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[2020] ZASCA 75
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Oranje Watersport CC v Dawid Kruiper Local Municipality and Others (397/2019) [2020] ZASCA 75 (30 June 2020)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Not
reportable
Case
No: 397/2019
In
the matter between:
ORANJE
WATERSPORT
CC APPLICANT
and
DAWID
KRUIPER LOCAL
MUNICIPALITY FIRST
RESPONDENT
UPINGTON
HOTEL (PTY)
LTD SECOND
RESPONDENT
THE
REGISTRAR OF DEEDS,
VRYBURG THIRD
RESPONDENT
Neutral
citation:
Oranje Watersport CC v Dawid
Kruiper Local Municipality and Others
(397/2019)
[2020] ZASCA 75
(30 June 2020)
Coram:
PONNAN, MOCUMIE and MBATHA JJA and KOEN and
GORVEN AJJA
Heard:
21 May 2020
Delivered:
This judgment was handed down electronically
by circulation to the parties' representatives by email, publication
on the Supreme
Court of Appeal website and release to SAFLII. The
date and time for hand-down is deemed to be 10h00 on 30 June 2020.
Summary:
Review of tender award – whether compliance with
the conditions of the request for bid and
s 14
of the
Local
Government: Municipal Finance Management Act 56 of 2003
.
ORDER
On
appeal from:
Northern Cape Division of the
High Court, Kimberley (Lever AJ and Phatsoane ADJP, sitting as court
of first instance):
1
Leave to appeal is granted.
2
The
appeal succeeds with costs.
3
The
order of the court a quo is set aside and replaced by the following:
‘
(a)
The resolution of the first respondent to sell the property known as
Erf 15747, Olivier Park, Upington, Northern Cape Province,
measuring
9 023 square metres, is reviewed and set aside.
(b)
The award of the tender adjudication committee dated 8 April 2016 in
respect of tender TN054/2015 is reviewed and set aside.
(c)
Any contract entered into as a result of the decisions of the tender
adjudication committee of the first respondent to award
the tender to
the second respondent is declared invalid and of no force and effect.
(d)
The first respondent is ordered to pay the costs of the application.’
JUDGMENT
Mbatha
JA (Ponnan and Mocumie JJA and Koen and Gorven AJJA concurring)
Introduction
[1]
This is an application for
leave to appeal and, if granted, the determination of the appeal
itself. The two judges who considered
the application referred it for
oral argument in terms of the provisions of
s 17(2)(d)
of the
Superior Courts Act 10 of 2013
.
Background
facts
[2]
On the northern banks of the Orange River lies the subject of the
present dispute, an immovable property described as Erf 15747,
Olivier Park, Upington, Northern Cape (the property). The applicant,
Oranje Watersport CC, has leased the property from the first
respondent, the Dawid Kruiper Local Municipality (the Municipality),
for the past 17 years. The latest lease commenced on 26 July
2013 and
would have run its course by the end of June 2018.The applicant
conducted a recreational barge cruise facility known as
‘Sakkie
se Arkie’ on the Orange River from the property.
[3]
On 3 December 2015 the Municipality adopted a resolution to the
following effect: to alienate the property at a market-related
price
as it was no longer required for basic municipal service delivery;
the alienation would occur by public tender that would
need to be
accompanied by a development proposal for the property; the
conditions of sale relating to the alienation thereof
would be
determined by the Municipality’s supply chain management
committee and the fair market-related price of the property
was to be
determined by a valuer.
[4]
In due course, the market value of the property was determined to be
the amount of R2 080 000. Pursuant to the invitation
to
tender, the applicant and the second respondent, Upington Hotel (Pty)
Ltd (Upington Hotel), submitted bids for the property
in the amounts
of R2 080 000 and R2 400 000 respectively. The
Municipality’s Bid Evaluation Committee
(BEC) accepted Upington
Hotel’s bid on the basis that it had offered a higher purchase
price and satisfied the other requirements
of the bid. On the 8 April
2016 the Municipality resolved to award the bid to Upington Hotel.
[5]
The applicant’s bid was not considered for evaluation. The
Municipality’s bid award committee found it to be
non-responsive
on the basis that it did not comply with one of the
special conditions of the bid, which required a guarantee from a
registered
financial institution that the bidder qualified for
financing to purchase and develop the property. Such a guarantee did
not accompany
the applicant’s bid. The bid by Upington Hotel
was found to be responsive on the strength of a letter from its bank,
Nedbank.
[6]
The award of the bid to Upington Hotel caused the applicant to bring
an application seeking: (a) to interdict the Municipality
and the
Registrar of Deeds, the third respondent, from transferring the
property to Upington Hotel; and (b) an order reviewing
and setting
aside the decision of the Municipality to award the tender to
Upington Hotel. On 4 November 2016, the Northern Cape
Division of
High Court Division, Kimberley granted the applicant the interdict
sought, pending finalisation of the review application.
