "suspect category" as referred to
in section
9(3) of the Constitution, so the reference to "discrimination"
is inapposite. One is simply concerned with
a case of
"differentiation", and a differentiation will only be set
aside if there is no rational connection between
the action and the
purpose it is intended to achieve. One can think of many
reason
why it would be
rational to permit existing suppliers to the City who are tendered
for a consolidated contract to have a right of
appeal against a
decision refusing their tenders, and yet not to grant a right of
appeal to a home-owner aggrieved by a decision
to approve a building
application submitted by a neighbour.
I
agree with these
submissions.
53. Mr
Binns-Ward submitted that
(a) it
is plain on the facts of the current matter that the indication
that the award of the tender was suspended pending the
expiry of
the period of appeal permitted in terms of s 62 of the Systems Act
and, in the event of any appeal being lodged during
that period,
pending determination of the appeal, was predicated on the
assumption of the existence of a right of appeal. The
content of
clause 211 of the City's supply chain management policy is
predicated on the same assumption. The City's supply
chain
management policy obviously cannot trump the provisions of national
legislation and to the extent that it would on an
acceptance of the
Reader judgment appear to have been premised on an incorrect
construction of the national legislation, it
fails to be treated as
pro non
scripto.
(b) The
provision of the supply chain management policy and the content of
the administrative decision contemplated in the City's
acceptance
of tender letter to Actaris, dated 19 January 2007, contemplate and
refer to two administrative decisions; viz.
(i) an acceptance of a
tender and (ii) the award of a contract pursuant to such
acceptance. The policy and the acceptance letter
do not purport to
suspend the effect of the first decision; they rather make any
implementation of the contemplated second
action - which would
essentially be an availment of rights under the first decision, -
dependent upon the outcome of any appeal
that might be made in
terms of s 62 of the Systems Act. What decision is the contemplated
appeal in terms of s 62 to be directed
at in the circumstances? It
can only be the decision that has been effectively and completely
made i.e. the decision to accept
the tender. Certainly it is not
possible on any basis to conceive of an appeal in terms of s 62 if
no determination of rights
has been made.
54. Mr
Farlam's response was this: Davis J held that when a licence is
granted and later revoked, the applicant is deprived of an
existing
right since the decision to grant approval is a determination of the
rights of the applicant and
"a
favourable
determination results in an accrual of a right to first respondent".
In this matter,
however, any determination of Actaris' rights was subject to the
outcome of the contemplated appeal and accordingly
did not result in
any accrual of rights (as was explicitly communicated to Actaris).
55. In
its argument in the
Reader
case, the City (represented by Mr Binns-Ward) submitted that the word
"accrued"
in s 62(3) fell to
be construed in a manner that denoted a right that had not only been
acquired, but also availed of. in other
words that an accrued right
for the purposes of s 62(3) would be an availed of right and that the
effectiveness of a decision upholding
an appeal in terms of s 62(1)
and setting the original decision aside or varying it would not
reverse what had already been done
in terms of the right originally
afforded. Such a construction of the word
"accrue"
is not without
precedent, in
Mahomed
NO v union Government (Minister of Interior)
1911 AD 1
at p. 10, Innes JA cited the decision of the Privy Council
in
Abbott v The
Minister for Lands
[1895] AC 425
(PC), stating as follows:
'It
was laid down by the Privy Council in Abbott v Minister of Lands
(A.C., 1895, p.425), that the mere right existing in the members
of
the community or any class of them to take advantage of an enactment
without any act done by an individual towards availing
himself of
that right, cannotproperly be deemed a "right accrued"
within the meaning of the enactment'
Such
an interpretation would also render sensible the
regulatory
power afforded to
the Minister in terms of s 72(1 )(a)(ii) of the Systems Act It was
this argument that is the
"purposive
construction"
referred
to by Davis J at paragraph 24 of the
Reader
judgment.
7
However that argument was rejected in the
Reader
judgment with
reference to the so-called
"determination
and deprivation theory".
56.
What Davis J meant when he referred to a determination and
deprivation theory appears plainly from the content of paragraph
28
of the judgment, in which the learned judge pronounced "As
Baxter
Administrative
Law
at 353
notes, administrative action has automatic consequences; (awful
administrative action may create a right, a privilege, a
power, a
liability or a duty or it may remove any of these."
Davis
J went further to
illustrate
this concept,
pointing out that
"when
a person applies for a license, her rights to a licence are
determined. ... A favourable determination therefore results
in an
accrual of a right.â
8
57. Accordingly, it was
submitted that rights did accrue to Actaris when the first decision
was made. The nature of those rights
was such that the City was not
at liberty to accept the bid of any other tenderer. In regard to the
acceptance of the bid submitted
by Syntell it was
functus
officio
on the
basis of the determination theory.
