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[2024] ZAKZPHC 93
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Amadwala Trading 73 CC v Ethekwini Municipality (AR317/2022) [2024] ZAKZPHC 93 (28 March 2024)
IN
THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL
DIVISION, PIETERMARITZBURG
CASE
NO: AR317/2022
In
the matter between:
AMADWALA
TRADING 73 CC
APPELLANT
and
ETHEKWINI
MUNICIPALITY
RESPONDENT
ORDER
On
appeal from:
KwaZulu-Natal
Division of the High Court, Durban (Shapiro AJ sitting as court of
first instance):
The
appeal is dismissed with costs.
JUDGMENT
Mathenjwa
J (Olsen J et Mpontshana AJ concurring)
Introduction
[1]
On 24 February 2017, the respondent, eThekwini Municipality,
advertised contracts for
refuse collection and street cleaning
in Umlazi, Durban for a period of 36 months. The appellant, Amadwala
Trading 73 CC, and other
tenderers submitted their bids. On 19 and 20
November 2018 the respondent’s Bid Evaluation Committee (BEC)
convened a meeting,
evaluated the bids and submitted its report on
the bids that successfully met the compliance criteria to the Bid
Adjudication Committee
(BAC). On 21 December 2018 the BAC
convened a meeting to assess whether bidders had the capacity to
perform in terms of the
contracts. The BAC took a decision /
resolution and supported the award of one of the tenders to the
appellant. On 30 January 2019
the respondent’s Acting Manager:
Tenders and Contracts section, addressed letters to the unsuccessful
bidders informing them
that their bids had been unsuccessful and that
the appellant was the successful tenderer. At that stage the
respondent had not
informed the appellant whether its tender was
successful or not. On 26 February 2019 Kaistor Investments (Pty) Ltd,
an unsuccessful
bidder appealed the decision of the respondent to the
respondent’s Tender Appeal Tribunal. On 14 May 2019 the
Tribunal considered
and dismissed Kaistor Investments appeal.
[2]
On 21 June 2019 the respondent’s Executive Committee on Human
Settlements and Infrastructure
(Exco), took a decision to insource
all seven Waste Management and Refuse Collection contracts in Umlazi
Township. The appellant's
tender fell within those contracts.
The Exco’s request to rescind the decisions to award the waste
management tenders was
placed before the BAC for consideration. The
report to the BAC dated 27 August 2019 recorded that there had been
several major
service delivery disruptions in Umlazi
since
December 2017
due to several contractual disputes whereby the
residents were left without refuse removal service for weeks; and the
disruption
had intensified from February 2019 whilst the tender
process had already commenced. The reasons for Exco’s decision
to insource
the refuse collection services was to minimize the
disruptions and the potential health hazard created by indiscriminate
dumping.
The report further recorded that the respondent’s
objective was to provide an efficient world standard service; and the
engagement
of external contractors in Umlazi had caused negative
unintended consequences which impacted negatively on the City's
image.
[3]
On 17 September 2019 the BAC convened a meeting and took a decision,
after considering Exco’s
report, to support the executive’s
decision not to proceed with the proposed contracts. On 21 January
2020, the respondent’s
Manager: Tenders and Contracts
Co-ordination addressed a letter to the appellant informing it that
no tender was recommended
for acceptance. Dissatisfied with the
decision of the respondent, the appellant launched an application in
the High Court to review
and set aside the respondent’s
decision to cancel the tender and to direct the respondent to
implement the award to the appellant.
[4]
The court a quo had to consider whether the respondent had actually
awarded the tender to the
appellant; whether it was entitled to
cancel the award of the tender and alternatively whether the tender
was cancelled for rational
or lawful reasons. Shapiro AJ held
that the respondent had not yet awarded the tender to the appellant
and therefore it was
entitled to cancel the tender in terms of the
respondent’s Supply Chain Management (SCM) policy.
[5]
Two issues were raised by the respondent’s counsel for
consideration in this appeal. They
are:
(a)
whether the tender was awarded to the appellant; and
(b)
whether there were rational and lawful grounds for cancelation of the
tender.
The
appellant’s counsel in his replying argument before us raised
the issue of procedural unfairness based on the respondent’s
failure to afford the appellant an opportunity to make
representations before rescinding the decision of the BAC to support
the
recommendation to award the tender. The issue was not raised in
the appellant’s grounds of appeal, and the court invited the
parties to submit supplementary heads of argument to address the
court on whether the issue of procedural fairness can be raised
on
appeal. The parties submitted their written submissions as per the
court’s direction.