[7]
The review application failed. On 6 July 2018 judgment was delivered
by Lever AJ (Phatsoane ADJP concurring) dismissing it with
costs. On
15 February 2018 the applicant’s application for leave to
appeal met the same fate. The applicant lodged an application
for
leave to appeal to this Court. The application for condonation and
leave to appeal were referred for oral argument in terms
of
s 17(2)
(d)
of the
Superior Courts Act 10 of 2013
. The parties were directed to be
prepared, if called upon to do so, to address this Court on the
merits of the appeal.
[8]
As pointed out in
Body Corporate of Marine Sands v Extra
Dimensions 121 (Pty) Ltd
[2019] ZASCA 161
;
2020 (2) SA 61
(SCA)
para 1:
‘
Different
considerations come into play when considering an application for
leave to appeal as compared to adjudicating the appeal
itself. As to
the former, it is for the applicant to convince the court that it has
a reasonable prospect of success on appeal.
Success in an application
for leave to appeal does not necessarily lead to success in the
appeal. Because the success of the application
for leave to appeal
depends,
inter
alia
,
on the prospects of eventual success of the appeal itself, the
argument on the application would, to a large extent, have to address
the merits of the appeal.’
[9]
Despite the various grounds of review on which the applicant’s
claim for the relief was based in the court a quo, only
two will be
considered on appeal, namely: (a) whether Upington Hotel’s bid
was responsive in the sense that it complied with
the special
conditions of the tender and (b) whether the Municipality complied
with
s 14
of the
Local Government: Municipal Finance Management Act
56 of 2003
(the MFMA).
Was
Upington Hotel’s bid responsive?
[10]
The Municipality’s request for bid contained the following
special condition.
‘
1.
A guarantee from a registered financial institution, that the bidder
does qualify for financing to purchase the land and the
development
thereof, must accompany the bid. A deposit to the amount of 10% of
the valued price of the tender payable by means
of transfer into
Council[’]s Bank Account or cash must be paid to the Council
within 14 days after the tender was awarded.
The deposit will be kept
as partial payment of the purchase price. The said deposit will be
forfeited if the purchase price is
not concluded within the period
mentioned in para 3.1 above. If no payment of the deposit is made
within the said period the tender
will be cancelled and the plot(s)
will be resold.
3.
The remainder of the purchase price must be paid:
3.1
in cash on a date of signing of the Deed of Sale; or
3.2
by means of a bank Guarantee payable on date of deed registration and
at an annual interest rate of 8%, calculated on a daily
basis from
date of signing of the Deed of Sale until one day after the date of
deed registration.’
[11]
Upington Hotel’s bid was found by
the Municipality to be compliant on the basis of a letter dated 8
January 2016 that was
issued by Nedbank, which read:
‘
We
refer to the request to issue a bank code to [THE MUNICIPALITY] in
respect of the conduct of the bank account of UPINGTON HOTEL
(PTY)
LIMITED. . . .
.
. .
Bank
codes are issued to other banks in accordance with normal banking
practice. Had the bank code been requested by another bank,
we would
have issued code “B” on R2 525 000.00 (Two
million five hundred and twenty five thousand Rand only).
The
information supplied herein is confirmed only at the date of issue
hereof and this letter is issued without prejudice to the
rights of
Nedbank.’
[12]
In my view there are two fundamental
difficulties with the Municipality’s acceptance of the letter
from Nedbank as a guarantee.
First, the letter from Nedbank did not
constitute a guarantee. Concerning the meaning of the term
‘guarantee’ R D Claassen
in
Claassen’s
Dictionary of Legal Words and Phrases
(June
2019, online) states:
‘
The
word is capable of a number of meanings, but the ordinary meaning is
to assure a person of the receipt of possession of something
”
(per Greenberg, J in
Walker’s
Fruit Farms Ltd v Sumner
1930
TPD 398
)
.
This word held used in the sense of a promise to pay in a certain
event rather than in the usual and more proper sense. . .
’
The
definition proceeds to refer to the decision in
Mayfair
South Townships (Pty) Ltd v Jhina
1980
(1) SA 869
(T), in which the term ‘guarantee’, as it
appeared in
s 58(11)
(a)
[1]
of the
Transvaal
Town-planning and Townships Ordinance 25 of 1965,
was
interpreted. In
Mayfair
at 257
the court expressed itself as follows:
‘
In
my view, the word is used in a simple, non-technical sense in s
58(11) and means no more than an assurance of payment. The Afrikaans
text which refers to “die waarborg tot voldoening” is, if
anything, more clearly indicative of the wide sense in which
a
guarantee is to be interpreted. (
Cf
Hermes Ship Chandlers (Pty) Ltd v Caltex Oil (SA) Ltd
1973
(3) SA 263
(D) at 266 – 7).’