58. I disagree. If
Actaris was expressly advised that the tender award was subject to an
appeal process, then it must follow that
rights did not accrue
to
it in the sense as is contemplated by the Reader judgment. It matters
not that the City may have been under a misapprehension as
to the
applicability of appeal process to the award offenders. Factually the
City did not intend rights to accrue to Actaris until
the appeal
process had been finalised.
59. Moreover, once the
appeal process has been embarked upon it would seem to me that
Syntell is entitled to demand that it be concluded.
60. The tender award may
furthermore not legally be implemented at this stage. In terms of the
tender award letter, no rights would
accrue to Actaris until any
appeal in terms of the Systems Act had been finalized. The word
"finalized"
in the tender
award clearly contemplated a final determination or decision on
the merits of the appeal by the relevant appeal
authority and not, as
is contended for by Actaris, a decision by a different functionary
that no appeal was available. The very
condition to which the accrual
of rights pursuant to the tender was made subject presupposed that
unsuccessful tenderers did have
a right of appeal. It is no answer
for the City now to suggest that, in the light of the
Reader
judgment, the condition must be regarded as having been based on a
wrong premise (unless the City is successful in its appeal against
that decision). The City is bound by its own decisions (even if
flawed) unless and until they are set aside (
Oudekraal
Estates (Pty) Ltd v City of Cape Town and Others
2004 (6) SA 222
(SCA) at
paras
26-37). The City
also cannot depart from the SCMP, even if any of its provisions
appear to have been inserted on the basis of a
wrong interpretation
of a law. In the absence of any final decision on the merits of
Syntell's appeal, no rights in relation to
the tender can thus have
accrued to Actaris.
61. Mr
Binns-Ward submitted that Syntell's contingent reliance on
Oudekraal
Estates
case in the
alternative is also misplaced. What Syntell seeks in this matter is a
mandamus
directing
the City to hear an appeal in terms of s 62 of the Systems Act where
no such right of appeal exists in law. It is seeking
an order from
the Court enjoining the City to do what it is not permitted in law to
do in terms of the
Reader
judgment's construction of the statutory provision. What the judgment
in
Oudekraal
determined was that it was impermissible to mount collateral
challenges to administrative decisions other
than
defensively, it did
not decide that a court was required to enforce an invalid
administrative decision unless and until it was set
aside on review.
On the contrary, notwithstanding its impeachment of the former City
of Cape Town's collateral challenge to the
unlawful decision of the
Administrator to proclaim a township at Oudekraal, the SCA refused to
grant the appellant an order requiring
the City to comply with the
requirements of the administrative decision in question despite it
not having been set aside on judicial
review.
62. Again, I disagree.
The right to an appeal would exist, also in terms of the Reader
judgment, if rights had not accrued to Actaris.
The moment it is
found that there does indeed exist a right of appeal, it must follow
that Syntell would be entitled to the
mandamus
is seeks.
63. Mr Rosenberg, who
appeared on behalf of Actaris, essentially advanced two arguments on
the merits
(a) The
first proceeds as follows
(i) A
final decision was purportedly taken by the Bid
Committee that the
tender of Actaris be accepted, and that decision was not
conditional (nor, allegedly, could it legally
be)
(ii) The City's
notification letter did not purport to
insert conditions
into the award of the tender: it was simply
"purporting
to point out what the City regarded as being the prevailing
legal position, namely that tender awards
were ... subject to a
s 62 appeal. This being so, implementation of the award was
suspended pending any s 62 appeal";
(iii) That
letter could not confer a right of appeal on
Syntell, because
no such right can be conferred (either
ex
lege
or ex
contractu)
by
an incorrect assumption by the City communicated to Actaris.
(iv)
And thus no appeal can lie against it in terms of section
62(3) of the Systems Act.
64.
This argument, as Mr Farlam pointed out, fails to give due
recognition to the fact that, irrespective of what the Bid Committee
may have decided, no rights could vest with Actaris until it had been
told in unequivocal terms of an unconditional right to implement
the
contract. That plainly did not happen, as the City's letter of 19
January 2007 made clear. There is therefore no question of
section
62(3) having been implicated, or any right to appeal having been
qualified or rendered meaningless.
65. The
argument also overlooks that section 62(1) of the Systems Act
entitles Syntell to appeal: Section 62(3) is concerned with
remedies,
and stipulates in this regard that an appellant is precluded from
obtaining any reversal of a decision if vested rights
have accrued.
It is thus not a question of the City's notification letter
conferring on Syntell a right which it did not have.
That right
already existed
(ex
lege)
by virtue of
section 62(1). The notification letter merely ensured that there was
no question of the s 62(3) proviso coming into
play, and effectively
rendering the appeal nugatory.