[6]
I first deal with the issue of whether the tender was awarded to the
appellant. In its founding
affidavit the appellant relies on the
meeting of the BAC in which a decision was taken to support the BEC’s
recommendation
to award the tender to the appellant for the
contract sum of R13 364 104.16 ; the letter addressed by
the respondent’s
Acting Manager: Tenders and Contracts
section,
to the
unsuccessful bidders informing them that their bids were unsuccessful
as the successful tenderer was the appellant; and to
the BAC meeting
of 17 September 2019 where the BAC supported Exco’s decision to
rescind its decision to place various contracts
for waste collection
in Umlazi, including the contract which is the subject of this
appeal. In argument before us counsel for the
appellant contended
that the tender was finally awarded to the appellant; the BAC was
authorized by the respondent’s SCM
policy, depending on its
delegation, to either make a final award or a recommendation to the
accounting officer to make a final
award. Counsel further submitted
that the accounting officer ratified the award of the tender by the
BAC on 21 December 2018, therefore
the BAC had the authority to award
the tender to the appellant.
[7]
I agree with the court a quo’s finding that the respondent had
not awarded the tender to
the appellant. With regard to ratification
of the tender by the accounting officer it is apparent from the
minutes where the ratification
was penned that the accounting officer
was not ratifying the delegation of the award of the tender to the
BAC. This is evident
below the signature of the accounting officer
where it is recorded that the item was approved for recommendation to
the accounting
officer by the BAC. In any event the accounting
officer has no authority to sub-delegate to the BAC and the BAC has
no authority
to award a tender above R10 million. Regulation 36(1)
(b)
of the SCM policy provides that: ‘The accounting officer may: …
ratify any minor breaches of the procurement processes
by an official
or committee acting in terms of delegated powers or duties which are
purely of a technical nature’. Regulation
5(2)
(a)
of the policy provides that the accounting officer may not
sub-delegate the power to make a final award above R10 million (VAT)
included. Upon a proper reading of the provisions of the policy the
meaning attributed by the appellant to the ratification of
the tender
by the accounting officer is untenable. In
Natal
Joint Municipal Pension Fund v Endumeni Municipality
[1]
the Supreme Court of Appeal laid the principles that applies in
interpreting documents. At paragraph 18 the Court stated as follows:
‘…
Interpretation
is the process of attributing meaning to the words used in a
document, be it legislation, some other statutory instrument,
or
contract, having regard to the context provided by reading the
particular provision or provisions in the light of the document
as a
whole and the circumstances attendant upon its coming into existence.
Whatever the nature of the
document,
consideration must be given to the language used in the light of the
ordinary rules of grammar and syntax; the context
in which the
provision appears; the apparent purpose to which it is directed and
the material known to those responsible for its
production. Where
more than one meaning is possible each possibility must be weighed in
the light of all these factors. The
process is objective, not
subjective. A sensible meaning is to be preferred to one that
leads to insensible or unbusinesslike
results or undermines the
apparent purpose of the document. Judges must be alert to, and guard
against, the temptation to substitute
what they regard as reasonable,
sensible or businesslike for the words actually used. To do so in
regard to a statute or statutory
instrument is to cross the
divide between interpretation and legislation; in a contractual
context it is to make a contract
for the parties other than the one
they in fact made. The “inevitable point of departure is the
language of the provision
itself”, read in context and having
regard to the purpose of the provision and the background to the
preparation and production
of the document.’ (Footnotes
omitted.)
[8]
In its heads of argument the appellant submitted that the BAC made a
final award to the appellant
for the contract sum of R13 364 103.16
with an amount of R2 004 615.48 exclusive of VAT. In
interpreting the words
used in the SCM policy and the document
ratified by the accounting officer, the conclusion that the
accounting officer was sub-delegating
the award of the tender to the
BAC is not sensible for the following reasons:
(a)
firstly, the accounting officer had no authority to sub-delegate to
the BAC the award of a tender
of over R10 million;
(b)
secondly, the policy allows the accounting officer to ratify a minor
breach of the procurement
process. The total amount of the tender was
R15 368 718.64. That could not be a minor breach of the
tender process because
it is in excess of R10 million; and
(c)
thirdly, the accounting officer may ratify a deviation of the BAC’s
exercise of powers which
are purely of a technical nature and the
huge amount in excess of R10 million is not of a technical nature.
Therefore,
the conclusion that the accounting officer was ratifying the
sub-delegation of the award
to
the BAC would not only be unlawful but is not sensible in the context
of the policy.