Second,
the letter from Nedbank said nothing about the costs of the
development to be undertaken on the property.
[13]
On this basis, the Municipality should have treated Upington Hotel’s
bid as non responsive. The requirement of a
bank guarantee was
to give the Municipality certainty as to the financial ability of the
tenderer not only to purchase the property
but also to complete its
proposed development. It assures the Municipality that the tenderer
will not abandon the project due to
lack of funds.
Was
there compliance with s 14 of the MFMA?
[14]
Section 14 of the MFMA provides:
‘
14.
Disposal of capital assets –
(1)
A municipality may not transfer ownership as a result of a sale or
other transaction or otherwise permanently dispose of a capital
asset
needed to provide a minimum level of basic municipal services.
(2)
A municipality may transfer ownership or otherwise dispose of a
capital asset other than one contemplated in subsection (1),
but only
after the municipal council, in a meeting open to the public –
(a)
has decided on reasonable
grounds that the asset is not needed to provide the minimum level of
basic municipal services; and
(b)
has considered the fair market
value of the asset and the economic and community value to be
received in exchange for the asset.
. . .
(5)
Any transfer of ownership of a capital asset in terms of subsection
(2) or (4) must be fair equitable, transparent, competitive
and
consistent with the supply chain management policy which the
municipality must have and maintain in terms of section 111.’
[15]
I have difficulties with the argument
raised by the Municipality that it complied in particular with the
requirements of s 14(2)
(b)
of the MFMA, being the consideration of the fair market value of the
assets and the economic and community value to be received
in
exchange for the asset. The provisions of s 14(2)
(b)
require that once the market value of the
property has been ascertained that it be weighed against the economic
and community value
to be received in exchange for the asset. There
is no evidence that this was done by the council of the Municipality.
Much less,
in a meeting open to the public.
[16]
This process could not be delegated by the council of the
Municipality to any of its officers, as contended by the
Municipality,
because s 14(4) is limited to movable assets and does
not extend to immovable property. S 14(4) specifically provides that:
‘
A
municipal council may delegate to the accounting officer of the
municipality its power to make determinations referred to in
subsection 2
(a)
and
(b)
in respect of movable capital assets below a value determined by the
council.’
[17]
The effect of non-compliance with the provisions of s 14(2)
(b)
of MFMA, that is the failure by the Municipality to take a resolution
determining the economic and community value of the property
to be
disposed, did not meet the jurisdictional facts for the disposal of a
capital asset as required in terms of the MFMA. Counsel
for the
Municipality accepted that if this conclusion was to be reached, the
Municipality would have to commence the entire process
de
novo.
[18]
In the result the application for leave to appeal must succeed. The
following order is made:
1 Leave to appeal is
granted.
2 The appeal succeeds
with costs.
3 The order of the court
a quo is set aside and replaced by the following:
‘
(a)
The resolution of the first respondent to sell the property known as
Erf 15747, Olivier Park, Upington, Northern Cape Province,
measuring
9 023 square metres, is reviewed and set aside.
(b)
The award of the tender adjudication committee dated 8 April 2016 in
respect of tender TN054/2015 is reviewed and set aside.
(c)
Any contract entered into as a result of the decisions of the tender
adjudication committee of the first respondent to award
the tender to
the second respondent is declared invalid and of no force and effect.
(d)
The first respondent is ordered to pay the costs of the application.’
__________________
Y
T MBATHA
JUDGE
OF APPEAL
APPEARANCES
For
applicant: M Snyman SC
Instructed
by: CJ Willemse Muller & Babinszky Attorneys, Upington
Symington
de Kok Attorneys, Bloemfontein
For
first respondent: J S Rautenbach
Instructed
by: Becker, Bergh & More Incorporated, Upington
Lovius
Block Attorneys, Bloemfontein
[1]
Section
58 of the Transvaal Town-planning and Townships Ordinance 25 of 1965
set out the procedure to be followed regarding the
establishment of a
township. The owner of the land was required to make an application
to the Director to the Administrator in
the prescribed form which
application was accompanied by the relevant supporting
documentation. At the time
Mayfair
was instituted s 58(11)
(a)
of
the read as follows:
‘
.
. . the applicant shall. . . furnish. . .
a
guarantee to the satisfaction of the local authority concerned for
the fulfilment of his obligations as previously agreed to
by himself
and such local authority in respect of the supply of the services
referred to in that sub-section, and such local authority
shall
inform the Director as soon as a satisfactory guarantee has been
furnished’.