66. I
agree
with both these submissions made by Mr Farlam.
67. Actaris' second
argument has the following components:
While
the award of the tender to Actaris involved an administrative
decision, the relationship of the parties is that of ordinarily
contracting parties;
In the circumstances,
notwithstanding the City's earlier communication that the tender was
not to be implemented pending the appeal
process, the City and
Actaris (as contracting parties) could subsequently agree that the
City should commence work;
This
is supposedly
"exactly
what has happened",
by
virtue of the City's letter to Actaris dated 21 September 2007 (par
31), after the City had
"[r]ightly
or wrongly,... concluded that the appeal process could be taken no
further"]
Pursuant thereto,
"the
parties proceeded to Implement the contract" and
rights
"clearly
accrued";
There can accordingly
"no longer be
any talk of a suspension of the award",
while
even if
Reader
was not previously of application,
"It
certainly is now by virtue of the City's later decision to
implement".
68.
When considering this argument, it must again be appreciated, that it
is not a question of a
right to appeal having to be bestowed on Syntell: the right existed
through section 62(1). Section 62(3)
merely deals with remedies, and
is concerned with what relief can be awarded to appellants.
69. In
any event, there can, on this alternative submission of Actaris, be
no question of section 62(3) having been implicated prior
to 21
September 2007 (well after Syntell's appeal was lodged, amplified and
comprehensively argued before the City Manager). The
allegedly
disqualifying circumstance only, on Actaris' version, occurred on or
about 21 September 2007. That can accordingly not
diminish Syntell's
right to the declaratory order outlined in paragraph 2 of the amended
notice of motion - in terms of which Syntell
has asked for an order
"[declaring
that [Syntell]
was entitled
to appeal on 8 February 2007
in terms of section 62 of the [Systems Act] against the tender
award..."
(emphasis
added).
70. Moreover, if
Actaris' alternative submission is correct, what this means is that
Syntell could appeal and set aside the tender
award to Actaris from
19 January 2007 to 21 September 2007, but from then onwards was
precluded from obtaining any meaningful relief
in an appeal. In other
words, the City could have finalized its appeal in the middle of
September 2007, when it abandoned that
process, but after erroneously
concluding that there was no appeal remedy for Syntell in the light
of
Reader
,
was able to scupper it.
71. It is difficult to
see how that argument assists Actaris. The City would plainly have
acted administratively unfairly if and
when it pulled the rug out of
the tender process by conferring rights on Actaris. The City's
actions would therefore be clearly
reviewable, while Actaris and the
City could also be interdicted in the meanwhile from acting in terms
of their patently wrong
decision, in any event, it is submitted that
section 62(3) must refer to the position when the appeal is lodged
and the rights
conferred at that time. Moreover, inasmuch as any
communication to Actaris in late September 2007 about there
purportedly not being
any internal appeal was made in a contractual
context,
it would
be void as a result of being premised on a mistaken assumption by the
City (and presumably Actaris).
72. Syntell asks that
the City's appeal authority (in this case, the City Manager)
determine its appeal. In addition, it seeks to
interdict Actaris from
implementing the tender award pending the determination of Syntell's
appeal.
73. The requirements for
a final interdict (as crystallized in
Setlogelo
v Setloqelo
1914 AD
221
at 227) are satisfied on the papers.
74. Syntell alleges a
clear right to have its appeal determined by the City and an
infringement of that right is established by
the City's undisputed
refusal to determine the appeal.
75. Moreover, contrary
to Actaris' assertions, neither review nor a damages claim is
suitable
alternative
remedies available to Syntell. Review of the City's decision to award
the tender to Actaris is no alternative to determination
of an
internal appeal which has already been prosecuted and argued. Review
grounds are in any event narrower, and therefore not
comparable with
appeal grounds.
Declaratory relie
f
sought
76. In its proposed
amended notice of motion Syntell seeks an order declaring that it was
entitled to appeal in terms of section
62 of the Systems Act. No
basis for objecting to the proposed amendment was advanced, and it is
granted.
77. Section
19(1)(a)(iii) of the Supreme Court Act 59 of 1959 empowers this Court
"in its
discretion, and at the instance of any interested person, to enquire
into and determine any existing, future or contingent
right or
obligation, notwithstanding that such person cannot claim any relief
consequential upon the determination".
78. The
right which the Court is being asked to investigate and determine
clearly relates to an
existing, legally enforceable right. Declaratory relief is
furthermore appropriate and desirable in circumstances
where, as in
this case, an issue of significant public interest is in dispute. It
is reiterated, in this regard, that, as the City
has acknowledged,
"the
application raises a matter of importance for the City's
administration of procurement matters, if, contrary to the City's
understanding, the Applicant is indeed entitled to an appeal..., so
are many other unsuccessful tenderers whose appeal have also
been
turned away or placed on hold pending the determination of the
Supreme Court of Appeal in the Reader case".