[9]
With regard to the appellant’s contention that the respondent
had informed the unsuccessful
bidders that the successful tenderer
was the appellant, it is appropriate to point out that it was not in
dispute in the court
a quo and before this court that the respondent
had never informed the appellant that its tender was successful. In
its answering
affidavit the respondent explained that in accordance
with its practice, the unsuccessful bidders are first informed of the
outcome
of their bids, then a time period is allowed for the
unsuccessful bidders to appeal to the
Tender Appeal Tribunal
and only after the internal appeal
process has been finalised is the successful bidder appointed or
awarded the tender. In this
matter the respondent took the decision
to cancel the tender after the internal appeal process was finalized
but before the appointment
of the successful bidder. The appellant’s
counsel argued that the respondent’s practice in this regard
was not in accordance
with its SCM policy. I am not persuaded by the
contention regarding the respondent’s practice. Reasons being
that reg 20
of the policy makes provision for the process for
competitive bidding that includes the compilation of bidding
documents and the
award and administration of contracts; reg
29(1)
(b)
(i)
makes provision for the BAC to either award a contract or make a
recommendation to the accounting officer to make the final
award. In
my view the respondent would not be acting contrary to the policy by
setting a practice of informing the bidders of the
outcome of their
bids provided such practice does not contravene any provisions of the
policy. The practice employed by the respondent
to appoint the
successful bidder only after it has finalised the internal appeal by
unsuccessful bidders is a practice used to
implement the award of
tenders and does not contravene any provision of the policy.
[10]
In regard to the question of whether the respondent was entitled to
cancel the tender I am in agreement with
the court a quo’s
findings that the tender was lawfully cancelled. At pages 6 to 7 of
the judgment the court held that:
‘
If
the municipality decided to insource the refuse removal service, it
follows that there was no longer a need for that service
to be put
out to tender. Circumstances had changed for whatever reason and
again on the undisputed facts, the municipality assumed
the
responsibility for refuse removal instead of appointing contractors
to render that service on its behalf. I am satisfied that
this
constitutes a change in circumstances and a legitimate explanation
for the change in need that would permit the municipality
to cancel
the tender in terms of its policy.’
[11]
I have had
regard to reg 13(1)
(a)
of the Preferential
Procurement Regulations, 2017 which provides that:
‘
An
organ of state, may before the award of a tender cancel a tender
invitation if-
(a)
due to changed circumstances, there is no longer a need for the goods
or services
specified in the invitation;’
The
provisions of the Preferential Procurement Regulations are further
inserted into the respondent’s SCM policy. Regulation
52(3)
(a)
of the policy allows the respondent to cancel a tender if due to the
changed circumstances there is no longer a need for the services
specified in the invitation. The Procurement Regulations and the
respondent’s SCM policy grant the respondent limited discretion
to cancel a tender if there is change of circumstances and the
specified services are no longer needed. In
Tshwane
City and Others v Nambiti Technologies (Pty) Ltd
[2]
the Supreme Court of Appeal grappled in attributing a meaning to the
phrase “changed circumstances” in the Procurement
Framework Regulations, 2011. The court held that the reg. 10
(4) of the Procurement Framework Regulations ,2011 are
couched
in permissive, not mandatory terms;
[3]
it is not intended to be restrictive in regard to an organ of state’s
power to cancel a tender and therefore, it should not
be necessary
for an organ of state to demonstrate a change of circumstances in
order to cancel a tender for goods or services that
it had decided it
no longer need.
[4]
[12]
In the present matter the respondent contended that due to the
disruption of services at Umlazi that commenced
in 2017, and
intensified in 2019, it had taken a decision to provide inhouse waste
management services instead of outsourcing the
services. For that
reason, there was no longer a need for the services specified in the
tender. In
Nambiti
the
municipality had advertised a tender for SAP support services. After
advertisement of the tender the municipality reviewed the
tender and
concluded that in the light of its need the published tender would no
longer meet the needs of the municipality. The
tender was cancelled
and re-advertised. Dissatisfied with the municipality’s
decision, Nambiti launched a court application
to review and set
aside the municipality’s decision. The Court held that “until
the tender was issued the City was
entirely free to determine for
itself what it required by way of SAP support services’.
[5]
In the present matter there were substantive grounds for the
respondent to cancel the tender based on the changed circumstances
coupled with its obligations to prevent further disruption of
services and to provide sustainable services in Umlazi.
[13]
In regard to the issue of the rationality of the decision, the
Constitutional Court in
Minister
of Justice and Another v SA Restructuring and Insolvency
Practitioners Association and Others
,
[6]
articulated the test for rationality as follows:
[7]
‘…
Rationality does not
speak to justification of the action but to a different issue.
Rationality seeks to determine the link between
the purpose and the
means chosen to achieve such purpose. It is a standard lower than
arbitrariness
. All that is required for
rationality to be satisfied is the connection between the means and
the purpose. Put differently,
the means chosen to achieve a
particular purpose must reasonably be capable of accomplishing that
purpose. They need not be the
best means or the only means through
which the purpose may be attained.’
[14]
It is appropriate to point out that the respondent has obligations
imposed by the Constitution to “provide
democratic and
accountable government for local communities” and “to
ensure the provision of services to communities
in a sustainable
manner”.
[8]
The decision
to cancel the tender and insource the waste management services, is
linked to the above mentioned purpose. Accordingly,
the respondent’s
decision is rationally connected to the constitutional obligations to
provide accountable government and
sustainable services.
[15]
This brings me to the question of whether the issue of procedural
fairness which was not raised in the appellant’s
heads of
argument should be considered in this appeal, and if so, whether the
respondent was required to afford the appellant an
opportunity to
make representations before cancelling the tender. Respondent’s
counsel conceded that since the order granting
leave to appeal does
not exclude the issue of procedural fairness, this court is not
precluded from considering the issue on appeal.
The appellant’s
counsel contends that since the issue of procedural fairness was
pertinently raised by the appellant in its
supplementary affidavit in
the review application, the court is entitled to consider it on
appeal. The appellant’s
counsel referred this court to
Logbro
Properties CC v Bedderson NO and Others
,
[9]
wherein the appellant’s counsel had raised an entirely
new point on appeal which was not raised in its affidavits nor
argued
in the court a quo, regarding the contention that the tender
committee should have afforded the appellant an opportunity
to make
representations before taking the decision to cancel the tender. The
Constitutional Court allowed the issue to be raised
on appeal,
reasons being that the facts before the court were clear and neither
party wished to adduce further evidence relating
to that issue. In
this case the appellant had raised the issue of procedural fairness
in its supplementary affidavit; it was argued
in the court a quo and
the acting judge made a finding that the provisions of the Promotion
of Administrative Justice Act
[10]
(PAJA) were not applicable because the decision to cancel the tender
was not an administrative action. Except for the argument
that the
issue of procedural fairness was not raised in the grounds of leave
to appeal all the relevant facts before us to consider
on the issue
were ventilated in the court a quo and there is no suggestion that to
consider the issue would prejudice the appellant.
For these reasons
the court will consider the issue even though it was not raised in
the grounds of appeal.
[16]
In regard to the issue of whether the appellant should have been
afforded an opportunity to make representations
before the decision
was taken to cancel the tender, the court a quo correctly found that
the decision to cancel the tender was
an executive
decision, not administrative action and therefore the provisions of
the PAJA did not apply to it. The appellant’s
counsel relied on
Logbro
in contending that procedural fairness applied and the respondent
should have afforded the appellant an opportunity to make
representations
before cancelling the tender. In
Logbro
the respondent had advertised a tender for sale of a property
approved for development in Richards bay; the appellant had tendered
but its tender was unsuccessful. Dissatisfied with the outcome the
appellant launched an application in the High Court seeking
an order
for the award of the tender to the other tenderer to be declared
unlawful and set aside. The court found that the award
of the tender
was unlawful and it was set aside. The court directed the respondent
to re-advertise the tender and reconsider the
appellant and other
tenderers that complied with the tender conditions. The tender was
re-advertised. The appellant submitted its
bid and its tender was now
the highest, but the committee decided not to accept any tenders,
instead it recommended a call for
fresh tenders in view of the
increase in the property values in Richards bay in the intervening
two years. The tender was subsequently
cancelled and re-advertised.
The Supreme Court of Appeal held that the tender process constituted
administrative action that entitled
the appellant to lawful and
procedural fairness and the principles of administrative justice.
[11]
The court held that procedural fairness demanded that the respondent
“in reconsidering the tenders would afford the compliant
tenderers an opportunity to make representations …on any
factor that might lead the committee not to award the tender at
all”.
[12]
The
respondent’s counsel relied on
Nambiti
where the court held that a decision not to procure services does not
have any direct external legal effect and no rights are infringed
thereby.
[13]
[17]
In
SAAB
Grintek Defence (Pty) Ltd v South African Police Services and
Others
[14]
the Supreme Court of Appeal drew a distinction between
Logbro
and
Nambiti
.
The court held that:
[15]
‘
The
distinction between
Logbro
and
Nambiti
is this: In
Logbro
there was a tender process that had progressed to the
stage where a decision had to be made whether to award the tender. In
Nambiti
there was a decision that the services reflected in
the tender were no longer required and the tender process was
terminated.’