79. A
case in point is Ex parte
Chief
immigration O
fficer.
Zi
mbabwe
1994 (1) SA 370
(ZS). In that case, the parties contested the
validity of a judgment determining the legal position of
"aliens"
under Zimbabwean
immigration legislation. The Court exercised its discretion to grant
declaratory relief, pointing out at 377E-F:
"A
powerfully persuasive factor for the exercise of the discretion
in favour of the applicant is that the issue concerning
the
judgment of this Court is anything but abstract or purely
intellectual, it is very much alive and if not resolved in
these
proceedings will inevitable come before this Court in the near
future. It affects the applicant ... and doubtless
many other
aliens similarly positioned to the [immigrants concerned]. The
raising of it in legal circles has caused uncertainty
and anxiety
in the minds of immigration officers. It is only right and
proper, therefore, that this Court should declare
... upon the
validity or otherwise of its judgment".
80. Similar
considerations warrant a declaratory order in this case.
Conclusion
81. In the circumstances
I am not persuaded by the argument that the tender had been finally
awarded; that the letter could not
detract from the finality of the
award - and hence that rights had accrued.
82. In
the premises I uphold the contentions made by Syntell that the matter
of its appeal is distinguishable from the facts in
the Reader case
and that the ratio in that case was accordingly not applicable to
Syntell's internal appeal since the tender award
was explicitly made
subject to an appeal period and the City had notified Actaris in
express terms that no rights would
accrue
to it until any
appeal process had been finalized.
83. I also uphold the
Syntell contention that there were therefore no accrued rights which
would be affected by a variation or revocation
of the tender award on
appeal. Accordingly, the internal appeal provided by section 62(1) of
the Systems Act was still available
to Syntell.
84. In the premises I
make the following order
Declaring
that the applicant was entitled to appeal on 8 February 2007
in
terms of section 62 of the Local Government Municipal Systems Act 32
of 2000 ("the appeal" against the tender award
69E/2006/07
made by the first respondent's supply chain management committee on
17 January 2007 ("the tender award");
Directing the first
respondent to determine the appeal against the tender award;
interdicting
the first and second respondents from taking any steps whatsoever to
implement the tender award, alternatively to
further implement the
tender award, pending the determination of the appeal;
Directing that the
costs of this application be paid by the first and second
respondents jointly and severally. The costs include
the costs of
two counsel.
Sven
Olivier
1
par 25, p.12 of the judgment
2
paragraph 32, page 15 of the
judgment
3
Par 32 of the judgment at p 15
4
At p 11 -
1
2
5
The predecessor of s 62 of the Systems Act in some of the old order
provincial legislation pertaining to
municipalities
was plainly consistent with the common law doctrine of
functus
officio:
see
s 88(4) of the Natal Local Authorities Ordinance 25 of 1974, which
provides:
"Whenever
any officer who has been requested by any person to exercise or
perform any power, duty or function delegated
to such officer in
terms of subsection (1)-
(a)
fails or refuses to comply with such request; or
(b) in
exercising or performing such power, duty or function, does so in a
manner which does not accord with such person's
request,
such
person may, within fourteen days of being notified of such failure
or refusal or of the decision of such officer, appeal
to the
council against such failure, refusal or decision by giving written
notice thereof and of his grounds of appeal to the
town clerk."
6
administrative
action which is justifiable in relation to the reasons given for it
where any of their rights is affected or threatened."
7
The argument was formulated as follows in the City's heads of
argument before the
full
court
"22.
If
a
decision
by a functionary that would be amenable to revocation in terms of
either s 59(3) or s 62(3) were to be beyond the reach
of either of
those sections merely because it gave rise to
a
right
in favour of any person even if such right had not 'accrued' in the
sense of having been exercised, the provisions would
be in large
measure dead letters. That cannot have been the intention of the
legislature. 23 It is submitted that the construction
of s 62(3)
contended for by the Second Respondent is supported by a
consideration of s 62(1). The right of appeal granted in
terms of s
62(1) is not restricted in any way. It is only the effect of the
determination of an appeal that may be restricted
by reason of the
qualification to the effect of the appellate authority's decision
in terms of s 62(3). Section 62(3) does
not restrict the appellate
authority's power to confirm, vary or revoke the decision appealed
against; it merely limits the
effect of such confirmation,
variation or revocation. If the intention were to exclude an appeal
in any case where the decision
had the consequence of merely
granting a right instead, as it is submitted it was intended,
merely to limit the effect of an
appeal decision in a case where a
decision had granted a right that been availed of, the appropriate
place to impose the limitation
would have been in s 62(1)."
8
Reader judgment,
page
14,
par 29