The
court further reaffirmed the principle in
Logbro
that when an organ of state took the decision to procure
goods and later cancelled the tender it does so in the
exercise
of executive authority and its decision to cancel the tender was not
susceptible to review in terms of PAJA.
[16]
Even though the exercise of executive authority to cancel a tender is
not reviewable in terms of PAJA, it is still reviewable in
terms of
the principle of legality, and therefore the principles of procedural
fairness would still apply. The court further explained
the
difference between PAJA and the principle of legality as grounds of
review. Mpati P stated as follows:
[17]
‘…
The
two differ, firstly, because the circumstances in which the principle
of legality will demand procedural fairness in the decision-making
process - in the sense of the rationality of the process by which the
decision is made - are not the same as under PAJA. Secondly,
the
level of scrutiny for irrationality under the principle of legality
is a low hurdle requiring only a rational connection between
the
action and the reasons given for it, while unreasonableness under
PAJA requires that the decision be one that a reasonable
decision-maker could not reach...’ (Footnotes omitted.)
The
court decided that a rational decision-making process did not demand
that SAAB be afforded a hearing because the decision was
an executive
decision involving the internal operational workings of SAPS and the
areas on which SAAB contended that it wished
to make representations
on were the decision, the effect of the decision on it and the extent
to which SAAB could meet SAPS requirements.
The court held that SAAB
had not shown that a rational decision-making process would be
lacking if it was not afforded a hearing.
[18]
[18]
I have pointed out in paragraph 12 above that there was no need for
the advertised tender because the respondent
had taken the decision
to render the services inhouse in order to apply its strategy to
provide sustainable services. In regard
to substantive requirements I
have found that the respondent’s decision to cancel the tender
was permissible in terms of
its own SCM policy and the Procurement
Regulations and therefore the cancellation of the tender was lawful.
Further, the decision
to cancel the tender was rationally connected
to the purpose of the respondent’s constitutional obligations
to provide sustainable
services. With regard to the issue of whether
the appellant should have been given an opportunity to make
representations I have
had regard to the nature of the decision
taken. Firstly, it was a policy decision taken by the respondent on
the issues of governance
about the manner of delivering services to
the community. This case is distinguishable from
Logbro
judgment where the tender was cancelled and re-advertised for reason
of increased rates to property. The representations sought
to be made
by the appellant would be on issues that fell within the sole
discretion of the respondent on the manner in which to
provide
services to the community. Thus, considering the nature of the
decision taken by the respondent, its failure to afford
the appellant
an opportunity to make representations does not violate procedural
fairness in the tender process.
[19]
In the result, the appeal is dismissed with costs.
Mathenjwa
J
Olsen
J
Mpontshana
AJ
Date
of hearing:
16 February 2024
Date
of judgment:
28 March 2024
Appearances:
Appellant’s
counsel:
G
O Van Niekerk SC
Assisted
by:
NSV
Mfeka
Instructed
by:
S
Mema & Associates Attorneys
Pinetown
C/O:
Themba Mkhize Attorneys
Pietermaritzburg
Respondent’s
counsel:
T
Palmer
Instructed
by:
Luthuli
Sithole Attorneys
Durban
C/O:
Austen Smith Attorneys
Pietermaritzburg
[1]
Natal
Joint Municipal Pension Fund v Endumeni Municipality
2012
(4) SA 593 (SCA).
[2]
T
shwane
City and Others v Nambiti Technologies
(Pty)
Ltd
[2015]
ZASCA 167; 2016 (2) SA 494 (SCA).
[3]
Ibid para 30.
[4]
Ibid
para 28.
[5]
Ibid
para 31.
[6]
Minister
of Justice and Another v SA Restructuring and Insolvency
Practitioners Association and Others
,
2018 (5) SA 349 (CC).
[7]
Ibid para 55.
[8]
Section
152(1)(
a)
-
(b)
of
the Constitution.
[9]
Logbro
Properties CC V Bedderson NO and Others
[2002]
ZASCA 135 (SCA)
;
2003 (2) SA 460 (SCA).
[10]
Promotion of Administrative Justice Act 3 of 2000
.
[11]
Logbro
para
5.
[12]
Logbro
para
25.
[13]
Tshwane
City and Others v Nambiti Technologies
(Pty)
Ltd
[2015]
ZASCA 167
(SCA)
;
2016 (2) SA 494
(SCA) para 32.
[14]
SAAB
Grintek Defence (Pty) Ltd v South African Police Services and Others
[2016]
ZASCA 104 (SCA)
;
[2016] 3 ALL SA 669 (SCA).
[15]
Ibid
para 18.
[16]
Ibid
para 21.
[17]
Ibid
para 22.
[18]
Ibid para 34.